BrightSpring Health Services, Inc. (BTSG) September 2026 Conference Transcript

But good morning, everyone. Welcome again to the 2026 Jeffries Healthcare Services Conference. I'm Brian Tequila, Healthcare Services Analyst here at Jeffries. And with us next is BrightSpring Health Services and the company's CEO, John Russo. John, thanks for doing this.

Yeah, thanks, Brian.

Great to be here. Yeah. How about we just do a quick State of the Union?

Sure. So let's see. It's already September. Can't believe the kids have been back in school for a couple of weeks. But, you know, we continue to have a really productive year here. as we work our way through Q3 and, you know, very pleased with the performance across the breadth of the organization. You know, at our company, we really position ourselves as a leading provider of home and community health care. You know, that's a very big market with a lot of demand for services in home and community settings. We think that's a great place to be. And within home and community health care, you know, we target a number of pharmacy and provider businesses that we feel like all have a lot of support behind them and where we can differentiate and be very successful. You know, on the pharmacy side, our specialty pharmacy infusion and home community pharmacy, and on the provider side, home health hospice and rehab, you know, where we just have really excellent teams running these businesses. And, you know, there's a lot of benefit that we get from being one organization. So we just continue to try to drive quality and innovate within our markets and do our best for patients so that they can receive great services and in optimal settings.

John, I mean, when you and I first met through the IPO process, you laid out operational goals, growth goals, and you've outperformed all of them. When we think about the growth outlook going forward, I mean, let's start with generics. One of the key drivers of the business today on the specialty pharmacy side, how do you see this all playing out? Like, you've got a bunch of generic introductions over the next few years. Just curious what your outlook is for that.

Yeah, you know, as I said before, you know, we like the breadth of the markets we're in. You know, we can really leverage our infrastructure across all of these. You know, what we do from a quality process perspective, from an HR perspective, from an M&A perspective, from a sales and marketing perspective, it's a very similar playbook for all of our pharmacy and provider businesses that we try to apply. So something that we've been focused on now for hard to believe about 10 years is just driving broad-based growth and really wanting to get to double-digit growth at a minimum, but doing so on the back of quality and on the back of really good technology and people. So, you know, broad-based growth across organizations, across the markets we really like is something we focus on all the time. So within our specialty business, Generics is one of five or six different growth drivers just within our specialty business. and you know we're pleased that when a drug does convert from a brand to generic you know which is a good thing you know ultimately for the health care system from a cost perspective we try to drive the utilization as much as we can and still offer really great services for our referral sources our physicians and our patients so we try to play a leading role where when those events happen you know inevitably there's always brands that are going to be converting to generic that's how the life cycle works and we've built up a sales force of you know over 250 people at this part at this point where we try to be a great partner to all the referral sources out there thousands of referral sources for these special patients every day and we just try to be the best partner we can through these events you know there were a number of more significant brands going generic in the last couple years there's been a couple conversions this year and as we look to next year. There's two or three of the bigger brands are converting generically next year as well. You can't always perfectly predict or just the way it happens. You can't always say that XYZ happens every quarter. So it can tend to be a little bit lumpy. But as you look over a year or a period of time, you're just always going to have several of these events every year. And we've tried to position the organization to be as effective in those conversion processes as possible with how we partner with doctors and patients and manufacturers out there through them. So, you know, we look forward to next year where, you know, we expect several more of these larger brands are going to convert.

John, since you mentioned that Generics is one out of five, the second growth driver that's key to that business too is LDDs, right? And you've been very successful in adding new drugs to the portfolio. Just curious if you can walk us through your, number one, you know, what does that look like for the next three years? And also So why does BrightSpring win these LDT arrangements?

Yeah, I think, you know, thankfully for patients, there's just a ton of innovation that continues to occur from the biotech firms and our manufacturing partners, which is a wonderful thing. I mean, your prognosis today, you know, with certain conditions is far different than even five years ago and in some cases even a year ago. So, you know, when these dynamic new therapies come to market, we do our best to be a value-add provider for biotech and pharma. you know through you know a lot of different mechanisms whether it's data analytics reporting whether it's you know patient support through the insurance verification process whether it's patient education serving as a hub for patients you know providing third-party logistic services you know those are things we really try to do in addition to just fundamental service quality and great fulfillment support for the patient being there you know fastest for them you know these things are all elements of what manufacturers and biotech partners need to help get great clinical outcomes for their patients, which is so important to them. So, you know, oncology has been the space we've been the deepest in for, you know, coming up on 15 years now. And as time has gone by, based on our capabilities on oncology and our partnerships with manufacturers, you know, we've expanded into other areas. You know, there's even some cardiology drugs now, some kidney drugs, but rare and orphan therapies is another one. And, you know, I think a number of pharmacies that really focus on these niche areas do a nice job. You know, we continue to try to do everything we can from a partnership perspective in these pharma services areas. It's resulted in about 20 new launches a year where we've been an exclusive or one of two in a pharmacy network. And, you know, we see that frequency, you know, continuing for the future. So, you know, there's There's a very healthy innovation pipeline thanks to the work of a lot of great companies out there, and we've just continued to try to position ourselves as a provider of choice. I mean, I point to something like a net promoter score from doctors and from patients, which is pulsed every quarter from third-party sources, and it's not unusual for us to get 100 there on a net promoter score, which is very difficult to do. So extremely proud of the team with how seriously they take these therapies for all the constituents.

John, maybe if I may double-click on this quickly, there's been a lot of focus on the Revolution MD drug, and you were named as one of the two LDDs there. Just how should investors be thinking about the economic benefit to a Bright Spring once you're an LDD partner for something like that? Because it's a big drug.

Yeah, no, it is. And, you know, look, I think it'll be a great thing for patients, thankfully. So, you know, we were honored yet again to be a partner, a one of two, you know, in that launch. And, you know, certainly that's that's going to be helpful for us. But we really view that, you know, as part and parcel with the whole strategy of how do we how do we continue to be a great partner across, you know, many new launches in the market every year? How are we, you know, somebody who's a very good partner as it relates to generic launches as well? How are we providing great fee for service? So, you know, for us, just even within the specialty business, you know, there's a multifactorial set of growth drivers there that we focus on. Then you look at the rest of pharmacy, then you look at the rest of the provider businesses. And so, you know, we have that mindset and mentality, as I said before, in terms of broad-based growth across the entirety of the company. But look, I mean, that, you know, that will be a tailwind for us next year. that win as all wins are. And, you know, we look forward to doing everything we can to help, you know, prescribers and the manufacturer bring that to as many people as possible for bladder cancer.

That makes sense. Another question that's come up a lot since your second quarter earnings is the comment you made on the call about gross profit per script being flat relative to Q2 for the rest of the year. Curious why that is or how you would explain to investors the dynamics around gross profit per script?

Yeah, we, that is really, so when you think about, you've got gross profit dollars, you've got gross profit percent, and you've got gross profit per script. You know, gross profit per script really tends to be an output from what's going on across your business in terms of mix of your drugs. So, you know, we have thousands of different drugs across our pharmacy business. We'll do over 40 million scripts this year. I think we're the, something like the 10th biggest pharmacy in the United States. You know, you've got the big retailers and the mail order houses. And then I think there's us. So, you know, as your mix moves around and all those different drugs have different profiles of economics. And so as your mix moves around, your gross profit per script is going to bounce around too. I mean, that's just completely normal. That's the math. You know, we focus a ton on just gross profit dollars and even more than that EBITDA dollars, because we have a ton of focus on OPEX as well. So, you know, we want to continue to show growth in those dollar metrics. You know, Q2 to Q1 was flattish on gross profit dollars on the pharmacy side. We expect that to tick up in Q3. We expect it to tick up in Q4 from Q3. So very optimistic about the rest of the year. But, you know, it's really driving ultimately those gross profit dollars as you look at a large portfolio of different drugs and strategies across the business that we focus on the most.

John, since you talked about broad based growth earlier, maybe let's shift to the provider side of the business. When we think of home health, maybe let's start there. How are you feeling about the regulatory outlook, the pricing outlook, and then just the success you've had integrating a big acquisition with Emeticis assets?

Yeah, so it's great. So tonight and tomorrow and a little bit of Wednesday, we're having a national home health meeting here right around the corner. And so, you know, it'll be so much fun to spend time with you know hundreds of our of our local leaders who are who are in for that event but you know clearly we have a lot of enthusiasm about that space you know the the clinical benefit in in value along with the the cost effectiveness of home health is is just is just beyond clear and beyond proven um you know it it is it is part of the solution and unfortunately about 40% of the folks who are written for home health today don't even get it. So, you know, we have continued to try to communicate and educate around the value of home health and hospice, as well as all other home and community health care services. You know, we feel like there's many, many more patients that could benefit it to, you know, to the benefit of the entirety of the health care system and total cost and total outcomes. So, you know, what we are seeing and what we're optimistic about is that some of the home health rate cuts from the prior years are hopefully completed. And, you know, we'll get about a two and a half percent rate increase this year, which is helpful. You could argue that should be four to five percent just given just given inflation on the cost side. But, you know, this has been, you know, a good year to see an increase starting in January. And, you know, we're optimistic that that's going to be the new norm going forward. That's certainly appropriate. You know, we need to provide more home health. You know, obviously we're paying our nurses and therapists more every day. You know, the technologies that we use go up in price every day. So, you know, adequate reimbursement for very valuable healthcare services in the home and community are something that we think is vital and beneficial for everybody, but we're optimistic. And, you know, I don't think we would have probably completed that that acquisition at the end of last year for some of those branches in the in the divestiture if we weren't optimistic about the future it's a big market it's still very very fragmented and so what we've tried to do is lean into our HR processes our quality so we can be a preferred provider in our technology you know I've talked about you know we're leaning into AI to automate certain workflows across the entirety of the organization that's a deliberate investment that we've made. And, you know, home health would be a great example of where we've already deployed multiple solutions to automate workflow for the better. And, and we continue to lean into that, you know, as we look at every workflow, we believe if you have good quality, good internal processes, and if you have leading technology, you know, that can help you be an innovator in the space and continue to professionalize the space as much as possible, which is what payers expect, all to the benefit of patients in our clinician employees. So that's what we're continuing to do. I think we're clearly a natural consolidator in that market and others. And we believe the environment will be rightfully conducive from a rate support standpoint.

John, maybe I'll follow up to that point you just made. So you are the consolidator, one of very few consolidators left in the market in the home health hospice space. What's your appetite right now, or how should we think about the kinds of deals you're looking for on top of the organic growth that you're delivering?

Yeah, you know, and, you know, when I speak about broad-based growth and we think about each different business and we talk about, you know, gross profit outlook on certain parts of the business, you know, all of that is going into the model and the equation that we have that we talked about on Investor Day of, you know, we would like to continue to target 15% to 20% growth for the coming two years, even off of a higher 26%. And, you know, we still we still feel good about that, you know, from an acquisition standpoint, you know, hopefully that that can be additive. You know, we've, I think, done a nice job in the last two and a half years since going public of getting the leverage ratio to a really good place. You know, if we don't do incremental investments and acquisitions over the balance of the year and TBD, you know, we'll be under two times leverage by by the end of the year. So a lot of that growth is, you know, a lot of that leverage decrease in that ratio has come from EBITDA dollar growth, and we've grown into it. But we've also had really good cash flow. And, look, I think it's important to us is, you know, we're going to continue to try to drive double-digit growth as best we can, and we feel good about everything we've always said. You know, but as we get bigger and bigger as an organization, you know, focusing on cash flow, you know, we feel like that is another really strong attribute of the organization, you know, Excluding the taxes we paid on the community living divestiture this year, we'll have over 600 of operating cash flow, probably over 500 of free cash flow. You know, Jen, our CFO, has done a really good job on the interest rate side and on the refinancing side. So, you know, with that, though, comes a little bit of added flexibility from an M&A standpoint. You know, we were very heads down the year or two before the IPO, the year or two since, and just wanting to deliver from an organic standpoint operationally. But we do have a lot more optionality, I feel like, today. And we feel like when we invest in quality, when we invest in process, when we invest in technology, you know, we can make companies better. And I think now that we are public, it's been helpful. We're viewed by a lot of sellers as kind of a natural long-term home for their employees. You know, people get really excited about joining our organization. You know, that's what we've built. And we feel like we can be that long-term home for a lot of organizations, but with a set of processes that we're trying to continue to lead in our industry for the benefit of everybody. So, you know, I don't think you'll see any huge moves from an M&A perspective from us, you know, but if there's more, you know, kind of mid-ish size deals in the, I don't know, 5 to 20 of EBITDA range, I think you'll continue to see us maybe lean into those a little bit more. You know, the smaller, just very low cost, low multiple tuck-ins, geographical tuck-ins, you know, that's been our bread and butter. we will continue to do probably 10 to 15 of those a year. But, you know, can we step into deals a little bit bigger? We certainly have flexibility to do that. You know, we've done almost 80 acquisitions in the last eight years. And I think there's only two or so, something like that, where the EBITDA of what we bought is not higher. So we literally almost have 100% hit rate on acquisitions. And that's because of the diligence we put into it. That's because of the deal flow that we get. A lot of it's proprietary. We have synergies, obviously, leveraging the systems we've put in place. And we try to grow and run these businesses better. So we're highly confident in our ability to do acquisitions. And, you know, hopefully that creates a lot of opportunity going forward.

Sean, with $500 million of free cash, and it's going to be bigger next year as the EBITDA base grows and, you know, interest rates are locked for you guys. So with what you just said, you're looking at deals that are in the $5 to $20 million range. So these aren't big transactions. So the leverage ratio will naturally come down or, you know, just walk me through how you're thinking about capital deployment towards buybacks or maybe like ramping up acquisitions on the other side of the business. Just curious how you're thinking about that.

Yeah, you know, we'd like to stay in the two to three times range for leverage. You know, we think that's pretty healthy. You know, if you if you get a little bit below that for a period of time, we'll see. But that is a range that, you know, we've been very comfortable with, you know, in terms of, you know, use of use of capital. you know, between acquisitions, you know, we've been supportive of a couple of buybacks that have occurred. You know, our plan would be to continue to do that to the extent there would be any more of those events. You know, you've got things like dividends. You know, I think we just kind of take these things quarter to quarter. You know, there certainly is a lot of acquisitions we could do. I mean, we could deploy three or four hundred million in EBITDA in the next six months if we wanted to, but we've been very deliberate about what transactions we do. And we always try to make sure they are going to work out and there's always a strategic rationale. So, you know, we want to try to be really good stewards of the organization, you know, from, um, you know, just from, uh, just from a balance sheet perspective and always making sure it's the right, it's the right move in terms of what we feel like our markets need and where we can help deliver better solutions in a certain geography or for the market. So, um, you know, you know, you, the pace can tick up, it can tick down, you know, over the next year, we'll, we'll see a lot of it is dictated by, you know, are there, are there good opportunities there that interest you or not? We don't do deals just to do a deal. Um, but you know, you know, we remain as, as active as ever. Our pipeline has 50 plus transactions in it at any one point in time, but we probably do one out of every 40 we look at so we're super picky there's always a reason why we do things but but you know I think this is an area that you know we continue to be optimistic about and you know we you know we'll continue to look at it quarter to quarter in terms of what we're we're most comfortable with but I think two to three times ultimately would be a good range for us and you know I think that points you in a certain direction as to you know what our what our M&A activity might be.

I appreciate that discipline. Maybe just as we circle back to your comment earlier about 15 to 20 percent EBITDA growth on top of a strong 26, just maybe if you can walk us through how you're thinking about building into that number, because you've been tracking way above that over the last few quarters.

Yeah, you know, certainly as you get up to the levels we are from an EBITDA perspective, you know, it's easy to just say, well, if everybody grows at this rate, you can just keep growing at the same rates. I mean, the fact is, I mean, it does get harder to grow EBITDA at certain percentages when you get bigger and bigger and bigger. And so, you know, as we've been saying for several years, you know, it's not, it's not, you know, wise to think that, you know, an organization and healthcare services continue to grow, you know, at 30 to 40% growth rates. And every investor has told us, make no mistake, we're not, we're not planning for that. But what do you think it looks like two to three years from Now, because, you know, in our minds, you know, hopefully 15 to 20 percent for a scaled company is is exceptional and market leading growth. So I think we've been second to Lilly, whether it's been three, five or seven years and EBITDA kegger within health care. So, I mean, look, we clearly want to continue to try to do the right things to drive double digit growth. We want to do it the right way with solutions that are beneficial to everybody. You know, we think our growth benefits everybody in the system. So it's important to us. But look, it, you know, it does come down to broad based growth. I mean, we could go through every one of our three pharmacy and three provider businesses. And, you know, our internal models and plans and strategies get us to double digit growth across every single one of them. Some of them are higher than others. And, you know, we have to go execute on that, especially whether it's through, you know, continuing to be a partner with all the innovators out there with drugs coming to market, being a helpful partner on generic launches, on infusion. We have an acute and especially chronic infusion business where, you know, we see a lot more growth potential. Home and community pharmacy, you know, we remain probably underweight on the assisted living side. Behavioral is a great market. we're a leader in hospice pharmacy, you know, all of those markets are attractive. You know, you look at home health, hospice and rehab, where we've continued to outpace market growth rates of five to 7%. So, and just a ton of, a ton of consolidation and acquisition opportunities there. So, you know, you add it all up and, you know, we try to, we try to stay, you know, far ahead of, of where we want to be. And then there's areas we continue to lean into this primary care business, you know, has been, you know, incubating for a number of years, but, you know, we feel like with some of the ACO opportunities out there and payer opportunities in the next couple of years, you know, we're hopeful that at some point, you know, we're disclosing that as, you know, as a meaningful EBITDA driver. You know, we had a meeting this morning where we were talking about we're trying to change the standard of care and home health, where every home health, you know, episode is, is, is done virtually with, with a doctor as well. You know, we're leaning into AI solutions across the board. You know, those could be, you know, further and further growth opportunities. So we have our core businesses, our three pharmacy and provider businesses, and we have strategic growth. And we talk about core and strategic growth all the time. Strategic is more integrated care, you know, more cross referrals, driving technology, driving value-based care models. And those are very real things internally that are getting a lot of momentum. So, you know, for us, we, you know, our expectations is that each business needs to grow at rates exceeding their market with focused strategies. And how do we make all of the parts worth more and perform better? And, you know, that's what we just continue to focus on, you know, every day.

John, in the two minutes we have left here, curious what you think investors are still missing about your story, and then maybe just closing points that you want them to walk away with for this presentation?

Yeah, I think, you know, we've just always continued to focus for coming up on a decade now with, you know, how do we provide great services and treat our employees really well? And in doing so, how is that driving more and more volume growth? You know, three things have really sustained our organization over the past decade. You know, it's been volume growth based on leading quality. It's been cost efficiency based on technology investments, and it's been a creative M&A and those are the three things that we continue just to try to focus on but it's a really great organization and a dynamic organization when you look at these businesses on the pharmacy and provider side and all of them you know do well in our position to do much better in the future because of these markets that we're in that are very large that still continue to have a lot of demand so you know we're fortunate to be in really attractive home and community health care markets and within those markets we're just continuing to try to lean in and so i think it's just the breadth of performance that we've been able to have across the business you know that has been quite unique you know when you look across a lot of other companies out there we like the diversification of that but we also like the complementary revenue and growth opportunities from that as well so you know we will just continue to focus on having best of breed businesses in what we think are really meaningfully important home and community health care markets And I think with more and more scale, you know, we just see more and more opportunities for innovation in our markets and to continue to scale, you know, as a leader in delivering best-in-class solutions. John, thank you so much for all that.

Yeah, Brian, good to see you.