CareRx Corp

TSX:CRRX

Earnings Call Transcript 2021-Q3

[Operator]

Good morning, everyone. Welcome to CareRx's Third Quarter 2021 Financial Results Conference Call.Please note that this call is being broadcast live over the Internet and will be available for replay beginning approximately 1 hour following the completion of the call. Details of how to access the webcast replay are available on yesterday's news release announcing the company's financial results, as well as the company's website at www.carerx.ca. Today's call is accompanied by a slide presentation. Those listening on their phones can access the slide presentation from the company's website in the Investors section under Events and Presentations by loading the webcast and choosing the non-streaming audio option.Certain matters discussed in today's call or answers that may be given to questions asked could constitute to forward-looking statements that are subject to risks or uncertainties relating to CareRx's future financial and business performance. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed on CareRx's periodical results and registration statements. You could access these documents on the SEDAR database under www.sedar.com. CareRx is under no obligation to update any of these forward-looking statements discussed today, and investors are cautioned not to place undue reliance under these statements.I would now like to turn the call over to David Murphy, President and CEO of CareRx Corporation. Please go ahead, Mr. Murphy.

[David Murphy, President, CEO & Director]

Thank you, and good morning, everyone. Welcome to our third quarter 2021 earnings call. With me today is our Chief Financial Officer, Andrew Mok.The third quarter exceeded our expectations. Our strong financial results once again demonstrated how the successful execution of our growth strategy has transformed our revenue and earnings profile. we delivered significant year-over-year growth in revenue and adjusted EBITDA, driven by a number of factors: the contributions from the SmartMeds and Rexall acquisitions that were completed earlier this year; the initial contribution from our acquisition of the Medical Pharmacies long-term care pharmacy business, which we closed in August; and importantly, from an acceleration of organic growth as the reduction in COVID-related impacts on our sector has allowed us to get more traction in our efforts to acquire new customers.I want to emphasize that a key driver of our strong financial performance is that each of the 4 acquisitions we have made in the past year is contributing in line with or ahead of our expectations. This is a testament to the M&A capabilities we have built and to our team's ability to execute and integrate. Integration of the Medical Pharmacies acquisition is well underway, and we continue to believe that we are on track to achieve at least $5 million in synergies from that transaction.Third quarter revenue grew 56% from the same period last year to just over $71 million. Growth was driven primarily by a 66% increase in the average number of beds serviced, 81,816, up 54% from 53,184 for the second quarter of this year. This growth was driven primarily by the addition of beds from the Medical Pharmacies acquisition, which closed partway through the quarter.In addition, as I mentioned, our bed count growth was also helped by an acceleration of organic bed wins. During the quarter, we won more than 3,500 new beds, approximately 2,200 of which were onboarded during the third quarter. These wins include approximately 1,800 beds in Western Canada that were formally serviced by Rexall and were not included in the partial acquisition we completed earlier this year. Our bed count at the end of September was 95,240. And our bed count at the end of October grew to 96,272. We are optimistic that if the sector continues to normalize after the challenges associated with the pandemic, we can continue to accelerate organic growth in the quarters ahead.Adjusted EBITDA for the third quarter was $6.9 million, a year-over-year increase of 79%, again, primarily due to the acquisitions that were completed during the year, as well as the quarterly contribution of the $3 million in annualized cost saving synergies from last year's Remedy's acquisition that we fully realized in the first quarter of this year.As I mentioned, on August 23, we completed our acquisition of the Medical Pharmacies long-term care pharmacy business, our largest and most significant transaction to date. It added approximately 36,000 beds and further solidified the leadership position we have established in the sector over the past several years. It is expected to contribute run rate annualized revenue of approximately $150 million and adjusted EBITDA between $10 million and $12 million before the realization of any cost saving synergies. The integration of the business and the team is underway and on schedule. We have already begun consolidation of facilities located in the same geographic areas with 1 completed during the third quarter and 4 more expected before year end. Accordingly, we expect to begin to realize a portion of the expected minimum $5 million in annual synergies in the fourth quarter of this year with achievement of the full $5 million expected to be realized within the first 12 months after closing.Importantly, beyond these significant financial contributions, strategically, this acquisition brings together 2 companies, both leaders in the sector, and will enable us to uniquely deliver a superior service offering to our home operator partners and their residents. I have been so impressed by the strength and capabilities of the Medical Pharmacies team. The teams are fitting together very well. And our combined experience, depth and leadership abilities are creating a meaningful competitive advantage that I believe will allow us to integrate with excellence, drive further growth, and support our customers and the sector in a way that no other pharmacy partner can do.With the completion of the Medical Pharmacies acquisition, it is worth taking a step back to put our progress into perspective. In Q3 of 2018, the quarter during which we announced our transformation and growth strategy, we were servicing fewer than 30,000 beds and our quarterly EBITDA was below breakeven. 3 years later, we are servicing almost 100,000 beds and have reported quarterly adjusted EBITDA of almost $7 million. And I will note that the Q3 performance reflects only partial contribution and no synergies from the Medical Pharmacies acquisition. We have made incredible progress. And as I will discuss in a few minutes, we are confident that there are continued organic and acquisition opportunities available to us that will allow us to continue our growth trajectory in the quarters and years ahead.There were some other notable developments during the quarter that I would like to highlight. First, the largest of our organic wins during the quarter came from the expansion of an existing contract with an Ontario-based seniors home operator. The expanded contract is expected to add approximately 1,500 new retirement and long-term care beds across 19 seniors housing communities, all of which will be serviced through our existing infrastructure. Onboarding of these beds was completed in October.Second, you will recall that earlier this year, we partnered with Think Research, a leader in integrated digital health software solutions to deliver virtual health care to seniors. The goal of that partnership is to provide seniors easy and secure access to a network of physicians and specialists from the comfort of their own residence, with our specific role being to provide same-day fulfillment of any prescription medication a resident requires following a virtual appointment. After a very successful pilot program in selected Chartwell retirement residences, in September we expanded that program to deliver this virtual healthcare solution broadly to all Chartwell locations in Ontario, British Columbia and Alberta. Rollout of the program began last month and will continue through early next year.Third, during the quarter, we were also pleased to announce the positive results of a pilot study for the Karie device. As a reminder, Karie is a home-based automated drug delivery device designed to simplify complex medication regimes by automatically delivering prescription drugs in the correct dosage and at the right time to individuals taking multiple medications, and in particular, seniors living independently or without full-time care. We are an equity investor in AceAge, the company that makes Karie, and we are their preferred partner in the commercialization of the device in Canada. The study involving independent residents at 3 Seasons Retirement Communities located in Ontario demonstrated a very impressive 97% compliance rate, which represents a significantly higher medication adherence rate than the baseline for this demographic broadly. We are very encouraged by the success of the study and look forward to supporting Seasons and AceAge with the rollout of Karie in all of Seasons Retirement Communities as a next step.I would now like to turn the call over to Andrew to discuss our Q3 results in more detail. Andrew?

[Andrew Mok, Chief Financial Officer]

Thank you, David, and good morning, everyone. Before I begin, a reminder that our financial statements and MD&A for the third quarter have been filed with SEDAR and are also available on our website.Revenue for the third quarter of 2021 increased $25.7 million, or 56%, to $71.3 million from $45.6 million for the same period in the prior year. This increase was primarily due to the contribution of the SmartMeds and Rexall acquisitions that we completed during the second quarter of this year, as well as the partial quarter's contribution of $16.5 million from the Medical Pharmacies business, which was acquired on August 23. As David noted, this contribution is consistent with the expected run rate annualized revenue of approximately $150 million for that business. Revenue further increased in the quarter as a result of organic growth that was achieved, including 2,200 beds that were onboarded during the quarter.Adjusted EBITDA for the third quarter increased $3.1 million, or 78%, to $6.9 million from $3.8 million for the same period in the prior year. Again, growth was driven by the SmartMeds and Rexall acquisitions completed in Q2 as well as the partial quarter's contribution from the acquired Medical Pharmacies business. The Medical Pharmacies contribution to adjusted EBITDA was higher than our expected annualized run rate of $10 million to $12 million, and this was primarily the result of 2 factors: one, the non-recurring benefit from certain operating costs that were not incurred during the first partial month post-closing; and two, the absence of certain costs that will not be incurred until the completion of the shared services agreement with the vendor in the first quarter of 2022. Normalized for these non-recurring and short-term benefits, adjusted EBITDA for the Medical Pharmacies business was in line with our expected annualized run rate of $10 million to $12 million.Turning to our balance sheet. Cash at September 30 was $39.9 million, up from $11.4 million at the end of the second quarter of this year. The increase is primarily related to the receipts upon closing of the Medical Pharmacies transaction on August 23 of the $63.3 million in proceeds from the bought deal and concurrent private placement of subscription receipts that we closed in May, which were in escrow until the closing of the transaction. A portion of those funds were used to satisfy part of the cash consideration for the Medical Pharmacies acquisition and related transaction costs.And I will note here that both the ending cash balance and cash provided by operating activities for the quarter benefited from certain working capital movements, with the most notable being just over $8 million in payments of trade payables that would have ordinarily been processed at the end of September, but which did not occur until the following day. While we expect to continue to generate positive cash flows from operations going forward, these cash flows may be impacted by costs incurred related to the Medical Pharmacies integration in the next few quarters.Also, concurrent with the closing of the Medical Pharmacies transaction, we entered into an amended and restated credit agreement with our senior lender, Crown Private Credit Partners, to refinance our existing credit facility. A total of $60 million in new credit facilities were advanced, approximately $37 million of which was used to pay a portion of the cash consideration from the Medical Pharmacies acquisition and related transaction costs. The remainder of these funds were used to repay the previous facility and associated fees. The terms of the new senior debt facility, as well as the amendments to the existing subordinated facility that I discussed on our last call, each contribute to lowering our overall cost of capital.Net debt at September 30 was $57.3 million, up from $47.8 million at the end of the second quarter. However, with the additional contribution from the Medical Pharmacies acquisition, net debt to annualized run rate adjusted EBITDA is 2.1x, down from 2.8x at the end of June.And with that, I will now turn the call back over to David for some concluding comments. David?

[David Murphy, President, CEO & Director]

Thank you, Andrew. As I mentioned earlier, our growth strategy has been incredibly successful during the past couple of years and has truly transformed the company, not just in terms of our revenue and earnings profile, but even more importantly in terms of the service and partnership that we can provide to our customers. We are on the verge of reaching our stated goal of 100,000 residents serviced, a full 2 years ahead of our original aspirational target.I want to emphasize very strongly, however, that we are just getting started. Growth opportunities lie ahead of us that are just as significant as what we have already realized. Our market share is still less than 25%, and we believe that we are building the team, capabilities and service offerings that will make us a significantly larger part of this sector in the coming years. As I mentioned, organic growth opportunities have reemerged after the challenges of the pandemic. We won 3,500 new beds during Q3 alone, most of which have now been onboarded. We are confident in our ability to continue this recent momentum.In addition, our acquisition pipeline remains very robust and increasingly active, and we expect to continue our track record of making disciplined, accretive and highly synergistic additions to our national operating platform. The key, as always, is to provide exceptional service to our customers and to ensure that our additional size, scale and capabilities are translated into an increasingly superior pharmacy services offering. We have confidence and momentum, but we also have the humility to recognize that we need to support our customers and earn their trust each and every day. If we do this, and we continue to pursue our mission to enhance the health of Canadians with unique or complex medication needs, I am very confident that our success and our growth trajectory will continue.In closing, I want to thank our exceptional team, including all those who have joined us as part of the recent acquisitions, for the commitment, responsiveness and service orientation that they display on a daily basis. From the challenges of the pandemic, to the demands of integration, to the day-to-day need to go above and beyond to take care of our customers, our people have consistently stepped up and are the primary reason for all our success.With that, I would now like to open the call to questions. Operator? Operator?

[Operator]

[Operator Instructions] Your first question will come from Doug Cooper from Beacon Securities.

[Doug Cooper, MD & Head of Research]

Congratulations on a great execution in the quarter. I guess a 2-pronged question. First of all, you talked market share in Canada at your 96,000 bed level of 23%. I'm assuming the biggest chunk of that 77%, or a large chunk anyway, would be in Québec. So can you talk a little bit about maybe do you want to enter that province, and/or where do you see the rest of the beds coming from? And can you put a sort of number on aspirationally where you want to get to or where you think you can get to in terms of numbers of beds in the long-term care? And then part 2, I guess. Is there an ancillary market that you find attractive that you think it could be your next leg of growth?

[David Murphy, President, CEO & Director]

Sure. Good morning and thanks, Doug. Yes, on the target and setting a new target, I think we're -- our team is really focused on getting across the line on 100,000 beds. So I'm a big believer that to run through the finish line of the race you're in before you start a new one. So we're almost there. So I don't think we're going to sort of make a specific target. But obviously based on my comments during the call thus far, we're very bullish. We believe, even without getting outside our existing geography, that the kind of organic growth rate that we delivered in Q3, which if you annualize, you're talking about a double digit organic growth rate, those are where we set our internal targets. Even within existing geographies, there's still a lot of beds available. On geographic expansion, yes, we have -- although our focus thus far has been about synergistic growth in the markets in which we operate, we are taking a hard look at every single province that we either don't operate in or have a very light presence in. And so nothing to announce or guide to now, but I do think you will see us enter other geographies in Canada in the next couple years.Yes. And then in terms of ancillary targets, there are, as you know Doug, there are other congregate care settings that have a similar, not exactly the same, but a similar dynamic in terms of the extent to which their residents are dependent on the facility for care and have some complex medication needs, things like corrections facilities, group homes. We do service some of those, but we have not historically taken as concerted a run at penetration in that space. So I think we traditionally quote our market size as just seniors housing. We think the addressable market is bigger than that, and we have opportunities to increase penetration there. And all of that I think adds up to some pretty bullish growth forecasts without even getting to the idea of future acquisitions, which we continue to pursue.

[Doug Cooper, MD & Head of Research]

Okay. Great. My final one just for Andrew. Maybe you can just -- free cash flow. I mean, there's great visibility given where your bed count is and the stability of revenue per bed. Can you talk about what we can expect in terms of CapEx, or other words, what's the flow-through of EBITDA to free cash flow for next year, do you think?

[David Murphy, President, CEO & Director]

Andrew?

[Andrew Mok, Chief Financial Officer]

Yes, I think that the next couple of quarters, they'll really be focused on the integration work. And as we've talked about in prior calls, there's some costs associated with that. We've typically forecasted about a 1:1 ratio in terms of the integration costs compared to the synergies we expect to realize. I think that where we're forecasting to both complete the integration work, not only in terms of getting those costs out of the way, but obviously realizing on those synergies. And we expect that by Q4 of next year, we'll be generating positive free cash flows and really start to improve our cash conversion on EBITDA from thereon.

[Operator]

Our next question will come from Chi Le from Desjardins.

[Chi Le]

Congratulations on the quarter. My first question will be from -- can you discuss the non-recurring benefit from costs not incurred and the costs not required until signing the [ sales of it ] or even with Medical Pharmacies? Maybe just some color behind why and is there a catch-up? And if we normalize for those, I think Medical Pharmacies contribution in the quarter was $1 million to $1.2 million, which imply a normalized EBITDA of $5.9 million to $6.1 million this quarter.

[David Murphy, President, CEO & Director]

I think Andrew can provide additional granularity if necessary. But I think at the highest level, the best way to think about this is remember that we're -- we purchased not a full company, but we purchased a division that was part of a broader company. And as it happens, I think that was the case with our Remedy's deal and our Rexall deal. So when that happens, there is a bit of complexity carving out the division from the broader entity. And so I would say in terms of most of those non-recurring costs, the first month of Medical Pharmacies is I think an 8-day months, and there were just certain aspects of the cost structure that I think weren't representative of what the full run rate will be, and that continued a little bit to some extent in September. And then the other factor is that we do have a shared service agreement with Medical Pharmacies whereby their corporate office is continuing to provide some services on a transitional basis while we create those capabilities and those resources inside our company. And so to some extent, our cost structure is lower than it ultimately will be. So those are the 2 main drivers. I think your math on the normalization I think is right. I think it probably could be a little bit higher in terms of what the Medical Pharmacies contribution is. It really I guess depends on whether it lands closer to the $12 million or the $10 million in the range. But obviously, really encouraging in terms of what the first 6 weeks or so have been. We're not ready to declare any sort of permanent overperformance, but we're encouraged by what the business has done thus far.

[Chi Le]

That's very helpful. And my next question will be from organic growth. So you won 3,500 new beds this quarter, including 1,500 beds from the Ontario contract. Can you please break down the remaining ones, whether they are from new homes or extensions of existing homes, or maybe an increase in occupancy rates at long-term care homes and how you think that would progress throughout Q4 and next year?

[David Murphy, President, CEO & Director]

Sure. So high level, the 3,500 were all net new beds. So the Ontario-based contract was one. And as I mentioned during the call, the other large driver of it was about 1,800 beds we won in Western Canada that for the most part were formerly served by Rexall and became available by virtue of Rexall's strategic decision to exit the market. There's a few smaller wins as well, but those were the 2 big ones. Over and above that, I think in terms of your question about occupancy, we are seeing continued normalization of occupancy rates. I think we said on the last call that we thought we were about 1,500 beds short of what we regard as normal occupancy rates. We would estimate that about 500 of that 1,500 normalized over the course of the quarter. So it's an imprecise science, but we're somewhere around we believe about 1,000 beds short of what the pre-COVID occupancy levels would look like.

[Chi Le]

And maybe just last one I'll squeeze in. The revenue per bed dropped to 876 this quarter. I think it's lower compared to your historical range of 920 to 930. Can you please discuss the driver behind this and how we should think about modeling this going forward?

[David Murphy, President, CEO & Director]

I think I'll ask Andrew to field that one.

[Andrew Mok, Chief Financial Officer]

Yes, I think it's a couple of factors, Chi. I think firstly, the number that you're using would just be the weighted average across all of our beds. I think some of the beds that we onboarded in the quarter, particularly in the West, would probably be on the lower end of that range in terms of what contributes to the average. So probably brought it down a little bit. As you know, the funding models, while more on a level playing field across the provinces and bed types now as some of the beds, particularly long-term care in the West, they are slightly lower in terms of annual revenue. So that was a primary driver. I think that the, call it, stub period first month of MPGL probably contributed a little bit to that as well. I think that using that, something around 900, 925 is still the right number to use on an overall basis. It may change from quarter-to-quarter just depending on where the bulk of any beds onboarded were.

[Operator]

Your next question comes from Sepehr Manochehry from Eight Capital.

[Sepehr Manochehry, Research Analyst]

Congrats on the continued execution. Just a quick question regarding the combined entity and the potential for integration of the technology back end. Can you walk us through some potential operational efficiencies that may be established from basically, whether it's integrating some of the management software that MGCL had in terms of the pharmacy management solutions, or maybe some of the access you guys have to the SmartLink software. I would love to know a bit more color on potential operations there.

[David Murphy, President, CEO & Director]

Thanks for your question. I don't think we're going to get that far down the road publicly on too much on the technology side. I would say the important thing to emphasize is that our minimum synergy target that we've guided to does not contemplate anything as it relates to technology-enabled efficiencies or innovation. But you're right that there are -- part of our integration work is about looking at the various software and technology platforms that the 2 companies use and making decisions about standardizing towards 1 or the other. And so we believe the benefits of that standardization and best practices I think are going to make our operations more efficient and also I think provide a more consistent service offering to our customers. I think over and above that, we do believe that there are technology-related opportunities to drive further automation and further efficiencies in our facilities, particularly as some of these facilities start to service a significant number of beds. We'll have facilities once we're finished that are servicing as many beds as some of the companies we acquired serviced in total nationally. But I think we're going to go one step at a time here. The main focus right now is just getting the physical consolidation done. And we'll continue to provide more guidance as it relates to how technology can be used to further drive both better service to our customers and margin expansion over the course of 2022.

[Sepehr Manochehry, Research Analyst]

Excellent. I appreciate the answer there.

[Operator]

Your next question will come from Justin Keywood with Stifel GMP.

[Justin Keywood, Director of Equity Research]

I noted in the press release there was a mention on the annualized revenue and adjusted EBITDA for the MPGL pharmacy business expected to be $150 million and $10 million to $12 million in EBITDA, and that doesn't include the cost synergies. And there's a few moving parts in general. I'm wondering if you have just a broad range of what the overall business could be doing on a run rate basis for revenue and EBITDA.

[David Murphy, President, CEO & Director]

Yes. Based on what we've seen so far, Justin, I think the revenue number is pretty much spot on. I think the bed count, the Medical Pharmacies bed count was a little bit higher than we had forecast, so that does create a bit of an uptick. I think we're going to hold to the $10 million to $12 million range. Obviously if you annualize Q3, it would be a higher amount than that. But as Andrew mentioned, there are some aspects of the cost structure that we don't think would be recurring. So I think we're going to hold the $10 million to $12 million. Obviously, there's probably an indication that hopefully it's fair to assume that it will at least be closer to the high end of that range. But I don't think we're going to declare victory here prematurely until we have more actual results under our belt.

[Justin Keywood, Director of Equity Research]

And just the consolidated operations as a whole, are you able to give any color there?

[David Murphy, President, CEO & Director]

In terms of overall EBITDA?

[Justin Keywood, Director of Equity Research]

Yes.

[David Murphy, President, CEO & Director]

Yes. I think I'd leave that to the analyst setting. But for the most part, you guys do a good job at modeling I think both where we are and where we'll be fully integrated. I think you can comfortably extrapolate the run rate of the core business by now, and I think we've guided to what the Medical Pharmacies number will be. And I think the $5 million in synergies, we feel very good about. And I think that we believe they should probably -- they'll probably be realized on a fairly even progressive basis starting in Q4 and running through next year. And so really, the main variable is just how much additional growth we can put through our platform, and we're obviously focused on trying to repeat the Q3 performance going forward.

[Justin Keywood, Director of Equity Research]

Okay. Fair enough. And then just in general, we hear about all the supply chain disruptions and a tight labor market, difficultly hiring people. I'm just wondering if that's at all being impacted to CareRx? And if so, what are some of the initiatives to manage through that?

[David Murphy, President, CEO & Director]

Yes, good question. Not to a significant degree. I think we're fortunate on the supply chain side in that we have a great relationship with our preferred wholesaler and distribution partner. And so the medication supply chain's been far and away the most important one for us, and they've done a wonderful job from the early days of the pandemic of getting us what we need. So we've not had any, thankfully, any supply chain-related issues that would mirror some of the things we're hearing about the broader economy. Similarly on the inflation and labor side, again, our labor force is a bit different than the quote-unquote "average" one in the sense that it's heavily populated by pharmacy professionals, pharmacists, pharmacy technicians and pharmacy assistants. I wouldn't say that the broader labor market trends would mirror that profession. We always see at any given time, and usually it's geographically isolated where the market for pharmacy professionals gets hot and we have challenges. But nothing that I think would be driven by the broader economic situation. And then lastly on inflation in general, again, fortunately, the biggest drivers of our cost structure are the cost of medication and the cost of labor, so we're not seeing pressures there. On smaller aspects of our cost structure, like insurance costs and other things, for sure we are seeing some inflation, but I wouldn't say at this point that it's material in our overall cost structure.

[Operator]

Your next question will come from Paul Stewardson from iA Capital Markets.

[Paul Stewardson]

Just calling in for Chelsea. Congratulations on the quarter. It's really great to see. We've been seeing a lot of indications that net new prescriptions were down during the pandemic. So just kind of wondering, if that bounces back now, is that something that would impact margins in terms of more medications per person increasing costs, or how do you look at that?

[David Murphy, President, CEO & Director]

Yes, it's a good question. I think it's -- in my 3 years here, we've always tried to prognosticate or make assessments there. But I would tell you in general, in the space we're in in the seniors housing residence, we've seen nothing but stability in terms of what prescription looks like over the course of a resident's tenure in a long-term care or retirement home. So I think to the extent that we're modeling anything, I think we can safely say it's pretty stable. We're obviously focused on driving revenue per bed up, but most of that is by doing things like providing ancillary services, like medical supplies, medical cannabis. But I think on the pure prescription front, I think our sector is relatively stable from a prescription perspective.

[Paul Stewardson]

Okay. And just one more. Maybe a brief update in terms of where the Canopy dispute is, and any color on how Vancouver is going for Pharmacy At Your Door and where you're looking next.

[David Murphy, President, CEO & Director]

Sure. Good question. So on Canopy, and not a lot to update. I would say, as I said on the last call, unfortunately, the entire cannabis sector, and medical cannabis in particular, has underperformed versus the initial commercial expectations. I don't think our partnership is unique in any way there. But we're having very constructive discussions with Canopy. I think our teams are working very well on the front line, and we're seeing some traction and some growth. And so I think my sense is both parties are disappointed, but want the partnership to continue. And I believe we're all pretty committed to making the next 3 years better than the first 3 years. So I'm feeling positive on that front. On Pharmacy At Your Door, yes, we are now in both Alberta and in the Vancouver market. Our monthly patients served and revenue continues to track upwards. I would say though, right now, just given the magnitude of the integration work underway, we've got to be selfish in focusing on the core business and making sure that that integration gets done and done with excellence. So I don't think at this point we're contemplating any near-term expansion to any other markets for Pharmacy At Your Door.

[Operator]

Your next question will come from Stefan Quenneville from Echelon.

[Stefan Quenneville, Research Analyst]

Congratulations on the quarter. I guess my first question is, there's obviously been some pretty dramatic changes in your industry over the last year, first with your acquisitions as well as COVID. And now that the medical facilities acquisition is closed, I was curious about what kind of -- or if there's been changes in terms of your conversations with clients, and is there a different dynamic in the marketplace now that those 2 kind of large events have come to pass? And then my second question is on the Think Research deal or expansion of that, can you help sort of size that opportunity and what it's going to mean for potentially getting incremental beds?

[David Murphy, President, CEO & Director]

Sure. Thanks, Stefan, for your questions. On the first point, I won't -- I never try to speak for the long-term care home operators because they've obviously been through an incredible amount, and some of them are publicly traded and can make their own comments. But obviously, I think there's a cautious optimism that the worst is behind us from a COVID perspective. I think a lot of lessons have been learned, not just by the home operators, but I think a lot of provincial governments across the country have recognized that their support for long-term care was not at the level it needed to be. And so I think you're seeing a very healthy reengagement by provincial governments to support the long-term care sector better, and I think that's long overdue and necessary. From a pharmacy perspective, I would say to the extent that there are silver linings in all this, I think we do benefit from that in terms of just government recognizing in the first instance just what role we play in the sector and how important we are. There's been a history of governments looking at long-term care pharmacy as a source of budget cuts. I think they're really reexamining that and understanding the value we play in the sector and that if the sector is underfunded, then the last thing they should be doing is underfunding pharmacy. I think, again, I won't speak for the long-term care operators, but I do think there is a recognition that when times get tough -- and it's not been any tougher than it's been the last few years -- you need to have a scaled, sophisticated partner that has multiple sites, that has multiple levers to pull in order to support the business. And so we hope and believe that more home operators will be looking for those, the larger scale national providers to be able to really hand their pharmacy needs to in a way that soup to nuts, we can do what they need and they can focus on resident care. But I think a lot of that story still has to be written in terms of what the aftermath of COVID will be. But for us, we're happy with what we accomplished, and now we're just focused on telling the story to the customers that don't work with us about why we believe it's in their best interest to do so.And then sorry, the second question on Think Research. Yes, the best way to think about this is, as we've talked about before, unlike a long-term care facility, in a retirement home, residents get their medications a whole host of ways. Some of them used our medication management services. Some of them source their medications independently or they still drive and drive to their local retail pharmacy. So I mean, the most important part of the Think Research partnership has nothing to do with us. It's really about making sure there's a physician presence in these homes, which is unfortunately challenged at some point. And so having a virtual network of physicians so that people can be seen on a timely basis, that's the most important thing. For us from a business perspective, though, the advantage is all of these folks who don't tend to use our medication management services will use us for prescription. So we look at it really as an additional driver of bed count growth. But more importantly, it's a service offering that we think differentiates us in terms of offering the most innovative value-add partnerships to our retirement home customers.

[Operator]

[Operator Instructions] Your next question is a follow-up from Chi Le from Desjardins.

[Chi Le]

It's Chi. Yes, just a couple of follow-up for me. So as you go into the Medical Pharmacies and Rexall and realized synergy, can you talk about the path ahead on realizing margins by quarter? Maybe provide a road map on the next 4, 5, 6 quarters until you reach the 12%, 13%?

[David Murphy, President, CEO & Director]

Yes. Good question, Chi. I think that's the first analyst follow-up question I've ever got to your first. I don't know that we're going to provide sort of numerical guidance. I think we've already -- we've made clear what we think the endpoint target will be and that hasn't changed. I think you're best to think about it as a progressive escalation from Q4, hitting the kind of fully integrated margin at some point in Q4 of next year. I think that's all we would say at this point just because, obviously, the exact timing of integration and when the benefits hit the P&L are still a little bit uncertain in terms of which month and which quarter.

[Chi Le]

And on the M&A front, I know that you are still digesting the Medical Pharmacies acquisition. But is there -- are you getting more inbound calls from your -- to your corporate development teams being the acquirer of choice of either tuck-ins or other acquisitions? And are you seeing any change in valuation?

[David Murphy, President, CEO & Director]

Yes. On the first point, we are, as I mentioned -- the pipeline is active and actually increasingly active in the last few months. I think you're right. I think we are -- we've established ourselves as the acquirer of choice. And so, although obviously future deals are likely to be much smaller than the Medical Pharmacies deal, the advantage of that is you can do more of them and you can integrate them more successfully. So yes, we're very committed, and we expect to do more deals in the quarters ahead. And on valuation, I think from our perspective, we've established what the market price should be for both small tuck-ins and larger platforms, and we don't see any inflation in that. And candidly, we're just too disciplined. We're not willing to chase anything above where we believe the right economics work for us.

[Operator]

There are no further questions at this time. Please proceed.

[David Murphy, President, CEO & Director]

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 continued progress next quarter. Thank you.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.