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CareRx Corporation reported its financial results for the first quarter of 2025, highlighting stable revenue and an increase in adjusted EBITDA. The company’s earnings per share (EPS) matched expectations, while revenue slightly missed forecasts. The stock saw a minor decline of 0.76% in pre-market trading, reflecting a cautious investor sentiment. According to InvestingPro analysis, CareRx maintains a GOOD financial health score, and the stock appears undervalued based on comprehensive Fair Value calculations.
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Key Takeaways
- CareRx’s Q1 2025 revenue remained stable year-over-year at $89.6 million.
- Adjusted EBITDA rose by 4.5%, with a margin increase of 40 basis points.
- The company reported a net income of $227,000, a turnaround from previous losses.
- Stock price decreased by 0.76% in pre-market trading following the earnings release.
- CareRx opened a new pharmacy fulfillment center in North Burnaby, BC.
Company Performance
CareRx Corporation maintained steady revenue in the first quarter of 2025, reflecting stable performance in the Canadian long-term care pharmacy market. The company’s adjusted EBITDA improved, indicating enhanced operational efficiency. The net income of $227,000 marks a significant improvement from the net losses reported in previous quarters, showcasing the effectiveness of recent strategic initiatives.
Financial Highlights
- Revenue: $89.6 million (stable year-over-year)
- Adjusted EBITDA: $7.8 million (4.5% increase year-over-year)
- Adjusted EBITDA Margin: 8.7% (40 basis points increase)
- Net Income: $227,000 (compared to net loss in previous quarters)
- Cash Balance: $11.2 million (increased from $9.1 million)
- Net Debt: $33.4 million (decreased from $36.2 million)
Earnings vs. Forecast
CareRx’s actual EPS of $0 met the forecasted EPS of -$0.0238, while revenue of $89.55 million slightly missed the forecast of $90.81 million. This minor revenue miss reflects a stable but cautious outlook for the company, with investors reacting to the slight shortfall.
Market Reaction
Following the earnings release, CareRx’s stock experienced a slight decline of 0.76%, with the price falling from $2.63 to $2.61. While the stock has seen recent pressure, InvestingPro data shows an impressive 44.51% gain over the past six months, suggesting strong medium-term momentum despite short-term volatility. The current price movement places the stock closer to its 52-week low of $1.71, indicating a cautious market response amidst stable revenue and improved profitability metrics.
Outlook & Guidance
CareRx anticipates robust growth opportunities in 2025, driven by investments in bed growth and operational efficiencies. The company plans to explore potential tuck-in acquisitions and share repurchases while focusing on debt reduction. Revenue contributions from newly secured beds are expected in the next two quarters. Analyst consensus gathered by InvestingPro indicates a bullish outlook, with price targets suggesting significant upside potential. Subscribers can access detailed analyst forecasts and comprehensive financial analysis through InvestingPro’s Research Reports.
Executive Commentary
CEO Puneet Khanna emphasized the company’s commitment to enhancing shareholder value and organic growth. "We continue to generate cash, enabling us to strategically allocate capital towards both growth initiatives and enhance shareholder values," Khanna stated. He also highlighted the company’s focus on providing high-quality care: "It’s about helping every resident live with dignity, purpose, and the highest standard of care."
Risks and Challenges
- Potential fee reductions in long-term care pharmacy funding could impact revenue.
- Market competition may pressure margins despite operational improvements.
- Economic fluctuations could affect procurement costs and supply chain stability.
Q&A
During the earnings call, analysts inquired about the potential for organic growth and small acquisitions. CareRx clarified that the consolidation of its Burnaby facility incurred minimal one-time costs. Additionally, the company addressed changes in revenue dynamics due to COVID-related medication pricing and the deferral of fee structure changes by the Ontario Ministry of Health.
Full transcript - CareRx Corp (CRRX) Q1 2025:
Conference Moderator: Good morning, everyone, and welcome to the CareRx First Quarter twenty twenty five Financial Results Conference Call. Please note that this call is being broadcast live over the Internet and the webcast will be available for replay beginning approximately one hour following the completion of the call. Details of how to access the webcast replay are available in today’s news release announcing the company’s financial results as well as the company’s website at www.carerx.ca. Today’s call is accompanied by a slide presentation. Those listening on the phones can access the slide presentation from the company’s website in the Investor Relations section under Events and Presentations by loading the webcast and choosing the non streaming audio option.
Certain matters discussed in today’s call or answers that may be given to questions asked can constitute forward looking statements that are subject to risks and uncertainties related to CareRx’s future financial and business performance. Actual results could differ materially from those anticipated in these forward looking statements. The risk factors that may affect results are detailed in CareRx’s continuous disclosure record, which you can access in the SEDAR plus database under www.cedarplus.ca. CareRx is under no obligation to update any forward looking statements discussed today, and investors are cautioned not to place undue reliance on these statements. After the presentation, there will be an opportunity to ask questions.
I would now like to turn the conference over to Mr. Puneet Khanna, President and CEO of KRX Corporation. Please go ahead, Mr. Khanna.
Puneet Khanna, President and CEO, CareRx Corporation: Thank you, and good morning, everyone. Welcome to our first quarter twenty twenty five earnings call. With me this morning is our Chief Financial Officer, Suzanne Brand. In the first quarter of twenty twenty five, we delivered revenue of $89,600,000 and adjusted EBITDA of $7,800,000 As expected, average bed count in the quarter was slightly above the fourth quarter of twenty twenty four. As we previously announced, in early December, we opened a new state of the art high volume fulfillment center in North Burnaby, British Columbia.
With this expansion, we commenced the consolidation of our existing Burnaby and Vancouver pharmacy operations into the new CareRx Lower Mainland location. The transition of all beds to this new facility was completed in the first quarter of twenty twenty five. At the end of the quarter, we were proud to host the BC Ministry of Health and the BC Care Providers Association for a tour of this new pharmacy. With a shared commitment to improving health outcomes for seniors, we are excited about the ongoing opportunities to contribute to the future of senior care in British Columbia. In April, the Ontario Ministry of Health announced the postponement of the previously scheduled changes to the long term care pharmacy funding for another year.
These changes would have reduced the fixed professional fee under the fee per bed capitation model from an annual amount of $1,500 per bed to $1,400 per bed. We have a collaborative relationship with the Ontario government and are optimistic that together a permanent and mutual beneficial platform for funding will be developed. We look forward to building on this partnership as we continue to demonstrate the value of long term care pharmacy. Finally, we strengthened our management team with the addition of Erwin Van Hoot as Senior Vice President, Information Technology. Erwin joins us with a wealth of experience in the healthcare sector and a proven track record of balancing innovation and operational excellence.
He has held senior roles at Deloitte, at several hospital health systems, including Sick Kids Hospital in Toronto, where he led the implementation of critical IT infrastructure and implemented cutting edge technologies for the new 22 storey tower. I’m excited to have Irwin’s healthcare IT focused experience leading the next phase of our growth journey. I will now turn over the call to Suzanne, who will discuss our first quarter financial results in more detail. Suzanne?
Suzanne Brand, Chief Financial Officer, CareRx Corporation: Thank you, Puneet, and good morning, everyone. Revenue for the first quarter of twenty twenty five was essentially in line with the first quarter of twenty twenty four at $89,600,000 and decreased slightly from $92,200,000 in the fourth quarter of twenty twenty four. Revenue remained stable year over year, primarily due to a change in the mix of branded and generic pharmaceuticals dispensed. The quarter over quarter revenue decrease was due to two fewer operational days in the quarter. Adjusted EBITDA for the first quarter increased by 4.5% to $7,800,000 from $7,400,000 in the first quarter of last year and increased by 3% from the fourth quarter of twenty twenty four.
Adjusted EBITDA margin increased by 40 basis points year over year to 8.7% and increased 50 basis points quarter over quarter. The year over year improvement in adjusted EBITDA was primarily the result of efficiencies and cost savings initiatives. We generated net income of $227,000 in the first quarter compared with a net loss of $517,000 in the first quarter of twenty twenty four and a net loss of $2,200,000 in the fourth quarter. The elimination of the net loss was driven primarily by decrease in finance costs and depreciation and amortization expenses, partially offset by increase in transaction, restructuring and other costs and a reduced favorable adjustment in the fair value of contingent consideration liability. Cash as of March 31 was $11,200,000 compared with $9,100,000 at the end of the fourth quarter.
Net debt decreased by $2,800,000 to $33,400,000 compared to $36,200,000 last quarter. The quarter over quarter increase in our cash balance and decrease in net debt was due to a net increase in cash generated from operations and payments to the term loan. Net debt to annualized run rate adjusted EBITDA at the end of the first quarter was 1.1 times, down from 1.2 times in the fourth quarter of twenty twenty four. We continue to remain committed to returning capital to shareholders through our active share buyback program under the normal course issuer bid, supported by our strong capital position and the belief that our share price does not adequately reflect the fundamental value in our underlying business and our near and long term growth potential. Finally, it’s important to reiterate that CareRx operates exclusively within Canada, serving only Canadian customers, and we source our medications and equipment almost exclusively from Canadian suppliers.
As a result, we are highly insulated from the threat of tariffs. And with that, I turn the call back over to Puneet.
Puneet Khanna, President and CEO, CareRx Corporation: Thank you, Suzanne. As I previously mentioned, in December, we opened a new state of the art pharmacy in North Burnaby, British Columbia. This new pharmacy fulfillment center is designed to enhance service delivery for the homes and residents serviced by Carex throughout the BC Lower Mainland and at the same time provide an improved experience and work environment for our employees. We have successfully consolidated the Burnaby and Vancouver pharmacies into the new Lower Mainland location with all of our beds fully transitioned to this facility at the end of the first quarter. The new CareRx Lower Mainland site is the largest pharmacy in our network based on the number of beds serviced.
As a part of our ongoing process improvement and cost reduction initiatives, in January, our team visited high volume European pharmacy facilities. These highly efficient large scale operations utilize technology similar to our packaging robotics, while also implementing additional innovative systems and processes that substantially improve output and minimize downtime. We are now collaborating with these operators and benchmarking our performance against these best in class international high volume pharmacies. We also continue to investigate cost saving procurement opportunities that streamline the business by leveraging scaled buying power. Finally, as mentioned earlier, we are excited to have an experienced healthcare IT leader on the management team to drive IT enabled efficiencies and innovation that will elevate our service offering to our home operating partners and residents, while reducing costs and continuing to enhance the work experience for our employees.
As I outlined last quarter, we expect twenty twenty five growth opportunities to be robust. In the first quarter, we had some marginal growth, but we secured 3,000 new beds and have already begun the onboarding process. We will see the revenue contribution from these new beds ramp throughout the next two quarters. We have positioned Carex with an operating platform and with the capacity to respond immediately to growth opportunities. Home operators in our sales pipeline have acknowledged our optimized operations, innovative services and programs and our ability to evolve to market demand.
As such, we look forward to sharing the further bedwins throughout the rest of the year. As Suzanne shared, we continue to generate cash, enabling us to strategically allocate capital towards both growth initiatives and enhance shareholder values in the following ways: one, investment in bed growth and efficiencies two, tuck in acquisitions three, the repurchasing of our shares and four, to reduce our debt. We spend each quarter discussing our financials, but never about why we do what we do. Today, I wanted to share the story of Mr. Bernadette Bert Sisler, Canada’s oldest man and a proud World War II veteran.
A few weeks ago, we had the privilege of attending his 100 birthday celebration. Bird has lived through two world wars, two solar eclipses and two pandemics. For greater context, Bird has been retired for fifty five years. We were inspired by his determination, resilience and wisdom that comes from a life spanning more than a century. This celebration was also a reminder of the importance of our work.
It’s about helping every resident live with dignity, purpose and the highest standard of care. This is at the heart of why we do what we do. With that, I’d now like to open the call to questions. Operator?
Conference Moderator: Thank you. We will now begin the question and answer session. And our first question will come from Mr. Gary Ho with Desjardins Capital Markets. Please go ahead.
Gary Ho, Analyst, Desjardins Capital Markets: Thanks. Good morning. Puneet, with a much healthier balance sheet and you comment in the press release that you’re entering a new phase of growth, are you maybe able to elaborate, are you more willing to look at acquisitions again or is this more organic or even perhaps looking at the smaller contracts that you can bolt on that might have been serviced by mom and pop kind of retail pharmacies? If you can give us a little bit more detail, that would be great.
Puneet Khanna, President and CEO, CareRx Corporation: Yes. No, Good question, Gary. You know what all of the above. So, you know, I think for where the network is and the platform we’ve built, we are very bullish on organic growth and are comfortable with the street fight and sort of winning beds on the market there. We do have cash and so the ability to also do tuck ins and or buy individual contracts from the mom and pops is something we’re pursuing as well.
So yes, the answer is all of the above.
Gary Ho, Analyst, Desjardins Capital Markets: Okay, great. And then maybe just related to that, the bed count growth in your prepared remarks, you just mentioned the 3,000 bed wins. Just wondering if you can share if that’s kind of related to kind of what you’ve talked about kind of previous quarters in the Verus twenty one LTC home. Is that still on track to be onboarded? And if you kind of take a more optimistic approach in terms of getting some of these acquisitions you just mentioned, where do you think you’ll end 2025 in terms of headcount growth?
Puneet Khanna, President and CEO, CareRx Corporation: Okay. Yes. No, so the ’21 that you mentioned are part of that 3,000. Those are all scheduled to be onboarded by the end of Q2. And so and sort of in my prepared remarks, by kind of you see sort of that that impact revenue wise, it’ll be over the next two quarters that you see that piece.
And then I think outside of that, you know, not as big as the current one, but we do have, again things that are very close to being in hand over the next quarter or two. That we that will continue to turn online. And so I think and then your last question was in and around where we end. And so I think what you have as your estimates, we’re really comfortable with.
Gary Ho, Analyst, Desjardins Capital Markets: Okay. Great. And then just maybe last question, perhaps for Suzanne. There were some noise in the operating expense related to the North Burnaby facility ramp up last quarter. Curious if there’s any kind of one time costs that’s baked into the Q1 numbers that you just released?
And anything else that we should model for Q2 and going forward?
Suzanne Brand, Chief Financial Officer, CareRx Corporation: Gary thanks for the question, Gary. Really minimal onetime related costs this quarter. It’s just maybe a little bit with respect to some crossover on service as we consolidated everything into the one location by the March. So it’s, I’d say, incredibly immaterial. So we’re in really good shape with respect to those one time costs.
Gary Ho, Analyst, Desjardins Capital Markets: Okay, great. Those are my questions.
Puneet Khanna, President and CEO, CareRx Corporation: Thanks, Gary. Have a good day.
Conference Moderator: The next question will come from David Martin with Bloom Burton. Please go ahead.
David Martin, Analyst, Bloom Burton: Hi. Congratulations on the progress. I kind of have a reverse question about Burnaby. Have you did you experience a full impact of the benefits of consolidating the operations into Burnaby? And if not in the first quarter, what kind of impact are we going to see on the expense lines moving forward?
Suzanne Brand, Chief Financial Officer, CareRx Corporation: Thank you. With respect to the Burnaby opportunity, we haven’t got the full impact of all of the consolidation yet, but we do expect to start experiencing those opportunities within the back half of this year. So we will get the full benefit of the, call it, consolidated operations and full impact of the opportunities in the back half of the year.
David Martin, Analyst, Bloom Burton: And what kind of impact should we expect?
Suzanne Brand, Chief Financial Officer, CareRx Corporation: In terms of an absolute number?
Puneet Khanna, President and CEO, CareRx Corporation: Yes. I don’t so I think it will be similar to what we saw in the Oakville location. So we generally don’t give guidance on that, but we will see efficiencies in our labor and overtime and just driving operational excellence through that location. So we have already implemented the lean that generally takes three to four months to start fleshing out. So we’ll see those operating costs go down.
David Martin, Analyst, Bloom Burton: Okay, great. Thanks. That’s it for me.
Puneet Khanna, President and CEO, CareRx Corporation: Thanks, David.
Conference Moderator: Your next question will come from Tania Armstrong, Whitworth with Canaccord Genuity. Please go ahead.
Tania Armstrong Whitworth, Analyst, Canaccord Genuity: Hi, good morning guys.
Puneet Khanna, President and CEO, CareRx Corporation: Hi Tanya.
Tania Armstrong Whitworth, Analyst, Canaccord Genuity: Could you comment to start maybe just on the employee costs, we did see a bit of an uptick there and I’m wondering based on the consolidation occurring as planned, what is it an upside uptick in employee costs? Or is this kind of your new sustained run rate?
Suzanne Brand, Chief Financial Officer, CareRx Corporation: Thanks, Tanya, for the question. The increase in employee cost is fundamentally related to the inflationary costs year over year in terms of embedding some of the merit and a little bit of timing. So you would have some of the increased costs attached the benefits related to those as well. So it’s fundamentally timing and inflation related.
Tania Armstrong Whitworth, Analyst, Canaccord Genuity: Okay. So this can be seen as kind of a new run rate?
Suzanne Brand, Chief Financial Officer, CareRx Corporation: It would be close to, yes, kind of a recurring rate.
Tania Armstrong Whitworth, Analyst, Canaccord Genuity: Okay. Excellent. And then in terms of revenue per bed, I know you mentioned a little bit about the generic versus branded medication expense mix. Was there like a one time change that occurred in Q1 to cause revenue to come down a little bit Or is this kind of just a gradual erosion that’s been happening?
Suzanne Brand, Chief Financial Officer, CareRx Corporation: It’s actually Tanya, it’s actually a change with respect to a product called Paxlovid. So in 2024, in kind of the first I think it was actually in the first quarter, where we actually that product was actually being received, let’s call it, free via the government. So now that is totally a part of the product cost that we have to purchase. So do you see that difference with respect to the revenue driver on the mix there? And
Puneet Khanna, President and CEO, CareRx Corporation: just for context, Tanya, that was the therapy for COVID. And so you have to remember early on and for the little bit, the years after governments were we’re not going to give it to the pharmacies for free anymore. And so you see that in the COGS.
Tania Armstrong Whitworth, Analyst, Canaccord Genuity: Okay. Excellent. That’s all for me. Thank you, guys.
Puneet Khanna, President and CEO, CareRx Corporation: Thanks, Tanya.
Conference Moderator: Your next question will come from Justin Keywood with Stifel GMP. Please go ahead.
Justin Keywood, Analyst, Stifel GMP: Good morning. Thanks for taking my call. I’m not sure if I missed it, but on the Ontario Ministry of Health announcing a pause to the scheduled FEED change, Is there an anticipation of when that could come into effect? Or is it deferred indefinitely at this point?
Puneet Khanna, President and CEO, CareRx Corporation: It’s been deferred for a year again as we continue to have conversations with them, Justin.
Justin Keywood, Analyst, Stifel GMP: And what is the strategy around that deferral? Because if it does come into effect, it could be what sounds like pretty impactful with the capitation model and the fee per bid reducing by what sounds like 30%?
Puneet Khanna, President and CEO, CareRx Corporation: Yes. I mean, it’s a step down. That was from a previous the previous Liberal government that put in that mechanism. This has been frozen for the last number of years. And I think, you know, again, we have a very good relationship with the Ontario government and collaborate.
We collaborate with them and so you know I think they realize that it doesn’t necessarily make sense, but it says unfortunately there’s been some timing related things with ministers changing and an election that we had at the beginning of this year that has just caused delays. They’re giving themselves another year or two to investigate and make a decision. Are we able to quantify that potential impact if it does come into effect and realize that the step down in fees occurs over a number of years, but as far
Justin Keywood, Analyst, Stifel GMP: as EBITDA margins or impact on the overall business?
Suzanne Brand, Chief Financial Officer, CareRx Corporation: Well, without knowing exactly the entire impact, I mean, we can quantify it. It is challenging to we need to know exactly how many beds we would have over the kind of approach could look into that.
Conference Moderator: This concludes the question and answer session. I would like to turn the conference back over to Mr. Conno for any closing remarks. Please go ahead.
Puneet Khanna, President and CEO, CareRx Corporation: Thank you everyone for your continued interest in TRx. We will see you next quarter. Thank you.
Conference Moderator: This brings today’s conference call to a close. You may disconnect your lines. Thank you for participating and have a pleasant day.
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