Q1 2024 Brightspring Health Services Inc Earnings Call

May 2, 2024

Operator: 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'll need to press star one one on your telephone. 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 turn the conference over to 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 Phipps, Chief Accounting Officer at BrightSpring. I am joined on today's call by Jon Rousseau, Chief Executive Officer, and Jim Mattingly, Chief Financial Officer. Earlier today, BrightSpring released financial results for the quarter ended 31 March 2024. A copy of the press release and presentation is available on the company's website. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. Such forward-looking statements are not guarantees of future performance. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations.

Jennifer Phipps: We encourage you to review the information in today's press release and presentation, as well as in our quarterly report on Form 10-Q that will be filed with the SEC. Specific risk factors and uncertainties can also be found in our 10-K previously filed with the SEC. Such factors may be updated from time to time in our periodic filings with the SEC, and we do not undertake any duty to update any forward-looking statements except as required by law. During the call, we will use non-GAAP financial measures when talking about the company's performance and financial condition. You can find additional information on these non-GAAP measures and reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures to the extent available without unreasonable effort in today's earnings press release and presentation, which 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. With that, I will turn the call over to Jon Rousseau, Chief Executive Officer.

Jon Rousseau: Thank you, Jen. Good morning, everyone, and thank you for joining BrightSpring's Q1 2024 earnings call. I would like to begin by extending a heartfelt thank you to all of the people with BrightSpring. At BrightSpring, we are working vigorously to deliver high-quality home and community-based pharmacy and provider health solutions to complex patient populations. This could not be accomplished without our dedicated employees and the support of our investors. Consistent with both our long-term and recent track records, we are pleased to start the year with strong first quarter performance across the portfolio of home and community health service lines at BrightSpring. Our comprehensive care platform continues to deliver timely, preventative, and coordinated care solutions centered around patients.

Jon Rousseau: Some highlights here up front include the following: extremely strong volume growth in Q1, revenue and Adjusted EBITDA in Q1 that exceeded plan, and significantly raised guidance for the full year while continuing to invest in our infrastructure and future growth. These results are driven by our provision of services in large and growing markets, the delivery of valuable services that reduce costs and improve outcomes, our demonstration of strong quality and service levels, strong operational capabilities within a scaled platform, and our ongoing pursuit of attractive near-term and long-term growth opportunities through a sales and marketing focus and commitment to strategic growth. For Q1, the company's revenue was $2.6 billion, which represented 27% growth year-over-year and exceeded expectations. Pharmacy Solutions generated $2 billion in revenue, representing 35% growth compared with Q1 last year.

Jon Rousseau: The Provider Services segment generated $600 million in revenue, representing 7% growth compared to the same period last year. We are very pleased with the robust growth and performance in the Pharmacy Solutions segment, which was well ahead of plan, as well as with the Provider Services segment, which delivered impressive growth in line with our expectations and is comprised of several underlying higher growth service lines. Very strong and broad-based revenue performance across the company led to better-than-expected Adjusted EBITDA growth for BrightSpring, with Adjusted EBITDA of $130.5 million for Q1, representing 13.2% growth versus the prior year's Q1. In Pharmacy Solutions, our 35% revenue growth was driven by strength in both the Infusion and Specialty business and the Home and Community Pharmacy business, with the specialty business performing exceptionally well.

Jon Rousseau: The Infusion and Specialty Pharmacy business grew 44% year over year, well ahead of our expectations, with specialty delivering growth above the sub-segment's growth rate. Home and Community Pharmacy revenue grew 15% year over year in the quarter. Across Pharmacy Solutions, total scripts dispensed and delivered were approximately 9.9 million in the quarter, which increased 9% versus the prior year, with excellent volume growth of over 35% in Specialty Pharmacy.

Jon Rousseau: Already this year, we have been selected as a preferred pharmacy partner for 3 new highly specialized limited distribution oncology drugs, a key driver of specialty growth, bringing our total limited distribution drugs portfolio to 117. Scripts dispensed in Home and Community Pharmacy grew in the high single digits year-over-year, and we are currently on track this year to realize the largest increase in the number of new customers and patients ever in this business. We believe our performance in pharmacy is reflective of our operational efficiency, clinical and dispensing accuracy, high-quality services, and customer and patient support programs and satisfaction levels. We expect the revenue momentum in this business to continue. Adjusted EBITDA in Pharmacy Solutions grew 7% year-over-year, driven by strong volume growth across the segment.

Jon Rousseau: Adjusted EBITDA margin was influenced by the outsized revenue growth in specialty above expectations and corresponding mix shift, in addition to some impact from the Change Healthcare disruption. We believe the pharmacy segment margins will expand over the balance of the year while continuing to make growth investments in the business. In Provider Services, 7% revenue growth was driven by strong home healthcare performance, as well as continued strength in our rehab business. Our community living business delivered above-market growth in the quarter as well. Daily patients served remained healthy across our care platform, with home healthcare average daily census of approximately 43,000 growing 11% year-over-year, with double-digit census growth in our home health and hospice business. Community living and rehab persons served was 16,600 in Q1, relatively flat compared to last year and in line with expectations.

Jon Rousseau: In rehab, we are internally focused on core billable hours for monitoring the growth of this business, which we believe is a better indicator of performance. In Q1, core billable hours in rehab grew at a high teens rate year over year, consistent with our plan. Adjusted EBITDA in Provider Services grew 25% year over year, with margin expansion driven by cost efficiencies, economies of scale, operational quality, and volume and revenue growth. We saw adjusted EBITDA strength across the provider portfolio, with margin expansion in both Home Health Care and Community and Rehab Care. Overall, as a company, EBITDA margin grew year over year when excluding the extremely high growth and higher share of business mix that the specialty pharmacy business delivered and represented in Q1.

Jon Rousseau: We were pleased with the total company growth in revenue and Adjusted EBITDA in the quarter, which puts us ahead of our plan for 2024. As a result, we have raised both revenue and Adjusted EBITDA guidance for the year, which we will discuss in more detail in just a few minutes. All in all, the company's Q1 financial results reflect impressive growth and profitability driven by consistency of performance in our complementary and comprehensive services platform. In addition to the growth metrics and financials, I would like to take a moment to discuss how and why BrightSpring is among the leading healthcare services companies in the country today. At BrightSpring, we deliver pharmacy and provider health services to complex patients in home and community settings. We operate in large and growing markets where we provide essential services with clear and strong ROI.

Jon Rousseau: Across our organization, our team works hard to deliver high-quality care to patients, and we believe our operational prowess and culture of continuous improvement are competitive differentiators. We work to ensure that patients receive appropriate and accurate care in the most efficient and desired setting. As part of our attentive and compassionate care, we work to identify potential medical and medication problems and reduce adverse events due to our highly proximate position to patients where they reside. We provide important health services for approximately 400,000 patients each day on average, enabled by the timely and high-quality care provided by well-trained personnel and BrightSpring's overarching focus on delivering patient-centric care. Our integrated platform of service capabilities also helps specific patients to receive the right care management at the right time and in the right setting.

Jon Rousseau: We will continue to improve the coordination of integrated and patient-centric care for all people who require multiple health services at the same time or over time. This results in many benefits for patients, including efficiency of care, and additional growth of the BrightSpring platform. In Pharmacy Solutions, we have 99.9% generic efficiency and order accuracy rates in our Home and Community Pharmacy settings. We start cancer patients on therapy twice as fast compared to the industry average. We have Net Promoter Scores greater than 90 in Infusion and Specialty, with patient satisfaction scores of 95% in our infusion business. Our medication adherence programs have delivered over $2,000 in average annual savings.

Jon Rousseau: Our medication management program for individuals in their own homes, called ContinueCare Rx, has demonstrated a 73% reduction in hospitalizations when utilized together with our home health, as highlighted in the JAMA article of November 2023. This high level of performance, to cite only a few examples, and as measured by patients and third parties, is well above industry average. Our proactive best practices and operational capabilities were also recently evidenced when BrightSpring was able to mitigate any significant impact to revenue or EBITDA related to the Change Healthcare cybersecurity incident in Q1. In our Provider Services segment, our patients often have complex health conditions which require dynamic care plans incorporating expertise across multiple disciplines. We are proactive in coordinating care delivered through customized programs and plans.

Jon Rousseau: As care takes place in the home or community clinics, we have demonstrated an ability to deliver high quality outcomes with lower costs. Our home-based primary care team has demonstrated an 84% reduction in readmissions for IDD patients, and our seniors and dual patients experience approximately 50% less hospitalizations compared to the national average for similar patients. In our community living business, we have delivered 99.9% of incident-free service hours to an often acute population. We've received very high customer satisfaction scores of 99% in our rehab business, 4.4 out of 5 in our personal care business, and an 84% overall rating of care in our hospice business.

Jon Rousseau: Our hospice business is rated in the top 5% of all hospice providers in the country and delivers significantly more clinician time and care to patients as compared to the national average. We deliver the highest level of skilled and compassionate care to patients at some of the most important times in their lives. Importantly, these quality and operational results not only reflect the commitment to high levels of service and care in our organization, but also contribute to our above industry average growth profile. Our focus on service levels and quality creates a positive cycle of patient success, efficiency, and increased partnerships and referrals, which all contribute to the growth of the company.

Jon Rousseau: Secular growth drivers underpinning performance across the company include continued robust market growth driven by demographics, the continued shift of services delivered closer to the patient in home and community settings, and specific customer setting growth factors. Within pharmacy, there is also secular innovation in the delivery of complex drugs and limited distribution drugs in Infusion and Onco360, and the continuing evolution of generic alternative availability in this specialty business. Against this positive industry backdrop, BrightSpring's scale, comprehensive offerings, and focused quality and service have been drivers of market share gains and above industry average historical growth. With this foundation in place, we remain strategic with our spend and are further investing in targeted resources and operational enhancements to improve customer and patient access and workflows while continuing to drive best practices across the enterprise.

Jon Rousseau: Ongoing operational focus, efficiency, and quality of services leads to superior sales and marketing results, improved revenue cycle management, and optimized recruiting and training systems for our employees. We leverage our operational capabilities to underpin our volume and revenue growth rates, and our ongoing strategic planning is aimed at meeting the needs of more patients as we continue to dive deeper into our existing and adjacent markets and focus on growing at above-market rates. We do this through the expansion of current operations, de novo projects, and acquisitions. Looking ahead, we will increasingly integrate additional offerings to patients through care management resources and the transitions of care to our lower cost and patient-preferred settings. By further incorporating leading payment models from both government and private payers, we are beginning to drive true value-based care through clinical and operational integration that we are uniquely capable of delivering.

Jon Rousseau: As we have demonstrated in the past, we are well-positioned to capitalize on external opportunities to augment our organic growth plan, and we will look to acquire operations in the right geographies where we see increased value under the BrightSpring platform. We have been a successful acquirer of businesses, and we can improve service levels and profitability through the deployment of technology, good operational process, enterprise best practices, synergies, and strong leadership. As you may have seen, there have been a number of updates from CMS on proposed reimbursement rules in healthcare, as well as final rulings on dynamics that could impact our industry. Numerous of these updates have been favorable, and net, we believe there is no material change to our near-term or long-term forecast or outlook.

Jon Rousseau: We operate in healthy markets with high demand, markets characterized by lower cost services that have proven value, and markets where we have significant opportunity to outperform due to our operational prowess, strategic discipline, and scale advantages. As a reminder, over the course of a given year, we have in excess of 4,900 payer contracts, and this breadth and balance of business and operations provides benefits, comparatively muting rate changes and enabling service lines to leverage the enterprise's infrastructure and scale in contracting and best practices. Our comprehensive portfolio has helped support both consistent stability and growth in the past and lays the foundation for continued opportunity in the future. To summarize, we are pleased by our strong performance this quarter and are optimistic about the year ahead, as evidenced by our increased revenue and Adjusted EBITDA guidance.

Jon Rousseau: We have recently added two independent directors to our board, Olivia Kirtley and Tim Wix. Both Olivia and Tim bring incredible operational and board experience to BrightSpring, and I look forward to working with them as we grow the company. The timely, high quality, compassionate, and coordinated care that we provide across our platform is unparalleled amongst our peer group, and we continue to cultivate and build upon a patient-centric culture characterized by continuous improvement and execution. I will now turn the call over to Jim to walk through the Q1's financial results in more detail.

Jim Mattingly: Thanks, Jon. Total revenue in Q1 2024 was $2.6 billion, representing 27% growth from the prior year period. Pharmacy Solutions segment revenue was $2.0 billion, achieving growth of 35% year over year. Within the pharmacy segment, infusion and specialty revenue was $1.5 billion, representing growth of 44% from last year, and home and community pharmacy revenue was $511 million, representing growth of 15% year over year. In the Provider Services segment, we reported revenue of $600 million, representing growth of 7% compared to the prior year period.

Jim Mattingly: Within the Provider Services segment, Home Health Care reported $242 million in revenue in Q1, growth of 9% versus last year, and Community and Rehab Care revenue was $358 million, representing growth of 6% year over year. Moving down the P&L, total company gross profit in Q1 was $369 million, representing growth of 10% compared with Q1 of last year. SG&A expenses for the total company were $361 million compared to $283 million in the prior year period. Adjusted EBITDA for the total company was $131 million for Q1, growing 13% compared to last year. Adjusted EPS for the total company was $0.12 for Q1 compared to -$0.10 in the prior year period.

Jim Mattingly: Turning back to segment performance, Pharmacy Solutions gross profit was $170 million, growing 6% compared with Q1 of last year. SG&A expenses for Pharmacy Solutions were $109 million compared to $106 million in the prior year period. Adjusted EBITDA for Pharmacy Solutions was $88 million for Q1, growing 7% compared to last year. Provider Services gross profit was $199 million, growing 14% versus Q1 of last year. SG&A expenses for Provider Services were $134 million compared to $127 million in the prior year period. Adjusted EBITDA for Provider Services was $82 million for Q1, growing 25% versus last year.

Jim Mattingly: On a total company basis, cash flow from operations was -$79 million in Q1 2024. The first quarter is typically a lower operating cash flow quarter when compared to the rest of the year. Operating cash flow was in line with our expectations for the first quarter, excluding some modest impact from the Change Healthcare disruption. We remain on track to deliver approximately $275 million of annual run rate operating cash flow. This excludes legacy litigation expenses and IPO-related expenses in H1 2024. We continue to focus on improving the company's leverage ratio towards our goal of 3x within three years. As of 31 March, our net debt outstanding is approximately $2.6 billion, with our leverage ratio at 4.3x.

Jim Mattingly: The company has three receive variable, pay fixed interest rate swap agreements in place with a combined notional value of $2.0 billion and a maturity date of September 30, 2025. As a result, net interest expense includes interest income related to cash flow hedges. Quarterly interest expense is expected to be approximately $50 million per quarter moving forward, including approximately $1.6 million in interest expense related to the TEU instrument. Turning to our guidance for 2024 following Q1 results, we are increasing our initial expectations for revenue and Adjusted EBITDA.

Jim Mattingly: Total revenue is expected to be in the range of $10.3 to 10.8 billion, including Pharmacy Solutions revenue of $7.85 to 8.3 billion and Provider Services revenue of $2.45 to 2.5 billion. As you will recall, we provided initial full year Adjusted EBITDA guidance of $550 to 564 million. This range previously included a $16 million contribution from a certain quality incentive payment or QIP. Based on our year-to-date performance and momentum as we evaluate the remainder of the year, total company Adjusted EBITDA is now expected to be in the range of $555 to 570 million and now excludes any contribution from the certain quality incentive payment.

Jim Mattingly: To be very clear, this updated range represents a like-for-like increase in company Adjusted EBITDA of approximately $20 million at the midpoint. It also represents 9.3% to 12.3% growth in 2024 versus 2023, excluding the impact from quality incentive payments in both years. Our visibility and confidence level regarding the quality incentive payment has not changed. However, we feel this revised EBITDA guidance, excluding the QIP, provides incremental clarity for investors. Should we receive a QIP next quarter, we would expect a $30 million dollar increase to the low end and high end of our updated $555 to 570 million Adjusted EBITDA range.

Jim Mattingly: At the midpoint of the $555 to 570 million range, the Adjusted EBITDA margin is approximately 5.3%, excluding QIP, and we expect to see margin expansion throughout the rest of the year, with company margin, excluding specialty, higher in 2024 as compared to 2023. You can refer to the Q3 report investor presentation for additional details on the increase to our Adjusted EBITDA guidance. With that, I will turn it back over to Jon.

Jim Mattingly: You can refer to the Q3 report investor presentation for additional details on the increase to our Adjusted EBITDA guidance. With that, I will turn it back over to Jon.

Jon Rousseau: Thank you for your time today to go through BrightSpring's platform, Q1 results, and guidance update. We will now open up the line for questions. Operator?

Operator: 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. In the interest of time, we ask that you limit yourself to one question and one follow-up, then rejoin the queue for any additional questions. Our first question comes from the line of Jamie Perse with Goldman Sachs.

Jon Rousseau: Hi, Jamie.

Jamie Perse: Hey, thank you. Good morning. I was wondering if you could maybe just help walk us through where some of the upside in the pharmacy business came from specifically. Obviously, that was in the infusion and specialty segment. But where were results, you know, different than expectations, when you provided, you know, initial full year guidance, you talked about some of the oncology, you know, partnerships you've entered into. You know, how much did that contribute? Just any more color you can give on where the upside to your guidance came from in that segment.

Jon Rousseau: Yeah. Good morning, Jamie. Thank you for the question. Look, I would say overall that the growth we had in the company in Q1 was very broad-based. We exceeded expectations really almost across the board, really thanks to a lot of our planning and investments we've made last year and going into this year. Specialty Pharmacy in particular had borderline really explosive growth, very much outsized growth as well. I would call out, though, that Home and Community Pharmacy also grew at 14% year over year as well. The growth really was very broad-based. You know, it was really driven by volume across the board. We had almost 10% script growth on the pharmacy side on average.

Jon Rousseau: You know, a lot of that is weighted to home and community because of the scale difference there on scripts. You know, on specialty, we've just continued to perform on our LDDs. You know, we won 3 more limited distribution drug contracts in Q1. We've now got a pipeline of 18 launching in the next 16 months is our belief. We've continued to execute really well on the generic side, and we have the largest sales force in the business that we've invested in. You know, it's continuing wins from an LDD perspective and execution really across the board on targeted therapies, you know, really driven by our quality and our leading sales force in the industry.

Jon Rousseau: You know, I would point out, you know, that we said in the script, you know, we had good new customer wins on Home and Community. This will be our biggest year ever in terms of new customers and patients on Home and Community as well. You know, we've just continued to lay the groundwork over the last few years, and it was a really strong quarter of execution on the volume side.

Jamie Perse: Okay, thank you. Just one on margins. You had some really nice leverage in the provider segment on EBITDA margin. Obviously, pharmacy had some of the mix pressures. You also spoke about a, you know, cadence of increasing margins throughout the year, which is implied in your guidance as well. Just wondering if you can talk us through some of the puts and takes for EBITDA margin, you know, for the balance of the year, especially in light of the lowest margin segment being kind of at this how you describe the explosive growth rate. Thank you.

Jon Rousseau: Yeah, sure. I mean, I think you're exactly right. The provider margins, you know, were very strong in the quarter. You know, we've continued to focus on operational execution and efficiency on that side of the business, and we definitely drove some leverage in our costs with our revenue increase. I think it's a really good example of our complementary diversification and stability as a company as you see that kind of balance in our organization. You know, the margin on the specialty and pharmacy side of the company was almost entirely driven by really outsized growth above our expectations and that explosive specialty growth, especially while the EBITDA percent growth and the dollars are great. You know, it does come with a lower margin as characteristic of that industry.

Jon Rousseau: It really was outsized growth versus expectations on specialty. The rest of the company outside of specialty grew its margin, and we expect from this point going forward, as we look at the quarterly forecast, that our margin as a company is gonna continue to remain stable to tick up throughout the year. We were at about a 5.1% margin as a company in Q1. We expect that to get into the 5.3% range later in the year and maybe up into the 5.4%, 5.5% range as well. Specialty is expected to stabilize to slightly tick up throughout the year, and then the rest of the company is expected to tick up a little bit throughout the rest of the year as well.

Jon Rousseau: You know, really driven by operational efficiencies, OpEx savings in a lot of different areas, you know, continued BU performance and leveraging our scale. We do have some rate positive impacts coming later in the year, like hospice in Q4. We also have the benefit, Jamie, of taxes and days as we go out through the year. You know, we have an impact in Q1 from payroll tax resets and the way the days fall, and so that's gonna be favorable for the rest of the year as well.

Operator: Our next question comes from the line of Brian Tanquilut with Jefferies.

Brian Tanquilut: Hey, good morning, guys, and congrats on a solid quarter. Maybe Jon, to follow up on the first question from Jamie earlier. As we think about the strength of your growth, you know, how are you thinking about the sustainability of these, you know, robust or elevated levels of growth? We're not looking at 30% specialty growth, obviously, longer term, but just curious how you're thinking about your ability to sustain these sort of elevated levels.

Jon Rousseau: Yeah. Thanks, Brian. Good morning. Thanks for the question. Look, we've never felt better about the company. You know, whether it's from a growth perspective or what we're doing from a strategic and operational cost and efficiency perspective, we've never felt better about the growth of the company. You know, we expect the specialty growth rate in particular to stay elevated, you know, well above 30%, looking out for the foreseeable time period. We expect infusion to be well into the double digits, and we expect home and community to be in double digits as well for the foreseeable future. You know, for us on provider, you know, there's different contributors. Home Health Care, home health and hospice, and rehab were all double-digit growers in the quarter as well.

Jon Rousseau: You know, we've really got broad-based growth in the organization. It's a really nice mix. You know, we continue to see the current levels of growth continuing, you know, into the foreseeable future. It's gonna ebb and flow a little bit across the business units, you know, with who contributes a little bit more, a little bit less per quarter. It's not always a straight line, but ultimately, you know, the line keeps moving up from a growth perspective in a very healthy way. You know, we remain just very confident with our volume growth and our revenue growth as we look into the future. You know, for us, you know, we really focus a lot not only on operational execution and efficiency, but on volume and outpacing the market growth rates on volume to continue to take share.

Jon Rousseau: You know, that volume and revenue growth has really been underpinned by our quality and our operational excellence, and then our sales and marketing focus and the investments we've made. You know, again, going back a couple years, we've always tried to put the foundation in place to be able to grow at rates higher than the market. You know, that's been underpinned by quality ops excellence and our sales and marketing team and investments, and we see that continuing to play out.

Brian Tanquilut: No, that's awesome. Maybe, Jon, as I think about acquisitions, you announced, you know, a few deals this past quarter. Just curious what you're seeing there in terms of your pipeline and interest from the sellers to sit down with you guys for deals now that you're public and what you're seeing in that area.

Jon Rousseau: Yeah. It's been very consistent. You know, the momentum there has only continued. I would say, Brian, to your question, being public now is only additive and positive to our ability to execute on transactions. You know, I would say again, historically, I think it's now like 55 out of 57 acquisitions we've done are higher on EBITDA than we acquired them just due to what we do operationally from a synergies perspective. You know, it's definitely an area of value and opportunity for the company that's only been enhanced now that we're public. You know, we did reference a couple transactions earlier in the quarter. One of them was really right on midnight on 31 December. It really could have counted either way in Q4 or Q1. That is the one that is closed.

Jon Rousseau: It is very small, with a de minimis impact in Q1. The other transactions that we referenced have not closed yet. You know, those had 0 impact obviously on Q1. Those are, I would characterize those, Brian, as our typical bread-and-butter tuck-ins at very low multiples. You know, not sizable deals, almost like CapEx, kind of a string of pearls strategy on M&A, just low tuck-ins and target geographies, folding them right in. You know, those are not included in our rest of year guidance as of yet because they've not closed. The M&A strategy is one that I think will continue to be a strength for our company and has only been enhanced.

Jon Rousseau: The other transactions that we referenced have not closed yet. You know, those had 0 impact obviously on Q1. Those are, I would characterize those, Brian, as our typical bread-and-butter tuck-ins at very low multiples. You know, not sizable deals, almost like CapEx, kind of a string of pearls strategy on M&A, just low tuck-ins and target geographies, folding them right in. You know, those are not included in our rest of year guidance as of yet because they've not closed. The M&A strategy is one that I think will continue to be a strength for our company and has only been enhanced.

Jon Rousseau: You know, really in Q1 with the IPO, we were heads down on that and executing as well as we could out of the gates. Operations was really our core focus. The M&A pipeline remains active. We'll have a few smaller deals that'll close in Q2, and, you know, obviously we'll speak more to them when that occurs.

Operator: Our next question comes from Joanna Gajuk with Bank of America.

Jon Rousseau: Hey, Joanna, if you can hear us, we cannot hear you. Maybe operator, we can come back to Joanna in a second.

Operator: Joanna, are you able to hear us? Okay. Our next question will come from the line of Linda Bolduc with Morgan Stanley.

Linda Bolduc: Hi. Good morning. Can you hear me?

Jon Rousseau: Yeah. Hi, Linda.

Linda Bolduc: Hi. This is Linda Bolduc on for Erin Wright. Thanks for the questions. A few questions. In terms of regulatory dynamics and reform, and you mentioned in your prepared remarks that it's been favorable so far, what are the key assumptions embedded in the low end and the high end of guidance? In terms of the enterprise long-term Adjusted EBITDA margin target of about 6%, when we dive deeper into each of the businesses, the pharmacy segment has inherently lower margins versus the provider business. The pharmacy space has seen meaningful growth. How does that margin mix between the two segments change over the next few years? Are there levers to pull for margin expansion across each of the different businesses?

Jon Rousseau: Yeah. Thanks a lot for the question. In terms of rate impact and the guide for 2024, there's really only one element that would be noteworthy. It's our hospice pharmacy rate. Hospice, just given the value of hospice, has continued to be supported very well over the years. The proposed rule for 2025 is no different from that. You know, that would come into effect in Q4. You know, it's one of the many items of EBITDA growth and drivers that we see in the business in H2. That's really the only one to speak of, and that would be impacting the business positively in Q4.

Jon Rousseau: You know, as you think about looking out on EBITDA margin into the future, you know, I think, you know, getting to a 6% margin will continue to be our long-term goal. I would say the variable item there is our specialty growth and mix over the years. You know, again, our specialty growth from a volume revenue and EBITDA dollars perspective has been terrific and extremely strong. You know, that's where our primary focus is continuing to drive EBITDA dollar growth. We really kind of think about the company separately on EBITDA margin and how we manage that. You know, it's at or north of 7%.

Jon Rousseau: You know, we expect margins in Infusion and Home and Community Pharmacy to continue to tick up through this year and certainly into next year. We feel very, very good about that for a variety of reasons, including our growth on the top line and with volume, leveraging that growth to the bottom line in our OpEx. We have a host of operational efficiencies, procurement, and OpEx savings projects that are going on in those business centralizations and automations. You know, we've never been more active in that area. That's always been a core competency for us, is driving operational efficiency, and we've never had more activity in ongoing initiatives in that area.

Jon Rousseau: We feel really good that Infusion and Home and Community Pharmacy are going to be increasing their margins in H2 and as we head into 2025. Really the only variable in our mind around pharmacy margin in the foreseeable future is just your mix. With this incredible growth in specialty, again, for very solid reasons that we've laid the groundwork for, but even ahead of our own expectations internally in Q1, it's just how fast does that business continue to grow. Again, you know, we really focus on EBITDA dollars. You know, we're gonna be extremely focused on working cap and cash flow in the company in the future. That's how we think about specialty market share and EBITDA dollars.

Jon Rousseau: Really the only variable in our mind around pharmacy margin in the foreseeable future is just your mix. With this incredible growth in specialty, again, for very solid reasons that we've laid the groundwork for, but even ahead of our own expectations internally in Q1, it's just how fast does that business continue to grow. Again, you know, we really focus on EBITDA dollars. You know, we're gonna be extremely focused on working cap and cash flow in the company in the future. That's how we think about specialty market share and EBITDA dollars. While doing everything we can on the margin side, and then really driving margin across the rest of the company, where we feel very, very confident margin's going to continue to increase over the next two years.

Jon Rousseau: While doing everything we can on the margin side, and then really driving margin across the rest of the company, where we feel very, very confident margin's going to continue to increase over the next two years.

Operator: Our next question comes from the line of Whit Mayo with Leerink Partners.

Whit Mayo: Is that me? John, is this?

Jon Rousseau: Hi, Whit.

Whit Mayo: Hey, I got confused there. Speaking of confusion, can we talk about the quality incentive payment just for a second? You're not expecting it now. It's not in the guides. You took it out, but you think you may get it. I just wanna make sure that what you're saying, I think you're saying we don't need it. We can demonstrate the growth of the business. I just wanna make sure I understand exactly what you're trying to message around the QIP.

Jon Rousseau: Yeah, on the quality incentive payment, and this is, you know, very specific singular quality incentive payment that we're talking about, that we've been talking about here, you know, that we had put into the IPO model, obviously, originally. Nothing has changed whatsoever about our expectations for that payment. We should know about that in late Q2. Nothing whatsoever has changed about that. You know, what we wanted to try to do for investors is to be as clear as we possibly could about what was in our guide. Previously, in the 550 to 564, our range that we had with 557 at the midpoint, there was a $16 million assumption in there, sort of middle of the road for that QIP.

Jon Rousseau: You know, without that, without any QIP assumption, our guide was $534 to $548 million. What we are saying now is without any QIP assumption, that specific one, our guide is now $555 to $570 million. That's about a $20 million increase in our guide. We are still saying we have the same expectations about the QIP. We will find out later this year. If we get the QIP, it should be in the range of a net $30 million, and you would add that net $30 million to the low and the high end of the range of the $555 to $570 million. Is that helpful?

Whit Mayo: Yeah. No, that's super helpful. Just the other question I have is just thinking about the uniqueness of your specialty business and the organization and the sales force. What do you think is different in terms of your platform versus others in terms of just the sheer size of the sales force and what you're doing?

Jon Rousseau: Yeah. Look, I think first and foremost, you know, we're playing and participating in providing services in the most attractive elements of the specialty industry. You know, that's oncology, some other areas of neuro and rare and orphan. We're participating in an area of oncology that's about 40% of the specialty industry, growing at about 15% a year, where there's just continuous innovation. You know, first and foremost, it's that. You know, we really also then execute extremely well operationally. That's evidenced by our 93 Net Promoter Score. Most recently here, actually, it was a 94 by a third party, by a third-party firm that pulses this every quarter.

Jon Rousseau: We get our drugs out the door and to patients after they're approved through benefit verification, you know, typically twice as fast as the industry, and we just have outstanding levels of patient satisfaction. You know, with that quality, which is so important to manufacturers and biotech partners, you know, we win a lot of these limited distribution drugs, really almost most of them, as they really wanna go with a very high-quality provider. That fuels our LDD pipeline, and these limited distribution drugs take years and years to ramp, and it provides this steady, underlying, continued growth in revenue in our business. You know, there's also favorable dynamics in the industry from generic conversions from brands. That's been a positive benefit for us over the last couple years.

Jon Rousseau: We're gonna have two more drugs near the end of the year going generic. That will be helpful. Then as you look out over the next five to six years, there's another nine more after the two at the end of this year that are going generic as well. Then, you know, with that quality and winning those LDD relationships from manufacturers based on that quality, we've got the biggest sales force in the industry in oncology. We're in thousands of doctors' offices every day interacting with referral sources and patients to pull referrals through. That's just really the engine and the machine that we've created in that business. You know, ultimately centered around the best possible outcomes for people with cancer. Literally, you know, our work helps them live longer, keeps them alive longer, and we're incredibly proud of that.

Jon Rousseau: Then as you look out over the next five to six years, there's another nine more after the two at the end of this year that are going generic as well. Then, you know, with that quality and winning those LDD relationships from manufacturers based on that quality, we've got the biggest sales force in the industry in oncology. We're in thousands of doctors' offices every day interacting with referral sources and patients to pull referrals through. That's just really the engine and the machine that we've created in that business. You know, ultimately centered around the best possible outcomes for people with cancer. Literally, you know, our work helps them live longer, keeps them alive longer, and we're incredibly proud of that. That's an operational process and strategy that's been put in place over the last decade.

Jon Rousseau: That's an operational process and strategy that's been put in place over the last decade.

Operator: Our next question comes from the line of Joanna Gajuk with Bank of America.

Mia Munoz: Good morning. This is Mia Munoz with Bank of America on for Joanna Gajuk. Apologies for the disconnection earlier. I guess I'm sure if this has already been answered, but I wanted to touch on deals. Firstly, on some deals closed this year, how much do these assets add to revenues and EBITDA this year? As a follow-up, are you adding new pharmacies or new infusion sites, or what other kind of assets do you look to be adding this year?

Jon Rousseau: Yeah, thanks for the question. So again, we've closed really one transaction through the year. We did buy a remaining 30% interest in a joint venture we had, which was pretty small. We bought that remaining 30% interest that we didn't own. I would say, you know, those two transactions in Q1 were de minimis in terms of their impact in the quarter. As we look out, we've got several more deals under definitive. Those will close later into Q2. You know, when they do close, we would provide updates on that. But the guidance that we have in place right now does not include any future M&A. As it relates to assets we're looking at, you know, I think it's just very complementary, consistent with our historical strategy.

Jon Rousseau: Home Health Care, home health hospice, rehab on the provider side, select home-based primary care assets to scale faster there in relevant geographies, and then tuck in home and community and infusion pharmacies. You know, really just balancing our acquisitions and looking at what are the most attractive deals in those sectors and geographies of focus is how we sit back and always think about things and optimize. That's really why we're able to, you know, drive the historical multiples on M&A that we have. You know, we're able to see most everything. Most of our deals are proprietary, and we're able to sit back across these markets and really selectively think about which deals we wanna do and why, as we balance multiples and really seek to drive the most accretive M&A possible.

Jon Rousseau: You know, it'll continue to be a mix across those clinical areas of Provider and then tuck-ins on Infusion and Home Community Pharmacy.

Mia Munoz: All right. Thank you.

Operator: Thank you. Our next question comes from the line of Ann Hynes with Mizuho.

Ann Hynes: Good morning. I just wanna confirm that all the guidance raise is really driven by organic. It's not really driven by incremental M&A. Secondly, can you just let us know what the quarter was versus your internal expectations and what really came in above? I mean, it sounds clearly specialty was above your expectations, but is there anything else that you would call out as second? Thanks.

Jon Rousseau: Yeah. On your first question, the answer is yes. The guide does not include incremental contribution from M&A. You know, in terms of our internal expectations, you know, we soundly beat revenue. We beat on EBITDA by about $several million. You know, as mentioned before, you know, we really did have explosive growth in specialty, but our growth at the company was very broad-based. Home and Community Pharmacy grew 14% as well. We had Home Health Care and rehab both growing well into the double digits on the provider side. You know, we were pleased with the quarter. We were at expectations in some areas. We were above expectations in other areas. You know, we see very strong growth continuing for the rest of the year.

Jon Rousseau: This is a function of the groundwork and the model we've put in place for years in the organization. You know, our outside volume growth has been based on operational excellence and quality, and then a real focus on sales and marketing. We enhance that with M&A, and you know, that's been the model, and it's continuing to work very well. You know, we did grow the top line higher than expectations in the quarter, and we're very enthusiastic about the rest of the year. You know, as I've said, we've sort of never had more focus on various growth and operational initiatives. In many ways, we've just never felt better about where the company is.

Operator: Our next question comes from the line of Jack Wallace with Guggenheim Securities.

Jack Wallace: Hey. Yeah, thanks for taking my questions, and congrats on a great start to the year. Just a couple questions. One, it sounds like the tuck-in strategy has been working really well and you may be paying off some dividends this quarter. Can you talk about just any of the synergies from prior tuck-in deals, particularly in the areas or geographies where you've got incremental density related to those deals? How much were those synergies powering the overperformance in the quarter?

Jon Rousseau: Yeah, there really wasn't an impact from prior deals in the quarter. It was almost all entirely organic, Jack. You know, we really were focusing on the IPO in H2. That's where the slowdown in M&A occurred last year as we were moving towards the IPO. You know, this was very much largely an organic quarter. But you're right, that synergies very much come into play. You know, our scale, our operational capability, our sales and marketing capability, and then our just our contracting and our purchasing capabilities in the organization. Those all drive immediate synergies and transactions. They usually cut our multiple in half very quickly when we do deals.

Jon Rousseau: You know, we would expect a healthy flow of smaller tuck-ins, you know, for this year. You know, obviously, just given our focus on execution after the IPO operationally and given our focus on cash flow, you know, for the first part of this year and into Q3, I think we're certainly gonna be focused on smaller tuck-ins and trying to drive things that are very accretive and even deleveraging in the acquisitions that we do. But really no contribution from prior M&A in the first quarter. Our pipeline has consistently remained as strong as it's ever been.

Jon Rousseau: We are under definitive with several more deals here that, you know, should be closing in the near future. Again, they will be of the smaller tuck-in variety at, you know, attractive multiples.

Jack Wallace: Yeah. That's helpful. It sounds like there was some good overperformance in the Provider Services segment driven by your ability to contract away some of the potential headwinds from reimbursement. Is there further upside to go, you know, there this year, and or is there maybe any, you know, an outsized benefit seen in Q1 that maybe won't repeat going forward? Any color there would be helpful. Thank you.

Jon Rousseau: Yeah. Thanks, Jack. Look, I think it's a great example of you know, the balance in the organization as well. You know, Provider did perform really well in the quarter from a year-over-year perspective and really on the margin side. You know, I think as we look out for the rest of the year, as I've said, the margin for the company outside of specialty and the specialty mix impact with their outsized growth, the margin for the rest of the company grew year over year. We expect the margin for the company to you know, on the other side of the calendar turning on January 1 and after Q1, we expect the margin for the rest of the company and the company in entirety to continue to grow through the balance of the year.

Jon Rousseau: That is the case on the provider side as well. You know, we see that margin continuing to creep up. You know, there are several drivers there, you know, continuing to drive volume growth and leveraging our fixed costs and our OpEx. We are going to, you know, get some positive rate there, particularly around hospice, in the later part of the year in Q4. We have numerous other operational initiatives in place, that are going to continue to be driving EBITDA as we go throughout the year. We do expect some tick up and some modest improvements even on the provider margin side through the balance of the year.

Operator: Our next question comes from the line of Pito Chickering with Deutsche Bank.

Kieran Ryan: Hi there. This is Kieran Ryan on for Pito. Thanks for taking the question. Just wanted to go back to the specialty and infusion margins one more time. Since the guidance raise is mostly driven by that segment, is this about the level of EBITDA flow through that we should assume on revenue upside for this segment going forward? Or is there anything you'd call out that is maybe kind of dragging the incremental margins down this time? Just trying to kind of square the incremental margins on the guidance increase with the kind of historical trend. Thank you.

Jon Rousseau: Yeah. No, our guide on the provider side is gonna go up as well, Pito. We feel really good about that business, and we've taken our expectations up for the year as well on the provider side. You know, really it was an enhancement on both the pharmacy and provider side for the company. You know, I think as it relates to you know to margin, it's all. The vast majority of it is all due to the outsized specialty growth and mix. Again, the rest of the company grew on margin. Outside of that, volume growth at specialty. And you know there was a little bit of mix impact you know within the business.

Jon Rousseau: There was some insulin pricing change in the industry, you know, that occurred at the beginning of the year. You know, we did note a relatively modest impact from Change in the quarter, which will go away into Q2, although I think we handled the Change situation, you know, really phenomenally as the company is an indicator of our operational performance. You know, as we look out to the rest of the year, the provider side guidance was raised too. We see that margin ticking up. We see the margin for the whole company ticking up over the rest of the year.

Jon Rousseau: It really is a function of just tremendous growth in the specialty pharmacy side of our business and, you know, which again, is a real positive from a revenue and an EBITDA dollars perspective. You know, margins for the company in total are extremely healthy and, you know, we feel really good about, you know, where they're gonna be headed here over the next 12 months.

Kieran Ryan: Thanks a lot.

Operator: That concludes today's question and answer session. I'd like to turn the call back to Jon Rousseau for closing remarks.

Jon Rousseau: Thank you, operator. Thanks all of you for joining us today on the call. Over the course of the next couple of months, we're gonna be participating in several investor conferences. We wanted to let you know as well, and we look forward to speaking with you there in the future and on the Q2 call in a few months. Thanks for joining today, and have a great one. Bye.

Operator: This concludes today's conference. Thank you for participating. You may now disconnect.

After the speaker's presentation, there will be a question and answer session.

Speaker Change: Ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised.

Speaker Change: To withdraw your question. Please press star one again.

Speaker Change: Please be advised that today's conference is being recorded.

Speaker Change: I would now like to turn the conference over to Jennifer <unk>, Chief Accounting Officer. Please.

Speaker Change: Please go ahead.

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

Speaker Change: Earlier today Bright spring released financial results for the quarter ended March 31 2024.

Speaker Change: 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.

Speaker Change: Such forward looking statements are not guarantees of future performance.

Speaker Change: 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.

Speaker Change: Specific risk factors and uncertainties can also be found in our 10-K previously filed with the SEC such factors may be updated from time to time in our periodic filings with the SEC and we do not undertake any duty to update any forward looking statements, except as required by law.

Speaker Change: 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: <unk>, which again are available on our Investor Relations website. This webcast is being recorded and will be available for replay on our investor Relations website and with that I will turn the call over to John Russo Chief Executive Officer.

Thank you Jeff.

John Russo: Morning, everyone and thank you for joining bright spring first quarter 2024 earnings call.

I would like to begin by extending a heartfelt. Thank you to all of the people with bright spring.

A bright spot and we are working vigorously to deliver high quality home and community based pharmacy and provider health solutions.

John Russo: The complex patient populations.

John Russo: This could not be accomplished without our dedicated employees and the support of our investors.

Consistent with both our long term and recent track records. We are pleased to start the year with strong first quarter performance across the portfolio of home and community Health service lines of bright spring.

John Russo: Our comprehensive care platform continues to deliver timely preventative and coordinated care solutions centered around patients.

John Russo: Some highlights here upfront include the following.

John Russo: Extremely strong volume growth in Q1.

Revenue and adjusted EBITDA in the first quarter that exceeded plan.

Significantly raised guidance for the full year, while continuing to invest in our infrastructure and future growth.

John Russo: These results are driven by our provision of services in large and growing markets.

John Russo: The delivery of valuable services that reduce cost and improve outcomes.

John Russo: Our demonstration of strong quality and service levels.

John Russo: Strong operational capabilities within a scaled platform.

John Russo: And our ongoing pursuit of attractive near term and long term growth opportunities through our sales and marketing focus and commitment to strategic growth.

For the first quarter. The Companys revenue was $2 6 billion, which represented 27% growth year over year and exceeded expectations farmer.

Pharmacy solutions generated $2 billion in revenue, representing 35% growth compared with the first quarter last year.

John Russo: And to provide our services segment generated $600 million in revenue, representing 7% growth compared to the same period last year.

We are very pleased with the robust growth and performance in the pharmacy solutions segment, which was well ahead of plan as well as with the provider services segment, which delivered impressive growth in line with our expectations and is comprised of several underlying higher growth service lines.

John Russo: Very strong and broad based revenue performance across the company led to better than expected adjusted EBITDA growth for bright spring.

John Russo: With adjusted EBITDA of $130 5 million for the first quarter, representing 13, 2% growth versus the prior year's first quarter.

And pharmacy solutions are 35% revenue growth was driven by strength in both the infusion and specialty business and the home and community pharmacy business.

John Russo: With the specialty business performing exceptionally well.

Infusion in specialty business grew 44% year over year, well ahead of our expectations.

With specialty delivering growth above the sub segments growth rate.

Speaker Change: <unk> community pharmacy revenue grew 15% year over year in the quarter.

Across pharmacy solutions total scripts dispensed that delivered were approximately $9 9 million in the quarter, which increased 9% versus the prior year with excellent volume growth of over 35% in specialty pharmacy.

Already this year, we have been selected as a preferred pharmacy partner for three new highly specialized limited distribution oncology drugs.

Speaker Change: Driver of specialty growth, bringing.

Speaker Change: Bringing our total limited distribution drugs portfolio to 117.

Scripts dispensed in home and community pharmacy grew in the high single digits year over year and we are currently on track this year to realize the largest increase in the number of new customers and patients ever in this business.

We believe our performance in pharmacy is reflective of our operational efficiency clinical and dispensing accuracy high quality services and customer and patient support programs and satisfaction levels and we expect our revenue momentum in this business to continue.

Speaker Change: Adjusted EBITDA in pharmacy solutions grew 7% year over year, driven by strong volume growth across the segment.

Speaker Change: Adjusted EBITDA margin was influenced by the outsized revenue growth in specialty above expectations and corresponding mixed shift in.

In addition to some impact from the change healthcare disruption.

We believe the pharmacy segment margins will expand over the balance of the year, while continuing to make growth investments in the business.

Speaker Change: And provider services, 7% revenue growth was driven by strong home health care performance as well as continued strength in our rehab business.

Our community living business delivered above market growth in the quarter as well.

Daily patient served remained healthy across our care platform.

Speaker Change: With home Health care average daily census of approximately 43000 growing 11% year over year.

With double digit census growth in our home health and hospice business.

Speaker Change: Community living in rehab person served with 16600 in the first quarter relatively flat compared to last year and in line with expectations and rehab. We are internally focused on core billable hours for monitoring the growth of this business, which we believe is a better indicator of performance and in the <unk>.

Speaker Change: First quarter core billable hours and rehab grew at a high teens rate year over year consistent with our plan.

Speaker Change: Adjusted EBITDA and provider services grew 25% year over year with margin expansion driven by cost efficiencies economies of scale operational quality and volume and revenue growth.

Speaker Change: We saw adjusted EBITDA strength across the provider portfolio with margin expansion in both home health care and community and rehab care.

Speaker Change: Overall as a company EBITDA margin grew year over year, when excluding the extremely high growth and higher share of business mix that the specialty pharmacy business delivered and represented in the first quarter.

Speaker Change: We were pleased with the total company growth in revenue and adjusted EBITDA in the quarter, which puts US ahead of our plan for 2024.

Speaker Change: As a result, we have raised both revenue and adjusted EBITDA guidance for the year, which we will discuss in more detail in just a few minutes.

Speaker Change: All in all the company's first quarter financial results reflect impressive growth in profitability driven by consistency of performance and are complementary and comprehensive services platform.

Speaker Change: In addition to the growth metrics and financials I would like to take a moment to discuss how and why bright spring is among the leading healthcare services companies in the country today.

Speaker Change: And bright spring, we deliver pharmacy and provider health services to complex patients and home and community settings, we operate in large and growing markets, where we provide essential services with clear and strong ROI.

Speaker Change: Across our organization our team works hard to deliver high quality care to patients and we believe our operational prowess and culture of continuous improvement our competitive differentiators.

Speaker Change: We work to ensure that patients receive appropriate and accurate care in the most efficient and desired setting.

Speaker Change: As part of our attentive and capacity care, we work to identify potential medical and medication problems and reduce adverse events due to our highly proximate physicians patients where they reside.

Speaker Change: We provide important health services for approximately 400000 patients each day on average enabled by the timely and high quality care provided by well trained personnel and bright springs overarching focus on delivering patient centric care.

Speaker Change: Our integrated platform of service capabilities also help specific patients to receive the right care management at the right time and in the right setting.

Speaker Change: We will continue to improve the coordination of integrated and patient centric care for all people who require multiple health services at the same time or over time.

Speaker Change: This results in many benefits for patients, including efficiency of care and additional growth of the bright spring platform.

Speaker Change: And pharmacy solutions, we have 99, 9% generic efficiency and order accuracy rates and our home and community pharmacy settings.

Speaker Change: We started cancer patients on therapy twice as fast compared to the industry average.

We have net promoter scores greater than 90 and infusion in specialty.

Speaker Change: With patient satisfaction scores of 95% and our infusion business.

Speaker Change: Our medication adherence programs have delivered over $2000 in average annual savings in.

Speaker Change: In our medication management program for individuals in their own homes call continued care Rx.

Speaker Change: As demonstrated a 73% reduction in hospitalizations when utilized together with our home health as highlighted in the Jama article of November 2023.

Speaker Change: This high level of performance. Despite only a few examples and as measured by patients and third parties as well above industry average.

Speaker Change: Our proactive best practices and operational capabilities. We're also recently evidenced when bright spring was able to mitigate any significant impact to revenue or EBITDA related to the change healthcare cyber security incident in the first quarter.

Speaker Change: And our provider services segment, our patients often have complex health conditions, which required dynamic care plans incorporating expertise across multiple disciplines.

We are proactive in coordinating care delivered through customized programs and plans and as care takes place in the home or community clinics, we have demonstrated an ability to deliver high quality outcomes with lower costs.

Speaker Change: Our home based primary care team has demonstrated an 84% reduction in readmissions for IBD patients and our seniors and duals patients experienced approximately 50% less hospitalization compared to the national average for similar patients.

Speaker Change: In our community living business, we have delivered 99, 9% of incident free service hours to and often acute population.

Speaker Change: We have received very high customer satisfaction scores of 99% and our rehab business for four out of five in our personal care business and an 84% overall rating of care in our hospice business.

Speaker Change: Our hospice business is rated in the top 5% of all hospice providers in the country and deliver significantly more clinician time and care to patients as compared to the national average.

Speaker Change: We deliver the highest level of skilled and compassionate care to patients at some of the most important times in their lives.

Speaker Change: Importantly, these quality and operational results not only reflect the commitment to high levels of service and care in our organization, but also contribute to our above industry average growth profile.

Speaker Change: Our focus on service levels and quality creates a positive cycle of patient success efficiency and increased partnerships and referrals, which all contribute to the growth of the company.

Speaker Change: Secular growth drivers underpinning performance across the company include continued robust market growth driven by demographics.

Speaker Change: The continued shift of services delivered closer to the patient and home and community settings.

Speaker Change: And specific customer setting growth factors.

Speaker Change: Within pharmacy. There is also a secular innovation in the delivery of complex drugs and limited distribution drugs and infusion and <unk> hundred 60.

And the continuing evolution of generic alternative availability in this specialty business.

Speaker Change: Against this positive industry backdrop, bright spring scale comprehensive offerings and focus quality and service have been drivers of market share gains and above industry average historical growth.

With this foundation in place we remain strategic with our spend and are further investing in targeted resources and operational enhancements to improve customer and patient access and workflows, while continuing to drive best practices across the enterprise.

Speaker Change: Ongoing operational focus efficiency and quality of services leads to superior sales and marketing results improved revenue cycle management, and optimize recruiting and training systems for our employees.

Speaker Change: We leverage our operational capabilities to underpin our volume and revenue growth rates and our ongoing strategic planning is aimed at meeting the needs of more patients as we continue to dive deeper into our existing and adjacent markets and focus on growing at above market rates.

Speaker Change: We do this through the expansion of current operations de Novo projects and acquisitions and looking ahead, we will increasingly integrate additional offerings to patients through care management resources and the transitions of care to our lower cost in patient preferred settings.

Speaker Change: By further incorporating leading payment models from both government and private payers. We are beginning to drive true value based care through clinical and operational integration that we are uniquely capable of delivering.

Speaker Change: As we have demonstrated in the past, we are well positioned to capitalize on external opportunities to augment our organic growth plan and we will look to acquire operations in the right geographies, where we see increased value under the bright spring platform.

Speaker Change: We have been a successful acquirer of businesses and we can improve service levels and profitability through the deployment of technology. Good operational process enterprise best practices synergies and strong leadership.

Speaker Change: As you may have seen there have been a number of updates from CMS on proposed reimbursement rules and healthcare as well as final rulings on dynamics that could impact our industry.

Speaker Change: Numerous of these updates have been favorable and net we believe there is no material change to our near term our long term forecast or outlook.

Speaker Change: We operate in healthy markets with high demand markets characterized by lower cost services that have proven value in markets, where we have significant opportunity to outperform due to our operational prowess strategic discipline and scale advantages.

Speaker Change: As a reminder, over the course of a given year, we have an excess of 4900 payer contracts and this breadth and balance of business and operations provide benefits comparatively.

Speaker Change: Comparatively muting rate changes and enabling service lines to leverage the enterprise infrastructure and scale in contracting and best practices.

Speaker Change: Our comprehensive portfolio has helped support both consistent stability and growth in the past and lays the foundation for continued opportunity in the future.

Speaker Change: To summarize we are pleased by our strong performance this quarter and are optimistic about the year ahead as evidenced by our increased revenue and adjusted EBITDA guidance.

Speaker Change: We have recently added two new independent directors to our board Olivia currently and Tim Wicks Bolivians him bring incredible operational and board experience bright spring and I look forward to working with them as we grow the company.

Speaker Change: The timely high quality compassionate and coordinated care that we provide across our platform is unparalleled amongst our peer group and we continue to cultivate and build upon a patient centric culture characterized by continuous improvement and execution.

Speaker Change: I will now turn the call over to Jim to walk through the first quarter's financial results in more detail.

Jim: Thanks, Sean total revenue in the first quarter of 2024 was $2 6 billion, representing 27% growth from the prior year period.

Jim: Pharmacy solutions segment revenue was 2.0 billion achieving growth of 35% year over year.

Jim: Within the pharmacy segment confusion and specialty revenue was $1 5 billion representing growth of 44% from last year and home and community pharmacy revenue was $511 million representing growth of 15% year over year.

Jim: And the provider services segment, we reported revenue of $600 million representing growth of 7% compared to the prior year period.

Jim: Within the provider services segment home healthcare reported $242 million in revenue in the first quarter growth of 9% versus last year and community and rehab care revenue was $358 million representing growth of 6% year over year.

Jim: Moving down the P&L total company gross profit in the first quarter was $369 million representing growth of 10% compared with the FERC quarter of last year SG&A expenses for the total company for $361 million compared to $283 million in the prior year period.

Jim: Adjusted EBITDA for the total company was $131 million for the first quarter growing 13% compared to last year and adjusted EPS for the total company was <unk> 12 for the first quarter compared to negative <unk> 10 in the prior year period.

Jim: Turning back to segment performance Pharmacy solutions gross profit was 170 million growing 6% compared with the first quarter of last year SG&A expenses for pharmacy solutions were $109 million compared to $106 million in the prior year period, adjusted EBITDA performance fee solutions was $88 million for the first.

Jim: Quarter growing 7% compared to last year.

Jim: Provider services gross profit was $199 million growing 14% versus the first quarter of last year.

Jim: SG&A expenses for provider services were $134 million compared to $127 million in the prior year period.

Jim: Adjusted EBITDA for provider services was $82 million for the first quarter growing 25% versus last year.

On a total company basis cash flow from operations was negative $79 million in the first quarter of 2020 for the.

Jim: The first quarter is typically a lower operating cash flow quarter, when compared to the rest of the year.

Jim: Operating cash flow was in line with our expectations for the first quarter, excluding some modest impact from the change healthcare disruption.

We remain on track to deliver approximately $275 million of annual run rate operating cash flow.

Jim: This excludes legacy litigation expenses and IPO related expenses in the first half of 2024.

Jim: We continue to focus on improving the company's leverage ratio towards our goal of three times within three years.

Jim: As of March 31, our net debt outstanding is approximately $2 6 billion with our leverage ratio at four three times.

The company has three received variable pay fixed interest rate swap agreements in place with a combined notional value of 2.0 billion and a maturity date of September 32025, and as a result net interest expense includes interest income related to cash flow hedges.

Jim: Orderly interest expense is expected to be approximately $50 million per quarter, moving forward, including approximately $1 6 million and interest expense related to the <unk> instrument.

Jim: Turning to our guidance for 2024 following first quarter results, we are increasing our initial expectations for revenue and adjusted EBITDA.

Jim: Total revenue is expected to be in the range of $10 $3 billion to $10 8 billion, including pharmacy solutions revenue of 785 billion to $8 3 billion and.

Jim: And provider services revenue of $2 $4 5 billion to $2 5 billion.

Jim: As you will recall, we provided initial full year adjusted EBITDA guidance of $550 million to $564 million.

Jim: This range previously included a $16 million contribution from a certain quality incentive payment or <unk>.

Jim: Based on our year to date performance and momentum as we evaluate the remainder of the year total company. Adjusted EBITDA is now expected to be in the range of 555 million to $570 million and now excludes any contribution from a certain quality incentive payments to be very clear this updated range.

Thats a like for like increase in company adjusted EBITDA of approximately $20 million at the midpoint.

Jim: It also represents nine 3% to 12, 3% growth in 2024 versus 2023, excluding the impact from quality incentive payments in both years.

Jim: Our visibility and confidence level regarding the quality incentive payments has not changed however, we feel this revised EBITDA guidance, excluding the <unk> IP provides incremental clarity for investors.

Jim: Should we receive the QEP next quarter, we would expect a $30 million increase to the low end and high end of our updated $555 million to $570 million adjusted EBITDA range.

Jim: At the midpoint of the $555 million to $570 million range. The adjusted EBITDA margin is approximately five 3%, excluding <unk> IP and we expect to see margin expansion throughout the rest of the year with company margin, excluding specialty hires in 2024 as compared to 2023.

Jim: You can refer to the FERC quarter report Investor presentation for additional details on the increase to our adjusted EBITDA guidance.

John Russo: With that I will turn it back over to John.

John Russo: Thank you for your time today to go through Bright Springs platform first quarter results and guidance update we will now open up the line for questions operator.

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 again.

Speaker Change: In the interest of time, we ask that you limit yourself to one question and one follow up then rejoin the queue for any additional questions.

Speaker Change: Our first question comes from the line of Jami, Paris with Goldman Sachs.

Speaker Change: Hi, Jamie Thank you.

Speaker Change: Good morning.

Speaker Change: I was wondering if you could maybe just help walk us through what were some of the upside in the pharmacy business came from specifically obviously.

Speaker Change: The infusion and specialty segment, but.

Speaker Change: <unk> results different than expectation.

Speaker Change: When you provided any.

Speaker Change: Full year guidance, you talked about some of the oncology.

Partnerships, you've entered into how much did that contribute.

Speaker Change: Any more color you can give on where the upside to your guidance came from.

Speaker Change: In that segment.

Yes, good morning, Jamie. Thank you for the question look I would say overall that the growth we had in the company in Q1 was very broad based we exceeded expectations really almost across the board are really thanks to a lot of our planning and investments we've made last year and going into this year.

Speaker Change: Especially pharmacy in particular had at.

Speaker Change: Borderline really explosive growth very much outsized growth as well.

Speaker Change: Call out, though that home and community pharmacy also grew at 14% year over year as well so the growth really was very broad based.

It was really driven by volume across the board, we had almost 10% script growth on the pharmacy side on average a lot of that is weighted to home and community because of the scale difference there on scripts.

Speaker Change: Especially we've just continued to perform on our Ltvs, we won three more limited distribution drug.

Speaker Change: Contracts in the first quarter, we've now got a pipeline of 18 launching in the next 16 months is our belief and we've continued to execute really well on the generic side and we have the largest sales force in the business that we've invested in so.

It's continuing wins.

Speaker Change: From an LTV perspective, and execution really across the board on targeted therapies really driven by our quality and our and our leading sales force in the industry I would no doubt that we said in the script.

Had good new customer wins on home and community. This will be our biggest year ever in terms of new customers and patients on home and community as well so yes.

We've just continued to lay the groundwork over the last few years and it was a really strong quarter of execution on the volume side.

Speaker Change: Okay. Thank you and then just one on margins.

Speaker Change: You can.

Some really nice leverage in the provider segment on an EBITDA margin.

Speaker Change: Obviously pharmacy add some of the mixed pressures.

Speaker Change: So I spoke about cadence of increasing margins throughout the year, which is implied in your guidance as well. So just wondering if you can talk us through some of the puts and takes for EBITDA margin for the balance of the year.

Speaker Change: In light of.

Speaker Change: The lowest margin segment being kind of at this.

Speaker Change: How do you describe explosive growth rate. Thank you.

Speaker Change: Yes, sure I mean, I think youre exactly right the provider margins.

Speaker Change: We're very strong in the quarter, we continued to focus on operational execution and efficiency on that side of the business and we definitely drove some some leverage in our cost with our with our revenue increase I think it's a really good example of our complementary diversification and stability of the company as you see that kind of balance in our organization.

Speaker Change: The margin on the specialty and.

Speaker Change: Pharmacy side of the company was almost entirely driven by a really outsized growth above our expectations and that explosive specialty growth, especially while the while the EBITDA percent growth and the dollars are great.

Speaker Change: Does it does come with a lower margin is characteristic of that industry.

Speaker Change: But it really was outsized growth versus expectations on specialty the rest of the company outside of specialty grew its margin and we expect from this point going forward as we look at the quarterly forecast, but our margin as a company is going to continue to remain stable to tick up throughout the year. We were at about a five 1% margin as a company in Q1, we expect that to go.

Into that the <unk> III range later in the year and maybe up into the $504 five range as well as again specialty.

Speaker Change: <unk> to stabilize the slightly pick up throughout the year and then the rest of the company is expected to tick up a little bit throughout the rest of the year as well really driven by.

Speaker Change: Operational efficiencies Opex savings and a lot of different areas continue to be your performance and leveraging our scale and we do have some rate hit rate positive impacts coming later in the year like hospice in Q4.

Speaker Change: We also have the benefit.

Jamie of taxes and days as we go out three year, we have an impact in Q1 from payroll tax resets and the way the days fall and so that's going to be favorable for the rest of the year as well.

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

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

Speaker Change: Maybe John to follow up on the first question from Jamie earlier, as we think about the strength that youre growth.

Speaker Change: How are you thinking about the sustainability of these robust or elevated levels of growth I don't we're not looking at 30% specialty growth, obviously longer term, but just curious how youre thinking about your ability to sustain this sort of elevated levels.

Speaker Change: Yes, Thanks, Brian Good morning. Thanks for the question look we've never felt better about about the company.

Speaker Change: Whether it's from a growth perspective, or what we're doing.

Speaker Change: From a strategic and operational cost and efficiency perspective.

Speaker Change: I've never felt better about the growth of the company.

Speaker Change: We expect especially our growth rate in particular to stay elevated well above 30%.

Looking out for the foreseeable time period, we expect infusion to be well into the double digits, and we expect home and community to be in double digits as well for the foreseeable future.

Speaker Change: For us on provider Theres different contributors home healthcare, our home health and Hospice and then and then rehab were all double digit growers in the quarter as well. So we've really got broad based growth in the organization, it's a really nice mix.

Speaker Change: We continue to see the current levels of growth continuing into the foreseeable future, it's going to ebb and flow a little bit across the business units.

Speaker Change: <unk> contributes a little bit more a little bit less per quarter, it's not always a straight line, but ultimately the line keeps moving up from a growth perspective, and a very healthy way. So we remain just very confident with our volume growth in our revenue growth as we look into the future.

Speaker Change: For us, we really focus a lot not only on operational execution and efficiency.

Speaker Change: But on volume and outpacing the market growth rates on volume to continue to take share in that volume and revenue growth has really been underpinned on our quality and our operational excellence and then our sales and marketing focus and the investments. We've made so again going back a couple of years. We've always tried to put the foundation in place to be able to grow at rates higher than the <unk>.

Speaker Change: That's been underpinned by quality ops excellence in our sales and marketing team and investments and we see that continuing to play out.

Speaker Change: No. It's awesome and then maybe John as I think about acquisitions, you announced a few deals this past quarter.

Speaker Change: Just curious what youre seeing there in terms of your pipeline and interest from.

Speaker Change: Sellers too.

Speaker Change: But that with you guys for deals now that you're public and what youre seeing in that area.

Speaker Change: Yes, it's been very consistent momentum there has only continued I would say Brian to your question being public now is only additive and positive to our ability to execute on transactions I would say again historically I think it's now at $55 57 acquisitions. We've done are higher on EBITDA. Then we acquired them just due to what we do operationally from a synergy.

Speaker Change: His perspective so.

Speaker Change: It's definitely an area of value and opportunity for the company. That's only been enhanced now that we're public we did reference a couple of transactions earlier in the quarter. One of them was was really right on midnight on 12 30 wants you really could cut either way in Q4 Q1 that that is the one that is closed it is very small.

The day minute de Minimis impact in Q1.

Speaker Change: And then the other transactions that we referenced had not closed yet so.

Speaker Change: Those those had zero impact obviously on Q1 at that.

Speaker Change: Those are I would characterize those Brian is our typical bread and butter tuck ins at very low multiples.

Speaker Change: Sizable deals almost like Capex kind of a string of pearls strategy on M&A, just low tuck ins in target geographies folding them right in.

Speaker Change: Those are not included in our rest of year guidance as of yet because they're not closed but the M&A strategy is one that I think will continue to be a strength for our company and is only only been enhanced really in Q1 with the IPO, we were heads down on that and executing as well as we could out of the gates and in operations was really our core core.

Speaker Change: Focus, but the M&A pipeline remains active we will have a few smaller deals that will close in Q2, and obviously, we will we will speak more to them when that occurs.

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

Hey, Joanna if you can hear us we cannot hear you.

Maybe operator, we can we can come back to Joanna in the second.

Speaker Change: Joanne are you able to euro.

Speaker Change: Okay.

Speaker Change: Our next question will come from the line of Linda Bolton with Morgan Stanley.

Linda Bolton: Hi, Good morning can you hear me, yes, Hi, Linda Hi.

Speaker Change: Hi, This is Linda buildup on for Amit Thanks for the question.

Speaker Change: So two questions in terms of regulatory dynamics there for them.

Speaker Change: Mentioned in your prepared remarks.

Speaker Change: Favorable so far what are the key assumptions in betting and now Boeing and the high end of guidance.

Speaker Change: And then also in terms of the enterprise long term adjusted EBITDA margin target of about 6%.

Speaker Change: We'll dive deeper into Egypt.

Speaker Change: The pharmacy segment.

Speaker Change: Inherently lower margin.

Speaker Change: First as a provider business.

Speaker Change: Are there any.

Speaker Change: This is Dave petrini in for growth, how does that margin mix between the two segments change over the next few years and are there levers to pull from margin expansion across each of the different type of thing.

Speaker Change: Yes, Thanks, a lot for the question.

In terms of rate impact in the guide for 2024, there's really there's really only one element that would be noteworthy it's our hospice pharmacy rate Hotspur.

Hospice is just given the value of hospice has continued to be supported very well over the years.

Speaker Change: The proposed rule for 2025 is no different from that that would that would come into effect in Q4.

Speaker Change: It's one of the many items.

Speaker Change: Of EBITDA growth and drivers that we see in the business in the in the back half of the year. So that's really the only wanted to speak of in that that would be impacting the business positively in Q4 as you think about looking out on EBITDA margin into the future.

Speaker Change: I think getting to a 6% margin will continue to be our long term goal I would say the variable item there.

Speaker Change: As our specialty growth and mix over the years again, our specialty growth from a volume revenue and EBITDA dollars perspective has been.

Speaker Change: <unk> has been terrific and extremely strong that's where our primary focus is continuing to drive EBITDA dollar growth and then we really kind of think about the companies separately on EBITDA margin and how we manage that it's at or north of 7%.

Speaker Change: We expect margins in infusion and home and community pharmacy to continue to tick up through this year and certainly into next year, we feel very very good about that for a variety of reasons, including our growth on the top line and with volume leveraging that growth to the bottom line in our Opex and we have.

Speaker Change: A host of operational efficiencies procurement opex savings projects that are going on in those business centralization and automation.

Speaker Change: We've never been more active in that area. That's always been a core competency for US is it's driving operational efficiency and we've never had more activity and ongoing initiatives in that area. So we feel really good that infusion in home community pharmacy are going to be increasing their margins in the back half of the year and as we head and head into 2025. So.

Speaker Change: Really the only variable in our mind around around pharmacy margin in the foreseeable future. It's just your mix and.

Speaker Change: With this with this incredible growth in specialty again for Berry.

Speaker Change: For very solid reasons that we've laid the ground work for but even ahead of our own expectations internally in Q1.

How fast does that continue that business to continue to grow and again, we really focus on EBITDA dollars were going to be extremely focused.

Speaker Change: On working cap and cash flow in the company in the future. That's how we think about specialty market share and EBITDA dollars and while doing everything we can on the margin side, and then really driving margin across the rest of the company, where we feel very very confident margins going to continue to increase over the next two years.

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

Speaker Change: Is that me John.

Okay I got it.

Speaker Change: Few sphere.

Speaker Change: Speaking of confusion can we talk about the quality incentive payment just for a second and then youre not expecting it now it's not in the guide you took it out but you think you may get it I just want to make sure that.

Speaker Change: What youre, saying I think youre, saying, we don't we don't need it we can demonstrate the growth of the business I just want to make sure I understand exactly what you're trying to message around the <unk> IP.

Speaker Change: Yes, so on the quality incentive payment and this is a very specific singular quality incentive payments that were talking about that we've been talking about here that we that we had put.

Speaker Change: Put into the IPO model, obviously originally.

Speaker Change: Nothing has changed whatsoever.

Speaker Change: Our.

Speaker Change: About our expectations for that payment, we should know about that in late late Q2, nothing whatsoever, it's changed about that and what we wanted to try to do for our investors is to be as clear as we possibly could about what was in our guide and so previously in the $5 50 to $5 64, a range that we have.

Speaker Change: With 557 at the midpoint.

Speaker Change: There was a $16 million assumption in there sort of middle of the road for that Q IP without that without any <unk> IP assumption. Our guide was $5 34 to 548, while we are saying now is without any <unk> assumption that specific one our guide is now $5 55 to 570 <unk>.

Speaker Change: About a $20 million increase in our guide we are still saying we have the same expectations about the queue IP. We will find out later this year, if we get the Q IP it should be in the range of a net $30 and you would add that net 30 to the low and the high high end of the range on the 555% to $5 70 is that helpful.

Speaker Change: Yes, no that's.

Speaker Change: Super helpful.

Speaker Change: The other question I have is just thinking about the uniqueness of your specialty business and.

The organization.

Speaker Change: Organization and the sales force what do you think is different in terms of your platform versus others in terms of just the sheer size of the sales force and what Youre doing.

Speaker Change: Yes look I think first and foremost we're playing in participating in providing services.

Speaker Change: The most attractive elements of the specialty industry, that's oncology some other areas of neuro and rare and orphan, but we're participating in an area of oncology, that's about 40% of the specialty industry growing at about 15% a year, where theres just continuous innovation.

Speaker Change: First and foremost it's that we really also then execute extremely well operationally that's evidenced by our 93 net promoter score.

Speaker Change: Most recently here actually it was <unk> 94 by a third party.

A third party firm that pulses. This every quarter, we get our drugs out the door in two patients after they're approved through benefit verification typically twice as fast as the industry and we just have outstanding levels of patient satisfaction with that quality, which is so important to manufacturers and buyout and biotech partners.

Speaker Change: We win a lot of these limited distribution drugs really almost most of them.

Speaker Change: They really want to go with a very high quality provider and so that fuels, our <unk> pipeline and these limited distribution drugs take years and years to ramp and it provides the steady underlying continued growth in revenue and our business. There is also a favorable dynamics in the industry from generic conversions from brands that's been a positive benefit for us.

Speaker Change: Over the last couple of years, we're going to have two more drugs here at the end of the year going generic that will be helpful. And then as you look out over the next five years to six years. There's another nine more after the two at the end of this year that are going generic as well and then with that quality in winning those LGD relationships for manufacturers based on that quality, we've got the biggest salesforce.

Speaker Change: The industry in oncology or in thousands of doctors offices everyday interacting with referral sources and patients with <unk> through and Thats just really the engine. The machine that we've created in that business ultimately centered around the best possible outcomes for people with cancer and literally our work helps them live longer keeps them alive longer.

Speaker Change: We're incredibly proud of that and that's that's a that's an operational process and strategy that's been put in place over the last decade.

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

Speaker Change: Good morning. This is no one else with bank of America on for John <unk>, I apologize for that disconnection earlier.

Speaker Change: And I guess I'm sure. This has already been answered, but I wanted to touch on deals firstly on some deals closed this year, how much do these assets to revenues and EBITDA this year and as a follow up.

Speaker Change: You're adding your pharmacies or an infusion sites or what other kind of assets do you look to.

Speaker Change: We'll be adding this year.

Speaker Change: Yes, thanks for the question.

Speaker Change: So again, we've closed really one transaction through the year, we did buy a remaining 30% interest.

Speaker Change: In a joint venture, we had which was pretty small we bought that remaining 30% interest that we did now I would say those two transactions in Q1 were de Minimis.

Speaker Change: <unk> of their impact in the quarter.

Speaker Change: As we look out we've got several more deals under definitive those will close later into Q2 and.

Speaker Change: When they do close we will provide updates on that but the guidance that we have in place right now does not include that.

Speaker Change: Any future M&A.

Speaker Change: As it relates to assets, we're looking at.

Speaker Change: I think it's just very complementary consistent with our historical strategy.

Speaker Change: Health care home health hospice rehab on the provider side select home based primary care assets to scale faster, there and relevant geographies and then tuck in home and community and infusion pharmacies really just balancing our acquisitions and looking at what are the most attractive deals in those sectors and geographies of focus is.

Speaker Change: How we sit back.

Speaker Change: And always and always think about things and optimize that's really why we're able to drive the historical multiples on M&A that we have we're able to see most everything most of our deals are proprietary and we're able to sit back across these markets and it really selectively think about which deals we want to do and why as.

As we balanced multiples and really seek to drive the most accretive M&A impossible, but it'll continue to be a mix across those clinical areas of a provider and then tuck ins on infusion at home community.

Speaker Change: <unk>.

Speaker Change: Alright, thank you.

Speaker Change: Thank you.

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

Speaker Change: Good morning.

I just wanted to confirm that all of the guidance range.

Speaker Change: Really driven by organic it's not really driven by incremental M&A.

Speaker Change: And then secondly can you just let us know what the quarter was versus your internal expectations and what really came in above I mean, it sounds clearly specialty with above your expectations is there anything else that you would call out as second.

Speaker Change: Yes, and on your first question. The answer is yes. The guide does not include incremental contribution from M&A.

Speaker Change: In terms of our internal expectations, we soundly beat revenue.

Speaker Change: We beat on EBITDA by about several million dollars and as mentioned before we really did have explosive growth in specialty but our growth at the company was very broad based homing community pharmacy of your 14% as well.

Speaker Change: We have home health care and rehab.

Speaker Change: Both growing well into the double digits on the provider side and so.

Speaker Change: We were pleased with the quarter.

Speaker Change: We're at expectations in some areas, we were above expectations in other areas, we see very strong growth continuing for the rest of the year. This is a function of the groundwork and the model we've put in place for.

Speaker Change: For years in the organization or our growth is based on our Altai volume broke has been based on operational excellence and quality and then a real focus on sales and marketing, we enhanced that with M&A and that's been the model and its continuing to work very well, we did grow the top line higher than expectations in the quarter.

Speaker Change: And we're very enthusiastic about the rest of the year as I've said, we've never had more focus on various growth and operational initiatives in many ways. We've just never felt better about where the company is.

Speaker Change: Our next question comes from the line of Jack Wallace with Guggenheim Securities.

Jack Wallace: Hey, guys. Thanks for taking my questions and congrats on a great start to the year.

Jack Wallace: Couple of questions one it sounds like the tuck in strategy has been working really well.

Jack Wallace: Maybe paying off some dividends this quarter can you talk about just any of the synergies.

Prior tuck in deals, particularly in the areas or geographies, where you've got incremental density related to those deals how much were those synergies powering over performance in the quarter.

Speaker Change: No there really wasn't an impact from from prior deals in the quarter. It was it was it was almost all entirely organic Jack we really were focusing on.

Speaker Change: On the IPO in the back half of the year and Thats, where the slowdown in M&A occurred last year as we were as we were moving towards the IPO and so this was very much largely inorganic quarter, but you are right that synergies very much come into play our scale our operational capabilities.

Speaker Change: Ability, our sales and marketing capability and then our just our contracting in our in our purchasing.

Speaker Change: <unk> capabilities in the organization those all drive immediate synergies and transactions they usually cut our multiple and have very quickly when we do deals.

Speaker Change: We would we would expect.

Speaker Change: The flow of smaller tuck ins for this year, obviously, just given our focus on execution after the IPO operationally and given our focus on cash flow.

Speaker Change: For the first part of this year and into Q3, I think we're certainly going to be focused on.

Speaker Change: Smaller tuck ins and trying to drive things that are that are that are very accretive and EBIT deleveraging and the acquisitions that we do so.

Speaker Change: But they're really no contribution from prior.

M&A in the first quarter.

Speaker Change: And but our pipeline has consistently remained.

Speaker Change: As strong as it's ever been and we are under definitive with several more deals here that should be closing in the near future again, they will be of the smaller tuck in variety at attractive multiples.

Speaker Change: Okay. That's helpful and then it sounds like there were some good over performance in the provider segment driven by your ability to.

Speaker Change: Contract away some of the potential headwinds from reimbursement is there further upside to go there this year.

Speaker Change: Or is there maybe any an outsized benefit seen in the first quarter that maybe won't repeat going forward.

Speaker Change: Color there would be helpful. Thank you.

Speaker Change: Yes, Thanks Jack.

Speaker Change: Look I think it's a great example.

Speaker Change: The balance in the organization as well provider did perform really well in the quarter from a year over year perspective, and really on the margin side.

Speaker Change: I think as we look out for the rest of the year as I've said the margin for the company outside of specialty and the.

Speaker Change: The specialty mix impact with their outsized growth the margin for the rest of the company grew year over year, we expect the margin for the company to on the other side of the calendar turning on one one and after Q1, we expect the margin for the rest of the company and the company in entirety.

Speaker Change: To grow through the balance of the year and that is the case on the provider side as well, we see that margin continuing to creep up there are several drivers there continuing to drive volume growth and leveraging our fixed cost in our opex.

Speaker Change: We're going to get some positive rate there, particularly around hospice and the later part of the year in Q4.

Speaker Change: We have numerous other operational initiatives in place.

Speaker Change: That are going to continue to be driving EBITDA as we go throughout the year. So we do expect some some tick up in to modest improvements even on the provider margin side through the balance of the year.

Speaker Change: Our next question comes from the line of Peter Chickering with Deutsche Bank.

Speaker Change: Hi, there this is kieran.

Speaker Change: On for Peter Thanks for taking the question.

Speaker Change: Just wanted to go back to the specialty infusion margins one more time.

Speaker Change: Is this about.

Speaker Change: The guidance raise is mostly driven by by that segment.

Speaker Change: The level of EBITDA flow through that we should assume on on revenue upside for this segment going forward or is there anything you'd call out that maybe kind of dragging the incremental margins down this time.

Speaker Change: Trying to kind of square the incremental margins on the guidance increase with with the kind of the historical trends.

Speaker Change: Keith.

Speaker Change: Yes.

Speaker Change: Our guide on the provider side.

Speaker Change: Is going to go up as well so we feel really good about that business and we've taken our expectations up for.

Speaker Change: For the for the year as well on the provider side. So really it was an enhancement on both the pharmacy and provider side.

Speaker Change: Four.

Speaker Change: For.

Speaker Change: For the company.

Speaker Change: As it relates to.

Speaker Change: Margin, it's the vast majority of it is all due to the outsized specialty growth and mix again, the rest of the company grew on margin outside of that outside of that.

Speaker Change: Volume growth at specialty.

Speaker Change: And there was a little bit of a mix impact.

Speaker Change: For in the business there was some insulin pricing change in the industry.

That occurred at the beginning of the year. We did note a relatively modest impact from change in the quarter, which will go away into Q2, although I think we handled the changed situation.

Speaker Change: Really phenomenally as a company as an indicator of our operational performance. So as we look out for the rest of the year on the provider side Guide was raised two we see that margin ticking up we see the margin for the whole company ticking up of the rest of the year and it really is a function of just tremendous growth and especially.

Speaker Change: The pharmacy side of our business and.

Speaker Change: Which again is a real positive from a from a revenue and an EBITDA perspective.

Speaker Change: Margins for the company in total are extremely healthy and.

Speaker Change: We feel really good about where theyre going to be headed here over the next 12 months.

Speaker Change: Thanks, a lot.

Speaker Change: That concludes today's question and answer session I would like to turn the call back to John Russo for closing remarks.

John Russo: Thank you operator, and thanks, all of you for joining us today on the call over the course of the next couple of months, we're going to be participating in several investor conferences. We wanted to let you know as well and we look forward to speaking with you there in the future and on the second quarter call in a few months. Thanks for joining today and have a great one.

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

Q1 2024 Brightspring Health Services Inc Earnings Call

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