BrightSpring Health Services, Inc. Common Stock Price & Performance (BTSG)

Good morning. Thank you for participating in today's conference call. My name is David Dyklar, and I'm responsible for Investor Relations at BrightSpring BrightSpring. I'm joined on today's call by John Rousseau, Chief Executive Officer and Jen Phipps, Chief Financial Officer. Earlier today, BrightSpring released financial results for the quarter and full year ended December 31, 2024. Copy of the press release and presentation is available on the company's Investor Relations website. Please note that today's discussion will include forward looking statements that reflect our current assumptions and expectations, those related to our future financial performance, 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 annual report and Form 10 ks filed with the SEC in including specific risk factors and uncertainties discussed in our 10 ks Such factors may be updated from time to time in our periodic filings with the SEC, and we do not undertake any duty or 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 performance and financial condition. Can find additional information on these non GAAP financial measures and reconciliations to their directly comparable GAAP financial measures, extent available without unreasonable effort in today's press release and presentation, which again are available on our Investor Relations website. This webcast is being recorded and will be available for replay on our Investor Relations website And with that, I'll turn the call over to Jiang Yixou, Chief Executive Officer. Good morning. Thank you for joining BrightSpring's fourth quarter and full year twenty twenty four earnings call. I'd like to begin this call by expressing my appreciation and gratitude to and for the BrightSpring team across the country. Our employees and caregivers work very hard with diligence each day to deliver compassionate and attentive care to the people we provide critical services to. I would also like to welcome Jen Phipps as Chief Financial Officer and thank Jim Mattingly for his excellent service over the years. As we transition the CFO position. During Jim's tenure, the company has achieved some exceptional results. Including the sale and recapitalization to KKR and WBA, 175% revenue and 109% EBITDA growth since that time implementation of best in class financial systems, completing the IPO and executing multiple successful refinancings, underpinned by the company's performance.

We appreciate all of Jim's leadership and contributions as he moves to other priorities and next steps. And after appropriate and thorough consideration and evaluation, we are extremely pleased that Jen will assume the role of Chief Financial Officer. With Jen's overall background and eight year tenure at BrightSpring, she is extremely well suited for this role. Jen has served as the Chief Accounting Officer at the company since January 2017 and Principal Accounting Officer since the IPO. Jen has also served as the CFO of the Home Health and Hospice business. And she has run numerous other departments within the company. Including procurement, real estate and tax. She has been deeply involved in all financial systems and processes over the years, as well as all acquisitions and divestitures and many automation and efficiency initiatives. Jed is well prepared knows the entirety of the company, and is very deserving of this position. Turning to 2024. It was another year of milestones continued quality improvements and leadership, further growth and significant ongoing impact for the customers, patients and communities that BrightSpring and we are proud of how our businesses and people have performed. Throughout 2024, we've also deepened our focus on operational efficiencies across the organization.

To best support employee effectiveness, and high quality services. In addressing significant needs for individuals across the country, the company has increased its reach to more patients and delivered strong growth across both pharmacy and provider businesses, through strategic prioritization disciplined investments, company scale and execution. Our results are ultimately a reflection of the reliable, relatively lower cost and coordinated care that drive high customer and patient satisfaction rates. In the fourth quarter, we are pleased to have realized total revenue growth of 29% year over year. Leading to total company and segment revenues for full year 2024 at the high end of our guidance range, and in line with our preliminary results provided in January. Total revenue of $11,300,000,000 in 2024 represented 28% growth year over year which included Pharmacy Solutions revenue of $8,800,000,000 and provider services revenue of $2,500,000,000 representing 349% growth year over year respectively. Full year 2024 adjusted EBITDA was $588,000,000 representing 16% growth year over year when excluding a certain $30,000,000 quality incentive payment from 2023. Adjusted EBITDA also came in at the high end of our guidance range and in line with preliminary 2024 results Today, we are increasing total revenue and adjusted with our adjusted EBITDA guidance for this year increasing by $5,000,000 at each of the low and high ends of the prior range provided in January, and which excludes the community living business.

We announced in January that we entered into a definitive agreement to divest community living business to Savita expect the transaction to close this year. Subject to regulatory approvals and typical closing conditions. Jen will discuss our fourth quarter and full year 2024 financial results, Along with our 2025 outlook, in more detail shortly. Before I discuss business performance, I would like to further reinforce our commitment to both quality and continuous improvement and efficiencies across the organization. Which go hand in hand For example, in quality, our most recent Net Promoter Scores and Specialty Pharmacy for Onco three sixty and CareMed were ninety eight and one hundred respectively. Almost a perfect rating for Onco three sixty and a perfect 10 out of 10 rating for CareMed from all participants. Also scores that are the best among specialty pharmacies. After the past year of investments in people and process in our infusion business, we are now seeing best in class referral to in home turnaround times for specialty patients. Our home and community pharmacy on time delivery metrics approached 97 Approximately 85% of our home health branch is now of four or five, Out of five. And we have 97% timely initiation of care.

Above industry average. In hospice, we have a 9.3 Hospice Care Index score out of 10, significantly above the national average. And we provide 16% more nursing visits to patients and 27% more patient visits in the last week of life. With 90% of our locations above national average on visits provided to patients. In primary care, our ACO is reporting 13% lower healthcare costs for patients in skilled nursing facilities and 31% lower cost for patients in assisted living, [indiscernible] and proactive care and quality And our special needs plant has already improved its star rating by 0.5 in less than a year under our ownership. With a 6% reduction in hospitalizations in the last year a ninety nine percent capture rate for health risk assessments, and ninety nine percent of our patients receiving annual wellness visits within ninety days of enrollment. In Personal Care, we have a likelihood to recommend a 4.54 out of five In rehab, we have overall stakeholder satisfaction of over 97%. Among case managers, discharge planners, physicians, claims managers, etcetera. And we have a patient satisfaction score of over ninety five percent. In community living, our external audits outperformed the national average and we hold more third party accreditations than anyone in the industry.

While we have deployed innovative and leading technologies to drive client risk stratification and care plans, These are just some select mentions and highlights among many other strong and leading service and quality measures in the company. Across the organization, we continue to invest in and deploy new and or enhanced technologies EMRs ERPs, applications and analytics and reporting. Numerous of which now incorporate new automation and AI use cases. To the benefit of our people and to drive outcomes for the individuals we serve. We also continue to invest heavily in compliance. With literally thousands of on-site internal compliance visits and audits conducted across our operations last year. On the efficiency front, since the start of last year, the company has over 100 procurement, workflow augmentation, or ongoing. Driving process improvements, cost efficiencies, best practices, and streamlining across all business lines. We are more dedicated than ever to lean into and provide all of our stakeholders with the best possible experiences over the years. Now taking a closer look at fourth quarter results, Pharmacy Solutions revenue of $2,400,000,000 represented 34% growth compared with the fourth quarter of last year. Growth for the business was primarily driven by total script volume of $11,000,000 in the fourth quarter which represented 14% growth compared to the prior year's quarter.

The infusion and specialty business has continued to deliver above expectation growing revenue 42% year over year in the quarter driven by specialty script growth of 35%. Our results in specialty and infusion this quarter and throughout the year have been a function of cross functional operational execution and continued LDD brand launches and generic drug utilization. Our total LDD portfolio now stands at 125 which includes 12 LDDs launched in 2024 in either an exclusive or ultra narrow pharmacy network.

We continue to see the potential for an additional 16 to 18 limited distribution drug launches over the next twelve to eighteen months. While also facilitating the adoption of new generic products. We are honored that we are selected by our pharma manufacturing and biotech [indiscernible] as a limited distribution drug specialty pharmacy for each of these therapies, and are committed to helping and improving the lives of patients who are battling cancer, Rare orphan, neuro a number of other diseases through market leading service levels and satisfaction scores. Within infusion in 2023 and through 2024, we initiated and completed operational initiatives and investments to deploy standardizations and process improvements, and we believe that results in the infusion sub segment will begin to benefit from these investments in 2025. In home and community pharmacy, revenue grew 17% year over year in the fourth quarter driven by script growth and new customer wins. We continue to be pleased with our execution across a variety of home and community pharmacy settings. Including behavioral, hospice, assisted living, skilled nursing, hospital, and rehab settings. As well as other locations where patients need at home pharmacy support. We believe we have an additional market share and growth potential and we will also be entering the PACE pharmacy market this year.

We remain focused on driving more operational and technology driven efficiencies in and the continued expansion of our pharmacy services is important to ensuring that as many people as possible receive the highest quality and most comprehensive medication management and care. Turning to provider services, segment revenue grew 11% year over year and segment adjusted EBITDA margin expanded by 70 basis points year over year to 15.2% in the fourth quarter. Which was primarily driven by strong service and quality based volume growth and broad based operational efficiency and execution. In home health care, revenue grew at a rate of 17% year over year in the fourth with average daily census growth of 9% to 46,000. We saw continued growth in the home health and hospice businesses, both in the fourth quarter and for the full year 2024. Personal care has been a consistent performer this year as well with steady billable hours and very consistent operational execution. Our primary care business has seen expansion and growth where we leverage proximity and access to patients including through core pharmacy and provider services and we believe home based primary care represents a significant opportunity in the coming years. With ACO and payer strategies continuing to develop.

Community and Rehab Care also performed well again in the quarter with strong revenue growth of 8% year over year and consistent growth in rehab persons and hours served, In the rehab business, billable hours grew in the mid teens year over year for fourth quarter and full year. We continue to add numerous de novos through new home and community neuro rehab programs and new rehab in motion programs in assisted living facilities. And we anticipate attractive growth from rehab in motion over the next five years as we continue to add locations. The community living business has shown solid growth through 2024 through operational continuity, a service focus and continued investments in technology and employees. As I mentioned earlier, divestiture of Community Living remains on track anticipated to close in the second half of twenty twenty five subject to customary regulatory approvals and closing conditions. We expect that the transaction will create a streamlined organization of BrightSpring BrightSpring, and augment both provider services and company revenue and adjusted EBITDA growth rates. Our strategic focus in provider will narrow to the remaining home health care, rehab and personal care businesses each of which continues to perform in line with our high expectations.

Consistent with the announced divestiture of Community Living, our capital allocation priorities remain on both debt pay down and continued tuck in acquisitions at disciplined valuations. Consistent with our prior strategy, To summarize, 2024 was an excellent year for BrightSpring I'm pleased with our execution so far in 2025 as we always continue to look for any ways to serve more people and improve their outcomes with mission driven and meaningful services. We are focused on delivering on our 2025 financial outlook through quality, volume growth, process optimizations and cost efficiencies, accretive acquisitions, and effective portfolio and asset management and deployment. With that, I'll turn the call over to Jed to discuss our twenty twenty four fourth quarter and full year financial results and 2025 guidance in more detail. Thank you, John. In the fourth quarter of twenty twenty four, the total company revenue was $3,100,000,000 representing 29% growth from the prior year period. Pharmacy Solutions segment revenue in the quarter was $2,400,000,000 achieving 34% year over year growth. Within the Pharmacy segment, infusion and specialty revenue was 1,800,000,000.0 representing growth of 42% from prior year and home and community pharmacy revenue was $6.00 $1,000,000 representing growth of 17% year over year.

In the Provider Services segment, we reported revenue of $656,000,000 in the fourth quarter, represented 11% growth compared to the prior year period.

Within the Provider Services segment, Home Healthcare reported $280,000,000 in revenue growing 17% versus last year, and community and rehab care revenue was $376,000,000 representing growth of 8% year over year. For the full year 2024, total company revenue was 11,300,000,000.0 representing 28% growth from 2023 Pharmacy Solutions segment revenue was $8,800,000,000 representing 34% growth from the prior year. And provider services segment revenue was $2,500,000,000 also representing very strong 9% growth from the prior year. Moving down the P and L, in Q4, company gross profit was $422,000,000 representing growth of 14% compared with the fourth quarter of last year. For full year 2024, company gross profit was $1,588,000,000 representing growth of 13% when excluding a $30,000,000 quality incentive payment. Adjusted EBITDA for total company was $167,000,000 in the fourth quarter, growing 17% compared to the fourth quarter of twenty twenty three. For full year 2024, adjusted EBITDA for the company was $588,000,000 representing 16% growth compared to 2023 when excluding a certain $30,000,000 QIP in 2023. Adjusted EPS for the total company was $0.22 for the fourth quarter. Turning back to segment performance in the fourth quarter. Pharmacy Solutions gross profit was $2.00 $5,000,000 growing 20% compared to the fourth quarter of last year.

Adjusted EBITDA for pharmacy solutions was and $13,000,000 for the fourth quarter, growing 22% compared to last year, representing an adjusted EBITDA margin of 4.7% which was in line with our expectations. Provider services gross profit was $217,000,000 growing 10% versus the fourth quarter of last year.

Adjusted EBITDA for provider services was $99,000,000 for the fourth quarter representing an adjusted EBITDA margin of 15.2%. Up 70 basis points versus last year.

On a total company basis, cash flow from operations was $116,000,000 in the fourth quarter, excluding IPO fees paid in Q4 and $90,000,000 of cash flow from operations in the quarter including these fees, We expect to deliver over $300,000,000 of annual run rate operating cash flows in 2025 as we remain focused on improving our leverage ratio towards our pro form a goal of three point zero to 3.5 times, and are now long term target of two to 2.5 times.

As of December 31, our net debt out [indiscernible] which was in line with our internal projections. As a reminder, net interest expense includes interest income related cash flow hedges Due to our three received variable pay fixed interest rate swap agreements, that we have in place set to mature on 09/30/2025. Prior to any proceeds from the pending community living divestiture, quarterly interest expense is expected to be approximately $43,000,000 per quarter.

Including approximately $1,200,000 in interest expense related to the TEU instrument. Turning to our guidance for 2025, we are increasing our expectations for revenue and adjusted EBITDA that was provided in January which excludes the community living business.

Total revenue is expected to be in the range of $11,600,000,000 dollars to $12,100,000,000 including pharmacy solutions [indiscernible] [indiscernible] provider services revenue of 1,450,000,000.00 to 1,500,000,000.0 This revenue range reflects 15.2% to 20.1% growth over full year 2024, excluding community living in both years. Total adjusted EBITDA is expected to be in the to $560,000,000 for full year 2025 this would reflect 18.4% to 21.7% growth over full year 2024, excluding community living in both years. With that, I will now turn it back to John.

Thank you, Jen, and thank you for your time today to go through Bright Spring's fourth quarter results and 2025 outlook. We will now open it up for questions. Operator?

Thank you.

Hi, everybody. Congratulations, Jen. Best wishes in the new role. When you think about your limited distribution drug business and pipeline, it seems like you guys are seeing more exclusivity, more fewer and fewer people are getting the contracts you're getting with less and less competition. Know some of that is obviously the strength of your franchise and what you've done, but I also wonder is there any changes in the competitive landscape Obviously, in the pipeline of new LDDs continues to look robust, but it seems like you might be capturing more of those or getting more narrow contracts Can you just comment on that? Yes. Good morning, A. J. Thank you. Nothing material has shifted in the market. And we've we've had about a ten to fifteen year history with our team of really focusing on operational process and service levels for our partners. Here in the most recent quarter, we pulse the market on Net Promoter Scores and we actually had 198 net promoter score for CareMed, which is really the non oncology and then Onco three sixty in satisfaction ratings, which we were obviously incredibly pleased with. So the team has just done a nice job of servicing our partners over the years.

And there is a general trend to more and more I would say, more niche micro therapies in the market. And perhaps there's something there in terms of partners being more and more comfortable with fewer and fewer pharmacies serving those niche targeted populations. But we have seen a trend towards the narrowing of networks and we've been pleased that we've been able continue to be a strong and chosen partner through that process. Okay. Then a couple of times you mentioned in the prepared remarks about the investments you've made over the last eighteen to twenty four months in the infusion business. And you sort of feel like it's positioned to grow from here. I wonder if we can get you to talk a little bit more about the what the growth trajectory might look like for that business as well as where you're at with respect to margin and what level of upside there might be on margin at this point? Yes. No, good question. Just time off the LDD point there as well. In 2025, we've now launched two LDDs so far this year. In the first two months. So good to see that momentum happening in the first part of the year too.

And importantly, a handful, three or so of our more recent launch is that we have been in the rare and orphan category. As we continue to not only focus on oncology, but more and more and more other relevant indications where we can apply our our operating model similarly. On infusion, certainly the last two years as has been mentioned multiple times, there has been a real focus on the business operationally trying to implement more commonality and standardization across the the 30 plus infusion pharmacies across the country really trying to apply best practices and really balance what gets more centralized and what stays more local. That's a critical decision in infusion and we've been very thoughtful about that. We generally have a totally new team there Fusion over the last, I would say, six to seven months. That team has been locked in. In its entirety for a good six months or so now. And we are seeing really good progress, whether it's on the operational front, whether it's on the AR and bad debt front. Things are really trending in the right direction. And from here, we need to just focus on now starting to drive more referrals again as we've been more focused operationally over the last eighteen months.

But a key metric in that industry is turnaround time. How fast can you get a referral and then get the patient through the process and be ready to schedule them in the home on the specialty side, not acute on the specialty side. And for us, we're seeing ten to eleven day turnaround times in the last three or four months as a result of all of our efforts, which would be generally best in class in that industry. So So we're excited about where that can go. Infusion, we believe, is a market with a ton of opportunity looking ahead. We're hopeful that that business could grow above 20% this year on a growth rate basis. And that's what we're pushing for. And I think longer term, I think staying in that range or even above is our internal goal. But 2025 will be an important year for us to get back growth mode there. Okay. All right. Thanks a lot.

Thank you.

And our next question comes from Whit Mayo of Leerink. Your line is open.

Hey, thanks guys. I think in the past, you've talked about a lot of internal operating cost saving efficiency opportunities, maybe 60 different projects or programs that you've had kind of in flight. I think you reached recently rebid your wholesaler. Just maybe any sense the cumulative savings from a lot of these initiatives and the opportunity on the margin side for this year? Yes. Good morning, Whit. I would say it's really amalgamation across a lot of different areas of our company. Fundamentally, we have for a very long [indiscernible] had a lean and PMO focus in the organization, just driving process and cost opportunities. We really put that in place going back about eight years ago and it really cuts across procurement, well beyond anything like drug spend medical supplies, delivery, just go down the list all across IT, We're very focused in that area. And then then we just look at processes across the organization from an RPA, from an automation perspective, as well. So you think about something like onboarding of all of our new employees, that's something that we're leaning into. And trying to automate a lot of touch points in that process. You look at something like scheduling, instead of a human being trying to figure out schedules, across 100 nurses and 100 patients in a city and what's the most efficient route, doing that in an automated way.

We have a process going on there right now as well. So it really just cuts across almost everything in our company rev cycle, where can you eliminate things that can easily be replicated in a more automatic way versus hands touching everything. And we're literally looking at every function in our company And I would say just the attention and the focus to that while it's been going on for a year I would say, has really deepened. In the last eight year, we're leaning into AI application now as well. We'll see about that as a lot of people will. A lot of AI today is just sort of glorified scribing. You have the obvious chat stuff. But even in new EMRs, we're looking at within some of the provider side, it's the idea that the EMR can be the doctor and there's recommendations coming out of that and there's chart prepopulating going on that's driving a ton of efficiency. So these are the things that we have a BPO, a business process optimization team that that works across everywhere in our organization. I would say the cumulative results of literally it's been now over 100 projects actually as we look back over the last fifteen months the cumulative results of all of those was a helpful driver to our EBITDA last year.

But not even necessarily EBITDA. A lot of the proceeds from those efficiencies were driving just go right back into the business, whether it's IT, compliance, quality, sales and marketing, hiring great people, etcetera. So So you drive a lot of these efficiencies for quality and just running good process in an organization. Some of the benefit of that does wrap EBITDA but a lot of it goes back into reinvesting for future growth and winning in the future as well. But certainly getting into the 8 figures that there has been a benefit of that to EBITDA. Last year and a lot of these things happen happened later in the year. And even a lot of these happened later last year and more will happen this year. So we expect to see continued contribution from that program in 2025. And And this we're we've always tried to and we'll continue to try to make the a hallmark of the organization.

No, that's helpful. Maybe just wondering how you're feeling about home health and hospice really on the development side. There's maybe some distraction with some of your peers tied up with acquisitions or whatnot. And just wondering how you're thinking about the potential development opportunity over the next year or so? Thanks.

Yes. Home health and hospice is a market that we're certainly committed to and and have been for the last four or five years as we've really sought to build that out. I mean, you go back five years ago, we really had nothing And in 2024, home health and hospice revenue was $600,000,000 That's a business we'd like to double in the next five years. And potentially more. But it's an area of focus I think we see hopefully a more conducive reimbursement environment on the home health side going forward. I think we're hearing things from D. C. Where a lot of people acknowledge that there does need to be more support there ultimately. The ROI data for home health in terms of the outcomes that can drive for people keeping the out of hospitals, lowering mortality rates has never been more positive. Interestingly, and it still has to be worked through, we're talking to several more of the innovative payers leaning in on on enhanced rates, but there's a quality component to that. And that's fair, and that's the way it should be. And we're leaning into those conversations and we're pleased that we feel like we're at the table on those because of our quality.

We got started in home health through some acquisitions It's been more of an organic push over the last couple of years.

But we inherited a lot of branches early on on, which didn't have the world's best star ratings. And what's been really pleasing to me is if you look back about three or four years ago because of that history, we probably had about 15%, 20% of the branches with four stars or better out of five. We're now up to about 85%. And so that is just really tremendous performance on the quality side and so we're trying to have a lot of interesting conversations with MA that could result in in enhanced rates for the outcomes we're delivering but you have to prove that quality out. So that's exciting. And then on the hospice side, the benefit is just so obvious and the data is so clear. On hospice being obviously an incredible experience for the family. With patient satisfaction rates above ninety nine percent. But really a lot of data that shows that hospice is is ultimately a cost reducer for the system and we've got a nice platform there. Still today about two thirds of our of our business mix between home health and hospice is on the latter. And for us, really, really strong quality, as I mentioned at some of our comments on the call earlier.

And for us, it's just trying to provide as much access to people as possible through our clinical liaisons in the field every day. Driving referrals for that terrific service.

Thanks.

Thank you. And our next question comes from Brian Tanquilot of Jefferies. Your line is open.

Hey, good morning guys and congrats on a good quarter of the year and congrats on the promotion. Maybe John, as I think about the your prepared remarks, clearly growth has been really good and seems to be tracking well. So as we think about maybe the sustainability of these growth rates or just these elevated And with community out of the picture now, how should we be thinking about your view blended growth going forward? Yes. We have good morning, Brian.

We have at this point going on an eight, it will be a nine year track record at this point of demonstrating double digit top and bottom line growth in the organization. So nothing about that will certainly change. Going forward. If the community living divestiture occurs and everything there, at present is just working through the process in a very expected and normal way at this point in time. That enhances our growth rate from an adjusted EBITDA standpoint about 5% or 6%.

As we see it going forward. In 2025, there was a couple of percent growth as you pro form a that for 2024. But as we look forward, probably more of a 5%, 6%, 7% uptick in our growth rate going forward. As we look out at at least to next year, I think we see we feel very good about this year. In the guidance we've put out there, which we obviously raised today. As we think about next year, there would be nothing that would change our view of of a similar growth rate as this year for next year. But some of the things in DC need to play out.

And there's just certain things that we just do not have visibility into yet. It's really just principally IRA. And how that plays out That's not going to have a massive impact one way or another.

On our performance in 2026. But certainly, there is a couple of points up and down based on how that ultimately plays out. And we continue to feel like the pharmacy industry will be well protected through that process, but it needs to it needs to play out over the balance of the year. But what we can sit here and tell you is that in a fairly steady state, exogenous environment we don't see a whole lot changing. And our focus in the organization has been drive quality, through very strong operational infrastructure, drive efficiency and lean processes and leverage all that with great people to reach as many people as you can and continue to drive volume above above market growth rates. That's been the playbook for the last five or six years in and we will continue to drive that playbook in the future. So So as always, there are some things in the external environment that need to play out. But in terms of what we can control, and in a fairly steady environment as it looks today, we're very confident in continuing to drive the level of growth that we see in the business this year.

That makes a lot of sense. And then maybe John, just to follow-up on A. J. Question earlier and then put in Fusion. As we think about your Quorum exiting [indiscernible] And then maybe thinking about the mix of business that you have in terms of being heavy on the acute versus chronic, just trying to think about the dynamics that we are seeing or we could be expecting in that infusion business for the third quarter. Thanks. [indiscernible] that is a good point and something we've talked about before. It's a good characterization of our business. I would say we probably are a little bit more tilted towards acute versus chronic and specialty in the infusion space. Versus what you might see in the broader landscape of some providers out there. Certainly, if anybody were to exit any markets on the [indiscernible] That's helpful. The acute margin is something that is is one that we are fine with. And we believe that if you have a broader set of services to payers, that is more well received and welcome with payers. And it ultimately will help us nurture and cultivate better and deeper relationships with payers over time. So acute is a market that we are committed to.

There is volume there.

There is nothing about acute therapies that changing anytime soon.

And so we like the idea of just growing more market share. I think what that ultimately says on the chronic and specialty side is that we've got hopefully real opportunity there.

Versus where some other people are today. And as I mentioned, really pleasing to see some of these turnaround times on specialty, which is really the linchpin for that business. How quickly can you manage people through the process? That's referral sources care about. And it will really deepen our focus on the specialty growth side this year. We would be very disappointed if specialty isn't growing well into the 20% range and above going forward.

Thank you.

And our next question comes from David Larsen of BTIG. Your line is open. Hey, congratulations on another very good quarter.

John, can you maybe talk a little bit about your the ACO arrangements that you're in people call the post acute space. It's lower cost in the acute care environment. But at the same time, a lot of investors are maybe a little bit wary of anything that says ACO or value based care given how some of the stocks the sector have kind of performed over the past year. So can you maybe just talk about your approach to your volumes and your pricing looked great on the provider side? So thanks very much.

Yes.

Thank you, David. Two quick points on that. For us, building out home based primary care was really an augmentation and complementary to our pharmacy and provider services. And just allowing us to ultimately better manage outcomes for patients. Really secondarily, there is an economic stream there. If you can get more appropriately compensated for the great outcomes that you're providing. Otherwise, the incredible quality work you're doing is enduring to everybody else in the system. And so those were really the two driving forces of the logic. I would say for us anything around ACO is purely upside. There is zero downside there. It is purely upside. And so amongst our patients that we serve across assisted living, skilled nursing facilities and some people in their own homes with our home based primary care The subset of those that would be Medicare, straight Medicare patients We have a partnership with another organization to get an ACO capability. Last year was the first year of that. And nine months after last year, so October one of this year, we will receive ultimately what our performance was from from Medicare. But we do have line of sight into our outcomes and what's happening on the cost side, albeit with a little bit of a delay with about a quarterly delay.

But we're pleased with what we're seeing in terms of our ability to drive outcomes and cost reduction versus the benchmark. And so we would expect the shared savings to be realized this year. We are just being conservative until we get through the first actualization of what those results were.

But we've got about 15,000, 16,000 patients today A subset of those are in the ACO.

And our focus in home based primary care is how do we continue to drive that in incredibly valuable service. To as many patients as we can and get them in the ACO so that we can drive more and more shared savings. We've said before, our five to seven year goal is how are we serving at least 100,000 or more people? And that's what we're working towards.

Okay, great. And then just one more quick one. In terms of specialty pricing, looks like your specialty revenue growth is is very good. Is there anything in your mind that could [indiscernible] down, and obviously a tailwind for the overall organization, pricing increase is right.

Yes, we've seen overall stability in the market for specialty Ultimately, your revenue per script and your margin in that business is is really a function of about 150 drugs, some brands, some generics, at different parts of their lifecycle. And so so, but just given the diversity of that portfolio, and the complementary nature of brands and generics, we've just ultimately seen all of that come out of the bottom of the bucket, if you will, in just a very steady way year over year. We do everything we can not only to provide great outcomes to manufacturers but those great outcomes are really focused on being the best partner we can for the the PBMs and the payers and their members as well. So they get the best outcomes possible our payer and PBM partners and nurturing great relationships with them as anybody. And those have been really stable over time. And we're very thankful for that.

And our team's got a long history of working with stakeholders across across the value chain and that's been very consistent.

Great. I'll hop back in the queue. Nice quarter.

Thank you. And as a reminder, please limit yourself to one question. Our next question comes from Joanna Gajah Bank of America Securities. Your line is open. So I guess my question will be around the IRA So just for up on the answer you gave earlier to the question about long term outlook for growth after 2025. So what do you mean by there's a downside risk there? What would need to happen for this to be a headwind in the IRA? Because I guess there's obviously the price reductions, but then there's some Part D redesign under the IR rate and the past, we spoke about this being a talent to the company as the evolution increases. So just trying to understand the different dynamics and what would need to happen that you're referring to in terms of being IRR being a swing faster?

Yes. Morning, Joanna. There's two pieces there. So in IRA, one of it is lowering the pocket for patients. Certainly, anything that makes drugs more affordable is helpful for patients. It's helpful for the utilization of specialty medications for them.

And increasing patients on therapy. So that's helpful.

The second point and it's really for us focused on our home and community pharma [indiscernible] And we just have to see that play out. What CMS issued guidance on last October endorsed using a true up on the MFP to whack. So as your reimbursement moves to MFP on those on those eight drugs, getting a true up on that to whack So those drugs certainly would not be negative in margin. And the discussion this year is all around what's going to be the mechanism to ensure those specific eight drugs have an appropriate and current margin to them. And I think there is a ton of support around the logic for that and needing to do that in DC and at CMS. It was literally written into IRA, this is not intended to harm any pharmacies. Pharmacies are the last mile to the home and they have to be they have to be more or less hell harmless continue to be that last mile. And so we're optimistic about how all this will play out. But but it needs to play out this year. And with a lot going on DC in the last two months, I think we just have to see how this plays out further into the year.

I think what I've said before is this is a swing factor on the downside of a couple percent of EBITDA. Which we would fully expect to grow through. Given growth in the other parts of our company. That's really the benefit of our complementary, but diversified organization with a lot of different growth drivers. And we would be very confident that something like that we would just absorb That said, we are very focused and think what is fair for there to be a proper resolution for the long term care pharmacy industry around these drugs and having a fix for that that's what the industry is focused on. And we see a lot of support for it. But those mechanisms need to play out through the balance of the year.

Thank you so much.

And our next Great. Thanks.

So following the community data refine in terms of the business mix? And how do you think about that in contrast with the efforts to better integrate the offering from a provider and pharmacy standpoint. And then I'll just ask my second question upfront too, which is just on the government business as well. You mentioned kind of Part D, but I wanted to ask about Medicaid. Just how you're thinking about the exposure there obviously comes down with the divestiture. But can you talk walk us through some of the potential risk factors as well as how you're just thinking about for that group given the unknowns in terms of that backdrop right now. Thanks.

Yes. No, the streamlining of our organization post the community living divestiture assuming that closes, I think that gives us with a very tight set of pharmacy and provider services in a platform that we think is is very unique and advantaged in a lot of ways in healthcare services. We view that as a terrific platform for the future. From a Medicaid standpoint, Trump and the Trump administration has said that they do not see touching Medicaid or Medicare. That's what they've said so far. The House Republicans are certainly talking about other things. Notwithstanding that, the populations we serve would not be in the conversations or some of that Medicaid discussion in the House The folks that we're serving, seniors and people with disabilities, that is very, very different from things being discussed with work requirements for the general population of otherwise healthy people on Medicare. Our populations are very different. And not in the relevancy in the context of those conversations. And our next question comes from Jamie Purse of Goldman Sachs.

Your line is open.

Hey, thank you. Good morning and congrats to Jen. I guess I wanted to start, can you help us think through OpEx investments needed to sustain growth in both businesses? In 2025? And then just how much does that level of investments scale up or down based on top line growth? Just trying to think through incremental [indiscernible] below gross profit.

Yes, I think we've certainly got some hey, Jamie, I think we've certainly got some leverage in our business. Without a doubt. I mean, I spoke to a lot of the efficiency projects that are part of our program we'll continue to get a little bit of a tailwind from those this year. And And every year, I think we would fully expect as we continue to grow top line in the future, we are going to realize more margin opportunity And we have seen our OpEx per script on the pharmacy side generally trend down in key areas. But if you look back historically, the primary impact to any margin has just been our mix. With outsized growth in specialty. And I've said before that home and community pharmacy and infusion pharmacy have OpEx per script opportunities. And we fully expect to see OpEx per script in those two businesses go down this year as we scale volume. On the provider side, we've continued to leverage fixed costs there I think as you look at the company over this year and next year, outside of any mix impacts, we fully expect to get some improvement incrementally on leveraging our cost base and some margin uptick we move forward.

Okay. And then just thinking about your new pro form a leverage targets for the year, which is obviously quicker deleveraging than we had contemplated before the divestiture. Can you just update us on on how you plan to allocate that in terms of pure debt pay down versus M and A? And just any color you can provide on the M and A pipeline or environment?

Yes. I think the current thinking is either with or without the funds from a community living disclosure, our base case would be some $100,000,000 for M and A [indiscernible] and if the community living divestiture happens, it's about 0.3 times deleveraging on a net basis.

And we put out guidance of more long term two to 2.5 at this point in time because if we do execute through this year and we start to get under three point point five times, our goal would then shift to 2.5x from a longer term Thank you.

And our next question comes from Pito Chick of Deutsche Bank. Your line is open.

Hey, good morning guys. Can you sort of get back to that rare and orphan opportunity that you're talking about with AJ? I think historically a big part of strength of specialty has been the deep ties with oncologists, which is maybe the partner of choice. With new drugs and then obviously as they go generic. So transitioning into where Norvin seems, I guess to me maybe pivot away from ecology. So can you talk about why you can be successful in that new area? After being so successful in oncology?

Yes, I would say nothing about our focus on oncology changes whatsoever. It just happens that really everything that's required for you to be very successful in service your payer members and biotech and pharma partners and all of the patients from an oncology perspective. Really directly applies to rare and orphan too. And PEDO for us, that's purely sitting back and saying, what other therapies can we also pursue are going to leverage our critical success factors that we have in place today. And so we specifically look for those therapy opportunities in the pipeline where we can apply all of our similar best practice to those areas and just continue to expand within the therapeutic space. I would say, that takes nothing away from oncology and it's really what is most closely peripheral and adjacent to oncology. That is also opportunities and our team has clearly demonstrated the ability to continue to execute on as many relevant therapies as possible and drive that growth with the bandwidth that we have.

Great. Thanks so much. Thank you. And our next question comes from Stephen Baxter of Wells Fargo. Your line is open. Hey, thank you for the question. So wanted to follow-up a little bit. The side of things. The segment level, it sounds like you might expect a little bit more in provider margins as we move through 2025. But can you speak a little bit about the pace of margin change in the pharmacy business? You obviously had a pretty big step down and it's all in a function of mix. Just wondering if we should be thinking about something similar in terms of the pacing of pharmacy margins in 2025 or whether you'd expect that to moderate potentially maybe as the growth slows a little? Thank you.

Yes. I would say outside of mix and continued growth on the specialty side that does have a lower margin We would expect within each one of the three pharmacy businesses stability to up ticking margins, I would say on a fusion and home and community. So margin historically has been influenced by our mix and then also investments that we've made on the infusion side and even home and community pharmacy. As mentioned earlier, we fully expect our OpEx per script in those two businesses to improve this year as we continue to grow volume at double digit rates. And those would be the two dynamics is ultimately what is the mix of all of our services between those three businesses and all of our drugs and then our ability to hopefully successfully drive OpEx for script down and home community and infusion this year, which ultimately we think will be to a positive EBITDA per script and margin story.

Got it. And just the improvement in the guidance for 2025 at stage is that based on trends that you're seeing year to date or additional limited distribution drugs you may have gotten that you didn't have at the time, in early January. Just wondering what influence that at this point in the year? Thank you.

Yes. I would say it's less to do with any one specific factor and just continued momentum and breadth of progress across entirety of the organization. So far, we've obviously been heads down from an always. And we just continue to work through what we see as a very productive first quarter. Across most all of our service and business lines and that was reflected with the update we provided Thank you. Our next question comes from Matthew Gillmor of KeyBanc. Your line is open.

Thanks for the question. Just had a quick follow-up on the guidance discussion. And any comments you can provide in terms of seasonality of EBITDA and how that may pace throughout the year? Should we just prior years for that or anything new to consider as we look at 2025?

Yes, go ahead, Jen.

Yes, thank you for the question. I think prior years would be a good reflection of how it typically plays out. Q1, we obviously have the reset of payroll taxes and versus last year. You should keep in mind that last year included a leap a leap year day, as we're thinking about the guidance for this year.

But also Q4 tends to be one of our strongest quarters for a variety of different reasons. But yes, we think seasonality Q1 and Q4 tend to be the outlier quarters just a little bit when you look historically and we expect that to continue in 2025.

That's great. Thank you.

Thank you. And our next question comes from Larry Solow of CJS Securities. Your line is open. Great. Thanks. Good morning everybody and echo the congrats to Jen.

I guess just a couple of follow-up questions. Just on staffing across your properties, availability and wage inflation. What sort of how does that feel as you look at the 25? Yes. Hi, Larry.

That's something we've just been continuing to manage for years in a very productive way. Ton of focus in the organization and HR around recruiting, onboarding, training, retention stability and numbers improve over time across every one of our businesses. They're very, very solid. And it's something that we just are very focused on managing, trying to make our provider service lines a destination within the industry where people want to work. We've always invested in comp and in wages. We've rolled out four zero one everywhere in the last few years. And so that's just been really steady for us. Obviously, you could always use more to to keep up with the volume growth we've driven in the double digits. Through all of our people focused efforts.

Got you. And you mentioned the M and A outlook and the spend expected target spend for this year. How about just can you just give us an update on de novo's the efforts in 'twenty four and going forward? [indiscernible] [indiscernible] and rehab principally. We'll do a few new hospice pharmacies this year as well. And those have really nice ROI to them, over a two to four year period of time. But they're principally in those four areas. And we'll continue to do about 10 to 15 of those a year. And those are helpful adders to your financial performance as you go out years into the future.

I guess, please one more, just the acquisition, the New Haven acquisition in 2024, how's that progressing?

I know I think it was going to sort of ramp up as we go out of the next couple of years, maybe any thoughts on that? Any color?

Thanks.

Yes. The team's done a really nice job integrating that in Q4 and so far this I think that's been a good example of our track record on M and A. Almost never having an acquisition go down from where we acquired it and that acquisition is ahead of plan.

Great. Thanks so much. Appreciate the call.

Thank you. I'm showing no further questions at this time. I'd like to turn it back to John Rousseau for closing remarks.

Thank you, everybody, for your time today. We really appreciate it as always. And we look forward to talking to you in another quarter Have a good day.