Q2 2024 BrightSpring Health Services Inc Earnings Call
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Operator: Good day, and thank you for standing by. Welcome to the Brightspring Health Services second quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jennifer Fitts, Chief Accounting Officer at BrightSpring. Please go ahead.
Speaker Change: Good day and thank you for standing by welcome to the Bright Spring Health services second quarter 2024 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session you will need.
Speaker Change: To press Star one one on your telephone you will then hear an automated message advising your hand, just raised to withdraw your question. Please press star one one again please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Jennifer that's cheap.
Jennifer Lachapelle: Accounting officer at Bright spring. Please go ahead.
Jennifer Fitts: Good morning. Thank you for participating in today's conference call. My name is Jennifer Fitts, Chief Accounting Officer at Brightspring. I am joined on today's call by John Rousseau, Chief Executive Officer, and Jim Mattingly, Chief Financial Officer.
Jennifer that's: Good morning. Thank you for participating in today's conference call. My name is Jennifer that's Chief Accounting officer at break frame I'm joined on today's call by John Russo Chief Executive Officer, and Jim <unk>.
Jennifer Fitts: Earlier today, Brightspring released financial results for the quarter ended June 30, 2024. A copy of the press release and presentation is available on the company's website. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. Such forward-looking statements are not guarantees of future performance. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations.
Speaker Change: Chief Financial Officer.
Speaker Change: Earlier today Bright spring released financial results for the quarter ended June 32020 for a copy of the press release and presentation is available on the company's website. Please note that today's discussion will include certain forward looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry.
Speaker Change: The end market conditions, such forward looking statements are not guarantees of future performance. These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release and presentation as well as in our quarterly report on form 10.
Jennifer Fitts: We encourage you to review the information in today's press release and presentation, as well as in our quarterly report on Form 10-Q that will be filed with the SEC. Specific risk factors and uncertainties can also be found in our 10-K previously filed with the SEC. Such factors may be updated from time to time in our periodic filings with the SEC, and we do not undertake any duty to update any forward-looking statements except as required by law.
Speaker Change: That will be filed with the SEC specific risk factors and uncertainties can also be found in our 10-K previously filed with the SEC such factors may be updated from time to time in our periodic filings with the SEC and we do not undertake any duty to update any forward looking statements, except as required by law during the call.
Jennifer Fitts: 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 and reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures to the extent available without unreasonable effort in today's earnings press release and presentation, which are again available on our Investor Relations website. This webcast is being recorded and will be available for replay on our Investor Relations website. And with that, I will turn the call over to John Rousseau, Chief Executive Officer.
Speaker Change: We'll 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 and reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures to the extent available without unreasonable effort in today's earnings press release and presentation, which again.
Speaker Change: <unk> are available on our Investor Relations website. This webcast is being recorded and will be available for replay on our investor Relations website and with that I will turn the call over to John Russo Chief Executive Officer.
John Russo: Thank you Chad.
John Rousseau: Good morning, and thank you for joining BrightSpring's second quarter 2024 earnings call. I'd also like to thank all of our employees and teammates, our clinicians, pharmacists, caregivers, and administrative and support employees who work hard every day to provide needed solutions to the customers and patients we serve, as well as to our other key stakeholders in health. We are pleased to report strong second-quarter performance with total revenue in the quarter of $2.7 billion, representing 26% growth year-over-year, and adjusted EBITDA of $139.1 billion, which represented 17% growth year-over-year and exceeded our internal plan. Adjusted EBITDA growth metrics throughout my remarks exclude a certain non-recurring Quality Incentive Payment, or QIP, of $30 million in the second quarter of 2020.
John Russo: Good morning, and thank you for joining bright spring second quarter 2024 earnings call.
Speaker Change: I'd also like to thank all of our employees and teammates are clinicians pharmacists caregivers administrative and support employees, who work hard everyday to provide needed solutions to the customers and patients we serve as well as to our other key stakeholders in health care.
John Rousseau: Within the $2.7 billion of total revenue, Pharmacy Solutions revenue was $2.1 billion, growing 32% compared to the second quarter of last year, and Provider Services revenue was $616 million, growing 8% compared to the second quarter of last year. We reported pharmacy solutions adjusted EBITDA of $94 million, which grew 19% year-over-year, and provider services EBITDA of $86 million, which grew 16% year-over-year. Following strong performance in the first half of the year and continued business momentum, we are raising our adjusted EBITDA guidance for 2024 to be in the range of $570 million to $580 million, representing 12 to 14 percent growth, excluding the QIP payment in 2023.
Speaker Change: We are pleased to report strong second quarter performance with total revenue in the quarter up $2 7 billion, representing 26% growth year over year, and adjusted EBITDA of $139 1 billion, which represented 17% growth year over year and exceeded our internal plan.
Adjusted EBITDA growth metrics throughout my remarks excluded certain nonrecurring quality incentive payment or <unk> of.
Speaker Change: $30 million in the second quarter of 2023.
Speaker Change: Within the $2 7 billion of total revenue pharmacy solutions revenue was $2 1 billion growing 32% compared to the second quarter of last year and provider services revenue was $660 million growing 8% compared to the second quarter of last year.
Speaker Change: We reported pharmacy solutions adjusted EBITDA of 94 billion, which grew 19% year over year and provider services EBITDA of $86 million grew 16% year over year.
Speaker Change: Following strong performance in the first half of the year and continued business momentum we are raising our adjusted EBITDA guidance for 2024 to be in the range of $570 million to $580 billion Rep.
Speaker Change: Representing 12% to 14% growth, excluding the <unk> payment in 2023.
John Rousseau: Our outperformance in the first half and increasing confidence in the second half of 2024 have led us to increase the midpoint of our Adjusted EBITDA guidance by nearly $35 million since the start of the year. Jim will discuss our financial performance and outlook in more detail in a few minutes.
Speaker Change: Our outperformance in the first half and increasing confidence in the second half of 2024 has led us to increase the midpoint of our adjusted EBITDA guidance.
Speaker Change: Nearly 35 billion since the start of the year.
Speaker Change: Jim will discuss the financial performance and outlook in more detail in a few minutes.
John Rousseau: Underpinning BrightSpring's success in the second quarter and throughout the first half of 2024 is our dedication to delivering timely, preventative, and coordinated care to our seniors and specialty patients in the home and in low-cost settings. Our platform's performance and our core strategy continue to be underpinned by three key hallmarks of strategy. First, we serve large and growing markets of complex patient populations in lower-cost home and community settings, which have significant and tangible quality and cost benefits. We bring a compassionate, local, and personal touch and an efficient care model to these complex patients, which preserves and improves their quality of life and health while lowering the risk of complications and institutional patient data.
Jim: Underpinning bright spring success in the second quarter and throughout the first half of 2024 is our dedication to delivering timely preventative and coordinated care to our seniors and specialty patients in the <unk>.
And in low cost settings.
Jim: Our platform's performance in our core strategy continues to be underpinned by three key hallmarks that strategies.
Jim: We serve large and growing markets of complex patient populations and lower cost, helping community settings, which has significant intangible quality and cost benefits.
Jim: We bring a capacity local and personal touch and inefficient care model to these complex patients, which preserves that improves quality of living and health, while lowering the risk of complications and institutional patient days we.
John Rousseau: We do this through standardized best practices, the use of leading technologies, and our proactive approach to addressing patient needs. Second, Brightspring is focused on driving outside volume growth and market share gains through our high-quality operations and sales and marketing capabilities, supplemented with integrated care, as well as de novos and a cycle of acquisitions to deepen and expand geographically and grow our volume further. As a result of our high-quality and dependable care model and our commercial capabilities, we drive volume growth across our business, in addition to serving a patient base with a comparatively high degree of recurring revenue.
Jim: We do this through standardized best practices, the use of leading technology and our proactive approach to addressing patient needs.
Speaker Change: Second bright spring is focused on driving outsized volume growth and market share gains through our high quality operations and sales and marketing capabilities supplemented with integrated care as well as de novo's and accretive acquisitions to deepen and expand geographically and grow our volume further.
Speaker Change: As a result of our high quality independent will care model and our commercial capabilities, we drive volume growth across our business. In addition to serving our patient base with a comparatively high degree of recurring revenue.
John Rousseau: Third, we benefit from our scale and complementary services, which allows for greater efficiencies, the deployment of best practices throughout the organization, and enhanced growth. We leverage our scale and the ever-evolving way we go to market, procure goods, and contract for services to drive these efficiencies with a continuous improvement mindset and culture. We drive acquisition synergies through procurement and operational synergies and best practices enabled by our platform. A good example of this is the recent announcement of the planned acquisition of Haven Hospital, a Florida-based company holding a certificate of need for comprehensive hospice care services in 18 counties in the state.
Speaker Change: Third we benefit from our scale and complementary services, which allows for greater efficiencies the deployment of best practices throughout the organization and enhance growth.
Speaker Change: We leverage our scale and our ever evolving the way we go to market procure goods and contract for services to drive these efficiencies with a continuous improvement mindset and culture.
Speaker Change: Drive acquisition synergies through procurement and operational synergies and best practices enabled by our platform.
Speaker Change: Good example of this is the recent announcement of the planned acquisition of Haven hospice.
Speaker Change: Florida based company holding a certificate of need for comprehensive hospice care services and 18 counties in the state.
John Rousseau: Haven operates in a highly desirable geography where we believe our capabilities can be implemented to improve operational metrics, financial performance, and growth. And last, our scale and complementary service lines also result in a unique level of payer diversification. In the pharmacy world, there is retail, and then there are all of the many places where customers and higher-acuity people need their medications with customized services every day, often 24-7, and that's us. In the provider world, there are hospitals and doctor's offices. And then there are homes and other community settings where people need their care every day. And that's up.
Speaker Change: <unk> operates in a highly desirable geography, where we believe our capabilities can be implemented to improve operational metrics financial performance the growth.
Speaker Change: And last our scale and complementary service lines also result in a unique comparative level of payer diversification.
Speaker Change: And the pharmacy World. There is retail and then there are all of the many places where customers in higher acuity people need their medications with customized services every day off in 'twenty, four and Thats up in the provider World. There's hospitals the doctors offices and then there are homes that other community settings.
Speaker Change: Where people need their care every day and Thats us.
John Rousseau: We serve patients in home and community settings with a highly beneficial and valuable model. We focus on driving volume and market share growth, and we leverage our scale and complementary services in important and meaningful ways. Turning back to the second quarter performance, pharmacy solutions revenue of $2.1 billion represented 32% growth compared with the second quarter of last year. Revenue momentum continued quarter-over-quarter, driven by ongoing execution supporting specialty product ramp-ups and launches from 2023 and 2024, infusion patient and volume growth, and strength in home and community pharmacy volume.
Speaker Change: We serve patients and home <unk> community settings, with a highly beneficial and valuable model, we focus on driving volume and market share growth and we leverage our scale and complementary services.
Speaker Change: <unk> and meaningful ways.
John Rousseau: The infusion and specialty business was particularly strong, growing 40% year-over-year, with specialty continuing to perform exceptionally well with outsized revenue growth. Home and community pharmacy revenue grew 13% year-over-year in the second quarter, driven by very solid script volume growth.
Speaker Change: Turning back to the second quarter performance Pharmacy solutions revenue of $2 1 billion represented 32% growth compared with the second quarter of last year.
Speaker Change: Revenue momentum continued quarter over quarter, driven by ongoing execution supporting specialty product ramp ups and launches from 2023 and 2024.
Speaker Change: Infusion patient volume growth and strength in helping community pharmacy volume.
Speaker Change: The infusion, especially business was particularly strong growing 40% year over year with specialty continuing to perform exceptionally well with outsized revenue growth.
Speaker Change: Well with the community pharmacy revenue grew 13% year over year in the second quarter, driven by very solid script volume growth.
John Rousseau: We saw robust volume growth across our pharmacy segment with 10.1 million total scripts dispensed in the second quarter, representing an increase of approximately 10% in total compared to the prior year. In Home and Community Pharmacy, Scripps dispensed grew in the high single digits year-over-year, highlighting the reliability, accuracy, high quality, and customized services that we continue to deliver to patients across settings. Our strong revenue performance in the quarter resulted in pharmacy solutions adjusted EBITDA of $94 million, representing 19% growth year-over-year.
Speaker Change: We saw robust volume growth across our pharmacy segment with $10 1 million total scripts dispensed in the second quarter, representing an increase of approximately 10% in total compared to the prior year.
Speaker Change: And home and community pharmacy scripts dispense grew in the high single digits year over year, highlighting the reliability accuracy high quality and customized services that we continue to deliver to patients across settings.
Speaker Change: Our strong revenue performance in the quarter resulted in pharmacy solutions, adjusted EBITDA of $94 million, representing 19% growth year over year.
John Rousseau: Pharmacy Solutions' adjusted EBITDA margin, at four and a half percent, was in line with our expectations and influenced by outsized growth and special needs. Specialty Pharmacy performed particularly well in the quarter with continued momentum in Scripps dispensed, delivering 36% volume growth.
Pharmacy solutions adjusted EBITDA margin at four 5% was in line with our expectations and influenced by outsized growth in specialty.
Speaker Change: Specialty pharmacy performed particularly well in the quarter with continued momentum in scripts dispense delivering 36% volume growth.
John Rousseau: The continued outperformance in specialty can be attributed to strong execution across our LVD and high-value generics portfolio, anchored by our quality and innovative national sales and marketing strategy. We continue to expand access to limited distribution drugs and coverage of prescribers, which drives referrals that are supported by our comprehensive patient service offerings, bringing higher quality of care to patients that is rated at world-class levels and helps to extend lives. The innovative, personalized, and high-tech services and clinical programs that we deliver continue to be preferred by patients, as evidenced by consistently high net promoter scores from prescribers and patients that approach or exceed 90.
Speaker Change: Our continued outperformance in specialty can be attributed to strong execution across our LCD at high value generics portfolio anchored by our quality and innovative national sales and marketing strategies, we continue to expand access to limited distribution drugs and coverage of prescribers, which drives referrals.
Speaker Change: That are supported by our comprehensive patient service offerings.
Speaker Change: A higher quality of care to patients that is rated at world class levels and helps to extend lives.
Speaker Change: The innovative personalized and high touch service and clinical programs that we deliver continue to be preferred by patients as evidenced by consistently high net promoter scores from prescribers and patients that approach or exceed Nike.
John Rousseau: We continue to grow our limited distribution drug network in oncology, rare and orphan drugs, and other select indications with 118 LDDs. Most recently, we were selected as a pharmacy partner by Day One Biopharmaceuticals for the distribution of Ogenta, which is utilized to treat central nervous system tumors in children six months and older, specifically relapsed or refractory pediatric low-grade glioma, the most common central nervous system tumor in children.
Speaker Change: We continue to grow our limited distribution drug networking oncology rare and orphan drugs and other select indications with 118 LDS.
Speaker Change: Most recently, we were selected as a pharmacy partner by day, one biopharmaceutical for distribution of agenda, which is utilized to treat central nervous system tumors in children six months and older specifically relapsed or refractory pediatric low grade glioma the most com.
Speaker Change: And central nervous system tumor in children.
John Rousseau: We're excited by this opportunity, and all others like it, to improve the lives of patients and families through this partnership and believe it speaks to the differentiated level of care and support that we deliver to patients every day. We expect to add an additional 18 LDDs to our portfolio over the next 12 to 18 months. We continue to grow volume robustly in high-value generics, and we see a meaningful opportunity to grow the specialty business further with 11 large brand drugs converting to generics over the next five to six years. The first of these is now expected in Q4 this year.
Speaker Change: We're excited by this opportunity and all others like that to improve the lives of patients and families through this partnership and believe it speaks to the differentiated level of care and support that we deliver to patients every day.
Speaker Change: We expect to add an additional 18 ldds to our portfolio over the next 12 months to 18 months, we continue to grow volume robustly in high value generics and we see a meaningful opportunity to grow the specialty business further with 11 large brand drugs converting to generic over the next five to six years. The first of these.
Now expected in Q4 this year.
John Rousseau: We are also pleased with the volume performance in our home and community pharmacy business. For example, Brightspring recently began services with one of the largest skilled nursing providers in the country as a long-term care pharmacy provider to all patients across all healthcare facilities in this country. This sizable new customer addition speaks to the quality of care and services that we provide to our valued partners and patients. In provider services, we saw very solid revenue growth of 8%, driven by strength in home health care, particularly home health and hospice, as well as in our rehab business.
Speaker Change: We are also pleased with the volume performance in our home and community pharmacy business.
Speaker Change: For example, bright spring recently began services with one of the largest skilled nursing providers in the country as a long term care pharmacy provider to all patients across all health care facilities of this customer.
Speaker Change: This sizable new customer addition speaks to the quality of care and services that we provide to our valued partners and patients.
Speaker Change: And provider services, we saw very solid revenue growth of 8% driven by strength in home healthcare, particularly home health and hospice as well as in our rehab business to.
John Rousseau: To highlight, home health care average daily census grew 13% year-over-year to 44,246 in the second quarter, and rehab billable hours grew in the high single digits. The number of patients that we serve across our platform continues to grow, enabled by our highly skilled health professionals and the company's continued commitment to coordinated care in our patients' preferred setting. The addition of Haven Hospice, which is expected to close this quarter, will expand our services into the attractive and hard-to-access Florida market with the opportunity to provide compassionate and high-quality care that has been rated in the top 5% of all hospice providers nationally to more patients and their families.
Speaker Change: To highlight home health care average daily census grew 13% year over year to 44, $2 46 in the second quarter and rehab billable hours grew in the high single digits.
Speaker Change: The number of patients that we serve across our platform continues to grow enabled by our highly skilled health professionals and the company's continued commitment to coordinated care and our patient preferred settings.
Speaker Change: The addition of Haven hospice, which is expected to close this quarter, we'll expand our services into the attractive and hard to access Florida market with the opportunity to provide capacity and high quality care that has been rated in the top 5% of all hospice providers nationally.
Speaker Change: More patients and their families.
John Rousseau: We remain enthusiastic about the trajectory of the provider business in the coming years. Our provider business also realized very solid adjusted EBITDA of $86 million, representing 16% year-over-year growth and a 14.0% margin compared to 13.1% in Q2 2023, driven by increased scale and additional operational efficiency. We continue to work hard to deliver patient-centric plans in home and community settings, driving significant reductions in hospital readmissions for seniors, duals, and behavioral patients. Ultimately, our ability to deliver higher quality care in preferred settings and in a more efficient way enables improved outcomes, increased patient satisfaction, and reduced costs, which helps drive referrals to meet ever-increasing demand and address significant societal needs.
Speaker Change: We remain enthusiastic about the trajectory of the provider business in the coming years.
Speaker Change: Our provider business also realized very solid adjusted EBITDA of $86 million, representing 16% year over year growth and a 14.0% margin compared to 13, 1% in Q2 2023.
Speaker Change: Driven by increased scale and additional operational efficiencies.
Speaker Change: We continue to work hard to deliver patient centric plans at home and community settings.
Speaker Change: Driving significant reductions in hospital readmissions for seniors duals and behavioral patients.
Speaker Change: Ultimately, our ability to deliver higher quality care and preferred settings and in a more efficient way enables improved outcomes increased patient satisfaction and reduced costs, which helped drive referrals to meet ever increasing demand and address significant societal needs.
John Rousseau: As we've discussed previously, Brightspring was eligible to receive its last Annual Equality Incentive Payment, or QIP, in specialty from one of our PBM partners in the second quarter. As we discussed, the bar for this QIP was extremely high, and while we delivered an outstanding net promoter score of 87 for these particular members, it was below the threshold of 90 in the contract and below the NPS that we track and see for all other payers in PVMM.
Speaker Change: As we've discussed previously bright spring was eligible to receive a last annual quality incentive payments or Q IP.
Speaker Change: Specialty from one of our <unk> partners to the second quarter.
Speaker Change: As we have discussed the bar for this Q IP with extremely high and while we delivered an outstanding net promoter score of 87% for these particular members. It was below the threshold of 90 in the contract and below the NPS that we track and see for all other payer and PBF efforts.
Jim Mattingly: While we're disappointed to not receive this payment, as has been known, this program is now concluded, and we benefited from receiving these QIP payments in the three years prior, based on our extremely high levels of quality and patient-focused care. Relative to peers and industry standards, we continue to deliver exceptional service levels, which are the foundation of the strong growth and financial performance we are experiencing in 2024 and expect to continue to experience in the future.
Speaker Change: While we are disappointed to not received this payment.
Speaker Change: <unk> has been known this program has now concluded and we benefited from receiving these <unk> payments and the three years prior.
Speaker Change: On our extremely high levels of quality and patient focused care realm.
Speaker Change: Relative to peers and industry standards, we continue to deliver exceptional service levels, which are the foundation of the strong growth and financial performance. We are experiencing in 2024 and expect to continue to experience in the future.
Jim Mattingly: Across our business, our employees work hard every day to deliver high quality and compassionate care to the people that we serve. We continue to invest in our employees who contribute to the success of the company and truly believe that our healthcare workers, clinicians, skilled caregivers, operators, and sales and marketing teams enable us to deliver leading levels of patient-centric care and support in our industry, to reward our employees for their hard work and dedication and to further create and foster an ownership culture at the company, in the second quarter we completed the $100 million all-employee equity grant that was announced at the IPO.
Speaker Change: Across our business our employees work hard every day to deliver high quality capacity to care for the people that we serve.
Speaker Change: We continue to invest in our employees, who contribute to the success of the company and truly believe that our health care workers clinicians skilled caregivers operators and sales and marketing teams enable us to deliver leading levels of patient centric care and support in our industry.
Speaker Change: To reward our employees for their hard work and dedication and to further create and foster an ownership culture at the company and the second quarter. We completed the $100 billion all employee equity grant that was announced at the IPO.
Jim Mattingly: Brightspring awarded approximately 20,000 full-time and tenured employees with employee-specific share grants to commemorate their dedication to the company and their impact on patients in the communities that we all live in. To summarize, the first half of 2024 has been very successful as we continue to execute on our goals and strategies as we have for the past seven years. We are optimistic about the performance across the entire portfolio, not only heading into the second half of the year but also as we head into 2025.
Speaker Change: Bright spring awarded approximately 20 full time and tenured employees with employees specific share grants to commemorate their dedication to the company and their impact on patients to the communities that we all live in.
Speaker Change: To summarize the first half of 2024, it's been very successful as we continue to execute on our goals and strategies as we have for the past seven years.
Speaker Change: We are optimistic about the performance across the entire portfolio not only heading into the second half of the year, but also as we head into 2025.
Jim Mattingly: Within pharmacy, we are particularly excited by our strong manufacturing and customer partnerships, our valued referral relationships, our high quality scores, and our growing portfolio of limited distribution drugs, generics, and specialties. We continue to drive improved operational performance with a real focus on efficiency initiatives across infusion and home and community pharmacy. On the provider side, we are outpacing the industry on volume growth and remain confident in our ability to grow daily census and hours while we continue to reduce hospitalizations and readmissions by delivering the right care management at the right time and in the right setting to patients.
Speaker Change: Within pharmacy, we are particularly excited by our strong manufacturing and customer partnerships are valued referral relationships, our high quality scores and our growing portfolio of limited distribution drugs generics and specialty.
Speaker Change: We continue to drive improved operational performance with a real focus on efficiency initiatives across infusion in healthy community pharmacy on.
Speaker Change: On the provider side, we are outpacing the industry on volume growth and remain confident in our ability to grow daily census, and hours, while we continue to reduce hospitalizations that readmission by delivering the right care management at the right time and in the right setting to patients.
Jim Mattingly: Our integrated platform service capabilities continue to improve and allow Brightspring to improve the coordination of patient-centered care for people who require multiple health services. Moving forward in the back half of the year and into 2025 and beyond, Brightspring continues to remain focused on targeting volume growth and attractive markets, delivering needed solutions, driving operational best practices, and providing more coordinated and high-quality care, leveraging the scale and complementary nature of our platform to deliver healthy financial results. I will now turn the call over to Jim to discuss our second quarter financial results and 2024 guidance in more detail.
Our integrated platform service capabilities continue to advance and allowed bright spring to improve the coordination of patient centric care for people who require multiple health services.
Speaker Change: Moving forward in the back half of the year and into 2025 and beyond Bright spring continues to remain focused on targeting volume growth in attractive markets delivering needed solutions driving operational best practices, and providing more coordinated and high quality care leveraging that scale and complementary.
Speaker Change: The nature of our platform to deliver healthy financial results.
Speaker Change: I will now turn the call over to Jim to discuss our second quarter financial results and 2024 guidance in more detail Jim.
Jim Mattingly: Thanks, John. Before I provide financial results for the quarter, please note that all growth metrics for growth profit and adjusted EBITDA compared to 2023 exclude a certain $30 million Quality Incentive Payment, or QIP, that Brightspring received in the second quarter of 2023. Total revenue in the second quarter of 2024 was $2.7 billion, representing 26% growth from the prior year period. Pharmacy Solutions Segment revenue was $2.1 billion, achieving growth of 32%
Jim: Thanks, John before I provide financial results for the quarter. Please note that all growth metrics for gross profit and adjusted EBITDA compared to 2023 excluded certain $30 million quality incentive payments are Q IP that bright spring received in the second quarter of 2023.
Jim: Total revenue in the second quarter of 2024 was $2 7 billion, representing 26% growth from the prior year period.
Jim: Pharmacy solutions segment revenue was $2 1 billion achieving growth of 32% year over year.
Jim Mattingly: Within the pharmacy segment, infusion and specialty revenue was $1.6 billion, representing growth of 40% from last year, and Home and Community Pharmacy revenue was $528 million, representing growth of 13% year-over-year. In the provider services segment, we reported revenue of $616 million, representing growth of 8% compared to the prior year period. Within the provider services segment, home health care reported $254 million in revenue for the second quarter, growth of 13% versus last year. And community and rehab care revenue was $362 million, representing growth of 5% year-over-year. Moving down the P&L.
Jim: Within the pharmacy segment infusion in specialty revenue was $1 6 billion representing growth of 40% from last year.
Jim: Homelink community pharmacy revenue was $528 million representing growth of 13% year over year.
Jim: And the provider services segment, we reported revenue of $616 million representing growth of 8% compared to the prior year period.
Jim: Within the provider services segment home healthcare reported $254 million in revenue for the second quarter growth of 13% versus last year and community and rehab care revenue was $362 million representing growth of 5% year over year.
Moving down the P&L.
Jim Mattingly: Total company gross profit in the second quarter was $389 million, representing growth of 14% compared with the second quarter of last year. Just EBITDA for the total company was $139 million for the second quarter, growing 17% compared with last year. An adjusted EPS for the total company was $0.10 for the second quarter. Turning back to segment performance,
Jim: Company gross profit in the second quarter was $389 million representing growth of 14% compared with the second quarter of last year.
Jim: Adjusted EBITDA for the total company was $139 million for the second quarter growing 17% compared to last year.
Jim: And adjusted EPS for the total company was <unk> 10 for the second quarter.
Jim: Turning back to the segment performance Pharmacy solutions gross profit was $183 million growing 16% compared with the second quarter of last year. Adjusted EBITDA performance fee solutions was $94 million for the second quarter growing 19% compared to last year.
Jim Mattingly: Pharmacy Solutions gross profit was $183 million, growing 16% compared with the second quarter of last year; adjusted EBITDA for pharmacy solutions was $94 million for the second quarter, growing 19% compared to last year. Provider services gross profit was $206 million, growing 12% versus the second quarter of last year. An adjusted EBITDA for provider services was $86 million for the second quarter, growing 16% versus the last quarter. Cash flow from operations was negative $15 million in the second quarter of 2024, which was in line with our expectations and included a $90 million cash payment related to the Legacy Pharmacy legal matter, which was disclosed at the IPI. Excluding that historical legal case payment, cash locum operations were $75 million in Q2.
Jim: Our services gross profit was $206 million growing 12% versus the second quarter of last year.
Jim: And adjusted EBITDA for provider services was $86 million for the second quarter growing 16% versus last year.
Jim: On a total company basis cash flow from operations was negative $15 million in the second quarter of 2024, which was in line with our expectations and included a $90 million cash payment related to the legacy pharmacy legal matter, which was disclosed at the IPO.
Jim: Excluding that historical legal case payment cash flow from operations was $75 million in Q2.
Jim Mattingly: We remain on track to deliver approximately $275 million of annual run-rate operating cash flow, excluding disclosed legacy litigation expenses and IPO-related expenses, as we continue to remain focused on improving our leverage ratio towards our goal of three times within three years. As of June 30th, our net debt outstanding was approximately $2.7 billion, with our leverage ratio at 4.51 times, which was better than our internal projection and which reflected the anticipated legal settlement cash payment in court.
Jim: We remain on track to deliver approximately $275 million of annual run rate operating cash flow, excluding disclosed legacy litigation expenses and IPO related expenses as we continue to remain focused on improving our leverage ratio towards our goal of three times within three years.
Jim: As of June 30, our net debt outstanding is approximately $2 7 billion with our leverage ratio at $4 five one times, which was better than our internal projections and which reflected the anticipated legal settlement cash payment in the quarter.
Jim Mattingly: As a reminder, net interest expense includes interest income related to cash flow hedges due to our three received variable pay fixed interest rate swap agreements that we have in place set to mature on September 30, 2025. Quarterly interest expense is still expected to be approximately $50 million per quarter, including approximately $1.6 million in interest expense related to the TEUN's. Turning to our guidance for 2024, we are increasing our expectations for revenue and adjusted... Total revenue is now expected to be in the range of $10.45 to $10.9 billion, including pharmacy solutions revenue of $8.0 billion to $8.4 billion and provider services revenue of $2.45 billion to $2.5 billion.
Speaker Change: As a reminder, net interest expense includes interest income related to cash flow hedges due to our three received variable pay fixed interest rate swap agreements that we have in place set to mature on September 32025 quarterly.
Speaker Change: Quarterly interest expense is still expected to be approximately $50 million per quarter, including approximately $1 6 million and interest expense related to the <unk> instrument.
Speaker Change: Turning to our guidance for 2024, we are increasing our expectations for revenue and adjusted EBITDA.
Speaker Change: Total revenue is now expected to be in the range of $10 four 5% to $10 9 billion, including pharmacy solutions revenue of 8.0 billion to $8 4 billion and provide our services revenue of $2 $4 5 billion to $2 5 billion.
Jim Mattingly: As you will recall, we increased our adjusted EBITDA guidance range last quarter, to $555 million to $570 million, excluding the potential QIP. Today, we are raising our total adjusted EBITDA outlook again to the range of $570 million to $580 million for full year 2020. This updated range represents a like-for-like increase in company-adjusted EBITDA of approximately $13 million at the midpoint and represents 12.2% to 14.2% growth versus full year 2023 when you exclude the QIP received in 2021.
Speaker Change: As you will recall, we increased our adjusted EBITDA guidance range last quarter.
Speaker Change: It's a 555 million to $570 million, excluding the potential <unk> IV.
Speaker Change: Today, we are raising our total adjusted EBITDA outlook again to the range of 570 million to $580 million for full year 2024.
Speaker Change: This updated range represents a like for like increase in company adjusted EBITDA of approximately $13 million at the midpoint and represents 12, 2% to 14, 2% growth versus full year 2023, when you exclude the Q IP received in 2023.
Jim Mattingly: Since the start of the year, we have increased the midpoint of our adjusted EBITDA guidance by nearly $35 million. At the midpoint of our adjusted EBITDA range, the adjusted EBITDA margin is approximately 5.4 percent, and we continue to expect to see margin expansion throughout the remainder of the year.
Speaker Change: Since the start of the year, we have increased the midpoint of our adjusted EBITDA guidance by nearly $35 million.
Speaker Change: At the midpoint of our adjusted EBITDA range. The adjusted EBITDA margin is approximately five 4% and we continue to expect to see margin expansion throughout the remainder of the year.
Speaker Change: With that I'll now turn it back to John.
John Rousseau: Thank you for your time today to go through BrightSpring's second quarter results and guidance updates. We will now open up the line for questions.
John Russo: Thank you for your time today to go through price Springs second quarter results and guidance update.
John Russo: We will now open up the line for questions operator.
Operator: Operator. Thank you. As Thank you.
Operator: Thank you. As a reminder, to ask a question, please press star 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question comes from Brian Tankrelot of Jeffrey's. Your line is open.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Speaker Change: And our first question comes from Brian <unk> of Jefferies. Your line is open.
Brian Tankrelot: Hey, good morning, guys, and congrats on a really strong quarter. I guess my question first, John, you know, you've seen really good and strong traction and specialty.
Brian <unk>: Hey, good morning, guys and congrats on a really strong quarter.
Brian <unk>: I guess my question first John.
Speaker Change: Really good strong traction in specialty and I think the guidance implies sequential growth in.
John Rousseau: And I think the guidance implies sequential growth in pharmacy solutions revenues into the back half of the year. As we look at the historical trend in terms of the back half and first half, it seems like it's up sequentially, but maybe not by quite as much as the historical trend. Is this conservatism, or is there anything we need to be thinking about as it relates to the ramp-up in pharma solutions revenue in the back half? Thanks.
Brian <unk>: Pharmacy solutions revenues into the back half of the year as we look at historical trends or is the back half first half it seems like it's up sequentially, but maybe not by quite as much as historical trend is it conservatism or is there anything we need to be thinking about as it relates to the ramp.
Speaker Change: <unk> pharma solutions revenue in the back half thanks.
Brian Tankrelot: Hey, Brian, good morning. Thanks for the question. No, our growth rate that we're seeing in pharmacy remains really strong, and we've got more momentum on the volume side in that business really than we ever have. Even at this point in time, 7 years in, so, you know, we would expect similar growth rates into the 2nd half, and again, we feel more positive about those growth rates. And we have, you know, typically we get about 53% of our even done in the 2nd half due to days and due to taxes and other items. We expect margins to always increase in the 2nd half as well.
Speaker Change: Hey, Brian Good morning, Thanks for the question.
Speaker Change: Our growth rate that we're seeing in pharmacy remains.
Speaker Change: Really strong and we've got more momentum on the volume side in that business really than we ever have.
Speaker Change: Even at this point in time seven years and so.
Speaker Change: We would expect similar growth rates into the second half.
Speaker Change: And again, we feel more positive about those growth rates than we have typically we get about 53% of our EBITDA in the second half.
Speaker Change: Due to days and due to taxes and other items, we expect margins to always increase in the second half as well, we're leveraging fixed costs and corporate which is flat in the second half as we continue to drive volume.
Brian Tankrelot: We're leveraging 6 costs and corporate, which is flat in the 2nd half as we continue to drive volume, but very consistent volume expectations in terms of growth rates for the 2nd half, and no reason to believe those will slow down or or slow down heading into 2025.
Speaker Change: But very <unk>.
Speaker Change: <unk> volume expectations in terms of growth rates for the second half.
Speaker Change: And no reason to believe those hold those will slowdown or slowdown heading into 2025.
John Rousseau: And then, maybe since you mentioned margins, and I think Jim mentioned that, you know, there are expectations for contained margin improvement, if you can just walk us through what the dynamics are, or what are the moving pieces that would drive the sequential margin improvement in the back half?
Speaker Change: And then maybe since you mentioned margins and I think Jim mentioned that there are expectations for continued margin improvement. If you can just walk us through what the dynamics are what are the moving pieces that would drive that sequential margin improvement in the back half of the year.
John Rousseau: Yeah, we see about a 535.4% EBITDA margin for the full year. So, obviously, that's going to be higher than the 5.1 in the 2nd half. You know, really, it's just a couple of things that are very clear and very tangible. We benefit from favorability in the way the days fall in the calendar months in the 2nd half versus the 1st half of the year. Taxes are lower, you get payroll taxes resetting in the 1st half of the year. Uh, that's a meaningful number.
Speaker Change: Yes, we see about a <unk> 35, 4% EBITDA margin for the full year. So obviously, that's going to be higher than the five one in the second half.
Speaker Change: Really it's just a couple of things, which are very clear and very tangible we benefit from <unk>.
Speaker Change: <unk> and the way the days fall in the calendar months in the second half versus the first half of the year taxes are lower you get payroll taxes resetting in the first half of the year. That's a meaningful number as I said, we're going to continue to drive I think.
John Rousseau: As I said, you know, we're going to continue to drive, I think, really strong volume growth rates here. I mean, you can see, on the pharmacy side, we're pushing 30%, and even on the provider side, close to 10%. We expect that to continue. Our assumption for corporate in the back half is flat after we've made, you know, we've continued to make a lot of it and people investments throughout the 1st half of the year.
Speaker Change: Really strong volume growth rates here I mean, you can see on the pharmacy side were pushing 30% and even on the provider side close to 10%. We expect that to continue our assumption for corporate in the back half is flat. After we've made we've continued to make a lot of it and people investments throughout the first half of the year and.
John Rousseau: And then, you know, we did have some ramp-up costs as we've been on board with a few very large customers on the home and community pharmacy side. We incurred those costs in the 1st half ahead of the volume ramping up in those contracts as well. And then, you know, as an organization, we continue to focus on operational excellence. And so, there's, there's just many operational initiatives that are continuing to kick in here in the 2nd half of the year for meaningful impact.
Speaker Change: And then we did have some ramp up costs as we've been onboard on boarding a few very large customers on the home and community pharmacy side, we incurred those those costs in the first half ahead of the volume ramping up and those contracts as well and then as an organization. We continue to focus on operational excellence.
Speaker Change: Theres, just many operational initiatives, which are which are continuing to kick in here in the second half of the year for meaningful impact as we continue to drive lean and automation across the organization.
John Rousseau: As we continue to drive lean and automation across the organization, you know, and really last, I mean, the hospital final rule came in a little bit better than was estimated, but that's going to go live in Q4 too. So it's really a combination of multiple factors that we feel we have a very direct line of sight on that will drive that margin improvement into the 2nd half.
Speaker Change: Really lapped the hospice final rule came in a little bit better than was estimated but thats going to go live in Q4 too. So it's really a combination of multiple factors that we feel we have very direct line of sight on that.
That will that will drive that margin improvement into the second half.
John Rousseau: That's awesome!
Brian Tankrelot: That's awesome. Congratulations again. Thanks, John.
Jon: Congrats again, thanks, Jon.
Speaker Change: Thank you.
Operator: Our next question comes from A.J. Rice of UBS. Your line is open.
Speaker Change: Our next question comes from AJ Rice of UBS. Your line is open.
A.J. Rice: Hi everyone. Thanks for the question. Just on the strong specialty performance. Can you just comment on areas of growth? Is it a new drug yet coming online? Are you gaining a share? What's driving that? And then comment on the margin trajectory that business is growing, maybe looking out a little further on the one hand in pharmacy solutions. I guess the makeshift could pressure margin, but I think as new business improves over time, you'd see margin improvement. So maybe delve into that a little more.
Speaker Change: No.
Speaker Change: Thanks for the question just the strong specialty performance can you just comment on areas of growth is that.
Speaker Change: New drug.
Luke: It's coming online are you gaining share what's driving that and then comment on the margin trajectory as that business grows maybe Luke.
Luke: Broken down a little further.
Speaker Change: On the one hand, and pharmacy solutions I guess, the mix shift could pressure margins, but I think as new business improves over time, you'd see margin improvement, so maybe delve into that a little more possible.
John Rousseau: Yeah, thanks, A.J. I appreciate the comment about the specialty growth. I would also note that the growth in the organization that we're seeing is really broad-based. If you look at it, almost every single one of our service lines is growing in the organization.
Luke: Yeah, Thanks, a J.
Speaker Change: The comment about the specialty growth I would also note that the growth in the organism that we're seeing it's really broad based.
Speaker Change: If you look at it really almost every single one of our service lines.
Speaker Change: They are growing in the organization. So we're really seeing very very strong performance across the entirety of the portfolio.
John Rousseau: So, we're really seeing very, very strong performance across the entirety of the portfolio. You know, specialty did see the highest growth rate. It was really driven by everything you mentioned.
Speaker Change: We did see the highest growth rate it was really driven by everything you mentioned.
John Rousseau: Brand growth through continued ramps in LVD drugs, both from the last couple years and even the five LVD drugs we've launched so far this year. You know, our continued focus on high-value generics and then a very large sales force that's out there in the field every day and prescriber offices with clinicians, patients, and families thriving. I think we are making strong market share improvement. We continue to win some hub business, and our fee-for-service and data business continues to increase at double-digit rates.
Speaker Change: Brand growth through continued ramps and LD drugs, both from the last couple of years and even the <unk> LD drugs. We've launched so far this year. Our continued focus on high value generics and then a very large sales force executing out there in the field everyday and prescriber offices with.
Speaker Change: With clinicians patients and families driving I think strong market share improvement.
Speaker Change: Continued to win some hub business are in our fee for service and data business continued to increase.
Speaker Change: At double digit rates.
John Rousseau: So, we're seeing broad-based growth in New York City. Also, within Specialty, you know, Specialty's margin ticked up a little bit into Q2. We expect that to continue into the back half as well, and we expect the same for the trend dynamic for overall pharmacy.
Speaker Change: So.
Speaker Change: Broad based growth in Europe.
Speaker Change: Also within specialty specialties margins ticked up a little bit into Q2.
Speaker Change: That's it.
The back half as well.
Speaker Change: And we expect the same trend dynamic for overall pharmacy.
John Rousseau: Okay, and it sounds like in your prepared comments, you're calling out a new service agreement with a large long-term care provider. So, I assume that the institutional pharmacy business.
Speaker Change: Yes.
Speaker Change: Okay and it sounds like in your prepared comments, you are calling out a new.
Speaker Change: Service agreement with a large loans our care provider, so I assume that the institutional pharmacy business.
John Rousseau: I haven't heard people calling out big new business wins in that segment for a while. Is there an increase in RFP activity? Is this just a client that you've been working on for a while that crossed the finish line? How would you characterize that competitive landscape and the opportunities there? Yeah, well, I mean, you know, the breadth of home and community pharmacy is, you know, it covers everything.
Speaker Change: Heard.
Speaker Change: People, calling out big new business wins in that segment in a while.
Speaker Change: Is there an increase in our fee activity. It's just the client that you've been working on for a while that came over the finish line or how would you characterize that competitive landscape and the opportunities there.
John Rousseau: Yeah, I mean, the breadth of home and community pharmacy is, it covers a lot of attractive market segments. That business grew its volume right around 10%, and its revenue was about 13%. We continue to see that, and we believe we'll continue to see that into the future. We've got a great quality operator and have set priority service programs for customers that serve them very well. We have a high-performance sales team, too, and the business is very technology-enabled.
Speaker Change: Yes.
Speaker Change: The breadth of home and community pharmacy.
Speaker Change: It covers a lot of attractive end market segments.
Speaker Change: That business grew it grew its volume right.
Speaker Change: Right around 10% revenue of about 13%, we continue to see that.
Speaker Change: We believe we will continue to see that into the future.
<unk> got a great quality.
Speaker Change: The quality.
Speaker Change: The operator.
Speaker Change: Bryan Ferry service programs for customers that served us very well we are.
Speaker Change: A high performing sales team to <unk>.
Very technology enabled so.
John Rousseau: Those elements are really driving very productive customer relationships. I think at this point, we've won some 35,000 or 40,000 new patients in beds from competitors this year. And we just really focus on the service model, quality operations, and that's continuing to drive preference with customers, including, in this case, a very large customer that we onboarded back half of Q2, which will be beneficial in the second half of next year in 2025.
Speaker Change: These elements are really driving very productive customer relationships I think at this point, we've won some 35 or 40000, new patients and beds from competitors. This year and we just really focus on the service model all the operations and that is continuing to drive <unk>.
Speaker Change: Reference with with customers, including in this case.
Speaker Change: A very large customer that we on boarded back half of Q2, which will be beneficial in the second half of next year in 2025.
Okay. Thanks, a lot.
Speaker Change: Thank you.
Speaker Change: Okay.
Operator: Our next question comes from Whit Mayo of Lyrinc. Your line is open.
Speaker Change: Our next question comes from Whit Mayo of Leerink. Your line is open.
Whit Mayo: Hey, thanks. Good morning.
Whit Mayo: Hey, Thanks, Good morning, just back on the <unk> launches just want to make sure I heard you that you've got 18 more that are coming I don't know how many you're launching in the second half versus 2025 and just.
Speaker Change: Is it are those accretive at launch or do they.
Speaker Change: It requires some investments in the earning slope is a little bit more on a lag.
John Rousseau: Back on the LDD launches, I just want to make sure. I heard you have 18 more that are coming. I don't know how many are launching in the second half versus 2025. And just remind us, are those accretive at launch, or do they require some investments, and the earning slope is a little bit more on a lag?
Speaker Change: Yes, good morning, what we're up to 118 limited distribution drugs now we do expect our most recent view after Q2 is <unk>.
John Rousseau: Yeah, good morning, Whit. We're up to 118 limited distribution drugs now. We do expect, you know, our most recent view after Q2 is probably another 18 or so wins in the next 15 or so months. So that cadence of about one a month, we would expect to continue again. That's based on the quality of our service to patients and our focus on manufacturing relationships and other service offerings to them. So the momentum there very much continues.
Speaker Change: Another 18, or so wind in the next in the next 15 or so months, so that cadence of about one a month, we would expect to continue again thats based on the.
Speaker Change: The quality of our service.
Speaker Change: Patients and our focus on manufacturing relationships.
Speaker Change: Other and other service offerings to them. So the momentum there very much continues those are accretive day one.
John Rousseau: There are a few investments that go into place to get ready for launch, but at launch, those are accretive from day one at the respective GP margins and even doctor script margins right out of the gate.
Speaker Change: There are a few investments that go into place to get ready for launch but at launch those those are accretive.
Speaker Change: From day one.
Speaker Change: At the respective GP margins.
Speaker Change: EBITDA per script margins right.
John Rousseau: Okay, so kind of one a month. All right. Second question, just on home infusion, just sort of curious where you are in the business and the growth of that business, how many locations you have, where you think you can go, and sort of how you're prioritizing the geographies that you plan on entering. Yeah, I think our view on infusion hasn't really changed. We're in about 35.
Speaker Change: Right out of the gate.
Speaker Change: Okay, so kind of one month alright.
Speaker Change: Second question just on home infusion just sort of curious where you are in the in.
Speaker Change: And the growth of that business. How many locations you have where you think you can go and sort of how you're prioritizing.
Speaker Change: The geographies that you plan on entering thanks.
John Rousseau: Yeah, I think our view on infusion hasn't really changed. We're in about 35 states today. So we've got a really good national presence, which is critically important. The volume growth there continues to be good. You know, we are focused on some operational initiatives and that business, and we've been making some investments in those throughout this year. We really believe infusion is going to be a more meaningful driver for us into 2025 and beyond as we continue to focus on operational excellence in that business and try to really win on service levels. That has been a very consistent plan and story for the past 6 to 9 months right now. And we're, we're excited for that business as we get into 2025 in particular.
Speaker Change: Yes, I think our view on on infusion Hasnt really changed we're in about 35 states. Today. So we've got a really good national presence, which is critically important the volume growth. There is continued to be good we are.
Speaker Change: We're focused on some operational initiatives in that business and we've been making some investments in those throughout this year.
Speaker Change: We really believe infusion is going to be a more meaningful driver for us into 2025 and beyond.
Speaker Change: As we continue to focus on operational excellence in that business in and trying to really went on service levels.
Speaker Change: That that that has been a very consistent plan and story for the past.
Six to nine months right now and we're we're excited for that business as we get into 2025 in particular.
Speaker Change: Thanks.
Speaker Change: Thank you.
Operator: Our next question comes from David Larson of BTIG. Your line is open.
Speaker Change: Our next question comes from David Larsen of <unk>. Your line is open.
David Larson: Hey, congratulations on a good quarter. Can you talk a little bit about cross-selling efforts within the provider division? So, for example, PT to OT and home health, hospice, group homes, and so forth. Do your sales people have a CRM that has all of the available solutions in it? And can they sort of see account by account what the in-cell potential is and just what the sort of growth potential is with cross-selling efforts?
David Larsen: Hey, congratulations on the good quarter can you talk a little bit about cross selling efforts within the provider Division. So for example, PT to Ot in home Health Hospice group homes and so forth.
Our sales people have like our CRM that has all of the available solutions and can we sort of see account by account what the installed potentially isn't just with the sort of growth.
Speaker Change: Growth potential is with cross selling efforts. Thank you.
John Rousseau: Thank you.
John Rousseau: Yeah, hey, David, good morning. Thank you for the question. Historically, a lot of our integrated care synergies have been driven through our pharmacy services also provided to our provider patients, which is, which is a real benefit to them receiving those one-stop services from one organization, really high-quality pharmacy services. You know, we do continue to have a lot more of those integrated care opportunities in the organization. As we look ahead, all of our data is integrated into 1 data lake.
Speaker Change: Yeah, Hey, David Good morning, Thank you for the question.
Speaker Change: Historically, a lot of our a lot of our <unk>.
Great care synergies have been driven through our pharmacy services also provided to our provider patients, which is which is a real benefit to them.
Speaker Change: Seeding those one stop services from one organization that really high quality pharmacy services. We do continue to have a lot more of those integrated care opportunities in the organization as we look ahead all of our data is.
John Rousseau: You know, it's been 5 years of significantly investing in our infrastructure and building out a data lake so that that data is all in 1 place and available for all of our analytical slicing and dicing to track what we've been doing really towards the 2nd half of last year and more intensively this year. And we do continue to invest in resources to drive these integrated care opportunities. You know, we're building out our clinical nursing hub.
Speaker Change: <unk> integrated into one data Lake, it's been five years of significantly investing into our it infrastructure and building out a data lake that that data is all in one place and available for all of our analytical slicing and dicing.
Speaker Change: Track, what we've been doing really towards the second half of last year and more intensively. This year as we do continue to invest in resources to drive these integrated care opportunities. We're building out our clinical nursing hub. These are nurses, who are care coordinators for patients and we're actually now.
Speaker Change: Creating and building out an integrated care team within the organization of professionals that that's looking at patient that at each step in their journey and in a very clinically appropriate way working with them to provide the best services through their through their transition and so.
John Rousseau: You know, these are nurses who are care coordinators for patients, and we're actually now creating and building out an integrated care team within the organization of professionals. Professionals who are looking at patients at each step in their journey and, in a very clinically appropriate way, working with them to provide the best services through their transitions.
John Rousseau: And so that is what is occurring in the organization. We are making investments in it because we believe that there is a much, much greater opportunity. So, as we've been saying since the IPO, you know, I believe in the next year and a half, we're really going to start to see the fruits of more and more integrated care. In the organization, you know, we obviously have very clinically appropriate home health to hospice transitions, some personal care, and home health being delivered to the same patients therapy as well. You know, those are occurring today, but we see an opportunity to really increase that in the future. It takes focus.
Speaker Change: That is that is occurring in the organization, we are making investments in that because we believe that there is much much greater opportunity. So as we've been saying since the IPO I believe into next year in 2006, we're really going to start to see the fruits of more and more integrated care and the organization. We obviously have very clinically appropriate.
Speaker Change: Home health to hospice transitions, some personal care and home health being delivered to the same patients therapy as well those are occurring today, but we see an opportunity to really increase that in the future. It takes focus and so we're investing in an integrated care team to do that.
John Rousseau: And so we're investing in an integrated care team to do that. You know, I would say that we are continuing to make very significant strides in whole-base primary care. You know, we are at this point on the precipice of signing a very meaningful contract with a large payer. You know, we are not talking about that now, but we would plan to be talking about that in Q3 and Q4, and hopefully, that's the 1st of many to come in the future.
Speaker Change: Say that we are continuing to make very significant strides in home based primary care.
Speaker Change: We are at this point on the precipice of signing a very meaningful contract.
Speaker Change: With a large payer.
Speaker Change: We are not talking about that now, but we would plan to be talking about that in Q3, and Q4 and hopefully thats. The first of many to come.
John Rousseau: But, you know, we're not talking a whole lot about that 3rd pillar of primary care and integrated care, but we are continuing to be heads down and investing in it. And hopefully, as we get into as early as 2025, we start to see 8 figures from those efforts.
Speaker Change: In the future, but we're not we're not talking a whole lot about about that third pillar of primary care and integrated care, but we are continuing to be heads down and investing in it and hopefully as we get into as early as 2025, we start to see eight figures of EBITDA from those efforts.
John Rousseau: Okay, it sounds like the breadth of services that you have is one of the reasons why you're winning all of this share from your hospital clients, which obviously I like. Can you maybe just talk about the broader sort of acute care environment? Obviously, there was a lull in volumes a few, like a year, year and a half ago with COVID. It seems like all these volumes are coming back up. Just what are you seeing in terms of broad-based demand for acute care and, obviously, post-acute services from the market bank? Yeah, obviously, our platform is really unique, and we have the ability to be integrated care.
Speaker Change: Okay. It sounds like the breadth of services that you have is one of the reasons why you're winning all of this share from your hospital clients.
Speaker Change: Obviously I like can you maybe just talk about the broader sort of acute care environment. Obviously, there was a lull in volumes a few like a year year and a half ago with Colgate. It seems like all of these volumes are coming back up just what are you seeing in terms of broad based demand for acute care and then obviously post acute services from the market.
John Rousseau: Yeah, obviously, our platform is really unique, and we have the ability to be an integrated care provider at scale, which is, I think, very different from most others outside of one or two of the payers. But first and foremost, we really focus on quality and growth within each individual service line. And so we focus on each one of our core service lines to really drive best practices within each one of them. We believe additional integrated care opportunities are upside and on top of that across the platform.
Speaker Change: Yes, obviously, our platform is really unique and we have the ability to be an integrated care provider at scale I think very different from most others out outside of one or two of the payers.
Speaker Change: But first and foremost, we really focus on quality and growth within each individual service line and so we focus on each one of our core service lines to really drive.
Speaker Change: Best practices within within.
Speaker Change: Within each one of them, we believe additional integrated care opportunities are upside and on top of that across the platform and thats something that we are leaning into further in the future as we've talked about but really on top of each one of the core service lines executing at a high level and continuing to expand and deepen geographic.
John Rousseau: And that's something that we are leaning into further in the future, as we've talked about, but really on top of each one of the core service lines executing at a high level and continuing to expand and deepen geographically and gain market share. As it relates to hospitals and the acute systems, again, with our platform, we really do benefit from complementary diversification. David, we see referrals across such a myriad of different referral sources across our service lines.
Speaker Change: And gain market share.
Speaker Change: As it relates to the hospitals and the acute systems again with our with our platform, we really do benefit from complementary diversification, David we see referrals across such a myriad of different referral sources across our service lines for example in specialty pharmacy and encore.
John Rousseau: For example, in specialty pharmacy and oncology, and orphan, you're not seeing any dependencies on hospital systems. I mean, that's really more of a function of the oncology market and prescribers. Our rehab business is really not tethered to acute pharmacies either. Where we work with hospitals the most on things like home health and hospice, we're seeing double-digit growth rates there. So we just continue to focus on quality and commercial capabilities in each one of our service lines to drive volume and market share. And then, we are fortunate with this very unique platform to drive referral sources from a very diversified set of partners and relationships.
Speaker Change: Allergy and orphan.
David Larsen: We're not seeing youre, not seeing sort of any dependencies on on hospital systems, I mean, thats really more of a function of the oncology market and prescribers, our rehab business is really not tethered to acute pharmacies either.
Speaker Change: Where we worked with sorry to acute hospitals, either where we work with the hospitals. The most the most on things like home health and hospice, we're seeing double digit growth rates. There. So we just continue to focus on quality and commercial capabilities in each one of our service lines to drive volume and market share and then we are fortunate with this very unique <unk>.
Speaker Change: At form to drive referral sources from a very diversified set.
Speaker Change: Partners and relationships.
Speaker Change: Thanks very much.
Speaker Change: Thank you.
Operator: Our next question comes from Joanna Gadzik of Bank of America. Your line is open.
Speaker Change: Our next question comes from Joanna <unk> of Bank of America. Your line is open.
Joanna Gadzik: Hi, good morning. Thanks for taking the question. So in the provider segment, the margins were pretty good, 14%, so up nicely year over year. So I guess I assume I know where the drivers are, but I would like to hear, you know, is there anything specific to call out on the margins? And is that, you know, 14% margin sustainable going forward?
Joanna: Hi, Good morning, Thanks for taking my question. So on the provider segments weighed on margins was pretty good 14%, so up nicely year over year, So I guess.
Joanna: I assume I know what the drivers are about I would like to hear you know is there anything specific to call out there on the margins and is that 14% margin sustainable going forward.
John Rousseau: Yeah, hey, Joanna, good morning. Thanks for the question. You know, when I received the question, I think from Brian earlier about 2nd, half margins of the items I mentioned numerous of them driving that 1 that you could add to the list is just continued growth, and provider provider comparatively has higher margins. So, if that business continues to perform, well, you know, that'll be a tailwind in the 2nd half additionally.
Joanna: Yeah, Hey, Joanne and good morning.
Speaker Change: Thanks for the question.
Speaker Change: When I received a question I think from Brian earlier around second half margins.
Speaker Change: Of the items I mentioned numerous of them driving that one that that you could add to the list is just continued growth in provider provider comparatively have higher margins. So as that business continues to perform well.
Joanna: It'll be a tailwind in the second half. Additionally, yes, we do see sustainability in those margins, we really just focus on quality and patient care and continuing to drive volume growth and so stability.
John Rousseau: Yes, we do see sustainability in those margins. You know, we really just focus on quality and patient care and continuing to drive volume growth. And so stability on the provider side from a margin standpoint is just really underpinned by operational performance and volume growth and seeing some leverage in our fixed costs on that side of the business.
Joanna: On the provider side from a margin standpoint, it's just really underpinned by operational performance and volume growth and seeing some some leverage in our fixed costs on that side of the business.
John Rousseau: And to that end, I guess this Haven Hospital acquisition. I guess it's only the second half, but I guess it's also going to be additive to the segment EBITDA, maybe a percent or so. Is that a way to think about it in the ballpark?
Speaker Change: Thank you and to that and I guess this.
Joanna: Haven Hospital acquisition.
Speaker Change: I guess it is only second half, but I guess, it's going to be also additive to them.
Speaker Change: The segment EBITDA, maybe a percent or so is that the way to think about in the ballpark.
John Rousseau: Yeah, it's, you know, I don't, I'd have to double-confirm your math on the 1%, but we're excited about Haven. You know, I think that's a good example of our M&A prowess. You know, that was a tricky deal in terms of some idiosyncratic characteristics of that particular target, but Florida CONs are are a very, very rare commodity.
Speaker Change: Yes.
Joanna: Yes.
Speaker Change: I'd have to double confirm your math on the 1%, but we're excited about Haven I think Thats a good example of our M&A prowess that was a tricky deal.
Speaker Change: In terms of some idiosyncratic characteristics of that particular target.
Speaker Change: But Florida.
John Rousseau: I mean, you're talking about 1 or 2 of these becoming available over a 20-year period of time. You know, our ability to form relationships there and get to know the sellers and work with them through what was a very complicated process. I think it's a good example of how we're very opportunistic about M&A and the types of transactions we will do. You know, we structured that very uniquely in a way that we think really works for the balance sheet.
Speaker Change: <unk> are a very very rare commodity I mean, youre talking about one or two of these become available over a 20 year period of time, our ability to form relationships, there and get to know that.
Joanna: Sellers and to work with them through what was a very complicated process. I think is a good example of how we're very opportunistic on M&A and the types of transactions. We will do we structured that very uniquely in a way that we think really works for the balance sheet.
John Rousseau: You know, that's the business that we will lean into from a quality and an operational perspective to try to drive operational and performance. And with that, we would expect to see both volume census growth and operational improvements and margin growth occur over time. Really, over the next year to year and a half in that business, you know, that's the business that we ultimately see the 15Million dollar plus EBITDA business, but it'll take us a little bit of time to get there going through that not for profit conversion.
Joanna: That's the business that we will we will lean into from a quality and an operational perspective to try to drive operational performance and with that we would expect to see both volume census growth and operational improvements and margin growth occur over time.
Joanna: Over the next year to year and a half in that business. That's a business that we ultimately see the $50 million plus EBITDA business, but it'll take us a little bit of time to get there going through that not for profit conversion.
John Rousseau: But it really will be applying our operational best practices to that situation and trying to serve more Floridians with really high-quality hospice in those counties like we see an opportunity to do. So, you know, that's gonna be a little bit of a build-up. We lean into situations where we can really apply our operational capabilities to improve businesses, and this is a great example of doing that in a really attractive market.
Joanna: But it really will be applying our operational best practices to that situation and trying to serve more floridians with really high quality hospice in those counties like we see an opportunity to do so that could be.
Joanna: Be a little bit of a buildup, we lean into situations, where we can really apply our operational capabilities to improve the businesses. This is a great example of doing that in a really attractive market.
John Rousseau: Right. And I guess on the comment about the home health and hospice businesses growing double digits, how much of that, I guess, is organic? And I guess, is that revenue, or is that volume? I'm just interested in what you see in terms of your volumes, organic volumes in home health and hospice.
Speaker Change: Alright, and I guess on that comment around home health and hospice business is growing double digits.
Speaker Change: How much of that I guess, it's organic and I guess is that revenue or is it volume and just interested in what are you seeing in terms of your volumes organic volumes.
Joanna: Hospice.
John Rousseau: Yeah, that is largely organic. And, you know, I've been particularly pleased with the home health side of our business. You know, in hospice, we are a top five quality provider in the United States. So it's a continued focus on reaching patients and many more patients who really deserve and need hospice care at the end of their life, which clearly reduces costs and hospitalization and provides an outstanding quality result for families and patients themselves. So, you know, hospice: a very, very stable, incredible quality platform.
Speaker Change: Yes that is largely organic and I've been particularly pleased on the home health side of our business.
Joanna: In hospice, we are a top five quality provider in the United States. So it's.
Speaker Change: Continued focus on reaching patients and many more patients who really deserve and need hospice care at the at the end of their life, which clearly reduces cost and hospitalization and provides an outstanding quality.
Joanna: For families and patients themselves, so hospice very very stable incredible quality platform and.
John Rousseau: And we actually made a change there on the leadership side with our sales team bringing in a best-in-class sales leader for hospice. We're really excited about that. You know, on the home health side, we've continued to add some incredible talent to that business in the first half of the year, and we're really seeing the results, which is very pleasing to me. You know, the home health census was up, and admins were up, were in the mid-teens, year over year in Q2, but we're also seeing operational performance across a variety of initiatives in the organization.
Joanna: We actually we actually made a change there on the leadership side with our sales team, bringing in our best in class sales leader for hospice, we're really excited about that on the home health side. We've continued to add some some just incredible talent into that business in the first half of the year and we're really seeing the results, which is very pleasing to me.
Joanna: Census was up and admit we're up we're in the mid teens year over year in Q2, but we're also seeing.
Joanna: Operational performance across a variety of initiatives.
John Rousseau: So look, we remain, as I've said before, very optimistic about home health care in the long-term. You know, some of the bigger providers in the United States are being acquired, and we believe that just creates opportunities in the future. The gate cost savings from CMS themselves have never been more clear in terms of the benefit on home health. And so we're optimistic in the future that rates will get back to very appropriate levels of increases here over the next year or two. And, you know, we're really trying to set ourselves up to capitalize on that over the next three to five years.
Speaker Change: <unk> in the organization. So look we remain as I've said before.
Joanna: Three optimistic about home health over the long term you have some of the bigger bigger providers in the United States being acquired.
Joanna: We believe that just creates opportunity in the future.
Joanna: The date off savings from CMS themselves has never been more clear in terms of the benefit on home health and so we're optimistic in the future of that.
Joanna: Rates will get back to very appropriate levels of increases here over the next year or two and we're really trying to set ourselves up to capitalize on that.
Joanna: Over the next three to five years.
Jim Mattingly: Joanna, it's Jim Eddingly. One quick follow-up on your previous question about Haven Hospice. Just for clarity, we have not included Haven Hospice in our guidance. We have announced the transaction but haven't closed it yet. So we will include, you know, any change to our guidance which will be immaterial once that transaction closes with an update in the second half of the year. Thank you.
Joanna: Joanna one Joanna it's dramatically one one quick follow up on your previous question about Haven hospice just for clarity.
Speaker Change: We have not included Haven hospice on our guidance.
Speaker Change: We've announced the transaction, but haven't closed it yet. So we will include any change to our guidance, which will be immaterial once that once that transaction closes with an update in the second half of the year just for clarity.
Joanna: Clearly.
Joanna Gadzik: Great. Thank you. Thanks so much. Thanks so much for that.
Speaker Change: Great. Thanks, so much thanks, so much for that thank you.
Joanna: Thank you.
Operator: Our next question comes from Erin Wright of Morgan Stanley. Your line is open. Great, thanks for taking my question.
Speaker Change: Our next question comes from Erin Wright of Morgan Stanley. Your line is open.
Erin Wright: Great, thanks for taking my question. You know, it's a little early to ask, and you're not going to give formal guidance, but you mentioned 2025 several times on the call. Can you speak to some of those bigger picture kind of high-level headwinds and tailwinds that we should be thinking about as we're kind of modeling out 2025 both from a top-line profit perspective? Thanks.
Erin Wright: Great. Thanks for taking my question.
Speaker Change: It's a little early to ask.
Erin Wright: Im going to give formal guidance, but you mentioned 2025 several times on the call. Just can you speak to some of the bigger picture kind of high level.
Speaker Change: Headwind and tailwind that we should be thinking about as you're kind of modeling out 2025, both from a top line profit perspective.
Erinn: Yes, good morning Erinn.
Speaker Change: It did.
Speaker Change: Okay.
Speaker Change: Alright.
John Rousseau: Looking out several years, we're, you know, we're shifting to 1.25 planning mode, but we'll be getting into those details here more intensively into Q3. I think at this point in time, we just see great momentum in the business. Obviously, you know, raising our second half guide was a reflection of that at this point in time. You know, we've raised our guidance since the time of the IPO by about 35 million EBITDA. We just continue to see very good momentum, not only in the second half but continuing into 2025. You know, as we sit here today, we would anticipate very similar growth rates into 2025 with potentially some upside, you know, in that if we do a little bit more M&A.
Speaker Change: And looking out several years out.
Speaker Change: <unk> shipped.
Speaker Change: Chip.
Speaker Change: $25 spending mode, but we will be getting into those details here more intensively into Q3 I think at this point in time, we just see great momentum in the business.
Speaker Change: Obviously.
Speaker Change: Raising our second half guide was a reflection of that at this point in time.
Speaker Change: We've raised our guidance since the time of the IPO about $35 million of EBITDA. We just continue to see very good momentum in that.
Speaker Change: Just think about not only in the second half, but continuing into 2025 as we sit here today, we would we would envision a very similar growth rates and ended 2025 with potentially some upside in that if we do a little bit more M&A.
Speaker Change: Okay.
John Rousseau: Okay, and on that front, on the M&A side, you know, can you speak to the nature of the acquisition pipeline, the health of that today relative to, let's say, a year ago in terms of how you're thinking about the pipeline? Yeah, sure. I mean, we continue to have an overflow of opportunities.
Speaker Change: Okay and on that Brian on the M&A side.
Speaker Change: Can you speak to the nature of the acquisition pipeline the health of that today relative to let's say a year ago in terms of how youre thinking about the pipeline.
John Rousseau: Yeah, sure. I mean, we continue just to have an overflow of opportunities like we always have. The pipeline is very similar to always being extremely full, and we just have to be very judicious about which deals we do. We really pick carefully.
Speaker Change: Yes sure.
Brian <unk>: Can you just to have an overflow of opportunities like we always have the pipeline is it very similar to always which is extremely full.
John Rousseau: We've been focused on deals that are very accretive, here in the last year in particular, that are four times pro forma EBITDA or less, typically. And that's really where our focus has been.
Speaker Change: And we just have to be very judicious about which deals. We do we really pick carefully we've been focused on deals that are that are very accretive here in the last in the last year in particular that are four times pro forma EBITDA less typically.
Speaker Change: That's really where our focus has been but there is an opportunity to do significantly more EBITDA and we just have a focus on the balance sheet as well and getting to that three times leverage target here in the next two two and a half years very pleased with the cash flow in Q2, we actually.
John Rousseau: But there is an opportunity to do significantly more EBITDA. You know, we just have a focus on the balance sheet as well and getting to that three times leverage target here in the next two, two and a half years. You know, very pleased with the cash flow in Q2. We actually received the vast majority of the cash payment related to that. 20 year old lawsuit went out the door in Q2, you know, adjusted for that.
Speaker Change: The majority of the cash payment related to that 20 year old lawsuit went out the door in Q2.
John Rousseau: We had about 75M of OCF in the quarter, which obviously annualizes to about 300M for the year. So, you know, we continue to see our OCF at an annualized run rate of about 280 as we work towards, you know, that three times leverage target in the future. And, you know, we believe we can continue to augment our growth rate through very accretive M&A combined with combined with organic growth to achieve our growth objectives while we work towards that leverage target.
Speaker Change: Adjusted for that we had about $75 million of OCI in the quarter.
Speaker Change: That obviously annualize to about $300 million for the year. So we continue to see our ocs at an annualized run rate of about $2 80, as we work towards.
Speaker Change: That three times leverage target in the future and we believe we can continue to augment our growth rate through very accretive M&A.
Speaker Change: Combined with combined with organic growth to achieve our growth objectives, while we work towards that leverage target.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you Sir.
Erin Wright: Okay, great. Thank you. Thank you. Our next question comes from Anne Hines of Mizzou Health Securities. Your line is open.
Operator: Our next question comes from Anne Hines of Mizuho Securities. Your line is open. Hi, good morning.
Speaker Change: Our next question comes from Ann Hynes of Mizuho Securities. Your line is open.
Ann Hynes: Hi, Good morning in your prepared remarks, you referenced just the oncology pipeline over the next five years I know the company has a lot of leverage to that can you remind us maybe what drugs going generic at the end of the year. I think you said it was Q4 'twenty four is this earlier than expected.
Speaker Change: And maybe how we should think from a modeling perspective over the next three to five years.
Speaker Change: Well this kind of a generic wave add like 2% to your growth 2% to your growth just from.
Speaker Change: Yes, just from that leverage that would be great. Thank you.
Anne Hines: Yeah. Hey Anne.
Ann: Yeah, Hey, Ann.
Ann: No oncology is obviously two of the biggest areas.
Speaker Change: The massive specialty pharmacy market.
John Rousseau: Oncology and chronic disease are obviously two of the biggest areas of the massive specialty pharmacy market. It's a market that grows into the double digits, at 10 to 15 percent depending on the quarter. We have an extremely strong position as one of the two biggest independents in specialty pharmacy oncology in the United States. Again, our growth has just continued to be underpinned by great quality and very strong manufacturing relationships in addition to a sales force that really focuses on high-value generics.
Speaker Change: Market that grows.
Speaker Change: Got it.
Speaker Change: Into the double digits at 12, 10% to 15% depending on the quarter. So we have an extremely strong position as one of the two biggest independents, especially pharmacy oncology in the United States.
Speaker Change: And again our growth is just continued to be underpinned by great quality and very strong manufacturing relationships. In addition to a salesforce that really focuses on high value generic.
John Rousseau: There are some $90 billion of new brand oncology drug launches expected in the next seven years. The FDA pipeline has never been deeper. A lot of those drugs are going to be trending more towards niche drugs and more specific specialty indications, which is beneficial for numerous reasons as well. But the pipeline at Oncology has never been more robust. We have an incredibly strong position in that market, which has been built over the last 10 to 15 years. There are 11 big brand drugs growing generic over the next six to seven years. We show what those are in our PowerPoint on our website.
Speaker Change: Some $90 billion of new brand oncology drug launches expected in the next seven years <unk> 90 billion.
Speaker Change: The FDA pipeline has never been deeper a lot of those drugs are going to be trending more towards niche drugs and more specific specialty indications more narrower indication.
Speaker Change: That's beneficial for numerous.
Speaker Change: Even as well, but the pipeline has never been more robust and we have an incredibly strong position in that market.
Speaker Change: Which has been built over the last 10 to 15 years Theres 11, Big brand drugs growing generic over the next six to seven years, we show what those are on our Powerpoint on our web site. That's good for everybody generic conversions are good for everybody.
John Rousseau: That's good for everybody. Generic conversions are good for everybody. One that we've gotten visibility on here in Q2 because you really don't know the exact timing or dynamics around generic launches until you get very close to them, but Spricell is going generic here in Q4. We were able to get as much confirmation as we could here in Q2. That'll certainly be a positive event, like any brand to generic conversion is. We expect Spricell to be the first one of these next 11 meaningful generics to go here in Q4.
Speaker Change: One that we've got visibility here in Q2, because you really sort of don't know exact timing or dynamics around generic launches until you get very close to them but.
Speaker Change: But <unk> is going generic here in Q4, we were able to get as much confirmation as we could here in Q2.
Speaker Change: And that will certainly be a positive event like any brand to generic conversion is and we expect <unk> to be the first one of these 11.
Speaker Change: Next 11 meaningful generics to go here in Q4.
Speaker Change: Okay.
Speaker Change: Great. Thank you.
Operator: Thank you. As a reminder, to ask a question, please press star 1 1. And our next question comes from Peto Chickering of Deutsche Bank. Your line is open.
Speaker Change: Thank you as a reminder to ask a question. Please press star one one.
Speaker Change: And our next question comes from Peter Chickering of Deutsche Bank. Your line is open.
Peto Chickering: Hey, good morning guys. Going back to that back half-year margin ramp that Brian and Joanne have already asked, you know, you raised the revenue guidance by $125 million and EBITDA by $13 million. So that's a lot more EBITDA guidance raised than the revenue would suggest. So if you think about the EBITDA guidance raised of $8 million, $9 million more than the revenue raised, can you help sort of quantify exactly where that's coming from?
Peter Chickering: Hey, good morning, guys.
Peter Chickering: Going back to the back half of your margin ramp that Brian and Joann have already asked you raised the revenue guidance by.
Speaker Change: 195.
Speaker Change: EBITDA by $30 million.
Peter Chickering: So that's a lot more EBITDA guidance raised and the revenue would suggest so if you think about the EBITDA guidance raise of eight 9 million more than the revenue raise can you help quantify exactly where that's coming from how much came from hospice did you get any better provider.
Peto Chickering: I mean, how much came from hospice? Did you get any better provider Medicaid rates or any supplemental payments? You know, I get that the margin change improves as providers have a better margin, but I just want to bridge what happened from the last guidance to today's guidance.
Speaker Change: Medicaid rates are I, just took the amount of payments.
Speaker Change: Get that the margin change improves as steeply as providers have a better margin, but I just wanted to gauge what happened from last guidance to today's guidance.
John Rousseau: Yeah, thanks, Peto. I mean, you know, as I sort of mentioned before, there are about eight factors, more, but principally about eight factors in summary that are driving second half margins. I can talk a little bit more specifically about the businesses, but, first off, typically, second half margins are higher for a variety of reasons. We've seen that every year historically.
Speaker Change: Yeah. Thanks Peter.
Speaker Change: I sort of mentioned before Theres about eight factors more but principally about eight factors in summary that are driving second half margins.
Speaker Change: I can talk a little bit more specifically into the businesses, but first off typically second half margins are higher for a variety of reasons, we've seen that every year historically.
John Rousseau: You know, second, just volume growth. As we leverage fixed costs, as I mentioned before, we've been making a lot of corporate investments in our people and compliance quality in IT, as we always do. Corporate is estimated to be flat in the back half of the year.
Speaker Change: Second just volume growth as we leveraged fixed costs as I mentioned before we've been making a lot of corporate investments in our people in compliance quality in it as we always do corporate is estimated to be flat in the back half of the year leveraging fixed costs not only in corporate but in the businesses as we just continue to drive.
John Rousseau: Leveraging fixed costs, not only in corporate but in the businesses, as we just continue to drive, you know, very high volume growth here, approaching double digits on the provider side and 30% on pharmacy. Really, third, as I mentioned before, we get a benefit from calendar days. You know, there's more shipping on Monday through Fridays in the back half of the year. That's meaningful.
Speaker Change: Very high volume growth here.
Speaker Change: Double digits on the provider side and 30% on pharmacy really third I mentioned before we get a benefit from calendar days, there's more shipping in Monday through Friday is in the back half of the year. That's meaningful fourth is the reduction in payroll taxes fifth we get some rate.
John Rousseau: Fourth is the reduction in payroll taxes. Fifth, we get some rate support here in the back half of the year, particularly around hospice and Q4. You know, fifth, a lot of operational initiatives that we've been working on. Continuously, we have a continuous improvement, you know, lean focus in this organization, but, you know, there is a very meaningful benefit that we are driving the company through continued process focus and automation.
Speaker Change: Support here in the back half of the year, particularly around hospice into Q4 fit a lot of operational initiatives that we've been working on continuously we have a continuous improvement lean focus in this organization, but there is there is very meaningful benefit that we are driving in the company for continued process focus and automation.
John Rousseau: You know, we're seeing some of those projects really take off in the back half of the year. You know, I would say you've got new customer growth, meaningful growth, in particular on the home and community pharmacy side with one of the biggest skilled nursing providers in the country that, you know, we spent money to ramp up in Q2, but that's starting to roll on in terms of revenue here in Q3.
Speaker Change: We're seeing them some of those projects really roll on.
Speaker Change: The back half of the year I would say <unk> got new customer growth meaningful growth with in particular on the home and community pharmacy side with one of the biggest.
Speaker Change: Skilled nursing providers in the country that we spent money to ramp up in Q2, but that's starting to roll on in terms of revenue here in Q3, and then into Q4 specialty growth will continue to be very positive and then home health and hospice and rehab growth continues to be very strong in the back half of the year really that I'd, just sort of and with and really a.
John Rousseau: And then into Q4, specialty growth will continue to be very positive, and then home health and hospice, and rehab growth will continue to be very strong in the back half of the year. Really, that I just sort of, you know, end with and really, as you said, the provider business is going to continue to grow because that has a higher margin disproportionately. If you look at the margins in the back half, they are both on the provider side and on the pharmacy side. If you were to look into our margins business by business, we expect really every single one of them to tick up in the back half of the year.
Speaker Change: As you said the provider business is going to continue to grow that.
Speaker Change: That has a higher margin disproportionately if you look at the margins in the back half it's both on the provider side and on the pharmacy side. If you were to look into our markets business by business. We expect really every single one of them to tick up into the back half of the year.
Peto Chickering: Okay, let me try to ask this, I guess, in a different way. You raised Eva Dygatis by $13 million in three different buckets, pharmacy, provider, or corporate. Kind of, where did that $13 million come from? Thanks. Yeah, I mean, it's going to be a pretty even mix. We've seen, as I said before, just...
Speaker Change: Okay.
Speaker Change: I guess, a different way you raised EBITDA guidance about $13 million.
Speaker Change: In the three different buckets pharmacy provider corporate kind of where does that 30 million coming from thanks.
John Rousseau: Yeah, I mean, it's going to be a pretty even mix. We've seen, as I said before, just really broad-based growth in the organization. You know, I think that's a hallmark of what we're doing here at this company. We really try to drive excellence in every one of our service lines, and then, secondarily, we try to augment that platform through integrated care and leveraging our scale and our size to drive operational efficiencies, and then we augment all of that third with accretive acquisitions.
Speaker Change: Yes, I mean, it's going to be a pretty even mix we've seen as I said before just really broad based growth in the organization.
Speaker Change: That's a hallmark of <unk>.
Speaker Change: What we're doing here at this company.
Speaker Change: We really try to drive excellence in every one of our service lines and then secondarily, we try to augment that platform through integrated care and leveraging our scale and our size to drive operational efficiencies and then we augment all of that third with accretive acquisitions, that's always been our strategy and it's really at this point in.
John Rousseau: That's always been our strategy, and it's really, at this point in time, at least working better than ever before, and we think those are key strategies required to be successful in the future of healthcare. And again, I mean, we're going to get some leverage on a lot of our OPEX in the back half of the year, so we really focus on gross profit margin, and as your volume grows, what's your GP margin, and how much of that can you keep because you're being very disciplined on the OPEX side, and we're continuing to drive a lot of these operational initiatives.
Speaker Change: Time at least working better than ever before and we think those are those are key strategies required to be successful in the future of health care and again I mean, we're going to get some leverage on a lot of our opex in the back half of the year. So we really focus on gross profit margin and as your volume growth, what's your GP margin and how much of that can you keep because you are being very disciplined.
Speaker Change: On the Opex side, and we're continuing to drive a lot of these operational initiatives, but it's drive the core through our service line.
John Rousseau: But it drives the core through our service line. It leverages that core through integrated care and our size, scale, and efficiency, and then it complements all of that with accretive acquisitions. Those three strategies that have served us well for the last seven years are really powering the company so far this year, and we see that into the back half of 2025. Thank you. Our next question comes from Stephen Baxter of Wells Fargo. Your line is open.
Speaker Change: Leverage that core through integrated care, and our size and scale and efficiency and then its complement all of that with accretive acquisitions.
Speaker Change: Three strategies that have served us well for the last seven years or really powering the company. So far this year and we see that into the back half of 2025.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Stephen Baxter of Wells Fargo. Your line is open.
Operator: Hey, thanks. I just wanted to follow up on some of the gross margin commentary.
Stephen Baxter: Hey, Thanks, I just wanted to follow up on some of the gross margin commentary it looks like in the first and the second quarter. The revenue growth rate on the pharmacy side of the business is very similar but then in the second quarter, we solid gross profit growth jump up to I think 16%, excluding <unk> payments I think that was 6% growth.
Speaker Change: In the first quarter I will limit us here, a little bit more about what drove the acceleration and whether the rest of the year, maybe look more like the second quarter first quarter gross profit growth. Thank you.
Steven Baxter: Thank you, Steven. As we've said before, margins do just naturally tick up through the course of the year for a variety of reasons. And then you've got some favorability on mix on both really the product side, primarily the product side, a little bit payer, primarily product side, Q2 and specialty. And that was favorable to their margin, you know, our generics continue to perform very well, and those and those on the margin ticked up a little bit comparatively in Q2 versus brands. If you were to look at Q2 versus Q1, that would have a favorable margin impact.
Speaker Change: Yes, Thank you Steven.
Speaker Change: So as we've said before margins do just naturally tick up through the course of the year for a variety of reasons.
Speaker Change: And then you've got some favorability on mix.
Speaker Change: Both really the product side, primarily the product side, a little bit payer, primarily product side in Q2, and specialty and that was favorable to their margin. Our generics continue to perform very well in and those and those are on the margin ticked up a little bit comparatively in Q2 versus brands. If you were to look at Q2 versus Q1 in that.
Speaker Change: The favorable margin impact.
Speaker Change: Thank you.
John Rousseau: Our next question comes from Jack Wallace of Guggenheim Securities. Your line is open.
Speaker Change: Our next question comes from Jack Wallace of Guggenheim Securities. Your line is open.
Operator: Hey, congrats on the quarter. Thanks for taking my questions. Quickly, just on the provider side, since we got some nice volume gains there, just thinking about sourcing those market share gains, and how much of that is kind of incremental density in existing markets versus expansions into newer markets. Thanks.
Jack Wallace: Congrats on the quarter, thanks for taking my questions.
Jack Wallace: Quickly just on the provider side sounds get some nice volume gains there just thinking about the sourcing of those market share gains and how much of that is kind of incremental density in existing markets versus expansion into newer markets.
Jack Wallace: Yeah, hey, Jack. The majority of that is probably going to be just growth in current markets, figure 90-10 on that growth in current markets versus, say, newer growth coming from DeNovos or small, small tuck in M&A, but 90-95% of that is just from execution in our core markets and growth there. Really, each one of our markets that we're in on the provider side, we're growing, I'd say, on community living, kind of at the market growth rate, really everywhere else, growing above the market.
Jack Wallace: Yes, Hey, Jack.
Speaker Change: The majority of that is probably going to be just growth in current market figure 90, 10 on that growth in current markets versus say newer growth coming from de novo's or small small tuck in M&A, but 90% to 95% of that is just from execution in our in our core markets and growth there.
Jack Wallace: Really really each one of our markets that we're in on the provider side.
Jack Wallace: We are growing.
Jack Wallace: Say on community living kind of at the market growth rate really everywhere else growing above market.
John Rousseau: Gotcha, that's helpful. And then just another one to kind of double-click on the 2Q margin. You know, were there any kind of material puts and takes there associated with supporting DeNovo's recent tuck-ins and then also any impact from diabetes care payments? Thank you.
Speaker Change: Okay. That's helpful and then just.
Speaker Change: Another one kind of double clicking into two <unk> margin were there any kind of material puts and takes there associated with supporting de novo's.
Speaker Change: Recent tuck ins.
Jack Wallace: And then also any impact from diabetes care payments. Thank you.
John Rousseau: Yeah, it's, you know, I would say we did have some investments in the quarter to continue to see future growth. We're always very thoughtful about that.
Jack Wallace: Yeah.
Speaker Change: I would say we did have some investments in the quarter to continue to seed future growth, we're always very thoughtful about that.
John Rousseau: You know, the quarter could have been materially higher if we didn't continue to invest for the future like we do. But you have, you know, quite a few de novos, you know, still working towards profitability, which is consistent with their plans, and they'll get there. You know, those will drive nice EBITDA into the future. We did onboard a very large customer contract, which was several million dollars of startup costs in the quarter.
Speaker Change: The quarter could have been materially higher if we don't continue to invest for the future like we do.
Speaker Change: But you have quite a few de novo's still working towards profitability, which is consistent with with their plans and they will get there.
Speaker Change: We'll drive those will drive nice EBITDA and to the future. We did onboard a very large customer contract, which was several million dollars of startup costs in the quarter.
John Rousseau: You know, those would principally be the two. And, you know, we continue to make investments in our people and in IT. We think we've made a lot of those investments here in the last year, and corporate's going to even out in the back half of the year as we just continue to invest in the platform and position ourselves for the future.
Speaker Change: Those would principally be the two and we continue to make investments in our people and in it.
Speaker Change: We think we've made a lot of those investments here in the last year and corporate is going to even out in the back half of the year as we just continue to invest in the platform and position ourselves for the future.
Speaker Change: Thank you.
John Rousseau: Thank you. This concludes the question and answer session. I would now like to turn it back to John Rousseau for closing remarks.
Speaker Change: Thank you. This concludes the question and answer session I would now like to turn it back to Jon Rousseau for closing remarks.
John Rousseau: Thank you, Dede. Thanks, everybody, for joining our call today. We really appreciate the time. It was really another successful quarter for Brightspring. We continue to focus on serving as many patients as we can who need our high-quality and high-ROI services in the U.S. in a very differentiated way with a very differentiated platform. We're continuing to drive a very consistent set of winning strategies, and we look forward to talking with you again in another quarter. Have a great day. Thank you.
Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Jon Rousseau: Thank you Didi, thanks, everybody for joining our call today, we really appreciate the time it was really another successful quarter for bright spring, we continue to focus on serving as many patients as we can who need our high quality and high ROI services in the U S and a very differentiated way with a very differentiated platform, we're continuing to drive the very.
Speaker Change: <unk> instead of winning strategies and we look forward to talking with you again in another quarter have a great day. Thank you.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Jack Wallace: [music].
Jack Wallace: Okay.
Jack Wallace: Okay.
Jack Wallace: Okay.
Jack Wallace: [music].