BrightSpring Health Services, Inc.

Good day and thank you for standing by. Welcome to the Bright Springs Health Service Inc. fourth 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 you 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, sir.

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 and full year ended December 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 and industry and market conditions. Such forward-looking statements are not a guarantee of future performance. These forward-looking statements are subject to risks and uncertainties that could cause action results to differ materially from our expectations. We encourage you to review the information in today's press release and presentation, as well as in our annual report in Form 10-K that we file with the SEC, including the specific risk factors and uncertainties discussed in our Form 10-K. 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 the 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 the Investor Relations website. This webcast is being recorded and will be available for replay on our Investor Relations website. And with that, I'll turn the call over to John Rousseau, Chief Executive Officer.

Good morning, everyone, and thank you for joining Bright Spring's fourth quarter and full year 2025 earnings call. I'd like to begin by expressing my and the company's appreciation to all of our Bright Spring teammates who work hard to deliver attentive and quality patient care and services to people in communities across the country. They drive the realization of our mission forward every day. 2025 was another productive and impactful year at Bright Spring in many ways. Overall, we saw continued success delivering revenue and EBITDA growth while achieving many milestones, all underpinned by the delivery of high quality and compassionate services and care to patients. In the beginning of 2025, we announced our plan to divest the community living business, which will streamline the company's operations and create more focus on core patient populations in prioritized markets. Earlier this year, the community living divestiture transaction was approved by the FTC, and at this time, we expect the transaction to close at the end of the first quarter. The transaction is expected to result in net after-tax cash proceeds of approximately $715 million, which we intend to primarily utilize for debt paydown to further improve our leverage and further strengthen the balance sheet. Additionally, the acquisition of a Medicis and LHC home health assets closed in the fourth quarter of 2025 in a two-part transaction on December 1st and December 31st. Bright Spring acquired 107 branches at a purchase price of $239 million, which was fully funded from cash on hand. The assets generated full-year pro forma revenue of $345 million in 2025, which includes the months throughout the year prior to the transaction close. These assets are very complementary to our existing home health business from a geographic perspective. while also being in the same markets as our hospice locations in many cases. And we are thrilled to have the Amedisys and LHC assets and colleagues integrated into BrightSpring, as we are already taking steps to bring new and improved company capabilities to these acquired operations. This is another example of thoughtful, logical, strategic, and accretive M&A that has defined our acquisitions history. Home health, of course, has a tremendous value proposition, given its impact on clinical outcomes and cost, as it is shown to reduce ER visits and hospitalizations by 15% and 25% respectively, and reduce mortality rates by 30% relatively. With an estimated 35% of patients referred to home health but who do not end up receiving the service, home health should continue to be an important solution in the future of healthcare. Some other accomplishments of note in the pharmacy and provider business last year include continued LDD wins, strength in quality metrics, technology and people investments that resulted in ongoing efficiency gains across the organization, de novo expansions, and small tuck-in acquisitions. BrightSpring's operational and financial performance exceeded the high end of our guidance range for the year, and we believe that the company's performance is a reflection of the value of our patient-centric, lower-cost, timely, and proximal care, enabled by our people and culture who maintain an ongoing commitment to providing excellent and leading services. Moreover, Our goal is to continue to build out a unique and scaled home and community healthcare platform that demonstrates leading quality outcomes and operational best practices, a platform that is best positioned to be a critical partner and solution in U.S. healthcare. Before discussing Bright Spring's fourth quarter and full year performance, I would like to remind you that the company's financial results and 2026 guidance pertain to continuing operations and do not include results from the community living business and the effects of any future closed acquisitions. For the fourth quarter, Bright Springs revenue grew approximately 29% and adjusted EBITDA grew approximately 41% versus last year's comparable quarter. resulting in full-year 2025 total revenue and adjusted EBITDA that were above expectations. For the year, total company revenue was $12.9 billion, representing 28% year-over-year growth, which included pharmacy solutions revenue of $11.4 billion and provider services revenue of $1.5 billion, representing 31% and 11% year-over-year growth, respectively. Full year 2025 adjusted EBITDA was $618 million, which grew 34% year-over-year, and adjusted EBITDA margin for the company was 4.8%, a 20 basis point increase versus 2024, primarily driven by cost efficiencies from procurement and operational initiatives, along with generic revenue mix shift in pharmacy. On cash flow, The company realized $490 million of cash flow from operations in 2025, and leverage was 2.99 times as of December 31, 2025, which declined from 4.16 times as of December 31, 2024. Overall, Bright Spring performed well in both the fourth quarter and full year 2025 across all business lines, and we are very pleased with the position of the balance sheet and expanded cash flow profile of the company this year. Today, we are initiating total revenue and adjusted EBITDA guidance for 2026. We expect total revenue to grow approximately 14% year-over-year at the midpoint of the provided range, and total adjusted EBITDA to grow approximately 25% year-over-year at the midpoint of the provided range. Included in total adjusted EBITDA guidance is an expected contribution of approximately $30 million from the Emeticis and LHC acquisition. We are excited for the year ahead, and Jen will discuss our 2026 outlook in more detail shortly. Before I discuss our business performance, I'd like to highlight Bright Spring's commitment to our employees and the communities, individuals, populations, and therapeutic areas that we support. Whether our people, seniors, youth, or other specialty patient populations, at the company, we continue to lean into helping individuals and organizations with access to resources and opportunities. For example, in supporting employees through difficult, unforeseen circumstances through our SHARE program, in college scholarships, in nursing school partnerships, and in partnering with many, many organizations, such as the Special Olympics, for one. We currently operate a foundation through our hospice service line, and we have now started an enterprise foundation that will more formally carry on all of our community and patient support activities. We are hopeful that this Bright Spring Health Foundation can positively impact lives for decades to come. I'd also like to briefly highlight our strong patient satisfaction and high quality scores in the fourth quarter, which are driven by our delivery of attentive and skilled care to complex populations in a timely and relatively lower cost manner. In home health, we continue to see over 91% of our branches at four stars or greater. with timely initiation of care at an industry-leading level of 99.4%. In hospice, our metrics remain well above the national average, with a top 5% ranked hospice program in the U.S. and a CAPS overall hospice rating of 87%. In rehab, our patient satisfaction scores remain very strong, with 100% outpatient satisfaction and 98.4% home and community rehab satisfaction. In personal care, we have a client satisfaction score of 4.6 out of 5 compared to 4.5 in the third quarter, along with strong internal client records and quality indicators audit scores. In home and community pharmacy, dispensing accuracy was 99.99%, order completeness was 99.3%, and on-time delivery was 96.8%. In infusion, our patient satisfaction score was 94%, and we were one of only two providers in the country to receive the ACHC IG Distinction Award based on our clinical and operational commitment to the IG patient population. Specialty pharmacy demonstrated a consistently strong medication possession ratio of 92.4% in the quarter, along with time to first fill of 4.1 days. both much stronger than the national average. In the second half of 2025, Onco360 ranked first and CareMed ranked second in the MMIT Physician and Office Staff Satisfaction Survey. Bright Spring continues to demonstrate very strong service and quality metrics across all businesses. Turning to Bright Spring's financial results by segment. Total pharmacy solutions revenue grew 32% in the fourth quarter and adjusted EBITDA grew 44% versus the prior year. Total pharmacy script volume was $10.8 million in the quarter, driven by total pharmacy census growth. Total pharmacy volumes declined 1% due to a slight decline in home and community pharmacy volumes from the previously mentioned unwinding of a large customer going through bankruptcy and our decision to exit specific uneconomic customers. Specialty and infusion script growth was 30% year-over-year in Q4. In the specialty and infusion business, performance throughout the year exceeded expectations, with fourth quarter revenue growth of 43% year-over-year, driven by market adoption of existing LDDs, new LDD wins, fee-for-service growth, and strong commercial execution in the field. Bright Spring saw strength in the quarter, from both brand LDDs and generic volumes. Our total LDD portfolio now standing at 149 LDDs, including five launches in the quarter and 24 total launches in 2025. Moving forward, we expect 16 to 20 plus limited distribution drug launches over the next 12 to 18 months. We believe that our growth will continue to be driven by new LDD launches, generic utilization, commercial execution with referral sources, and expanding fee-for-service. We are excited to have been chosen as the preferred specialty partner for additional new innovative therapies this quarter, which include infusible LDD therapies to treat a range of oncology-rare and complex diseases. In infusion, the business performed in line with expectations in the fourth quarter with solid script volume growth. Adjusted EBITDA on the quarter grew in double digits driven by the benefits of operational initiatives and process improvements. We expect to continue to see improved profitability and infusion from our operational and growth initiatives moving forward. In home and community pharmacy, we are pleased with the progress throughout the year. We've executed consistently across several end markets, including in behavioral, assisted living, hospice, and skilled nursing. As we've entered 2026, We continue to enhance our go-to-market strategy, invest in growth resources, and look forward to driving expansion in each of our end markets, while we execute against the 2026 set of process, technology, and automation work to drive ongoing efficiency improvements. Turning to provider services, we are very pleased with the overall performance in the quarter and the year. In the fourth quarter, segment revenue grew 13% year-over-year, and segment adjusted EBITDA grew 16% year-over-year, with an adjusted EBITDA margin of 16.4% in the fourth quarter, a 50 basis point expansion year-over-year primarily driven by economies of scale and efficiency. Home health care, which represents approximately 55% of revenue in the provider segment, grew 19% year-over-year. Average daily census grew 15% to almost 35,000 in the quarter, driven by strong quality metrics, de novos, execution on partnerships and preferred MA contracts, and strategic tuck-in acquisitions in target markets. In home-based primary care, we are excited by the large opportunity that exists, especially with ACO payment strategies, We continue to invest in resources in this strategic area, and we believe we can further expand our home-based primary care business to benefit payers and their members and better connect patients to other integrated services that they need. In rehab care, which represented approximately 20% of provider revenue in the fourth quarter, revenue growth was 8% year-over-year. We are pleased by strong person-served growth of 13%, and hours billed growth in the core neuro rehab services of 17%. Growth in the fourth quarter was driven by neuro rehab de novo additions and very high patient satisfaction scores, along with continued expansion of our rehab in motion program into ALF and home settings. We are excited by momentum in rehab part B for seniors and look forward to driving additional de novo locations this year. Turning to personal care, which represented approximately 25% of provider revenue in the fourth quarter, revenue remained steady to up and grew 4% year over year. Personal care persons served grew 2% to 16,175 in the fourth quarter. In the quarter and throughout 2025, we saw steady operational performance as we continue to provide high-quality supportive care to seniors and assist with activities of daily living in the home. Overall, I'm pleased with our operational execution throughout 2025, leading to excellent business performance across Bright Springs Enterprise. We now have a seven-year CAGR of 22% on revenue and 18% on adjusted EBITDA. 2026 is off to a consistent and good start as we remain focused on leveraging our leading, complementary, and differentiated service capabilities. and leveraging our scale, operational efficiencies, and best practices to deliver high-quality, coordinated care to complex patients. We will be hosting an Investor Day on March 17th and look forward to discussing the BrightSpring platform and strategy that enables high-quality, lower-cost, timely care delivery to an approximately 1.5 million senior and complex patient individuals every day. We'll provide information on the operations and markets and growth drivers of each of our business units, and we'll discuss our long-term company vision and strategy and the reasons why we've never been more excited about Bright Spring's future. With that, I'll turn the call over to Jen.