Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Date

Wednesday, May 6, 2026 at 4:30 p.m. ET

Call participants

  • President and Chief Executive Officer — Fred Burke
  • Chief Financial Officer — David Morris
  • Vice President, Investor Relations — Ashley Stockton

Takeaways

  • Revenue -- $336.6 million, representing a 2% increase, driven by organic growth, acquisitions, and plan optimization, with additional benefit from a modest payer mix shift toward more favorable payors.
  • Total Residents -- Increased 10% to approximately 207,000, with assisted living residents maintaining a 70% mix.
  • Script Volume -- Grew 10%, aligning with resident growth.
  • Gross Profit -- $76 million, up 19%; excluding a $3 million discrete benefit, gross profit rose 14%.
  • Gross Margin -- 22.7% as reported; 22% excluding the $3 million gross profit benefit.
  • Adjusted EBITDA -- $29.8 million, increasing 27% with an 8.8% margin; excluding the gross profit benefit, adjusted EBITDA growth was 14% and margin was 8%.
  • Legal Expense -- $3.2 million for securing appropriate reimbursement, added back to adjusted EBITDA; subsequent $8.5 million settlement to be recognized as other income in the next quarter outside adjusted EBITDA.
  • Secondary Offering -- 6.9 million Class A shares priced at $31 per share, including the full over-allotment, enhancing stock liquidity and utilizing the prior S-3 capacity.
  • Cash Position -- $65 million at period end, stable with prior year-end, after absorbing the working capital impact from IRA-driven payment timing shifts.
  • Capital Allocation -- Acquisitions and greenfield investments remain top priorities, with an active M&A pipeline and further infrastructure investment planned.
  • Fiscal 2026 Guidance -- Revenue: $1.4 billion to $1.42 billion (unchanged); adjusted EBITDA: $123 million to $127 million, revised to incorporate the $3 million discrete benefit.
  • IRA Pricing Impact -- Approximately 60% pricing decline for IRA-selected branded drugs led to muted reported revenue growth; mitigating actions offset an estimated $10 million pre-mitigation gross profit headwind.
  • Working Capital Reset -- IRA implementation caused temporary increases in receivables and changes in cash flows, but management confirmed this is a timing shift, not a long-term issue.
  • Omnicare Process -- Increased clarity on a potential strategic path as a stalking horse bidder has been identified, with the company viewing the backdrop as "constructive."

Need a quote from a Motley Fool analyst? Email [email protected]

Risks

  • CEO Burke said, "one area of uncertainty for both us and the broader market is fuel. Given the current geopolitical backdrop, there is potential for continued volatility." Higher fuel costs could be a headwind of "up to a few million dollars annually if prices remain elevated."
  • CEO Burke described a one-time working capital reset from IRA implementation, resulting in temporarily higher receivables and "less offsetting payables," requiring robust systems and capital resources to manage.
  • Ongoing IRA-driven pricing reductions, with management noting a 60% decline in pricing for branded drugs, increase pressure on industry margins and present continued challenges for smaller competitors.
  • SG&A included $3.2 million in legal expense, acknowledged as tied to efforts ensuring appropriate reimbursement, reflecting potential ongoing challenges in negotiating provider-payment arrangements.

Summary

Guardian Pharmacy Services (GRDN 1.77%) demonstrated resilient performance despite IRA-driven pricing declines, delivering above-trend gross profit following effective mitigation measures and a notable $3 million discrete benefit. The company successfully managed operational and payment process disruptions introduced by the IRA, including a temporary working capital reset, and confirmed no underlying cash generation impact. Strategic investments in infrastructure and a robust M&A pipeline position the company for continued expansion, while revised adjusted EBITDA guidance now factors in the discrete quarterly benefit. With enhanced gross profit alignment to operating activity, and an unchanged revenue outlook, management remains confident in navigating near-term uncertainty related to fuel cost volatility and further IRA legislative responses.

  • Gross margin excluding discrete gains moved closer to management's targeted mix, reflecting successful rebalancing of profitability between generics and branded products.
  • The post-IRA regulatory environment prompted Guardian Pharmacy Services to deepen payor relationships and open discussions about future value-based reimbursement models, as characterized under management's statements.
  • Management noted that completed acquisitions continue to dampen consolidated margins by about 80 basis points, a trend expected to persist with further operator integration this year and next.
  • The legal resolution yielding an anticipated $8.5 million payment, set to appear as other income next quarter, will not be included in adjusted EBITDA results.
  • The secondary offering priced at $31 per share increased liquidity and broadened the shareholder base without diluting existing holders, according to management.
  • National accounts continue to influence M&A targeting, supporting further expansion in assisted living, where the company maintains approximately 13%-14% market share and views continued growth opportunities as substantial.

Industry glossary

  • IRA (Inflation Reduction Act): Legislation impacting drug pricing and reimbursement mechanisms, particularly affecting branded pharmaceutical margins in the long-term care pharmacy sector.
  • Stalking Horse Bidder: An initial bid on assets in a sale process, setting a minimum acceptable offer and often providing clarity in competitive M&A scenarios.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to Guardian Pharmacy Services, Inc.’s 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 1 to raise your hand. To withdraw your question, press 1 again. I will now hand the conference over to Ashley Stockton. Please go ahead.

Ashley Stockton: Good afternoon. Thank you for participating in today’s conference call. My name is Ashley Stockton, Vice President, Investor Relations for Guardian Pharmacy Services, Inc. I am joined on today’s call by Fred Burke, President and Chief Executive Officer, and David Morris, Chief Financial Officer. After the close today, Guardian Pharmacy Services, Inc. posted its financial results for the quarter ended 03/31/2026. A copy of the press release is available on Guardian Pharmacy Services, Inc.’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 and quarterly report on Form 10-Q, as well as the specific risks 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 Guardian Pharmacy Services, Inc.’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 Guardian Pharmacy Services, Inc.’s Investor Relations website. I will now turn it over to Fred for commentary on the first quarter results.

Fred Burke: Thank you, Ashley, and good afternoon, everyone. We appreciate your continued interest in Guardian Pharmacy Services, Inc. as we report our first quarter results and, importantly, our first full quarter operating under the new IRA framework. I am pleased to report that we delivered solid results. Before David walks through the financials, I would 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 have seen in decades. Let me start with the revenue impact. Across the industry, pricing on IRA-selected drugs in 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 last year, we proactively took coordinated firm-wide actions, including direct negotiations with our payor partners, to offset 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 across the system, as well as the timing and synchronization of cash flows. For instance, post-adjudication all IRA-branded drugs are now further processed through the Medicare Transaction Facilitator, an online platform established by CMS. This has introduced additional steps into the transaction life cycle and led to a delay in the timing of certain payments. Data submission formats also varied across manufacturers, adding even more complexity to the end-to-end process.

Our team navigated these changes very effectively. Lastly, the IRA created a one-time working capital reset as it altered how and when cash moves through the system, resulting in long-term care pharmacies temporarily carrying higher receivables with less offsetting payables as the system rebalanced. This was fully within our capacity to manage given the strength of our balance sheet. We believe dynamics like these may prove far more challenging for smaller operators who lack the necessary systems and access to capital, further highlighting the advantage of scale in our model. Overall, as it pertains to the IRA, I can now say with confidence and clarity that the business performed in line with our expectations.

Pricing is flowing through as we forecasted. Reimbursement is tracking in line and the new payment processes, while complex, are functional. We also maintained strong service levels, preserved customer relationships, and delivered on our financial objectives. Just as importantly, we demonstrated our ability to anticipate outcomes and execute on our strategy. Successfully forecasting this complicated and unprecedented environment speaks to the expertise of our teams and the strength of our data and analytics capabilities, which gives us greater confidence in how we manage and predict the business. Across the broader industry, there has been no legislative resolution to the unintended consequences of the IRA, and we expect continued pressure on our peers as they adjust.

While there is still discussion around potential legislative relief, including a bipartisan bill proposing a dispensing fee to support long-term care pharmacies, we view the likelihood of any near-term action as uncertain at best. Returning to our quarterly performance, results were driven by strong underlying fundamentals, including solid resident and script volume growth, with a portion attributable to items not reflective of the core operating run rate. Results included approximately $3 million of discrete benefits to our gross profit from favorable payor dynamics and a manufacturer inventory credit associated with the IRA. These flowed through at a full incremental margin to adjusted EBITDA.

Consistent with our commentary last quarter, items such as these cannot be forecasted as recurring in our underlying quarterly run rate. 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 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 are updating our full-year adjusted EBITDA guidance to include the $3 million benefit recognized in the quarter. Our updated adjusted EBITDA guidance is $123 million to $127 million, up from $120 million to $124 million. Revenue guidance remains at $1.4 billion 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 forward. While the process may continue to evolve, the current backdrop appears constructive for Guardian Pharmacy Services, Inc. From our perspective, periods like this can create some dislocation opportunity, where the foundation we have built, consistent service, and financial stability matters even more. 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 do so. Lastly, I want to recognize the work of our teams across the organization. I could not be more proud of the people driving this business forward every day at every level. With that, I will turn it over to David to review the quarter.

David Morris: Thank you, Fred, and good afternoon, everyone. I will 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 thousand at quarter-end, with assisted living residents continuing to represent roughly 70% of our mix. Script volumes were also strong, increasing 10% year over year. Revenue for the quarter was $336.6 million, reflecting contributions from organic growth, acquisitions, and continued plan optimization efforts. In addition, resident reenrollment drove a modest mix shift toward more favorable payors.

Reported revenue was up 2%; absent the government-mandated price declines from the IRA, revenues would have been up low double digits year over year. Gross profit was $76 million, up 19% year over year and up 14% excluding the previously mentioned $3 million benefit. 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 legal expense related to efforts that ensure appropriate reimbursement across our payor relationships. We actively advocate for fair payment for services we provide, which at times includes pursuing resolution through legal channels.

Subsequent to quarter-end, we reached a settlement related to this matter resulting in an $8.5 million cash payment that will 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 $1 million. Stock-based compensation was $1.9 million in the quarter. As a reminder, we expect SBC to run at approximately $3 million per quarter for the remainder of the year. Adjusted EBITDA for the quarter was $29.8 million, representing 27% year-over-year growth and an 8.8% margin. Excluding the $3 million benefit, adjusted EBITDA grew 14% with an adjusted EBITDA margin of 8%.

Acquisitions completed over the past two years are collectively contributing modest profitability in the quarter but remain well below our consolidated margin profile, dampening margins by approximately 80 basis points. The effective tax rate for the quarter was 26%, in line with our expectations, and adjusted EPS was $0.29 per share. 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 payouts and higher private pay AR balances. We also absorbed the one-time working capital impact associated with the IRA transition. Approximately half of the working capital used in the quarter was attributable to the IRA.

Importantly, this reflects a temporary timing shift rather than a structural change and does not impact the underlying cash generation of the business. We expect working capital and cash conversion to normalize over the balance of the year. With a strong cash balance and minimal debt, our capital allocation priorities remain unchanged and on track, with acquisitions and greenfield investments at the forefront. We are in active 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 billion to $1.42 billion.

We are 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. We remain confident in our underlying growth drivers and our visibility into the impact of the IRA. As the year progresses and we gain additional visibility, we will continue to assess our outlook. Lastly, I want to acknowledge our non-dilutive secondary offering priced in the quarter. The offering was for 6.9 million Class A shares, including the full exercise of the underwriters’ over-allotment option, and was priced at $31 a share.

This transaction enhanced the liquidity of our stock and broadened our investor base. It also fully utilized the capacity under our prior Form S-3. As a normal course of business, today we filed a new shelf registration statement to maintain flexibility to undertake additional offerings in the future. At this time, we do not have any plans to utilize the shelf. In closing, we delivered a solid start to the year, successfully transitioned into the new framework under the IRA, and continue to execute against our long-term strategy. As always, I want to thank our teams across the organization for their continued execution and commitment, and to our investors for their continued support of Guardian Pharmacy Services, Inc.

Operator, we will now open the call for questions.

Operator: We will now open the call for questions. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 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 Tanquilut with Jefferies. Please go ahead.

Brian Tanquilut: Hey, good afternoon, and congrats on a solid quarter. Maybe, Fred, I will start. When I look at your balance sheet, you obviously have a good bit of cash still on the balance sheet, and you are generating pretty good free cash flow. How should I think about capital allocation between M&A now and other priorities, given how accretive these transactions are? And how should we be thinking about the pipeline that is in front of you for deals, both tuck-in and scaled?

Fred Burke: 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 have seen recently, even in the balance of this year, and we will continue to evaluate other ideas and alternatives with respect to that cash.

Brian Tanquilut: Understood. And maybe, Fred, as I think about the dynamics that we are seeing in senior housing, which underpins your business, for example, the largest player has seen occupancy declines three straight months now, kind of bottoming out in April. What are you seeing in the market, and how is that translating into your relative strength versus what we are seeing occupancy-wise in terms of your revenue line?

Fred Burke: Brian, as you know, Q1 is 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. We have the silver tsunami occurring before our very eyes, and we are very positive and constructive on continuing the organic growth that we have always forecast.

Brian Tanquilut: Awesome, Fred. Thank you so much.

Fred Burke: Thank you.

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

John Ransom: Hey, guys. I am going to dazzle you with some SEC math, so, David, buckle up. 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 that the two of those things would have been a push. Is that right, or am I missing something? Or did you add the $3 million of legal back to adjusted? I am sorry if you said that; I must have missed it.

David Morris: Well, the $3.2 million legal is added back. And the $3 million good guy is included.

John Ransom: Okay. Alright, thanks for clarifying that. And just secondly, Fred, stepping back, I know you talked about some of the second-order impact of the IRA on the competitive climate, but did this end up being a win, a tie, or a loss in terms of your relationships with your PBMs? And are we at least starting conversations around getting paid for some of the good value-based care work that you do, with interdicting script problems? 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?

Fred Burke: 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 are 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, we do have several things underway with respect to value-based reimbursement, and I am very pleased and optimistic that as we move forward, we will have more and more of that.

John Ransom: Thanks. And just one other one. I know you have mentioned that one of the changes is the migration of profit under the new arrangement being closer to your 92/8 split between generics and branded. Are there any—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 relatively low-cost scripts?

Fred Burke: Well, you have honed in on one of the objectives—I will call it ancillary objectives—that we had in this process, and it is something we have 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 that you mentioned. It is actually 92/8 for us, and we think that is important because, to the point you made, it does mitigate risk associated with future initiatives to lower branded price, such as NFP and, of course, the most [inaudible] as well.

More importantly, it makes it a lot more runnable as a business when you align margin with activity and costs. So we are pleased with the progress we are making on that.

John Ransom: Well, thanks so much. I will leave it there. Thanks.

Fred Burke: Thanks, John.

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

Allen Lutz: Good afternoon. Thanks for taking the questions. For either Fred or David, it is 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 were not able to go back to the PBMs and renegotiate the way that you were, I am curious—I know it is very early; we are talking about four or five months that some of these IRA changes have gone in—have any of the conversations you are having with prospects changed? Has there been more of an urgency from some competitors that might be looking to be acquired?

If it has not yet, would love to get a sense of your expectations on how this evolves over the rest of the year.

David Morris: Hey, Allen. It is David, and welcome. It is great to have you on here. Our pipeline, as Fred and I mentioned, continues to remain robust. I think it is early into the IRA process, and obviously there are legislative activities that have been going on, and we are advocating for the industry at large. So I would say no dramatic shift, and it is early. We are one quarter into the IRA implications, and 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. We will continue to monitor this as we go through this year.

Allen Lutz: Great. And then you raised EBITDA by $3 million. I think you called out that this is really a reflection of the discrete benefits that you 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 is embedded in the current EBITDA guide, is it fair to assume that those assumptions are contemplated in the guide? Or is this something that, if we get to the back half of the year and fuel costs remain high, could be a headwind? Just trying to get a sense of what is included and what is not included.

Fred Burke: I think we can represent that our guidance includes what we believe will be our ability to overcome the fuel headwind, but we will have to be watching that carefully as we go. We feel very comfortable with our guide.

Allen Lutz: Great. Thank you.

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

Grayson McAllister: Hey, guys. This is Grayson on for Dave. I just wanted to follow up on the conversation around branded versus generic. Back to Ransom’s question, when we think about your efforts in 2025 to help get over some of the IRA impact and tie more of your economics to generics versus branded, can you give us a sense 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 2026?

Fred Burke: Grayson, it is a great question. We are partially the way there. We have more work to do, but we are currently involved in doing exactly that with other of our payor [inaudible].

Grayson McAllister: And then just following up on the M&A pipeline, could you give a ballpark percentage of what percent of the pipeline is driven by national partners in certain markets that might be asking for your capabilities or asking you to expand into that market? And would it be safe to assume that has moved higher over the last year or two as the value prop has really played out?

David Morris: Grayson, obviously our national accounts and their footprint and where they are asking for Guardian Pharmacy Services, Inc.’s services plays a key role in our M&A activity and targeting markets, and that is what has driven, in large part, our focus the last couple of years and continues to do so. Then we line that up with our pipeline of like-minded partners and target that and move from there. As we say, we have 13% or 14% of the U.S. assisted living market, so there continues to be a very large opportunity for us to continue to grow the business like we have historically.

Grayson McAllister: Got it. Thanks, guys.

Operator: Your next question comes from the line of Raj Kumar with Stephens. Please go ahead.

Raj Kumar: Hey, good afternoon. Maybe just one on guidance. Appreciate the commentary on the M&A-related drag. As we think about that cohort, can you talk about what is embedded into guidance in terms of that 80 bps drag being consistent throughout the year, or any expectation of that improving as those operations continue to ramp?

David Morris: Hey, Raj, it is David. Good to have you on the call. Keep in mind that this quarter it is dampening our EBITDA margins by about 80 basis points, but as the existing businesses and cohorts improve, we are going to be making additional investments and expanding continuously. So while the existing platform is getting better, we are bringing on new operators who will depress. Whether it is 80 basis points, 90, or 70, we see that trending only into 2026 and 2027 at a similar rate.

Raj Kumar: Got it. And then as I think about organic growth and the opportunity ahead, any callouts from a quarter perspective in terms of new senior housing facilities additions or operational expansion in terms of growing capacity at existing facilities? Any color on that as some of these mature operations might be reaching a threshold for operational expansion?

Fred Burke: I think it is steady as we go. Continuing the initiatives that we have spoken about previously will continue to bear fruit. There is, as David said, a lot of opportunity. We might be the leader in assisted living, but at 14% market share, there is a lot of opportunity out there for us.

Raj Kumar: Great. Thank you.

Operator: A reminder, if you would like to ask a question, please press 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.