Hi, good afternoon, everyone. My name is Erin Wright. I'm the Healthcare Services Analyst at Morgan Stanley. Happy to have with us today, BrightSpring Health Services. With us, we have Jon Rousseau, the CEO of the company, a recent entry kind of into this space from a public arena standpoint, so we're excited to have you here. For important disclosures, please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. If you do have any questions, please reach out to your Morgan Stanley sales representative, and with that, let's get started. Sure. So thank you so much for coming. I think it's been a kind of dynamic conference so far and a lot of news flow. But can you just take a step back and for investors that are newer to the story, give us a little bit of a background on kind of the underlying vision of kind of the combined pharmacy, the care delivery provider business, and kind of where we stand now in terms of overlap, where that goes over time, and just, you know, the vision in terms of the combined assets? Yeah, sure. Thanks, Erin. Really appreciate it. So BrightSpring today is, you know, we are a leading home and community health services company, and, you know, we think that value proposition is very strong. You know, we're participating in very large growing markets in U.S. healthcare, in service areas where we deliver pharmacy and provider capabilities to individuals where they are in home and community settings by and large. And, you know, that's done in a very high-quality way, and it has a really high ROI. And so I think the fact that we are participating in the home and community is really the fundamental thesis for how we're trying to drive impact within healthcare. Our businesses ultimately are very related in that most all of the individuals that we serve, you know, either seniors or behavioral populations, have a need for multiple services. So if we are able to do that in a more integrated and coordinated way for the individuals on our services, that's of significant benefit to them, and I think that's one thing that does make us unique. You know, so as I like to sort of speak about it in sixth-grade terms, you know, in the pharmacy world, there's retail, and then there's the hundreds and thousands of locations every day, where millions of Americans need their medications brought to them in a more customized way, and that's us. On the provider side, there's hospitals and doctor's offices, and then there's the millions of Americans every day who need their healthcare brought to them or where they go to a clinic in the community, and that's us. And so we try to go to individuals where they are in a highly customized way with higher quality, lower cost services. And you know, there's significant tailwinds in that offering in the healthcare world today. And you know, ultimately, you know, we just continue to try to put the infrastructure in place to continue to satisfy that demand for the years to come. Okay. And can you talk a little bit about the growth algorithm kind of across your business and what we should expect kind of in the coming years, just bigger picture? You know, M&A is a component of that, as well as some organic growth opportunities. Sure. Can you describe a little bit of that? Yeah, sure, Erin. If you look back and factoring in 2024 at this point, we've had. I've been at the company, time flies, about coming up on eight years, and, as we go through 2024, you know, we have about a 15% CAGR on an EBITDA perspective on an annual basis, looking back over that time period. About 10% of that has been organic, and about 5% of that has been through acquisition. So you know, we have a fairly extensive track record at this point and pretty consistent at being able to drive double-digit EBITDA growth. I mean, if you look at what has been the underpinnings of our company to go from, you know, even five years ago, we've essentially doubled the revenue in EBITDA. You know, it's really, it's really been three things. You know, we've continued to drive volume and market share across all of our service lines. You know, number two, that has continued to grow our scale, and with that scale, we have driven significant cost efficiencies in many different ways. And then third, we've been able to execute on accretive M&A. We're able to bring a lot of operational expertise to the businesses we acquire, and we're able to drive a lot of acquisition synergies as well. And so volume, efficiencies related to our scale, and our best practices related to our scale, and then accretive M&A, that's really been what's driving our organization historically. The pharmacy side has been a little bit higher growth historically, but provider has been extremely steady, and then here in particular, over the last year, has been a double-digit EBITDA grower for us as well. As we look to the future, we have been layering on some integrated care capabilities and home-based primary care, so these are docs, NPs, doing house calls. And we believe in the future, that could be really helpful to unlock a lot more integrated care opportunities within the organization and ultimately allow us to manage people in different payer constructs, which would be helpful as to... We ultimately see that as an upside driver in the future. But you know, as we sit here today, you know, nothing makes us feel any differently about, you know, the trajectory that we're on for the foreseeable future. And M&A, you did recently close a more sizable deal for you. And how do you think about kind of the pipeline here, and can you talk a little bit about your most recent transaction as well as where you see kind of the greatest opportunities? And you're relatively agnostic across the different segments, but where does the pipeline stand today? Sure. Yeah. You know, we've done about. I think we've closed six acquisitions so far this year, other than the one transaction you're referencing, I'll come back to. They've largely just been lower multiple tuck-ins and complementary or adjacent geographies. That's really been our strategy the last two years, is just focusing on geographical tuck-ins at very attractive multiples. Our pipeline has, has been consistent and has never been more robust. You know, just given our footprint, you know, serving four hundred thousand people every day in the U.S., being in fifty states, you know, we tend to see a lot. Most of it's proprietary, and so we have, you know, very good opportunities within the acquisitions world, and we just have to really try to be very disciplined. You know, we're focused on getting to three times leverage within the next two years. That's a priority for us, but we think we can get there and balance accretive M&A as well, given our cash flow, but we have tremendous deal volume. I mean, there's upwards of 150 of EBITDA that we theoretically could acquire, you know, in the next six months if we wanted to, and so we have to force ourselves to be very intentional and very selective about the M&A we do, and again, in the last two years, as we, you know, started to go through the IPO process, we've just been very heads down operationally and have been very focused on tuck-in M&A, as I said. You know, we will continue to be opportunistic, and there's always a reason and a sound logic for why we do anything. If you look at the 60 deals we've done over the past five and a half years, the average M&A multiple on those pro forma on EBITDA, pro forma EBITDA multiple is about four times. And so, you know, through our operational prowess and acquisition synergies, we're really able to be effective in driving that level of performance. But we're very selective in the deals we do to get that level of performance as well. The Florida Hospice deal, more recently, was an interesting example of being creative from a structuring perspective, which was required to effectuate that. But it was a unique opportunity to get into a great market, where there's a Certificate of Need, so there's limited providers, which creates a nice environment. For an opportunity like that in a new market, defined by a CON in hospice, where we do very well, you know, that was something we decided, you know, we wanted to make a priority, and we were able to figure it out through relationships with the seller and then being creative on the structuring side. De novo expansions are also a key part of the company's network expansion strategy organically. I guess, within your latest guidance, what's embedded, I guess, near term, or what are your plans from a de novo perspective? Yeah, I would say a cadence that resembles our historical of about 15-20 de novos a year, you know, would be consistent. I would say it's going to mirror where we've done tuck-in acquisitions across our service lines the most as well, which would be, you know, home health, hospice, rehab on the provider side, and then infusion and home and community pharmacy on the pharmacy side. You know, that's where we've done most of our acquisitions, and that's where we'll probably do most of our de novos as well. De novos would be even more weighted towards new home health, new hospice, new rehab locations, branches, and clinics. And then, you know, a handful of new pharmacies in certain geographies where we want to open up a pharmacy, maybe to be a little bit closer, you know, to some folks in certain areas. But the de novos will skew about 80% to home health, hospices, rehab, as we continue to try to organically grow that business and add market share. You know, de novos are typically, you know, high return on capital investments. They can take three or four years to get, you know, to a couple times return on your investment, but you're always seeding growth several years out when you do them, and it's just a key part of our overall volume growth and market share strategy. And then, thinking about, like, in our long-term model, we kind of have that high single-digit kind of EBITDA margin in perpetuity. But when we dive deeper into the two businesses, pharmacy segment, inherently lower margins, obviously, but you have the provider business that's higher margin. So, how do we think about that mixed dynamic and across the two segments, and how that will evolve, I guess, given some of the strength in kind of pharmacy as well, and are there other levers, I guess, from a margin perspective? Yeah. Any margin change that we've had in the last few years has purely really been driven by some extraordinary growth in our specialty oncology pharmacy business, which, by the nature of specialty pharmacy, has a lower margin, so it's really been purely mixed driven. As that business continues to perform well and continues to scale, we feel that the margin within that business specifically is, you know, is very steady. Generics are great for everybody, and as more generics come into that business over time, I think that's a helpful adder. From a margin perspective, on home and community and pharmacy, you know, we've been really focused on some operational initiatives that we feel could be incrementally positive to the margin in that- in those two businesses over the next couple of years. And then, you know, provider has, you know, has a very stable margin in line with industry averages. That is, the provider business grows, it has a beneficial impact on the overall margin of the entirety of the organization. And then, Erin, you've just got volume growth. You know, we continue to scale from a volume perspective, which drives margin too, and then really last, you know, we're very focused on continuous improvement projects, lean processes, and, you know, getting into AI applications today. You know, this year alone, there's gonna be probably some 15-20 million of EBITDA we've generated from just project initiatives, you know, across the organization, driving lean and driving automation, and that will always continue to be the case. I think in some of our pharmacy businesses, as they grow, we have specific margin opportunities operationally in those. The provider business is helpful from a margin perspective as it continues to grow, and then we're always very focused on operational initiatives as well. You know, I think that puts us in a place where we see our margin being very stable, to ticking up, you know, you know, some 0.5-1% over the next year or two. That's our base case assumption right now. Okay, and then anything, any nuances we should be thinking about? This is more of a short-term question, so apologies, like in terms of heading into the second half or early twenty twenty-five, that we should be aware of. Yeah. You know, we always see some- Mm ... seasonality in our business, where you have a little bit of a higher margin in the back half of the year. But there are some specific drivers as we look to the back half of this year, that were underpinning our EBITDA guidance raises as we've gone through the year here. You know, there are some product launches coming on the specialty pharmacy side of our business that will be helpful in that regard. There are some new rates coming onto the market in hospice and on the personal care side of our business. We did sign, you know, several new large customers in home and community pharmacy, which will be, you know, fully ramping into the back half of the year. And then as we just continue to grow volume quarter-over-quarter in the organization, that will be helpful as well. So you do have just some typical, little bit of higher margin in the back half of the year, but then, you know, some strong volume growth and other specific factors that we've been driving this year that give us good line of sight into where we think we'll be in the next two quarters. Okay, so I'll delve into the pharmacy solution segment a little bit more. So limited distribution drugs, I guess LDDs, I think the last time you disclosed it, 118, plus or minus, in terms of what you've won, I guess, to date or over the past 12-18 months, about 18 or so. How meaningful, I guess, is that for you in terms of your positioning and competitive positioning in the market, and how do we think about the cadence of that going forward? Yeah, we have about, and specialty oncology business and some rare and orphan, we have about 120 limited distribution drugs today. You know, what those are is, you know, there's dynamics in those end markets, those diagnostic categories, where manufacturers will often and typically, you know, allow certain pharmacies to be in their network to fill the drugs for their patients. Those are called limited distribution drug networks. So, we're very proud of our quality. We have a Net Promoter Score in pharmacy of over 90. We drive very high levels of patient adherence and satisfaction and outcomes, you know, which forges, you know, very healthy and productive relationships with the manufacturers and the drug markets, and the drug makers to service their patients as best possible. There is a big pipeline of drugs at the FDA and oncology that will continue to be the case for the next decade. I think, there's some $90 billion of new drugs that are estimated to come onto the market incrementally over the next seven or eight years, and just given the healthy relationships that we have with the drug makers and biopharma, you know, we would expect to be a partner on many of these drugs that just continue to come onto the market, so you know, the net result of very strong quality and very strong manufacturer relationships is there is this steady stream of new innovative brand drugs coming onto the market and limited distribution networks that we participate in. You know, we tend to see about one new drug that we gain access to on a monthly basis. So as you look out over the next, you know, two years, that would be another twenty brand drugs coming onto the market that we would be servicing and supporting, in addition to continued growth in generic drugs and drugs going from brand to generic. And so, you know- Mm ... healthy dynamics really on both sides of the business, with brands and generics. Since you mentioned generics, biosimilars, you know, come into the fold, but do you have that embedded in your expectations? Like, is that embedded in your forward outlook in terms of certain generic or biosimilar launches across specialty? Yeah, when you look at the portfolio of our drugs and the formulations of them, biosimilar exposure is really not a significant risk or issue for us, just given the nature of the drugs that we're filling. So, you know, our drugs just tend to be, you know, small molecule, straight brands, or on the infusion side, you know, largely in areas that you don't see biosimilar threats necessarily. On specialty oncology side, it's oral solids as well. So, you know, really, it's brand or generic, and as it relates to generics, which are good for everybody, there's eleven more big brands going generic over the next five, six years. You know, there was one drug called Sprycel, that's actually now converting this month. and, you know, you can think about, you know, two or so big brands going generic every year, and, you know, those are good for everybody, and those are helpful tailwinds in the business. Okay. And then, can you take a step back and kind of break out where the focus is? You have specialty and infusion versus home and community across that segment. What's the mix now, or where does that go over time? Because you're obviously seeing outsized growth across that core, mostly specialty oncology, it sounds like, but other areas, I guess, that you would call out. Yeah. Within our pharmacy business, we don't break that out specifically, but the majority of our revenue is now coming from specialty and infusion pharmacy. You know, we see that business continuing to execute at a high level. You know, I don't know if we can say that some of the growth rates we've been able to deliver on there over the last year or two as we get bigger and bigger are necessarily sustainable, you know, in the 35%-40% range. But, you know, I would say that there's nothing that would otherwise tell us, you know, that things would slow down necessarily. And, you know, we will just continue to try to drive quality to the greatest extent we can. And, you know, we have a really high-performing sales force in that business too, that's in thousands of prescriber offices every day, working with patients, families, working with clinicians to pull through the referrals. That's a key part of that whole business, too. And so, you know, we see a great innovation pipeline at the FDA across oncology and infusion. We really focus on quality and operational execution. We really invest in sales and marketing, and so, you know, our intention is to continue to try to grow that business at consistent rates, and, you know, over time, it has become now the majority of what we do in pharmacy. And then home and community, I guess, is that still... You know, can you see growth across that segment? I guess it's inherently- Yeah Slower growth, given the nature of kind of innovation across that. Yeah. You know, the home and community pharmacy is, you know, you're gonna see areas like oncology and some of the infusion therapeutic areas as categories grow at higher rates, you know, eight or nine%, or into the double digits, 12, 15% for oncology. You know, home and community, those end markets grow at a little bit more conservative rates. You know, this is a business where we're serving hundreds of thousands of people in senior living communities, assisted living facilities, people in skilled nursing facilities, people at home on hospice or home health, or with behavioral conditions, hospitals, you know, a very diverse customer base. But channels and end markets that are growing probably more at sort of the 3-6% range. So this is an area where market share becomes more important, and that's been a characteristic of that business for us over the past five and a half years. You know, that's a business that will grow its scripts at close to or at 10% this year. And so you can see that we are driving market share growth in home and community pharmacy. And all of these pharmacies, particularly that one, really benefit from scale. You know, it can be more challenging in the pharmacy world if you don't have very significant scale. And you know, that has been a strategic focus for us in that business. How do we continue to drive maximum scale in the organization through leading quality, which leads to more and more patients and customer relationships? Scale is just very important to be successful in the pharmacy world. You know, I think outside of the PBMs and retail pharmacy, you know, today we are the biggest pharmacy in the US. We'll do 40 million scripts this year, and it's really been built around our quality and our customer service programs and relationships with our customer base. It's been very nice growth across kind of the overall pharmacy business in general. Can you just remind us about how much of that is truly organic? Is that... You know, you mentioned a whole bunch of drivers there, whether it's innovation, but how much of it would be, like, market share gains, versus innovation, versus other drivers kind of at play? Yeah. In specialty and infusion pharmacy, it is almost all entirely been organic growth. On the home and community pharma side, pharmacy side, we've definitely benefited from accretive acquisitions. You know, again, that's a space where there are, you know, smaller, more local pharmacies out there, where you have opportunities to acquire at lower multiples, and that's really where you can bring pretty significant acquisition synergies to bear. And where you can drive, you know, attractive opportunities from an EBITDA multiple standpoint. So you've seen more M&A on the home and community pharmacy side. You know, as it relates to the provider side of our business, you know, rehab, home health, and hospice, we've been active in doing tuck-in acquisitions on a regular basis. I would say outside of the one larger home health and hospice acquisition we did a couple of years ago, three years ago, to get critical mass, you know, they've all been, you know, pretty attractive, lower multiple, geographical tuck-in acquisitions. And, you know, probably if I had to characterize it, you know, 75%-80% of the provider side growth has been organic, with some supplemental growth from the acquisition side. But specialty pharmacy and infusion in particular has been, you know, really an all organic growth story. Since you mentioned moving to the provider segment, as we think about kind of growth across the different sub-segments in the longer term growth, I guess, where do you see an opportunity for more accelerated growth? I know you've mentioned kind of rehab, an area that's been faster growing, but you have this home health, you know, component, versus the community and rehab setting. Yeah, we've seen broad-based growth across our provider platform. You know, really proud of that business this year. You know, all the service lines are really performing very well. I would say we've focused more of our efforts from a strategy and an investment and resource perspective on the more clinically oriented service lines, like home health, hospice, and rehab, and now building out home-based primary care, getting into that. That's where most of our focus has been. You know, there's just tremendous market share opportunities in those industries over a long period of time. You know, you look at things like home health and hospice, and you know, there's some 15,000 providers in the United States. And so, you know, you could be a company of 100 or 200 million in EBITDA and still be, you know, in the mid- to low-single-digit market share in these industries. And so, you know, we just see a nice opportunity in those markets just to continue to focus on, you know, really strong service offerings, technology capabilities, sales and marketing capabilities to drive market share, you know, over long periods of time. And in doing so, within one enterprise, that I think really brings other enhancements and advantages to those businesses to foster them, and help them grow more quickly over time, versus being a standalone organization. You know, we really like the long-term dynamics in those markets, and the data around the clinical benefit of these services has just never been stronger. In terms of labor, how are staffing levels, use of contractors, wage investments, like those, retention, how is that trending, relative to you? Yeah. Pharmacy is very helpful in that regard. You know, it has a very scalable labor model with about $1 million per FTE. We like that about the pharmacy side of our business. On the provider side, you know, you've got to have the clinicians and the staff to serve the patients, but we have managed that well. Turnover and retention has gone up every single year I've been at the company. I'm sorry, turnover's gone in the right direction. Turnover's gone down, retention's gone up every single year. I think just looking at the data the other day, retention so far this year, year-over-year, is three or four percent better. For clinical roles, you know, we're in the 70s, close to 80% on retention, which is really good in this world today. You know, I think 80% retention is best in class, and, you know, that's where we continue to target, but you know, a quality-focused culture at the organization, a people-focused culture in the organization. We've continued to invest in systems for our people. We've continued to invest in wages and benefits, and I think people like being a part of this one enterprise with a bigger value proposition and strategy, ultimately, you know, that's created just a lot of stability and continuity in our labor force. Value-based care, you know, is a potential area of upside, a potential, you know, $100 million opportunity for you. How do you think about, you know, implementing that and how that works kind of across your business? Yeah, you know, we started building out this third pillar of home-based primary care in addition to pharmacy and provider services, a year or two ago, really to connect our services as much as possible. But if you look at our pharmacy and our home health, you know, patients we serve every year, there's some 400,000, you know, new patients we will see and serve and have access to every year. I mean, one of the just big hallmarks of our organization is we're in the home, and it's such a proximal setting to the patient, and it's so unique about our organization. So if we had a primary care capability that could take care of these individuals in their home or in assisted living, that's just tremendous access to a large amount of patients that we would have to provide better quality to. You know, we see in our home-based primary care, it drives hospitalization rates down 50%. You know, just tremendous outcomes that you get when you go to the patient on a higher frequency basis. And so how do we get access to more patients? We can put in primary care, leveraging our service lines. How do we drive great quality? But then, Erin, ultimately, how do we serve those patients in a more interesting payer model? And so last year was the first year that we developed an ACO capability. We did that in partnership with another entity. In Q2, one of our six acquisitions this year was buying a little I-SNP. That's a special needs plan, where you are a managed care plan for eligible patients in long-term care settings, and that was just in two states with several thousand patients to get started there, but the goal is to have our own payer capabilities that we could plug patients into, to better see the benefit of all of the quality outcomes that we're driving, and then ultimately, if we're doing this for our own patients, we are also now starting to talk to payers to do this for their high-risk members, to get better outcomes for them as well. And, you know, again, this is a one, three, five, and 10-year build, but we feel like we're in a really unique position to be able to build this out. And, spending a lot of time on it, you know, not talking about it a ton until there's more, you know, tangible results to point to. And, you know, but I think next year is gonna be a year of some material growth in this business, for the first time, that we'll be able to speak more to. And, I think exciting what we can do to try to provide better, more integrated solutions for payers, you know, moving up the value stream as the doctor or the NP. Okay, great. And I have to ask, just into an election cycle, and it's a dynamic regulatory environment right now. Yeah. Anything you're paying attention to, whether it's on the reimbursement side or broader, kind of bigger picture regulatory, dynamics that you're... That we should be aware of? Yeah. I mean, we're lucky. We have a world-class government relations team that is, you know, constantly meeting with people at the state and federal level to educate about all of our services, but you know, we serve front of the line populations, where our services make a dramatic impact on individuals, both in terms of quality and then cost reduction in the industry, so we see bipartisan support for all of our services, given the nature of who we're serving and the benefit that our services have, and so we don't see much variability in the future based upon, you know, whichever party would, you know, be in power in the executive branch or on the Hill, just given the nature of what we do and the benefit of it. Okay, great. Lastly, if I could just ask, you know, hopefully, you know, we'll be speaking again next year. Kind of what you think is kind of underappreciated today that hopefully everyone will kind of understand even better as we kind of head into next year? We talked a lot about the bigger picture stuff, but are there any things that sticks out that we haven't spoken to? Yeah, you know, I think with our platform, you know, one of the reasons, a main reason we've been successful over the last, you know, eight years and hopefully into the future is because of our platform. You know, we're able to be very thoughtful and intentional about the service lines that we're participating in. We try to focus on markets that we're the most excited about over the long term. We try to prioritize our resources into those markets, and then we really try to create best practices in the enterprise that we can leverage into each and every one of the businesses to drive performance. And again, we leverage that scale, and we drive accretive M&A. And so, you know, everything we do is serving people in high-quality ways, at lower cost settings in the home and community. You know, those trends are not going to change. I think, you know, there needs to be much, much more of that. So if we can be a more scaled and sophisticated provider, providing needed solutions in those markets, I think that will continue to be a very good place to be. But the reason that we perform well today is because of the enterprise and all the capabilities that we can bring to bear. And I think as you look forward to the future of healthcare, scale and technology investment, and quality innovation is only going to become more and more important in these really large, fragmented markets, where I think you need innovators and providers out there who can continue to try to, you know, lead and stand apart in the industry. Hopefully, we'll continue to drive really solid growth in each and every one of the service lines, and we'll continue to make progress in some of these areas around integrated care that are really interesting to us. Great. We're excited for what's to come. Thank you so much. Thanks, Erin. Thank you.