Overview of Guardian Pharmacy Services

Guardian Pharmacy Services is a leading provider of pharmacy services to long-term care facilities (LTCFs) such as assisted living facilities and behavioral health facilities. The company offers a range of technology-enabled services to help residents adhere to their medication regimens, which in turn helps reduce healthcare costs and improve clinical outcomes.

Guardian Pharmacy Services contracts directly with LTCFs to serve as the primary pharmacy provider for their residents. The company provides high-touch, personalized clinical, drug dispensing, and administration services tailored to the needs of residents in lower-acuity LTCFs. Guardian also has the capabilities to serve residents in all types of LTCFs.

The company’s services include prescription intake, packaging drugs into unit or multi-dose compliance packaging, electronically tracking each medication, and providing training and compliance support to LTCF staff. As of the end of 2024, Guardian’s 51 pharmacies served approximately 186,000 residents in 7,000 LTCFs across 38 states.

Recent Developments

In 2024, Guardian Pharmacy Services completed a corporate reorganization and initial public offering (IPO). Prior to this, the business was operated through Guardian Pharmacy, LLC and its subsidiaries. As part of the reorganization:

• Guardian Pharmacy, LLC’s preferred units were converted to common units.
• Membership interests in Guardian’s subsidiaries were converted to common units of Guardian Pharmacy, LLC.
• Guardian Pharmacy, LLC became a wholly-owned subsidiary of the newly formed Guardian Pharmacy Services, Inc.
• Guardian Pharmacy Services, Inc. issued 54 million shares of Class B common stock in exchange for Guardian Pharmacy, LLC’s common units. These Class B shares will automatically convert to Class A common stock over a 2-year period.
• Guardian Pharmacy Services, Inc. completed its IPO, issuing 9.2 million shares of Class A common stock and raising $119.8 million in net proceeds.

The reorganization and IPO resulted in Guardian Pharmacy Services, Inc. becoming a publicly traded holding company for the pharmacy business. It also led to the recognition of significant share-based compensation expense related to the modification of restricted interest unit awards.

Financial Performance

Guardian Pharmacy Services’ revenue grew 17.4% in 2024 compared to 2023, reaching $1.23 billion. This increase was driven by both organic growth (adding new LTCF customers and increasing resident adoption) as well as $55.1 million in revenue from acquisitions completed during the year.

Cost of goods sold also increased 17.4% in 2024, in line with the revenue growth, and remained at 80.1% of revenue. This indicates that the company’s gross profit margin was stable year-over-year.

However, selling, general, and administrative (SG&A) expenses increased 83.6% in 2024, rising from $167.4 million to $307.3 million. This was primarily due to a $131.5 million increase in share-based compensation expense related to the modification of restricted interest unit awards in connection with the corporate reorganization and IPO.

Excluding the impact of share-based compensation, adjusted SG&A expenses increased more modestly, from $150.0 million in 2023 to $171.4 million in 2024. This 14.3% increase was driven by higher employee headcount to support the company’s organic and acquired growth.

As a result of the significant increase in share-based compensation, Guardian Pharmacy Services reported a net loss of $71.0 million in 2024, compared to net income of $37.7 million in 2023. However, adjusted EBITDA, which excludes the impact of share-based compensation and other non-recurring items, grew 19.2% from $76.2 million to $90.8 million.

Strengths and Weaknesses

Guardian Pharmacy Services’ key strengths include:

• Differentiated service offering: The company provides high-touch, personalized pharmacy services tailored to the needs of lower-acuity LTCF residents, which sets it apart from national competitors focused on skilled nursing facilities.
• Strong market position: Over two-thirds of Guardian’s revenue comes from assisted living and behavioral health facilities, which the company believes to be the most attractive and fastest-growing segment of the LTCF market.
• Robust organic and acquired growth: The company has demonstrated the ability to grow both organically by adding new LTCF customers and increasing resident adoption, as well as through strategic acquisitions.

Potential weaknesses or risks include:

• Reliance on government reimbursement: A significant portion of Guardian’s revenue comes from Medicare and Medicaid, making the company susceptible to changes in these government programs.
• Integration of acquired businesses: The company will need to successfully integrate newly acquired pharmacies and achieve expected synergies to realize the full benefits of its acquisition strategy.
• Regulatory environment: The pharmacy industry is highly regulated, and Guardian must maintain compliance with various laws and regulations, which could result in fines, penalties, or other liabilities.
• Competition: The company faces competition from other pharmacy providers, both regional and national, which could impact its ability to win new LTCF contracts or retain existing customers.

Outlook and Future Plans

Guardian Pharmacy Services’ core growth strategy focuses on increasing the number of residents it serves through a combination of organic growth (new LTCF relationships, increased resident adoption) and acquired growth (acquiring operating pharmacies).

The company believes it is well-positioned to continue serving the assisted living and behavioral health facility market, which it sees as the most attractive and fastest-growing segment of the LTCF industry. Favorable industry trends, such as aging demographics, increases in assisted living residents, and enhanced quality of care, are expected to drive increased demand for Guardian’s high-touch pharmacy services.

To support its growth plans, Guardian has ample liquidity, with $4.7 million in cash and cash equivalents as of the end of 2024, as well as access to a $40 million line of credit. The company also recently paid off its $15 million term loan, further strengthening its balance sheet.

Overall, while Guardian Pharmacy Services reported a net loss in 2024 due to one-time share-based compensation expenses, the company’s core business fundamentals remain strong. With its differentiated service offering, leading market position, and growth strategy, the company appears well-positioned to continue capitalizing on favorable industry trends and delivering value to its LTCF customers and shareholders.