Extendicare (TSE:EXE) executives highlighted a “milestone year” in 2025, pointing to organic growth in home health, improved margins across operating segments, and the addition of acquisitions that management said are tracking ahead of initial expectations.
On the company’s fourth-quarter conference call, President and CEO Michael Guerriere and CFO David Bacon said results benefited from strong demand for home health services, steady long-term care occupancy, and continued progress on Extendicare’s Ontario redevelopment pipeline. Management also provided an update on its pending acquisition of CBI Home Health and related financing.
Quarterly performance and profitability
Bacon said Q4 net operating income (NOI) included CAD 3.9 million of net favorable out-of-period items, primarily tied to workers’ compensation rebates received in LTC and home health, partially offset by retroactive wage adjustments in LTC. Excluding out-of-period items, he said fourth-quarter NOI improved by CAD 14.3 million, or 30.2%, reflecting revenue growth and an estimated CAD 8.6 million NOI contribution from the two acquisitions, partially offset by higher operating costs.
Adjusted funds from operations (AFFO) per share in Q4 was reported at CAD 0.337, down slightly from the prior year. Bacon attributed the change to higher maintenance capital expenditures in the quarter, including additional maintenance CapEx from acquired LTC homes. When excluding out-of-period items in both periods, management said AFFO per basic share rose 6% to CAD 0.301. Bacon noted the December 2025 equity issuance had an approximately CAD 0.01 per share impact on reported AFFO per share and earnings per share in Q4.
Home health: strong organic demand, margin expansion focus
Extendicare’s ParaMed home health segment remained a key focus of the call. Management reported 15.3% organic volume growth in Q4 and said demand continues to be supported by demographic trends and capacity constraints in long-term care.
For Q4, Bacon said home health revenue increased CAD 49.7 million, or 33.6% year over year, driven by CAD 26.6 million from Closing the Gap and the 15.3% organic increase. Excluding out-of-period items, NOI margin in the segment improved 280 basis points to 13.2% in the quarter, while Guerriere cited the same 13.2% margin and said it reflected the scalability of the company’s “technology-enabled back office.”
In Q&A, Guerriere said the pace of growth has been higher than the company expected, noting demographic growth in served populations is closer to 4% but that governments are increasingly using home health to address long-term care capacity limitations. He referenced Ontario statistics indicating the number of patients in acute care hospitals waiting to go home or to long-term care declined about 14% from the prior year, which he said the company believes is supported by higher home care volumes.
Executives cautioned that growth is unlikely to continue at the current rate indefinitely. Guerriere said the company expects growth to moderate toward a mid-to-high single-digit pace, though he said the timing is uncertain. He also discussed labor dynamics, saying recruiting is currently manageable in major municipalities, but rural and remote geographies still present constraints, and immigration policy changes are a file the company is monitoring.
On profitability, management suggested there is still room for margin expansion in home health. Bacon said Extendicare’s normalized full-year 2025 home health margin was 12.8% and reiterated a view that the business “should be a 13% plus margin business,” while also noting that sustained high growth could require step changes in the cost structure that may temper margin gains. He also said labor generally represents 75% to 80% of the cost structure in the segment.
Long-term care and managed services trends
In long-term care, Guerriere said Q4 NOI margin improved to 10.9%, up 90 basis points year over year after adjusting for out-of-period items, and said occupancy remained steady at 98%. Bacon said long-term care revenue, excluding out-of-period impacts, increased CAD 26.3 million, or 11.8%, driven by the full-quarter contribution from the nine LTC homes acquired from Revera. He said the benefit was partially offset by approximately CAD 7.6 million in revenue lost from the closure of two redeveloped Class C homes that were replaced by new homes in the company’s joint venture.
Managed services results reflected changes in the Revera relationship. Bacon said managed services revenue declined CAD 3.6 million to CAD 15.3 million and NOI fell CAD 1.8 million to CAD 8.5 million, citing the termination of management contracts after Revera sold 30 LTC homes (nine of which were acquired by Extendicare and moved into its LTC segment). Guerriere said third-party and joint venture beds served by SGP rose to over 153,500, up 5% from the prior year quarter, and that managed services NOI margin was 55.5%, within the company’s long-term expectations of 50% to 55%.
CBI Home Health acquisition, financing, and leverage outlook
Management also updated investors on Extendicare’s agreement, announced in November 2025, to acquire the CBI Home Health business for CAD 570 million. Guerriere described CBI as highly complementary to ParaMed, adding scale in Western Canada and introducing new delivery models that management believes can expand organic growth opportunities and drive synergies through Extendicare’s technology platform.
Extendicare said the CBI transaction is expected to add approximately 10 million hours and 8,500 team members to its home health segment and contribute an estimated CAD 478 million of revenue and CAD 61.9 million in pro forma adjusted EBITDA. Guerriere said the deal is expected to be 9% accretive to earnings per share at the outset, rising to 15% with anticipated synergies of CAD 7.4 million.
On timing, management said the regulatory process is “progressing well” and expressed hope to close in early Q2. In Q&A, Guerriere said there were no unexpected developments but emphasized that regulatory approvals are required.
To help fund the acquisition, Extendicare completed a CAD 200 million bought-deal private placement in December, generating net proceeds of CAD 191.5 million. Bacon said the company ended the year with CAD 348 million in cash and CAD 154 million of available lines of credit, and also secured a committed CAD 214.5 million upsizing of its senior secured credit facility, extending maturity to 2029. Based on the funding plan described on the call, Bacon said pro forma leverage is expected to be approximately 2.7x to 2.9x total debt to adjusted EBITDA at closing.
Redevelopment pipeline and dividend increase
Extendicare also discussed progress on its Ontario long-term care redevelopment program. Guerriere said the company commenced preliminary construction of a 320-bed home in Sudbury to replace a nearby 278-bed Class C home, bringing the number of homes under construction to seven, representing total investment of CAD 692.3 million. He said Extendicare continues to use its joint venture platform to fund redevelopment while retaining a 15% managed interest, and that it is awaiting final regulatory approval to sell the new Sudbury project into the joint venture, expecting to close “in the coming weeks.”
Management said it remains on track to open two 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, the company completed the sale of its vacated West End Villa Class C home in Ottawa for CAD 12.5 million, resulting in an after-tax gain of CAD 10.1 million.
On capital returns, Guerriere announced a 5% increase in the monthly dividend to CAD 0.0441, effective with the dividend to be declared in March. He said the payout ratio was 42% for the quarter and 46% for the full year (both adjusted for out-of-period items), which he said leaves flexibility for capital allocation decisions.
About Extendicare (TSE:EXE)
Extendicare Inc, operating solely in Canada, is the largest private-sector owner and operator of long-term care (LTC”) homes and one of the largest private-sector providers of publicly funded home health care services.
