BrightSpring Health Services, Inc. (NASDAQ:BTSG) Q1 2024 Earnings Conference Call May 2, 2024 8:30 AM ET

Company Participants

Jennifer Phipps – Chief Accounting Officer
Jon Rousseau – President and CEO
Jim Mattingly – CFO

Conference Call Participants

Jamie Perse – Goldman Sachs
Brian Tanquilut – Jefferies
Linda Bolduc – Morgan Stanley
Whit Mayo – Leerink Partners
Unidentified Analyst – Bank of America
Ann Hynes – Mizuho Securities
Jack Wallace – Guggenheim Securities
Kieran Ryan – Deutsche Bank

Operator

Good day, and thank you for standing by. Welcome to the BrightSpring Health Services First Quarter 2024 Earnings Call. At this time all participants are in a listen-only mode. After the speaker’s presentation there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to turn the conference over to Jennifer Phipps, Chief Accounting Officer. Please go ahead.

Jennifer Phipps

Good morning. Thank you for participating in today’s conference call. My name is Jennifer Phipps, Chief Accounting Officer of BrightSpring. I am joined on today’s call by John Rousseau, Chief Executive Officer, and Jim Mattingly, Chief Financial Officer. Earlier today, BrightSpring released financial results for the quarter ended March 31, 2024. A copy of the press release and presentation is available on the company’s 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 in our quarterly report on Form 10 Q that will be filed with the SEC. Specific risk factors and uncertainties can also be found in our 10-K previously filed with the SEC. 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 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

Thank you, Jen. Good morning, everyone, and thank you for joining BrightSpring’s first quarter 2024 earnings call. I would like to begin by extending a heartfelt thank you to all of the people with BrightSpring. At BrightSpring, we are working vigorously to deliver high-quality home and community-based pharmacy and provider health solutions to complex patient populations. This could not be accomplished without our dedicated employees and the support of our investors. Consistent with both our long-term and recent track records, we are pleased to start the year with strong first quarter performance across the portfolio of home and community health service lines at BrightSpring. Our comprehensive care platform continues to deliver timely, preventative, and coordinated care solutions centered around patients.

Some highlights here up front include the following: extremely strong volume growth in Q1, revenue and adjusted EBITDA in the first quarter that exceeded plan, and significantly raised guidance for the full year while continuing to invest in our infrastructure and future growth. These results are driven by our provision of services in large and growing markets, the delivery of valuable services that reduce costs and improve outcomes, our demonstration of strong quality and service levels, strong operational capabilities within a scaled platform, and our ongoing pursuit of attractive near-term and long-term growth opportunities through a sales and marketing focus and commitment to strategic growth.

For the first quarter, the company’s revenue was $2.6 billion, which represented 27% growth year-over-year and exceeded expectations. Pharmacy Solutions generated $2 billion in revenue, representing 35% growth compared with the first quarter last year. And the Provider Services segment generated $600 million in revenue, representing 7% growth compared to the same period last year. We are very pleased with the robust growth and performance in the Pharmacy Solutions segment, which was well ahead of plan as well as with the Provider Services segment, which delivered impressive growth in line with our expectations and is comprised of several underlying higher-growth service lines. Very strong and broad-based revenue performance across the company led to better-than-expected adjusted EBITDA growth for BrightSpring with adjusted EBITDA of $130.5 million for the first quarter, representing 13.2% growth versus the prior year’s first quarter.

In Pharmacy Solutions, our 35% revenue growth was driven by strength in both the infusion and specialty business, and the Home and Community Pharmacy business, with the specialty business performing exceptionally well. The infusion and specialty business grew 44% year-over-year, well ahead of our expectations, with specialty delivery growth above the sub segment’s growth rate. Home and Community Pharmacy revenue grew 15% year-over-year in the quarter. Across Pharmacy Solutions, total scripts dispensed and delivered were approximately $9.9 million in the quarter, which increased 9% versus the prior year, with excellent volume growth of over 35% in specialty pharmacy.

Already this year, we have been selected as a preferred pharmacy partner for three new highly specialized limited distribution oncology drugs, a key driver of specialty growth bringing our total limited distribution drugs portfolio to 117. Scripts dispensed in Home and Community Pharmacy grew in the high single digits year-over-year, and we are currently on track this year to realize the largest increase in the number of new customers and patients ever in this business. We believe our performance in pharmacy is reflective of our operational efficiency, clinical and dispensing accuracy, high-quality services, and customer and patient support programs and satisfaction levels. And we expect the revenue momentum in this business to continue.

Adjusted EBITDA in Pharmacy Solutions grew 7% year-over-year, driven by strong volume growth across the segment. Adjusted EBITDA margin was influenced by the outsized revenue growth in specialty, above expectations and corresponding mix shift, in addition to some impact from the changed health care disruption. We believe the pharmacy segment margins will expand over the balance of the year while continuing to make growth investments in the business.

In Provider Services, 7% revenue growth was driven by strong home health care performance as well as continued strength in our rehab business. Our community living business delivered above-market growth in the quarter as well. Daily patients served remain healthy across our care platform. With home health care average daily census of approximately 43,000 growing 11% year-over-year, with double-digit census growth in our home health and hospice business. Community living and rehab person served was 16,600 in the first quarter, relatively flat compared to last year and in line with expectations. In rehab, we are internally focused on core billable hours for monitoring the growth of this business, which we believe is a better indicator of performance. And in the first quarter, core billable hours and rehab grew at a high-teens rate year-over-year, consistent with our plan.

Adjusted EBITDA in Provider Services grew 25% year-over-year with margin expansion driven by cost efficiencies, economies of scale, operational quality, and volume and revenue growth. We saw adjusted EBITDA strength across the provider portfolio with margin expansion in both home health care and community and rehab care. Overall, as a company, EBITDA margin grew year-over-year when excluding the extremely high growth and higher share of business mix that the specialty pharmacy business delivered and represented in the first quarter. We were pleased with the total company growth and revenue and adjusted EBITDA in the quarter, which puts us ahead of our plan for 2024. As a result, we have raised both revenue and adjusted EBITDA guidance for the year, which we will discuss in more detail in just a few minutes.

All in all, the company’s first quarter financial results reflect impressive growth and profitability driven by consistency of performance in our complementary and comprehensive services platform. In addition to the growth metrics and financials, I would like to take a moment to discuss how and why BrightSpring is among the leading health care services companies in the country today.

At Bright spring, we deliver pharmacy and provider health services to complex patients in home and community settings. We operate in large and growing markets where we provide essential services with clear and strong ROI. Across our organization, our team works hard to deliver high-quality care to patients and we believe our operational prowess and culture of continuous improvement are competitive differentiators. We work to ensure that patients receive appropriate and accurate care in the most efficient and desired setting. As part of our attentive and compassionate care, we work to identify potential medical and medication problems and reduce adverse events due to our highly proximate position to patients where they reside. We provide important health services for approximately 400,000 patients each day on average, enabled by the timely and high-quality care provided by well-trained personnel and BrightSpring’s overarching focus on delivering patient-centric care.

Our integrated platform of service capabilities also helps specific patients to receive the right care of management at the right time and in the right setting. We will continue to improve the coordination of integrated and patient-centric care for all people who require multiple health services at the same time or over time. This results in many benefits for patients including efficiency of care and additional growth of the BrightSpring platform.

In Pharmacy Solutions, we have 99.9% generic efficiency and order accuracy rates in our home and community pharmacy settings. We start cancer patients on therapy twice as fast compared to the industry average. We have Net Promoter scores greater than 90 in infusion and specialty, with patient satisfaction scores of 95% in our infusion business. Our medication adherence programs have delivered over $2,000 in average annual savings. And our medication management program for individuals in their own homes called Continue CareRx, has demonstrated a 73% reduction in hospitalizations when utilized together with our home health, as highlighted in the [indiscernible] article of November 2023. This high level of performance, to cite only a few examples, and is measured by patients and third parties is well above industry average. Our proactive best practices and operational capabilities were also recently evidenced when BrightSpring was able to mitigate any significant impact to revenue or EBITDA related to the changed healthcare, cybersecurity incident in the first quarter.

In our Provider Services segment, our patients often have complex health conditions, which require dynamic care plans incorporating expertise across multiple disciplines. We are proactive in coordinating care delivered through customized programs and plans. As care takes place in the home or community clinics, we have demonstrated an ability to deliver high-quality outcomes with lower costs. Our home-based primary care team has demonstrated an 84% reduction in readmission for IDD patients and our seniors and duals patients experienced approximately 50% less hospitalization compared to the national average for similar patients.

In our community living business, we have delivered 99.9% of incident-free service hours to an often acute population. We’ve received a very high customer satisfaction scores of 99% in our rehab business, 4.4 out of 5 in our Personal Care business, and an 84% overall rating of care in our hospice business. Our hospice business is rated in the top 5% of all hospice providers in the country and deliver significantly more clinician time and care to patients as compared to the national average. We deliver the highest level of skill and compassionate care to patients at some of the most important times in their lives.

Importantly, these quality and operational results not only reflect the commitment to high levels of service and care in our organization but also contribute to our above-industry average growth profile. Our focus on service levels and quality creates a positive cycle of patient success, efficiency, and increased partnerships and referrals, which all contribute to the growth of the company. Secular growth drivers underpinning performance across the company include continued robust market growth driven by demographics, the continued shift of services delivered closer to the patient in home and community settings, and specific customer setting growth factors. Within pharmacy, there is also secular innovation in the delivery of complex drugs and limited distribution drugs in infusion and Onco360 and the continuing evolution of generic alternative availability in this specialty business.

Against this positive industry backdrop, BrightSpring scale, comprehensive offerings, and focused quality and service have been drivers of market share gains and above industry average historical growth. With this foundation in place, we remain strategic with our spend and are further investing in targeted resources and operational enhancements to improve customer and patient access and workflows, while continuing to drive best practices across the enterprise. Ongoing operational focus, efficiency, and quality of services leads to superior sales and marketing results, improved revenue cycle management, and optimize recruiting and training systems for our employees.

We leverage our operational capabilities to underpin our volume and revenue growth rates. And our ongoing strategic planning is aimed at meeting the needs of more patients as we continue to dive deeper into our existing and adjacent markets and focus on growing at above market rates. We do this through the expansion of current operations, de novo projects, and acquisitions. And looking ahead, we will increasingly integrate additional offerings to patients through care management resources and the transitions of care to our lower cost and patient preferred settings. By further incorporating leading payment models from both government and private payers, we are beginning to drive true value-based care through clinical and operational integration that we are uniquely capable of delivering.

As we have demonstrated in the past, we are well positioned to capitalize on external opportunities to augment our organic growth plan, and we will look to acquire operations in the right geographies where we see increased value under the BrightSpring platform. We have been a successful acquirer of businesses and we can improve service levels and profitability through the deployment of technology, good operational process, enterprise best practices, synergies and strong leadership.

As you may have seen, there have been a number of updates from CMS on proposed reimbursement rules in health care as well as final rulings on dynamics that could impact our industry. Numerous of these updates have been favorable and net, we believe there is no material change to our near-term or long-term forecast or outlook. We operate in healthy markets with high demand, markets characterized by lower cost services that have proven value, and markets where we have significant opportunity to outperform due to our operational prowess, strategic discipline, and scale advantages. As a reminder, over the course of a given year, we have in excess of 4,900 payer contracts, and this breadth and balance of business and operations provide benefits, comparatively muting rate changes and enabling service lines to leverage the enterprise’s infrastructure and scale in contracting and best practices. Our comprehensive portfolio has helped support both consistent stability and growth in the past and lays the foundation for continued opportunity in the future.

To summarize, we are pleased by our strong performance this quarter and are optimistic about the year ahead, as evidenced by our increased revenue and adjusted EBITDA guidance. We have recently added two independent directors to our Board, Olivia Kirtley and Tim Wicks. Both Olivia and Tim bring incredible operational and Board experience to BrightSpring and I look forward to working with them as we grow the company. The timely, high-quality, compassionate, and coordinated care that we provide across our platform is unparalleled amongst our peer group. And we continue to cultivate and build upon a patient-centric culture characterized by continuous improvement and execution. I will now turn the call over to Jim to walk through the first quarter’s financial results in more detail.

Jim Mattingly

Thanks, Jon. Total revenue in the first quarter of 2024 was $2.6 billion, representing 27% growth from the prior year period. Pharmacy Solutions segment revenue was $2.0 billion, achieving growth of 35% year-over-year. Within the Pharmacy segment, infusion and specialty revenue was $1.5 billion, representing growth of 44% from last year and Home and Community pharmacy revenue was $511 million, representing growth of 15% year-over-year. In the Provider Services segment, we reported revenue of $600 million, representing growth of 7% compared to the prior year period. Within the Provider Services segment, Home Healthcare reported $242 million in revenue in the first quarter, growth of 9% versus last year, and community and Rehab Care revenue was $358 million representing growth of 6% year-over-year.

Moving down to P&L, total company gross profit in the third quarter was $369 million, representing growth of 10% compared with the third quarter of last year. SG&A expenses for the total company were $361 million compared to $283 million in the prior year period. Adjusted EBITDA for the total company was $131 million for the first quarter growing 13% compared to last year. And adjusted EPS for the total company was $0.12 for the first quarter compared to negative $0.10 in the prior year period.

Turning back to segment performance, Pharmacy Solutions gross profit was $170 million, growing 6% compared with the first quarter of last year. SG&A expenses for Pharmacy Solutions were $109 million compared to $106 million in the prior year period. Adjusted EBITDA for Pharmacy Solutions was $88 million for the first quarter, growing 7% compared to last year. Provider Services gross profit was $199 million, growing 14% versus the first quarter of last year. SG&A expenses for provider services were $134 million compared to $127 million in the prior year period. Adjusted EBITDA for Provider Services was $82 million for the first quarter, growing 25% versus last year.

On a total company basis, cash flow from operations was negative $79 million in the first quarter of 2024. The first quarter is typically a lower operating cash flow quarter when compared to the rest of the year. Operating cash flow was in line with our expectations for the first quarter, excluding some modest impact from the changed health care disruption. We remain on track to deliver approximately $275 million of annual run rate operating cash flow. This excludes legacy litigation expenses and IPO-related expenses in the first half of 2024. We continue to focus on improving the company’s leverage ratio towards our goal of three times within three years. As of March 31st, our net debt outstanding is approximately $2.6 billion with our leverage ratio at 4.3 times. The company has three received variable pay fixed intricate swap agreements in place with a combined notional value of $2.0 billion and a maturity date of September 30, 2025. And as a result, net interest expense includes interest income related to cash flow hedges. Quarterly interest expense is expected to be approximately $50 million per quarter moving forward, including approximately $1.6 million in interest expense related to the TEU instrument.

Turning to our guidance for 2024 following the first quarter results, we are increasing our initial expectations for revenue and adjusted EBITDA. Total revenue is expected to be in the range of $10.3 billion to $10.8 billion, including Pharmacy Solutions revenue of $7.85 billion to $8.3 billion, and Provider Services revenue of $2.45 billion to $2.5 billion. As you will recall, we provided initial full year adjusted EBITDA guidance of $550 million to $564 million. This range previously included a $16 million contribution from a certain quality incentive payment or QIP. Based on our year-to-date performance and momentum as we evaluate the remainder of the year, total company adjusted EBITDA is now expected to be in the range of $555 million to $570 million and now excludes any contribution from a certain quality incentive payment. To be very clear, this updated range represents a like-for-like increase in company adjusted EBITDA of approximately $20 million at the midpoint. It also represents 9.3% to 12.3% growth in 2024 versus 2023, excluding the impact from quality incentive payments in both years.

Our visibility and confidence level regarding the quality incentive payment has not changed. However, we feel this revised EBITDA guidance, excluding the QIP, provides incremental clarity for investors. Should we receive a QIP next quarter, we would expect a $30 million increase to the low end and high end of our updated $555 million to $570 million adjusted EBITDA range. At the midpoint of the $555 million to $570 million range, the adjusted EBITDA margin is approximately 5.3%, excluding QIP, and we expect to see margin expansion throughout the rest of the year with company margin, excluding specialty, higher in 2024 as compared to 2023. You can refer to the first quarter report investor presentation for additional details on the increase to our adjusted EBITDA guidance. With that, I will turn it back over to Jon.

Jon Rousseau

Thank you for your time today to go through BrightSpring’s platform, first quarter results and guidance update. We will now open up the line for questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question comes from the line of Jamie Perse with Goldman Sachs.

Jamie Perse

Hey, thank you. Good morning. I was wondering if you could maybe just help walk us through where some of the upside in the pharmacy business came from specifically. Obviously, that was in the infusion and specialty segment, but where were results different than expectations when you provided initial full year guidance, you talked about some of the oncology partnerships you’ve entered into, how much did that contribute, just any more color you can give on where the upside to your guidance came from in that segment?

Jon Rousseau

Yeah, good morning Jamie. Thank you for the question. Look, I would say overall that the growth we had in the company in Q1 was very broad-based. We exceeded expectations, really almost across the board. Really thanks to a lot of our planning and investments we’ve made last year and going into this year, Specialty Pharmacy, in particular, had borderline really explosive growth, very much outsized growth as well. I would call out though the Home and Community pharmacy also grew at 14% year-over-year as well. So the growth really was very broad based. It was really driven by volume across the Board. We had almost 10% script growth on the pharmacy side on average. A lot of that is weighted to home and community because of the scale difference there on scripts.

On Specialty, we just continue to perform on our LDDs. We want three more limited distribution drugs contracts in the first quarter. We’ve now got a pipeline of 18 launching in the next 16 months is our belief. And we have continued to execute really well on the generic side, and we have the largest sales force in the business that we’ve invested in. So it’s continuing wins from an LDD perspective and execution really across the Board on targeted therapies, really driven by our quality and our leading sales force in the industry. I would note out that we said in the script, we had good new customer wins on home and community. This will be our biggest year ever in terms of new customers and patients on home and community as well. So we’ve just continued to lay the groundwork over the last few years, and it was a really strong quarter of execution on the volume side.

Jamie Perse

Okay, thank you. And then just one on margins. you had some really nice leverage in the provider segment on EBITDA margin. Obviously, pharmacy had some of the mix pressures. You also spoke about a cadence of increasing margins throughout the year, which is implied in your guidance as well. So just wondering if you can talk us through some of the puts and takes for EBITDA margin for the balance of the year, especially in light of lowest-margin segment being kind of at this — how you describe the explosive growth rate? Thank you.

Jon Rousseau

Yes, sure. I mean, I think you’re exactly right. The provider margins were very strong in the quarter. We have continued to focus on operational execution and efficiency on that side of the business, and we definitely drove some leverage in our costs with our revenue increase. I think it’s a really good example of our complementary diversification and stability as a company as you see that kind of balance in our organization. The margin on the specialty and pharmacy side of the company was almost entirely driven by really outsized growth above our expectations and that explosive specialty growth, especially while the EBITDA percent growth and the dollars are great, it does come with a lower margin as characteristic of that industry. But it really was outsized growth versus expectations on specialty.

The rest of the company outside of Specialty grew its margin. And we expect from this point going forward, as we look at the quarterly forecast that our margin as a company is going to continue to remain stable to tick up throughout the year. We were at about a 5.1% margin as a company in Q1. We expect that to get into the 5.3% range later in the year, and then maybe up into the 5.4%, 5.5% range as well. Again, Specialty is expected to stabilize to slightly tick up throughout the year. And then the rest of the company is expected to tick up a little bit throughout the rest of the year as well. Really driven by operational efficiencies, OPEX savings in a lot of different areas, continued BU performance and leveraging our scale. And we do have some rate positive impacts coming later in the year like hospice in Q4. We also have the benefit, Jamie, of taxes and days as we go out for the year, and we have an impact in Q1 from payroll tax resets in the way the days fall. And so that’s going to be favorable for the rest of the year as well.

Operator

Our next question comes from the line of Brian Tanquilut with Jefferies.

Brian Tanquilut

Hey, good morning guys. And congrats on a solid quarter. Maybe, Jon, to follow up on the first question from Jamie earlier. As we think about the strength of your growth, how are you thinking about the sustainability of these robust or elevated levels of growth, I know we’re not looking at 30% specialty growth, obviously longer term but just curious how you’re thinking about your ability to sustain these sort of elevated levels?

Jon Rousseau

Yeah, thanks, Brian. Good morning. Thanks for the question. Look, we’ve never felt better about the company, whether it’s from a growth perspective or what we’re doing from a strategic and operational cost and efficiency perspective, we’ve never felt better about the growth of the company. We expect the specialty growth rate in particular to stay elevated, well above 30%, looking out for the foreseeable time period. We expect infusion to be well into the double digits, and we expect Home and Community to be in double digits as well for the foreseeable future.

For us, on Provider, there’s different contributors, Home Health Care, Home Health and Hospice, and then Rehab, we’re all double-digit growers in the quarter as well. So we’ve really got broad-based growth in the organization. It’s a really nice mix. We continue to see the current levels of growth continuing into the foreseeable future. It’s going to ebb and flow a little bit across the business units with who contributes a little bit more, a little bit less per quarter. It’s not always a straight line, but ultimately, the line keeps moving up from a growth perspective in a very healthy way. So we remain just very confident with our volume growth and our revenue growth as we look into the future.

For us, we really focus a lot not only on operational execution and efficiency, but on volume and outpacing the market growth rates on volume to continue to take share. That volume and revenue growth has really been underpinned on our quality and our operational excellence and then our sales and marketing focus and the investments we’ve made. So again, going back a couple of years, we’ve always tried to put the foundation in place to be able to grow at rates higher than the market. That’s been underpinned by quality ops excellence in our sales and marketing team and investments, and we see that continuing to play out.

Brian Tanquilut

No, it’s awesome. And then maybe, Jon, as I think about acquisitions, you announced a few deals this past quarter. Just curious what you’re seeing there in terms of your pipeline and interest from sellers to sit down with you guys for deals now that you’re public and what you’re seeing in that area?

Jon Rousseau

Yes. It’s been very consistent. The momentum there has only continued. I would say, Brian, to your question being public now is only additive and positive to our ability to execute on transactions. I would say, again, historically, I think it’s now like 55 out of 57 acquisitions we’ve done are higher on EBITDA than we acquired them just due to what we do operationally from a synergies perspective. So it’s definitely an area of value and opportunity for the company. That’s only been enhanced now that we’re public, we did reference a couple of transactions earlier in the quarter. One of them was really right on midnight on 12/31 — could have cut either way in Q4, Q1. That is the one that is closed. It is very small with a deminimis impact in Q1. And then the other transactions that we referenced have not closed yet.

So those had zero impact, obviously, on Q1. And those are I would characterize, Brian, as our typical bread and butter tuck-ins at very low multiples. Not sizable deals, almost like CAPEX, kind of a string of pearls strategy on M&A, just low tuck-ins and target geographies holding them right in. Those are not included in our rest of year guidance as of yet because they’re not closed. But the M&A strategy is one that I think will continue to be a strength for our company and has only been enhanced. Really in Q1 with the IPO, we were heads down on that and executing as well as we could out of the gates and operations was really our core focus. But the M&A pipeline remains active. We’ll have a few smaller deals that will close in Q2. And obviously, we’ll speak more to them when that occurs.

Operator

Our next question comes from Joanna Gajuk with Bank of America.

Jon Rousseau

Hey Joanna, if you can hear us, we cannot hear you. Maybe operator, we can come back to Joanna in a second.

Operator

Joanna are you able to hear us? Okay. Our next question will come from the line of Linda Bolduc with Morgan Stanley.

Linda Bolduc

Hi, good morning. Can you hear me?

Jon Rousseau

Yes, hi Linda.

Linda Bolduc

Hi, this is Linda Bolduc on for Erin Wright. Thanks for the questions. So two questions. In terms of regulatory dynamics and reform and you mentioned in your prepared remarks that has been favorable so far. What are the key assumptions embedding in the low end and the high end of guidance? And then also, in terms of the enterprise long-term adjusted EBITDA margin target of about 6%, when you dive deeper into each of the businesses, the pharmacy segment has been inherently has lower margins versus the provider business and are there any — and the pharmacy space has seen meaningful growth, how does that margin mix between the two segments change over the next few years and are there levers to pull for margin expansion across each of the different businesses?

Jon Rousseau

Yes. Thanks a lot for the question. In terms of rate impact and the guide for 2024, there’s really only one element that would be noteworthy, it’s our hospice pharmacy rate. Hospices — just given the value of hospice has continued to be supported very well over the years. The proposed rule for 2025 is no different from that. That would come into effect in Q4. It’s one of the many items of EBITDA growth and drivers that we see in the business in the back half of the year. So that’s really the only one to speak of, and that would be impacting the business positively in Q4.

As you think about looking out on EBITDA margin into the future, I think getting to a 6% margin will continue to be our long-term goal. I would say the variable item there is our specialty growth and mix over the years. Again, our specialty growth from a volume revenue and EBITDA dollars perspective has been has been terrific and extremely strong. That’s where our primary focus is, is continuing to drive EBITDA dollar growth. And then we really kind of think about the company separately on EBITDA margin and how we manage that. It’s at or north of 7% and we expect margins in Infusion and Home and Community pharmacy to continue to tick up through this year and certainly into next year. We feel very, very good about that for a variety of reasons, including our growth on the top line and with volume, leveraging that growth to the bottom line and our OPEX. And we have a host of operational efficiencies, procurement, OPEX savings projects that are going on in those business centralizations, automations. We’ve never been more active in that area. That’s always been a core competency for us is driving operational efficiency, and we’ve never had more activity and ongoing initiatives in that area.

So we feel really good that Infusion and Home Community Pharmacy are going to be increasing their margins in the back half of the year and as we head into 2025. So really the only variable in our mind around pharmacy margin in the foreseeable future, it’s just your mix. And with this incredible growth in Specialty, again, for very solid reasons that we’ve laid the ground work for, but even ahead of our own expectations internally in Q1, it’s just how fast does that continue — that business to continue to grow. And again, we really focus on EBITDA dollars. We’re going to be extremely focused on working capital cash flow in the company in the future. That’s how we think about specialty market share and EBITDA dollars. And while doing everything we can on the margin side and then really driving margin across the rest of the company where we feel very, very confident margin is going to continue to increase over the next two years.

Operator

Our next question comes from the line of Whit Mayo with Leerink Partners.

Whit Mayo

Is that me? Jon — I got confused there. Speaking of confusion, can we talk about the quality incentive payment just for a second, and you’re not expecting it now, it’s not in the guide, you took it out, but you think you may get it. I just want to make sure that what you’re saying, I think you’re saying we don’t need it, we can demonstrate the growth of the business, I just want to make sure I understand exactly what you’re trying to message around the QIP?

Jon Rousseau

Yes. So on the quality incentive payment, and this is a very specific singular quality incentive payment that we’re talking about, that we’ve been talking about here that we had put into the IPO model. Obviously, originally, nothing has changed whatsoever about our expectations for that payment. We should know about that in late Q2. Nothing whatsoever has changed about that. And what we wanted to try to do for investors is to be as clear as we possibly could about what was in our guide. And so previously, in the $550 million to $564 million range that we had with $557 million at the midpoint, there was a $16 million assumption in there sort of middle of the road for that QIP. Without that, without any QIP assumption, our guide was $534 million to $548 million. What we are saying now is without any QIP assumption, that specific one, our guide is now $555 million to $570 million. That’s about a $20 million increase in our guide. We are still saying we have the same expectations about the QIP, we will find out later this year. If we get the QIP, it should be in the range of a net 30 and you would add that net 30 to the low and the high end of the range on the $555 million to the $570 million. Is that helpful?

Whit Mayo

Yes. No, that’s super helpful. Just the other question I have is just thinking about the uniqueness of your specialty business and the organization and the sales force, what do you think is different in terms of your platform versus others in terms of just the sheer size of the sales force and what you’re doing?

Jon Rousseau

Yes. Look, I think, first and foremost, we’re playing and participating in providing services in the most attractive elements of the specialty industry. That’s oncology, some other areas of neuro and rare and orphan [ph]. But we’re participating in an area of oncology that’s about 40% of the specialty industry growing at about 15% a year where there’s just continuous innovation. First and foremost, it’s that. We really also then execute extremely well operationally. That’s evidenced by our 93% Net Promoter Score. Most recently here, actually, it was 94% by a third party, by a third-party firm that alters this every quarter. We get our drugs out the door in two patients after their approved through benefit verification. Typically, twice as fast as the industry, and we just have outstanding levels of patient satisfaction.

With that quality, which is so important to manufacturers and biotech partners, we win a lot of these limited distribution drugs, really almost most of them as they really want to go with a very high-quality provider. And so that fuels our LDV pipeline, and these limited distribution drugs take years and years to ramp, and it provides the steady underlying continued growth in revenue and our business. There’s also favorable dynamics in the industry from generic conversions from brands. That’s been a positive benefit for us over the last couple of years. We’re going to have two more drugs at the end of the year going generic. That will be helpful. And then as you look out over the next five to six years, there’s another nine more after the two at the end of this year, that are going generic as well.

And then with that quality and winning those LDV relationships for manufacturers based on that quality, we’ve got the biggest sales force in the industry in oncology. We’re in thousands of doctors’ offices every day interacting with referral sources in patients to pull referral through. And that’s just really the engine, the machine that we’ve created in that business, ultimately centered around the best possible outcomes for people with cancer. And literally, our work helps them live longer, keep them alive longer, and we’re incredibly proud of that. And that’s an operational process and strategy that’s been put in place over the last decade.

Operator

Our next question comes from the line of Joanna Gajuk with Bank of America.

Unidentified Analyst

Good morning. This is [indiscernible] with Bank of America on for Joanna Gajuk. Apologies for the disconnection earlier. And I guess — I’m sure if this has already been answered, but I wanted to touch on deals. Firstly, on some deals closed this year. How much do these assets add to revenues and EBITDA this year? And as a follow-up, are you adding new pharmacies or new infusion types or what other kind of assets do you look to be adding this year?

Jon Rousseau

Yes. Thanks for the question. So again, we’ve closed really one transaction through the year. We did buy a remaining 30% interest in the joint venture we had, which was pretty small. We bought that remaining 30% interest that we didn’t own. I would say those two transactions in Q1 were deminimis in terms of their impact in the quarter. As we look out, we’ve got several more deals under definitive. Those will close later into Q2 and when they do close, we would provide updates on that. But the guidance that we have in place right now does not include any future M&A.

As it relates to assets we’re looking at, I think it’s just very complementary, consistent with our historical strategy, Home Health Care, Home Health Hospice, Rehab on the Provider side, select home-based primary care assets to scale faster there in relevant geographies. And then tuck-in home and community and infusion pharmacies, really just balancing our acquisitions and looking at what are the most attractive deals in those sectors and geographies of focus is how we sit back and always think about things and optimize. That’s really why we’re able to drive the historical multiples on M&A that we have. We’re able to see most everything. Most of our deals are proprietary, and we’re able to sit back across these markets and really selectively think about which deals we want to do and why as we balance multiples and really seek to drive the most accretive M&A possible. But it will continue to be a mix across those clinical areas of provider and then tuck-ins on infusion and Home Community Pharmacy.

Unidentified Analyst

Alright, thank you.

Operator

Thank you. Our next question comes from the line of Anne Hynes with Mizuho.

Ann Hynes

Good morning. I just want to confirm that all the guidance raised is really driven by organic. It’s not really driven by incremental M&A? And then secondly, can you just let us know what the quarter was versus your internal expectations and what really came in above, I mean it sounds clearly specialty was above your expectations, is there anything else that you would call out as a second?

Jon Rousseau

Yes. Ann on your first question, the answer is yes. The guide does not include incremental contribution from M&A. In terms of our internal expectations, we soundly beat revenue. We beat on EBITDA by about several million. And as mentioned before, we really did have explosive growth in specialty, but our growth at the company was very broad-based. Home and Community pharmacies were 14% as well. We have Home Health Care and Rehab, both growing well into the double digits on the Provider side. And so we were pleased with the quarter. We were at expectations. In some areas, we were above expectations than in other areas. We see very strong growth continuing for the rest of the year. This is a function of the groundwork and the model we’ve put in place for years in the organization. Our growth is based on — our outsized volume growth has been based on operational excellence and quality and then a real focus on sales and marketing. We enhance that with M&A. And that’s been the model and it’s continuing to work very well. We did grow the top line higher than expectations in the quarter and we’re very enthusiastic about the rest of the year. As I said, we’ve sort of never had more focus on various growth and operational initiatives in many ways, we just never felt better about where the company is.

Operator

Our next question comes from the line of Jack Wallace with Guggenheim Securities.

Jack Wallace

Yeah, thanks for taking my questions and congrats on a great start to the year. A couple of questions. One, it sounds like the tuck-in strategy has been working really well and maybe paying off some dividends this quarter. Can you talk about just any of these synergies, just prior tuck-in deals, particularly in the areas or geographies where you’ve got incremental density related to those deals? And how much were those synergies powering over performance in the quarter?

Jon Rousseau

There really wasn’t an impact from prior deals in the quarter. It was almost all entirely organic Jack. We really were focusing on the IPO in the back half of the year and that’s where the slowdown in M&A occurred last year as we were moving towards the IPO. And so this was very much largely an organic quarter. But you’re right that synergies very much come into play. Our scale, our operational capability, our sales and marketing capability, and then just our contracting and our purchasing capabilities in the organization, those all drive immediate synergies and transactions. They usually cut our multiple in half very quickly when we do deals. We would expect a healthy flow of smaller tuck-ins for this year, obviously, just given our focus on execution after the IPO operationally and given our focus on cash flow. For the first part of this year and into Q3, I think we’re certainly going to be focused on smaller tuck-ins and trying to drive things that are very accretive and even deleveraging and in the acquisitions that we do. So — but really no contribution from prior M&A in the first quarter. And — but our pipeline has consistently remained as strong as it’s ever been. And we are under definitive with several more deals here that should be closing in the near future. Again, they will be of the smaller tuck-in variety at attractive multiples.

Jack Wallace

Got it. That’s helpful. And then it sounds like there was some good over performance in the provider segment driven by your ability to contract away some of the potential headwinds from reimbursement. Is there further upside to go there this year or is there maybe any — an outsized benefit seen in the first quarter that maybe won’t repeat going forward, any color there would be helpful? Thank you.

Jon Rousseau

Yes. Thanks, Jack. Look, I think it’s a great example of the balance in the organization as well. Provider did perform really well in the quarter from a year-over-year perspective and really on the margin side. I think as we look out for the rest of the year, as I’ve said, the margin for the company outside of specialty and the specialty mix impact with their outsized growth, the margin for the rest of the company grew year-over-year. We expect the margin for the company to — on the other side of the calendar turning on 1/1 and after Q1, we expect the margin for the rest of the company and the company in entirety to continue to grow through the balance of the year. And that is the case on the provider side as well. We see that margin continuing to creep up. There are several drivers there, continuing to drive volume growth and leveraging our fixed cost and our OPEX. We are going to get some positive rate there, particularly around hospice in the later part of the year in Q4. And then we have numerous other operational initiatives in place that are going to continue to be driving EBITDA as we go throughout the year. So we do expect some tick up and some modest improvements even on the provider margin side through the balance of the year.

Operator

Our next question comes from the line of Pito Chickering with Deutsche Bank.

Kieran Ryan

Hi there, this is Kieran Ryan on for Pito. Thanks for taking the questions. Just wanted to go back to the Specialty and Infusion margins one more time. Is this about — since the guidance raise is mostly driven by that segment, is this about the level of EBITDA flow-through that we should assume on revenue upside for this segment going forward or is there anything you’d call out that is maybe kind of dragging the incremental margins down this time, just trying to kind of square the incremental margins on the guidance increase with the kind of the historical trends? Thank you.

Jon Rousseau

Yes. No, our guide on the provider side is going to go up as well, Pito. So we feel really good about that business, and we’ve taken our expectations up for the year as well on the provider side. So really, it was an enhancement on both the pharmacy and provider side for the company. I think as it relates to margin, it’s — the vast majority of it is all due to the outside specialty growth and mix. Again, the rest of the company grew on margin outside of that volume growth in specialty. And there was a little bit of mix impact in the business. There was some insulin pricing change in the industry that occurred at the beginning of the year. We did note a relatively modest impact from change in the quarter, which will go away into Q2, although I think we handled the change situation really phenomenally as a company as an indicator of our operational performance. So as we look out to the rest of the year, the provider side guide was raised too. We see that margin ticking up. We see the margin for the whole company ticking up over the rest of the year. And it really is a function of just tremendous growth in the specialty pharmacy side of our business. And — which, again, is a real positive from a revenue and an EBITDA dollars perspective. And margins for the company in total are extremely healthy, and we feel really good about where they’re going to be headed here over the next 12 months.

Kieran Ryan

Thanks a lot.

Operator

That concludes today’s question-and-answer session. I’d like to turn the call back to Jon Rousseau for closing remarks.

Jon Rousseau

Thank you, operator and thanks all of you for joining us today on the call. Over the course of the next couple of months, we’re going to be participating in several investor conferences. We wanted to let you know as well, and we look forward to speaking with you there in the future and on the second quarter call in a few months. Thanks for joining today, and have a great one. Bye.

Operator

This concludes today’s conference. Thank you for participating. You may now disconnect.