Extendicare Inc Stock

Thank you for standing by. This is the conference operator. Welcome to Extendicare Inc. Third Quarter 2026 Analyst Conference Call. The conference is being recorded.

[Operator Instructions] I would now like to turn the conference over to Jillian Fountain, Vice President, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Extendicare's 2026 Third Quarter Results Conference Call. Joining me today are Extendicare's President and CEO, Michael Guerriere; and Executive Vice President and CFO, David Bacon. Our Q3 results were released yesterday and are available on our website, as is a live audio webcast of today's call, along with an accompanying slide presentation. An archived recording will also be available on our website following the call today. As well, replay numbers and passcodes have been provided in our press release for those wishing to access an archived recording by phone until midnight on November 20.

Before we get started, please be reminded that today's call may include forward-looking statements and non-GAAP and other financial measures. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. We have identified such factors as well as details of non-GAAP and other financial measures in our public filings with the securities regulators and suggest that you refer to those filings.

With that, I'll turn the call over to Mike.

Thank you, Jillian, and good morning. Our third quarter results reflect the continued execution of our strategy, with acquisitions and organic growth delivering adjusted EBITDA of $71.7 million, up 41% from the prior year and ahead of consensus. Net earnings of $0.354 per diluted share were up 26% over the prior year period.

Our strong financial and operating results enabled us to pay down $53.7 million on our unsecured revolving credit facility this quarter, improving our pro forma net debt to EBITDA to 2.3x. We ended the quarter with $246 million in available liquidity, providing us with significant flexibility as we consider our options to allocate capital. Home health care delivered another strong quarter of organic growth. Combined with the acquisitions, volumes increased 111.5% year-over-year.

Excluding CBI, ADV increased 18.8% from the prior year, driven by strong underlying growth of the market. NOI margins in our Home Health segment were 13.1% in Q3 after removing out-of-period revenue, up 20 basis points from Q2.

As we noted last quarter, we invested in technology and back-office teams earlier this year to support the rapid growth in home care services. These investments and the absence of a 2026 rate increase in Ontario, contributed to a 50 basis point reduction in home health care NOI margins from the prior year. We continue to expect that underlying market growth will moderate over time to approximately 6% to 8% on an annualized basis, reflecting the 4% demographic growth trend and the unmet care needs driven by a shortfall in long-term care beds that is anticipated to persist for the foreseeable future. We also expect that over time, funding increases will substantially keep pace with inflation, supporting NOI margins.

Long-term care occupancy remains strong and NOI margins were 11.8% for the quarter, adjusted to remove out-of-period funding. This quarter, we received retroactive rate increases in Alberta in both long-term care and home health, consistent with historical patterns that have seen funding increases keep pace with wage rate increases, ultimately supporting NOI margins.

Our Managed Services segment continues its record of strong performance, including 9.4% year-over-year growth in the SGP customer base and NOI margins of 55.6%. We continue to expect annualized margins of 50% to 55% for this segment.

Driven by the strength of these results, our diluted FFO per share, excluding out-of-period items, increased to $0.43 per share, up 35% year-over-year, driving our payout ratio down to 34% on a trailing 12-month basis.

Turning to Slide 4. Our Home Health acquisitions continue to outperform our original underwriting. CBI delivered another strong quarter, contributing $153.3 million in revenue and $20.3 million in NOI. In the first 6 months after close, CBI is tracking approximately 23% on adjusted EBITDA and 25% ahead on volumes relative to our original underwriting. We are on-track to substantially complete the integration of Closing the Gap this year and to complete the finance and enterprise IT systems integration for CBI by January 1, '27. This establishes the requisite foundation for integration of frontline CBI care teams through 2027, using a phased approach similar to that used for CTG. We continue to expect annualized synergies to total approximately $7.4 million by the time CBI is fully integrated in 2028.

Turning to Slide 5. We continue to advance our Ontario long-term care redevelopment program through our joint venture with Axium Infrastructure. At the end of September, we welcomed residents to Extendicare Forest Trail, the new 256-bed home in Peterborough, that opened in the joint venture. Subsequent to the quarter, we completed the sale of the vacated Peterborough Class C home for cash proceeds of $7 million, once again demonstrating the capital recycling advantages of our redevelopment partnership with Axium. We currently have 5 projects under construction with plans to open 4 of these new homes in 2027, bringing a further 832 beds online in the JV.

We also continue to advance 17 additional projects at varying stages of planning and development under the Ontario Long-Term Care Home Capital development program, with our next construction start targeted for spring 2027. We are working to commence construction on additional new projects later next year, should conditions be favorable. We remain actively engaged with the government on necessary funding and other elements required to fully realize our redevelopment agenda and are closely monitoring construction costs and interest rates as we navigate a period of heightened economic uncertainty.

I'll now turn to our CFO, David Bacon, to discuss our financial results in more detail.

Thanks, Michael. Before I review our consolidated and segment results for the quarter, I want to highlight that this quarter, we introduced a new non-GAAP measure, adjusted net earnings and the related adjusted earnings per share. Details of this reconciliation are included in the appendix to our Q3 results presentation and in our MD&A. This new measure is intended to present our net earnings and earnings per share on an adjusted basis to remove the impacts of items that are, by their nature, nonrecurring and difficult to predict, which can create volatility in our quarterly results.

Gains and losses from our legacy C-bed home dispositions, gains on the sale of LTC redevelopment projects into the Axium joint ventures and acquisition integration costs are just a few examples of recent items that have impacted our quarterly results that can make it challenging to develop a consensus view of our performance on a net earnings and earnings per share basis.

In addition, we will also adjust for the amortization of acquired intangibles in this adjustment to report adjusted net earnings results that are more closely aligned with the cash flows of the company. We believe this new measure provides additional insight into the underlying performance of the business and enhances comparability between reporting periods.

Turning now to the consolidated results. Our Q3 results were impacted by $1.4 million reduction in net out-of-period retroactive funding on a year-over-year basis, which is more fully outlined in the appendix and MD&A. Excluding these out-of-period impacts, our consolidated Q3 revenue increased by 43.3% to $625.3 million, driven by the contribution of the CBI acquisition, which -- combined with organic growth in ParaMed -- drove 111.5% growth in Home Health volumes, long-term funding care increases, which were partially offset by the closure of 2 Class C long-term care homes following the opening of the newly developed homes in the joint venture.

Our Q3 adjusted EBITDA, excluding out-of-period items, was $69.2 million, an increase of $22.3 million or 47.7% over the prior year, reflecting the CBI acquisition, which contributed $19.6 million and strong underlying organic growth in our Home Health segment. Net earnings were $34.2 million, up $10.1 million or 41.8% from the prior year. Adjusted net earnings were $39.6 million, up $11.4 million or 40.4% from the prior year and on a diluted per share basis were $0.41, up $0.08 from the prior year. Our diluted FFO and AFFO per share were both approximately $0.45 this quarter, with FFO growing nearly 26% year-over-year and AFFO increasing approximately 30%. The out-of-period items impacted both AFFO and FFO per share by approximately $0.02.

Turning to our individual segments. Home health care continues to deliver strong performance driven by the acquisition and our continued organic growth. We did receive a retroactive rate increase of 3% in Alberta for Home Health, resulting in an out-of-period revenue and NOI impact of approximately $500,000 recognized this quarter. Excluding this out-of-period funding, our Q3 revenue increased by $186.3 million year-over-year, while NOI increased by $23.6 million or 92.8%.

Turning to our long-term care segment. The Q3 results were impacted by out-of-period funding of $2 million from a retroactive rate increase in Alberta for long-term care. In the prior year quarter, we recognized $3.9 million in out-of-period funding. Excluding these out-of-period amounts, revenue increased by $1.7 million and NOI increased by $200,000, driven primarily by funding increases and improved occupancy, net of the closure of the Carlingview Manor and Extendicare Peterborough C-bed homes, which were replaced by new homes in the JV. NOI margins, excluding out-of-period items, were 11.8% for the quarter, unchanged from the prior year and in line with the trailing 12 months ended September 30, 2026.

Turning to our Managed Service segment. At the end of Q3, management contract beds in Extendicare Assist were modestly higher than the prior year, reflecting the opening of the 2 new homes in the joint venture in May and September of this year, partially offset by the expiry of 2 third-party Assist contracts earlier this year in Q2. Together with 9.4% organic growth in SGP clients, our revenue increased by $1 million to $16.6 million, while NOI improved by $300,000 to $9.2 million.

Turning to Slide 11. We exited Q3 in a strong financial position with $246 million in liquidity comprised of $75 million in cash on hand and $171 million available on our unsecured revolving facility. Our pro forma debt to adjusted EBITDA ratio improved from Q2 to approximately 2.3x, benefiting from the improved financial results and the $53.7 million reduction in our borrowing on our unsecured facilities. Our strong liquidity position, low payout ratio, and conservative leverage profile creates significant flexibility as we consider a range of capital allocation options, including further acquisitions, dividend policy and -- where appropriate -- share buybacks.

With that, I'll pass it back to Mike, for his closing remarks.

Thank you, David. The strength of our platform was confirmed with another quarter of strong financial and operating performance. Our acquisitions have outperformed, and we continue to deliver strong organic growth in our home health care segment at a pace that exceeds our long-term expectations. We continue to be very confident about the potential of our home care and long-term care platforms and our ability to expand access to care for the growing number of Canadians who depend on us.

As we enter the final quarter of 2026, we will maintain resolute focus on integrating CBI and executing our long-term care redevelopment program. We will be disciplined as we consider capital allocation options that build shareholder value. Our prudent approach to managing our balance sheet provides us with significant flexibility in this regard while also managing the risk inherent in a more volatile economic climate.

We believe firmly in the opportunity ahead of us. Short-term movements in the share price or variability in the alignment of funding and wage increases do not take away from the relentless demographic trends underpinning our business that will drive demand growth for years to come, both in home health care and long-term care. Of course, our first priority is always the quality imperative that is fundamental to the care we provide to thousands of people who rely on us every day. Our scale, technology platform, and the flexibility of our capital structure position us to continue to build home health and long-term care capacity so more Canadians can access the care they need wherever they call home.

My sincere thanks to our team members for their daily commitment to providing high-quality care and services for the residents, patients, and individuals we serve.

So with that, we welcome any questions that you might have.

[Operator Instructions] Our first question comes from Kyle McPhee with ATB Cormark Securities.

Great quarter. The moving pieces all seem strong and pretty straightforward. So I just have one high-level question this quarter about what to do with all your excess capital you're generating. I know you generally addressed it in your prepared remarks, but I'm specifically interested in whether or not you may shift to doing some of your remaining Class C redevelopment in-house using the JV playbook to keep all the cash flow in your long-term care segment? Or is there still really ample opportunities to use your excess capital for things that are better return on capital versus your own Class C redevelopment, things like more home health care M&A or maybe even buybacks at the current valuation?

Yes. No, Kyle, thanks for the question. Yes, I think a few things I'd say on that. We do have flexibility as we pointed out in the prepared remarks. We think we're in a very strong position from that perspective. As we have said, we do think there is a significant opportunity in home care, in particular, on the roll-up there and continued M&A just given the fragmentation in that market. So we'll continue to pursue those opportunities. We have, in the last 2 years, increased the dividend. So we'll be looking at that again early in the first quarter with our year-end results, and that's an expectation, I think we've created and will follow through on.

So the question you asked about, would we do C-bed redevelopment on our own balance sheet. I think our first intent would be to always drive it through the joint venture and drive the managed service revenue in that and keep that capital-light perspective, capital-light model going. I would not -- I'd say that it's not that we would never not do another project on our own balance sheet. But initially, at the moment, I think we've got a good pipeline going and certainly pushed through a lot of projects in partnership with Axium -- that have gone well. So I'd say that's our first priority to do development that way, but I wouldn't say it's an impossibility that we would consider it on our balance sheet.

And your last part on issuer bid and shares, I'd just say we've been active in the past when we felt the share price didn't reflect sort of the prospects of the business, and we wouldn't be afraid to do that again if we thought that there was a disconnect to the fundamentals with the share price.

Okay. So it sounds like more home health care M&A is still among the priorities here for your capital. Would you consider doing more before you're fully done the CBI integration, especially given your Closing the Gap integration is done pretty soon and you likely have more capacity to integrate another target at that point?

We might consider that. We might consider an earlier acquisition, but we would want to be down the path in terms of the CBI integration. I mean, we've got a pretty good integration playbook. I was very happy with the Closing the Gap integration. There were no service interruptions. There was no increase in staff turnover. The whole thing went extremely smoothly, and we'll be using the same playbook for CBI. But I do want to acknowledge that CBI is 8x bigger. And so I just want to be very careful that -- we're well down the path, and we can see the end of that integration before we start taking on something else.

The next question comes from Lorne Kalmar with Desjardins.

Just wanted to talk a little bit more about the organic growth outlook for Home Health. And I know you said it can't go on like this forever, and I appreciate there's not a crystal ball. But could you maybe give us a rough idea of sort of how long you think this can carry on for? Is it another year? Is it 2 years? Just maybe to give us a bit better perspective on how we should be looking at this business over the next couple of years?

Well, Lorne, I have to caveat my answer by saying I've been wrong so many times in the past about this that I'm really not gaining confidence in my ability to predict. We -- I talked about the 6% to 8% range that we continue to talk about, which is really what the demographics are suggesting. And the LTC bed growth is not keeping pace. So the waiting list in Ontario, for instance, has been creeping up, over the last while. So it shows that that demand backlog is still there, but it is very hard to quantify.

We really don't have good metrics around the sector to be able to tell us what to expect, how long to expect this. And part of it is because the growth that we're seeing is not just growth in the number of people we're serving. It's also growth in the number of hours that we're providing to those individuals. So we're seeing a higher acuity group of patients, presumably the people that we would otherwise have been managing in a long-term care setting. So you've got both a volume element in terms of the number of people that we're treating, but also a volume element in terms of the intensity of the needs of those individuals. And we really don't have a good crystal ball for being able to see when that will slow down. And of course, there's no magic to the 6% to 8% either. That's our conjecture. And perhaps that's an underestimate.

Okay. I guess maybe -- and I guess you alluded to it, like what do you think really needs to happen within the system for volumes to kind of normalize? Like is it the LTC, the shortage of LTC beds abating? Like what do you think really needs to happen?

Well, I think the best barometer of what's happening in the health care system is the emergency departments in the hospitals because they're the entry point to acute care, which gives you a sense of whether people are able to exit acute care.

There's a lot of people that are in beds in hospitals that belong in other parts of the system, but there's no place for them to go, particularly long-term care beds. And over the summer period, there were a lot of news reports that the usual kind of lightening of load in emergency departments in hospitals in the summer didn't happen this year.

So we do have some anecdotal evidence that the acute care part of the system is still under stress. So I think that's probably the best place to look. It's that whole hallway medicine issue in emergency departments, that is the best measure of stress on the system.

Okay. That's very helpful. And then maybe just switching over to back to acquisitions. As you're evaluating targets, what are the criteria you're looking at in acquiring? Is it geographies? Is it maybe services that you don't offer that could enhance the ParaMed service offering? How do you sort of weigh those? And what are you looking for?

Yes, Lorne, on the home care side, a few kind of key things that we follow. So one is, I think we've said and demonstrated, I think, with the deals we've done -- the 2 deals we've done to-date. We're looking to buy growth platforms when we're looking to buy. So we don't -- we're not just trying to pile volume into the same districts. We're looking for platforms where we can bring our -- we're not there today. We can bring our back office and technology and scale to it. So we are looking for -- in the case of CBI and CTG, you saw us buy new geographic markets. It gave us a presence in the West with CBI and Nova Scotia with CPG and CBI. With CBI, it gave us a new market vertical with the specialized commercial community service business. So that group home business, it's new to us. That gave us another new kind of market way to come to market.

So we're looking for areas where we don't service. You'll recall our business is really 3 kind of service levels. There's the PSW -- personal support work, there's nursing, and then there's the therapies or allied parts of the business. So we'll look for markets where perhaps we have a strong PSW presence, but we don't do any nursing. And we'll look for a regional player that has a good concentration in nursing and we infill it in, say, in the Ontario context.

Other markets, other geographies are of interest. We are in Nova Scotia, but there's the Maritimes. We now have a strong presence in Alberta. We have a toehold back in Manitoba and B.C. to think about. So it's really geography or service line augmentation, I'd call it, as opposed to just chasing volume in sort of a district or a region where we're already quite strong or have quite a lot of depth in a particular service type. And there seems to be a lot of before.

Yes. It's still very fragmented. We've spoken about that in the past. Probably not another deal the size of CBI, but there's regional players that would be -- that would look a lot like Closing the Gap size, and there's dozens and dozens of small players that have a niche that might fit nicely with us. And notwithstanding Mike's earlier comments about when will we next look at something, CBI and integration is key, but it takes a long time to get to a point where you're going to execute on a deal, and we do have a pipeline, and we'll always be opportunistic as well in looking at what may come to market versus us seeking something out that we think would fit well.

The next question comes from Jonathan Kelcher with TD Cowen.

Just want to go back to the organic growth in home health care. Is staffing still really the sticking point? For example, if you could grow your staffing levels by 20%, you could -- just the demand would just be there for it?

No. I would say that the staffing constraint really passed 2 or 3 years ago. So for the most part, we are accepting all the referrals that are coming to us from government and able to fulfil them. The exception to that is in certain rural and remote parts of the provinces that we serve, where we have still constraints on staffing in the north and in areas of the provinces where it's not an urban environment. So our client population is very widely dispersed. But those constraints are really not very material from a volume perspective. Those are also areas of our business where the volumes tend to be quite low. So overall, I would say, no, there's not a constraint from a health human resources perspective. It's a matter of the volume of referrals that are coming our way.

So in other words, the referrals and I guess, just more hours per patient are really what's driving 18% year-over-year organic growth?

Yes. And our understanding of this, John, is that -- that growth is the whole market growing. So we're not taking market share from others. This is an expansion of the overall home care sector.

Okay. That's helpful. And then just secondly, on the LTC redevelopments. In your prepared remarks, you made some mention of just higher interest rates and construction costs. Have they increased enough that any of the projects you're looking at are no longer really feasible?

Yes. Jonathan, I'd say -- yes, I'd say it's -- we're just watching it, right? There's a lot of moving parts over the last few months with the tariff and counter tariff. Now with the election results, like I'm not sure what happens there. So we were definitely starting to hear about the impact of those counter tariffs increasing our structural steel and our kitchen equipment and HVAC equipment for new homes.

We all have a view -- there's different views out there on rate increase environment. So what I'd just say is that we're just watching it. There's a lot of uncertainty right now. We'll see how the election thing in the states may change the perspective. And I think the truth is we're advancing all of these projects. We're committed to doing the pipeline. It may just happen at a different cadence if perhaps some of these factors we're watching had an impact. But the reality is until you tender a project, you do not have your final answer. You need to get to tender stage. So we are committed to driving all of our projects through to what we call shovel-ready and tender. And I think we've said this in the past, the project that we started in Sudbury last year or that project, we had on the books for a few years, and we waited until the tender results and the costs align where it made sense to proceed.

So we're just watching it. I think the sector is watching it. And it's hard for us all to know how evolution of interest rate environment and the cost side could -- what that looks like over the next 6 to 8 months. I think it's -- there's a lot of uncertainty there. So we're just watching it.

The next question comes from Tom Callaghan with BMO Capital Markets.

Maybe on the Home Health side, just kind of curious for your thoughts and perspectives. There's been a bit in the press over the last couple of weeks just in terms of the federal government and provincial governments with respect to certain health care funding and transfer. So just interested in any of your thoughts in terms of implications for kind of the Home Health business at kind of over the medium-term basis on that piece.

Sure. Sure. Happy to address that. First, it's important to understand that Extendicare's contracts are all with the provinces. So none of our funding comes from the federal government nor are any of our contracts with the provinces contingent on federal funding. So federal health transfers to the provinces are a regular feature of the federal provincial political dynamic and obviously receive wide attention because they're the largest transfer of funds between the levels of government.

So in theory, the magnitude of the transfers could affect the fiscal capacity of a provincial government to invest in health care, but the practical reality is that demand for service is really driven by demographics. So we remain the lowest cost option for meeting the needs of the aging population. So that keeps us front and centre in terms of dealing with that demographic challenge. I think any attempt to constrain the growth of community services would cause unmet demand to back up into hospitals, like I was talking about earlier. And so that's the highest cost, at least politically palatable option for dealing with the aging population. So all that said, I don't think that the federal provincial negotiations around transfers are really, in any way, an indicator of the demand curve for Extendicare.

Okay. Appreciate that. Maybe a bit of a housekeeping one on Home Health. David, nice to see the margins improve there on a sequential basis. And kind of obviously, you've talked about some of the reasons in Q2. How best to think about that cadence of recovery into '27 on the margin front today?

Yes. I think as we've said on margins, there's a little bit of -- in Q2, I think we did talk about that we had put some extra costs and investment in the back office because of the significant demand. And as we indicated, that there's a bit of a step function that happens in that back office. So we've put some costs back and resources in there. So -- and it played out as expected. We had good sequential growth in the quarter, and you can see that when the growth comes, there's some margin.

So I think going forward, we do believe this is a 13% margin business that has an opportunity to grow over time, 50 to another 100 basis points. I think we've said that a number of times. Obviously, the trajectory of that is -- will be driven by the volume discussion we just had. And sort of just trying to crystal ball kind of the volume growth over the medium, long term, the rate increase -- rate increases keeping pace with wage inflation is key, but we firmly believe and demonstrate another example this quarter. Alberta gave us the rate increases, albeit later in the year, but they come. So the timing and quantum of rate increases can affect the patterns. But again, over the medium- to long-term, I believe this is a 13% margin business that has opportunities to grow both through organic growth and volumes.

And there's the synergies coming when CBI is fully integrated. We've talked about those would be sort of more reflective in '28 than in '27. That's more of a -- when we get the full integration done. And all of that is the current picture. And we do expect to be active on the M&A front in home care in the future, which would augment that. So we still firmly believe that that's the outlook.

I think as we go into '27, it's -- there's that 50 to 100 is that's more of a -- that is not a 2027 thing. That's more over the next couple of years as we get the integration done. And certainly, in the Ontario context, we expect rate increases in the future. So that will help as well. So...

The next question comes from Giuliano Thornhill with National Bank.

I just wanted to stick with that question on the seasonality. I'm just wondering if that still does exist in your CBI markets, right, like Alberta and Nova Scotia, the kind of what you saw historically?

Yes. I'd say the seasonality impact in CBI is less -- much less pronounced than, say, the ParaMed CTG business. Most of the programs in the summer that have -- that are affected are in the nursing and allied service lines, which are much more prevalent in ParaMed and CTG versus CBI.

So they're a bit more pronounced on the ParaMed side. Of course, as time -- as the integration happens and we won't be breaking out CBI anymore, that will get a bit muted in the impact as well. But it is much more of a nursing allied program that is more impactful on ParaMed side.

Okay. And just on that, I know like the last -- the prior flu season was pretty tough. Like historically, would you say like that was more of a onetime event like when you're looking at the volume growth that you saw related to the hospital stress? I guess I'm just wondering like how much of a driver was the flu season on home care demand to relieve those hospital settings?

Yes. The flu is a double-edged sword for home care. On the one hand, it can drive demand, as you pointed out, because it puts stress on hospitals. And so hospitals and various health care agencies are much more resolute in their efforts to get people out of hospital. On the other hand, flu also affects our workforce. So we have more sick time and absenteeism, which is a drag on volumes. So we kind of see it both ways. So I don't really look at influenza as being a major impactor on volumes one way or the other.

Okay. And then just my last question, just on -- would you say your customers, the government, are they satisfied with the pace of growth in the sector? Or like if they were able to do more, would that be an option? Because I know, as you mentioned, your referrals and acceptance rates are quite high. So it seems like there could be capacity to do more. I'm just wondering like if there was a case, do you think they would be able to do that?

Well, I mean, I wish I knew the answer to that question precisely. What I would say is that we've experienced really positive reactions when we bring forward innovative ways or approaches for treating groups that otherwise or in the past, we wouldn't have been able to manage in the community. I think that's why we were so excited about specialized community services in CBI because it's just a different way of dealing with a population that is difficult to manage in the community. And CBI had developed that service line over a number of years and had quite a large following from various governments on that service.

So I think governments and hospitals are looking for innovation, are looking for more close kind of integration of our services. What that means is we're communicating effectively with hospitals and doctors, and they're communicating effectively with us so that we're better coordinated. That takes advantage of some of our technology platforms. So I do think there's continued opportunities for adding capabilities, service capabilities. But that said, I mean, we are, as I mentioned earlier, accepting the vast majority of referrals that come our way. So I think the government is happy with our responsiveness to the demand that they're sending our way.

The next question comes from Pammi Bir with RBC Capital Markets.

I just wanted to clarify the comments around seasonality in the margins for ParaMed. So just looking back, typically, we would see, I guess, a Q4 improvement in margins, although I think the -- there has been some volatility with maybe prior period funding. But is that how we would still think about that at this point, like a pickup in Q4 and then a drop in Q1?

I'd say a drop in Q1 is quite common, and we've talked about that in the past because you've got -- we're just a bit over half unionized in ParaMed. So the nonunionized staff tend to get their rate -- their wage increases on January 1 every year, but rate increases then don't come until April. You also have the phenomenon of things like employee wage benefits like CPP and EI kind of restart the clock. So there's always a dip in Q1.

I would say it's uneven on Q4, Pammi. It's a function of the weather. It's a function of where the holidays fall. If Christmas or Christmas Eve or New Year's fall on a weekday, it can have a bit more of an impact on volume because you're displacing what otherwise would have been a full workday, whereas if those holidays fall on weekends, those tend to be lower daily volumes.

So we have -- if you go off the top of my head, if you went back and looked at every pattern over the last decade, I think sometimes Q4 can be a little bit better than Q3 because the seasonal summer dip comes back and then depending on where the holidays fall, weather has an impact, snowstorms, et cetera. So Q4 is a little hard from a trending. So it's not always going to be in line up or down from Q3. But definitely, Q4 to Q1 is -- I'd say Q1 goes down from Q4 and Q3 goes down from Q2 pretty reliably. Q4 is a little bit tougher.

Okay. All right. That's helpful. In terms of going back to the comments around the investments that were made in ParaMed, were there any additional costs incurred in Q3? And at this point, are you -- any change to the outlook in terms of what you may need to spend?

Yes. No, I think nothing substantive sort of in Q3. Most of the activity around the back office was Q1 and later into Q1 into Q2. So at the moment, I think we're focused more now on getting CBI integrated, which will then give us the opportunities to pursue the synergies that we flagged. So that's kind of the next order of focus.

Okay. And I guess, has there been any update or any dialogue at all with the Ontario government for a bill rate increase?

We're always in dialogue sharing information, particularly what the status is in terms of wage rate inflation. So we stay in close touch with the government on that so that they're aware of the cost structure. And we do that through industry associations. So it's a sector-wide activity. But we don't have insight into the rate increase plans until they're announced.

Okay. All right. And then maybe, Michael, for you, just going back to your earlier comments about patients in hospitals and alternative care settings. Are you seeing any changes maybe in the last couple of months that might suggest that the backlog, if you want to call it, is declining or it's still been pretty elevated?

Yes. I would say it's quite elevated. I mean, what we look at is typically the number of -- 2 statistics really from acute hospitals, the number of people that are ready to leave hospital, but don't have an appropriate place to go. So in government parlance, they call that ALC, alternative level of care. And so they periodically publish those statistics. But then there's also the number of people that are admitted to hospital who do not have a bed -- and in quite a number of places in the province in Ottawa, in Sudbury, in Mississauga, these hospitals typically have tens of patients that are admitted in hallways and -- in bureaucratic speak -- in unconventional locations in the hospitals that are waiting for a bed. And those numbers are quite high. So there really isn't much indication at the moment that that pressure is coming off.

Right. Okay. Maybe last one, David, just on the new disclosure for the adjusted net earnings. Are you at some point going to stop or discontinue the FFO and AFFO reporting?

Yes. I think our thoughts there, like the long-term road map is going to be a focus on adjusted EBITDA, adjusted EPS and a cash flow from operations measure. As I think I mentioned in Q2 or some of you in our individual conversations, that there is a new accounting pronouncement coming for next year called IFRS 18. It's going to cause everybody to represent their income statements in a slightly different way and have some new subtotals and some changes on the cash flow statement presentation.

So our thinking is you will see us introduce a cash flow measure in Q1 of next year that's driven off of this new IFRS 18. And I suspect you'll see us continue FFO and AFFO in parallel for a period of time until people get used to -- get comfortable that the new cash flow measure is probably going to look and feel a lot like FFO. That will probably be the closest proxy for it. So over time, as people get comfortable with the core 3 new measures of EBITDA, adjusted earnings per share and cash flow from ops, that will be -- eventually, those will be our 3 prime objectives, but we will do it in kind of a transitionary fashion so people can get used to what the new cash flow measure looks like relative to the sort of the traditional REIT metrics.

The next question comes from Tania Armstrong with Canaccord.

Most of my questions have been asked already, but maybe just commenting on the property redevelopment. I noticed that Orleans slipped 2 quarters and costs rose about $4 million. And then I think the same cap rent in London each also moved back by a quarter. The MD&A also mentioned something called like adjusted commissioning schedules for the first time. I'm just wondering why these delays are happening? Is the issue of construction, staffing of the new homes or ministry licensing time lines? And those cost overruns, if they do increase, do they fall on the JV's equity? Do they reduce the capital funding grant? Any more color on those items would be helpful.

Sure. So on the -- I'll hit them sort of one at a time. So on the timing issue, I'd say that outside of Orleans, the other changes in timing, I know we report by quarter, not by month, but I would say some of these changes are really measured in weeks, and it's just orchestrating us, the city inspectors, TSSA, the ministry inspection timing. So part of this is we're trying to get 4 opened in a fairly condensed time. So that puts pressure on a bunch of us and the ministry.

And so I'd say the timing tweaks to things like St. Katharine's, London are really measured quite modestly in weeks, and it's just because of the way we report quarterly. You notice that costs don't change on those projects. We're still well within contingencies. So it really -- there is a little bit of coordination that goes on, and there's a lot of different thing -- different streams you need to bring forward. So as you get closer to the end, it's really just refining the timing on what otherwise are 2- to 3-year timing on projects.

Orleans is different. Orleans, we have experienced some delays with the contractor on that project and just working through the finishing stages of the project. So that is, I'd say, a legitimate delay. I wouldn't say it's labor as much as just working through with the contractor. The interesting thing on that project, while the costs have gone up as a result of that delay, it's actually in a strange circumstance there, it's -- the costs are now back closer to the original cost. There was some change in HST legislation and change in the municipal regulations around development charges that actually that project was the beneficiary of. So we thought we had some savings coming on that project going back to the original pro forma because of some changes on the development charges in HST.

So while the costs appear to be going up, they're actually sort of spending what we were hoping could have been an opportunistic savings on that project. So we're back to the original kind of cost outlook there and so tying in with leverage, et cetera. So there is no sort of impact there, just unfortunate sort of foregone opportunity where we could have come in under budget on that project.

But -- and then your last question is what happened if there were an overrun over and above the original pro forma contingency. And these projects are all in the JV. We are equity partners with Axium. So we bear the risk of overruns 85-15. So there's no disproportionate sort of impact to us or obligation on us. It's -- we are sharing in the risk of construction with our partner in our pro rata share. So if there was an overrun over and beyond original cost contingencies and some equity had to be topped up, it would be -- our share of that would be 15%.

Okay. Perfect. That's very helpful. And then on home health care volumes, maybe excluding CBI, we did see volumes grow about, I think it was 3% sequentially in Q3. But I saw that the MD&A language kind of -- it moderated a little bit. So we went from should demand growth moderate to as demand growth moderates, which is, I guess, just a little bit more indicative of your expectations for the business. Have you seen kind of a slowdown in that growth? And is it coming from anything in particular, referrals from Ontario Health at Home or new bundled care models, your ability to staff the volume, et cetera?

Yes. We haven't seen any changes in referral volumes. We don't have any new constraints on volumes. based on availability of health human resources. So at this point, we've experienced that kind of 18.8% year-over-year, and we'll see what happens going forward. But nothing's happened that gives me kind of any more visibility to what might constitute a slowdown at this point. And I think that wording change just happened, Tania. I don't think it was intended to signal anything.

The next question comes from Tal Woolley with CIBC Capital Markets.

Michael, I was just wondering, you've seen 2 step-ups -- significant step-ups from the Ontario government for home health care. Do you have an idea of like what's the scorecard they're using to measure the effectiveness?

Well, I think that ALC metric in hospitals is a key metric. They also measure the quality measures and customer satisfaction measures as well that they use. But I think the ALC number is critical. Remember that the referrals here come from hospitals and from doctors' offices. So the demand is coming from health system operators themselves. And so the government is also monitoring whether we are meeting that demand by accepting the referrals in a reasonable amount of time. Coming out of the pandemic, there were actually long waiting lists for home care, but we've cleared those now across the province. So we are keeping up with the demand that's coming out of the hospitals and doctors' offices.

This concludes our question-and-answer session. I would like to turn the conference back over to Jillian Fountain for any closing remarks.

Thank you, operator. That concludes our call for today. This presentation is available on our website, along with a link to a replay of the call. Thank you all for joining us, and please don't hesitate to reach out if you have any further questions.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Thank you for standing by. This is the conference operator. Welcome to Extendicare Inc. Second Quarter 2026 Analyst Conference Call. [Operator Instructions] The conference is being recorded. I would now like to turn the conference over to Jillian Fountain, Vice President, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Extendicare's 2026 Second Quarter Results Conference Call. Joining me today are Extendicare's President and CEO, Michael Guerriere; and Executive Vice President and CFO, David Bacon. Our Q2 results were released yesterday and are available on our website as is a live audio webcast of today's call, along with an accompanying slide presentation.

An archived recording will also be available on our website following the call today. As well, replay numbers and passcodes have been provided in our press release for those wishing to access an archived recording by phone until midnight on August 21. Before we get started, please be reminded that today's call may include forward-looking statements and non-GAAP and other financial measures. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. We have identified such factors as well as details of non-GAAP and other financial measures in our public filings with the securities regulators and suggest that you refer to those filings.

With that, I'll turn the call over to Michael.

Thank you, Jillian, and good morning. Our second quarter results reflect the successful execution of our acquisition strategy over the last 18 months. On April 1, we closed the $570 million acquisition of CBI, making Q2 the first period that CBI contributes to our results. The year-over-year increase in our EBITDA of 71.7% also reflects the acquisition of 9 long-term care homes from Revera that closed June 1, 2025, and Closing the Gap that closed July 1, 2025. All 3 acquisitions are exceeding the originally underwritten adjusted EBITDA that we reported at the time they were announced, reflecting our focus on acquiring platforms that contribute to our organic growth.

Q2 also featured Extendicare's inaugural unsecured notes offering with the issuance of $450 million of unsecured notes, supported by a BBB credit rating from DBRS. Together with a new $250 million unsecured senior credit facility, this new investment-grade capital structure gives us flexibility in making future capital allocation decisions, leaving our pro forma net debt-to-EBITDA at 2.5x, well ahead of our original leverage outlook when we announced the largest acquisition in our history. We are on track to complete the integration of Closing the Gap this year as we now focus our attention on integrating CBI.

We achieved another strong quarter of organic growth in home health care, which, coupled with the acquisitions, contributed to 133% year-over-year growth in home health care volumes. Excluding CBI, our ADV increased 31.7% from the prior year, driven by the Closing of the Gap acquisition and strong underlying growth of the market. As we have previously noted, the unexpectedly rapid organic growth we have experienced recently in the home health care segment has necessitated additional investments in technology and back-office teams to support frontline home health care operations.

These investments, along with the lack of a 2026 rate increase in Ontario, contributed to the 60 basis point reduction in home health care NOI margins from the prior year period. Despite the strong volume growth again this quarter, we continue to expect that the underlying market growth will moderate over time to a long-run average of approximately 6% to 8% on an annualized basis, reflecting the 4% demographic growth trend and the expectation that the shortfall in the availability of long-term care beds will continue.

Long-term care occupancy remains strong with announced funding enhancements and preferred occupancy rate increases contributing to NOI growth of $5.7 million and trailing 12-month NOI margins of 11.8%. Our Managed Services segment continues its record of strong performance, including 8.3% year-over-year growth in the SGP customer base and NOI margins at 57.6%. We continue to expect annualized margins of 50% to 55% for this segment. Driven by the strength of these results, our AFFO per share adjusted to remove the impact of stock-based compensation payments increased to $0.448 per share, an increase of 52.9% year-over-year.

Stock-based compensation was unusually impactful this quarter due to the retirement of 2 long-tenured directors from our Board. Our payout ratio on a trailing 12-month basis, excluding the impact of out-of-period items, was 37%. Turning to Slide 4. We see updated information on CBI Home Health as detailed in the business acquisition report we filed on May 12. CBI is tracking ahead of initial expectations with Q2 '26 revenue of $145.7 million and adjusted EBITDA of $18.5 million. CBI contributed ADV of 33,609 in the quarter, approximating a run rate of 12 million hours of care annually, about 20% ahead of 2024 volumes, a very similar growth rate to what we experienced at ParaMed in the same period.

CBI is highly complementary to ParaMed as it materially expands our presence in Western Canada and introduces business models that offer new avenues for organic growth. The added scale of the combined companies will enable further investments in technology and deliver significant synergies once the integration is complete. This is important to position us to provide reliable, high-quality services more efficiently to the thousands of people that rely on us for care every day.

Turning to Slide 5. We continue to advance our Ontario long-term care redevelopment agenda through our joint venture with Axium Infrastructure. At the end of May, we welcomed residents to Extendicare Beauclaire, the new 320-bed home in Ottawa that we opened in the joint venture. We also completed the sale of the Sudbury project to Axium joint venture for net cash proceeds of $18.1 million, net of costs and our 15% retained managed interest, resulting in a $7.7 million gain after tax.

We currently have 6 projects under construction, including Extendicare Forest Trail, a 256-bed home, which is scheduled to open next month in Peterborough. Looking ahead, we remain on track to open 4 new homes in 2027, representing a further 832 beds. We continue to progress an additional 17 projects that are at varying stages of planning and development under the Ontario Long-Term Care Home Capital development program, including a 256-bed home in Ottawa, where we hope to break ground by the end of 2026.

We are actively working with the government on necessary funding and other elements required to fully realize our development agenda. I'll now turn the call over to our CFO, David Bacon, to discuss our financial results in more detail.

Thanks, Michael. I'll start with an overview of our consolidated results, review our individual business segments and provide an update on the recent changes to our balance sheet. This quarter's results reflect the full quarter impact from all of our acquisitions. Our consolidated Q2 revenue increased by 59.4% to $611 million, driven by the full quarter contribution of the CBI acquisition, which drove 132.6% growth in our home health volumes, the impact of Closing the Gap acquisition on a year-over-year basis and continued home health care organic growth.

It was also bolstered by the acquisition of the 9 LTC homes in June of 2025 and our long-term care funding enhancements. Our Q2 adjusted EBITDA was $68.3 million, an increase of $28.5 million or 71% over the prior year, reflecting our acquisitions and strong underlying organic growth, particularly in our home health segment. The CBI acquisition contributed adjusted EBITDA of $18.5 million. It's important to note this quarter that both our net earnings and our AFFO were negatively impacted by certain onetime items that we believe should be adjusted for when considering our results.

Our Q2 net earnings of $30.9 million, down $1.1 million from the prior year, were impacted by pretax costs of $8.1 million in connection with establishing our senior unsecured credit structure and the early prepayment of certain long-term care home mortgages and loans. In addition, net earnings were further impacted by pretax costs of $8.7 million related to transaction and integration costs primarily related to the CBI acquisition.

Additionally, we reported $3.6 million lower pretax gains on the sale of assets to the joint venture on a year-over-year basis. Adjusting for these impacts and certain fair value impacts net of tax, our net earnings increased by $15.6 million to $36.4 million or $0.38 per basic share. Our Q2 AFFO improved by $11.7 million or 47% to $36.5 million. However, this quarter's AFFO was impacted by the settlement of deferred share units held by 2 long-standing directors who retired in April, resulting in payroll cash withholding taxes of $8.7 million or $6.4 million on an after-tax basis. When this is excluded, our Q2 AFFO increased by $18.1 million or 73% to $42.9 million or AFFO per basic share of $0.448, an increase of 52.9% from the prior year.

Turning to our individual segments. Our home health care continues to deliver strong performance, driven by the acquisitions and continued organic growth. Our Q2 revenue increased by $201.7 million year-over-year, while NOI increased by $25.2 million or 117.8%. CBI contributed approximately $145.7 million in revenue and $19.5 million in NOI during the quarter. As Michael indicated, our NOI margins declined 60 basis points to 12.9%, largely due to the increased investment in the back office to address recent and future growth and the absence of a 2026 rate increase in Ontario to offset labor cost inflation.

Turning to our Long-Term Care segment. Revenue increased by $26.5 million or 12.8%, driven primarily by the contribution of $18.8 million from the 9 LTC homes acquired last June, net of the closure of the Carlingview Manor following the opening of the Extendicare Beauclaire Home in the joint venture in May. In addition, our LTC operations benefited from funding increases and improved preferred occupancy. Our NOI increased by $5.7 million or 23.9%, driven by the increases in revenue and the net contribution of approximately $2.5 million in NOI from the 9 LTC homes acquired. Q2 NOI margins increased 110 basis points over the prior year period to 12.7% -- our LTC NOI margins are typically higher in the second and third quarters due to the timing of funding increases and spending under the envelope funding system and the timing of wage rate increases under our union agreements. For the trailing 12-month period ended June, our LTC NOI margin normalized for out-of-period items was approximately 11.8%, which is more in line with our expectation that margins in [ LTC ] will remain consistent with these levels in recent years.

Turning to our Managed Services segment. The results were impacted by the loss of the Revera management contracts during Q2 of last year following Revera's sale of 30 LTC homes, 9 of which we acquired and are now included in our LTC segment. The number of management contract beds in Extendicare Assist dropped 3.8% in Q2 as two third-party assist contracts were not renewed during the quarter. partially offset by the new 320-bed Beauclaire home opening in the JV in May. As a result, our managed services revenue decreased by $0.6 million to $17.1 million. Despite this reduction, our NOI improved by $0.2 million to $9.9 million, primarily from 8.3% organic growth in SGP clients and our increased management fees from the newly opened home in the joint venture.

Turning to Slide 11. We have significantly enhanced our balance sheet following the acquisition of CBI on April 1. This quarter, we established our new unsecured credit structure, including our successful inaugural senior secured investment-grade credit offering, where we issued $450 million senior unsecured notes priced at 4.345% on a 5-year term maturing in April of 2031. Both the company and the notes received a BBB stable rating from Morningstar DBRS. In conjunction with the notes offering and the repayment of the senior secured delayed draw term loan, we amended our senior secured facilities to establish a new $250 million unsecured credit facility.

This new facility provides us with lower credit spreads than the previous secured facility and extended the maturity to a new 3-year term ending in April of 2029. In addition, we completed a series of repayments on certain long-term care home-related mortgages and loans to address near-term maturities, floating rate interest and higher cost debt. This reduces our borrowing costs, improves our maturity profile and provides us with additional flexibility through lower mandatory payments associated with the mortgages and the term loan structures we retired. The result of these changes lowers our weighted average interest rate by 80 basis points to 4.4% and improves our weighted average term to maturity to 5.1 years.

Lastly, turning to Slide 12. With the full impact from acquisitions and our capital structure changes now reflected, we exit Q2 in a strong financial position with $208 million in overall liquidity, comprised of $93 million in cash on hand and $115 million available on our unsecured revolving facility. Our pro forma debt to adjusted EBITDA is approximately 2.5x at quarter end, reflecting the incremental debt in support of our recent acquisitions and the pro forma full year impact on adjusted EBITDA from CBI.

This is well ahead of our original estimate of approximately 3.3x post the CBI acquisition at the time we announced the transaction last year. We're very comfortable with leverage at this level. And given our strong free cash flow profile and capital-efficient redevelopment model, we have significant flexibility in considering future capital allocation decisions while maintaining our leverage commensurate with our new BBB stable rating.

With that, I'll pass it back to Michael for his closing remarks.

Thank you, David. Our second quarter results reflect the strength of the platform we've built over the past number of years, including a home health care segment that has more than doubled in size. We continue to be very confident about the potential of our home care and long-term care platforms and our ability to expand access to care for the growing number of Canadians who depend on us. In the second half of 2026, we will be focused on disciplined execution. We will complete the integration of Closing the Gap, advance the integration of CBI and continue to progress our redevelopment program with 5 new homes opening in the next 4 quarters, all without losing sight of the quality imperative that is fundamental to the care we provide to thousands of people who rely on us every day.

The demographic trends underpinning our business are relentless in driving demand for care. Our scale, technology platform and the flexibility of our capital structure position us well to meet that demand. Canada's health care system is under significant strain and our services allow us to ease pressure on hospital capacity by delivering care in the settings best suited to each person's needs at the most sustainable cost. We will keep building that capacity so more Canadians can access the care they need wherever they call home.

My sincere thanks to our team members for their unwavering commitment to the residents, patients and individuals we serve. And with that, we welcome any questions that you might have.

[Operator Instructions] Our first question comes from Kyle McPhee with ATB Cormark.

First one for me, just regarding your home health care margins, I understand the small move down versus recent quarters as you go through a round of OpEx investments to support all the growth. Based on your investment needs that you would know, is there more transient margin pressure near term? Or are you kind of back on stable footing now and maybe climbing and leveraging the new cost base going forward from here?

And then also, is any of the OpEx investment you're making in anticipation of more home health care M&A that you're eyeing near and midterm?

Yes. Thanks, Kyle. I'd say address your -- the last part of your question right away, I think we have said, I think, in the last couple of quarters that we had been running quite hot on organic growth, as we all know. We had talked about the fact that, that back office that supports the frontline operations, think of those as schedulers and coordinator supervisors, so not accountants and HR types, but the mid-office that supports the front lines. It's a bit of a step function from a cost perspective there. So we had grown quite significantly with that very rapid organic growth with largely an unchanged back office supporting that front line.

So we have made investments. It's mostly people and the related technology costs that come with upsizing that back office. And so we've been doing that over the last couple of quarters. I don't think it's not in anticipation of any future M&A. It's more to support where we're at from the recent growth and future growth. From a margin perspective, I think the -- our view is unchanged. I think we've always felt that this margin -- this business would run 50 to 100 basis points higher than where we were at. When we first started talking about that, we were in the high 12s, and we thought we could be into the -- up into the 13s. I think when that happened, part of it was a function of putting some additional investment in the back office, knowing how fast we were running on organic growth.

And so I think there's not -- what I'd say is we still believe that this is a higher-margin business. The timing of when that 50 to 100 basis points will come in moderates with the investments we've had to make in the back office. Obviously, rate increases tie into that. And as we know, as of yet, there hasn't been an increase or an announcement in Ontario for this year on home care. So that obviously factors in. From a long-term perspective, though, the largest single cost for the business is labor, and we do feel that over time, that always will even out from a rate increase perspective so that the businesses maintain an equilibrium with labor costs.

So I think I wouldn't read too much into a 60 basis point decline year-over-year this one quarter. Our trailing 12 margins in the business are still above 13%. And I think that we still, on a medium-term basis to longer-term basis, feel that there's margin expansion to come in this business, but I wouldn't get too focused on an individual quarter.

Got it. Is it fair to say the step-up -- the phase of the step-up in investment is done now? Or is there more...

We've made quite a significant move on the headcount. I mean, I'd say there's probably not another big step coming. I think it was happening ratably over the first half of this year. So maybe a little bit of normalizing that out. But I think, yes, for the most part, we've made a fairly large step-up in the last 6 months in the size of the back office. So I don't expect that trend to continue.

Got it. And then just on your onetime costs, they were high in Q2, understandably, given you closed the CBI deal and that had costs associated with it. But one of the components of your onetime cost was integration, which I assume is reoccurring near term as you integrate CBI. You broke that out, it was $1.5 million of integration costs. Is that a good kind of run rate to expect over the next year or so as you integrate CBI? Or will that step up or down?

No, I think -- I mean, that may be -- I think we're looking at $3 million to $4 million a year for the next couple of years. So the $1.5 million in the quarter, probably a tad high if you try to annualize that. But it's not a bad -- that'd be in that level of what we're looking at.

And the next question comes from Jonathan Kelcher with TD Securities (sic) [ TD Cowen ].

Just sticking on the home health care. What sort of rate increases do you typically get from the Ontario government? And are those like -- has those been consistently annual and it's just delayed this year for whatever reason?

Jonathan, we tend to see, as David said, over the long term that it tracks labor cost inflation. So in our current environment, that's in the 2%, 2.5% kind of range. The rate increases in home care in the different provinces don't happen like clockwork. It's not as kind of regular as we see in long-term care where it tends to happen at the same time every year. So there can be some lumpiness, but what we have seen over the long term is that the rate increases track labor cost inflation quite closely.

Okay. And then are they -- do they work like the long-term care one where you might get a retroactive increase?

Yes. We've certainly seen onetime like retroactive payments coming in the past. If you look into our past statements, you can see several examples of that.

Okay. And then just maybe a different way asking about M&A in the space. When you -- like you've now made these investments to be able to grow or scale up, like ultimately, how much do the investments you've just made let you scale?

Well, the technology platform that we've put in place gives us a lot of scalability. And that's the key element that really allows us to scale up. But to be candid, we modeled a few years ago, when we were looking at this, we modeled on that 6% to 8% annual growth, and we've exceeded that by a lot. And hence, the step function that David talked about that we needed to do. But we have been able to get quite significant annual productivity improvements in our back office because of the technology that we are continuing to introduce AI is giving us a lot of flexibility now as well in terms of introducing increased tools for our staff to be able to become more efficient.

So we see that efficiency trend continuing. But that's been able to absorb volume growth 10%, even 15% annually in the past without increasing the headcount in the back office, but when we started getting into the high teens and even up to 20%, that was just exceeding our ability to accommodate that based purely on efficiency gains. And so hence, the step function headcount that we added in the first couple of quarters of this year. But we expect that ability to continue to improve our back-office productivity to extend into the future.

And the next question comes from Lorne Kalmar with Desjardins.

Just back to the billing rate increases, has there ever been an instance where you haven't gotten one at all during a year and then you have a big catch up the next year? Or are you still expecting to see something either this quarter or next?

Yes. Lorne, I think if you go back far enough, especially coming out of COVID, -- you would have seen examples both in LTC and home care, where inflation ran quite hot emerging out of COVID, and there were years where we got a catch-up of -- in home care, 6.7% 1 year and then 4% the next. We got an 11% roughly increase to catch up. So there's been quite a bit of volatility with that.

But I think that pre-COVID, the LTC was quite regular, as Michael alluded to, like an inflationary increase every year around the same time. We're feeling like we're back to that in LTC over the last couple of years. Home care has always been a little bit more sporadic in terms of when they do the announcements, even a bit before COVID. So yes, there's conceivably a period of time where you'll have a gap where the increase doesn't come when you want it. But again, over time, we do feel that on a long-term basis, it takes care of itself. It finds that equilibrium, whether it's through a bigger catch-up versus a regular. So that -- you would see that pattern if you went back far enough. So...

Yes. I was just trying to get at like have you ever had a year where they have given you -- like they just haven't announced an increase for home health and then done a big catch-up versus doing one that's maybe below where inflation actually came in and doing a catch-up? Just trying to get an idea from a modeling standpoint and I guess, an outlook standpoint, what to expect in terms of top line for the home health business.

Yes. We have -- it's a bit of a hard question to answer because they make the announcements at different times. So sometimes we've had announcements in November. Sometimes we've had announcements earlier in the year. So I guess I would say yes is the answer to the question, but then we've always seen a catch-up of some sort when that happens.

Got to love the government. Okay. And then flipping over to the LTC redevelopments, obviously have a big tranche that's expected to be completed by the -- by 2Q '27. And you mentioned the Ottawa one you're working towards. Do you expect to announce more developments in the coming quarters to kind of keep that cadence in that 5 to 7 project range or not?

Yes. I think we're definitely advancing projects in the 17. As you mentioned, we're aiming to start another one by the end of this year. We are tracking, as we've said in the past, looking to start at least 3 a year on average. So there are -- I'd expect more starts towards the back half of next year, just based on kind of our current cadence on moving through the development cycle on a few more of the near-term projects. So we still have that target of trying to have 3 to 4 started per year.

And the next question comes from Tania Armstrong with Canaccord Genuity.

A couple for me. So on CBI, now that it's closed and you've completed the investment-grade refinancing, how should we think about your appetite for additional home health care acquisitions versus focusing on that integration over the next couple of years?

Well, at this point, the integration is front and center in our focus. And certainly, for the rest of 2026 will be a key focal point. I think it's going to take us some time to integrate this, and we want to make sure that we do that well. That said, our balance sheet gives us the flexibility to be opportunistic. So we'll certainly evaluate things that may come to our attention. But I'd say that likelihood is that further acquisition activity wouldn't be likely until later next year at the earliest. But never say never. I mean, I think if something fit really well with our strategy and came to our attention, we would consider it.

Okay. Excellent. And now that you've had CBI under the umbrella for a full quarter, can you just give us a little bit more detail, I guess, on where you are in the integration process? What's been completed? What are the next steps and whether you're seeing opportunities for revenue or cost synergies beyond what you originally underwrote?

Yes. I'd say it's still early days. We are at quarter end. Most of our focus at the moment on the CBI side of things is planning for -- there are a couple of elements of that transaction where there's still some transitional services, a couple of our application platforms where we need to separate. So our focus is trying to move off of any transition support, which we think is targeted for the start of next year. Behind the scenes, there's a significant amount of work going on now going through analyzing and breaking down their business region by region, office by office. As we've talked about in the past and what we're doing with CTG, we don't do a big bang cutover. We move things in a very methodical way piece by piece.

So the front -- ahead of those integrations, you have to understand the nature of the workforce in those particular geographies, how the union versus nonunion grids might stack up, harmonizing wages and benefits, et cetera. So a lot of planning for that. It is 8, 9x the size of CTG, and it's got some nuances with the SCS business and some other geographies that we need to work through. So the real focus now is all of the planning for that. The better you plan upfront, and we've learned this through lots of examples, the more planning you do upfront on the harmonization and the communications plans, the better the cutovers go.

And the immediate focus will be on just weaning ourselves off the last couple of pieces of transitional services, the focus. And some of this team is doing double duty on CTG and CBI, but we are on track to finish the CTG work by the end of the year. So then that same team gets freed up to then turn their minds to the very methodical process of cutting over the business sort of geography by geography, which will take us some time.

And then second part of your question, any different view of revenue or cost synergies, I'd say at this point, there was never really a revenue synergy aspect of these transactions as much as creating the growth platforms and putting ourselves in the right geographies and the right service types. On the cost side, we still have -- still looking at that target of the $7.4 million of cost side on -- from an exit perspective once the businesses are fully bought together. We still think that's a target that's achievable.

And the next question comes from Giuliano Thornhill with National Bank.

I just want to go to the funding announcement that recently happened, the collectively $2.2 billion. I know you haven't received details on how that's being allocated, but in prior episodes, how was that? Like with that being earmarked for operators, I'm just a bit surprised that there was no rate increase this year or thus far.

I think you're talking about the two $1.1 billion announcements that the Ontario government made for home care.

That's correct.

Yes. So those were predominantly directed at volume. And so that really is what's making these very rapid organic volume increases possible. And their decisions about rates are handled through a different process. So we'll see what happens now in the fall economic statement, but the pace of growth continues to be quite fast. And so we're anticipating that they'll continue to be making these investments, but it's impossible to tell at what pace until the announcement comes out.

Right. And then is the industry growing at similar rates as yourselves right now, like that mid-teens or so area? Or are you anticipating that you're taking share from competitors?

No. I think the whole sector is increasing at this pace. I mean one of the things that we observed in our, our management discussion was the fact that the CBI volume growth pace and the ParaMed volume growth pace have been very similar despite the fact they've had a little bit of a different kind of mix of services and a little bit of a different geographic distribution, remarkably similar growth patterns. So it does appear to be a sector-wide expansion as opposed to us gaining share from other operators.

And I'm just kind of curious as to why then you're thinking it reverts down to kind of 6% to 8%. Is that like a low base, do you think relative if this ALC issue kind of persists and there's more funding? I know the demographics are 4%, but I'm just kind of trying to determine where that range could trend if the issues persist as they are?

Well, I think the first thing to say about this is that we're using our best knowledge of the industry to guess at what may be ahead. It's really very difficult to project what -- how this may go because a lot of the demand for services is hidden. It's not easy to quantify it. But that said, I think it's unlikely that a service line in health care will outgrow kind of the expansion in demographics for an extended period of time. So that's why we're looking at it and saying the 4% growth in the demographic that we serve, which is kind of an ironclad projection and then the fact that long-term care bed additions are not going to keep pace at that kind of rate and means that, that 6% to 8% is where we think that it's going to settle.

So where is the rest of the growth coming from? Well, it must be coming from unmet needs -- and the backlog that is based on the 50,000-person wait list for long-term care in the province and the ALC in acute care hospitals, which we have been seeing declining for the first time in my experience. So we do see some evidence that, that backlog, which is difficult to quantify, is dropping. So how long it will take before it goes back down to the numbers that we're suggesting, we really can't say.

And the next question comes from Pammi Bir with RBC.

I just wanted to come back to the investments in the back office and the technology side in ParaMed. Were any of those perhaps costs unanticipated or maybe even just brought forward just to sort of get it all done as you focus on the integration of CBI?

Yes. I wouldn't say unanticipated. I think we -- I think we have this large group that we've talked about in the past that supports the front line. We -- it largely stayed the same size through '24, '25 with multi high teen-digit organic growth which proved out sort of the technology and support, we were able to absorb a lot of that growth. I think we've -- as we've been saying in the last couple of quarters, it's -- we need to bolster the size of that team and the resources there. So I wouldn’t say it was unexpected. I think we've been talking about needing to do that given the sustained level of organic growth.

So I think, again, and it's mostly -- it's just mostly -- it scales with just the size of our frontline teams and the level of activity and the referral activity, scheduling activity. So -- so it's mostly people supporting that level of growth. So it wasn't necessarily looking ahead to CBI. CBI has their own folks in their back office as well, and that's where some of the opportunities will come when we bring everybody together. And longer term, there's -- as we've spoken about in the past, there's definitely future opportunities when we're all on one platform to bring further technology into play and looking at AI, et cetera, for that -- the functions that, that back office does.

But -- so it's really just trying to get back to an equilibrium in that group so that we're servicing and supporting the front lines appropriately given just the volume of activity that we're asking those frontline teams to take on.

Got it. And then just not to keep beating on this, but the Ontario -- the absence of the Ontario billing rate increases, are there any discussions at the moment underway with -- by the industry, with the ministry in Ontario that would suggest that it's really just a matter of time.

So there are constant communications back and forth, in particular, where the industry shares the labor cost inflation, what we're seeing in the labor market, what we're seeing in terms of costs. So the government has complete information to make their decisions. But we generally do not get much forewarning about their thinking until the announcement comes out. So we don't really have any visibility to when a rate increase might come, but that's not unusual.

Okay. And then just on CBI, on the integration that you've been working on to date, have there been any surprises at all or any pain points that might maybe shift your view as to the anticipated accretion on this transaction?

Not at all, actually. If there's been any surprises, it's been on the quality of the team there. They've been an outstanding group. I'm very, very excited about the -- just the level of energy as the two teams come together. We're seeing a lot of opportunities -- and I think the groups are working well together.

So as David said, we still are very confident about the synergies that we projected. And we quantified $7.4 million of synergies that we could readily see. But then we also speculated about further synergies further out based on the common technology platform and some of the new capabilities that we are pursuing with our vendors. So we're very positive about the way that that's unfolding.

Okay. And then just on that point, in terms of that $7.4 million, can you just remind us what the sort of time line was for that to get -- or I guess, to get realized?

Well, we don't feel that those will be fully realized until we complete the integration. And we said it was going to take 18 to 24 months to do the integration. We don't have any further refinement of that projection at this point.

And the next question comes from Tal Woolley with CIBC.

Just in early days, any hitches serving customers as you've integrated the businesses thus far?

No. I think the strategy that David described where we do it kind of region by region rather than a big bang, allows us to mitigate any hiccups that may occur along the way. The Closing the Gap integration has been quite seamless from a customer perspective. So we're quite happy with the way that that's going. And that's allowed us to develop a really solid playbook for how to do this as we move to the CBI segments. So that's been going quite well.

And no staff communication issues or anything like that? I guess like what I'm trying to get at is that like service to the customer and labor -- the labor team is functioning well in your opinion?

Yes. We haven't seen any increase in quality issues or anything of that sort. And from a staff perspective, our turnover has been dropping over the last few quarters. So retention has improved. So if we were seeing an exodus of staff from our acquisitions, that might be a concern. But in fact, we've been seeing the opposite trend. So there's every indication that this is coming together well.

Okay. And then just with respect to provincial funding, like I guess at this point, like as we're seeing demand surge for the product, like is the bigger worry right now to get the province to commit more of like a higher share of its operating budget to home health care or the rates?

So I would not describe it as a concern at all. I mean there's a few fundamentals at work here. The first is to remember that we're the lowest cost provider of services to this particular demographic surge. So if the government made a decision not to fund the services that we're providing or not to expand those services, then all of that need would back up into hospitals, which are the most expensive place to provide those services.

So I think we have a dynamic in the market that supports continued expansion of the services that -- to meet that constant kind of demographic need. So as we've talked about, there can be shorter-term kind of considerations that might kind of interrupt the cadence of those rate increases or volume increases, but we believe that over time, those long-run averages are going to prove out the two thesis points that our whole business model is built on, which is that 6% to 8% annual growth in volumes and rate increases that track labor costs. So we don't see any indication that, that won't continue to be the dynamic that drives the market.

Okay. That's helpful. David, you're still carrying about $95 million, I think, on the balance sheet in cash. I think since Extendicare sold the retirement business, the cash balance on your balance sheet has been pretty elevated. Just wondering, is that the number you need to be carrying going forward?

No. Tal, the quick answer is no. I think the short-term answer is we're -- we've just taken on CBI. We want to get a sense of how that factors into the needs and the timing of working cap swings, get used to the new some of the new cash flow patterns on the SCS business, which are a little different than what happens on home care and long-term care. So I do suspect you'll see us carrying lower balances. And in the immediate term, given the flexibility and we have now with the new structure, we would redirect some of that to the revolver paydown.

So -- but no, I don't -- I think that's just where we ended up, but I do think over the next quarter or so and towards year-end, you'll probably see that balance lower. And an obvious place to direct that cash would be to just pay down the revolver draws in the meantime, which would delever us a little bit further. So...

Perfect. And can you talk about just the SCS business? Can you just maybe give a little bit of a broader explanation of what that involves, how big a piece it is of the combined puzzle and how it might grow going forward?

Yes. SCS was about 20% of the CBI operation. And the business model there is residential homes that are leased and house typically 3 to 5 residents with long-term needs. And currently, there's just under 100 of these leased homes in operation and the services are provided by the home care team. So at this point, the pace of growth in that group is something that we're becoming more familiar with.

So I don't have a number at this point to suggest. But given what we're seeing in long-term care and the long-term care waiting lists, we feel that a number of people on those waiting lists could be served by this different business model. And the volume that we're currently serving is predominantly Western provinces. There's very little in Ontario and provinces East. And so we see potentially quite significant growth opportunities in that segment. But as to what those trend lines might look like, I think it's just too early for us to hazard a guess.

Got it. And then I guess just lastly, like when we're talking about the stock with clients, like if I'm talking to a real estate client, we'll talk about FFO and AFFO. I'm talking to someone else, probably talking about EBITDA and EPS where ultimately would you like the market to sort of train its eye when we're looking at quarters? And are you thinking longer term about how to sort of present your results to the market? Because obviously, this has been a company in transition for the last several years.

Yes. It's a great question, Tal. And we spend a lot of time talking about it. We are have been in transition, but I think we feel now we're past that, like we kind of -- we have a view now of kind of our business model and strategy, which is an asset-light base focused on growing the services side and advancing redevelopment in a capital-light model. With the CBI deal now in there, we're 2/3 of our NOI is coming from services businesses, and we expect that to grow even if we do nothing else other than redevelop the 17 homes, that's going to push more into managed services on the services side. So I think what you'll see, we are thinking about evolving our view and focus.

I would say, absolutely moving away from AFFO over time is something that we likely will do. There's a lot of variability down between FFO, AFFO, and we've seen that even this quarter with the DSU treatment. Whether FFO is the right cash flow measure or something that's less real estate kind of looking. But quite frankly, at the FFO level, it's not dissimilar to other free cash flow measures where you could factor in EBITDA less interest and CapEx needs, et cetera. For us, the CapEx is more maintenance related as the big growth CapEx -- those are more transient because we're doing the growth, big growth CapEx through the JV off balance sheet. So I do think over time, we're going to try and hopefully tell the story with a focus on EBITDA and a focus on a cash flow measure that doesn't have some of the volatility variability that comes into play is probably more of a focus for us going forward.

So -- but we're also, we are in and in between. So we've grown our analyst coverage over the last year, as everybody knows, and we've got some new folks that are covering us that aren't sort of coming from the REIT side, and we have folks like yourselves that are evolving their thinking about us together. So I do think EBITDA and a sort of a cash flow measure that's not AFFO that eliminates some of that noise that I think is a problem and hopefully try and bring everybody to focus on consensus numbers that are everybody looking at the same number. We do have a bit of variety out there, which I think sometimes causes some of the disconnect because people are focused on different things.

But that's, I think, where we're going, Tal, and you'll start to see us do give more prominence to those measures certainly next year for sure as we start thinking about some of that for '27.

This concludes our question-and-answer session. I would like to turn the conference back over to Jillian Fountain for any closing remarks.

Thank you, operator. That concludes our call for today. This presentation is available on our website, along with a link to a replay of the call. Thank you all for joining us, and please don't hesitate to reach out if you have any further questions. Goodbye.

This concludes today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.

Thank you for standing by. This is the conference operator. Welcome to Extendicare Inc. First Quarter 2026 Analyst Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Jillian Fountain, Vice President, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Extendicare's 2026 First Quarter Results Conference Call. Joining me today are Extendicare's President and CEO, Michael Guerriere; and Executive Vice President and Chief Financial Officer, David Bacon.

Our Q1 results were released yesterday and are available on our website as is a live audio webcast of today's call, along with an accompanying slide presentation. An archived recording will also be available on our website following the call today. As well, replay numbers and passcodes have been provided in our press release for those wishing to access an archived recording by phone until midnight on May 22.

Before we get started, please be reminded that today's call may include forward-looking statements and non-GAAP and other financial measures. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. We have identified such factors as well as details of non-GAAP and other financial measures in our public filings with the securities regulators and suggest that you refer to those filings.

With that, I'll turn the call over to Michael.

Thank you, Jillian, and good morning. Our first quarter results demonstrate the various components of our strategy working in concert, Strong organic growth in home health care augmented by acquisitions, progressing our long-term care construction activities in our joint venture with Axium and organic growth in SGP, all benefiting from the operating leverage that results from a technology-enabled back office.

Subsequent to the quarter, we closed the $570 million acquisition of CBI and completed the sale of $450 million in unsecured notes, supported by a BBB credit rating from DBRS. These transactions provide us with new opportunities for growth and additional capital flexibility as we work to meet the increasing care needs of an aging population.

The ParaMed segment delivered volume growth of 32.7% over the prior year quarter, reflecting the addition of Closing the Gap and strong underlying organic growth. Higher volumes, combined with the scalability of our technology-enabled back office drove an NOI margin of 13.3% after adjusting for out-of-period items, a 300 basis point increase over the prior year quarter.

Our long-term care NOI margins improved by 90 basis points from the prior year to 10.9% after adjusting for out-of-period items with occupancy unchanged at 97.5% Managed service revenues declined year-over-year due to Revera's sale of its remaining C-bed portfolio, some to Extendicare and the balance to another operator.

Nonetheless, third-party and joint venture beds served by SGP grew to over 157,000, up 6% from the prior year. Managed Services NOI margins were 54.6%, remaining in line with our expectations of 50% to 55% margins for this segment. Driven by the strength of these results, AFFO adjusted for out-of-period items increased to $0.276 per share, up 56% year-over-year, driving our payout ratio down to 41% on a trailing 12-month basis.

Turning to Slide 4. We closed the CBI acquisition on April 1. CBI Home Health is highly complementary to ParaMed as it materially expands our presence in Western Canada and introduces business models that offer new avenues for organic growth. The combination of the two companies provides an opportunity to achieve significant synergies as we manage additional volumes using our highly scalable technology platform.

The added scale will enable further investments in technology, enabling us to provide reliable, high-quality services more efficiently to the thousands of people that rely on us for care each day. The transaction adds CBI's approximately 10 million hours of service and 8,500 team members to our Home Health segment, which as previously disclosed, generated an estimated $478 million in revenue and $61.9 million in adjusted EBITDA on a pro forma basis in the 12 months ending June 2025.

Turning to Slide 5. We continue to advance our Ontario long-term care redevelopment agenda through our joint venture with Axium. We currently have 7 projects under construction, 2 of which will open this year. At the end of May, we will welcome residents to Extendicare Beauclaire in Ottawa, followed later in the year by Extendicare Forest Trail in Peterborough. Together, these two homes will deliver 576 new and upgraded beds.

We remain on track to open 4 new homes in 2027, delivering an additional 832 beds. In February, we completed the sale of our vacated West End Villa in Ottawa for $12.1 million, realizing a $9.8 million post-tax gain. This sale is another example of the capital recycling potential of our redevelopment strategy as we can invest these proceeds in new projects to advance our redevelopment pipeline.

We continue to progress an additional 17 projects, which are at varying stages of planning and development under the Ontario Long-Term Care Home Capital Development program. We are actively working with government to put in place the necessary funding and other considerations required to begin construction on additional homes to fully realize our redevelopment agenda.

I'll now turn the call over to our CFO, David Bacon, to discuss our financial results in more detail.

Thanks, Michael. I'll start with a brief overview of our consolidated results, review our individual business segments and provide an update on the recent changes to our capital structure. Our consolidated results for the quarter included approximately $8.7 million in net favorable out-of-period items related to retroactive funding in both LTC and home health, partially offset by retroactive wage adjustments in home health. The impact of the out-of-period items is summarized in the appendix to our presentation.

Our consolidated Q1 revenue increased by 24.2% to $465.2 million, driven by 32.7% growth in our home health care volumes, reflecting the organic growth in the acquisition of Closing the Gap last July, the acquisition of 9 LTC homes in June of 2025, long-term care funding enhancements, partially offset by the closure of the West End Villa home that was vacated when we opened Extendicare Crossing Bridge in the Axium joint venture and lower management fees resulting from Revera's sale last year of the LTC homes that we previously managed.

Excluding out-of-period items, our Q1 NOI improved by $16.7 million or 38.3%, reflecting the revenue growth, partially offset by higher operating costs. Excluding the impact of out-of-period items, our Q1 adjusted EBITDA increased by $15.2 million or 52%, reflecting the improvement in our NOI, partially offset by higher admin costs.

Our Q1 AFFO improved by 65% to $32.7 million. When out-of-period items are excluded from both periods, our Q1 AFFO increased by $11.4 million or 76% from the prior year, reflecting the improved after-tax earnings, partially offset by the cash impact of our annual settlements of our share-based compensation. The corresponding AFFO per basic share was $0.276 this quarter, an increase of 56% from the prior year and was impacted by the December equity offering, which on a pro forma basis, reduced AFFO by approximately $0.035.

Turning to our individual segments. Home health care continues to deliver strong performance. The Q1 results were impacted by out-of-period revenue of $1.7 million and related costs of $900,000 for a net impact of $800,000. Last year's Q1 results were impacted by out-of-period revenue and offsetting costs of $11 million as well as workers' compensation rebates of $3.9 million.

Excluding these out-of-period impacts, our Q1 revenue increased by $56.5 million or 38% year-over-year, driven by organic growth and the acquisition of Closing the Gap. Corresponding Q1 NOI improved by $12 million or 78%, driven by the revenue growth, partially offset by increased wages and benefits. On the same basis, excluding the out-of-period items, our NOI margins increased 300 basis points to 13.3% in the quarter.

Turning to our long-term care segment. The Q1 results were impacted by out-of-period funding of $7.9 million this year compared to workers' compensation rebates of $2.7 million in last year's quarter. Excluding out-of-period impacts, revenue increased by $37.9 million or 19%, driven by the contribution of $32.5 million from the 9 LTC homes acquired last June and the timing of envelope spending, partially offset by the closure of the West End Villa home in February as a result of the opening of Crossing Bridge in the joint venture.

On the same basis, NOI increased by $5.8 million or 31%, driven by the increases in revenue and a contribution of approximately $3.5 million in NOI from the 9 LTC homes acquired, partially offset by a higher operating costs and the closure of the redeveloped C Class home. Corresponding NOI margins increased 90 basis points over the prior year period to 10.3% in the quarter.

Turning to our Managed services segment. The anticipated decline in revenue and NOI this quarter reflects the termination of the management contracts resulting from Revera's sale of 30 LTC homes last year, 9 of which we acquired, now are included in our LTC segment. Our Managed services revenue decreased $2.4 million to $16.2 million and NOI declined $1.1 million to $8.9 million. Despite the reduction in the number of managed homes, earnings benefited from 6% organic growth in SGP clients and our increased management fees from the newly opened home in the joint venture.

Turning to Slide 11. On April 1, we closed the CBI acquisition, utilizing the committed upsized senior credit facility as well as cash on hand, which included the $191.5 million in net proceeds from our December 2025 equity issuance. The addition of CBI meaningfully increases Extendicare's scale and diversifies our earnings base, helping to broaden our access to the capital markets.

On April 14, we successfully completed an inaugural investment-grade credit offering, issuing $450 million senior unsecured notes priced at 4.345% on a 5-year term maturing April 2031. Both the company and the notes received a BBB rating -- stable rating from Morningstar DBRS.

We used approximately $427.7 million of the net proceeds to fully repay the delayed draw term loan and to repay a portion of the revolving credit facility that we had drawn to fund the CBI acquisition on April 1. In conjunction with the notes offering and the repayment of the delayed draw term loan, we amended our senior secured credit facilities to establish an unsecured credit facility structure that ranks pari passu with the notes. The new $250 million unsecured revolving facility provides us with lower credit spreads than our former senior secured credit facility and extends the maturity for a new 3-year term to April 2029.

Turning to Slide 12 for a look at our credit metrics and liquidity position. We continue to maintain a prudent capital structure following the closing of the CBI acquisition and our new unsecured credit structure. We have improved our maturity profile with the maturity of our new revolving facility extended to April 2029 and the 5-year notes maturing in April 2031.

We do intend to consider early prepayments of certain of our senior secured mortgages, including those that mature in 2027 to further improve our maturity profile outlook and improve our weighted cost of debt. Our pro forma liquidity position as at March is approximately $211 million, comprised of approximately $67 million in cash on hand and $161 million available on our unsecured revolving credit facility.

This reflects the CBI acquisition and the notes offering and related to credit facility changes that I had outlined on the prior slide. Our pro forma debt to adjusted EBITDA as of March 31, 2026, is approximately 2.8x, reflecting the incremental debt we have taken on in 2025 and '26 to fund our acquisitions as well as the full year impact to EBITDA of our 2025 acquisitions and the pro forma adjusted EBITDA of $61.9 million from CBI.

We are comfortable with this leverage at this level and have the opportunity to further delever given our strong free cash flow profile and our capital-efficient redevelopment model or to add leverage in support of accretive acquisitions as necessary.

We are pleased with the strength of our capital structure and are well positioned to continue to pursue our growth agenda. We will remain disciplined in our approach to allocating capital, balancing our objectives to drive growth and create shareholder value, but also managing leverage commensurate with our new BBB stable rating.

With that, I'll pass it back to Mike for his closing remarks.

Thank you, David. The closing of the CBI transaction, together with the recent transformation of our capital structure creates meaningful new opportunities for Extendicare as we work to expand access to care for the growing number of Canadians who depend on us. Our Q1 results represent a strong start to 2026 with our strategy delivering across all business segments.

For the remainder of the year, we will be intently focused on completing the integration of Closing the Gap and advancing the integration of CBI while continuing to deliver high-quality care to those we serve. The demographic realities of the aging population are driving sustained demand for our services and the scale and efficiency of our operations position us well to meet it.

In a healthcare sector facing real challenges, we are confident that our scale and mix of services will help relieve pressure on hospital capacity by delivering care in the most appropriate and cost-effective settings. We will continue to build capacity to ensure that everyone in Canada receives the care they need to live their best lives.

My sincere thanks to our growing team, including our new colleagues from CBI for their commitment to advancing this important mission. With that, we welcome any questions that you might have.

[Operator Instructions] The first question comes from Kyle McPhee with ATB Cormark.

Great update. First one for me on your home health care business. You didn't report the organic change in hours of service this quarter, but I think backing out what I think came with Closing the Gap, it looks like organic growth for hours of service was up by just over 20% year-over-year. So even more momentum than we've seen in recent quarters. I think we all know the senior demand theme, home health care taking share from LTC. Last quarter, you highlighted the acute care bed theme. Anything else worth highlighting here that benefited Q1, whether it's temporary or durable?

Well, Kyle, we've consistently been predicting that the volume growth would be driven by two major factors, one being the underlying demographic growth trend in the population that we serve primarily, which is around 4% a year and then the failure of long-term care to keep up with that demographic trend. So home care is expanding to fill that gap.

So we've often thought that mid- to high single digits is the kind of the long-run organic growth trajectory that we would expect. It's been higher than that, I think, partly because we're still filling the gap that emerged over the pandemic and backing up into acute care hospitals. We're seeing that start to be relieved in different provinces. And so we do think the organic growth is going to slow down. We just can't predict when. We seem to predict that every quarter, and it just hasn't happened yet, but we do expect that, that's going to happen soon.

As far as the Closing the Gap numbers, as Closing the Gap becomes more and more integrated with the rest of our operation, our ability to really discern which volumes are which to be able to segment that out has passed. And so we're just going to continue to report it on a combined basis from here forward.

Got it. Okay. And then just shifting to another topic. You have a very resilient business model given the nature of demand and you're shielded from things like energy costs, which is not a big cost bucket for you. But that's what I wanted to check in on. I think one cost bucket for your home health care platform is presumably vehicle fuel, your caregiver driving around to patients' homes. Can you offer any color on whether or not the inflationary fuel environment will eat into any of your home health care margins? I'm not sure if it would be Extendicare eating the fuel cost hit or the caregivers or the payers or if it's even a big enough cost bucket to matter?

Well, the most important cost driver for us is labor costs. It's approximately 85% of our cost structure. So any fuel cost impact is going to be small. We do reimburse our staff for travel costs. So it may have some impact on our cost going forward, but I don't think it would be material enough to call it out.

The next question comes from Jonathan Kelcher with TD Cowen.

Just a quick follow-up on that last one. When you reimburse for travel costs, is that kind of like a $1 or a dollar amount per kilometer? Or how does that work?

Yes, that's how we structure it.

Okay. And then just sticking with the home health care, do you have a sense of how big the gap is between what you're trying to fill and the demand?

Jonathan, it's really hard to see that to know how much home care is required to offset the pressure on hospitals. And it's difficult for a couple of reasons. One is some of the pent-up demand is hidden in the form of waiting lists that we don't have visibility to. And the second is that it's difficult to know how many hours of care those people would require to be able to remain safely independent in their own homes.

So that combination of things makes it very difficult. I'll candidly say that we expected the volume growth to moderate long before now. So it has been a surprise to us to the degree to which it has continued to increase, and we just don't know when it will slow down, but we're quite certain it will at some point.

Okay. That's helpful. And what's -- I guess, in meeting that, you're adding labor all the time -- like what's the capacity constraint on labor? Are you running into issues? Or is it still going very well?

It's different for different groups. The majority of home care employees are PSWs. And in recent years, we've had very good luck with adding to our PSW team, partly because we've partnered with colleges, and we have a large number of students who are doing part of their training in our operations, which gives us a leg up when it comes to recruiting. So we have been able to recruit everything we need on that front.

Where we've had more difficulty is in the allied health side of home care, physiotherapists, occupational therapists. They've -- they're in very, very short supply. So that has been a significant challenge, and we're continuing to struggle with that. But because it's a small -- very small part of our volumes overall, it really isn't affecting our overall performance.

The next question comes from Tom Callaghan with BMO.

Maybe just following up on Jonathan's question there on labor. Like I guess you've been very open about the fact that you do expect a slowdown or a return to more seasonality. I'm just curious on the PSW side, like if we continue to grow here kind of sequentially 4%, 5%, 6% a quarter, is that something you can kind of support into 2027 with the current labor? Or just kind of how are you thinking about that if we are or remain in a situation where that volume growth kind of continues to come through like it has?

Yes. We believe that we'll have access to enough new recruits to be able to do that. We're also very focused on retention, and we've had very good luck over the last 2 or 3 years reducing turnover in our staff. We've also invested quite heavily in our own training capability to be able to support onboarding and therefore, have a flexibility in our ability to increase the workforce in tandem with any demand for services that we're seeing from hospitals and from doctors' offices.

So you can see that in how quickly our organic volume growth has increased. We've been more planning on the sort of mid- to high single-digit growth front, but we're able to flex our recruiting to meet demand as it comes in. So we expect that, that will continue to be the case as we go forward. As I said to Jonathan, I mean, that the exceptions are allied health like physiotherapy and also in some of the more remote and rural regions of the country that we serve, it can be a challenge to get staff. But those challenges really aren't reflected in our results.

Got it. Maybe a follow-up for me is just on capital allocation post CBI there. In the prepared remarks, I think you mentioned both you're comfortable with current leverage on a pro forma basis, but also kind of going to focus on integration here. So just how are we thinking about capital allocation over the balance of the year and into '27?

Yes. I think our focus, as Mike said, will be on the integration. I think from a capital perspective, there's a natural delevering, I think, that we'll focus on over the next few quarters as we do integrate the business and pay down the revolver. So you'll see the 2.8x come down a bit. So that will be kind of first priority as to where we put our capital to give us more dry powder and liquidity.

And I think what we've said is as we get back into '27, we do still think there's opportunities on the acquisition front. And so we're hopeful that when we're ready to turn that back on, that there's -- we still think there's good fragmentation out there and good opportunities for accretive acquisitions. So we'll turn our -- redirect the capital back to that. But for the next few quarters, it will be integration and delevering will be the focus.

The next question comes from Tal Woolley with CIBC.

The CBI pro forma numbers were given when you started the deal process, they're almost a year stale now. Is it fair to say that $62 million in NOI is likely not the current run rate? And can you give us any sort of estimate of where that might be tracking right now?

Yes, Tal, good question. They are a bit dated. I think it'd be fair to say that over half the business in CBI is in Ontario and Ontario Health at Home contracts. So I don't think it's a big leap to suggest that, that business has performed similarly to what we've seen with ourselves and CTG. The Western business that we pick up has a slightly different mix to it. The SCS business within CBI, as we've said prior, wouldn't be growing at that same pace, but still growth. But -- so yes, the business is definitely performing better. I think our preference is to wait and you'll see a full quarter in Q2, given we closed April 1, and we can talk more about that improvement. But I think directionally, it's not unreasonable to conclude that the business is probably doing better than the $62 million we bought at.

For sure. And then, Michael, the Ontario came in and extended the funding for the old Class C ward beds for another several years on a sliding scale. I was just wondering like it kind of reminds me a bit of the Class C license extensions that it was all supposed to fall off a cliff in 2025 and now they've subsequently been extended.

What's your perspective on what those beds could be used for? And is the industry thinking about potentially how to repurpose some of these assets to maybe make them more useful, whether it's to help with hospital overload or long-term care overload. Appreciating that they're probably not in a shape to do everything they were originally designed to do.

David runs this portfolio for us. So I'm just going to ask him to comment on this. He's closer to it.

Yes. Just -- I mean, in terms of the C-beds, a couple of points. Yes, they've extended that funding out for a few years. Obviously, that's a positive for us. But we don't have a lot of third and fourth ward beds today, just over 200 in total, and almost half of those are going to be put back in service with our -- the homes that we already have under construction. So from a financial point of view for us, it's helpful that it's been extended, but we also don't have a lot there. From a repurposing point of view, it's a good question. I think that what we've seen in our redevelopment to date is that people are buying our old C-bed homes and repurposing them for other social purposes, not long-term care, but affordable housing, multifamily housing.

So to date, every C-bed home we've sold is still there and being repurposed to use for housing. So I think there's -- that's something that we're seeing. And I think other operators that are redeveloping are seeing the same thing is that people are finding new uses for them. I think that -- there has been some conversations in the sector with the ministry and the OLTCA about are there other ways we could extend using these homes for periods of time to help with transition. In the GTA, for example, people are going to need to -- it's hard to find land. So if you can rebuild potentially on the existing land you own, but you may need to decamp the old home for a while in order to build the new one.

So there has been some discussions, but I think it's fair to say that in the end, there's a reason there's a C-bed redevelopment program, which is we think all these homes as they serve -- all these homes should be redeveloped and they should be taken out of service as long-term care homes, and that's what we're committed to do. But we have seen repurposing of the facilities in a number of cases for other social purposes, which is not what we expected when we first set out, but it seems to be happening more commonly.

Okay. And then the Sudbury asset sale, do you have a rough estimate of the NOI contribution from that building?

For Sudbury 2, the new one?

No, no, for the sale -- so the building is generating roughly how much NOI right now?

For York, yes -- again, we don't ever talk about NOI on a per home basis. But I think, again, I'd encourage you to go back to kind of just average NOI per bed. If you look at our beds NOI for LTC divided by sort of our total beds will give you a bit of a proxy given the size of that home. So the current home is about 278 beds. So on average, if you just do the math, it's about $10,000, $11,000 to $12,000 a bed, but that gives you a bit of a proxy.

Okay. And then just lastly, you guys have been hanging on to a lot of cash here as you're waiting for the -- you've been waiting for the CBI deal to close. But Extendicare has kind of historically held a lot of cash, I would say, over the course of its history. Just kind of wondering like with the business mix changing, what is -- what's the right level you think going forward?

Yes. No, it's a great question. I think there's been a huge shift this quarter with part of our plan to move with CBI in particular. We've now moved into a much more -- a couple of years ago, we moved into a secured credit facility. Now we've moved into the unsecured with a $250 million revolver. So I do think you'll see us running sort of more modest cash balances and using the revolver for, again, '27 and beyond, smaller tuck-in type acquisitions. So I don't think you'll see us carrying as much cash as we historically had.

Obviously, quite purposeful with sort of how high our cash balances got late last year and with the equity offering for CBI. But in the deck, it shows pro forma after you've washed through all the subsequent events with buying CBI and the debt -- the bond deal. We have about $67 million of cash and about $160 million left on the revolver. So sort of a more modest cash position than certainly what we've been running at for the last little while.

The next question comes from Lorne Kalmar with Desjardins.

Congrats on a great result this quarter. On the home health care margins, I'm sorry if I missed this, if you guys are running at these ADV growth levels that are above expectations, is it fair to assume that so long as that continues, you can actually achieve margins in excess of the 13% sort of long-term average target that you provided previously?

Yes. I think a couple of things just to put into context there. Just this quarter, we were 13.3% when you normalize it. If you go back the last few quarters, normalized, we are running just over 13%. For the full year last year, we did 12.8%. And I think we've said in past calls that we do believe this will be 50 to 100 basis point improvement over time in that business as we continue to grow, integrate the acquisitions, invest more in sort of efficiency gains through technology. So I think that we're still into a 13% margin business.

The one thing I -- and I think we talked about this at Q4, we've -- with this double-digit growth we've been experiencing now for what we -- is an extended period of time, we've been able to grow a lot with the back office we have. But there is -- the back office is a bit of a step function. So if we -- with the sustained levels of growth organically and if that stretches in, we will need to put some additional investments into the back office to support just that higher volume.

So I think the end result is still the same. This will be a higher -- this can be modestly higher business, but I think that given the sustained growth in volumes, I think that 50 to 100 basis points might be stretched out or a little further out because I do think we need to -- we're going to need to put some investment back into just the supporting functions and back office that are been doing a lot to support the growth, but it's now run pretty hot for a while and needs some more investment. So we're not changing what we've said. I think it's just the timing. So I think we're now running at that just above 13%, probably moderates here for a little bit before we'd see some of those increases we've talked about in the past kicking in.

And do you expect -- if I recall correctly, I know I'm still kind of new to the story here, but there typically is a little bit of seasonality in home health. Is the idea that with the environment being what it is, that seasonality kind of goes away until things start to normalize?

I mean the underlying things that happened that gave us those seasonal patterns in the past still happen. They've just been masked with 5%, 6% sequential growth quarter-over-quarter. So there's still -- the holiday is still fall. There's still snowstorms in December and January. We still have -- certainly in home care, we still give every -- all of our non-unionized people get their raises on January 1, and we don't get rate increases until later in the year. So all those things still happen. I think they've just been masked.

So the quarter-over-quarter patterns are important, but we really try and focus when we think about the business, think about outlook and planning, we really try and look at TTM kind of kind of rolling basis to just knock all that out, but it has been masked for the last couple of years, just given the sequential pace of growth.

Okay. I appreciate that. And then maybe just switching over to the LTC redevelopments. I think you called out you got basically the entire pipeline with the exception of Sudbury expect to be finished in, call it, the next 12 or so months. How are you thinking about new project initiations? What can we sort of expect on that front over the balance of the year?

Yes. I think for this year, we've got 2 scheduled to open, which are on track. We hope to bring at least 1 more project in by the end of the year. We've got -- we're very active on the 17. We were -- so I think that 1 by the end of the year is probably quite -- you can expect that. There's a few that are quite close behind, but probably don't make the cutoff for 2026. But -- so I think you'll have to see a more robust number of new starts next year, but we're pretty confident that we'll get another one going in the fall.

Okay. And then maybe just last one on Sudbury. Can you give us maybe a rough idea of what the development costs that you've had to incur so far for that project are?

Yes. The best proxy I can give you, if you look at the financial statements, we have -- in our property, plant and equipment note, you're going to have a construction in progress category that's in there. So that's probably the best place to look to date. So it's not purely just this project because we also have some larger scale kind of leasehold improvement, capital improvement projects that go on in our -- through our maintenance CapEx. But you're looking in the sort of $20 million to $25 million range. You'll see about $30 million in our construction in progress, but that's not all Sudbury.

[Operator Instructions] The next question comes from Giuliano Thornhill with National Bank.

I'm just wondering on the volume and kind of the strong volume, like the risk there. Would you say the reduction in ALC volumes or funding or like possibly labor, like out of the three, like which do you think is the biggest risk to a sequential step down whenever that does happen?

Well, it could really come from one of two things. It could come from the benefit of additional services tailing off in terms of not seeing as much reduction in demand for service in the hospital sector. So I think that one is important, like just what -- how much benefit are we getting from the additional home care expenditures. And the other is going to be a fiscal consideration. This has been growing quite a bit faster than government expected. They are seeing the benefit because this is the lowest cost way of managing the aging demographic. But nonetheless, it is still accelerating costs and governments have fiscal challenges.

So I think it will be one of those two things that will moderate the growth pace at this point. I think governments are very encouraged by what they're seeing, and that's why they keep putting one investment on top of another. You saw $1.1 billion in the fall economic statement in Ontario. You saw another $1.1 billion in the spring budget. So they're seeing the benefit and so making further investment. So I think it's just a question of at what point does the benefit that they're seeing in the hospitals and kind of the policy agenda intersect to slow things down again. So it's very tough to tell what's going to drive that.

The reduction in ALC patients in Ontario was absolutely unprecedented over the last year. I've never seen that before. It took the ALC numbers down to levels that haven't been seen since long before the pandemic. So I think this is a very large-scale social experiment to see how far we can improve things. It is nice that all the poll results show that people vastly prefer to get care in their own homes than to go into institutions of any sort. So we are aligned with both the kind of fiscal imperatives, but also the preferences of the voting public. So I think both of those things are reasons for optimism.

And then just on that, do you have any visibility into like the number of ALC patients? Or could you give us like a sense of what that year-over-year reduction has been? Is that still that 17% that you mentioned last quarter?

I think it was 14%. That's the last number that I've heard from government sources.

Okay. And then I'm just wondering kind of what does this -- the strain on the hospitals -- capacity constraints, like how does that translate to policy risk for your LTC side? Do you think you're going to see more solid support for the operational aspect of the business because it is part of the system going forward?

Yes. Well, we have seen that. I mean the degree to which the government has elevated staffing levels since the pandemic has been remarkable and has been the case across multiple provinces. So 20% to 30% increase in staffing overall for the long-term care sector. Recently, the Alberta government, Premier in Alberta announced a 15,000-bed 10-year agenda for that province. So we're seeing capital expenditures for long-term care spinning up in Alberta. So I think the government is very clear-minded that long-term care is far less expensive than acute care beds and that home care is far less expensive than long-term care. So I expect the investments to continue.

I mean that's why we ended on in our investment -- investor deck this quarter with the demographic chart. I mean that doubling and then tripling of the demographic that we care for is something that the health care system has to grapple with. And so the only way they can do that is to keep up with the curve and keep expanding the capacity in this sector. Otherwise, we know what happens. The acute care hospital system just gets completely blocked by people who should be better cared for elsewhere.

And just with the kind of state of all of that, what you just stated, I'm just wondering, does that really eliminate any obsolescence risk of your Class C portfolio just because I know some of them are a little more rurally located, in smaller markets and maybe smaller buildings. I'm just wondering if like the issues in the hospitals really remove that overhanging risk that could be there.

Sorry, you were saying obsolescence risk. Do you mean that they won't be redeveloped?

Yes.

Yes. No -- first of all, I think that the C-beds have to be maintained somehow until they're replaced. The thought that we could have them removed from the system, I just don't think there's a great risk of that. What I would say is that if any particular operator fails to redevelop their own C-beds that the government will seek another operator to step in and replace them that way. So it's not necessarily obsolescence. It would be that some other operator would win new licenses to replace those C-beds.

I don't think that's a risk for Extendicare. In fact, I think that there's a potential opportunity for greenfield sites for us where other operators have failed to step up. But at the moment, our 17 project pipeline is all replacements for our own homes with significant additions of beds to each of those projects to expand capacity.

This concludes the question-and-answer session. I would like to turn the conference back over to Jillian Fountain for any closing remarks. Please go ahead.

Thank you, operator. That concludes our call for today. This presentation is available on our website, along with a link to a replay of the call. Thank you all for joining us, and please don't hesitate to reach out if you have any questions. Goodbye.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Good morning, everyone, and welcome to the 2026 Annual Meeting of Shareholders of Extendicare.

Before we begin, we acknowledge the land we are meeting on, is the traditional territory of many nations, including the Mississaugas of the Credit, the Anishnabeg, the Chippewa, the Haudenosaunee and the Wendat peoples and is now home of many diverse First Nations Inuit, and Métis peoples. We also acknowledge that Toronto is covered by Treaty 13 with the Mississaugas of the Credit.

Thank you. So I'm Alan Torrie. I'm your Chairman, and joining me today at the podium are Michael Guerriere, President and Chief Executive Officer; David Bacon, your Executive Vice President and Chief Financial Officer; and John Toffoletto, Senior Vice President, Chief Legal Officer and our Corporate Secretary.

Also joining me today in the room are current fellow directors, Norma Beauchamp, Sandra Hanington, Heather-Anne Irwin, Donna Kingelin, Samir Manji as well as Josh Blair, who is standing for election as a new director. Board member, Brent Houlden, could not be here in-person but is following these proceedings via our live webcast and fellow Director, Donald Clow, sends his regrets. Leslee Thompson, who is also standing for election as a new director, also sends her regrets as she could not be here today.

So with that, we're about to commence the formal business portion of this meeting. But before doing so, I'd like to remind you that our remarks today, including answers to your questions, may contain forward-looking information. By its nature, this information contains forecasts, assumptions and expectations about future outcomes, which are subject to the risks and uncertainties discussed more fully in our public disclosure filings.

So I'll now call the meeting to order. I will act as Chair of today's meeting, and I will ask that John Toffoletto act as Secretary to the meeting.

For the purposes of today's meeting, I appoint Computershare Trust Company to act as scrutineer through their representatives, Josette Koffyberg and Heather [indiscernible].

We are constituted this morning as the Annual Meeting of the Shareholders of Extendicare Inc. Under the articles of the company, the common shares have attached to them a single vote per share. In order to facilitate proceedings of today's meeting, I will present and move the proposals related to the items of business identified in the notice of the meeting. This is in no way intended to influence or discourage any comments or questions from the floor. On the contrary, should any shareholder or duly appointed proxy holder wish to speak on any matter, please do so.

In that regard, I would ask the shareholders or proxy holders to identify themselves by stating their name prior to speaking. So if you have a question that relates to a specific motion, please ask it at the time that the matter of business is before this meeting. Any questions that are not in respect to a particular motion should be asked during the general question-and-answer session following the formal business of the meeting.

So now we can proceed with the formal business of the meeting. The Secretary has provided me with a declaration affirming that the notice of the meeting was properly given to all shareholders entitled to receive notice and was accompanied by the management information circular and form of proxy or voting instruction form. Accordingly, with the consent of the meeting, the reading of the notice of this meeting will be dispensed with.

The preliminary scrutineers' report on common share representation at today's meeting has been received, and it shows that there are more than 25% of all outstanding voting shares present, and therefore, a quorum is present. A final report will be prepared following the meeting. I therefore declare the meeting regularly called and properly constituted for the transaction of business. I direct the Secretary to attach the declaration of mailing and the scrutineer's final report to the minutes of the meeting.

We will now proceed with the first item of business, which is the presentation of the consolidated financial statements of Extendicare for the year ended December 31, 2025, and the report of the auditors thereon. A copy of the 2025 annual report containing the financial statements and auditor's report was mailed to each shareholder that requested a copy. The report is also filed on SEDAR and posted on our website.

Apart from presenting the financial statements, no further action is required to be taken by the shareholders on these financial matters. David, though, will be pleased to deal with any questions you may have at this time concerning financial statements. If any shareholder or proxy holder has a question, will they please rise and use one of the microphones provided. And before you begin, please indicate whether you are a shareholder or a proxy holder and state your name.

I'll pause for a moment to see if there are any questions from the floor.

There are no questions from the floor. I'll carry on.

I'm going to now proceed with the next item of business, which is the appointment of Extendicare's auditors. As indicated in the management information circular, KPMG LLP are the present auditors of the company and the Board on the advice of the Audit Committee recommends their reappointment.

Therefore, I move that KPMG LLP be appointed as auditors for Extendicare as such remuneration as shall be fixed by the Board until the next annual meeting of the company. As a proxy holder, I'm advised that sufficient votes in favor of this motion were cast prior to the meeting.

We will now proceed to vote by a show of hands. All those in favor, please raise your hands.

Any withheld from voting?

None. So I declare the motion carried. Thank you very much.

I'm going to now proceed with the next item of business, which is the election of directors for the ensuing year.

So before listing the nominees for election, I would like to take a moment to acknowledge that in addition to me, Donna Kingelin is not standing for reelection at this meeting. Donna has been a valued member of our Board for over 10 years and during which time she chaired the HR Committee and more recently, the Quality and Risk Committee, helping to build pivotal capabilities that are core to Extendicare's health service mandate. On behalf of the management team and the Board of Directors, we are deeply grateful for Donna's meaningful contributions and dedicated service to Extendicare.

I would also like to acknowledge and welcome 2 nominees who are standing for election to the Board for the first time, Josh Blair and Leslee Thompson. Josh is Co-Founder and CEO of Impro.AI with a background in Engineering and Human Resources and Telecommunications, quite an unusual combination, Josh.

Leslee Thompson is a Corporate Director and health care expert, who most recently served as President and CEO of Health Standards Organization and Accreditation Canada.

Each of them brings valuable experience and perspectives, and we are pleased to have them standing for election today.

The Board has fixed the number of directors to be elected today at 9. The management information circular sets out the list of nominees for election as directors who are as follows: Norma Beauchamp, Josh Blair, Donald Clow, Michael Guerriere, Sandra Hanington, Brent Houlden, Heather-Anne Irwin, Samir Manji and Leslee Thompson.

There have been no further nominations received in advance of this meeting in accordance with Extendicare's advanced notice bylaw, I declare the nominations closed. So I move now that each of the individuals so nominated be elected as directors of Extendicare to hold office until the next annual meeting of the company or until respective successors are elected or appointed.

The vote for this item of business will be conducted by ballot. The scrutineers have distributed ballots to shareholders and proxy holders as they entered the meeting. The ballots for this item of business are blue. If you have already voted by proxy and did not revoke your proxy prior to the commencement of this meeting, you should not cast a ballot. But if you have not received a ballot and require one, please raise your hand now.

I will now instruct you on the completion of the ballot. In the space provided on the ballot, please inscribe an X to indicate whether you are voting for or against as the case may be. Please sign and print your name at the bottom of the ballot. And when you have finished, please hold up the completed ballot for collection by the scrutineers. I'm going to pause while any ballots are completed for collection.

I think there's one being collected at the moment.

So I believe all ballots are now collected. As there are no more ballots to cast, I declare this poll closed.

The last scheduled item of business is an advisory resolution on the Board of Directors' approach to executive compensation commonly called say-on-pay. This is an advisory vote, the results of which are nonbinding. However, it gives shareholders an opportunity to provide important input on the company's executive compensation practices. The Board and in particular, the Human Resources Governance and Sustainability Committee will consider the outcome of the advisory vote as part of its ongoing review of executive compensation and when considering future compensation policies, procedures and decisions.

At this time, I would invite you to ask questions with respect to the company's approach to executive compensation. And if you have a question, please raise and use one of the microphones provided. Before you begin, please indicate whether you are a shareholder or a proxy holder and please state your name. Pause to see if there are -- Yes, we have a question. Please stand -- address the mic and state your name and if you're a shareholder or proxy holder.

Thank you very much, Mr. Torrie. I'm a proxy shareholder. My name is [ Karen McKay Eden ].

I'm concerned about what this massive increase in profits means for resident care in Extendicare homes. This past year, your profits increased over 28% and your CEO, Michael Guerriere, received over $2.6 million in total compensation. That money could instead be used to benefit residents, but you choose to divert it through short-term gains and corporate salaries.

Meanwhile, nurses in long-term care make about 10.8% less than hospital nurses despite providing similar levels of care. Disrespect and poor working conditions are pushing nurses and health care professionals out of long-term care, which impacts the quality of care that our residents receive.

Aren't you concerned that as money goes to profit, residents are left with less? Without fair wages, benefits and safe working conditions, nursing homes can't retain enough staff to provide timely, high-quality resident care. Isn't it bad for Extendicare to have staff leaving and residents not getting the care they deserve? By prioritizing short-term profits, are you not creating conditions of care that are unsustainable and will lead to long-term problems?

Thank you for your question. Let me start off by first indicating that we have the highest respect and highest regard for all our employees, especially our frontline employees, the PSWs and the nursing staff that are face-to-face with our patients and our residents every day. We have continuously made great efforts along with their assistance to provide development and education and also safe and productive working environment so that they could carry out those situations.

We are also a company that prides itself in its overall quality. There have been a number of awards that over the past year that the company has been noted for, particularly as it relates to our patient care. I cite just one of them, which others could speak to in more detail, but that was when psychotropic drug use and the program that we put in place with the help of all the staff in Extendicare was noted on a North American basis as the benchmark for all people and long-term care to proceed with.

So what I'm trying to say is that we -- it is not lost in us our responsibility for the quality of care that we give our patient. It's not lost in us the importance of those on the front line, particularly our nurses. It's also not lost on us that part of the ability to do that is to be able to continue to have a business model that produces the results that allows us to do that and even more in the future, and that's our intent.

Michael, do you have some comments you'd like to add to that?

Yes. A couple of things, Alan, that I think the shareholders and owners of the organization should understand. First of all, the whole concept that you can increase profit by reducing the amount of care we provide in our long-term care homes is actually impossible to do. Funding for long-term care is structured in a way that is dedicated for patient care. And if we don't spend that money on patient care, we have to return it to the government.

So there is no possible way to skimp on care and then increase profit or sort of take money away from the bedside. This is a very important structural element of the entire long-term care sector in Canada.

The second point that I want to emphasize is what Alan has talked about. We measure our quality. We report our quality to the Canadian Institute for Health Information as all players do in the sector, and that information is available to the public. Our results are better than the Canadian average by a significant margin. So we are very accountable for the quality that we provide.

And the third thing that I'll add is that this idea that somehow we're reducing the amount of care that's happening in homes is a complete misconception. Across the country in the aftermath of the pandemic, there has been a significant increase in the hours of care that are being provided in long-term care.

In Ontario, it's gone from about 2.8 hours per resident day of direct care to 4 hours. So a more than 30% increase in the number of care hours that are being received today compared to what it was 5 years ago. So there's no reduction in quality. There's no opportunity even if we wanted to take away from bedside care in order to increase profit, we wouldn't be able to do that. So this is a misconception.

And then I'll just leave you with one last point because I get asked a lot about shareholders and their participation in Canadian health care. We are a publicly funded organization. Virtually all of our revenue comes from government. Our shareholders and also the banking industry in Canada that supports us have helped us to put over $1 billion into building new beds and new capacity across Canada. And as you'll hear in a few minutes, I'll talk about the projects that we still have in the planning phases that will involve another investment of $1 billion or $1.5 billion in building more capacity that's desperately needed across the country.

And for that, we pay a very reasonable return in the form of dividends and in the form of interest payments to bondholders and mortgage holders. And that enables us to provide the care that we're providing to more and more Canadians. So all in all, I'm very, very proud of the quality that we provide, very confident that we are increasing the quality of care and the hours of care that we're providing to our residents.

Thanks, Michael, and thank you for the question.

Are there any other questions from the floor? Not seeing any. If there are no further questions, I move on an advisory basis and not to diminish the role and responsibility of the Board of Directors that the shareholders accept the approach to executive compensation disclosed in the company's management information circular delivered in advance of this meeting of the shareholders. As proxy holder, I am advised that sufficient votes in favor of the motion were cast prior to the meeting, and we'll now proceed to vote on a show of hands. All those in favor, please raise your hands.

And any withheld? Opposed?

I declare the motion carried. Okay. In respect to the election of directors, I've been advised by the scrutineer that based on the ballots and proxies deposited for this item of business, each of the 9 nominees have received an affirmative vote of a majority of the votes cast.

As such, I declare that the proposed director nominees have all been duly elected to hold office until the next Annual Meeting of Shareholders or until they resign or their successors are duly elected or appointed.

This concludes the proposals to be voted on at today's meeting. The exact number of votes cast in respect of all matters will be announced by way of a press release and filed on SEDAR as well as available on our website.

So having completed all of the business for which this Annual Meeting of Shareholders is called, I move and declare the meeting to be terminated.

On behalf of the management and the Board, thank you all for your strong show of support, your interest and your continued loyalty to attending today's meeting. And with the formal portion of the meeting now concluded, I'd like to take a moment to reflect on the past year and the progress Extendicare has made over the past decade.

2025 was an important year for Extendicare and in many ways, a year that revealed the full potential of the transformation that the company has undertaken over the past several years. Extendicare has continued to advance a strategy focused on health services and improving access to care. The organization strengthened its platform, expanded its reach and reinforced a business model designed to be more resilient, more scalable and aligned with long-term demographic trends.

We have positioned Extendicare to play a meaningful role in addressing seniors care across the continuum from long-term care to care in the community and at-home. As the company enters 2026, we do so with considerable momentum. The multiyear shift towards a service-focused capital-efficient model has taken hold, enabling growth and value creation. Extendicare's foundation is strong, strong strategically, financially and operationally. And that strength provides the shareholders with confidence in the company's ability to navigate the uncertainty that characterizes the current global environment while continuing to deliver the highest quality of care to Canadians.

We take our responsibility seriously. Our responsibility to Canadians and all stakeholders alike, not only in how services are delivered, but also in how the organization governs itself, supports its workforce and engages with communities where it operates. Extendicare continues to place a strong emphasis on quality, safety and continuous improvement guided by evidence-based practices and accountability at every level of the organization.

My tenure comes to an end, and I want to express my gratitude for the opportunity to have been of service on Extendicare's Board, including my 9 years as Chair. It has been a privilege to serve during a period of meaningful change for the organization and to support the transition to a strategy that positions Extendicare as a leading health services company in Canada.

As I mentioned earlier, I would like to also recognize and thank my fellow Director, Donna Kingelin, for more than 10 years of distinguished service on this Board. Donna's leadership and contributions, particularly in strengthening the organization's people, quality and risk frameworks will have a lasting impact on Extendicare and those that we serve.

The Board is entering its next chapter with both succession and continuity. Extendicare will benefit from the expertise and experience of our 2 new directors Leslee Thompson, a health care expert, most recently served as President and CEO of Health Standards Organization and Accreditation Canada. She started her career as an ICU nurse before leading multiple organizations across the public and private sectors, including the CEO of the Kingston General Hospital.

Josh Blair is Co-Founder and Chief Executive Officer of Impro.AI, a high-tech company that enables corporations and their employees to accelerate their growth through AI-powered workforce insights and performance mentoring. Josh is an engineer who worked for many years at TELUS in executive leadership positions, including many years as it's Chief Human Resource Officer and executive lead for TELUS International and TELUS Health.

Leslee and Josh will bring new perspectives as they take Extendicare's health services focused business model to the next level.

As previously announced, Samir Manji will assume the role of Chair following today's meeting. With Samir's 7-year tenure on the Board and his deep experience in seniors care, I am confident that he will provide strong continuity as Chair. Together with the other members of the Board, Samir will continue to uphold the strong governance practices and methodological strategy execution that Extendicare has become known for.

So looking ahead, I have great confidence in Extendicare's future. The market the company exists to serve is clear, enduring and growing. Extendicare has the scale, the capabilities and the leadership to continue expanding access to care, supporting Canada's evolving health care system and delivering long-term value for shareholders.

So in closing, I thank our shareholders for your ongoing confidence and support. I thank my fellow directors, the leadership team and the thousands of dedicated team members across Canada whose work underpins everything Extendicare has achieved. And I thank our partners, our advisers and collaborators across the health care system who have enabled our success. As I complete my tenure on the Board, I am confident that the foundation is strong. The purpose is clear and the future is full of opportunity.

So with that, I'd like to welcome our CEO, Michael Guerriere, to the podium to make his remarks. Michael?

Thanks, Alan, and good morning, everyone. And I really want to thank everybody for taking time to join us today. Without a doubt, this past year has been one of the most transformative years in Extendicare's history. We've achieved a number of firsts that break through barriers and bring new tools to bear in our continuing effort to meet the growing demand for seniors care services.

The demographics that underpin demand for care in Canada are relentless, necessitating continued focus on expansion to meet that growing need.

Our vision that everyone in Canada have access to the care and support they need to live their best lives is not an abstract ambition. It's a practical and urgent need that is vested in Canadian values. It's the core of our strategy and guides our investments and our attention. Every day, our network of long-term care homes and home health care teams across the country help people to live better, providing the care they need wherever they call home.

Canada's population of seniors is growing at an unprecedented pace. The number of people aged 85 and over is increasing by about 4% each year. And the first baby boomers are just reaching age 80 now, which means the fastest growth in the seniors population is still ahead of us.

The resulting capacity gap is real. The Conference Board of Canada estimates the country will require more than 200,000 new long-term care beds by 2035. Despite ambitious construction targets, we are not building beds fast enough to meet that need. The waitlist in Ontario alone has reached 50,000 people. And to fill the gap, provincial governments across the country are investing in home-based care to relieve pressure on overburdened hospitals.

Extendicare is at the center of these efforts. Our home health care operations delivered a record 13 million hours of care in 2025. That represents an increase of more than 18% compared to the prior year. Organic growth generated a 12% increase, reflecting our investments in recruitment, retention, training and technology. And enhanced scheduling algorithms improved our service reliability across urban, rural and northern communities. The other 6% of that growth came from 2 quarters of volume from the acquisition of Closing the Gap, which closed on July 1. That added approximately 1,200 caregivers, expanding ParaMed's capabilities in Allied Health services, including physiotherapy, occupational therapy and speech language services.

And then earlier this month, we closed our acquisition of CBI Home Health. CBI's dedicated team of 8,500 members delivered more than 10 million hours of publicly funded home health care in 2025 in 7 provinces. With this acquisition, our annualized capacity reaches approximately 24 million hours of service. We now serve more communities in more provinces than ever before.

CBI also adds specialized community services to our offerings. This is a model of care that provides support in residential settings with around-the-clock care for individuals with complex needs. These services are individually tailored and delivered in homes for 3 to 5 individuals. This expands our ability to provide care to people who need 7x24 support, but who are not ideally suited to long-term care. We look forward to working with the outstanding team at CBI. I'm confident that by combining our platforms and our expertise, we will establish a new standard of care grounded in the dedication and professionalism our teams bring to work every day.

Meanwhile, we continue to advance our long-term care redevelopment program. In 2025, we opened Extendicare Crossing Bridge in Stittsville, bringing 256 new and upgraded beds into operation. This spring, we will open Extendicare Beauclaire in Ottawa and later in the year, Extendicare Forest Trail in Peterborough.

Together, these modernized homes will bring 576 new and upgraded beds to the system. And then we also have 5 other homes comprising 1,152 beds under construction and a further 17 projects that we are advancing through our development pipeline.

With our joint venture partner, Axium Infrastructure, we continue to leverage our off-balance sheet model to build new homes, generating development and management fees while recycling capital into new projects. And of course, we deeply appreciate the support we received from the government of Ontario as we work to create more long-term care capacity across the province.

Now technology remains a strategic priority at Extendicare. And in 2025, we appointed Lee Geyer as our first Chief Data, Analytics and Knowledge Officer. Lee is responsible for unlocking the value in our data, turning it into actionable insights and deploying artificial intelligence to enhance execution.

We use AI to analyze thousands of resident and family surveys, helping us to identify patterns and respond more quickly and more effectively to feedback. We use it to understand team member engagement data so we can better support the people who deliver care every day. And we've launched an AI chatbot that gives frontline staff real-time answers to policy questions, reducing the time it takes to find the information that they need. These tools help care professionals make more informed decisions and to deliver higher quality, more coordinated care. Now technology won't replace the compassion and the skill of our team members, but it will give them the tools they need to devote more time to care quality and customer service.

Through our SGP Purchasing Network, we leverage our scale and purchasing power to provide the senior care sector with access to lower cost, higher-value inputs. SGP now serves over 154,000 beds across Canada, an increase of 5% from the prior year. By making care delivery more affordable for the entire sector, SGP supports senior living operators right across the country.

Now we continue to be disciplined in our allocation of capital to drive shareholder value. We've built a strong balance sheet by retiring and refinancing debt, recycling capital from the sale of older properties and generating stronger cash flows from operations. In December, we completed a $200 million equity private placement in support of the CBI acquisition, adding a number of new institutional shareholders.

And earlier this month, we completed a $450 million inaugural unsecured note offering, supported by a BBB rating from DBRS, further strengthening our financial position. And in March, we increased our monthly dividend by 5% for the second consecutive year. These increases reflect our confidence in our financial health and prospects for growth. It is gratifying that our mission and track record of execution have given the equity and debt capital markets the conviction to provide us with the financial backing we need to expand and thrive.

Now while progress and performance are important, Extendicare is, first and foremost, a people-focused organization. Each day, the company touches the lives of tens of thousands of people, the seniors and patients who depend on us for care, the families who place their trust in us and the team members who deliver compassionate, high-quality services in communities across Canada, including small, remote and difficult-to-serve areas. More than 36,000 people come to work every day to deliver care with compassion and professionalism, and they are the heart of this organization. We continue to invest in them through skilled labs and professional development programs. Our commitment to strengthening teams and improving service excellence is fundamental to our values.

And I invite you to take a moment to watch a brief video that captures how our work is expanding access to care and making a difference in the lives of the people we serve.

[Presentation]

Every year, I say to myself, we're not doing a video again because I have so much trouble talking again after the video is over. But that video captures the heartfelt appreciation that we hear from our residents and patients and their families. And I'm grateful to each and every team member across the country who show up with commitment and purpose every day. They make Extendicare what it is. And every step we take, expanding our services, investing in technology and innovation, building new capacity, welcoming new partners and team members is really driven by our purpose to help people live better. And it's really our privilege to serve Canadians, and it's a responsibility that we take very seriously.

Now before concluding today, I will take a moment to pay tribute to Alan Torrie despite the fact that he hates it when I do this. As mentioned earlier, Alan is departing Extendicare after 10 outstanding years as a member of the Board. And Alan's experience and inclusive approach to governance really enabled the transformation of Extendicare from a real estate-focused organization to the health services organization we are today. And that transformation created significant value for shareholders, but more importantly, it expanded access to quality care for tens of thousands of Canadians. Alan's careful stewardship and focus on succession and continuity have set us on a path to continued success that will endure long past his tenure on the Board.

On behalf of the management team, I thank Alan for his enlightened leadership and steady hand through some of the most challenging years the senior sector has ever faced. Thank you.

Now we're very fortunate to have a Board that brings diverse expertise and a deep commitment to our stakeholders and the communities we serve. And I certainly thank them for continuing to steward our mission and strategy so capably as we embark on the next chapter of our growth.

And finally, I extend my thanks to our shareholders for your continued confidence and support and to the more than 36,000 Extendicare team members whose commitment to providing exceptional care is the foundation of everything we do. And together, we will not rest until our vision is realized, that everyone in Canada has access to the care they need to live their best lives.

Now that concludes my remarks, and we'd now be pleased to respond to any questions from shareholders or duly appointed proxy holders. If you have a question, please rise and use one of the microphones provided.

Good morning. My name is Monica. I'm proxy. I wanted to talk about the nurses and health care professionals at Extendicare across your 57 homes in Ontario that are bargaining with you right now for their next contract.

So we heard while nursing home CEOs are making record profits, nurses and health care professionals are trying to provide high-quality resident care with less staff, fewer resources and residents that have more complex care needs, as you mentioned in your presentation. So this is putting residents and workers at risk. Workers are organizing and taking action for their bargaining demands. And they want to know this round of bargaining, will you put care over profit? Will you negotiate a new collective agreement with fair wages and safer working conditions?

So thanks for the question. I do want to go back to my earlier remarks that we are dealing with a situation that has dramatically more staff and more resources than were there 3, 4 years ago. So I just want to correct that misconception that somehow there's less staff.

Our management team knows that when it comes to bargaining in long-term care, we bargain collectively with all of the operators in Ontario. So we do this as a group in order to manage the entire sector in an organized way. And we will do what we always do. We will bargain with all of the unions that we work with. And I do want to thank the unions because I've found over the years, that these bargaining sessions often yield significant improvements in the way we organize ourselves and the way that we take care of people, the way we schedule our staff because often we do things that are suboptimal, and we can learn from our staff in terms of how we can make improvements.

And certainly, we are very active as advocates with the Ontario Long Term Care Association for increased funding. I think that's why we've seen a significant increase in the number of hours per resident day in recent years. But as I said earlier in my remarks, those people are -- that provide the care day in and day out on a 7x24 basis at the heart of the organization. And so it's always our agenda to find collaborative ways to work more effectively together, and I can guarantee we'll continue to do that.

Good morning. My name is Obi. I'm a proxy holder. I have a few questions for you. Two on strategy, one on the funding model and one on more technical question. So the first one is essentially capital out there right now is relatively plentiful. So debt and equity markets are both relatively cheap. So then why are there not enough beds being built for long-term care facilities in general? That's my first question.

And in terms of strategy, I know that you split about 50% between long-term care and home health services and about under 5% managed care. I'm wondering if that is the your target for now? Or is that the long-term target? Are you trying to have a different mix in the future? And generally, where you're going in that sense?

And then you talked -- you discussed the funding model for long-term care. I was wondering what is the funding model on the home health services area? Is it driven by hours? Is it driven by mandates? Is it driven by the number of -- I won't say patients, but the number of clients?

And then finally, I noticed that most of the joint ventures have about a 15% equity holding by Extendicare. I was wondering what the logic was behind that, if it's an accounting issue, a technical issue, a tax issue or whatnot.

And yes, I also had a question about the operations in the London branch, but I think I could just try and catch one of you and ask that offline.

Okay. Thank you. I think I've got them all written down. So the barrier to building capacity, so I'll just deal with them in order that you asked. That is a great question, and it's often the case is a multifactorial answer. There were long periods of time, if you look back over the last 20 years when no capacity was built in the province of Ontario and in fact, most other provinces. Those were policy decisions that were made at the time. And we've been talking about the aging demographic for so long that I think people have become inured to the -- saying they don't hear anything anymore. Like you just -- it's -- it just kind of gradually sneaks up on you. And so there's -- it takes a crisis to galvanize action, right?

And certainly, the pandemic was a huge crisis that made everybody understand in more real terms, not only the vulnerability of the long-term care sector, which had very aging facilities. I mean that was a key vulnerability, but also the vulnerability of the acute care system when you don't have capacity in the community to care for people, everything backs up into the hospitals. And we saw those really agonizing periods when the hospitals were seriously overcapacity. So nothing like a crisis to galvanize people's attention.

And since then, we've seen huge funding in adding staff, as I mentioned earlier, about a 30% increase in staffing per bed but also a big injection of capital. But of course, when you're thinking about building something, when you're at a standing start, I mean, the entire province of Ontario built about 600 beds in 15 years, okay, before the pandemic.

So when you're starting from that position and then you want to start all of a sudden building what the province of Ontario has targeted 58,000 beds from a standing start, it's difficult. And it just takes time to create the capacity and bring together the architects and the construction companies. And then, of course, there was a period there where we were competing with a huge condo building boom where it was very difficult to even get construction companies to bid on our projects.

All of those kind of bottlenecks are now in the past, and we now have a significant construction agenda going forward. So I'm confident that we're going to make significant progress now in the future. But if you want the best report that kind of gives you some of this detail kind of historically, the Financial Accountability Office of the Government of Ontario publishes a chart that outlines the number of beds per 1,000 people over the age of 75. You can actually find it in my remarks from last year's AGM. There's a version of that chart in the deck. So you can find it on our website as well. But that gives you kind of the picture of what the net effect of all those factors was.

In terms of the kind of ideal balance between the various lines of business for Extendicare, I think given the -- just some of the challenges of building capacity in long-term care and the pace with which we can build new buildings, I think that home care is going to grow faster than long-term care for the foreseeable future. And it is where most people want to be. People don't want to be in long-term care unless they absolutely have no other option. So we're trying to build out care options that are more supportive of people in their homes so that they can stay independent for as long as possible. So I expect that you'll see faster growth in the home care side of things than in long-term care for the foreseeable future.

And then on home care, all of the services that we provide are government funded. And the way that works is that hospitals and doctors' offices make referrals to government agency in each of the provinces where we provide service. And the government then decides which operators will actually provide that service. So the referral gets passed on to us, and we're paid in different ways depending on the program. So sometimes it's a pay per visit, sometimes it's a pay over time for taking care of a person holistically and meeting all their needs over a longer period of time.

And then finally, there was a question about the joint venture and why a 15% equity holding. I mean, one of the key things that we wanted to do with our joint venture partners was to make sure there was a strong alignment of interests. And so by Extendicare having a minority interest in the joint venture, we're very aligned in terms of how we want to manage those assets for the 30-year life of the licenses. Whether it needed to be 15% or 10% or 20% I mean, 15% just seemed like a reasonable number, there was nothing particularly magical. But it was more of the fact that we have a managed interest in the joint venture that was key.

But it's important to understand that we run the homes in the joint venture in exactly the same way as the homes that we wholly own, so that -- even in our management structure, they're indistinguishable in terms of how we operate.

All very good questions. Any others? Okay. So with that, thanks for attending, and we will share some refreshments. So I invite you to stay and any other questions you might have offline, very happy to entertain them. Thanks very much.

Thank you for standing by. This is the conference operator. Welcome to Extendicare Inc. Fourth Quarter 2025 Analyst Conference Call.

[Operator Instructions]

The conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Jillian Fountain, Vice President, Investor Relations. Please go ahead, ma'am.

Thank you, operator, and good morning, everyone. Welcome to Extendicare's 2025 Fourth Quarter and Full Year Results Conference Call. Joining me today are Extendicare's President and CEO, Michael Guerriere; and Executive Vice President and Chief Financial Officer, David Bacon. Our Q4 results were released yesterday and are available on our website as is a live audio webcast of today's call, along with an accompanying slide presentation.

An archived recording will also be available on our website following the call today. As well, replay numbers and pass-codes have been provided in our press release to access an archived recording by phone until midnight of March 13. Before we get started, please be reminded that today's call may include forward-looking statements and non-GAAP and other financial measures.

Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. We have identified such factors as well as details of non-GAAP and other financial measures in our public filings with the securities regulators and suggest that you refer to those filings. With that, I'll turn the call over to Michael.

Thank you, Jillian, and good morning. 2025 was a very successful year for Extendicare, marked by strong organic growth in ParaMed and SGP, higher margins in all 3 operating segments and 2 acquisitions that we closed midyear that augmented our long-term care and home health platforms. Taken together, these developments resulted in overall adjusted EBITDA for the quarter of $45.6 million. This is an increase of 36.4% from the prior year after adjusting for out-of-period items. The integration of the long-term care homes acquired from Revera is now complete and the Closing the Gap integration is well underway and expected to finish in Q3. Both acquisitions are performing ahead of the pro forma financial information shared at the time the acquisitions were announced. AFFO per share is up 6% over the prior year quarter, with the earnings improvement moderated by a catch-up in maintenance CapEx in the last quarter of the year.

Our payout ratio for the quarter was 42% and 46% for the full year, both numbers adjusted for out-of-period items, providing us with considerable flexibility in our capital allocation options. ParaMed delivered 15.3% organic volume growth over the prior year quarter. The continued strength of demand for our home health services is supported by strong demographic trends and ongoing long-term care capacity constraints.

This strong organic growth combined with the contribution from Closing the Gap and the scalability of our technology-enabled back office drove an NOI margin of 13.2% after adjusting for out-of-period items. This represents a 280 basis point improvement over the prior year quarter. Our long-term care NOI margins in the quarter improved by 90 basis points to 10.9% over the prior year after adjusting for out-of-period items, and our occupancy remained consistent at 98%.

Managed service revenues declined in the second half as Revera sold the remainder of its C bed portfolio, some to Extendicare and others to a large operator that took operations in-house. Nonetheless, third party and joint venture beds served by SGP grew to over 153,500, up 5% from the prior year quarter.

Managed services NOI margins were 55.5% this quarter and remain in line with our long-term expectations of 50% to 55% for this segment. Finally, we announced a 5% increase to our monthly dividend to $0.0441 effective with the dividend to be declared in March. This is the second year that we have increased the dividend reflecting our sustained financial and operating performance, sound capital structure and prospects for growth.

Operational momentum augmented by organic growth, acquisitions and prudent management of our balance sheet will enable us to consider further dividend increases as we make capital allocation decisions in future years.

Turning to Slide 4. As previously announced, in November 2025, we entered into an agreement to acquire the CBI Home Health business for $570 million. CBI Home Health is highly complementary to ParaMed as it gives us an expanded presence in Western Canada and new business models that offer new avenues for organic growth. The combination of the 2 companies provides an opportunity to achieve significant synergies as we scale up the volumes we drive through our technology platform. The added scale will also support the continued investment in technology, enabling us to provide reliable high-quality services more efficiently to the thousands of people that rely on us for care. The transaction is expected to add approximately 10 million hours and 8,500 team members to our home health segment, contributing an estimated $478 million in revenue and $61.9 million in pro forma adjusted EBITDA, the transaction is 9% accretive to earnings per share at the outset, growing to 15% when anticipated synergies of $7.4 million are realized.

The regulatory approval process is progressing well, and we hope to close the acquisition in early Q2. In December, we completed our $200 million bought deal private placement generating net proceeds of $191.5 million. Together with the $214.5 million committed expansion to our senior secured credit facilities and cash on hand, we are positioned to close the transaction, while preserving flexibility in our capital structure.

Turning to Slide 5. We continue to advance our Ontario redevelopment agenda in Q4 by commencing preliminary construction of a 320-bed home in Sudbury, which will replace a 278-bed Class C home we operate nearby. This brings to 7, the number of homes we have under construction for a total investment of $692.3 million. We continue to use our joint venture platform to fund our redevelopment projects to preserve our balance sheet while retaining a 15% managed interest.

We are awaiting final regulatory approval to sell the new Sudbury project into the joint venture and expect to close in the coming weeks. Recovering the capital we invested in the project to date and realizing a gain on the sale. We remain on track to open 2 new homes in 2026, Extendicare Beauclaire, a 320-bed home in Ottawa and Extendicare Forest Trail, a 256-bed home in Peterborough.

After year-end, we completed the sale of our vacated West End Villa C bed home in Ottawa for proceeds of $12.5 million, resulting in an after-tax gain of $10.1 million. This home was vacated earlier in 2025 following the opening of Extendicare Crossing Bridge, a joint venture home.

Consistent with recent projects, the proceeds from this sale will enable further investment to advance our redevelopment pipeline. We continue to progress on additional 17 projects which are at varying stages of planning and development under the Ontario government Long-Term Care Home Capital development policy. We also continue to advocate for additional funding and other considerations for certain projects, particularly in Northern Ontario that we need to execute on our full redevelopment agenda. I'll now turn the call over to our CFO, David Bacon, to discuss our financial results in more detail.

Thanks, Michael. I'll start with a brief overview of our consolidated results and then talk about our individual business segments and our liquidity. Our consolidated results for the quarter, Q4 NOI was impacted by approximately $3.9 million in net favorable out-of-period items related primarily to workers' compensation rebates received in LTC and home health, offset by retroactive wage adjustments in LTC. The impact of the out-of-period items is summarized in the appendix for the presentation.

Our consolidated Q4 revenue increased by 18% to $462 million driven by the full quarter contribution from the acquisitions of Closing the Gap and the 9 LTC homes acquired from Revera earlier in 2025, contributing $61.8 million in revenue. 15.3% organic growth in our home health care volumes, along with bill rate increases, long-term care funding increases partially offset by the closure of the Class C LTC homes that were vacated following the opening of the newly redeveloped long-term care homes in the Axium joint venture and lower management fees as a result of the sale by Revera of the LTC homes we previously managed.

Excluding out-of-period items, our Q4 NOI improved by $14.3 million or 30.2%, reflecting the revenue growth and a contribution of approximately $8.6 million to NOI from the 2 acquisitions, partially offset by higher operating costs. Excluding the impact of out-of-period items, our Q4 adjusted EBITDA increased by $12.2 million or 36.4% reflecting the improvement in our NOI, partially offset by higher administrative costs. Q4 AFFO per share is $0.337, down slightly from the prior year with the improved after-tax earnings this quarter, partially offset by higher maintenance CapEx compared to the same period last year due to the timing and size of maintenance projects in LTC in the quarter, and additional maintenance CapEx from the LTC homes we acquired earlier in the year.

When out-of-period items are excluded from both this year and last, our AFFO per basic share improved 6% to $0.301 per share. The equity issuance completed in December of 2025 had an approximately $0.01 per share impact on both our reported AFFO per share and our earnings per share in Q4.

Turning to our individual segments. Home health care continues to deliver exceptional performance. Q4 revenue increased by $49.7 million or 33.6% year-over-year driven by the $26.6 million contribution from Closing the Gap and 15.3% organic growth. Q4 NOI, excluding the net impact of the year-over-year change and out-of-period items, improved by $11.2 million or 75.3% driven by the organic volume growth and approximately $3.8 million in NOI from Closing the Gap. On the same basis, excluding the out-of-period items, NOI margins increased 280 basis points to 13.2% in the quarter.

Turning to our Long-Term Care segment. The Q4 results were impacted by out-of-period costs of $1.6 million this year compared to out-of-period funding of $1.9 million in the prior year period. Excluding out-of-period impacts, revenue increased by $26.3 million or 11.8%, driven by the full quarter contribution of $35.2 million from the 9 LTC homes acquired from Revera, the timing of envelope spending, partially offset by a loss of approximately $7.6 million in revenue from the closure of the 2 redeveloped Class C homes that were replaced by the new homes in the JV.

Excluding the net impact of the out-of-period items, NOI increased by $4.9 million or 22%, driven by the increases in revenue and approximately $4.8 million in NOI contribution from the 9 LTC homes acquired partially offset by higher operating costs and the loss of approximately $500,000 in NOI related to the closed Class C homes. Corresponding NOI margins increased 90 basis points over the prior year period to 10.9% in the quarter. And our full year NOI margins adjusted for out-of-period items is also 10.9%, up 50 basis points from the full year 2024.

Turning to our Managed Services segment. The decline in revenue and NOI this quarter reflect the termination of the management contracts resulting from the sale by Revera of the 30 LTC homes, 9 of which were sold to us in Q2 and are now in our LTC segment. Our managed service revenue decreased $3.6 million to $15.3 million and NOI declined $1.8 million to $8.5 million. Despite the reduction in the number of managed homes, earnings benefited from our 5% organic growth in our SGP clients and the increased management fees from the newly homed open -- homes in the JV.

Turning to the balance sheet. With our successful equity offering in December, we ended the year with $348 million in cash on hand and $154 million of available lines of credit and strong credit metrics. As Mike mentioned earlier, we have secured a committed $214.5 million upsizing of our senior secured credit facility to help fund the CBI acquisition. This consists of an incremental $154.5 million in delayed draw term loan and $60 million in our revolving credit facility. Furthermore, this upsized facility will have a new 3-year term extending the maturity to 2029.

We intend to fund the CBI acquisition by drawing the incremental $154.5 million delayed draw term loan and approximately $154 million drawn on the revolving credit facility with the balance coming from cash on hand. Based on this, our pro forma total debt to adjusted EBITDA will be approximately in the 2.7 to 2.9x range at closing based on the financing plan and the $228 million in estimated pro forma adjusted EBITDA previously disclosed in our CBI acquisition announcement, which is ahead of our estimated leverage at the time of announcement.

We're pleased with the strength of our capital structure and are well positioned to continue to pursue our growth agenda. We will remain disciplined in our approach to allocating capital, balancing our objectives to drive growth and create shareholder value. With that, I'll pass it back to Mike for his closing remarks.

Thank you, David. 2025 was a milestone year for Extendicare. The benefits of our compelling strategy are clearly evident in our results for the fourth quarter and the full year. The demographic realities of an aging population continue to drive demand for our services and the scale and efficiency of our operations position us well to answer the call. We are excited about the prospects that 2026 will bring, most notably the completion of the CBI Home Health acquisition. This transaction combined with our achievements of the last several years, position Extendicare to make a significant contribution to building capacity in the Canadian health care system.

Given the ongoing challenges faced by the health care sector, we are confident that our scale and mix of services will relieve pressure on hospitals by providing care in more appropriate and cost-effective settings. We will continue to build capacity to ensure that everyone in Canada receives the care they need to live their best lives. My sincere thanks to our growing team including the new team members, we will soon welcome from CBI for their commitment to advancing this important mission. And with that, we welcome any questions that you might have.

[Operator Instructions]

The first question will come from Kyle McPhee with ATB.

First one for me. Just on your home health care segment, the organic volume growth, the service hours provided up organically 15% in Q4. That figure just keeps climbing quarter-after-quarter. So great to see. But wondering do you have anything to call out as kind of a onetime tailwind? Or is this performance just reflective of demand tailwinds you're experiencing for home health care as a key supplier to the provinces?

Thanks, Kyle. The pace of growth continues to surprise us, frankly and certainly more than what we've been expecting. The demographic -- the underlying demographic growth in the populations we serve drives about a 4% growth pace and then we've been noting the fact that long-term care capacity is not growing in keeping with the demographics. And so governments are turning to home health care to fill in that gap, which is what we think is driving the outsized increases. It's interesting that in Ontario, we've seen statistics that the number of people inappropriately in acute care hospitals waiting to go home or waiting to go to long-term care has been declining for the first time in many years. It's dropped about 14% from the prior year. And so we think that the home care volumes are helping that kind of decompression of the hospital sector to happen.

So all that said, it's hard to know how long these really rapid growth rates will continue. We continue to believe that the growth rates will moderate back to a mid- to high single-digit kind of pace. But we really don't know when that's going to happen. So we take it quarter-by-quarter and make sure that our recruiting and training capabilities are calibrated to changes in demand in the marketplace. So I continue to think that this kind of pace cannot continue at this rate indefinitely.

Got it. Okay. That's very helpful color. I appreciate all that. Second one for me. Thanks for the messaging that the Sudbury redevelopment project will go into the JV in the coming weeks. Is it still the plan to do all future Class C redevelopments using the JV structure as you opt to save your capital for other sources of growth? Or will that playbook maybe evolve over time to include wholly owned redevelopment projects, notably giving you up so much capital access and free cash flow continuing to roll.

Yes. Kyle, I think it is our intent to continue with the strategy we have to date. So at the moment, we do view the Ontario redevelopment agenda as squarely being done in partnership with capital partners. And to date, it's been Axium. And so we don't see us changing that viewpoint at the moment. So I think you'd see us being consistent going forward.

Got it. Okay. And one last quick one. Just on the CBI acquisition closing, is there any risk to closing? Or is this just a basic delay as you go through the closing process. Maybe you can provide some color on the source of the delay versus the original timing expectation.

Well, look, the regulatory approval process is real. So we do need to get those approvals and work with our various government partners to make sure that we're aligned on the path forward. That said, the process is going very well. There's been no unexpected developments. So we have no reason to think that we won't be successful in getting to conclusion in Q2.

The next question will come from Tom Callaghan with BMO Capital Markets.

Maybe just building on some of those home health questions there. Appreciate the color. I guess, one of the things you mentioned was just making sure recruiting and training capabilities are appropriately calibrated. And I understand kind of the view that eventually this growth kind of starts to decelerate. But assuming we work through a good part of '26 of these elevated ADV growth levels. Like is there any constraint from a labor perspective? Or do you feel pretty good about where you sit today from that end?

Right now, I'd say we feel pretty good. We're not seeing any headwinds in the labor market that suggests that we would have challenges fulfilling most of our human resources needs. That said, we are in a world where labor markets are changing quite significantly as a result of changing immigration policies. So that is a file that we're watching carefully. We've seen no impact on our ability to deliver, our ability to recruit to date as a result of that. But I would also say that the rules seem to be changing on a weekly and monthly basis. So it may have an impact on the broader market.

The other comment that I would make is that although we are largely able to meet demand, in certain geographies where we operate in rural parts of the provinces in more remote places. We continue to have constraints on our ability to recruit enough caregivers. So the big municipalities, no problem meeting demand, but there are still parts of the province of Ontario, where we are not able to accept all the referrals that come our way. So managing labor supply and building our own capabilities to train people to provide care continues to be a key part of our strategy.

Maybe just one follow-up on the home health side. Just in terms of like, I guess, incremental delivery models. I saw Ontario launched a high-intensity bundled home care program. Appears to me at least more of a trial around here in early '26. But just any thoughts there to that program specifically or maybe other initiatives that could come through that maybe set you up for incremental volume as opposed or when compared to years past?

Yes. That procurement was an example of something that has been developing and growing over the last several years of hospitals partnering more closely with home care operators to streamline the hand-off of patients that are discharged from hospital and make sure that they get continuity of care as they go home. And we're certainly involved with a whole number of hospitals in those kinds of projects.

The other trend, I mean, you pointed out that, that particular one was high intensity. We are seeing more in the way of 7x24 home care services where it's a little bit more wraparound and providing support at all hours, including weekends to allow people to stay in their own homes. So when we look at our volume growth, some of it is because we have more patients and some of it is because we're just providing a higher number of hours for some of the new patients that we're taking on in that high-intensity category.

So I think we're going to continue to see those kinds of activities. And both Closing the Gap and CBI were very good in very competitive in those 2 spaces, which is one of the things that made it quite attractive for us.

Okay. Great. Maybe if I could just sneak one more in on the housekeeping or modeling side. David, just in terms of cash taxes for '26, is a similar range to '25 in terms of percentage of pretax FFO a good way to think about it? Or are there any impacts from the CBI acquisition?

No, I think you're still going to look at the taxes in the sort of 24% to 27% range from a percentage basis. So that's the guidance we've put in the MD&A for next year.

Next question will come from Giuliano Thornhill with National Bank.

I just kind of want to start with the home health care segment. What's kind of the ceiling, do you think, on the margin performance in that business?

Yes. I think a few thoughts, Giuliano there. I think if you look at our normalized full year for 2025, we're at 12.8%. I think as we've said, I think, on past calls, we do believe there is still margin expansion in this business. And as we grow volumes, look for continued development of technology solutions in the back office that we still think there's opportunities, especially in home care on added technology that can help with the productivity efficiency. So I think looking forward, there'll be some improvement into that 12.8% as we go forward.

But we are, as Mike mentioned, it's been this sustain this high level of the organic growth gets sustained like it is for a period of time, there is going to be some step change needed in the cost structure in the business that could temper some of the margin improvement. So there is still improvement.

It could just be tempered a little bit if we have a continued run at this level. But -- so I think as we've said before, this should be a 13%-plus margin business. But when we hit that on a sustained basis is still to come.

Okay. And then how much is the labor side out of the OpEx, if they're getting -- if think average wage is around $23 or so. That means there's around half of the OpEx is not related to labor. So I'm just wondering, out of that half, how much is fixed and really driving that scaling?

Yes, we -- I mean we don't really break that out, Giuliano. Like I think -- We focus on the NOI margins. So -- but I mean labor is generally 75%, 80% of our cost structure, but those splits it out between back office, front office, it's not something we split out.

Okay. Moving on to the volumes, how many kind of contract wins did you get this quarter out of the share that were offered.

We're not sharing that information. You're talking about our win rate in terms of contracts. So the first thing I would say is that the volume that comes from some of those new contracts is not material. It takes a long time for those contracts to turn into anything that would even come into 100 basis points impact on our volume. So that's the first thing. But the second thing is that we're not sharing that kind of competitive information.

Right. Okay. And then just moving to the kind of CapEx. I'm wondering how many more projects need to be sold from the old homes remaining and -- yes.

Yes. I think with the sale of the Stittsville home in Q1 just after year-end, like every -- we've now sold the 3 projects for the 3 homes that have opened. So we have 7 homes now in construction. The next 2 to open is in Peterborough and in -- just in Ottawa. So we're readying the legacy C homes related to those 2 to go to market. We tend to kind of go to market as we're getting ready to transition into the new home.

So we'll be looking to sell these gear up so that we minimize the gap between closing and selling so that we're not sitting on that capital tied up in the vacant home. So everything we've opened, we've now sold the homes and the next wave, we're getting ready on the marketing.

Okay, just the last question for me is with CBI kind of being acquired, does this really round out your platform to go for, for the smaller acquisitions that tend to have higher accretion?

Yes. I think -- I mean, it would be market by market. I think is the way to answer that. Certainly, this transaction will give us substantial presence in Ontario. But that's not to say in certain markets still, we're going to have -- we'll be light on nursing or light on the allied Physio-type services. So there's definitely infill opportunities. The CBI gives us a beachhead across the West with a strong presence in Alberta. So I think those markets are opportunity. And lastly, there's adjacencies, which I think we've talked about before.

There's other markets that we could look to that still can leverage our back office and how we work and sort of workers' compensation, private insurance type market. So all of those are still opportunities for us, something sizable in Ontario is probably the one thing that is now done with CBI. And I would just remind everybody, too, and I think we've said this for the next foreseeable time, our focus is going to be on integrating finishing CTG and integrating CBI. So there is going to be a pause on the M&A for '26 until we get into '27 and well underway on CBI. But there's still a lot of opportunity in Home Care still very fragmented, we're just going to take a bit of a beat before we're back.

The next question will come from Pammi Bir with RBC.

Maybe just coming back to ParaMed. And aside from the acquisition of Closing the Gap, is it fair to say that are you gaining share from your competitors? Or are you seeing their volumes grow perhaps at similar clips?

Based on the information we have about the growth in the market, we think that this is predominantly a market expansion and that our share is staying quite consistent.

And you can see that even in CTG, right? Where CTG itself has been outperforming our original pro forma information, but it's just another data point. So that supports that.

And I guess, maybe just building on that is the trend line for CPI to date, I guess, through Q4 and pretty much consistent with what you've seen from CTG and your existing platform.

Yes. I think we don't have -- we're still looking for updated financial information from them. They're still working through their year-end audits, but I don't think we have any expectation that they're not enjoying some of the similar performance. But yes, we wouldn't be able to comment specifically on their numbers at the moment.

Okay. And I guess I think you mentioned that you're really not going to be looking to do anything of significance from any sort of additional capital deployment on acquisitions in home care. But are you seeing more home care providers perhaps looking to monetize and capitalize on this momentum in the space. Just wondering if there's other deals out there that you may just perhaps pass on just because you have obviously a very substantial acquisition that works.

Yes, I'd say there's -- we still -- there's still activity for sure. We do have a pipeline. We do have discussions going on. We did before CBI, we still do now. So certainly, over the last 12 to 18 months, the sector has had a lot of activity, like our transactions as well, the Spectrum transaction. But there is opportunity, as we said, out there, people looking to monetize all sorts of different reasons. Some of the smaller ones are your traditional single operator, lack of succession planning or opportunities, et cetera. So -- but I think that there's lots of opportunity there, but likely no nothing of a scale or as big as a CBI, but lots of other opportunities.

Okay. And then just lastly, David, I mean these out-of-period funding amounts and the workers comp rebates. I recognize these amounts can be lumpy, but they do seem to recur on a fairly consistent basis. So is it fair to assume that maybe these amounts perhaps just continue going forward? Or do you think it's kind of done at this point?

Honestly, Pammi, I wish we knew to some extent. I don't think we came into '25 thinking we'd have 2 installments of workers' comp. I don't think anybody expected that. What I'd say, I'd like to think those types will go away and at some point stop. I do think the one place where we will continue to potentially have kind of catch up is on the funding announcements because we just know historically some of the various provincial announcements come late.

They don't come ahead of April 1. They come a little later with retro components that I think will always be there to some extent. But the WSIB has been unusual. Didn't think it was going to continue to the extent it did in 2025. And as you know, it's not just us, that's a sector thing like an employer thing, that's happening. So -- but yes, hard to predict, hard to say.

Okay. I mean it's a good thing to have, but that's all fair.

[Operator Instructions]

Seeing no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Jillian Fountain for any closing remarks.

Thank you, operator. That concludes our call for today. This presentation is available on our website, along with a link to a replay of the call. Thank you all for joining us. And please don't hesitate to reach out if you have any further questions. Goodbye.

This brings to a close today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.

Hello, and thank you for dialing in. I'm Kathryn Bradley, Vice President, Corporate Development at Extendicare, and I am joined by Michael Guerriere, President and CEO; and David Bacon, Executive Vice President and Chief Financial Officer. We are very pleased to have the opportunity to discuss Extendicare's acquisition of CBI Home Health, which we announced earlier today.

Today's slide presentation is available on our website. But before we get started, please be reminded that today's call may include forward-looking statements and non-GAAP and other financial measures. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. We have identified such factors as well as details of non-GAAP and other financial measures in our public filings with the securities regulators and suggest that you refer to those filings.

With that, I'll turn the call over to Michael.

Thank you, Kathryn. As Kathryn mentioned, today's announcement of our acquisition of CBI Home Health is a strategic opportunity that materially advances our services-oriented growth model.

Turning to Slide 5. We are a leading Canadian provider of seniors care and services, operating across 3 segments: long-term care, home health care and managed services. We're Canada's largest long-term care operator, operating a network of 99 homes. We also have a robust M&A track record, including 2 acquisitions that we closed this year, closing the gap, a leading provider of integrated home and community-based health care, which added approximately 10% to our home care volume and 9 long-term care homes that we acquired from Revera. We are pursuing growth through a capital-efficient services-focused business model.

We're focused on expanding our home health care segment organically and through acquisitions and leveraging our joint venture with Axium to fund long-term care development and expansion. The joint venture structure largely addresses the capital required to grow this aspect of our business.

Turning to Slide 6. Extendicare has been publicly traded on the TSX for over 50 years. Our growth is underpinned by favorable demographics and a fragmented Canadian seniors care market, which we will address in more detail shortly. With a strong balance sheet, low leverage and stable revenue, over 90% of which comes from government contracts, we are well positioned to drive continued growth and shareholder value. We've invested a lot in our technology platform. It underpins our service quality and reliability, and it is a major factor in the scale economies that have been driving the margin expansion we have achieved in the last couple of years.

Turning to Slide 7. We've announced the acquisition of CBI Home Health, the home health care segment of CBI Health. In 2024, CBI's more than 8,500 team members delivered over 10 million hours of service to Canadians, driving $478 million in revenue and $62 million in adjusted EBITDA for the 12 months ended July 31, 2025. This acquisition is very complementary to our own home care operations and will create the largest home health care platform in Canada. It takes us to new geographies and new business models and provides an opportunity to deliver significant synergies as we scale up the volumes we drive through our technology platform. It will be immediately accretive to earnings per share. We will fund the purchase with an upsizing to our existing senior secured credit facility, a bought deal private placement equity offering and cash on hand.

And now I'll turn it over to Kathryn to provide a brief overview of our business today.

Thank you. Turning to Slide 9. As Michael noted earlier, Extendicare leverages a diversified business model to drive growth without significant capital requirements.

We are focused on the delivery of publicly funded health care services through our 3 business segments: Long-term care, which includes the 59 long-term care homes across Ontario, Alberta and Manitoba that we fully own and operate; Home health care, which operates under the ParaMed brand, including our recent acquisition of closing the gap, ParaMed delivers approximately 13.5 million hours of service on an annualized basis.

And managed services, which is comprised of 2 pieces: management and consulting services, which is largely made up of management fees earned on homes we do not wholly own, including 28 homes owned by our Axium joint venture; and SBP Purchasing Network, our group purchasing services that purchase on behalf of nearly 150,000 third-party and JV beds across the country. Currently, nearly 55% of our NOI is derived from our services business segments.

Turning to Slide 10. We can clearly see the demographic realities that drive the demand for our services. The eldest baby boomers are about to hit 80 and the youngest are turning 60. So we are far from the crest of the wave. The number of Canadians 85 years and older will double by 2036 and triple by 2051. Extendicare services are largely focused on the 80-plus segment of the population. We are leveraging our partnership with Axium to build new long-term care homes to help meet this demand. But even with this development activity in the sector, the supply of long-term care beds will still lag demand for years to come.

As you can see on Slide 11, the chart on the right shows the ratio of long-term care beds per 1,000 Ontarians over the age of 75, which peaked almost 20 years ago and has been on a steady decline ever since. Even with the development activity in the sector over the last several years, we are not keeping up. To that end, home health services have a critical role to play to help address the supply-demand imbalance and ease the pressures on the broader health system.

Home care is the most cost-effective way to deliver care and supports most seniors desire to age in their own homes for as long as possible. Given our business mix, we are well positioned to address this need, leveraging the scope and scale of our services and the strength of our balance sheet.

Turning to Slide 12. We've seen the challenges experienced in other parts of the health care system, such as the pressures on the acute care hospitals and shortage of long-term care beds drive increased demand for home care services. We have made significant investments in our recruiting processes, training programs and technology platform to help meet this demand and are proud of the results these investments have yielded, including a 33% increase in service volumes since 2022.

Our acquisition of closing the gap, which is expected to add 1.1 million service hours and $9.8 million in NOI, demonstrates our ability to leverage M&A to help augment strong organic growth. Provincial governments continue to invest in home health care services, supporting sustainable growth.

Turning to Slide 13. Extendicare's LTC segment is comprised of 59 wholly owned long-term care homes, which have returned to pre-pandemic occupancy and NOI levels. Occupancy across the portfolio is above the 97% threshold required to receive full government funding. Regular government rate increases mitigate the impacts of inflation and enable stable operating margins, which results in same-property NOI growing in line with inflation.

Turning to Slide 14. Managed Services is the highest margin business segment with NOI margin of between 50% and 55%. It is comprised of our Extendicare Assist business and SGP Purchasing Network. Today, 28 of the 40 homes we manage are for our joint venture partner, Axium, which generates long-term stable management fees. As we continue to pursue redevelopment in the joint venture, this drives growth in our management fees as well as earning development fees through the course of construction. Through SGP, we offer an opportunity for smaller operators in the seniors living sector to benefit from our scale and buying power. SGP is truly national and operates in every province and territory with over 500 customers.

Finally, turning to Slide 15. We've been able to pursue development activity in a capital-efficient manner through our joint venture with Axium Infrastructure, where we own 15% of the JV and Axium owns the balance. We earn development fees through the construction of new homes in the joint venture and then management fees for operating the new homes through the life of the home, generating long-term recurring revenue in our Managed Services segment.

Together, we have opened 3 new homes since March 2024, and we have 6 homes currently under construction. The development costs and associated financing for these projects are all held by the joint venture and off of Extendicare's balance sheet. We have another 18 projects that we are advancing through the development cycle. We will start one more project before year-end and are targeting 3 more in 2026.

With that, I'll turn it over to David.

Thank you, Kathryn. On Slide 16, you can see on the right-hand side, the pro forma full year impact of the closing the gap and LTC transactions we closed earlier this year. As at September 30, 2025, on a pro forma trailing 12-month basis, our consolidated revenue is now $1.7 billion and adjusted EBITDA is $166 million. Through the acquisitions completed to date, combined with focused operational execution and investment in our team and technology, Extendicare has delivered a 55% adjusted EBITDA cumulative average growth rate since 2022. We continue to see M&A as an opportunity to augment our strong organic growth, particularly where there is an opportunity to diversify service mix and geography. The acquisition of CBI Home Health checks all these boxes.

Turning to Slide 18. CBI Home Health has operated for more than 40 years. Its 8,500 team members operate across 7 provinces and deliver a comprehensive suite of home health care services. CBI has a highly experienced management team who will add further depth to our own talented ParaMed team.

Turning to Slide 19. CBI's revenue is 95% derived from government contracts. The CBI Home Health team has an established track record of providing exceptional service and personal support, nursing, therapy and specialized community services, and its operations are anchored in Ontario and Alberta. When combined with our own operations, this will create a sizable presence in Alberta, which we view as a very favorable market.

Turning to Slide 20. The transaction has a highly compelling financial profile. The purchase price of $570 million represents approximately 9.4x adjusted EBITDA. We anticipate achieving approximately $7.4 million in IT and other cost synergies within the initial 2 years post-closing, reducing the implied multiple to 8.4x. Longer term, we do expect to drive further efficiencies through scale and enhanced use of technology over time, but these are not reflected in the 8.4x synergized multiple.

We are comfortable with the post-closing pro forma leverage of 3.3x pro forma total debt to adjusted EBITDA as the strong free cash flow profile of the business will enable near-term deleveraging post-closing.

Turning to Slide 21. On a pro forma basis, the transaction is immediately accretive to earnings and AFFO per share, both on a pre- and post-synergy basis. On the left side, you can see the chart I previously discussed, reflecting Extendicare's current financial profile. And the chart on the right reflects the addition of CBI Home Health, resulting in combined revenue of $2.2 billion and adjusted EBITDA of approximately $228 million.

Now I will turn it back to Mike for his closing remarks.

Thank you, David. As outlined on Slide 22, the acquisition of CBI Home Health diversifies our geographic footprint and establishes a sizable market presence in Alberta to augment ParaMed's focus in Ontario. It enhances our capabilities by adding innovative care models, working with hospitals and social service agencies to support people living independently in the community. It aligns with our services-focused strategy and positions us to capitalize on favorable industry dynamics driven by demographics and enduring supply constraints in institutional care.

CBI Home Health has a compelling financial profile that is highly accretive to Extendicare's business model and leverages scale to drive industry-leading operating performance. The acquisition of CBI Home Health is a transformative step for Extendicare, creating Canada's preeminent home health care platform to complement our industry-leading long-term care platform. It will allow us to support more Canadians to live independently at home while leveraging our technology to drive outstanding customer experience and deliver strong value for shareholders.

Thank you for your interest. And if you have any questions, please do not hesitate to contact us.

Thank you for standing by. This is the conference operator. Welcome to Extendicare Inc. Third Quarter 2025 Analyst Conference Call. [Operator Instructions]. The conference is being recorded.

I would now like to turn the conference over to Jillian Fountain, Vice President, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Extendicare's 2025 Third Quarter Results Conference Call.

Joining me today are Extendicare's President and CEO, Michael Guerriere; and Executive Vice President and CFO, David Bacon. Our Q3 results were released yesterday and are available on our website as is a live audio webcast of today's call, along with an accompanying slide presentation.

An archived recording will also be available on our website following the call today. As well, replay numbers and passcodes have been provided in our press release to access an archived recording by phone until midnight on November 28. Before we get started, please be reminded that today's call may include forward-looking statements and non-GAAP and other financial measures. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today.

We have identified such factors as well as details of non-GAAP and other financial measures in our public filings with the securities regulators and suggest that you refer to those filings.

With that, I'll now turn the call over to Michael.

Thank you, Jillian, and good morning. Q3 was an excellent quarter for Extendicare. Strong organic growth augmented by a full quarter impact of our recent acquisitions established a new baseline for our results. We started the quarter by completing the acquisition of Closing the Gap on July 1, welcoming more than 1,200 caregivers and adding an estimated 1.1 million annual service hours to our Home health segment.

Closing the Gap added $24 million in revenue and $3.1 million in NOI in Q3, ahead of our expectations when we first announced the deal earlier this year. As we integrate Closing the Gap into ParaMed operations, we expect to generate annualized operating efficiencies of approximately $1.1 million after the first year. The acquisition also enhances our capability to establish and deliver new integrated care models such as direct Home care contracts with hospitals that provide us with new ways to meet the needs of the aging demographic.

Home health care volumes at ParaMed were up 13% over the prior year quarter, the largest year-over-year organic growth we've experienced. This reflects rising demand due to the aging demographic, Long-Term Care capacity growth that's falling short of needs, and a strong societal preference for living independently at home for as long as possible. We've been successful in meeting this rising demand through large-scale recruiting and training programs that ensure we have the staff necessary to meet the needs of our clients.

On the heels of the Closing the Gap acquisition and the Nine Home LTC acquisition we completed in Q2, we increased our senior secured credit facility by $100 million in the quarter, drawing $55 million on our delayed draw term loan to partially fund the Closing the Gap acquisition. The upsize in our credit facility allowed us to complete the 2 acquisitions while maintaining very favorable liquidity, providing us with significant flexibility to optimize capital allocation and drive further growth.

On Slide 4, you can see that this quarter marks our strongest performance in recent years, reflecting margin improvements across all segments. We strive to be Canada's leader in the delivery of high-quality Long-Term Care and Home care services, leveraging our deep expertise to drive growth in a capital-efficient manner. Our results released yesterday demonstrate several pillars of our strategy at work, including organic growth driven by strong operational execution, strategic M&A that builds scale and expand service capabilities, and disciplined capital allocation grounded in a strong balance sheet.

Adjusted EBITDA increased to $50.8 million, up 40.6% over the prior year. Excluding the out-of-period items recorded in both years, adjusted EBITDA increased by 36.6% to $46.9 million, with Home health care leading the way. Home health volumes grew almost 25% from the prior year, reflecting the organic growth and Closing the Gap. Home health care NOI margin improved by 230 basis points to 13.6%, reflecting the operating leverage enabled by the scalability of our technology-driven back office.

In our Long-Term Care segment, Q3 NOI margin improved by 40 basis points over the prior year after adjusting for out-of-period items. And in Managed Services, third-party and joint venture beds serviced by SGP grew 6% from last year, bringing the total to over 152,000 beds.

Driven by the strength of these results, AFFO increased to $0.31 per share, up 19.3% on a year-over-year basis, driving our payout ratio down to 45% on a trailing 12-month basis. Our growing cash flow and strong balance sheet give us flexibility to pursue strategic growth through acquisitions. We see attractive opportunities in a fragmented senior's care market that is underpinned by strong demographic demand. Our scalable back office helps make acquisitions immediately accretive as we realize the synergies that come from running higher volumes through our cloud-based technology platform.

Turning to Slide 5. We continue to advance our redevelopment agenda with 6 homes under construction that will bring 1,408 new state-of-the-art beds into service, replacing 1,097 Class C beds. The $565 million development cost of these 6 projects is being funded through our joint venture with Axium, where we retain a 15% managed interest. We are targeting opening 2 new homes, our Orleans and Peterborough projects in the first half of next year.

In addition, we have a further 18 projects advancing through the planning and development stages under the new Ontario government Long-Term Care Home capital development program. We plan to start construction on a new 320-bed Home in Sudbury by the end of this year, which we intend to vend into the Axium JV in Q1 2026, subject to regulatory approval.

We aim to start construction on up to 3 additional projects in 2026. We remain committed to replacing the older homes in our portfolio and expanding Long-Term Care capacity in Canada. As recent projects have demonstrated, pursuing redevelopment through the joint venture structure is capital efficient.

Proceeds from the sale of new projects into the joint venture and sales of vacated Class C buildings to third parties provide capital that we can redeploy into the next wave of redevelopment projects. This preserves our balance sheet and delivers long-term value to shareholders.

I'll now turn the call over to our CFO, David Bacon, to discuss our financial results in more detail.

Thanks, Michael. I'll start with a brief review of our consolidated results, followed by our individual business segments and our liquidity position.

Turning first to consolidated results for the quarter. Q3 was impacted by a $2.1 million net increase in out-of-period Long-Term Care funding. The impact of out-of-period items is summarized in the appendix of the presentation, which is referenced on each of the financial results slides.

Our consolidated Q3 revenue increased by 22.6% to $440.3 million, driven by the full quarter contribution of $56.9 million in revenue from the 2 recent acquisitions, 13% organic growth in our Home care volumes, along with bill rate increases and Long-Term Care funding increases. This was partially offset by the closure of Class C LTC homes that were vacated following the opening of the newly redeveloped Long-Term Care homes in the Axium joint venture.

Excluding out-of-period items, our Q3 NOI improved by $13.7 million or 28.3% to $62 million, reflecting the revenue growth and approximately $6.3 million contribution to NOI from the 2 acquisitions, partially offset by higher operating costs. Excluding the impact of out-of-period items, our Q3 adjusted EBITDA increased by $12.6 million or 36.6%, reflecting the improvement in NOI, partially offset by higher administrative costs.

Growth in AFFO continues to be strong with Q3 AFFO of $0.349 per share, up 27.4% from the same period last year, supported by our stronger after-tax earnings, partially offset by higher maintenance CapEx, in part due to the LTC homes that were acquired. When out-of-period items are excluded, our AFFO per share improved by $0.05 or 19.3% to $0.309 per share.

Turning first to Home health care, which delivered exceptional performance this quarter. Revenue increased by $48.4 million or 35% year-over-year, driven by the $24 million contribution from the Closing the Gap acquisition, 13% organic growth in volumes and the impact of the rate increases received in Q4 of last year. NOI improved by $9.9 million or 63.2%, reflecting the strong organic volume growth in our base business, augmented by approximately $3.1 million of NOI from closing the gap.

Turning to our Long-Term Care segment. The Q3 results were impacted by out-of-period funding of $3.9 million this year and $1.8 million last year. Excluding out-of-period funding, our revenue increased by $34 million, driven by the full quarter contribution of $32.9 million from the Nine LTC homes acquired from Revera, funding increases and the timing of envelope care spending, partially offset by a loss of $8 million in revenue from the closure of the 2 redeveloped Class C homes that were replaced by new homes in the JV.

NOI increased by $4.8 million or 21.2%, driven by the increases in revenue and approximately $3.2 million in NOI contribution from the Nine LTC homes that were acquired, partially offset by higher operating costs and the loss of approximately $600,000 in NOI related to the closed C bed homes. Corresponding NOI margins increased 40 basis points over the prior year period to $11.8 million in the quarter.

Finally, turning to our Managed Services segment. The decline in revenue and NOI this quarter reflects the loss of the management contract resulting from the sale by Rivera of the 30 Long-Term Care homes that were under contract to Extendicare, 9 of which we acquired in Q2 and are now included in our LTC segment. Our Managed Services revenue decreased $3.3 million to $15.6 million, and our NOI declined $1 million to $8.9 million.

Despite the reduction in the number of managed homes, earnings benefited from the 6% organic growth in our SGP clients and increased management fees from the newly opened home in the Axium JV. NOI margins were 57.2% for the quarter, while our year-to-date NOI margin of 54.9% remains in line with our expectations for this segment of between 50% and 55%.

Turning to the balance sheet. Our liquidity position remains strong. Despite funding the 2 acquisitions earlier this year, we ended the quarter with cash on hand of $166 million and access to a further $154 million under our revolving credit facility. All of our credit metrics remain solid, and we have no debt maturities until Q1 2027.

We are in a strong position, which allow us to pursue our growth agenda. We will remain disciplined in our approach to allocating capital as we evaluate opportunities that strategically fit and align with our growth and shareholder value creation objectives.

With that, I'll pass it back to Mike for his closing remarks.

Thank you, David. The compelling merits of our strategy are evident in our third quarter results. As the demographic realities of an aging population continue to drive demand for our services, the scale and efficiency of our operations position us well to answer the call. Not a day goes by without a new story about the stress our health care system is experiencing.

Access to care is a national challenge. The services we provide offer a way to relieve pressure on hospitals, by providing care in more comfortable and cost-effective settings. We will continue to build capacity to ensure that everyone in Canada receives the care they need to live their best lives.

My sincere thanks to our growing team for their commitment to advancing this important mission. With that, we're happy to take any questions that you might have.

[Operator Instructions] The first question comes from Linda Wright with TD Securities. Please go ahead.

This is Linda standing in for Jonathan today. Congrats on a great quarter. My first question is on the CTG acquisition. When we're comparing it to the Q1 sorry, the Q2 press release and also the initial announcement, we noticed that the earn-out initially was estimated to be $3.5 million to $5 million, but now it seems that it's dropped to $1.5 million to $2 million and the same with also the new business revenue estimates. So just wondering if you can provide some details on this change.

Sure. The first part of the question first with respect to the earn-out. There's 3 discrete contracts that the earn-out relates to that were relatively new to the business at the time of the acquisition. So, and the earn-out mechanic has us paying a portion, a percentage of the revenues for the first 12 months post-closing. So what you're seeing there is more of a timing difference, and those 3 new contracts are ramping up a little bit slower than anticipated.

And the fact that the earnout cuts off after the first 12 months just means the contribution will be a little bit lower for the period that the earn-out is applicable. So it's more of a timing thing on starting up that new business.

And I think your second part of the question just more generally around the overall results. for Closing the Gap. They are tracking higher than our when we originally announced the deal, but that is in line and keeping with, I think, what you're seeing in our own business and the growth that we've been experiencing. So it is tracking higher, but it is in line with the underlying organic growth we're seeing in ParaMed.

Okay. That's helpful. And then just continuing on the Home health care segment, we noticed that margins were higher during the quarter. Just wondering, is this being driven with the CTG business having a higher margin? Or is this more like organic growth?

Yes. I'd say that the single biggest contributor is just the volume growth this quarter, like a 13% organic growth year-over-year. The margins in Closing the Gap are largely similar to ours. I think it's just; it's a volume impact more than anything. And it does go to what we've said in the past about the back office and scalability. So, we're able to handle that growth and you see that then get reflected in higher margins.

And then on the Home health care segment, again, should we expect to see more acquisitions in like the near to medium term?

Well, we're constantly looking for opportunities that fit well with our, with our existing business. We don't want to buy volume just for the sake of buying volume. We're always looking for capabilities that expand our current either geographic reach or the scope of services that we're providing. So, we do see a number of attractive opportunities in the market. So that is something that we're looking to explore. And the fact that our balance sheet is quite healthy, I think, gives us flexibility to look for those opportunities.

And then one last one for me. On the LTC projects under construction, it looks like the Theodore Place location completion was delayed by a quarter. Just wondering if there's any particular reasons behind that.

No, I think it's just, it actually slipped by 6 weeks and it slips us into a quarter. But it is construction. There's nothing particularly concerning about that, but it is a bit delayed, had to do a bit with tying in the power with Hydro One, to be honest. But we're talking about the difference measured in weeks. It just crosses over a quarter.

The next question comes from Tal Woolley with CIBC.

Just for Home health care, obviously, the business is expanding rapidly. The profitability has really improved. And you talked about scalability. I'm just wondering, is there a certain breakpoint here where you need to start thinking about making more investments? Or are there other investments you should be thinking about making in the business now if it's going to be this much a bigger part of the profitability picture going forward?

Yes. I think it's a good question. I think what you're seeing to date for us, we've been able to handle the growth that we've experienced, which you're seeing in the margin improvement. I think at the moment, we're comfortable sort of being able to sort of sustain this level, although we'll be honest, the 13% year-over-year organic growth was, did exceed even our expectations for growth, but we were able to handle that. So, I do think where we're at and our ability to absorb some additional M&A through this, acquisitions like Closing the Gap, I think we could absorb quite readily. So, there's nothing imminent sort of like a step function at the current level we're at. But so I think it is, I think we're in a good spot here given sort of the, where we sit today.

And then just looking at the Long-Term Care performance, I think if I'm doing my math right, like the sort of organic growth or same-property NOI growth is probably in the mid-single-digit range, which is maybe a little bit higher than what we would typically expect. Is there anything particular driving that?

I think, yes, it's marginally ahead of the kind of 2%, 3%. But I think a few things. I mean, there's a bit of an uptick in occupancy. I do think, particularly in Western Canada, where you don't have the flow-through funding like you do in Ontario, we've made improvements there in our operating costs, virtually eliminating use of agency, et cetera, which were a bit of an overhang for quite a while. But, so, and we did get some rate increases in the West in the quarter, some additional funding there with not only kind of underlying increases, but a little bit of catching up on costs that have been running over the last couple of years. So I think it's a little bit outsized, but I still think the longer-term outlook, as we've said before, is we should expect same-property NOI and LTC to be growing in that kind of inflationary kind of range, 2%, 3% with the various provincial governments keeping tabs on the underlying wage increases, which really drive all the decision-making.

And then for the Class C buildings that you still have on your balance sheet, I think you said there's probably 15 to 18 projects still remaining. As you look to move those out, is that a sort of 1 to 2 per year kind of phenomenon or 2 to 3 per year? Or are you, is there some sort of deadline you've got to hit with the ministry to try and get these all underway?

Yes. The last part of the question first, there is no deadline to hit. I think one of the positive features of the new program in Ontario is it isn't time constrained like the former capital funding. We have a target, we have 18 to do. We are ramping up to start a seventh project in construction before the end of the year, and we expect to try and start another 3 next year. We'd like to do 3 to 5 a year over the next, however that maps out over the next 4 to 5 years. we are looking at ways to maybe accelerate that as well to take advantage of the program. But at the moment, that's the cadence of sort of 3 to 5 a year starting to work through the balance of the Ontario portfolio.

And then just lastly, with Axium sort of playing a big role here in Ontario redevelopment, are you, any concern that the province has some thoughts about them having control of this many assets? Or is there any sort of concentration risk? And have any other capital providers come to the floor now that things have sort of started to progress with more ease?

No, we don't see any concern there. I mean if you look at it from the perspective of our entire portfolio owned and operated, we're running about 15% of the beds in Ontario and Axium is a smaller proportion of that. So there's not a significant concentration risk as a result.

And no one else has really decided like, hey, this is a business we'd like to step forward and be like an alternative to them.

Well, not with the joint venture model that we're using, no. But there are quite a number of other financial partners that are partnered with various players in the sector, including with the joint venture, with our joint venture. So there are quite a number of organizations that are part of capitalizing this building program.

The next question comes from Giuliano Thornhill with National Bank Capital Markets.

I guess just starting off with the Home health care and the volume growth there. I'm just wondering what it's like, if you could aggregate or place in buckets like the levels of strain on the system, whether that's the aging or the immigration or the lack of doctors, like how would you rank them, that's really resulting in that like 13% ADV growth?

Well, the Financial Accountability Office in Ontario has started publishing information about the availability of Long-Term Care beds in the province per 1,000 people over the age of 75. And what that shows is a steady downward trend in that ratio. We peaked at about 99 beds per 1,000 back in 2006, and we're at 58 now. And even with the new homes and the new beds that are coming on stream, they're still forecasting further declines.

So you look at that in the face of a waiting list for Long-Term Care in the province that today stands at about 48,000 people. And you realize that we have a problem in terms of supporting the needs of all of those people that are eligible for Long-Term Care that are eligible for 4 hours a day of resident care in a Long-Term Care environment, but are not able to get it.

So those people are occupying a lot of beds in acute care hospitals, which is causing the backup into emergency departments and the hallway medicine problem that we have. But there are also many of them at home. And so we're supporting them now with Home care. So a lot of the growth that we've been seeing has been in the hours of care that we're providing to each person in our care as opposed to just more people in kind of a Home care setting.

So you may recall us talking about the demographic growth of the population that we serve is running at about 4% growth per year. You can kind of think of that as the underlying kind of demographic support for the sector. But with the constraints in the Long-Term Care beds, we're seeing more and more of those people being referred to us for Home care support, and they require very significant numbers of hours each day to keep them living independently and to keep them safe.

So, we think that, that's what's driving the volume growth that we're seeing. And as David mentioned, 13% year-over-year, it's a surprise to us that it's growing at that pace, but that's what we think is the underlying driver.

So, it's mostly the LTC waitlist. And are you seeing that or noticing that Bill 7 is impacting that Home health care growth at all?

No, not very much. That bill attracted a lot of attention, but it's a small minority of the referrals that are subject to the terms of that process. So, it really is not a material impact on the volumes.

And how would you characterize the Atlantic Canada Home health care market compared to Ontario? And just similarly, what does the year-over-year growth in volumes also match Ontario?

It's very different province to province because each province uses a somewhat different model. And each province has quite significantly different availability of Long-Term Care beds. So, some provinces have quite a bit of availability and some are more constrained than Ontario. So, it's actually quite different province to province. And in the provinces that we operate, that 13% is the weighted average of what's happening in the different provinces.

And then, just obviously, the volume growth here is driving a lot of the margin upside, say, in Home health care. How much does an extra $1 million in Home health care revenue get you in NOI? And how does that compare to, like, last year or 2 years ago? I guess my question is just really on the incremental margin and where that is trending.

I don't think there's an easy rule of thumb on this, unfortunately. There are a lot of moving parts that are underpinning the margins changing from quarter-to-quarter, including things like how many staff holidays, how much vacation our staff are taking. There's a whole bunch of different variables that contribute to it. What I would suggest is that our year-to-date margins are probably a good guide. There may be some additional margin improvement over the next couple of years; it's possible. But I think our trailing 4 quarters is probably the best guide, so that you've factored in all of the seasonal variability that we see in that sector.

And just the last couple of questions I had was with the softer hard costs and lower interest expenses. Are you increasing your expectations on how much of a gain you can recognize on the projects that are actually being dropped down into the Axium JV?

I'd say no. I think that if you go back in time at the couple of different waves of construction we started in the different programs and now this new next-generation program, the first 2 are sort of look at cash-on-cash yield out of those developments, even though they were done in 2 very different times, 2 very different interest rate cost environments, they modeled out the same. And I think the way they've designed this third program, it's a sliding scale based on costs. So, I still think that our expectation is the returns will be largely in line with what we've seen in the past, and therefore, be fairly consistent going forward, and I think that's by design the way they've set the program.

And just the last question was just on the tax. It was kind of high this quarter. I'm wondering if there's anything one-time included there.

The biggest difference there is there's a bunch of, some of our, the transactions have transaction-related costs related to them that are not deductible. So, we have a little bit of a blip this quarter with the deal costs that aren't deductible, in particular, on Closing the Gap because it was a share deal.

The next question comes from Tania Armstrong with Canaccord Genuity.

Most of my questions have been asked, but just a couple on the margins then. You talked a little bit about Home health care margins. [Technical Difficulty]

Tania, you're breaking up.

I'll try the organic growth on your Home health care segment, that 13%, you touched on the overall market gains. Could you also touch on whether you had any market share growth in the quarter that contributed to that 13%?

So market share information, precise market share information is a little bit hard to come by because we don't have statistics that cover all the different Home care programs really in any of the provinces. That said, our impression is that the majority of our growth is coming from growth in the underlying demand in the market. Remember that our contracts, particularly in Ontario, are driven by market share and entitle us to a certain market share by region across the province. So I think the majority of this is an expansion in the market as opposed to market share gains from other operators.

And then touching on the [Technical Difficulty] operating margins, but just flipping to the Managed Services segment, we saw a very strong NOI margin expansion there, too. Is this a new? Or was there any onetime operating expense items that affected the quarter?

Yes. I think you're breaking up a bit. I think you're asking about margins in managed services.

Yes

So it's a bit elevated. I think if you go back in the last three or four years, we've had a couple of quarters where we blipped above 55%, but we generally are comfortable in that 50% to 55% range. The things that affect it are periodically, we have some consulting with some of our Assist clients that can have a bit of a blip, timing of purchases and rebates with our SGP clients, if they have a, maybe they have a capital program going on that has a blip in some of their procurement that comes through in the rebates. So there's a bit of variability in there. But I don't, I still feel that sort of that 50%, 55% we're quite comfortable with, but we will see variability from time to time because of the examples that I just gave.

The next question comes from Pammi Bir with RBC Capital Markets.

In the commentary, you mentioned that you continue to review potential acquisition opportunities in the Home health care space. So I'm just curious what sort of deal sizes are you looking at? And maybe if you could also just comment on maybe what you're seeing from a multiple standpoint in terms of where they range?

Yes. There's a lot of variability in the size of organizations in the Home health sector across Canada. There's a handful of companies that are similar in size to ParaMed. There's 10 or 20 sort of midsized companies that look more like Closing the Gap. And then there's a couple of hundred companies that are smaller than that. And so there's quite a range. We, as I mentioned earlier are more interested in organizations that cover a geographic area or cover a service line that we don't currently provide and that, that then adds to the base for our organic growth because the organic growth is really the opportunity for creating value here. And so our acquisitions are very much about augmenting that and giving us more geographic reach. From a multiple perspective, there's not a lot of comps out there. And I would say that there's some, pretty big differences depending on the size of the organization. So I really couldn't say much about that.

Okay. That's helpful. You mentioned also just coming back to Home health care, the stronger organic growth. And as we kind of think about 4% sort of being the baseline. Is 13% that you put up this quarter, is that sort of the high end of where you sort of see it playing out? Or maybe the other way to think about it is, what are you budgeting for internally as you map out the ParaMed business?

Yes. I think we're, the way that we're approaching this is we've set up our systems to be very, very responsive to the referrals that are coming in through our government contracts and our hospital contracts. And so, it's really difficult to predict. We found it very, very difficult to predict. I mean, a couple of years ago, we were thinking that there would be a rebound from the pandemic lows that we experienced and then things would level off and that they would get closer to just that underlying demographic trend line of the expansion in that senior's population.

So, we've been surprised that we've been growing at double digits and have continued to do so as long as we have. We think we have an explanation, but it's a theory just based on looking at demand for the other services that we provide. But honestly, I would have a lot of difficulty even guessing what we would expect to see next year. We've created a very scalable platform, right, that as the referrals come in, we can throttle our hiring and our training up and down to be able to respond to that quite rapidly. So, we're following the market. I wish I could give you a better projection, but we're following what's coming in the front door.

And I guess part of this is really going to be tied to the delivery of these Long-Term Care beds as they are completed and the wait list over time would start to diminish, but it feels like we're probably still some time away.

Well, and that's why, I am sorry to interrupt; that's why I pointed to these reports now that are coming out of the FAO, Financial Accountability Office because they're starting to put together some projections looking out the next couple of years to see if that wait list is going to go down. And unfortunately, at this point, they are not projecting a decline in that wait list for the next couple of years at least. And I mean, the 4% demographic growth equates to about 4,000 Long-Term Care beds a year. So, we need to be opening 4,000 beds a year to cause that availability curve to level off. And we haven't hit that because we're probably opening more than that over the next couple of years, but a lot of them are replacement beds because we're replacing the old C Homes. So anyway, for the foreseeable future, we're not seeing any meaningful drop in that wait list.

Okay. That's helpful. Last one for me. Just on the $1.1 billion of funding the Ontario government announced last month. Just any incremental pickup for ParaMed there? Or anything you can comment on?

Yes. I think, Pammi, that was, there's no rate increase in that $1.1 billion. I think the way to think of it is these elevated, like the volume growth we've experienced over the last couple of years. What you saw there is the government kind of reallocating, committing enough funding in their budgets to create the new floor in the funding underneath the kind of volumes that you're seeing now in the sector. So, I think it helps underpin kind of the new floor, which is encouraging, but there's no kind of rate increase buried in there.

[Operator Instructions] The next question comes from Kyle McPhee with Cormark Securities.

I'm just thinking through potential bottlenecks here for ongoing pretty healthy Home health care growth. It doesn't sound like back office is a bottleneck at all. What about labor? If you keep growing like this, the sector keeps growing like this, does labor supply become an issue for the sector or for Extendicare? And maybe as part of your comments, you can just comment on your relative ability to find and keep labor versus some of the other platforms out there.

For the most part, labor is not a constraint because of the fact that we've got our in-house training programs and our partnerships with colleges. We have about 3,000 students spending part of the year in our organization, getting their clinical training and getting their credentials. We also fund with various in-house scholarship programs, PSWs who want to bridge to a nursing registration. So, we've got our own internal supply that is working quite well. So, I don't see any significant constraint. A few years ago, that was a big issue for us. But now from a volume perspective, it really isn't a big factor. We do have some challenges in certain regions, particularly more rural regions of the country where we have trouble finding nurses and physiotherapists and certain registered staff but that does not have a material impact on our growth numbers.

This concludes the question-and-answer session. I would like to turn the conference back over to Jillian Fountain for any closing remarks. Please go ahead.

Thank you, operator. That concludes our call for today. This presentation is available on our website, along with a link to a replay of the call. Thank you all for joining us, and please don't hesitate to reach out if you have any questions. Goodbye.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.