BrightSpring Health Services, Inc. (BTSG) Earnings Call Transcript
November 11, 2025
Earnings Call Speaker Segments
All right. Thanks. Welcome, everyone, to our next presentation with BrightSpring. We're very pleased to have Jon Rousseau, President and CEO; and Jennifer Phipps, Chief Financial Officer, to talk about the company.
So, Jon, we're about 10 months into the year at this point. Do you want to just give us an assessment of year-to-date performance? What's been the positives? Have there been any challenges? Had a good year, so probably not that many challenges, but give us some flavor for that.
Sure, sure. Thanks, A.J. Good to be here. As always, good to see you. It's been a productive, constructive year for us. We've been pleased with how it's unfolded throughout the year. I would say a lot of the focus areas and initiatives that were on our plate have been well executed as we progressed throughout the quarters. I would say really a lot of consistency through the quarters. And in the businesses themselves, really, it's been broad-based growth. So if you look across the 3 pharmacy businesses and if you look at the 3 provider businesses, it's been broad-based growth. They've all done well this year through a combination of both volume and then a lot of cost and efficiency and automation initiatives as well. So -- and as we sit here, obviously, now already in the fourth quarter, our sights are squarely on next year, and we see a lot of the same trends and a lot of the consistency moving into next year as well. I think we continue to benefit from being in home and community health services markets, where we experienced a lot of demand for complex and high-need individuals with really high-quality services that can be delivered in lower cost settings. Within our markets, we've continued to invest heavily in sales and marketing on the back of really leading quality results, and that's just continued to drive a lot of volume. And more than ever, we're kind of building on our 9-year track record of focusing on the operational side. We're leaning into just more and more investments in IT, and in HR to continue to try to have the strongest foundation of operational processes that we can. So it's been a positive year. both on the volume side and on the operational side. And we just continue to think about how we can build the largest and very sustainable high-growth platform for the long term.
That's great. That's great. I know there's probably some people that are new to the BrightSpring story. Can you just remind us how you think about the long-term growth algorithm and how we think about the company in the next couple of years achieving that?
Yes. So if you look back over 9 years now, since Jen and I have been at the company, a lot of new and great people have joined us, obviously, over time. But our CAGR is right at around 15%. I would say, about 10%, 11% organic, then a couple of percent, 3%, 4% from an M&A perspective over that close to a decade. Here more recently, in the last 3 years or so, our CAGR has been higher than that even now really around sort of 20% based on some of the growth that we've been experiencing in some of our businesses. So as we've built the scale that we have today, and we just want to continue to lean into just more and more scale. We continue to believe that scale, making the right technology, HR, process investments in this industry is going to be critical to future success, no matter what the world looks like. And so we want to continue building as much scale as we can. It's very helpful in our industries. At some point, as you continue to be a larger and larger company, certainly, the law of numbers does kick in. We don't necessarily sit around thinking 30% growth forever is sustainable, that's extremely difficult. But I think for the foreseeable future, certainly continuing to execute at a level of our historical CAGR when you look back close to a decade in the mid-teens, that's always the base case and the minimum that we aspire to. And more recently here, if you look at our more elevated CAGR, we're hopeful that if we can get to a 20% number, we'd like to, but certainly no guarantees there just given the size of the company we have today. And -- but look, we're always going to continue to try to invest for the future and invest for growth. We like the markets we're in and the businesses that we're in. They have a ton of value. They have a ton of ROI. The drivers of our business historically have been volume, more and more efficiency, leveraging our scale and then very accretive, mostly tuck-in M&A, and that will continue to be the playbook. If we can augment that more with certain care management capabilities and innovative payer contracts, we will look to do that. But we're going to continue to invest on both the growth and the infrastructure side and try to keep doing our best to be at or beat that, I think, very robust historical CAGR.
That's great. When you think about '26 specifically, it was coming off a good year, like it looks like '25 will end up being, does that create a hurdle for you? Can you maintain it? Maybe just talk about headwinds and tailwinds that people should keep in mind as you think about '26?
Yes. I think, obviously, we'll probably get into more formal views that we would communicate on next year like we always have in Q1 or later in Q1, and we look forward to doing that. But it's -- I think we see a lot of consistency in the organization as we sit here today, and there are certain things that are important to get through in January and Q1. And once you kind of get into Q2 in our business, you start to get a much better sense of how the year unfolds. So I think as we get through the first quarter, that will be very helpful. That will give us more and more insight. But as we sit here today, we see a lot of consistency. All of our pharmacy businesses are doing well. We like those businesses because they're closed door in nature, meaning we go to the customer. We serve all very complex patients with very white glove customized services for our different populations and being local like that and serving very complex patients who often have the need for life-saving and life-sustaining therapies. It's -- those businesses have good momentum now. We've continued to invest on the operational side, particularly in areas like infusion and home and community, they have some augmented leadership teams there, and we're really excited about that. So -- and on the provider side, I would just -- a hallmark of that business has just been real predictability and consistency with, I think, best-in-class businesses. So if anything, we see good momentum and even more positivity as we think about next year, but getting into next year will be helpful. The provider side has had really good rate stability, and we'll continue to focus on volume, as always, as we get into next year and just a ton of different cost and automation projects going on at the company today that will carry over into next year, too. So I mean, maybe just kind of the last tailwind, Jen has done a remarkable job with the balance sheet and on cash flow, and we're really proud of that over the last 2 years. I think we probably will have a little bit more flexibility on the acquisition side. If you think about where our leverage is now, we should be at 3x or below by the end of the year, even without that potential community living divestiture finalizing. If it does, that could push us closer to 2.5x. And then as we think about cash flow next year, I think just gives us a little bit more optionality on some acquisitions. I don't think anything major, but it could be a little bit more of an adder in the future just based on where we've evolved from a balance sheet perspective.
And is there any update on the divestiture that -- and where that sits and so forth?
Jen, do you want it?
Sure. We continue to work towards that -- sorry, Community Living divestiture, I apologize. I was about to say Amedisys. We continue to work towards that. The transaction, we believe will close in Q1. That's our best view at this point in time as we're working through the specific action items that were laid out by the FTC. And so we're working with IQVIA on that.
Okay. Okay. And was that delayed somewhat by the government shutdown, I assume that had an impact?
That was probably not helpful, but we progressed through that -- we've been progressing through that process during the shutdown.
Okay. And what about -- since you mentioned that the Amedisys, that's a purchase for you guys. Where does that sit?
We expect to close that in Q4.
Okay.
So...
Is there any gating factor to getting that closed? Are you still waiting for regulatory approval, financing or anything?
Yes. It should be very high confidence view that in Q4, high confidence view, that will clear the finish line.
Okay. Maybe just on the pharmacy, Infusion Specialty revenues grew about 42% in the third quarter, you've had a great year. When you think about the different subcomponents, oncology, rare and orphan, infusion, talk about where there's been strength? Is that consistent going forward? Any comments on breaking that down a little further?
Yes. I think good momentum and good consistency really across all 3 of the businesses. You start on the Specialty oncology side in rare orphan. It's been another year where we've been honored to be selectively chosen by a lot of manufacturers and biotech in these limited drug distribution networks, typically have 1 or 2 pharmacies, keep investing in quality there. I think with outstanding results by the team and really good partnerships with everybody in the value stream, whether it's on the manufacturing side or our partners on the payer side, but a lot of access to drugs coming through the innovative pipeline of these therapies with the FDA, which remains very deep. And so a good number of product launches this year. We continue to grow our fee-for-service business, value-add data service agreements with our upstream partners in biotech. So that's been helpful, too. As we look at next year, we would envision a similar number of new drugs coming to market and think that will look a lot like this year. On the infusion side, as we've said before, there's a lot of companies out there that just focus on some of the Specialty chronic therapies. We really believe that a broader-based strategy that looks at the acute infusible drugs in addition to chronic infusible therapies is really important. I think that creates the most market opportunity ultimately, probably makes you the most germane with your payer partners as well, and so we've been really focusing on trying to make sure that we have the infrastructure in place to address both of those markets, and we're really pleased with our momentum in that business. I think the infusion industry will remain a very attractive one over the long term, but importantly, you have to be operationally set up to service those patients in infusion therapy models in a very high-quality and predictable way. And so infusion isn't the easiest thing in the world. I think there's actually some barriers to doing it very well. And so we give a lot of credit to people who do, do it well. And we've made a lot of investments in that business to get it to a place where we think it can really scale more quickly, and we're pleased with where we are today. Home and Community Pharmacy continues to service a lot of really interesting end markets. So really just think about where patients may have a need for drugs and therapies outside of us going to Walgreens or CVS to pick them up, right? So closed door is you go to the patient and the customer wherever they are, whether that be in a senior living community, assisted living, a skilled nursing facility, somebody at home on hospice, somebody at home on home health, individuals and behavioral group home settings, hospitals, these are all places within the community where people need a customized set of services brought to them. And so across all of those end markets, the business has been doing well. As we talked about a little bit on the last call, what was a very interesting tailwind last Q3 flipped with the Genesis bankruptcy process. And so we worked through that earlier in the year and completely accrued and have no exposure on that. That would be kind of the one headwind in that business from a volume perspective, but outside of that, when you look at the various end markets and some of the great partners that are out there, the business has a ton of momentum, and we are really leaning into as much automation as we possibly can. Pharmacy is just an industry where very, very difficult to survive, if you just don't have tremendous and massive scale. And we've seen the benefits of that over time. It's been a necessity, and we just continue to lean into more and more of that scale. So wherever we can further penetrate a lot of these interesting growth end markets, we're going to continue to do so. And there's a lot of synergies across the entirety of the pharmacy platform in terms of our ability to contract with entities outside and deploying automation and deploying best practices. So I think we're excited about each one of these businesses. We love what they do. They provide tremendous value for the patients where and when they need these therapies in a very customized way. And we just continue to try to invest in these businesses to foster more growth and market share.
Okay. I think just to drill down a little bit on each one of those. In the limited distribution drug pipeline, I think you came into the year thinking 16 to 18 LDDs would be introduced over the next 12 to 18 months. And then I think at one point this year, you said, well, it's actually going to happen within a year. You're saying next year looks pretty good, too. Is it the 16 to 18 over 12 to 18 months? Is that sort of a benchmark way to think about it?
That would be our best view.
Okay.
It's a very strong pipeline. We continue to see the drugs moving through -- and progressing through the pipeline, and we have been working with manufacturers. We typically have a view of what's going to come to market in the next 12 months.
I was going to ask you how much lead time you get, so it's about a year typically.
We start having conversations with manufacturers about 12 months out from the drug launch.
And when do they typically pick you to be one of their -- excuse me, is it in that time frame? Or is it a little tighter than that?
It would be within that time frame. It's not usually that far out, but we're having conversations with them about our ability to service their drugs and working with them on that, and then they would pick us closer to time.
Okay. There's just been a lot of really healthy innovation continuing in that market, give credit to a lot of the pharma and the bio companies that are bringing these therapies to market. We've seen, A.J., just a little bit more trending of niche therapies, narrowing of indication. Maybe that has to do with sort of an increased frequency, but even if we were sitting here a year ago, the data and the research talked about some $90 billion of new revenue from therapies coming on to that market over the next 5 to 6 years. So I think the pipeline of therapies is just -- it's huge. And the innovation just continues, and we've just continued to try to position ourselves as a great partner to participate with them in that commercialization process.
And would you describe the competitive landscape for those deals is sort of steady? Or is it anything disrupted?
I would say it's very steady. I mean there's a group of 5 to 10 pharmacies that have been pharmacies in this space for quite a long period of time. And it's hard to roll the rock up to the top of the hill in this space, but once you get it there, it starts to move on the other side. And I think our team has been working for 15 years to be a trusted partner and to develop national capabilities, and I think we sort of got to that place 5 years ago. And you really do need a national presence in the scale of the 5 to 10 pharmacies in this space to be able to kind of provide the type of services that I think most manufacturers expect.
And one of the incremental drivers, not only new limited distribution drugs, but conversion of some of those drugs to biosimilar. Has that paced as you expected? I think you always said a couple of year, maybe 1 or 2 a year would be the driver, and that's almost more of a driver on the profitability line. Is that what you're seeing? Any update thoughts on that?
Yes. I would say for the services that we're in, really more from a brand to generic conversion perspective, that is always happening in pharma. I think that's healthy for the entirety of the health care ecosystem. You see dramatic reductions on the reimbursement side, but the manufacturing side opens up, too, which is very helpful. And so I mean, if you look at our business, it's kind of been a steady stream of you win 13, 14 to 16 new brands coming to market every year, working with the manufacturers as the best partner we can. And then every year, several brands will go generic. And then third, we really have a growing fee-for-service business, partnering with biopharma. And really, those 3 things working together have ultimately sort of produced the track record that we've had over the last 5 and 10 years. And we see those sorts of numbers on the brand side, a handful of conversions a year, continuing to invest in value-add fee-for-service offerings, we see that continuing to play out fairly consistently.
And in infusion, I think you're in sort of a low single-digit national market share with a goal that over 3 to 5 years to get to 10% or so. What are the building blocks to get you to that? What needs to happen? Is your geographic footprint sufficient and you see more penetration? Do you need to expand your geographic footprint? What are some of the other things?
Yes. Yes. Infusion is a huge market. I think in the U.S., some $20 billion, $25 billion market between acute and chronic therapies. I think those are both important and relevant markets for us. We will continue to look at both of them and not just the chronic side, as you often see out there. But for us, I think it's deepening within our current markets, and it is expanding to new states. So we have some 30 or so pharmacies locally in addition to having national distribution capability in that business, but even in those 30 markets, we could be significantly bigger, I think. And then there's 5 or 6 very material and big states out there that we still need to expand into. And then I would say, from a site of service perspective, we've got some 30 suites today where instead of infusing somebody in the home, they can go to a clinic and be seen in a suite. We'd like to have more and more of those locations to be able to offer patients and referral sources too. So we sort of think about the business in a 2 by 2. There's the acute and the chronic market and then serving individuals either for any of those therapies in the home or in a suite or a clinic setting, which a lot of people prefer is our thoughts on the entirety of the business. So I think it's just continuing to try to deepen as much as we can in current markets while also addressing some 5 to 10 states that are still opportunities today where we're not yet.
Okay. And the IRA is expected to have some impact on the business. What are you seeing there? And what's the latest in that?
Sure. Jen, do you want to hit IRA?
Sure. So from an IRA perspective, as we've talked about many times, we are working on a regulatory fix with Congress. So there was bills introduced in the House probably about 1.5 months to 2 months ago. There was a bill introduced into the Senate last week, both with an enhanced dispensing fee that would cover the impact for the long-term care pharmacies. We're not sure whether or not that will ultimately get passed in 2025. We've also been working and new information, I guess, probably in the last quarter has been that CMS has encouraged or directed the payers to work with the pharmacies, the long-term care pharmacies on an enhanced dispensing fee. We've been working through that process with our payers. Other members in the long-term care pharmacy community are also doing that. Separately, we -- so we're working to mitigate or at least partially mitigate through what would be PBM rates. And then as we have mentioned, the home and community pharmacy, we have a new team in place that has many different operational initiatives that we have been working on. And we are working through a lot of efficiencies that would otherwise be growth, but that we believe would more than offset the impact for any IRA if we were to have any.
Okay. And I think in terms of cost efficiencies, you guys have -- and you talked about investments earlier, talked about $30 million to $40 million. And is that an annual -- I think that's an annual thing you're talking about.
Yes. We've been really proud of the ability to continue to try to run the organization as efficiently as you can. You just have to do that. And it's been going on 10 years of having a PMO in place that has really driven, I mean, hundreds of Lean Sigma automation, RPA projects across the organization. This year was probably our biggest year of driving cost out of the company by just working smarter and being more efficient. Now, A.J., a ton of that money goes back into quality infrastructure, HR, IT. And so we really do reinvest as much as we can to try to continue to have the infrastructure for future growth, but as we look at next year, the plan remains the same. And it's like flip the page, what are the next set of 40 projects. And -- we're already working on those. I mean some of the things we've driven this year will be fully annualized and realized next year. So you'll get some of that carryover. And then there will be new projects. So we hired a Chief Technology Officer kind of in this domain of discussion topic several months ago, who's outstanding. And we're not only building out our own AI team, but we're also looking to partner with certain organizations, who can move us forward in this area more rapidly. So we feel like as a scaled organization, we should be able to do things in a more sophisticated way versus always having to buy it. So we're very judicious with our buy versus build decisions, but like these are our processes every day across our provider and pharmacy businesses at scale that we're trying to figure out how to optimize. And so if we have some of that internal development capability to build our own product solutions, that's what we want to do. And -- but we can't do it all the time, and there's an urgency to it. So sometimes we'll partner, other times, we'll want to build it out. But we are trying to build over the next 3 to 5 years, a portfolio of our own AI solutions based on optimizing our own internal practices. And so really optimizing those products over time. And so I would say with a lot of the lean work that we've done historically here more recently, it's how do we do that through all of the AI tools out there and trying to build and enhance the team around that specific element. So -- and yes, we've made some great talent additions to the organization and the businesses. I'd point to Home and Community Pharmacy, as Jen just mentioned, as a group of very seasoned leaders who in their career have consistently from some of the biggest and best pharmacies out there have driven cost out and just continue to make organizations more efficient, which, again, you have to be able to do. And our view is if we can keep scaling on the customer volume side and if you have the best practices and cost leadership, that will ultimately lead to a good place in your industry, and that's what we continue to try to do, but really excited to continue to enhance the program we've always had with more of the AI capabilities.
Okay. Maybe for a couple of minutes on the provider services side of the business. We were waiting for the home health update. Any thoughts on that? Any word?
Should be any moment. We'll see what happens there. Ultimately, we feel like it's very important to make sure there is long-term sustainability from a rate perspective in that industry, obviously. I mean it's like IRA with the LTC pharmacies. I mean that was just clearly a miss. And everybody we've talked to acknowledges it and it's, okay, well, what do we do about it because that's such a critical industry. For home health, the ROI of home health and the value that it provides is just clearly unquestionable, right? So if you have less home health, you're going to have more hospitalizations and ER visits. So you have to figure it out. Congress, right -- CMS rightly so, is focused on any fraud perpetrators out there. And that is something that absolutely everybody should be focused on going after. And as a high-quality, highly compliant provider, we want that as well, of course. We're optimistic that at some point over the next year or 2, and there's even some bills that are churning through or I think about to maybe get to Congress for just some long-term rate sustainability. So we want to try to be, particularly with the Amedisys and LHC branch divestiture pickups that that we'll have, we want to try to be helpful in any way we possibly can to provide that sort of long-term sustainability for the industry, working with Congress and working with CMS. I mean, even some of our more recent payer contracts have had quality incentives in there and tied to them, and we welcome that and embrace that because we just continue to invest in quality. So whatever we can do to help educate and maybe be more of an involved party in the future of this discussion to satisfy everybody is what we want to do. But we'll see where this most recent final rule lands. And for us, we haven't been huge in home health historically. For this very reason, we've been wanting to get visibility on what happens in the industry. I think the opportunity here to be a solution and the Amedisys transaction is one that we thought was unique, and we were well positioned for -- so we stepped into that. But otherwise, wanting to make sure that the industry has what it needs to continue to provide such great services to seniors.
And when you think about the Amedisys transaction, even if we got the rate as proposed, do you think that would still be accretive to you next year?
That -- all of this was certainly in our thinking as we were having our discussions with the other party. And no matter where that lands, we had contemplated that and how we view the transaction.
And say we get clarity, whatever comes out, you feel like you got a road map for what reimbursement looks like, would we then expect you to step up the pace of home health deals at that point?
I think certainly for the next year, we'll be heads down integrating that transaction. We want to -- we're super excited to welcome all the employees, and we want to do that in the highest quality way we can. Look, I think as you look across our organization, we're something like -- how many acquisitions in the last 5 years? Was it 68 or 70?
I think it's like 73.
So we're at 73. So I think we're -- like some of them are recent. So 71 out of 73 times in the last 5 years when we've done acquisitions, the EBITDA is higher than what we bought. So I think that just speaks to the care and attention we put into transactions with our operators and with our integration management office, our IMO. So we like all of our markets. They have a huge benefit. And we have the ability to sit back and think about what makes the most sense and to really optimize. So we get a ton of proprietary deal flow, because of all of our relationships in our markets. Most everything we do is proprietary in nature. And -- but whether it's rehab, hospice, pharmacy where scale is so critical and you can really leverage your platform and your synergies we look at everything. So I mean, if I had to handicap it right now, I would say more on the infusion, hospice, rehab side is where for the next year, probably more of our priorities will be while we just kind of digest this home health acquisition and try to make sure it's going as well as possible.
And when you think about the growth trajectory of personal care, rehab, hospice, anything to call out there?
We would hope and expect that it would be very consistent. That's been a business that's been able to achieve a mid-teens CAGR from an EBITDA perspective. Those are our goals going forward for a variety of reasons with a lot of different drivers in there. Personal care has really been the one business in our company that's had the lowest growth profile. It's just a very steady high-quality business, but a couple of percent growth. That team has done a wonderful job from an execution standpoint, but not necessarily -- I mean, there are -- if we did more private pay, there's some opportunities there, but that wouldn't be one of the higher growth parts of our company, more of a steady cash flow business that we like a lot to complement some of the areas of higher growth within the platform.
And I think just as we wind down here, operating cash flow this year should be north of $375 million. I don't see a reason why that would diminish next year. M&A at one point, you were saying $100 million a year could be order of magnitude. Is that -- I think you'll get back on track for that. I know you participated in the recent divestiture of -- or sale by KKR shares. Is that something that's going to be part of this ongoing?
Yes, those will be case-by-case decisions. I mean, I think we feel really good about where our leverage has evolved to over time. I think if we can get to that $350 million, $375 million of OCF this year, we've been talking about $300 million, but it's been a really good year from a cash perspective. Free cash flow before debt pay down should be in the $250 million to $300 million range. As we sit here today, those numbers should only increase next year. And look, I think as a proxy, we've had about 75 to 100 of M&A and very accretive tuck-in deals. I think we'll have more flexibility with that going forward. And KKR has just been a wonderful partner. They continue to be so. They're never in a rush because they continue to be enthusiastic about the company. If situations arise in the future where we can be a helpful partner in the process, and we still feel great about the valuation, we'll take that case by case. But I think safe to say that we'd like to lean in if we could, and we're just continuing to try to maximize cash flow by being very sound on the operational side and on the working capital side, too, to give ourselves as much flexibility as we can.
Okay. Well, with that, we'll wrap this up. Appreciation to BrightSpring for participating in the conference this year. Thanks, everyone, and have a good afternoon.
Thank you, A.J.
Thank you.
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