Extendicare (TSE:EXE) reported sharply higher second-quarter revenue and adjusted EBITDA as its recently completed acquisitions contributed for a full quarter, while management said it remains focused on integrating CBI Home Health and advancing its Ontario long-term-care redevelopment program.
Revenue rose 59.4% from a year earlier to C$611 million in the second quarter, while adjusted EBITDA increased 71% to C$68.3 million. President and CEO Michael Guerriere said the results reflected execution of the company’s acquisition strategy over the past 18 months, including the C$570 million purchase of CBI, which closed April 1.
CBI adds scale to home health operations
CBI contributed C$145.7 million of revenue and C$18.5 million of adjusted EBITDA during the quarter, according to management. The business generated average daily visits of 33,609, representing an annualized run rate of about 12 million hours of care and approximately 20% growth from 2024 volumes.
Guerriere said CBI expands Extendicare’s presence in Western Canada and adds business models that create additional organic-growth opportunities. He said the combined scale of CBI and ParaMed should support further technology investment and future operating synergies after integration is completed.
Management said the integration remains in its early stages. Chief Financial Officer David Bacon said the immediate priority is exiting remaining transitional service arrangements, with that work targeted for the beginning of 2027. The company plans to integrate CBI methodically by geography rather than through a single cutover.
Extendicare continues to expect C$7.4 million in cost synergies once CBI is fully integrated. Management maintained its expectation that the integration will take roughly 18 to 24 months. Bacon said the company expects CBI-related integration expenses of about C$3 million to C$4 million annually over the next couple of years.
Guerriere said CBI integration will be the company’s principal focus through the rest of 2026, although Extendicare’s strengthened balance sheet gives it the ability to consider opportunities that fit its strategy. He said additional acquisition activity is more likely later in 2027 at the earliest, barring an unusually compelling opportunity.
Home health growth remains strong, margins affected by investment
Home health-care volumes increased 132.6% year over year, driven by acquisitions and organic demand. Excluding CBI, average daily visits rose 31.7% from the prior-year period, reflecting both the Closing the Gap purchase and market growth.
Home health-care revenue increased by C$201.7 million year over year, while net operating income rose C$25.2 million, or 117.8%. However, the segment’s NOI margin declined 60 basis points to 12.9%.
Management attributed the margin decline to additional investment in technology and frontline-support functions, including scheduling, coordination and supervisory resources, as well as the absence of a 2026 Ontario home-care rate increase to offset labor-cost inflation.
Bacon said the company had made a “fairly large step up” in the size of its supporting back-office team over the past six months and does not expect another comparable step-up. He said management still views home health care as a higher-margin business over the medium to long term, though the timing of expansion will depend partly on funding-rate increases.
Guerriere said provincial home-care funding increases have historically tracked labor-cost inflation over the long term, though announcements are less regular than in long-term care and may include retroactive adjustments. Ontario’s two recent C$1.1 billion home-care funding announcements were primarily aimed at volumes rather than rates, he said.
Despite recent rapid expansion, Extendicare continues to expect long-run home-health-care volume growth of approximately 6% to 8% annually. Management cited roughly 4% demographic growth and continued shortages of long-term-care beds, while noting that recent higher growth likely reflects unmet demand and healthcare-system backlogs.
Long-term care and managed services contribute to earnings growth
Long-term-care revenue rose C$26.5 million, or 12.8%, supported by the nine acquired homes, funding increases and improved preferred occupancy. Segment NOI increased C$5.7 million, or 23.9%, and the quarterly NOI margin rose 110 basis points to 12.7%.
Bacon said long-term-care margins tend to be higher during the second and third quarters because of the timing of funding and wage increases. For the trailing 12 months ended June, normalized long-term-care NOI margin was about 11.8%, which management said is consistent with its recent expectations.
Managed Services revenue declined C$0.6 million to C$17.1 million, partly because certain management contracts were not renewed. Still, NOI increased C$0.2 million to C$9.9 million, supported by 8.3% organic growth in SGP clients and higher management fees from the newly opened Extendicare Beauclaire home. The segment’s NOI margin was 57.6%, above the company’s expected annualized range of 50% to 55%.
Financing changes lower leverage and borrowing costs
Extendicare completed its inaugural unsecured notes offering during the quarter, issuing C$450 million of five-year senior unsecured notes bearing interest at 4.345% and maturing in April 2031. Morningstar DBRS assigned both the company and the notes a BBB stable rating.
The company also established a new C$250 million unsecured credit facility maturing in April 2029 and repaid certain higher-cost and nearer-term long-term-care mortgages and loans. Bacon said these changes reduced Extendicare’s weighted-average interest rate by 80 basis points to 4.4% and extended its weighted-average debt maturity to 5.1 years.
At quarter-end, the company had C$208 million of liquidity, consisting of C$93 million of cash and C$115 million available under its unsecured revolving facility. Pro forma debt to adjusted EBITDA was approximately 2.5 times, below management’s original estimate of about 3.3 times following the CBI acquisition.
Second-quarter net earnings were C$30.9 million, down C$1.1 million from a year earlier, reflecting financing, debt-prepayment, transaction and integration costs. AFFO rose 47% to C$36.5 million, but was affected by C$8.7 million of payroll withholding taxes related to deferred share-unit settlements for two retiring directors. Excluding that impact, AFFO increased 73% to C$42.9 million, or C$0.448 per basic share.
Looking ahead, Extendicare plans to complete the Closing the Gap integration this year, continue integrating CBI and advance its redevelopment agenda. The company opened the 320-bed Extendicare Beauclaire home in Ottawa in May and has six redevelopment projects under construction, including the 256-bed Extendicare Forest Trail home in Peterborough, which is scheduled to open next month. Management said it remains on track to open four additional homes in 2027, adding 832 beds.
About Extendicare (TSE:EXE)
Extendicare Inc, operating solely in Canada, is the largest private-sector owner and operator of long-term care (LTC”) homes and one of the largest private-sector providers of publicly funded home health care services.
