Q3 2024 BrightSpring Health Services Inc Earnings Call

[music].

Good day and thank you for standing by welcome to Bright Spring Health Services, Inc. Third quarter 2024 earnings Conference 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 one one on your telephone.

Speaker Change: You will then hear an automated message advising your hand is 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 Phipps Chief Accounting Officer. Please go ahead.

Good.

Good morning. Thank you for participating in today's conference call. My name is Jennifer <unk>, Chief Accounting Officer at Bright Spring I am joined on today's call by John Russo Chief Executive Officer, and Jim Mattingly, Chief Financial Officer earlier today Bright spring released financial results for the quarter ended September.

Speaker Change: 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 and market conditions such forward looking.

Speaker Change: 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: 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.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: Which again are available on our Investor Relations website.

Speaker Change: 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 Jon Rousseau, Chief Executive Officer.

Jon Rousseau: Good morning, everyone. Thank you for joining bright springs third quarter of 2024 earnings call I.

Jon Rousseau: I would like to take a moment and express my gratitude and appreciation to them for our employees and teammates who work very hard to deliver incentive compassionate and quality care to the individuals and patients we serve across forward community settings everyday.

Jon Rousseau: We're pleased to have delivered another strong quarter of financial results third quarter total revenue was $2 9 billion, representing 29% growth year over year, and adjusted EBITDA was $151 million, representing 16% growth year over year.

Jon Rousseau: Based on this performance in the quarter, we are raising the midpoint of our total revenue and adjusted EBITDA guidance for 2024 from $570 million to $580 million to $580 million to $585 million.

Speaker Change: Jim will discuss our financial outlook in more detail shortly.

Speaker Change: Consistent with prior quarters, we continued to operate and expand in large and growing markets a significant need where we can best serve patients with a central high quality services.

Speaker Change: Within our pharmacy segment, we drove exceptional volume growth with our operational focus and rigor as well as leading sales and marketing strategies connecting patients with the services and therapies they need.

Speaker Change: Total scripts dispense a year to date continue to trend favorably as the operators continue to execute.

Speaker Change: Our specialty business outpaced forecast with higher script volumes, driven by 2023, and 2020 for LGD launches and generic scripts.

And provider, we saw good growth in census, and hours and we successfully integrated previously announced acquisition.

Speaker Change: We continue to deliver quality care to patients, while improving margins sequentially, driven by leveraging scale and best practices across the organization.

Speaker Change: And to Novo expansion remain a focus at bright spring. We continue to have a strong acquisition engine with a healthy pipeline that if converted would augment the organic growth profile of the company.

Speaker Change: All in all it bright spring we are proud of the high quality care, we delivered a complex patients where they reside and in the community, which support the financial results delivered.

Looking closer at third quarter performance Pharmacy solutions revenue of $2 3 billion represented 35% growth compared with the third quarter of last year.

Speaker Change: Driven primarily by strong script volume we.

Speaker Change: The infusion and specialty business had another very strong revenue quarter growing 42% year over year, while home community pharmacy revenue grew 19% year over year.

Speaker Change: Across the pharmacy segment, we saw a $10 9 billion total scripts dispensed in the third quarter, representing growth of 15% compared with last year, driven by 36% growth in specialty scripts dispense.

Speaker Change: Strong growth in specialty and infusion continued to be driven by our strategic focus and operational discipline, leading quality and net promoter scores partner and customer satisfaction, LGD launches salesforce support and integration with providers and generic drug utilization.

Speaker Change: The <unk> portfolio expanded to 123 therapies during the quarter and we continue to expect 80, new LCD for launch over the next 16% to 20 months.

Speaker Change: We are honored that <unk> hundred 60 was selected as the limited drug distribution specialty pharmacy partner for each of those therapies and are committed to improving the lives of patients who are battling cancer rare orphan and a number of other diseases.

Speaker Change: <unk> used for treatment of adults with newly diagnosed ph positive CML in the chronic phase also converted and launched this generic late in the third quarter and we look forward to helping patients navigate the generic opportunity now in the market.

Within infusion the business continued to drive volume growth in acute and chronic therapies in the third quarter.

Speaker Change: Throughout 2024.

Speaker Change: Can you to Overinvest in our infusion business, we started with operational leadership changes earlier in the year and we have been investing in people capabilities and process to drive operational efficiencies best practices and improving profitability in the future expecting to see results from these investments in 2025.

And hoping community pharmacy this quarter mid teens script growth was driven by new customer wins and strong execution of our service programs across a variety of common community settings, including assisted living skilled nursing medical and rehab facilities behavioral settings, and hospice as well as other low.

Occasions, where patients need at home pharmacy support.

Turning to provider services segment revenue grew 10% year over year and segment adjusted EBITDA margin expanded by 50 basis points year over year, primarily driven by broad based execution volume growth and leveraging infrastructure across all service lines.

Speaker Change: Community and rehab care revenue grew 8%, which is a testament to the quality and customer service. The team continues to deliver to patients.

Speaker Change: And our rehab business, we saw billable hours growth in the mid teens compared with last year.

Speaker Change: New and future Avenue of growth. We're excited about is our rehab and motion program. This program supports part B Medicare outpatient rehab patients as we add de novo's through partnerships with AOS to provide rehab care to seniors and additional home and community settings.

Speaker Change: Complementary to the commercial and workers comp neuro rehab that we're known for today and also complementary to our home health primary care and hospice services, we provide to the Medicare population in Pos and in homes today.

We anticipate rehab in motion to continue to evolve next year and growth through meaningful size over the next five years. Another way we are laying the foundation for long term growth and better and more integrated prescriber and patient solutions.

Speaker Change: Community living performance has remained consistent driven by quality services delivered to clients by a conscientious in coordinated care team within a robust infrastructure as most recent evidence of this we received another three year car for credit nation in the state of Indiana, which is very difficult for providers to achieve and another third party.

Speaker Change: <unk> stamp of quality.

Speaker Change: In the third quarter and help healthcare revenue grew 13% year over year and average daily census grew 16% to over 46000 supported by exceptional clinical quality scores, including 30 day readmission rates that are 60% lower than the national average and our emerging primary care services.

Speaker Change: Towards the end of the third quarter, we announced the closing of the Haven Hospice acquisition, and we look forward to expanding our quality care to high need patients in Florida.

Speaker Change: Our hospice business continues to display a solid growth profile with great patient satisfaction. We currently hold an 84% overall rating of care. According to the consumer assessment of health care provider and systems.

Speaker Change: Overall in 2024 bright spring and our teams continue to execute consistently towards our mission of driving compassionate and comprehensive health solutions to complex populations.

We believe we are well positioned to deliver on our updated 2020 for outlook.

Speaker Change: Broad based strength across pharmacy provider continues to underpin bright spring success in.

In 2025 and beyond the company plans to drive operational best practices and volume growth in attractive markets, while further providing patients reliable coordinated high quality and lower cost care.

Speaker Change: Before I turn the call over to Jim to discuss our third quarter financial results and 2024 guidance in more detail I would like to highlight that we recently added a third independent director to our board Dr. Steve Miller, who brings to bright spring decades of impressive clinical leadership experience.

Speaker Change: I look forward to working with Steve to grow our company and deliver leading quality of care to patients.

Speaker Change: With that I'll turn the call over to Jim to walk through the financials and updated guidance.

Jim: Thank you John.

Jim: Total revenue in the third quarter of 2024 was $2 9 billion, representing 29% growth from the prior year period.

Pharmacy solutions segment revenue was $2 3 billion achieving growth of 35% year over year.

Jim: Within the pharmacy segment infusion of specialty revenue was $1 7 billion representing growth of 42% from last year and home and community pharmacy revenue was $588 million representing growth of 19% year over year.

Jim: In the provider services segment, we reported revenue of $641 million representing growth of 10% compared to the prior year period.

Jim: Within the provider services segment home healthcare reported $265 million in revenue for the third quarter growth of 13% versus last year and community and rehab care revenue was $376 million representing growth of 8% year over year.

Jim: Moving down the P&L total company gross profit in the third quarter was $408 million representing growth of 14% compared with the third quarter of last year.

Jim: Gross profit was negatively impacted by approximately $10 million related to nonrecurring items in the quarter, including startup costs related to Onboarding, a large customer in home or community pharmacy, a small impact from the hurricane that was not material to adjusted EBITDA.

Jim: A settlement with a payer related to prior periods.

Jim: Adjusted EBITDA for the total company was $151 million for the third quarter growing 16% compared to last year adjusted EPS for the total company was <unk> 11 for the third quarter.

Jim: Turning back to segment performance Pharmacy solutions gross profit was $189 million growing 16% compared with the third quarter of last year adjusted EBITDA for pharmacy solutions was $99 million for the third quarter growing 15% compared to last year, representing an adjusted EBITDA margin of four 4%, which was in line with our expectations.

Jim: Provider services gross profit was $219 million growing 13% versus the third quarter of last year adjusted EBITDA for provider services was $93 million for the third quarter growing 14% versus last year, representing an adjusted EBITDA margin of 14, 5% up 50 basis points.

Jim: As last year.

Jim: On a total company basis cash flow from operations was $27 million in the third quarter of 2024, including $24 million as a final payment on the legacy legal matter previously disclosed.

Jim: Excluding that legal payment cash flow from operations was $51 million, which was in line with our expectations and included some strategic inventory purchases.

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 two to three years.

Jim: As of September 30th our net debt outstanding is approximately $2 7 billion with a leverage ratio at 439 times, which was in line with our internal projections.

Jim: 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.

Jim: Quarterly interest expense is still expected to be approximately $50 million per quarter, including approximately $1 4 million and interest expense related to the <unk> instrument.

Jim: Turning to our guidance for 2024, we are raising expectations for revenue and adjusted EBITDA.

Jim: Total revenue is now expected to be in the range of 11.0 dollars to $11 3 billion, including pharmacy solutions revenue of $8 5 billion to $8 75 billion and provider services revenue of $2 5 billion to $2 55 billion.

Jim: We are also raising our total adjusted EBITDA outlook to the range of 580 million to $585 million for full year 2020 for.

Jim: This range represents 14, two to 15, 2% growth versus full year 2023, when excluding the Q IP received in 2023.

Jim: Since the start of the year, we have increased the midpoint of our adjusted EBITDA guidance by nearly $42 million.

Jim: At the midpoint of our adjusted EBITDA range. The adjusted EBITDA margin is approximately five 2% and we continue to expect to see margin expansion in Q4.

Speaker Change: With that I'll now turn it back to John.

Jon Rousseau: Thank you for your time today to go through bright spring third quarter results of guidance update we will now open up the call for questions operator.

Speaker Change: Thank you.

Speaker Change: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please standby, while we compile the Q&A roster.

Speaker Change: Our first question comes from the line of Brian <unk> from Jefferies.

Brian: Hey, good morning, guys and congrats on the solid quarter.

Brian <unk>: Maybe John My first question just to the point that Jim made about margins expected to be expecting that to improve in the fourth quarter. Just curious how we should be thinking about that between balancing between mix and other initiatives that would drive that margin expansion.

Speaker Change: Hey, Brian Good morning.

Speaker Change: Q4 is always typically our highest margin quarter of the year for a variety of reasons.

Speaker Change: <unk> days and other items, but we expect that trend to continue this year as it's been for almost every year.

Speaker Change: Or some other.

Speaker Change: Non structural items that are going to occur or we expect to occur in Q4, we.

Speaker Change: We had a we had a launch of.

Speaker Change: Of a generic drug and specialty spray sell the hospice new hospice rate goes goes into effect in the quarter, we should be through some on boardings up some new customers as well.

Speaker Change: Those items, along with continued volume growth and leveraging our fixed costs are all.

Speaker Change: Ultimately as well adders to to the margin in the quarter and we are holding our corporate.

Speaker Change: Much flat quarter over quarter at this point in time.

Speaker Change: Awesome and then maybe John just as a follow up there is a lot of.

Speaker Change: There are a lot of questions from the Investor community on Biosimilars and pricing adjustment there does seem to be happening in that space. So just curious what youre seeing or how we should we be thinking about your exposure to some of these pricing dynamics in the biosimilar. Thanks, Yes.

Speaker Change: So that's not relevant in our specialty pharmacy oncology business in rare and orphan business, that's more of an oral and injectable business as you look to infusion.

Speaker Change: <unk> really the only drug we're aware of right now where youre seeing biosimilar activity.

Speaker Change: For us given our business mix at the company as well as in infusion.

Speaker Change: We don't see a material impact from that there is still multiple items that have to play out in that specific situation that could be positive.

Speaker Change: Well.

Speaker Change: And.

Speaker Change: And then for us specifically in infusion.

Speaker Change: There is a whole host of operational initiatives as we've talked about that we've been focused on this year.

Speaker Change: In terms of our service delivery, our nursing et cetera, et cetera, where we're really building for the future we've been making investments to try to build.

Speaker Change: Very durable long term platform in this space with leading service levels. So that's where our focus has been and we believe we have we are as we've talked about margin upside in that business into next year from a whole host of other operational.

Speaker Change: And sales related items.

Speaker Change: From from anything to do with the Stellaris So for US as we think about 2025.

Speaker Change: <unk> and what happens on that next year is not going to have a material impact versus what we otherwise would have set and are planning to say that.

Speaker Change: And that specific case.

Speaker Change: The drug is <unk>, 2% of our company revenue less than 5% of our GP. So.

Speaker Change: Again, we're focused on growing volume and driving efficiency in the business to hopefully move past.

Speaker Change: Any of these events as they inevitably occur in the market from time to time. These are just things that you have to absorb.

Speaker Change: Fortunately there is a lot of other growth drivers.

Speaker Change: Awesome John Thank you so much very helpful.

Speaker Change: Thank you.

One moment for our next question.

Our next question comes from the line of a J rice from UBS.

Speaker Change: Thanks, Hi, everybody.

Speaker Change: I know last quarter, you talked about being in negotiations with a large.

Speaker Change: Long term care operators sounds like from your comments about startup costs for Onboarding, a client that must have come to fruition.

Speaker Change: You give us any color on what that might be you did I think also last quarter you had talked about.

Speaker Change: Being in discussion with some managed care a large managed care plan.

Speaker Change: About your home health business Im wondering if there was any update on what youre seeing in contracting at home health as well.

Speaker Change: Yeah, Thanks, a J.

Speaker Change: So on the first point in home and community pharmacy weaker scripts in that business year over year of double digit again.

Speaker Change: And we continue to focus on sales and marketing tactics in this space across multiple attractive channels and.

Speaker Change: And that's all really underpinned by our service programs and our quality as well as we really try to differentiate in the market on those on those dimensions, but we did onboard one customer in particular as we've talked about that was very successful it was across over 200 buildings and.

Speaker Change: It was a big effort, but I think speaks to the execution of the team we're probably the only company in the United States that would have been able to do that.

Well, we still do have some lingering costs.

Speaker Change: You incur overtime and some other things as you're onboarding, such a massive amount of customers and individuals. We expect that to continue to decrease as we get through Q4 and into Q1.

Speaker Change: You can think about that is.

Speaker Change: $1 million of monthly EBITDA that we've been able to drive that hopefully should should continue to increase as we get into Q1.

Speaker Change: And ultimately finalized.

Speaker Change: What we what we see as a long term labor profile for that specific situation.

Speaker Change: On home based primary care, we do continue to talk to a handful of.

Payers here in the early innings.

Speaker Change: The idea being that we can provide.

A very high level of primary care directly where payer members are in the home and community for the high risk.

Speaker Change: <unk> and dramatically reduce hospitalization.

Speaker Change: These discussions.

Speaker Change: Take a while but they are still continuing to progress and then looking very well.

Speaker Change: One specific situation.

Speaker Change: Don't yet have the ability to specifically talk about that other than it's continuing to trend in the right direction.

Speaker Change: Okay and.

Speaker Change: Glad to hear you got the Haven deal completed I think the original discussion was it that might contribute.

Speaker Change: Another $15 million of EBITDA is there any update on how that might flow through is that a 2025 potential contribution.

Speaker Change: Any thoughts on how you might have.

Speaker Change: Expand how quickly you might expand that business and what revenue contributes yes. It was good to see that close in the first 30 60 days have been have been excellent in terms of Onboarding the team and really really getting ingrained with with everybody over there just a ton of enthusiasm I believe coming together.

Speaker Change: That will be about $1 million or two of EBITDA realized this year.

Speaker Change: We believe that can be a $50 million opportunity over over several years.

A 510 15 stair step if you will over over the next couple of years.

Speaker Change: Okay. Thanks, a lot sure.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of David Larsen from <unk>.

David Larsen: Hi, congratulations on the good quarter can you talk a little bit about the impact of the inflation reduction Act.

Speaker Change: Theres any I mean, we've seen.

<unk> pulled back yesterday, we've seen icon on the CRO has come under some pressure.

Speaker Change: A view amongst some investors that it's sort of a headwind on the overall market.

Speaker Change: My view is maybe it's causing pharma to invest more heavily into specialty just wanted to ask is brand inflation in the IRI, having on your overall business. Thanks, a lot yes.

Speaker Change: Yes. So certainly these are events that you would look out to in the future.

Speaker Change: Primarily in 2026.

Speaker Change: The <unk> situation could be an example, where a manufacturer move to do certain things in the market are ahead of that timeline.

Speaker Change:

Speaker Change: Again, thats a situation for us that's meaningful whatsoever.

Speaker Change: Take it take a business by business and pharmacy on specialty we really just have one drug on the list.

Speaker Change: That's out in 2026, but we are having very constructive conversations with that manufacturing partner already and see no risk on that specific situation and in our specialty oncology business.

Speaker Change: You look at infusion, we talked about the one drug there.

Speaker Change: For us in our situation.

Speaker Change: That's not material and then you look at the LTC pharmacy, where you've got six or seven drugs on the list for 2026.

Speaker Change: There was very good news in Q3 around this which is which is what we thought but CMS has always said in the Iras I mean, it was written into it.

Speaker Change: The intention is to have no impact on the pharmacies.

Speaker Change: And so CMS really formalize that in Q3.

Speaker Change: Basically, stating that clarifying that theres going to be a true up mechanism to whack.

Speaker Change: For the LTC pharmacies, which is pretty much exactly what we were seeking so you've got to take this business by business drug by drug, but as we look across specialty infusion and LTC pharmacy.

Speaker Change: We feel like we're in a really good place the value of pharmacies in the last mile to the patient's home and what we do from a program and quality perspective.

Speaker Change: Just beyond essential in the pharmacy World you can't get the drug to the home without the pharmacies as willing participants and so.

Speaker Change: The specific situations of the drug in each business.

Speaker Change: Our very low risk to us looking out a couple of years and then Cms's formalization of the mechanism on the LTC side was great to see in the quarter.

Great and then just any color around M&A volumes.

Speaker Change: <unk> has been under pressure because of high volumes. It seems to me like that could be a tailwind to you just any color there on how the plans that have been under how that's translating to your business. Thanks.

Speaker Change: Yes for us as it relates to M&A, that's going to be on the provider side and.

Speaker Change: Really the only relevance there is on home health, a little bit and so.

We've been we've been constructive in working with home health over the past several years, just given the imbalance of demand and supply and home health demand really outstrips supply.

Speaker Change: Today, 40% of the individuals who need home health don't get it which is which is really really a problem because the benefits of home health are so profound it keeping people out of the hospital on reducing cost and so really the only relevance there. David is it is in our home health business call it 30% or so of what we do is M&A.

Speaker Change: But we've had very constructive relationships just given quality levels.

Speaker Change: Ed.

Speaker Change: And the broad contracting that we do with payers across all of our service lines at continuing to negotiate.

We could see considered to be very sustainable rates with that so.

Speaker Change: From an M&A standpoint, that's really it in the company.

Speaker Change: Thanks, a lot.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of Joanna <unk> from Bank of America.

Speaker Change: Hi, good morning. Thanks, so much for taking the question. So I guess I have two questions related to prior topics. If I may so the first one on the IAA and if any will commenting on that tangent.

Speaker Change: So the block prices, but on the flip side, there's some opportunity for part D.

Essentially lowering the cost of a patient and some payers that that batesville.

Speaker Change: Nation specialty glass because of that so how do you think the best well and also in this context.

Speaker Change: The changes to the patient costs are actually going to be even 25. So do you expect even bigger increase.

Speaker Change: Thanks, <unk> next year.

Speaker Change: Thank you. Thank you.

Speaker Change: Hey, Joanna thank you.

Speaker Change: Yes, I mean, what you referred to there.

Speaker Change: From a from a part D perspective has been and we expect we will continue to be to be positive for us to the extent that.

Speaker Change: Drugs are continuing to be made more affordable for patients.

Speaker Change: That is only a good thing.

Oncology in particular is a very dynamic market.

Speaker Change: It is an extremely innovative and high growth market right now and with our quality with our relationships with manufacturers and with our sales force.

Speaker Change: We are continuing to drive.

Speaker Change: Very robust volume growth in that business specialty and infusion grew their revenue.

Speaker Change: Over 40% in the quarter as example.

Speaker Change: As the calendar turns into January every year. Some of those items that you mentioned go into effect that was an accelerant this year for us and given our planning ahead of the changeover of year over year. This year in January we expect.

Speaker Change: The bolus of new referrals, as well and our sales and marketing team as always months out in front of an event like that making sure that we can.

Take full advantage of it to get these life saving drugs to as many people as we can so we would expect another bump as we get into January from a volume perspective.

Due to the items that you laid out.

Speaker Change: Great. Thank you if I may follow up.

Speaker Change: On the discussion around Stella. Thank you details in terms of your exposure but.

Speaker Change: Infusion peer set I guess, you referred to it but there are some changes that make up the lineup that sue.

Speaker Change: Introduced.

Speaker Change: Hello.

Speaker Change: The changes happening essentially but do you see that spread much maturity on that track. So how does this change if that's what's to happen because sounds like maybe not final, but if that was to happen. How does this change your view of the impact of future.

Speaker Change: Similar launch it could we see other truck makers kind of followed suit and does that change how you think about biosimilars benefit to your business going forward. Thank you.

Speaker Change: Yeah look, it's really impossible to prognosticate around sort of the future of biosimilars in the space.

Speaker Change: I would just say that at least at least we view this situation as being very idiosyncratic.

Speaker Change: This drug is on the IRR IR able if.

Speaker Change: And that's that's probably at play here in terms of any of the change in pricing from from the manufacturer in this one specific instance, so.

Speaker Change: That's our view is that this is this is isolated.

Speaker Change: When you step back and you look at.

Speaker Change: Infusion broadly continues to be an extremely attractive market.

Speaker Change: Where there are real barriers to entry.

Speaker Change: Given the local services.

Speaker Change: And the high demand from prescribers and patients for fast turnaround time is a high execution business where.

Speaker Change: I think some of the larger players in the market they have done a fantastic job.

Speaker Change: We like to participate in pharmacy markets that are challenging from a service model perspective, and that are local that really defines everything we do so we like infusion a lot for those reasons.

Speaker Change: The pipeline is extremely deep.

Speaker Change: There are many possible growth drivers in this market over the next 135 and 10 years and.

Speaker Change: Look drugs drugs coming onto the market drugs going generic drugs going biosimilar that is constantly at play in any drug market and with a long term focus on quality service levels and volume and then real efficiency from a margin perspective, you just have to continue to focus on those critical.

Speaker Change: Success factors and take advantage of all the opportunities you can over time.

Speaker Change: For us that's been continuing to try to try to drive volume as much as we can on infusion as we've talked about.

Speaker Change: That's a business that was less mature and our company historically we've.

Speaker Change: We've made a lot of investments in that business. This year, that's in our P&L, we expect those to be a benefit as we look into next year.

Speaker Change: So again <unk>, we view as a very specific situation for a variety of reasons and.

Speaker Change: And as I said before not one that would materially change our our outlook from what we were otherwise planning next year and there are still several items to play out within this <unk> specific situation that can be very positive as well so still more to be seen there.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: One moment for our next caller.

Speaker Change: Our next question comes from the line of Ann Hynes from Mizuho.

Ann Hynes: Hi, Good morning, Thank you for the question.

Ann Hynes: No youre, not giving 2025 guidance, but heading into next year can you maybe highlight some key headwinds in tailwind you might be facing.

Speaker Change: Yeah, Hey, Ann.

Speaker Change: Sure.

Speaker Change: Yes, we'll be getting to 2025 guidance and time off.

Speaker Change: Obviously, we're well down the path of budgets.

Speaker Change: So we need to formula formalize all that work and formalized.

Speaker Change: <unk> to be communicated.

Speaker Change: But at this time as I've said in the past.

Speaker Change: We're feeling the same way if not a little bit more positive as we were on the last call in terms of our ability to continue to drive our historical level of growth into next year.

Speaker Change: The last eight years now our CAGR has been in the double digits from a revenue and EBITDA growth perspective, and we see no reason why why that would change next year and that's our that's our base plan.

Speaker Change: And how we're thinking about the business right now.

Speaker Change: In terms of drivers in the business again, just given our business mix.

Speaker Change: We are a multi pronged growth company, it's something we really like and you look at specialty first and foremost, there's just a ton of momentum, particularly in the oncology and rare and orphan space.

Speaker Change: We have a dominant position as an independent pharmacy in that market and in our quality and our trade relationships and our sales force investment and focus.

It's continuing to drive the business forward, we certainly expect that to continue <unk> launched in Q3 it went generic.

Speaker Change: It's a tailwind and other drug is going to go generic and hopefully Q1, maybe Q2, hopefully Q1, and we continue to have just really good momentum overall from our LTE launches, we will launch <unk>. This year of note of those 15 LTE launches in specialty.

Speaker Change: Four or five are exclusive and the rest are only.

Speaker Change: And ultra narrow networks are two pharmacies or less and so manufacturers really selecting only one or two pharmacies.

Speaker Change: To fulfill and support these drugs. So we will continue with our <unk> momentum and our generics momentum in our existing portfolio next year as well and then our fee for service business in specialty.

With highly valued services in data we provide for manufacturers that continues to grow too so.

Speaker Change: Multiple growth drivers within specialty alone I mentioned infusion, we expect the investments operationally in that business to start to pay off next year. We would expect continued volume growth in that business with double digit, but and importantly.

Speaker Change: We're expecting to see the margin in that business now starts to tick up just given some of the operational projects. We've been we've been focusing on.

Speaker Change: For us that's an opportunity to grow our market share in a really attractive bid.

Speaker Change: Big market and that's our focus with with with service levels that hopefully are in the are in the top of the industry.

Speaker Change: And that's what we've been working on there I should note also on infusion corium.

Speaker Change: <unk> in the quarter that they were getting out of acute.

Speaker Change: A lot of the infusion players when you look out there have just started to focus on specialty, particularly the smaller infusion companies RFP.

Speaker Change: Our thesis is that you have to do both you have to do acute and you have to do chronic infusion.

Speaker Change: Ah therapies.

Speaker Change: That to US is the most relevant to the Payor payers would expect you to be able to infuse all therapy types for their members and not just one or two and so we are focusing on being a broad based infusion company that continues to do acute acute infusion is a huge market and it has it has era.

Speaker Change: <unk> margin and so we believe that Theres a lot of reasons to continue to do acute.

Speaker Change: Quorum is most recently pulled away from that market that should also be a tailwind as we get into next year as we've said before we like home health and hospice alive Hospice continues to get great rates support.

Speaker Change: We expect both of those businesses to continue to grow volume doubled.

Speaker Change: Double digits, and we continue to invest in operational technology and efficiency centralization opportunities in those businesses as well, we like rehab clinically as well, we expect that business to grow at double digits. As we continue to do de novo's in more markets and penetrate current markets and that we will continue to try to evolve.

Speaker Change: And scale, our home based primary care business for upside too so.

Speaker Change: I Didnt mentioned LTC, our third pharmacy business, but that business is going to be up year over year on EBITDA for us this year for a variety of reasons and I think both from a volume and customer and a margin perspective next year given some of the operational initiatives. We have been driving hard this year, we expect to see LTC pharmacy.

Speaker Change: Do well next year.

Speaker Change: Great. Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Yes.

Speaker Change: Our next question comes from the line of Whit Mayo from Leerink.

Whit Mayo: Hey, thanks.

Curious about the sequential growth implied within the guide for the fourth quarter certainly points to the stronger seasonality that we see within the business, but how are you sort of thinking about the directional trends within each of the individual segments. Thanks.

Speaker Change: Yes, so Q4.

Speaker Change: Would imply essentially a 15% to 16% growth rate year over year.

Speaker Change: Step up of 10% to $15 million sequentially.

Speaker Change: But we feel good about that number I think it's a reflection of our of our continued operational execution and focus on growth at the company, we spoke to a number of the drivers earlier and.

Speaker Change: And.

Speaker Change: And why we raised our guidance.

Speaker Change: We raised our guidance again as we look at Q4.

Speaker Change: It's going to be more of the same.

Speaker Change: Ross the across the business.

Speaker Change: Pharmacy is expected to grow at very healthy rates.

Speaker Change: And provider is expected to grow at a double digit EBITDA growth rate in Q4 as well so very very similar relative contribution I would say in the Q4 growth as we saw in the Q3 growth.

Speaker Change: But Jim or John I don't know if you had anything else.

Speaker Change: Yes, John I would just add a couple of pieces Q4, as we've talked about.

Speaker Change: Half of the year is stronger from a seasonality perspective in the first half and Q4 historically is a little bit stronger than Q3. So we have our best seasonality period of the year the number of different different initiatives John mentioned earlier as it relates to the margin question that came up.

Speaker Change: So very much drive the dollar profit so so the price will generic launch that.

Speaker Change: Went live at the end of Q3 will be be full bore in Q4.

Speaker Change: On the our launch on the home and community pharmacy customer.

Speaker Change: Customer those those startup costs will start to dissipate as we go into and through Q4, which will be net favorable quarter over quarter.

Speaker Change: On the provider side, we continue to have solid rate support hospice rates went live 10 one.

Net favorable quarter over quarter sequentially that Haven hospice acquisition, while while not overly meaningful from a from a total company EBITDA perspective on the full year.

Speaker Change: Sequentially Q3 to Q4 is certainly net positive and then we just have we have overall volume continuing to grow year over year and sequentially that that drives through Q4 and through the end of the year. So all of those pieces really add up to a.

Speaker Change: A a high degree of confidence all wrapped around a a divisional G&A and corporate overhead that.

Speaker Change: We continue to scale, our corporate overhead Q2 to Q3 was flat our corporate overhead Q3 to Q4 should be in the same same area or slightly favorable as we continue to grow revenue and drive gross profit and business level.

Speaker Change: Stability. So all of those pieces add up to a strong Q4 for us to close out the year as we continue to scale holding holding those divisional and corporate costs flat.

Speaker Change: That's super helpful. Maybe.

Speaker Change: Missed this but just and maybe start in your best interest to say this but like where do you think the capital deployment priorities will be.

Speaker Change: Over the next year you have been active in half was maybe a little bit marginally in home health are there any areas or businesses do you think maybe more non core going forward. So just kind of thinking about the portfolio and how you are maybe allocating capital or taking capital out as you look out over the next year, Yes, I think from an acquisition strategy perspective with its just going.

Speaker Change: Be extremely consistent with what we've done over the past couple of years on the pharmacy side.

Speaker Change: There's opportunities for very accretive.

Speaker Change: Transactions.

Speaker Change: Sub four times.

Speaker Change: And long term care pharmacy or infusion those are those will be things we look at.

Speaker Change: And then on the and then on the provider side, its been rehab and home health and hospice and and then home based primary care as well so.

Speaker Change: That will continue to be the focus if I had to say up and exits.

Speaker Change: It's probably 50 50.

Speaker Change: As a rule of thumb.

Speaker Change: Our pipeline right now we have three or four.

Speaker Change: Very small little.

Speaker Change: Tuck ins in our home health and hospice.

Speaker Change: Those are the kind of things that are.

Speaker Change: A couple of million dollars or less of capital, but just.

Speaker Change: Just really high ROI investments.

Speaker Change: Investments that we can make certainly we might do several acquisitions that are little bit bigger than that.

Speaker Change: Three four or $5 million EBITDA range, that's sort of our base case right now.

Speaker Change: And then on the de Novo side.

Speaker Change: It's really it's really on provider at this point between home health hospice and rehab.

Speaker Change: Entrance into adjacent markets and new markets.

Speaker Change: Call It call it 10% to 20 of those a year. Those are those are several hundred thousand dollars investments for each asset.

Speaker Change: Very easy to do from a capital standpoint.

Speaker Change: Typically and historically have had really good ROI attached to them. So.

Speaker Change: No Big plans at this point in time for four for anything outside of what we've been doing over the last two years.

But were always opportunistic we always have opportunities.

Speaker Change: Very focused on getting to a specific leverage target that's at the front and center right now for everything we're doing.

Speaker Change: And our behavior over the last year or two has been to focus on smaller very accretive.

Speaker Change: Transactions.

Speaker Change: Could be a couple that are a little bit bigger, but it's sub $10 million of EBITDA.

Speaker Change: We will always remain agile for situations that are just really unique to us that we can drive value for shareholders, but that's our base plan.

Speaker Change: Okay. Thanks.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of Linda Bolton from Morgan Stanley.

Speaker Change: Hi, Good morning, Howard This is Linda Bolduc on for Erin Wright. Thanks for taking my question, so going quickly back to the Iia I believe I heard a mention of the company having one Doug.

Speaker Change: Sorry Draglines.

Speaker Change: The lora or is it another drug and if so what is that journey.

Speaker Change: Yeah.

Speaker Change: Yes, improve especially oncology would.

Speaker Change: It would be the one drug, especially oncology, we have a great relationship there with the manufacturer we've been we've been talking to them.

Speaker Change: For months already well over a year ahead of any IRA we feel very good about that situation in terms of.

Speaker Change: How it's all going to play out I don't see any risk there.

Speaker Change: On the infusion side, it's really Solara, we talked about that.

Speaker Change: And we think thats pretty isolated within the infusion world and and then on LTC Theres five or six drugs.

Speaker Change: I've mentioned in the quarter CMS really clarified in memorialized.

Speaker Change: Their language around the true up mechanism that would be in place for the LTC pharmacies.

Speaker Change: Which was which was great to see that really took any meaningful impact.

Speaker Change: For the industry.

Speaker Change: Down significantly it took the risk down significantly there are still items that we will be working with.

Speaker Change: CMS and on the hill throughout all of next year in terms of things that we believe the LTC industry.

Speaker Change: Should do and have that would make sense for everybody.

Speaker Change: That debt that we would view as positive for LTC. So we're still going to be working on our long list of.

Speaker Change: Of of items with with folks in D C as it relates to LTC.

Speaker Change: But but that'll play out over next year, but it was really good to see at least sort of the baseline fees.

Speaker Change: Feedback from from CMS in the quarter, so that really summarizes everything across our service lines as it relates to IRA.

Speaker Change: Really no change from our perspective in terms of.

Speaker Change: How we think about long term growth over over three five years and beyond at the company.

Speaker Change: Thanks, that's helpful.

Speaker Change: Also within the pharmacy segment, we've seen continued quarter over quarter impressive growth compared to last year, and especially when we compare that to a long term growth target of high single digits.

Speaker Change: Just to parse out this growth a bit further how much of that impressive growth this relate to.

Speaker Change: Great spring, capturing meaningful share kind of industry peers and the market expanding with these new specialty Chad.

Speaker Change: Yes, I think its primarily the latter oncology is a.

Speaker Change: One of the two biggest markets within specialty pharmacy, it's growing it's growing in the double digits in the innovation pipeline is as big as ever I think theres, some $90 billion of new revenue expected to come onto the market in the next seven or eight years.

Speaker Change: And there is a massive generic pipeline as you look out seven years. After Sprightful just went generic in Q3. There is 10 more large brands that are expected to go generic over the next six to seven years and so.

Speaker Change: As those events are occurring as it is new brands come onto the market and Ltd's.

Speaker Change: Our team just given our service levels.

Speaker Change: And our sales force investments has really been effective at being able to work closely with manufacturers to be.

Speaker Change: A launch partner on these new brands and.

Speaker Change: That's something we take very seriously and and endeavor to provide the best possible service to our manufacturing partners and our and our patients every day, but I would say us really having done the hard work over the last 15 years to put ourselves in a really good position from a quality and service perspective and sales force perspective.

Speaker Change: <unk>.

Speaker Change: To work closely with the innovators in this market as they come to market to be a partner and to be able to capitalize on those on those new drugs entering the market and.

Speaker Change: And really try to provide the best and the most speedy service for patients as possible and Janet generics are good for everybody and so we've also had a real focus strategically.

Speaker Change: Strategically and from a tactical perspective on how we support generics.

Speaker Change: That's something that just anybody can do.

Speaker Change: It is also extremely involved in place to our business model really well.

Speaker Change: That's very helpful. Thank you.

Speaker Change: Thank you.

Speaker Change: So you please limit yourself to one question due to time constraints.

Speaker Change: Our next question comes from the line of Jamie <unk> from Goldman Sachs.

Speaker Change: Hey, good morning, guys.

Jamie: John I was hoping you could spend a minute just on your early primary care efforts, what Youre look.

Jamie: Gives me looking for there to to gauge the level of management focus and capital.

Jamie: Deploy here.

Jamie: How should we be measuring your success in that space in 2025 and 2026.

Speaker Change: Yeah. Thanks, Jamie.

Speaker Change: So that's a business that we continue to really grow and focus on mostly organically. It's been an organic build where we've never really lost any money.

Speaker Change: Which is which has been a.

Speaker Change: Prerogative for us, but the business has continued to drive very good patient growth. This year again. These are these are doctors.

Speaker Change: 80% of the time nurse practitioners going into assisted living going into going into skilled nursing facilities that sometimes to the home.

Speaker Change: B the primary.

Speaker Change: Physician and clinician.

Speaker Change: To really drive 60% reductions in hospitalization rates so.

Speaker Change: With that value proposition that benefit we continue to grow our volumes.

Speaker Change: At 40%, 50% from a patient perspective this year the key for US was getting some ACO contracts in place and with our eyes SNP acquisition back late in Q2, having our own internal.

Speaker Change: Managed care plans and so those efforts are discontinuing on Theres a lot of focus around it we're not talking about it really very much until theres really real EBITDA there to talk about we'll do $7 million of EBITDA in that space. This year, but we're hoping to get to eight figures of EBITDA quickly.

Speaker Change: Maybe next year, certainly certainly into 2026 as we have.

Speaker Change: As we have about a five to seven year target to manage.

Speaker Change: Over 100000 patients.

Speaker Change: In that business. So I would say patient count is really sort of the best near term proxy over the next year or two and then and then obviously you would look at profitability of the business and the level of profitability.

Speaker Change: I think as we get into 2026 in particular and that potentially be pretty meaningful as a growth driver in the company, but things are going well there and we continue to focus on our patient population as it relates to lives, where we have ACO shared savings as it relates to lives on.

Speaker Change: And I SNP model and as it relates to lives in the future hopefully.

Speaker Change: Where we are contracted with the payer managing their members.

Speaker Change: Alright, Thats really helpful. Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of <unk> Chickering from Deutsche Bank.

Speaker Change: Hey, good morning, guys relative to street models, it looks like the provider solid business with a big part of the third quarter EBITDA beat so how much of that margin improvement sort of seen this quarter, which is spectacular.

Speaker Change: Came from pricing versus community and rehab patients declining year over year, so positive mix coming from home health or just overall SG&A leverage on the 10% revenue growth yes.

Speaker Change: Yeah, Thanks, Peter Theres, a little bit of both.

Speaker Change: So certainly we had good volume growth in the quarter with that we were able to leverage fixed cost which was helpful. From a margin perspective. When you look at four factors number. Two then you look at mix with home health continuing to grow at attractive rates to the hospice with their margins relative to the commute.

Speaker Change: City living business.

Speaker Change: Rehab as well, so rehab and home health and hospice. Those are those are higher margin than the community living business as those businesses continue to grow volume at higher rates.

Speaker Change: That is at play as well really third we've continued to drive some nice efficiency projects across the organization, which really get reflected in the P&L of the individual segments of businesses, but for example, with our corporate.

Speaker Change: <unk> business process optimization team and with our corporate procurement team.

Speaker Change: We're on track to deliver over $20 million. This is really outside of pharmacy initiatives. We're on track to deliver over $20 million of cost reduction this year.

Speaker Change: Just from a procurement purchasing an efficiency perspective, the benefit of that really flows through the businesses and the segments in the P&L and then I would say really fourth just given the value the quality of the services and the ROI of all of these services, which dramatically reduced.

Speaker Change: Costs versus any other setting.

Speaker Change: To get good <unk>.

Speaker Change: Have good rate advocacy and rates support, particularly on the hospice and community living side. The vast majority of that ultimately goes and funds, our clinicians and our frontline caregivers. So that we can continue to have a very stable workforce.

Speaker Change: But that is that is helpful as well.

Speaker Change: Great. Thanks, so much nice quarter.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Our final question from Matthew Gilmore from Keybanc.

Matthew Gilmore: Hey, Thanks for the question for the $10 million of nonrecurring items, you called out I was curious if you could delineate between the startup losses and the Payor settlement.

Matthew Gilmore: And then related to that was that something that was contemplated in guidance are we should we view that as sort of incremental too.

Matthew Gilmore: You reported on EBITDA.

Speaker Change: Yes, so I'll turn that over to Janet Jim I mean, as it relates to any of the startup costs associated with Onboarding, new customers that would have been in the guidance before it all along.

Speaker Change: The item as it relates to.

Speaker Change: All payer situations that dated back to literally six years ago, very very isolated but any other comments on that too. Yes. So that payer settlement was also included from a guidance perspective as well.

Speaker Change: We did finalize as we noted all of the other legal cases that was an increase this year.

Speaker Change: From a non recurring.

Speaker Change: Expenses standpoint, as well as we had a lot of acquisition and integration costs in the quarter as we were.

Speaker Change: We're working through.

Speaker Change: At this project.

Speaker Change: Got it thank you.

Speaker Change: Thank you.

Speaker Change: At this time I would now like to turn the conference back to John Russo for closing remarks.

Thank you everybody for your time today, we appreciate it at the company. We continue to focus everyday on trying to bring a very valuable high quality services to people across homes and communities all around US every day, who really can benefit from these services. So.

Speaker Change: We continue to do a good job really focusing on operational execution in each one of these service lines.

Speaker Change: Quality volume growth and efficiency will remain our areas of focus and we are optimistic about closing out 2020 forward getting into 2025.

Speaker Change: Good position again trying to make the biggest impact we can through our people and our communities. Thank.

Speaker Change: Thank you for all your time today and have a good one bye.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

[music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Sure.

Speaker Change: Okay.

Speaker Change: Okay.

Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Dan.

Speaker Change: [music].

Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Thanks.

Speaker Change: [music].

Okay.

Okay.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

[music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Yeah.

Speaker Change: Yes.

Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Dan.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: [music].

Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: [music].

Speaker Change: Good day and thank you for standing by welcome to Bright Spring Health Services, Inc. Third quarter 2024 earnings Conference call.

Speaker Change: 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 one one on your telephone.

Speaker Change: You will then hear an automated message advisor your hand is raised to withdraw your question. Please press star one one again, please be advised that today's conference is being recorded.

Speaker Change: I would now like to hand, the conference over to your Speaker today, Jennifer Phipps Chief Accounting Officer. Please go ahead.

Jennifer Phipps: Good morning. Thank you for participating in today's conference call. My name is Jennifer <unk>, Chief Accounting Officer, a bright spring I am joined on today's call by John Russo Chief Executive Officer, and Jim Mattingly, Chief Financial Officer.

Jennifer Phipps: Earlier today Bright spring released financial results for the quarter ended September 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.

Jennifer Phipps: 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. We encourage you to review the information in today's press release and presentation as well as in our core.

<unk> 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.

Jennifer Phipps: 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.

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.

Jennifer Phipps: Which again are available on our Investor Relations website.

Jennifer Phipps: 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.

Jon Rousseau: Good morning, everyone. Thank you for joining bright spring third quarter 2024 earnings call.

Jon Rousseau: I would like to take a moment and express my gratitude and appreciation to them for our employees and teammates who work very hard to deliver attentive compassionate and quality care to the individuals and patients we serve across all with community settings everyday.

Jon Rousseau: We're pleased to have delivered another strong quarter of financial results third quarter total revenue was $2 9 billion, representing 29% growth year over year, and adjusted EBITDA was $151 million, representing 16% growth year over year.

Based on this performance in the quarter, we are raising the midpoint of our total revenue and adjusted EBITDA guidance for 2024 from $570 million to $580 million to $580 million to $585 million.

Speaker Change: Jim will discuss our financial outlook in more detail shortly.

Speaker Change: Consistent with prior quarters, we continue to operate and expand in large and growing markets a significant need where we can best serve patients with a central high quality services.

Within our pharmacy segment, we drove exceptional volume growth with our operational focus and rigor as well as leading sales and marketing strategies connecting patients with the services and therapies they need.

Speaker Change: Total scripts dispense a year to date continue to trend favorably as the operators continue to execute.

Speaker Change: Our specialty business outpaced forecast with higher script volumes, driven by 2023, and 2024 LCD launches and generic scripts.

Speaker Change: Provider, we saw good growth in census, and hours and we successfully integrated previously announced the acquisition.

Speaker Change: We continue to deliver quality care to patients, while improving margins sequentially, driven by leveraging scale and best practices across the organization M&A.

Speaker Change: M&A and de Novo expansion remain a focus at bright spring. We continue to have a strong acquisition engine with a healthy pipeline that if converted would augment the organic growth profile of the company.

Speaker Change: All in all it bright spring we are proud of the high quality care, we delivered a complex patients where they reside and in the community, which support the financial results delivered.

Speaker Change: Looking closer at third quarter performance Pharmacy solutions revenue of $2 3 billion represented 35% growth compared with the third quarter of last year, driven primarily by strong script volume.

Speaker Change: Infusion in specialty business had another very strong revenue quarter growing 42% year over year, while home <unk> community pharmacy revenue grew 19% year over year.

Speaker Change: Across the pharmacy segment, we saw $10 9 million total scripts dispensed in the third quarter, representing growth of 15% compared with last year, driven by 36% growth in specialty scripts dispense.

Speaker Change: Strong growth in specialty and infusion continued to be driven by strategic focus and operational discipline, leading quality and net promoter scores partner and customer satisfaction, LGD launches salesforce support and integration with providers and generic drug utilization.

Speaker Change: The <unk> portfolio expanded to 123 therapies during the quarter and we continue to expect 80, new Ltd's the launch over the next 16 to 20 months.

Speaker Change: We are honored that onto a 360 was selected as the limited drug distribution specialty pharmacy partner for each of those therapies and are committed to improving the lives of patients who are battling cancer rare orphan and a number of other diseases.

Speaker Change: <unk> used for treatment of adults with newly diagnosed ph positive CML in the chronic phase also converted and launched this generic late in the third quarter and we look forward to helping patients navigate the generic opportunity now in the market.

Speaker Change: Within infusion the business continued to drive volume growth in acute and chronic therapies in the third quarter. Throughout 2024, we have continued to overinvest in our infusion business. We started with operational leadership changes earlier in the year and we have been investing in people capabilities and process to drive operational efficiency.

Speaker Change: <unk> best practices and improving profitability in the future expecting to see results from these investments in 2025.

And hoping community pharmacy this quarter mid teen script growth was driven by new customer wins and strong execution of our service programs across a variety of home and community settings, including assisted living skilled nursing medical and rehab facilities behavioral settings, and hospice as well as other.

Speaker Change: <unk>, where patients need at home pharmacy support.

Speaker Change: Turning to provider services segment revenue grew 10% year over year and segment adjusted EBITDA margin expanded by 50 basis points year over year, primarily driven by broad based execution volume growth and leveraging infrastructure across all service lines.

Speaker Change: Community and rehab care revenue grew 8%, which is a testament to the quality and customer service. The team continues to deliver to patients.

And our rehab business, we saw billable hours growth in the mid teens compared with last year.

Speaker Change: New and future Avenue of growth. We're excited about is our rehab and motion program. This program supports part B Medicare outpatient rehab patients as we add de novo's through partnerships with AOS to provide rehab care to seniors and additional home and community settings.

Speaker Change: Elementary to the commercial and workers comp neuro rehab that we're known for today and also complementary to our home health primary care and hospice services, we provide to the Medicare population in Pos and in homes today.

Speaker Change: We anticipate rehab in motion to continue to evolve next year and growth through meaningful size over the next five years.

Speaker Change: Other way, we are laying the foundation for long term growth and better and more integrated prescriber and patient solutions.

Speaker Change: Community living performance has remained consistent driven by quality services delivered to clients by a conscientious in coordinated care team within a robust infrastructure.

Speaker Change: As most recent evidence of this we received another three year car for credit nation in the state of Indiana, which is very difficult for providers to achieve and another third party stamp of quality.

Speaker Change: In the third quarter and help healthcare revenue grew 13% year over year and average daily census grew 16% to over 46000 supported by exceptional clinical quality scores, including 30 day readmission rates that are 60% lower than the national average and our emerging primary care services.

Speaker Change: Towards the end of the third quarter, we announced the closing of the Haven Hospice acquisition, and we look forward to expanding our quality care to high need patients in Florida.

Speaker Change: Our hospice business continues to display a solid growth profile with great patient satisfaction. We currently hold an 84% overall rating of care. According to the consumer assessment of health care provider and systems.

Speaker Change: Overall in 2024 bright spring and our teams continue to execute consistently towards our mission of driving compassionate and comprehensive health solutions to complex populations.

Speaker Change: We believe we are well positioned to deliver on our updated 2024 outlook.

Speaker Change: Broad based strength across pharmacy provider continues to underpin bright spring success.

Speaker Change: In 2025 and beyond the company plans to drive operational best practices and volume growth in attractive markets, while further providing patients reliable coordinated high quality and lower cost care.

Before I turn the call over to Jim to discuss our third quarter financial results and 2024 guidance in more detail I would like to highlight that we recently added a third independent director to our board Dr. Steve Miller, who brings to bright spring decades of impressive clinical leadership experience.

I look forward to working with Steve to grow our company and deliver leading quality of care to patients.

Speaker Change: With that I'll turn the call over to Jim to walk through the financials and updated guidance.

Jim Mattingly: Thank you John.

Jim Mattingly: Total revenue in the third quarter of 2024 was $2 9 billion, representing 29% growth from the prior year period.

Jim Mattingly: Pharmacy solutions segment revenue was $2 3 billion achieving growth of 35% year over year.

Jim Mattingly: Within the pharmacy segment and infusion of specialty revenue was $1 7 billion representing growth of 42% from last year and home and community pharmacy revenue was $588 million representing growth of 19% year over year.

Jim Mattingly: In the provider services segment, we reported revenue of $641 million representing growth of 10% compared to the prior year period.

Jim Mattingly: Within the provider services segment home healthcare reported $265 million in revenue for the third quarter growth of 13% versus last year and community and rehab care revenue was 376 million representing growth of 8% year over year.

Jim Mattingly: Moving down the P&L total company gross profit in the third quarter was $408 million representing growth of 14% compared with the third quarter of last year gross profit was negatively impacted by approximately $10 million related to nonrecurring items in the quarter.

Jim Mattingly: <unk> startup costs related to Onboarding, a large customer in home or community pharmacy, a small impact from the hurricane that was not material to adjusted EBITDA and a settlement with a payer related to prior periods.

Jim Mattingly: Adjusted EBITDA for the total company was $151 million for the third quarter growing 16% compared to last year adjusted EPS for the total company was <unk> 11 for the third quarter.

Jim Mattingly: Turning back to the segment performance Pharmacy solutions gross profit was $189 million growing 16% compared with the third quarter of last year adjusted EBITDA for pharmacy solutions was $99 million for the third quarter growing 15% compared to last year, representing an adjusted EBITDA margin of four 4%, which was in line with our expectations.

Jim Mattingly: <unk>.

Jim Mattingly: Provide our services gross profit was $219 million growing 13% versus the third quarter of last year adjusted EBITDA for provider services was $93 million for the third quarter growing 14% versus last year, representing an adjusted EBITDA margin of 14, 5% up 50 basis points versus last year.

Jim Mattingly: On a total company basis cash flow from operations was $27 million in the third quarter of 2024, including $24 million as a final payment on the legacy legal matter previously disclosed excluding that legal payment cash flow from operations was $51 million, which was in line with our expectations and included some strategic inventory purchase.

Jim Mattingly: <unk>.

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 two to three years.

Jim Mattingly: As of September 30, our net debt outstanding is approximately $2 7 billion with a leverage ratio at 439 times, which was in line with our internal projections.

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 32025.

Jim Mattingly: Quarterly interest expense is still expected to be approximately $50 million per quarter, including approximately $1 4 million and interest expense related to the <unk> instrument.

Jim Mattingly: Turning to our guidance for 2024, we are raising expectations for revenue and adjusted EBITDA.

Jim Mattingly: Total revenue is now expected to be in the range of 11.0 billion to $11 3 billion.

Jim Mattingly: Including pharmacy solutions revenue of $8 5 billion to $8 75 billion and provider services revenue of $2 5 billion to $2 55 billion.

Jim Mattingly: We are also raising our total adjusted EBITDA outlook to the range of 580 million to $585 million for full year 2020 for.

Jim Mattingly: This range represents 14, two to 15, 2% growth versus full year 2023, when excluding the Q IP received in 2023.

Since the start of the year, we have increased the midpoint of our adjusted EBITDA guidance by nearly $42 million at.

Jim Mattingly: At the midpoint of our adjusted EBITDA range. The adjusted EBITDA margin is approximately five 2% and we continue to expect to see margin expansion in Q4.

Speaker Change: With that I'll now turn it back to John.

Thank you for your time today to go through bright spring third quarter results and guidance update we will now open up the call for questions operator.

Speaker Change: Thank you.

Speaker Change: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please standby, while we compile the Q&A roster.

Speaker Change #100: Our first question comes from the line of Brian <unk> from Jefferies.

Speaker Change #101: Hey, good morning, guys and congrats on the solid quarter.

Brian <unk>: John My first question just to the point that Jim made about margins expected to be expecting that to improve in the fourth quarter. Just curious how we should be thinking about that between balancing between mix and other initiatives that would drive that margin expansion.

Speaker Change #102: Hey, Brian Good morning.

Speaker Change #103: Q4 is always typically our highest margin quarter of the year for a variety of reasons include.

Speaker Change #103: Including days and other items, but we expect that trend to continue this year as it's been for almost every year there are some other.

Speaker Change #103: Non structural.

Items that are going to occur or we expect to occur in Q4.

Speaker Change #103: We had a we had a launch of.

Speaker Change #103: Of a generic drug and specialty spray sell the hospice new hospice rate goes goes into effect in the quarter, we should be through some on boardings of some new customers as well.

Speaker Change #103: Those items, along with continued volume growth and leveraging our fixed costs are all.

Speaker Change #103: Ultimately as well adders to to the margin in the quarter and were holding our corporate pretty much flat quarter over quarter at this point in time.

Speaker Change #104: Awesome and then maybe John just as a follow up there's a lot of.

Speaker Change #105: There are a lot of questions from the Investor community on Biosimilars and pricing adjustment there does seem to be happening in that space. So just curious what youre seeing or how should we be thinking about your exposure to some of these pricing dynamics in the biosimilar. Thanks, Yes.

Speaker Change #105: So that's not relevant in our specialty pharmacy oncology business in rare and orphan business, that's more of an oral and injectable business as you look to infusion.

Speaker Change #105: <unk> really the only drug we're aware of right now where youre seeing biosimilar activity.

Speaker Change #105: For us given our business mix at the company as well as in infusion.

Speaker Change #105: We don't we don't see a material impact from that there is still multiple items that have to play out in that specific situation.

Speaker Change #105: That could be positive as.

Speaker Change #105: As well.

Speaker Change #105: And.

And then for us specifically in infusion.

Speaker Change #105: There's a whole host of operational initiatives as we've talked about that we've been focused on this year.

Speaker Change #105: In terms of our service delivery, our nursing et cetera, et cetera, where we're really building for the future we've been making investments to try to build very durable long term platform in this space with leading service levels. So that's where our focus has been and we believe we have we are as we've talked about margin upside of that business into <unk>.

Speaker Change #105: Next year from a whole host of other operational.

Speaker Change #105: And sales related items separate from anything to do with Mr. Laura So.

Speaker Change #105: For us as we think about 2025.

Speaker Change #105: <unk> and what happens on that next year is not going to have a material impact versus what we otherwise would've said and are planning to say.

Speaker Change #105: In that specific case.

Speaker Change #105: The drug is <unk>, 2% of our company revenue less than 5% of our GP. So.

Speaker Change #105: Again, we're focused on growing volume and driving efficiency in the business to hopefully move past.

Speaker Change #105: Any of these events as they inevitably occur in the market from time to time. These are just things that you have to absorb.

Speaker Change #105: Fortunately there is a lot of other growth drivers.

Speaker Change #106: Awesome John Thank you so much very helpful.

Speaker Change #106: Thank you.

Speaker Change #107: One moment for our next question.

Speaker Change #108: Our next question comes from the line of a J rice from UBS.

Speaker Change #109: Thanks, Hi, everybody.

Speaker Change #110: I know last quarter, you talked about being in negotiations with a large.

Speaker Change #111: Long term care operators sounds like two more comments about startup costs for Onboarding, a client that must have come to fruition.

Speaker Change #111: Give us any color on what that might be you did I think also last quarter you had talked about.

Speaker Change #111: Being in discussion with.

Speaker Change #111: Managed care, a large managed care plan.

About your home health business Im wondering if there was any update on what youre seeing in contracting in home health as well.

Speaker Change #112: Yeah, Thanks, a J.

Speaker Change #112: So on the first point in home and community pharmacy weaker scripts in that business year over year of double digit again.

Speaker Change #112: And we continue to focus on sales and marketing tactics in the space across multiple attractive channels and.

Speaker Change #112: And that's all really underpinned by our service programs and our quality as well as we really try to differentiate in the market on those on those dimensions, but we did onboard one customer in particular as we've talked about that was very successful it was across over 200 buildings and.

Speaker Change #112: It was a big effort, but I think speaks to the execution of the team we're probably the only company in the United States that would have been able to do that.

Speaker Change #112: Going well, we still do have some lingering costs.

Speaker Change #112: You incur overtime and some other things as you're onboarding, such a massive amount of customers and individuals we expect that to continue to decrease as we get through Q4 into Q1.

You can think about that is.

Speaker Change #112: $1 million of monthly EBITDA that we've been able to drive that hopefully should should continue to increase as we get into Q1 in <unk>.

Speaker Change #112: And ultimately finalized.

Speaker Change #112: What we what we see as a long term labor.

Speaker Change #112: Flavor profile for that specific situation.

Speaker Change #112: On on home based primary care, we do continue to talk to a handful of.

Speaker Change #112: Payers here in the early innings.

Speaker Change #112: The idea being that we can provide.

A very high level of primary care directly where payer members are in the home and community for the high risk.

Speaker Change #112: <unk> and dramatically reduce hospitalization.

These discussions.

Speaker Change #112: Take a while.

Speaker Change #112: They are still continuing to progress and looking very well.

Speaker Change #112: One specific situation.

Speaker Change #112: Don't yet have the ability to specifically talk about that other than it's continuing to trend in the right direction.

Speaker Change #112: Okay.

Speaker Change #113: Glad to hear you got the Haven deal completed I think the original discussion was that that might contribute.

Speaker Change #114: Another $15 million of EBITDA is there any update on how that might flow through is that a 2025 potential contribution is.

Speaker Change #115: Any thoughts on how you might have.

Speaker Change #115: Expand how quickly you might expand that business and what revenue account contributes yes. It was good to see that close in the first 30 60 days have been have been excellent in terms of Onboarding the team and really really getting ingrained with with everybody over there just a ton of enthusiasm that we have coming together.

Speaker Change #115: That will be about $1 million or two of EBITDA realized this year.

Speaker Change #115: We believe that can be a $50 million opportunity over over several years.

Speaker Change #115: And a $510 15 stair step if you will over over the next couple of years.

Speaker Change #116: Okay. Thanks, a lot sure.

Speaker Change #117: Thank you one moment for our next question.

Speaker Change #118: Our next question comes from the line of David Larsen from BTG.

Hi, congratulations on the good quarter can you talk a little bit about the impact of the inflation reduction Act.

Speaker Change #118: Theres any I mean, we've seen.

Speaker Change #118: <unk> pulled back yesterday, we've seen icon on the CRO has come under some pressure.

Speaker Change #118: A view amongst some investors that it's sort of a headwind on the overall market.

Speaker Change #118: My view is maybe it's causing pharma to invest more heavily into specialty just wanted to ask as brand inflation and the IRI having on your overall business. Thanks, a lot yes.

Yes. So certainly these are events that you would look out to in the future.

Speaker Change #118: Primarily in 2026.

Speaker Change #118: The <unk> situation could be an example, where a manufacturer move to do certain things in the market ahead of that timeline.

Speaker Change #118: Again Thats <unk>.

Speaker Change #118: Situation for us that's meaningful whatsoever.

Speaker Change #118: Got to take it take a business by business and pharmacy on specialty we really just have one drug on the list.

Speaker Change #118: That's out in 2026, but we are having very constructive conversations with that manufacturing partner already and see no risk on that specific situation and in our specialty oncology business.

Speaker Change #118: You look at infusion, we talked about the one drug there.

For us in our situation.

That's not material and then you look at the LTC pharmacy, where <unk> got six or seven drugs on the list for 2026.

Speaker Change #118: There was very good news in Q3 around this which is which is what we thought.

Speaker Change #118: CMS has always said in the Iras I mean, it was written into it.

Speaker Change #118: That the intention is to have no impact on the pharmacies.

Speaker Change #118: And so CMS really formalize that in Q3.

Speaker Change #118: Basically, stating that clarifying that theres going to be a true up mechanism to whack.

Speaker Change #118: For the LTC pharmacies, which is pretty much exactly what we were seeking so you've got to take this business by business drug by drug, but as we look across specialty infusion and LTC pharmacy.

Speaker Change #118: We feel like we're in a really good place the value of pharmacies in the last mile to the patient's home and what we do from a program and quality perspective is.

Speaker Change #118: This is just beyond.

Speaker Change #118: Central in the pharmacy World you can't get the drug to the home without the pharmacies as willing participants and so.

Speaker Change #118: The specific situations of the drug in each business.

Our very low risk to us looking out a couple of years and then CMS is formalization of of the mechanism on the LTC side was great to see in the quarter.

Speaker Change #119: Great and then just any color around M&A volumes. The plans have been under pressure because of high volumes. It seems to me like that could be a tailwind to you just any color there on how the plans that have been under how that's translating to your business. Thanks.

Yes for us as it relates to M&A, that's going to be on the provider side and.

Speaker Change #120: Really the only relevance there is on home health, a little bit and so.

Speaker Change #120: We've been we've been constructive in working with home health over the past several years.

Speaker Change #120: Given the imbalance of demand and supply and home health demand really outstrips supply.

Speaker Change #120: Today, 40% of the individuals who need home health don't get it which is which is really really a problem because the benefits of home health are so profound it keeping people out of the hospital on reducing cost and so really the only relevance there. David is it is in our home health business call it 30% or so of what we do is M&A.

Speaker Change #120: But we've had very constructive relationships, just given quality levels and.

Speaker Change #120: And the broad contracting that we do with payers across all of our service lines at continuing to negotiate.

Speaker Change #120: What we would could see considered to be very sustainable.

Speaker Change #120: With that so far.

Speaker Change #120: From an M&A standpoint, that's really it in the company.

Speaker Change #120: Thanks, a lot.

Speaker Change #121: Thank you one moment for our next question.

Speaker Change #122: Our next question comes from the line of Joanna <unk> from Bank of America.

Speaker Change #123: Hi, good morning. Thanks, so much for taking the question. So I guess I have two.

Speaker Change #124: It's related to prior topics if I may so the first one on the IAA and if any were commenting on the attendance.

Speaker Change #125: So the block prices, but on the flip side, there's some opportunities to part D.

Speaker Change #125: Essentially lowering the cost of a patient and some payers that that batesville.

Speaker Change #125: Nation specialty glass because of that so how do you think that that as well and also in this context.

Speaker Change #125: The changes to the patient costs are actually going to be even 25. So do you expect a bigger increase.

Speaker Change #125: Next year.

Speaker Change #125: Thank you.

Speaker Change #126: Hey, Joanna thank you.

Speaker Change #127: Yes, I mean, what you referred to there.

Speaker Change #127: From a part D perspective has been and we expect we will continue to be to be positive for us to the extent that.

Drugs that are continuing to be made more affordable for patients.

Speaker Change #127: That is only a good thing.

Speaker Change #127: Oncology in particular is a very dynamic market.

Speaker Change #127: It is an extremely innovative and high growth market right now and with our quality with our relationships with manufacturers and with our sales force.

We are continuing to drive.

Speaker Change #127: Very robust volume growth in that business specialty and infusion grew their revenue.

Speaker Change #127: Over 40% in the quarter as example.

Speaker Change #127: As the calendar turns into January every year. Some of those items that you mentioned go into effect that was an accelerant this year for us and given our planning ahead of the changeover of year over year. This year into January we expect.

Speaker Change #127: Our goal is to be referrals, as well and our sales and marketing team as always months out in front of an event like that making sure that we.

Speaker Change #127: Take full advantage of it to get these life saving drugs to as many people as we can so we would expect another bump as we get into January from a volume perspective.

Speaker Change #127: Due to the items that you laid out.

Great. Thank you if I may follow up.

Speaker Change #128: On the discussion around stellaris. Thank you details in terms of your exposure but.

Speaker Change #129: Infusion peer set I guess, you referred to it but there are some changes that make up a lot of plants.

Speaker Change #128: Introduced.

Speaker Change #128: Hello.

Speaker Change #128: Opportunities happening essentially but do you see that spread much maturity on that track. So how does the chairman and chief that's what's to happen because it sounds like maybe not finance, but if that were to happen. How does this change the impact of future.

Speaker Change #130: Similar launch it could we see other truck makers kind of followed suit and does that change how you think about biosimilars benefit to your business going forward. Thank you.

Speaker Change #131: Yeah look, it's really impossible to prognosticate around sort of the future of biosimilars in the space.

Speaker Change #131: I would just say that at least at least we view this situation as being very idiosyncratic.

Speaker Change #131: This drug is on the IRR.

Speaker Change #131: We're able list.

And Thats Thats, probably at play here in terms of any of that change in pricing from from the manufacturer in this one specific instance, so.

Speaker Change #131: That's our view is that this is this is isolated.

Speaker Change #131: When you step back and you look at.

Speaker Change #131: Infusion Broadway continues to be an extremely attractive market.

Speaker Change #131: Where there are real barriers to entry.

Speaker Change #131: Given the local services.

Speaker Change #131: And the high demand from prescribers and patients for fast turnaround time is a high execution business where.

Speaker Change #131: I think some of the larger players in the market has done a fantastic job.

Speaker Change #131: We'd like to participate in pharmacy markets that are challenging from a service model perspective, and that are local that really defines everything we do so we like infusion a lot for those reasons.

The pipeline is extremely deep.

Speaker Change #131: There are many possible growth drivers in this market over the next 135 and 10 years and.

Speaker Change #131: Look drugs drugs coming onto the market drugs going generic drugs going biosimilar that is constantly play in any drug market and with a long term focus on quality service levels and volume and then real efficiency from a margin perspective.

Speaker Change #131: Have to continue to focus on those critical success factors and.

Speaker Change #131: And take advantage of all the opportunities you can over time for.

Speaker Change #131: For us that's been continuing to try to try to drive volume as much as we can on infusion as we've talked about.

Speaker Change #131: That's a business that was less mature at our company historically we've.

Speaker Change #131: We've made a lot of investments in that business. This year, that's in our P&L, we expect those to be a benefit as we look into next year.

Speaker Change #131: So again Solara, we view as a very specific situation for a variety of reasons and.

And as I said before not one that would materially change our our outlook from what we were otherwise planning next year and there are still several items to play out within this <unk> specific situation that can be very positive as well so still more to be seen there.

Speaker Change #132: Thank you.

Speaker Change #132: Thank you.

Speaker Change #133: One moment for our next caller.

Speaker Change #134: Our next question comes from the line of Ann Hynes from Mizuho.

Ann Hynes: Hi, Good morning, Thank you for the question.

Ann Hynes: No youre not given 2025 guidance, but heading into next year can you maybe highlight some key headwinds in tailwind you might be facing.

Speaker Change #135: Yeah, Hey, Ann.

Speaker Change #135: Yes.

Speaker Change #136: Yes, we'll be getting to 2025 guidance and time.

Speaker Change #136: Obviously, we're well down the path of budgets.

Speaker Change #136: So we need to formula formalize all of that work and formalized.

Speaker Change #136: <unk> to be communicated.

Speaker Change #136: But at this time as I've said in the past.

Speaker Change #136: We're feeling the same way if not a little bit more positive as we were on the last call in terms of our ability to continue to drive our historical level of growth into next year.

Speaker Change #136: The last eight years now our CAGR has been in the double digits from a revenue and EBITDA growth perspective, and we see no reason why why that would change next year and that's our that's our base plan.

Speaker Change #136: And how we're thinking about the business right now.

In terms of drivers in the business again, just given our business mix.

Speaker Change #136: We are a multi pronged growth company, it's something we really like and you look at specialty first and foremost, there's just a ton of momentum, particularly in the oncology and rare and orphan space.

Speaker Change #136: We have a dominant position as an independent pharmacy in that market and in our quality and our trade relationships and our sales force investment and focus.

Speaker Change #136: It's continuing to drive the business forward, we certainly expect that to continue <unk> launched in Q3, it went generic to <unk>.

Speaker Change #136: Tailwind another drug is going to go generic and hopefully Q1, maybe Q2, hopefully Q1, and we continue to have really good momentum overall from our LTE launches.

Speaker Change #136: We'll launch <unk> this year.

Speaker Change #136: Note of those 15 LGD launches in specialty I.

Speaker Change #136: I think four or five are exclusive and the rest are only.

Speaker Change #136: Ultra narrow networks are two pharmacies or less and so manufacturers really selecting only one or two pharmacies.

Speaker Change #136: To fulfill and support these drugs. So we will continue with our <unk> momentum and our generics momentum in our existing portfolio next year as well and then our fee for service business in specialty.

Speaker Change #136: With highly valued services in data we provide for manufacturers that continues to grow too so.

Speaker Change #136: Yes.

Speaker Change #136: Multiple growth drivers within specialty alone I mentioned infusion, we expect the investments operationally in that business to start to pay off next year. We would expect continued volume growth in that business with double digit, but and importantly, we're expecting to see the margin in that business now start to tick up just given some of the operational.

Speaker Change #136: <unk>, we've been we've been focusing on.

Speaker Change #136: For us that's an opportunity to grow our market share in a really attractive big market and that's our focus with with with service levels that hopefully are in the are in the top of the industry.

Speaker Change #136: And that's what we've been working on there I should note also on infusion corum announced in the quarter that they were getting out of acute.

Speaker Change #136: A lot of the infusion players when you look out there have just started to focus on specialty, particularly the smaller infusion companies. Our thesis is that you have to do both you have to do a cute and you have to do chronic infusion.

Speaker Change #136: Therapies.

That to US is the most relevant to the Payor payers would expect you to be able to infuse all therapy types for their members and not just one or two and so we are focusing on being a broad based infusion company that continues to do acute acute infusion is a huge market.

Speaker Change #136: It has it has a respectable margin and so we believe that there is a lot of reasons to continue to do acute.

Speaker Change #136: Quorum is most recently pulled away from that market that should also be a tailwind as we get into next year as we've said before we like home health and hospice a lot hospice continues to get great rates support, but we expect both of those businesses to continue to grow volume at double digits, and we continue to invest in operational technology and efficiency.

Speaker Change #136: <unk> opportunities in those businesses as well, we like rehab clinically as well, we expect that business to grow with double digits. As we continue to do de novo's in more markets and penetrate current markets and that we will.

Speaker Change #136: To try to evolve and scale, our home based primary care business for upside too so.

Speaker Change #136: I Didnt mentioned LTC, our third pharmacy business, but that business is going to be up year over year on EBITDA for us this year for a variety of reasons and I think both from a volume and customer and a margin perspective next year given some of the operational initiatives. We have been driving part of this year, we expect to see LTC pharmacy.

Speaker Change #136: <unk> do well next year too.

Speaker Change #137: Great. Thank you.

Speaker Change #138: Thank you one moment for our next question.

Speaker Change #138: Okay.

Our next question comes from the line of Whit Mayo from Leerink.

Whit Mayo: Hey, thanks.

Whit Mayo: Curious about the sequential growth implied within the guide for the fourth quarter certainly points to the stronger seasonality that we see within the business, but how are you sort of thinking about the directional trends within each of the individual segments. Thanks.

Speaker Change #139: Yes, so Q4.

Speaker Change #140: Would imply essentially a 15% to 16% growth rate year over year.

Speaker Change #139: Step up.

Speaker Change #139: $10 million to $15 million sequentially, but.

Speaker Change #139: But we feel good about that number I think it's a reflection of our of our continued operational execution and focus on growth at the company, we spoke to a number of the drivers earlier and.

Speaker Change #139: And.

Speaker Change #139: And why.

Speaker Change #139: <unk> raised our guidance.

Speaker Change #139: We raised our guidance again as we look at Q4.

Speaker Change #139: It's going to be more of the same.

Speaker Change #139: But across the business.

Speaker Change #139: Pharmacy is expected to grow at very healthy rates.

Speaker Change #139: And provider is expected to grow at a double digit EBITDA growth rate in Q4 as well so very very similar relative contribution I would say in the Q4 growth as we saw in Q3 growth.

Speaker Change #141: But Jim our Gen. I don't know if you had anything else John.

Speaker Change #141: Just add a couple of pieces Q4, as we've talked about.

Jim Mattingly: Half of the year is stronger from a seasonality perspective in the first half and Q4 historically is a little bit stronger than Q3. So we have our best seasonality period of the year the number of different different initiatives John mentioned earlier as it relates to the margin question that came up.

Also very much.

Jim Mattingly: <unk> the dollar profit so so the price will generic launch.

Went live at the end of Q3 will be be full bore in Q4.

Jim Mattingly: On the our launch on the <unk> community pharmacy cut.

Jim Mattingly: Customer those those startup costs will start to dissipate as we go into and through Q4, which will be net favorable quarter over quarter.

On the provider side, we continue to have solid rate support hospice rates went live <unk>.

Jim Mattingly: Net favorable quarter over quarter sequentially, the Haven hospice acquisition, well, while not overly meaningful from a from a total company EBITDA perspective on the full year.

Jim Mattingly: Sequentially Q3 to Q4 is certainly net positive and then we just have we have overall volume continuing to grow year over year and sequentially that that drives through Q4 and through the end of the year. So all of those pieces really add up to.

Jim Mattingly: A high degree of confidence all wrapped around a a divisional G&A and corporate overhead that.

Jim Mattingly: We continue to scale, our corporate overhead Q2 to Q3 was flat our corporate overhead in Q3 to Q4 should be in the same same area or slightly favorable as we continue to grow revenue and drive gross profit and business level.

Stability, so all of those pieces add up to.

Jim Mattingly: To a strong Q4 for us to close out the year, yes, we as we continue to scale holding holding those divisional and corporate cost flat.

Speaker Change #142: That's super helpful. Maybe I missed this but just and maybe spend in your best interest to say this but like where do you think the capital deployment priorities will be over the next year you've been active in hospice may be a little bit marginally in home health are there any areas or businesses do you think maybe more non core.

Speaker Change #143: Going forward, so just kind of thinking about the portfolio and how you are maybe allocating capital or taking capital out as you look out over the next year, Yes, I think from an acquisition strategy perspective, with its just going to be extremely consistent with what we've done over the past couple of years on the pharmacy side.

If there is opportunities for that.

Very accretive.

Speaker Change #143: Transactions.

Sub four times.

Speaker Change #143: And long term care pharmacy or infusion.

Speaker Change #143: Things, we look at and then on the and then on the provider side its been rehab home health and hospice and and then home based primary care as well so.

Speaker Change #143: That will continue to be the focus if I had to say a exits.

Speaker Change #143: It's probably 50 50.

Speaker Change #143: As a rule of thumb.

Speaker Change #143: Our pipeline right now we have three or four.

Speaker Change #143: Very small little tuck ins in our home health and hospice.

Those are the kind of things that.

Speaker Change #143: A couple of million dollars or less of capital, but just really high ROI invest.

Speaker Change #143: Investments that we can make certainly we might do several acquisitions that are little bit bigger than that.

Speaker Change #143: <unk> $4 $5 million EBITDA range, that's sort of our base case right now.

And then on the de Novo side.

Speaker Change #143: It's really it's really on provider at this point between home health hospice and rehab and.

Speaker Change #143: Entrance into adjacent markets and new markets.

Speaker Change #143: Call It call. It 10 to 20 of those a year.

Speaker Change #143: Those are several hundred thousand dollars investments for each yet.

Speaker Change #143: Very easy to do from a capital standpoint.

Speaker Change #143: Typically and historically have had really good ROI attached to them. So.

Speaker Change #143: No Big plans at this point in time for four for anything outside of what we've been doing over the last two years.

Speaker Change #143: But were always opportunistic we always have opportunities.

Speaker Change #143: Very focused on getting to a specific leverage target that's at the front and center right now for everything we're doing.

And our behavior over the last year or two has been to focus on smaller very accretive.

Speaker Change #143: Transactions there could be a couple that are a little bit bigger, but it's sub $10 million of EBITDA.

Speaker Change #143: And then we will always remain agile for situations that are just really unique to us that we can drive value for shareholders, but that's our base plan.

Speaker Change #145: Okay. Thanks.

Speaker Change #146: Thank you one moment for our next question.

Speaker Change #147: Our next question comes from the line of Linda Bolton from Morgan Stanley.

Speaker Change #147: Hi, Good morning, Howard This is Linda Buck on for Erinn right. Thanks for taking our questions. So going quickly back to the IAA I believe I heard the mention of the company, having one drug.

Laurie Douglas: Laurie Douglas.

Laurie Douglas: With the Lora or is it another drug and if so what is that journey.

Laurie Douglas: Yeah.

Yes, improve especially oncology.

Speaker Change #149: That would be the one drug, especially oncology, we have a great relationship there with the manufacturer.

Speaker Change #149: We've been talking to them.

Speaker Change #149: For months already well over a year ahead of any IRA we feel very good about that situation in terms of how.

Speaker Change #149: It's all going to play out I don't see any risk there.

Speaker Change #149: On the infusion side, it's really Solara, we've talked about that.

Speaker Change #149: We think that's pretty isolated within the infusion world.

Speaker Change #149: And then on LTC, theres, five or six drugs.

Speaker Change #149: I had mentioned in the quarter CMS really clarified in memorialized.

Speaker Change #149: Their language around the true up mechanism that would be in place for the LTC pharmacies.

Speaker Change #149: Which was which was great to see that really took any meaningful impact for.

Speaker Change #149: For the industry.

Speaker Change #149: Down significantly it took the risk down significantly there are still items that we will be working with.

Speaker Change #149: CMS and on the hill throughout all of next year in terms of things that we believe the LTC industry.

Speaker Change #149: Should do and have that would make sense for everybody.

Speaker Change #149: That debt that we would view as positive for LTC. So we're still going to be working on our long list of.

Speaker Change #149: Of of items with with folks in D C as it relates to LTC.

Speaker Change #149: But but that will play out over next year, but it was really good to see at least sort of the baseline feed.

Speaker Change #149: Feedback from CMS in the quarter, so that really summarizes everything across our service lines as it relates to IRA.

Speaker Change #149: Really no change from our perspective in terms of.

Speaker Change #149: How we think about long term growth over over three five years and beyond that the company.

Speaker Change #150: Thanks, that's helpful.

Also within the pharmacy segment, we've seen continued quarter over quarter and impressive growth compared to last year, and especially when we compare that to a long term growth target of high single digits.

Speaker Change #150: Just to parse out this growth a bit further how much of that impressive growth is really Q.

Speaker Change #150: Great spring, capturing meaningful share kind of industry peers, and the market expanding with Disney specialty Chad.

Yes, I think its primarily the latter oncology is a.

One of the two biggest markets within specialty pharmacy, it's growing it's growing in the double digits in the innovation pipeline is as big as ever I think theyre sub $90 billion of new revenue expected to come onto the market in the next seven or eight years.

Speaker Change #150: And there is a massive generic pipeline as you look out seven years. After Sprightful just went generic in Q3. There is 10 more large brands that are expected to go generic over the next six to seven years and so.

Speaker Change #150: As those events are occurring as it is new brands come onto the market in Ltvs.

Speaker Change #150: Our team just given our service levels.

Speaker Change #150: And our sales force investments has really been effective at being able to work closely with manufacturers to be.

Speaker Change #150: A launch partner on these new brands and.

That's something we take very seriously and and endeavor to provide the best possible service to our manufacturing partners and our and our patients every day, but I would say us really having done the hard work over the last 15 years to put ourselves in a really good position from a quality and service perspective, and Salesforce perspective.

Speaker Change #150: Sure.

Speaker Change #150: To work closely with the innovators in this market as they come to market to be a partner and to be able to capitalize on those on those new drugs entering the market and.

Speaker Change #150: And really try to provide the best and the most speedy service for patients as possible and Janet generics are good for everybody and so we've also had a real focus strategically.

Speaker Change #150: Strategically and from a tactical perspective on how we support generics.

Speaker Change #150: That's something that just anybody can do.

It is also extremely involved in place to our business model really well.

Speaker Change #151: That's very helpful. Thank you.

Speaker Change #152: Thank you.

So you please limit yourself to one question due to time constraints.

Speaker Change #153: Our next question comes from the line of Jamie <unk> from Goldman Sachs.

Speaker Change #154: Hey, good morning, guys.

Speaker Change #155: John I was hoping you could spend a minute just on your early primary care efforts what you are.

Speaker Change #156: It gives me looking for there to to gauge the level of management focus and capital.

Speaker Change #156: Deploy here and.

Speaker Change #156: How should we be measuring your success in that space in 2025 and 2026.

Speaker Change #157: Yes, thanks, Jamie.

Speaker Change #158: So that's a business that we continue to really grow and focus on mostly organically. It's been an organic build where we've never really lost any money.

Speaker Change #158: Which is which has been.

Speaker Change #158: Prerogative for us, but the business has continued to drive very good patient growth. This year again. These are these are doctors.

Speaker Change #158: 80% of the time nurse practitioners going into assisted living going into going into skilled nursing facilities that sometimes to the home.

To be the primary.

Speaker Change #158: Physician and clinician.

Speaker Change #158: To really drive 60% reductions in hospitalization rates so.

Speaker Change #158: With that value proposition that benefit we continue to grow our volumes.

Speaker Change #158: At 40%, 50% from a patient perspective this year the key for US was getting some ACO contracts in place and with our <unk> acquisition back late in Q2, having our own internal.

Speaker Change #158: Managed care plans and so those efforts are discontinuing on Theres a lot of focus around it we're not talking about it really very much until theres really real EBITDA there to talk about we'll do $7 million of EBITDA in that space. This year, but we're hoping to get to eight figures of EBITDA quickly.

Speaker Change #158: Maybe next year, certainly certainly into 2026 as we have.

Speaker Change #158: As we have about a five to seven year target to manage.

Speaker Change #158: Over 100 patients.

Speaker Change #158: And that business. So I would say patient count is really sort of the best near term proxy over the next year or two and then and then obviously you would look at profitability of the business and the level of profitability.

Speaker Change #158: I think as we get into 2026 in particular and that potentially be pretty meaningful as a growth driver in the company, but but things are going well there and we continue to focus on our patient population as it relates to lives, where we have ACO shared savings as it relates to lives on.

Speaker Change #158: And I SNP model and as it relates to the lives in the future hopefully.

Speaker Change #158: Where we are contracted with the payer managing their members.

Speaker Change #159: Alright, Thats really helpful. Thank you.

Speaker Change #159: Thank you.

Speaker Change #160: One moment for our next question.

Speaker Change #161: Our next question comes from the line of <unk> Chickering from Deutsche Bank.

Speaker Change #162: Hey, good morning, guys relative to street models, it looks like the provider solid business was a big part of the third quarter EBITDA beat so how much of that margin improvement sort of seen this quarter, which is spectacular keane.

Speaker Change #162: Came from pricing versus community and we have patients declining year over year, So positive mix coming from home health or just overall SG&A leverage on the 10% revenue growth. Thanks.

Speaker Change #163: Thanks Peter.

Speaker Change #164: Little bit of both.

Speaker Change #165: So certainly we had good volume growth in the quarter with that we were able to leverage fixed cost, which was helpful. From a margin perspective. When you look at four factors number two when you look at mix with home health continuing to grow at attractive rates at a hospice with their margins relative to the.

Speaker Change #164: City living business.

Speaker Change #164: Rehab as well so.

We have home health and hospice those are those are higher margin than the community living business as those businesses continue to grow volume at higher rates.

Speaker Change #164: That is at play as well really third we've continued to drive some nice efficiency projects across the organization, which really get reflected in the P&L of the individual segments of businesses, but for example, with our corporate.

Speaker Change #164: PPO team business process optimization team and with our corporate procurement team.

Speaker Change #164: We're on track to deliver over $20 million. This is really outside of pharmacy initiatives, we're on track to deliver.

Speaker Change #164: $20 million of cost reduction this year.

Speaker Change #164: Just from a procurement purchasing an efficiency perspective, the benefit of that really flows through the businesses and the segments in the <unk>.

Speaker Change #164: And then I would say really fourth just given the value the quality of the services and the ROI of all of these services, which dramatically reduce cost versus any other setting.

Speaker Change #164: Continue to get good.

Have good rate advocacy and rates support, particularly on the hospice and community living side. The vast majority of that ultimately goes and funds, our clinicians and our frontline caregivers. So that we can continue to have a very stable workforce.

Speaker Change #164: But that is that is helpful as well.

Speaker Change #166: Great. Thanks, so much nice quarter.

Speaker Change #167: Thank you.

Speaker Change #168: One moment for our next question.

Speaker Change #169: Our final question from Matthew Gilmore from Keybanc.

Matthew Gilmore: Hey, Thanks for the question for the $10 million of nonrecurring items, you've called out I was curious if you could delineate between the startup losses and the Payor settlement.

And then related to that is that something that was contemplated in guidance are we should we view that as sort of incremental to.

Matthew Gilmore: What youre reporting on EBITDA.

Speaker Change #170: Yes, so I'll turn that over to Janet Jim I mean, as it relates to any of the startup costs associated with Onboarding, new customers that would have been in the guidance before and all along.

Speaker Change #170: The item as it relates to.

Speaker Change #170: An old payor situations that dated back to literally six years ago, very very isolated but any other comments on that too.

Janet Jim: So that payer settlement was also included from a guidance perspective as well.

Janet Jim: To finalize as we noted all of the other legal cases, so that was an increase this year.

Janet Jim: From a non recurring.

Janet Jim: Expenses standpoint, as well as we had a lot of acquisition integration costs in the quarter as we were.

Janet Jim: We're working through.

Janet Jim: Some of those projects.

Speaker Change #172: Got it thank you.

Speaker Change #172: Thank you.

Speaker Change #173: At this time I would now like to turn the conference back to John Russo for closing remarks.

John Russo: Thank you everybody for your time today, we appreciate it at the company, we continue to focus everyday on trying to bring a very valuable high quality services to <unk>.

John Russo: People across homes and communities all around US every day, who really can benefit from these services. So I think we continue to do a good job really focusing on operational execution in each one of these service lines.

John Russo: Quality volume growth and efficiency will remain our areas of focus and we are optimistic about closing out 2020 forward getting into 2025 in a good position again trying to make the biggest impact we can through our people and our communities. Thank.

John Russo: Thank you for all your time today and have a good one bye.

Speaker Change #175: This concludes today's conference call. Thank you for participating you may now disconnect.