Ladies and gentlemen, the program is about to begin. At this time, it is my pleasure to turn the program over to your host, Joanna Gajuk. Please go ahead. Hello, everyone. Thanks so much for joining us. My name is Joanna Gajuk. I'm the Equity Research Analyst at Bank of America, and it's my pleasure now to host this next session with BrightSpring. It's a diversified home care provider, and today with us is Jon Rousseau, President and CEO, and we will go right into Q&A, but before we do, I just want to make a note to the audience that if you want to ask a question, you can use the Ask Question window that you see in the webcast panel, so please use that to send questions my way, so Jon, thanks so much for joining us. Maybe we should start with the pharmacy segment because obviously there's been a lot of nice outperformance there, or much more, I guess, significant outperformance in there, specifically the specialty pharmacy, right, with that growth of 40%, I guess, tracking for this year after growing, you know, 30% the year before that. Can you kind of give us a state of the union in terms of the sources of outperformance, you know, any specific therapies that came in better, I guess, you know, the new contracts, you know, the LDDs, but also maybe something about competition during the Change Healthcare system outage and such. Kind of, you know, give us a sense of what's driving that outperformance there. Sure. Thanks, Joanna. Good afternoon. Yeah, our specialty oncology business has continued to have very good momentum through this year, really the last six, seven years. And I think broadly at the organization, though, worth noting, you know, we've had very good breadth and contribution of our growth across really all of our service lines this year, which has been good to see as we continue to address markets of high need and high growth with really valuable solutions. You know, in oncology, it's a multifactorial growth model that is working well today. You know, we have been able to develop with the team, you know, a very strong position in oncology, growing in rare and orphan indications as well today, you know, over the last decade plus. And so you see oncology, which continues to have strong innovation in its pipeline with new therapies coming to market. With our service levels, actually, the Net Promoter Score for Q3 just came out. Our patient and physician Net Promoter Scores were the highest ever, 94 Net Promoter Score with patients, which is pretty remarkable in terms of the service levels that they are characterizing. But based on that service level and quality, you know, we really have constructive relationships with our manufacturing partners who we work very hard for, and we are able to pull through and help execute for them as new products come to market. We will launch probably about 15 new therapies into the market this year, either in an exclusive pharmacy arrangement or in an ultra narrow where we would be one of two pharmacies in the network. So, you know, first and foremost, you know, oncology, thankfully for patients and their family, continues to have a lot of tremendous innovation in terms of new therapies and the benefit of those coming to market. We're very thankful to be working with our manufacturing partners to be a pharmacy of choice for them and continue to service and support their patients as best possible to drive quality outcomes for individuals every day. So you're seeing more and more drugs come to market, thankfully, helping patients. We are winning those in a disproportionate way. You have other brands that have come to market in prior years that are continuing to ramp and penetrate the market as well, reaching more patients. And then you also have brands going generic over time, which is a good thing for all stakeholders in the industry, really. We had one drug that will go generic here in Q4. It was actually the very end of Q3, and then we continue to deepen with manufacturers on fee-for-service type business around data analytics hub services as well, so you know, there are five or six growth drivers in this business within, you know, the dynamic and double-digit growth oncology market where, as an independent pharmacy, we have, you know, really built a nice reputation and partnership with manufacturers over the last decade, and you know, that's what's continuing to drive the growth at above market growth rate levels. As new therapies are coming on the market, the ability to win those preferentially is driving market share overall, and then as certain drugs continue to convert to generic, when drugs go generic, they typically broaden in terms of their volume and utilization. That's something we really focus on, making those drugs more accessible for more people. And as more drugs go generic, and with our focus on generics, that drives market share as well. And as we look out, you know, five to seven years, as you look at the pipeline in oncology, as you look at new brands coming to market, and as you look at the expected conversion of existing brands going generic, you know, we continue to see this model playing out for a long time. I guess you mentioned the, you know, the oncology, that the industry is growing 15%, but I guess you're growing even faster than that. So who are you taking share from? Yeah, I think, Joanna, it's really just a function of, as new brands are coming to market, it's really being a partner of choice for those manufacturers in that process. So, yes, over time, given our investment in clinical liaisons and sales force, you know, we believe we continue to take a little bit of share in existing products. But as new products come to market, if you are selectively chosen as a partner for those, you know, that is where you will ultimately, you know, by the math, gain market share in the overall market if you're taking a disproportionate or even 100% share of the specialty pharmacy channel for new drugs coming to market. And then as drugs go generic, they typically get more utilization. And we have a strong focus on value-add generics. The clinical requirements to support these drugs are all very similar. But as drugs go generic, you know, our focus on those will result in ultimately a market share increase as well. So it's really driven mostly by events in the market, whether it's a new brand or a brand-to-generic conversion, and our focus and execution on those events. Okay, that makes sense. And I guess since we're talking about oncology and fast growth there, some, you know, there's been some interest in owning oncology clinics, but, you know, I would want to ask you whether, you know, you're interested in going that route as well? Yeah, we are building out with some providers really in primary care and home-based primary care, really with a focus in seniors and assisted living and skilled nursing in some home settings. And we think that is highly synergistic in the future. You know, oncology is not an area that we've thought about for prescribers, you know, and just given sort of valuations in that market, probably not something that's on our strategy list right now. Okay, I guess that makes sense. And the other piece of that specialty, right, is the home infusion. It's much smaller, maybe 10% of the company. But can you talk a little bit about growth there in terms of, you know, what it's been, but also how you think about the growth outlook going forward? Yeah, infusion tends to be a little bit of a split market with chronic specialty therapies growing, you know, growing at higher rates than acute therapies like antibiotics and enteral and other. And I'll just back up a second just to be clear. In oncology, that is oral and injectable therapies for us. And then so on the infusion side, that's obviously all infusible therapies, excluding oncology, which is really something that's done by the oncologists and the prescribers and the buy-and-bill model. So on infusible products, other than oncology, we focus on both chronic specialty therapies and acute therapies. A lot of people gravitate more towards the chronic. We believe in being a full-service provider in infusion. We ultimately believe, you know, that creates more ultimate size and scale and more relevance with the payers. But, you know, infusion is something that we've continued to, you know, really dedicate significant resources to. It's about 10% of the company overall, you know, from an EBITDA perspective. But we do believe there is, you know, significantly more potential. I think our portfolio of products that we're serving and supporting in infusion is nicely diversified. That's always been, you know, a key element for us is not to be too heavy in any certain area. We like that. We spent the better part of the last year really focusing on some operational initiatives, some leadership and people augmentations to really try to focus on service levels as best we could. I think we were always a very good pharmacy in that regard, but, you know, we're really focused on turnaround times and service levels in particular, you know, even to the point where we curtailed the business and the volume growth this year intentionally, really looking for 2025, 2026, and 2027 to be years where our infusion business really starts to tick up in EBITDA growth again. I also think in that business, there's a little bit of margin and efficiency opportunity from some of the operational efforts that we employed this year. So I think for us in infusion, you know, where we sit today, it's a little bit more of an idiosyncratic story versus a market story where, as we get through some operational augmentations, I think it makes some increased sales investments on the back of that in the future. I think that'll put us in a pretty good place. But our growth, you know, to really generalize, is probably 80/20 going to be driven by the things that we are doing specifically in our business, whether it's a sales or whether it's an efficiency opportunity versus what's going on growth rate-wise external to us. But nevertheless, longer term, you know, infusion, like everything we do, has a tremendous value in ROI for the system and for payers, just given that we provide these products and services in lower-cost environments. They produce great outcomes. And so we like the industry longer term, no doubt. And, you know, we continue to try to make sure we have the building blocks in place so that, you know, we can get more and more focused on market share in 2025 and beyond. Right. And I guess in that business, you know, a lot of interest about Stelara, which, you know, you guys made a comment on your call that, you know, it's immaterial to your company in the aggregate. But maybe, you know, can you kind of give us your thoughts about this dynamic, which, you know, there's some uncertainty how that particular one is going to play out. But in general, you know, biosimilars, you know, in that business, because you alluded to like the generics, very positive when that occurs. So is it something similar in the infusion business when you have biosimilar launches? And I guess, you know, would that Stelara dynamic change your view of the biosimilar switches going forward? Yeah. So for us, as I mentioned before, you know, we've intentionally tried to have a really, you know, healthily diversified book of products that we support in service and infusion. So Stelara, you know, there's a dynamic there where the manufacturer is changing some of the pricing that you can buy it at in the industry. You know, we'll still see where a lot of that settles out. But for us, you know, Stelara represents less than 1% of what we do as a company. And, you know, we don't see that being a swing factor of more than, you know, $2 million here or there as we look at next year. You know, there's many other potential areas of growth within the infusion business that, you know, we continue to feel really good about as we execute against our operational and growth strategy that I talked through before. You know, as it relates to biosimilars more broadly in our oncology business, you know, since that's an oral and injectable business, you know, there really isn't a biosimilar threat there per se. You know, we are serving innovative brands that are coming to market brand new or tried and true generics that have converted from brands that have been around for a really long time, and they're just fundamental mainstays in the market. So, you know, we don't see biosimilar threat in our oncology business. Then for infusion, you know, Stelara, after Remicade a few years ago, you know, is the one that was on the radar screen. We don't see risk from biosimilars in the near future within infusion, and if you look at the infusion pipeline, you know, it is very, very large, and so, you know, ultimately, we would expect that dynamics in the pipeline of new therapies that would be very beneficial for populations, things like Alzheimer's growth, market share gains, idiosyncratically, then potentially any opportunities, for example, with Medicare, you know, fixing some of the reimbursement challenges there, which is far overdue. You know, these sort of opportunities all, you know, we think, you know, create much more of a positive dynamic, ultimately net-net. So as you think about that business growth, how would you characterize it? Yeah, that's certainly a business that we expect to grow in double-digit as we get through, as we get through a lot of our operational updates and investments in 2023 and 2024. That's a business that we will certainly budget to be double-digit growth next year. And hopefully, you know, we can, you know, we can do even better than that. So staying on the topic of pharmacy and policies, you mentioned Medicare fixing infusion, but I guess bigger picture, some other relevant topics, you know, for that segment is the IRA. There's some changes, right, under IRA to Part D that essentially lower the cost for the patients. So some payers indicated, you know, they already saw high utilization of specialty drugs already this year because there are more changes happening to that patient cost in 2025, really, right? So how would you think about that impacting your business? You know, have you seen this already this year and kind of the magnitude of things that you would expect into next year? Yeah, that dynamic has been at play all year as the donut hole has been addressed here, you know, with IRA over the past couple of years. Anything that fundamentally would make, you know, the patient's financial responsibility lessened would allow for more individuals to be on therapy and for utilization to increase. That's a tremendous thing in terms of people that can be positively impacted in their life by these therapies. And so whatever has reduced the out-of-pocket ultimately is a positive for patients. And, you know, that incrementally, you know, does create some positive volume impact. We will see that occur again on January 1st, just around the corner, where the out-of-pocket's going to come down a little more. So we would expect a little bit more of an increase in patient volumes as we get into next year as well as a result of that. I mean, if I were to sort of characterize it, though, you know, any impact in our volume from that, you know, is more on the edges. Again, to really just generalize, you know, that might account for 5%-10% of our incremental growth. But it's really the continued stream of innovative new oncology drugs getting into rare and orphan, launching these drugs in exclusive or limited networks, and then continuing to drive market share focus with our sales force on the back of our service levels. That is what is driving, you know, the far, far preponderance of our growth and performance in the company, you know, versus any sort of one-time reimbursement updates. Thinking about, you know, IRA, but also in the context of the administration change, right? I know we don't have much details in terms of where things are going to be heading to, but I guess, you know, I should ask you your thoughts in terms of just high-level expectations for any changes under the new administration and what those could be, you know, how those could impact the company, I guess, the pharmacy, but also maybe provider side. Yeah. Yeah. No, you're exactly right, Joanna. So we'll see who's in the seat and what those specific policies are. You know, that will allow us to have more definitive views on that in time. I think we're extremely fortunate that what we do is universally, you know, well regarded. You know, the pharmacies in that whole value chain are the folks that are getting meds to people every day, you know, helping to, you know, make sure there's adherence, helping to reduce unnecessary hospitalizations from lack of proper adherence and medication management. Same on the provider side, providing patient-family preferred services where people reside in the home and community results in ultimately better and hospitalization outcomes. And, you know, it reduces costs dramatically as well. So we get tremendous bipartisan support, you know, when our government relations team is really working to educate and advocate on the Hill and at the state level every day. You know, they are talking to everybody. And we really do get broad, broad support for these high-quality and high-ROI therapies. So we've never really had any concerns or preferences, you know, as it relates to what happens, you know, in D.C., just given the broad-based support that we have for our therapies and services. I would say big picture too, you know, regardless of what's going on in the industry, you know, our strategy has always been to, you know, just drive long-term durability and outperformance and just continued market share gains, regardless of the environment, which we've demonstrated for the past, you know, eight years that I've been here now, you know, by continuing to build scale, by focusing on quality, by investing in sales and marketing, you know, by doing accretive acquisitions. You know, those have been the things that have continued to drive our volume growth. And regardless of what's going on exogenous to us, you know, we'll always continue to be our focus. That said, you know, we focus on markets with a value proposition that, you know, that reduces costs and improves outcomes. And, you know, we love working in that area. But I guess, you know, talking about the elections and the changes, the company has relatively high Medicaid exposure, right? And Republicans in Congress have talked about, you know, cuts to Medicaid spending. So obviously, there are specific ideas, but we don't know exactly, you know, which way it's going to go. But I guess there are a couple of things being discussed, you know, reducing the federal matching percent or, you know, the work requirements or maybe cutting some supplemental payment programs, you know, block grants. So a lot of different things being thrown out there. But I guess, you know, if one of those things were pursued, you know, how would you think about the potential impact to your business, you know, thinking about specifically these Medicaid areas that are being kind of discussed? Yeah. Most of those factors would not pertain to our populations and our service models. You know, there are no work requirements. We've not participated in any of these supplemental payments. So, you know, the folks by and large were taken care of in Medicaid are individuals with behavioral conditions and/or, you know, seniors in their home. You know, this is who Medicaid was intended for. You know, widows, orphans, and people with disabilities or seniors who need it. And so, you know, we are serving front-of-the-line populations where, you know, 20% of our revenue comes from Medicaid. And as far as we're aware, you know, nothing would change in regard to that. These are state-funded programs for, you know, which are extremely essential services for people really born with these conditions. It's not Medicaid populations of an otherwise 35-year-old healthy individual. So we don't see any risk from, you know, any Medicaid changes. It's usually all just a function of state budget processes year over year. You know, where we do have our Medicaid businesses, we've had over 30 years in a row of continued rate support and, you know, just a long track record of support with those services. And since, you know, you mentioned specifically your Medicaid business and provider side, right, the IDD business that's targeting very specific, you know, patient population is, you know, the way, you know, it's designed. So, you know, we usually don't talk about that business much, right? We started with the pharmacy because that's where the excitement is. But maybe you can kind of remind us, you know, about the main drivers for that business and also how to think about the reimbursement from the states because clearly, you know, this is Medicaid reimbursed because obviously rates have been pretty good, but I guess, you know, there's always questions how long this could last. So maybe, you know, you can spend, you know, a couple of minutes talking about that business specifically and the main drivers and also specifically the reimbursement outlook in that business. Yeah. Incredibly stable business. Again, these are individuals that are able to live in a home in the community, you know, instead of an institution. And so it's really the highest ROI of service we have. Typically saves states over $200,000 a year per individual. And it's just an incredible business from a mission perspective and from an outcomes perspective. Again, it's a business where rates and revenue have been very stable and have increased every year for 30 years. And, you know, we pour a lot of quality and compliance into that business every day. But just a very steady business. And I think if you step back and look at our enterprise in totality, you know, we are a mix of, you know, some higher growth businesses and then some very steady cash flow businesses. And ultimately, you know, that gives us a very nice and unique level of payer diversification as well, which we really like. And so, you know, across our pharmacy and our provider services, we really sit back on a very regular basis and are very thoughtful and intentional about where we're trying to dedicate resources and where we want to grow the most. You know, on pharmacy, we think especially oncology, we think infusion, we think home and community pharmacy focused on, you know, the senior living setting, home health, hospice, skilled nursing facilities, behavioral settings. You know, those are our three pharmacy businesses. You know, there are dynamics in each one of those markets that we think are attractive from a long-term perspective and where we think given our scale and our focus on quality and service programs allows us to compete very effectively with leading service levels, you know, on the provider side, home health, hospice, rehab, and then this more personal care, behavioral care area. Home health, hospice, and rehab would be the double-digit growth areas that we're very focused on growing into the future. You know, I would say community living and personal care, you know, these are sort of just very steady 2%-4% businesses that really help with cash flow generation and help us reinvest into other growth areas of the company. So it all fits together very well for us and, you know, has had a stabilizing impact on the organization over the years. You know, as it relates to any future reimbursement outlook, you know, IDD was carved out of any of that discussion starting about a year ago in terms of, you know, hey, what happens six years from now if ever implemented on, you know, 80% of the reimbursement having to go back to direct labor. IDD was always carved out of that discussion, still is, and, you know, we'll see where that even lands, you know, five to six years from now. Right and I guess staying on that business because, you know, there's been an increase in litigation and media articles about quality issues and behavioral health providers, so it's not really what BrightSpring does, but I guess there was one also for BrightSpring a while ago, so maybe can you comment on any changes in operating environment for that business at all because of that attention that's being put on behavioral, I guess, bigger picture behavioral industry? Yeah. I would say, no, just very consistent performance in that business. We're not a psych hospital or anything like that. You know, this is taking care of individuals in largely three, four, five-bedroom homes out in the community instead of an institution. This is about 15% of our company today. It was really the legacy of the organization. When I arrived eight years ago, it was about 70% of the company. And, you know, we've just continued to grow so much in the clinical areas, home health, hospice, and the pharmacy areas that even as this business has grown, it's become, you know, a small part of what we do overall. But a tremendous mission there. Again, it is a huge ROI for states. The ability for these individuals who have more or less been put out to be able to live in a neighborhood, in a home, live a great life, you know, is an incredible thing. You know, it is a more acute population a lot of the time that you're helping to live out there, you know, in a community, and so you've really got to focus on quality and compliance, but we make more investments in that business and in those areas than really I think almost anybody in the industry and have leading quality measures to show for it, so again, you know, this is a business that's been around for 50 years at the company. It's been one that's been very stable where we continue to make investments in it. But, you know, we derive our growth in the organization and where our growth focus is, is really the other 85% of our company today. Right. Exactly. And I guess to that point, since you mentioned, yeah, the company is quite diversified. I counted like 10 different business lines. I mean, you can even go more narrow and you can come up with even bigger numbers. So there's a lot of different things going on inside this organization. So, you know, this obviously begs a question of, you know, examples of what are actual benefits of owning all these verticals under one roof? Yeah. I mean, fundamentally, you know, we have three pharmacy businesses and especially oncology and infusion and then home and community pharmacy serving a variety of settings where we go to people 24/7. We can be anywhere in the U.S. within three hours, and so, you know, but our pharmacy is really characterized as a closed-door pharmacy where we go to the patient with very specialized programs. These are more acute populations. All of this is extremely different from retail, and so, you know, it is a specialty pharmacy focus to unique higher-need populations characterized by a very customized set of services, which drives, you know, health outcomes significantly. You know, that is what we are doing in pharmacy writ large, and there's a lot of markets where you need to go to people where they have specialized needs. We really leverage our scale and our clinical and quality expertise in doing that. On the provider side, you've got home health, hospice, you've got rehab, and you've really got the personal care services, those three. We are now building out a primary care overlay to that, you know, which we're excited about, but which is a longer-term build, which can ultimately drive more integrated care. It's moving us more into value-based care as well. You know, look, we think that's the reason we've been successful is that we have complementary service lines that we are able to offer. It gives us more scale. We are able to leverage best practices in the enterprise in each one of those businesses, whether it's HR, GR, IT, sales, quality. You know, we are able to deploy expertise into every one of those businesses theoretically to try to run them better than individual company providers in a couple of states, and so it's our scale, it's our best practice deployment, and it's also our ability to do accretive acquisitions to drive synergies, operational improvement. These are all things that we are able to, you know, to bring to the party, so to speak, when we have one integrated platform that's being managed separately, but at the same time, we have dedicated owners, leaders, and strategies and resources for each one of those businesses, so we think our one enterprise approach is what makes us successful. It gives us more stability, I think, more diversification, but we also try to drive more growth in terms of how we think about where we want to spend our time and money and optimizing within all of those markets. And so, again, what's driven our growth historically has been, you know, we participate in good markets that are growing where we're driving market share gains, and that's driving really strong and outsized volume growth. You know, and that's been on the back of quality. Number two, we've continued to drive a lot of efficiencies over time, leveraging the scale of the platform. And then number three, we've been able to do accretive M&A. I think going forward, number four, hopefully we will continue to demonstrate and build out this primary care capability, which will be a care management adder. But that's something that we need to execute on as we move forward in the future. But certainly a dynamic organization, and we think that, you know, that's a good thing. So you mentioned M&A, but I guess if you strip the M&A because you mentioned a lot of these business lines growing double digits. So just to confirm, I guess I assume the pharmacy business, that's largely organic, but in the provider segment, there's been more acquisitions that you've been doing. So when you say double digits growing in some of these segments, like how much is organic and how much, I guess, acquisitions when you talk about the expectations for the growth rates being double digits? Yeah. When you look at our 2023 and 2024 revenue across the company, you can assume that's largely all 98%-99% organic growth. Especially oncology has been 100% organic. Really, the M&A we've done on the pharmacy side has been more on the home and community pharmacy where we've done some tuck-ins, you know, at sub-four times multiples. That's been it on the pharmacy side in the last two years. And then on the provider side, you know, we've really focused our M&A on home health, hospice, and rehab. We don't really do any M&A in community living or personal care. And even those deals in the last two years have been very measured. Other than the deal we did in hospice in Florida here most recently, which, given the uniqueness of the situation, we needed to be a little bit creative on. Other than that, even the provider deals have been at, you know, six, five times or lower multiples. We've been real opportunistic as we were heads down, you know, before the M&A and before the IPO and in our first year after the IPO, really focused on getting leveraged to three times in the next two years, and so, you know, but opportunities abound, and we've done 60, 59 deals in the last six years. You know, all but one or two of them, you know, have more EBITDA than we acquired them, and so, you know, we really do have an incredible M&A platform here. There is more, you know, value creation possibility, potential that we have. You know, but we're always, you know, probably for the next year or so, I would assume it's safe to say, you know, we're really going to, you know, balance, you know, our view of leverage and with incremental growth and focus on deals that, you know, we think are going to be very accretive from a multiple standpoint. All right, so we should think more about like tack-on acquisitions rather than anything material. That's been what we've done for the last two years, and I would say safe to assume at least for the next year, that's probably where we'll continue to operate. You know, as we're able to manage our leverage down over time, you know, I think, you know, that'll create more opportunities to do slugs of EBITDA here and there for, call it $15 million or $20 million or $25 million, but you know, we've largely kind of focused on smaller deals where you can just get better multiples, and I think we'll probably do that for the next, you know, 12 months and go from there. Right. Because you also stated your target leverage of three times, right? So should we assume essentially that the free cash flow should be going towards debt paydown versus acquisitions? That's the way to think about next 12 months? Yeah, and so we'll balance use of free cash flow across debt paydown and accretive M&A. I mean, you know, if you think about 10% or 12% of EBITDA from M&A, you know, call it we'll do this year, you know, maybe pro forma on an annualized basis now. But that's just kind of the rule of thumb we've had. We don't exactly hit that number every year, but sort of 10%-15% as a baseline of tuck-in M&A. That's how we've always talked about it. You know, when you think about multiples on that amount of pro forma EBITDA, you know, being in the four-to-six range, you know, that you have ample ability to do that M&A extremely comfortably, you know, while still having, you know, a lot of free cash flow to pay down debt. So, you know, if that's the target for M&A, you know, we have ample ability to execute against that and pay down debt. You're really not even eating up half your free cash flow. Now, if we decided to get more aggressive on M&A for all the right reasons, you know, you know, you know, that'd be something we'd have to take on a case-by-case situation. But our baseline has been to comfortably be able to do some tuck-in accretive M&A while still generating free cash flow for debt paydown. And in opportunistic situations, we've also used equity where we thought that that would be helpful and also, you know, keep moving us down the path on leverage. Right. Exactly. And I guess we ran out of time. So I appreciate, Jon, for spending this time with us. And to the audience, we still have one more session for today. So please stay tuned. And thanks so much for joining the conference. Okay. Thanks, Joanna. Nice being with you. Have a good day.