Brightspring Health Services Inc at Goldman Sachs Global Healthcare Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : Maybe just to start -- you coming off the recent IPO, I think a lot of people are still getting up to speed on the company. Can you start with just a brief overview of the platform and what's unique, what's differentiated?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : One question I've gotten repeatedly throughout the last few months, I'm sure you've gotten it as well. How do you address the question of just when you're asked, why do all these businesses fit together? I mean, there's some obvious ones that do, but there's some where the synergies and the complementary nature that you spoke of aren't as obvious. So how do you answer that question of why this collection of businesses fits together?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : Can you just lay out the strategy over the next couple years and where you're spending your time? What are you focused on in terms of executing the strategy?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : You touched on market growth. Can we talk about the drivers of growing above the market? So just through the lens of your commercial go-to-market strategy, and then I know you have specific investments in the [Clinical Nursing Hub] and Continue Rx. These are programs to try to drive above market growth and differentiate the patient experience. Can you talk about those and other initiatives to execute on the commercial side to grow above markets?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : Over the last, I don't know, probably 2 years, 2.5 years, being able to attract and retain employees has been a big differentiator for companies. You guys just did all-employee stock grant. Talk about your focus on people as a differentiator and how that's factoring into the strategy.

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : I want to get to some of the business details in a minute, but just keeping it very high level and simplifying the kind of story for a second. The building blocks you've talked about getting to 8% organic EBITDA growth and 10% with M&A. Why is 8% the right number in the context of what the recent history has looked like? I mean, you've been growing much faster than that in many of your markets. What are you contemplating in that guidance? Why is that the right kind of long-term outlook?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : And then the M&A side has obviously been a huge part of the story. I mean, the company has really been built through M&A. It's approaching 60 deals, I think, over the last five years or so. Talk about your approach to M&A, how you have differentiated access to and execution of deals, and just how we should think about your target of $100 million deployed to M&A. Getting out into 2025, I think you [have recast on the $275 million] range. So there would seem to be room to be more aggressive there. Just talk to us about how you're thinking about M&A.

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : Is there any appetite for larger deals or what's the flexibility on that $100 million? And then just to throw something out there, you can comment on it or not, but United is obviously shopping a larger portfolio of home health and hospice facilities. Is something like that feasible given your strategy and capital position?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : I guess the last one on this, is there at all a provider versus pharmacy focus, either internal focus or just based on what's available in the markets?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : Okay. I guess going in detail on the businesses, starting with pharmacy and specialty in particular, you're coming off a 40%-plus growth quarter in Q1. How should we think about what elements of that are sustainable? Obviously, I don't think we expect 40% growth every quarter, but how much of that is sustainable? How much of that is cyclical, sort of one-time tailwinds that will abate? How should we think about growth in specialty?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : I asked you this question in the context of the whole company, but it's most obvious in this segment, where the track record has been -- the last three years have been growing much faster than how you framed the forward outlook. I think CAGR's north of 30% in this business and you're talking about 8% to 9% pharmacy growth going forward. Are there specific headwinds you're contemplating, and again, just why is that kind of the right long-term expectation?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : And I guess on the home and community pharmacy side, this is largely the legacy PharMerica business, which many people will have some history with. What's different about the business today versus the old PharMerica? And I guess just most recently, you've been talking about contract win rates and just coming off a very strong quarter in 1Q. What's driving that? Is that sustainable going forward?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : Let's go to the provider side. This is about half of profit within the business, but probably gets less focus just given the growth rates on the pharmacy side. You mentioned a couple of times in the conversation, 6% to 8% growth in those markets. On hospice, yeah, that makes sense. The home health's probably dilutive to that. IDD, almost certainly dilutive to that. So how are you getting to 6% to 8%? I guess what stage is the home-based primary care in and how much is that contributing to your market outlook?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : We started the conversation with where these businesses are complementary. You just mentioned the 350,000 patients that are discharged from facilities you serve on the pharmacy side that are opportunities for you. Is that the biggest kind of cross-sell synergy opportunity? Are there others? And then really, how do you get after that and execute on converting that opportunity?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : Can you just give us an update on the rehab business? I think this sometimes gets a little lost. You've highlighted on some recent calls. You brought it up in this conversation as just a really strong growth business, but it's not as prominent. It's not a reportable segment. So just what's going on in rehab and driving the strong results there?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : Okay. Last few minutes here, I want to touch on the outlook for the year and some other financial topics. So maybe first, just on the longer-term margin outlook, this is one area, I guess I struggle with the math of how do we get to 6% or so long-term operating margin. You're at, I think, 5.1% in the first quarter. Given the strong growth in some of your lower-margin businesses, how should we think about realistically the cadence of margin growth? Is 6% a realistic target in the next few years? And how much of that is business mix versus G&A leverage and that type of thing? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 10, 2024 / 3:20PM, BTSG.OQ - Brightspring Health Services Inc at Goldman Sachs Global Healthcare Conference

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : Okay. Just on the outlook for the year, you guys have already raised guidance, coming off a very strong first quarter. Included into that, you took out $16 million from the quality incentive payment. Just talk to us about your confidence in the balance of the year, and then how should we think about range of outcomes on the QIP? I think we're pretty close to knowing if that's coming or not. How should we think about that contributing?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : You guys are 4.3 times levered. We talked about some of the M&A capital allocation priorities and cash flow. I guess, what are you hearing in conversations with investors on what you should be doing with the balance sheet? Has anything changed in terms of how you're thinking about the deleveraging strategy that you've laid out?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : And I'll close with this. I think there's still a lot of discovery value that in terms of market getting up to speed on [pricing]. What's the one thing you think is just totally being overlooked at this point in terms of the company or what you guys are building towards?

Question: Jamie Perse - Goldman Sachs & Company, Inc. - Analyst : Right. Well, with that, thank you, Jon. Thank you, everyone, in the room.