Medical Facilities Q2 2026 Earnings Report

Medical Facilities EPS Results

• Actual EPS: C$0.13
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Medical Facilities Revenue Results

• Actual Revenue: $89.62 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Medical Facilities Announcement Details

• Quarter: Q2 2026
• Date: 8/6/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, August 6, 2026
• Conference Call Time: 8:30AM ET

Medical Facilities (TSE:DR) Corp owns a diverse portfolio of surgical facilities in the United States. Through its wholly-owned subsidiaries, the company owns controlling interests in four specialty hospitals and six ambulatory surgery centers. The hospitals offer a range of non-emergency surgical, imaging, diagnostic and pain management procedures, and other ancillary services. Its key revenue source is from the facility service income. The corporation's operations are based in the United States.

Medical Facilities Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Revenue increased 7.8% year over year to $63.1 million, supported by favorable payer and case mix, particularly a higher proportion of orthopedic and spine procedures. Income from operations rose 9.4% and EBITDA increased 7.1% to $12.5 million.
• Positive Sentiment: Medical Facilities repurchased approximately 1.66 million shares for $21 million during the first half of 2026 and subsequently completed the current NCIB limit. Management said it has returned approximately CAD 218 million to shareholders since changing its corporate strategy in Q3 2022.
• Negative Sentiment: Surgical case volume declined 2.3%, with inpatient cases down 12.5%, observation cases down 9.1%, and pain management cases down 19.9%. The pain-management weakness was concentrated at Arkansas Surgical Hospital, although physician recruitment is underway.
• Negative Sentiment: Operating expenses rose 7.6%, including a 12.5% increase in drugs and supplies and a 6.4% increase in salaries and benefits, reflecting case mix, merit increases, higher anesthesia compensation, and health-plan costs.
• Positive Sentiment: The company ended the quarter with $64.1 million in cash, including $58 million at the corporate level, and no corporate-level bank debt. Management said the liquidity provides flexibility to support hospitals and potentially return additional capital to shareholders.

Presentation

[Operator]

Good morning, everyone. Welcome to the Medical Facilities Corporation's 2026 Second Quarter Earnings Call. After management's remarks, this call will include a question and answer session when qualified equity analysts may ask questions. Before turning the call over to management, listeners are reminded that today's call may contain forward-looking statements within the meaning of the safe harbor provisions of Canadian provincial securities laws. Forward-looking statements involve risks and uncertainties, undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information, please consult the MD&A for this quarter, the Risk Factors section of the annual information form, and Medical Facilities' other filings with Canadian securities regulators. Medical Facilities does not undertake to update any forward-looking statements except as required by law.

[Operator]

Such statements may speak only as of the date made. I would now like to turn the meeting over to Mr. Jason Redman, President and CEO of Medical Facilities. Please go ahead, Mr. Redman.

[Jason Redman, President and CEO at Medical Facilities Corporation]

Good morning, everyone, and thank you for joining us. On the call with me is our Chief Financial Officer, David Watson. Earlier this morning, we reported our second quarter results. Our news release, financial statements, and MD&A are available on our website and have been filed on SEDAR+. Before we begin, our highlights of the income statement variances Dave and I will be discussing are for continuing operations, and the amounts exclude non-controllable non-cash corporate-level charges related to share-based compensation plans. As usual, all dollar amounts are in U.S. dollars unless otherwise specified. Starting with our operating performance for the quarter, the facilities service revenue grew by 7.8%, driven by a favorable case mix that was weighted more towards higher-value orthopedic and spine procedures.

[Jason Redman, President and CEO at Medical Facilities Corporation]

The higher revenue translated to a 9.4% increase in income from operations and a 7.1% increase in EBITDA compared to Q2 of last year. On the capital allocation front, we demonstrated a strong and sustained commitment to returning capital to shareholders. During the quarter, we repurchased approximately 1.34 million common shares for $17.1 million under a normal course issuer bid, bringing total purchases in the first half of the year to approximately 1.66 million shares for $21 million. Subsequent to quarter end, we are pleased to report we have now fully utilized the purchase limit of approximately 1.81 million shares under the current NCIB.

[Jason Redman, President and CEO at Medical Facilities Corporation]

Commencing with the change in corporate strategy back in Q3 2022, the corporation has cumulatively returned approximately CAD 218 million to shareholders through a combination of NCIBs, substantial issuer bids, and dividends. Lastly, we ended the quarter with a consolidated cash balance of $64.1 million, including $58 million at the corporate level. This strong liquidity position provides flexibility for us to continue supporting our hospitals while evaluating opportunities to return capital to shareholders in the most efficient manner. With that, I will now turn the call over to David to review our financial results for the quarter. David?

[David Watson, CFO at Medical Facilities Corporation]

Thanks, Jason, and good morning, everyone. Our revenue for the quarter totaled $63.1 million, which was up 7.8% year-over-year. Most of the increase was attributable to the combined impact of payer and case mix. The case mix included more higher-value orthopedic and spine procedures. We also benefited to a smaller degree from payer rate increases. Our surgical case volume was 2.3% lower in the quarter. However, if you exclude low-margin dental cases, surgical volumes were essentially flat. Although outpatient cases edged up 0.9% in the quarter, inpatient cases fell 12.5%, and observation cases were down 9.1%. Pain management cases were down 19.9%, with the decline again stemming from Arkansas Surgical Hospital, as we've noted on prior calls.

[David Watson, CFO at Medical Facilities Corporation]

Both hospitals have active recruitment campaigns to attract additional pain physicians to add volume. I'm pleased to mention that Arkansas Surgical Hospital has a new pain physician, as well as a new orthopedic surgeon joining at the start of September. Looking at our expenses for the quarter, overall operating expenses increased $3.8 million or 7.6%. Over half of the increase came from higher consolidated drugs and supplies, which were up 12.5% and largely a reflection of our case mix. In addition, consolidated salaries and benefits increased 6.4% due to annual merit increases, elevated market-driven compensation for anesthesia nurse practitioners, and higher health plan benefits utilization. G&A expenses were also up 3.8%, with the increase primarily due to higher costs for contracted anesthesia services, repairs and maintenance, billing fees, and marketing costs.

[David Watson, CFO at Medical Facilities Corporation]

In terms of our profitability for the quarter, income from operations increased 9.4% to $9.6 million, and EBITDA was up 7.1% to $12.5 million. Turning to our balance sheet, consolidated net working capital was $65.2 million at the end of June, including $64.1 million in cash and cash equivalents. This compares to $54 million in net working capital and $43.4 million in cash and cash equivalents back at the end of December. The change in consolidated net working capital was driven largely by the sale of Oklahoma Spine Hospital in Q1, which increased cash but was partly offset by a reduction in current assets and liabilities for the removal of Oklahoma Spine's held-for-sale balances.

[David Watson, CFO at Medical Facilities Corporation]

Finally, we continue to operate with no corporate-level bank debt, having fully paid off our corporate credit facility back in 2024. This concludes our prepared remarks. We would now like to open up the call for questions. Operator?

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Again, if anyone would like to ask a question, you may please press star one on your telephone keypad. We don't have any question on the queue. I would now like to turn the call over to Mr. Jason Redman. Please go ahead.

[Jason Redman, President and CEO at Medical Facilities Corporation]

Thank you, operator. Thank you to everyone joining us this morning. We appreciate your continued support and look forward to keeping you updated on our progress. Have a great day.

[Operator]

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Jason Redman, President and CEO
• David Watson, CFO