BrightSpring Health Services, Inc. (BTSG) Q2 2026 Earnings Call Transcript

Thank you for standing by, and welcome to Brighter 2026, Earnings, and Participants Aren't a Listen-Only Mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to David Dykler, Investor Relations. Please go ahead. Good morning.

Thank you for participating in today's conference call. My name is David Dykler with Investor Relations at BrightSpring. I'm joined on today's call by John Russo, Chief Executive Officer, and Jen Phipps, Chief Financial Officer. Earlier today, BrightSpring released financial results for the quarter ended June 30, 2026. A copy of the press release and presentation is available on the company's Investor Relations Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. Such forward-looking statements are not guarantees of future performance. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release and presentation, as well as in our quarterly report on Form 10-Q that will be filed with the SEC, including specific risk factors and uncertainties discussed in our Form 10-K and Form 10-Q. Such factors may be updated from time to time in our periodic violence for 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 through their most directly comparable GAAP financial measures to the extent available without unreasonable effort in today's press release and presentation, which again are available on our Investor Relations website. This webcast is being recorded and will be available for replay on our Investor Relations website. With that, I will now turn the call over to John Rousseau, Chief Executive Officer.

Good morning, everyone, and thank you for joining BrightSpring's second quarter 2026 earnings call. I'd like to start by thanking everyone at BrightSpring who drives our mission forward and makes a lasting impact every day. We're grateful for the hard work and commitment of all of our teammates, enabling us to deliver high-quality and timely care to patients in so many communities across the U.S. As we grow the BrightSpring platform, we remain focused on our important role and value proposition of delivering quality services and compassionate care to patients in lower-cost and, most often, patient-preferred settings. Our strategy is aligned with many secular trends in U.S. healthcare, and we are focused on strong execution, thoughtful innovation, and continuous improvement to drive greater impact and sustained growth. Our business continues to be underpinned by quality and operational performance, and these fundamental and critical enablers go hand in hand with patient volume increases, expansion into adjacent and new markets, and disciplined capital allocation. We see many opportunities for the company in the years ahead. Turning to the second quarter, we were pleased with the performance across the organization, which reinforces our conviction in the value that we provide to patients and stakeholders across the country. Financial results for the quarter came in ahead of baseline expectations, with total company revenue of $3.9 billion that represented 23% year-over-year growth and adjusted EBITDA of $206 million that grew 44% year-over-year. In the segments, pharmacy solutions revenue of $3.4 billion represented 22% growth year-over-year and adjusted EBITDA of $180 million represented an increase of forty four percent versus last year in provider services revenue of four hundred and sixty six million represented thirty percent growth and adjusted EBITDA of seventy five million increased thirty three percent versus last year in pharmacy solutions we saw continued business momentum in the second quarter our specialty and infusion business delivered revenue growth of thirty percent and script growth of thirty one percent reflecting strong performance from the clinical, operational, and commercial teams, and relationships developed with manufacturers, physicians, and patients over the years. Our specialty business continues to be driven by the branded oncology LDD portfolio, while we continue to leverage proven and core capabilities and expand into other targeted therapeutic areas, including certain rare, orphan, and other complex therapies, with noteworthy partnership wins in these areas. During the quarter, we added two Ultranero network LDDs to our portfolio, bringing the total number of LDDs to 155. For the year, we have launched 12 LDDs through Q2, four as exclusive partners, and eight Ultranero. And we, of course, continue to be extremely committed to our manufacturing and biotech partners and patients to deliver the best possible service support and experience for these life-changing and life-saving therapies. Additionally, we continue to see solid contribution from generic scripts, driven in part by newly available generic alternatives last year and this year. The infusion business delivered solid volume growth across both acute and chronic therapies in line with expectations, driven by operational initiatives and service levels, as well as growth investments and execution this year. We plan to expand both the acute and chronic footprint into new markets in the future and are optimistic about the opportunity to scale this business. In home and community pharmacy, we continue to operate at a high level, with service levels and controllable customer retention at all-time highs, as we serve a variety of growing end markets, including assisted living, behavioral, hospice, PACE, skilled nursing, and others. Second quarter volume and revenue performance in the home and community pharmacy business was impacted by the exit of certain skilled nursing customers last year and earlier this year, which in some cases has helped improve profitable growth year to date. We continue to invest in automation and technology to improve efficiency and service across our scale national footprint, and the positive impact of these initiatives was reflected in the profitability of the business in the quarter, which was up year over year. On the provider side, the home health care business performed well, driven by strong need and demand for these valuable services and continued volume growth above industry levels, as well as de novo investments, preferred MA and ACO contract execution, and contribution from acquisitions, all underpinned by leading quality results across the provider service lines. We are pleased with the integration of the Emeticis and LAC branches, with the home health team doing a great job of integrating, particularly in the areas of HR and IT, all while we continue to have nearly 95% of our branches at four-star or better. We now expect an EBITDA contribution of approximately $35 million in 2026 from these acquired branches. Our hospice services continue to demonstrate industry-leading quality metrics and strong census growth. The rehab care business continues its long-standing performance with continued payer contract advancements for these highly clinical neurotherapy programs, entry into new markets, and programs like Rehab in Motion resonating with patients and customers. All retention metrics for our clinicians continue to improve every year with retention at best practice levels. Personal care continues to provide consistent, high-quality supportive care to patients who need assistance with activities of daily living in the home, with a growth rate in hours served well above the industry growth rate. And in our home-based primary care business, our quality measures are extremely good, demonstrating significant reductions in hospitalizations and overall health care costs, realized by patients in our network. We continue to expand and invest in business development in this service line while further integrating with home health and hospice. Also, laying the groundwork for future growth in quality-based payment models. At the corporate level and across the organization, we continue to invest in and progress on key clinical, HR, and operational systems and new applications, including leveraging new automation and AI tools and agents in areas such as hiring, onboarding, intake, documentation, medication reviews, and patient care plans. We've now had almost 300 employees receive Lean Sigma certification of various belts while completing Lean projects for each across the organization, as we further institutionalize Lean business processes every year. On acquisitions, we have a full pipeline per usual, and while we remain very disciplined in executing deals that clearly meet our strategy and objectives, we are optimistic about possible transactions in the second half, having signed several small tuck-ins and geographical expansions in the past quarter. Now, let me provide a few more financial highlights from the second quarter, which Jen will discuss in greater detail in a few minutes. As a reminder, the company's financial results reference pertain to continuing operations and do not include results from the community living business, which was divested on March 30, 2026. Second quarter financial results came in ahead of baseline expectations, with total company revenue of $3.9 billion representing 23% year-over-year growth. Pharmacy solutions revenue of $3.4 billion and provider services revenue of $466 million represented 22% and 30% growth, respectively. Second quarter adjusted EBITDA of $206 million grew 44% year-over-year, representing an adjusted EBITDA margin of 5.3%, an 80 basis point improvement versus last year. Profitability in the quarter again benefited from the scale and complementary diversification of our platform across our target home and community end markets, which enables tangible advantages, including breadth and optionality of opportunities for revenue generation, disciplined operational execution, leveraging top-down driven best practices, procurement and contracting processes across the organization, the cumulative impact of our lean and process improvement programs, ongoing technology and AI investments, and our acquisition integration capabilities and synergies. Many initiatives contributed to the profitability and margin performance in the quarter, and these remain an important source of ongoing efficiency generation going forward. From a cash flow perspective, the company generated $144 million of cash flow from operations in the quarter, excluding a one-time cash tax payment of approximately $100 million related to the community living transaction. Leverage was reduced to 2.15 times as of June 30, 2026. We now expect approximately $600 million of operating cash flow this year, with EBITDA operating cash conversion of around 70% and leveraged for the year to end below two times before any potential acquisition. Also in the quarter, we received ratings upgrades from both S&P and Moody's, and we refinanced our debt at a 50 basis points lower spread. As mentioned, performance in the quarter was underpinned by consistent focus on quality of care and patient satisfaction. Additional quality measures of note include an industry-leading timely initiation of care of 99% in home health, hospice quality measures that continue to be well above the national average with a CAF's overall hospice rating of 89%, rehab patient satisfaction scores above 97%, and client satisfaction scores of 4.6 out of 5 in personal care. On the pharmacy side, in home and community pharmacy, dispensing accuracy was 99.98 percent, order completeness was 99 percent, and on-time delivery was 94.3 percent, while in infusion, our patient satisfaction score was 94 percent, with 94 percent of discharges due to completion of therapy. Specialty pharmacy demonstrated quality metrics well above the national average in the second quarter, delivering a high medication possession ratio of 93% and time to first fill of 3.7 days, with industry-leading net promoter scores. We are very pleased to consistently demonstrate exceptional service and quality across our businesses. Earlier this month, CMS released the calendar year 2027 preliminary rate for home health services. The preliminary rates include a positive annual payment update, the first such upward adjustment in several years, and a positive starting point. We continue to work with CMS and Congress to highlight third-party data showing the positive health outcomes and lower Medicare cost profile of high-quality, clinically appropriate, and medically necessary home health services. To close, the second quarter reflected consistent execution that we strive for every day, with broad performance and steady progress towards our operating and growth priorities. We are building upon a strong foundation of growth, anchored on quality, to drive scale while we deploy best practices and processes across the organization to continually improve operations for the future. As we move into the second half of the year, the business is well-positioned, momentum is broad-based, and we are confident in our ability to deliver the updated full-year guidance Jen will discuss in a moment. With that, I'll turn the call over to her.

Thank you, John. As a reminder, we closed the community living transaction on March 30, 2026, and all financial results reflect only continuing operations, with community living results reflected in discontinued operations. For the second quarter of 2026, the company revenue was $3.9 billion, representing 23% growth from the prior year period. Pharmacy solutions segment revenue in the quarter was $3.4 billion, achieving 22% year-over-year Within the pharmacy segment, specialty and infusion revenue was $2.9 billion, representing growth of 30% from prior year, which was driven by branded LDDs and new LDD launches script as well as wraparound fee-for-service program growth, generics, acute infusion growth, and strong commercial execution in both the specialty and infusion businesses. Home and community pharmacy revenue was $540 million, representing a decline of 8% year-over-year due to an approximate $50 million impact from the IRA, along with our decision to exit some uneconomic customers, both of which we have previously discussed and performed as expected. On the IRA impact for the balance of the year, we continue to see a revenue impact in home and community pharmacy of approximately $45 million in each of the remaining quarters in 2026, bringing the total year IRA impact to home and community pharmacy revenue of approximately $200 million. In the provider services segment, we reported revenue of $466 million, which represents 30% growth compared to the prior year. Home health care reported $278 million in revenue, growing 51% versus last year. Revenue performance was driven by average daily census growth, de novo expansions, and the impact of the acquired of Metasys and LHC branches, which contributed approximately $78 million of revenue and approximately $8 million of adjusted EBITDA in the second quarter. Rehab care revenue was $82 million, growing 12% versus last year, with healthy growth in person served and hours built in core neuro rehab along with the continued momentum in our rehab in motion program personal care revenue was 107 million representing 7% growth year-over-year driven by modest growth in person served strong growth in hours built and stable operations moving down the P&L second quarter company gross profit was 493 million representing growth of 32% compared with the second quarter of last year. Adjusted EBITDA for the total company was $206 million in the second quarter, an increase of 44% compared to the second quarter of 2025. Adjusted EPS for the total company was $0.45. Company profitability benefited from strong top-line performance across the businesses, as well as consistent operational execution in addition to and from investments related to technology and AI. We continue to make targeted investments supporting a variety of operational processes and programs that will improve procurement efficiencies, streamline operations, and further standardize best practices throughout the organization. Turning to segment profitability performance in the second quarter, Pharmacy Solutions' gross profit was $298 million, growing 28% compared with the second quarter of last year. Adjusted EBITDA for pharmacy solutions was $180 million for the second quarter, an increase of 44% compared to last year, representing an adjusted EBITDA margin of 5.3%, which increased approximately 80 basis points versus last year and was similar to the first quarter of 2026. Second quarter pharmacy profitability benefited from strong branded LDD portfolio performance, product mix across all pharmacy businesses, pharma services and hub revenue and gross profit, as well as continued investments to improve operational performance. Of note, notwithstanding external IRA and any payer impacts, home and community pharmacy EBITDA performed well year over year in the quarter due to our internal continued operational process improvement underpinned by the deployment of new technologies. Provider services gross profit was $195 million, growing 38% versus the second quarter of last year, with adjusted EBITDA of $75 million, growing 33% versus last year. This represents an adjusted EBITDA margin of 16.1%, up approximately 30 basis points compared to last year. We have continued to see the benefits of operational initiatives that we have put in place over the past year, driving broad-based growth, greater efficiency, and economies of scale and increased margins across our provider services lines. On a total company basis, cash flow from operations was $44 million in the second quarter. excluding the one-time cash payment for taxes of approximately $100 million related to the community living transaction. Cash flow from operations was $144 million. Recall that the discontinued operations cash flows are included in the consolidated company cash flows. As we look forward to the balance of the year, excluding community living-related cash flow impact, we expect to deliver approximately $600 million of annual operating cash flow. As of June 30th, net debt outstanding was approximately $1.7 billion, and we finished the quarter with a leverage ratio of 2.15 times, which includes the impact of approximately $100 million of taxes associated with the community living divestiture in the quarter. As mentioned during the Q1-2026 earnings call, our leverage at Q1 when adjusting for the community living taxes that were due subsequent to quarter end was a leverage of 2.4 times. were able to reduce our leverage from q1 2026 to q2 2026 on an adjusted basis by 0.25 times our leverage ratio also includes 120 million dollars of share repurchases year to date during the second quarter we repaid approximately 300 million of the term loan with proceeds from the community living sale and repriced the loan at sofa plus 200 this compares with sofa plus 325 at the time of our IPO and reflects strong operating performance of the business, improved cash flow generation, and our lower leverage position of the company since the IPO. During Q2, Moody's and S&P both upgraded BrightSpring's credit rating, better reflecting our leverage position and debt management philosophies. Moody's upgraded its rating to BA3 from B1 and our senior secured first lien revolving credit facility and senior secured first lien term loan b ratings to ba3 from b1 s p upgraded our issuer credit rating to double b minus from b plus and also upgraded the ratings on our revolving credit facility and first lien term loans to double b minus from b plus the company has evolved since going public in january 2024 with business mix scale operating performance and leverage all further improved as we move into the second half of the year and 2027 we will continue to evaluate options for the most appropriate capital structure needed to support growth over the next five years turning to guidance for 2026 which excludes the community living business as well as any acquisitions that have not yet closed total revenues is expected to be in the range of $15.1 billion to $15.425 billion, including pharmacy solutions revenue of $13.2 billion to $13.5 billion and provider services revenue of $1.9 billion to $1.925 billion. This range reflects 17.0 to 19.5% growth over full year 2025, excluding community living in both years total adjusted evita is now expected to be in the range of 820 million to 845 million for full year 2026 this would reflect 32.8 to 36.8 percent growth over full year 2025 excluding community living in both years included in total adjusted evita is expected contribution from the Emeticis and LHC assets acquisition of approximately $35 million. I will now turn it back to John.

Thanks, Jen, and thank you for your time today to go through Bright Spring's second quarter 2026 results. We will now open up the call for questions. Operator?

Question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 1-1 again. You will be limited to one question to allow everyone the opportunity to participate. Please stand by while we compile the Q&A roster. Our first question comes from the line of Charles Rye of TD Cohen. Your line is open, Charles.

Yeah, thanks for taking the question. Maybe, well, congrats for the quarter. I just wanted to ask maybe what you're seeing in terms of generics there's a lot of discussion you know the other day about Revlimed and I think you guys had said previously that that was kind of coming on in stages just curious you know maybe sort of the contribution you saw in the quarter from that and and maybe just give us an update on you know what you're seeing how we should be thinking about layering in the benefit as we look to the rest at 26. And then maybe Jen, just real quick, any comments on sort of the step up in corporate expense in the quarter? Thanks.

Hey, Charles, good morning. I'm not entirely familiar with, you know, any news on Revlimed lately, but, you know, that started going generic about four years ago. It's been fully generic for quite a while now. So, you know, there's really been no change whatsoever to our expectations this year.

Yeah, from a corporate standpoint, Charles, We did see an increase as we continue to increase some investments across key hires, including some key hires we have in a couple different business roles, as well as corporate leaders that we're really excited about that are going to help drive value. We also did continue to invest in AI and automation technology projects throughout the quarter, and we'll be looking for the benefit of those to come on either later in the year or very early next year. Great.

Our next question comes from the line of Ann Hines of Mizuho. Please go ahead, Ann.

I just want to focus on gross margin in the pharmacy segment. It was up year-over-year 40 basis points, but it was down sequentially 70 basis points. And when I look historically, gross margin is usually flat or up Q1 to Q2. Can you just tell us what's going on?

Yeah. Hey, Ann. The margins in Q2 were very healthy again and completely in line with our expectations. We had seasonality in Q1 of this year, which is very typical and typical for your gross margin to be a little bit higher in Q1 versus Q2 for a variety of reasons. And on a GP per script basis, actually, when you normalize for that, our GP per script was actually up in Q2. So, you know, I would just reiterate that, you know, in the business, year-over-year growth was still 28% in GP, higher than revenue growth, and especially script growth in particular was 32% year-over-year and even 15% up sequentially.

Thank you. Our next question comes from the line of Scott Fidel of Goldman Sachs. Please go ahead, Scott.

All right, thanks. Good morning. Would be interesting if you can maybe parse out in the infusion business, maybe talk about how growth in the chronic birth to acute segments looked in terms of, you know, anything to call out year over year or sequentially, and then maybe just talk about in terms of the continued sort of investment and build out in the chronic infusion side of the business in terms of, you know, momentum there in terms of manufacturing engagement or demand or any other milestones you'd want to call out. Thanks.

Yeah. Hey, good morning, Scott. Yeah. I mean, look, we continue to be really positive on the infusion market, you know, notwithstanding, you know, some things here and there, you know, it's a $20 billion market, you know, still pretty fragmented, you know, and less competitive on the acute side for a variety of reasons, you know, just given the demands of service delivery requirements there, you know, but within that market, you know, I can say that our acute volume year-over-year was up over 20%, you know, which is what, you know, some seven to eight times, you know, what that market grows at. So, you know, some of our investments really pay off, and I think as we sit here today, there's another 12 to 15 states that we want to be in over the next five years. So we really do infusion as a long-term play here where we can continue to grind away. On the chronic side, we're still making progress nowhere near where we want to be. Nevertheless, the volume growth on that side of the business year over year was close to 20%. We've done some things like rollout, white glove, concierge programs for things like IG. We've seen that increase our conversion rate noticeably in the quarter. We're going to do that on some other target therapies and you know we just continue to invest and add into the business in terms of capabilities and infrastructure you know we've got you know a key AI project going on on the intake side and we've made some key hires you know upgraded CFO in the business within the last quarter you know some commercial investments as well you know brought in new leadership from a data analytics standpoint and we're starting to put this business together from a payer and purchasing standpoint in a more integrated way with our pharmacy for America business and all of that scale over there. So, you know, we see a lot of benefits from that in the future as well. So it's been a really productive quarter in that business, but remain, yeah, I would say more enthusiastic from a long-term perspective.

Okay, great. Thank you. Thank you. Our next question comes from the line of Peter O'Chickering of Deutsche Bank. Your line is open, Peter.

Hey, good morning, guys, and thanks for taking my question. Can you talk about the ramp of the LDDs in the back half of the year and how to think about the contribution of revenue and EBITDA? Any color of view will be involved in the directs and RASA when it launches in the fall, and how should we think about the overall EBITDA seasonality in 3Q and 4Q?

Yeah, I'll let Jen handle some of this, but, you know, Peto, we remain – good morning. We remain, you know, really enthusiastic about that business just given, you know, we've already won 12 LDDs to date this year. As mentioned in the script, you know, not only are we, you know, continuing to try to be the best oncology partner we can be, you know, within, you know, I think one of the more dynamic and innovative spaces within the specialty market. you know we're really leveraging those capabilities as much as we can not only from an operational but from a commercial perspective and field perspective to you know extend our partnerships outside of oncology and you know we have we have a lot of those today and you know some of our you know most I would say exciting wins here going forward have actually been outside of oncology now so you know we're not at liberty to talk about you know any specific drugs but you know we're well aware you know of the situation you reference and you know again you know I think we always leveraging our our unique operational capabilities and our customer satisfaction feedback and our value add wraparound services for for manufacturers which include you know you know patient contact centers nursing services 3pl data analytics agreements and capabilities, you know, we just continue to lean into those as much as we can and leverage our track record to put ourselves in a great position, you know, to continue to be a partnership, to partner for, you know, a lot of these just incredible therapies that are in the pipeline. So optimistic about it as well. And, you know, the year is playing out as planned, you know, if not a little bit better than planned, and we couldn't be more enthusiastic about the future.

Yeah, the only thing I would add, Peto, in terms of growth through, you know, each quarter of 2026 and our guidance, we have delivered a very strong first half, $206 million in the quarter. We expect quarter over quarter growth continuing for the rest in the balance of 2026. We do expect that growth quarter over quarter to be very similar. So Q2 going to Q3, Q3 going to Q4, we expect continued growth and that to be very similar to, you know, in Q3 and Q4's growth to be similar to each other.

Yeah, I mean, last year's second half, for a variety of reasons, in Catalyst was, you know, a really huge second half, and we're going to be lapping that. But, you know, we still expect, you know, robust year-over-year growth. I mean, if you look at the first half versus, you know, our guidance and the high end of the guidance, that obviously implies, you know, pretty good continued growth throughout the year. Thanks so much.

Thank you. Our next question comes from the line of Stephen Baxter of Wells Fargo. Please go ahead, Stephen.

Thanks. So I'm going to get an update on pharmacy sourcing initiatives as you continue to build scale. And then, relatedly, we saw some headlines recently about the potential for generic tariffs starting in a couple of years. So how are you thinking about the potential impacts of that, and how do you build contingencies for that into your contracting?

Yeah, I would just say, you know, from a purchasing perspective, you know, that's something that, you know, we've had a focus on for a decade now. You know, if you look at our value proposition as a home and community healthcare company targeting, you know, what we believe to be the most attractive markets and those of highest need, and then just leveraging our scale in our operating and commercial capabilities, you know, that scale component has been a focus for us for a really long time. And so, you know, we continue to do what we can there. And, you know, I think, you know, what we've done more and more over time that we're continuing to do is to really try to be one face, you know, to a lot of our external partners to be able to leverage that scale as much as we can. And, you know, we'll continue to do that.

From a tariff perspective, there continues to be a lot of noise, but nothing that has impacted the company to date. We're pleased that the Trump administration has pushed any potential tariffs on generics to 2028. We continue to be flexible, as John mentioned, in our purchasing contracts. There's a lot of opportunities to buy drugs from different locations. You know, we continue to monitor that closely, and we'll obviously continue to, you know, exercise good judgment, you know, as best we can, you know, as we approach any tariff impact that there could be.

Yeah, look, I mean, the good news is, like, generics are obviously, you know, a lot lower cost, right? So for, you know, and so for that reason, as we kind of look across our business and, you know, take a view of it, you know, when you look at the product by product, business by business, you know, has us concerned as we think about our long-term growth algorithm and, you know, adding up all the different, you know, growth pieces that are going to go into it over the years. You know, we don't view that as something that's worrisome.

Thank you. Our next question comes from the line of A.J. Rice of UBS. Please go ahead, A.J.

Thanks. Hi, everybody. I'm just interested maybe in pursuing a little more Jen's comments in the prepared remark that you were looking at options for evaluating what the optimal capital structure is for the company going forward. I know you've gotten rid of or gotten the proceeds in now from the community living divestiture. Are you thinking maybe you can lean into acquisitions a little more, maybe give us a little flavor of what you're seeing in terms of the pipeline as well, or is there something else you're looking at in terms of commenting on optimal capital structure?

Yeah, AJ, thank you so much. We appreciate the question. We're really proud of the work that we've done from a balance sheet perspective with our leverage at 2.15 times at the end of this quarter. We really, you know, are excited about the position that puts us in. You know, as John mentioned in the call, I mentioned in the call, we were able to reduce our interest expense. We continue to look at, you know, what makes sense from a capital structure perspective, especially with the ratings upgrades and what makes sense there. We do believe that we will continue to be able to lean in on M&A, and we have a very robust pipeline. As John has mentioned, that continues to be very robust, and we're excited about the back half of 2026 and into 2027 that the balance sheet position has really given us a lot of flexibility from a capital standpoint.

Hey, Jay, good morning. I would just add, you know, we're actually thinking about adding to that M&A team. I mean, we've got seven people on the team already. They do a great job. But, you know, really the hallmark of our M&A approach over the last, you know, 10 years now has been, you know, really targeting tuck-ins and geographically adjacent areas where we can apply better operational capabilities and synergies to drive a lot of accretive deals. So, you know, we operate in massive markets. You know, some of our markets don't really have acquisition opportunities, but, you know, you look at home health, hospice, rehab, infusion, primary care, home community pharmacy, those all do. And so, you know, the ability to be, you know, the scaled provider, you know, across these markets and leverage all of our scale synergies and operational capabilities is just a really big value proposition. So, you know, I think that's something that, you know, particularly from a smaller tuck in perspective, you know, we'll probably look to even increase the frequency on. And, you know, in terms of medium, you know, medium do a little bit bigger size deals. And for us, bigger is still always probably less than, you know, 30 or 40 of EBITDA. And, you know, that pipeline continues to be huge and long, and we continue to get people who proactively approach us who really want to be a part of our enterprise as a long-term home. But, you know, some people out there, you know, always do and are increasingly doing goofy things on prices and valuations, you know, in some of these markets that go well into the 20 times EBITDA. So, you know, we just stay incredibly disciplined. We pick our spots and, you know, we've got we've got our hit list right now and we'll see if they work out or not. But, you know, it's always got to meet our criteria. And, you know, we always try to make everything work in the equation and stay pretty disciplined. But, you know, great to see, you know, where the balance sheet is evolved. And I mean, we'll do over 600 of OCF this year. You know, the free cash flow is not going to be far behind it. And, you know, I think we're just, you know, really pleased with how that's played out over time. All right. Thanks a lot.

Thank you. Our next question comes from the line of David Larson of BTIG. Your line is open, David.

Hey, can you talk a bit about your selling efforts and how they've evolved? So if you're talking to an acute care IDN, what is sort of the value prop to those hospital systems? How much time do you spend selling to the actual health plans? Are they encouraging their networks to, you know, work with you? And then how many reps do you have, like commission-based reps, really, if any, just how that has evolved over time? Thanks a lot.

Yeah, I mean, I just think fundamentally our value proposition, you know, is to be a leading partner where we can deliver, you know, hopefully some of the highest quality services, you know, to payers and to hospital systems and to ACOs to everybody and, you know, really help in particular in those first 30 to 60 days post-discharge to reduce unnecessary bounce backs in ER visits. And, you know, that's what we've been really focused on for years. And so, you know, our ability to be a preferred provider in a narrower network, you know, with ACOs, with some hospital systems, with payers, you know, we've seen the ability to execute on those agreements here over the last couple of years. And, you know, it will remain, you know, a really key focus for us. You know, I think in part that is one reason why we're seeing growth rates, you know, well above, you know, the industry averages here. I mean, even on the provider side, you know, David, while the business grew over 30 percent all in from an EBITDA perspective year over year, I mean, organically, we were we were just a touch under 20 percent on the provider side organically. So, but I think that's, that's at play. It starts with our quality. And, but then you've got to be a great partner, Johnny on the spot service, you know, all day long, you know, with, you know, thousands and thousands of referral sources and, and hundreds of thousands of patients on a daily basis. So, you know, we have a lot of individual clinical liaisons across our service lines that are in doctor offices and hospital systems every day. I mean, it's, you know, if you look across the breadth of the company, it's probably near a thousand, you know, clinical liaisons, you know, across our service lines just doing great educational and support work every day. So, you know, I think our ability to more formalize post-discharge programs and enter into even more preferred agreements with individuals, you know, there's only more and more opportunity and a lot of opportunity to do that, but building on some of the things we already have done in that area, which has been a part of our volume growth.

Thanks a lot. Thank you. My next question comes from the line of Sean Dodge of BMO Capital Markets. Your line is open, Sean.

Yeah, thanks, Zach.

In pharmacy, the IRA headwinds this year, Jen, you said $200 million now to home and community. And I think you said before $175 million to specialty and infusion. Is that still what you're expecting for specialty?

And then is it too early to tell?

Are there kind of any directional indicators you can give us on the impact, either in aggregate or by subsegment there, what the impact from the next round next year will be?

Yeah, thank you. So IRA for home and community is just a touch higher than where we were based on our sale of the drugs this year. So it's about $200 million that we expect for the balance of the year. Or not the balance of the year, for the full year. about $50 million worth of impact in each quarter. The EBITDA impact remains about the same as we have previously expected and stated, which is $15 million for the year. That's for home and community. IRA impact and specialty, just as a reminder from an EBITDA standpoint, is really nothing, but from a revenue headwind standpoint, does remain around that $175 million for the year.

We try to get well ahead of this from an operational perspective. A lot of the things we've done on technology and automation and AI last year and now this year are going to play out you know into next year as well so now that IRA thing needs to get fixed you know it's still broken in its approach and how it was applied to the industry you know but you know we're doing everything we can from an internal perspective to control what we can control and you know the team's operational execution this year has just been phenomenal and you know we're seeing that play out in the business and it'll continue to play out next year. And, you know, makes us optimistic about the prospects for that business this year. I mean, it's going to have, you know, an up second half, had an up second quarter. And, you know, there's some good drivers there for next year from an operational perspective. And, you know, in a lot of these growth markets that we're in like ALF and behavioral. So unfortunate that we have to deal with some of these unintended consequences, you know, and things that occur in some of these legislative, you know, items, but, you know, we continue to work our way through it.

Yeah, and just to your question on 2027, the drugs, they selected the largest drugs first. As we think about 2027 impacts, really from a home and community standpoint, it's about 50% of the impact that we had in 2026 is our best view. And obviously, we continue to work, as John mentioned, you know, from a regulatory standpoint and then also on payer contracting to mitigate the impact for 2027 in addition to the work that we're doing operationally okay great thank you thank you our next question comes from the line of joanna gojek of bank of america your line is open joanna oh hi good morning uh if i may um i'll have a question on the question around the gross profits in the pharmacy segment.

So like you said, the gross profit per script was up 28% or so year over year, but I guess sequentially it did decline slightly, right? So is that the new sort of number, the 2750, call it, you know, gross profit per script as a good number to think about going forward? You know, is there more, I guess, growth that we should assume for that metric going forward and kind of, you know, remind us the main drivers, And specifically, if there's a way for you to help us quantify or understand the impact of the people's service revenue adding to that metric as well.

I mean, I would just – good morning. I would just take a step back and just sort of, you know, as we think about the broad growth of the company, you know, really, really pleased across the board with what we've done, not only on the pharmacy side, but then you look at the provider side, you know, 44% and 30%. So, you know, we always think about the company just from a total growth perspective and go from there with all the different pieces in the organization. You know, within specialty and infusion, you know, a lot of different levers there and a lot of different moving pieces that all, you know, that all contributed to the quarter. You know, as you said there at the end, FIFA service is certainly one of them. You know, we've really focused on having best in class wraparound services to support our manufacturing and biotech partners and all of their patients. in, you know, five or six different dimensions of what we offer them, you know, from a partnership perspective. So, you know, that capability set and the volume of patients we're serving and the amount of manufacturers we're serving with those wraparound value drivers, you know, does continue to, you know, to increase at a very healthy clip, you know, but it very was multifaceted growth, not only across the enterprise, but within specialty and infusion. And, you know, you had the acute business in infusion doing really well. The chronic business is growing there. You know, operational efficiencies. You know, we've actually won five LDDs in infusion in the past six months, too. So, you know, we're turning our focus from an LDD perspective, leveraging our know-how on that side in the oncology world to infusion, too. And then you look within specialty in the, you know, the 12 LDD launches this year, eight, you know, networks to four exclusives. You've got the fee-for-service, you've got OPEX per script leverage, you know, and you've got, you know, continued partnership as we help drive generic conversions as they come out. So, you know, there's a lot there, and we're always focused on a lot of different growth levers. You know, GP per script in the quarter was up sequentially when you adjust for, you know, some typical seasonality and some items that occur in Q1. You know, as we look to the rest of the year, you know, we think that is a pretty stable level. You know, but everything is within our expectations right now fully. And, you know, as we think about the rest of the year and next year, you know, nothing has been outside of what we would have expected whatsoever.

Thank you. Thank you. Our next question comes from the line of Whit Mayo of Larenk Partners. Please go ahead, Whit.

Hey, thanks. John, you've talked about acute infusion as being an area of focus for the organization. I was just wondering if any of the potential 340B changes sort of impact your views on that. Hey, Witt, good morning.

No, that is not a meaningful part of our infusion business.

Okay.

Thank you. Our next question comes from the line of Raj Kumar of Stevens. Please go ahead, Raj.

Good morning. Maybe kind of going back to the generic conversion component of the growth here, and as we kind of think about 2027 and that pipeline, maybe any way of framing what the branded versions of those drugs make up in the kind of current script that you're seeing here to date as we try to kind of frame the opportunity for 2027?

Yeah, the launches that we – the brands going generic that we see in 2027 will probably happen later in the year, you know, which would be our expectation right now.

Thank you. Our next question comes from the line of Matthew Gilmore of KeyBank. Please go ahead, Matthew.

Hey, thanks for the question. I wanted to see if you could frame up the rare and orphan opportunity relative to oncology, And then can you help us think through any sort of augmentation or investments into the sales force that needs to go along with that? Or does that leverage the existing sales force within specialty pharmacy?

Yeah, on the ladder, you're exactly right. And, you know, I think that's something that's really interesting to us. You know, we've got several hundred folks, you know, that are clinical liaisons, you know, working across thousands of prescriber offices today. You know, I think some other niche companies that have only focused on rare and orphan in the past don't have a sales force. So, you know, we see the, and then we've got 155 LDD programs and 15 years of experience in that area. So, but I mean, there, it's not one or two therapies that we're supporting outside of oncology. It's, it's, it's quite a few. And we've had some really noteworthy wins there here in the last six months, which has been terrific to see. And it's been based on, you know, the long track record that we can point to across, you know, our history of other LDDs. So we can 100 percent service almost any other therapy outside of oncology within within the world that you reference. And, you know, that's why that's an obvious area of strategic growth for us. But, you know, that market is is is sizable. I don't think it's nearly as sizable as oncology. But it is sizable, and, you know, it's – we wouldn't be spending time on it if we didn't think it could be, you know, a meaningful contributor in the future. You know, it's nowhere near as big as oncology, but it is an interesting market.

Great. Thanks. Thank you. Our next question comes from the line of Jared Heath of William Blair. Please go ahead, Jared.

You're squeezing me in here. Maybe I'll drill back to your comments about seeing retention at all-time highs in the home and community business. I'm curious, would you sort of primarily attribute that to some of the technology initiatives that you guys have put in place? Or is there anything else that you would call out driving that retention? And I guess how much more incremental opportunity do you see to push retention higher as sort of another growth lever going forward?

Yeah, Jared. Hey, I really appreciate that question. So that's been an area of focus for a really long time. I mean, it's really fundamentally three things. You know, we continue to invest in our individuals, you know, from a compensation and benefits perspective. And, you know, that's been a continued focus for us. And we've been able to do that, you know, within our financial performance here for a really long time. We want to attract really good talent and the best talent. And so I think we've really tried to reward our people as best we can. And, you know, I would say to your point, exactly number two on technology and process, how do you try to make the job as efficient as possible for people so they don't have headaches? You know, we try to be really innovative with our approaches there and lean in to make, you know, to give them every ability to focus on the patient as much as they can versus, you know, some of the headaches administratively and with paperwork that you might face. So that's been a huge area of focus for us. And we continue to do that. You know, I would say just really third, you know, from a training perspective, you know, it's a huge investment for us. We try to make sure the onboarding experience is as seamless as possible. And, you know, people get trained and they're invested in from a talent perspective and a development perspective, too. We have all sorts of programs in the company where people can graduate through and move up and be advanced in their career at the organization. So, you know, people and talent management is kind of a passion for us here. And the bigger we get, we just try to invest more and more in that if we can. And then culturally, you know, we just try to be a good place to work. You know, we focus on the mission every day. We try to reward people and try to create a very mission-focused culture where, you know, everybody's really respectful of what we're trying to do here and each other. And I think it's a place people like to work.

Thank you. Our next question comes from the line of Aaron Wright of Morgan Stanley. Please go ahead, Aaron.

Great. Thanks for squeezing me in here. So I want to go back to growth profit per script. It was up 28% in the second quarter, 50% in the first quarter, 21% in 2025. But before that, it was like roughly flat. So can you give us a little bit of a context of what led to the inflection and some of those durable, overarching drivers there as we kind of head into 2027 as well? and somewhat of a related question. Can you speak to hub services, particularly, like, in terms of how big it is, how much of a driver that is for you, how important that is to growth? Can you remind us of how some of those fee-for-service relationships work?

Yeah, I would say just, you know, any changes in our gross profit margin are always a function of mix, you know, in every one of our businesses. And as we've layered on more fee-for-service business, you know, really, really those services are offered in every one of our launches. And so, you know, that's, that's, you know, that's something that, that we're seeing consistently now is when we come to market with a new drug, you know, there's a lot of other services that, that we have to offer, you know, to our partners, you know, for real-time visibility and, and optimal patient outcomes. And so, you know, it's, you know, it's not the majority, you know, certainly of our profitability in the business, but, you know, I would say, you know, it has become, you know, know, a meaningful, probably top four, top three, you know, contributor to margin in the business.

Our next question comes from the line of Brian Tanquilu of Jefferies. Your line is open, Brian.

Hey, good morning, and congrats on the quarter. John, maybe as we think about some of these bigger oncology or oral oncologics that are coming down the pipeline, how do we think about the dynamics of those shifting or going down the LDD pike and, you know, as we think through exclusive agreements versus really ultra-narrow networks, and then maybe Jen just related to that question, from a margin perspective, just curious how to think through the differences between those two, like exclusives and ultra-narrow, and how that ramps over time. Yeah, sure.

I mean, Brian, I mean, I just would agree with your point that we're very enthusiastic about the pipeline within oncology. you know there's you know there's a lot of innovation that obviously continues to go on there and you know we've tried to position ourselves as the partner in choice in that market for a long time.

Yeah and I would just add from from a margin perspective we typically are negotiating with payers on a basket of LDDs which includes all you know exclusive and ultra narrow so you know certainly having exclusives and ultra narrow has been a differentiator for us and our ability to negotiate rate on those drugs thank you thank you our next question comes from the line of Parker Snore of Raymond James your line is open Parker hey good morning so just piggybacking off a previous question on the sales force and pharmacy if I look at the G and a in the pharmacy business it stepped down in the second quarter about 13 to 14 million from the

first quarter. Just curious on the drivers there. Was there any timing of certain investments or anything else you'd call out? And just how should we expect that line item to track going forward?

Yeah. So, you know, we did have some specific one-time investments in the first quarter that we had a mix of both ongoing investments. We talked about that last quarter, Salesforce and other key positions, you know, as we've been layering out our management team to support future growth. We did have some AI projects and some other automation work that spend wrapped up in the first quarter. We continue to have other projects and spend, some of which is in our corporate spend in the second quarter.

Okay. Thank you. Thank you. Our next question comes from the line of Jason Kosorla of Guggenheim. Please go ahead, Jason.

Great. Thanks for squeezing me in here, and good morning. Maybe just on the Emeticis and LHC assets, you upped the EBITDA expectation there for about $5 million, which isn't significant for the enterprise, but it's almost an incremental 20% step up in EBITDA for those assets specifically. So I guess, just can you walk through the drivers there beyond just perhaps the pricing benefits of hopping onto your platform?

I guess just any help there would be great.

Thanks.

So integration in that business has continued to go really well. You know, as we started off the year, you know, from a guidance perspective, you know, we had planned for a slower ramp on some of the growth initiatives that we would have just to make sure that the team had the time that they needed in order to really be able to do the integration work that we had going on. Some of the investments that we needed to make, so Q1 to Q2, we talked last quarter about some investments. As of today, all of our business lines and branches are now on our home care home-based system. We're working through the final steps of integration, and we just feel more confident about the ability to increase that guidance.

Integration's gone extremely well, and the volume's moving up under our ownership now.

Thank you. I would now like to turn the conference back to John Russo for closing remarks.

Thank you, everybody, for joining today. We really appreciate your time on the call, and it was a productive quarter, I think, as well. We just continue to really invest for the future at the same time as delivering on today, and we look forward to talking with you in another 90 days. Thank you, and have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.