Brightspring Health Services Inc

NASDAQ:BTSG

Q3-2025 Earnings Call

[Operator]

Good day, and thank you for standing by. Welcome to the BrightSpring Health Services Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Deuchler, Investor Relations. Please go ahead.

[David Deuchler, executive]

Good afternoon. Thank you for participating in today's conference call. My name is David Deuchler with Investor Relations for BrightSpring.

I'm joined on today's call by Jon Rousseau, Chief Executive Officer; and Jen Phipps, Chief Financial Officer.

Earlier today, BrightSpring released financial results for the quarter ended September 30, 2025. 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 their 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.

And with that, I will turn the call over to Jon Rousseau, Chief Executive Officer.

[Jon Rousseau, executive]

Good afternoon, everyone, and thank you for joining BrightSpring's Third Quarter 2025 Earnings Call. First off, I would like to thank all of our BrightSpring employees in the field and in administrative support roles who make a real impact for patients and people every day. I'm grateful for their continued dedication and commitment to providing the high quality and compassionate care and services to the individuals we serve.

BrightSpring is a leading health services provider in home and community settings, in large and growing pharmacy and provider markets. And we believe a scaled platform in home and community health care differentiates and positions us well for the future.

Today, we reported third quarter financial results that are in line with the preliminary financial results we announced on October 20. The third quarter exceeded our expectations and our ongoing commitment to high value and high quality services, operational execution and continuous improvement, all hallmarks of our company culture, have driven the financial results so far this year.

Before discussing BrightSpring's third quarter performance, I would like to remind you that the company's financial results and 2025 guidance pertain to the continuing operations and do not include results from the Community Living business.

At this time, we now expect the Community Living divestiture transaction to close in the first quarter of 2026, which remains subject to final federal regulatory approvals and typical closing conditions.

For the third quarter, BrightSpring's revenue grew approximately 28% and adjusted EBITDA grew approximately 37% versus last year's comparable quarter. Total company revenue was $3.3 billion, with Pharmacy Solutions revenue of $3.0 billion increasing 31% year-over-year and provider services revenue of $367 million, increasing 9% year-over-year.

Total company adjusted EBITDA of $160 million in the quarter grew 37% compared to the same period last year, driven by strength across the businesses. EBITDA margin for the company was 4.8%, which grew approximately 30 basis points compared to the third quarter of last year and up 30 basis points versus second quarter.

Margin expansion was primarily driven by disciplined operating expense management and modest revenue mix shift within pharmacy with greater contribution from generics.

On cash flow. The company realized over $100 million of cash flow from operations in the third quarter and leverage declined to 3.3x at the end of the quarter sooner than previously communicated expectations with an updated goal of 3x by year-end as is and below 3x pro forma for both the Amedisys and LHC home health branch acquisitions and the Community Living sale.

The company continues to deliver growth, reflective of each business line executing on our internal goals. Given the third quarter update today and current expectations for the fourth quarter of 2025, we are increasing total revenue and adjusted EBITDA guidance for 2025.

A week ago in the October 20 release, we increased our adjusted EBITDA guidance to a range of $605 million to $615 million, which compares to $590 million to $605 million communicated in August, following our second quarter results. As a reminder, this 2025 guidance excludes Community Living and any M&A activity not yet closed.

We continue to expect the Amedisys and LHC branches to close later this quarter and expect this to be immaterial to our 2025 results. We look forward to having the Amedisys and LHC colleagues joined BrightSpring and Jen will discuss Bright Spring's third quarter financial results and 2025 outlook in more detail shortly.

At BrightSpring, we're focused on quality and continuous improvement in our people and services to deliver comparatively low cost, timely and intentive patient-centric care to complex populations. Quality and patient satisfaction scores across our service lines in the third quarter remained at very high levels.

In Home Health, 94% of our branches are at 4 stars or greater with timely initiation of care at an industry-leading level of 99%. In Hospice, we continue to be a top 5% ranked hospice program in the U.S. with a caps overall hospice rating of 89%, up from 85% in the second quarter.

Overall, hospice quality index scores and the number of visits we provide patients per month on average remain well above national average.

In Rehab, our patient satisfaction scores remain exceptionally high. And in Personal Care, we have strong internal client records and quality indicator audit scores along with a satisfaction score of 4.54 out of 5. In Infusion, our patient satisfaction score was approximately 95%, and our discharge rate due to completion of therapy was stable at 96%.

Home and Community Pharmacy demonstrated 99.5% order completeness and on-time delivery of 97.2%. In Specialty Pharmacy, our medication possession ratio remains much higher than the national average at approximately 95%, and we have a time to first fill of 3.7 days. Our company continues to demonstrate high levels of execution and customer satisfaction across service lines.

Turning to the company's financial results by segment. Total Pharmacy Solutions revenue grew 31% in the third quarter and adjusted EBITDA grew 42% versus the prior year with Total Pharmacy census growth facilitating Total Pharmacy script volume of 10.8 million in the quarter. Though script volumes demonstrated strong growth in both Specialty and Infusion with over 30% script growth in the subsegment, Total Pharmacy volumes declined 1% versus the prior year due to the majority of scripts being in Home and Community Pharmacy and a decline in the Home and Community Pharmacy Total scripts dispensed due to divestitures associated with the customer that previously declared bankruptcy as well as flu season beginning later in 2025 as compared to 2024, operational decisions made to exit specific uneconomic customers and a difficult comparison to last year when we added the same aforementioned customer in the third quarter.

In the Specialty and Infusion business, revenue grew 42% year-over-year, which exceeded expectations. The performance in Specialty and Infusion was driven by limited distribution drug launches, generic drug utilization from conversions over the past year, strong commercial execution from the team and excellent patient service.

Specialty Scripts grew approximately 40% in the third quarter, driven by strength in both brand LDDs and generics. We ended Q3 with 144 LDDs including 5 LDD launches in the quarter. Through the end of October, our LDD portfolio has now expanded to 145 therapies and we continue to expect 16 to 18 additional LDD launches over the next 12 to 18 months.

We are honored and proud to have been chosen as a preferred specialty pharmacy partner for these new therapies that are being utilized to treat a range of cancers and rare and orphan diseases. We work diligently to deliver high-quality care to patients and gain the trust of manufacturers prescribing physicians and patients to support long-term therapy innovation and growth.

Within Infusion, performance in the quarter was in line with expectations, driven by solid double-digit volume growth and continued benefit from operational improvements and procurement initiatives to streamline the business and improve profitability with strong year-over-year EBITDA growth well into the double digits.

Our strategy is a broad-based one in terms of both acute and chronic therapies. We remain excited about the acute market where we believe there exists a multibillion-dollar market where our leadership team can leverage best practices and scale the business in new geographic markets efficiently.

We also remain constructive on our ability to expand chronic infused therapy offerings, as we look to innovate delivery to patients living with chronic disease.

In Home and Community Pharmacy, revenue performance in the quarter was in line with our expectations, and we continue to optimize the go-to-market strategy and customer mix to ensure profitable growth in attractive and targeted end markets. Under a new and expanded leadership team, we continue to implement operational initiatives to augment efficiency with year-over-year EBITDA up outside of several unusual items in the quarter. Over time, we expect to continue to expand our presence in target markets with industry-leading operational processes, quality and efficiency.

Turning to the provider segment. We are pleased by the performance across each of our service lines in the third quarter. Provider revenue grew 9% year-over-year, and segment adjusted EBITDA grew 16% with a segment adjusted EBITDA margin in the quarter of 16.5%, up approximately 90 basis points year-over-year.

Home Health Care, which represents about 50% of the revenue in Provider segments and is comprised of home health, hospice and primary care, grew 12% year-over-year. The Home Health Care business continues to perform very well, driven by strong quality metrics and patient satisfaction scores, ongoing operational investments and advancements, de novo expansion and preferred provider of Medicare Advantage contracts are continuing to advance.

Average daily census and Home Health Care was 29,592 in the third quarter, representing a 3% increase year-over-year, with hospice increased approximately 15% year-over-year in the quarter. In the third quarter, Home Health settings at 5 states were awarded accreditation by the Accreditation Commission for Healthcare, or ACHC, reflecting compliance with ACHC standards and CMS' conditions of participation, highlighting our commitment to providing safe and high-quality care to patients.

Home-Based Primary Care also delivered solid growth in the quarter. We believe primary care and home remains a large opportunity, as we continue to build out the business, particularly as it relates to the benefits of our integrated services and ACO and payment models, which we continue to make steady progress on.

Moving to Rehab Care, which represented approximately 20% of provider revenue in the third quarter, growth was 9% year-over-year, underpinned by 11% growth in person served and approximately 17% growth in hours billed in the core neuro rehab services. We have continued to see a long history of performance and positive momentum in the rehab business and the expansion of our rehab into ALS and home settings with Part B rehab for seniors is now ongoing, as we went live in the quarter with a key milestone and integrated home health and rehab offering in ALS.

In Personal Care, which represented approximately 30% of provider revenue in the third quarter, revenue grew 6%. Personal Care growth operations and performance remained very steady, including solid growth in persons served. Overall, we continue to realize and see many benefits from our high-value services in targeted markets with 1 integrated and coordinated enterprise.

Finally, we are excited to announce that we will be hosting an Investor Day on March 17 in Louisville. We look forward to the opportunity to review our company's strategy with the investment community, discuss each of our service lines and outline the prospects for each in the years to come.

To close, we are pleased with BrightSpring's operating performance and financial results in the third quarter and the progress we have made so far in 2025, and we look forward to entering 2026 from a position of strength with continuing investments for long-term differentiation and sustainable growth across the organization.

With that, I'll turn the call over to Jen.

[Jennifer Phipps, executive]

Thank you, Jon. Before I discuss our financial results for the third quarter of 2025, I'd like to remind you that in the first quarter of this year, we began to record the Community Living business in discontinued operations, as indicated in the press release and 10-Q, to adhere to accounting standards required on an interim basis.

As such, all BrightSpring financial results and forecasts that I will discuss are related to continuing operations and exclude Community Living. Management believes the presentation of the non-GAAP financials from continuing operations is a useful reflection of our current business performance.

In the third quarter of 2025, total company revenue was $3.3 billion, representing 28% growth from the prior year period. Pharmacy Solutions segment revenue in the quarter was $3.0 billion, achieving 31% year-over-year growth. Within the Pharmacy segment, Infusion and Specialty revenue was $2.4 billion representing growth of 42% from prior year and Home and Community Pharmacy revenue was $590 million, which was approximately flat year-over-year.

In the Provider Services segment, we reported revenue of $367 million in the third quarter, which represented 9% growth compared to the prior year. Within the Provider Services segment, Home Healthcare reported $188 million in revenue, growing 12% versus last year. Rehab revenue was $76 million, growing 9% versus last year; and Personal Care revenue was $102 million, representing growth of 6% year-over-year.

Moving down the P&L. Third quarter company gross profit was $392 million, representing growth of 21% compared with the third quarter of last year. Adjusted EBITDA for the total company was $160 million in the third quarter, an increase of 37% compared to the third quarter of 2024. Adjusted EPS for the total company was $0.30 for the third quarter.

In the third quarter, continuous lean, automation and efficiency programs at the company contributed to growth and margin improvement, and we anticipate additional improvements in the fourth quarter from ongoing operational initiatives. Further, we have seen a positive impact in the third quarter and into Q4 from our targeted growth investments including in recent home health volume, hospice volume, rehab volume and an accelerating infusion volume and growth in LDD and generics in the specialty oncology and rare and orphan therapy business.

Turning back to segment performance in the third quarter. Pharmacy Solutions gross profit was $246 million, growing 30% compared with the third quarter of last year. Adjusted EBITDA for Pharmacy Solutions was $141 million for the third quarter, an increase of 42% compared to last year representing an adjusted EBITDA margin of 4.8%, which was up approximately 40 basis points versus last year.

Provider Services gross profit was $146 million, growing 9% versus the third quarter of last year. Adjusted EBITDA for Provider Services was $61 million for the third quarter, growing 16% versus last year, representing an adjusted EBITDA margin of 16.5%, up approximately 90 basis points versus last year.

Not included in the company's reported adjusted EBITDA of $160 million, as previously stated, Community Living's adjusted EBITDA was an additional $40 million in the quarter, an increase of 18% from the prior year in this business.

On a total company basis, cash flow from operations was $108 million in the third quarter. We continue to expect to deliver over $300 million of annual run rate operating cash flow in 2025, and we remain focused on improving our leverage ratio towards our year-end goal of below 3.0x pro forma for both the pending Home Health acquisition and the Community Living divestiture.

Our adjusted EBITDA growth, combined with our cash flow generation during the quarter, has led to a leverage ratio at September 30 of 3.3x. Longer term, with continued growth, execution and cash flow generation, we remain on track towards a leverage target of 2.5x which at current trends could be realized by mid or later next year, excluding acquisitions or other uses of cash.

As of September 30, net debt outstanding was approximately $2.5 billion. As mentioned previously in January, we expect to receive approximately $715 million of net cash proceeds from the $835 million of gross cash consideration in the pending Community Living sales. As a reminder, net interest expense includes interest income related to cash flow hedges due to our 3 received variable, pay fixed interest rate swap agreements that we have in place, which matured on September 30, 2025.

As part of our process to monitor and address risks, during the quarter, we entered into two 3-year interest rate hedges, which are additional to the 1-year extension that was entered into during the first quarter, providing stability to our interest rate risk through September 2028.

Prior to any proceeds from the pending Community Living divestiture, quarterly interest expense is still expected to be approximately $43 million, including approximately $1.2 million of interest expense related to the TEU instrument.

Turning to guidance for 2025, 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 $12.5 billion to $12.8 billion, including Pharmacy Solutions revenue of $11.05 billion to $11.3 billion and Provider Services revenue of $1.45 billion to $1.5 billion.

This revenue range reflects 24.1% to 27.1% growth over full year 2024, excluding Community Living in both years. Total adjusted EBITDA is expected to be in the range of $605 million to $615 million for full year 2025. This would reflect 31.5% to 33.7% growth over full year 2024, excluding Community Living in both years.

I will now turn it back to Jon.

[Jon Rousseau, executive]

Thanks, Jen. Thank you for your time today to go through BrightSpring's third quarter 2025 results. We will now open up the call for questions. Operator?

[Operator]

[Operator Instructions] And our first question comes from A.J. Rice of UBS.

[Albert Rice, analyst]

Just one question and a follow-up maybe. On the discussion about the pacing of new drug launches, I know for some time, you talked about 16 to 18 launches over an 18-month period. Earlier this year, you sort of said that, that pacing you've seen that go in a year. I know today, you made the comment that looking ahead, you still see that 16 to 18 over the next 12 to 18 months.

I guess I'm just trying to understand, is the pacing of new drug launches that are relevant to you accelerating? Is it about what it's always been? And is the -- if it's accelerated, is the pipeline still pretty robust?

[Jon Rousseau, executive]

Thanks for the question. I think the pipeline remains unchanged, just given the magnitude of it both in the next year and over the next 5 to 7 years on the brand side. We have had probably one of our strongest years in terms of brand wins going back several years. It's been robust, but this year has been a very good year. So we've seen some therapies come to market sooner, and we've been in a good position to be a partner on most all of those therapies.

So it has been a good year, a little bit ahead of expectations, but we still expect a similar number of the 15 to 18 over the next year, 1.5 years. Nothing's really been pulled forward that would affect the future. Some things happen a little bit sooner, but the pipeline remains robust, as we go bottoms up drug by drug. We still feel confident in that pace going forward.

[Albert Rice, analyst]

Okay. And then the follow-up question I was going to ask is, in your prepared comments about the pending transaction, I know you mentioned Amedisys and LHC branch acquisitions. How -- it sounds like maybe what you're buying has changed a bit. Can you give us any specifics on is it significantly bigger than what you were originally looking at or any other ways in which you ultimately ending up buying has changed?

[Jon Rousseau, executive]

Yes. There's always been some of the divested branches for LHC, but it's been the minority. So I think we just more or less said Amedisys in the past. It is a significant majority of those branches. As United was working through all of its final agreements with the FTC, the universe did increase a little bit, not dramatically at all, but a little bit.

So there's been a handful more branches that have that have been included in the group in the past couple of months, and we do expect that transaction to close in the quarter.

[Albert Rice, analyst]

Do you have any early read on whether it will be accretive to '26? I know you said it would be neutral this year. Is it meaning any significant accretion next year or is it neutral or how should we think about it?

[Jon Rousseau, executive]

I think accretion is a fair comment, yes.

[Operator]

And our next question comes from David Larsen of BTIG.

[David Larsen, analyst]

Congratulations on a great quarter. Can you talk about the sources of accretion for like the Amedisys transaction or, quite frankly, any transaction, where do you drive the incremental margin and profit from, please?

[Jon Rousseau, executive]

We're limited -- trying to make sure I understand the question. We're limited on what we're able to disclose about this transaction still to do some of our agreements with the other party. I think it's fair to say that we would look to integrate the operations as seamlessly as we can. We've had a really good partner which has enabled us to dialogue with the other side to make sure we do this as well as we possibly can.

We're very excited about it, and we're optimistic about applying some of our practices, some of our payer contracts, some of our IT and technology and people practices to the organization. But look, it's well run, always has been well run. That's one of the things that we were very enthused about, and we look forward to keeping up that consistency.

And if there's any synergies that are really beneficial really more from a growth and efficiency perspective because we'll retain all the employees for sure. But if there's any other synergies in the technology area or other areas similar to those that were able to drive on other acquisitions, we're certainly going to be planning and looking to do those.

[David Larsen, analyst]

Okay. That's very helpful. And then I think I'm calculating an EBITDA per script increase of 32% year-over-year. Is that correct? That sounds high, which is good, obviously. Just any color around sort of the sustainability of that growth rate? And what some of the key drivers there would be?

[Jennifer Phipps, executive]

Yes. So I think directionally, that is accurate. It's really probably just a little bit higher on a per script adjusted EBITDA basis from a pharmacy perspective. The sources of those changes are really mixed. We've had higher growth in specialty and specialty scripts, which -- those are our highest gross profit and adjusted EBITDA scripts that we have. And so we -- as Jon mentioned in his prepared remarks, we had over 40% growth in specialty scripts during the quarter, and so you see a mix impact associated with that.

[David Larsen, analyst]

Great. And one more quick one. Can you just remind me as a drug launches biosimilar or goes generic, how much of an earnings lift is there typically in terms of margin per drug?

[Jon Rousseau, executive]

David, that's not really information that we really reference. But when a drug goes generic, I think it's common knowledge that there are more manufacturers and that reduces the procurement cost. And overall, the price of the drug comes down pretty dramatically. But net-net, that's a very positive thing for all stakeholders and everybody in the industry, but really as a function of a lot more manufacturers typically able to provide the drug, you see a dynamic there, which is favorable to all stakeholders.

[Operator]

And our next question comes from Charles Rhyee of TD Cowen.

[Charles Rhyee, analyst]

Jon and Jen, just wanted to ask, obviously, in one of the big competitors in Community and Pharmacy would be Omnicare and they declare bankruptcy. Just curious to what you think of that as an opportunity to pick up incremental share? What kind of overlap in the markets? Are you there? Is that an opportunity to enter into new markets? Or is skilled nursing really maybe not that attractive to keep expanding into first?

[Jon Rousseau, executive]

I don't know that we have any view that that's going to be material. As we understand it, it was really related to some litigation going away back less to do with operational performance. But we're just very focused on our customers and our end markets including some that we think are really interesting, like assisted living, behavioral, hospice, et cetera.

And that is where the majority -- the vast majority of our Home and Community Pharmacy EBITDA comes from. I will take a second to talk a little bit further about the script growth in the quarter on the hospice, on the infusion, on the specialty pharmacy sides, all really, really strong growth, well, well, well into the double digits.

On the SNF side, just a few dynamics that will probably be dynamics for the next couple of quarters, but doesn't impact anything from an EBITDA standpoint. We signed a large customer last Q3, which at the time was a really great event. That's the customer that has subsequently declared bankruptcy.

And we've been unwinding some of those buildings. We've also taken the opportunity with the new leadership team to heavily scrutinize the customer base and make some decisions proactively about what we want to do there to make sure we don't ever encounter sort of any payment issues or unprofitable customers.

And so we've been very proactive about that. It's been very constructive. The flu season also started later this year. And so you have basically a huge customer that was coming online last Q3, that is going offline. And from an EBITDA perspective, the business is doing extremely well.

Just given growth in the other markets and our focus on a lot of operational efficiencies. And so -- but that's a dynamic that you'll see for the next quarter or 2, as we work through just the timing element around around that, really that 1 customer.

I think importantly, we are growing and doing extremely well in the areas that matter, that drive EBITDA. And we're extremely excited about Home and Community Pharmacy's prospects over the long term. Their EBITDA was up this quarter. I couldn't be more enthusiastic about a lot of the operational automation, AI efficiency projects in there with the new team and super excited about the business, but that is the dynamic when you look at last Q3 versus this Q3.

And since Home and Community scripts are 77% of the Pharmacy scripts, that's the net number for the year-over-year. But in some of our key service lines, exceptional performance. And again, where we're looking to drive the most growth with Home and Community being a play around targeted end markets and continued operational and automation improvement there.

[Charles Rhyee, analyst]

That's helpful. Just one follow-up on LDDs. Obviously, the FDA, I think there have been some concerns about the pace of drug approvals. I know that there were relatively fewer drug approvals in the first half of this year. Just curious what you're seeing, if you're starting to see that pick up, if that causes any concerns for you in terms of sort of the LDDs you have on deck in terms of timing?

[Jon Rousseau, executive]

We haven't seen any impact. Our performance on the LDD side has really kind of been a record year and the pipeline is as big as ever.

[Operator]

And our next question comes from Pito Chickering of Deutsche Bank.

[Kieran Ryan, analyst]

This is Kieran Ryan on for Pito. Apologies if I missed something on this, but I was wondering if you could kind of provide a little more color on the breakout of the pharmacy guidance between Spec and Infusion and Home and Community, but with a focus on kind of what it implies to Spec and Infusion? I just wanted to see if maybe a little bit of the potential slowdown there in 4Q, if that was kind of related to your comments on it's been -- how it's been kind of a record year on the branded side, and maybe that's normalizing a little bit.

[Jennifer Phipps, executive]

So what we would say is that we don't really see a slowdown. We did update our revenue guidance. And when you look at that, I think you'll still see strong growth year-over-year and we do expect that in Q4. From a pharmacy perspective, from a revenue standpoint, we did have obviously increased revenue guidance, that largely relates to the Specialty and Infusion business, as it relates to the continued strong growth from a scripts perspective that we continue to see in that business.

I would also add though that from a margin perspective or an EBITDA perspective, we do have -- we have increased our guidance to include additional efficiencies in the projects that we had talked about earlier and throughout our scripts, the operational projects that are going on, both in Infusion and Home and Community Pharmacy, and we do expect those to accelerate in Q4 as well.

[Kieran Ryan, analyst]

Got it. That's helpful. And then if you could just provide maybe a quick update on what you're seeing within M&A pipeline and kind of your priorities there? I know it's mostly focused on the tuck-in style deals, but just a quick refresh there would be helpful.

[Jon Rousseau, executive]

Yes, that's right. Nothing imminent outside of that, other than obviously the Amedisys LHC transaction. So as we've been working through the community living divestiture and then the Amedisys LHC branch acquisition. We have just been focused on really small deals and target attractive geographies that are highly accretive. And that will probably continue at least for another quarter.

So there's nothing imminent in terms of anything sizable, but our M&A strategy will remain primarily focused on accretive tuck-ins and target geographies and probably a little bit more activity in deals of a little bit higher size, call it in the $3 million to $10 million of EBITDA range, those might start to get more focused again as we get past these 2 transactions into next year.

We remain open and flexible to something interesting, a little bit larger, but certainly nothing transformational that's on our radar screen whatsoever right now. We really like our current strategy and where our organic growth is and where the balance sheet is.

[Operator]

And our next question comes from Brian Tanquilut of Jefferies.

[Brian Tanquilut, analyst]

Congrats on the quarter. Jon, maybe as I think about generics really quickly since you touched on that in your prepared remarks. Anything you can share with us in terms of the cadence of upcoming patent expirations in your portfolio and also the dynamics in terms of the margin ramp? Like what is the runway for margin ramping on a per script basis for a new generic launch?

[Jon Rousseau, executive]

Yes. I think some of the information brand we've laid out publicly remains the same. We expect numerous more brand to generic conversions over the next couple of years including a more significant one probably at the end of Q1 next year and we expect similar overall dynamics in these conversions that we've seen and experienced in the past and over the past 10 years.

So our ability to partner with manufacturers and win innovative new brand therapies, the very strong growth in our fee-for-service business in that business and then the steady stream of these branches to generics, really all underpinned by our service levels and commercial team and efforts, I think really remains very consistent as we look out still over the next 5 years. So I think the information that we've put out there publicly and in our slide deck remains our current view.

[Brian Tanquilut, analyst]

Got it. And then, Jon, just on the delay on the Community Living divestiture. Anything you can share in terms of what that is or what caused that and just anything we should be on the lookout for to get that closed?

[Jon Rousseau, executive]

Yes. No, nothing unusual. Unfortunately, these processes could just take time these days. The recent government shutdown wasn't overly helpful. But we remain very optimistic that this will close in Q1. There were a handful of markets that the buyer needed to work through with the FTC, which is ongoing and seems very straightforward and is well down the path. So we expect that to occur in Q1.

[Operator]

And our next question comes from Ann Hynes of Mizuho.

[Ann Hynes, analyst]

Great. Just anything on the Washington front that we should be on the lookout in the next coming months, especially with the potential health care bill going through Congress at the end of December?

[Jon Rousseau, executive]

Yes. There's nothing too noteworthy from our perspective on that front. It's been pretty consistent over the last few months on the home health rule that's supposed to come out any day, it could be delayed a little bit due to the government shutdown. While any potential -- if you look at what's historically happened and some strong industry advocacy, we expect to see some mitigation of the proposed cut in the final rule.

While any cut is not a meaningful impact on us today, just given the percent of revenue and EBITDA that, that business is, we'll navigate any rate changes pretty readily. And ultimately, these critical services need to be appropriately funded going forward. So we'll continue to be very vocal about that, trying to educate where we can, and we look forward to partnering with CMS as best possible on some aligned solutions there.

On the IRA front, we're very pleased that CMS and a letter to the payers in the quarter directing them to account for the IRA and their 2026 pricing. And we're also pleased to our advocacy on the with the administration that we have a lot of champions who understand the unique impacts on LTC pharmacies from IRA.

There's a bill in the house. There's one hitting the Senate tune. But that said, there's a lot going on in D.C. up until the end of the year. And regardless of what happens, we feel like our internal mitigation plans along with the strength of the breadth of the enterprise put us in a really good situation. And so really no material updates in how we framed that before.

[Operator]

And our next question comes from Matthew Gillmor of KeyBanc.

[Matthew Gillmor, analyst]

I wanted to drill down on the EBITDA guidance raise. You raised the outlook a bit more than the beat on the quarter. From Jennifer's comments, it sounds like that reflects the combination of core performance and then pulling through some efficiency efforts. Was that about the components of the change?

[Jennifer Phipps, executive]

That is correct, yes.

[Matthew Gillmor, analyst]

Okay. And then as a quick follow-up, I think in the past, you've talked about being conservative with the value-based care accruals, but you have some potential shared savings to go get. I just wanted to see if there's been any change in thinking there and if there's still some potential to pull through some shared savings at some point later in the year?

[Jon Rousseau, executive]

Yes. I think at this point, we've gained clarity that we will get some shared savings there. But that after receiving news about last year, here, just very recently, looks to be probably a little bit of opportunity there that will be realized.

[Operator]

And our next question comes from Joanna Gajuk of Bank of America.

[Joanna Gajuk, analyst]

So I guess, a couple of follow-ups. So first, I appreciate the comments around the acquisition of the assets from Amedisys and LHC will be accretive next year. But anything else we should be thinking about heading into next year in terms of any high-level tailwinds and headwinds?

[Jon Rousseau, executive]

Look, I mean, I think there's been just real consistency throughout the year certainly, as we sit here today, we expect that to continue really something we've seen all year long, every quarter, each service line is performing really well. individually. And I would say here, more recently, a lot of our efforts, as we've talked about in infusion in the past 18 months-or-so, are bearing fruit.

Extremely excited about that being a real tailwind for next year. Hospice continues to perform extremely well. That rate increase will go into effect in Q4. And obviously, some of the momentum around the LDDs and the conversions on the specialty side, home health with the acquisition of the divested branches.

A lot of great things going on there in the business, too, including automation initiatives, hiring a new sales team. We had the best admissions month ever in September in Home Health and that's where we have a new sales leadership team in place. We're tracking right now to have our biggest customer win quarter ever in Home and Community Pharmacy. We're excited about that.

And as Jen mentioned, we are really investing heavily. We've always had a focus on lean, continuous improvement and efficiency. We're just continuing to invest there. We maybe mentioned last quarter, I can't remember, we have a new CTO, and we're building out an internal AI team that is well underway.

We've got all of our projects identified. We're also working with outside vendors on AI implementation. And so look, from a growth and from an efficiency standpoint, we just continue to push as hard as we can and a lot of positives there. I would also note just the balance sheet and where that's gotten to here, even a quarter ago, we were sitting at about 3.64x leverage.

Now we're at 3.31x, that's a pretty good decline in a quarter. I think a quarter ago, we were talking more about 3.5x year-end leverage, now our view is 3x, 3.0x year-end. We were talking about getting down to 3.0x after the Community Living sale, now we think that puts us well below 3x when the Community Living transaction closes, even net of the Amedisys and LHC acquisition.

So we just feel really good and are enthusiastic about our progress on the balance sheet and being at or quite a bit below 3x leverage at the end of the year on the other side of that Community Living divestiture. We also have been talking about 300 of OCF this year, that number is probably more like 375, maybe a little bit more, probably 260, 270 of free cash flow before debt and more.

So a lot of focus in the organization too on the balance sheet around cash flow and that's been really positive.

[Joanna Gajuk, analyst]

And if I had a couple of follow-ups. So on this comment about infusion right you -- so I'm very excited about this, and I guess you've been growing it nicely. But as we think about the Pharmacy segment, I guess, in totality or maybe the Specialty Infusion, but the Pharmacy segment, right, the revenue is going to grow more than 25% this year, right? So how should we think about your ability to kind of grow on top of this growing into next year?

[Jennifer Phipps, executive]

So from an Infusion standpoint, obviously, as they're growing faster than they are today, we would -- so Specialty, we don't see any changes. As it stands today, we don't see significant changes to their pace of growth. We do see Infusion accelerating. So we think that provides a little bit of a tailwind for us into next year.

[Operator]

And our next question comes from Erin Wright of Morgan Stanley.

[Erin Wilson Wright, analyst]

A couple of questions. First one is kind of bigger picture. Just -- can you speak to kind of some of the future opportunities across kind of Pharmacy solutions and specifically kind of Specialty Pharmacy. The focus has been on oncology, but can you speak to rare disease or other areas and also the opportunity around some of those value-added manufactured biopharma services and the respective margins associated with some of those opportunities evolving over time?

[Jon Rousseau, executive]

Yes. Thanks, Erin. I mean those are all accurate. The -- we do, do quite a bit of the rare and orphan therapies today. Quite a few of those are in the oncology space, too, that is certainly a big focus. Whether it's inside or outside of oncology, and we'll continue to do that. The fee-for-service business, whether it's data agreements, clinical hubs or other programs with pharma, it's been good to see that continue to gain a ton of traction over the last couple of years.

It's become a meaningful piece of EBITDA in the business, and we expect that to continue with a lot more launches next year of programs with them. On the Infusion -- with the manufacturers. On the Infusion side, we are really trying to grow both acute and chronic therapies. Acute is a very big market, a multibillion-dollar market in the U.S.

Some folks have stepped away from that market. They can be more operationally challenging. We are leaning into that. We saw the benefits of that in Q3. It was a big part of our growth rate and then really focusing on customized programs for chronic therapies, including some LDDs on the Infusion side. That's really where we're spending a lot of time.

And then in the Home and Community Pharmacy, some of these markets like assisted living, IVD behavioral hospice and pace can still be significantly bigger for us from a market share perspective, and we're excited about that. then across all of the pharmacies just a large focus on process and efficiency in the organization, deploying automation, deploying AI throughout the businesses to try to be as efficient as we possibly can and to try to leverage our scale as much as we possibly can.

So I think quite a few growth drivers within each one of the businesses and across all of them is the process and automation work that we're doing. And I think the net of that makes us really enthusiastic about next year and the coming years.

[Erin Wilson Wright, analyst]

Okay. Great. And then can you speak to what percentage of the portfolio is now more directly tied to drug pricing dynamics with potential MFN pricing as well as you spoke to IRA earlier, which we spoke to, I think, at length before, but what percentage of the book would be branded therapeutics that would be potentially exposed?

[Jon Rousseau, executive]

Yes. So the fee-for-service part of what we do is still the minority, the far minority, but as we've talked about before, we do our best to drive generic utilization for the industry, which is positive and good for all stakeholders. We also have a lot of our therapies, for example, in acute, which is immune from any of this discussion, too.

So if you look across the breadth of our portfolio, branded GP is not the majority, just given the diversification of what we do. And then as it relates to things like DTC, our pharmacy services are really to complex and high-acuity patients and often very local with significant clinical support needs. So they really don't lend themselves to DTC.

[Operator]

And our next question comes from Stephen Baxter of Wells Fargo.

[Stephen Baxter, analyst]

Yes. Obviously, the sequential progress you made on margins in the pharmacy business has been really notable. It sounds like you're expecting that to continue in the fourth quarter based on the guidance that you've given. And then probably you're describing kind of the conditions around further progress on LDDs and further generic dynamics continuing I guess how do we think about the trajectory of margins exiting this year and an opportunity for further improvement in 2026?

[Jennifer Phipps, executive]

Yes. So from a guidance perspective, margins in Q4 are expected to be higher than what we've seen in the last couple of quarters. Q4 tends to be our highest margin quarter for a number of different reasons. But we do see continued growth in our different businesses that -- and different mix of products that will cause Q4 to be a slightly higher margin, landing us from an annual perspective slightly higher as indicated in the guidance.

[Jon Rousseau, executive]

Yes, I would just say from an enterprise perspective, when -- as we think about margins, it's a lot of these lean and efficiency and operational initiatives that we continue to drive across the organization, which will be really helpful. As provider grows, they have a higher margin. Some of our -- a lot of our acquisitions with synergies come over as a result, pro forma with a higher margin.

So we're really focused on being efficient in the organization while also providing as best quality as we possibly can and leveraging that quality where we can to partner with payers in preferred ways to help with appropriate and more enhanced rates, too.

So margin fundamentally, obviously, is a key function of mix, but some very intentional efforts across the organization to try to make sure we're operating as smoothly and efficiently as we can.

[Operator]

And our next question comes from Larry Solow of CJS Securities.

[Lawrence Solow, analyst]

Great. And congrats on another great quarter. Just some high level quickly. I really appreciate all the color, things sound really good. Just your visibility as we look out, Jon, maybe you'll share some of this too coming up in March. But as we look out 3 to 5 years, maybe this 30% or even 40% volume growth this quarter that's not sustainable.

But from a high level, I know you've spoken about double-digit growth in Pharmacy Solutions going forward. Clearly, that seems very attainable. But how do we -- I mean, can we continue to grow at these rapid 25%, 30% levels or directionally, do we -- The Street is coming down to low double digits as we look out over the next few years? Where do we think we end up? Is it closer to that? Or clearly, maybe this 30% is not sustainable, but can we continue to grow at well over the low double-digit rate? Any color on that would be great.

[Jon Rousseau, executive]

Yes. I mean it's a good question, obviously, and when we spend a ton of time thinking about our historical CAGR going back really a decade now has been about 15% it's been higher than that in the last couple of years and that's been a function of a lot of things. I mean we've really tried to assemble a platform that we feel like is well positioned in, in particular, comparatively well positioned for the future in a lot of different environments.

And so one of the reasons why corporate was up a little bit in the quarter and has been up this year, we continue to make investments for the future. For example, building out an AI team and hiring very real people from the tech world to do that. These are things that we're going to continue to do, investing in new marketers and numerous of our businesses, heavily investing in our development teams.

And so we will continue to do that. Hard to -- really impossible, I think, to sit back today and say you would expect these growth rates over the next 4 to 5 years. I don't know if I would say that. But we don't -- as we sit here today, and we've got to get through Q1, obviously, I think it is fair to say, based on everything we know, we would expect to grow again next year well above that historical CAGR, and we'll see.

But as we look at each one of the businesses, other than maybe personal care, we aspire to grow at or above 20% in every business. And we really try to do that based on quality, operational process and then really educating and advocating for these services for as many patients as we can to drive better outcomes and lower cost in the industry.

I mean that's really what we're passionate about. Some of the businesses from time to time have opportunities to do better than our internal goals. Some of them might fall a little bit short. But we always set a really high bar. We like the markets we're in. We've tried to really curate what we do pretty well. I think we will get acceleration in the future for more and more integrated care across our platform.

We're just getting into some ALS now with the combined offering, which is very well received. I do think primary care and some value-based contracting, which is all upside, will continue to scale. So we think about the business in terms of core growth and strategic growth.

Core growth is each and every one of our businesses having very clear objectives over the 1-, 3-, 5-year time lines. And then we think about strategic growth being things like home-based primary care, value-based care contracts, pulling it all together, things like integrated selling into ALFs, things like building out AI products, et cetera.

So -- and it all really makes a lot of sense and fits together well within the constellation of assets that we have. So look, as we sit here today, as we said on the call, we think we're in a good position heading into next year. We learned a lot more in Q1. But we're very optimistic, and we'll continue to do what we can to grow the platform as best we can, leveraging numerous different businesses that all have really attractive opportunities, driving some strategic growth and then all the while trying to drive a lot of these operational and technology investments and innovation throughout the organization.

[Lawrence Solow, analyst]

Great. I appreciate that color. Really helpful. Just quickly on the bankruptcy and Home and Community, is that actually a little bit of a drag in EBITDA in this quarter, maybe for the next couple?

[Jon Rousseau, executive]

No, we don't expect it to be whatsoever. So that was announced in the last quarter. I think based on the strength of our platform and our diversification, it was a nonevent for us in Q2. We talked about that. I only mention it because that's part of the reason why the Home and Community scripts had a tough year-over-year comp, just given we were coming on to that contract last Q3, and now we're kind of going off, and so that's that.

But really attractive growth within all of our pharmacy businesses and the ones that matter the most across Specialty, Infusion, Hospice, Behavioral, et cetera. So -- and in Home and Community Pharmacy, we're seeing -- right now, our pipeline has us looking at our biggest customer signing in 3 or 4 years.

So things are moving in a really good direction. And one of the things surely we will talk about at the Investor Day is how much automation and process innovation is going into that pharmacy business today, which is going to be extremely constructive.

[Operator]

We have no further questions at this time, I'd like to turn it back to Jon Rousseau for closing remarks.

[Jon Rousseau, executive]

Yes. Thank you for the time today, everybody. We appreciate the interest in the company. Thank you for all the questions, and we look forward to talking with you again in another quarter. Have a great rest of the day.

[Operator]

This concludes today's conference call. Thank you for participating, and you may now disconnect.