BrightSpring Health Services, Inc.

Thank you for standing by. Welcome to the Bright Spring Health Services first quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, David Deichler, Investor Relations. Please go ahead.

Good morning. Thank you for participating in today's conference call. My name is David Deichler with Investor Relations for Bright Spring. I'm joined on today's call by John Rousseau, Chief Executive Officer, and Jen Phipps, Chief Financial Officer. Earlier today, Bright Spring released financial results for the quarter ended March 31st, 2025. A copy of the press release and presentation is available on the company's Investor Relations website. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance in industry and market conditions. Such forward-looking statements are not guarantees of future performance. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release and presentation, as well as our quarterly report on Form 10-Q that will be filed with the FCC, including the specific risk factors and uncertainties discussed in our Form 10-K and 10-Q. Such factors may be updated from time to time in our periodic violence with the FCC, and we do not undertake any duty to update any forward-looking statements except as required by law. During the call, we will use non-GAAP financial measures when discussing the company's performance and financial condition. You can find additional information on these non-GAAP measures and reconciliations our non-GAAP financial measures to their most directly comparable GAAP financial measures to the extent available without unreasonable effort in today's earnings release and presentation, which again are available on the Investor Relations website. This webcast is being recorded and will be available for replay on the Investor Relations website. And with that, I'll turn the call over to John Huston, Chief Executive Officer.

Good morning. Thank you for joining Bright Spring's first quarter 2025 earnings call. I'd like to start by thanking our employees, who work hard to ensure that patients receive proper, high-quality, and timely care in home and community settings. I'm grateful for our team at Bright Spring and their diligence to each other and patients in their care every day. We're pleased with the start to the year across our businesses, with first quarter results exceeding expectations. In 2025, we remain well-positioned for continued growth while leveraging our scale with an ongoing focus on high-quality operations and disciplined investments to drive efficiency. At Bright Spring, we believe that there is always room to improve and innovate as we strive to deliver the best and most reliable coordinated care as a leader in critically needed and highly valuable home and community-based healthcare. Before I review the first quarter's performance, a brief update on the planned investiture of the community living business, which we announced in January. We continue to expect the transaction to close in the second half of this year, subject to regulatory approvals and typical closing conditions. We did receive a second request to review from the FDC, and we continue to work with them to advance the transaction's approval process. As you may recall, we previously provided 2025 guidance excluding community living with this business reported in the discontinued operations lines of our financial results. As a result, my remarks related to the company's financial performance on this call principally pertain to the continuing operations and do not include the results from community living. For the first quarter, total company revenue was $2.9 billion, which represented growth of 26% year-over-year. Pharmacy solutions revenue was $2.5 billion, representing 28% growth year-over-year, while provider services revenue was $346 million, representing 12% growth year-over-year. Total company adjusted EBITDA of $131 million grew 28% compared to the same period last year, driven by strong revenue results across the businesses, particularly in our Onco360 and CareMed specialty pharmacy business. EBITDA margins for the company increased in the quarter versus last year. These results were achieved notwithstanding the impact from fewer days in Q1 this year versus last year, with 2024 being a leap year, which equated to a negative 3.7 million EBITDA impact as compared to this year's first quarter. Following strong performance in the first quarter and an updated outlook for the balance of the year, we are increasing total revenue and adjusted EBITDA guidance for 2025. with adjusted EBITDA guidance for the year increasing by $25 million at the low and high ends of the prior range communicated in March. And again, for clarity purposes, as before, this guidance excludes community living. Jen will speak to Bright Spring's first quarter financial results and 2025 outlook in more detail in a moment. Demand for our services and broad demand for health services in lower cost and preferred home and community settings Combined with our commitment to delivering high quality in these settings, continue to support strong growth in the quarter. We have consistently driven outsized volume growth in our markets, led by responsive and reliable high quality care, loyal and expanding referral sources, and new market investments. We also continue to see the benefits of leveraging our scale and investing in our business to increase organizational efficiencies and reduce costs. Our investments in process improvements, including new and enhanced technologies, are important to provide modern, coordinated, and best practice approaches to care for complex patient populations. Every year, we have dozens of programs with varying scope that help improve the efficiency of care delivery and outcomes for our patients. Some quality highlights include the following. In home health, over 80% of the branches are four-star or better. The 60-day hospitalization rate continued to decrease, and our patient satisfaction rate is approximately 90%. In hospice, our visits and time with patients remains 50% higher than the national average, and our hospice quality index score, which is excellent, has never been higher. In rehab, the percent of patients experiencing a catastrophic neuro event who reached independence again, rose to 52%, and our patient satisfaction score remained at 98%. In personal care, our 4.6 satisfaction score out of 5 is the highest ever. In community living in Q1, we had the lowest number of audit findings ever and 40% better than industry average. In infusion, the discharge rate due to completion of therapy was 96%, with 95% patient satisfaction. In hospice and home and community pharmacy, we had 99.999% dispense accuracy, 99% order completeness, and local staff delivery times of two hours. And in specialty pharmacy, our time to first fill was four days, well below industry average, with a medication possession ratio of 93% versus the industry benchmark of 80%. We continue to demonstrate a capability to meet the needs of a broader set of patients and deliver highly valuable home and community healthcare across complimentary service lines. Turning back to the company's financial results, in the pharmacy segment, total revenue grew 28% in Q1 and adjusted EBITDA increased by 31% in Q1 versus prior year, with total pharmacy script volume growth of 10% to 10.9 million. In the specialty and infusion business, Revenue growth was 33% year-over-year, with total script volume growth of 20% in the quarter, exceeding our expectations. Specialty and infusion growth continues to be driven by launches across the now 127 LDD drugs in our portfolio, market share driven by high quality scores and service levels, and market education and patient fulfillment supporting generic drug utilizations. We continue to have good visibility into the LDD market opportunity, expecting 16 to 18 additional LDD launches and their corresponding clinical advancements over the next 12 to 18 months. Specialty script growth was 32% in the first quarter, a reflection of innovative new therapies coming to market and our ability to serve as a strong partner to prescribing physicians and patients and their families. In infusion, continued investment in the business has translated into improved volume performance through the quarter and presently, and we remain optimistic about the future of the business over the coming years with the opportunity to treat both acute and chronic health conditions across infusion settings as our strategy. In home and community pharmacy, revenue grew 14%, primarily driven by increased script volumes and new customers. The business continues to be operationally steady, and there remains opportunity to expand market share, particularly in assisted living, behavioral, hospice, PACE, and at-home pharmacy settings in the future. Before I turn to our provider segment, I would like to spend a minute discussing a few external regulatory topics. Bright Spring has been evaluating scenarios associated with any potential future pharma tariffs. We've been in discussions with manufacturers, wholesalers, payers, and legislators to best understand potential outcomes, all of which are uncertain given there is no significant policy yet in place. While we have a good understanding of our drug sourcing and current supply in the market, there are still unknowns related to when, what, how, and even if materials could be tariffed in the future. Currently, we do not believe that there will be a material impact to Bright Spring in 2025 given our contractual relationships and inventory. We're continuing to monitor and evaluate potential 2026 dynamics in order to mitigate any potential impact, should one even potentially arise. It's worth noting that approximately 50% of our drug supply comes from the U.S. and North America. Reimbursement for brand drugs is tied to cost, for example, as an annual drug price inflation, and there are typically many domestic and global sourcing options for generics in supplier markets that are competitive. On the IRA, the broad intent and understanding of the legislation is the lower prescription drug costs, and pharmacies were not and are not expected to bear any financial burden of resulting changes. Moreover, regulators acknowledge the crucial role that pharmacies play is the last mile in ensuring patient access to medications and in driving health outcomes and reducing unnecessary hospitalizations. While outstanding legal challenges or actions by Congress or the Trump administration may modify implementation of the IRA, we continue to constructively work with our industry partners to educate and eliminate potential unintended consequences of the new law. All in all, our views on the potential impact to our business from the IRA policy have not changed over the past six months. And in a scenario where the IRA remains in place as it is today, we think there is a manageable impact that we would look to mitigate through continued growth and additional operational focus. Regarding Medicaid, approximately 10% of the company's revenue is derived from Medicaid post the community living divestiture, with our provider and pharmacy patients served being seniors and or complex patients, many with behavioral conditions. These are the originally intended Medicaid patients. who are not the focus of any Medicaid discussions and, in our view, unlikely to be impacted. This is a high-need patient base who has received increased annual rates for over 30 years, with our services being critical to support them in home and community settings, with quality outcomes that reduce costs to the system. Amidst varying environments, our company has grown in a mid-teens revenue and EBITDA CAGR for the past nine years now. based on the strengths of our platform, the clear ROI of what we do, and our complementary diversification and differentiated position in attractive and highly valuable home and community health services markets. And we expect our growth track record to continue into next year and beyond. Turning to the provider segment financials. The business delivered solid results in the first quarter despite unfavorable calendar days with 2024 being a leap year and having the extra selling day and more Mondays and Fridays than this year's first quarter. Provider revenue grew 12% year-over-year and segment adjusted EBITDA grew 9% year-over-year with a 14.8% margin in the first quarter. As a reminder, we will be discussing three businesses within the provider segment, home health care, rehab care, and personal care. Home health care includes the home health, hospice, and primary care businesses and today represents approximately 50% of provider revenue. Revenue in home health care grew 21% year over year in the first quarter. The home health and hospice businesses continue to perform well with average daily census of over 30,000 growing 12% compared with the same period last year. Growth in home health and hospice continues to be driven by strong operational execution underpinned by leading quality metrics, high levels of patient satisfaction, de novo expansion, and advancing contracts with Medicare Advantage. As we continue to grow and expand our home health and hospice capabilities, home-based primary care remains a large opportunity that we are excited about and further progressing on this year. As the healthcare system continues to face higher costs and an increasingly capacity-constrained infrastructure, payers and regulators are making progress on improving accessibility for home-based care. We are focused on bringing high-quality services, including physician oversight, to the home and community settings to treat patients where they are. In rehab, which represents approximately 20% of provider revenue, We deliver highly clinical and skilled rehab and behavioral therapy to patients with neuro-rehabilitation needs and psych and behavioral conditions, with significantly lower longer-term costs. Revenue in this operating unit grew 5% in the first quarter, driven by the continued addition of de novos through our neuro-rehab and rehab-in-motion programs. In the quarter, we executed on a significant number of new contracts in a rehab in motion program where we began this build out of rehab for seniors and assisted living later last year. Another example of the innovative growth approach of the company that leverages core capabilities and existing customer markets and relationships. In personal care, which represents approximately 30% of provider revenue, we support the activities of daily living care and social determinants of health. the business delivered steady performance in the first quarter with revenue growth of 3% and modest growth in person served. Overall, we again observed consistent execution and high quality of care across the provider segment where there continues to be payer support for our services that reduce overall healthcare costs. To conclude, we are pleased with the company's performance in the first quarter. We focused and pride ourselves on our long history of operational execution and high-performing employees that have created organizational best practices. We remain optimistic about our pharmacy and provider businesses over the near, medium, and long term as we see large opportunities for growth and market expansion across the company. And we are confident in our ability to execute against our increased financial outlook throughout 2025. With that, I'll turn the call over to Jen.