Good day, everyone, and welcome to Guardian Pharmacy's Third Quarter Earnings Call. [Operator Instructions] I will now hand the call over to Ashley Stockton.

Good afternoon. Thank you for participating in today's conference call. This is Ashley Stockton, Senior Director of 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 September 30, 2025. A copy of the press release is available on the company's Investor Relations website. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release as well as in our quarterly report on Form 10-Q to be filed with the SEC, including the specific risk factors and uncertainties discussed in our SEC filings. 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 quarter.

Thank you, Ashley, and good afternoon, everyone. Thank you for joining us as we review another strong quarter for Guardian. Before diving into the details, I want to take a brief moment to reflect on how far we come. This quarter marks an important milestone, our first full year as a publicly traded company. A little over a year ago, we stood on the floor of the New York Stock Exchange to ring the bell, not as the culmination of a journey but as the beginning of a new chapter in the 20-plus year life of our company. When we went public, we made a commitment to continue to execute with discipline, grow with purpose and carry forward the entrepreneurial spirit that has always defined Guardian, all while earning the trust of our new shareholders along the way. I believe that thus far, we've delivered on that promise, and I'm very proud of what our team has achieved. As I look ahead, I'm even more energized by the opportunities in front of us to continue building a company that provides exceptional service to our communities and the residents they serve, creates value for our partners and deliver sustainable long-term growth for our shareholders. With that foundation in mind, let's turn to our third quarter performance, which marked another period of strong double-digit growth across revenue, resident count and adjusted EBITDA, which yielded adjusted EPS of $0.25. Revenue grew 20% to $377 million, a top 13% resident growth driven both organically and through acquisitions. Adjusted EBITDA grew 19% to $27 million, with margins holding steady at 7.2%, including the continued dilutive impact from recent greenfields and acquired pharmacies. Given the strength of the quarter, we are raising full year revenue and adjusted EBITDA guidance, which David will go over in detail…

Thank you, Fred, and good afternoon. Before I begin with a review of our 3Q results, I wanted to quickly mention the recent shelf S-3 filing and lockup agreement we announced in mid-October. Having been a public company for a year now, we recently became eligible to file an S-3 Registration Statement. As such, we filed an S-3 Shelf Registration for up to an aggregate 6 million shares, which has since become effective to provide flexibility to efficiently access the public markets if and when needed and subject to market conditions. In conjunction with that filing, we also announced that we work with our pre-IPO shareholders to lock up approximately 93% of the shares until June 30, 2026. There are no immediate or specific plans to offer securities pursuant to the shelf registration. We view the shelf as a tool for financial flexibility rather than a near-term catalyst, and we will continue to take a disciplined, long-term approach to capital markets activity. Turning to the financial results. I'm pleased to announce another strong quarter for Guardian with adjusted EPS of $0.25. Revenue grew 20% to $377.4 million, reflecting mid-double-digit organic revenue growth. Total resident count ended the quarter at 203,766, up 13% versus a year ago. Upside in revenue this quarter came from several areas. First, a higher percentage of new residents joined early in the period, providing a full quarter benefit. Second, plant optimization efforts continue to perform well, improving coverage for residents while reducing co-pays. Third, vaccine activity was strong as many communities launched their clinics earlier in the season. And finally, acquisitions contributed meaningfully with a full quarter of revenue from Washington and 2 months of contribution from Oregon. This pharmacy is a great strategic fit for Guardian, bringing on board an experienced leadership team with a…

Operator, we'll now open the line for questions.

[Operator Instructions] Your first question comes from the line of John Ransom from Raymond James.

So just a question about the fourth quarter. How would you compare the contribution of the vaccine program this year to last year? I think this is what the third year you've done it and I'm sure you learn a little something every year. But the backdrop is interesting because there's a little less vaccine uptake among the greater world, especially COVID. But I'm just curious kind of what you're seeing with your population, how the uptake looks and just how the program overall compares to what you did last year, which was also very successful?

John, Fred here. Did I hear you say, third quarter or fourth quarter?

Fourth quarter. So in your implied guidance, what's going on with your vaccine program this year compared to last year?

It's steady as we go. You did mention an interesting anomaly that we wondered about, which is the CDC guidance potentially could have caused fewer people to want to be vaccinated, particularly COVID. We are not seeing that. It's steady as we go. However, I will comment that we started the clinic season with a stronger September this year than last. So some of the total perhaps has been pulled forward into Q3.

Okay. And as we think about resident count, it looks like you're only missing one month of an acquisition. So this resident count is a pretty good placeholder for 4Q with a little bit of one month of that one acquisition.

That's correct. Generally, we measure residents served as of the end of the quarter. So the acquisitions that were completed recently are included in the Q3 number. And so recognize that we do see fluctuations quarter-to-quarter, particularly in Q4 as some loved ones are reluctant to move their mother or father into assisted living in certainly the November, December period. So I would expect to see steady as we go in Q4 on resident count.

And just last for me. I know you hit on the IRA issue and the conversations with the PBMs. Using the baseball analogy, how close are you to wrapping up these negotiations and kind of putting a bow on this issue?

John, as you know, these are very sensitive discussions, literally covered by NDAs. So I don't want to comment on specifics with respect to the PBM negotiations other than to reiterate what I said before, which is they're taking shape, and we're growing ever more confident in our ability to offset the headwind.

And Fred, we've talked about this before, but is there any more -- it's always interesting to me like some industries, the payers are more willing to give providers some bogeys that would result in upside to their -- and as we know, you're paying a dispensing fee and you paid a spread. But is there any more indication that they might be -- especially with all the issues going on with Part D and more Part D plans embedded in MA and sensitivity around Part D losses, is there any more chopping of wood -- that's a bad expression, but is there any more kind of fulsome discussion around, "Hey, look guys, why don't we throw in an upside kicker for X or Y?" Or is it still just kind of mechanically the same in terms of just dispensing fee and spread?

Well, we, at Guardian, as having mentioned before, are very willing to think about value-based models because we're very comfortable in the value that we are providing to their insured lives. But it's evolving. There's not a major shift, but each is interested in exploring this idea as are we. So we're working our way towards that, but it's an evolution.

So the normal glacial pace of health care is still -- we'll think about it next year.

One Georgia boy to another, we'll keep chopping that wood.

Your next question comes from the line of David MacDonald from Truist.

Just a couple of additional ones. One, can you guys spend just a quick minute on some of the areas where, from a margin standpoint, if I just look at the amount of acquisition activity that you've had and just kind of the impact in terms of margins as those come on, any couple of key areas that you would flag in terms of where you've done better to continue to maintain those flattish margins despite the meaningful M&A activity?

David, it's David. We've talked about the various cohorts that I mentioned in the comments, our 4- or 5-year cohorts are performing well ahead of our overall margins and the 2- or 3-year cohorts are coming along as well. And we have a substantial investment we've made in the last 18 to 24 months in 11 locations, probably greater than 10% of our overall revenue that are a drag on our overall EBITDA margin. So it takes on average 4 years to get these businesses up to performing where they need to be and some are performing quicker and better and some take longer. So I think it's pretty much steady as she goes. And we're pleased with all the various businesses and where they are in the various cohorts. So it's pretty much steady as she goes.

Okay. And then just one other quick follow-up in that same vein, when you think about the pipeline, it sounds like there's still a fair number of opportunities sitting in front of you. How do you think about pacing, I guess, on 2 fronts. One, just the margin impact as they come on, but also, number two, just are there any kind of operational bottlenecks internally in terms of how many of these things you want to take on at the same time?

Yes. I think we've talked about in the last 24 months, things have been accelerated specifically with the large Heartland acquisition at 4 locations. So I'm not sure we can set expectations to continue at that level. But the pipeline is robust. And as I said, very active, and we see '26, '27 us continuing our similar type approach. We have many contiguous startups that we're looking at as well as an active pipeline. So no real bottlenecks that would impact us being able to continue to execute much as we have this past year.

Your next question comes from the line of Raj Kumar from Stephens.

Maybe just kind of touching on the implied 4Q here. It seems like the dilutive impact to margins is slightly accelerating. So maybe just kind of want to get your thoughts on if that's conservatism or kind of anything to call out on that front?

Raj, it's David. I think our adjusted EBITDA margins were forecast to remain relatively steady. And the biggest impact there would be the investment that we've made over the last 12 to 18 months, depressing overall margins. I think the Q4 will tick up slightly because of the seasonality with the vaccine clinics.

Got it. And then maybe just as a follow-up. I appreciate the commentary on the mature pharmacy kind of margin. Maybe just kind of thinking about what the ceiling or the kind of theoretical ceiling is there from a margin perspective? And kind of also thinking about one of your mature pharmacies, what kind of the available expansion capacities to those pharmacies as we think about that helping out in this overall high single-digit organic revenue growth framework they kind of laid out long term?

We've talked about the impact that our investment in the contiguous start-ups and acquisitions has on overall margin, it's plus or minus 80 basis points. And where can the business be, say, in 24, 36 months or even longer? We hope to continue to optimize these acquisitions, that's going to enhance our overall margin. We're going to leverage the platform that we've built, not only in each pharmacy where we're not to full market share but also leverage our support infrastructure. So 8% higher, we're going to be working on that every day, every quarter. But hopefully, we'll see things continue to improve.

[Operator Instructions] Your next question is a follow-up from John Ransom from Raymond James.

Just going back to the fun topic of Medicare Part D, as you no doubt know, there's a lot of turmoil in the market. There's fewer stand-alone Part D plans. There's more MA-PD plans. And I just wonder how does Guardian look at that? And your plan optimizer tool, are you seeing more switching within your residents? Is it creating more kind of churning behind the scenes? Or is it not something that's risen to the level of something that you've noticed?

I'll start on that one, John. It's very early in the process because the details were late in coming this year. So the big effort is underway as we speak, and we'll know more as we move through the next few weeks.

Okay. And do you -- I'm sorry, do you have a general preference for stand-alone versus MA-PD or do you care?

We're relatively agnostic. We want to help the residents find the best plan for their particular situation in their drug regimen.

Okay. And if you all noticed anything kind of different. I was just looking at some numbers that suggest some small moves. But has there been any change to point out in terms of the mix of brand versus generics or the mix within brand? And I know you're not real levered to expensive biosimilars. But is there anything to call out in the average drug consumption this year versus last year? And does that -- is that bigger than a breadbox for you?

We've mentioned in previous communications that we see increasing levels of acuity, which manifests itself with greater utilization of some of these brands, and that has continued. It's -- I would call it just steadily -- a steady growth in acuity. Obviously, that is also greatly impacted by resident mix this being a market where our residents are turning over. So it can fluctuate quarter-to-quarter, year-to-year depending on that. But in general, these residents that we serve have a high acuity level.

And the fact that the whole Part D deductible and out-of-pocket max has changed, are you noticing that in a shift to the plans being more in the hook in the fourth quarter? Are you seeing any kind of change versus last year when that wasn't the case?

We have not, and I'm surprised at that. Perhaps, it may take more than 1 year.

Thank you very much. There are no further questions at this time. This concludes today's conference call. Thank you very much for your participation. You may now disconnect.