Conference Transcript - BTSG 2026-06-03

Jared Haase, Analyst — William Blair

So hi everyone. Thanks for joining us here on the second day of our annual Girl Stock Conference. For those I have not yet met, my name is Jared Haas. I cover healthcare delivery and healthcare IT stocks for William Blair. So it's my pleasure to introduce Bright Spring Health Services, first time hosting the company here at our conference. With me on stage we have John Russo, the company CEO. We also have David Dykler who heads up investor relations for the company in the audience with us as well. So Bright Spring's been public now for coming up on two and a half years and over that time you know just demonstrated really remarkable consistency good execution really broad-based growth momentum across the business and i'm sure john will get into this in a little bit more detail in the presentation but you really have this vision that's coming together of this integrated uh platform you know enterprise scale really coming together and playing out nicely and driving strong results so two quick housekeeping items before we get in uh i'm required to inform you that a full list of disclosures are available at williamblair.com and then after we run through the presentation we'll move to our breakout session on the second floor in room jenny b so with that john over to you all right good afternoon thank

Speaker 1

you jared well it's a pleasure to be here thanks for your time this morning and we'll uh roll through a few slides here on our organization so bright spring today we are a leading home and community health services company you know really full stop we think within the world of healthcare targeting home and community patients in settings is a very good place to be. It is a setting where you have a huge impact on populations. It's often a preferred setting, a lower cost of services as well, where you deliver really impactful, high quality services and thus a high ROI for the system. So, you know, it's a space within healthcare that we've been in for almost a decade now and within home and community we've continued to try to drive what we think are our preferred markets um you know as i said you know we we serve very needed solutions for more acute chronic patients typically with our platform we have really focused on quality and operational capabilities to be serving almost a half a million people every day at this point across all 50 states and we really look we really look to leverage the scale of capabilities of the organization in many ways that we'll talk about so i've been at the organization almost a decade now um and it's been uh it's been a fascinating journey when i first arrived we were largely a behavioral company focused on idd populations that was about 70 percent of the of the business we have um within the last quarter actually sold that business which was the majority of the organization that i came to over time what you have seen is a continued focus strategic focus and evolution on certain target markets and more clinical services that we believe fit well together so the schematic here on the on the left hand bottom left hand side of the page today we are a pharmacy platform and a provider platform you know all focusing on home and community settings you know those are really our two big pillars today we think we those fit very well together as we'll talk about in a few slides we have three primary service lines in each the pharmacy and each the provider business but we've been very focused on leveraging the quality and the operational capabilities that we've put in place over the last 10 years to drive more and more growth to reach more and more patients who can benefit from these services as evidence of that we've done over 150 de novo locations you know these are new pharmacies new branch locations and new geographies that we continue to expand to and we really leverage our our capabilities on the acquisition side to do um accretive deals mostly geographical tuck-ins and expansions we've done almost 80 of those to date with an almost 100 track record where we really leverage our quality and operational capabilities and the synergies of our scale platform to bring those benefits to the acquired operations. But if you look at our growth historically, about two-thirds has been organic over this time period, and about a third has been through a very intentional, strategic, accretive M&A. As I started out with, we exist in what we believe to be our, you know, is a sweet spot within healthcare in the United States today and in attractive markets. we serve seniors and specialty populations we have attractive demographics that are supporting the markets that we're serving you know whether it's the seniors population or 8 to 12 percent type growth and the specialty populations and markets that we're in the markets that we're serving are large and very fragmented thus creating I think a lot more opportunity in the future for a scale provider and a natural consolidator like us as I said you know chronic of conditions for the specialty patient populations we're serving tend to grow at about eight to 12 percent in our markets. You see an increased prevalence of those, you know, and ultimately that is resulting in a growth in pharmacy spend, primarily in the targets that we focused on in the specialty arena. The people we're serving are more complex and make up the majority of the healthcare spend. So five to 10 percent of the people in the United States can make up 50 to 70 percent of the health care spent that is who we are serving taking care of and that's where we provide services to them and preferred settings that really lower these costs that's where we think we are a solution a continuing solution in the future of health care and these patients typically have multiple chronic conditions and they are defined by polypharm polypharmacy that is to say they're typically on six or more medications you know historically what you see with the U.S. healthcare system and a lot of this is self-evident probably to everybody in the room, but your experience as a complex patient can be very fragmented, it can be very disjointed, whether it relates to your medication and your pharmacy services or the care you're receiving. The platform that we have built to address this over time is one that focuses on these populations in home and community settings, serving both the pharmacy and the provider side of these patients and individual needs. everybody that we serve will have a pharmacy need and the vast majority of the people we're serving will also have a provider need so in the future we see more and more opportunity to serve the multiple needs of these chronic senior and specialty populations our clinical service services rate at an extremely high level I think there's opportunities for even more coordinated services in the future continued scale with geographic expansion and ultimately we see potentially adding a third pillar, which would be value based care, where we've been building out a primary care model serving people in the community, and ultimately using that model to drive differential and more attractive economic contracts and structures. So we believe that we have a very purpose filled built platform that not only serves clinical needs today, but it's very well positioned for the future of healthcare, and what is needed in this space. So key pillars of the platform is we take a little bit of a deeper dive into our business. As I mentioned before, there's really three primary businesses, both on the pharmacy and the provider side. On the pharmacy side, it's our specialty business with a focus on oncology and other rare and orphan therapies. It's our infusion business and our home community pharmacy business. You know, the best way to describe our pharmacy business is it is closed door. So it is the opposite of retail and closed door, meaning you can't go in. we go to the customer, to the patient, wherever they are. So whether you're in a skilled nursing facility, a senior living community, whether you're somebody at home fighting cancer, whether you're somebody at home who needs home infusion therapies, whether you are on hospice in your home, we will go to you wherever you are with very white glove, specialized and customized services for that setting for that patient. That is what we do in pharmacy across the board. On the specialty side, you know our beachhead there and our historical footprint has been more and on the oncology market you know that's obviously one of the bigger and faster growing markets within the specialty world it's defined by a lot thankfully it's defined by a lot of very innovative therapies that continue coming to the market we have leveraged the quality and the platform that we have built out in the oncology space into other areas of specialty that we think benefit from the same business model drivers and enablers that we have today, certain rare and orphan therapies, other spaces like cardiac where we have now been winning new therapeutics and partner in partnership with manufacturers. This market is defined by limited distribution drugs. That is where the biotech or the manufacturers when they come to market with a new therapeutic typically will pick and select a pharmacy partner. You know that can be three, that can be two, or that can be in one. You know This is a dynamic that has really unfolded over the last 10 or 15 years, where we have seen our farm, our manufacturing partners really want to work with, you know, just a select amount of pharmacy partners that they can that they feel that can optimally serve their patients. These are obviously really serious conditions that we serve and support. And it goes far beyond just filling the script. I mean, there are over 30 different things we do or points of interaction and support with a patient as they go through their journey. And we're proud to be, you know, a terrific partner with all of the manufacturers out there. Up today, about 150 drugs that go through this limited distribution drug model. On the infusion side, that's a $20 billion plus market in the U.S. for home infusion. We remain very enthusiastic about the prospects for that business over the long term. For us, we provide both acute and chronic specialty infusible therapies. The history of our infusion business was on the acute side. These are antibiotics, TPN, which is nutrition through the vein, very steady, stable business, no risk of disruption. And we like to build as much scale as we can in the acute business for a variety of reasons. And there's a lot more to go in terms of geographical expansion on the acute side you know chronic you know there's a 10 to 30 drugs out there from especially chronic perspective on the infusible side that are all interesting that we are continuing to grow into but especially for us given the history of our company on the acute side is much more of an upside opportunity that we are continuing to lean into home and community pharmacy that's where we have the majority of our scripts given the nature of that business that is going into senior living communities alfs skilled nursing facilities hospitals people at home on hospice and home health behavioral group homes you know where we go to that entity on a daily basis 24 7 with the meds and with the with the pharmacy support services it's a really great business that also benefits tremendously from dependable service levels and a lot of scale. As you can see, the majority of the revenue in the company today is on the pharmacy side. It becomes much more balanced when you look at our margins from an EBITDA standpoint when you factor in provider. The three primary businesses in provider are home health, hospice, and rehab. These are all terrific markets. They're large markets, and we have great management teams and continue to execute really well on the provider side. This has been about a 15% EBITDA CAGR for us on the provider side for a long time. And it's a business we remain really excited about. You know, home health care, this is going into the home with clinical services, nursing therapy, or the personal care support services to keep people out of the hospital and out of the ER. From a rehab perspective, that's historically been more of a workers comp and commercial, um, population serving people with neuro and, um, and spinal cord, uh, injuries, but literally where you go into the home or, um, a day, um, you know, we have day outpatient centers, six hours a day, very intensive rehab for extended periods of time where you make a dramatic change in, in the patient's, um, future and tremendously bend the cost curve. For example, unfortunately somebody you know could be a 33 year old car accident spinal cord injury you're in that home for 18 months literally bringing that person back to life it is an unbelievable business we're leveraging the rehab platform and capability we now have also into the senior side as we're building out part b outpatient with rehab now which we are now offering together with home health in senior living communities and extending that into the senior space which is something that i have a fair amount of experience with before running the rehab and home health businesses at kindred um you know from a revenue perspective this has been a solid grower for us the margin profile is higher than the pharmacy side and really complementary from that perspective and it really balances our ebit dial from an enterprise perspective we've gained some recent shale on the scale on the provider side uh picking up the divested assets from the united acquisition of the metasys and that's going very well i'm really proud of the quality and the management teams in all these businesses again you know we've touched on this but when you look at our markets they're all very large giving us a huge tam that we operate within and they're all growing for various demographic and therapeutic innovation growth reasons you know you can go across the board here and we're very positive on the growth rate if you look at on the provider cell side home health hospice rehab you know those are markets that are generally growing at five to seven percent we've been growing at rates north of that historically for a long time just driving market share gains through our investment in sales and clinical quality you know from a specialty perspective when you look at oncology and some of those other areas within the chronic specialty world those depending on the therapeutic category are growing at about eight to 12 percent again we've been able to grow it at rates exceeding those historically due to investments in our operational quality and sales capabilities as well mentioned quality a few a few times it's really the bedrock of our organization you know if you are not taking really good care of your patients and offering great quality services everything else unravels really quickly so for us this is the bedrock and the basis for which we try to reach more and more patients with our really high quality and higher roi services You can go across each one of the pharmacy service lines and each one of the provider service lines, and we can point out quality statistics that are either the lead or in the top 10% of all of our markets. So I can't tell you how seriously we take quality within the organization. We have seen continued improvement in this area over the past decade. We literally get net promoter scores in some of our businesses of 100 in our quarterly pulsing that we do with our customer base and with our referral sources and we just continue to lean into this we enable more and more of our caregivers and our services with technology which has been a helpful enabler for our ability to deliver these outcomes for patients over time and we will continue to try to drive a leadership position in quality in our markets benefits we get a lot of benefits from scale I think each one of our three by three pharmacy and provider businesses are very complimentary fundamentally we were taking care of very similar people in the same setting they all need pharmacy services and most of them need provider services at some point but we are able to leverage the scale of our organization in a lot of ways you know one of the most obvious would be just procurement and contracting you know where we're buying or we're buying drugs or other supplies or the other 5 000 things we buy in company on a regular basis you get a lot of benefits of scale in your purchasing leveraging and deploying technology and it capabilities across the organization that is a very real thing you know i would say from an enterprise perspective we really try to drive best practices out of corporate through all of the service lines every one of the businesses in the service lines has their own management team dedicated teams leadership teams but we try to augment any of those capabilities from support from my office out of hr out of i.t out of legal and finance and really driving expertise in those disciplines and those domains throughout our organization you know so for example we should be able to drive technology capabilities and performance in our home health business than a standalone two-state home health company and we see that time and time again so we drive technology best practices we drive clinical and quality scores like on the prior slide. We drive sales and marketing expertise into our businesses from corporate. We drive HR systems and expertise through our businesses. You know, we have seen improving retention and turnover scores every single year that I've been here to really strong levels today. We have a PMO in the company that goes business by business, constantly working on process improvement. And I think we've got a very unique acquisition engine within these very large fragmented markets as i said before on the i think second slide we've done almost 80 deals we've had an almost 100 hit rate most of our deals are proprietary we have a lot of operators with relationships throughout all of our markets and we have an imo an integration management office that takes these acquisitions very seriously and we leverage our synergies and our operational capabilities in the process to improve what we buy but these are all of the benefits that we are driving through our organization by having our one enterprise approach in building out this scaled leader in home community health care i won't go into too much of these bullets on this slide but just another reinforcement around how much we focus not only on quality but on operational execution you know we've been able to drive cost reduction and efficiency in our organization every year it's been a focus for us over time a lot of the savings that we've driven we've reinvested back into people you know hires wages 401k into it systems into compliance into quality you know some of this has been an adder to the bottom line but a lot of what we've done from an efficiency standpoint um has been reinvested and we continue to drive more and more innovation and leadership i think within our markets in it and what we're doing from a quality perspective but even in the last year or two we've tried to take lean to to another level in the organization you know we have a dedicated 20 person PMO team in addition to the IMO doing acquisitions we have a PMO that is just constantly working on upwards of 100 projects in the organization at any point in time just looking at every process and trying to make it better whether that involves technology or not but they are constantly driving a myriad number of projects throughout the organization through the service lines trying to optimize what we're doing from a process standpoint we've actually created a a white green and black belt program within the organization from a lean and six sigma perspective in the last year that we formalized that i think already a couple hundred people in the organization have graduated through so we're trying to not only have a centralized focused team driving process improvement but we're further trying to make that sort of lean mindset something in the dna across the organization where people are doing and thinking of these things on their own where they work and live every day um it has been a big focus for us you know we want we're aspiring to be the most technology advanced company within certainly within healthcare services you know hopefully within within healthcare over time you know we've brought on a lot of really good leaders in our technology shop over the past couple years most recently we hired a cto about nine months ago who's done an amazing job getting about 10 different AI projects off the ground and going and those are going really well and we're looking to deploy AI across clinical across operational processes and to help drive commercial and revenue growth as well you know some simple examples of that would be you know an intake process in one of our pharmacy businesses that you know could take two hours otherwise getting 200 pages of information into a system through intake can now literally take two seconds right you know doing that through the ai agent that we're building you know another example would be pharmacy med management we have to do that for all of our customers you know that's a human being doing that typically today you know pharmacy reconciliation and med management is something that is perfectly suited for an ai agent you know with human oversight so that would be another key area that we're looking at today how do you look a sea of your patients out there that you're serving across all 50 states how are you identifying potential risk factors more proactively that you can address and and um and respond to more quickly as we're building out home-based primary care you know nps and doctors who are getting responses on have you thought about this or that for the patient right properly coding patients probably having the right care plan these are all things that the right ai agent can make more seamless for our employees and for the organization, which has both quality and operational efficiency and cost impacts for the organization. But it's been a big focus area for us. About a year ago, we said, hey, in five years, I don't know that we want to be working with 200 different AI vendors out there across our service lines. Like with our scale and the people we have with this organization, we should be able to do this on our own. And so that's what we set out to do we've got about 30 people probably hired on our ai team right now working on about 10 or so ai projects and you know they're going to start rolling out sequentially probably in the fall of this year and you know i think as we look out to the next five or ten years i think we'll continue to see more and more positive impact and a large impact from all these efforts you know from a growth for us from a growth perspective you know multi-factorial growth model in the organization that we've always had if you look at our 10-year history and sort of i I think it's about an 18%, both revenue and EBITDA CAGR, as you go back almost a decade now that we've been able to drive. You know, that has really fundamentally come from three things. You know, volume growth, which has been based on our quality. Number two, just continued efficiency. And number three, accretive M&A. And those are the same three things that we're going to continue to focus on and drive in the future. And I hope there's a fourth driver in the future, which is more integrated care and value-based care. and and we're working hard on that as well um but first of all as i talked about you know we're we're in attractive markets that are that have populations that are all growing um you know we want to continue number two within those markets to drive market share gains through our investments in quality and through our investments on the commercial side we've done over 150 de novos historically you know we would like to do about 15 or so de novos every year continuing to expand to do adjacent geographies, setting up shop in new areas to access and serve more patients who can benefit from our services. As I've talked about, we continue to drive platform efficiencies from a cost perspective that we reinvest in the company. We reinvest that in technology, which is continuing to drive improvements in quality and efficiency in the organization. And we've been thoughtful about where we continue to leverage what we do today into adjacent or neighboring end markets. Home and community would be a good example, home and community pharmacy. Historically, that, you know, eight years ago was skilled nursing pharmacy. Now, skilled nursing pharmacy is the fourth biggest end market we have just in that home and community pharmacy business. We've built out into hospice pharmacy. We're further building out into senior living pharmacy. So we're always looking, you know, another good example I talked about earlier would be rehab. We focusing on more neuro patients let's leverage that in the senior living community with with seniors in Medicare side by side with the home health offering in those businesses so we're always looking to see how we can leverage our capabilities into an adjacent and attractive end Market where we can deploy what we're already doing um to address more people and more customers um you know we're looking to build out value-based care as well with with kind of a third pillar if you will, in the future. Investing in our house calls business, where if those patients are attributed to you, you are the doctor for them. And if you can drive better outcomes, driving shared savings, I think that has the potential to be materially larger and very meaningful for the organization in the future. Obviously, last, acquisitions. I think we have a very unique track record of success in acquisitions. We are a scale provider in large fragmented markets that will continue to benefit from scaled providers leaning into quality leaning into efficiency leading into technology capabilities and with our team in the company with our ability to integrate really well with our ability to access deals there is an almost endless opportunity to do interesting attractive tuck in m a in our markets and you know we will continue to do that to expand geographically to try to deliver um these terrific services to more people you know from a financial perspective looking at q q1 after a very successful 2025 you know in you know everything i've talked about has resulted in in another good quarter you know we grew revenue about 26 percent in q1 of this year ebitda growth was was higher than that and the growth was was very broad-based and that's something that we really focus on in the organization. We talk about core growth and we talk about strategic growth in our company. Core growth is each one of those six service lines. How do they continue to grow at double digits as best possible? Strategic growth is some of the integrated care, value-based care, and technology investments we make in the organization. But the growth has been broad-based. You know, the only hiccup on the page was in home and community pharmacy. That was the result of a specific customer or two in the SNF space that declared bankruptcy but otherwise a very healthy business and you know each one of the businesses has clear strategic plans for how they're going to continue to try to access and treat more patients in these in these in these markets that are big and defined by high need populations when we released q1 at the end of february and most recently here in our last quarter we updated our guidance for the year our view on ebitda adjusted ebitda for the year at this point in time is a range of 795 to 825 million and we feel good about that number as we continue to tick through the second quarter you know really last you know is if i were to just literally sit down and just talk to somebody in words about bright spring and what makes it unique and different i would say this we are creating great value through our focus on home and community health care services to large and growing populations of complex patients with services that all improve outcomes and reduce costs that is that is everything that we do we prioritize attractive markets within home and community we leverage our scale and we create efficiencies in meaningful ways based on our platform we drive best practices throughout each one of our business and we give them the resources that they need to be successful in their markets we executed a very high level on acquisitions and our scale leverage ratio and cash flow position us to continue to do that i think in a very unique way and capitalize on accretive opportunities in the market we have a lot more opportunities from an integration from an integrated care perspective that i touched on that i'm excited about for the future and collectively related these attractive service lines are continuing to gain share in all of their markets and they and they do better because we are one enterprise and we are able to leverage our enterprise capabilities throughout each one of these service lines so we think we're on the right side of healthcare trends and we think more and more of these services is good for healthcare good for our country and a part of the solution and we want to be the highest quality provider and most innovative provider in this space thank you five seconds to go