Hello everyone. Thank you for joining us and welcome to Guardian Pharmacy's third quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. I will now hand the call over to Ashley Stockton, Investor Relations. Please go ahead.

Good afternoon. Thank you for participating in today's conference call. This is Ashley Stockton, Vice President, Investor Relations for Guardian Pharmacy Services. I'm joined on today's call by Fred Burke, President and Chief Executive Officer, David Morris, Chief Operating Officer, and Will Mudd, Chief Financial Officer. After market closed today, Guardian posted its financial results for the quarter ended September 30th, 2026. A copy of the press release is available on the company's investor relations website. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release and quarterly report on Form 10-Q, as well as the specific risk factors and uncertainties discussed in our annual report on Form 10-K. We do not undertake any duty to update any forward-looking statements which speak only as of the date they are made. On today's call, we will also use certain non-GAAP financial measures when discussing the company's financial performance and condition. You can find additional information on these non-GAAP measures and reconciliations to their most directly comparable GAAP financial measures in today's press release, which again is available on our Investor Relations website. And now I will turn it over to Fred for high-level commentary.

Thank you, Ashley, and good afternoon, everyone. We're extremely pleased with our performance this year and the momentum we're seeing across the business. Our results reflect the strength of the Guardian model, The dedication of our teams and growing demand for high quality pharmacy services in the long term care setting. Given our performance year to date, we are raising our full year guidance, which Will will discuss in more detail. Before I hand it over to David on operations, I'd like to take a few minutes to discuss the broader economic environment, industry fundamentals, and how Guardian is positioned for continued growth. Looking across the broader economy, affordability, higher interest rates, and elevated operating costs all remain concerns. We believe the characteristics of the markets we serve and our business model help insulate Guardian from many of these issues. First, on affordability, it's well documented that those 75 and over are among the wealthiest segment of the population. We believe this provides an important foundation for long-term demand for private pay-assisted living, which represents approximately 70% of the residents we serve. Second, on interest rates, our debt-free balance sheet eliminates direct exposure to higher borrowing costs, while our cash generation has allowed us to fund our typical pace of market expansion without relying on external financing. Finally, our business is delivery intensive, making fuel an important operating expense, which unfortunately remains elevated. However, as we stated last quarter, our full year guidance already assumes these higher costs will persist through the remainder of the year. Beyond these macro considerations, Conditions across senior housing remain favorable and reinforce the value of Guardian's service model. Assisted living occupancy continues to improve, reaching 89% in the third quarter, according to NCMAP data, and is expected to continue to climb. At the same time, resident acuity remains elevated and labor challenges continue to pressure facility operators. As occupancy approaches historical highs and residents' care needs become more complex, operators increasingly need a sophisticated pharmacy partner like Guardian that can manage higher prescription volumes, support complex medication regimens, and invest in the capabilities needed to meet these evolving demands. Thank you for joining us. even if industry occupancy eventually reaches maximum capacity. At the heart of Guardian's strategy is our commitment to delivering exceptional high-touch pharmacy services to benefit the residents and facilities we serve. To sustain best-in-class service levels, It is imperative that we are appropriately compensated for the value our services provide in supporting better clinical outcomes and helping bend the cost curve in long-term care. Today, generics account for over 90% of our prescription volume and generate the vast majority of our gross profit. Accordingly, we are advancing a reimbursement model that better compensates us for the services we provide and places greater emphasis on our generic portfolio. This shift represents a meaningful evolution in our approach, one that we are helping to pioneer alongside our payor partners who increasingly recognize the need for greater transparency. Ultimately, we believe this approach will serve to de-risk our business model and enhance our longer-term stability. Taken together, Favorable industry fundamentals, substantial market share opportunity, and our differentiated service model should position Guardian exceptionally well for the future. Coupled with our efforts to strengthen reimbursement economics, consistent cash generation, and our highly liquid balance sheet, I am ever more confident in Guardian's ability to deliver durable growth and shareholder value. With that, I'll turn the call over to David.

Thanks, Fred, and good afternoon, everyone. I'd like to focus on our operational progress, where we've made meaningful strides this quarter in expanding our resident base, both through Greenfield startups and acquisitions. Our Greenfield startup in Lexington, Kentucky, announced last quarter, is now operational. We are also moving forward with plans to further expand our presence in Texas and Alabama with new locations in Houston and Huntsville, respectively. These additions will mark our second pharmacy location in each state. Our wellness concepts acquisitions in Grottoes, Virginia closed in July. While still early, the integration is on track. We also completed the Nautilus asset acquisition late in the quarter, representing a unique opportunity to add scale across our existing pharmacy network. Nautilus previously served assisted living communities across 14 states through a centralized mail order model. We now have transitioned all of these residents to 18 guardian pharmacies already operating in their respective markets providing them access to our locally managed high-touch pharmacy services. From a financial perspective, this is an attractive asset-light transaction that allows us to leverage existing infrastructure and operating capacity to absorb additional residents with limited incremental investment. As a result, this transaction is immediately accretive after we absorb the cost of onboarding. In October, we added a small pharmacy in Sioux City. Collectively, with our existing pharmacy in that area, it gives us a more significant presence in northwest Iowa. Lastly, earlier this week, we also completed the acquisition of Vann's Institutional Pharmacy, a well-established long-term care pharmacy serving communities across western Tennessee and Kentucky. This acquisition brings our total pharmacy count to five in Tennessee. Vans is slightly smaller than our typical acquisition, but it is an excellent cultural and operational fit, having built a reputation for high quality service over a period of more than 50 years that aligns closely with our commitment to service excellence. Looking ahead, our acquisition pipeline remains active. Additionally, we see significant potential to build greater scale and density in adjacent markets through our contiguous greenfield startups. Maintaining both our organic and inorganic growth requires the right leadership, which is why we established our regional SVP structure earlier this year. This team is already driving greater consistency, accountability, and collaboration across our pharmacy network while preserving the local decision-making and entrepreneurial culture that have long been central to Guardian. More specifically, we are seeing benefits through increased sharing of best practices, better coordination of sales and account management efforts, and opportunities to improve operating efficiencies both within individual pharmacies and across regions. This is particularly important as we expand relationships with regional and national customers who rely on Guardian to deliver consistency across multiple states and markets. And while our regional leaders play an important role, it's the dedication of our people across the entire organization that makes all of this possible. On behalf of our senior management team, I'd like to thank everyone for their hard work and commitment to the customers and residents we serve. Our people remain the foundation of Guardian's success. With that, I'll turn the call over to Will for a more detailed review of our financial performance and updated outlook.

Thank you, David, and good afternoon, everyone. As David mentioned, we delivered another strong quarter with solid growth in residents served, prescription volumes, and adjusted EBITDA. We ended the quarter serving approximately 218,000 residents, representing high single-digit growth compared with the prior year period. Alongside this growth, prescription volumes increased 10% year-over-year. Reported revenue was $371 million compared with $377 million in the prior year period, representing a reported decline of 1.7%. Absent the impact of IRA-related drug price reductions that took effect earlier this year, revenues would have increased high single digits in line with what we got into last quarter, mostly reflecting organic growth. Note wellness concepts. Our primary acquisition year-to-date was on the smaller side, and Nautilus did not meaningfully contribute to this quarter. Gross profit was $85.2 million, up 14% year-over-year. Gross margin was also up sequentially to 23%. Revenue and margins continue to benefit from improved reimbursement, ongoing purchasing initiatives, plan optimization efforts, and a successful launch to this year's vaccine programs. Adjusted SG&A was $57.4 million, representing 15.5% of revenues. We continue to benefit from operating leverage as our resident base and prescription volumes grow, allowing us to spread our fixed operating costs across a larger base of business. Share-based compensation was close to $2.8 million. Adjusted EBITDA increased 24% year-over-year to $33.9 million. EBITDA margin was 9.1%. Acquisitions in Greenfield startups completed since 2024 are collectively contributing positive adjusted EBITDA, although they dampened our adjusted EBITDA margin by 44 basis points in the quarter. The effective tax rate came in at 26%. Net income was $19 million, up from $9.6 million in the year-ago quarter. Given our strong year-to-date performance and current expectations for the fourth quarter, We are raising our full-year 2026 guidance. We now expect revenue in the range of $1.44 billion to $1.46 billion, up from $1.43 billion to $1.45 billion. Adjusted EBITDA is now expected in the range of $136 million to $138 million, up from $129 million to $131 million. Our updated outlook reflects our stronger-than-expected third quarter performance. Various market expansion initiatives David laid out in the continuation of improved reimbursement and other strong operating trends into the fourth quarter. As in the past, our guidance does not assume any additional acquisitions beyond those already completed. Turning to our balance sheet, we ended the quarter with approximately $120 million in cash and no debt. Our capital allocation priorities remain focused on supporting long-term profitable growth while maintaining the financial discipline that has been a hallmark of Guardian's strategy. Finally, I want to highlight an important milestone related to our share structure. On September 27, the final tranche of approximately 13.5 million shares of Class B common stock that were originally issued in connection with our September 2024 corporate reorganization and IPO converted into Class A common stock. Ahead of the conversion, our founders, executive officers, and certain other employees entered into lockup agreements covering approximately 30 million shares, or close to 80% of the Class A shares held by our founders, executive officers, and other pre-IPO employee shareholders. These shares will remain subject to lockup restrictions through September 14, 2027, subject to limited exceptions. such as a small allocation to 10 plans. The strong continued insider ownership in Guardian reflects long-term confidence in the company and alignment with our public shareholders. With that, operator, please open the line for questions.

We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question from the line of Brian Tankulat with Jefferies. Your line is now open. Please go ahead.

Hey, good afternoon, guys, and congrats on a solid quarter. I guess my first question, Fred, to your comment that you made in your prepared remarks about how there's room to grow even as industry occupancy starts to taper off or top out. I'm curious, how do you think about what drives market share to Guardian and why these senior housing facilities would pick you as their partner over the competition? With that in mind, how do you think investors should be thinking about the right growth rate over the next three to five years as you think through the opportunities that you have in front of you? Thanks.

Thanks, Brian. The main way that we grow organically is through convincing an assisted living operator to Declared Guardian is their preferred pharmacy. And when we do that, it's a big decision for our customers. But when they do, we then begin servicing that facility. As we've mentioned, typically, we'll find a lower adoption rate at the outset than what we typically enjoy. And we'll set about the task of then growing the adoption over time to our 90% corporate average. The reason that an assisted living operator would choose Guardian as their preferred pharmacy is because of the value-add services that we provide with the focus on managing the drug regimen of the residents, providing the technical platform for their caregivers to administer the meds, and all the various services that we render to make sure that resident is on the proper drug regimen and also adhering to it, both of which bend the cost curve and improve outcomes.

Got it. Okay, that makes sense. Obviously, good acquisition activities during this quarter, two different flavors of deals. When we think of the remaining opportunity to roll up in the space, Fred, how are you thinking about that? And just in terms of the size of that market in terms of assets out there, and then what does that look like once you plug it in? I know, again, two different kinds of acquisitions this quarter. How do we think about how that accrues and how that plugs into your businesses? Thanks.

I'll start by passing to David Morris, who is day-to-day heavily involved in the biz dev activity. We've mentioned before, Brian, that there are hundreds of long-term care pharmacies that are independent, but about 100 or so would fit our target. That would be to say typically a closed door,

100% focused LTC Pharmacy.

There are still many of those left to go. So, David is working that pipeline every day and we're in constant contact and I can assure you that we have a very robust opportunity over the next few years.

Hey, Brian, David here. Yeah, just you step back. We've got about 14% market share of our primary market assisted living. As Fred said, it's a very fragmented group of operators, hundreds out there. We're focused on a certain group that fit, you know, what we're looking for and what they're looking for. But we're going to continue to do what we've been doing really the last 10 plus years. It's a two prong approach. and we had a lot of that in this quarter where we're doing contiguous greenfield startups with operators in existing territory where customers are asking us to expand and then with our other hand we're finding like-minded operators to put new pins on the map. So that's what we've been doing and that's what we're going to continue to do and the opportunity is bigger than probably we've ever had. Amazing.

Thank you guys. Congrats again.

Your next question from the line of Zach Haggerty with KeyBank Capital Markets. Your line is now open. Please go ahead.

Hey, good afternoon. I want to ask you about the plan to expand in Texas and Alabama. What does the opportunity look like within those specific markets with respect to demand and then any comments on competition? And then do you have a bias towards organic or M&A in those markets over time?

Yeah, I'll start with the last question. We really don't have a bias. We feel like we can effectively deploy capital both in acquiring an existing business and through contiguous startups. If you look at Alabama, that's a market we've been in for over 15 years, but it's growing and we've been looking at several customers in the North Alabama area. and we just felt like it's time to expand our footprint to better serve those customers in that growing region. Texas is a market we've been in for five to six years and have a lot of demand there and I think Houston is a great opportunity and I think there will be many more as we expand our footprint to better serve that state.

Great. And then just On 2027, maybe if you guys have any high-level thoughts about next year, any contribution from the maturing cohorts of pharmacies, and any headwinds or tailwinds that we should be keeping in mind. Thanks.

I think we'll, as we have over the years, we'll see our existing cohorts continue to mature. Will mentioned that the prior quarters we had about 80 basis points of margin depression That's 44 points for this quarter, but that'll ebb and flow as we invest and roll out more contiguous startups. It may go back up, so it'll move around. So we've constantly got pharmacies maturing to the margins of our overall platform, but we'll also continue to invest in new geographic expansions. So I think what you'll see is an investment level similar to what we've had the past couple of years from a margin standpoint. Great. Thank you.

Your next question from the line of Raj Kumar with Stevens. Your line is now open. Please go ahead.

Hey, good afternoon. Maybe just one on kind of midterms and I think the policy environment.

Appreciate that

You know, you guys haven't needed to depend on policy, especially with the kind of IRA dynamics playing out this year. But as you kind of think about the Democratic sweep and the kind of already introduced bills in place around correcting the unintended consequences, IRA would just love to hear your thoughts on kind of if there's more fuel there, given the kind of the landscape shift or or kind of still just in the background while the main focus remains just executing on the operations of the business.

I would say at this point it's the latter, but it's too early to call. We'll certainly be keeping our ear to the ground and monitoring any policy proposals coming out of Washington. But for the moment, as steady as we go, don't forget that Part D is arguably the most popular of the government benefits. Very successful, and at least in my personal opinion, I think politicians are very, very careful to touch that rail of something that's working and popular. But we'll see and monitor, keep you posted.

Got it. Then as a follow-up, I was curious on kind of how you think about, you know, I think CVS announced a pending split in 2028 for CrossFit Health Insurance, PBM, and pharmacy assets. I know there's not a lot of overlap in the business, especially with Omnicare kind of being set to the side for them, but curious how you see that dynamic for kind of the long-term care pharmacy space that presents an opportunity or if that is an area where it increases potential competition, just given differentiated focus on some of those assets. Just kind of curious on that development and your thoughts.

Roger's certainly not our prerogative to speak to their strategy, but with respect to the impact on our business, we don't see any at all. Retail pharmacy is not equipped to properly serve our customer base. And we would be hopeful, frankly, that CDS operating as an independent company would be stronger. And that's what we need broadly in our industry is our strong competitors. We're pulling for them and hope this works out well, but do not see much impact on our particular space.

Got it. Thank you.

Your next question from David McDonald with Truist Securities. Your line is now open. Please go ahead.

Hey, good afternoon, guys. Congratulations. Would love to ask a kind of a payer partner question. Fred, during the prepared remarks, you talked about, you know, demand for high quality services. And when we look at the focus at the payer level on quality, I mean, I guess number one is the quality of the services that you provide becoming an even bigger differentiator. And then secondly, you also mentioned during the prepared remarks just contracting and generics. and any additional detail you can provide there. I mean, it feels like that's kind of an aligned incentive game if you're getting a larger and larger percentage coming from generics, which is where the payers want to go anyway. But any additional detail there would be helpful.

That is exactly the situation, David. It's in both our interest to align the margin profile of of the business with the dispensing profile, and that's what we've set about to do. And we're a long way toward that goal, and I think it will strengthen both sides of this equation, both the payors and us, the providers, such that we are aligned in what we're trying to accomplish.

And then guys, just one other quick question. Your margins kind of continue to outperform at least what we had estimated. I'm just curious, you laid out a bunch of operational efficiencies that you guys are driving, the new regional structure, etc. But is it more of that or is it also a combination of that? And are your acquisitions as you bring them on, are those ramping quicker than maybe they have historically?

Dave, I'll start at 30,000 feet and say that we are the beneficiary this year of some outsized gains that are resulting from business initiatives that have been ongoing for multiple years. And we're very pleased with that. Now let Will walk you through some of the items where we're experiencing these positives.

Hey, David. Yeah, you mentioned it, but obviously we had to step up to 22% margins going into the year with the IRA. But what Fred's referencing, we've been working these initiatives as a combination of Reimbursement, Purchasing, Plan Optimization, several of these things that are really kind of contributing equally to that lift. But again, it's kind of another step up because these are longer term initiatives and not something that we will see to this magnitude in the quarters going forward. But yeah, we're happy with these initiatives sort of bearing fruit.

Okay, thanks very much.

Your next question from the line of Parker Snor with Raymond James. Your line is now open. Please go ahead.

Hi, good afternoon and thanks for the question. Just wanted to ask one on the flu season and your fourth quarter program. So the flu season appears to be tracking hotter this year than it's been the past couple years, at least according to the publicly available data. Just curious if a hotter flu season, could that lead to more activity in your fourth quarter flu vaccine program? Is that something that you've historically seen or is this program somewhat agnostic to flu activity and it just happens regardless of the flu season?

I think it's the latter, Parker. It is a very important initiative for assisted living and still nursing operators to ensure that their resident population is vaccinated. So the numbers you see with the public at large don't apply as much to this particular resident population, which essentially is virtually 100% vaccinated. But we can add more color. We're out of the gate. Very proud to have continued We're refining this vaccination initiative that we are so proud to have developed. So it's a great service that we're proud to render to our residents and our assisted living operators. But it's extremely complex logistically, supply chains, refrigerated product. scheduling clinics to make sure that all the residents and staff can be available for the vaccination. And then it's a complicated reimbursement challenge. So we continue to refine the program and hope to see that it'll improve each and every year.

Okay. Yeah, no, great. That's super helpful. Just kind of following up on Brian's question earlier, in the assisted living market, you have a few big name customers, but it's my understanding that you aren't currently serving every single one of their facilities, but you already have the existing relationships with those customers. So I guess, how should we think about the embedded growth opportunity just from further penetrating some of these existing relationships that you have and how that gives you better visibility and some easy wins when you expand into these new markets. And, you know, I won't ask you to give specific names, but could you just give us maybe a flavor or a general feel of for some of your larger customers, what percent of their facilities do you kind of currently serve and what is the remaining opportunity?

Parker Hayes, David. I'll start with keeping in mind that even the national providers are a small percent of our overall book of business, so none of them are significant. But as we look for partners in geographic markets to expand into, or as we look to do contiguous expansions in a market like Houston, the national account relationships we have play into that decision. and there is growth there as we get into markets that they need services, you know, from a provider like Guardian. So all that's factored into, you know, our organic growth that, you know, we're providing to the street.

Okay, great. Thank you so much.

The queue is now open for additional questions. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. Please stand by while we compile our Q&A roster. Your next question from the line of Alan Lutz with Bank of America. Your line is now open. Please go ahead.

Good afternoon, and thanks for taking the question. This one could go to really either of you three, Fred, Will, and David. So I don't know who to address it to, but you did a really interesting acquisition of Nautilus Pharmacy, which was a file buy a couple months ago, which is different than your traditional M&A where you're buying the physical pharmacy itself. Can you speak at a high level to the difference in accretion we should expect from that type of transaction versus the typical one that you do? and then as we think about the scale of your pharmacy footprint, it's obviously much larger than it was five, 10 years ago. What percent of the country do you think you have the scale where if this type of opportunity presented itself, you'd be able to do a file buy as opposed to having to purchase a specific pharmacy? We'd love any high level commentary around that. Thank you.

I'll start, Alan, by saying that There have been attempts over the years to serve assisted living via mail order and inevitably it has failed. So there are not very many of these opportunities to start with. This particular one is very exciting because the customers of this pharmacy are very excited to be able to receive our high touch service from local bricks and mortar. I'll let David or Will talk to the accretion, but once we get these residents onboarded, which does have initial cost, we do, it is accreted quicker.

Yeah, and I'll add to it. I mean, there are other providers who have attempted to start and run their pharmacies. They're not a lot like this. We happen to have a close relationship with these guys. And as Fred said, the assisted living locations are very excited to be coming back to Guardian from the mail order. And as we distributed this through, I think, 18 plus pharmacies, it's highly accretive. And We have to absorb the onboarding cost of bringing the residents back on, getting them into our systems, but it's accretive and accretive quickly.

Great. Thank you very much.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.