BrightSpring Health Services, Inc.

and thank you for standing by. Welcome to the Bright Spring Health Services third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you 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. I would now like to hand the conference over to your speaker today, David Deichler, Investor Relations. Please go ahead.

Good afternoon. 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 September 30th, 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 and industry and market conditions. Such forward-looking statements are not guarantees of future performance. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. 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 SEC, including the specific risk factors and uncertainties discussed in our Form 10-K and Form 10-Q. Such factors may be updated from time to time in our periodic filings with the SEC, and we do not undertake any duty to update any forward-looking statements except as required by law. During the call, we will use non-GAAP financial measures when talking about the company's financial performance and financial condition. You can find additional information on these non-GAAP measures and reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures to the extent available without unreasonable effort in today's earnings press release and presentation, which again are available on our Investor Relations website. This webcast is being recorded and will be available for replay on our Investor Relations website. And with that, I will turn the call over to John Rousseau, Chief Executive Officer.

Good afternoon, everyone. And thank you for joining Bright Spring's third quarter 2025 earnings call. First off, I would like to thank all of our Bright Spring employees in the field and in administrative support roles who make a real impact for patients and people every day. I'm grateful for their continued dedication and commitment to providing the high quality and compassionate care and services to the individuals we serve. Bright Spring is a leading health services provider in home and community settings. in large and growing pharmacy and provider markets. And we believe a scaled platform in home and community healthcare differentiates and positions us well for the future. Today, we reported third quarter financial results that are in line with the preliminary financial results we announced on October 20th. The third quarter exceeded our expectations and our ongoing commitment to high value and high quality services, operational execution, and continuous improvement, all hallmarks of our company culture, have driven the financial results so far this year. Before discussing Bright Spring's third quarter performance, I would like to remind you that the company's financial results in 2025 guidance pertain to the continuing operations and do not include results from the community living business. At this time, we now expect the community living divestiture transaction to close in the first quarter of 2026. which remained subject to final federal regulatory approvals and typical closing conditions. For the third quarter, Bright Springs revenue grew approximately 28% and adjusted EBITDA grew approximately 37% versus last year's comparable quarter. Total company revenue was $3.3 billion, with pharmacy solutions revenue of $3.0 billion increasing 31% year-over-year, and provider services revenue of $367 million, increasing 9% year-over-year. Total company adjusted EBITDA of $160 million in the quarter grew 37% compared to the same period last year, driven by strength across the businesses. EBITDA margin for the company was 4.8%, which grew approximately 30 basis points compared to the third quarter of last year and up 30 basis points versus second quarter. Margin expansion was primarily driven by disciplined operating expense management and modest revenue mix shift within pharmacy with greater contribution from generics. On cash flow, the company realized over $100 million of cash flow from operations in the third quarter and leveraged decline to 3.3 times at the end of the quarter, sooner than previously communicated expectations, with an updated goal of three times by year end as is. and below three times pro forma for both the Amedisys and LHC home health branch acquisitions and the community living sale. The company continues to deliver growth, reflective of each business line executing on our internal goals. Given the third quarter update today and current expectations for the fourth quarter of 2025, we are increasing total revenue and adjusted EBITDA guidance for 2025. A week ago, in the October 20th release, we increased our adjusted EBITDA guidance to a range of 605 to 615 million, which compares to 590 to 605 million communicated in August following our second quarter results. As a reminder, this 2025 guidance excludes community living and any M&A activity not yet closed. We continue to expect the emeticists and LAC branches to close later this quarter and expect this to be immaterial to our 2025 results. We look forward to having the emeticists and LAC colleagues join BrightSpring, and Jen will discuss BrightSpring's third quarter financial results and 2025 outlook in more detail shortly. At Bright Spring, we're focused on quality and continuous improvement in our people and services to deliver comparatively low-cost, timely, and attentive patient-centric care to complex populations. Quality and patient satisfaction scores across our service lines in the third quarter remained at very high levels. In home health, 94% of our branches are at four stars or greater, with timely initiation of care at an industry-leading level of 99%. In hospice, we continue to be a top 5% ranked hospice program in the U.S., with a CAPS overall hospice rating of 89%, up from 85% in the second quarter. Overall, hospice quality index scores and the number of visits we provide patients per month on average remain well above national average. In rehab, our patient satisfaction scores remain exceptionally high, and in personal care, we have strong internal client records, and quality indicator audit scores, along with a satisfaction score of 4.54 out of 5. In infusion, our patient satisfaction score was approximately 95%, and our discharge rate due to completion of therapy was stable at 96%. Home and community pharmacy demonstrated 99.5% order completeness and on-time delivery of 97.2%. In specialty pharmacy, our medication possession ratio remains much higher than the national average at approximately 95%, and we have a time to first fill of 3.7 days. Our company continues to demonstrate high levels of execution and customer satisfaction across service lines. Turning to the company's financial results by segment, total pharmacy solutions revenue grew 31% in the third quarter, and adjusted EBITDA grew 42% versus the prior year, with total pharmacy census growth facilitating total pharmacy script volume of 10.8 million in the quarter. Those script volumes demonstrated strong growth in both specialty and infusion, with over 30% script growth in the subsegment. Total pharmacy volumes declined 1% versus the prior year due to the majority of scripts being in home and community pharmacy and a decline in the home and community pharmacy total scripts dispensed. Due to divestitures associated with the customer that previously declared bankruptcy, as well as flu season beginning later in 2025 as compared to 2024, operational decisions made to exit specific uneconomic customers, and a difficult comparison to last year when we added the same aforementioned customer in the third quarter. In the specialty and infusion business, revenue grew 42% year over year, which exceeded expectations. The performance in specialty and infusion was driven by limited distribution drug launches, generic drug utilization from conversions over the past year, strong commercial execution from the team, and excellent patient service. Specialty scripts grew approximately 40% in the third quarter, driven by strength in both brand LDDs and generics. We ended Q3 with 144 LDDs, including five LDD launches in the quarter. Through the end of October, our LDD portfolio has now expanded to 145 therapies, and we continue to expect 16 to 18 additional LDD launches over the next 12 to 18 months. We are honored and proud to have been chosen as a preferred specialty pharmacy partner for these new therapies that are being utilized to treat a range of cancers and rare and orphan diseases. We work diligently to deliver high-quality care to patients, and gain the trust of manufacturers prescribing physicians and patients to support long-term therapy innovation and growth. Within Infusion, performance in the quarter was in line with expectations, driven by solid double-digit volume growth and continued benefit from operational improvements and procurement initiatives to streamline the business and improve profitability, with strong year-over-year EBITDA growth well into the double digits. Our strategy is a broad-based one in terms of both acute and chronic therapies. We remain excited about the acute market where we believe there exists a multi-billion dollar market where our leadership team can leverage best practices and scale the business in new geographic markets efficiently. We also remain constructive on our ability to expand chronic infused therapy offerings as we look to innovate delivery to patients living with chronic disease. In home and community pharmacy, revenue performance in the quarter was in line with our expectations, and we continue to optimize the go-to-market strategy and customer mix to ensure profitable growth in attractive and targeted end markets. Under a new and expanded leadership team, we continue to implement operational initiatives to augment efficiency with year-over-year events outside of several unusual items in the quarter. Over time, we expect to continue to expand our presence in target markets with industry-leading operational processes, quality, and efficiency. Turning to the provider segment, we are pleased by the performance across each of our service lines in the third quarter. Provider revenue grew 9% year over year, and segment-adjusted EBITDA grew 16%, with a segment-adjusted EBITDA margin in the quarter of 16.5%, up approximately 90 basis points year over year. Home health care, which represents about 50% of the revenue and provider segment, and is comprised of home health, hospice, and primary care, grew 12% year over year. The home health care business continues to perform very well, driven by strong quality metrics and patient satisfaction scores. Ongoing operational investments and advancements, de novo expansions, and preferred provider Medicare Advantage contracts are continuing to advance. Average daily census in home health care was 29,592 in the third quarter, representing a 3% increase year-over-year, with hospice increased approximately 15% year-over-year in the quarter. In the third quarter, home health settings in five states were awarded accreditation by the Accreditation Commission for Health Care, or ACHC, reflecting compliance with ACHC standards and CMS's conditions of participation. highlighting our commitment to providing safe and high-quality care to patients. Home-based primary care also delivered solid growth in the quarter. We believe primary care at home remains a large opportunity as we continue to build out the business, particularly as it relates to the benefits of our integrated services and ACO and ISNIP payment models, which we continue to make steady progress on. Moving to rehab care, which represented approximately 20% of provider revenue in the third quarter Growth was 9% year-over-year, underpinned by 11% growth in person-served and approximately 17% growth in hours billed in the core neuro-rehab services. We have continued to see a long history of performance and positive momentum in the rehab business, and the expansion of our rehab into ALF and home settings with Part B rehab for seniors is now ongoing. As we went live in the quarter with a key milestone, and integrated home health and rehab offering in ALS. In personal care, which represented approximately 30% of provider revenue in the third quarter, revenue grew 6%. Personal care growth, operations, and performance remained very steady, including solid growth in person served. Overall, we continue to realize and see many benefits from our high-value services and targeted markets with one integrated and coordinated enterprise. Finally, we are excited to announce that we will be hosting an Investor Day on March 17th in Louisville. We look forward to the opportunity to review our company strategy with the investment community, discuss each of our service lines, and outline the prospects for each in the years to come. To close, we are pleased with BrightSpring's operating performance and financial results in the third quarter and the progress we have made so far in 2025, and we look forward to entering 2026 from a position of strength with continuing investments for long-term differentiation and sustainable growth across the organization. With that, I'll turn the call over to Jen.

Thank you, John. Before I discuss our financial results for the third quarter of 2025, I'd like to remind you that in the first quarter of this year, we began to record the community living business in discontinued operations, as indicated in the press release and 10Q, to adhere to accounting standards required on an interim basis. As such, all Bright Spring financial results and forecasts that I will discuss are related to continuing operations and exclude community living. Management believes the presentation of the non-GAAP financials from continuing operations is a useful reflection of our current business performance. In the third quarter of 2025, total company revenue was $3.3 billion, representing 28% growth from the prior year period. Pharmacy solutions segment revenue in the quarter was $3.0 billion, achieving 31% year-over-year growth. Within the pharmacy segment, infusion and specialty revenue was 2.4 billion, representing growth of 42% from prior year, and home and community pharmacy revenue was 590 million, which was approximately flat year-over-year. In the provider services segment, we reported revenue of 367 million in the third quarter, which represented 9% growth compared to the prior year. Within the provider services segment, home health care reported $188 million in revenue, growing 12% versus last year. Rehab revenue was $76 million, growing 9% versus last year. And personal care revenue was $102 million, representing growth of 6% year over year. Moving down the P&L, third quarter company gross profit was $392 million, representing growth of 21% compared with the third quarter of last year. Adjusted EBITDA for the total company was $160 million in the third quarter, an increase of 37% compared to the third quarter of 2024. Adjusted EPS for the total company was $0.30 for the third quarter. In the third quarter, continuous lean, automation, and efficiency programs at the company contributed to growth and margin improvement, and we anticipate additional improvements in the fourth quarter from ongoing operational initiatives. Further, we have seen a positive impact in the third quarter and into Q4 from our targeted growth investments, including in recent home health volume, hospice volume, rehab volume, and in accelerating infusion volume and growth in LDD and generics in the specialty oncology and rare and orphan therapy business. Turning back to segment performance in the third quarter, Pharmacy Solutions' gross profit was $246 million, growing 30% compared with the third quarter of last year. Adjusted EBITDA for pharmacy solutions was $141 million for the third quarter, an increase of 42% compared to last year, representing an adjusted EBITDA margin of 4.8%, which was up approximately 40 basis points versus last year. Provider services gross profit was $146 million, growing 9% versus the third quarter of last year. Adjusted EBITDA for provider services was $61 million for the third quarter, growing 16% versus last year, representing an adjusted EBITDA margin of 16.5%, up approximately 90 basis points versus last year. Not included in the company's reported adjusted EBITDA of $160 million, as previously stated, community living's adjusted EBITDA was an additional $40 million in the quarter, an increase of 18% from the prior year in this business. On a total company basis, cash flow from operations was $108 million in the third quarter. We continue to expect to deliver over $300 million of annual run rate operating cash flow in 2025, and we remain focused on improving our leverage ratio towards our year-end goal of below 3.0 times pro forma for both the pending home health acquisition and the community living divestiture. Our adjusted EBITDA growth combined with our cash flow generation during the quarter has led to a leverage ratio at September 30th of 3.3 times. Longer term, with continued growth, execution, and cash flow generation, we remain on track towards a leverage target of 2.5 times, which at current trends could be realized by mid or later next year, excluding acquisitions or other uses of cash. As of September 30th, net debt outstanding was approximately $2.5 billion. As mentioned previously in January, we expect to receive approximately $715 million of net cash proceeds from the $835 million of gross cash consideration in the pending community living sale. As a reminder, net interest expense includes interest income related to cash flow hedges due to our three received variable pay fixed interest rate swap agreements that we have in place, which matured on September 30, 2025. As part of our process to monitor and address risk, During the quarter, we entered into two three-year interest rate hedges, which are additional to the one-year extension that was entered into during the first quarter, providing stability to our interest rate risk through September 2028. Prior to any proceeds from the pending community living divestiture, quarterly interest expense is still expected to be approximately $43 million, including approximately $1.2 million of interest expense related to the TEU instruments. Turning to guidance for 2025, which excludes the community living business as well as any acquisitions that have not yet closed, total revenue is expected to be in the range of $12.5 billion to $12.8 billion, including pharmacy solutions revenue of $11.05 billion to $11.3 billion, and provider services revenue of $1.45 billion to $1.5 billion. This revenue range reflects 24.1% to 27.1% growth over full year 2024, excluding community living in both years. Total adjusted EBITDA is expected to be in the range of $605 million to $615 million for full year 2025. This would reflect 31.5% to 33.7% growth over full year 2024, excluding community living in both years. I will now turn it back to John.

Thanks, Jen. Thank you for your time today to go through Bright Springs' third quarter 2025 results. We will now open up the call for questions. Operator?

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. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. And our first question comes from AJ Rice of UBS. Your line is open.

Thanks. Hi, everybody. Just one question and a follow-up maybe. On the discussion about the pacing of new drug launches, I know for some time you talked about 16 to 18 launches over an 18-month period. Earlier this year you sort of said that that pacing had seen that go in a year. I know today you made the comment that looking ahead, you still see that 16 to 18 over the next 12 to 18 months. I guess I'm just trying to understand, is the pacing of new drug launches that are relevant to you accelerating? Is it about what it's always been? And if it's accelerated, is the pipeline still pretty robust?

Hey, Jay, how are you? Thanks for the question. I think the pipeline remains unchanged, just given the magnitude of it, both in the next year and over the next five or seven years on the brand side. We have had probably one of our strongest years in terms of brand wins going back several years. It's been robust, but this year has been a very good year. You know, we've seen some therapies come to market sooner, and, you know, we've been in a good position to be a partner on most all of those therapies. So it has been a good year, a little bit ahead of expectations, but we still expect, you know, a similar number of the 15 to 18 over the next year, year and a half. You know, nothing's really been pulled forward that would affect the future. Some things happen a little bit sooner, but the pipeline remains robust. As we go bottoms up, drug by drug, you know, we still feel confident in that pace going forward.

Okay, and then the follow-up question I was going to ask is, in your prepared comments about the pending transaction, I know you mentioned the Medicis and LHC branch acquisitions. It sounds like maybe what you're buying has changed a bit. Can you give us any specifics on is it significantly bigger than what you were originally looking at or any other ways in which you ultimately ending up buying has changed?

Yeah, there's always been some of the divested branches were LHC, but it's been the minority. So I think we've just more or less said of Metasys in the past, it is the significant majority. of those branches um as you know as as united was working through all of its final agreements with with the ftc uh the universe did increase a little bit you know not not dramatically at all but a little bit so there's been a handful more branches that have that have been included in the group in the past in the past couple months and we do expect that transaction to close in the quarter

Do you have any early read on whether it will be accretive to 26? I know you said it would be neutral this year. Is it meaning any significant accretion next year, or is it neutral, or how should we think about it?

I think accretion is a fair comment, yes.

Okay. All right. Thanks a lot.

Thank you. And our next question comes from David Larson of BTIG. Your line is open.

Hi, David. Hey, congratulations on a great quarter. Can you talk about the sources of accretion for, like, the emeticist transaction or, quite frankly, any transaction? Where do you drive the incremental margin and profit from, please? Thank you.

We're limited. I'm trying to make sure I understand the question. We're limited on what we're able to disclose about this transaction still due to some of our agreements with the other party. You know, I think it's fair to say that, you know, we would look to integrate the operations as seamlessly as we can. We've had a really good partner, you know, which has enabled us to dialogue, you know, with the other side to make sure we do this as well as we possibly can. We're very excited about it. And we're optimistic about applying some of our practices, some of our payer contracts, some of our IT and technology and people practices to the organization. But look, it's well run, always has been well run. That's one of the things that we were very, very enthused about. And we look forward to keeping up that consistency and If there's any synergies that are really beneficial, really more from a growth and efficiency perspective, because we'll retain all the employees for sure. But if there's any other synergies in the technology area or other areas similar to those that we're able to drive on other acquisitions, we're certainly going to be planning and looking to do those.

Okay, that's very helpful. Thank you. And then I think I'm calculating an EBITDA per script increase of 32% year over year. Is that correct? That sounds high, which is good, obviously. Does any color around sort of the sustainability of that growth rate and what some of the key drivers there would be? Thank you very much.

Yeah, so I think directionally that is accurate. It's really probably just a little bit higher on a per-script adjusted EBITDA basis from a pharmacy perspective. The sources of those changes are really mixed. We've had higher growth in specialty and specialty scripts, which those are our highest gross profit and adjusted EBITDA scripts that we have. And so we, as John mentioned in his prepared remarks, we had over 40% growth in specialty scripts during the quarter. And so you see a mixed impact associated with that.

Great. And one more quick one. Can you just remind me, as a drug launches biosimilar or goes generic, how much of an earnings lift is there typically in terms of margin per drug? Thank you.

You know, David, that's not really information that, you know, we really reference. But, you know, when a drug goes generic, I think it's common knowledge that, you know, there are more manufacturers and that reduces the procurement cost. And, you know, overall, the price of the drug comes down pretty dramatically from But net-net, you know, that's a very positive thing for all stakeholders and everybody in the industry. But, you know, really as a function of, you know, a lot more manufacturers typically able to provide the drug, you know, you see a dynamic there which is favorable to all stakeholders.

Okay, great. Thanks very much. I'll hop back in the queue.

Thank you. And our next question comes from Charles Rhee of TD Cal, and your line is open.

Yeah, thanks for taking the questions. Hey, John and Jen, just wanted to ask, obviously in, you know, one of the big competitors in community and pharmacy would be Omnicare, and then they've declared bankruptcy. Just curious to, you know, what you think of that as an opportunity to pick up incremental share. What kind of overlap in the markets are, you know, are you there? Is that an opportunity to enter into new markets? Or is skilled nursing really maybe not that attractive to keep expanding into first?

Hey, Charles. I don't know that we have any view that that's going to be material. As we understand it, it was really related to some litigation going a ways back, less to do with operational performance. But we're just very focused on our customers and our end markets, including some that we think are really interesting, like assisted living, behavioral, hospice, etc., And that is where the majority, the vast majority of our home community pharmacy EBITDA comes from. I will take a second to, you know, to talk a little bit further about the script growth in the quarter. You know, on the hospice, on the infusion, on the specialty pharmacy sides, all, you know, really, really strong growth. You know, well, well, well into the double digits. You know, on the SNF side, just a few dynamics that will probably be dynamics for the next couple quarters, but doesn't impact anything from an EBITDA standpoint. We signed a large customer last Q3, which at the time was, you know, a really great event. You know, that's the customer that has subsequently declared bankruptcy. And, you know, we've been unwinding some of those buildings recently. We've also taken the opportunity with the new leadership team to heavily scrutinize the customer base and make some decisions proactively about what we want to do there to make sure we don't ever encounter sort of any payment issues or unprofitable customers. And so we've been very proactive about that. It's been very constructive. The flu season also started later this year. And so you have basically a huge customer that was coming online last Q3 that is going offline. And from an EBITDA perspective, the business is doing extremely well, just given growth in the other markets and our focus on a lot of operational efficiencies. But that's a dynamic that you'll see for the next quarter or two as we work through just the timing element around that, really that one customer. I think importantly, you know, we are growing and doing extremely well, you know, in the areas that matter, that drive EBITDA. And we're extremely excited about Home and Community Pharmacy's prospects over the long term. Their EBITDA was up this quarter. Couldn't be more enthusiastic about a lot of the operational automation, AI efficiency projects in there with the new team. And super excited about the business. But that is the dynamic when you look at last Q3 versus this Q3. And since Home and Community scripts are 77% of the pharmacy scripts, You know, that's the net number for the year-over-year. But in some of our key service lines, exceptional performance, and again, you know, where we're looking to drive the most growth, with home and community being a play around targeted end markets and continued operational and automation improvement there.

Thanks. That's helpful. Just one follow-up on LDDs. You know, obviously the FDA, I think there's been some concerns about the pace of drug approvals. I knew that there were relatively few drug approvals in the first half of this year. Just curious what you're seeing, if you're starting to see that pick up, if that causes any concerns for you in terms of sort of the LDDs you have on deck in terms of timing. Thanks.

We haven't seen any impact. Our performance on the LDD side has really kind of been a record year in the pipeline.

You know, it's as big as ever.

Great, thank you. Thank you.

And our next question comes from Pito Chickering of Deutsche Bank. Your line is open.

Hi there. This is Kieran Ryan for Pito. Thanks for taking the question. Apologies if I missed something on this, but I was wondering if you could kind of provide a little more color on the breakout of the pharmacy guidance between spec and infusion and home and community, but with a focus on kind of what it implies for spec and infusion. I just wanted to see if maybe a little bit of the potential slowdown there in 4Q, if that was kind of related to your comments on, you know, how it's been kind of a record here on the branded side, and maybe that's normalizing it a little bit. Yeah.

So what we would say is that we don't really see a slowdown. We did update our revenue guidance. And, you know, when you look at that, I think you'll still see strong growth year over year. And we do expect that in Q4. From a pharmacy perspective, from a revenue standpoint, we did have obviously increased revenue guidance that largely relates to the specialty and infusion business as it relates to the continued strong growth from a Scripps perspective that we continue to see in that business. I would also add, though, that from a margin perspective or an EBITDA perspective, we do have We have increased our guidance to include additional efficiencies and the projects that we had talked about earlier and throughout our script, the operational projects that are going on both in infusion and home and community pharmacy, and we do expect those to accelerate in Q4 as well.

Got it. That's helpful. Thank you. And then if you could just provide maybe a quick update on what you're seeing within M&A Pipeline and kind of your priorities there. I know it's mostly focused on the tuck-in style deals, but just a quick refresher there would be helpful. Yeah, that's right.

You know, nothing imminent outside of that other than obviously the Emeticis LAC transaction. So, You know, as we've been working through the community living divestiture and then the Amedisys LAC branch acquisition, you know, we have just been focused on really small deals and target attractive geographies that are highly accretive. And, you know, that'll probably continue at least for another quarter or so. You know, there's nothing imminent in terms of anything sizable. But our M&A strategy, you know, will remain primarily focused on, you know, accretive tuck-ins and target geographies and, you know, and probably a little bit more activity in deals of a little bit higher size, you know, call it in the $3 to $10 million of EBITDA range. You know, those might start to get more focused again as we get past these two transactions. into next year. You know, we remain, you know, open and flexible to something interesting, a little bit larger, but, you know, certainly nothing transformational that's on our radar screen whatsoever right now. We really like our current strategy and, you know, where our organic growth is and where the balance sheet is.

Thanks a lot. Thank you.

And our next question comes from Brian Tenquillat of Jefferies. Your line is open.

Hey, good afternoon, guys, and congrats for the quarter. Sean, maybe as I think about generics, really quickly since you touched on that in your prepared remarks, anything you can share with us in terms of the cadence of upcoming patent expirations in your portfolio and also the dynamics in terms of the margin ramp, like what is the runway for margin ramping on a per-script basis for a new generic launch? Thanks.

Yeah, I think some of the information, Brian, we've laid out publicly remains the same. We expect numerous more brand to generic conversions over the next couple of years, including a more significant one probably at the end of Q1 next year. And we expect similar overall dynamics in these conversions that we've seen and experienced in the past and over the past 10 years. So our ability to partner with manufacturers and win innovative new brand therapies, the very strong growth in our fee-for-service business in that business, and then the steady stream of these brands to generics, really all underpinned by our service levels and commercial team and efforts, I think really remains very consistent as we look out still over the next five years. So I think the information that we've put out there publicly and in our slide deck remains our current view.

Got it. And then, John, just on the delay on the community living, anything you can share in terms of what that is or what caused that and just anything we should be on the lookout for to get that closed?

Yeah, no, nothing unusual. Unfortunately, these processes could just take time these days. The recent government shutdown wasn't overly helpful, but we remain very optimistic that this will close in Q1. There were a handful of markets that that the buyer needed to work through with the FTC, which is ongoing and seems very straightforward and is well down the path. So, you know, we expect that to occur in Q1.

Awesome. Thank you.

Thank you.

And our next question comes from Anne Hines of Mizuho. Your line is open.

Great. Thank you. Just anything on the Washington front that we should be on the lookout in the next coming months, especially with a potential health care bill going through Congress at the end of December?

Yeah. Hey, Anne. You know, there's nothing too noteworthy from our perspective on that front. It's been pretty consistent over the last few months. You know, on the home health rule, you know, that's supposed to come out any day. It could be delayed a little bit due to the government shutdown. You know, while any potential, you know, if you look at what's historically happened and some strong industry advocacy, we expect to see some mitigation of the proposed cut and the final rule. While any cut is not a meaningful impact on us today, just given, you know, just given the percent of revenue and EBITDA that that business is, we'll navigate any rate changes pretty readily. And ultimately, these critical services need to be appropriately funded going forward. So we'll continue to be very vocal about that, try to educate where we can, and we look forward to partnering with CMS as best possible on some aligned solutions there. You know, on the IRA front, we're very pleased that CMS sent a letter to the payers in the quarter directing them to account for the IRA in their 2026 pricing. And we're also pleased through our advocacy on the Hill and with the administration that we have a lot of champions who understand the unique impacts on LTC pharmacies from IRA. You know, there's a bill in the House. There's one hitting the Senate soon. But, you know, that said, You know, there's a lot going on in D.C. up until the end of the year. And regardless of what happens, we feel like, you know, our internal mitigation plans, along with, you know, the strength of the breadth of the enterprise, you know, put us in a really good situation. And so really no material updates since how we framed that before.

Great. Thank you. Thank you.

And our next question comes from Matthew Gilmore of KeyBank. Your line is open.

Hey, thanks. I wanted to drill down on the EBITDA guidance raise. You raised the outlook a bit more than the beat on the corner. From Jennifer's comments, it sounded like that reflects the combination of core performance and then pulling through some efficiency efforts. Was that about the components of the change?

That is correct, yes.

Okay, and then as a quick follow-up, I think in the past you've talked about being conservative with the value-based care accruals, but you have some potential shared savings to go get. I just wanted to see if there's been any change in thinking there, if there's still some potential to pull through some shared savings at some point later in the year.

Yeah, I think at this point we've gained clarity that we will get some shared savings there, but that after receiving news about last year, here just very recently, um, you know, looks, looks to be probably a little bit of opportunity there that, you know, will be, uh, will be realized.

Got it. Thank you.

Thank you. And our next question comes from Joanna Gadzak of Bank of America. Your line is open.

Hi, thanks so much for taking that question. So I guess, uh, A couple of follow-ups. So first, I appreciate the comments around the acquisition of the assets from our medicines and LHC will be accretive next year. But anything else we should be thinking about heading into next year in terms of any high-level, you know, tailwinds and headwinds? That's also up here. Thanks.

Yeah. Hey, Joanna. No, look, I mean, I think there's been just real consistency throughout the year. And, you know, certainly as we sit here today, we expect that to continue, you know, You know, really something we've seen all year long, every quarter is, you know, each service line, you know, is performing really well individually. And I would say here more recently, a lot of our efforts, as we've talked about, in infusion in the past 18 months or so, are bearing fruit. Extremely excited about that being a real tailwind for next year. Hospice continues to perform extremely well. That rate increase will go into effect in Q4. Obviously, some of the momentum around the LDDs and the conversions on the specialty side. Home health with the acquisition of the divested branches. A lot of great things going on there in the business too, including automation initiatives, hiring a new sales team. We had the best admissions month ever in September in home health. That's where we have a new sales leadership team in place. um you know we're tracking right now to have our biggest customer win quarter ever in home and community pharmacy we're excited about that um and uh as jen mentioned you know we are really investing heavily um we've always had a focus on lean continuous improvement and efficiency um you know we're just continuing to invest there uh we you know maybe mentioned last quarter i can't remember We have a new CTO, and we're building out an internal AI team that is well underway. We've got all of our projects identified. We're also working with outside vendors on AI implementations. And so, look, from a growth and from an efficiency standpoint, we just continue to push as hard as we can. You know, a lot of positives there. I would also note just the balance sheet and where that's gotten to here. Even a quarter ago, you know, we were sitting at about 3.64 times leverage. You know, now we're at 3.31 times. You know, that's pretty good decline in a quarter. I think a quarter ago, we were talking more about three and a half times year-end leverage. Now our view is three times, 3.0 times year-end. You know, we were talking about getting down to 3.0 times after the community living sale. Now we think that puts us well below three times when the community living transaction closes, even net of the Amedisys and LAC acquisitions. So, you know, we just feel really good and are enthusiastic about our progress on the balance sheet and being at or quite a bit below three times leverage at the end of the year on the other side of that community living divestiture. We also have been talking about you know, 300 of OCF this year. That number is probably more like 375, you know, maybe a little bit more, probably 260, 270 of free cash flow before debt and more. So, you know, a lot of focus in the organization, too, on the balance sheet around cash flow. And, you know, that's been really positive.

No, thank you. And if I make a couple of follow-ups, so on this comment about infusion, why do you So I'm very excited about this, and I guess you've been growing it nicely. But as we think about the pharmacy segment, I guess, in totality, or maybe the specialty infusion, but the pharmacy segment, the revenue is going to grow more than 25% this year, right? So how should we think about your ability to kind of grow on top of this fast-growing into next year?

So from an infusion standpoint, Obviously, you know, as they're growing faster than they are today, you know, so specialty, we don't see, you know, any changes, you know, as it stands today. We don't see significant changes to their pace of growth. We do see infusion accelerating. So, you know, we think that provides a little bit of a tailwind for us into next year.

Great. Thank you so much. Thank you.

And our next question comes from Erin Wright of Morgan Stanley. Your line is open.

Okay, thanks. A couple of questions. First one is kind of bigger picture. Just can you speak to kind of some of the future opportunities across kind of pharmacy solutions and specifically kind of specialty pharmacy The focus has been on oncology, but can you speak to rare disease or other areas and also the opportunity around some of those value-added manufacturer biopharma services and the respective margins associated with some of those opportunities evolving over time?

Yeah, thanks, Erin. I mean, those are all accurate. You know, the... You know, we do do quite a bit of the rare and orphan therapies today. You know, quite a few of those are in the oncology space, too. That is certainly a big focus, whether it's inside or outside of oncology, and we'll continue to do that. You know, the fee-for-service business, whether it's data agreements, clinical hubs, or or other programs with pharma, it's been good to see that continue to gain a ton of traction over the last couple years. It's become a meaningful piece of EBITDA in the business and we expect that to continue with You know, with a lot more launches next year of programs with them on the infusion with manufacturers on the infusion side. You know, we are really trying to grow both acute and chronic therapies. Acute is a very big market, multibillion dollar market in the U.S. Some folks have stepped away from that market. It can be more operationally challenging. We are leaning into that. We saw the benefits of that in Q3. It was a big part of our growth rate. And then really focusing on customized programs for chronic therapies, including some LDDs on the infusion side. That's really where we're spending a lot of time. And then in home and community pharmacy, you know, some of these markets like assisted living, IDD behavioral hospice, and PACE, you know, can still be significantly bigger for us from a market share perspective. And we're excited about that. Writ large then across all of the pharmacies, you know, just a large focus on process and efficiency in the organization, deploying automation, deploying AI, throughout the businesses to try to be as efficient as we possibly can and to try to leverage our scale as much as we possibly can. So I think quite a few growth drivers within each one of the businesses and a constant across all of them is the process and automation work that we're doing. And I think the net of that makes us really enthusiastic about next year and the coming years.

Okay, great. And then can you speak to what percentage of the portfolio is now more directly tied to drug pricing dynamics with potential MFN pricing, as well as you spoke to IRA earlier, which we spoke to, I think, at length before. But, you know, what percentage of the book would be, you know, branded therapeutics that would be potentially exposed?

Okay. Yeah, so the fee-for-service part of what we do is still the minority, the FAR minority. But as we've talked about before, we do our best to drive generic utilization for the industry, which is positive and good for all stakeholders. You know, we also have a lot of our therapies, for example, in acute, you know, which is immune from any of this discussion too. So, you know, if you look across the breadth of our portfolio, you know, branded GP is not the majority just given the diversification of what we do. And then as it relates to things like DTC, our pharmacy services are really to complex and high-acuity patients. and often very local with significant clinical support needs.

So they really don't lend themselves to DTC.

Great. Thank you. Thank you.

And our next question comes from Steven Baxter of Wells Fargo. Your line is open.

yeah hi thanks for the question obviously the sequential progress you've made on margins and the pharmacy business has been really notable it sounds like you know you're expecting that to continue in the fourth quarter based on you know the guidance that you've given and then probably you're describing kind of the conditions around you know further progress on lbds and further sort of generic dynamics continuing in 2026 i guess how do we think about the trajectory of margins exiting this year and an opportunity for further improvement in 2026. Thank you.

Yeah. So, you know, from a guidance perspective, margins in Q4 are expected to be higher than what we've seen in the last couple of quarters. Q4 tends to be our highest margin quarter for a number of different reasons. But we do see continued growth in our different businesses and different mix of products that will cause Q4 to be a slightly higher margin. landing us from an annual perspective slightly higher as indicated in the guidance.

I would just say from an enterprise perspective, as we think about margins, it's a lot of these lean and efficiency and operational initiatives that we continue to drive across the organization, which will be really helpful. As a provider grows, they have a higher margin. you know, some of our, a lot of our acquisitions, you know, with synergies come over, um, as a result pro forma with a higher margin. So, um, you know, we're, we're really focused on being efficient in the organization while also providing as best quality as we possibly can. Um, and leveraging that quality where we can to partner with payers and preferred ways, you know, to help with, um, you know, appropriate and more enhanced rates too. So, um, Margin fundamentally obviously is a key function of mix, but some very intentional efforts across the organization to try to make sure we're operating as smoothly and efficiently as we can.

Thank you.

And our next question comes from Larry Solo of CJS Securities.

Great. Thank you, and congrats on another great quarter. Just from a high level, quickly, I really appreciate all the callers. Things sound really good. Just due to visibility, as we look out, John, I know maybe you'll share some of this, too, coming up in March, but as we look out three to five years, maybe this 30% or even 40% volume growth this quarter, that's not sustainable. But from a high level, I know you've spoken about double-digit growth. in pharmacy solutions going forward. Clearly, that seems very attainable. Can we continue to grow at these rapid 25-30% levels or directionally? The street's coming down to low double digits as we look out over the next few years. Where do we think we end up? Is it closer to that? Clearly, maybe this 30% is not sustainable, but Can we continue to grow it well over the, you know, low double-digit rate? You know, if any color, that would be great.

Yeah. I mean, it's a good question, obviously, and one we spend a ton of time thinking about. You know, our historical CAGR going back really a decade now has been about 15%. It's been higher than that in the last couple of years, you know, and – You know, and that's been a function of a lot of things. I mean, we've really tried to assemble a platform that we feel like is well positioned and in particular, comparatively well positioned for the future in a lot of different environments. And so, you know, one of the reasons why corporate was up a little bit in the quarter and has been up this year, we continue to make investments for the future. For example, building out an AI team and hiring very real people from the tech world to do that. These are things that we're going to continue to do, investing in new marketers and numerous of our businesses, heavily investing in in our development teams. And so we will continue to do that. Hard to, really impossible, I think, to sit back today and say you would expect these growth rates over the next four to five years. I don't know who would say that. But we don't. you know as we sit here today and you know we've got to get through q1 obviously um you know i i think i think it is fair to say based on everything we know we would expect to grow again next year well above our well above that historical kegger and you know we'll see um but as as we look at each one of the businesses you know You know, other than maybe personal care, you know, we aspire to grow at or above 20% in every business. And, you know, we really try to do that, you know, based on quality operational process and then, you know, really, you know, educating and advocating, you know, for these services for as many patients as we can. to drive better outcomes and lower costs in the industry. I mean, that's really what we're passionate about. Some of the businesses from time to time have opportunities to do better than our internal goals. Some of them might fall a little bit short, but we always set a really high bar. We like the markets we're in. We've tried to really curate what we do pretty well. I think we will get acceleration in the future from more and more integrated care across our platform. We're just getting into some ALS now with a combined offering, which is very well received. I do think primary care and some value-based contracting, which is all upside, will continue to scale. So we think about the business in terms of core growth and strategic growth. Core growth is each and every one of our businesses having very clear objectives over the one, three, five year timelines. And then we think about strategic growth being things like home-based primary care, value-based care contracts, pulling it all together, things like integrated selling into ALS, things like building out AI products, et cetera. So, and it all really makes a lot of sense and fits together well within the constellation of assets that we have. So, you know, look, as we sit here today, as we sat on the call, We think we're in a good position heading into next year. We learn a lot more in Q1. But we're very optimistic, and we'll continue to do what we can to grow the platform as best we can, leveraging numerous different businesses that all have really attractive opportunities, driving some strategic growth, and then all the while trying to drive a lot of these operational and technology opportunities investments and innovation throughout the organization.

Oh, great. I appreciate that caller. Really helpful. Just a quickie on the bankruptcy and home and community. Is that actually a little bit of a drag on EBITDA in this quarter, maybe for the next couple?

No, we don't expect it to be whatsoever. So, you know, that was announced in the last quarter. You know, I think based on the strength of our platform and our diversification, it was a non-event for us in Q2. We talked about that. I only mention it because that's part of the reason why the home and community scripts had a tough year-over-year comp, just given we were coming onto that contract last Q3, and now we're kind of going off. And so that's that. But you know, really attractive growth, you know, within, you know, all of our, all of our pharmacy businesses, you know, and the ones that, that matter the most across specialty infusion, hospice, behavioral, et cetera. So, and in home and community pharmacy, you know, we're seeing right now, our pipeline has us looking at our biggest customer signing in three or four years. So, you know, things are moving in a really good direction and, You know, one of the things surely we will talk about at the Investor Day is how much automation and process innovation is going into that pharmacy business today, which is going to be extremely constructive.

Got it. Great. Thank you so much.

Thank you. We have no further questions at this time. I'd like to turn it back to John Rousseau for closing remarks.

Yeah, thank you for the time today, everybody. We appreciate the interest in the company. Thank you for all the questions, and we look forward to talking with you again in another quarter. Have a great rest of the day.

This concludes today's conference call. Thank you for participating, and you may now disconnect.