Thank you, and good morning, everyone. Welcome to our fourth quarter and year-end earnings call.

I’m joined this morning by our Chief Financial Officer, Andrew Mok. The fourth quarter of 2020 was a tremendous finish to what was a truly transformational year for CareRx.

It was a quarter that further underscored the strong momentum in our business while demonstrating the power of operating leverage in our business model as we add beds to our national pharmacy platform. As Andrew will explain in more detail, the Remedy’s acquisition and the early completion of the integration of that acquisition contributed meaningfully to adjusted EBITDA growth in the quarter.

Revenue for Q4 once again reflected growth in the number of bed service year-over-year, attributable primarily in this quarter to the Remedy’s acquisition. The average number of beds serviced during the quarter was 48,768, up 55% year-over-year, but down slightly from Q3, as we continue to experience a temporary reduction in the average number of beds serviced as a result of COVID-19.

Q4 revenue increased 44% year-over-year to 46.4 million. For the full-year of 2020, revenue grew by 30%.

Completion of the Remedy’s integration generated approximately $0.5 million in cost saving synergies in Q4, roughly two-thirds of these $750,000 in savings we expect to generate quarterly on a go-forward basis or $3 million on an annualized basis. As a reminder, these cost savings resulted primarily from the consolidation of our Pharmacy Fulfillment network and a reduction in the number of sites to 18 by the end of 2020.

These synergies helped us deliver 65% growth in adjusted EBITDA in Q4 as well as an increase in EBITDA margin to 8.8%. 2020 was reaffirmed in terms of both the growth opportunity that exists for us and our ability to execute on it.

We now have a multiyear track record of growing our bed count from both new customer contract wins and acquisitions. And in the last few months, we have announced an additional new contract and an acquisition that has positioned us to continue that growth trajectory moving forward.

Just as importantly, I should emphasize that our team’s ability to execute on the integration of acquisitions and the on-boarding of new beds has been critical to translating growth initiatives into meaningful improvement in financial performance. Our execution in 2020 was a clear testament to the capabilities of our team and gives me tremendous confidence as we continue to pursue our growth strategy moving forward.

Our momentum has carried forward into 2021. In January, we announced a meaningful tuck-in acquisition, entering into a definitive agreement to acquire SmartMeds pharmacy, which serves more than 2,400 residents in long-term care, assisted living and other institutional settings in Ontario.

The closing consideration will be $4.5 million, $4 million in cash and $475,000 in shares. The business is expected to contribute run rate annual revenue of $13 million and run rate annual EBITDA of approximately $1.5 million prior to any benefits from the integration of the operations of the two businesses.

We are currently aiming to close that transaction by March 31st. SmartMeds was compelling to us for a number of reasons.

It is a well-run organization with significant customer loyalty and a broad range of customers in both long-term care and other institutional settings. It also has an excellent reputation as a leader in innovation, quality, customer service and technology.

We also continued to execute on our organic growth strategy, winning a new 1100 bed multiyear contract with an Ontario-based seniors home operator. The new bed spanned 13 seniors housing communities in Ontario.

We began on-boarding those beds with the commencement of the contract in January. Finally, in February, we strengthened our balance sheet with the completion of a very successful equity offering, the public component of which was upsized by 30% immediately after launch or total gross proceeds of just over $21 million, including the full exercise of the overallotment option.

The offering provides us with additional capital to fuel the execution of our growth strategy, which I will discuss after turning things over to Andrew to discuss our Q4 results in more detail. Andrew.

Thank you, David, and good morning, everyone. First, as a reminder, our financial statements and MD&A for the quarter and the full-year have been filed with SEDAR and are also available on our website.

Revenue for the fourth quarter of 2020 increased 14.2 million or 44% to 46.4 million from 32.2 million in the fourth quarter of last year. This increase was primarily attributable to the contribution of the Remedy’s business of 15.1 million, which was slightly offset by the impact of the amendments to the Ontario Drug Benefit Act, which came into effect on January 1st of last year.

In addition, as David mentioned earlier, growth was also slightly offset by temporary occupancy reductions in some of the homes we serviced due to COVID-19. I will take this opportunity to remind you that as per our announcement in mid-January.

The Ontario Ministry of Health made the decision to pause its previously scheduled changes to long-term care pharmacy funding for a year. The change would have seen the annual capitated fee decrease to $1400 per bed from $1500 per bed on April 1st of this year.

That step down is now scheduled to resume on April 1st of 2022. Turning to adjusted EBITDA.

Adjusted EBITDA in Q4 increased by 1.6 million or 65% year-over-year to 4.1 million from 2.5 million in Q4 of last year. The increase was driven by a $1.6 million contribution from the Remedy’s business, which included $0.5 million in cost saving synergies that were achieved during the quarter.

Again, we expect annualized cost savings from the Remedy’s integration to be $3 million and expect to fully realize those in Q1 of 2021 and onwards. Turning to our balance sheet.

We finished Q4 with $19.6 million in cash. That is up from 18.6 million in the prior quarter.

Cash flows during the quarter included cash provided by operations of 2.8 million and the 1.5 million of proceeds from the divestiture of one of our non-operating subsidiaries at the beginning of the quarter, which were partially offset by capital expenditures of 0.7 million and cash used in financing activities of 2.1 million. Net debt at the end of Q4 stood at 38.5 million, and our run rate net debt to adjusted EBITDA was 2.4 times for Q4, decreasing from 2.6 times in the prior quarter and 5.7 times a year-ago.

As David mentioned earlier, subsequent to quarter end, we completed a bought deal public offering with a concurrent private placement of just under five million shares at a price of $4.25 per share for total gross proceeds of 21.2 million, which included the full exercise of the overallotment option. The offering gives us additional financial flexibility as we continue to aggressively pursue opportunities under our growth strategy.

I will now turn the call back over to David for some concluding comments. David.

Thank you, Andrew. 2020 was truly an incredible year.

Despite the challenges of the COVID-19 pandemic, we made and successfully integrated the largest pharmacy acquisition in our history; we became the largest and fastest-growing pharmacy provider to seniors’ homes in Canada; we executed a successful rebranding of the company. We strengthened our national fulfillment network and enhanced our team and capabilities; we continue to transform our balance sheet and improve our financial performance; and perhaps most importantly, we further strengthened our value proposition to our home operator partners and helped support them through an incredibly challenging period.

But in many respects, we are just getting started. Having nearly doubled our bed count in the past three years, it is our intention to do the same thing in the next three years with a target of 100,000 beds serviced by 2023.

We are now the only major pharmacy player that is singularly focused on servicing the unique and complex needs of congregate care settings. And we have become the obvious consolidator in a market that for many reasons, requires further consolidation.

The benefits and enhanced capabilities that come with increased scale will allow us to provide a superior pharmacy service offering to our customers while also driving the fundamental metrics that underpin shareholder value. We are building a clear track record of being able to identify compelling acquisition opportunities, transact successfully and at attractive multiples and integrate in a manner that drives meaningful financial synergies while also strengthening our service capabilities to customers.

The M&A pipeline remains very active, and it is our goal to execute on additional transactions this year. This roll up strategy supplemented by what we continue to believe as a significant organic growth opportunity gives us multiple paths to achieve our 100,000 bed target.

I would like to close by thanking our team for their incredible dedication and contributions during this past year. Although we are proud to say that COVID-19 did not have a material impact on our financial results, that does not mean it did not affect us.

It profoundly affected our lives, how we worked together and on-boarded new team members from the Remedy’s acquisition. It had a devastating impact on the vulnerable residents of our home operator partners as well as their families.

And it created business challenges and pressures for us as we managed through lower occupancy levels and increased costs associated with outbreaks and other activities. But our team resolved not to let this pandemic stop us from achieving our objectives.

The most important of which was being the partner our customers required in their time of need. I’m proud to be part of this team, and I look forward to us writing the next chapter of our growth story together in 2021.

I would now like to open the call to questions. Operator.

Good morning David and congratulations on a great Q4 and 2020. Just an update though, you gave a pretty comprehensive update on the pharmacy side.

Just on the pharmacy at-home, is there an update to how things are progressing now?

Yes. Good question, Doug.

It is still early days. As you know, we launched that venture late in the summer.

At this point, it is an Alberta-only venture, so Calgary and Edmonton. We are really encouraged.

We think this is a space that has a lot of interest, but also starting to drive some increased adoption of alternate methods of receiving pharmacy services. We are going slow.

We are not going to invest an excessive amount of capital, and so we really believe in the story, but it is gone well. And I think we obviously have paid attention as well to what’s happened in the broader sector in terms of the attention on this virtual pharmacy world.

So more to come. I think we haven’t determined yet what the pace of our ramping up of that business will be.

But I would say we are very satisfied with the progress to-date, and you should see us expand that further in 2021.

Okay. And on the Think Research partnership, can you expand a little bit of that or what do you expect to get out of that?

Sure. I mean, first and foremost, Think Research is just a great company and a great group of people, and so we are excited to be partnered with them.

We actually had a pre-existing partnership two or three years ago, mostly focused on helping us drive some automation in our workflow. The partnership we announced most recently is really focused on increasing the number of residents in retirement homes that use our pharmacy services.

As you know, Doug, there is a subset of the retirement residents that are generally more independent, healthier, don’t use our medication management services, and it is always been part of our growth plan to put a more compelling case in front of them for why they should use our services. The partnership with Think essentially allows us to collaborate with them to offer to a retirement resident the ability to see a doctor virtually and also fill their prescriptions without leaving their room or their home, which, obviously, particularly in a COVID world, is really compelling option.

So that is the essence of the partnership. It is just rolled out, although I heard even this week that some of the homes that we have started it in on a pilot basis, have already started to ask about how fast we can ramp it up to other homes.

So like I said, great company, great partnership. And fundamentally, it is really about driving increased penetration for us in retirement homes.

Okay. Great.

And then final one for me, just an update on [indiscernible], is there anything to speak about there?

Yes. I think we announced late in the fourth quarter that they had done a Series A financing.

So I think, really excited to see that. It included some really high-caliber investors, including long-lived ventures, which is a division of the CK Hutchison group.

So I think they are in good shape from a capital perspective. Their European distribution agreements continued to drive expanded volume.

You may have noticed that in our year-end financials, we wrote up the value of that investment to reflect the growth in our equity investment over the few years since we made it. So we feel good.

Still predominantly, I would characterize it as an equity investment. Canadian activity has been slow, although there have been renewed Canadian pilots and sales activities in the last few months.

So cautiously optimistic that it may also contribute to our business in Canada moving forward.

Thanks very much. That is it for me.

Thanks Doug. Operator Your next question comes from the line of Justin Keywood from Stifel GMP.

Please go ahead, your line is now open.

Good morning and thank you for taking my call. On the SmartMeds acquisition, if I’m calculating it correctly, I think it implies a five to six times purchase EBITDA multiple.

And I’m just wondering, is that a multiple that you can continue to acquire at, or any views of the target multiples that are out there for M&A?

Good morning Jus. Good question.

I think every deal has its own life cycle and valuation. But yes, I think high level, I think if you look at the last two deals we have done, you start to get a general indication of where valuations are.

I think it will differ depending on whether you are talking about a smaller tuck-in single site operator versus something larger than that. But yes, I think the approximate multiple is five times on that deal.

And I would say, although we are always a bit conservative in terms of giving specific synergy targets, we also do think about this on a fully synergized basis as well in terms of what multiple we will pay once we fully integrate the business. So obviously, our expectation will be that we will be even lower on a fully synergized basis.

But I think directionally, yes, that plus the Remedy’s deal probably gives you an indication of how we look at deal structure and valuation.

Okay, thank you. And then just in the target to still double beds under management, are you going to characterize that if that will be primarily through the near-term RFPS and I know there is quite a substantial opportunity there or through consolidation, and what that split could roughly be?

Yes, it is a good question. I mean, candidly, we wouldn’t publicize that target if we didn’t think we had multiple paths to getting there.

It will definitely be both organic growth and M&A. Personally, I would like to see at least half of that growth come from organic growth.

Although COVID, unfortunately, has slowed down things in the last few months, we still believe that that sort of opportunity is out there. But I think I would characterize it as a target balance, almost 50/50.

But obviously, we have levers we can pull to the extent that the best laid plans don’t materialize, and we have an active enough M&A pipeline if necessary, we can ramp that up as well.

Okay. And then we saw the kind of scale benefits show in the quarter and the margin expansion.

Any indication of what the margins could trend towards business as we look out three or four years, and you are seeing the additional beds contribute under management?

It is a good question. I don’t know that we want to provide that much sort of forward guidance on our targets.

I mean, at a high level, I think we always said that at a normalized bed count, so once we return to the pre-COVID levels and fully synergized, that the Remedy’s deal should get us close to that 10% margin. That is certainly not where we are going to stop.

And it is our view that the 100,000 bed version of CareRx will have meaningfully better margins than that 10% number. I don’t know that I would throw anything out there specifically at this point.

But certainly, we are not doing this in order to be the same margin at 100,000 beds as we would be at 50,000.

Understood and thank you for taking my questions.

Thanks Justin.

Good morning gentlemen. So when you look at the environment right now with the vaccinations, I think last count was like 90% through the long-term care and retirement homes.

So they are almost getting 100% here. Are you seeing any pickup in the utilization or again, I think some things were kind of pushed out on the RFP front or deal activity.

Anything that you are seeing that maybe the activity is starting to turn the corner?

Yes. So it is a really good question.

I mean the short answer as of today is nothing yet, but I do think we are increasingly optimistic that it is coming. So yes, as you know, David, it has been a strange few months.

On the one hand, the second wave of COVID was quite devastating in terms of outbreaks in long-term care homes since December and January were really difficult. And so the homes are really been all hands on deck on managing outbreaks, managing testing requirements and then obviously shifting to vaccination.

Fortunately, as you know, there are a number of home operators who are publicly traded. So I would always defer to their comments and their predictions more than mine, they are the experts.

But I think what seems to be the case now is I think there is increasing confidence that we are going to see in the near-term a normalization of a number of things, including occupancy levels. And for us, that will mean a meaningful pop in our bed count.

But I don’t think anyone is comfortably yet predicting when that happens. So I hope by May, when we deliver our Q1 results in May, I think we should have a more clear outlook on when normalization is going to happen.

But as of now, there really isn’t any evidence of that. And certainly, on the RFP side, the COVID-related holding pattern is certainly still in place.

Okay. Any plus or minus on the 100,000 target.

In other words, if things get delayed or they accelerate, any plus or minus that you guys, 5%, 10% around that number?

No, not at all. I think certainly not for a 2023 target.

And even for us, I don’t think our year-end number in terms of targeting has changed. I think that we just have to be cognizant of what the first half is going to be in terms of returning to normal.

Okay. And if you look at obviously, the ODBA and the provincial governments and the delaying and all that, are they starting to, in your view, recognize more value of your role and that this will be maybe permanently put on hold?

Yes. Certainly, on the first part of your question, yes, I think we have had really constructive discussions with the government, particularly with the Ministry of Long-Term Care.

Obviously, our entire sector, it is not just pharmacy, but the long-term care sector is - there has been a meaningful spotlight on it in the last year. And I think good things will come of that.

Included in that, I think, is the recognition that a cut to pharmacy is a cut to long-term care. And I don’t think there is a - I think the pause that was announced, I think, was a clear indication of the lack of any desire to make such a cut.

We are in ongoing discussions and obviously, would be our hope that we could turn temporary pause into something more permanent. More to come on that, but we certainly are happy with the dialogue we have had with the governments, particularly in Ontario, where the most recent change was made.

Okay. And then last one for me, guys.

The Pharmacy At Your Door, you are making good progress in Alberta, maybe [BCNX] (Ph) kind of thing. But would you look to accelerate that.

Again, it is kind of a land grab right now, as you know, on the whole virtual pharmacy online space. Would you look at maybe doing an acquisition there rather than just obviously getting more bed count, but maybe kind of accelerate that because that is obviously one of the key drivers, I think, long-term, more people wanting to stay in their homes.

Maybe acquiring somebody that doesn’t have fulfillment centers and things like that, where you have a natural advantage, is that something that you would look at?

Yes. Good question.

So we are certainly open-minded on strategic options in that space. And obviously, we have paid attention to some of the financing and valuations that have happened.

I wouldn’t necessarily characterize it as a land grab, because I think a lot of the stuff is still valuations and financing based on potential revenue as opposed to anything that is actually real. But yes, I mean obviously, we are trying to build something that is real, that isn’t just hype but actually offers customers a meaningful difference in terms of what they can get from a retail pharmacy.

And you are right in saying that our fulfillment capabilities really do differentiate us from other start-ups in the space. So we are open minded.

I would say there is probably some caution about purchasing something in this market. I just think valuations are something we just need to pay attention to, but we are definitely open-minded about something more than just purely organic as it relates to growth.

Okay. excellent.

Thanks David, thanks Andrew, good results.

Thanks David.

Thanks David.

Hi David, hi Andrew. I think most of my questions have been asked, but just a couple for me here.

In terms of your M&A pipeline today, could you talk to the number of targets in that pipeline and do you have a sweet spot in terms of size. Obviously, it can range, seeing you acquired Remedy’s last year.

But is there a sweet spot in terms of how much revenue you are looking to acquire per target?

Yes. Certainly, on the last part of your question, it is target-specific.

I think we want to acquire well-run businesses with sustainable customer contracts that we can purchase at good multiples. So that could manifest itself in a number of different sizes.

I don’t think I would give color on how many targets. It is certainly multiple.

And I mentioned earlier, I think the high-level balance we are thinking about is sort of a 50/50 organic and M&A play. But that really will be target dependent.

In terms of capacity, I think on tuck-ins, just because a tuck-in acquisition tends to be isolated to a single geographic area, we are very confident we can do multiple tuck-ins in parallel, just because the integration efforts can be sort of a divide and conquer concept. Obviously, something larger if presented itself at the right value, we would obviously be very interested in that, and that might change everything in terms of the revenue contribution and the integration activities related to it.

Okay. Perfect, thank you.

And then on the ODBA, the payment decline, how did they come into effect in April as expected, what kind of impact would that have had on your revenue?

Roughly, I mean, it depends, I guess, on what you used for bed count, because we are a little bit lower because of COVID. But I think high level, the net impact would have been roughly $650,000.

Okay. that is all for me.

Thank you both.

Thank you Tania.

Yes, thanks very much and good morning David. Most of the questions around your acquisitive growth have been asked here.

But maybe just returning to a theme that I have asked on prior conference calls. I mean, now that you have achieved your considerable scale, and you are now the largest long-term CareRx provider in the country, I just kind of wonder how you are thinking about the relative proportions of the way you scale up your bed count by winning new business rather than buying new business through acquisitions.

So maybe just kind of walk me through how you might be thinking about the relative balance there, because I think winning your beds is more cost-effective than buying them, depending on valuations. And then second question is just the delay of the declines in reimbursement per bed in the industry, of course, benefits your competitors as much as they do you, at least for the next year.

So again, just kind of returning to the acquisition multiples, just wondered, it is still early days, but if you are seeing any multiple creep that you might want to consider as you are determining whether you would want to do an acquisition now as opposed to a year from now when the valuations might creep down a bit? And that is it for me.

Thanks.

Yes. Good question, both, Doug.

I mean, on the mix, as I said, I continue to say, we really do feel like this is a mix between organic and M&A. It is certainly the roll-up aspect of the strategy has always been a big part of it.

But we also, I think, recognize that unlike the way this sector has operated for the last five or 10-years, I think there is more differentiation in the space in terms of pharmacy providers. There are customers that are, I think, interested in understanding what their options are.

So we are still very bullish on organic growth. In the last year, I would say, for sure, my bullishness on M&A has gone up in the last year, and that is partly about the opportunities.

It is partly also just about our ability to transact, finance, integrate. I’m definitely more bullish on M&A.

But I would not say I’m less bullish in any way on the organic side. The reality is COVID is just stalled that out a little bit.

But as I said, I feel like we are on the verge of some normalization there. And on multiples, no, we have not seen any changes related to capitation, I mean, at this point.

The ODB announcement was a pause. So there is nothing that is fundamentally changed from a longer-term basis.

And we have got to plan ourselves on the assumption that that capitation ramp will continue to go down, and that is certainly how we would approach any target. So nothing’s changed there.

Thanks David.

Thanks Doug.

Hey guys, just calling in for Chelsea, and congrats on the year. Couple of questions.

I will start with, in terms of - you had the February financing. You have been talking for a while about sort of deleveraging.

Now that you have that extra 20 million, is that where you want it to be or is further delevering still in the works?

Yes, good question. I certainly think debt repayment is an option.

It is probably not our preferred use of capital. As I said, we believe we have the opportunity to do further M&A.

And so using our cash for that or even for CapEx associated with the on-boarding of new beds is probably the preferred use of capital; and that obviously, in itself delevers us by growing our earnings. But certainly, to the extent that that doesn’t materialize, we do have the ability to pay down some of our debt, if that is the right play.

But I think we want to run the gross options to ground in the next few months first.

Sure, sure. Okay.

Yes, fair enough. And then just in terms of a little bit of granularity for the SmartMeds acquisition.

I know you don’t guide for the synergy amount, but can you guide for the timing, which quarters that will hit in?

Yes. Really, at this point, our focus is entirely about closing the deal and welcoming the SmartMeds employees to the company.

So unfortunately, I don’t know that we do more than say that. That is the main focus right now.

And they obviously have a retail pharmacy as well that is relatively - I wouldn’t say new to us, we are experienced in operating retail pharmacies, but we don’t currently do it now. So I think we want to just get to know these people in the business before we make any more definitive commitments around the future.

Sure. Sure.

And so you haven’t necessarily decided to divest the retail pharmacy yet?

No. I think, obviously, that is been what we have done with retail pharmacies in the past, but it is a very profitable pharmacy.

And I just don’t think we want to be too quick in making a decision in that regard.

Okay. it is enough.

Thanks for taking my question.

Thanks Paul.

Thanks Paul.

Thank you, and thank you, everyone, for participating on today’s call and for your continued interest in CareRx. We look forward to reporting on our progress again next quarter.

Thank you.