Q4 2024 Brightspring Health Services Inc Earnings Call
Speaker Change: David Larsen, Brian Tanquilut, David Larsen, John
. . . . . . .
. . . . . .
Speaker Change: Good day, and thank you for standing by. Welcome to the Brightspring Health Services Inc. 4th quarter in full year 2024 earnings call.
Speaker Change: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session, you will need to press star 1-1 on your telephone You will then hear an automated message advising your hand is raised To withdraw your question, please press star 1-1 again Please be advised that today's conference is being recorded [inaudible]
Speaker Change: I would now like to hand the conference over to your speaker today, David Daugler, Investor Relations. Please go ahead.
Speaker Change: Good morning. Thank you for participating in today's conference call. My name is David Deichler and I'm responsible for investor relations at Brightspring.
Speaker Change: I'm joined on today's call by Jon Rousseau, Chief Executive Officer, and Jen Phipps, Chief Financial Officer. Earlier today, Brightspring released financial results for the quarter and full year end of December 31, 2024. A copy of the press release and presentation is available on the company's investor relations website.
Speaker Change: Please note that today's discussion will include forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance, industry and market conditions.
Such four lifting statements are not guarantees of future performance.
Speaker Change: These four looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release and presentation, as well as our annual report informed 10K filed with the FCC, including specific risk factors and uncertainties discussed in our 10K. We encourage you to review the information in today's press release, as well as our annual report informed 10K.
Speaker Change: Such factors may be updated from time to time in our periodic violence with the FCC, and we do not undertake any duty or to update any forward-looking statements except is required by law. During the call, we will use non-GAAP financial measures when talking about the company's performance and financial conditions.
Speaker Change: You can find additional information on these non-GAAP financial measures and reconciliation to their most directly comparable GAAP financial measures to the extent available without unreasonable effort.
Speaker Change: and today's press release and presentation, which again are available on our Invest Relations website. This webcast is being recorded and will be available for replay on our Invest Relations website. With that, I'll turn the call over to Jon Housseau, Chief Executive Officer.
Jon Rousseau: Good morning. Thank you for joining Brightspring's fourth quarter in full year 2024 earnings call. I'd like to begin this call by expressing my appreciation and gratitude to and for the Brightspring team across the country.
Jon Rousseau: Our employees and caregivers work very hard with diligence each day to deliver compassionate and attentive care to the people we provide critical services to.
Jon Rousseau: I would also like to welcome Jen Phipps as Chief Financial Officer and thank Jim Mattingly for his excellent service over the years, as we transition the CFO position.
Jon Rousseau: During Jim's 10-year, the company has achieved some exceptional results, including the sale and recapitalization to KKR and WBA.
Jon Rousseau: 175% revenue and 109% evidog growth since that time, implementation of best-in-class financial systems, completing the IPO, and executing multiple successful refinancings underpin by the company's performance.
Jon Rousseau: We appreciate all of Jim's leadership and contributions as he moves to other priorities in next steps, and after appropriate and thorough consideration and evaluation, we are extremely pleased that General Assume the role of Chief Financial Officer
Jon Rousseau: With Jen's overall background in eight-year tenure at Bright Spring, she's extremely well-suited for this role. Jen has served as the Chief Accounting Officer at the company since January 2017 and Principal Accounting Officer since the IPO.
Jon Rousseau: Janice also served as the CFO of the home health and hospice business and she has run numerous other departments within the company
including procurement, real estate and tax [inaudible]
Jon Rousseau: She has been deeply involved in all financial systems and processes over the years as well as all acquisitions and debuts teachers and many automation and efficiency initiatives.
Jon Rousseau: Jen is well-prepared, notably the entirety of the company and is very deserving of this position
Jon Rousseau: Turning to 2024, it was another year of milestones, continued quality improvements in leadership, further growth, and significant ongoing impact for the customers, patients, and communities that Brightspring serves. And we are proud of how our businesses and people have performed.
Jon Rousseau: Throughout 2024, we have also deepened our focus on operational efficiencies across the organization, to best support employee effectiveness and high quality services.
Jon Rousseau: In addressing significant needs for individuals across the country, the company has increased its reach to more patients and delivered strong growth across both pharmacy and provider businesses.
Jon Rousseau: through Strategic Prioritization, Disciplined Investments, Company Scale, and Execution. Our results are ultimately a reflection of the reliable, relatively lower cost and coordinated care that drive high customer and patient satisfaction rates.
Jon Rousseau: In the fourth quarter, we are pleased to have realized total revenue growth of 29 percent year-over-year, leading to total company and segment revenues for full year 2024 at the high end of our guidance range and in line with our preliminary results provided in January .
Jon Rousseau: Total revenue of $11.3 billion in 2024, represented 28% growth year-over-year, which included pharmacy solutions revenue of $8.8 billion and provider services revenue of $2.5 billion, representing 34% and 9% growth year-over-year respectively.
Jon Rousseau: Full-year 2024 Adjusted EBITDA was $588 million, representing 16% growth year-over-year, when excluding a certain $30 million dollar quality incentive payment from 2023.
Jon Rousseau: Adjusted EBITDA also came in at the high end of our guidance range and in line with preliminary 2020-24 results communicated in January .
Jon Rousseau: Today, we are increasing total revenue and adjusted EBITDA guidance for 2025.
Jon Rousseau: with our adjusted EBITDA guidance for this year, increasing by 5 million at each the low and high ends of the prior range provided in January .
and which excludes the community-loving business.
Jon Rousseau: General Discuss our fourth quarter in full year 2024 financial results along with our 2025 Outlook and more details shortly.
Jon Rousseau: Before I discuss business performance, I would like to further reinforce our commitments about quality and continuous improvement and efficiencies across the organization which go hand in hand.
Jon Rousseau: For example, in quality, our most recent net promoter scores and specialty pharmacy for ONCO360 and CAREMED were 98 and 100 respectively, almost a perfect rating for ONCO360 and a perfect 10 out of 10 rating for CAREMED from all participants.
Also scores that are the best among specialty pharmacies [inaudible]
Jon Rousseau: After the past year of investments in people and process in our infusion business, we are now seeing best in class referral to in-home turnaround times for special patients.
Our Home and Community Pharmacy on-time delivery metrics approach 97%.
Jon Rousseau: Approximately 85% of our home health branches now have a predicted CMS star rating of 4 or 5 out of 5 and we have 97% timely initiation of care above industry average.
Jon Rousseau: In hospice, we have a 9.3 hospice care index score out of 10, significantly above the national average, and we provide 16% more nursing visits to patients [inaudible]
Jon Rousseau: and 27% more patient visits in the last week of light, with 90% of our locations above national average on visits provided to patients.
Jon Rousseau: In primary care, our ACO is reporting 13% lower healthcare costs for patients in skilled nursing facilities and 31% lower cost for patients in assisted living through our more attended local and proactive care and quality.
Jon Rousseau: and our special needs grant has already improved its star rating by 0.5 and less than a year under our ownership.
With a 6% reduction in hospitalizations in the last year [inaudible]
Jon Rousseau: A 99% capture rate for health risk assessments and 99% of our patients receiving annual wellness visits within 90 days of enrollment.
Jon Rousseau: In personal care, we have a likelihood to recommend a 4.54 out of five
Jon Rousseau: In rehab, we have overall stakeholder satisfaction of over 97%, among case managers, discharge planners, physicians, claims managers, etc. And we have a patient satisfaction score of over 95% . . . . . . . . . . . . . .
Jon Rousseau: In community living, our external audits outperform the national average, and we hold more third party accreditations than anyone in the industry, while we have deployed innovative and leading technologies to try client risk stratification and care plans.
Jon Rousseau: These are just some select mentions and highlights among many other strong and leading service and quality measures in the company.
Jon Rousseau: Across the organization, we continue to invest in and deploy new and or enhanced technologies, EMR's, ERP's, applications, and analytics and reporting.
Jon Rousseau: Numerous of which now incorporate new automation and AI use cases.
Jon Rousseau: to the benefit of our people and to drive outcomes for the individuals we serve.
Jon Rousseau: We also continue to invest heavily in compliance with literally thousands of onsite internal compliance visits and audits conducted across our operations last year.
Jon Rousseau: On the efficiency front, since the start of last year, the company has over 100 procurement, workflow augmentation, and automation programs completed or ongoing, driving process improvements, cost efficiencies, best practices, and streamlining across all business lines.
Jon Rousseau: We are more dedicated than ever to lean into process and technology innovation and leadership and healthcare services and provide all of our stakeholders with the best possible experiences over the years.
Jon Rousseau: Now, taking a closer look at fourth quarter results, pharmacy solutions revenue of $2.4 billion represented 34% growth compared with the fourth quarter of last year
Jon Rousseau: Growth for the business was primarily driven by total script volume of 11 million in the fourth quarter which represented 14% growth compared to the prior year's quarter.
Jon Rousseau: The infusion and specially business has continued to deliver above expectations, growing revenue 42% year over year in the quarter, driven by specially script growth of 35%.
Jon Rousseau: Our results in specialty and infusion this quarter and throughout the year have been a function of cross-functional operational execution and continued LED brand launches and generic drug utilization.
Jon Rousseau: Our total LED portfolio now stands at 125, which includes 12 LED's launched in 2024 in either an exclusive or alternator of pharmacy network.
Jon Rousseau: We continue to see the potential for an additional 16 to 18 limited distribution drug launches over the next 12 to 18 months while also facilitating the adoption of new generic products.
Jon Rousseau: We are honored that we are selected by our former manufacturing and biotech partners.
Jon Rousseau: as a limited distribution drug, especially pharmacy for each of these therapies and are committed to helping and improving the lives of patients who are battling cancer, rare, orphan, and a number of other diseases through market leading service levels and satisfaction scores.
Jon Rousseau: Within Infusion in 2023 and through 2024, we initiated and completed operational initiatives and investments to deploy standardizations and process improvements, and we believe that result in the infusion sub-signet will begin to benefit from these investments in 2025.
Jon Rousseau: In home and community pharmacy, revenue grew 17% year-round year in the fourth quarter, driven by script growth and new customer wins. We continue to be pleased with our execution across a variety of home and community pharmacy settings.
Jon Rousseau: including behavioral, hospice, assisted living, skilled nursing, hospital, and rehab settings, as well as other locations where patients need at-home pharmacy support.
Jon Rousseau: We believe we have an additional market share and growth potential opportunity in all of these markets and we will also be entering the pace pharmacy market this year.
Jon Rousseau: We remain focused on driving more operational and technology-driven efficiencies in the business and the continued expansion of our pharmacy services is important to ensuring that as many people as possible receive the highest quality and most comprehensive medication management and care.
Turning to Provider Services
Jon Rousseau: Segment Revenue grew 11% year-to-year, and segment adjusted EBITDA margin expanded by 70 base's points year-to-year to 15.2% in the fourth quarter, which was primarily driven by strong service and quality-based volume growth and broad-based operational efficiency and execution.
Jon Rousseau: In home health care, revenue grew at a rate of 17% every year in the fourth quarter, with average daily census growth of 9% to 46,000. We saw continued growth in the home health and hospice businesses, both in the fourth quarter and for the full year 2024.
Jon Rousseau: Personal Care has been a consistent performer this year as well with steady billable hours and very consistent operational execution.
Jon Rousseau: Our primary care business has seen expansion and growth where we leverage proximity and access to patients including through core pharmacy and provider services and we believe home-based primary care represents a significant opportunity in the coming years with ACO and payer strategies continuing to develop.
Jon Rousseau: Community and Rehab Care also performed well again in the quarter with strong revenue growth of 8% year-over-year, and consistent growth and rehab persons in our serve.
Jon Rousseau: In the rehab business, Bill Blowers grew in the mid-teens year to year for the fourth quarter and full year.
Jon Rousseau: We continue to add numerous maneuvers through new home and community neural rehab programs and new rehab and motion programs in assisted living facility and we anticipate attractive growth from rehab and motion over the next five years as we continue to add location
Jon Rousseau: The community living business has shown solid growth through 2024 through operational continuity, a service focus, and continued investments in technology and employees.
Jon Rousseau: As I mentioned earlier, the defense teacher of community living remains on track, anticipated to close in the second half of 2025, subject to customary regulatory approvals and closing conditions.
Jon Rousseau: We expect that the transaction will create a streamlined organization of Brightspring and augment both provider services and company revenue and adjusted EBITDA growth rates.
Jon Rousseau: Our strategic focus in provider will narrow to the remaining home health care, rehab, and personal care businesses each of which continues to perform in line with our high expectations.
Jon Rousseau: Consistent with the announced abestiture of community living, our capital allocation priorities remain on both debt paydown and continue tuck-in acquisitions at discipline valuations, consistent with our prior strategy.
Jon Rousseau: To summarize, 2024 was an excellent year for Brightspring, and I'm pleased with our execution so far in 2025 as we always continue to look for any way to serve more people and improve their outcomes with mission driven and meaningful services.
Jon Rousseau: We are focused on delivering on our 2025 financial outlook through quality volume growth, process optimizations and cost efficiencies, accretive acquisitions, and effective portfolio and asset management and deployment.
Jon Rousseau: With that, I'll turn the call over to Jen to discuss our 2024 fourth quarter and full-year financial results and 2025 guidance in more detail.
Jen Phipps: Thank you, Jon. In the fourth quarter of 2024, the total company revenue was $3.1 billion, representing 29% growth from the prior year period. Pharmacy Solution
Jen Phipps: Within the pharmacy segment, Infusion and Specialty Revenue was $1.8 billion representing growth of 42% from prior year and homie community pharmacy revenue was $601 million representing growth of 17% year over year.
Jen Phipps: In the Provider Services segment, we reported revenue of $656 million in the fourth quarter, which represented 11% growth compared to the prior year period.
Jen Phipps: Within the Provider Services segment, Home Health Care reported 280 million in revenue, growing 17% versus last year, and community and rehab care revenue with 376 million, representing growth of 8% year over year.
Jen Phipps: For the full year, 2024, total company revenue was $11.3 billion, representing 28% growth from 2023.
Jen Phipps: Pharmacy Solution Segment Revenue with $8.8 billion, representing 34% growth from the prior year, and Provider Services Segment Revenue with $2.5 billion, also representing very strong 9% growth
Jen Phipps: Moving down the P&L, in Q4, a company growth profit was $422 million, representing growth of 14% compared with the fourth quarter of last year.
Jen Phipps: For full year 2024, company gross profit was $1.58 billion, representing growth of 13% compared to 2023, when excluding a $30 million quality incentive payment.
Jen Phipps: Adjusted EBITDA for Total Company with 167 million in the fourth quarter, growing 17% compared to the fourth quarter of 2023.
Jen Phipps: For 4-year 2024, Adjusted Evidoph of the Company was $588 million, representing 16% growth compared to 2023, with excluding a certain $30 million QIP in 2023.
Jen Phipps: Turning back to segment performance in the fourth quarter, Pharmacy Solutions gross profit with 205 million, growing 20% compared to the fourth quarter of last year.
Jen Phipps: Adjusted evidop for pharmacy solutions was $113 million for the fourth quarter, growing 22% compared to last year, representing an adjusted evidop margin of 4.7% which was in line with our expectation.
Provider Services Gross Profit with 217 million, growing 10% versus the fourth quarter of last year.
Jen Phipps: Adjusted EBITDA for Provider Services with 99 million for the fourth quarter, growing 16 percent versus last year, representing an adjusted EBITDA margin of 15.2 percent, up 70 basis points points versus last year.
Jen Phipps: On a total company basis, cash flow from operations was 116 million in the fourth quarter, excluding IPO fees paid in Q4, and $90 million of cash flow from operations in the quarter, including these fees.
Jen Phipps: We expect to deliver over 300 million of annual run rate operating cash flows in 2025 as we remain focused on improving our leverage ratio towards our pro forma goal of 3.0 to 3.5 times and are now long-term target of two to two and a half times.
Jen Phipps: As of December 31st, our net debt outstanding is approximately 2.7 billion with a leverage ratio of 4.16 times which was in line with our internal projection.
Jen Phipps: As a reminder, net interest expense includes interest income related to cash flow hedges due to our three received variable pay-fix interest rate swap agreement that we have in place, set to mature on September 30th, 2025.
Jen Phipps: Prior to any proceeds from the pending community living to vestiture, quarterly interest expense is expected to be approximately 43 million per quarter, including approximately 1.2 million and interest expense related to the T.E.U. instrument.
Jen Phipps: Turning to our guidance for 2025, we are increasing our expectations for revenue and justice at Yvita, that was provided in January , which excludes the community living business.
Jen Phipps: This revenue range reflects 15.2% to 20.1% growth over full-year 2024, excluding community living in both years .
Jen Phipps: Total adjustity is expected to be in the range of 545 million to 560 million for full-year 2025. This would reflect 18.4% to 21.7% growth over full-year 2024, excluding community living in both years. [inaudible]
With that, I will now turn it back to Jon
John Rousseau: Thank you, Jen. And thank you for your time today to go through Brightspring's fourth quarter results in 2025 outlook.
We will now open it up for questions. Operator?
Speaker Change: Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced.
John Rousseau: To withdraw your question, please press star one one again. Please stand by while with Tim Pyle, the Q&A roster.
Speaker Change: And our first question comes from AJ Rice of UBS. Your line is open.
Hi, everybody.
Congratulations, Jim, Baxter, which is in the new role.
When you think about your limited distribution drug [inaudible]
Speaker Change: You guys are seeing more exclusivity, fewer and fewer people are getting the contracts you're getting with less and less competition. I know some of that is obviously the strength of your franchise and what you've done but I also wonder. Thank you very much.
Speaker Change: Is there any changes in the competitive landscape? Obviously the pipeline of new LBDs continues to look robust, but it seems like you might be capturing more of those are getting more narrow contracts. Can you just comment on that?
Speaker Change: Yeah, good morning, AJ. Thank you. No, nothing material is shifted in the market. And, you know, we've, you know, we've had about a 10 to 15 year history with our team, you know, really focusing on operational process and service levels for our partners.
Speaker Change: Here in the most recent quarter, we pulse the market on that promoter's scores .
Speaker Change: We actually had a hundred and a 98 net promoter score for Care Med, which is really the non-oncology and then onco 360 in satisfaction ratings which we were obviously incredibly pleased with so the team is just done a nice job of servicing our partners over the years. Thank you very much for your time.
Speaker Change: You know, there is a general trend to, you know, more and more, I would say, more niche micro therapies in the market.
Speaker Change: and perhaps there's something there in terms of partners being more and more comfortable with.
Speaker Change: You know, fewer and fewer pharmacy serving those niche targeted populations, but we have seen a trend towards you know the narrowing of networks and you know we've been we've been pleased that we've been able to continue to be a strong and chosen partner through that process.
Speaker Change: Okay, then a couple of times you mentioned the prepared remarks about the investments you made over the last 18 to 24 months in the infusion business. [inaudible]
Speaker Change: and you should have feel like it's positioned to grow from here. I wonder if we can get you to talk a little bit more about the opportunity now.
Speaker Change: with the growth trajectory might look like for that business as well as where you're at with respect to margin and what level of upside there might be on margin at this point.
Speaker Change: Yes, no good question. Just tying off the LVB point there as well. In 2025, we've now launched two LVBs so far this year.
Speaker Change: in the first two months. So, good to see that moment. I'm happening in the first part of the year, too. And, you know, importantly, a handful, three or so of our more recent launches that have been in the rare and orphan category. As we continue to not only focus on oncology, but more and more, more and more other relevant.
Speaker Change: Indications, where we can apply our operating model similarly. On infusion, certainly the last two years as has been mentioned multiple times.
Speaker Change: There has been a real focus on the business operationally trying to implement more commonality and standardization across the 30 plus infusion pharmacies across the country.
Speaker Change: You know, what gets more centralized and what stays more local, you know, that's a critical decision and infusion and we've been very thoughtful about that Thank you very much.
Speaker Change: We generally have a totally new team there in infusion. Over the last, I would say, six to seven months, that team has been locked in.
Speaker Change: and its entirety for a good, you know, six months or so now. And, you know, we are seeing really good progress, whether it's on the operational front, whether it's on the AR and bad debt front. You know, things are really trending in the right direction. And from here, we need to just focus on...
and now starting to...
Speaker Change: Starting to drive more referrals again, you know, as we've been more focused operationally over the last 18 months But, you know, in key metric in that industry is turnaround time How fast can you get a referral?
Speaker Change: and then get the patient through the process and be ready to schedule them in the home on the specialty side not acute.
Speaker Change: on the specialty side. And for us, we're seeing 10 to 11 day turnaround times.
Speaker Change: In the last three or four months as a result of all of our efforts [inaudible]
Speaker Change: which would be generally best in class in that industry. So we're excited about where that can go in fusion. We believe it was a market with a ton of opportunity looking ahead. We're hopeful that that business could grow about 20% this year on a growth rate basis. [inaudible]
Speaker Change: And, you know, that's what we're pushing for. And, you know, I think longer term, I think, you know, staying in that range or even above is our internal goal. But 2025 will be an important year for us to get back to growth mode there.
Okay, all right, thanks a lot.
Thank you
Speaker Change: And our next question comes from with Mayo of Learing. Your line is open.
Whit Mayo: Hey, thanks guys. I think in the past, you've talked about a lot of internal operating, cost saving, and efficiency opportunities, maybe 60 different.
Whit Mayo: Projects or programs that you've had kind of in flight. I think you recently re-bid your wholesaler. Just maybe any sense on the cumulative savings from a lot of these initiatives and the opportunity on the March inside for this year.
Whit Mayo: Yeah, good morning, Whit. I would say, you know, it's really amalgamation across a lot of different areas of our company. Fundamentally, we have for a very long time.
you know, had a lean in.
Whit Mayo: and PMO focus to the organization, just driving process and cost opportunities
We really put that in place going back.
Whit Mayo: about eight years ago, and it really cuts across procurement well beyond anything like drug spend, medical supplies, delivery, just go down the list, all across IT, we're very focused in that area, and then we just look at processes across the organization. [inaudible]
Whit Mayo: from an RPA, from an automation perspective as well. So you think about something like onboarding.
Whit Mayo: I've all heard new employees. That's something that we're leaning into and trying to automate a lot of touch points in that process. You look at something like scheduling.
Whit Mayo: You know, instead of a human being trying to figure out schedules, you know, across a hundred nurses and a hundred patients in the city and what's the most efficient route, you know, doing that in an automated way, you know, we have a process going on there right now as well. So, you know, it really just cuts across.
Whit Mayo: You know, almost everything in our company, Red Cycle, you know, where can you eliminate?
Whit Mayo: You know, things that, you know, that can easily be replicated in a more autonomous and a more automatic way, you know, versus hands touching everything and we're literally looking at every function in our company. And I would say just the attention and the focus to that while it's been going on for eight years I would say is really deep end. [inaudible]
Whit Mayo: You know, in the last, in the last eight year, you know, we're leaning into, into AI applications now as well. You know, we'll see about that as a lot of people will.
Whit Mayo: You know, a lot of AI today is just sort of glorified, scribing, you know, you have the obvious chat stuff, but, you know, even in, you know, new EMRs, we're looking at, you know, within some of the provider side [inaudible]
Whit Mayo: You know, it's the idea that, you know, the EMR can be the doctor, and there's recommendations coming out of that, and there's chart pre-populating going on that's driving a ton of efficiency. So, you know, these are the things that we have...
Speaker Change: have the EPO a business process optimization team that works across everywhere in our organization. I would say the cumulative result of...
Speaker Change: You know, literally it's been now over 100 projects actually as we look back over the last, you know, 15 months.
Speaker Change: You know, was a helpful driver to our EBITDA last year, but not even necessarily EBITDA. You know, a lot of the proceeds from those efficiencies were driving just go right back into the business, whether it's IT, compliance, quality, sales and marketing.
Speaker Change: Hiring great people, etc. So, you drive a lot of these efficiencies for quality in.
just running good process in an organization.
Speaker Change: You know, some of the benefit of that does rock to even thought [inaudible]
Speaker Change: but a lot that goes back into reinvesting for future growth. [inaudible]
in winning in the future as well, but...
Speaker Change: You know, certainly, you know, getting into the figures, you know, that there has been a benefit of that, you know, to Ibiza, you know, last year, and a lot of these things happen, you know, happened later in the year and...
Speaker Change: and even a lot of these happened later last year and more will happen this year. So we expect to see continued contribution from that program in 2025 and we've always tried to and we'll continue to try to make this a hallmark of the organization.
Speaker Change: No, that's helpful. And maybe just wondering how you're feeling about home health and hospice really on the development side. There's maybe some distraction with some of your peers tied up with acquisitions or whatnot and just wondering how you're thinking about the potential development opportunity over the next year or so. Thanks.
Speaker Change: Yeah, home health and hospice is a market that we're certainly committed to and have been for the last four or five years as we've really sought to build that out. I mean, you go back five years ago, we really had nothing.
Speaker Change: and, you know, in 2024, home health and hospice revenue was 600 billion.
Speaker Change: You know, that's a business, you know, we'd like to double in the next five years.
Speaker Change: and potentially more. But, it's an area of focus. I think we see, hopefully, a more conducive reimbursement environment on the home health side going forward. I think we're hearing things from DC where a lot of people acknowledge that.
Speaker Change: You know, there does need to be more support there ultimately. The ROI data for home health in terms of the outcomes that can try for people keeping them out of hospitals, lowering mortality rates.
has never been more positive. [inaudible]
Speaker Change: Interestingly, you know, and it still has to be worked through.
Speaker Change: We're talking to several more of the innovative payers leaning in on enhanced rates, but there's a quality component to that, and that's fair and that's the way it should be [inaudible]
Speaker Change: and we're leaning into those conversations and we're pleased that we feel like we're at the table on those.
Speaker Change: because of our quality. You know, we got started in Home Health through some acquisitions.
Speaker Change: It's been more of an organic push over the last couple years but we inherited a lot of branches early on which didn't have the world's best star ratings and what's been really pleasing to me is if you look back about three or four years ago because of that history. [inaudible]
Speaker Change: We probably had about 15-20% of the branches with four stars or better out of five. We're now up to about 85% and so that is just really tremendous performance.
Speaker Change: on the quality side and until we're trying to have a lot of interesting conversations with M.A. That could result in enhanced rates for the outcomes we're delivering.
Speaker Change: for the system. We've got a nice platform there, still today about two-thirds of our business mix, between home health and hospices on the ladder. And for us, really, really strong quality, as I mentioned in some of our comments.
Speaker Change: on the call earlier, and for us, it's just trying to provide as much access to people as possible through our clinical liaison field every day, driving referrals for that terrific service.
Thanks.
Bye.
Thank you.
Speaker Change: And our next question comes from Brian Tanquilut of Jeffrey Thurlingus Open.
Speaker Change: Hey, good morning, guys. I'm congrats on the reporter of the year and that congrats on the promotion.
Speaker Change: Maybe Jon, as I think about your prepared remarks, clearly growth has been really good and seems to be tracking well. So as we think about maybe the sustainability of these growth rates or just these elevated. Thank you very much.
Speaker Change: Gross Levels, and with community out of the picture now, how should we be thinking about your view on blended growth going forward? [inaudible]
Speaker Change: Yeah, you know, we have a good morning, Brian . We have at this point, you know, going on in eight, it'll be a nine-year track record at this point of demonstrating double digit.
Speaker Change: Top and bottom line growth in the organization. So, nothing about that will certainly change.
Speaker Change: Going forward, you know, if the community living to vassature occurs and everything there at present, you know, is just working through the process, you know, in a very...
Spacted in normal way at this point in time .
Speaker Change: You know, that enhances our growth rate from an adjusted EBITDA standpoint about 5% or 6%, you know, as we see it going forward.
Speaker Change: In 2025, there was a couple percent growth as you perform with that for 24, but as we look forward, probably more of a 5-6-7% uptick in our growth rate going forward.
You know, as we look at it, at least next year,
Speaker Change: You know, I think we feel very good about this year and the guidance we've put out there, which we obviously raised today.
as we think about next year.
Speaker Change: There would be nothing that would change our view of a similar growth rate this year for next year, but some of the things in DC need to play out.
Speaker Change: and there's just certain things that we just do not have visibility into yet. You know, it's literally just principally IRA and how that plays out. [inaudible] know, you know, you know,
Speaker Change: You know, that's not going to have a massive impact one way or another [inaudible]
Speaker Change: on our performance in 26, but certainly there is a couple points up and down based on how that ultimately plays out, and we continue to feel like.
Speaker Change: You know, the pharmacy industry will be well protected through that process, but it needs to play out over the balance of the year. But you know, what we can sit here and tell you is that [inaudible]
Speaker Change: You know, in a fairly steady state, exogenous environment, you know, we don't see a lot changing and you know, our focus in the organization has been drive quality. Thank you very much. Thank you.
through very strong operational infrastructure, drive efficiency and lean processes.
Speaker Change: You know, I leverage all that with great people. You know, it reaches many people as you can and continue to drive volume above market growth rates. You know, that's been the playbook.
Speaker Change: for the last five or six years, in particular, and we will continue to drive that playbook in the future. So, as always, there are some things in the external environment that need to play out. But in terms of what we can control and a fairly steady environment as it looks today, we're very confident in continuing to drive the level of growth that we see in the business this year.
Thank you. Thank you.
Whit Mayo: to make a lot of sense. And then maybe, Jon, just to follow up on AJ's question earlier in on Infusion, as we think about your forum exiting market and then maybe think about the mix of business that you have in terms of being heavy on the acute versus chronic, just trying to think about the dynamics that we are seeing or we should be expecting in that Infusion Business for the future. Thanks.
Whit Mayo: Yeah, that is a good point in something we've talked about before. It's a good characterization of our business.
Whit Mayo: You know, I would say we probably are a little bit more tilted toward the cute [inaudible]
versus Chronic and specialty in the infusion space. [inaudible]
Versus what you might see [inaudible]
Whit Mayo: You know, in the broader landscape of some providers out there [inaudible]
Whit Mayo: You know, certainly if anybody were to exit any markets on the acute side, that's helpful.
Whit Mayo: You know, the acute margin is something that is one that we are fine with. And we believe that if you have a broader set of services, the payers, that is more well received and welcome with payers and it ultimately will help us.
Whit Mayo: You know, nurture and cultivate better and deeper relationships with payers over time. So, you know, acute is a market that we are committed to. There is volume there. There is nothing about acute therapies that is changing anytime soon. And so we like the idea of just growing more market share. I think what that ultimately says on the chronic and specialty side is that...
Whit Mayo: We've got, hopefully, a real opportunity there versus where some other people are today.
Speaker Change: And as I mentioned, really pleasing to see some of these turnaround times on specialty, which is really the linchpin for that business, how quickly can you manage people through the process? That's what referrals sources care about.
Speaker Change: and we'll really deepen our focus on the specialty growth side this year. We would be very disappointed if especially isn't growing well into the 20% range and above going forward.
Thank you.
Speaker Change: And our next question comes from David Larsen of BTIG. Your line is open.
Speaker Change: Hey, congratulations on another very good quarter. Jon, can you maybe talk a little bit about your ACO arrangements that you're involved in? I mean, one of the things I've always liked about your business is that you're in what people call the post-acute space. It's lower cost than you to care environment.
Speaker Change: But at the same time, a lot of investors are maybe a little bit wary of anything that says ACO or value-based care given how some of the stocks
Speaker Change: in the sector have kind of performed over the past year. So can you maybe just talk about
Speaker Change: You are approached to your volumes and your pricing looked great on the provider side, so thanks very much.
Speaker Change: Yeah, thank you, David. You know, two quick points on that. For us, you know, building out the home-based primary care was really an augmentation and complimentary to our pharmacy and provider services and just allowing us to ultimately better manage.
Outcomes for Patients
you know, really secondarily, you know, there is.
and Economic Stream there, if you can get more appropriately.
Speaker Change: compensated for the great outcomes that you're providing. Otherwise, you know, the incredible quality work you're doing is enduring.
Speaker Change: to everybody else in the system. And so, those were really the two-
Speaker Change: Driving Forces of the Logic. You know, I would say for us anything around, you know, ACO is purely upside. You know, there's zero downside there. It is purely upside. And so amongst our patients that we serve across this, who's been living skilled nursing facilities in some people in their own homes.
Speaker Change: with our home-based primary care, the subset of those that would be Medicare, straight Medicare patients.
Speaker Change: We have a partnership with another organization to get an ACO capability last year was the first year of that and you know nine months after last year, so October 1st of this year [inaudible]
Speaker Change: We will receive ultimately what our performance was from Medicare, but we do have line of sight into our outcomes and what's happening on the cost side, albeit with a little bit of a delay with about a quarterly delay. But we're pleased with what we're seeing in terms of our ability to drive outcomes in cost reduction versus the benchmark. We're pleased with what we're seeing in terms of our ability to drive outcomes in terms of our ability to drive outcomes in terms of our ability to drive outcomes in terms of our ability
and so we would expect the shared savings.
Speaker Change: to be realized this year. We are just being conservative until we get through.
Speaker Change: You know, the first actualization of what those results were. But we've got about, you know, 15, 16,000 patients today, you know, a subset of those were in the ACO. And our focus in home-based primary care is, you know, how do we continue to drive that incredibly valuable service? [inaudible]
Speaker Change: to as many patients as we can and get them in the ACO so that we can drive more and more shared savings. You know, we said before our five to seven-year goal is how are we serving at least 100,000 or more people? And that's what we're working towards.
Whit Mayo: Okay, great. And then just one more quick one in terms of specialty pricing. Looks like your specialty revenue growth is very good. Is there anything in your mind that could slow that down? And obviously a tailwind for the overall organization the pricing increases, right? Yeah.
Whit Mayo: Yeah, we've seen overall stability in the market for specialty. You know, ultimately, you're revenue prescribed and you're in your margin in that business is really a function of about 150 different drugs, some brands, some generics.
Whit Mayo: at different parts of their life cycle. But just given the diversity of that portfolio,
Whit Mayo: and the complementary nature of brands and generics, you know, we've just ultimately seen all of that, you know, come out of the bottom of the bucket, if you will, and in just a very steady way year over year. You know, we do everything we can, not only to provide great outcomes to manufacturers,
Whit Mayo: You know, but those great outcomes are really focused on being the best partner we can for the for the PBMs of the payers and their members as well.
Whit Mayo: so they get the best outcomes possible. And we're as focused on-
Whit Mayo: Our payer and PVM partners in nurturing great relationships with them.
Whit Mayo: as anybody and those have been really stable over time and we're very thankful for that and our teams got a long history of working with stakeholders across the value chain and that's been very consistent. Thank you very much.
Whit Mayo: Great. I'll have that in a few nice quarter.
Thank you.
Whit Mayo: Joanna Gajuk, Bank of America Security, Thurlinus Open.
Joanna Gadzak: Good morning. Thanks so much. So I guess my question will be around the eye away. So just follow up on the answer you gave earlier to the question about a long-term article for growth after 25.
Joanna Gadzak: So, what do you mean by, you know, there's a vast amount of risk there? What would need to happen for this to be a headwind in the IRA? Because I guess, you know, there's obviously the press productions, but then there's some part D with design under the IRA and the past is spoken about as being, you know,
Joanna Gadzak: a talent. The company has a devolution increases, so just trying to understand.
Joanna Gadzak: You know, the different dynamics, and what would need to happen that you're referring to in terms of being an IRA being explained faster? Yeah, good morning, Joanna. There's two pieces there. So in IRA, one of it is lowering the out of pocket for patients. [inaudible]
Speaker Change: Certainly, anything that makes drugs more affordable is helpful for patients. It's helpful.
Speaker Change: You know, for the utilization, you know, especially medications for them and increasing patients on therapy. So that's helpful. You know, the second point, and it's really for us focused on our home and community pharmacy. There's a drugs there on the IRA and those for 2025.
Speaker Change: And we just have to see that play out. You know what CMS issue guidance on last October endorsed using a true up on the MFP to whack. So as your reimbursement lose to MFP
Speaker Change: on those, on those eight drugs, getting a true up on that to whack, you know, so those drugs certainly, you know, would not be negative in margin. And the discussion this year is all around. What's going to be the mechanism?
to ensure those specific aid drugs.
Speaker Change: You know, have an appropriate and current margin to them. And, you know, I think there is a ton of support around the logic for that and needing to do that in DC and at CMS.
Speaker Change: It was literally written into IRA, this is not intended to harm any pharmacies [inaudible]
Speaker Change: You know, pharmacies are the last mile to the home and they have to be [inaudible]
Speaker Change: You know, they have to be more or less held harmless to continue to be that last mile. And so, you know, we're optimistic about how all this will play out, but it needs the it needs the play out this year and with a lot going on DC in the last two months.
Speaker Change: You know, I think, you know, I think we just have to see how this plays out further into the year.
You know, I think what I've said before is [inaudible]
Speaker Change: You know, you know, this is this is a swing factor on the downside of a couple percent of EBITDA, which we would fully expect to grow through given growth in the other parts of our company. You know, that's really the benefit of our complimentary but diversified organization with a lot of different growth drivers.
Speaker Change: and we would be very confident that's something like that. You know, we would just absorb, you know, that said we are very focused and think what is fair is for there to be a proper resolution.
Speaker Change: for the long-term care pharmacy industry around these drugs and having a fix for that. And that's what the industry is focused on, and we see a lot of support for it, but those mechanisms need to play out through the balance of here.
Thank you very much
Erin Wright: And our next question comes from Erin Wright of Morgan Stanley , your line is open.
Erin Wright: Great. Thanks. So following the community data feature which made sense to us, but are there other areas that you would be looking to refine in terms of the business mix and how do you think about that in contrast with the efforts to better integrate the offering from a provider and pharmacy standpoint.
Speaker Change: And then all this has my second question up front too, which is just on the government's business as well. You mentioned kind of party, but I wanted to ask about Medicaid. Just tell you're thinking about the exposure there obviously comes down with the divastiture, but
Speaker Change: Can you talk, walk us through some of the potential risk factors as well as how you're just thinking about that outlook for that group given the unknowns in terms of that backdrop right now? Thank you
Speaker Change: Yeah, no, the streamlining of our organization post-the-community living debustiture assuming that closes, you know, I think that gives us with a very tight set of pharmacy and provider services and a platform that we think is very unique and advantaged in a lot of ways and healthcare services.
We view that as a terrific platform for the future.
Speaker Change: You know, from a Medicaid standpoint, you know, Trump and the Trump administration has said
Speaker Change: You know, that they do not see touching Medicaid or Medicare. That's what they've said so far. You know, the House Republicans are certainly talking about other things. You know, notwithstanding that, you know, the populations we serve would not be in the conversations or some of that Medicaid discussion in the House. [inaudible]
the folks that were serving seniors and people with disabilities.
Speaker Change: You know, that is very, very different from things being discussed with work requirements for the general population of otherwise healthy people on Medicaid. Our populations are very different and not in the relevancy in the context of those conversations. Thank you.
Thank you. Thank you.
Speaker Change: And our next question comes from Jamie Perse, Goldman Tax. Your line is open.
Jamie Purce: Hey, thank you. Good morning and congrats to Jen. I guess I want to start. Can you help us think through AWPX investments needed to sustain growth in both businesses in 2025 and then just, you know, how much does that level of investment scale up or down based on top line growth to trying to think through, you know, incremental margins below growth profit?
Jamie Purce: Yeah, I think we've certainly got some, hey, Jamie, I think we've certainly got some leverage in our business.
Jamie Purce: without a doubt. I mean, I spoke to a lot of the efficiency projects that are a part of our program. We'll continue to get a little bit of a tailwind from those this year.
in every year I think. [inaudible]
Jamie Purce: You know, we would fully expect as we continue to grow the top line in the future, we are going to realize, you know, more, more margin opportunity, you know, and, you know, we have seen our op-x prescribed on the pharmacy side.
Jamie Purce: generally, you know, trend down in key areas. But if you look back historically, you know, the primary impact to any margin, it's just been our mix with outsized growth and specialty.
Jamie Purce: You know, and I've said before that, Home and Community Pharmacy and the end of Fusion
Jamie Purce: Pharmacy, Hab, OpExPerscript, Opportunities, and we fully expect to see OpExPerscript.
Jamie Purce: and those two businesses go down this year as we scale volume. On the provider side, we've continued to leverage fixed cost there. I think as you look at the company over this year and next year, outside of any mixed impacts we fully expect.
Jamie Purce: to get some improvement incrementally on leveraging our cost-based and some margin uptick as we move forward.
Speaker Change: Okay, and then just thinking about your new pro forma leverage targets for the year, which is obviously quicker deleveraging than we had contemplated before the Investiture. Can you just update us on, you know, how you plan to allocate that in terms of pure debt paydown versus, you know, M&A and just in any color, you can provide on the M&A pipeline or environment.
Speaker Change: Yeah, I think the current thinking is either with or without the funds from a community living disclosure our base case would be some hundred million dollars for M&A spend
Speaker Change: And, you know, if the community living the best that you're happened, it's about 0.3 times the leveraging on a net basis. And, you know, we put out guidance of more long-term two to two and a half at this point in time because...
Speaker Change: If we do execute through this year and we start to get under three and a half times, our goal would then shift to two and a half times from a longer term perspective.
Okay, thank you.
Thank you.
Speaker Change: And our next question comes from Pito Chickering of Gorgeous Bank. Your line is open.
Peto Chickering: Good morning guys, keys are the back to that wear and open up tree that like you're talking about with AJ, you know I think historically a big part of his strength and specialty
Peto Chickering: has been a deep tie with oncologists, which has made you the partner of choice with new drugs and then obviously as they go generic. So, transitioning into where it often seems, I guess, to me maybe pivot away from oncology. So, keep talking about why you can be successful in a new area after being so successful in oncology.
Peto Chickering: Yeah, I would say nothing about our focus on ecology changes whatsoever. It just happens that really everything that's required for you to be very successful and to service.
Peto Chickering: You know, your pay your members and biotech and form of partners and all of the patients from an oncology perspective really directly applies to rare and orphaned too and and and Peto for us that's purely sitting back and saying
Peto Chickering: You know, what other therapies can we also pursue that are going to leverage our critical success factors that we have in place today And so we specifically look for those [inaudible]
Peto Chickering: Therapy opportunities in the pipeline, where we can apply all of our similar best practices to those areas and just continue to expand.
Peto Chickering: You know, within the therapeutic space, I would say, you know, that takes nothing away from oncology and it's really what is most closely peripheral and adjacent to oncology, that is also opportunities and our team has clearly demonstrated the ability to continue to execute on as many relevant therapies as possible and drive that growth with the bandwidth that we have. [inaudible]
Stephen Baxter: And our next question comes from Stephen Baxter of Wells Fargo. Your line is open.
Stephen Baxter: Hey, thank you for the question. It was a follow-up a little bit far from me.
Stephen Baxter: The segment level, you know, it sounds like you might expect a little bit more improvement.
Stephen Baxter: and Provider Margins as we move through 2025, but he's thinking about the pace of margin change in the pharmacy business. You know, you obviously had a pretty big step down in the function of mix. Just wondering if we should be thinking about, you know, similar in terms of the pace in pharmacy margins.
Stephen Baxter: in 2025, or whether you expect that to moderate potentially maybe as the growth source model. Thank you.
Stephen Baxter: Yeah, I would say, you know, outside of mix and continue growth on the specialty side that does have a lower margin You know, we would expect within each one of the three pharmacy businesses [inaudible]
Stephen Baxter: Stability to upticking margins, I would say, on a fusion in home and community.
Stephen Baxter: So, you know, margin historically has been influenced by our mix [inaudible]
Stephen Baxter: and then also investments that we've made on the infusion side in even home and community pharmacy. As mentioned earlier, we fully expect our OPEX prescript and those two businesses to improve this year as we continue to grow volume at double digit rates.
Stephen Baxter: and those would be the two dynamics is ultimately what is the mix of all of our services.
Stephen Baxter: You know, between those three businesses and all of our drugs and our ability to hopefully successfully drive off expert script down in home community and infusion this year, which ultimately we think will lead to, you know, a positive even doctor script and margin story.
Stephen Baxter: Got it. And just the improvement in the guidance for 2025 at this stage is that, you know, based on, you know, trends you've seen near to data or additional limited distribution drugs, you may have gotten that you didn't have at the time. In early January , I just wondering, you know, what influence that? They're just pointing here. Thank you.
Stephen Baxter: Yeah, I would say it's less to do with any one specific factor and just continue, you know, momentum and breadth of...
Stephen Baxter: Progress across the entirety of the organization. So far, we've obviously been headstand from an execution standpoint in Q1, like always. And we just continue to work through what we see as a very productive first quarter, across most all of our service and business lines, and that was reflected with the update we provided. Thank you very much.
Thank you.
Thank you
Speaker Change: Our next question comes from Matthew Gillmor of Keyback. Your line is open.
Matthew Gilmore: Thanks for the question. Just had a quick follow up on the guidance discussion and any comments you can provide in terms of seasonality of EBITDA and how that may pace throughout the year. Should we just look at prior years for that or anything new to consider as we look at 2025?
Matthew Gilmore: Yeah, go ahead, Jen. Yeah, thank you for the question. I think prior years would be a good reflection of how it typically plays out.
Matthew Gilmore: Q1, we obviously have the reset of payroll taxes and versus last year. You should keep in mind that last year included a leap year day as we're thinking about the guidance for this year. But also, Q4 tends to be one of our strongest quarters for a variety of different reasons.
Matthew Gilmore: But yes, we think, you know, seasonality, Q1 and Q4 tend to be the outlier quarters just a little bit when you look historically and we expect that to continue in 2025.
That's right. Thank you.
Thank you, and as a reminder, if you have a question, please press star 11.
Speaker Change: And our next question comes from Larry Solow of CJS Securities. Please, your line is open.
Larry Solo: Great, thanks to one everybody, and echo the congrats to Jim. I guess a couple of follow-up questions. I'm staffing across your property's availability and wage inflation. What does that feel as you look at the 25? Thank you very much.
Speaker Change: Yeah, hi Larry. You know, that's something we've just been continuing to manage for years in a very productive way. Ton of focus in the organization and HR around recruiting, onboarding, training, retention.
Speaker Change: We continue to see all of our retention stability and numbers improve over time across every one of our businesses.
Speaker Change: They're very, very solid and it's something that we just, you know, are very focused on managing, trying to make.
Speaker Change: You know, our provider service lines, a destination within the industry where people want to work. You know, we've always invented it in comp content.
Speaker Change: in Wages, we rolled out 401K everywhere in the last few years. And so that's just been really steady for us. Obviously, you could always use more nurses and therapists, but we've been able to keep up with the volume growth we've driven in the double digits.
for all of our people focused efforts.
Speaker Change: Patrick, and you mentioned the M&A Outlook and the spend, the expected target spend for this year. How about just, could you just give us an update on the nobles, you know, the efforts in 24 and, you know, going forward?
Speaker Change: Yeah, Dinovo has been a hallmark for the organization. You know, we'll do about 10 to 15 new locations this year across home health hospitals and rehab principally
Speaker Change: We'll do a few new hospice pharmacies this year as well, and those have really nice ROI to them, over a two to four year period of time, but they're principally in those four areas.
Speaker Change: and we'll continue to do about 10 to 15 of those a year and those are helpful adders to your financial performance as you go out years into the future.
Speaker Change: I could squeeze one more just that the acquisition, the new Haven Hospice Activision in 24, how's that progressing? I know I think it was gonna sort of ramp up as you go out of the next couple of years maybe got so many calls. Yeah, the teams done a really nice job integrating that you know in Q4 and so far this year and. [inaudible]
Speaker Change: You know, I think that's been a good example of our track record on M&A, almost never having an acquisition go down from where we acquired it and that acquisition is ahead of plan.
Great. Thanks so much. Be sure to call.
Speaker Change: Thank you. I'm showing no further questions at this time. I'd like to turn it back to Jon Rousseau for closing remarks.
Speaker Change: Thank you everybody for your time today. We really appreciate it as always and we look forward to talking to you in another quarter. Have a good day.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.
Narrated by Michael MacLeod