BrightSpring Health Q3 2026 Earnings Call Transcript

BrightSpring Health (NASDAQ:BTSG) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

BrightSpring Health reported third-quarter 2026 revenue of $4.2 billion, a 26% increase year-over-year, with adjusted EBITDA rising 42% to $228 million.

Pharmacy Solutions and Provider Services segments saw strong growth, with revenue increases of 26% and 31% respectively, supported by new LDD launches and operational efficiencies.

The company expects continued robust growth, projecting 15%-20% organic adjusted EBITDA growth in 2027, citing high demand for its services and successful strategic investments.

BrightSpring Health’s operational highlights include significant expansion in home health services and the successful integration of acquired branches, boosting its service quality and reach.

Management emphasized ongoing investment in AI and technology to enhance service quality and operational efficiency, alongside evaluating further acquisition opportunities to expand scale and profitability.

Full Transcript

OPERATOR

Good day, and thank you for standing by. Welcome to the BrightSpring Health third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. Please be advised that today’s conference is being recorded. After the speakers’ presentation, there will be a question-and-answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

I would now like to hand the conference over to your speaker today, David Daikeler, Investor Relations.

David Daikeler (Investor Relations)

Good morning. Thank you for participating in today’s conference call. My name is David Daikeler with Investor Relations at BrightSpring. I’m joined on today’s call by John Rousseau, Chief Executive Officer, and Jen Fitz, Chief Financial Officer. Earlier today, BrightSpring released financial results for the quarter ended September 30, 2026. As a reminder, we closed the Community Living transaction on March 30, 2026, and all financial results and commentary reflect only continuing operations, with Community Living results reflected in discontinued operations.

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 and 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 10-Q that will be filed with the SEC, including the specific risk factors and uncertainties discussed in our Form 10-K and Form 10-Q. Such factors may be updated from time to time in our periodic filings with the SEC, 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 talking about the company’s financial performance and financial condition. You can find additional information on these non-GAAP measures and reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures, to the extent available without unreasonable effort, in today’s earnings 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. With that, I will now turn the call over to John Rousseau, Chief Executive Officer.

John Rousseau (Chief Executive Officer)

Good morning, everyone, and thank you for joining BrightSpring Health third quarter 2026 earnings call. As always, I’d like to start by thanking everyone at BrightSpring Health who drives our mission forward and makes a lasting impact every day. We’re grateful for the great work and commitment of all BrightSpring Health teammates enabling us to deliver high-quality and timely care to patients in so many communities across the United States. Overall, we continue to execute at a high level, providing compassionate, person-centered quality care in patient-preferred, lower-cost settings with another productive quarter delivered amidst an always-fluid external environment and performance enabled by our continuous focus on expanded patient reach, operational efficiency, and accretive M&A. Our strategy is aligned with enduring trends impacting the U.S. healthcare system, including demographics and the increase in the prevalence of certain health conditions, creating meaningful opportunities to support more individuals in need of our highly valuable services.

Our quality outcomes, service levels, and relationships with hospitals, physicians, and other healthcare providers in the community are what underpin our ability to capture this demand, fostering long-term durable growth. This growth in turn creates more and more scale and efficiency. Moreover, our services have a clear and significant ROI. Demand for these services continues to increase, we provide leading-quality, innovative operations, and we continue to see the benefits of our differentiated scale and complementary service offerings as a leading provider of health services in the U.S. Turning to the third quarter results, revenue and adjusted EBITDA were above forecast with total company revenue of $4.2 billion, an increase of 26% year over year, and adjusted EBITDA of $228 million, an increase of 42% year over year. EPS of $0.54 in the quarter increased 80% from the third quarter last year and EPS increased 20% sequentially from Q2. Cash flow from operations exceeded $200 million in the quarter. Looking at the segments, Pharmacy Solutions revenue of $3.7 billion increased 26% year over year and segment EBITDA was $202 million, an increase of 43% versus last year.

In Provider Services, revenue of $481 million represented 31% year-over-year growth and segment EBITDA of $79 million increased 30% versus last year. These results are consistent with the performance the company has delivered since going public in January 2024 and with growth well into the double digits over the past decade. Now in Pharmacy Solutions, Specialty and infusion delivered broad-based revenue growth of 34% driven by script growth of 29%, including robust contribution from branded LDDs and generics, as well as growth in value-add pharma services and mid-teens growth in both chronic and acute infusion therapies. We continue to focus on clinical, operational, and commercial execution supported by relationships built with manufacturers, physicians, patients, and payers over the years.

We launched seven LDDs in the quarter for a total of 19 year to date, and we are now supporting 162 total LDDs across dozens of manufacturers and indications. In the quarter, we supported the launch of life-changing and life-saving therapies across liquid and solid tumor cancers as well as in rare disease. The outlook for our branded LDD portfolio remains compelling and we are well positioned to support existing and new manufacturer partners in the years to come, as well as any conversions to generics.

As we think about the growth prospects for the company, both acute and chronic infusion are meaningful components of our strategy and we continue to invest in operational capabilities, including chronic therapy, infusion suite and clinic upgrades, as well as therapeutic category expansion like with our IG Connect program. Home and Community Pharmacy had an excellent quarter operationally and is now continuing to be a contributor to organic growth.

Ongoing investments in technology and process improvements with a focus on attractive end markets such as hospice, ALS, and behavioral drove year-over-year EBITDA growth well into the double digits despite lower revenue compared with the prior year, primarily due to IRA in 2026. This service line has become yet another strength of the company and we believe Home and Community Pharmacy has a significant growth trajectory ahead based on operational and technological leadership and multiple opportunities to expand volume and revenue across end markets.

The Provider Services segment had another strong quarter with continued momentum across all three subsegments driven by volume growth and a very stable operating environment. Given the size, performance, and our leadership position in the provider segment, we are eager to continue to expand and invest in our provider platform to reach more patients with necessary and high-quality services that help patients and the entire healthcare system. Within Home Health, care census growth of approximately 58% was underpinned by leading quality measures and driven by de novo locations, expanding preferred MA relationships, core business development execution, and contribution from the Amedisys LHC branches. Acquisition integration of the acquired branches has performed as expected, particularly on the IT and back-office side. We recently held a national Home Health meeting in Nashville, and the enthusiasm from the combined team was really high.

We continue to expect the acquired branches to contribute approximately $35 million in adjusted EBITDA in 2026, which is consistent with the second quarter update. Ninety-six percent of our legacy home health branches are now rated four star or better, and we are now doing the same to the acquired branches. Hospice operational measures remain consistent and quality remains at industry-leading levels, and we view this service line as one of continued investment focus given its impact and value proposition and our service levels’ consistency of performance. And Team Rehab care continues to grow steadily with new payer contracts for clinical neurotherapy programs and continued expansion in both existing and new de novo markets with superior demonstrated rehab outcomes.

Like across the entire company, clinician retention has improved again this year and is being sustained at well above industry average. Personal Care continues to execute very well, providing high-quality support with activities of daily living for patients at home. While our services are growing above industry average, demand for services continues to outstrip our ability to provide them, and our operational quality and execution in this service line is marked by real consistency, and service hours delivered per day are exceeding budgets. While we continue to grow private pay and alternative payer sources, in Primary Care we continue to drive operational efficiencies, quality measures that demonstrate 50% reductions in hospitalizations, and patient growth.

We see our model of primary care in the community and in patient residences as key to driving more integrated and coordinated care across our service lines, better care transitions, optimal outcomes, and growth from value-based care models and new payer opportunities. We are expanding our virtual primary care offering as well to support more required visits to higher-risk patients, visits in rural geographies, and primary care for home health or homebound patients discharging from hospitals and nursing homes.

We’ve been selected as a provider in the new LEAD ACO Medicare program which starts in January. In the quarter, the $228 million of total company adjusted EBITDA, which represented year-over-year growth of 42%, reflected the consistent operational execution that we have seen since going public in 2024 and in the years before that. We believe that the breadth of growth and profitability drivers and the operational capabilities across our platform are unique to our company.

Within Health Services, operating within targeted and attractive end markets, we deploy best practices across service lines, utilize scale and procurement and contracting leverage, OpEx and acquisition synergies, and invest in new technologies and AI at a rapid pace and at large scale. Our AI investments across the organization drive automation and ongoing improvement in quality documentation, medication review processes, HR and hiring systems, and employee efficiency and satisfaction, to name a few.

We were again pleased with the breadth and level of performance across the organization, which is a result of our management practices, controls, and culture with our company platform. We remain active in potential acquisition opportunities and look to capital deployment to add additional scale and profitability growth, where we can bring best practices to acquired companies in our target markets that remain very large and fragmented in most cases.

On cash flow, the company generated $204 million of cash flow from operations in the quarter. Leverage was reduced to 1.79 times as of September 30th. For the full year, and excluding the Community Living divestiture, we now project over $700 million of operating cash flow with EBITDA-to-operating cash conversion of approximately 80% and over $600 million of cash flow after capex and before debt pay-down and share repurchases. Quality and patient, family, and referral source experiences remain at the center of everything we do. In Provider, Home Health demonstrated timely initiation of care of 99%, as well as a CAHPS overall hospice rating of 86%, and a number of visits per patient that remain well above national average. Our own clinical data demonstrates that homebound patients who cannot accurately manage their medications, as measured by the OASIS Home Health assessment, experience hospitalization rates approximately five times higher than those who can.

BrightSpring Health’s uniquely integrated healthcare platform positions us to address this critical risk through coordinated clinical care and pharmacy services with innovative medication management solutions that improve medication adherence in the home to reduce avoidable hospitalizations and lower total healthcare costs. In Rehab, patient satisfaction was 99% in outpatient rehab, and Personal Care delivered a client satisfaction score of 4.6 out of 5.

On the pharmacy side, Home and Community Pharmacy achieved order completeness of 98.2% and on-time delivery of 91.9%. Specialty Pharmacy again performed well above the national average with a medication possession ratio of 93% and a time to first fill of four days, alongside net promoter scores in the top two of the industry in the past quarter. Looking ahead, our operational footprint is uniquely positioned in a competitive advantage where patient-centric, coordinated, and lower-cost care models are essential to the future of healthcare in the United States. We have been and will continue to be purposeful with our investments to support long-term growth. How we execute in any given quarter is a result of decisions made several quarters and even years prior, and we manage the business for long-term results.

While we do not typically provide commentary this far in advance, we still anticipate and reiterate from Analyst Day at least 15% to 20% organic adjusted EBITDA growth in 2027. However, now off of a significantly larger EBITDA base in 2026, we anticipate similar levels of adjusted EBITDA year-over-year growth rates through the quarters of next year. With that, I’ll turn the call over to Jen to discuss the third quarter results and updated 2026 guidance in greater detail.

Jen

Thank you, John. For the third quarter of 2026, company revenue was $4.2 billion, representing 26% growth from the prior-year period. Pharmacy Solutions segment revenue was $3.7 billion, achieving 26% year-over-year growth. Within the Pharmacy segment, Specialty and Infusion revenue was $3.2 billion, representing growth of 34% from prior year. Revenue growth reflects Specialty and Infusion script growth of 29%, driven in part by the 19 branded LDDs launched this year, mid-teens script growth from both acute and chronic infusion, and continued growth in pharma services, that being fee-for-service and hub programs.

Of note, the number of year-to-date branded LDD launches is comparable with 2025 at this point in the year, but the annualized revenue contribution from the 2026 launches is tracking ahead of the 2025 LDD launches. In the first year of launch, Home and Community Pharmacy revenue was $553 million, representing a decline of 6% year over year due to an approximate $50 million impact from the IRA along with the decision to exit some uneconomic customers, both of which we have previously discussed.

We expect the revenue impact from the IRA in Home and Community Pharmacy to be approximately $50 million in the fourth quarter of 2026, bringing the total year IRA impact to Home and Community Pharmacy of approximately $200 million, consistent with the second quarter update. Excluding the impact of the IRA and voluntary customer exits, underlying growth in Home and Community continues to improve throughout the year. In the Provider Services segment, we reported revenue of $481 million, which represents 31% growth compared to the prior year. Home Healthcare reported $288 million in revenue, growing 50% versus last year, with revenue performance driven by average daily census growth, de novo expansion, and the acquired Amedisys and LHC branches, which contributed approximately $76 million of revenue in the quarter. Excluding the impact of the Amedisys/LHC acquired branches, revenue growth was 12%.

Rehab Care revenue was $82 million, growing 8% versus last year with strong growth in persons served and hours billed. In core neuro rehab, Personal Care revenue was $111 million, representing 8% growth year over year, driven by solid growth in persons served and hours. Moving down the P&L, third quarter company gross profit was $519 million, representing growth of 32% compared with the third quarter of last year. Adjusted EBITDA for the total company was $228 million in the third quarter, an increase of 42% compared to the third quarter of 2025. Adjusted EPS for the total company was $0.54. Profitability growth reflected strong revenue performance across our businesses, disciplined execution, and continued investment in technology, processes, and people across the company.

Turning to segment profitability performance in the third quarter, Pharmacy Solutions gross profit was $316 million, growing 29% compared to the third quarter of last year and growing 6% sequentially versus the second quarter of this year. Segment EBITDA for Pharmacy Solutions was $202 million for the third quarter, an increase of 43% compared to last year, representing a segment EBITDA margin of 5.4%, which increased approximately 60 basis points versus last year and was slightly higher than the first and second quarters of 2026.

Third quarter pharmacy profitability benefited from strong performance in Specialty and Infusion, branded LDDs, pharma services, and contributions from generics, as well as strong performance in Home and Community Pharmacy from volume mix and operational improvements in both gross profit and G&A. Now to the per-script metrics, which is not something we have historically commented on. Revenue per script in the quarter was $340.86, up 24% year over year, with gross profit per script of $28.86, up 27% year over year. The per-script metrics are an output result of many factors, including drug and payer mix and operational initiatives. Due to the broad diversity of scripts and mix of therapies we provide, we do not rely on the per-script metrics to inform our growth strategy or capital allocation decisions across the pharmacy organization and broader BrightSpring Health.

From a financial perspective, we are more focused on growing absolute dollars of revenue and EBITDA through a combination of initiatives where script mix is not a focus but a byproduct of business activity. Moving on to Provider Services, gross profit was $203 million, growing 38% versus the third quarter of last year, and segment EBITDA was $79 million, growing 30% versus last year. This represents a segment EBITDA margin of 16.4% in the quarter, consistent with the performance in the third quarter last year. Excluding the impact of the Amedisys and LHC branches, Provider Services segment EBITDA grew 16% versus last year. Growth and margin expansion were impacted by volumes and operational initiatives driving efficiency and economies of scale across the segment.

On a total company basis, cash flow from operations was $204 million in the third quarter. As we look forward to the balance of the year, excluding Community Living transaction-related cash flow impacts, we anticipate annual operating cash flow of at least $700 million. As of September 30th, total debt outstanding was approximately $2.2 billion and, net of cash of $718 million, our net debt outstanding was $1.5 billion. We finished the quarter with a leverage ratio of 1.79 times.

Our leverage ratio also includes the impact of $120 million of share repurchases year to date. We are continuing to evaluate our capital structure as we head into 2027 to support the company’s growth plans over the next several years. Moving on to the guidance for 2026, which excludes the Community Living business as well as any acquisitions that have not yet closed. Total revenue is expected to be in the range of $15.9 billion to $16.125 billion, including Pharmacy Solutions revenue of $14.0 to $14.2 billion and Provider Services revenue of $1.9 to $1.925 billion. This revenue range reflects 23.2% to 24.9% growth over full year 2025. Total adjusted EBITDA is now expected to be in the range of $850 to $860 million for the full year 2026.

This would reflect 37.6% to 39.3% growth over full year 2025. Included in total adjusted EBITDA is expected contribution from the Amedisys and LHC asset acquisition of approximately $35 million. While we plan to discuss full year 2027 guidance on the fourth quarter call, we currently view 2027 as another very positive year of opportunity for the company, with a broad base of growth drivers. At this stage, we still expect 2027 organic adjusted EBITDA growth of at least 15% to 20% next year, consistent with the framework outlined at our Investor Day in March, but now on a higher 2026 EBITDA base that reflects 39% growth at the high end of the range.

Provided at this point in the budgeting process, we anticipate year-over-year adjusted EBITDA growth in each quarter of 2027 similar to the overall growth for the year, with year-over-year growth in the second half expected to be a little higher than the first half, consistent with normal long-term seasonal patterns. We will not be discussing 2027 beyond our prepared remarks and expect to discuss the 2027 outlook in more detail when we report the fourth quarter in February.

This durable and differentiated growth profile is not easy to execute, but the quality, operational, business development, IT, HR, and finance leaders across the organization continue to perform well. With that, I will now turn it back to John.

John Rousseau (Chief Executive Officer)

Thanks, Jen, and thank you for your time today to go through BrightSpring Health’s third quarter 2026 results. We’ll now open up the call for questions. Operator.

OPERATOR

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question. Our first question comes from Whitmeil with Leary Partners. You may proceed.

Whit (Analyst at Leary Partners)

Hey, thanks, Jen. Just back to the gross profit per script. I heard you mention that mix was a factor given the acceleration, but just maybe elaborate a little bit more on what drove that metric within the quarter. And then I’d like to hear a little bit more on the focus on gross profit dollars and EBITDA versus per script, and remind us how much of your scripts today are coming from home and community. Thanks.

Jen

Great. Thanks so much, Whit. From a quarter-over-quarter perspective, mix was the most significant driver as it relates to the quarter-over-quarter growth. So we did have higher growth in our Specialty and Infusion scripts, which do have a higher gross profit per script than our average. We did see favorable sequential Home and Community and Infusion Pharmacy GP per script and stable Specialty GP per script, but obviously the very strong Specialty volume helped drive the overall GP per script.

We are focused on gross profit dollars, as we mentioned during the call and as we’ve talked over the years, as well as EBITDA dollar growth. And that’s largely because the script growth we’re focused on has areas of growth across each of our different businesses, and the GP per script is a byproduct of what is happening in each of those different separate revenue streams.

Whit (Analyst at Leary Partners)

Just to follow up, just remind us the percentage of scripts that are PharMerica or your home and community-based pharmacy. Thanks.

Jen

So we have not disclosed that publicly in terms of our script growth. Obviously a vast majority of our scripts are Home and Community Pharmacy.

Whit (Analyst at Leary Partners)

Okay, thanks.

OPERATOR

Thank you. Our next question comes from Joanna Goodrick with Bank of America. You may proceed.

Joanna Goodrick (Analyst at Bank of America)

Hi, good morning. How are you? Thanks so much for taking the question. So I guess you announced, I think, maybe seven new LDDs since the last call, and there’s one of these therapies where they could be quite sizable. I think at one of the conferences you kind of said you expect this to be, you know, a nice tailwind into next year. I’m referring to the Revolution Medicines therapy, and it did launch. So can you maybe give us a comment on the early launch trajectory and, you know, was there any meaningful contribution?

And also, as you look into ’27, I appreciate you’re not going to give us specific guidance, but kind of help us frame how significant this particular therapy could be and maybe also, in the context of the therapies launched this year, you know, how material could they be to next year? Thank you.

John Rousseau (Chief Executive Officer)

Hey, good morning, Joanna. So we don’t comment at the individual drug or therapy level. What I can say is 2026 has been another very successful year of partnering with biopharma and manufacturers to help them bring really incredible new therapies to market in the best possible way, get them to patients with the highest possible quality. So we remain extremely excited about that for the rest of the year and for the future years. When you look at the pipeline, the drugs that have come to market in 2026 are performing really well in their first year.

Current year, they’re actually outperforming the drugs that we launched in ’25, which are also doing well in their own right. So we just continue to execute against that strategy.

Joanna Goodrick (Analyst at Bank of America)

Great. Thank you so much.

OPERATOR

Thank you. Our next question comes from Charles Raju with TD Cowen. You may proceed.

John Rousseau (Chief Executive Officer)

Yeah. You know, one thing I notice, you know, despite the 29% growth rate that you referenced, it was lower than our provider growth rate of 30%. So the provider business just continues to perform exceedingly well. And I just want to make sure everybody always continues to realize how big of a base of a business that is, you know, growing at over 30% this year. But on specialty, it’s just—it’s consistent with the track record, you know, that we’ve had for the past couple years and the strategy that we have. We’ve had really similar growth rates to this for quite a long period of time in this business due to our strategy, and our team, and our relationships, and our quality in the market. So, you know, the 2026 launches, the 2025 launches, and the launches before those are all really well. And as we look at the pipeline in the future and all of our really deep relationships in the market and our focus on quality and efficiency and patient outcomes, we would expect the same going forward.

It can really vary depending on the specific circumstance. But I mean, typically, you know, these things start happening, as you would imagine, at least a year in advance.

OPERATOR

Thank you. Our next question comes from A.J. Rice with UBS. You may proceed.

A.J. Rice (Analyst at UBS)

Hi everybody. Obviously, you now have your leverage down below your 2.5 target, so that’s great. And deal activity has always been a part of the growth story there. I wonder if I can get you to comment a little bit on the pipeline—where there seems to be increasing opportunities and where maybe less so. And one thing, in concept, what we’re seeing more of is these transactions where, to do a bigger deal, a strategic player is sort of partnering with a private equity or multiple private equity guys and then has the option to buy a larger entity out down the road, in that way maybe minimize the impact and disruption to near-term consolidated results.

I’m just curious whether, in concept, you guys would be open to that—looking at those kind of deals—and then again just comments on the pipeline.

John Rousseau (Chief Executive Officer)

Yeah. Good morning, A.J. Hope you’re doing well. You know, look, overall in the results and the performance, I think you’re really seeing the strength of a very unique platform. Home and community health services, you know, a piece of that historically, but probably a bigger piece in terms of opportunity going forward, you know, would be the M&A platform that we have too. You know, when you couple our capabilities in M&A and our track record and results there with the balance sheet, you know, it obviously does create interesting opportunities, scenarios, and I think probably more interesting and potentially more impactful as we look forward, certainly than the last three or four years.

Our bread and butter has been tucking new acquisitions into adjacent geographies and that’s worked extremely well for us historically. We’ve driven a really attractive pro forma multiple there, which has been highly accretive over the years. That will always remain our mainstay. We said over the course of the year that we think we probably should lean into some slightly larger transactions than small tuck-ins. But for us, that’s probably still in the range of 20-ish of EBITDA or below.

In terms of, say, a second category of deals which might become more of a focus—but deals are hard—we’re always extremely active and our pipeline is as full as ever. We see a ton of stuff that’s proprietary due to our relationships. I say a lot: we could do 400 of EBITDA in M&A tomorrow if we wanted to. And I’m not saying that tongue in cheek, but we’re extremely intentional and extremely deliberate, as you can see with our history. And we really focus on driving value both organically and inorganically.

We’re leaning in like always. But when you get into diligence on things, you find a lot of stuff and we make sure that we do transactions that we know will work. So we just continue to be very intentional about anything we would do. I would say we are bullish in terms of probably the M&A volume we would do going forward as compared to the last couple years. But again, that’s going to look like, from a deal profile perspective, probably very similar to what we’ve done historically. And maybe the size of some acquisitions increases, but again, within that size range that I mentioned before. We have not to date entertained any sort of transactions in partnership with anybody else, and nor do I think we would in the future.

It’s just hard for us to consider scenarios where that would be relevant or helpful to us.

A.J. Rice (Analyst at UBS)

Okay, and just a provider versus something like infusion or the other specialty drug area, is it still both or do you see more opportunities on one side versus the other?

John Rousseau (Chief Executive Officer)

Yeah, you know, we’ve been very balanced historically with our acquisitions and that’s worked well for us. I mean, we really like continuing to do things that have been proven and have worked well for us over time. You know, what you’re seeing in our numbers, again, you know, for yet another quarter, is broad-based growth within the organization. And that continues to be something that we think is a real strength of the enterprise. So our intention will be to be very balanced. In the specialty world, there’s very little out there—maybe a couple things—but they’re extremely large in size. And so you look at home health, you look at hospice, rehab, you look at primary care, you look at infusion, you look at very low multiples home and community pharmacy deals, and there’s opportunities abound within each one of those service lines. So, you know, we’re fortunate that most of our industries, with the exception of maybe one, are really huge and also fragmented.

So it just creates a wealth of opportunity. And we just try to be really careful about how we pick our way through that over time. But we’ll, I think, continue to take a balanced approach to continue to expand into targeted and attractive geographies within probably most of those service lines.

A.J. Rice (Analyst at UBS)

Okay, thanks so much.

OPERATOR

Thank you. Our next question comes from Ann Hines with Mizuho Securities. You may proceed.

Ann Hines (Analyst at Mizuho Securities)

Good morning. Thanks for the question. So also thanks for all the details on 2027, especially the quarterly data, as I think there was some concern in the market that the 2027 calendar of generic launches would result in lower growth in the first half of 2027. So, given your guidance today that you expect the same percent growth throughout the year, does this imply that LDDs are as big a driver as generics, maybe, versus the market perception that your growth mostly comes from generics?

And maybe to that end, can you provide what your view is for a long-term growth rate for LDDs and for generics, and which is actually the bigger driver of overall profit for the pharmacy? Thanks.

John Rousseau (Chief Executive Officer)

Yeah. Good morning, Ann. You know, I think at this time we’re going to leave our comments regarding 2027, you know, exactly to what we said in the prepared remarks. Hopefully that’s helpful. You know, what I would say is, you know, we have a company that really has a broad base of growth drivers and you’re seeing that in Q3. You’ve seen that throughout this year. You’ve seen that since we’ve been public in 2024. You’ve seen that going back for 10 years now. And we see that going forward as well. So there are a plethora of growth drivers across all of our service lines and we focus on driving each one of them as best we can from a quality and market share perspective.

So we’re fortunate that we live in a world that’s not always easy, but there’s a lot of demand for these high-need services and we do everything we can to meet that demand in the highest quality way and to position ourselves well to do so. So it was another quarter really marked by broad-based growth up and down the P&L and in the service lines. And that expectation for the continuance of that is reflected in our comments for ’27.

Ann Hines (Analyst at Mizuho Securities)

Great, thank you.

OPERATOR

Thank you. Our next question comes from Erin Wright with Morgan Stanley. You may proceed.

Michelle (Analyst at Morgan Stanley)

Hi, this is Michelle on for Erin. I just wanted to turn to infusion. So does the recently announced transaction in the infusion space change anything for you in terms of the competitive landscape? Do you feel comfortable with the current capacity of suites to sustain the strong growth that you’ve been seeing? And can you also speak about the IG Connect program, what you’re seeing from that so far, and how that’s been contributing to growth? Thank you.

John Rousseau (Chief Executive Officer)

Yeah, we don’t see any difference to our strategy from that transaction. You know, we are continuing to build capacity in our business over time, so that will continue to be a focus for us. I think our infusion strategy is unique to most others—not all, but most others—in that we think addressing acute is just as important to patients and referral sources and physicians and payers as is chronic specialty infusion. A lot of folks just focus on specialty, but acute is also a big market.

We just saw here in the last month yet another player back out of acute, which we think just creates more opportunity on that side. Ultimately, spanning the breadth of infusion therapies in the market from acute to chronic, and doing so in the home and in suites—that is our ultimate strategy. And I would just say we’re still in the pretty early innings of that within a really big market and industry. So we just want to continue to grind that out over a long period of time. And we continue to focus on assembling a really good team here internally. And we certainly view that as meaningful growth opportunity for us next year and beyond.

Michelle (Analyst at Morgan Stanley)

Thank you.

OPERATOR

Thank you. Our next question comes from Scott Faddell with Goldman Sachs. You may proceed.

Sarah Conrad (Analyst at Goldman Sachs)

Hi, good morning. You’ve got Sarah Conrad on for Scott. I wanted to ask on the home and community business, just as we anniversary the IRA headwinds and also the customer exits, can you frame the underlying growth in this book and just how should we think about the setup into next year? And as this business returns to growth, can you frame how we should think about the mix impact on gross profit per script?

John Rousseau (Chief Executive Officer)

Yeah, we’ve been really pleased to see the home and community pharmacy performance this year. As we mentioned in the prepared remarks, it has now again become a nice contributor to our overall company growth, which has really been great to see and it’s been a real focus over the last year or two. If you go back four or five years ago, due to the external actions of a competitor or two and some of the dynamics in the skilled nursing market, it was a tough business that we had to work our way through.

Our focus has always been on service-level quality and then operational efficiency, but particularly in those areas in the last year or two, we’ve just made a ton of progress. And so IRA was a headwind for the business. It’ll be a little bit of a headwind for the business next year, but I think at this point in time we’re demonstrating growth through that in a really nice business, really, for two reasons. It’s just a focus on maximizing your scale and your operational efficiency and your cost per fill. And then there’s a bunch of attractive end markets there: senior living, hospice, PACE, behavioral, et cetera. Skilled nursing is just a stable market for us, which is fine because there are four other really interesting or even five growth markets for us.

And if we can have the highest service levels in the industry and the best cost per fill, that’s a really winning formula. So it was a good quarter for home and community pharmacy. And if you annualize just that quarter alone, they’re primed for significant growth next year. But we want to continue to do better on top of that. So we’ve executed on a lot of operational and technological initiatives so far this year, but the pipeline is quite full of even more to come as we can just work our way through them. Probably take us a couple years to ultimately get to the point operationally that we want to in terms of sort of nirvana for how a pharmacy business serving all 50 states can be most optimally designed from a production and cost and logistics standpoint.

And we’re working our way through that, and it’s really exciting and we think it’ll be really differentiating. And this year we’re seeing the results of it.

OPERATOR

Thank you. Our next question comes from David Larson with BTIG. You may proceed.

David Larson (Analyst at BTIG)

Hey, congratulations on the good quarter. I think I heard in the prepared remarks some comments around a new ACO endeavor 1127. Can you talk a bit about that? How do you differentiate yourself in the market? I think it’s primary care at home. And what sort of revenue and earnings contribution could you see coming from that business maybe in the near and longer term? Thanks.

John Rousseau (Chief Executive Officer)

Yeah, it took a lot of work, but over the course of a year or so through applications, we were approved to be in the new Next Gen lead ACO for Medicare, starts January 1st. We’re really excited about that. We view primary care as the tip of the spear and the linchpin for “integrated care” within our company—very complementary, sits kind of in between, if you will, pharmacy and provider services. And as the primary care clinician, obviously you have attribution to the patient.

It clearly drives quality outcomes. It can drive a lot more integrated care across our service lines in the business and it’s ultimately what positions you for value-based care. So our vision five to ten years is to be the household name and national brand for primary care out in the community—people’s homes and skilled nursing facilities and senior living communities. It has a dramatic outcome on improved quality and reduced hospitalizations. You have to have shared savings models or new types of arrangements with payers for that to be most feasible, which is what we’ve been working on and we’ll continue to work on over time.

But excited to be in the latest version of the ACO. In our opinion, just due to the way this thing ramps and mechanics around it, 2028 would be a time period that we feel comfortable where we could see some impactful economics from this.

David Larson (Analyst at BTIG)

There are some ACO models that are making money within risk. Some companies are actually doing very well. There are others that have faced significant margin pressure in the risk business. Can you just talk a little bit about are you confident you’re going to make money in risk where the claims cost will come in below the capitated amount you’re receiving from the plans? I don’t think you have the fixed cost overhead of facilities that some other organizations did have in the space in the past.

Just any color there will be helpful. John, thanks.

John Rousseau (Chief Executive Officer)

Yeah, we actually had a little bit of shared savings this year, but we’re evolving our ACO models to be the priority principle in these going forward. But we have absolutely zero risk of downside today in any of this. And anything that we would do we would be extremely measured about and just view as purely opportunity with extremely, extremely low risk. I mean, the upside from what we can do in primary care and leveraging the access to patients we have today and leveraging our quality outcomes is very significant.

But there is clearly a way that we are approaching this where we view it as all potential upside.

David Larson (Analyst at BTIG)

Thanks very much.

OPERATOR

Thank you. Our next question comes from Matthew Gilmore with KeyBank. You may proceed.

Matthew Gilmore (Analyst at KeyBank)

Hey, thanks for the question. I wanted to ask about the competitive environment within specialty pharmacy. From our vantage point, LDD networks have been narrowing, yet we see Onco360 and CareMed continue to win more than their fair share. I was just hoping you’d provide a couple comments in terms of how you feel you’re positioned competitively with prescribers and manufacturers. And if you’ve seen any sort of notable change or movement within the last couple quarters or years?

John Rousseau (Chief Executive Officer)

Yeah, I think it’s been pretty consistent. There are some other independents out there that do a nice job and we just try to do our best to provide a suite of value-add services to our partners. We do our best to provide great outcomes and service levels to payers and obviously patients as well. I think in the specialty world, the more track record you’re able to build over time and the more infrastructure and scale that you have and the more clinical and technology-based capabilities that you have is only helpful. So I think we just continue to evolve our business and try to get a little bit better every year and be as efficient as we can and provide interesting solutions to our partners. But I think within that context, the competitive landscape has been fairly consistent overall.

Matthew Gilmore (Analyst at KeyBank)

Great. Thank you.

OPERATOR

Thank you. Our next question comes from Raj Kumar with Stephens. You may proceed.

Raj Kumar (Analyst at Stephens)

Hey, good morning. Maybe I wanted to kind of touch upon the home and community pharmacy business and maybe kind of any quantitative points around just growth in scripts that you’re seeing across assisted living and hospice. And maybe on the hospice piece, curious on the connection there with the provider side of the business and whether you guys fully capture the breadth of the patients on the provider side of the business or still see that as an early-innings opportunity.

John Rousseau (Chief Executive Officer)

Yeah, on hospice we serve all of our hospice patients with our pharmacy. We have an outstanding hospice pharmacy business. The quality outcomes that we get, the clinical tools that we provide hospice companies I think are absolutely second to none. We are leveraging that by entering the PACE market as well. I would say on the senior living side too, our service levels and some of the offerings that we offer customers are differentiated and unique, and we look forward to continuing to grow into that market as well.

Both are going extremely well.

OPERATOR

Thank you. Our next question comes from Peto Chickering with Deutsche Bank. You may proceed.

Peto Chickering (Analyst at Deutsche Bank)

Hey, good morning guys and great quarter and very much appreciate the comments. Around 2027 you become one of the most dominant players in the LDD market in the last few years, with you and one other getting exclusivity or winning it together. As you look at the LDD market from a couple years ago versus today, have the economics changed at all? During the IPO I used to think about LDDs at a 1.5% margin. Has that evolved with market dominance and wrap-around offerings into more of a 3% margin when you include the hub programs?

And also, do these margins change throughout the periods of these contracts? Thanks.

John Rousseau (Chief Executive Officer)

Yeah. Good morning, Peto. Thank you. I think we’ve seen just real consistency over the past years; we haven’t seen dramatic changes in those dynamics. One of the things we’ve done over time is start to broaden outside of oncology, leveraging the capabilities that we have, which are directly applicable to a lot of other therapies and indication areas where you’re seeing LDDs, ultra narrows, or exclusives develop. But in our GP per script and GP dollars per script, I think stability is a really appropriate word and that works great.

Our focus is on driving volume growth and efficiency in the organization. And so we have continued to augment some of our wraparound services. That’s been helpful. That’s an area that was really nascent as recently as three or four years ago and in the next year or two could be even twice as big as it is today. It’s really grown significantly. The team has done an excellent job with that. I would say we’ve continued to evolve a lot of our processes and service offerings, but some of the items around the economics that you’ve mentioned—you’ve seen just a lot of consistency there over time.

OPERATOR

Great, thanks so much. Thank you. Our next question comes from Brian Tenkelit with Jefferies. You may proceed.

Brian Tenkelit (Analyst at Jefferies)

Hey, good morning guys and congrats, John, and to the team. John, maybe just as I think broadly speaking, not asking about specific drugs here, but when we think about these new oral drug LDD introductions, where you’re part of a very narrow network, does the historical rule of thumb of roughly 50% going to hospitals still hold, or how much variability is there? Then maybe to clarify, as we think about whatever percentage goes to the hospital channel in that exclusive or very narrow network, where do the hospitals source their drugs from?

John Rousseau (Chief Executive Officer)

Thanks. Yeah, the 50% estimation is what we see when we look at the market data as well. And they would be going direct to the manufacturer or through their other purchasing options in those scenarios. But yeah, a 50/50 split is going to vary a little bit by drug, but that’s generally what we’ve seen in the most recent data still.

OPERATOR

Awesome. Thank you. Our next question comes from Jared Hayes with William Blair and Company. You may proceed.

Jared Hayes (Analyst at William Blair and Company)

Hey guys, good morning. Wanted to ask about operating leverage in corporate SG&A. It looks like that was down a little bit sequentially from the first half run rate. And so just wanted to ask what’s resonating or working well in terms of where you’re finding efficiencies here, and then what’s the incremental opportunity as we think about either fourth-quarter modeling or even beyond that over the next couple of years?

Jen

Yeah, thank you so much for the question. We continue to see the ability to leverage our corporate infrastructure while continuing to invest in new technologies in AI, products, and people across quality, sales, and other investment opportunity areas for us. So as we think about looking forward, we continue to see significant ability to leverage the infrastructure that we have across each of our different business lines. And then we continue to make very strategic investment decisions for long-term growth and we expect that to continue.

So that does, depending on the opportunities and things we see from an investment standpoint, move our G&A a little bit from time to time and quarter to quarter. But again, that continues to be our focus: How can we become more lean and efficient through all of our different investments, leverage our infrastructure, but then continue to invest for the future?

OPERATOR

Thank you. Our next question comes from Sean Dodge with BMO Capital Markets. You may proceed.

Sean Dodge (Analyst at BMO Capital Markets)

Yeah, thanks. Maybe just going to the provider side. Within home health and the preferred MA contracts, is there anything you can share on just what proportion of your volumes there are under those contracts now? How much runway is left to add more of those and then just anything on the rate differential you’re able to negotiate in those preferred relationships with MA?

Cam

Yeah, I would say our mix of MA and Medicare is probably not going to be too dissimilar from some of the recent but no longer existing public companies and what they would have reported. We really focus on quality in a set of specific programs within home health that we think are interesting and that hopefully can provide better outcomes. And so with that we’ve been able to deepen some of our contracting with specific plans, which has been, I think, really mutually beneficial.

I think there’s still a lot more opportunity to do that for us on the MA side. Thankfully, some of the rates have improved over time. There’s been an imbalance in demand versus supply of home health for quite a while and I think people are really appreciating and realizing that, as well as more and more indicating a flight to quality. You look at a scale provider like us that invests in people and technology like crazy and I think you’re going to get a different result there. You look at our home health offerings and we have the opportunity to provide meds in the home, our continued care program with that, which is like the number one thing you can do to reduce re-hospitalizations.

And we have the studies that prove that out and we offer that capability and are still bringing that to more of our patients. We’re now rolling out virtual primary care for our home health population where appropriate. You have an MD and NP running sidecar throughout that home health episode, and that has a much better result, too. These are the kind of things that we’re doing that I think few other people do. And, you know, that’s the kind of program that we hope to take to more and more people and be a deeper partner to give them the best possible solution, whether it’s a hospital ACO, a physician ACO, or a payer.

Sean Dodge (Analyst at BMO Capital Markets)

Okay, great. Thanks, Cam.

OPERATOR

Thank you. Our next question comes from Parker Snoor with Raymond James. You may proceed.

Parker Snoor (Analyst at Raymond James)

Hi, good morning. Just wanted to touch on cash flow quickly. You had a strong quarter on operating cash flow. Just curious if there were maybe some specific drivers there, any other notable items to call out, and maybe just remind us how you think about operating cash flow conversion going forward, whether it be a percentage of EBITDA or net income, just to make sure that our models are dialed in, given your increased outlook on adjusted EBITDA.

Jen

Yeah, Parker, I appreciate the question. We did have a really strong quarter from a cash flow perspective. Typically, Q3 and Q4 tend to be our largest just in terms of timing, and some of the seasonality associated with cash flow and inventory tend to be some of our higher cash flow quarters. I would say working capital tends to be, with some of our revenue growth, we continue to see some benefit associated with the timing of receivables and our DSO compared to payables.

So there is some component of that that is one time in nature. However, we continue to obviously expect to grow revenue, so from that standpoint, there is a continuation of that. We would expect, I would say, generally across a quarter, what we said at Investor Day would still hold: that on average, we would expect to have greater than 60% conversion of adjusted EBITDA to operating cash flow. We do expect that to be a little bit higher this year, as we noted, excluding the community living taxes, with $700 million of expected operating cash flow, excluding the community living taxes.

Parker Snoor (Analyst at Raymond James)

Okay, thank you.

OPERATOR

Thank you. Our next question comes from Jason Kasorla with Guggenheim. You may proceed.

Jason Kasorla (Analyst at Guggenheim)

Great. Thanks. Good morning. I was hoping you can give us an update on the AI and tech investments you made this year across both businesses, and then maybe help frame the return opportunity from those investments. You know, how much you’ve realized in return so far this year, what you’re expecting to generate into the rest of this year and into next year would be very helpful. Thanks.

Jen

Yeah, Jason, thanks so much for the question. You know, as we’ve mentioned, we continue to invest and see opportunities for efficiencies and higher-quality opportunities across different AI and technology solutions. We have begun many of those and started to implement those into Q3 and Q4, and we expect opportunities for return on investment. So every single investment that we’ve made across the organization, we do have ROI that we are expecting as we evaluate each of those opportunities, and how those play out can vary over time.

We would expect more of what we’ve implemented this year to be realized in 2027 as some of these are just beginning to roll out. But we will continue to invest in 27. So we’re early in the budget process, which is why we’re not talking much about 27. But we also see a number of continued opportunities that will provide growth into 28 and into 29 that we are going to lean into and expect to lean into 2027.

Jason Kasorla (Analyst at Guggenheim)

Great. Thank you.

OPERATOR

Thank you. Our next question comes from Steven Baxter with Wells Fargo. You may proceed.

Steven Baxter (Analyst at Wells Fargo)

Hi. Thanks. I wanted to ask about payer mix in the specialty and infusion business. It looks like, you know, if you look back to last year, the commercial was driving about a third of your revenue growth on a dollar basis. But when you look at it this year, I think commercial is driving more like 45 to 50% of the revenue growth that you’ve seen year to date. Could you help us understand, you know, what’s driving that change and whether to think about maybe this year or last year as more indicative of what’s normal, and I guess how that flows through the P&L and influences margins?

Jen

Yeah, it’s primarily associated with growth in branded LDDs. So as we continue to bring on new LDDs and see revenue growth associated with those LDDs, there is a mix of those, as we are one of one or one of two that is typically serving that drug. And those drugs are a mix between Medicare and commercial. So as you see those come online, you are seeing some increase skewed to commercial. Separately, we have continued to see infusion growth, which is much more commercial.

John Rousseau (Chief Executive Officer)

Yeah. As you expand a little bit more outside of oncology with certain opportunities in the exclusive and rare and orphan world, those can be more—when you think about the population of individuals, might not be as many seniors for those types of therapies. If you have a rare and orphan condition, you pretty much have that from birth. So a little bit more of a commercial slant to the expansion in LDDs and rare and orphan. As Jen said, infusion growth is more tilted toward commercial.

We’ve seen good growth there. And I would say even more broadly within specialty pharmacy, I think we’ve had deepening partnerships within commercial, even in oncology itself.

OPERATOR

Thank you. I would now like to turn the call back over to John Russo for any closing remarks.

John Rousseau (Chief Executive Officer)

Thank you, everybody, for joining the call today. We appreciate your time and look forward to speaking with you again in another quarter. Have a great day.

OPERATOR

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

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