BrightSpring Health Services, Inc. (BTSG) Q3 2026 Earnings Call Transcript

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

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 Rousseau, Chief Executive Officer, and Jen Phipps, Chief Financial Officer. Earlier today, BrightSpring released financial results for the quarter ended September 30, 2026. As a reminder, we closed the community living transaction on March 30, 2026, and all financial results and commentary reflect only continuing operations, with community living results reflected in discontinued operations. A copy of the press release and presentation is available on the company's investor relations website. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. Such forward-looking statements are not guarantees of future performance. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release and presentation, As well as our quarterly report on Form 10-Q that will be filed with the FCC, including the specific risk factors and uncertainties discussed in our Form 10-K and Form 10-Q. Such factors may be updated from time to time in our periodic filings with the FCC, and we do not undertake any duties 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 the most directly comparable GAAP financial measures to the extent available without unreasonable effort in today's earnings press release and presentation, which, again, are available on our Investor Relations website. This webcast is being recorded and will be available for replay on our Investor Relations website. With that, I will now turn the call over to John Russo, Chief Executive Officer.

Good morning, everyone, and thank you for joining BrightSpring's third quarter 2026 earnings call. As always, I'd like to start by thanking everyone at BrightSpring who drives our mission forward and makes a lasting impact every day. We're grateful for the great work and commitment of all BrightSpring teammates, enabling us to deliver high-quality and timely care to patients in so many communities across the United States. Overall, we continue to execute at a high level, providing compassionate, person-centered, quality care in patient-preferred, lower-cost settings, with another productive quarter delivered amidst an always-fluid external environment and performance enabled by our continuous focus on expanded patient reach, operational efficiency, and accretive M&A. Our strategy is aligned with enduring trends impacting the U.S. health care system, including demographics and the increase in the prevalence of certain health conditions, creating meaningful opportunities to support more individuals in need of our highly valuable services. Our quality outcomes, service levels, and relationships with hospitals, physicians, and other health care providers in the community are what underpin our ability to capture this demand, fostering long-term durable growth. This growth, in turn, creates more and more scale and efficiency. Moreover, our services have a clear and significant ROI. Demand for these services continues to increase. We provide leading quality, innovative operations, and we continue to see the benefits of our differentiated scale and complementary service offerings as a leading provider of health services in the U.S. Turning to the third quarter results, revenue and adjusted EBITDA were above forecast with total company revenue of $4.2 billion, an increase of 26% year-over-year, an adjusted EBITDA of $228 million, an increase of 42% year-over-year. EPS of $0.54 in the quarter increased 80% from the third quarter last year, and EPS increased 20% sequentially from Q2. Cash flow from operations exceeded $200 million in the quarter. Looking at the segments, pharmacy solutions revenue of $3.7 billion increased 26% year-over-year, and segment EBITDA was $202 million, an increase of 43% versus last year. In provider services, revenue of $481 million represented 31% year-over-year growth, and segment EBITDA of $79 million increased 30% versus last year. These results are consistent with the performance the company has delivered since going public in January 2024, and with growth well into the double digits over the past decade now. In pharmacy solutions, specialty and infusion delivered broad-based revenue growth of 34%, driven by script growth of 29%, including robust contribution from branded LDDs and generics, as well as growth in value-add pharma services and mid-teens growth in both chronic and acute infusion therapies. We continue to focus on clinical, operational, and commercial execution supported by relationships built with manufacturers, physicians, patients, and payers over the years. We launched seven LDDs in the quarter for a total of 19 year-to-date, and we are now supporting 162 total LDDs across dozens of manufacturers and indications. In the quarter, we supported the launch of life-changing and life-saving therapies across liquid and solid tumor cancers as well as in rare disease. The outlook for our branded LDD portfolio remains compelling, and we are well-positioned to support existing and new manufacturer partners in the years to come, as well as any conversions to generics. As we think about the growth prospects for the company, both acute and chronic infusion are meaningful components of our strategy. And we continue to invest in operational capabilities, including chronic therapy infusion suite and clinic upgrades, as well as therapeutic category expansion, like with our IG Connect program. Home and Community Pharmacy had an excellent quarter operationally and is now continuing to be a contributor to organic growth. Ongoing investments in technology and process improvements with a focus on attractive end markets such as hospice, ALF, and behavioral drove year-over-year EBITDA growth well into the double digits, despite lower revenue compared with the prior year, primarily due to IRA. In 2026, this service line has become yet another strength of the company, and we believe home and community pharmacy has a significant growth trajectory ahead, based on operational and technological leadership and multiple opportunities to expand volume and revenue across end markets. The provider services segment had another strong quarter, with continued momentum across all three subsegments, driven by volume growth and a very stable operating environment. Given the size, performance, and our leadership position in the provider segment, we are eager to continue to expand and invest in our provider platform to reach more patients with necessary and high-quality services that help patients and the entire healthcare system. Within home health care, census growth of approximately 58% was underpinned by leading quality measures and driven by de novo locations, expanding preferred MA relationships, core business development execution, and contribution from the Emeticis LHC branches acquisition. Integration of the acquired branches has performed as expected, particularly on the IT and back office side. We recently held a national home health meeting in Nashville, and the enthusiasm from the combined team was really high. We continue to expect the acquired branches to contribute approximately $35 million in adjusted EBITDA in 2026, which is consistent with the second quarter update. 96% of our legacy home health branches are now rated four-star or better, and we are now doing the same to the acquired branches. Hospice operational measures remain consistent and quality remains at industry-leading levels, and we view this service line as one of continued investment focus, given its impact and value proposition, and our service level's consistency of performance and team. Rehab care continues to grow steadily with new payer contracts for clinical neurotherapy programs and continued expansion in both existing and new de novo markets. With superior demonstrated rehab outcomes, like across the entire company, clinician retention has improved again this year and is being sustained at well above industry average. Personal care continues to execute very well, providing high-quality support with activities of daily living for patients at home, while hours served are growing above industry average. Demand for services continues to outstrip our ability to provide them, and our operational quality and execution in this service line is marked by real consistency, and service hours delivered per day are exceeding budgets, while we continue to grow private pay and alternative payer sources. In primary care, we continue to drive operational efficiencies, quality measures that demonstrate 50% reductions in hospitalizations, and patient growth. We see our model of primary care in the community and in patient residences as key to driving more integrated and coordinated care across our service lines, better care transitions, optimal outcomes, and growth from value-based care models and new payer opportunities. We are expanding our virtual primary care offering as well to support more required visits to higher-risk patients, visits in rural geographies, and primary care for home health or homebound patients discharging from hospitals and nursing homes. We've been selected as a provider in the new LEAD ACO Medicare program, which starts in January. In the quarter, the $228 million of total company-adjusted EBITDA, which represented year-over-year growth of 42%, reflected the consistent operational execution we have seen since going public in 2024 and in the years before that. We believe that the breadth of growth and profitability drivers and the operational capabilities across our platform are unique to our company within health services. Operating within targeted and attractive end markets, we deploy best practices across service lines, utilize scale and procurement and contracting, leverage OPEX and acquisition synergies, and invest in new technologies and AI at a rapid pace and at large scale. Our AI investments across the organization drive automation and ongoing improvement in quality, documentation, medication review processes, HR and hiring systems, and employee efficiency and satisfaction, to name a few. We were again pleased with the breadth and level of performance across the organization, which is a result of our management practices, controls, and culture. With our company platform, we remain active in potential acquisition opportunities and look to capital deployment to add additional scale and profitability growth, where we can bring best practices to acquired companies in our target markets that remain very large and fragmented in most cases. On cash flow, the company generated $204 million of cash flow from operations in the quarter. Leverage was reduced to 1.79 times as of September 30th. For the full year, and excluding the community living divestiture, we now project over $700 million of operating cash flow, with EBITDA to operating cash conversion of approximately 80% and over $600 million of cash flow after CapEx and before debt pay down and share repurchases. Quality and patient, family, and referral source experiences remain at the center of everything we do. In provider, home health demonstrated timely initiation of care of 99%, as well as a CAF's overall hospice rating of 86%, and a number of visits per patient that remain well above national average. Our own clinical data demonstrates that homebound patients who cannot accurately manage their medications, as measured by the OASIS home health assessment, experience hospitalization rates approximately five times higher than those who can. BrightSpring's uniquely integrated healthcare platform positions us to address this critical risk through coordinated clinical care and pharmacy services with innovative medication management solutions that improve medication adherence in the home to reduce avoidable hospitalizations and lower total healthcare costs. In rehab, patient satisfaction was 99%, and outpatient rehab and personal care delivered a client satisfaction score of 4.6 out of 5. On the pharmacy side, Home and Community Pharmacy achieved order completeness of 98.2% and on-time delivery of 91.9%. Specialty Pharmacy again performed well above the national average with a medication possession ratio of 93% and a time-to-first fill of four days, alongside net promoter scores in the top two of the industry in the past quarter. Looking ahead, our operational footprint is uniquely positioned in a competitive advantage where patient-centric, coordinated, and lower-cost care models are essential to the future of healthcare in the United States. We have been, and will continue to be, purposeful with our investments to support long-term growth. How we execute in any given quarter is a result of decisions made several quarters and even years prior, and we manage the business for long-term While we do not typically provide commentary this far in advance, we still anticipate, and reiterate from analyst day, at least 15% to 20% organic adjusted EBITDA growth in 2027, however, now off of a significantly larger EBITDA base in 2026. We anticipate similar levels of adjusted EBITDA year-over-year growth rates through the quarters of next year. With that, I'll turn the call over to Jen to discuss the third quarter results and updated 2026 guidance in greater detail.

Thank you, John. For the third quarter of 2026, company revenue was $4.2 billion, representing 26% growth from the prior year period. Pharmacy solution segment revenue was $3.7 billion, achieving 26% year-over-year growth. Within the pharmacy segment, specialty and infusion revenue was $3.2 billion, representing growth of 34% from prior year. Revenue growth reflects specialty and infusion script growth of 29%, driven in part by the 19 branded LDDs launched this year, Mid-team script growth from both acute and chronic infusion, and continued growth in pharma services, that being fee-for-service and hub programs. Of note, the number of year-to-date branded LDD launches is comparable with 2025 at this point in the year, but the annualized revenue contribution from the 2026 launches is tracking ahead of the 2025 LDD launches in the first year of launch. Home and community pharmacy revenue was $553 million, representing a decline of 6% year-over-year due to an approximate $50 million impact from the IRA, along with the decision to exit some uneconomic customers, both of which we have previously discussed. We expect the revenue impact from the IRA and home and community pharmacy to be approximately $50 million in the fourth quarter of 2026, bringing the total year IRA impact to home and community pharmacy of approximately $200 million, consistent with a second quarter update. Excluding the impact of the IRA and voluntary customer exits, underlying growth in home and community continues to improve throughout the year. In the provider services segment, we reported revenue of $481 million, which represents 31% growth compared to the prior year. Home health care reported $288 million in revenue, growing 50% versus last year, with revenue performance driven by average daily census growth, de novo expansion, and the acquired Emeticis and LHC branches, which contributed approximately $76 million of revenue in the quarter. Excluding the impact of the Emeticis LHC-acquired branches, revenue growth was 12%. Rehab care revenue was $82 million, growing 8% versus last year, with strong growth in persons served and hours built in core neurorehab. Personal care revenue was $111 million, representing 8% growth year-over-year, driven by solid growth in persons served and hours built. Moving down the P&L, third quarter company gross profit was $519 million, representing growth of 32% compared with the third quarter of last year. Adjusted EBITDA for the total company was $228 million in the third quarter, an increase of 42% compared to the third quarter of 2025. Adjusted EPS for the total company was $0.54. Profitability growth reflected strong revenue We'll see you next time. An increase of 43% compared to last year, representing a segment EBITDA margin of 5.4%, which increased approximately 60 basis points versus last year, and was slightly higher than the first and second quarters of 2026. Third quarter pharmacy profitability benefited from strong performance in specialty and infusion branded LDDs, pharma services, and contributions from generics, as well as strong performance in home and community pharmacy from volume, mix, and operational improvements in both gross profit and G&A. Now to the per-script metrics, which is not something we have historically commented on. Revenue per script in the quarter was $340.86, up 24% year-over-year, with gross profit per script of $28.86, up 27% year-over-year. The per script metrics are an output result of many factors, including drug and payer mix and operational initiatives. Due to the broad diversity of scripts and mix of therapies we provide, we do not rely on the per script metrics to inform our gross strategy or capital allocation decisions. Across the pharmacy organization and broader BrightSpring, from a financial perspective, we are more focused on growing absolute dollars of revenue and EBITDA through a combination of initiatives where script mix is not a focus but a byproduct of business activity. Moving on to provider services, gross profit was $203 million, growing 38% versus the Thank you. economies of scale across the segment. On a total company basis, cash flow from operations was $204 million in the third quarter. As we look forward to the balance of the year, excluding community living transaction-related cash flow impacts, we anticipate annual operating cash flow of at least $700 million. As of September 30th, total debt outstanding was approximately $2.2 billion, and net of cash of $718 million, our net debt outstanding, Standing was $1.5 billion. We finished the quarter with a leverage ratio of 1.79 times. Our leverage ratio also includes the impact of $120 million of share repurchases year-to-date. We are continuing to evaluate our capital structure as we head into 2027 to support the company's growth plans over the next several years. Moving on to the guidance for 2026, which excludes the community living business, as well as any acquisitions that have not yet closed. Total revenue is expected to be in the range of $15.9 to $16.125 billion, including pharmacy solutions revenue of $14.0 to $14.2 billion and provider services revenue of $1.9 to $1.925 billion. This revenue range reflects 23.2 to 24.9% growth over full year 2025. Total adjusted EBITDA is now expected to be in the range of $850 to $860 million for the full year 2026. This would reflect 37.6 to 39.3% growth over full year 2025. Included In total adjusted EBITDA is expected contribution from the Emeticis and LHC Asset Acquisition of approximately $35 million. While we plan to discuss full year 2027 guidance on the fourth quarter call, we currently view 2027 as another very positive year of opportunity for the company with a broad base of growth drivers. At this stage, we still expect 2027 organic adjusted EBITDA growth of at least 15% to 20% next year, consistent with the framework outlined at our investor day in March, but now on a higher 2026 EBITDA base that reflects 39% growth at the high end of the range provided. At this point in the budgeting process, we anticipate year-over-year adjusted EBITDA growth in each quarter of 2027, similar to the overall growth for the year, with year-over-year growth in the second half expected to be a little higher than the first half, consistent with normal long-term seasonal patterns. We will not be discussing 2027 beyond our prepared remarks and expect to discuss the 2027 outlook in more detail when we report the fourth quarter in February. This durable and differentiated growth profile is not easy to execute, but the quality, operational, business development, IT, HR, and finance leaders across the organization continue to perform well. With that, I will now turn it back to John.

Thanks, Jen. And thank you for your time today to go through BrightSprings' third quarter 2026 results. We'll now open up the call for questions. Operator?

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question. Our first question comes from Whit Mayo with Lyric Partners. You may proceed.

Hey, thanks. Jen, just back to the gross profit per script. I heard you mention that mix was a factor given the acceleration, but just maybe elaborate a little bit more on what drove that metric within the quarter, and then I'd like to hear a little bit more on the focus on gross profit dollars and EBITDA versus per script, and remind us how much of your scripts today are coming from home and community. Thanks.

Great. Thanks so much, Whit. From a quarter-over-quarter perspective, MIX was the most significant driver as it relates to the quarter-over-quarter growth. So we did have higher growth in our specialty in infusion scripts, which do have a higher gross profit per script than our average. We did see favorable sequential home and community and infusion pharmacy GP per script and stable specialty GP per script, but obviously the very strong specialty volume helped drive the overall GP per script. We are focused on gross profit dollars, as we mentioned during the call and as we've talked over the years, as well as EBITDA dollar growth. And that's largely because the script growth, we're focused and have areas of growth and focus across each of our different businesses. And the GP per script is a byproduct of what is happening in each of those different separate revenue streams.

Just to follow up, just to remind us, like, the percentage of scripts that are for America or your home and community-based pharmacy. Thanks.

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

Okay. Thanks. Thank you. Our next question comes from Joanna Goodrick with Bank of America. You may proceed.

Please, hi. Good morning. How are you? Thanks so much for taking that question. So, I guess you announced, I think, maybe seven new LDDs since the last call, and there's one of these therapies that could be quite sizable. I think one of the conferences you kind of said you expect this to be, you know, a nice one into next year, you know, according to Revolution Medicine Therapy, and it did launch. So can you maybe give us a comment on the early launch trajectory, and, you know, was there any meaningful contribution in September? And also, as you look into 27, I appreciate you not going to give us specific guidance, but kind of help us frame how significant this particular therapy could be, and maybe also in the context of other therapies launched this year, you know, how material could they be to next year?

Hey, good morning, Joanna. So we don't comment at the individual drug or therapy level. What I can say is, you know, 2026 has been another very successful year of partnering with biopharma and manufacturers, you know, to help them bring, you know, really incredible new therapies to market in the best possible way, get them to patients with the highest possible quality. So we remain extremely excited about that for the rest of the year and for the future years when you look at the pipeline. The drugs that have come to market in 2026 are performing really well. In their first year, current year, they're actually outperforming the drugs that we launched in 25, which are also doing well in their own right. So we just continue to execute against that strategy.

Great. Thank you so much.

Thank you. Our next question comes from Charles Ryu with TD Cowan. You may proceed.

Oh, yeah. Thanks for taking the question. Maybe just to follow up a little bit on that question, you know, with 29% script growth and specialty, obviously, I think much stronger than certainly we were expecting or at least implied by the guidance originally. Can you talk about sort of the dynamics? Because are we right to think that what we're seeing in this Script growth is the benefit of, you know, these LED launches since you are, you know, one of, you know, very few pharmacies, and it's that layering effect that kind of allows us to grow at such an accelerated rate, and is there any reason why, given the number of LEDs you've announced are winning, that we should expect launching, let's say, over the next year or so, that kind of pace is sustainable? Thanks.

Yeah, you know, one thing I'd note is, you know, despite the 29% growth rate that you referenced, it was lower than our provider growth rate of 30%. So the provider business just continues to perform exceedingly well, and I just want to make sure everybody always continues to realize how big of a base of a business that is, you know, growing at over 30% this year. But on specialty, it's consistent with the track record that we've had for the past couple of years and the strategy that we have. We've had really similar growth rates to this for quite a long period of time in this business due to our strategy and our team and our relationships and our quality in the market. So, you know, the 2026 launches, the 2025 launches, and the launches before those are all performing really well. And as we look at the pipeline in the future and, you know, all of our, you know, really deep relationships in the market and our focus on quality and efficiency and patient outcomes, you know, we would expect the same going forward.

And if I could just quickly follow up. When you announced that we've won X number of LDDs, what is typically the lead time before those drugs launch? Are you being selected sort of as, you know, before phase three data is out, or is this sort of after, so we would expect launch in a relatively shorter period of time? Thank you.

Yeah, it can really vary depending on the specific circumstance. But, I mean, typically, you know, these things start happening, as you would imagine, you know, at least a year in advance.

Awesome. Great. Thank you.

Thank you. Our next question comes from AJ Rice with UBS. You may proceed.

Hi, everybody.

Obviously, you now have your leverage down below your 2.5 target, so that's great. And deal activity has always been a part of the growth story there. I wonder if I can get you to comment a little bit on the pipeline where there seems to be increasing opportunities and where maybe less so. And one thing in concept, what we're seeing more of is these transactions where to do a bigger deal, a strategic player is sort of partnering with a private equity or multiple private equity guys, and then has the option to buy a larger entity out down the road, and that way maybe minimize the impact and disruption to near-term consolidated results. I'm just curious whether, in concept, you guys would be open to looking at those kind of deals, and then, again, just the comments on the pipeline.

Yeah, good morning, AJ. Hope you're doing well. You know, look, overall, in the results and the performance, I think you're really seeing the strength of a very unique platform in home and community health services. You know, a piece of that historically, but probably a bigger piece in terms of opportunity going forward, you know, would be the M&A platform that we have, too. You know, when you couple our capabilities in M&A and our track record and results there with the balance sheet, you know, it obviously does create, you know, interesting opportunities and scenarios. And I think probably more interesting and potentially more impactful as we look forward, you know, certainly than the last three or four years. You know, our bread and butter has been, you know, tucking, you know, new acquisitions into, you know, adjacent geographies, and that's worked extremely well for us historically. You know, we've driven, you know, a really attractive pro forma multiple there, which has been highly accretive over the years. You know, that will always remain our mainstay. You know, we've said, you know, over the course of the year that, you know, we think we probably should lean into, you know, some slightly larger transactions than, you know, than small tuck-ins, you know, but for us, you know, that's probably still in the range of, you know, 20-ish of EBITDA or, or below in terms of, say, a second category of deals, which, you know, might become more of a focus. But, you know, deals are hard. You know, we're always extremely active, and our pipeline is as full as ever. You know, we see a ton of stuff that's proprietary due to our relationships. And, you know, I say a lot. We could do 400 of EBITDA and M&A tomorrow if we wanted to. You know, and I'm not saying that, you know, tongue in cheek. But we're extremely intentional and extremely deliberate, as you can see, with our history. And we really focus on, you know, driving value, both organically and inorganically. So, you know, we're leaning in like always, but when you get into diligence on things, you find a lot of stuff. And, you know, we make sure that, you know, we do transactions that we know will work. So, you know, we just continue to be very, very, very intentional about anything we would do. I would say we are bullish in terms of, you know, probably, you know, the M&A volume we would do going forward as compared to, you know, the last couple years. But again, that's going to look like, from a deal profile perspective, probably very similar to what we've done historically and maybe the size of some acquisitions increases. But again, within that size range that I mentioned before, we have not to date entertained any sort of transactions in partnership with anybody else, nor do I think we would in the future. It's just hard for us to consider scenarios where that would be relevant or helpful to us.

Okay, and just a provider versus something like infusion or the other specialty drug area, is it still both, or do you see more opportunities on one side versus the other?

Yeah, you know, we've been very balanced historically with our acquisitions, and that's worked well for us. I mean, we really like continuing to do things that have been proven and have worked well for us over time. You know, what you're seeing in our numbers, again, you know, for yet another quarter is broad-based growth within the organization. And that continues to be something that we think is a real strength of the enterprise. So, you know, our intention will be to be very balanced. You know, in the specialty world, there's very little out there. You know, maybe a couple things, but they're extremely large in size. And so you look at home health, you look at hospice rehab, you look at primary care, you look at infusion, you look at very low multiples, home and community pharmacy deals, and there's opportunities, you know, abound within each one of those service lines. So, you know, we're fortunate that most of our industries, with the exception of maybe one, are really huge and also fragmented. So it just creates a wealth of opportunity. And, you know, we just try to be really careful about how we pick our way through that over time. But we'll, I think, continue to take a balanced approach to continue to, you know, expand into targeted and attractive geographies within probably most of those service lines.

Okay, thanks so much.

Sure.

Thank you. Our next question comes from Ann Hines with Mizzou Health Security, as you may proceed.

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

Yeah, good morning, Ann. You know, I think at this time, we're going to leave our comments regarding 2027, you know, exactly to what we said in the prepared remarks. Hopefully, that's helpful. You know, what I would say is, you know, we have a company that really has a broad base of growth drivers, and you're seeing that in Q3. You've seen that throughout this year. You've seen that since we've been public in 2024. You've seen that going back for 10 years now, and we see that going forward. So, you know, there are a plethora of growth drivers across all of our service lines, and we focus on driving each one of them, you know, as best we can from a quality and market share perspective. So, you know, we're fortunate that, you know, we live in a world that's not always easy, but there's a lot of demand for these high-need services, and, you know, we do everything we can to meet that demand in the highest quality way. And to position ourselves well to do so. So, you know, it was another quarter really marked by broad-based growth up and down the P&L and in the service lines. And, you know, that expectation for the continuance of that is reflected in our comments for 27th.

Great. Thank you.

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

Hi, this is Michelle on for Aaron. I just wanted to turn to Infusion. So, does the recently announced transaction in the Infusion space change anything for you in terms of the competitive landscape? Do you feel comfortable with the current capacity of Sweets to sustain the strong growth that you've been seeing? And can you also speak about the IG Connect program, what you're seeing from that so far, and how that's been contributing to growth? Thank you.

Yeah. We don't see any difference to our strategy from that transaction. You know, we are continuing to build capacity in our business over time, so that will continue to be a focus for us. You know, I think our infusion strategy is unique to most others, not all, but most others, in that, you know, we think addressing Acute is just as important to patients and referral sources and physicians and payers, you know, as is chronic specialty infusion. A lot of folks just focus on specialty, you know, but Acute is also a big market. We just saw here in the last month yet another player back out of Acute, which, you know, we think just creates more opportunity on that side. So, you know, ultimately, spanning the breadth of infusion therapies in the market from acute to chronic and doing so in the home and in suites, that is our ultimate strategy. You know, and I would just say, you know, just we're still in the pretty early innings of that, you know, within a really big market and industry. So, you know, we just want to continue to grind that out over a long period of time, and, you know, we continue to focus on assembling a really good team here internally, and, you know, we certainly view that as, you know, as a meaningful growth opportunity for us next year and beyond.

Thank you.

Thank you. Our next question comes from Scott Fidel with Goldman Sachs. You may proceed.

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

Yeah, we've been really pleased to see the Home and Community Pharmacy performance this year. You know, as we mentioned in the prepared remarks, it has now, again, become, you know, a nice contributor to our overall company growth, which has really been great to see, and it's been a real focus over the last year or two. You know, if you go back four or five years ago, you know, due to the external actions of a competitor or two and, you know, some of the dynamics in the skilled nursing market, you know, it was a tough business that we had to work our way through. Our focus has always been on service level quality and then operational efficiency, but particularly, you know, in those areas, you know, in the last year or two, we've just made a ton of progress. And so, you know, IRA, you know, was a headwind for the business. It'll be a little bit of a headwind, you know, for the business next year. But I think at this point in time, we're demonstrating, you know, growth through that, you know, in a really nice business, you know, really for two reasons. It's just a focus on maximizing your scale and your operational efficiency and your cost per fill. And then there's a bunch of attractive end markets there, senior living, hospice, pace, behavioral, et cetera. Skilled nursing is just a stable market for us, you know, which is fine because there's four other really interesting or even five growth markets for us. And, you know, if we can have the highest service levels in the industry and the best cost per fill, you know, that's a really winning formula. So, you know, it was a good quarter for home and community pharmacy. And if you annualize just that quarter alone, you know, they're primed for significant growth next year. But we want to continue to do better on top of that. So, you know, we've executed on a lot of operational and technological initiatives so far this year, you know, but the pipeline is quite full of even more to come. As we can just work our way through them, probably take us a couple years, you know, to ultimately get to the point operationally that we want to in terms of, you know, sort of nirvana for how, you know, a pharmacy business serving all 50 states can be most optimally designed from a production and cost and logistics standpoint. And we're working our way through that, and it's really exciting, and, you know, we think it'll be really differentiating.

And, you know, this year, we're seeing the results of it.

Thank you. Our next question comes from David Larson with BTIG. You may proceed.

Hey, congratulations on the good quarter. I think I heard in the prepared remarks some comments around a new ACO Endeavor 1127. Can you talk a bit about that? How do you differentiate yourself in the market? I think it's primary care at home. And what sort of revenue and earnings contribution could you see coming from that business, maybe in the near and longer term? Thanks.

Yeah, it took a lot of work, you know, but over the course of a year or so through applications, we were approved to be in the new next-gen lead ACO for Medicare. It starts January 1. We're really excited about that. You know, we view primary care as, you know, the tip of the spear and the linchpin for quote-unquote integrated care within our company. You know, very complementary, sits kind of in between, if you will, pharmacy and provider services. And, you know, as the primary care clinician, obviously, you have attribution to the patient. You know, it clearly drives quality outcomes. It can drive a lot more integrated care across our service lines in the business, and it's ultimately what positions you for value-based care. You know, so our vision, you know, five to ten years is to, you know, be the household name and national brand for primary care out in the community. People's homes and skilled nursing facilities and senior living communities has a dramatic outcome on improved quality and reduced hospitalizations. You have to have shared savings models or new types of arrangements with payers for that to be most feasible, which is what we've been working on and will continue to work on over time. But, you know, excited to be in the latest version of the ACO, you know, in our opinion, just due to the way this thing ramps and, you know, and mechanics around it, 2028, you know, would be a time period that we feel comfortable, you know, where we could see, you know, some impactful economics from this.

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

Yeah, we actually had a little bit of shared savings this year, you know, but we're evolving our ACO models to, you know, be the principal in these going forward. But we have absolutely zero risk of downside, you know, today in any of this. And anything that we would do, you know, we would be, you know, extremely measured about and just view as purely opportunity with extremely, extremely low risk. I mean, the upside, you know, from, you know, what we can do in primary care and leveraging, you know, the access to patients we have today and leveraging our quality outcomes is very significant. And, but there is clearly a way that, you know, that we are approaching this where we view it as all potential upsides.

Thanks very much.

Thank you. Our next question comes from Matthew Gilmore with KeyBank. You may proceed.

Hey, thanks for the question. I wanted to ask about the competitive environment within specialty pharmacy. You know, from our vantage point, LDD networks have been narrowing, yet we see Onco360 and CareMed continue to win more than their fair share. I was just hoping you'd provide a couple comments in terms of how you feel with your position competitively with prescribers and manufacturers, and if you've seen any sort of notable change or movement within the last, you know, couple quarters or years.

I think it's been pretty consistent. There's some other independents out there that do a nice job, and we just try to do our best to provide a suite of value-add services to our partners. We do our best to provide great outcomes and service levels to payers and obviously patients as well. So, you know, I think in the specialty world, you know, the more track record you're able to build over time and the more infrastructure and scale that you have and, you know, and the more clinical and technology-based capabilities that you have is only helpful. You know, so I think we just continue to evolve our business and try to get a little bit better every year and be as efficient as we can and provide interesting solutions to our partners. And but, you know, I think, you know, within that context, you know, the competitive landscape has been fairly consistent overall.

Great. Thank you. Thank you. Our next question comes from Raj Kumar with Stevens. You may proceed.

Hey, good morning. Maybe I wanted to kind of touch upon the home and community pharmacy business and maybe kind of any quantitative points around just growth and scripts that you're seeing across assisted living and hospice. And maybe on the hospice piece, curious on, you know, the connection there with the provider's side of the business and whether you guys, you know, fully capture the rest of the patients on the provider's side of the business or still see that as an early innings opportunity.

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

Both are going extremely well. Thank you.

Our next question comes from Pito Chikering with Deutsche Bank. You may proceed.

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

Yeah. Hey, good morning, Peto. Thank you. I think we've seen just real consistency over the past years. We haven't seen, you know, dramatic changes in those dynamics. You know, one of the things we've done over time is start to broaden outside of oncology with leveraging the capabilities that we have, which are directly applicable to, you know, a lot of other therapies and indication areas where you're seeing LVDs, alternators, or exclusives develop. You know, but in our GP per script and in GP dollars per script, I think stability is a really appropriate word, and, you know, that works great. You know, we drive, you know, our focus is on driving volume growth and efficiency in the organization. And so, you know, we have continued to augment some of our wraparound services. You know, that's been helpful. You know, that's, you know, that's an area that was really nascent, you know, as recently as three or four years ago. And the next year or two could be even twice as big as it is today. And it's really grown significantly. The team has done an excellent job with that. So I would say we've continued to evolve a lot of our processes and service offerings. But some of the items around the economics that you've mentioned, you've seen just a lot of consistency there over time. Great.

Thanks so much.

Thank you. Our next question comes from Brian Tenkulik with Jeffries. You may proceed.

Hey, good morning, guys, and congrats, John, and to the team. John, maybe just as I think broadly speaking, not asking about specific drugs here, but when we think about these new oral drug LDB introductions where you're part of a very narrow network, Like, does the historical real sum of roughly 50% go into hospitals still hold, or how much variability is there? And then maybe to clarify, as we think about whatever percentage goes to the hospital channel in that exclusive or very narrow network, where do the hospitals source their drugs from?

Yeah, the 50% estimation is what we see when we look at the market data as well. And, you know, they're just going through their normal, well, you know, they would be going direct to the manufacturer or through their other purchasing.

Thank you.

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

Hey, guys. I wanted to ask about operating leverage in corporate SG&A. It looks like that was down a little bit sequentially from the first half run rate. And so I just wanted to ask, you know, sort of what's resonating or working well in terms of where you're finding efficiencies here, and then, you know, what's the incremental opportunity as we think about either fourth quarter modeling or even beyond that over the next couple of years?

Yeah, thank you so much for the question. We continue to see the ability to leverage our corporate infrastructure while continuing to invest, you know, in new technologies, in AI products, and people across quality sales and other investment opportunity areas for us. So, you know, as we think about looking forward, we continue to see significant ability to leverage the infrastructure that we have across each of our different business lines, and then we continue to make very strategic investment decisions for long-term growth, and we expect that to continue. So that does, you know, depending on the opportunities and things we see from an investment standpoint, you know, that can, you know, move our G&A a little bit from time to time and quarter to quarter. But again, that continues to be our focus. How can we become more lean and efficient through all of our different investments, leverage our infrastructure, but then continue to invest for the future?

Thank you.

Our next question comes from Sean Dodge. With BMO Capital Markets, you may proceed.

Yeah, thanks. Maybe just going to the provider side, within home health and the preferred MA contracts, is there anything you can share on just what proportion of your volumes there are under those contracts now? How much runway is left to add more of those? And then just anything on like the rate differential you're able to negotiate in those preferred relationships with MA?

Yeah, you know, I would say, you know, our mix of MA and Medicare is probably not going to be too dissimilar from, you know, some of the recent but no longer existing public companies and what they would have reported. You know, we really focus on quality and, you know, in a set of specific programs within home health that we think are interesting and that, you know, hopefully can provide better outcomes. And so with that, you know, we've been able to deepen, you know, some of our contracting with specific plans, which has been, I think, really mutually beneficial. I think there's still, though, a lot more opportunity to do that, you know, for us on the MA side, you know, thankfully, you know, some of the rates have improved over time. You know, there's been an imbalance in demand versus supply of home health for quite a while. And I think people are really appreciating and realizing that as well as, you know, more and more indicating a flight to quality. You know, you look at a scaled provider like us that invests in people and technology like crazy, and I think you're going to get a different result there. You know, you look at our home health offerings, and, you know, we have the opportunity to provide, you know, meds in the home, our continued care program with that, which is like the number one thing you can do to reduce re-hospitalizations. And, you know, we have the studies that prove that out. And, you know, we offer that capability and are still bringing that to more of our patients. We're now rolling out, you know, virtual primary care for our home health population where appropriate. So, you know, you have an MDN NP running sidecar throughout that home health episode, and that has a much better result, too. So, these are the kind of things that we're doing that I think few other people do, and, you know, and those are the kind of, you know, that's the kind of program that, you know, we hope to take to more and more people and be a deeper partner to, you know, to give them the best possible solution, you know, whether it's a hospital ACO, a physician ACO, or a payer.

Okay, great. Thanks, Cam.

Thank you. Our next question goes from Parker Sneer with Raymond James. You may proceed.

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

Yeah, Parker, I appreciate the question. We did have a really strong quarter from a cash flow perspective. Typically, Q3 and Q4 tend to be our largest just in terms of timing and some of the seasonality associated with cash flow and inventory tend to be some of our higher cash flow quarters. I would say working capital tends to be, with some of our revenue growth, we continue to see some benefit associated with the timing of receivables and our DSO compared to payables. So there is some component of that that is, you know, one time in nature. However, we continue to obviously, you know, expect to grow revenue. So from that standpoint, you know, there is, you know, a continuation of that we would expect. I would say, you know, generally across a quarter, what we said at Investor Day would still hold that on average, we would expect to have greater than 60% conversion of adjusted EBITDA to operating cash flow. We do expect that to be a little bit higher this year, as we noted, you know, excluding the community living taxes with, you know, $700 million of expected operating cash flow, excluding the community living taxes.

Okay. Thank you.

Thank you. Our next question comes from Jason Casorla with Guggenheim. You may proceed.

Great. Thanks. Good morning. I was hoping you can give us an update on the AI and tech investments you made this year across both businesses, and then maybe help frame the return opportunity from those investments, how much you've realized in return so far this year, What you're expecting to generate into the rest of this year and into next year would be very helpful. Thanks.

Yeah, Jason, thanks so much for the question. You know, as we've mentioned, we continue to invest and see opportunities for efficiencies and higher quality opportunities across different AI and technology solutions. We have begun many of those and started to implement those into Q3 and Q4. And we expect opportunities for return on investment. So every single investment that we've made across the organization, we do have ROI that we are expecting as we evaluate each of those opportunities and how those play out can vary over time. We would expect more of what we've implemented this year to be realized in 2027, as some of these are just beginning to roll out. But we will continue to invest in 27. So we're early in the budget process, which is why we're not talking much about 27. But we also see a number of continued opportunities that will provide growth into 28 and into 29 that we are going to lean into and expect to lean into into 2027.

Great. Thank you.

Thank you. Our next question comes from Stephen Baxter with Wells Fargo. You may proceed.

Hi, thanks. I wanted to ask about a payer mix in the specialty and infusion business. It looks like, you know, if you look back to last year, the commercial was driving about a third of your revenue growth on a dollar basis. But when you look at it this year, I think commercial is driving more We're like 45 to 50 percent of the revenue growth that you see in year to date. Could you help us understand, you know, what's driving that change and whether to think about, you know, maybe this year or last year is more indicative of what's normal and I guess how that flows through, you know, the P&L and influences margins? Thanks.

Yeah, it's primarily associated with growth in branded LDDs. So, as we, you know, continue to bring on new LDDs and see revenue growth associated with those LDDs, there is a mix of those as we are one of two that is typically one of one or one of two that is typically serving that drug, and those drugs are a mix between Medicare and commercial. So, as you see those come online, you are seeing some increase in SKU to commercial. Separately, we have continued to see infusion growth, which is much more commercial.

Yeah, as you expand a little bit more outside of oncology with certain opportunities, you know, in the exclusive and rare and orphan world, those can be more, when you think about the population of individuals, might not be as many seniors for those types of therapies. You know, if you have a rare and orphan condition, you pretty much have that from birth. So, you know, a little bit more of a commercial slant to the expansion in LDDs and rare and orphan. You know, and as Jen said, you know, infusion growth is more tilted toward commercial, and we've seen good growth there. And I would say even more broadly within specialty pharmacy, you know, we've just, we've, you know, I think we've had deepening partnerships, you know, within commercial, even in oncology itself.

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

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

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