Extendicare Q1 2025 slides: 42.7% adjusted EBITDA growth, strategic acquisitions ahead

Introduction & Market Context

Extendicare Inc. (TSX:EXE) presented its Q1 2025 financial results on May 7, 2025, highlighting strong performance across all business segments despite shares falling 4.26% to $13.93 on the day of the presentation. The company continues to position itself to capitalize on Canada’s aging demographic, with seniors aged 85+ increasing at approximately 4% annually and projections showing this population will double by 2036 and triple by 2051.

The long-term care provider emphasized the growing demand for its services, noting an Ontario LTC waitlist exceeding 48,000 and a nationwide need for more than 200,000 new LTC beds by 2035. This demographic tailwind supports Extendicare’s expansion strategy through both organic growth and strategic acquisitions.

Quarterly Performance Highlights

Extendicare reported substantial financial improvements in Q1 2025, with Adjusted EBITDA reaching $35.6 million, an 18.2% increase year-over-year. When excluding out-of-period items, Adjusted EBITDA grew by an impressive 42.7% to $29.0 million.

As shown in the following consolidated results summary:

Revenue increased by 2.1% to $374.7 million, while net operating income (NOI) rose 12.3% to $50.2 million. Net earnings improved by 14.8% to $15.0 million, and adjusted funds from operations (AFFO) per basic share grew 11.9% to $0.235, with a conservative payout ratio of 51%.

All three business segments demonstrated margin improvements:

• Long-term care: NOI margin of 9.4% (up 150 basis points)
• Home health care: NOI margin of 10.3% (up 200 basis points)
• Managed services: NOI margin of 53.4% (up 270 basis points)

The home health care segment was particularly strong, with average daily volume (ADV) increasing 8.9% year-over-year to 31,603, as illustrated in this performance chart:

Strategic Initiatives and Acquisitions

Extendicare outlined two major acquisition initiatives that will significantly expand its footprint. The company has entered into an agreement to acquire Closing the Gap Healthcare for $75.5 million, with closing expected in Q3 2025 subject to regulatory approvals.

The acquisition details show substantial potential value creation:

Based on 2024 performance, Closing the Gap’s approximately 1,200 caregivers delivered 1.1 million service hours in Ontario and Nova Scotia, which would have added $84.2 million in revenue with similar NOI margins to ParaMed and an estimated $0.06 in AFFO per basic share. The company also expects to realize $1.1 million in annualized cost synergies within the first year following closing.

Additionally, Extendicare is acquiring nine LTC homes from Revera, expected to close in Q2 2025. This acquisition will add 822 LTC beds and 574 private pay retirement beds to Extendicare’s portfolio:

The company plans to redevelop the LTC beds into six new LTC homes, adding approximately 1,100 beds. After these transactions, Extendicare will operate 101 long-term care homes with over 14,500 beds.

Development Projects and Financial Position

Extendicare is actively redeveloping its portfolio to meet growing demand, with six LTC homes currently under construction that will provide 1,408 new beds replacing 1,097 Class C beds:

The company completed the sale of three LTC projects to its Axium joint venture for net proceeds of $56.3 million subsequent to quarter-end, bolstering its already strong financial position.

Extendicare maintains a solid balance sheet with $110 million in cash and $108 million in available credit facilities as of March 31, 2025:

This financial flexibility positions the company well to fund its pending acquisitions and ongoing development projects. The company’s debt metrics continue to improve, with increasing interest coverage and decreasing debt-to-gross book value ratios.

Forward-Looking Statements

Extendicare’s long-term growth strategy focuses on expanding its less capital-intensive, higher-margin business segments while strategically developing new LTC homes through joint venture partnerships:

The company’s geographically diversified operations span multiple Canadian provinces, with particularly strong presence in Ontario, Alberta, and British Columbia. This diversification, combined with the company’s multi-service approach across long-term care, home health care, and managed services, provides resilience and multiple growth avenues.

With seniors aged 85+ projected to increase substantially over the coming decades, Extendicare appears well-positioned to benefit from this demographic trend while executing on its strategic growth initiatives through both organic expansion and acquisitions.

Full presentation:

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