Brightspring Health Services Inc Q4 2023 Earnings Call Transcript

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

Question: Jamie Perse - The Goldman Sachs Group, Inc. - Analyst : Hey, thank you. Good morning, and I'll just say a quick congrats on the IPO. I wanted to start with the value of the platform that you've talked a lot about, the sales synergies that you see across the business. And as you've talked to folks over the last few months, what do you think's most misunderstood about the complementary nature of the businesses and how you actually execute on generating some of those sales synergies? And what data can you share about where you are in that process and the number of patients getting multiple services or leads generated internally?

Question: Jamie Perse - The Goldman Sachs Group, Inc. - Analyst : Yes, that's super helpful. I wanted to ask one separate question just on the longer-term margin targets, the 6% to 7% that you're talking about for EBITDA margins. Given the growth and margin rates of your businesses, you've got some natural mixed pressure, and we've ended up kind of on the lower end of that range. Can you talk about the offsets to that mixed pressure, whether it's that margin at the business unit level, corporate leverage or otherwise, and what would need to happen to kind of make progress and move more consistently into the higher end of that range?

Question: Jamie Perse - The Goldman Sachs Group, Inc. - Analyst : Okay, great, I'll leave it there, thank you.

Question: Brian Tanquilut - Jefferies Financial Group Inc. - Analyst : Hey, good morning, guys. And congrats on the IPO and the quarter. Jon, maybe just a follow up to the answer that you gave Jamie to the second question. So if we're thinking about the growth rate for the company over the next three to five years, where would you set that? And how should we be thinking about the key drivers there, and maybe also how that compares to the growth historical growth rates, right? Is that just conservatism or -- just curious how you're thinking about growth in general.

Question: Brian Tanquilut - Jefferies Financial Group Inc. - Analyst : That's awesome. Maybe, Jim, just a quick question on the guidance. Curious, what is embedded in there in terms of acquisitions? And then just the DIR stuff, just to clarify if you can quantify how much is in there, and what is the potential upside from those payments. Thanks.

Question: Brian Tanquilut - Jefferies Financial Group Inc. - Analyst : Okay. Got it. That's what I was going to ask. Awesome. Thank you, guys, and congrats again.

Question: AJ Rice - UBS Securities LLC - Analyst : Thanks. Hi, everybody. Just to maybe drill down, because I think there are some questions about what's in and what's not in those specialty quality incentive payments. So you booked $30 million in '23. It sounds like you got $16 million in your '24 outlook. Is there anything magical about $16 million that you know you got that versus the $30 million? Why the $16 million? And then is that number something that could conceivably grow? I mean, is the upside potential to $30 million or is there some reason to think, given the growth in the business, that there could be even more than that if you hit everything you're hoping for? Just give us a little more specific flavor on what's in, what's out, and how you ended up with that number of $16 million for this year.

Question: AJ Rice - UBS Securities LLC - Analyst : Okay, and just maybe drill down a little further on the acquisitions. So there's no acquisitions baked in for your outlook for '24. Give us a little flavor for what the pipeline is. Obviously, you have a wide array of businesses in their particular areas that you're focused on for acquisitions. And if you're thinking about how those acquisitions get valued and what prices you're able to obtain on that, has there been any change in thinking on that?

Question: AJ Rice - UBS Securities LLC - Analyst : Okay, thanks. Great.

Question: Joanna Gajuk - BofA Securities, Inc. - Analyst : Hi, good morning, Joanna Gajuk here. Thanks for taking the question. So I guess maybe just a quick follow up on the discussion around the QIP, the quality payments, and to the point of the likelihood you actually get the same amount, and when will you know?

Question: Joanna Gajuk - BofA Securities, Inc. - Analyst : Thanks for that. And my question is around, I guess, some other comments you were making around the organic growth that you outlined in the slides, and you talked about long-term growing high single digits. Can you -- and I know in the slides you also talked about 9% organic growth CAGRs the last couple of years. Can you give us the organic revenue growth for Q4 and the full year? Or maybe the other way to ask a question would be, some metrics that you gave like home healthcare census grew 8%. How much was organic of that 8%? And also, as it relates to your guidance for '24, what number do you assume? And also, specifically, how many de novos are assumed for 2024?.

Question: Joanna Gajuk - BofA Securities, Inc. - Analyst : Okay, that's helpful. And my last question, when it comes to guidance, any comment on operating cash flow for the year? You talk about some savings of the interest expense, but I guess there's also the settlement payment. So how should we think about the '24 operating cash flow? Thank you.

Question: Whit Mayo - Leerink Partners LLC - Analyst : Hey, good morning. Jon, maybe just an update on timing of the acquisition of the ISNP plan? Maybe just some more color on that, the size, which markets, the overlap you have with your current platform, and maybe just elaborate on any additional strategic thoughts that you'd like to share on that.

Question: Whit Mayo - Leerink Partners LLC - Analyst : That's helpful. Maybe just an update on labor. I know pharmacy isn't really an area of concern. But maybe just on the provider side, I think maybe a little bit more inflation on low-skilled labor, just what you have in your plan, how that's trending versus prior years, just anything that gives us a sense of how confident you are that you have your arms around it. Maybe $100 million of stock grants is the answer, but just any thoughts would be helpful.

Question: Whit Mayo - Leerink Partners LLC - Analyst : Awesome. Thanks.

Question: Stephen Baxter - Wells Fargo Securities LLC - Analyst : Yes, hi, thanks. So your revenue growth in the pharmacy business has been really impressive in recent years. I guess, first, can you help us understand the assumptions you're making and the revenue growth guidance for the pharmacy business for 2024? I guess, how should we think about how you're approaching further LDD launches and generic conversions and the guidance? And what can be potential drivers of upside as the year plays out? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 29, 2024 / 1:30PM, BTSG.OQ - Q4 2023 Brightspring Health Services Inc Earnings Call And then just to kind of put a pin in the discussion around the quality incentive payments, just confirming that your expectation is still that 2024 is the last year for these payments regardless of whatever the ultimate amount turns out to be. Thank you.

Question: Ann Hynes - Mizuho Securities USA - Analyst : Great, thanks. We were talking about guidance. What are the key assumptions that would get you to the low end, and what are the key assumptions that would get you to the high end? And then secondly, just on leverage, I know your target leverage is below 3 times over the long term. Can you give more just on an intermediate goal for maybe 2024 and 2025 and what your definition of long term is when you think you can get below 3 times? Thanks.

Question: Ann Hynes - Mizuho Securities USA - Analyst : All right. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 29, 2024 / 1:30PM, BTSG.OQ - Q4 2023 Brightspring Health Services Inc Earnings Call

Question: Jack Wallace - Guggenheim Securities LLC - Analyst : Hey, thanks for taking my questions. I just wanted to double-click into the value-based care strategy and marry that with the capital deployment. It sounds like to me the de novos are going to be the -- versus M&A are going to be helping to unlock that capability, thinking about the primary care element there. But the second part of that is how much EBITDAs are you getting from value-based care in just today? And if you could kind of help us wrap our models around how much de novos are going to be pointed at primary care to unlock additional value-based care even on the next couple of years. Thank you.

Question: Jack Wallace - Guggenheim Securities LLC - Analyst : And then as a follow up to that, is there any material, back-end infrastructure investors need to make in order to take on that additional risk and whether that's market dependent or kind of more a national company platform wide? Thank you.

Question: Jack Wallace - Guggenheim Securities LLC - Analyst : Excellent. Thank you so much.

Question: Pito Chickering - Deutsche Bank - Analyst : Hey, good morning, guys. Thanks for taking my questions. Can I follow up on Stephen's question? Just on the pharmacy, which grew 30% of the fourth quarter and guidance is about 7.4% at the midpoint. Is there a wave of a limited distribution of drugs from '22 or '23 that are slowing? Just trying to bridge the four key results of the guidance. I get the law of large numbers, but is there anything structurally different in '24 than there was in '23?

Question: Pito Chickering - Deutsche Bank - Analyst : All right, great. And then the second question is on margins. I guess they're a guide to compress a little bit. Can you just give us the detail on the interplay between the gross margin pressures from pharmacies or that mixed impact versus any gross margin impacts, headwinds or tailwinds actually in the provider side, and how you offset that with SG&A? Thanks so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 29, 2024 / 1:30PM, BTSG.OQ - Q4 2023 Brightspring Health Services Inc Earnings Call

Question: Pito Chickering - Deutsche Bank - Analyst : Great, thanks so much.