BrightSpring Health Services, Inc. (BTSG)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion analyzes our financial condition and results of operations and should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (our “Form 10-Q”). This discussion contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements.” When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that characterize our business. Known material factors that could affect our financial performance and actual results, and could cause actual results to differ materially from those expressed or implied in any forward-looking statements included in this discussion or otherwise made by our management, are described in Item 2 of Part I of this Form 10-Q, and in Item 1A, “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2025 (our “Form 10-K”). Factors that could cause or contribute to such difference are not limited to those identified in “Risk Factors.” When used in the following discussion, “Senior” patients and populations mean individuals who are aged 65 and older, and “Specialty” patients and populations mean individuals who have unique, specialized and most often chronic/life-long health conditions and needs.

Overview

We are a leading home and community-based healthcare services platform, focused on delivering complementary pharmacy and provider services to medically complex patients. We have a differentiated approach to care delivery, with an integrated and scaled model that addresses critical services that the highest-need and highest-cost patients require. With a focus on Senior and Specialty patients, our platform provides pharmacy and provider services (both clinical and supportive care in nature) in lower-cost home and community settings largely to Medicare, Medicaid, and commercially-insured populations. We are an essential part of our nation’s health delivery network as a front-line provider of high-quality and cost-effective care to a large and growing number of people, who increasingly require a combination of specialized solutions to enable holistic health care management. Our presence spans all 50 states; we serve over 485,000 patients daily through our approximately 12,700 clinical providers and pharmacists; and our services make a profound impact in the lives and communities of the people we serve.

Unless otherwise noted, amounts and disclosures throughout this Management’s Discussion and Analysis relate to our continuing operations. Refer to “PART I - Item 1. Note 2” of our Form 10-K for additional information regarding discontinued operations.

For additional overview of our business, see “PART I - Item 1. Business” of our Form 10-K.

Second Quarter of 2026 Key Highlights

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$300.0 million paydown and concurrent modification of our First Lien Facility, including interest rate refinancings that resulted in interest savings

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Completed an underwritten secondary offering of our common stock by affiliates Kohlberg Kravis Roberts & Co. L.P. and certain members of management in June 2026

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Repurchased 1,026,465 shares of common stock in connection with the June 2026 secondary offering

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Company leverage of 2.15x at June 30, 2026

Financial Performance Highlights: Second Quarter of 2026 Compared to Second Quarter of 2025

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Revenue grew by $725.4 million, or 23.0%, to $3.9 billion

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Pharmacy Solutions segment revenue grew by $617.1 million, or 22.1%, to $3.4 billion

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Provider Services segment revenue grew by $108.4 million, or 30.3%, to $466.0 million

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Net income increased by $78.1 million to $86.6 million

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Adjusted EBITDA(1) increased by $63.0 million, or 44.2%, to $205.5 million

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Pharmacy Solutions segment EBITDA increased by $55.4 million, or 44.4%, to $180.0 million

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Provider Services segment EBITDA grew by $18.4 million, or 32.6%, to $74.9 million

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Diluted EPS increased by $0.35 from $0.04 to $0.39

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Adjusted EPS(1) increased by $0.23 from $0.22 to $0.45

(1) Reconciliation of GAAP to non-GAAP results is provided below under the section entitled “Non-GAAP Financial Measures.”

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Recent Developments

On May 28, 2026, the company used proceeds from the Community Living divestiture to repay $300.0 million of Tranche B-5 and established a new Tranche B-6 Term Loan of $2,214.9 million to refinance the remaining Tranche B-5 balance at SOFR plus 2.00% (or ABR plus 1.00%), maturing February 21, 2031. Additionally, borrowings of the Revolver bear interest at a rate equal to SOFR (with a floor of 0.00%) plus 2.00% for the Revolving Credit Loans or ABR (with a floor of 0.00%) plus 1.00% for the Swingline Loans.

On June 6, 2026, KKR Stockholder and certain management selling stockholders completed a registered secondary public offering of 14,999,771 shares of the Company’s common stock (the “June 2026 Offering”). The Company did not sell any shares of common stock that were offered in the June 2026 Offering. Also, the Company did not receive any proceeds from the June 2026 Offering, other than proceeds received in connection with the cash exercise of stock options by the management selling stockholders in connection with the June 2026 Offering.

In connection with the June 2026 Offering, the Company concurrently purchased from the underwriter, out of the aggregate of 14,999,771 shares of common stock that were the subject of the June 2026 Offering, 1,026,465 shares of common stock at a price of $58.453 per share, for a total purchase price of $60.0 million. The purchase price reflected a discount to the closing market price on the date of purchase. The repurchase was reviewed and approved by the Audit Committee of our Board of Directors.

Our Service Offerings

We are one of the largest independent providers of home and community-based health services in the United States, delivering both pharmacy and provider services. We believe our high-quality and complementary health services offerings address significant and important patient and stakeholder needs. We enhance patient outcomes through the delivery and coordination of high-quality services that high-need, high-cost patients require. Our services are principally delivered in patient-preferred and lower-cost settings and often over longer periods of time, given the chronic nature of the patient conditions that we address. We believe our breadth of service capabilities and proven outcomes position us as a provider of choice for patients, families, referral sources, customers, and payors. We deliver services through two reportable segments: Pharmacy Solutions and Provider Services. For additional details regarding our diversified service offerings within each reportable segment see “PART I - Item 1. Business” of our Form 10-K.

The following table summarizes the revenues generated by each of our reportable segments:

Payor Mix

We are characterized by payor diversification across our platform. Our payors are principally federal, state, and local governmental agencies, commercial insurance, private, and other payors. Additionally, our Medicaid payors can be further broken down across each individual state with our top 10 Medicaid states representing 7% and 6% of total Company revenue for the three and six months ended June 30, 2026 and 2025, respectively.

We provide our services across all 50 states, Puerto Rico and Canada, with our top 10 states of operations comprising 53% and 52% of total Company revenues for the three and six months ended June 30, 2026, respectively, compared to 53% for the three and six months ended June 30, 2025. The federal, state, and local programs under which we operate are subject to legislative and budgetary changes that can influence reimbursement rates.

The following tables summarize the percentage of revenue generated by each payor type for each of our service offerings and reportable segments:

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion analyzes our financial condition and results of operations and should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements.” When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that characterize our business. Known material factors that could affect our financial performance and actual results, and could cause actual results to differ materially from those expressed or implied in any forward-looking statements included in this discussion or otherwise made by our management, are described in “Risk Factors.” Factors that could cause or contribute to such difference are not limited to those identified in “Risk Factors.”

Overview

We are a leading home and community-based healthcare services platform, focused on delivering complementary pharmacy and provider services to complex patients. We have a differentiated approach to care delivery, with an integrated and scaled model that addresses critical services that the highest-need and highest-cost patients require. With a focus on Senior and Specialty patients, our platform provides pharmacy and provider services (both clinical and supportive care in nature) in lower-cost home and community settings largely to Medicare, Medicaid, and commercially-insured populations. Our presence spans all 50 states, we serve over 465,000 patients daily through our approximately 10,500 clinical providers and pharmacists, and our services make a profound impact in the lives and communities of the people we serve.

We have built a significant presence and capability in delivering complementary and high-touch daily healthcare services and programs to complex patients in their homes and in communities in order to address their multiple health needs and requirements more completely, through two reportable segments: Pharmacy Solutions and Provider Services. In pharmacy, we leverage our national infrastructure to provide daily medication therapy management to various customer and patient types wherever they reside in the community, including home and in-clinic infusion patients, oncology and other specialty patients in their homes, residents of independent and senior living communities, people receiving hospice care, neuro and Behavioral clients’ and patients’ homes, residents of skilled nursing and rehabilitation facilities, hospital patients, and the homes of Seniors who are on a significant number of medications. Within provider services, we address the clinical and supportive care needs of Senior and Specialty populations, including neuro patients, primarily in their homes, as well as some clinic and community settings. Our clinical services consist of home health and hospice and rehab therapy, and our supportive care services address activities of daily living and social determinants of health as well. We also provide home-based primary care for patients in senior living communities, long-term care, and individual homes to directly manage and optimize patient outcomes and to enable value-based care. By providing these complementary and necessary services for complex patients, our care model is designed to address multiple patient needs and better integrate health services delivery to improve quality and patient experiences, while reducing overall costs.

Discontinued Operations

On January 17, 2025, the Company entered into a purchase agreement with National Mentor Holding, Inc. to divest our community living services, home and community based waiver programs, and intermediate care facilities (the “Community Living business”), for $835 million, subject to typical adjustments for working capital and other customary items. We expect the divestiture to close in the first fiscal quarter of 2026, subject to customary closing conditions. This transaction provides for continuity of important intellectual and developmental disability services while the Company focuses on a concentrated group of customers, patients and stakeholders in the future. We believe the Company’s streamlined service offerings will result in increased strategic focus, operational efficiencies, a refined payor mix, and greater clinical integration and business synergy across the Provider Services segment. The divestiture will also augment our expected Revenue and Adjusted EBITDA growth rates and maximize exposure to target growth markets that require the Company's needed and valuable solutions, such as home health, rehab, primary care, and hospice.

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 therefore met the criteria for classification as discontinued operations. As a result, the financial results of the Community Living business, which were previously reported as part of our Provider Services segment, have been classified as discontinued operations in the audited consolidated statements of operations, and its assets and liabilities have been classified as held for sale for all periods presented. Unless otherwise noted, amounts and disclosures throughout this Management’s Discussion and Analysis relate to our continuing operations. Refer to Part II, Item 8. Note 2 for additional information regarding discontinued operations.

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2025 Key Highlights

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Completed three acquisitions within our Provider Services segment

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Announced definitive agreement to divest the Community Living business

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Completed two underwritten secondary offerings of our common stock by affiliates of Kohlberg Kravis Roberts & Co. L.P. and certain members of management, which were completed in June 2025 and October 2025. As a result of these offerings, we are no longer a “controlled company” within the meaning of the corporate governance standards of Nasdaq

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Repurchased 1,500,000 shares of common stock in connection with the October 2025 secondary offering

Financial Performance Highlights: Fiscal Year 2025 Compared to Fiscal Year 2024

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Revenue grew by $2.8 billion, or 28.2%, to $12.9 billion

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Pharmacy Solutions segment revenue grew by $2.7 billion, or 30.7%, to $11.4 billion

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Provider Services segment revenue grew by $146.9 million, or 11.1%, to $1.5 billion

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Net income increased by $173.7 million from a net loss of $68.9 million to net income of $104.8 million

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Adjusted EBITDA(1) increased by $157.4 million, or 34.2%, to $617.6 million

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Pharmacy Solutions segment EBITDA grew by $148.8 million, or 37.7%, to $543.5 million

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Provider Services segment EBITDA grew by $27.4 million, or 13.3%, to $232.7 million

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Diluted income per share increased by $0.82 from diluted loss per share of $(0.34) to diluted income per share of $0.48

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Adjusted EPS (1) increased by $0.65 from $0.35 to $1.00

(1) Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

Our Service Offerings

We are one of the largest independent providers of home and community-based health services in the United States, delivering both pharmacy and provider services. We believe our high-quality and complementary health services offerings address significant and important patient and stakeholder needs. We enhance patient outcomes through the delivery and coordination of high-quality services that high-need, high-cost patients require. Our services are principally delivered in patient-preferred and lower-cost settings and often over longer periods of time, given the chronic nature of the patient conditions that we address. We believe our breadth of service capabilities and proven outcomes position us as a provider of choice for patients, families, referral sources, customers, and payors. We deliver services through two reportable segments: Pharmacy Solutions and Provider Services.

The following table summarizes the revenues generated by each of our reportable segments for the most recent two years:

Pharmacy Solutions

We opportunistically provide pharmacy services when and where demanded and as required to customers and patients in their homes and communities, often in coordination with our provider services. The Company filled over 43 million prescriptions in 2025 from over 175 pharmacies across all 50 states, with services delivered to approximately 6,600 customer locations, approximately 73,000 individual or group homes, and over 410,000 patients, all through over 4,500 unique customer and payor contracts. Our leading pharmacy support across customer and patient settings is achieved through a focus on medication availability and reliability, cost containment, customer staff and patient support programs, clinical and regulatory education and support, and leading customer service. Infusion and Specialty Pharmacy prescriptions and Home and Community Pharmacy prescriptions have grown at more than 27% and 3%, respectively, from December 2024 to December 2025. We have a unique opportunity to increasingly provide more

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pharmacy services in the future to provider patients and patients transitioning across settings of care. Almost every one of the Company’s patients who receive provider services from us have a significant medication support need given their polypharmacy profile, which we have the opportunity to further address.

Infusion and Specialty Pharmacy

We provide infused, injectable, and oral medication services in the home and clinic focused on pharmaceutical therapies that require expert administration and high-touch clinical services to patients by our pharmacists, registered nursing staff, and patient support teams. Infusion therapy services are a specialty form of pharmaceuticals that involve the intravenous administration of higher-cost, specially-handled medications that treat a wide range of acute and chronic health conditions, including, for example, infections, auto-immune illnesses, oncology, multiple sclerosis, hemophilia, and nutritional deficiencies. Oral and injectable medication therapies for complex disease management treat oncology, neurology, dermatology, cardiology, immunology, inflammatory, rare and orphan, and other conditions. Within oncology, as one of the leading independent specialty pharmacies in the United States, our services encompass clinical coordination, patient education, protocol compliance, patient assistance with insurance access and outside funding, and timely delivery of medication. Our certified oncology pharmacists are available 24/7 to provide support for patients and caregivers while working in close coordination with their physicians.

As a result of our unique capabilities in serving pharmaceutical manufacturers and biotech companies, we have exclusive or preferred relationships in specialty oncology drugs, as manufacturers select our pharmacy – exclusively or as part of a group of a few other pharmacies – to distribute and support their therapies in the market. We currently have 149 limited distribution oncology drugs in the market, with an additional 18 in the pipeline still to launch over the next 12 to 18 months.

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