Q3 2025 Guardian Pharmacy Services Inc Earnings Call

Speaker #1: Good day, everyone, and welcome to Guardian Pharmacy's third quarter earnings call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session.

Speaker #1: I will now hand the call over to Ashley Stockton.

Speaker #2: Good afternoon. Thank you for participating in today's conference call. This is Ashley Stockton, Senior Director of Investor Relations for Guardian Pharmacy Services. I'm joined on today's call by Fred Burke, President and Chief Executive Officer, and David Morris, Chief Financial Officer.

Speaker #2: After the close today, Guardian posted its financial results for the quarter ended September 30th, 2025. A copy of the press release is available on the company's Investor Relations website.

Speaker #2: Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions.

Speaker #2: Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations.

Speaker #2: We encourage you to review the information in today's press release as well as in our quarterly report on Form 10Q to be filed with the SEC.

Speaker #2: Including the specific risk factors and uncertainties discussed in our SEC filings, we do not undertake any duty to update any forward-looking statements, which speak only as of the date they are made.

Speaker #2: On today's call, we will also use certain non-GAAP financial measures when discussing the company's financial performance and condition. You can find additional information on these non-GAAP measures and reconciliations to their most directly comparable GAAP financial measures in today's press release.

Speaker #2: Which again is available on our Investor Relations website. And now I will turn it over to Fred for commentary on the quarter.

Speaker #3: Thank you, Ashley, and good afternoon, everyone. Thank you for joining us as we review another strong quarter for Guardian. Before diving into the details, I want to take a brief moment to reflect on how far we've come.

Speaker #3: This quarter marks an important milestone. Our first full year as a publicly traded company. A little over a year ago, we stood on the floor of the New York Stock Exchange to ring the bell.

Speaker #3: Not as the culmination of a journey, but as the beginning of a new chapter in the 20-plus-year life of our company. When we went public, we made a commitment to continued execution with discipline, grow with purpose, and carry forward the entrepreneurial spirit that has always defined Guardian.

Speaker #3: All while earning the trust of our new shareholders along the way. I believe that thus far, we've delivered on that promise. And I'm very proud of what our team has achieved.

Speaker #3: As I look ahead, I'm even more energized by the opportunities in front of us to continue building a company that provides exceptional service to our communities and the residents they serve.

Speaker #3: Creates value for our partners and delivers sustainable, long-term growth for our shareholders. With that foundation in mind, let's turn to our third quarter performance.

Speaker #3: Which marked another period of strong double-digit growth across revenue, resident count, and adjusted EBITDA. Which yielded adjusted EPS of $0.25. Revenue grew 20% to $377 million.

Speaker #3: A top 13% resident growth driven both organically and through acquisitions. Adjusted EBITDA grew 19% to $27 million. With margins holding steady at 7.2%. Including the continued dilutive impact from recent greenfields and acquired pharmacies.

Speaker #3: Given the strength of the quarter, we are raising full year revenue and adjusted EBITDA guidance, which David will go over in detail later in the call.

Speaker #3: Now, turning to the policy environment. The unintended consequences of the inflation reduction act remain an issue for our industry as a whole. Consistent with our longstanding approach, we're working closely with our peers and trade group to advocate for legislative and policy solutions that address these impacts and support the long-term stability of our sector.

Speaker #3: But at the same time, we've continued to take proactive steps with our payors. Those initiatives are taking shape, and combined with other strategic actions across the business, we are growing ever more confident in our ability to offset the anticipated EBITDA headwind.

Speaker #3: Even as reported revenue growth is expected to remain relatively flat in 2026. Our philosophy on addressing policy issues remains simple. Control what we can.

Speaker #3: around what we cannot. It's becoming increasingly clear how important the right people and scale are to executing successfully through these challenges. And that same And navigate thoughtfully mindset disciplined, proactive, and grounded in leadership extends across our organization.

Speaker #3: To that end, our pharmacy entrepreneurs fuel our growth with ingenuity, and commitment to the clients we serve. And the specialized teams supporting them strengthen our platform every day.

Speaker #3: From purchasing to PBM contracting to data analytics, to name a few, most of our pharmacy leaders have been with Guardian for more than a decade.

Speaker #3: Some going on two. Prior to joining, they were highly skilled clinicians who built successful, independent pharmacies from the ground up—entrepreneurs in their own right.

Speaker #3: They recognize the opportunity to combine their local expertise and community relationships with the strength of Guardian's national platform and scale. Unlocking new levels of performance and profitability within their pharmacies.

Speaker #3: Many have since built on that success, launching greenfield locations and adjacent markets. Guardian is continuing to invest in these professionals. Helping them deepen their business acumen.

Speaker #3: Today, they are exceptional operators who embody a rare combination of clinical expertise, entrepreneurial drive, and business-minded execution. That blend is central to our model.

Speaker #3: And underscores why selecting the right local leadership teams is so critical. And why we remain highly selective and targeted in our acquisitions. Collectively, our operators have helped propel us to be the clear leader in serving assisted living facilities.

Speaker #3: While our national market share is 13%, we have a much stronger presence in the markets where we operate. In fact, 37 of our pharmacies have over 20% market share, with 12 pharmacies operating at over 40%.

Speaker #3: Additionally, we now serve nearly 204,000 residents, the vast majority in ALF. Looking ahead, we expect to benefit from powerful demographic tailwinds as the aging population grows.

Speaker #3: While continuing to gain share through new facility partnerships, higher resident adoption, and greenfield expansion with the help of our existing operators, at the same time, at the corporate level, we'll continue to pursue targeted acquisitions.

Speaker #3: Such as the recent additions in Oregon and Washington. Which put us on the map in the Pacific Northwest and answered demand from our national customer partners.

Speaker #3: Integration with both pharmacies is tracking as expected, with both teams already onboarding facilities operated by our national customer partners. Over time, we expect this geographic area to become an important growth contributor.

Speaker #3: On the heels of these acquisitions, our pipeline continues to be very attractive and active. Furthermore, as the assisted living facility market continues to consolidate, we believe Guardian's scale, sophistication, and partnership-driven model position us as the provider of choice.

Speaker #3: Looking back, we've accomplished a lot in the last year. We've expanded our pharmacy footprint, delivered consistent financial performance, strengthened our balance sheet, and deepened relationships with a broader investor base.

Speaker #3: Internally, we've enhanced our infrastructure and continue to navigate policy-related headwinds. Together, these accomplishments give us confidence as we enter our second year as a public company.

Speaker #3: Stronger and better positioned for the opportunities ahead. Our priorities remain clear. Drive organic growth through new customer facility wins, higher adoption, and greenfield expansions.

Speaker #3: Expand our network through disciplined acquisitions aligned with our culture and vision. Enhance profitability by integrating new pharmacies, es, implementing our technology advantages, and leveraging procurement reimbursement and logistics efficiencies.

Speaker #3: And lastly, navigate policy changes thoughtfully, with confidence and discipline. Advocating for fair outcomes while managing risks proactively. These are the same levers that have propelled Guardian's growth for over two decades.

Speaker #3: But today, enhanced by greater scale, visibility, and financial flexibility. So on that note, happy birthday, Guardian. We're still early, and our journey as a public company.

Speaker #3: But our foundation is strong, our strategy is clear, and our momentum is real. With that, I'll turn the call over to David Morris, our CFO, who will take you through the quarter's financial results and outlook in more detail.

Speaker #2: Thank you, Fred, and good afternoon. Before I begin with the review of our three key results, I wanted to quickly mention the recent shelf S3 filing and lockup agreement we announced in mid-October.

Speaker #2: Having been a public company for a year now, we recently became eligible to file an S3 registration statement. As such, we filed an S3 shelf registration for up to an aggregate $6 million shares.

Speaker #2: Which has since become effective. To provide flexibility to efficiently access the public markets, if and when needed, and subject to market conditions. In conjunction with that filing, we also announced that we worked with our pre-IPO shareholders to lock up approximately 93% of the shares until June 30th of 2026.

Speaker #2: There are no immediate or specific plans to offer securities pursuant to the shelf registration. We've either shelved as a tool for financial flexibility, rather than a near-term catalyst.

Speaker #2: And we will continue to take a disciplined, long-term approach to capital markets activity. Turning to the financial results, I'm pleased to announce another strong quarter for Guardian with adjusted EPS of $0.25.

Speaker #2: Revenue grew 20% to $377.4 million, reflecting mid-double-digit organic revenue growth. Total resident count ended the quarter at 203,766, up 13% versus a year ago.

Speaker #2: Upside in revenue this quarter came from several areas. First, a higher percentage of new residents joined early in the period, providing a full quarter benefit.

Speaker #2: Second, plan optimization efforts continued to perform well. Improving coverage for residents while reducing copays. Third, vaccine activity was strong as many communities launched their clinics earlier in the season.

Speaker #2: And finally, acquisitions contributed meaningfully with a full quarter of revenue from Washington and two months of contribution from Oregon. This pharmacy is a great strategic fit for Guardian.

Speaker #2: Bringing on board an experienced leadership team with a strong reputation for service excellence. Alongside our operations in Washington, this expansion gives us a solid foothold in a new growth region, the Pacific Northwest.

If you'd like to ask a question please press star, followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised.

If you would like to enjoy your question, please press star. Then the number to

if you are using a speaker-phone, please make sure to lift your handset before pressing any Keys 1 moment, while we prepare that you and a roster.

Your first question comes from the line of John Ransom from Raymond James. Please go ahead.

Hey, good evening. Um

So just a question about the fourth quarter. Uh, how would you compare the contribution?

Among the greater World especially Co, but I'm just curious kind of what you're seeing with your population, how the uptake looks, and the just how how the program overall compares to what you did last year, which is also very successful.

Uh hey, John Fred here. Um,

Did I hear you say third quarter or fourth quarter, fourth quarter? So in your implied guidance, what what, what's going on with your vaccine program? This year compared to last year, um, it's steady as we go, you, you did mention an interesting uh anomaly that we wondered about, which is the CDC guidance.

Potentially could have caused fewer people to walk. Um, back to be vaccinated particularly Co, we are not seeing that it's steady as we go. However, I will comment that we started the clinic season uh, with a stronger uh, September this year than last. So some of the uh total perhaps has been pulled forward into Q3.

And as we think about resident count, it looks like you're only missing one month of a...

acquisition. So this resident account is a pretty good placeholder for 4K with a little bit of 1 month of that 1 Acres.

Uh, that's correct. Generally, we measure residents served as of the end of the quarter. Okay. So, um, the acquisitions that were completed recently are included in the Q3 number. And, uh, so recognize that we do see fluctuations quarter to quarter, particularly in Q4, as some loved ones are reluctant to move their, uh, their.

Mother or father into assisted living. And, and certainly the November December period.

so right, I would

I would expect to see uh steady as we go in Q4 or resident count.

and, and just last for me, I know, I know you had had on the IRA issue and the conversations with the pbms, um, using the, the baseball analogy, uh,

How close are you to wrapping up these negotiations and kind of putting a bow on this issue?

John, as you know, these are very sensitive discussions, literally covered by NDAs. Um, so I don't want to comment on specifics with respect to the PBM negotiations, other than to reiterate what I said before.

which is uh they're taking shape and we're growing ever more confident in our ability to offset the uh headwind

And Fred, we've talked about this before. But, um, is there any more? It's always interesting to me, like some industries, the payers are more willing to give providers some bogies that will result in upside. You know, as we know, you're paid a dispensing fee and you're paid a spread. But is there any more indication that they might be?

You know, especially with all the issues going on with Part D and more Part. D plans invented in Ma and sensitivity around part. The losses is there any more chopping of woods? That's, that's a bad expression that's Southern. But if is, is there any more kind of wholesome discussion around? Hey look guys why don't we throw in an upside kicker for x or y, or is it still just kind of mechanically the same in terms of just dispensing fee and

And spread.

Well, um, we

We at Guardian, as having mentioned, before are very willing to think about value-based models, uh, because we're very comfortable in in the value that we are providing to their insured lives. Uh, but it's evolving.

There's not a major shift but each, uh, is interested in exploring this idea, as are we? So, we're, we're working our way toward that.

But it's an evil evolution.

So the normal glacial pace of healthcare is still in effect.

Well, think about it next year.

All right. Yeah 1 Georgia Boy to another we'll keep chopping that wood.

All right. Thank you. Thank you, guys.

Your next question comes from the line of David McDonald from truist. Please go ahead.

Yeah, good afternoon everyone. Um, just a couple additional ones. Um, 1 C, can you guys spend just a quick minute on some of the areas where um from a margin standpoint. If I just look at the amount of um, acquisition activity that you've had, um, and just kind of the impact in terms of margins, as those come on. Um, you know, any any couple of key areas that you would flag in terms of where you've done better um to continue to maintain those flattish margins despite the meaningful, I'm an a activity.

Hey David, this is David. How you doing? Hey, David.

Hey, you know, we we've talked about the various cohorts and I mentioned in the comments, you know, our, you know, 4 or 5 year cohorts are performing. Well, you know, ahead of our overall margins of the 2 or 3 year cohorts so are coming along as well. Um and we have a substantial investment we've made in the last 18 to 24 months and 11 locations probably greater than 10% of our overall Revenue, that are a drag on our overall. Ebida margin so you know,

It takes on average 4 years, to get these businesses up to performing where they need to be and some or performing quicker and better and some take longer. So I think it's, it's pretty much Steady As She Goes. And, uh, we're pleased with, you know, all the various businesses and where they are in the various cohorts. So it's uh, it's pretty much Steady As She Goes.

Okay. And then just 1 other quick, follow-up. You know, in that same vein, you know, when you think about the pipeline it sounds like there's still a fair number of opportunities sitting in front of you. Um how do you think about pacing I guess on 2 front 1? Um

You know, just you know the margin impact as they come on but also you know number 2 just you know are there any kind of operational bottlenecks internally in terms of you know, how many of these things you want to um take on at the same time.

Yeah, I think we've talked about, in the last 24 months of things have been accelerated, uh, specifically with the large Heartland, acquisition at 4 locations. So I'm not sure we can set expectations expectations to continue at that level, but the, the pipelines robust. And as I said, very active and we see, you know, 26 27 US continuing, you know, our similar type of approach. We have, uh, many contiguous, uh, startups that we're looking at, as well as an active pipeline.

So, uh, no, no real bottlenecks that would, you know, impact us being able to continue to execute much as we have, you know, this past year.

Your next question comes from the line of Raj Kamar from Stevens. Please go ahead.

Hi, good afternoon. Uh, maybe just touching on the implied Q4. Here, it seems like the dilution of impact to margins is slightly accelerating. So, maybe just kind of want to get your thoughts on if that's this conservatism or kind of anything to call out on that front.

Hey, Raj, David, um, I think you know our Majesty, but our margins were forecast to remain relatively steady, and the biggest impact would be the investment that we've made over the last 12 to 18 months, um, you know, depressing, you know, overall margins. I think, you know, the Q4 would pick up slightly because of the seasonality with the vaccine clinics.

Got it, got it and then maybe just as a follow-up, you know, appreciate the commentary on the mature. Pharmacy kind of margin maybe, just kind of thinking about what the ceiling or the kind of theoretical ceiling is there from a margin perspective and and kind of also thinking about, you know, 1 of your mature, pharmacies, what kind of the available expansion

Capacities to those pharmacies as we think about helping out in this overall high single digits organic revenue growth framework that you've kind of laid out long term.

To continue to optimize these Acquisitions, that's going to enhance our overall margin. We're going to leverage the platform that we've built. Not only in each Pharmacy that you know where we're not to full market share but also leverage our support infrastructure. So, you know, 8% higher, we're going to be working on that, you know, every day, every quarter. But uh, hopefully, we'll see things continue to uh, to improve.

Yeah, got it. Thank you.

Ladies and gentlemen, a reminder: if you would like to ask a question, please press star, followed by the number 1. If you are using a speakerphone, please make sure to lift the handset before pressing any keys.

Your next question is a follow-up from John Ransom from Raymond James. Please go ahead.

Hey there. Um, just going back to the fun topic of Medicare Part D. As you no doubt know, there's a lot of turmoil in the market. You know, there's fewer standalone Part D plans, and there's more MATD plans. I just wonder.

How, how does guardian look at that and, and, and your plan optimiser tool, are you seeing more switching within your resonance? Is it creating more kind of churning behind the scenes? Or is it, uh, is it not something that's risen to the level of, uh, something that you've noticed?

I'll start on that when John it's very early in the process because the, uh, the details were late in coming this year. Uh, so the the big effort is underway as we speak, um, and, uh, we'll know more as we move through the next few weeks.

Okay, thank you and do, do you. I'm sorry. If I do. You have a general preference for Standalone versus mapd? Or do you, do you care?

We're relatively agnostic, we want to help the residents, find the best plan for their uh particular situation in their drug regimen.

Okay.

Kind of different. I was just looking at some numbers that suggest some small moves, but has there been any change to point out?

In terms of the mix of brand versus generics or the mix within brand, uh, and I know you're not real leveraged expensive about similar, but is there anything to call out in the, you know, the average drug consumption this year versus last year and is that does that is that bigger than a bread box for you?

We mentioned in in previous, uh, Communications that we see increasing levels of acuity.

Which manifest uh itself with uh greater utilization of some of these um um Brands. Um and that has uh continued its I would call it just steadily a steady growth in Acuity obviously. That is also

Greatly impacted by Resident mix. Uh, this uh, being a, a, uh, Market where our residents are turning over. Uh, so it can

Fluctuate quarter to quarter, year to year, and depending on that. But, uh, in general, um, these residents that we serve, um, have a high acuity level.

And and the fact that, you know, the whole part deductible and out-of-pocket Max has changed. So you noticing that in a you know shift to the plans being more on the hook, in the fourth quarter. Are you seeing any kind of change versus last year when that wasn't the case?

We have not and I'm surprised at that. Um, okay, perhaps it may take more than 1 year.

Okay.

All right. Thank you.

Thank you very much. There are no further questions at this time. This concludes today's conference call. Thank you very much for your participation. You may now disconnect