• Total Revenue (2024): Expected to be in the range of $11.2 billion to $11.3 billion.
• Pharmacy Solutions Revenue (2024): Expected to be between $8.7 billion to $8.75 billion.
• Provider Services Revenue (2024): Expected to be between $2.5 billion to $2.55 billion.
• Community Living Revenue (2024): Expected to be approximately $1.194 billion.
• Total Adjusted EBITDA (2024): Expected to be approximately $588 million, representing 15.8% growth versus 2023.
• Community Living Adjusted EBITDA (2024): Expected to be approximately $128 million.
• Total Revenue (2025 Guidance): Expected to be in the range of $11.5 billion to $12.0 billion.
• Pharmacy Solutions Revenue (2025 Guidance): Expected to be $10.05 billion to $10.5 billion.
• Provider Services Revenue (2025 Guidance): Expected to be $1.45 billion to $1.5 billion.
• Total Adjusted EBITDA (2025 Guidance): Expected to be in the range of $540 million to $555 million.
• Operating Cash Flow (2025 Guidance): Expected to be over $300 million.

• Warning! GuruFocus has detected 11 Warning Signs with KEY.

Release Date: January 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• BrightSpring Health Services Inc (NASDAQ:BTSG) entered into a definitive agreement to divest its community living business for approximately $835 million, which is expected to close in 2025.
• The divestiture will streamline BrightSpring's operations, allowing for enhanced focus on core markets such as home health, hospice, personal care, rehabilitation, and pharmacy services.
• The transaction is expected to be deleveraging, with plans to use after-tax proceeds to reduce outstanding indebtedness, accelerating the path towards a three times debt to EBITDA ratio.
• BrightSpring anticipates a significant increase in growth rate and improved cash flow conversion following the transaction, with 2025 revenue expected to be between $11.5 billion and $12.0 billion.
• The company reported strong financial performance in Q4 2024, with a 17.5% year-over-year growth in EBITDA, driven by robust performance in both pharmacy and provider segments.

Negative Points

• The divestiture of the community living business may result in a modest impact on BrightSpring's 2024 total company free cash flow generation.
• The community living business, which is being divested, has been a stable contributor with a Medicaid-funded model, potentially reducing the company's Medicaid payer base from 20% to 12%.
• There is a risk that the new owner of the community living assets might choose different pharmacy vendors, although current contracts are expected to roll over.
• The transaction excludes the community living business from 2025 guidance, which may lead to adjustments in financial expectations and reporting.
• Despite the divestiture, BrightSpring will need to manage the transition and integration of remaining operations to maintain growth momentum and operational efficiency.

Q & A Highlights

Q: Jon, just looking at the 2025 numbers, you're not giving specific numbers around the prior contribution of community living. If I assume that business is probably not growing too much, is 670 a doable number this year? A: Hi, Whit, good morning. I think your assumption there would be solidly in the range for what we otherwise would have guided. - Jon Rousseau, CEO

Q: Can you provide details on the overall Medicaid mix of the business after the transaction? A: Community living was a Medicaid-funded business. Our Medicaid as a percent of our total payer base will go down from about 20% to 12% after the transaction. - Jon Rousseau, CEO and Jennifer Phipps, CAO

Q: Looking at the numbers you're providing today, it seems like your performance was primarily on the pharmacy side. Anything to call out there? A: Q4 was a very solid quarter with about 17.5% EBITDA growth year-over-year. On the pharmacy side, it was about 22% EBITDA growth year-over-year. - Jon Rousseau, CEO

Q: Can you give us a sense of the revenue breakdown for the provider segment going forward? A: Home Health, Hospice, and primary care will be about 50% of the provider revenue, with rehab and personal care making up the rest almost evenly. - Jennifer Phipps, CAO and Jon Rousseau, CEO

Q: What will your leverage ratio be by the end of 2025, and what is your expected free cash flow? A: We expect to be very close to three times leverage by the end of 2025. Operating cash flow is expected to be between $275 million and $300 million. - Jon Rousseau, CEO and Jim Mattingly, CFO

Q: Can you talk about the selling synergies between community living and other businesses like Home Health and Hospice? A: Community living is primarily Medicaid-funded and has unique referral sources. The remaining businesses have more consistency in patients and delivery models, which allows for a streamlined focus. - Jon Rousseau, CEO

Q: For the community living business, is it 100% provider? A: Yes, what we are divesting is 100% provider community living. - Jon Rousseau, CEO

Q: Can you clarify the 2025 outlook regarding the community business? A: Yes, the 2025 guidance excludes the community living business, assuming it will be in discontinued operations throughout 2025. - Jennifer Phipps, CAO

Q: What are your capital deployment priorities once you reach the target leverage ratio? A: The majority of net proceeds will go to debt reduction, but we will retain some capital for acquisition flexibility. Our M&A pipeline remains strong, and we will continue to be selective. - Jon Rousseau, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.