BrightSpring (BTSG) Q3 2026 Earnings Call Transcript

DATE

Friday, Oct. 30, 2026

CALL PARTICIPANTS

• Investor Relations - David J. Deuchler
• Chief Executive Officer - Jon Rousseau
• Chief Financial Officer - Jennifer A. Phipps

TAKEAWAYS

• Net Revenue -- $4.213 billion, representing 26.4% growth year over year driven by specialty pharmacy volume and acquisition contributions.
• Adjusted EBITDA -- $228 million, an increase of 42.0% year over year reflecting operational efficiency and expanded patient reach.
• Adjusted EPS -- $0.54, up 80% from $0.30 in the third quarter of 2025.
• Pharmacy Solutions Revenue -- $3.732 billion, growing 26% year over year supported by strength in specialty and infusion services.
• Provider Services Revenue -- $481 million, increasing 31% year over year due to organic volume growth and branch acquisitions.
• Specialty and Infusion Revenue -- $3.2 billion, representing 34% growth year over year driven by script volume increases.
• Specialty Script Growth -- 29%, including contributions from branded limited distribution drugs and generics.
• Branded LDD Launches -- seven in the third quarter, bringing the year-to-date total to 19 launches across various indications.
• Home and Community Pharmacy Revenue -- $553 million, a decline of 6% year over year primarily due to legislative impacts.
• IRA Impact -- $50 million in the third quarter, with management anticipating a total annual impact of approximately $200 million for 2026.
• Home Health Care Revenue -- $288 million, growing 50% year over year following the acquisition of Amedisys and LHC branches.
• Acquired Branch Performance -- $76 million in revenue during the quarter, with management maintaining a full-year contribution target of $35 million in Adjusted EBITDA.
• Home Health ADC -- 47,256, representing 58% growth year over year driven by de novo expansion and acquisitions.
• Revenue per Script -- $340.86, increasing 24% year over year reflecting drug and payer mix shifts.
• Gross Profit per Script -- $28.86, up 27% year over year due to specialty volume strength and operational initiatives.
• Cash Flow from Operations -- $204 million, representing an increase from $108 million in the prior-year period.
• Net Leverage -- 1.79 times, representing a reduction from 2.15 times as of June 30, 2026.
• Full Year 2026 Revenue Guidance -- $15.9 billion to $16.125 billion, reflecting expected annual growth of 23.2% to 24.9%.
• Full Year 2026 Adjusted EBITDA Guidance -- $850 million to $860 million, implying annual growth of 37.6% to 39.3%.
• 2027 Organic Growth Framework -- 15% to 20% organic Adjusted EBITDA growth reiterated by management for the next fiscal year.
• Operating Cash Flow Forecast -- at least $700 million projected for the full year 2026, excluding divestiture-related impacts.

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RISKS

• Phipps stated, "We expect the revenue impact from the IRA and home and community pharmacy to be approximately $50 million in the fourth quarter of 2026, bringing the total year IRA impact to home and community pharmacy of approximately $200 million," highlighting the negative effect of the Inflation Reduction Act on pharmacy revenue.
• Rousseau warned that while performance remains high, the company continues to deliver results "amidst an always fluid external environment," which could introduce volatility to future operations.

SUMMARY

BrightSpring Health Services, Inc. (NASDAQ:BTSG) reported third-quarter results characterized by double-digit growth in both its pharmacy and provider segments. Management reported that financial performance was driven by record script volumes in specialty pharmacy and the successful integration of home health assets acquired from Amedisys and LHC. The company stated that its uniquely integrated platform is addressing critical patient risks, noting that clinical data demonstrates homebound patients who cannot manage medications experience hospitalization rates fivefold higher than those who can. Management also confirmed that the company has reached its leverage target ahead of schedule, providing a flexible balance sheet for future capital allocation and strategic investments in technology and automation.

• Management reported that 96% of legacy home health branches are rated 4-star or better, and the company is applying the same operational standards to recently acquired branches.
• Rousseau noted that the company has been selected as a provider in the new Reach ACO Medicare program, which is scheduled to commence on Jan. 1.
• The company reported that the annualized revenue contribution from 2026 limited distribution drug launches is currently tracking ahead of the 2025 launch cohort.
• Management stated that artificial intelligence investments are driving improvements in documentation, medication review processes, and hiring systems.
• Phipps indicated that returns from current technology investments are expected to be more fully realized in 2027 as various automation products complete their rollouts.
• Rousseau reported that home health timely initiation of care reached 99% in the quarter, exceeding industry averages.

INDUSTRY GLOSSARY

• ADC: Average Daily Census, a measure of the average number of patients receiving care per day.
• IRA: Inflation Reduction Act, federal legislation that includes provisions impacting prescription drug pricing and reimbursement.
• LDD: Limited Distribution Drug, a specialty medication available only through a restricted network of pharmacies.
• MPR: Medication Possession Ratio, a metric used to measure patient adherence to prescribed medication therapy.
• Reach ACO: Realizing Equity, Access, and Community Health Accountable Care Organization, a Medicare program focused on health equity and coordinated care.
• Specialty Pharmacy: A pharmacy focused on high-cost, high-complexity medications for patients with chronic or rare conditions.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Bright Spring Health Services Inc. Q3 2026 Earnings Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question-and-answer session. To ask a question, please press *11 on your telephone, and wait for your name to be announced. To withdraw your question, please press *11 again. I would now like to hand the conference over to your speaker today, David J. Deuchler.

David J. Deuchler: Investor Relations. Good morning. Thank you for participating in today's conference call. My name is David Deuchler with Investor Relations at BrightSpring. I am joined on today's call by Jon Rousseau, executive officer, and Jennifer Phipps, chief financial officer. Earlier today, Bright Spring released financial results for the quarter ended 09/30/2026. 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. 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-Ks 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 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. 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.

Jon Rousseau: Good morning, everyone, and thank you for joining BrightSpring's third-quarter 2026 earnings call. As always, I would like to start by thanking everyone at Bright Spring who drives our mission forward and makes a lasting impact every day. We are 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 United States. 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. health care 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 health care 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 innovative 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 of 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 of 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 7 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 for the years to come. As well as any conversion 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. and 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 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 3 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 health care system. Within home health care, 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. 90-6 percent of our legacy home health branches are now rated 4-star or better. 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 1 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. And 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 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 have been selected as a provider in the new REACH ACO Medicare program which starts January 1. 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 deployed best practices across service lines utilize scale and 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. With our company platform, we remain active in potential acquisition opportunities and look to capital deployment to add additional scale and profitability growth.

Where we can bring best practices to acquired companies in our target markets that remain very large and fragmented in most cases. On cash flow, the company generated $204 million of cash flow from operations in the quarter. Leverage was reduced to 1.79 times as of September 30. For the full year and excluding the community living divestiture, we now project over $700 million of operating cash flow with EBITDA to operating cash conversion of approximately 80% and over $600 million of cash flow after CapEx and before debt pay down and share repurchases. Quality and patient family, and referral source experiences remain at the center of everything we do.

In provider, home health demonstrated timely initiation of care of 99%. As well as a CAHPS overall hospice rating of 86% and a number of visits per patient that remain well above national average. Our own clinical data demonstrates that homebound patients who cannot accurately manage their medications as measured by the OASIS Home Health Assessment, experienced hospitalization rates approximately 5x higher than those who can. BrightSpring's uniquely integrated health care platform positions us to address this critical risk through coordinated clinical care and pharmacy services. With innovative medication management solutions that improve medication adherence in the home to reduce avoidable hospitalizations and lower total health care costs.

In rehab, patient satisfaction was 99%, In outpatient rehab, and personal care delivered a client satisfaction score of 4.6 out of 5. On the pharmacy side, and community pharmacy achieved order completeness of 98.2%, and on time delivery of 91.9%. Specialty pharmacy again performed well above the national average, with a medication possession ratio of 93% and a time to first fill of 4 days. Alongside net promoter scores in the top 2 of the industry in the past quarter. Looking ahead, our operational footprint is uniquely positioned and a competitive advantage where patient centric, coordinated, and lower cost care models are essential to the future of health care in The United States.

We have been and will continue to be purposeful with our investments to support long term growth. How we execute in any given quarter is a result of decisions made several quarters and even years prior. And we manage the business for long term results. While we do not typically provide commentary this far in advance, we still anticipate and reiterate from Analyst Day at least 15% to 20% organic adjusted EBITDA growth in 2027. However, now off of a significantly larger EBITDA base in 2026. We anticipate similar levels of adjusted EBITDA year over year growth rates through the quarters of next year.

With that, I will turn the call over to Jennifer to discuss the third quarter results and updated 2026 guidance in greater detail.

Jennifer A. Phipps: Thank you, John. For the third quarter of 2026, company revenue was $4.2 billion representing 26% growth from the prior year period. Pharmacy solutions segment revenue was $3.7 billion, achieving 26% year over year growth. Within the pharmacy segment, specialty and infusion revenue was $3.2 billion, representing growth of 34% from prior year. Revenue growth reflects specialty and infusion script growth of 29% driven in part by the 19 branded LDDs launched this year, mid-teen script growth from both acute and chronic infusion, and continued growth in pharma services, that being fee-for-service and hub programs. Of note, the number of year-to-date branded LDD launches is comparable with 2025 at this point in the year.

But the annualized revenue contribution from the 2026 launches is tracking ahead of the 2025 LDD launches in the first year of launch. Home and community pharmacy revenue was $553 million representing a decline of 6% year over year due to an approximate $50 million impact from the IRA along with the decision to exit some uneconomic customers both of which we have previously discussed. We expect the revenue impact from the IRA and home and community pharmacy to be approximately $50 million in the fourth quarter of 2026, bringing the total year IRA impact to home and community pharmacy of approximately $200 million consistent with the second quarter update.

Excluding the impact of the IRA, and voluntary customer exits, underlying growth in home and community, continues to improve throughout the year. In the provider services segment, we reported revenue of $481 million which represents 31% growth compared to the prior year. Home health care reported $288 million in revenue, growing 50% versus last year, with revenue performance driven by average daily census growth, de novo expansion, and the acquired Amedisys/LHC branches, which contributed $76 million of revenue in the quarter. Excluding the impact of the Amedisys/LHC acquired branches, revenue growth was 12%. Rehab care revenue was $82 million, growing 8% versus last year, with strong growth in person served and hours built in core neuro rehab.

Personal care revenue was $111 million, representing 8% growth year over year driven by solid growth in person served and hours built. Moving down the P&L, third quarter company gross profit of $519 million, representing growth of 32% compared with the third quarter of last year. Adjusted EBITDA for the total company was $228 million in the third quarter, an increase of 42% compared to the third quarter of 25. Adjusted EPS for the total company was $0.54 Profitability growth reflected strong revenue performance across our businesses, disciplined execution, and continued investment in technology, processes, and people across the company. Turning to segment profitability performance in the third quarter.

Pharmacy Solutions gross profit was $316 million, growing 29% compared to the third quarter of last year, and growing 6% sequentially versus the second quarter of this year. Segment EBITDA for Pharmacy Solutions was $202 million for the third quarter, an increase of 43% compared to last year. Representing a segment EBITDA margin of 5.4% which increased approximately 60 basis points versus last year and was slightly higher than the first and second quarters of 26. Third quarter pharmacy profitability benefited from strong performance in specialty and infusion branded LDDs pharma services, and contributions from generic, as well as strong performance in home and community pharmacy from volume, mix, and operational improvements in both gross profit and G&A.

Now to the per script metrics. Which is not something we have historically commented on. Revenue per script in the quarter was $340.86. Up 24% year over year with gross profit per script of $28.86, up 27% year over year. The per script metrics are an output result of many factors including drug and payer mix and operational initiatives. Due to the broad diversity of scripts, mix of therapies we provide, we do not rely on the per script metrics to inform our growth strategy or capital allocation decision.

Across the pharmacy organization in broader BrightSpring, a financial perspective, we are more focused on growing absolute dollars of revenue and EBITDA through a combination of initiatives where script mix is not a focus, but a byproduct of business activity. Moving on to provider services. Gross profit was $203 million, growing 38% versus the third quarter of last year and segment EBITDA was $79 million, growing 30% versus last year. This represents a segment EBITDA margin of 16.4% in the quarter. Consistent with the performance in the third quarter last year. Excluding the impact of the Amedisys/LHC branches, provider services segment EBITDA grew 16% versus last year.

Growth and margin expansion were impacted by volumes and operational initiatives driving efficiency and economies of scale across the segments. On a total company basis, cash flow from operations was $204 million in the third quarter. As we look forward to the balance of the year, excluding community living transaction related cash flow impacts, we anticipate annual operating cash flow of at least $700 million. As of September 30, total debt outstanding was approximately $2.2 billion and net of cash of $718 million our net debt outstanding was $1.5 billion. We finished the quarter with a leverage ratio of 1.79 times, Our leverage ratio also includes the impact of $120 million of share repurchases year to date.

We are continuing to evaluate our capital structure as we head into 2027 to support the company's growth plans over the next several years. Moving on to the guidance for 2026, 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 $15.9 billion to $16.125 billion, including pharmacy solutions revenue of $14.0 to $14.2 billion and provider services revenue of $1.9 to $1.93 billion. This revenue range reflects 23.2 to 24.9% growth over full year 2025. Total adjusted EBITDA is now expected to be in the range of $850 million to $860 million for the full year 2026.

This would reflect 37.6 to 39.3% growth over full year 2025. Included in total adjusted EBITDA is expected contribution from the Amedisys/LHC asset acquisition of approximately $35 million. While we plan to discuss full year 2027 guidance on the fourth-quarter call, we currently view 2027 as another very positive year of opportunity for the company, with a broad base of growth drivers. At this stage, we still expect 2027 organic adjusted EBITDA growth of at least 15% to 20% next year. Consistent with the framework outlined at our Investor Day in March. But now on a higher 2026 EBITDA base that reflects 39% growth at the high end of the range provided.

At this point in the budgeting process, we anticipate year over year adjusted EBITDA growth in each quarter of 2027 similar to the overall growth for the year with year over year growth in the second half expected to be a little higher than the first half. Consistent with normal long term seasonal patterns. We will not be discussing 2027 beyond our prepared remarks, and expect to discuss the 2027 outlook in more detail when we report the fourth quarter in February. This durable and differentiated growth profile is not easy to execute. But the quality, operational, business development, IT, HR, and finance leaders across the organization continue to perform well.

With that, I will now turn it back to John.

Jon Rousseau: Thanks, Jennifer. And thank you for your time today to go through Bright Spring's third-quarter 2026 results. We will now open up the call for questions. Operator?

Operator: Thank you. Press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Please limit yourself to 1 question. Our first question comes from Whit Mayo with Leerink Partners. You may proceed.

Whit Mayo: Thanks. Jon, just back to the gross profit per script. Mike, I heard you mention that mix was a factor, given the acceleration. But just maybe elaborate a little bit more on what drove that metric within the quarter And then I would like to hear a little bit more on the focus on gross profit dollars and EBITDA versus per script and remind us how much of your scripts today are coming from a home and community. Thanks.

Jennifer A. Phipps: Great. Thanks so much, Whit. From a quarter over quarter perspective, mix was the most significant driver as it relates to the quarter over quarter growth. So we did have higher growth in our specialty and infusion scripts, which do have a higher gross profit per script than our average. We did see favorable sequential home and community and infusion pharmacy GP per script and stable specialty, GP per script. But obviously, the very strong specialty volume helped drive the overall GP per script.

We are focused on gross profit dollars as we mentioned during the call and as we have talked over the years, as well as EBITDA dollar growth, and that is largely because the scripts growth were focused and have, you know, areas of growth and focus across each of our different businesses. And the GP per script is a by product of what is happening in each of those different separate revenue streams.

Whit Mayo: Just to follow-up, just remind us, like, percentage of scripts that are for America or your home community base. Pharmacy? Thanks.

Jennifer A. Phipps: So we have not disclosed that publicly. In terms of our script growth. Obviously, a vast majority of our scripts are home and community pharmacy.

Whit Mayo: Okay. Thanks.

Operator: Thank you. Our next question comes from Joanna Gajuk with Bank of America You may proceed.

Joanna: Yes. Hi. Good morning. How are you? So much for taking that question. So I guess you announced, I think, maybe 7 new LDDs since the last call, and there is 1 of these therapies where they could be quite sizable. I think 1 of the conferences you kinda said you expect this to be a nice tailwind into next year. The. I am applying to Revolution Medicines therapy, and it did launch. So can you maybe give us a comment on the early launch trajectory? And was there any meaningful contribution in September?

And also, as you look into 2027, I appreciate you not wanting to give us specific guidance, but it is gonna help us frame how significant is particular therapy could be and maybe also in the context of other therapies launched this year. How much you are expecting to next year? Thank you.

Jon Rousseau: Yeah, hey, good morning, Joanna. So we do not comment at the individual drug or therapy level. What I can say is, 2026 has been another very successful year. Of partnering with biopharma and manufacturers to help them bring really incredible new therapies to market in the best way. Get them to patients with the highest possible quality. So we remain extremely excited about that for the rest of the year. And for the future years when you look at the pipeline, The drugs that have come to market in 2026 are performing really well. In their first year, current year, they are actually outperforming the drugs that we launched in 2025.

Which are also doing well in their own right. So you know, we just continue to execute against that strategy. Great. Thank you so much.

Operator: Thank you. Our next question comes from Charles Ryu with TD Cowen. You may proceed.

Charles Rhyee: Yeah. Thanks for taking the question. Maybe just to follow-up a little bit on that question. With 29% script growth in specialty, obviously, I think much stronger than some of we were expecting or at least implied by the guidance. Originally. Can you talk about sort of the dynamics? Because are we right to think that what we are seeing in this script growth is the benefit of you know, these LDV launches, since you are, you know, 1 of, very few pharmacies, and it is that layering effect that kind of allows us to grow at such an accelerated rate.

And is there any reason why given the number of LDDs you have announced and winning that we should expect launching, let's say, over the next year or so. That kind of pace is sustainable. Thanks.

Jon Rousseau: Yeah, 1 thing I would note is, despite the 29% growth rate that you referenced, it was lower than our provider growth rate of 30%. So the provider business just continues to perform exceedingly well and I just wanna make sure everybody always continues to realize how big of a base of a business that is you know, growing at over 30% this year. But on specialty, it is just. it is consistent with the track record, you know, that we have had for the past couple years. And the strategy that we have. We have had really similar growth rates to this for quite a long period in this business due to our strategy.

And our and our team and our and our relationships and our quality in the market. So the 2026 launches, the 2025 launches, and the launches before those are all performing really well. And as we look at the pipeline in the future and you know, all of our, you know, really deep relationships in the market and our focus on quality and efficiency and patient outcomes, you know, we would expect the same going forward.

Charles Rhyee: And if I could just quickly when you announced that we have won x number of LDDs, is typically the lead time before those drugs launch? Are you being selected sort of as before phase 3 data's out? Or is this sort of after? So we would expect launch in a relatively shorter period of time? Thank you.

Jon Rousseau: Yeah. It can really vary depending on the specific circumstance. But, I mean, typically, you know, these things start happening as you would imagine, you know, at least a year in advance. Awesome. Great. Thank you.

Operator: Thank you. Our next question comes from A.J. Rice with UBS. You may proceed.

Albert Rice: Hi. Obviously, you got. You now have your leverage down below your 2.5 target, so that is great. And, deal activity has always been a part of the growth story there. I wonder if I could get you to comment, a little bit on the pipeline where they are seems to be increasing opportunities and where maybe less so. And 1 thing in concept what we are seeing more of is these transactions where to do a bigger deal, a strategic player is sort of partnering with a private equity or multiple private equity guys. And then has the option to buy a larger entity out down the road.

In that way, maybe minimize the impact of disruption to near term consolidated results. I am just curious whether in concept you guys would be open to that kind. Looking at those kind of deals. And then, again, just the comments on the pipeline.

Jon Rousseau: Yeah. Good morning, AJ. Hope you are doing well. You know, look, overall, in the results, I think you are really seeing the strength of a very unique platform. In home and community health services You know, a piece of that historically but probably a bigger piece in terms of opportunity going forward. Would be the M and A platform that we have too. When you couple our capabilities in M&A and our track record, and results there, with the balance sheet It obviously does create interesting opportunities in scenarios. And I think probably more interesting and potentially more impactful is we look forward, you know, certainly than the last 3 or 4 years.

Our bread and butter has been tucking new acquisitions into adjacent geographies. And that is worked extremely well for us historically. We have we have driven, you know, really attractive pro forma multiple there. Which has been highly accretive over the years. That will always remain our mainstay. You know, you know, we said, you know, over the course of the year that know, we think we probably should lean into you know, you know, some slightly larger transactions than you know, than small tuck ins. You know, but for us, you know, that is that is probably still in the range of EBITDA or below.

In terms of, say, a second category of deals, which you know, might become more of a focus. But, you know, deals are hard. We are always extremely active and our pipeline is as full as ever. You know, we see a ton of stuff that is proprietary due to our relationships. And, you know, I say a lot. We could do $400 million of EBITDA in M&A tomorrow. If we wanted to. You know, and I am not saying that, you know, tongue in cheek. But we are extremely intentional and extremely deliberate as you can see with our history, and we really focus on you know, driving value both organically and inorganically.

So we are leaning in like always, but you get into diligence on things, you find a lot of stuff. And, you know, we make sure that, you know, we do transactions that we know will work. So, you know, we just continue to be very, very intentional about anything we would do.

Albert Rice: Yeah.

Jon Rousseau: I would say we are bullish in terms of you know, probably, you know, the M&A volume we would do going forward as compared to the last couple of years. But, again, that is gonna look like from a deal profile perspective, you know, probably very similar to what we have done historically and maybe the size of some acquisitions increases, but again, within that size range that I mentioned before. You know, we have not you know, to date entertained any sort of transactions in partnership with anybody else. And, you know, nor do I think we would in the future. it is just hard for us to consider scenarios where that would be relevant or helpful to us.

Albert Rice: Okay. And just a provider versus something like infusion on. Or the other specialty drug area? Is it still both, or do you see more opportunities on 1 side versus the other?

Jon Rousseau: Yeah. You know, we have been very balanced historically with our acquisitions, and that is that is worked well for us. I mean, we really like continuing to do things that have been proven and have worked well for us over time. Whit you are seeing in our numbers again for yet another quarter is broad based growth within the organization. And that continues to be something that we think is a real strength of the enterprise. So, you know, our intention will be to be very balanced, you know, on. In the specialty world. there is very little out there. You know, maybe a couple things, but they are they are extremely large in size.

And so you look at home health, you look at hospice rehab, you look at primary care. You look at infusion. You look at very low multiples, home and community pharmacies. Deals, and there is opportunities abound within each 1 of those service lines. So, you know, we are we are fortunate that most of our industry with the exception of maybe 1, are really huge and also fragmented. It just creates a wealth of opportunity and you know, we will. We just we just try to be really careful about how we pick our way through that over time. And.

But we will, I think, continue to take a balanced approach to continue to expand into targeted and attractive geographies within probably most of those service lines. Okay. Thanks so much. Sure.

Operator: Thank you. Our next question comes from Ann Hynes with Mizuho Securities. You may proceed.

Ann Hynes: So, also, thanks for all the details on 2027, especially the quarterly data as I think there was some concern in the market. At the 2027 calendar of generic launches would result in lower growth in the first half 27. So given your guidance today that you expect the same percent growth throughout the year, Does this imply that LDDs are as a bigger driver as generics maybe versus the market perception that the your growth mostly comes from generics. And maybe to that end, can you provide what your view is for a long term growth rate for LDDs and for generics? Which is actually the bigger driver of overall profits of the pharmacy? Thanks.

Jon Rousseau: Yeah, good morning, Ann. I think at this time, we are gonna leave our comments regarding 2027 exactly to what we said in the prepared remarks. Hopefully, that is helpful. What I would say is you know, we have a company that really has a broad base of growth drivers. And you are seeing that in Q3. You have seen that throughout this year. You have seen that since we have been public in 2024. You have seen that going back for 10 years now. And we see that going forward as well.

So there are a plethora of growth drivers across all of our service lines, and we focus on driving each 1 of them you know, as best we can from a quality and market share perspective. So we are fortunate that you know, we live in a world that is that is not always easy, but there is a lot of demand for these high need services. And we do everything we can to meet that demand in the highest quality way. And to position ourselves well to do so. So it was another quarter really marked by broad based growth up and down the P&L and in the service lines.

And, you know, that, you know, that expectation for the continuance of that is reflected in our comments for 2027. Great. Thank you.

Operator: Thank you. Our next question comes from Erin Wilson Wright with Morgan Stanley. You may proceed.

Erin Wilson Wright: Hi. This is Michelle on for Erin. I just wanted to turn to infusion. So does the recently announced transaction in the infusion space change anything for you in terms of the competitive landscape? You feel comfortable with the current capacity of suites to sustain the strong growth that you have been seeing? And can you also speak about the IG Connect program what you are seeing from that so far, how that is been contributing to growth? Thank you.

Jon Rousseau: Yeah, we do not see any difference to our strategy from that transaction. You know, we are continuing to build capacity in our business over time so that will continue to be a focus for us. You know, I think our infusion strategy is unique to, most others. Not all, but most others in that We think addressing acute is just as important to patients and referral sources and physicians and payers as is chronic specialty infusion A lot of folks just focus on specialty. But acute is also a big market. We just saw here in the last month that yet another player back out of acute. Which, you know, we think just creates more opportunity on that side.

So ultimately, spanning the breadth of infusion therapies in the market from acute to chronic and doing so in the home and in suites, that is our ultimate strategy. You know, and I would just say, you know, just we are we are still in the pretty early innings of that, you know, with a really big market and industry. So we just want to continue to grind that out over a long period of time. And we continue to focus on assembling a really good team here internally. And we certainly view that as meaningful growth opportunity for us. Next year and beyond. Thank you.

Operator: Thank you. Next question comes from Scott Fidel with Goldman Sachs. You may proceed.

Scott Fidel: Hi. Good morning. You have got Sarah Conrad on for Scott. I wanted to ask on the home and community business. Just as we anniversary the IRA headwinds and also the customer exits, can you frame the underlying growth in this book and just how should we think about the setup into next year? And as this business returns to growth, can you frame how we should think about the mix impact on gross profit per script?

Jon Rousseau: Yeah, we have been really pleased to see the home and community pharmacy performance this year. As we mentioned in the prepared remarks, it has now again become you know, a nice contributor to our overall company growth, which is really been great to see, and it is been a real focus over the last year or 2. You know, if you go back 4 or 5 years ago, you know, due to the external actions of a competitor or 2, And, you know, you know, some of the dynamics in the skilled nursing market You know, it was a tough business that we had to work our way through. Our focus has always been on service level quality.

And then operational efficiency But particularly, you know, in those areas, you know, in the last year or 2, we have we have just made ton of progress. And so IRA was a headwind for the business. It will be a little bit of a headwind, you know, for the business next year. But I think at this point in time, we are demonstrating you know, growth through that, you know, in a in a really nice business. You know, really for 2 reasons. it is just it is just a focus on maximizing your scale and your operational efficiency and your cost per fill.

And then there is a bunch of attractive end markets there, senior living, hospice, PACE, behavioral, etcetera. Skilled nursing is just a stable market for us. You know, which is which is fine because there is there is 4 other really interesting or even 5, growth markets for us And, you know, if we can have the highest service levels in the industry and the best cost per fill, know, that is a that is a really winning formula. So you know, it was a good quarter for home and community pharmacy. And if you annualize just that quarter alone, you know, they are primed for significant growth next year.

But we want to continue to do better on top of that. So you know, we. We have executed on a lot of operational and technological initiatives so far this year. You know? But the pipeline is quite full with even more to come. As we can just work our way work our way through them. Probably take us a couple years you know, to ultimately get to the point operationally that we want to in terms of, you know, sort of nirvana for how a pharmacy business serving all 50 states can be most optimally designed from a production and cost of logistics standpoint we are working our way through that. it is really exciting.

And we think it will be really differentiating. And, you know, this year, we are we are seeing the results of it. Thank you.

Operator: Our next question comes from David Larsen with BTIG.

David Michael Larsen: Hey, congratulations on a good quarter. I think I heard in the prepared remarks some comments around a new ACO endeavor in 2020. Can you talk a bit about that? How do you differentiate yourself in the market? I think it is primary care at home. And what sort of revenue and earnings contribution could you see coming from that business maybe in the near and longer term? Thanks.

Jon Rousseau: Yeah. It took a lot of work, you know, but over the course of a year or so through applications, we were approved to be in the new next-gen REACH ACO for Medicare. Starts January 1. We are really excited about that. You know, we view primary care is the tip of the spear and the linchpin for integrated care within our company. You know, very complimentary, sits kind of in between if you will, pharmacy and provider services. And, you know, as the primary care clinician, obviously, you have attribution to the patient. You know, it clearly drives quality outcomes. It can drive a lot more integrated care across our service lines in the business.

And it is ultimately what positions you for value based care. So our vision, 5 to 10 years, is to be the household name and national brand for primary care out in the community, people's homes and skilled nursing facilities and senior living communities. Has a dramatic outcome on improved quality and reduced hospitalizations. You have to have shared savings models or, you know, new types of arrangements with payers. You know, for that to be most feasible, you know, which is what we have been working on and we will continue to work on over time. But excited to be in the latest version of the ACO.

In our opinion, just due to the way this thing ramps and, you know, and mechanics around it, 2028 would be a time period that we feel comfortable. You know, where we could see, you know, some impactful economics from this.

David Michael Larsen: There are some ACO models that are making money, within risk. Some companies are actually doing very well. There are others that have faced significant margin pressure in the risk business. So you know, can you just talk a little bit about, you know, are you are you confident you are gonna make money in risk where the claims cost will come in below the capitated amount you are receiving from the plans. I do not think you have the fixed cost overhead of facilities that some other organizations did have in the space in the past? Just any color there would be helpful, John. Thanks.

Jon Rousseau: Yeah. We actually had a little bit of shared savings this year. You know, but, we are evolving our ACO models to, you know, be the principal in these going forward. But we have absolutely zero risk of downside, you know, today and any of this. And anything that we would do you know, we would be extremely measured about and just view as purely opportunity with extremely, extremely low risk. I mean, the upside you know, from, you know, what we can do in primary care and leveraging you know, the access to patients we have today and leveraging our quality outcomes. Is very significant. And.

But there is clearly a way that, you know, that we are approaching this where we view it as is all potential upside. Thanks very much.

Operator: Thank you. Our next question comes from Matthew Gillmor with KeyBanc. You may proceed.

Matthew Dale Gillmor: Hey, thanks for the question. Wanted to ask about the competitive environment within specialty pharmacy. From our vantage point, LDD networks have been narrowing yet. We see Onco360 and CareMed continue to win more than their fair share. Was just hoping you provide a couple comments in terms of how you feel your position competitively with prescribers and manufacturers and if you have seen any sort of notable change or movement within the last couple quarters or years.

Jon Rousseau: Yeah, I think it is been pretty consistent. You know, there are some other independents out there that do a nice job. And you know, we just try to do our best to, you know, provide a suite of value add services to, you know, our partners. We do our best to provide great outcomes and service levels to payers. And obviously patients as well. So, you know, I think in the specialty world, you know, the more track record you are able to build over time and the more infrastructure and scale that you have and, you know, and the more clinical and technology-based capabilities that you have is only helpful.

So I think we just continue to evolve our business and try to get a little bit better every year. Be as efficient as we can. And provide interesting solutions to our partners and but, you know, I think, you know, within that context, you know, the competitive landscape has been fairly consistent overall. Great. Thank you.

Operator: Thank you. Our next question comes from Raj Kumar with Stephen. You may proceed.

Raj Kumar: Hey. Good morning. Maybe I wanted to kinda touch upon the home and community pharmacy business and maybe kind of any quant quantitative points around just growth in scripts that you are seeing across assisted living and hospice? And maybe on the hospice piece, curious on know, the connection there with the provider side of the business and whether you guys you know, fully capture the breast of the patients on the provider side of the business or still see that as a early innings opportunity?

Jon Rousseau: Yeah, on hospice, we serve all of our hospice patients with our pharmacy. We have an outstanding hospice pharmacy business. it is the quality outcomes that we get, the clinical tools that we provide, hospice, companies, I think, are absolutely second to none. We are leveraging that by entering the PACE market as well. I would say on the senior living side too, our service levels and some of the offerings that, you know, that we offer customers are differentiated and unique. And we look forward to continuing to, to grow into that market as well. Both are going extremely well. Thank you.

Operator: Our next question comes from Pito Chickering with Deutsche Bank. You may proceed.

Pito Chickering: Hey, good morning, guys, and great quarter and very appreciate the comments around 2027. You have become 1 of the most dominant players in the LDD market in the last few years if you and 1 other getting exclusivity or winning it together. As you look at the LDD market from couple of years ago versus today, have the economics changed at all? During the IPO, you said to think about LDDs at a 1.5% margin. Has that evolved with market dominance and wraparound offerings into more of a 3% margin when you include the hub programs? And, also, do these margins change throughout the periods of these contracts? Thanks.

Jon Rousseau: Yeah, hey, good morning, Pito. Thank you. I think we have seen just real consistency over the past years. We have not seen, you know, dramatic changes in those dynamics. 1 of the things we have done over time is start to broaden outside of oncology. With leveraging the capabilities that we have, which are directly applicable to you know, a lot of other therapies and indication areas where you are seeing LDDs, ultra-rares, or exclusives develop. But in our GP per script and in GP dollars, per script, I think stability is a really appropriate word. And you know, that works great. You know, we drive.

You know, our focus is on driving volume growth and efficiency in the organization. And so you know, we have continued to augment some of our wraparound services know, that is been helpful. You know, that is, you know, that. that is an area that was really nascent. You know, as recently as 3 or 4 years ago. And in the next year or 2, you know, it, you know, could be, you know, could be even twice as big as it is today. So. And it is and it is really grown. Significantly. The team has done an excellent job with that. So I would say we have continued to evolve a lot of our processes and service offerings.

But some of the items the economics that you have mentioned, you know, have. You have seen just a lot of consistency there over time. Great. Thanks so much.

Operator: Thank you. Our next question comes from Brian Tanquilut with Jefferies.

Brian Gil Tanquilut: Hey, good morning, guys, and congrats, John, and to the team. John, maybe just. As I think broadly speaking, not asking about specific drugs here, but when we think about these new 50% go into hospitals, still older, much variability is there? And then maybe to clarify, as we think about whatever percentage goes to the hospital channel in that exclusive or very narrow network, where do the hospitals source their drugs from? Yeah.

Jon Rousseau: Your. The 50 percent estimation is what we see when we look at the market data as well. And, you know, they are just going through their normal. Well, you know, they would be going direct to the manufacturer or through their other purchasing, options you know, in those scenarios. But, yeah, a 50 split is you know, it is gonna vary a little bit by drug, but that is generally what we have seen in the most recent data still. Awesome. Thank you.

Operator: Thank you. Our next question comes from Jared Haas with William Blair and Company. You may proceed.

Jared Haas: Hey, guys, good morning. Wanted to ask about operating leverage and corporate SG&A. It looks like that was down a little bit sequentially from the first half run rate. And so just wanted to ask sort of what is resonating or working well in terms of where you are finding efficiencies here, and then, you know, what is the incremental opportunity either fourth quarter modeling or either. Even beyond that over the next couple of years? Yeah.

Jennifer A. Phipps: Thank you so much for the question. We continue to see the ability to leverage our corporate infrastructure while continuing to invest in new technologies, in AI products, and people across quality sales, and other investment opportunity areas for us. So as we think about looking forward, we continue to see significant ability to leverage the infrastructure that we have across each of our different business lines and then we continue to make very strategic investment decisions for long term growth, and we expect that to continue. So that does depending on the opportunities and things we see from an investment standpoint, you know, that can, you know, move our G&A little bit.

From time to time and quarter to quarter. But, again, that continues to be our focus. How can we become more lean and efficient through all of our different investments, leverage our infrastructure, then continue to invest for the future. Thank you.

Operator: Our next question comes from Sean Dodge with BMO Capital Markets. You may proceed.

Sean Dodge: Maybe just going to the provider side. Within home health and the preferred MA contracts, is there anything you can share on just what proportion of your volumes there are under those contracts now? How much runway you will have to add more of those? And then just anything on like the rate differential you are able to negotiate in those preferred relationships with MA?

Jon Rousseau: Yeah. You know, I would say, you know, our mix of MA and Medicare is probably not going to be too dissimilar from you know, some of the recent but no longer existing public companies. And what they would have reported. You know, we really focus on quality and you know, in a set of specific programs within home health that we think are interesting. And that, you know, hopefully, can provide better outcomes. And so with that, we have been able to deepen some of our contracts. With specific plans, which has been, I think, really mutually beneficial. I think there is still, though, a lot more opportunity to do that.

You know, for us on the MA side, you know, thankfully, you know, some of the rates have improved over time. You know, there is been an imbalance in demand versus supply of home health for quite a while. And, I think people are really appreciating and realizing that as well as you know, more and more indicating a flight to quality. You know, you look at a scale provider like us that invests in people and technology like crazy. And I think you are gonna get a different result there.

You know, you look at our home health offerings and you know, we have the opportunity to provide, you know, meds in the home, our continued care program with that. Which is, like, the number 1 thing you can do to reduce rehospitalizations. And know, we have the studies that prove that out. And, you know, we offer that capability and are still bringing that to more of our patients. We are now rolling out, you know, virtual primary care for our home health pop. Population where appropriate. So, you know, you have a you have an MDNNP running sidecar throughout that home health episode. And that has a much better result too.

These are the kind of things that we are doing that I think few other people do, and you know, and those are the kinda know, that is the kinda program that, you know, we hope to take to more and more people and be a deeper partner to, you know, to give them the best possible solution. You know, whether it is a hospital ACO, a physician ACO, or a payer. Okay. Great. Thanks, Kim.

Operator: Thank you. Our next question comes from Parker Snure with Raymond James. You may proceed.

Parker: Hi. Good morning. I just wanted to touch on cash flow quickly. You had a strong quarter on operating cash flow. Just curious if there were maybe some specific drivers there or any other notable items to call out? And maybe just remind us how you think about operating cash flow conversion going forward, whether it be a percentage of EBITDA or net income, just to make sure that our models are dialed in given your increased outlook on adjusted EBITDA?

Jennifer A. Phipps: Yeah, Parker, I appreciate the question. We did have a really strong quarter from a cash flow perspective. Typically, Q3 and Q4 tend to be our largest just in terms of timing and some of the seasonality associated with cash flow and inventory. Tend to be some of our higher cash flow quarters. I would say, you know, working capital tends to be with some of our revenue growth, we continue to see some benefit as associated with the timing of receivables and our DSO compared to payables. So there is some component of that is 1-time in nature. However, we continue to obviously, you know, expect to grow revenue.

So from that standpoint, you know, there is a continuation of that we would expect. I would say, you know, generally, across a quarter, what we said at Investor Day would still hold that on average, we would expect to have greater than 60% conversion of adjusted EBITDA to operating cash flow. We do expect that to be a little bit higher this year as we noted you know, excluding the community living taxes with $700 million of expected operating cash flow excluding the community living taxes. Okay. Thank you.

Operator: Thank you. Our next question comes from Jason Cassorla with Guggenheim.

Jason Cassorla: Great. Thanks. Good morning. Hoping you can give us an update on the, AI and tech investments you made this year across both businesses. Then maybe help frame the return opportunity from those investments, you know, how much you have realized in return so far this year. What you are expecting to generate, into the rest of this year and into next year would be very helpful. Thanks.

Jennifer A. Phipps: Yes, Jason, thanks so much for the question. As we have mentioned, we continue to invest and see opportunities for efficiencies and higher quality opportunities across different AI and technology solutions. We have begun many of those and started to implement those into Q3 and Q4. And we expect opportunities for return on investment. So every single investment that we have made across the organization, we do have ROI that we are expecting as we evaluate each of those opportunities and how those play out can vary over time. We would expect more of what we have implemented this year to be realized in 2027 as some of these are just beginning to roll out.

But we will continue to invest in 2027. So we are early in the budget process, which is why we are not talking much about 2027, but we are. We also see a number of continued that will provide growth into 2028 and into 2029. That we are gonna lean into and expect to lean into 2027. Great. Thank you.

Operator: Thank you. Our next question comes from Steven Baxter with Wells Fargo. You may proceed.

Stephen Baxter: Hi. Thanks. I wanted to ask about payer mix. In the specialty and infusion business. It looks like if you look back to the last year, the commercial was driving about 1-third of your revenue growth on a dollar basis. But when you look at it this year, I think commercial is driving more like 45% to 50%. Of the revenue growth that you have seen year to date. Could you help us understand what is driving that change and whether to think about maybe this year or last year as more of what is normal and, I guess, how that flows through the P and L and influences margins?

Jennifer A. Phipps: Yes, it is primarily associated with growth in branded LDDs. So as we continue to bring on new LDDs and see revenue growth associated with those LDDs, there is a mix of those as we are 1 of 2 that is typically served 1 of 1 or 1 of 2 that is typically serving that drug, and those drugs are a mix Medicare and commercial. So as you see, those come online, you are seeing some increase in skew to commercial. Separately, we have continued to see infusion growth, which is much more commercial.

Jon Rousseau: Yeah, as you expand a little bit more outside of oncology with certain opportunities, you know, in the exclusive and rare and orphan world, those can be more when you think about the population of individuals, might not be as many seniors for those types of therapies. You know, if you have a rare and orphan condition, you pretty much have that from birth. So you know, a little bit more of a commercial slant to the expansion in LDDs in rare and orphan. You know? And as Jennifer said, you know, infusion growth is more tilted toward commercial, and we have seen good growth there.

And I would say even more broadly within specialty pharmacy you know, we have just. We have. You know, I think we have had deepening partnerships within commercial even in oncology itself. Thank you.

Operator: I would now like to turn the call back over to Jon Rousseau for any closing remarks.

Jon Rousseau: Thank you, everybody, for joining the call today. We appreciate your time and look forward to speaking with you again in another quarter. Have a great day.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

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