Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
1
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
BrightSpring Health Services, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of BrightSpring Health Services, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of self-insurance liabilities
As discussed in Note 1 to the consolidated financial statements, the Company is self-insured for a substantial portion of its general and professional liabilities, automobile liabilities, and workers’ compensation liabilities. As discussed in Note 9 to the consolidated financial statements, accrued expenses include workers’ compensation insurance reserves, general and professional liability insurance reserves, and automobile insurance reserves of $19,966 thousand, $8,328 thousand, and $21,353 thousand, respectively, and long-term liabilities include workers’ compensation insurance reserves, general and professional liability insurance reserves, and automobile insurance reserves of $25,360 thousand, $21,182 thousand, and $9,034 thousand, respectively, as of December 31, 2024.The liabilities recognized for workers’ compensation are actuarially determined estimates, while the other reserves are based on analyses performed by management.
We identified the evaluation of the self-insurance liabilities noted above as a critical audit matter. Specifically, evaluation of the Company’s determination of the claims incurred but not reported for workers’ compensation
2
liabilities involved auditor judgment due to significant measurement uncertainty. In addition, evaluation of the Company’s estimates of the ultimate cost of reported claims related to general and professional liabilities, automobile liabilities, and workers’ compensation liabilities involved actuarial professionals with specialized skills and knowledge. The following are the primary procedures we performed to address this critical audit matter. We evaluated the Company’s ability to estimate self-insurance reserves, and assessed potential management bias, by comparing the prior year estimated reserves to subsequent adjustments to those reserves recorded in the current year. We involved actuarial professionals with specialized skills and knowledge, who assisted in:
/s/ KPMG LLP
We have served as the Company’s auditor since 2019.
Louisville, Kentucky
March 6, 2025, except for the effects of discontinued operations as discussed in Notes 1 and 2, as to which the date is June 10, 2025
3
BrightSpring Health Services, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share data)
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December 31, 2024 |
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December 31, 2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance for credit losses |
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Inventories |
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Prepaid expenses and other current assets |
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Current assets held for sale |
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Total current assets |
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Property and equipment, net of accumulated depreciation of $ |
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Goodwill |
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Intangible assets, net of accumulated amortization |
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Operating lease right-of-use assets, net |
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Deferred income taxes, net |
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— |
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Other assets |
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Non-current assets held for sale |
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Total assets |
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$ |
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$ |
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Liabilities, Redeemable Noncontrolling Interests, and Equity |
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Current liabilities: |
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Trade accounts payable |
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$ |
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$ |
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Accrued expenses |
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Current portion of obligations under operating leases |
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Current portion of obligations under financing leases |
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Current portion of long-term debt |
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Current liabilities held for sale |
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Total current liabilities |
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Obligations under operating leases, net of current portion |
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Obligations under financing leases, net of current portion |
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Long-term debt, net of current portion |
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Deferred income taxes, net |
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— |
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Long-term liabilities |
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Non-current liabilities held for sale |
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Total liabilities |
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Redeemable noncontrolling interests |
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Shareholders’ equity: |
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Common stock, $ |
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$ |
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$ |
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Preferred stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
) |
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( |
) |
Accumulated other comprehensive income |
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Total shareholders’ equity |
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Noncontrolling interest |
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— |
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Total equity |
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Total liabilities, redeemable noncontrolling interests, and equity |
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$ |
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$ |
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See accompanying notes to the consolidated financial statements.
4
BrightSpring Health Services, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
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For the Years Ended December 31, |
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2024 |
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2023 |
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2022 |
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Revenues: |
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Products |
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$ |
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$ |
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$ |
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Services |
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Total revenues |
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Cost of goods |
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Cost of services |
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Gross profit |
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Selling, general, and administrative expenses |
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Goodwill impairment loss |
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— |
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— |
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Operating income |
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Loss on extinguishment of debt |
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— |
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— |
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Interest expense, net |
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Loss from continuing operations before income taxes |
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( |
) |
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( |
) |
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( |
) |
Income tax benefit |
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( |
) |
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( |
) |
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( |
) |
Loss from continuing operations, net of income taxes |
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( |
) |
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( |
) |
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( |
) |
Income from discontinued operations, net of income taxes |
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Net loss |
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( |
) |
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( |
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( |
) |
Net loss attributable to noncontrolling interests included in continuing |
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( |
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( |
) |
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( |
) |
Net loss attributable to BrightSpring Health Services, Inc. and subsidiaries |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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Net (loss) income per common share (Note 10): |
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Basic (loss) income per share attributable to common shareholders: |
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Continuing operations |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Discontinued operations |
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$ |
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$ |
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$ |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Diluted (loss) income per share attributable to common shareholders: |
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Continuing operations |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Discontinued operations |
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$ |
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$ |
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$ |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Weighted average shares outstanding: |
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Basic |
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Diluted |
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See accompanying notes to the consolidated financial statements.
5
BrightSpring Health Services, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Loss
(In thousands)
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For the Years Ended December 31, |
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2024 |
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2023 |
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2022 |
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Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
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$ |
( |
) |
Other comprehensive (loss) income, net of tax: |
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Foreign currency translation adjustments |
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( |
) |
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( |
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Cash flow hedges: |
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Net change in fair value, net of tax (1) |
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Amounts reclassified to earnings, net of tax (2) |
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( |
) |
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( |
) |
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( |
) |
Total other comprehensive (loss) income |
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( |
) |
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( |
) |
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Total comprehensive loss |
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( |
) |
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( |
) |
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( |
) |
Comprehensive loss attributable to redeemable noncontrolling interests |
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( |
) |
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( |
) |
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( |
) |
Comprehensive loss attributable to noncontrolling interest |
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( |
) |
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( |
) |
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Comprehensive loss attributable to BrightSpring Health Services, Inc. and |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
(1)
(2)
See accompanying notes to the consolidated financial statements.
6
BrightSpring Health Services, Inc. and Subsidiaries
(In thousands, except share data or otherwise indicated)
|
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Common Stock |
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Additional |
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(Accumulated Deficit) |
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Accumulated Other |
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Noncontrolling Interest |
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Total |
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Shares |
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Amount |
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Balances at January 1, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
— |
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$ |
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Net loss (1) |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Other comprehensive income, net of tax |
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— |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Acquisition of noncontrolling interest |
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— |
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— |
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— |
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— |
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Adjustments to redemption value of redeemable |
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— |
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— |
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— |
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Shares issued under share-based compensation plan, |
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— |
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— |
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— |
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Other |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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Balances at December 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
— |
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$ |
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Net loss (1) |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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( |
) |
Other comprehensive loss, net of tax |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Repurchase of shares of common stock |
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( |
) |
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( |
) |
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( |
) |
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— |
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— |
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— |
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( |
) |
Shares issued under share-based compensation plan, |
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— |
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— |
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Repurchase of stock options |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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( |
) |
Investment in noncontrolling interest |
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— |
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— |
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— |
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( |
) |
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— |
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Balances at December 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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Net loss (1) |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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( |
) |
Other comprehensive loss, net of tax |
|
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— |
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— |
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— |
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— |
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( |
) |
|
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— |
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( |
) |
Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Issuance of common stock for settlement of RSUs |
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( |
) |
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— |
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— |
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— |
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— |
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||
Shares withheld related to net share settlement |
|
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( |
) |
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( |
) |
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( |
) |
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— |
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— |
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— |
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( |
) |
Shares issued for payment of acquisition |
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— |
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— |
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— |
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Derecognition of redeemable noncontrolling interest, |
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— |
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— |
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( |
) |
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— |
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— |
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Issuance of common stock on initial public |
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— |
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— |
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— |
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Proceeds from stock purchase contract issued under |
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— |
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— |
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— |
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— |
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— |
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Other |
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( |
) |
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— |
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— |
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— |
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( |
) |
||
Balances at December 31, 2024 |
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|
$ |
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$ |
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$ |
( |
) |
|
$ |
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$ |
— |
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$ |
|
|||||
(1)
(2)
(3)
See accompanying notes to the consolidated financial statements.
7
BrightSpring Health Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
|
|
For the Years Ended December 31, |
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2024 |
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2023 |
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2022 |
|
|||
Operating activities: |
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|
|||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to cash provided |
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Depreciation and amortization |
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Impairment of long-lived assets |
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Change in fair value of contingent consideration, net |
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— |
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— |
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Payment of contingent consideration in excess of acquisition date fair value |
|
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( |
) |
|
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— |
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— |
|
Goodwill impairment |
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— |
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— |
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|
|
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|||
Amortization of deferred debt issuance costs |
|
|
|
|
|
|
|
|
|
|||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|||
Deferred income taxes, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Loss on divestiture |
|
|
— |
|
|
|
— |
|
|
|
|
|
Loss on extinguishment of debt |
|
|
|
|
|
— |
|
|
|
— |
|
|
Loss (gain) on disposition of fixed assets |
|
|
|
|
|
|
|
|
( |
) |
||
Other |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Change in operating assets and liabilities, net of acquisitions and dispositions: |
|
|
|
|
|
|
|
|
|
|||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other current assets |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Inventories |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Trade accounts payable |
|
|
|
|
|
|
|
|
|
|||
Accrued expenses |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Other assets and liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) operating activities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
||
8
BrightSpring Health Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(In thousands)
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Investing activities: |
|
|
|
|
|
|
|
|
|
|||
Purchases of property and equipment |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Acquisitions of businesses, net of cash acquired |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of business, net of cash divested |
|
|
— |
|
|
|
— |
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|||
Net cash (used in) provided by investing activities |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|||
Long-term debt borrowings |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
Long-term debt repayments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from issuance of common stock on initial public offering, net |
|
|
|
|
|
— |
|
|
|
— |
|
|
Proceeds from issuance of tangible equity units, net |
|
|
|
|
|
— |
|
|
|
— |
|
|
Borrowings (repayments) of the Revolving Credit Facility, net |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Payment of debt issuance costs |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Repurchase of shares of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Proceeds from shares issued under share-based compensation plan |
|
|
|
|
|
|
|
|
|
|||
Taxes paid related to net share settlement of equity awards |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Repurchase of stock options |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Payment of contingent consideration up to acquisition date fair value |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Distributions to redeemable noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Purchase of redeemable noncontrolling interest |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Investment in noncontrolling interests |
|
|
— |
|
|
|
|
|
|
— |
|
|
Payment of financing lease obligations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Cash and cash equivalents at beginning of year |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents at end of year |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Cash and cash equivalents included in assets held for sale at end of year |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents included in continuing operations at end of year |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
|||
Cash paid for: |
|
|
|
|
|
|
|
|
|
|||
Interest, net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Income taxes, net of refunds |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|||
Notes issued and contingent liabilities assumed in connection with |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Financing lease obligations (Note 13) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Repurchases of common stock in accounts payable |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
Purchases of property and equipment in accounts payable |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Acquisition consideration in accounts payable |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
Consideration for purchase of redeemable noncontrolling interest in |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
Shares issued in connection with acquisitions |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
See accompanying notes to the consolidated financial statements.
9
BrightSpring Health Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Significant Accounting Policies
Description of Business
BrightSpring Health Services, Inc. and its subsidiaries (“BrightSpring,” the “Company,” “we,” “us,” or “our”) is a leading home and community-based healthcare services platform, focused on delivering complementary pharmacy and provider services to complex patients. Our platform delivers clinical services and pharmacy solutions across Medicare, Medicaid, and commercially-insured populations.
On December 7, 2017, affiliates of Kohlberg Kravis Roberts & Co. L.P. (“KKR”) and Walgreens Boots Alliance, Inc. (“WBA”) purchased PharMerica Corporation (“PharMerica”) and on March 5, 2019, expanded with the acquisition of BrightSpring Health Holdings Corp. (“BrightSpring Corp. Acquisition”). The surviving entity was renamed BrightSpring Health Services, Inc.
BrightSpring Health Services, Inc. completed its initial public offering (“IPO”) of
On January 17, 2025, the Company entered into a purchase agreement to divest its community living services, home and community based waiver programs, and intermediate care facilities (the “Community Living business”). The transaction is subject to customary closing conditions and certain other antitrust laws and is expected to close in 2025.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of BrightSpring Health Services, Inc. and its subsidiaries. The Company consolidates its majority-owned and controlled entities, including variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated.
We record a noncontrolling interest for the allocable portion of income or loss and comprehensive income or loss to which the noncontrolling interest holders are entitled based upon their ownership share of the affiliate. The Company determined noncontrolling interests for certain of these VIEs to be redeemable noncontrolling interests, which are presented on the consolidated balance sheets as redeemable noncontrolling interests (see Note 16).
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
As a result of the Company's plan to divest the Community Living business, discussed further in Note 2, the Community Living business met the criteria to be reported as discontinued operations and held for sale. The Company has retrospectively revised and recast the historical results of the Community Living business, including the results of operations, cash flows, and related assets and liabilities, as discontinued operations and held for sale for all periods presented herein. Unless otherwise noted, all activities and amounts reported in the accompanying notes to the consolidated financial statements relate to the continuing operations of the Company and exclude activities and amounts related to the Community Living business.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts and related disclosures. We rely on historical experience and on various other assumptions that we believe to be reasonable under the circumstances to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Significant estimates are involved in the valuation of accounts receivable, inventory, long-lived assets, intangible assets, derivatives, contingent consideration, taxes, insurance reserves, share-based compensation, and goodwill. Actual amounts may differ from these estimates.
10
Revenue Recognition
The Company recognizes the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. For transactions involving the transfer of goods, revenues are primarily recognized when the customer obtains control of the products sold, which is generally upon shipment or delivery, depending on the delivery terms specified in the sales agreement. For transactions exclusively involving provision of services, revenues are recognized over time based on an appropriate measure of progress. Additionally, where we are required to collect sales taxes from our customers, revenue is recognized net of any taxes collected, and the sales tax amounts are recorded as a liability until remitted to the governmental taxing authorities. The Company’s revenue recognition policy by reportable segment is as follows:
Provider Services
Provider Services revenues are generated from providing care services directly to consumers under contracts with state, local and other governmental agencies, as well as commercial insurance companies, long-term care insurance policies, private pay customers, and management contracts with private operators. Generally, these contracts, which are negotiated based on current contract practices as appropriate for the payor, establish the terms of a customer relationship and set the broad range of terms for services to be performed at stated rates. The contracts do not give rise to rights and obligations until a service request is placed with the Company. Contract terms vary but generally are for one year or less with available renewal options and a thirty-to-sixty-day reimbursement period. When a service request is placed with the Company, it creates the performance obligation to provide a defined quantity of service hours per patient. Performance obligations to deliver patient care services are satisfied over time and revenue is recognized using a time-based input method to measure progress against the contract between the Company and the customer, given that consumers simultaneously receive and consume the benefits provided by the Company as the services are performed. Revenues are recognized over a period of time as the services are rendered at the contractual rate established at or before the time services are rendered; thus, there are no forms of variable consideration associated with the various revenue streams.
Pharmacy Solutions
Pharmacy Solutions revenues are generated from the products and services provided in association with the distribution of prescription drugs to consumers primarily under contracts with Prescription Drug Plans (“PDPs”) under Medicare Part D, state Medicaid programs, long-term care institutions, third party insurance companies and private payors. Services provided include individualized medication management and support, staff and patient support programs and solutions, regulatory support, and product delivery. When an order for a prescription is placed with the Company, it creates the performance obligation to deliver a prescription and related services. The performance obligation is satisfied at a point in time upon shipment for specialty pharmacies and upon delivery for home and community-based pharmacies and facility-based pharmacies. Revenues are recognized at a point in time when the associated performance obligations are satisfied at the contractual rate established at or before the time the performance obligation is satisfied.
Contractual Allowances
Revenues and the associated receivables are based upon the actual reimbursements expected to be received and include contractual allowances based upon historical trends, contractual reimbursement terms, and other factors which may impact ultimate reimbursement. Amounts are adjusted to actual reimbursed amounts based upon cash receipts.
Cost of Goods and Cost of Services
We classify expenses directly related to providing goods and services, including associated depreciation and amortization expense, as cost of goods and cost of services, respectively. Direct costs and expenses primarily include cost of drugs, salaries and benefits for direct care and service professionals, contracted labor costs, insurance costs, transportation costs for clients requiring services, certain client expenses such as supplies and medicine, facility occupancy expenses, which primarily comprise rent and utilities, and other miscellaneous direct goods or service-related expenses.
Supplier Rebates
Pharmacy Solutions receives rebates on purchases from select vendors and suppliers for achieving purchase volumes, primarily through agreements with or between WBA, certain of its affiliates, and AmerisourceBergen Drug Corporation (“ABDC”). Rebates for brand name products are generally based on purchasing volumes or actual prescriptions dispensed. Rebates for generic products are primarily based on achieving purchasing volume requirements or other contractually based requirements. The Company considers these rebates product discounts, and as a result, the rebates are recorded as a reduction of product cost and relieved through cost of goods upon the sale of the related inventory or as a reduction of inventory for drugs which have not yet been sold. The rebate recorded is adjusted, if necessary, after the third party validates the appropriate data and notifies the Company of its agreement under the terms of the contract.
11
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and cash equivalents with original maturities of three months or less. The Company places its cash in financial institutions that are federally insured. The majority of the Company’s bank accounts are zero balance accounts where cash needs are funded as checks are presented for payment by the holder. Checks issued pending clearance that result in overdraft balances for accounting purposes are included in accrued expenses in our consolidated balance sheets, and the change in the related balances are reflected in operating activities in the Company’s consolidated statements of cash flows.
Accounts Receivable
Accounts receivable primarily consist of amounts due from PDPs under Medicare Part D, institutional healthcare providers, state Medicaid programs, other government agencies, third party insurance companies, and private payors. To provide for accounts receivable that could become uncollectible in the future, the Company establishes an allowance for credit losses to reduce the carrying value of such receivables to the extent it is probable that a portion or all of a particular account will not be collected, with the related expense recorded as a component of selling, general, and administrative expenses. The allowance for credit losses totaled $
We regularly monitor past due accounts and establish appropriate reserves to cover potential losses and consider historical experience, pricing discrepancies, the current economic environment, customer credit ratings and/or bankruptcies to develop our allowance for credit losses. We review these factors quarterly to determine if any adjustments are needed to the allowance and write off any amounts deemed uncollectible against the established allowance for credit losses. Activity in the allowance for credit losses for the years ended December 31, 2024 and 2023 included provisions of credit losses of $
Inventories
Inventory is primarily located at the Company’s pharmacy locations. Inventory consists solely of finished products (primarily prescription drugs) and is valued at the lower of first-in, first-out (“FIFO”) cost or net realizable value. Physical inventory counts are performed, at a minimum, on a quarterly basis at all pharmacy sites. Inventory and cost of goods are adjusted based upon the results of the physical inventory counts.
Investments
We consolidate investments when the entity is a VIE and we are the primary beneficiary, or if we have controlling interests in the entity, which is generally ownership in excess of
We account for investments in entities in which we have the ability to exercise significant influence under the equity method if we hold 50% or less of the voting stock and the entity is not a VIE in which we are the primary beneficiary. The book value of investments that we account for under the equity method of accounting totaled $
Goodwill and Intangible Assets
The Company tests goodwill for impairment annually as of October 1, or more frequently if impairment indicators arise. The Company had
Our intangible assets consist primarily of customer relationships, trade names, and definite-lived licenses, which are amortized over to
12
Debt Issuance Costs
The Company capitalizes financing fees related to acquiring or issuing new debt instruments. These expenditures include bank fees and premiums, legal costs, and filing fees. Debt issuance costs are capitalized and amortized as interest expense over the terms of the related debt using the effective interest rate method. Debt issuance costs related to term loans and specified maturity borrowings are presented as a direct reduction of the carrying value of the debt. Debt issuance costs related to revolving credit facilities and lines of credit are presented as other assets in our consolidated balance sheets.
Deferred Offering Costs
Deferred offering costs of $
Derivative Financial Instruments
The Company has interest rate swap agreements to manage its interest rate exposure. The Company does not use financial instruments for trading or other speculative purposes.
The interest rate swap agreements are designated as qualifying cash flow hedging relationships and changes in the fair values that are included in the assessment of effectiveness are recognized in accumulated other comprehensive income (“AOCI”) until the hedged items affect earnings. The Company formally assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in cash flows of hedged transactions. The gain or loss on the derivative included in the assessment of effectiveness is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.
The Company’s policy for treatment of discontinued derivative instruments states that the Company will discontinue hedge accounting prospectively when it determines that the derivative is no longer effective in offsetting cash flows attributable to the hedged risk, the derivative expires or is sold, terminated, or exercised, the cash flow hedge is de-designated because a forecasted transaction is not probable of occurring, or management determines to remove the designation of the cash flow hedge. Additionally, if it becomes probable that a forecasted transaction will not occur, the Company will recognize immediately in earnings gains and losses that were accumulated in OCI related to the hedging relationship. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company would continue to carry the derivative at its fair value on the consolidated balance sheets and recognize any subsequent changes in its fair value in earnings.
Income Taxes
Our provision for income taxes is based on expected book income, permanent book/tax differences, discrete items, and statutory tax rates in the various jurisdictions in which we operate. Income tax (benefit) expense includes the recognized portion of current and deferred income taxes at a federal, state, and local level. Significant estimates and judgments are required in determining the provision for income taxes.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred assets if it is more-likely-than-not that some portion or all of the net deferred tax assets will not be realized.
The Company recognizes tax benefits that are considered more-likely-than-not to be sustained. Recognized income tax positions are measured at the largest amount that is more-likely-than-not of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
Our policy is to recognize interest related to unrecognized tax benefits as interest expense, and penalties as selling, general, and administrative expenses in the consolidated statements of operations.
13
Legal Contingencies
We are a party to numerous claims and lawsuits with respect to various matters. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. See Note 15.
Insurance Losses
We self-insure a substantial portion of our general and professional liability, automobile liability, workers’ compensation risks, and health benefits, subject to certain stop loss coverage at a high level of losses. Provisions for losses for workers’ compensation risks and health benefits are based upon actuarially determined estimates and include an amount determined from reported claims and an amount based on past experiences for losses incurred but not reported. Estimates of workers’ compensation claims reserves have been discounted using a discount rate of
Transition Services Agreement (“TSA”)
In conjunction with the divestiture of Workforce Solutions on November 1, 2022, BrightSpring entered into a TSA with the buyer to provide certain transition services in exchange for service fees totaling $
Fair Value of Financial Instruments
The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
(a) Level 1 |
Quoted prices in active markets for identified assets or liabilities. |
(b) Level 2 |
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability. |
(c) Level 3 |
Unobservable inputs used in valuations in which there is little market activity for the asset or liability at the measurement date. |
At December 31, 2024 and 2023, the fair value of cash and cash equivalents, accounts receivable, trade accounts payable, and accrued expenses approximated their carrying values because of the short-term nature of these instruments. The carrying amounts of the Company’s long-term debt approximated fair value as interest rates and negotiated terms and conditions are consistent with current market rates due to the close proximity of recent refinancing transactions to the dates of these consolidated financial statements. All debt classifications and interest rate swaps represent Level 2 fair value measurements. Contingent consideration, which is comprised of future earn-outs and a post-closing equity adjustment feature associated with an acquisition, represents a Level 3 fair value measurement as there is little or no market data available. Refer to Note 14.
Leases
We determine if an arrangement is, or contains, a lease at contract inception and recognize a right-of-use asset and a lease liability at the lease commencement date. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet for select asset classes. The lease liability is measured at the present value of future lease payments as of the lease commencement date. The right-of-use asset recognized is based on the lease liability adjusted for prepaid and deferred rent and unamortized lease incentives. Amortization of the right-of-use asset and accretion of the lease liability for an operating lease are recognized as a single lease cost, on a straight-line basis, over the lease term and included
14
in cost of goods, cost of services, or selling, general, and administrative expenses on our consolidated statements of operations. A finance lease right-of-use asset is amortized on a straight-line basis over the lesser of the useful life of the leased asset or lease term, with interest costs reported separately. Variable common area maintenance and property tax expenses are expensed as incurred. Reductions of the right-of-use asset and the change in the lease liability are included within the changes in other assets and liabilities within operating activities on our consolidated statements of cash flows.
As our leases do not provide an implicit discount rate, we use our incremental borrowing rate as the discount rate for our leases, which is equal to the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. We determine the incremental borrowing rate applicable to each lease by reference to our outstanding secured borrowings. We then obtain a corporate yield curve with the same rating from an external source to adjust for differing tenors to reflect differing lease terms. We have elected to use the portfolio approach in determining our incremental borrowing rate. The incremental borrowing rate for all new or amended leases is based upon the lease terms. The lease terms for all the Company’s leases include the contractually obligated period of the leases, plus any additional periods covered by Company options to extend the leases that the Company is reasonably certain to exercise.
Certain leases provide that the lease payments may be increased annually based on the fixed rate terms or adjustable terms such as the Consumer Price Index. Future base rent escalations that are not contractually quantifiable as of the lease commencement date are not included in our lease liability.
We regularly review the carrying value of our right-of-use assets with respect to any events or circumstances that indicate a possible inability to recover their carrying amount. Indicators of impairment include, but are not limited to, loss of contracts, significant census declines, reductions in reimbursement levels, significant litigation, and impact of economic conditions on service demands and levels. Our evaluation is based on undiscounted cash flows, operating results, as well as significant events or changes in the reimbursement or regulatory environment. If the undiscounted cash flows suggest the recorded amounts cannot be recovered, the carrying values of such assets are reduced to fair value. We recorded a right-of-use asset impairment of $
Property and Equipment
Property and equipment are recorded at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets (generally, to
We regularly review the carrying value of long-lived assets, with respect to any events or circumstances that indicate a possible inability to recover their carrying amount. Indicators of impairment include, but are not limited to, loss of contracts, significant census declines, reductions in reimbursement levels, significant litigation, and impact of economic conditions on service demands and levels. Our evaluation is based on undiscounted cash flows, operating results, as well as significant events or changes in the reimbursement or regulatory environment. If the undiscounted cash flows suggest the recorded amounts cannot be recovered, the carrying values of such assets are reduced to fair value. There was
Segments
Operating segments are defined as components of a company that engage in business activities from which it may earn revenues and incur expenses, and for which separate financial information is available and is regularly reviewed by the Company’s chief operating decision maker (“CODM”) to assess the performance of the individual segments and make decisions about resources to be allocated to the segments. The Company’s operating segments have been identified based upon similar economic characteristics, nature of services, types of customers, and how the CODM manages the business and allocates resources in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, Segment Reporting. The Company has identified
In our Provider Services reportable segment, we provide a variety of services to help manage the whole-person health of our patients in their homes and communities through services such as home health care and hospice care and long-term specialty care. This includes providing services to support individuals who need assistance with daily living due to an intellectual, developmental or cognitive disability.
Our Pharmacy Solutions segment operates long-term institutional pharmacies, hospice pharmacies, specialty oncology pharmacies, and home infusion centers. Our service offerings are impacted by medication availability and reliability, cost
15
containment, staff and patient support solutions, and regulatory support. Our Pharmacy Solutions segment is designed to drive medication adherence, patient outcomes, process efficiency, and compliance in a number of areas.
Substantially all of the Company’s revenues are generated inside the United States, with the Provider Services segment generating insignificant amounts of revenue in Canada. Refer to Note 18 for additional information on the Company’s segments.
Share-Based Compensation
The Company measures and recognizes compensation expense for share-based compensation awards based on the fair value of each award at its grant date and recognizes expense over the related service period on a straight-line basis. The Company accounts for forfeitures of share-based compensation awards as they occur. Compensation expense for share-based payments is included in cost of goods, cost of services, and selling, general, and administrative expenses in our consolidated statements of operations.
Foreign Currency Translation
BrightSpring’s Canadian subsidiary designates its local currency as its functional currency. Operating results are translated into U.S. dollars using monthly average exchange rates, while balance sheet accounts are translated using period-end exchange rates. The resulting translation adjustments are included as a component of AOCI in shareholders’ equity. Operating results from foreign operations are not material to our consolidated financial statements.
Government Actions to Mitigate COVID-19’s Impact
On May 11, 2023, the Department of Health and Human Services declared that the COVID-19 pandemic is no longer a public health emergency. Through the Coronavirus Aid, Relief, and Economic Security Act, the Paycheck Protection Program and Health Care Enhancement Act, and the Consolidated Appropriations Act, $
Recently Adopted Accounting Standards
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting. This ASU requires the following disclosures on an annual and interim basis:
The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted, and should be applied on a retrospective basis. The Company
Recently Issued Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires the following disclosures on an annual basis:
16
The amendments in this ASU are effective for annual periods beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis. This ASU will have no impact on the Company’s consolidated financial condition or results of operations. The Company is currently evaluating the impact to the income tax disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which was further clarified in January 2025 through the issuance of ASU 2025-01. These ASUs require new financial statement disclosures to provide disaggregated information for certain types of expenses, including purchases of inventory, employee compensation, depreciation, and amortization in commonly presented expense captions such as cost of goods and services and selling, general and administrative expenses. The amendments in this ASU are effective for annual periods beginning after December 15, 2026, with early adoption permitted. The adoption of this guidance will have no impact on the Company's consolidated financial condition or results of operations. The Company is currently evaluating the impact to the related disclosures.
2. Discontinued Operations
On January 17, 2025, BrightSpring entered into a definitive agreement to sell its Community Living business to National Mentor Holdings, Inc. (the “Purchaser”), for $
The Company has determined the divestiture of the Community Living business represents a strategic shift that will have a major effect on its business and has concluded the criteria for classification as discontinued operations were met. Accordingly, the Community Living business is reported as discontinued operations in accordance with Accounting Standards Codification (“ASC”) 205-20, Discontinued Operations. The related assets and liabilities of the Community Living business are classified as assets and liabilities held for sale in the accompanying consolidated balance sheets and the results of operations from the Community Living business are classified as discontinued operations in the consolidated statements of operations. Applicable amounts in prior years have been retrospectively revised and recast to conform to this discontinued operations presentation. The Community Living business was historically presented as a part of the Provider Services reportable segment.
In accordance with ASC 205-20, Allocation of Interest to Discontinued Operations, the Company elected to allocate interest expense to discontinued operations for the Company’s debt that is not directly attributed to the Community Living business. Interest expense was allocated based on a ratio of net assets held for sale to the sum of consolidated net assets and consolidated debt. In addition, upon closing of the divestiture, we will enter into a transition services agreement with the Purchaser to support the Purchaser's post-closing operations of the Community Living business by providing the Purchaser with certain transition services in exchange for service fees in the form of both fixed-price and pass through costs. Transition services will primarily include finance and accounting, human resources, IT, facilities management, and compliance.
The financial results of the Community Living business are presented as income from discontinued operations on our consolidated statements of operations.
|
For the Years Ended December 31, |
|
|||||||||
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Services revenue |
$ |
|
|
$ |
|
|
$ |
|
|||
Cost of services |
|
|
|
|
|
|
|
|
|||
Gross profit |
|
|
|
|
|
|
|
|
|||
Selling, general, and administrative expenses |
|
|
|
|
|
|
|
|
|||
Operating income of discontinued operations |
|
|
|
|
|
|
|
|
|||
Interest expense, net |
|
|
|
|
|
|
|
|
|||
Income from discontinued operations before incomes taxes |
|
|
|
|
|
|
|
|
|||
Income tax expense from discontinued operations |
|
|
|
|
|
|
|
|
|||
Income from discontinued operations, net of income taxes |
$ |
|
|
$ |
|
|
$ |
|
|||
17
The following table presents the aggregate carrying amounts of assets and liabilities held for sale for the Community Living business in the consolidated balance sheets (in thousands):
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable, net of allowance for credit losses |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets held for sale |
|
|
|
|
|
|
||
Property and equipment, net of accumulated depreciation of $ |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Intangible assets, net of accumulated amortization |
|
|
|
|
|
|
||
Operating lease right-of-use assets, net |
|
|
|
|
|
|
||
Deferred income taxes, net |
|
|
|
|
|
— |
|
|
Other assets |
|
|
|
|
|
|
||
Total assets held for sale |
|
$ |
|
|
$ |
|
||
Liabilities |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Trade accounts payable |
|
$ |
|
|
$ |
|
||
Accrued expenses |
|
|
|
|
|
|
||
Current portion of obligations under operating leases |
|
|
|
|
|
|
||
Current portion of obligations under financing leases |
|
|
|
|
|
|
||
Total current liabilities held for sale |
|
|
|
|
|
|
||
Obligations under operating leases, net of current portion |
|
|
|
|
|
|
||
Obligations under financing leases, net of current portion |
|
|
|
|
|
|
||
Deferred income taxes, net |
|
|
— |
|
|
|
|
|
Long-term liabilities |
|
|
|
|
|
|
||
Total liabilities held for sale |
|
$ |
|
|
$ |
|
||
The following table presents the significant non-cash items and purchases of property and equipment for the discontinued operations that are included in the accompanying consolidated statements of cash flows (in thousands):
|
For the Years Ended December 31, |
|
|||||||||
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Cash flows from discontinued operations operating activities: |
|
|
|
|
|
|
|
|
|||
Depreciation and amortization |
$ |
|
|
$ |
|
|
$ |
|
|||
Share-based compensation |
|
|
|
|
|
|
|
|
|||
Impairment of long-lived assets |
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|||
Cash flows from discontinued operations investing activities: |
|
|
|
|
|
|
|
|
|||
Purchases of property and equipment |
|
|
|
|
|
|
|
|
|||
18
3. Revenues
The Company is substantially dependent on revenues received under contracts with federal, state, and local government agencies. Operating funding sources are generally earned from Medicaid, Medicare, commercial insurance reimbursement, and private and other payors. There is
|
|
Pharmacy Solutions |
|
|||||||||||||||||||||
|
|
For the Years Ended December 31, |
|
|||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||||||||||||||
|
|
Revenue |
|
|
% of Revenue |
|
|
Revenue |
|
|
% of Revenue |
|
|
Revenue |
|
|
% of Revenue |
|
||||||
Commercial insurance |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
Medicaid |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Medicare A |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Medicare B |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Medicare C |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Medicare D |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Private & other |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
|
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
|
|
Provider Services |
|
|||||||||||||||||||||
|
|
For the Years Ended December 31, |
|
|||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||||||||||||||
|
|
Revenue |
|
|
% of Revenue |
|
|
Revenue |
|
|
% of Revenue |
|
|
Revenue |
|
|
% of Revenue |
|
||||||
Commercial insurance |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
Medicaid |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Medicare A |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Medicare B |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Medicare C |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Private & other |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
|
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
|
|
Other |
|
|||||||||||||||||||||
|
|
For the Years Ended December 31, |
|
|||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||||||||||||||
|
|
Revenue |
|
|
% of Revenue |
|
|
Revenue |
|
|
% of Revenue |
|
|
Revenue |
|
|
% of Revenue |
|
||||||
Department of Labor |
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
|
|
|
% |
||
Private & other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
% |
||
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
|
|
|
% |
||
|
|
Consolidated |
|
|||||||||||||||||||||
|
|
For the Years Ended December 31, |
|
|||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||||||||||||||
|
|
Revenue |
|
|
% of Revenue |
|
|
Revenue |
|
|
% of Revenue |
|
|
Revenue |
|
|
% of Revenue |
|
||||||
Commercial insurance |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
Medicaid |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Medicare A |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Medicare B |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Medicare C |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Medicare D |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Department of Labor |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
% |
||
Private & other |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
|
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
Refer to Note 18 for the disaggregation of revenues by segment.
19
4. Acquisitions
2024 Acquisitions
During the year ended December 31, 2024, we completed
Haven Hospice
The following table summarizes the consideration paid (in thousands) for the September 1, 2024 acquisition of North Central Florida Hospice, Inc. (“Haven Hospice”) and the fair value of the assets acquired and the liabilities assumed at the acquisition date, which has been adjusted for immaterial measurement-period adjustments through December 31, 2024. Haven Hospice provides hospice and palliative care services in the state of Florida. Its results are consolidated within the Provider Services segment.
Inventories |
|
$ |
|
|
Property and equipment |
|
|
|
|
Goodwill |
|
|
|
|
Intangible assets |
|
|
|
|
Operating lease right-of-use assets |
|
|
|
|
Trade accounts payable |
|
|
|
|
Current portion of obligations under operating leases |
|
|
|
|
Obligations under operating leases, net of current portion |
|
|
|
|
Aggregate purchase price |
|
$ |
|
The Company is in the process of reviewing the fair value of the assets acquired and liabilities assumed. We have estimated the fair value of acquired intangible assets based upon a third-party valuation. Based on the Company’s preliminary valuations, the total estimated consideration has been allocated to assets acquired and liabilities assumed as of the acquisition date.
Consideration for the Haven Hospice acquisition included a $
The estimated intangible assets consist of $
Haven Hospice contributed $
Others
The following table summarizes the consideration paid (in thousands) for 2024 acquisitions, excluding Haven Hospice, and the estimated fair value of the assets acquired and the liabilities assumed at the acquisition dates, which are adjusted for immaterial measurement-period adjustments through December 31, 2024. Consideration for acquisitions by the Pharmacy Solutions and Provider Services segments was $
20
Accounts receivable |
|
$ |
|
|
Inventories |
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
Property and equipment |
|
|
|
|
Goodwill |
|
|
|
|
Intangible assets |
|
|
|
|
Operating lease right-of-use assets |
|
|
|
|
Other assets |
|
|
|
|
Trade accounts payable |
|
|
|
|
Accrued expenses |
|
|
|
|
Current portion of obligations under operating leases |
|
|
|
|
Current portion of obligations under financing leases |
|
|
|
|
Obligations under operating leases, net of current portion |
|
|
|
|
Obligations under financing leases, net of current portion |
|
|
|
|
Deferred income taxes, net |
|
|
|
|
Aggregate purchase price, net of cash acquired |
|
$ |
|
The Company is in the process of reviewing the fair value of the assets acquired and liabilities assumed. We have estimated the fair value of acquired intangible assets based upon third-party valuations and/or the values assigned in prior acquisitions that were deemed comparable in nature. Based on the Company’s preliminary valuations, the total estimated consideration has been allocated to assets acquired and liabilities assumed as of the acquisition dates.
The estimated intangible assets consist primarily of $
The above acquisitions contributed approximately $
During the year ended December 31, 2024, the Company incurred approximately $
The Company also purchased the remaining
2023 Acquisitions
During the year ended December 31, 2023, we completed
The following table summarizes the consideration paid (in thousands) for 2023 acquisitions, and the estimated fair value of the assets acquired and the liabilities assumed at the acquisition dates, which are adjusted for immaterial measurement-period adjustments through December 31, 2023. Consideration for acquisitions by the Pharmacy Solutions and Provider Services segments was $
21
Accounts receivable |
$ |
|
|
Inventories |
|
|
|
Property and equipment |
|
|
|
Intangible assets |
|
|
|
Goodwill |
|
|
|
Operating lease right-of-use assets |
|
|
|
Accrued expenses |
|
|
|
Current portion of obligations under operating leases |
|
|
|
Obligations under operating leases, net of current portion |
|
|
|
Aggregate purchase price |
$ |
|
The intangible assets consist primarily of $
Measurement period adjustments for 2023 acquisitions recorded in the year ended December 31, 2024 were not material to the consolidated financial statements. The Company finalized the purchase price allocation for the 2023 acquisitions prior to the one-year anniversary date of each acquisition.
The above acquisitions contributed approximately $
During the year ended December 31, 2023, the Company incurred approximately $
5. Goodwill and Intangible Assets
In 2024, 2023 and 2022, the Company performed a quantitative assessment of all reporting units as of October 1. We utilized a combination of the discounted cash flow analysis or “income approach” (
Our 2024 and 2023 goodwill impairment analyses concluded that the fair values of all reporting units were in excess of their carrying amounts. Subsequent to completing our goodwill impairment tests, no further indicators of impairment were identified. Based on these analyses, we recorded
Our 2022 goodwill impairment analysis concluded that the fair values of the Institutional Pharmacy, Specialty Solutions, Home Infusion, Home Health and Therapies, and Behavioral Health reporting units were in excess of their carrying amounts, and that the fair values of the Hospice Pharmacy and Workforce Solutions reporting units were less than their carrying amounts. We recognized non-cash goodwill impairment charges of $
The determination of whether the carrying value of the reporting unit exceeds its fair value involves a high degree of estimation and can be affected by a number of industry and company-specific risk factors that are subject to change over time. If actual performance does not achieve the projections, or if the assumptions used change in the future, we may be required to recognize additional impairment charges in future periods.
22
A summary of changes to goodwill is as follows (in thousands):
|
|
Goodwill |
|
|||||||||
|
|
Pharmacy Solutions |
|
|
Provider Services |
|
|
Total |
|
|||
Goodwill at January 1, 2023* |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Goodwill added through acquisitions |
|
|
|
|
|
|
|
|
|
|||
Measurement period adjustments |
|
|
— |
|
|
|
|
|
|
|
||
Foreign currency adjustments |
|
|
— |
|
|
|
|
|
|
|
||
Goodwill at December 31, 2023* |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Goodwill added through acquisitions |
|
|
|
|
|
|
|
|
|
|||
Measurement period adjustments |
|
|
— |
|
|
|
|
|
|
|
||
Foreign currency adjustments |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Goodwill at December 31, 2024* |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
* For the periods presented, the carrying amount of goodwill is presented net of accumulated impairment losses of $ |
|
|||||||||||
Intangible assets are as follows (in thousands):
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
|
|
||||||||||||||||||
|
|
Gross |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Gross |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Life |
||||||
Customer relationships |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||||
Trade names |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Licenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Doctor/payor network |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Covenants not to compete |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total definite-lived assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
||||||
Licenses |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Indefinite |
||||
Total intangible assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
||||||
Amortization expense for the years ended December 31, 2024, 2023 and 2022 was $
As of December 31, 2024, total estimated amortization expense for the Company’s definite-lived intangible assets for the next five years and thereafter is as follows (in thousands):
2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
23
6. Debt and Derivatives
The table below summarizes the total outstanding debt of the Company (in thousands):
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
||||
First Lien - payable to lenders at SOFR plus applicable margin |
|
|
— |
|
|
$ |
— |
|
|
|
|
$ |
|
|||
First Lien Incremental Term Loans Tranches B-2 and B-3 - payable to |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|||
First Lien Incremental Term Loan Tranche B-5 - payable to lenders at |
|
|
% |
|
|
|
|
|
— |
|
|
|
— |
|
||
Second Lien - payable to lenders at SOFR plus applicable margin |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|||
Revolving Credit Loans - payable to lenders at SOFR plus applicable |
|
|
% |
|
|
— |
|
|
|
|
|
|
||||
Swingline Loans and Base Rate Loans - payable to lenders at |
|
|
% |
|
|
|
|
|
|
|
|
|||||
Amortizing Notes (1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Notes payable and other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: debt issuance costs, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total debt, net of debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: current portion of long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total long-term debt, net of current portion |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(1) See Note 7 for discussion of Amortizing Notes. |
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of December 31, 2024, maturities of long-term debt for the next five years and thereafter are as follows (in thousands):
2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
See Note 13 for maturities of obligations under financing leases.
The following discussion summarizes the debt agreements and related extinguishments and modifications for the years ended December 31, 2024 and 2023.
Obligations under the First Lien and Second Lien Facility are guaranteed by Phoenix Guarantor, Inc., a subsidiary of the Company, and each of its current and future direct and indirect subsidiaries other than (among others) (i) foreign subsidiaries, (ii) unrestricted subsidiaries, (iii) non-wholly owned subsidiaries, (iv) certain receivables financing subsidiaries, (v) certain immaterial subsidiaries and (vi) certain holding companies of foreign subsidiaries, and are secured by a first lien on substantially all of their assets, including capital stock of subsidiaries.
The current credit facilities described below contain customary negative covenants, including, but not limited to, restrictions on the Company and its restricted subsidiaries’ ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make acquisitions, loans, advances or investments, pay dividends, sell or otherwise transfer assets, prepay or modify terms of certain junior indebtedness, enter into transactions with affiliates, or change their lines of business or fiscal year. In addition, the terms of the credit facilities will not permit the consolidated First Lien secured debt to consolidated earnings before interest, taxes, depreciation, and amortization (“EBITDA”) to be greater than
We were in compliance with all applicable financial debt covenants at December 31, 2024 and 2023.
24
First Lien Credit Agreement
On
The First Lien, as amended in 2020, established a Tranche B-2 Term Loan (“Tranche B-2”) in an aggregate principal amount equal to $
On February 21, 2024, we used a portion of the net proceeds received from the IPO Offerings to repay $
On December 11, 2024, we amended the First Lien to refinance Tranche B-4 by establishing a Tranche B-5 Term Loan (“Tranche B-5”) in an aggregate principal amount of $
Revolving Credit Facility
The First Lien also extends credit in the form of Revolving Credit Facility with a borrowing capacity of $
The Company’s First Lien also provides for an additional letter of credit commitments (the “LC Facility”), which are not subject to the LC Sublimit and do not reduce the Revolver borrowing capacity. On September 17, 2024, the Company amended the First Lien to increase the LC Facility from $
Second Lien Credit Agreement
The Company’s amended and restated Second Lien Credit Agreement (the “Second Lien Facility”), with certain Lenders and Wilmington Trust, National Association, as the Administrative Agent and the Collateral Agent consisted of a principal amount of $
Borrowings under the Second Lien Facility term were subordinated to the First Lien and bore interest at a rate equal to, at our option, (a) SOFR (with a floor of
On January 30, 2024, we used a portion of the net proceeds received from the IPO Offerings to repay all outstanding borrowings under the Second Lien Facility. No remaining obligation exists related to the Second Lien Facility. This transaction was accounted for as a debt extinguishment and the Company incurred a loss on extinguishment of debt of $
25
Derivative Financial Instruments
To manage fluctuations in cash flows resulting from changes in the variable rates, the Company entered into three receive-variable, pay-fixed interest rate swap agreements, all effective September 30, 2022. Taken together with the related debt, these swaps create the economic equivalent of fixed-rate debt, up to the notional amount of the hedged debt. By using a derivative instrument to hedge exposures to changes in interest rates, we expose ourselves to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, the Company is not exposed to the counterparty’s credit risk in those circumstances. The Company mitigates counterparty credit risk in derivative instruments by entering into transactions with high-quality counterparties. The derivative instruments entered into by the Company do not contain credit-risk-related contingent features.
As of December 31, 2024, we have the following cash flow hedge agreements with a total notional value of $
Financial Institution |
|
Effective Dates |
|
Floating Rate Debt |
|
|
Fixed Rates |
|
||
Credit Suisse |
|
|
$ |
|
|
|
% |
|||
Morgan Stanley |
|
|
|
|
|
|
% |
|||
Credit Agricole Corporate and |
|
|
|
|
|
|
% |
|||
The fair value of the cash flow hedges as of December 31, 2024 and 2023 was $
Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Interest received, including payments made or received under the cash flow hedges, was $
The debt modifications and extinguishment in 2024 did not impact the effectiveness of the cash flow hedge arrangements outstanding as of December 31, 2024.
7. Tangible Equity Units
Concurrently with the IPO, we issued
|
|
Equity Component |
|
|
Debt Component |
|
|
Total |
|
|||
Fair value per unit |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Gross proceeds |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Less: issuance costs |
|
|
|
|
|
|
|
|
|
|||
Net proceeds |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The value allocated to the Purchase Contract is reflected net of issuance costs in additional paid-in capital on the consolidated balance sheet. The value allocated to the Amortizing Notes are reflected in long-term debt, with payments expected in the next twelve months reflected in current portion of long-term debt, in the consolidated balance sheet. Issuance costs related to the Amortizing Notes are reflected as a reduction of the carrying amount and will be amortized through the maturity date using the effective interest rate method.
On each February 1, May 1, August 1, and November 1, we pay equal quarterly cash installments of $
26
The Amortizing Notes rank equally in right of payment with all other existing and future unsecured senior indebtedness and rank senior to all of our existing and future indebtedness, if any, that is subordinated to the Amortizing Notes. At any time prior to the second scheduled trading day immediately preceding February 1, 2027, a holder may elect to settle its Purchase Contract early, in whole or in part, at an early settlement rate equal to the minimum settlement rate. The Company has the right to settle the Purchase Contracts on or after November 1, 2024, in whole but not in part, on a date fixed by it at an early mandatory settlement rate equal to the maximum settlement rate, subject to certain exceptions. During the year ended December 31, 2024,
Unless settled earlier at the holder’s option or at the Company's election, each Purchase Contract will, subject to postponement in certain limited circumstances, automatically settle on February 1, 2027 for a number of shares of our common stock, subject to certain anti-dilution adjustments, based upon the 20-day volume-weighted average price (“VWAP”) of our common stock as follows:
VWAP of BTSG Common Stock |
|
Common Stock Issued |
Greater than $ |
|
|
Equal to or less than $ |
|
$ |
Less than $ |
|
|
The Purchase Contracts are mandatorily convertible into a minimum of
8. Income Taxes
Loss before income taxes consists of the following (in thousands):
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
U.S. Operations |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Foreign Operations |
|
|
|
|
|
|
|
|
|
|||
Loss before income taxes |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Income tax benefit attributable to loss before income taxes is summarized as follows (in thousands):
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Current provision: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
|
|
$ |
|
|
$ |
|
|||
State |
|
|
|
|
|
|
|
|
|
|||
Foreign |
|
|
|
|
|
|
|
|
|
|||
Total current provision |
|
|
|
|
|
|
|
|
|
|||
Deferred provision: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
State |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total deferred provision |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income tax benefit |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
27
A reconciliation of the U.S. Federal income tax rate of
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Federal income tax at the statutory rate |
|
|
% |
|
|
% |
|
|
% |
|||
(Decrease) increase in income tax benefit: |
|
|
|
|
|
|
|
|
|
|||
State and foreign income taxes, net of federal benefits |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Jobs tax credits, net |
|
|
|
|
|
|
|
|
|
|||
State deferred rate change |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Legal claims |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Non-deductible expenses |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Share-based compensation |
|
|
( |
) |
|
|
|
|
|
|
||
Executive compensation |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Non-deductible goodwill |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Uncertain tax positions |
|
|
|
|
|
( |
) |
|
|
|
||
Adjustments associated with prior year provision |
|
|
|
|
|
|
|
|
( |
) |
||
Acquisition impacts |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Minority interest |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Lobbying and political contributions |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Other |
|
|
|
|
|
|
|
|
( |
) |
||
Total |
|
|
% |
|
|
% |
|
|
% |
|||
The increase in adjustments associated with prior year provision for 2024 is primarily attributable to finalization of the settlement agreement for the Silver matter, including partial deductibility for tax purposes, as well as the reduction in pre-tax loss.
On December 27, 2020, the Consolidated Appropriations Act was signed into law and extended the jobs credit provisions through 2025. Accordingly, jobs credits generated during the year have been recognized in the provision for income taxes for all years presented.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below (in thousands):
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Accrued expenses |
|
$ |
|
|
$ |
|
||
Allowance for credit losses and contractual allowances |
|
|
|
|
|
|
||
Net operating losses |
|
|
|
|
|
|
||
Share-based compensation |
|
|
|
|
|
|
||
IRC §163(j) interest |
|
|
|
|
|
|
||
Operating lease liability |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Deferred tax assets |
|
|
|
|
|
|
||
Valuation allowances |
|
|
( |
) |
|
|
( |
) |
Deferred tax assets, net |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Deferred tax liabilities: |
|
|
|
|
|
|
||
Operating lease right-of-use asset |
|
|
( |
) |
|
|
( |
) |
Property and equipment |
|
|
( |
) |
|
|
( |
) |
Goodwill and other intangible assets |
|
|
( |
) |
|
|
( |
) |
Insurance recovery |
|
|
( |
) |
|
|
( |
) |
Interest rate swaps |
|
|
( |
) |
|
|
( |
) |
Deferred tax liabilities |
|
|
( |
) |
|
|
( |
) |
Deferred income taxes, net |
|
$ |
|
|
$ |
( |
) |
|
28
As of December 31, 2024, the Company has federal net operating loss (“NOL”) carryforwards of $
With the enactment of the Tax Cuts and Jobs Act of 2019 on December 22, 2017, as of January 1, 2018 and as adjusted by the enactment of the CARES Act on March 25, 2020, the Company is subject to a limitation on interest expense in excess of
A valuation allowance for deferred tax assets was provided as of December 31, 2024 and 2023 related to state income tax NOL carryforwards. The realization of deferred tax assets is dependent upon generating future taxable income when temporary differences become deductible. Based upon the historical and projected levels of taxable income, we believe it is more-likely-than-not that we will realize the benefits of the deductible differences after consideration of the valuation allowance.
A reconciliation of the beginning and ending amount of total unrecognized tax benefits is as follows (in thousands):
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
||
Balance at beginning of year |
|
$ |
|
|
$ |
|
||
(Decrease) increase related to prior year tax positions |
|
|
( |
) |
|
|
|
|
Decrease related to current year tax positions |
|
|
— |
|
|
|
( |
) |
Lapse of statue of limitations |
|
|
— |
|
|
|
( |
) |
Balance at end of year |
|
$ |
|
|
$ |
|
||
Included in the balance of total unrecognized tax benefits at December 31, 2024 are potential benefits of $
We file numerous consolidated and separate income tax returns in the U.S. federal and various state and foreign jurisdictions. With few exceptions, we are no longer subject to income tax examinations by the taxing authorities for years prior to 2019. We believe that we have appropriate support for the income tax positions taken and to be taken on our income tax returns and that our accruals for income tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of the tax laws as applied to the facts of each matter. We expect that the amounts of unrecognized tax benefits will be reduced by $
9. Detail of Certain Balance Sheet Accounts
Prepaid expenses and other current assets consist of the following (in thousands):
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
||
Rebate receivable |
|
$ |
|
|
$ |
|
||
Non-trade receivables |
|
|
|
|
|
|
||
Prepaid insurance |
|
|
|
|
|
|
||
Income tax receivable |
|
|
|
|
|
|
||
Inventory returns receivable |
|
|
|
|
|
|
||
Interest rate swaps |
|
|
|
|
|
|
||
Prepaid maintenance |
|
|
|
|
|
|
||
Other prepaid expenses and current assets |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
29
Other assets consist of the following (in thousands):
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
||
Notes receivable |
|
$ |
|
|
$ |
|
||
Insurance recoveries |
|
|
|
|
|
|
||
Cloud computing |
|
|
|
|
|
|
||
Deposits |
|
|
|
|
|
|
||
Deferred debt issuance costs |
|
|
|
|
|
|
||
Equity method investments |
|
|
|
|
|
|
||
Interest rate swaps |
|
|
|
|
|
|
||
Deferred offering costs |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total other assets |
|
$ |
|
|
$ |
|
||
Accrued expenses consist of the following (in thousands):
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
||
Wages and payroll taxes |
|
$ |
|
|
$ |
|
||
Checks in excess of cash balance |
|
|
|
|
|
|
||
Compensated absences |
|
|
|
|
|
|
||
Automobile insurance reserves |
|
|
|
|
|
|
||
Workers compensation insurance reserves |
|
|
|
|
|
|
||
Health insurance reserves |
|
|
|
|
|
|
||
Legal settlements and professional fees |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Interest |
|
|
|
|
|
|
||
General and professional liability insurance reserves |
|
|
|
|
|
|
||
Contingent consideration |
|
|
|
|
|
|
||
Taxes other than income taxes |
|
|
|
|
|
|
||
Recoupment fees |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued expenses |
|
$ |
|
|
$ |
|
||
Long-term liabilities consist of the following (in thousands):
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
||
Workers compensation insurance reserves |
|
$ |
|
|
$ |
|
||
General and professional liability insurance reserves |
|
|
|
|
|
|
||
Automobile insurance reserves |
|
|
|
|
|
|
||
Contingent consideration |
|
|
|
|
|
|
||
Employee incentives |
|
|
|
|
|
|
||
Deferred gain |
|
|
|
|
|
|
||
Legal settlements and professional fees |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total long-term liabilities |
|
$ |
|
|
$ |
|
||
10. Earnings Per Share (“EPS”)
Basic net income (loss) per share excludes dilution and is reported separately for continuing operations and discontinued operations. Basic net loss per share of common stock for continuing operations and discontinued operations is calculated by dividing net income (loss) from continuing operations and discontinued operations attributable to common shareholders by the weighted average number of shares outstanding for the reporting period, respectively. Diluted net income (loss) per share of common stock is computed by giving effect to all potential weighted average dilutive common stock. In periods of net loss, no potentially dilutive common shares are included in the diluted shares outstanding as the effect is anti-dilutive.
30
The number of additional shares of common stock related to stock option awards subject to only a time-based condition is calculated using the treasury stock method, if dilutive. Stock option awards subject to a performance condition are not included in the denominator of the diluted EPS calculation using the treasury stock method for the years ended December 31, 2023 and 2022, as the performance condition had not been satisfied. Upon completion of the IPO in January 2024, the performance condition was met and a portion of the Tier I options vested (Note 11). Thus, the number of additional shares of common stock related to stock option awards subject to a performance condition are included in the denominator of the diluted EPS calculation using the treasury stock method for the year ended December 31, 2024, if dilutive.
The number of additional shares of common stock related to restricted stock units (“RSUs”) is reflected in the denominator of the diluted EPS calculation using the treasury stock method, if dilutive.
For the year ended December 31, 2024, the TEUs were assumed to be outstanding at the minimum settlement amount for weighted-average shares for basic EPS. For diluted EPS, the shares were assumed to be settled at a conversion factor based on the 20-day VWAP per share of the Company's common stock not to exceed
The following table sets forth the computation of basic and diluted net loss per share attributable to common shareholders (in thousands, except per share amounts):
|
|
For The Years Ended December 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Numerator: |
|
|
|
|
|
|
|
|
|
|||
Net loss from continuing operations |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Less: Net loss attributable to noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net loss from continuing operations attributable to common shareholders |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income from discontinued operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net loss attributable to common shareholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Denominator: |
|
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|
|||
Weighted-average shares outstanding - basic |
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|
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|
|||
|
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|
|
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|
|
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|
|||
Effect of dilutive securities: |
|
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|
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|
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|
|||
Stock options |
|
|
|
|
|
|
|
|
|
|||
RSUs |
|
|
|
|
|
|
|
|
|
|||
TEUs |
|
|
|
|
|
|
|
|
|
|||
Weighted-average shares outstanding - diluted |
|
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|
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|
|
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|
|||
|
|
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|
|
|
|
|
|||
Basic income (loss) per share attributable to common shareholders: |
|
|
|
|
|
|
|
|
|
|||
Continuing operations |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Discontinued operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Diluted income (loss) per share attributable to common shareholders: |
|
|
|
|
|
|
|
|
|
|||
Continuing operations |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Discontinued operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
31
The following potentially common share equivalents were excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented, as well as options that are contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period (in thousands):
|
|
For The Years Ended December 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Stock options (1) |
|
|
|
|
|
|
|
|
|
|||
RSUs |
|
|
|
|
|
|
|
|
|
|||
TEUs |
|
|
|
|
|
|
|
|
|
|||
Total |
|
|
|
|
|
|
|
|
|
|||
(1) For all periods presented, the dilutive effect of stock options were excluded from the computation of loss per share because the assumed proceeds from the awards' exercise were greater than the average market price of the common shares.
All share and per share amounts have been retroactively adjusted to reflect the effects of the stock split that occurred in January 2024 (see Note 11).
11. Common Stock, Preferred Stock, and Share-Based Compensation
Common Stock
The Company’s Board of Directors approved a
Preferred Stock
Upon completion of the IPO Offerings in January 2024, the Company's Board of Directors approved an amendment to our articles of incorporation to authorize
Share-Based Compensation Plans
On January 24, 2024, the Board of Directors adopted the 2024 Incentive Plan. Concurrent with the adoption of the 2024 Incentive Plan, the previously existing share-based compensation plan, the 2017 Stock Plan, was terminated and no further issuances are permitted under the 2017 Stock Plan; however, awards granted under the 2017 Stock Plan will continue to be governed by their existing terms.
The Company recorded share-based compensation expense on the consolidated statements of operations for the periods indicated as follows (in thousands):
|
|
For The Years Ended December 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Cost of goods |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
Cost of services |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
Selling, general, and administrative expense |
|
$ |
|
|
$ |
|
|
$ |
|
|||
In addition to the amounts above, the Company recognized $
32
2017 Stock Plan
In January 2018, the Compensation Committee of the Company’s Board of Directors approved a grant of
Following the BrightSpring Corp. Acquisition in 2019, the Compensation Committee of the Company’s Board of Directors approved the modification of the previously granted Tier I and Tier II Performance Options. Tier 1 Performance options now vest upon the attainment of Sponsor Month over Month (“MoM”) (quotient obtained by dividing sponsor cash available by sponsor cash invested) of at least
Concurrent with the adoption of the 2024 Incentive Plan on January 24, 2024, no further awards are authorized to be granted under the 2017 Stock Plan.
2024 Incentive Plan
The 2024 Incentive Plan initially reserved
Under the 2024 Incentive Plan, the Company granted stock options, representing options to purchase shares of the Company’s common stock at a stated price, and RSUs, which represent the conditional right to receive one share of common stock, both upon satisfaction of a vesting requirement. Stock options and RSUs granted under the 2024 Incentive Plan vest upon the satisfaction of time-based requirements. We recognize expense for stock options and RSUs over the vesting term based on the grant date fair value of the award. In each case, vesting of the Company’s outstanding and unvested stock options and RSUs is contingent upon the holder’s continued service through the date of each applicable vesting event. The options all have a 10-year life and we record forfeitures as they occur.
Concurrent with the IPO, the Compensation Committee of the Company’s Board of Directors granted approximately $
Summary details for RSUs
The following table summarizes the RSU activity under the 2024 Incentive Plan for the period presented:
|
|
Units |
|
|
Weighted Average Grant Date Fair Value |
|
|
Weighted Average Remaining Contractual Term (years) |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding RSUs at January 1, 2024 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
$ |
— |
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Vested |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding RSUs at December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
As of December 31, 2024, there was $
33
Summary details for Stock Options
The following table summarizes the Time-Based Options stock incentive plan activity under the 2017 Stock Plan and the 2024 Incentive Plan for the period presented:
|
|
Number of Shares |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Grant Date Fair Value |
|
|
Aggregate Intrinsic Value |
|
|
Weighted Average Remaining Contractual Term (years) |
|
|||||
Outstanding options at January 1, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Forfeited, repurchased or expired |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Exercised |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Outstanding options at December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Exercisable options at December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|||||
The following table summarizes the Tier I and II Performance Option stock incentive plan activity under the 2017 Stock Plan for the period presented:
|
|
Number of Shares |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Grant Date Fair Value |
|
|
Aggregate Intrinsic Value |
|
|
Weighted Average Remaining Contractual Term (years) |
|
|||||
Outstanding options at January 1, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|||||
Granted |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Forfeited, repurchased or expired |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Exercised |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Outstanding options at December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Exercisable options at December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|||||
Cash received from stock option exercises for the years ended December 31, 2024, 2023 and 2022 was $
As of December 31, 2024, there was $
Fair Value Assumptions
The Company estimates the fair value of options granted using the Black-Scholes-Merton model for Time-Based Options under the 2017 Stock Plan and 2024 Incentive Plan, and a Monte Carlo simulation for Performance Options granted under the 2017 Stock Plan. The assumptions used to calculate the fair value of options granted are evaluated and modified, as necessary, to reflect current market conditions and experience. The Company estimates the volatility of its common stock utilizing the historical re-levered volatility, re-levered to account for differences in leverage, of the Company and its peer-group. The peer-group utilized consisted of eight companies, in the same or similar industries as the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The dividend yield was based on the expectation that no dividends will be paid. The Company has never paid cash dividends on its common stock and does not anticipate paying cash dividends in the foreseeable future. In 2024, 2023 and 2022, the Company used a Simplified Method to estimate the expected term for the Time-Based Options, which assumes that options will be exercised early at a uniform rate over the period between vesting and the end of the contractual term, as adequate historical
34
experience is not available to provide a reasonable estimate. For the Tier I and II Performance Options, the Company used management estimates of the performance events that trigger vesting and subsequent exercising of the options.
The following table summarizes the weighted average assumptions used to estimate the fair value of options granted during the periods presented:
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Expected volatility (range) |
|
|
|
|
|
|
||||||
Risk free interest rate (range) |
|
|
|
|
|
|
||||||
Expected dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Average expected term (years) |
|
|
|
|
|
|
||||||
Average fair value per share of time-based stock options based on the |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Average fair value per share of performance stock options based on the |
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Weighted average fair value of options granted (in millions) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
12. Property and Equipment, Net
Property and equipment, net is summarized as follows (in thousands):
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
||
Land and land improvements |
|
$ |
|
|
$ |
|
||
Furniture and equipment |
|
|
|
|
|
|
||
Software |
|
|
|
|
|
|
||
Buildings |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Property and equipment under finance lease (Note 13) |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Property and equipment |
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
|
|
|
|
||
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense is recorded within cost of goods, cost of services, and selling, general, and administrative expenses within our consolidated statements of operations, depending on the nature of the underlying fixed assets. Depreciation expense was $
13. Lease Arrangements
The Company has a significant population of leases that primarily includes provider facilities and pharmacy locations, as well as office space and office equipment. The Company has real estate and equipment leases that have expiration dates through
Lease expense consists of operating and finance lease costs, short-term lease costs, and variable lease costs, which primarily include common area maintenance, real estate taxes, and insurance for the Company’s real estate leases.
35
Lease expense is summarized as follows (in thousands):
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Finance leases: |
|
|
|
|
|
|
|
|
|
|||
Amortization of right-of-use assets |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Interest on lease liabilities |
|
|
|
|
|
|
|
|
|
|||
Operating leases: |
|
|
|
|
|
|
|
|
|
|||
Operating lease cost |
|
|
|
|
|
|
|
|
|
|||
Short-term lease cost |
|
|
|
|
|
|
|
|
|
|||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|||
Total lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Future minimum lease payments of our leases as of December 31, 2024 are as follows (in thousands):
Fiscal Year |
|
Finance Lease Costs |
|
|
Operating Lease Costs |
|
||
2025 |
|
$ |
|
|
$ |
|
||
2026 |
|
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
2029 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total future minimum lease payments |
|
$ |
|
|
$ |
|
||
Less: imputed interest |
|
|
|
|
|
|
||
Total present value of lease liabilities |
|
$ |
|
|
$ |
|
||
Supplemental Cash Flow & Other Information
Supplemental cash flow information related to leases are summarized as follows (dollars in thousands):
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
|||
Operating cash flows from finance leases |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Financing cash flows from finance leases |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Operating cash flows from operating leases |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Right-of-use assets obtained in exchange for new finance lease liabilities |
|
|
|
|
|
|
|
|
|
|||
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
|
|
|
|
|
|
|
|
|||
Weighted-average remaining lease term (in years): |
|
|
|
|
|
|
|
|
|
|||
Finance leases |
|
|
|
|
|
|
|
|
|
|||
Operating leases |
|
|
|
|
|
|
|
|
|
|||
Weighted-average discount rate: |
|
|
|
|
|
|
|
|
|
|||
Finance leases |
|
|
% |
|
|
% |
|
|
% |
|||
Operating leases |
|
|
% |
|
|
% |
|
|
% |
|||
14. Fair Value
Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques:
36
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The financial assets or liabilities recorded at fair value on a recurring basis are set forth in the table below (in thousands):
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
|
Valuation Technique |
||
Assets: |
|
|
|
|
|
|
|
|
||
Interest rate swaps (Level 2) |
|
$ |
|
|
$ |
|
|
A |
||
Total assets |
|
$ |
|
|
$ |
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Liabilities: |
|
|
|
|
|
|
|
|
||
Contingent consideration (Level 3) |
|
$ |
|
|
$ |
|
|
C |
||
Total liabilities |
|
$ |
|
|
$ |
|
|
|
||
The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models. The key inputs for the valuation models are quoted market prices, interest rates, forward yield curves, and credit risk adjustments that are necessary to reflect the probability of default by the counterparty or us. For disclosures about the fair value measurements of our derivative instruments, refer to Note 6.
The contingent consideration represents future earn-outs and a post-closing equity adjustment feature, both associated with acquisitions, which are recognized as part of the purchase price at the estimated fair value on the acquisition date. These liabilities are classified as accrued expenses and long-term liabilities in our accompanying consolidated balance sheets.
The fair values of the liabilities associated with future earn outs were derived using the income approach with unobservable inputs, which included future earnings forecasts and present value assumptions, and there was little or no market data (Level 3). The Company will re-assess the fair values on each reporting period thereafter until settlement.
The preliminary fair value of the liability associated with post-closing equity adjustment feature related to the Haven Hospice acquisition was derived with unobservable inputs using a Monte Carlo simulation, where the common stock price of the Company was evolved using a Geometric Brownian Motion of a period from the valuation date to the end of the fourth anniversary of closing. Estimated equity volatility was based on historical volatility, implied volatility, and peer group volatility over various periods. The Company will re-assess the fair value at each reporting period with changes in value being recorded through the consolidated statements of operations. The ultimate settlement of the liability will be through either issuance of additional equity shares and/or additional cash paid in the case of net realized losses on sales; or reduction of the outstanding balance of the seller note, in the case of net aggregate realized gain on sales up to the amounts previously paid.
The following table summarizes the changes in fair value of the Company’s contingent consideration for the years ended December 31, 2024 and 2023, as follows (in thousands):
Balance at January 1, 2023 |
|
$ |
|
|
Additions from acquisitions |
|
|
|
|
Contingent consideration payments |
|
|
( |
) |
Change in fair value |
|
|
( |
) |
Balance at December 31, 2023 |
|
$ |
|
|
Addition of acquisition earn-out |
|
|
|
|
Addition of post-closing equity adjustment feature |
|
|
|
|
Contingent consideration payments |
|
|
( |
) |
Change in fair value |
|
|
|
|
Balance at December 31, 2024 |
|
$ |
|
Assets Measured at Fair Value on a Non-Recurring Basis
The Company’s non-financial assets, such as goodwill and long-lived assets are adjusted to fair value when an impairment charge is recognized.
During the years ended December 31, 2024 and 2023, we recorded
Long-lived assets include operating lease assets and definite-lived intangible assets. During the year ended December 31, 2024 and 2023, we concluded that sufficient indicators existed to require us to perform recoverability tests by comparing the sum of the estimated undiscounted future cash flows attributable to the assets to their carrying values. Approximately $
37
million and $
If actual performance does not achieve the projections, or if the assumptions used change in the future, we may be required to recognize impairment charges in future periods.
15. Commitments and Contingencies
Legal Proceedings
On March 4, 2011, Relator Marc Silver, on behalf of the U.S. Government and various state governments, filed a complaint in the United States District Court for the District of New Jersey (“the District Court”) against PharMerica, seeking relief, with respect to alleged violations of the federal False Claims Act and state false claims acts, including three times the amount of damages to the federal government plus civil penalties and no less than a certain amount for each alleged false claim, as well as any other recoveries or relief provided for by the federal False Claims Act; damages, fines, penalties, and other recoveries or relief permitted under state false claims acts; and other forms of relief, including attorneys’ fees. The complaint alleged that, in violation of the Anti-Kickback Statute and the False Claims Act, PharMerica offered below-cost or below-fair-market-value prices on drugs in exchange for so-called preferred or exclusive provider status that would allow PharMerica to dispense drugs to patients for which PharMerica could bill federal health care program payers. The U.S. Government and state governments declined to intervene in the case.
The District Court issued an order dismissing the case in full in 2016. In 2018, however, the Third Circuit Court of Appeals issued an order reinstating the case. In April 2023, the District Court issued an order denying Relator’s motion seeking to strike portions of the opinions of PharMerica’s experts and granted in part PharMerica’s motions to exclude Relator’s experts. On June 28, 2023, the District Court issued an order setting a trial date of December 4, 2023. On November 6, 2023, the District Court denied our motion for summary judgment. On November 18, 2023, the Company agreed to settle the matter without admitting liability. On May 29, 2024, the parties entered into a final settlement agreement, which was approved by both the United States Department of Justice and the District Court. The total financial impact of the settlement is $
The Company is also party to various legal and/or administrative proceedings arising out of the operation of our programs and arising in the ordinary course of business. We record accruals for such contingencies to the extent that we conclude it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We do not believe the ultimate liability, if any, for outstanding proceedings or claims, individually or in the aggregate, in excess of amounts already provided, will have a material adverse effect on our consolidated financial condition, results of operations, or cash flows. It is reasonably possible that an adverse determination might have an impact on a particular period. While we believe our provision for legal contingencies is adequate, the outcome of legal proceedings is difficult to predict, and we may settle legal claims or be subject to judgments for amounts that exceed our estimates.
16. Redeemable Noncontrolling Interests
The Company has a
38
The respective joint venture agreement contains both a put option for the minority partners and a call option for the Company, requiring or allowing the Company, in certain circumstances, to purchase the partners’ remaining interest in the joint venture at a price based on predetermined earnings multiples. Each of these options is to be triggered upon the occurrence of specified events and/or upon the passage of time. The Company calculates the redemption amount related to the Abode Care Partners options using a Monte Carlo simulation and records the amount, if any, by which the redemption amount exceeds the carrying value as a charge to accumulated deficit.
The total redeemable noncontrolling interest associated with Abode Care Partners was $
On March 1, 2024, the Company purchased the remaining
On August 1, 2024, the Company purchased the remaining
Income tax impacts related to the purchase of Gateway and Harvest Grove of $
The following table summarizes the changes in the carrying value of the Company’s redeemable noncontrolling interest (in thousands):
Balance at December 31, 2023 |
$ |
|
|
Adjustment of Gateway redeemable noncontrolling interest to redemption amount |
|
( |
) |
Adjustment of Harvest Grove redeemable noncontrolling interest to redemption amount |
|
|
|
Purchase of Gateway redeemable noncontrolling interest |
|
( |
) |
Purchase of Harvest Grove redeemable noncontrolling interest |
|
( |
) |
Net loss attributable to redeemable noncontrolling interests |
|
( |
) |
Balance at December 31, 2024 |
$ |
|
17. Related Party Transactions
The Company was party to a Monitoring Agreement with KKR and WBA, which required payment of an aggregate advisory fee equivalent to
Prior to the termination of the Monitoring Agreement, the Company recognized $
As a result of the termination of the Monitoring Agreement and in accordance with the agreement, the Company paid $
39
KKR Capital Markets LLC (“KCM”), a wholly owned subsidiary of KKR, acted as an underwriter in the IPO Offerings during the first fiscal quarter of 2024 and received $
KKR has ownership interests in a broad range of portfolio companies, and we may enter into commercial transactions for goods or services in the ordinary course of business with these companies. We do not believe such transactions are material to our business.
The Company has agreements with WBA and/or certain of its affiliates under which the Company purchases significant volume of inventory, including a Joinder Agreement to the Pharmaceutical Purchase and Distribution Agreement (the “WBAD Membership Agreement”) between WBA and ABDC. The Company, as a third-party beneficiary to the Pharmaceutical Purchase and Distribution Agreement, has the right to participate in certain pricing and payment related terms as well as appoint WBA to negotiate certain commercial and other mutually agreed upon terms for generic pharmaceutical products in accordance with guiding principles that address topics such as improvements in pricing and notification regarding switches in suppliers. The WBAD Membership Agreement was terminated in the first fiscal quarter of 2025, and we entered into a separate agreement with ABDC.
18. Segment Information
The Company's CODM is its , who evaluates the performance of our segments and allocates resources based on segment EBITDA.
For all segments, the CODM uses segment EBITDA in the annual budgeting and monthly forecasting process. The CODM considers actual-to budget and actual-to current forecast variances for segment EBITDA on a monthly basis for evaluating performance of each segment and making decisions about allocating capital and other resources to each segment.
Segment amounts exclude certain expenses not specifically identifiable to the segments for functions performed in a centralized manner, which include accounting, finance, human resources, legal, information technology, corporate office support and overall corporate management. Segment assets and capital expenditures are not provided to the Company’s CODM and, therefore, are not disclosed.
The following tables set forth information about the Company’s reportable segments, along with the items necessary to reconcile the segment information to the totals reported in the Company’s consolidated statements of operations as follows (in thousands):
|
For the Year Ended December 31, 2024 |
|
|||||||||
|
Pharmacy Solutions |
|
|
Provider Services |
|
|
Total Segments |
|
|||
Product revenue |
$ |
|
|
$ |
— |
|
|
$ |
|
||
Service revenue |
|
— |
|
|
|
|
|
|
|
||
Cost of drugs |
|
|
|
|
— |
|
|
|
|
||
Cost of services |
|
— |
|
|
|
|
|
|
|
||
Other direct costs (1) |
|
|
|
|
— |
|
|
|
|
||
Segment selling, general, and administrative expenses (2) |
|
|
|
|
|
|
|
|
|||
Segment depreciation and amortization expense (3) |
|
|
|
|
|
|
|
|
|||
Segment EBITDA |
$ |
|
|
$ |
|
|
$ |
|
|||
40
|
For the Year Ended December 31, 2023 |
|
|||||||||
|
Pharmacy Solutions |
|
|
Provider Services |
|
|
Total Segments |
|
|||
Product revenue |
$ |
|
|
$ |
— |
|
|
$ |
|
||
Service revenue |
|
— |
|
|
|
|
|
|
|
||
Cost of drugs |
|
|
|
|
— |
|
|
|
|
||
Cost of services |
|
— |
|
|
|
|
|
|
|
||
Other direct costs (1) |
|
|
|
|
— |
|
|
|
|
||
Segment selling, general, and administrative expenses (2) |
|
|
|
|
|
|
|
|
|||
Segment depreciation and amortization expense (3) |
|
|
|
|
|
|
|
|
|||
Segment EBITDA |
$ |
|
|
$ |
|
|
$ |
|
|||
|
For the Year Ended December 31, 2022 |
|
|||||||||||||
|
Pharmacy Solutions |
|
|
Provider Services |
|
|
Other |
|
|
Total Segments |
|
||||
Product revenue |
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Service revenue |
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Cost of drugs |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Cost of services |
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Other direct costs (1) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Segment selling, general, and administrative |
|
|
|
|
|
|
|
|
|
|
|
||||
Segment depreciation and amortization expense (3) |
|
|
|
|
|
|
|
|
|
|
|
||||
Segment EBITDA |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Reconciliation of loss: |
|
|
|
|
|
|
|
|
|
|||
Total Segment EBITDA |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Segment depreciation and amortization |
|
|
|
|
|
|
|
|
|
|||
Expenses not allocated at segment level: |
|
|
|
|
|
|
|
|
|
|||
Selling, general, and administrative expenses |
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|||
Goodwill impairment loss |
|
|
— |
|
|
|
— |
|
|
|
|
|
Loss on extinguishment of debt |
|
|
|
|
|
— |
|
|
|
— |
|
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
|||
Income tax benefit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
41