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

Good afternoon. Thank you for participating in today's conference call. My name is Ashley Stockton, Vice President, Investor Relations for Guardian Pharmacy Services. I'm joined on today's call by Fred Burke, President and Chief Executive Officer, and David Morris, Chief Financial Officer. After the close today, Guardian posted its financial results for the quarter ended March 31st, 2026. A copy of the press release is available in the company's investor relations website. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. Such forward-looking statements are not guaranteed of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release and quarterly report on Form 10-Q, as well as the specific risk factors and uncertainties discussed in our annual report on Form 10-K. We do not undertake any duty to update any forward-looking statements, which speak only as of the date they are made. On today's call, we will also use certain non-GAAP financial measures when discussing the company's financial performance and condition. You can find additional information on these non-GAAP measures and reconciliations to their most directly comparable GAAP financial measures in today's press release, which, again, is available on our Investor Relations website. And now, I will turn it over to Fred for commentary on the first quarter results.

Thank you, Ashley, and good afternoon, everyone. We appreciate your continued interest in Guardian as we report our first quarter results, and importantly, our first full quarter operating under the new IRA framework. I'm pleased to report that we delivered solid results. Before David walks through the financials, I'd like to take a few minutes to discuss our transition under the IRA, as it has driven more change in our industry in a single quarter than we've seen in decades. Let me start with the revenue impact. Across the industry, pricing on IRA selected drugs for 2026 declined meaningfully. For our book of business, we experienced an approximately 60% decline in pricing across our branded drug mix that was impacted by the IRA. Despite this, we were able to deliver a 2% increase year-over-year in reported revenue. Absent the government-mandated price declines, we would have grown revenues by low double digits. On gross profit, as we outlined previously, absent our mitigation efforts, the IRA would have represented approximately a $10 million headwind. Throughout the course of life, we actively took coordinated, firm-wide actions, including direct negotiations with our payor were part of this impact. Those efforts were realized in the quarter, allowing us to deliver double-digit gross profit growth, reinforcing the effectiveness of our approach and giving us confidence in our forward momentum. Beyond pricing and reimbursement, the IRA introduced meaningful changes to the operational mechanics of how transactions are processed, as well as the timing and synchronization of cash flows. For instance, post-adjudication, a further process through the Medicare transaction facilitator produced additional steps into the transaction lifecycle and led to a delay in the timing of certain payments. Data submission formats also varied across manufacturers, adding even more complexity. Our team navigated these changes very effectively. It created a one-time working capital reset as it altered how and when cash moves through the system, resulting in long-term temporarily carrying higher receivables than payables. It was fully within our capacity to manage, given the strength we believe dynamics like who lack the necessary systems and access to capital. Overall, as it pertains to the IRA, I can now say with confidence and clarity that the business performed in line with forecasted and how we manage to expect continued pressure on our peers as they adjust. While there is still discussion around potential leaving a bipartisan bill proposing a dispute of any near-term action is uncertain. Returning to our quarterly performance, results were driven by strong underlying fundamentals, including solid residents with a portion of $3 million in incremental margin. With our commentary last quarter, items such as looking ahead, one area of uncertainty for both us and the broader market is fuel. Given the current geopolitical backdrop, there is potential for continued volatility. While fuel is not a dominant cost for us, it is meaningful and can represent a headwind of up to a few million dollars annually if prices remain elevated. Additionally, as we continue to scale, we expect to invest further in our organizational infrastructure, particularly at the regional level, to build out our bench to support our growth. Hence, we continue to make targeted hires to support our expansion efforts. As such, labor costs are likely to trend modestly higher over the remainder of the year. While we are very pleased with our performance in the quarter, it remains early in the year, and our underlying outlook for the business remains unchanged. We believe it is appropriate to remain disciplined, particularly in light of potential fuel cost pressures and necessary investment in our leadership. That said, we're updating our full year adjusted EBITDA guidance to include the $3 million benefit recognized in the core. The EBITDA guidance is $123 million to $127 million, up from $120 million to $124 million. Revenue guidance remains at $1.4 to $1.42 billion. Before I close, I want to briefly touch on the ongoing Omnicare process. With another entity now identified as a stalking horse bidder, there is increasing clarity around our potential path. While the process may continue to evolve, the current backdrop appears constructive for guardians. From our perspective, periods like this can create some dislocation and opportunity, where the foundation we've built, consistent social stability, in summary, this quarter reflects the work we did throughout the last several years to proactively position the business for successful implementation under the IRA. Our ability to navigate this transition underscores the strength of our platform and the advantages of scale, enabling us to effectively advocate for the value we deliver and ensure alignment with our partners. And we will continue to recognize the word organization. I couldn't be more proud of the people driving this business forward every day.

With that, I'll- Thank you, Fred, and good afternoon. I'll now walk through our first quarter results in more detail. The underlying drivers of our business continued to perform well during the quarter. Total residents increased 10% year-over-year to approximately 207, with assisted living residents continuing to represent. Script volumes were also strong, increasing 10% year-over-year. Revenue for the quarter was 300, reflecting contributions from organic growth and continued plan optimization efforts. In addition, reported revenue was up 2%, absent the government-mandated price profit was $76 million, up 19% year-over-year, and up 14%, excluding the previously met. Reported gross margin was 22.7%, excluding the $3 million benefit. Gross margin was 22%. As we turn to SG&A, I wanted to highlight several items. This quarter includes a $3.2 million insurer appropriate actively advocate for fair payment for some includes be recognized as other income in the second quarter and will not be included in our adjusted EBITDA. SG&A also included legal and financing costs associated with our secondary offering, a little under a million dollars. Stock-based compensation was $1.9 million in the quarter. As a reminder, we expect SBC to run at approximately $3 million per quarter. Adjusted EBITDA for the quarter was $29.8 million, representing 27% year-over-year growth and an 8.8%. Excluding the $3 million benefit, adjusted EBITDA grew with an adjusted EBITDA market. Acquisitions completed over the past two years are collectively contributing modest profitability in the quarter, but remaining well below our consolidated margin, dampening margins by approximately 80 basis points. The effective tax rate for the quarter was 26%, in line with our expected EPS was turning to the balance sheet. Cash ended the quarter at $65 million, essentially flat with year-end. Strong operating cash flow funded normal course business activities typically associated with the first quarter, including annual bonus payout, one-time working capital impact, and working capital used in the quarter. Importantly, this reflects a temporary timing shift rather than a structural change and does not impact the underlying cash. We expect working capital and cash conversion to normalize. With a strong cash balance and minimal debt, our capital allocation priorities remain unchanged and on track with acquisitions and greenfield investment discussions with acquisition candidates we believe are a strong strategic fit and expect to continue our historical pace of acquisitions in 2026. Looking ahead, as Fred mentioned, our revenue guidance remains unchanged at $1.4 to $1.42 billion. We're updating our adjusted EBITDA guidance to reflect the pass-through of approximately $3 million of discrete benefits recognized in the quarter, bringing our updated range to $123 million to $127 million, compared to the prior range of $120 million to $124 million. Confident in our underlying growth drivers and our visibility, and we gain additional visibility, we will continue to assess. Lastly, I want to acknowledge our non-diluted secondary 6.9 million Class A shares, including the full exercise of the underwriters over allotment option this transaction enhanced the liquidity of our stock so fully utilized the normal course of a new shelf maintain flexibility in closing we delivered a solid start

to the year successfully transitioned into the new brand our teams across our continued execution thank you we will now begin the question and answer session if you would like to ask a question please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Brian Tankulu with Jeffries. Please go ahead.

Hey, good afternoon, guys. Congrats on a call reporter. Maybe Fred, I'll start, you know, when I look at your balance sheet and you obviously have a good bit of cash still in the balance sheet there, you're generating pretty good free cash flow here. How do I think about capital allocation between M&A now and other priorities, you know, given how creative these transactions are and how should we be thinking about the pipeline that's in front of you for, you know, deals both tuck in and, you know, scaled?

Hey, Brian, thank you very much. Appreciate it. Good to have you on the call. Yes, we do have a strong balance sheet. Our plan is to continue steady as we go. as David mentioned, we have a very robust M&A pipeline. We intend to maintain the pace that you've seen recently, even in the balance of this year, and we will continue to evaluate other ideas and alternatives with respect to that cash.

I understand. And then maybe Fred, as I think about, you know, obviously you guys beat on the revenue line here, so good revenue performance but when we think about the dynamics that we're seeing in senior housing which underpins your business obviously uh for example you know the largest player has seen occupancy decline three straight months now uh kind of bottoming out in april just curious how you know what you're seeing in the market and then how that's translating into or how you're translating that into this upside or your relative strength versus what we're seeing occupancy wise in terms of your revenue line um brian is as you know q1 is a generally for the industry a challenge and

it can be exacerbated by weather which we had a lot of in q1 so yes i think occupancy did not increase dramatically in q1 but the underlying drivers remain absolutely intact i mean we've got the silver tsunami occurring before our very eyes and we we are very very positive and constructive on continuing the organic growth that we've always forecasted awesome fred thank you so much. Thank you.

Your next question comes from the line of John Ransom with Raymond James. Please go ahead.

Hey, guys. I'm going to dazzle you with some SEC math. So, David, buckle up, big fella. So, if I look at the quarter, you got the $3 million good guy, but then you also called out a $3 million legal fee. So, I assume that was included in adjusted EBITDA. So, the two of those things would have been a push is that right or did you add the 3 million of legal back to adjusted I'm sorry if I if you said that I must admit the 3.2 million illegal is added back okay and the 3 million dollar good guy is included okay all right well thanks for clarifying that and just secondly Fred just kind of stepping back. I know you talked about some of the second order impacts of the IRA on the competitive climate, but did this end up being a win, a tie, or a loss in terms of your relationship with your PBMs?

And, yeah, I know I ask this all the time, but are we having at least starting conversations around getting paid, you know, for some of the good value-based care work that you do um you know with with interdicting script problems did that did any of those conversations come are they in development or is it still as far as the eye can see a dispensing fee and a reimbursement driven model john i would characterize the discussions that we had with our payors as very very positive and constructive as it turned out the ira offered an opportunity for us to have very open and frank conversations that led to a deeper understanding of the value add that we're bringing and also an ability to start talking about the very things that you ask about. So while in general, the reimbursement at the moment continues in the old model, So we do have several things underway with respect to value-based reimbursement. And I'm very pleased and optimistic that as we move forward, we'll have more and more of that.

Thanks. And just one other one. I know you've mentioned, and we've tried to triangulate some work here, as you know, but I know you've mentioned that one of the changes is, you know, the migration of profit under the new arrangements is closer to your 90-10 split between generics or 92-8 split between generics and branded. Are there any, you know, just having the volumes and the gross profits more aligned, how do we think about that in terms of de-risking the business model and aligning your efforts to support, you know, relatively low-cost scripts?

Well, you've honed in on one of the objectives. I'll call it ancillary objectives that we had in this process, and it's something we've been working on now for years, and it came to fruition in this round, whereby we would like to see the margin aligned more closely with the activity, i.e. the 90-10 that you mentioned. It's actually 92.8 for us. And we think that's important because the point you made, it does mitigate risk associated with future initiatives to lower granted price, such as MFP and, of course, the most MFN as well. So and more importantly, it makes it a lot more straightforward to run a business when you align margin with activity and costs. So we're pleased with the progress we're making on that.

Well, thanks so much. I'll leave it there. Thanks.

Thanks, John.

Your next question comes from the line of Alan Lutz with Bank of America. Please go ahead.

Good afternoon, and thanks for taking the questions. For either Fred or David, it's great to see the strong performance in the quarter, despite all the IRA headwinds that you talked about, Fred. As we think about the competitive landscape and some of the smaller players that weren't able to go back to the PBMs and renegotiate the way that you were, I'm curious. I know it's very early. We're talking about four or five months and some of these IRA changes have gone in, But has any of the conversations you're having with prospects changed? Has there been more of an urgency from some of these, you know, competitors that might be looking to be acquired? I'm curious if any of that has changed at this point. If it hasn't yet, we'd love to get a sense of your expectations on how this evolves over the rest of the year.

Hey, Alan, it's David, and welcome. It's great to have you on here. You know, our pipeline, as Fred and I mentioned, continues to remain robust. I think it's early into the IRA process, and obviously their legislative activities that are going on have been going on, and, you know, we're advocating for the industry at So I would say no dramatic shift, and it's sort of early. we're one quarter into the IRA implications. And, you know, the pharmacies that may not have some of the analytic capabilities that we have are probably still analyzing the results and impact on their business. So we'll continue to monitor this as we go through, you know, this year.

Great. And then you raised EBITDA by $3 million. I think you called out that that is really a reflection of the discrete benefits that you've received in the quarter. Fred, you talked a little bit about some of the risks from higher fuel costs and some more employee costs. As we think about what's embedded in the current EBITDA guide, is it fair to assume that those assumptions are contemplated in the guide, or is it something that if we get to the back half of the year and fuel costs remain high, that's something that could be a headwind?

Just trying to get a sense as we think about this updated guidance what's included what's not included thank you i think we can represent that our guidance includes our what we believe will be our ability to overcome the fuel headwind but we'll have to be watching that carefully as we go so we feel very comfortable with our guidance.

Great. Thank you.

Your next question comes from the line of Grayson McAllister with Truist. Please go ahead.

Hey, guys. This is Grayson on for Dave. I just wanted to follow up on the conversation around branded versus generic back to the ransom's question. When we think about your efforts in the back half of 25 to help get over some of the IRA impact and tie more of your economics to generics versus branded um can you just give us a sense of kind of where you are on that front and how much more runway you think there is for that to help offset the ira impact through the rest of 26th uh grayson it's a great question we're we're um partially the way that we have more work to do but we're currently involved in doing exactly that with other of our pay or appointments okay all right and then just following up on kind of the m a pipeline um when we think about you know the pipeline could you just give like a maybe a ballpark percentage of you know what percent of the pipeline is driven by elf partners in certain markets that might be asking for your capabilities or asking you to expand into that market and just to kind of follow on there would it be safe to assume that that has moved higher over the last year or two, as the value prop has really kind of played out.

Grayson, obviously our national accounts and their footprint and where they are asking for guardian services plays a key role in our M&A activity and targeting markets. And, you know, that's what's driven in large part, you know, our focus the last couple of years, they will continue to do so. And then we line that up with our pipeline of like-minded partners. and, you know, target that and move from there. So that continues there. You know, as we say, we've got 13 or 14 percent of the U.S. out market. So there continues to be a very large opportunity for us to continue to grow the business like we have historically.

Thank you.

Your next question comes from the line of Raj Kumar with Stevens. Please go ahead.

Hey, good afternoon. and maybe just kind of one-on-guide and kind of appreciate the commentary on the kind of the M&A related drag and so as you kind of think about that cohort maybe can you talk about what's embedded into guidance in terms of that 80-bit track kind of being consistent throughout the year or kind of any expectation of that kind of improving as as those operations continue to ramp Hey Raj, it's David.

Good to have you on the call. Keep in mind that this quarter, it's dampening our EBITDA margins by about 80 basis points. But as the existing businesses and cohorts improve, we're going to be making additional investments and expanding contiguously. So while the existing platform is getting better, we're bringing on new operators who will depress. So whether it's 80 basis points, 90, 70, we see that trending, you know, only into 26 and 27, sort of a similar rate.

Got it. And then as I kind of think about the organic growth and, you know, seeing the kind of opportunity ahead, I guess any call outs from a core perspective in terms of, you know, new senior housing facilities additions or kind of operational expansion in terms of growing the capacity at existing facilities? This may be kind of any color on that as, you know, some of these mature operations might kind of be reaching a kind of a threshold for operational expansion.

I think it's steady as we go, continuing the initiatives that we've spoken about previously, continue to bear fruit, and we'll continue to do that. There's, as David said, a lot of opportunity. We might be the leader in assisted living, but gee whiz, at 14% market share, there's a lot of opportunity out there for us.

Great. Thank you.

A reminder, if you would like to ask a question, please press star 1 to raise your hand. We have no further questions in the queue. This concludes today's call. Thank you for attending. You may now disconnect.