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BrightSpring Health Services, Inc. (BTSG)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 revenue rose 28.8% YoY to $2.91B with Adjusted EBITDA up 15.7% to $151M; management raised FY24 revenue guidance to $11.0–$11.3B and Adjusted EBITDA to $580–$585M, citing broad-based strength across Pharmacy Solutions and Provider Services .
  • Segment drivers: Specialty and Infusion revenue grew 42% YoY within Pharmacy; home and community pharmacy grew 19%; Provider revenue grew 10% with 50 bps YoY margin expansion, aided by rate support and efficiency programs .
  • Q3 included ~$10M gross profit headwinds (onboarding costs for a >200-facility LTC customer, minor hurricane impact, and a prior-period payer settlement); CFFO was $27M ($51M ex a $24M final legacy legal payment). Net debt ≈$2.7B; leverage 4.39x; interest expense expected ≈$50M/quarter .
  • Catalysts into Q4/FY: full-quarter benefit from SPRYCEL’s generic, hospice rate increase effective 10/1, onboarding costs dissipating, Haven Hospice initial contribution; management expects Q4 margin expansion and reiterated deleveraging toward ~3x in 2–3 years .

What Went Well and What Went Wrong

What Went Well

  • Specialty/Infusion outperformance: “Specialty business outpaced forecast with higher script volumes driven by 2023 and 2024 LDD launches and generic scripts,” with Pharmacy Solutions revenue up 35% YoY and Specialty/Infusion revenue up 42% YoY .
  • Provider margin execution: Provider Adjusted EBITDA margin reached 14.5% (up 50 bps YoY), supported by rate advocacy, efficiency programs (>$20M cost reduction targets), and mix benefits from home health and rehab .
  • Guidance raised again: FY24 revenue raised to $11.0–$11.3B and Adjusted EBITDA to $580–$585M, reflecting durable volume growth and Q4 tailwinds (generic SPRYCEL, hospice rate, onboarding normalization) .

What Went Wrong

  • Transitory gross profit headwinds: ~$10M Q3 gross profit impact from onboarding a large LTC customer (>200 buildings), minor hurricane effects, and a prior-period payer settlement (included in guidance) .
  • Net loss persisted: GAAP net loss was $9.0M (improved from $(130.1)M YoY) as interest expense (~$50M/quarter) and non-GAAP adjustments continue to weigh on GAAP metrics .
  • Infusion profitability timing: Management is “overinvesting” in 2024 (leadership, people, processes) to drive 2025 margin improvements; near-term margin uplift is more limited until projects mature .

Financial Results

Consolidated P&L and Per-Share Metrics

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$2,256.5 $2,576.6 $2,730.2 $2,906.8
Gross Profit ($USD Millions)$358.3 $369.4 $389.0 $408.1
Operating Income ($USD Millions)$(52.3) $8.1 $62.4 $56.8
Net Income (Loss) ($USD Millions)$(130.1) $(46.4) $19.4 $(9.0)
Diluted EPS (GAAP)$(1.11) $(0.26) $0.10 $(0.04)
Adjusted EBITDA ($USD Millions)$130.5 $130.5 $139.1 $151.0
Adjusted EPS ($)$(0.08) $0.12 $0.10 $0.11
Gross Margin (%)15.9% 14.3% 14.2% 14.0%
Adjusted EBITDA Margin (%)5.8% 5.1% 5.1% 5.2%
Net Income Margin (%)(5.8%) (1.8%) 0.7% (0.3%)

Note: Margin percentages are calculated from cited revenue and profit figures.

Segment Revenue and EBITDA

SegmentQ3 2023 Revenue ($M)Q3 2024 Revenue ($M)YoY %Q3 2023 Segment EBITDA ($M)Q3 2024 Segment EBITDA ($M)YoY %
Pharmacy Solutions$1,673 $2,266 35% $86 $99 15%
Provider Services$583 $641 10% $81 $93 14%
Total Segment Adj. EBITDA———$168 $192 14%
Corporate Costs———$(37) $(41) —
Total Company Adj. EBITDA———$131 $151 15.7%

KPIs and Balance Sheet/Cash Flow

  • Scripts: 10.9M total scripts in Q3 (+15% YoY), driven by +36% specialty scripts; LDD portfolio at 123 therapies; expecting 18 new LDDs in next 16–20 months .
  • Home health: Avg daily census >46,000 (+16% YoY); home healthcare revenue $265M in Q3 (+13% YoY) .
  • Cash flow and leverage: CFFO $27M in Q3; $51M ex $24M final legacy legal payment; net debt ≈$2.7B; leverage 4.39x; quarterly interest expense ≈$50M including ~$1.4M TEU interest; three pay-fixed swaps mature 9/30/2025 .
  • Legal matters: final payments largely completed, with $24M in Q3; other legal matters finalized in 2024 per management .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueFY 2024$10.45–$10.90B $11.0–$11.3B Raised
Pharmacy Segment RevenueFY 2024$8.0–$8.4B $8.5–$8.75B Raised
Provider Segment RevenueFY 2024$2.45–$2.50B $2.50–$2.55B Raised
Adjusted EBITDAFY 2024$570–$580M $580–$585M Raised

Note: Q1 had initial FY24 guide of $10.3–$10.8B revenue, $555–$570M Adjusted EBITDA (ex potential QIP) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1–Q2)Current Period (Q3)Trend
Specialty/LDD pipelineStrong specialty and infusion growth called out; revenue up 35% in Q1/Q2 pressers Specialty/Infusion +42% revenue; 10.9M total scripts (+15%); 123 LDDs; 18 new LDDs expected in 16–20 months Strengthening
Infusion operationsNot detailed in 8-KsOverinvesting in 2024 (leadership, people, process); margin improvement expected in 2025 Investing now; 2025 uplift
IRA/biosimilarsNot discussedMinimal exposure; STELARA ~0.2% of revenue and <0.5% of GP; CMS LTC “true-up” de-risks LTC impact Risk de-risked
Home health/hospiceProvider margin expansion noted; rate support Hospice rate effective 10/1; Haven Hospice closed; provider margin +50 bps YoY Positive
Primary care initiativeNot in 8-Ks~$7M EBITDA in 2024; aiming for 8 figures next year; long-term 100k patients; ACO/I-SNP/payor contracting progressing Building momentum
Legal mattersOngoing costs noted in Q1 $24M final payment in Q3; matters finalized in 2024; CFFO ex-legal in line Clearing overhang
Deleveraging/M&ARaised guides; smaller tuck-ins implied Target ~3x leverage in 2–3 years; pipeline of small accretive deals; de novos across home health/hospice/rehab Deleveraging focus

Management Commentary

  • “We’re pleased to have delivered another strong quarter… revenue was $2.9B (+29% YoY)… adjusted EBITDA was $151M (+16% YoY)… we are raising… guidance… to $580–$585M.” – CEO Jon Rousseau .
  • “Specialty business outpaced forecast with higher script volumes driven by 2023 and 2024 LDD launches and generic scripts… LDD portfolio expanded to 123 therapies… expect 18 new LDDs in the next 16–20 months.” – CEO .
  • “Gross profit was negatively impacted by approximately $10M… start-up costs… hurricane… and a settlement with a payer… Adjusted EBITDA was $151M… Adjusted EPS $0.11… CFFO $27M; $51M ex final legal payment… net debt ≈$2.7B; leverage 4.39x… interest ≈$50M/quarter.” – CFO Jim Mattingly .
  • “Q4 is typically our highest margin quarter… SPRYCEL generic, hospice rate, onboarding normalization and volume leverage to contribute.” – CEO .

Q&A Highlights

  • Q4 margin expansion drivers: SPRYCEL generic fully in Q4, hospice rate effective 10/1, onboarding costs dissipating, positive sequential contribution from Haven; corporate overhead held flat .
  • Biosimilars/IRA exposure limited: STELARA impact not material; STELARA ≈0.2% of company revenue and <0.5% of gross profit; CMS LTC “true-up” mechanism supportive; specialty oncology drug on IRA list (IMBRUVICA) viewed as low risk given manufacturer alignment .
  • Large LTC customer onboarding: >200 facilities; execution on track; lingering costs to decrease into Q4/Q1; ~$1M monthly EBITDA opportunity increasing into Q1 as labor profile normalizes .
  • Haven Hospice ramp: $1–$2M EBITDA in 2024; pathway to ~$15M over several years (stair-step) .
  • MA/home health: ~30% of home health under MA; constructive rate environment and broad payer relationships support sustainability .
  • Part D changes: Lower patient out-of-pocket supports higher specialty utilization; expected January “bump” again in 2025 .

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 2024 EPS and revenue was unavailable at time of analysis due to S&P Global request limits; therefore, explicit beat/miss vs consensus cannot be shown. As a result, estimate comparison cells are marked N/A.
  • Given the FY24 guidance raise for both revenue and Adjusted EBITDA, street models likely need upward revisions to FY24 and potentially Q4, especially in Pharmacy and Provider segments (base on company guidance) .

Financial Results vs Estimates

MetricQ3 2023Q1 2024Q2 2024Q3 2024Consensusvs Cons
Revenue ($USD Millions)$2,256.5 $2,576.6 $2,730.2 $2,906.8 N/AN/A
Diluted EPS (GAAP)$(1.11) $(0.26) $0.10 $(0.04) N/AN/A
Adjusted EPS ($)$(0.08) $0.12 $0.10 $0.11 N/AN/A
Adjusted EBITDA ($USD Millions)$130.5 $130.5 $139.1 $151.0 N/AN/A

Guidance Detail (FY 2024)

MetricPrevious (Aug 2)Current (Nov 1)Notes
Total Revenue$10.45–$10.90B $11.0–$11.3B Excludes future acquisitions
Pharmacy Revenue$8.0–$8.4B $8.5–$8.75B 30.3–34.2% YoY growth
Provider Revenue$2.45–$2.50B $2.50–$2.55B 8.5–10.7% YoY growth
Adjusted EBITDA$570–$580M $580–$585M 14.2–15.2% YoY growth ex 2023 QIP
Other Items (OpEx, OI&E, Tax, Dividend)——No additional quantitative guidance provided in filings

Management Commentary (Selected Quotes)

  • “We are raising the midpoint of our total revenue and adjusted EBITDA guidance… to $580–$585 million.” – CEO .
  • “Gross profit was negatively impacted by approximately $10 million related to nonrecurring items… start-up costs… hurricane… and a settlement with a payer related to prior periods.” – CFO .
  • “Q4 is always typically our highest margin quarter… SPRYCEL generic… hospice rate… onboarding… adders to the margin in the quarter.” – CEO .
  • “We remain on track to deliver approximately $275 million of annual run rate operating cash flow… and… improving our leverage ratio towards our goal of 3x within 2 to 3 years.” – CFO .

Key Takeaways for Investors

  • Broad-based momentum with raised FY24 guidance; Pharmacy strength (LDD/generics) and Provider margin execution support continued growth into Q4 and 2025 .
  • Near-term margin uplift in Q4 driven by SPRYCEL generic, hospice rate increase, onboarding normalization, and Haven contribution; corporate overhead held flat sequentially .
  • Infusion profitability targeted to improve in 2025 after 2024 investment; Specialty pipeline (123 LDDs; 18 expected launches) sustains volume growth .
  • Regulatory/IRA risks appear contained (STELARA small exposure; LTC “true-up”); minimal biosimilar impact expected on core oncology specialty .
  • Deleveraging priority with CFFO improvement as legal overhang clears; management reiterates 3x leverage goal in 2–3 years .
  • Primary care initiative could emerge as a meaningful EBITDA contributor over 2025–2026, with patient growth and contracting milestones as key proof points .
  • Watch Q4 execution on onboarding efficiencies and mix tailwinds; any upside to FY24 guide or 2025 outlook framing could be a stock catalyst .

Appendix: Other Relevant Press Releases (Q3 context)

  • Haven Hospice asset acquisition effective Sept 1, 2024 (Florida, 18 counties); provides incremental hospice scale in Provider Services .