BrightSpring Health Services - Earnings Call - Q1 2025

Transcript

Speaker 2

For standing by, and welcome to the BrightSpring Health Services First Quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, David Deuchler at Investor Relations. Please go ahead.

Speaker 0

Good morning. Thank you for participating in today's conference call. My name is David Deuchler with Investor Relations for BrightSpring. I'm joined on today's call by Jon Rousseau, Chief Executive Officer, and Jen Phipps, Chief Financial Officer. Earlier today, BrightSpring released financial results for the quarter ended March 31, 2025. A copy of the press release and presentation is available on the company's Investor Relations website. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance in industry and market conditions. Such forward-looking statements are not guarantees of future performance. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations.

We encourage you to review the information in today's press release and presentation, as well as our quarterly report on Form 10Q that will be filed with the FTC, including the specific risk factors and uncertainties discussed in our Form 10K and 10Q. Such factors may be updated from time to time in our periodic filings with the FTC, and we do not undertake any duty to update any forward-looking statements except as required by law. During the call, we will use non-GAAP financial measures when discussing the company's performance and financial condition. You can find additional information on these non-GAAP measures and reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures to the extent available without unreasonable effort in today's earnings release and presentation, which again are available on the Investor Relations website.

This webcast is being recorded and will be available for replay on the Investor Relations website. With that, I'll turn the call over to Jon Rousseau, Chief Executive Officer.

Speaker 1

Good morning. Thank you for joining BrightSpring's First Quarter 2025 earnings call. I'd like to start by thanking our employees who work hard to ensure that patients receive proper, high-quality, and timely care in home and community settings. I'm grateful for our team at BrightSpring and their diligence to each other and patients in their care every day. We're pleased with the start to the year across our businesses, with first-quarter results exceeding expectations. In 2025, we remain well-positioned for continued growth while leveraging our scale with an ongoing focus on high-quality operations and disciplined investments to drive efficiency. At BrightSpring, we believe that there is always room to improve and innovate as we strive to deliver the best and most reliable coordinated care as a leader in critically needed and highly valuable home and community-based healthcare.

Before I review the first quarter's performance, a brief update on the planned divestiture of the community living business, which we announced in January. We continue to expect the transaction to close in the second half of this year, subject to regulatory approvals and typical closing conditions. We did receive a second request to review from the FTC, and we continue to work with them to advance the transaction's approval process. As you may recall, we previously provided 2025 guidance excluding community living, with this business reported in the discontinued operations lines of our financial results. As a result, my remarks related to the company's financial performance on this call principally pertain to the continuing operations and do not include the results from community living. For the first quarter, total company revenue was $2.9 billion, which represented growth of 26% year over year.

Pharmacy solutions revenue was $2.5 billion, representing 28% growth year over year, while provider services revenue was $346 million, representing 12% growth year over year. Total company adjusted EBITDA of $131 million grew 28% compared to the same period last year, driven by strong revenue results across the businesses, particularly in our Onco 360 and Caremed Specialty Pharmacy business. EBITDA margin for the company increased in the quarter versus last year. These results were achieved, notwithstanding the impact from fewer days in Q1 this year versus last year, with 2024 being a leap year, which equated to a negative $3.7 million EBITDA impact as compared to this year's first quarter.

Following strong performance in the first quarter and an updated outlook for the balance of the year, we are increasing total revenue and adjusted EBITDA guidance for 2025, with adjusted EBITDA guidance for the year increasing by $25 million at the low and high ends of the prior range communicated in March. For clarity purposes, as before, this guidance excludes community living. Jen will speak to BrightSpring's first quarter financial results and 2025 outlook in more detail in a moment. Demand for our services and broad demand for health services at lower costs and preferred home and community settings, combined with our commitment to delivering high quality in these settings, continue to support strong growth in the quarter. We have consistently driven outsized volume growth in our markets, led by responsive and reliable high-quality care, loyal and expanding referral sources, and new market investments.

We also continue to see the benefits of leveraging our scale and investing in our business to increase organizational efficiencies and reduce costs. Our investments and process improvements, including new and enhanced technologies, are important to provide modern, coordinated, and best practice approaches to care for complex patient populations. Every year, we have dozens of programs with varying scope that help improve the efficiency of care delivery and outcomes for our patients. Some quality highlights include the following: in home health, over 80% of the branches are four-star or better. The 60-day hospitalization rate continued to decrease, and our patient satisfaction rate is approximately 90%. In hospice, our visits and time with patients remains 50% higher than the national average, and our hospice quality index score, which is excellent, has never been higher.

In rehab, the % of patients experiencing a catastrophic neuro event who reach independence again rose to 52%, and our patient satisfaction score remained at 98%. In personal care, our 4.6 satisfaction score out of five is the highest ever. In community living in Q1, we had the lowest number of audit findings ever and 40% better than industry average. In infusion, the discharge rate due to completion of therapy was 96%, with 95% patient satisfaction. In hospice and home and community pharmacy, we had 99.999% dispense accuracy, 99% order completeness, and local staff delivery times of two hours. In specialty pharmacy, our time to first fill was four days, well below industry average, with a medication possession ratio of 93% versus the industry benchmark of 80%.

We continue to demonstrate a capability to meet the needs of a broader set of patients and deliver highly valuable home and community healthcare across complementary service lines. Turning back to the company's financial results, in the pharmacy segment, total revenue grew 28% in Q1 and adjusted EBITDA increased by 31% in Q1 versus prior year, with total pharmacy script volume growth of 10% to $10.9 million. In the specialty and infusion business, revenue growth was 33% year over year, with total script volume growth of 20% in the quarter, exceeding our expectations. Specialty and infusion growth continues to be driven by launches across the now 127 LDD drugs in our portfolio, market share driven by high-quality scores and service levels, and market education and patient fulfillment supporting generic drug utilization.

We continue to have good visibility into the LDD market opportunity, expecting 16-18 additional LDD launches and their corresponding clinical advancements over the next 12-18 months. Specialty script growth was 32% in the first quarter, a reflection of innovative new therapies coming to market and our ability to serve as a strong partner to prescribing physicians and patients and their families. In infusion, continued investment in the business has translated into improved volume performance through the quarter and presently, and we remain optimistic about the future of the business over the coming years, with the opportunity to treat both acute and chronic health conditions across infusion settings as our strategy. In home and community pharmacy, revenue grew 14%, primarily driven by increased script volumes and new customers.

The business continues to be operationally steady, and there remains opportunity to expand market share, particularly in assisted living, behavioral, hospice, PACE, and at-home pharmacy settings in the future. Before I turn to our provider segment, I would like to spend a minute discussing a few external regulatory topics. BrightSpring has been evaluating scenarios associated with any potential future pharm tariffs. We have been in discussions with manufacturers, wholesalers, payers, and legislators to best understand potential outcomes, all of which are uncertain given there is no significant policy yet in place. While we have a good understanding of our drug sourcing and current supply in the market, there are still unknowns related to when, what, how, and even if materials could be tariffed in the future. Currently, we do not believe that there will be a material impact to BrightSpring in 2025, given our contractual relationships and inventory.

We're continuing to monitor and evaluate potential 2026 dynamics in order to mitigate any potential impact, should one even potentially arise. It's worth noting that approximately 50% of our drug supply comes from the U.S. and North America. Reimbursement for brand drugs is tied to cost, for example, as an annual drug price inflation, and there are typically many domestic and global sourcing options for generics in supplier markets that are competitive. On the IRA, the broad intent and understanding of the legislation is to lower prescription drug costs, and pharmacies were not and are not expected to bear any financial burden of resultant changes. Moreover, regulators acknowledge the crucial role that pharmacies play as the last mile in ensuring patient access to medications and in driving health outcomes and reducing unnecessary hospitalizations.

While outstanding legal challenges or actions by Congress or the Trump administration may modify implementation of the IRA, we continue to constructively work with our industry partners to educate and eliminate potential unintended consequences of the new law. All in all, our views on the potential impact to our business from the IRA policy have not changed over the past six months. In a scenario where the IRA remains in place as it is today, we think there is a manageable impact that we would look to mitigate through continued growth and additional operational focus. Regarding Medicaid, approximately 10% of the company's revenue is derived from Medicaid post the community living divestiture, with our provider and pharmacy patients served being seniors and/or complex patients, many with behavioral conditions.

These are the originally intended Medicaid patients who are not the focus of any Medicaid discussions and, in our view, unlikely to be impacted. This is a high-need patient base who has received increased annual rates for over 30 years, with our services being critical to support them in home and community settings with quality outcomes that reduce costs to the system. Amidst varying environments, our company has grown at a mid-teens revenue and EBITDA CAGR for the past nine years now, based on the strengths of our platform, the clear ROI of what we do, and our complementary diversification and differentiated position in attractive and highly valuable home and community health services markets. We expect our growth track record to continue into next year and beyond.

Turning to the provider segment financials, the business delivered solid results in the first quarter despite unfavorable calendar days, with 2024 being a leap year and having the extra selling day and more Mondays and Fridays than this year's first quarter. Provider revenue grew 12% year over year, and segment-adjusted EBITDA grew 9% year over year, with a 14.8% margin in the first quarter. As a reminder, we will be discussing three businesses within the provider segment: home healthcare, rehab care, and personal care. Home healthcare includes the home health, hospice, and primary care businesses, and today represents approximately 50% of provider revenue. Revenue in home healthcare grew 21% year over year in the first quarter. The home health and hospice businesses continue to perform well, with average daily census of over 30,000 growing 12% compared with the same period last year.

Growth in home health and hospice continues to be driven by strong operational execution underpinned by leading quality metrics, high levels of patient satisfaction, de novo expansion, and advancing contracts with Medicare Advantage. As we continue to grow and expand our home health and hospice capabilities, home-based primary care remains a large opportunity that we are excited about and further progressing on this year. As the healthcare system continues to face higher costs and an increasingly capacity-constrained infrastructure, payers and regulators are making progress on improving accessibility for home-based care. We are focused on bringing high-quality services, including physician oversight, to the home and community settings to treat patients where they are. In rehab, which represents approximately 20% of provider revenue, we deliver highly clinical and skilled rehab and behavioral therapy to patients with neuro rehabilitation needs and psych and behavioral conditions, with significantly lower longer-term costs.

Revenue in this operating unit grew 5% in the first quarter, driven by the continued addition of de novos through our neuro rehab and rehab in motion programs. In the quarter, we executed on a significant number of new contracts in a rehab in motion program, where we began this build-out of rehab for seniors and assisted living later last year, another example of the innovative growth approach of the company that leverages core capabilities and existing customer markets and relationships. In personal care, which represents approximately 30% of provider revenue, we support the activities of daily living care and social determinants of health. The business delivered steady performance in the first quarter, with revenue growth of 3% and modest growth in person served.

Overall, we again observed consistent execution and high quality of care across the provider segment, where there continues to be payer support for our services that reduce overall healthcare costs. To conclude, we are pleased with the company's performance in the first quarter. We focused and pride ourselves on our long history of operational execution and high-performing employees that have created organizational best practices. We remain optimistic about our pharmacy and provider businesses over the near, medium, and long term as we see large opportunities for growth and market expansion across the company, and we are confident in our ability to execute against our increased financial outlook throughout 2025. With that, I'll turn the call over to Jen. Thank you, Jon. Before I discuss our results for the first quarter of 2025, I'd like to provide an update on accounting for the quarter.

In the first quarter of 2025, we began to record the community living business in discontinued operations, as indicated in the press release and 10-Q, to adhere to accounting standards required on an interim basis. As such, all BrightSpring financial results and forecasts that I will discuss are related to continuing operations and exclude community living. Management believes the presentation of the non-GAAP financials from continuing operations is a useful reflection of our current business performance. In the first quarter of 2025, total company revenue was $2.9 billion, representing 26% growth from the prior year period. Pharmacy solution segment revenue in the quarter was $2.5 billion, achieving 28% year-over-year growth. Within the pharmacy segment, infusion and specialty revenue was $2.0 billion, representing growth of 33% from prior year, and home and community pharmacy revenue was $581 million, representing growth of 14% year-over-year.

In the provider services segment, we reported revenue of $346 million in the first quarter, which represented 12% growth compared to the prior year period. Within the provider services segment, home healthcare reported $178 million in revenue, growing 21% versus last year. Rehab revenue was $70 million, growing 5% versus last year, and personal care revenue was $98 million, representing growth of 3% year-over-year. Moving down the P&L, first quarter company gross profit was $338 million, representing growth of 16% compared with the first quarter of last year. Gross margin in the quarter was impacted by a mix of revenue, given the comparably larger revenue growth in the specialty pharmacy business, which carries lower than corporate average gross margins. Adjusted EBITDA for the total company was $131 million in the first quarter, growing 28% compared to the first quarter of 2024.

Adjusted EBITDA margin improvement on a year-over-year basis was driven by strong execution and offset by some calendar dynamics, including typical first quarter elevated costs such as tax resets and an unfavorable leap year days compared versus last year. Adjusted EPS for the total company was $0.19 for the first quarter. To highlight, our procurement and lean operational initiatives continue to generate improved efficiencies across the organization. We expect these initiatives will have momentum through the course of the year and support improved margins beginning in the second quarter. Turning back to segment performance in the first quarter, pharmacy solutions gross profit was $204 million, growing 20% compared with the first quarter of last year.

Adjusted EBITDA for pharmacy solutions was $116 million for the first quarter, growing 31% compared to last year, representing an adjusted EBITDA margin of 4.6%, which represented an increase and was in line with our expectations. Provider services gross profit was $134 million, growing 10% versus the first quarter of last year. Adjusted EBITDA for provider services was $51 million for the first quarter, growing 9% versus last year, representing an adjusted EBITDA margin of 14.8%, down 30 basis points versus last year, driven by the previously noted calendar dynamics of days and leap year. Not included in the company's reported adjusted EBITDA, as previously stated, community living's adjusted EBITDA was an additional $32 million in the quarter, an increase of 14% from the prior year in this business. On a total company basis, cash flow from operations was $102 million in the first quarter.

We continue to expect to deliver over $300 million of annual run rate operating cash flows in 2025, as we remain focused on improving our leverage ratio towards our goal of 3.0 times this year, pro forma for the community living divestiture, and towards our long-term target of 2.0-2.5 times. As of March 31, our net debt outstanding was approximately $2.5 billion, with a leverage ratio of 3.87 times, which was in line with our internal projections. As previously mentioned in January, we expect approximately $715 million of net cash proceeds of the $835 million of gross cash consideration in the pending community living sale. As a reminder, net interest expense includes interest income related to cash flow hedges due to our three receive variable pay fixed interest rate swap agreements that we have in place, set to mature on September 30, 2025.

As part of our processes to monitor and address risks during the first quarter, we entered into an extension of our interest rate hedge, providing stability to our interest rate risk through September 2026. Prior to any proceeds from the pending community living divestiture, quarterly interest expense is still expected to be approximately $43 million per quarter, including approximately $1.2 million of interest expense related to the TEU instrument. Turning to our guidance for 2025, we are increasing our expectations for total revenue and adjusted EBITDA that was provided in March, which excludes the community living business. Total revenue is expected to be in the range of $12 billion-$12.5 billion, including pharmacy solutions revenue of $10.55 billion-$11.0 billion, and provider services revenue of $1.45 billion-$1.5 billion. This revenue range reflects 19.1%-24.1% growth over full year 2024, excluding community living in both years.

Total adjusted EBITDA is expected to be in the range of $570 million-$585 million for full year 2025. This would reflect 23.9%-27.2% growth over full year 2024, excluding community living in both years. Our increased total adjusted EBITDA outlook reflects better than expected pharmacy revenue performance in the quarter, with associated incremental margins from launched products, strong provider revenue and operating performance and profitability, and further benefit from enterprise operational initiatives. With that, I will now turn it back to Jon. Thank you for your time today to go through BrightSpring's first quarter 2025 results. We will now open up the call for questions. Operator? Certainly. Our first question for today comes from the line of Whit Mayo from Leerink Partners. Your question, please. Hey, thanks. Good morning. I guess my first question is just on the gross profit per script.

It was very strong in the quarter. Jen, I think you hit on maybe some of the factors, but not sure I called everything exactly. Can you talk about everything that sort of drove that dynamic in the quarter? Yeah. Good morning, Whit. Yeah, that was definitely a positive dynamic in the quarter. That would really just be a function of our mix in general, along with some proactive efforts we've had on the purchasing side of the organization. As you just look at a mix of drugs in totality, including brands versus generics, and then our efforts on the procurement side internally, that would have driven the increase. Okay.

My follow-up question, just thinking about the IRA and the MOOC changes that we're seeing this year, how are you thinking about the second-half growth around the pharmacy trends now and maybe any color that you have around changes in manufacturer behavior that you care to share, maybe as it relates to patient assistant funds or anything else? Thanks. Yeah, I would probably refer back to the prepared comments on IRA. Nothing has changed in the last six to nine months in our view. We do not see any change in the pharmacy traction growth rate over the balance of the year. As I said before, we feel like if we look at our long-term track record of our company in terms of EBITDA growth, that is something that we are going to be sustaining into the future, regardless of the environment.

IRA has not changed for six to nine months. As mentioned, pharmacies have not been, are not the target. There are discussions with CMS, with DC around addressing that for pharmacies. In any scenario, our confidence level in next year remains very strong and what it has been. Thanks. Thank you. Our next question comes from the line of Anne Hines from Mizuho. Your question, please. Yep. Good morning. Just staying on the IRA, I do think there are opinions of the market that the IRA will lead to behavior change on the patient and physician side that could lead to an acceleration of utilization. How much of that kind of patient behavior change and physician change do you have in your guidance from our IRA, or should we think that as maybe upside potential going forward?

Yeah, Anne, I think it's largely the same that we've talked about. I mean, we don't see a meaningful swing to our business, really, potentially either way on IRA next year. I would just really look at the breadth of the organization in totality. Maybe just take a step back and really speak to the quarter again and really broadly over the last decade. Really proud of the quality performance and the organization. We continue to reiterate those metrics. To be able to have industry-leading metrics across really all of our service lines, and many of these are just best-in-class levels, I think speaks to our ability to manage across service lines in a really high-quality way.

The fact that we're doing that with a home and community focus, delivering healthcare where people want to be, where there's a high ROI, is really just an attractive place in the healthcare market as we see it, and really ultimately creates those two factors together create an ability for us to address multiple services for greater growth and scale, I think, comparatively to a lot of other people. We look at a nine-year track record on revenue and EBITDA in the mid-teens in terms of growth rates. We expect that to continue. As it relates to IRA, there are still some things that need to play out. Our view on that has not changed for a long time. Regardless of the outcome, we feel good about next year, and we don't see IRA being a major swing factor. Thank you. Thank you.

Our next question comes from the line of Joanne Gajuk from Bank of America. Your question, please. Yes. Hi. Good morning. Thank you so much for taking the question here. I think maybe I missed the first question. Was it about the gross profit per script? Because that was the one number that stood out. It sounds like you said it was something about mix and the purchasing efforts. As we think about the generic launches going forward, should we expect this number to even accelerate when it comes to the gross profit per script growth? Because it was up like 9%, and this $18.75 or so per script, should we expect this to continue to go higher? Yeah. Morning, Joanne.

Your gross profit per script, as you know, is always a function of your product mix, your payer mix, and then what you can do on the procurement side. I would say, really, from a product mix and procurement perspective, what we can control internally, those were favorable trends. I mean, your gross profit per script and your revenue per script can bounce around over time from quarter to quarter just due to mix. We are very focused from an execution standpoint, from a sourcing standpoint, managing across our portfolio on the COG side. That continues to be helpful for us. Yeah, the generics are generally a good thing for everybody. They reduce the cost in healthcare for the system. We are an organization, and part of our value as a pharmacy is driving generic utilization.

I think what you're seeing is us really partner with brand companies to drive innovation in the market with products that improve people's clinical outcomes and prognosis. At the same time, when generics come available with our sales force and our service levels and our partnerships, we really try to do what we can do to accelerate those generic launches. Those factors all played out as dynamics in the quarter and resulting in the numbers that you saw. The generic pipeline to your last question does remain very robust. The last thing that I would add, Joanna, is specialty, obviously, has had significant growth. When you think about the GP per script, that goes to the mix there. Oh, perhaps. Oh, okay. I see. If I may, a different topic.

We saw a headline yesterday that I guess the company was named one of the buyers from some assets that will be divested in the medicines acquisition by United. I don't know if you can give us a sense. Is it home health hospice or anything else you can give us on that one? Thank you. Yeah, Joanna, we're subject to confidentiality with the parties there, so there's really not a lot we can say due to that. I would just say that this is a unique situation as we observed it to be. It really has been, I would say, our quality and our overall platform strength as an enterprise that allowed us to be a part of those conversations as a potential positive party and solution to work with. We also really have essentially no geographical overlap whatsoever with those locations.

It was a unique situation for us, and we were glad in that circumstance to be able to be potentially a really positive party and solution for the other parties. Obviously, that transaction between those entities has to consummate and come to completion for our transaction to consummate as well. Great. Thank you. Thank you. Our next question comes from the line of David Larson from BTIG. Your question, please. Hey, congratulations on another very good beat-and-raise quarter. Jon, can you talk a little bit about the potential sort of scenarios around tariffs? If tariffs are implemented, I would imagine this would increase wholesale acquisition cost. Would that simply increase average wholesale price and those costs be passed through to your customers? How long would that process take? Roughly how many days inventory do you have on hand? Thanks very much. Yeah.

Good morning, David. Again, I'd probably refer you back to the comments we made before on that. There really are no meaningful tariffs in place today. I think, as everybody knows, it's a really uncertain environment from day to day. I would say, though, that on the brand side, we're reimbursed off of cost, and that happens right away. On the generic side, there's a lot of choices for drugs across the globe. It's a very, very competitive market. We're very sophisticated in our purchasing capabilities. On the generic side, we would expect reimbursement increases as well if there were cost increases. Net-net, that's not something that we're seeing as a significant swing factor at this point in time next year. We don't see that impacting this year, just given inventory levels. Okay.

Just what I heard you say was you're reimbursed on cost on the brand side, and that happens right away. If prices increase, let's say, August 1 on the brand side, then on August 1, you would be covered for those higher costs right away? Yeah, that's generally how it works. Okay. Great. Thanks very much. Thank you. Our next question comes from the line of Brian Tinklet from Jefferies. Your question, please. Hey, good morning, guys. Congrats on the quarter. Hey, Jon. Just on the medicines deal acquisition announcement, curious, more strategically speaking, I know you've been focused on growing the provider side of the business. Is this a sign that we should expect more deal flow in that space?

Maybe the follow-up to that would just be, as we think about your leverage targets, how should we be thinking about that as you may potentially ramp up acquisitions in that space? Thanks. Yeah. Good morning, Brian. Yeah, I would say the only other thing I could probably say about the transaction at this point in time, it is very in line with our acquisitions philosophy and as we've articulated it previously. We've been in a mode for a couple of years of largely doing Tuckins that have been highly accretive at very attractive pro forma multiples. We've always said, if there is a unique opportunity, not something of massive size, but a unique opportunity still at a level from a pro forma perspective that we think over time we can realize, that's something we'll consider.

I mean, I would direct you back to our Haven acquisition in Florida on Hospice last Q3 or so. That was a unique scenario where we structured it creatively to be able to execute against that transaction. Just given the current state of that company, the multiple was a little bit challenging for us. We had to be creative in the structuring. You look at that business today. It is performing exceptionally well in terms of what our team has been able to do with that. We very much will work our way into a multiple of four times or less here, probably within the next year. That was a unique situation that we were able to capitalize on, just given our abilities from an integration standpoint, operational standpoint, and our relationships in the market.

We knew that over time, that was going to be the multiple that we'd be very, very pleased with. I would say this transaction fits in with our M&A philosophy. We do not see it impacting our leverage goals whatsoever, really for this year or the long term. There is close to no impact on our leverage as we see this transaction next year. Awesome. Thank you. Thank you. As a reminder, if you have a question at this time, please press star 11 on your telephone. Our next question comes from the line of Matthew Gilmore from KeyBanc. Your question, please. Hey, thanks for the question. I wanted to ask about the guidance update. I think the revenue is up $400 million, and the EBITDA is up $25 million, which is nicely above the beat.

Jennifer provided some of the drivers, but I was hoping maybe you could sort of help us think through which of those drivers are sort of more important if you're able to size them relative to the EBITDA upside on the guide. Yeah. I just reiterate the comments that I made. We have continued to see strong pharmacy volume growth ahead of our expectations. We've adjusted the guidance to reflect that. As we've also discussed over the last several quarters, we have many different initiatives that we've put in place focused on margin expansion. We will see and expect to see some of that in the provider space especially, as well as in pharmacy. That is also reflected in our guidance. That's great. That is a follow-up on the efficiency initiatives that you discussed.

Is there a longer-term view in terms of what the total opportunity could be over the next couple of years? Just curious how you guys are thinking about that. Yes. This is an ongoing program that we've had since we entered as management to this organization. We just continue to be focused on these items every single year and would expect that there will be opportunities for us into we will continue to pursue all of those opportunities into perpetuity. It's just an institutionalized way we work here going back nine years now. Annual savings have driven continued investments in technology, continued investments in people, offsets, any headwinds in the market from time to time. Some of it drops to EBITDA. It's really the way we just work here. Got it. Thank you. Sure. Thank you.

Once again, if you have a question at this time, please press star 11 on your telephone. Our next question comes from the line of Larry Solo from CJS Securities. Your question, please. Great. Good morning. I echo the congrats on the good start to the year. Just a couple of follow-up questions. Could you give us any update just on your efforts in bundled services and value-based care and where we stand with ACOs currently? Any update there? Yeah. We continue to make steady progress on our primary care business and some of the alternative payment models there. You ought to remind folks that the ACO is zero risk. It's just all upside. If you get savings, then you get some shared savings. Last year was the first year of that program. We've been pretty conservative in booking any shared savings to date.

You ultimately do not get those final results from Medicare until even later still this year for last year. We have been pretty conservative there. We are optimistic. We are going to see double-digit savings rates on what we have been able to do for this population at higher quality levels. We do have an I-SNP program. That is a managed care plan. It is just on a couple thousand patients. It takes quite a while to get these plans approved state to state, county to county. Hopefully, as we look out five years, we will be in about 15 states with that plan. We really just need to scale it. We have, I do not know, some 4,000 or 5,000 patients in these ACO and managed care plans today. Over time, we want to get that to over 100,000 in three, four, or five years. We are making steady progress.

There's an outside chance that could result in eight figures of EBITDA this year. We'll have to see. That's what we're hopeful for. We have to see how these final numbers come in. We just continue to lean into that business and think we're in a really unique situation to capitalize on reaching more patients with these payer models, just given the access to the hundreds of thousands of patients in our pharmacy and provider business that we have every year. Great strength in the core businesses. We've always viewed this as a very unique capability we have to scale this leg of the company as well. Slow and steady progress here. Hopefully, we're going to really start accelerating into the future. Great. I appreciate that call. Then just a quick follow-up for Jen, just on the cash flow in the quarter.

Nice strong start to the year. I think the cash flow from operations was a little over $100 million. You paid down a little bit. Looks like a good amount of it. You used a lot of that excess for debt pay down. Is there any seasonality in your business? I do not think so, but maybe just in terms of timing. Is Q1 normally a little bit stronger, maybe just running a little bit ahead of the game to start the year? Do you, I guess, continue to expect to use most of your free cash flow for debt pay down this year? Thanks. Yeah. Q1 does tend to be a stronger quarter. There is a little bit of seasonality, but it is mostly associated with inventory opportunities that we can have from time to time in our business.

Q2, we do have tends to be one of our lower cash flow quarters just related to stick payments and some other one-time items in the year that are paid during the second quarter. Other than that, it's pretty steady. Yeah. I'd say on provider too with that leap year last year. That was an extra day. That was like 3.6% of growth rate that we were impacted by because last year had that extra day. A lot of that, most of that was on the provider side. If you look at that leap year from a provider standpoint, that was like 4-5% growth on the provider side that we were impacted by because of the extra day last year. Last year had a lot of had more Mondays and through Fridays.

Just the way the business works, how we book revenue, how we expense labor, that was a favorable dynamic last year versus this year too. As we get through the balance of the year, those Mondays and Fridays always even out. That should be a little bit helpful as we get through the rest of the year. Great. Thank you. I appreciate it. Thank you. Our next question comes from the line of AJ Rice from UBS. Your question, please. Hi, everybody. Maybe first to ask just on the infusion side of the business. I know you'd spent the last 18 months or so really repositioning that business internally, resource-wise and externally, and have some pretty optimistic views about how much that might grow multiple times of its current size. Can you comment on how you feel that is unfolding?

I know it's still early, but just are you on pace to accomplish that kind of growth? And how much is CVS, as I said, Quorum, from the market providing a tailwind? Yeah. Good morning, AJ. Yeah, I would say largely what we saw from any exit in the market by Quorum has probably all been kind of baked in at this point. I mean, that started really happening in Q4. I would just say with infusion, we continue to work away there. Very, very positive thoughts just on the overall infusion market in general. A ton of opportunity there. We have a good platform. And at this point in time, we still feel good about hitting our internal budget for the year. Okay. And on the M&A comment, I think you typically talk about deploying about $100 million in capital in M&A.

Is that a Medicis deal basically additive to that, or is that part of the overall goal for the year? Again, I have got to be measured here in terms of some of the confidentiality we have with all the parties. I think what I would say is that sort of what we have always done historically with our tuck-in M&A, you look back over six years, an effective pro forma EBITDA multiple we have realized of about four or four and a half times. That has been the mode we have been in. That will continue to be the mode we will be in for the balance of the year. From time to time, there can be some unique situations like Haven was last year. I would say this is a unique situation that we fold into that strategy and that philosophy.

At the same time, as I said before, we do not view this as impacting what we have said from a leverage perspective, really this year or next year. I look forward to sharing a lot more details when we can, assuming that transaction on their side goes through. Okay. All right. Thanks, Juan. Sure. Thank you. Our next question comes from the line of Aaron Wright from Morgan Stanley. Your question, please. Thank you. This is Linda Althoff on for Aaron Wright. Congrats again on another strong quarter. Today, we want to inquire further on cadence for 2025, building on the prior cash flow comments that you just answered. Are there additional unique quarterly dynamics that we should think through as we progress through the remainder of the year, perhaps margin expansion across both segments, utilization, or generic launches? Thank you. Yeah.

I just reiterate what I said earlier in the prepared remarks, which is we do expect our operating cash flow to be ahead of $300 million for the year, which obviously from a balance of the year perspective, as operating cash flow was $102 million, would reflect a couple of quarters that are less than what we saw in Q1. If that's helpful. We do, again, continue to expect strong management. We are focused on improving our DSO, our days inventory on hand, but providing opportunities to allow flexibility to invest in inventory builds and other strategic items as necessary. We feel really good about our ability to deliver on that this year. Thank you. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Jon Rousseau for any further remarks. Thank you, Jonathan.

We appreciate everybody's time today. Thank you for the questions. Thank you for joining the call. We look forward to talking with you again next quarter. Have a great day. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.