BrightSpring Health Services, Inc. Common Stock 2026 Q3 Earnings Call

Good morning. Thank you for participating in today's conference call. My name is David Deuchler with Investor Relations at BrightSpring. I'm joined on today's call by Jon Rousseau, Chief Executive Officer, and Jen Phipps, Chief Financial Officer. Earlier today, BrightSpring released financial results for the quarter ended September 30, 2026. As a reminder, we closed the Community Living transaction on March 30, 2026, and all financial results and commentary reflect only continuing operations, with Community Living results reflected in discontinued operations. 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 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 our investor relations website. This webcast is being recorded and will be available for replay on our investor relations website. With that, I will now turn the call over to Jon Rousseau, Chief Executive Officer.

Good morning, everyone, and thank you for joining BrightSpring's Third Quarter 2026 Earnings Call. As always, I'd like to start by thanking everyone at BrightSpring who drives our mission forward and makes a lasting impact every day. We're grateful for the great work and commitment of all BrightSpring teammates, enabling us to deliver high-quality and timely care to patients in so many communities across the U.S. Overall, we continue to execute at a high level, providing compassionate, person-centered, quality care in patient-preferred, lower-cost settings, with another productive quarter delivered amidst an always fluid external environment, and performance enabled by our continuous focus on expanded patient reach, operational efficiency, and accretive M&A. Our strategy is aligned with enduring trends impacting the U.S. healthcare system, including demographics and the increase in the prevalence of certain health conditions, creating meaningful opportunities to support more individuals in need of our highly valuable services.

Our quality outcomes, service levels, and relationships with hospitals, physicians, and other healthcare providers in the community are what underpin our ability to capture this demand, fostering long-term durable growth. This growth, in turn, creates more and more scale and efficiency. Moreover, our services have a clear and significant ROI. Demand for these services continues to increase. We provide leading quality, innovate in operations, and we continue to see the benefits of our differentiated scale and complementary service offerings as a leading provider of health services in the U.S. Turning to the third quarter results, revenue and adjusted EBITDA were above forecast, with total company revenue of $4.2 billion, an increase of 26% year-over-year, and adjusted EBITDA of $228 million, an increase of 42% year-over-year.

EPS of $0.54 in the quarter increased 80% from the third quarter last year, and EPS increased 20% sequentially from Q2. Cash flow from operations exceeded $200 million in the quarter. Looking at the segments, Pharmacy Solutions revenue of $3.7 billion increased 26% year-over-year, and segment EBITDA was $202 million, an increase of 43% versus last year. In Provider Services, revenue of $481 million represented 31% year-over-year growth, and segment EBITDA of $79 million increased 30% versus last year. These results are consistent with the performance the company has delivered since going public in January 2024, and with growth well into the double digits over the past decade now.

In Pharmacy Solutions, Specialty and Infusion delivered broad-based revenue growth of 34%, driven by script growth of 29%, including robust contribution from branded LDDs and generics, as well as growth in value-add pharma services and mid-teens growth in both chronic and acute infusion therapies. We continue to focus on clinical, operational, and commercial execution, supported by relationships built with manufacturers, physicians, patients, and payers over the years. We launched seven LDDs in the quarter for a total of 19 year-to-date, and we are now supporting 162 total LDDs across dozens of manufacturers and indications. In the quarter, we supported the launch of life-changing and life-saving therapies across liquid and solid tumor cancers, as well as in rare disease. The outlook for our branded LDD portfolio remains compelling, and we are well-positioned to support existing and new manufacturer partners in the years to come, as well as any conversions to generics.

As we think about the growth prospects for the company, both acute and chronic infusion are meaningful components of our strategy, and we continue to invest in operational capabilities, including chronic therapy infusion suite and clinic upgrades, as well as therapeutic category expansion, like with our IG Connect program. Home and community pharmacy had an excellent quarter operationally and is now continuing to be a contributor to organic growth. Ongoing investments in technology and process improvements, with a focus on attractive end markets such as hospice, ALF, and behavioral, drove year-over-year EBITDA growth well into the double digits, despite lower revenue compared with the prior year, primarily due to IRA.

In 2026, this service line has become yet another strength of the company, and we believe home and community pharmacy has a significant growth trajectory ahead, based on operational and technological leadership and multiple opportunities to expand volume and revenue across end markets. The Provider Services segment had another strong quarter, with continued momentum across all three sub-segments, driven by volume growth and a very stable operating environment. Given the size, performance, and our leadership position in the provider segment, we are eager to continue to expand and invest in our provider platform to reach more patients with necessary and high-quality services that help patients and the entire healthcare system. Within home healthcare, census growth of approximately 58% was underpinned by leading quality measures and driven by de novo locations, expanding preferred MA relationships, core business development execution, and contribution from the Amedisys LHC branches acquisition.

Integration of the acquired branches has performed as expected, particularly on the IT and back office side. We recently held a national home health meeting in Nashville, and the enthusiasm from the combined team was really high. We continue to expect the acquired branches to contribute approximately $35 million in adjusted EBITDA in 2026, which is consistent with the second quarter update. 96% of our legacy home health branches are now rated four-star or better, and we are now doing the same to the acquired branches. Hospice operational measures remain consistent, and quality remains at industry-leading levels, and we view this service line as one of continued investment focus, given its impact and value proposition, and our service levels, consistency of performance, and team.

Rehab care continues to grow steadily, with new payer contracts for clinical neurotherapy programs and continued expansion in both existing and new de novo markets, with superior demonstrated rehab outcomes. Like across the entire company, clinician retention has improved again this year and is being sustained at well above industry average. Personal care continues to execute very well, providing high-quality support with activities of daily living for patients at home, while hours served are growing above industry average. Demand for services continues to outstrip our ability to provide them, and our operational quality and execution in this service line is marked by real consistency, and service hours delivered per day are exceeding budgets, while we continue to grow private pay and alternative payer sources. In primary care, we continue to drive operational efficiencies, quality measures that demonstrate 50% reductions in hospitalizations, and patient growth.

We see our model of primary care in the community and in patient residences as key to driving more integrated and coordinated care across our service lines, better care transitions, optimal outcomes, and growth from value-based care models and new payer opportunities. We are expanding our virtual primary care offering as well, to support more required visits to higher-risk patients, visits in rural geographies, and primary care for home health or homebound patients discharging from hospitals and nursing homes. We've been selected as a provider in the new LEAD ACO Medicare program, which starts in January. In the quarter, the $228 million of total company adjusted EBITDA, which represented year-over-year growth of 42%, reflected the consistent operational execution we have seen since going public in 2024, and in the years before that.

We believe that the breadth of growth and profitability drivers and the operational capabilities across our platform are unique to our company within health services. Operating within targeted and attractive end markets, we deploy best practices across service lines, utilize scale in procurement and contracting, leverage OpEx and acquisition synergies, and invest in new technologies and AI at a rapid pace and at large scale. Our AI investments across the organization drive automation and ongoing improvement in quality, documentation, medication review processes, HR and hiring systems, and employee efficiency and satisfaction, to name a few. We were again pleased with the breadth and level of performance across the organization, which is a result of our management practices, controls, and culture.