CareRx Corporation (TSX:CRRX) said its first-quarter revenue jumped 108% from the year-ago period on the back of strong contributions from businesses it acquired as well as organic growth from contracts onboarded last year.
Canada's leading provider of pharmacy services to senior living communities said it recorded revenue of C$93.2 million in the three months to March 31, 2022 from C$44.9 million a year earlier, while adjusted EBITDA increased 111% to C$8.6 million from C$4.1 million as a result of the integration of the earnings of the acquired businesses of SmartMeds, Rexall LTC Pharmacy and the long-term care pharmacy business of Medical Pharmacies Group Limited (MPGL LTC Pharmacy).
"The first quarter of 2022 once again saw strong year-over-year revenue and adjusted EBITDA growth, driven by both acquisitions and organic growth, and by continued outstanding execution by our team," CareRx president and CEO David Murphy said in a statement.
READ: CareRx Corporation releases inaugural ESG report
"We delivered a solid start to 2022 despite average bed count for the quarter being slightly dampened by the impact of the Omicron variant. Importantly, during the quarter, we continued to execute in areas that will support our growth in the near- and long-term,” he added.
On top of strong contributions from the acquired businesses, CareRx said net loss in the first quarter narrowed to C$2.8 million from C$5.9 million as a result of non-cash adjustments related to the change in fair value of derivative financial instruments, which were partially offset by an increase in transaction and restructuring costs related to the transition and integration of MPGL LTC Pharmacy and an increase in share-based compensation.
The company provided highlights from the integration of MPGL LTC Pharmacy so far, saying integration projects are expected to be substantially completed by the end of the third quarter of 2022:
- Total cumulative cost savings synergies realized by the end of 1Q were approximately C$0.5 million, or C$2.0 million annualized. Total annual cost savings synergies of approximately $5.0 million is expected upon the completion of the integration.
- One pharmacy site was consolidated during 1Q with three additional consolidations expected to be completed in 2022 and the last remaining site consolidation now expected in the first half of 2023.
Other business highlights included:
- Securing long-term extensions with three of the company's four largest customers, including its two largest customers, representing approximately 18,000 total beds serviced, for an average of 5.5 years from the end of 2021.
- Expecting to offboard approximately 5,800 beds throughout the second half of 2022 as a result of a large customer awarding a request for proposal to another pharmacy services provider.
- Entered into a definitive agreement to acquire the long-term care pharmacy business of Hogan Pharmacy Partners Ltd.
- Serving approximately 725 residents in long-term care and retirement homes in Ontario and expected to contribute run-rate annualized revenue and adjusted EBITDA of approximately C$4.0 million and C$0.6 million, respectively, not including potential cost savings synergies.
CareRx will sign a new seven-year contract with Hogan's largest customer, a regional senior living operator, representing approximately 85% of the beds serviced by Hogan, the company said, noting that Hogan's customers are expected to increase their beds serviced by over 1,200 by the fourth anniversary of closing based on new license allocations and other anticipated growth plans, which is expected to increase the total beds serviced to approximately 2,000.
It also said it commenced operations at a new high-volume fulfillment center in Oakville, Ontario in April, which will allow for enhanced operating margins through higher prescription volumes without additional labor costs while improving safety and reducing medication packaging errors and waste.
The company warned that it expects to see a reduction in adjusted EBITDA of about $0.5 million for 2022 as a result of further pricing adjustments agreed between the pan-Canadian Pharmaceutical Alliance and the Canadian Generic Pharmaceutical Association.
The company will host a conference call to discuss the 1Q results today at 8.30am ET. For more information on how to dial in, visit the Events and Presentations page of the Investors section of the company's website.
CareRx serves over 95,000 residents in over 1,600 senior and other congregate care communities. It has a large network of pharmacy fulfillment centers strategically located across the country, which allows it to deliver medications in a timely and cost-effective manner.
Contact the author at jon.hopkins@proactiveinvestors.com