Kieran Ryan

Kieran Ryan inquired about the sleep business, asking if there are any specific factors to be aware of regarding cadence, year-over-year comparisons, or price mix, or if revenues are generally expected to track with the strong new starts and census growth.

Answer

CFO Jason Clemens highlighted noise in the 2025 comparable due to a change in the rental and sales mix related to CPAP accounting, which sets up an easier comparable for 2026. He expressed satisfaction with sleep start growth and the overall business outlook. Kieran Ryan also followed up on the diabetes segment, asking about the stability of the DME versus pharmacy shift for CGM and trends in pumps moving into the pharmacy channel.

Kieran Ryan asked about the cadence, year-over-year comparables, and price mix for the Sleep Health business, and what to expect regarding the DME versus pharmacy shift in diabetes, particularly for pumps.

Answer

Jason Clemens (CFO, AdaptHealth) explained that there was noise in the 2025 Sleep Health comparables due to a change in the rental and sales mix related to CPAP accounting, which sets up an easier comparable for 2026. He expressed confidence in the sleep business due to nearing record start activity. For diabetes, he noted fewer payer policy changes for CGMs and the company's full capability to distribute pumps through both pharmacy and traditional DME channels, contributing to strong pump growth in late 2025 and expected continuation in 2026.

Kieran Ryan, on behalf of Deutsche Bank AG, asked about the ongoing impact of pricing pressure in the Diabetes segment from shifts to the pharmacy channel and inquired about the growth outlook for the Sleep segment in 2025.

Answer

CFO Jason Clemens stated that the impact from payers shifting to pharmacy reimbursement for diabetes is expected to be "muted" in 2025 compared to the prior year, viewing the environment as stable. While not providing specific segment guidance, he indicated that the Sleep segment is expected to provide the growth needed to offset anticipated compression in Diabetes and achieve the overall company guidance.

Kieran Ryan asked for more color on the pharmacy guidance breakout, specifically what it implies for specialty and infusion, and if a potential Q4 slowdown in specialty and infusion is related to a normalization after a record year. He also requested an update on the M&A pipeline and priorities.

Answer

CFO Jen Phipps stated that there is no expected slowdown, with strong growth anticipated in Q4 for specialty and infusion, leading to increased revenue guidance. She also expects accelerated efficiencies in Q4 from operational projects in infusion and home and community pharmacy. CEO Jon Rousseau noted that outside of the Amedisys/LHC transaction, M&A focus remains on small, highly accretive tuck-in deals in attractive geographies for another quarter or so. He anticipates more activity in deals ranging from $3 million to $10 million in EBITDA after the current transactions, while remaining open to slightly larger opportunities but nothing transformational.

Kieran Ryan sought more color on the pharmacy guidance breakout between specialty/infusion and home/community, specifically if the implied Q4 slowdown in specialty/infusion was related to a normalization after a record year for branded drugs. He also requested an update on BrightSpring's M&A pipeline and priorities, particularly regarding tuck-in deals.

Answer

CFO Jen Phipps clarified there is no slowdown expected in specialty/infusion, anticipating strong year-over-year growth in Q4, with increased revenue guidance largely driven by continued strong script growth in that business. She also expects accelerated efficiencies in Q4 from operational projects. CEO Jon Rousseau stated that M&A remains focused on small, highly accretive tuck-in deals in target geographies, with nothing imminent outside the Amedisys/LHC transaction, and expects more activity in the $3M-$10M EBITDA range after these two transactions.

Kieran Ryan, on for Philip Chickering, asked for clarification on the events between late February and the current report that led to the Q1 miss and the significant guidance revision. He also requested details on the expected revenue and EBITDA ramp for the Payer & Provider vertical.

Answer

CEO Lee Bienstock stated the guidance change was a strategic decision to remove uncertain Government Population Health revenue due to policy-driven delays and stalled contracts, while core businesses remain on track. CFO Norman Rosenberg added that the Q1 revenue miss was contained within the government vertical. Regarding the Payer vertical, Bienstock confirmed the $50 million revenue target is unchanged, with margins expected to approach 40% next year as utilization improves. Rosenberg noted that while the business currently drags on margins, clinician utilization rates are trending up significantly.

Kieran Ryan, on for Pito Chickering, asked about the potential business impact from proposed changes to Medicaid and ACA exchange subsidies.

Answer

Chairman and CEO Adam Schechter noted that Medicare and Medicaid combined represent about 10% of Diagnostics revenue. He stated that the company manages shifts between different government and private plans well. The primary concern would be a significant rise in the number of uninsured individuals, which he views as an unlikely scenario. As long as patients maintain coverage, he believes the financial impact of plan shifts is manageable.

Kieran Ryan of Deutsche Bank asked for confirmation on the underlying EBITDA margin expansion for 2025 after excluding one-time items and sought reasons for the slower growth in Home Health & Hospice in Q4.

Answer

CFO Matt Buckhalter confirmed the underlying margin expansion analysis was correct, clarifying that it would primarily be driven by SG&A leverage as rate gains are passed to caregivers to drive volume. CEO Jeff Shaner attributed the Q4 HHH slowdown to temporary open sales positions, noting trends have already improved. He stated a willingness to trade some of the high 76% episodic mix for more organic growth, targeting 1-3% in 2025.

Kieran Ryan from Deutsche Bank asked if Pediatrix has seen an improved ability to secure additional funding or subsidies from hospitals. He also questioned the company's plans for returning to M&A activity given its strong cash flow and lower leverage, and asked for commentary on the M&A pipeline.

Answer

CEO James Swift stated that Pediatrix's relationships with hospitals are stable and that necessary contract increases were largely secured in late 2022 and early 2023. He does not see the same need for subsidies as some adult service lines. On M&A, Swift confirmed the company sees a 'real opportunity' for acquisitions in its core services in late 2024 and into 2025, supported by a strong pipeline and improved operational stability.

Kieran Ryan, on for Pito Chickering, questioned the implied Q4 EBITDA margin decline, asking if it was solely due to opening costs and hurricane impacts. He also asked about free cash flow dynamics.

Answer

CFO Douglas Coltharp confirmed the Q4 margin outlook is shaped by several year-over-year factors outlined in his prepared remarks, including a prior-year bad debt reserve, insurance adjustments, and current-year preopening costs. Regarding cash flow, he attributed the quarter's strength to robust accounts receivable collections, particularly the resolution of claims that were under TPE review in Q2.