Earnings Call Transcript - BTSG Q1 2026

Operator, Operator

Hello, and thank you for standing by. Welcome to BrightSpring Health Services, Inc. First Quarter 2026 Earnings Conference Call. Please note that all participants are in listen-only mode until the question-and-answer session. I would now like to hand the conference over to David Deuchler. Please go ahead.

David Deuchler, Investor Relations

Good morning. Thank you for participating in today's conference call. My name is David Deuchler with Investor Relations at BrightSpring. I'm joined on today's call by Jon Rousseau, Chief Executive Officer; and Jen Phipps, Chief Financial Officer. Earlier today, BrightSpring released financial results for the quarter ended March 31, 2026. 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 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 filings with the SEC, and we do not undertake any duty to update any forward-looking statements, except as required by law. During the call, we will use non-GAAP financial measures when talking about the company's financial performance and financial condition. You can find additional information on these non-GAAP measures and reconciliations of our non-GAAP financial measures to their 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 Jon Rousseau, Chief Executive Officer.

Jon Rousseau, Chief Executive Officer

Good morning, everyone, and thank you for joining BrightSpring's First 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 their hard work and commitment, enabling us to deliver high-quality and timely care to patients. Before we speak to first quarter performance, a few key messages and takeaways from our Investor Day in March and why we are optimistic about the company's prospects in the years ahead. BrightSpring is a national leader in home and community health services, serving complex patients in the health care system. We deliver high-quality services at significant scale with a disciplined operating model that focuses on patient and provider outcomes. Throughout our service lines, that focus on quality care underpins commercial efforts supporting sustainable growth. Our organizational culture of continuous improvement and best practice sharing will continue to enable operations that expand the impact we're making in providing comparatively lower cost services for complex patients across the country. In Pharmacy Solutions, the growth outlook is healthy with the specialty and infusion businesses continuing to deliver impressive script growth and patient satisfaction scores. We continue to see strong volume performance from both brand limited distribution drugs and generics, and we added 4 exclusive ultra-narrow limited distribution drugs to our portfolio in the first quarter, bringing our total number of limited distribution drugs to 153. Infusion represents one of our larger geographic expansion opportunities looking forward, covering today about one-third of the country on the acute side and half the country in chronic specialty. Home and Community Pharmacy is looking to drive organic profitable growth in assisted living, behavioral, hospice, PACE, skilled nursing and other markets, supported by investments in automation across our national pharmacy footprint. On the provider side, in our home health care businesses, we continue to expect organic growth to be underpinned by market share gains from high-quality services and scaled market development and clinical support teams that we continue to invest in. In 2026, we are integrating the acquired Amedisys and LHC branches and expect approximately $30 million of EBITDA contribution in year one. We are continuously looking to innovate services and associated operational processes to drive outcomes and growth with numerous payer agreements and partnerships that reflect this. In palliative and hospice, the strength of our quality results and our patient-centric approach positions us well in a market that remains significantly underutilized with only half of eligible patients receiving such valuable care today. Rehab continues to deliver consistent growth in home and community settings with excellent clinical outcomes as we continue to expand in the senior setting through Rehab in Motion and assisted living facilities. Home-based primary care and value-based care initiatives, while still in earlier stages, produce meaningful reductions in hospitalization, help coordinate other needed services and represent significant potential for future growth as we scale. BrightSpring is firmly positioned on the right side of the most important trends in health care to address system and patient needs, with a differentiated enterprise and a unique set of assets that deliver real solutions to patients, providers and payers alike. With that context, let me turn to the first quarter. As a reminder, the company's financial results and 2026 guidance pertain to continuing operations and do not include results from the divested Community Living business nor the impact of any future closed acquisitions. We completed the sale of Community Living to Sevita on March 30, 2026, which resulted in net cash proceeds before tax of approximately $811 million. The proceeds from this transaction will be used to further strengthen the balance sheet, including both debt paydown and cash availability. Overall, we are pleased with our first quarter financial results with total company revenue of $3.6 billion that grew 26% year-over-year. Pharmacy Solutions revenue of $3.2 billion and Provider Services revenue of $442 million represented 25% and 28% growth, respectively. First quarter 2026 adjusted EBITDA of $190 million grew 45% year-over-year with an adjusted EBITDA margin of 5.3%, a 70 basis point improvement year-over-year. Margin expansion was primarily driven by mix and operational efficiencies across the organization. On cash flow, the company realized $123 million of cash flow from operations in the quarter, excluding fees from the Community Living divestiture. Leverage was 2.27x as of March 31, 2026, which declined from 2.99x as of December 31, 2025. Pro forma leverage on March 31 was 2.40x when factoring in cash taxes associated with the Community Living proceeds that will be paid in Q2. Performance in the quarter was driven by a high quality of care and patient satisfaction. In Home Health, over 91% of our branches are four stars or greater. We have an industry-leading timely initiation of care of greater than 99%. And in Q1, 65 Home Health locations were named a Best Home Health provider by U.S. News & World Report. In hospice, quality measures remain well above national average with significantly more visits provided, a top five percent ranked hospice program in the U.S. and a CAPS overall hospice rating of 87%. In rehab, patient satisfaction scores are at 98% with outpatient and 97% with Home and Community Rehab. In personal care, we have a client satisfaction score of 4.6 out of 5, consistent with the fourth quarter. On the pharmacy side, in Home and Community, dispensing accuracy was 99.99%. Order completeness was 99% and on-time delivery was 96%. And in infusion, our patient satisfaction score was 94%, 97% of discharges were due to completion of therapy. And importantly, we saw recent improvements in both acute and specialty turnaround times near internal goals aimed at best-in-class. Specialty Pharmacy demonstrated a consistently high medication possession ratio of 92.1% in the quarter, along with time to first fill of 4.6 days, both much better than national average. I'd like to close by emphasizing that BrightSpring's continued focus on serving large and growing markets, providing high-quality care for patients, building and leveraging scale and institutionalizing a disciplined operating model are what collectively differentiate the company. We serve expanding populations of high-acuity individuals with solutions delivered in the home or community settings that consistently improve clinical outcomes while reducing total cost of care. We are deliberate in our corporate strategy, and we use our platform scale to generate operational efficiencies while deploying best practices across our pharmacy and provider service lines, equipping them with the resources and capabilities they need to execute and grow. We believe this approach and model is what creates durable value and the most positive impact for all of our stakeholders. BrightSpring's first quarter saw broad-based momentum across both the pharmacy and provider segments that reflected execution on our operating and growth priorities, which we laid out at our Investor Day in March. We feel good about the performance of the business through the first three months and are on track to deliver the updated full year guidance provided today. With that, I'll turn the call over to Jen.

Jennifer Phipps, Chief Financial Officer

Thank you, Jon. Before I discuss our financial results for the first quarter of 2026, I'd like to remind you that in the first quarter of 2025, we began to record the Community Living business in discontinued operations, as indicated in the press release and 10-Q to adhere to accounting standards required on an interim basis. As such, all BrightSpring financial results and forecasts that I will discuss are related to continuing operations and exclude Community Living and any acquisitions that have not yet closed. Management believes the presentation of the non-GAAP financials from continuing operations is a useful reflection of our current business performance. In the first quarter of 2026, the total company revenue was $3.6 billion, representing 26% growth from the prior year period. Pharmacy Solutions segment revenue in the quarter was $3.2 billion, achieving 25% year-over-year growth. Within the Pharmacy Segment, Specialty and Infusion revenue was $2.6 billion, representing growth of 36% from prior year, which was driven by strength in specialty and market adoption of existing limited distribution drugs, new limited distribution drug wins, brand to generic conversions and generic utilization. Growth in fee-for-service programs, including hubs and service agreements, and strong commercial execution supported the results. Infusion showed solid volume growth and operational metrics driven by process improvements. Home and Community Pharmacy revenue was $527 million, representing a decline of 9% year-over-year due to an approximately $50 million impact from the Inflation Reduction Act, which was expected, along with our decision to exit any uneconomic customers, both of which we have previously discussed and came in line with our expectations. We expect to see a revenue impact from the Inflation Reduction Act of approximately $45 million for each of the remaining quarters of 2026, totaling a Home and Community Pharmacy revenue impact of approximately $175 million for the full year of 2026. In the Provider Services segment, we reported revenue of $442 million in the first quarter, which represented 28% growth compared to the prior year. Within the Provider Services segment, Home Healthcare reported $266 million in revenue, growing 49% versus last year with strong census growth, de novo expansion, preferred Medicare Advantage contracts and ongoing successful integration of our acquired branches. The acquired assets contributed $79 million of revenue and approximately $9 million in adjusted EBITDA in the first quarter. We are encouraged with how well the integration process is going and are optimistic about the performance for the year. Rehab revenue was $75 million, growing 7% versus last year, with momentum in persons served and hours billed in Core Neuro Rehab, de novo additions and continued expansion in our Rehab in Motion program. Personal Care revenue was $102 million, representing growth of 4% year-over-year, driven by modest growth in persons served and stable operations. Moving down the P&L, first quarter company gross profit was $482 million, representing growth of 43% compared with the first quarter of last year. Adjusted EBITDA for the total company was $190 million in the first quarter, an increase of 45% compared to the first quarter of 2025. Adjusted EPS for the total company was $0.39 in the first quarter. The company's profitability growth and margins in the first quarter benefited from the performance dynamics Jon discussed and the impact of investment initiatives to drive operational improvement across the organization. Throughout 2026, we expect targeted commercial strategies and our operational and procurement initiatives to support both investment and growth from best practices deployment in operations, streamlining and ongoing efficiencies realized. Turning to segment performance in the first quarter, Pharmacy Solutions gross profit was $301 million, growing 48% compared with the first quarter of last year. Adjusted EBITDA for Pharmacy Solutions was $169 million for the first quarter, an increase of 46% compared to last year, representing an adjusted EBITDA margin of 5.3%, which was up approximately 70 basis points versus last year. Strong performance across the therapy portfolio, favorable mix and fee-for-service contributed to profitability performance. Provider Services gross profit was $181 million, growing 35% versus the first quarter of last year. Adjusted EBITDA for Provider Services was $66 million for the first quarter, growing 29% versus last year, representing an adjusted EBITDA margin of 14.9%, up approximately 10 basis points versus last year. On a total company basis, cash flow from operations was $123 million in the first quarter. Recall that the discontinued operations cash flow are included in total company reports. As we look forward to the balance of the year, excluding Community Living related cash flow impact, we expect to deliver approximately $500 million of annual operating cash flow. Our adjusted EBITDA growth, combined with our cash flow generation during the quarter led to a leverage ratio of 2.27x as of March 31, 2026. This cash flow and leverage profile provides the company with some additional flexibility in capital allocation and capital structure as we move throughout the year. As of March 31, net debt outstanding was approximately $1.7 billion. As Jon mentioned, we received approximately $811 million of net cash proceeds before tax from the $835 million gross cash consideration for Community Living. Approximately $100 million in taxes is expected to be paid out in the second quarter of 2026. We will remain active in evaluating options for the existing term loan and the appropriate capital structure for the company over the coming months in light of continued strong operating performance. We expect quarterly interest expense to be approximately $35 million. Turning to 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 $14.725 billion to $15.225 billion, including Pharmacy Solutions revenue of $12.85 billion to $13.3 billion and Provider Services revenue of $1.875 billion to $1.925 billion. This revenue range reflects 14.1% to 17.9% growth over full year 2025, excluding Community Living in both years. Total adjusted EBITDA is now expected to be in the range of $795 million to $825 million for full year 2026. This would reflect 28.7% to 33.6% growth over full year 2025, excluding Community Living in both years. Included in total adjusted EBITDA is expected contribution from the Amedisys and LHC assets acquisition of approximately $30 million. I will now turn it back to Jon.

Jon Rousseau, Chief Executive Officer

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

Operator, Operator

The instructions for question queueing are as follows: to ask a question, press star then one. Our first question comes from the line of Ann Hynes with Mizuho.

Ann Hynes, Analyst (Mizuho)

I just want to talk about some of the growth initiatives hitting the P&L this year, especially with Infusion. I know that's been a big focus for the company, expanding the chronic portfolio. Can you just let us know how that's going, what the growth rate is, maybe what drug classes you're focused on?

Jon Rousseau, Chief Executive Officer

Yes. We saw broad-based growth across the organization on both the provider and the pharmacy side. Provider had a tailwind from closing of the Home Health branches. One of the reasons we had a little outperformance in the acquired Home Health branches was the step-up in admissions we were able to drive with them under our roof for three to four months. On the pharmacy side, the ramp-up of existing limited distribution drugs, the launching of new limited distribution drugs and focused growth around driving generic utilization led to good growth within our Onco360 and CareMed business. Within that business, many of our limited distribution drugs under CareMed are outside of oncology, which has been intentional. We saw script growth rates over 30%, and we saw a continued growth rate in the number of new prescriber accounts as we invest in more reps, particularly on the West Coast, and expand into therapeutic areas beyond oncology. Specifically within infusion, we saw double-digit growth on both the acute side and the chronic specialty side. We had been underweight on chronic specialty, so we view that as an opportunity. We went live in early Q2 with a concierge program around IVIG and plan to build out concierge programs around targeted therapy. It was a productive quarter with solid double-digit growth across those areas within Infusion.

Ann Hynes, Analyst (Mizuho)

Great. And just for a follow-up, obviously, your leverage is at a nice point after the repayment of debt. If you — I guess, one, would you be interested in larger M&A? And if you would be, what would be a leverage you would be comfortable going back up to for the right asset?

Jon Rousseau, Chief Executive Officer

We're pleased with the balance sheet. We have said that under three times and mid-two times is a longer-term target where we'd like to be. We'll continue to act with a disciplined approach. Over the last seven years, there were two larger transactions that worked well for us: the original Home Health and hospice acquisition of Abode and our recent transaction with LHC and Amedisys assets. We have some flexibility, but we will continue to look at opportunities that make long-term sense. Our bread and butter will be geographic expansion with tuck-ins in our current businesses that allow us to enter new markets more quickly where it makes sense. Deals in the midrange of $5 million to $10 million are easier to execute, and our pipeline now is similar to historical patterns. Whatever we do, we'll be measured and prefer to stay within our target leverage range for the right assets.

Operator, Operator

Our next question comes from the line of David Larsen with BTIG.

David Larsen, Analyst (BTIG)

Congratulations on another excellent beat-and-raise quarter. Can you maybe talk a little bit about the overall Medicare environment and how this is impacting your business? Some health plans are talking about high trend pressure on margins. I think you had talked about the potential for getting into some value-based care arrangements in Medicare that could benefit you. General thoughts on the overall Medicare landscape and how this is affecting you would be very helpful.

Jon Rousseau, Chief Executive Officer

We've seen consistency on the Medicare side this year with no major changes. On the pharmacy side, from a Part D perspective, we continue to be a partner in driving costs down through generic utilization over time. On Infusion, we continue to press in D.C. with the industry and associations around fixes to the Cures Act to provide greater access for Medicare beneficiaries to receive home infusion instead of hospital care; we believe that change could deliver significant program benefits and remain optimistic about eventual progress. On the provider side, Home Health and Hospice rates have been stable over the last six months. Regarding value-based care, we continue to make progress. We are applying to the new ACO program with applications due in May, and we have added experienced people to the business. Operationally, serving patients across skilled nursing, assisted living and home with a house calls model is complex, and we've focused on delivering high-quality outcomes. Our goal is to scale these efforts, pursue next-generation ACO programs and continue to reduce costs in desirable care settings. We're investing in a hub to provide oversight and applying AI to our data and analytics to be proactive and smart in our care approaches. Overall, no major changes in traditional Medicare payment programs, but there are real opportunities for cost reduction that we intend to pursue.

David Larsen, Analyst (BTIG)

Great. And then just one quick follow-up. Jen, I thought that we had been talking about $600 million of revenue headwind in 2026 coming from a combination of the Inflation Reduction Act, community, specialty infusion and brand to generic conversions. Is that correct? You obviously beat my revenue estimate by a lot in the quarter. Just an update on how that's tracking relative to expectations would be helpful.

Jennifer Phipps, Chief Financial Officer

Yes, that's correct. We did discuss the IRA impact in Home and Community because it was obvious from a revenue standpoint. We are tracking towards our expected numbers in all those areas. As a reminder, the Home and Community IRA impact is about $175 million for the full year. Full year IRA impact in Specialty and Infusion is about $181 million, and branded to generic conversions are about $250 million.

Operator, Operator

Our next question comes from the line of Charles Rhyee with TD Cowen.

Charles Rhyee, Analyst (TD Cowen)

Congrats on the results. Maybe, Jen, just to quickly follow up there. Besides the revenue headwind, are we still looking at $15 million of mitigated sort of headwind on the EBITDA line that hasn't changed?

Jennifer Phipps, Chief Financial Officer

That is correct.

Charles Rhyee, Analyst (TD Cowen)

Okay. Perfect. And then I don't think you gave sort of what the specialty script growth in the quarter was. I was curious what that number was and what Home and Community revenue growth ex Genesis was as well?

Jennifer Phipps, Chief Financial Officer

Our Specialty and Infusion script growth in the quarter was approximately 30% year-over-year. Specialty growth was a bit higher than that total, and Infusion was in the mid-teens for script growth. Home and Community, excluding uneconomic customers, saw modest script growth in the mid-single digits.

Charles Rhyee, Analyst (TD Cowen)

Got it. That's helpful. And then maybe just one last question. We're seeing a lot of commentary from PBMs that they are trying to push their own label biosimilars and steer patients into captive pharmacies. I would like to understand how much exposure you have to those dynamics and if that's something you're seeing. If so, what can you do to mitigate that?

Jon Rousseau, Chief Executive Officer

Given our history and product portfolio today, we don't have a lot of exposure to that dynamic. That risk tends to be higher for injectables. Our Infusion business is still majority acute, though we are growing in chronic specialty, and much of our chronic specialty is infusible rather than subcutaneous or injectable. On Onco360 and CareMed, the predominant form factor is oral solid, so we feel comfortable about our exposure. Excluding the IRA impact, Home and Community Pharmacy was up in profitability year-over-year in the quarter. We expect a strong Q2 over last year despite the IRA, so there is nice momentum there.

Operator, Operator

Our next question comes from the line of Joanna Gajuk with Bank of America.

Joanna Gajuk, Analyst (Bank of America)

So maybe on Infusion. Thanks for the color in terms of you guys growing double digits in both segments. As it relates to that business, can you give us an update? The growth, I guess, is coming from these 20 or so limited distribution drugs. Last time we spoke you said you had these LDDs but were not really participating. Is that still the case or are you executing on this already?

Jon Rousseau, Chief Executive Officer

Previously we had access to many LDDs and had won a few. Since then, we've won five LDDs in the last six months. None of those new wins are exclusive or ultra-narrow one- or two-pharmacy categories in Onco360 and CareMed; our goal is to win more exclusives. When launching specialty programs, you must win access to the drug and execute operational initiatives to pull the drug through the market. We do well on Onco360 and CareMed with wraparound programs, data services and hubs. We are building that out on the Infusion side. We launched IG Connect in the quarter, a concierge program for all IG referrals, and we plan to apply concierge programs to other LDDs to customize the experience for manufacturers and patients. We are in the early stages of what we expect to be a multi-year growth focus in LDDs and infusion, similar to what we've done on the oncology side over the past decade. We have made continued progress with manufacturers on Infusion and will keep focusing on pull-through in these programs.

Joanna Gajuk, Analyst (Bank of America)

If I might follow up, my question was actually about gross profit per script, which was up 50% year-over-year and sequentially. How much of that was from new LDD launches versus generic conversions? How much more room is left on that metric?

Jon Rousseau, Chief Executive Officer

We would not expect much more continued gains in gross profit per script; stability would be positive. Four principal drivers contributed to the increase: first, disproportionate growth in the Specialty and Infusion business which has a higher gross profit per script; second, healthy growth in both brands and generics with a brand-to-generic mix shift that was additive to gross profit per script; third, purchasing benefits from leveraging our scale and constructive relationships in the supply chain; and fourth, fee-for-service revenue from hubs and service agreements, which is a high gross profit margin business often associated with brand launches. Those four factors drove the change in gross profit per script.

Operator, Operator

Our next question comes from the line of Jared Haase with William Blair & Company.

Jared Haase, Analyst (William Blair)

Maybe I'll pack two here into one regarding the margin in the quarter. One, I wanted to clarify a mix comment: rapid growth in specialty, particularly branded, could be dilutive to overall margin. I wanted to understand the dynamics there and whether mix was related to generics. Two, how should we think about the cadence of margins for the rest of the year? You typically show margins building sequentially, but your guidance implies full year margins consistent with Q1. How should we think about that?

Jon Rousseau, Chief Executive Officer

On the gross profit side, there is percent margin versus dollar margin. The mix shift we saw helped more on the dollar margin side than on the percent margin. Jen, you can speak to the outlook for the rest of the year.

Jennifer Phipps, Chief Financial Officer

For the rest of the year, we expect the potential for slight margin build, and our guidance range implies full year adjusted EBITDA margins in the range of approximately 5.2% to 5.6%. Continued leverage of scale, operational initiatives and procurement efforts are expected to support margin, and as we execute on chronic therapies within Infusion, that has potential for slight margin expansion. Largely, we expect margins to be consistent with Q1 with room for slight improvement through the year based on execution.

Operator, Operator

Our next question comes from the line of A.J. Rice.

Albert Rice, Analyst

Just maybe picking up on the comment that Jen just made. Operational efficiencies have been an ongoing part of your strategy and you're attributing part of the 70 basis points of margin improvement to operational efficiencies. Can you update us on specific areas of focus and any AI-related applications you're looking at?

Jon Rousseau, Chief Executive Officer

We have prioritized procurement, operations and automation to offset impacts such as the IRA in Home and Community Pharmacy. Examples include automation tools in order intake and revenue cycle. In Infusion, we are working on order intake automation. For example, transforming a two-hour manual data entry task from a five-inch patient packet into an agent that can extract the necessary information in seconds is the kind of workflow streamlining we are pursuing. In Home Health and Hospice, we invested heavily in portals to accept referrals electronically from hospitals; connecting to numerous portals has improved admissions. We've also centralized order intake in Home Health, producing benefits as we integrate acquired assets. Our internal AI team has grown to over 20 people, and as we explore these capabilities, we find more opportunities to apply them. We have targets for cost-to-fill reduction in Home Community Pharmacy in Q2 and additional improvements in Q3 and Q4 that depend on OpEx initiatives supported by technology and automation. We're seeing progress on these fronts.

Albert Rice, Analyst

Okay. That's great. Maybe just conceptually also ask about biosimilars. You benefited from new limited distribution drug launches. I'm curious about the pace of biosimilars coming to market. Is that still the opportunity you thought it was a couple of years ago, or are there aspects that make you more optimistic or more cautious about the pipeline and what it might mean for you?

Jon Rousseau, Chief Executive Officer

As of today, we do not see much biosimilar risk based on our current portfolio and revenue. Conceptually, over time there is an opportunity for us to participate, and we view that as upside. Our specialty portfolio includes oncology products, rare and orphan LDDs, oral injectables and infusible products, which are our primary specialty swim lanes. We continue to evaluate other attractive products and potential participation areas. There are no near-term risks from biosimilars for us, and we will continue to refine our strategic assessment this year. As we lean into the opportunity, biosimilars could become an additional swim lane over time.

Operator, Operator

Our next question comes from the line of Sean Dodge with BMO Capital Markets.

Sean Dodge, Analyst (BMO Capital Markets)

Going back to the operational initiatives, Jon, you gave specific examples. How should we think about expected contribution from those initiatives in 2026 relative to 2025? Will the savings or benefits be greater this year than last? Of all the margin levers you discussed, where do these efficiency initiatives rank in terms of EBITDA contribution? Are they close to generics or a distant second?

Jon Rousseau, Chief Executive Officer

We have a formal continuous improvement program with White, Green and Black Belt training deployed across the organization. Over the past five-plus years, we've completed over 700 process improvement projects that generated nine figures of savings, much of which we've reinvested in people and technology. Our three primary drivers remain volume growth, operational efficiency and accretive M&A. Volume growth will always be a top priority, and operational improvements are complementary. We've historically generated meaningful savings annually from these initiatives, and we will continue to pursue them.

Jennifer Phipps, Chief Financial Officer

I agree. Volume driven by high-quality services is our highest focus. Our portfolio strength and procurement initiatives are key contributors. We have many people trained in continuous improvement and we are leveraging that in procurement as we scale. That will remain an important contributor alongside volume growth.

Sean Dodge, Analyst (BMO Capital Markets)

Okay. Great. You mentioned fee-for-service business as a growth area within pharmacy. Anything you can share on the scale of that business now? How much is it contributing and what is the longer-run opportunity?

Jon Rousseau, Chief Executive Officer

We have 31 hub programs today and more service agreements. That business is growing in the 40% to 50% range year-over-year. It's not the majority of gross profit contribution within specialty, but it is meaningful—no longer a small number—and it's important as a way to deepen manufacturer relationships.

Operator, Operator

Our next question comes from the line of Whit Mayo with Leerink Partners.

Benjamin (Whit) Mayo, Analyst (Leerink Partners)

Jon, do you have market share data for your specialty business? I'm wondering what your oncology share is today versus one to three years ago.

Jon Rousseau, Chief Executive Officer

Market share is tricky and often drug-by-drug. A proxy is that about half of specialty drug revenue flows through the specialty pharmacy channel, and you measure your share from there. We believe our share continues to increase. When you are exclusive with a manufacturer or in an ultra-narrow network of two pharmacies, you capture a large share of that specific drug. As more drugs move to limited distribution, exclusives and ultra-narrow networks, that trend can increase our share. On the generic side, we work to be proactive with prescribers and offices in advance of generic launches to support conversion volume. We believe our conversion performance is strong, and our share is trending up, though visibility is imperfect and we continue to refine our market share tracking.

Benjamin (Whit) Mayo, Analyst (Leerink Partners)

That's helpful. Corporate cost was up a bit more than expected. You've been making a lot of investments this year. Jen, what's in the plan for corporate for the full year?

Jennifer Phipps, Chief Financial Officer

Compared to Q4, corporate costs are not up as much year-over-year as they may appear because we made investments in 2025 as well. I expect a small increase for the remainder of the year related to additional IT projects and other initiatives, but not a significant increase at this time.

Operator, Operator

Our next question comes from the line of Matthew Gillmor with KeyBanc.

Matthew Gillmor, Analyst (KeyBanc)

Picking up on generic conversions, you mentioned utilization was strong. Can you comment on the broader landscape for generic conversions and how you're performing relative to that opportunity?

Jon Rousseau, Chief Executive Officer

The landscape remains dynamic. We have a broad portfolio of brands and generics, and the playbook for conversions remains consistent: invest in the sales force, build relationships with manufacturing partners—both branded and generic—and secure supply access. We continue to refine that strategy. Over the next two to five years, a steady stream of patent expirations will drive conversions, and we will look to grow our product portfolio across therapy areas.

Operator, Operator

Our next question comes from the line of Brian Tanquilut with Jefferies.

Brian Tanquilut, Analyst (Jefferies)

Congrats, Jon. A question on the defensiveness of the business: how resilient is it to PBM moves, given recent commentary about PBMs and payers trying to move drugs away from non-PBM or specialty pharmacies? How are you thinking about defending your moat?

Jon Rousseau, Chief Executive Officer

We aim to partner constructively across the value chain and maintain long-standing relationships. Our quality standards and scale are important differentiators. We support patient and member choice and strive to be a high-quality provider with strong service. We consider carefully where we participate by therapeutic area and continue to focus on quality, service and strategic participation decisions to defend and grow our position.

Operator, Operator

Our next question comes from the line of Larry Solow with CJS Securities.

Lawrence Solow, Analyst (CJS Securities)

Congrats on the good quarter. Pharmacy Solutions grew about 25% in the quarter and the midpoint of guidance is mid-teens. Is the difference going forward related to increased IRA impact and branded conversions, or is it conservatism? What drives the slowdown?

Jennifer Phipps, Chief Financial Officer

The difference is more related to the year-over-year and sequential growth we saw in 2025. For the remainder of the quarters, while we expect sequential revenue and EBITDA growth, we see it being more balanced quarter-to-quarter.

Operator, Operator

Our next question comes from the line of Stephen Baxter with Wells Fargo.

Stephen Baxter, Analyst (Wells Fargo)

Following up on efficiency conversations, specifically in the pharmacy business, you've held SG&A in a tight range. In Q1 SG&A stepped up about $40 million sequentially. What drove that sequential increase? Was anything onetime or unusual? What are you spending on and how should we think about returns on these platform investments?

Jennifer Phipps, Chief Financial Officer

In Q1 there were several investments in IT and other areas that contributed to the increase. We continue to invest for growth in the sales force across different businesses and in other areas. Commissions and sales-related expenses tied to strong sales growth also contributed. We evaluate investments with a view to how they drive growth in subsequent years, and the largest impacts in Q1 were those investments including Salesforce and IT projects.

Operator, Operator

Our next question comes from the line of Erin Wright with Morgan Stanley.

Erin Wilson Wright, Analyst (Morgan Stanley)

Since we're getting many questions on this, can you dig into the PBM dynamic on private label? It seems more dedicated to subcutaneous products. Are you seeing changes in reimbursement on the Infusion side versus subcutaneous? If subcutaneous launches, how do you think the scope of private label might broaden over time? Also, how do you think about relationships with payers and PBMs and potential conflicts of interest? What percentage of your portfolio could be exposed to this competition over time?

Jon Rousseau, Chief Executive Officer

We do not have a lot of volume or exposure to private label products in the relevant categories today. We are not seeing major changes in reimbursement or in our agreements related to private labels. From payer and PBM relationships, our approach is to be a constructive partner, focus on quality and service, and be thoughtful about where we participate. At present, exposure to private label dynamics is limited for our portfolio.

Operator, Operator

I'm showing no further questions in the queue. That concludes today's conference call. Thank you for your participation. You may now disconnect.