All right. Thank you everyone. We're really pleased to close out the conference. The last fireside chat will be with BrightSpring. BrightSpring is a provider of a variety of pharmacy and provider services from the company. We're happy to have CFO Jennifer Phipps here with us and David Deuchler from Investor Relations. Thanks for being here. Really appreciate you making the time. Any kind of introductory commentary you'd like to make, or should we just get right into a question?
No, we can go ahead and jump right into the questions.
Okay, great. Well, maybe just to step back a little bit, in the pharmacy business, EBITDA growth in this business, if we go back to call it 2022, 2023, 2024, really range in that 6%-8% range. Since that time, you've really seen a remarkable acceleration with EBITDA growing almost 40% in 2025, and you're over 40% in the first half of 2026. From a big picture perspective, I guess, how should we break down the acceleration between the different key components of the business?
Yeah. From an acceleration standpoint, I would say we have a number of growth drivers across our pharmacy segment. First, specialty pharmacy, the growth drivers have been LDD wins. These are not necessarily in any particular order, but LDD wins that we've had in each of the years.
Ramping of prior LDDs that we win in prior years, because those typically take two, three, four years to ramp fully in the marketplace. We have seen growth drivers in terms of generic conversions, and our fee-for-service business associated with supporting the LDD manufacturers have driven growth in our specialty pharmacy business. From an infusion standpoint, we have continued to see volume growth across acute and targeted chronic infusion underpinned by our high-quality services. From a home and community standpoint, the growth drivers have been multifaceted there as well. We continue to obviously seek profitable volume growth. We did have some script changes as we talked about last year as we exited some uneconomic customers from a profitability standpoint.
Growth in good core volume there, but also a significant amount of operational efficiencies that we have been working on, whether they are driven by AI projects and automation that we have done, as well as other operational efficiencies that we have been working on in that business.
Okay, that is great. Then maybe to zoom in a little bit more so just to come back to the second quarter, I think one thing if we were to look at the pharmacy solutions results, I think gross profit per prescription was a bit lower in the second quarter than it was in the first quarter. I think that was a bit of a point of confusion for the market, given some expectations, for a step up for certain recent generic launches. As you think about going from Q1 to Q2 and the various factors that impacted those comparisons, just help us think about that and when the company discusses that it sees Q2 underlying gross profit is higher than Q1, what are the considerations to keep in mind there?
Yeah. In Q1, we typically have some, and we have this every year, some seasonality for price appreciation that occurs related to inventory that we have on hand. That is a dynamic that benefits the first quarter. When you exclude that benefit, we actually did see growth in a gross profit per script. I think there is a number of drivers. Obviously, gross profit per script is really an output for us of probably 70 to 80 different factors across each of our different business lines, and how our different business lines. So each one of our products and each one of our different business lines has a different GP per script profile.
We're really focused on growing underlying EBITDA GP dollars and EBITDA growth for the sustainable long term. That's really what we're focused on, and we really look at GP per script as an output.
Yeah.
We're certainly not going to stop growing, for example, or stop working to grow our home and community pharmacy business because that is our lowest per script, just because that could negatively impact a gross profit per script measure.
Yeah.
Again, we're really focused on the total and long-term sustainable growth rate across both of those.
Okay. Then, as you discussed a little bit with one of your previous answers about the acceleration, the track record of winning new LDDs has obviously been phenomenal. When we think about the key considerations that manufacturers have when they're selecting specialty pharmacies, how different are they now than they are in the past? Many of your recent launches have been concentrated in exclusive and ultranarrow arrangements. Do you start to think of this increasingly as being the new normal in many cases?
We continue to see this being the path that oncology and rare and orphan drugs are going into these exclusive and ultranarrow categories as manufacturers and pharma have gotten increasingly comfortable that a small number of pharmacies can fully service their drug. We are focused on having really high-quality services. We have one of the best time to first fills compared to many of our competitors. We are focused on having high patient satisfaction scores, medication possession ratio, which is an adherence measure. We think that produces ultimately better outcomes which is valued by our pharma partners. We seek to just be a full-service partner for any of the needs that pharma would have in servicing their drugs, and we take pride in executing on those.
Okay, that's great. Obviously, you provided some attractive financial targets for the business quite recently. As we think about the role that LDDs play in that, I guess how much of that growth can be delivered on, I guess, from LDDs that you've already won and have a pretty healthy ramp-up period in front of them? I guess how dependent are the targets on winning LDDs that you don't yet have today?
Yeah. Again, typically it takes two to three years for a drug to fully ramp in the marketplace. We actually have seen growth this year from even a small amount, but from drugs that were launched in 2021.
Okay.
You do continue to see some growth. I would say we have good line of sight also to what that portfolio is going to look like and what those wins are going to look like, typically 12 to 18 months out. All of those things go into our considerations-
Yeah
And certainly went into our view of the range that we put out at the investor day.
Okay. You've recently highlighted your expanded focus on LDDs, the infusion market, and you've highlighted some recent wins there. Maybe give us an update on this part of the strategy and how to think about the size and the importance of this opportunity.
Yeah, we're really excited about the opportunity within infusion. We're focused on growing density in some additional markets, and from an acute standpoint, and then we think that gives us obviously leverage in negotiation and scale that is helpful from a procurement standpoint. Then on the chronic specialty side, which is where you typically see the LDDs in the infusion space, we're excited to really partner and we've been spending a lot of time working on and thinking about our strategy and specific targeted- targeted disease states and drugs that we believe are attractive and are working on building sales strategies associated with that.
Okay.
We see this as a continued good opportunity for us to continue to grow in this market.
Okay, great, and then if we were to think a little bit more about the generic conversion part of the story, maybe walk us a little bit through the playbook here for a branded to generic conversion. I guess, how does that typically work? Then we will talk a little bit more about how to think about the durability of it, but just walk us through, I guess you have an initial conversion coming up. How does that work for your company?
Yeah. From a conversion standpoint, we typically are in advance of a conversion, we are focused on getting volume in that particular drug. Our focus when drugs are branded typically are the LDDs that we are servicing, and the drugs that have been going generic are a lot more of the highly commoditized brands that we have typically seen. We are focused on gaining volume in advance of that conversion, and then we have an operational team that focuses on the ability to execute very quickly and converting that. Generics are really good for patients. It is good for the system. It reduces the cost of the drug to the market, and so we want to be a really good partner and be able to do that conversion as quickly as possible.
We typically are able to get almost 100% conversion very quickly early in the launch, and the team has been very successful at doing that. It takes a lot of prep work to be able to do that. Then, from there, it is continuing to grow the volume because of our large sales force that we have from a generic standpoint.
Okay. As you think about it, once you are generic and you move outside the LDD or the exclusivity that you have had before, how does the company work to operationally keep the volume to you versus potentially having it leak out to other places in the system?
This is where I think it is really important, the patient satisfaction, the high quality scores that we have in terms of medication possession ratio. Nothing changes once a drug goes generic, so we still have the same requirements, whether they are REMS programs, toxicity programs, other things that we need to manage and help patients manage while they are on the drug. Our ability to navigate that, I think, has been important. The sales force that we have that is out trying to pull through scripts has been very important, then just making sure that patients, when they are on the drug, with our Onco360 or CareMed brand, ultimately are going to be able to continue and want to continue to receive their services from our pharmacy.
Okay. Then, I think one question that comes up a lot is just the durability of the improved profitability that a generic conversion creates. I know when you think about the examples that I think people are familiar with in the retail pharmacy business, ultimately there is eventually a catch-up on the reimbursement side. I guess you are dealing with a pretty unique set of drugs. How does it work for your business?
Yeah. So historically what we have seen is generic price step down over time. Which typically happens over a five- to 10-year period.
Yeah.
We are working to grow volumes and then also get better pricing from manufacturers at the same time to help offset some of that impact. Separately from that headwind, you have new LDDs that are launching, you have LDDs that continue to grow, we have fee for service that continues to grow, and new generics that are launching in the market. All of those dynamics are helpful for tailwinds that help us be with the headwind associated with generics over time.
Makes sense. You guys have some great investor materials that I think help people focus on some of the key generic launches and the year that they sit in. I think some of the key drugs that have been highlighted for 2026 are, I'm going to pronounce these horribly, BOSULIF, POMALYST, and Rydapt. Just remind us how much of the initial benefits for those drugs have been realized at this point, and I guess how you're thinking about the phasing of the generic impacts throughout the year.
Yeah. So, obviously we don't talk very specifically about any drug. Most of those POMALYST launch, that was the biggest of that group, launched early in Q1. You saw a lot of that in the run rate within Q1. As I mentioned earlier, we're really focused on getting our patients converted to generics as quickly as we can and having them ready to go as soon as that conversion takes place. I would say that largely is run rated, and then you just continue to see incremental volume as it relates to new patients that are coming on that drug that we're working to win.
One of the things that is kind of important to recognize is that most of the drugs that are going generic last year, this year, over the next couple of years, were branded drugs that came to market 10 or 15 or 20 years ago. Those pharmacy networks are typically 10 to 15 to 20 pharmacies. Once the brand drug goes generic, it actually represents a new market opportunity for us. We are building a cohort of patients when the drug is on brand, but once it becomes generic, we have a several hundred person sales force that is out in the market trying to drive volumes. As that volume growth increases, our franchise, if you will, for that drug has a great opportunity to grow even as there is deflationary pricing into the market.
We have a very kind of long-term perspective as we think about the generic franchise. It is multifaceted across many different individual drugs. That patient volume story is an important dynamic to think about our franchise as you think about kind of longer term growth. It is not a drug goes generic, maximize profitability, and the story is quote unquote over. It is really just the beginning of the growth of the franchise.
No, that makes sense. As we think about some of the future cohorts, at face value, it looks like the 2027 cohort, 2028 cohort represent a lot of brand revenue. I guess it is always a little harder to tell for each individual drug, like how many, to your point, like the size of the networks and things like that are important considerations. I guess, how does the company generally thinking about those two years in terms of the opportunity there, maybe comparatively to the 2026 or 2025 cohorts that we have seen impact the P&L at this point?
Our best view is the 2027 generic conversions are going to happen later in the year. From a timing standpoint, that is our best view as it stands today. As you think about the 2027 impact from those launches, I think there will be more impact that will be in 2028. From the 2027 launches, just given the timing of those launches. But certainly those are meaningful drugs and the generic conversion opportunity is very important ultimately to the entire ecosystem from the healthcare system.
Okay. That is great. I think you touched on this a little bit, but if you focus on, I guess, the home and community business, the top line I think has been impacted by a couple different factors and 2026, obviously IRA drug price negotiations are having a big impact. How should investors be thinking about impacts prospectively from here on the top line and bottom line from IRA?
Great question. As we have talked a little bit about, historically, the impact associated with 2027, so IRA addressed the largest drugs first. 2026 is our biggest impact year. As you look at the cohort of drugs, it is just a smaller cohort of drugs from a 2027 perspective. We expect the revenue and EBITDA impact to be approximately half of the impact that we saw in 2026. That is without further mitigation. We continue to also seek additional mitigations as we are negotiating our contracts with payers. Importantly, late in 2025, right before the 2026 launch, CMS directed the payers to ultimately cover the impact to the long-term care pharmacies. Obviously many of them did negotiate to do that. We continue to negotiate enhanced dispensing fees, further enhanced dispensing fees that we believe will hopefully mitigate even further.
Are those offsets that you have gotten for 2026 at all, or at this point you are still negotiating for both 2026 and 2027 impacted drugs?
We did get offsets in 2026, and that took our number to an EBITDA impact of 15.
Yeah.
That is the mitigated number.
Okay.
To the extent that we are able to get additional enhanced dispensing fees, that would apply to everything that would be IRA. That would include the 2026 cohort of drugs as well.
Okay. We focused a lot on the growth, but if we are focusing a little bit more on the operating expenses, it seems like some of the really strong gross profit growth you have generated is giving you an opportunity maybe to invest a little bit. We have seen a big tick up in the operating expenses this year. Maybe talk a little bit about where these investments are going and maybe how should we think about the pace of expense growth in the business going forward.
Yeah. Some of our investments have been permanent investments, for example, investments in sales force and incremental sales force that we believe will drive volume into the future. Then some of those investments have been more temporary or one time in nature, things like building out IT, best in class systems, or some of the AI initiatives that we have talked about. So, we will continue to look and over the last several years, actually frankly back to Jon joining the company and me joining the company, we have continued to invest for growth over the last 10 years. So our EBITDA could be higher if we were not thinking about how to, or in prior years could have been higher, but those things, those investments that we have made help drive future growth.
We are managing and thinking about EBITDA growth over the long term, and how do we maximize that with the right initiatives. We obviously want to make sure any of those things that we are investing in have the right ROI, and that we will ultimately receive a return on that. But certainly our performance has allowed us to lean in to a lot of those investments
Okay
That we are excited about.
Got it. No, that is helpful. Then if we are to maybe pivot to provider business for a little bit before coming back to enterprise and capital deployment, it has been a really good year for EBITDA growth, both organically and all-in for the provider business as well. It looks like, I think, organic EBITDA is growing around nearly 20% in the most recent quarter. So it looks like you are growing nicely and also getting a good deal of margin expansion to drive that. Maybe just update us on what some of the drivers are of that improved operating leverage. Are you benefiting at all from maybe pace of slower wage inflation than we have seen over the past couple of years? Just help us understand what is happening in that part of the business.
We are really proud of the growth that we have achieved in our provider side of our business. Really, we have seen multifaceted growth across each one of those businesses that we have there. And underpinned largely by volume growth, which is supported by the high quality care that we are able to provide. We continue to execute really well on the Amedisys LHC acquisition that we did early in December and are excited about what that has done in terms of opening additional market opportunities for growth across many different geographies from a home health perspective. We have been able to continue to leverage our infrastructure for some of that growth.
I would say we've continued to invest in wages and invest in benefits and invest in our people. Ultimately, we've been able to help offset some of that by reduced turnover. Increased stability in our workforce has been certainly beneficial.
Yeah
Helped offset some of that.
No, that's great. Then you touched on this, but you have a pretty material amount of newly acquired assets in the portfolio, specifically the deal you referenced. But you've been acquisitive in the provider space generally over the past few years. I guess how should we think about generally how the integration has gone? How are a lot of these assets tracking versus plan, and I guess how much room is there to still improve profitability for some of the businesses you've acquired more recently?
Yeah. No, really good question. When we do M&A, we're focused on certainly a number of different factors. One of those is we're highly focused on our long-term total company growth rate, so the acquisitions that we're looking to do, we're focused on the ability to continue to grow in the markets that those businesses are in.
Okay.
As we think about our ability to integrate, we have a really great corporate development team, an integration management office that has been able to deliver really good, working with all of the different functional groups and whatever operational business team that the particular acquisition is in. Which has driven ultimately, I think, I forget exactly what number of acquisitions we are up to now. It is over 80. It might be-
It is like 75. Yeah.
85, actually. All but two, the EBITDA is ahead of what we acquired them at. Our pro forma multiple over the course of those deals is under 4x. We have been able to drive a lot of operational synergies and growth synergies, revenue synergies across those deals.
Okay. You mentioned AI earlier, but as you think about what are the highest priority opportunities within the business, clearest applications of AI, what would a couple of interesting use cases be to highlight? In general, I guess, what is the company's financial framework around evaluating investing in AI and the kind of returns you are looking for?
Yeah. We really started thinking about AI technologies probably about 24 months ago. About 12 months ago, we really in earnest started building out a team as we really were looking at different use cases, given our scale, given where some of those technologies were and what we were going to have to do to participate in the building out of that anyway to use that if we were using other partners. We really felt like we could do that better ourselves. We've built a team. I think we're now up to almost 30 people on that team that is actively working on some very specific use cases. One example that we've talked about is, we're focused on certainly areas where it's highly manual, high touch, back end or front end processes.
One example that we're working on is in our infusion business when we get a new referral, and those are referrals that need to be managed very, very quickly a lot of times from an acute standpoint, where a patient might need meds delivered in their home within three hours. We might get over a medical file that is 300 pages long, and it historically might have taken an individual 45 minutes to just make sure they input the relevant factors from the patient's medical file into our EMR to make sure we've got the proper documentation to be able to get through benefits verification. We're working on AI tools that are helping our team do that much, much faster. That's just a practical example where we're utilizing. We've got a lot of rev cycle examples. That's a good area. Central intake and pharmacy.
How do we do things much more in an automated way. We're working on tools across our provider business that might not lead to efficiency, but ultimately higher quality results. How do we make sure we're getting better visibility into care plans that might help manage their disease state even better than we do today?
Yeah. Okay, that's great. Just when we think about the balance sheet, I guess you're in the enviable position of, it looks like you'll be approaching 2x leverage pretty quickly. Your targeted level, I believe, is mid 2s. Obviously, you still have a pretty attractive EBITDA growth target in front of the company for the next couple of years. Overall, that's an exciting position to be in. I guess, how do you think about the balance sheet capacity that you're going to have and how to best utilize that? Otherwise, what would keep the leverage towards just trending down to well below target? I guess, what do you do with that?
Yeah, really good question. One of the things that we're most proud of, I know Jon would say the same thing, I know David would echo, is what we've done from a leverage perspective post-IPO, and then the value that ultimately is able to help us unlock. I think we believe that our highest use of capital is M&A and our ability to do highly accretive M&A. That remains a priority for us. Having said all of that, we still are very focused on making sure we're doing the right deals at the right price, that have the right strategic fit. How that ultimately plays out and what deals do we get across the finish line.
We have a very robust pipeline that we're constantly working, and the team is extremely active, as I'm sure you can imagine, with the balance sheet position you mentioned we're in, really thinking about what those deals are going to look like. I would say that remains our highest priority. We have stated that we would like our share count to remain flat at a minimum. I would say over the next couple of years, we'll be thinking about that as a goal. Then ultimately, as the deals play out and as we generate really strong cash flow, there may be additional opportunities for
Yeah
Return of capital, potentially to shareholders in additional buybacks. But I think we're probably nine to 12 months out from really thinking about what that could look like at this point.
Yeah. The history of the company over the last five years has changed quite a bit, right?
Yeah.
If you think about where we were five years ago as a private company, the business mix was quite different then. As we look forward over the next five years, it may require a different capital structure and a different way to think about capital allocation. We are very much in a transition period, having been just north of 4x levered at IPO two and a half years ago. As you mentioned, run rating under 2x. Let us give it a couple of quarters or maybe a year before we think about how the right capital structure should be.
Okay
How we think about the priorities for allocation outside of M&A.
Yeah. Historically, the company's M&A has been pretty focused in the provider side of the business. When you look at what the opportunity set is there, maybe what is the latest thinking on what is attractive, I guess how competitive deals are, and valuation obviously has been something that the company has been disciplined on over time. Are the valuations in a place that make things actionable?
Yeah.
Yeah.
I would say our balance sheet position, we have historically done a lot of very small tuck-in M&A, call it $5 million or less of EBITDA. I continue to see that as being table stakes for us.
Yeah
Continuing to do a number of those deals. Those are very, very attractive multiples that we're able to generate because of the synergies, so we'll continue to remain focused there. As we think about what the balance sheet position does allow us to do, I think as you think about deals in the $10 million-$15 million of EBITDA range, do we lean into a couple more of those deals a year potentially?
Yeah.
I think the answer is yes. Obviously, it's got to be the right deal. It's got to be the right price. We're very focused on our continued long-term growth rate, so certainly, we'll see. Would there be a deal in the $15 million-$50 million range that we do once every couple of years? I think certainly we have a balance sheet
Yeah
Position that would allow us to do that.
Yeah. Just maybe it seems like the balance sheet is no longer the issue. I guess when you think about operationally and integration work that has to be required, I guess, how's the company prepared itself maybe to do things like that?
Yeah. I think we're in a really good place. We've got a really great team from a corporate standpoint. We have an entire integration management office. I think we have a playbook that we've executed on really well to do that. I think it allows us to do that across whatever. We're in a lot of different businesses that allow us to then look across all of those businesses and see what's the most attractive opportunity. So we have things that we would potentially like in each one of our businesses. I would say as we think about pharmacy space, I would say infusion and additional markets. There's some additional markets
Yeah
That we really would like to be in, and can we get there faster because of M&A? From a pharmacy perspective, I think that's something that's of interest to us. We feel like we've got the right team in place that can deliver on the growth that we want to have. So we're looking, I think, in that space. Certainly, valuation is a consideration there. Home and community pharmacy, we've done small tuck-in M&A there.
Yeah.
I don't see that changing. I think that's probably the base case.
Yeah.
That's probably what we would do or be interested in in that space. As we think about home health, hospice, primary care, and rehab, there's different geographies that are very attractive to us as we think about providing more density and more geographies and having more of our services align across our different business. Our M&A team, our corporate development team is focused on really looking at all the different opportunities across those different sets. Our operators are very closely tied in to the M&A strategy associated with each business.
Yeah.
We can look across all the different opportunity sets and ask, "What's the most attractive?
Interesting. Okay. I know a big part of the story, especially as the company came to the public markets, was just that the integration between many of the businesses was very value creative, and there are a lot of opportunities to cross-sell and generate value in that way. I guess just give us an update on generally what the key milestones have been in terms of things like that. The company has got some interesting business initiatives that it has been working on with more like I-SNP type plans. Where do those stand today?
Yeah. We continue to obviously have certain of our businesses provide services to other parts of our business. For example, all of our hospice patients receive their medications or their PBM services from our hospice pharmacy. There are tangible examples like that that have existed in our organization for a while. We have been really focused over the last couple of years building out integrated care teams that are focused on driving opportunities across business lines. That could mean and does mean in some cases, like for example, we have a team that is focused on senior living opportunities. If you look at senior living communities, they all need a pharmacy, they all need home health, they all need our Part B rehab provider. They all need primary care doctors, and they all need rehab, or I think I said rehab maybe already.
Those are all, and hospice in some cases, partnership. Those are all services that we offer. We put resources now and a team that is focused on doing some go-to-market strategies across those, and how do we leverage the relationships that we have to deliver more of our services to our partners. There are a number of other initiatives. You talked a little bit about, we have ACO opportunities.
Yeah
I-SNP. That is definitely a much smaller piece of our business. As we are stepping into more care in density in different markets, how can we better leverage the outcomes that we are producing for differentiated payment models? That is interesting to us.
That's great. That might be all the time we have today.
Okay.
Thank you very much for being here.
Yeah. Thank you.
Very comprehensive update. Thank you.
Thanks for having us.
Thank you.