BrightSpring Health Services, Inc. Common Stock (BTSG) Earnings

Management highlights

### Strategic Focus & Core Value Proposition - Aligned with secular U.S. healthcare trends, focused on delivering high-quality, lower-cost, patient-preferred care in home and community settings, with core priorities of strong execution, thoughtful innovation, and disciplined capital allocation. - Maintains a focus on quality care and patient satisfaction as foundational to growth, with all business lines reporting industry-leading or all-time high quality and satisfaction metrics. ### Pharmacy Segment Operational Updates - Specialty pharmacy added 2 new ultra-narrow network LDDs in Q2, bringing the total portfolio to 155 LDDs. 12 total LDDs have been launched in 2026 year-to-date (4 exclusive, 8 ultra-narrow), with expansion into rare, orphan, and other complex therapies beyond oncology. - Infusion business delivered 20%+ YoY volume growth for both acute and chronic segments, outpacing overall market growth. Management plans to expand the acute and chronic footprint into 12-15 additional states over 5 years, with new capability investments including an AI intake project, new leadership hires, and a white glove concierge program for chronic therapies that has improved conversion rates. - Home and community pharmacy exited unprofitable skilled nursing customers to improve overall profitability, implemented automation and technology to boost efficiency, and achieved all-time high controllable customer retention. ### Provider Segment Operational Updates - Integration of acquired Amedisys and LHC Group branches is progressing well, with nearly 95% of branches holding a 4-star or higher quality rating. EBITDA contribution from these assets for full-year 2026 is now expected to be ~$35 million, up from prior guidance. - All service lines (home health, hospice, rehab care, personal care, home-based primary care) are delivering growth above industry averages, with ongoing integration across service lines to support value-based payment models. - Clinician retention has improved to best practice levels. ### Corporate & Capital Operations - Generated $144 million in operating cash flow in Q2 (excluding a one-time $100 million cash tax payment from the divestiture of the community living business completed in March 2026). Net leverage was reduced to 2.15x as of Q2 end. - Received credit rating upgrades from both S&P and Moody's, and refinanced debt to achieve a 50 basis point lower interest spread. - Continued investment in automation, AI, and process improvement across the organization, with almost 300 employees earning Lean Sigma certifications to date. - Maintains a disciplined acquisition pipeline, with several small tuck-in and geographic expansion deals completed in Q2, and management optimistic about additional closed deals in the second half of 2026.

Guidance

Full-year 2026 guidance excludes the divested community living business and any unclosed acquisitions: - Total company revenue is expected to be in the range of $15.1 billion to $15.425 billion, representing 17.0% to 19.5% YoY growth (excluding community living in both years). - Pharmacy solutions revenue is expected to be $13.2 billion to $13.5 billion, and provider services revenue is expected to be $1.9 billion to $1.925 billion. - Total adjusted EBITDA is now guided to a range of $820 million to $845 million, representing 32.8% to 36.8% YoY growth (excluding community living in both years), an upward revision from prior guidance, with $35 million of this total coming from the Amedisys and LHC Group acquisition. - Annual operating cash flow for 2026 is expected to be approximately $600 million, with EBITDA to operating cash conversion of ~70%, and full-year end leverage expected to fall below 2.0x before any potential acquisitions. - Management expects continued quarter-over-quarter revenue and adjusted EBITDA growth in Q3 2026 and Q4 2026, with robust YoY growth even as it lapped a strong second half in 2025. - The full-year 2026 IRA revenue impact for home and community pharmacy is now expected to be ~$200 million ($50 million per quarter), with an EBITDA impact of $15 million for the full year. The IRA revenue impact for specialty and infusion remains ~$175 million for 2026, with no material EBITDA impact. For 2027, the expected 2027 IRA revenue impact for home and community pharmacy is currently estimated to be 50% of the 2026 impact.

Segment performance

Bright Spring reported total Q2 2026 revenue of $3.9 billion, representing 23% year-over-year (YoY) growth, and total adjusted EBITDA of $206 million, up 44% YoY, with an adjusted EBITDA margin of 5.3% (an 80 basis point improvement YoY). 1. **Pharmacy Solutions**: Revenue of $3.4 billion (87.2% of total company revenue), growing 22% YoY. Adjusted EBITDA was $180 million (up 44% YoY), with an adjusted EBITDA margin of 5.3% (an 80 basis point YoY increase). Within this segment: - Specialty and infusion: Revenue of $2.9 billion, growing 30% YoY, driven by branded limited distribution drugs (LDDs), new LDD launches, script growth, and wraparound fee-for-service program growth. - Home and community pharmacy: Revenue of $540 million, down 8% YoY, due to a $50 million impact from the Inflation Reduction Act (IRA) and the exit of uneconomic skilled nursing customers. Despite this headwinds, home and community pharmacy adjusted EBITDA increased YoY due to internal operational improvements and new technology deployment. 2. **Provider Services**: Revenue of $466 million (12.8% of total company revenue), growing 30% YoY. Adjusted EBITDA was $75 million (up 33% YoY), with an adjusted EBITDA margin of 16.1% (a 30 basis point YoY increase). Within this segment: - Home health care: Revenue of $278 million, growing 51% YoY, driven by average daily census growth, de novo expansions, and contribution from acquired Amedisys and LHC Group branches, which added $78 million in Q2 revenue and $8 million in adjusted EBITDA. - Rehab care: Revenue of $82 million, growing 12% YoY, supported by growth in patients served, hours billed for core neuro rehab, and momentum for the Rehab in Motion program. - Personal care: Revenue of $107 million, growing 7% YoY, driven by modest growth in persons served and strong growth in hours billed.

Risks & headwinds

- The Inflation Reduction Act (IRA) drug pricing provisions create ongoing expected revenue headwinds for Bright Spring's home and community pharmacy segment, with additional headwinds expected in 2027, even as the company works operationally to mitigate impacts. - Proposed generic drug tariffs scheduled to take effect in 2028 represent a potential future input cost risk, though management notes this is not a material concern at this time. - Valuations for potential acquisition targets are often excessively high (in excess of 20x EBITDA), which may limit the number of viable deals that meet the company's disciplined investment criteria. - All forward-looking results are subject to general market and industry risks, as well as regulatory changes that could impact the company's reimbursement and cost structure.

Analyst Q&A

• Q: The analyst asks what contribution Revlimid generics have had in Q2, how the benefit will layer in for the rest of 2026, and what drove the step-up in corporate expense in the quarter. /

  A: Jon Rousseau notes Revlimid has been fully generic for four years, so there is no change to 2026 expectations from this drug. Jen Phipps explains the corporate expense increase comes from continued investments in AI and automation technology projects, with benefits expected to materialize later in 2026 or early 2027.

• Q: The analyst asks for an explanation of the sequential 70 basis point drop in pharmacy segment gross margin, which historically has been flat or up sequentially from Q1 to Q2. /

  A: Jon Rousseau states Q2 gross margins were healthy and in line with expectations. The sequential drop reflects typical seasonality that pushes Q1 gross margin higher, and when adjusted for this seasonal effect, gross profit per script actually increased in Q2. Year-over-year gross profit growth for pharmacy remains 28%, outpacing revenue growth, and script growth is up 15% sequentially.

• Q: The analyst asks to break down growth in acute vs chronic infusion, and updates on investment momentum and milestones for the chronic infusion business. /

  A: Jon Rousseau says acute infusion volume is up over 20% YoY, 7-8x the overall market growth rate, with 12-15 new target states for expansion over 5 years. Chronic infusion volume is also up nearly 20% YoY, with a new white glove concierge program for therapies like IG driving noticeable conversion improvements. The business is adding new capabilities including an AI intake project, upgraded commercial and data leadership, and more integrated contracting with the broader pharmacy business, and management remains optimistic about long-term scaling.

• Q: The analyst asks how the company is thinking about optimal capital structure after the community living divestiture, and what this means for M&A activity and the current acquisition pipeline. /

  A: Jen Phipps says the improved balance sheet (2.15x leverage at Q2 end, recent credit rating upgrades, lower interest expense) gives the company more flexibility to pursue M&A, with a robust pipeline going into the second half of 2026 and 2027. Jon Rousseau adds the company will focus on small tuck-in and geographically adjacent acquisitions that can deliver synergies, with most target deals expected to be less than $30-40 million in EBITDA. Management remains disciplined, will not pursue deals with excessive 20x+ EBITDA valuations, and plans to expand the M&A team to increase deal flow.

• Q: The analyst asks for an update on the rare and orphan therapy opportunity compared to oncology, and whether new sales force investment is needed or existing infrastructure can be leveraged. /

  A: Jon Rousseau confirms the rare/orphan opportunity leverages existing infrastructure: the company already has hundreds of clinical liaisons covering prescriber offices, and 15 years of experience managing 155 LDD programs that can be applied to non-oncology therapies. The rare/orphan market is smaller than oncology but still sizable, and the company has already secured several noteworthy wins in the space in the last six months, making it a clear strategic growth priority.