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Operator: Thank you for standing by. This is the conference operator. Welcome to Extendicare Inc. Fourth Quarter 2025 Analyst Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Jillian Fountain, Vice President, Investor Relations. Please go ahead, ma'am.
Jillian Fountain: Thank you, operator, and good morning, everyone. Welcome to Extendicare's 2025 Fourth Quarter and Full Year Results Conference Call. Joining me today are Extendicare's President and CEO, Michael Guerriere; and Executive Vice President and Chief Financial Officer, David Bacon. Our Q4 results were released yesterday and are available on our website as is a live audio webcast of today's call, along with an accompanying slide presentation. An archived recording will also be available on our website following the call today. As well, replay numbers and pass-codes have been provided in our press release to access an archived recording by phone until midnight of March 13. Before we get started, please be reminded that today's call may include forward-looking statements and non-GAAP and other financial measures. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. We have identified such factors as well as details of non-GAAP and other financial measures in our public filings with the securities regulators and suggest that you refer to those filings. With that, I'll turn the call over to Michael.
Michael Guerriere: Thank you, Jillian, and good morning. 2025 was a very successful year for Extendicare, marked by strong organic growth in ParaMed and SGP, higher margins in all 3 operating segments and 2 acquisitions that we closed midyear that augmented our long-term care and home health platforms. Taken together, these developments resulted in overall adjusted EBITDA for the quarter of $45.6 million. This is an increase of 36.4% from the prior year after adjusting for out-of-period items. The integration of the long-term care homes acquired from Revera is now complete and the Closing the Gap integration is well underway and expected to finish in Q3. Both acquisitions are performing ahead of the pro forma financial information shared at the time the acquisitions were announced. AFFO per share is up 6% over the prior year quarter, with the earnings improvement moderated by a catch-up in maintenance CapEx in the last quarter of the year. Our payout ratio for the quarter was 42% and 46% for the full year, both numbers adjusted for out-of-period items, providing us with considerable flexibility in our capital allocation options. ParaMed delivered 15.3% organic volume growth over the prior year quarter. The continued strength of demand for our home health services is supported by strong demographic trends and ongoing long-term care capacity constraints. This strong organic growth combined with the contribution from Closing the Gap and the scalability of our technology-enabled back office drove an NOI margin of 13.2% after adjusting for out-of-period items. This represents a 280 basis point improvement over the prior year quarter. Our long-term care NOI margins in the quarter improved by 90 basis points to 10.9% over the prior year after adjusting for out-of-period items, and our occupancy remained consistent at 98%. Managed service revenues declined in the second half as Revera sold the remainder of its C bed portfolio, some to Extendicare and others to a large operator that took operations in-house. Nonetheless, third party and joint venture beds served by SGP grew to over 153,500, up 5% from the prior year quarter. Managed services NOI margins were 55.5% this quarter and remain in line with our long-term expectations of 50% to 55% for this segment. Finally, we announced a 5% increase to our monthly dividend to $0.0441 effective with the dividend to be declared in March. This is the second year that we have increased the dividend reflecting our sustained financial and operating performance, sound capital structure and prospects for growth. Operational momentum augmented by organic growth, acquisitions and prudent management of our balance sheet will enable us to consider further dividend increases as we make capital allocation decisions in future years. Turning to Slide 4. As previously announced, in November 2025, we entered into an agreement to acquire the CBI Home Health business for $570 million. CBI Home Health is highly complementary to ParaMed as it gives us an expanded presence in Western Canada and new business models that offer new avenues for organic growth. The combination of the 2 companies provides an opportunity to achieve significant synergies as we scale up the volumes we drive through our technology platform. The added scale will also support the continued investment in technology, enabling us to provide reliable high-quality services more efficiently to the thousands of people that rely on us for care. The transaction is expected to add approximately 10 million hours and 8,500 team members to our home health segment, contributing an estimated $478 million in revenue and $61.9 million in pro forma adjusted EBITDA, the transaction is 9% accretive to earnings per share at the outset, growing to 15% when anticipated synergies of $7.4 million are realized. The regulatory approval process is progressing well, and we hope to close the acquisition in early Q2. In December, we completed our $200 million bought deal private placement generating net proceeds of $191.5 million. Together with the $214.5 million committed expansion to our senior secured credit facilities and cash on hand, we are positioned to close the transaction, while preserving flexibility in our capital structure. Turning to Slide 5. We continue to advance our Ontario redevelopment agenda in Q4 by commencing preliminary construction of a 320-bed home in Sudbury, which will replace a 278-bed Class C home we operate nearby. This brings to 7, the number of homes we have under construction for a total investment of $692.3 million. We continue to use our joint venture platform to fund our redevelopment projects to preserve our balance sheet while retaining a 15% managed interest. We are awaiting final regulatory approval to sell the new Sudbury project into the joint venture and expect to close in the coming weeks. Recovering the capital we invested in the project to date and realizing a gain on the sale. We remain on track to open 2 new homes in 2026, Extendicare Beauclaire, a 320-bed home in Ottawa and Extendicare Forest Trail, a 256-bed home in Peterborough. After year-end, we completed the sale of our vacated West End Villa C bed home in Ottawa for proceeds of $12.5 million, resulting in an after-tax gain of $10.1 million. This home was vacated earlier in 2025 following the opening of Extendicare Crossing Bridge, a joint venture home. Consistent with recent projects, the proceeds from this sale will enable further investment to advance our redevelopment pipeline. We continue to progress on additional 17 projects which are at varying stages of planning and development under the Ontario government Long-Term Care Home Capital development policy. We also continue to advocate for additional funding and other considerations for certain projects, particularly in Northern Ontario that we need to execute on our full redevelopment agenda. I'll now turn the call over to our CFO, David Bacon, to discuss our financial results in more detail.
David Bacon: Thanks, Michael. I'll start with a brief overview of our consolidated results and then talk about our individual business segments and our liquidity. Our consolidated results for the quarter, Q4 NOI was impacted by approximately $3.9 million in net favorable out-of-period items related primarily to workers' compensation rebates received in LTC and home health, offset by retroactive wage adjustments in LTC. The impact of the out-of-period items is summarized in the appendix for the presentation. Our consolidated Q4 revenue increased by 18% to $462 million driven by the full quarter contribution from the acquisitions of Closing the Gap and the 9 LTC homes acquired from Revera earlier in 2025, contributing $61.8 million in revenue. 15.3% organic growth in our home health care volumes, along with bill rate increases, long-term care funding increases partially offset by the closure of the Class C LTC homes that were vacated following the opening of the newly redeveloped long-term care homes in the Axium joint venture and lower management fees as a result of the sale by Revera of the LTC homes we previously managed. Excluding out-of-period items, our Q4 NOI improved by $14.3 million or 30.2%, reflecting the revenue growth and a contribution of approximately $8.6 million to NOI from the 2 acquisitions, partially offset by higher operating costs. Excluding the impact of out-of-period items, our Q4 adjusted EBITDA increased by $12.2 million or 36.4% reflecting the improvement in our NOI, partially offset by higher administrative costs. Q4 AFFO per share is $0.337, down slightly from the prior year with the improved after-tax earnings this quarter, partially offset by higher maintenance CapEx compared to the same period last year due to the timing and size of maintenance projects in LTC in the quarter, and additional maintenance CapEx from the LTC homes we acquired earlier in the year. When out-of-period items are excluded from both this year and last, our AFFO per basic share improved 6% to $0.301 per share. The equity issuance completed in December of 2025 had an approximately $0.01 per share impact on both our reported AFFO per share and our earnings per share in Q4. Turning to our individual segments. Home health care continues to deliver exceptional performance. Q4 revenue increased by $49.7 million or 33.6% year-over-year driven by the $26.6 million contribution from Closing the Gap and 15.3% organic growth. Q4 NOI, excluding the net impact of the year-over-year change and out-of-period items, improved by $11.2 million or 75.3% driven by the organic volume growth and approximately $3.8 million in NOI from Closing the Gap. On the same basis, excluding the out-of-period items, NOI margins increased 280 basis points to 13.2% in the quarter. Turning to our Long-Term Care segment. The Q4 results were impacted by out-of-period costs of $1.6 million this year compared to out-of-period funding of $1.9 million in the prior year period. Excluding out-of-period impacts, revenue increased by $26.3 million or 11.8%, driven by the full quarter contribution of $35.2 million from the 9 LTC homes acquired from Revera, the timing of envelope spending, partially offset by a loss of approximately $7.6 million in revenue from the closure of the 2 redeveloped Class C homes that were replaced by the new homes in the JV. Excluding the net impact of the out-of-period items, NOI increased by $4.9 million or 22%, driven by the increases in revenue and approximately $4.8 million in NOI contribution from the 9 LTC homes acquired partially offset by higher operating costs and the loss of approximately $500,000 in NOI related to the closed Class C homes. Corresponding NOI margins increased 90 basis points over the prior year period to 10.9% in the quarter. And our full year NOI margins adjusted for out-of-period items is also 10.9%, up 50 basis points from the full year 2024. Turning to our Managed Services segment. The decline in revenue and NOI this quarter reflect the termination of the management contracts resulting from the sale by Revera of the 30 LTC homes, 9 of which were sold to us in Q2 and are now in our LTC segment. Our managed service revenue decreased $3.6 million to $15.3 million and NOI declined $1.8 million to $8.5 million. Despite the reduction in the number of managed homes, earnings benefited from our 5% organic growth in our SGP clients and the increased management fees from the newly homed open -- homes in the JV. Turning to the balance sheet. With our successful equity offering in December, we ended the year with $348 million in cash on hand and $154 million of available lines of credit and strong credit metrics. As Mike mentioned earlier, we have secured a committed $214.5 million upsizing of our senior secured credit facility to help fund the CBI acquisition. This consists of an incremental $154.5 million in delayed draw term loan and $60 million in our revolving credit facility. Furthermore, this upsized facility will have a new 3-year term extending the maturity to 2029. We intend to fund the CBI acquisition by drawing the incremental $154.5 million delayed draw term loan and approximately $154 million drawn on the revolving credit facility with the balance coming from cash on hand. Based on this, our pro forma total debt to adjusted EBITDA will be approximately in the 2.7 to 2.9x range at closing based on the financing plan and the $228 million in estimated pro forma adjusted EBITDA previously disclosed in our CBI acquisition announcement, which is ahead of our estimated leverage at the time of announcement. We're pleased with the strength of our capital structure and are well positioned to continue to pursue our growth agenda. We will remain disciplined in our approach to allocating capital, balancing our objectives to drive growth and create shareholder value. With that, I'll pass it back to Mike for his closing remarks.
Michael Guerriere: Thank you, David. 2025 was a milestone year for Extendicare. The benefits of our compelling strategy are clearly evident in our results for the fourth quarter and the full year. The demographic realities of an aging population continue to drive demand for our services and the scale and efficiency of our operations position us well to answer the call. We are excited about the prospects that 2026 will bring, most notably the completion of the CBI Home Health acquisition. This transaction combined with our achievements of the last several years, position Extendicare to make a significant contribution to building capacity in the Canadian health care system. Given the ongoing challenges faced by the health care sector, we are confident that our scale and mix of services will relieve pressure on hospitals by providing care in more appropriate and cost-effective settings. We will continue to build capacity to ensure that everyone in Canada receives the care they need to live their best lives. My sincere thanks to our growing team including the new team members, we will soon welcome from CBI for their commitment to advancing this important mission. And with that, we welcome any questions that you might have.
Operator: [Operator Instructions] The first question will come from Kyle McPhee with ATB.
Kyle McPhee: First one for me. Just on your home health care segment, the organic volume growth, the service hours provided up organically 15% in Q4. That figure just keeps climbing quarter-after-quarter. So great to see. But wondering do you have anything to call out as kind of a onetime tailwind? Or is this performance just reflective of demand tailwinds you're experiencing for home health care as a key supplier to the provinces?
Michael Guerriere: Thanks, Kyle. The pace of growth continues to surprise us, frankly and certainly more than what we've been expecting. The demographic -- the underlying demographic growth in the populations we serve drives about a 4% growth pace and then we've been noting the fact that long-term care capacity is not growing in keeping with the demographics. And so governments are turning to home health care to fill in that gap, which is what we think is driving the outsized increases. It's interesting that in Ontario, we've seen statistics that the number of people inappropriately in acute care hospitals waiting to go home or waiting to go to long-term care has been declining for the first time in many years. It's dropped about 14% from the prior year. And so we think that the home care volumes are helping that kind of decompression of the hospital sector to happen. So all that said, it's hard to know how long these really rapid growth rates will continue. We continue to believe that the growth rates will moderate back to a mid- to high single-digit kind of pace. But we really don't know when that's going to happen. So we take it quarter-by-quarter and make sure that our recruiting and training capabilities are calibrated to changes in demand in the marketplace. So I continue to think that this kind of pace cannot continue at this rate indefinitely.
Kyle McPhee: Got it. Okay. That's very helpful color. I appreciate all that. Second one for me. Thanks for the messaging that the Sudbury redevelopment project will go into the JV in the coming weeks. Is it still the plan to do all future Class C redevelopments using the JV structure as you opt to save your capital for other sources of growth? Or will that playbook maybe evolve over time to include wholly owned redevelopment projects, notably giving you up so much capital access and free cash flow continuing to roll.
David Bacon: Yes. Kyle, I think it is our intent to continue with the strategy we have to date. So at the moment, we do view the Ontario redevelopment agenda as squarely being done in partnership with capital partners. And to date, it's been Axium. And so we don't see us changing that viewpoint at the moment. So I think you'd see us being consistent going forward.
Kyle McPhee: Got it. Okay. And one last quick one. Just on the CBI acquisition closing, is there any risk to closing? Or is this just a basic delay as you go through the closing process. Maybe you can provide some color on the source of the delay versus the original timing expectation.
Michael Guerriere: Well, look, the regulatory approval process is real. So we do need to get those approvals and work with our various government partners to make sure that we're aligned on the path forward. That said, the process is going very well. There's been no unexpected developments. So we have no reason to think that we won't be successful in getting to conclusion in Q2.
Operator: The next question will come from Tom Callaghan with BMO Capital Markets.
Tom Callaghan: Maybe just building on some of those home health questions there. Appreciate the color. I guess, one of the things you mentioned was just making sure recruiting and training capabilities are appropriately calibrated. And I understand kind of the view that eventually this growth kind of starts to decelerate. But assuming we work through a good part of '26 of these elevated ADV growth levels. Like is there any constraint from a labor perspective? Or do you feel pretty good about where you sit today from that end?
Michael Guerriere: Right now, I'd say we feel pretty good. We're not seeing any headwinds in the labor market that suggests that we would have challenges fulfilling most of our human resources needs. That said, we are in a world where labor markets are changing quite significantly as a result of changing immigration policies. So that is a file that we're watching carefully. We've seen no impact on our ability to deliver, our ability to recruit to date as a result of that. But I would also say that the rules seem to be changing on a weekly and monthly basis. So it may have an impact on the broader market. The other comment that I would make is that although we are largely able to meet demand, in certain geographies where we operate in rural parts of the provinces in more remote places. We continue to have constraints on our ability to recruit enough caregivers. So the big municipalities, no problem meeting demand, but there are still parts of the province of Ontario, where we are not able to accept all the referrals that come our way. So managing labor supply and building our own capabilities to train people to provide care continues to be a key part of our strategy.
Tom Callaghan: Maybe just one follow-up on the home health side. Just in terms of like, I guess, incremental delivery models. I saw Ontario launched a high-intensity bundled home care program. Appears to me at least more of a trial around here in early '26. But just any thoughts there to that program specifically or maybe other initiatives that could come through that maybe set you up for incremental volume as opposed or when compared to years past?
Michael Guerriere: Yes. That procurement was an example of something that has been developing and growing over the last several years of hospitals partnering more closely with home care operators to streamline the hand-off of patients that are discharged from hospital and make sure that they get continuity of care as they go home. And we're certainly involved with a whole number of hospitals in those kinds of projects. The other trend, I mean, you pointed out that, that particular one was high intensity. We are seeing more in the way of 7x24 home care services where it's a little bit more wraparound and providing support at all hours, including weekends to allow people to stay in their own homes. So when we look at our volume growth, some of it is because we have more patients and some of it is because we're just providing a higher number of hours for some of the new patients that we're taking on in that high-intensity category. So I think we're going to continue to see those kinds of activities. And both Closing the Gap and CBI were very good in very competitive in those 2 spaces, which is one of the things that made it quite attractive for us.
Tom Callaghan: Okay. Great. Maybe if I could just sneak one more in on the housekeeping or modeling side. David, just in terms of cash taxes for '26, is a similar range to '25 in terms of percentage of pretax FFO a good way to think about it? Or are there any impacts from the CBI acquisition?
David Bacon: No, I think you're still going to look at the taxes in the sort of 24% to 27% range from a percentage basis. So that's the guidance we've put in the MD&A for next year.
Operator: Next question will come from Giuliano Thornhill with National Bank.
Giuliano Thornhill: I just kind of want to start with the home health care segment. What's kind of the ceiling, do you think, on the margin performance in that business?
David Bacon: Yes. I think a few thoughts, Giuliano there. I think if you look at our normalized full year for 2025, we're at 12.8%. I think as we've said, I think, on past calls, we do believe there is still margin expansion in this business. And as we grow volumes, look for continued development of technology solutions in the back office that we still think there's opportunities, especially in home care on added technology that can help with the productivity efficiency. So I think looking forward, there'll be some improvement into that 12.8% as we go forward. But we are, as Mike mentioned, it's been this sustain this high level of the organic growth gets sustained like it is for a period of time, there is going to be some step change needed in the cost structure in the business that could temper some of the margin improvement. So there is still improvement. It could just be tempered a little bit if we have a continued run at this level. But -- so I think as we've said before, this should be a 13%-plus margin business. But when we hit that on a sustained basis is still to come.
Giuliano Thornhill: Okay. And then how much is the labor side out of the OpEx, if they're getting -- if think average wage is around $23 or so. That means there's around half of the OpEx is not related to labor. So I'm just wondering, out of that half, how much is fixed and really driving that scaling?
David Bacon: Yes, we -- I mean we don't really break that out, Giuliano. Like I think -- We focus on the NOI margins. So -- but I mean labor is generally 75%, 80% of our cost structure, but those splits it out between back office, front office, it's not something we split out.
Giuliano Thornhill: Okay. Moving on to the volumes, how many kind of contract wins did you get this quarter out of the share that were offered.
Michael Guerriere: We're not sharing that information. You're talking about our win rate in terms of contracts. So the first thing I would say is that the volume that comes from some of those new contracts is not material. It takes a long time for those contracts to turn into anything that would even come into 100 basis points impact on our volume. So that's the first thing. But the second thing is that we're not sharing that kind of competitive information.
Giuliano Thornhill: Right. Okay. And then just moving to the kind of CapEx. I'm wondering how many more projects need to be sold from the old homes remaining and -- yes.
David Bacon: Yes. I think with the sale of the Stittsville home in Q1 just after year-end, like every -- we've now sold the 3 projects for the 3 homes that have opened. So we have 7 homes now in construction. The next 2 to open is in Peterborough and in -- just in Ottawa. So we're readying the legacy C homes related to those 2 to go to market. We tend to kind of go to market as we're getting ready to transition into the new home. So we'll be looking to sell these gear up so that we minimize the gap between closing and selling so that we're not sitting on that capital tied up in the vacant home. So everything we've opened, we've now sold the homes and the next wave, we're getting ready on the marketing.
Giuliano Thornhill: Okay, just the last question for me is with CBI kind of being acquired, does this really round out your platform to go for, for the smaller acquisitions that tend to have higher accretion?
David Bacon: Yes. I think -- I mean, it would be market by market. I think is the way to answer that. Certainly, this transaction will give us substantial presence in Ontario. But that's not to say in certain markets still, we're going to have -- we'll be light on nursing or light on the allied Physio-type services. So there's definitely infill opportunities. The CBI gives us a beachhead across the West with a strong presence in Alberta. So I think those markets are opportunity. And lastly, there's adjacencies, which I think we've talked about before. There's other markets that we could look to that still can leverage our back office and how we work and sort of workers' compensation, private insurance type market. So all of those are still opportunities for us, something sizable in Ontario is probably the one thing that is now done with CBI. And I would just remind everybody, too, and I think we've said this for the next foreseeable time, our focus is going to be on integrating finishing CTG and integrating CBI. So there is going to be a pause on the M&A for '26 until we get into '27 and well underway on CBI. But there's still a lot of opportunity in Home Care still very fragmented, we're just going to take a bit of a beat before we're back.
Operator: The next question will come from Pammi Bir with RBC.
Pammi Bir: Maybe just coming back to ParaMed. And aside from the acquisition of Closing the Gap, is it fair to say that are you gaining share from your competitors? Or are you seeing their volumes grow perhaps at similar clips?
Michael Guerriere: Based on the information we have about the growth in the market, we think that this is predominantly a market expansion and that our share is staying quite consistent.
David Bacon: And you can see that even in CTG, right? Where CTG itself has been outperforming our original pro forma information, but it's just another data point. So that supports that.
Pammi Bir: And I guess, maybe just building on that is the trend line for CPI to date, I guess, through Q4 and pretty much consistent with what you've seen from CTG and your existing platform.
David Bacon: Yes. I think we don't have -- we're still looking for updated financial information from them. They're still working through their year-end audits, but I don't think we have any expectation that they're not enjoying some of the similar performance. But yes, we wouldn't be able to comment specifically on their numbers at the moment.
Pammi Bir: Okay. And I guess I think you mentioned that you're really not going to be looking to do anything of significance from any sort of additional capital deployment on acquisitions in home care. But are you seeing more home care providers perhaps looking to monetize and capitalize on this momentum in the space. Just wondering if there's other deals out there that you may just perhaps pass on just because you have obviously a very substantial acquisition that works.
David Bacon: Yes, I'd say there's -- we still -- there's still activity for sure. We do have a pipeline. We do have discussions going on. We did before CBI, we still do now. So certainly, over the last 12 to 18 months, the sector has had a lot of activity, like our transactions as well, the Spectrum transaction. But there is opportunity, as we said, out there, people looking to monetize all sorts of different reasons. Some of the smaller ones are your traditional single operator, lack of succession planning or opportunities, et cetera. So -- but I think that there's lots of opportunity there, but likely no nothing of a scale or as big as a CBI, but lots of other opportunities.
Pammi Bir: Okay. And then just lastly, David, I mean these out-of-period funding amounts and the workers comp rebates. I recognize these amounts can be lumpy, but they do seem to recur on a fairly consistent basis. So is it fair to assume that maybe these amounts perhaps just continue going forward? Or do you think it's kind of done at this point?
David Bacon: Honestly, Pammi, I wish we knew to some extent. I don't think we came into '25 thinking we'd have 2 installments of workers' comp. I don't think anybody expected that. What I'd say, I'd like to think those types will go away and at some point stop. I do think the one place where we will continue to potentially have kind of catch up is on the funding announcements because we just know historically some of the various provincial announcements come late. They don't come ahead of April 1. They come a little later with retro components that I think will always be there to some extent. But the WSIB has been unusual. Didn't think it was going to continue to the extent it did in 2025. And as you know, it's not just us, that's a sector thing like an employer thing, that's happening. So -- but yes, hard to predict, hard to say.
Pammi Bir: Okay. I mean it's a good thing to have, but that's all fair.
Operator: [Operator Instructions] Seeing no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Jillian Fountain for any closing remarks.
Jillian Fountain: Thank you, operator. That concludes our call for today. This presentation is available on our website, along with a link to a replay of the call. Thank you all for joining us. And please don't hesitate to reach out if you have any further questions. Goodbye.
Operator: This brings to a close today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.