What Extendicare (EXE) Said on Its Q3 Earnings Call

Key Points

• Q3 results surged: Adjusted EBITDA rose 41% to CAD 71.7 million and net earnings increased 41.8% to CAD 34.2 million, supported by the CBI acquisition and organic home healthcare growth.
• Home healthcare momentum and integration: Volumes more than doubled including CBI, while underlying volumes grew 18.8%. CBI is tracking ahead of initial expectations, with integration and annualized synergies of about CAD 7.4 million expected by 2028.
• Growth plans remain active: Extendicare is open to further acquisitions once CBI integration is further along and plans to add 832 long-term-care beds through four homes opening in 2027.

Extendicare TSE: EXE reported a 41% increase in third-quarter adjusted EBITDA as its CBI acquisition and organic growth in home healthcare boosted results, while executives said they remain open to further acquisitions as integration work continues.

Adjusted EBITDA rose to CAD 71.7 million, and net earnings reached CAD 34.2 million, up 41.8% from a year earlier. Diluted net earnings per share increased 26% to CAD 0.354, CEO Michael Guerriere said on the company’s third-quarter earnings call.

Excluding out-of-period funding items, revenue climbed 43.3% to CAD 625.3 million and adjusted EBITDA increased 47.7% to CAD 69.2 million. CFO David Bacon said CBI contributed CAD 19.6 million of that adjusted EBITDA.

The company ended the quarter with CAD 246 million in liquidity after paying down CAD 53.7 million on its unsecured revolving credit facility. Guerriere said pro forma net debt to EBITDA improved to 2.3 times.

Home Healthcare Growth and Margins

Home healthcare volumes more than doubled from a year earlier, rising 111.5% with acquisitions included. Excluding CBI, average daily volumes rose 18.8%, which Guerriere attributed to underlying market growth.

Guerriere said he expects annualized underlying market growth to moderate over time to approximately 6% to 8%, reflecting demographic trends and unmet care needs associated with a shortage of long-term care beds. He cautioned, however, that the timing is difficult to predict and that the estimate could prove too low.

“We really do not have a good crystal ball for being able to see when that will slow down,” Guerriere said. He added that growth reflects both the number of people receiving care and the number of hours provided to patients with more intensive needs.

The CEO said staffing is no longer a material constraint on overall volumes, although challenges remain in some rural and remote areas. Extendicare is accepting the vast majority of government referrals, he said. He also told analysts that the company had not seen changes in referral volumes or new staffing constraints that would signal a slowdown.

Home healthcare net operating income margin was 13.1%, excluding out-of-period revenue, up 20 basis points from the second quarter but down 50 basis points from a year earlier. Guerriere attributed the year-over-year decline partly to investments in technology and back-office teams and the absence of a 2026 rate increase in Ontario.

Bacon said the business has an opportunity to improve margins by 50 to 100 basis points over the next couple of years, rather than solely in 2027. The trajectory will depend on factors including volume growth, funding increases and the completion of CBI integration, he said.

Integration and Acquisition Plans

CBI generated CAD 153.3 million in revenue and CAD 20.3 million in net operating income during the quarter. In its first six months after closing, the acquisition was tracking approximately 23% ahead of Extendicare’s original underwriting on adjusted EBITDA and 25% ahead on volumes, Guerriere said.

Extendicare expects to substantially complete the integration of Closing the Gap this year and complete CBI’s finance and enterprise IT systems integration by January 1, 2027. Frontline CBI care teams are expected to be integrated in phases through 2027, with approximately CAD 7.4 million in annualized synergies expected by full integration in 2028.

Guerriere said another acquisition could be considered before CBI integration is fully complete, but the company wants to be well along in that process first. Bacon said Extendicare is interested in home care businesses that expand its geographic reach or add services, rather than simply increasing volume in markets where it is already strong.

Bacon also said the company plans to review its dividend with year-end results early in the first quarter. Share buybacks remain an option if management believes the share price does not reflect the business’s prospects, he said.

Long-Term Care Redevelopment

Extendicare opened the 256-bed Forest Trail home in Peterborough, Ontario, at the end of September through its joint venture with Axium Infrastructure. After the quarter, it sold the vacated Peterborough Class C home for CAD 7 million in cash proceeds.

The company has five projects under construction and plans to open four new homes in 2027, adding 832 beds to the joint venture. Another 17 projects are in planning and development, with the next construction start targeted for spring 2027.

Bacon said Extendicare is monitoring interest rates and construction costs amid uncertainty, but remains committed to advancing the projects. He said delays at its Orleans project involved work with the contractor, while timing changes at St. Catharines and London were more modest. Although Orleans costs rose, they were back near the original cost outlook after anticipated savings did not materialize, he said.

Extendicare’s preference is to continue redevelopment through the joint venture and retain a capital-light model, though Bacon did not rule out undertaking a project on its own balance sheet.

New Earnings Measure

Extendicare introduced adjusted net earnings and adjusted earnings per share during the quarter. Bacon said the measures remove certain nonrecurring items and amortization of acquired intangibles to improve comparability between periods.

Adjusted net earnings rose 40.4% to CAD 39.6 million, or CAD 0.41 per diluted share. The company also plans to introduce a new cash flow measure in the first quarter of 2027 alongside changes associated with IFRS 18, while continuing to report funds from operations and adjusted funds from operations during a transition period, Bacon said.

About Extendicare (TSE:EXE)

Extendicare is a leading provider of care and services for seniors across Canada, operating under the Extendicare, ParaMed, Extendicare Assist, and SGP Purchasing Network brands. We are committed to delivering quality care to meet the needs of the growing seniors' population, inspired by our mission to provide people with the care they need, wherever they call home. We deliver more than 27 million hours of home health care services annually, operate a network of 97 long-term care homes (58 owned, 39 under management contracts), and provide group purchasing services to third parties representing approximately 161,700 beds across Canada.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.