CareRx Corp

TSX:CRRX

Earnings Call Transcript 2021-Q4

[Operator]

Good morning, everyone, and welcome to the CareRx's Fourth Quarter and Year-end 2021 Financial Results Conference Call. Please note that this call is being broadcast live over the Internet and the webcast 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 in yesterday's news release announcing the company's financial results as well as on 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 Investor 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 forward-looking statements that are subject to risks and 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 in CareRx's periodical results and registration statements, and you can access these documents in the SEDAR database under www.sedar.com. CareRx is under no obligation to update any forward-looking statements discussed today and investors are cautioned not to place undue reliance on these statements.

I would now like to turn the conference call over to Mr. David Murphy, President and CEO of CareRx Corporation. Please go ahead, Mr. Murphy.

[David Murphy, executive]

Thank you, and good morning, everyone. Welcome to our fourth quarter and year-end 2021 earnings call. With me today is our Chief Financial Officer, Andrew Mok. The fourth quarter was a strong finish to an exceptional year as we continued the successful execution of our growth strategy. We saw our bed count double, transforming our revenue and earnings profile. We delivered significant year-over-year growth on both the top and bottom lines with meaningful organic growth, complementing our acquisitions.

Importantly, each of our acquisitions continues to perform in line with our expectations, both in terms of their baseline contribution and synergy generation. Most notably, integration of the medical pharmacies business acquired in August is proceeding as planned and we are on track to realize the $5 million in annual cost-saving synergies within our stated target of 12 months from closing. Finally, we continue to deliver organic growth as the waning of pandemic-related impacts on the seniors living sector has allowed home operators to return some of their focus to their pharmacy partner decisions at a time when we bring to the table a significantly enhanced set of capabilities and expanded national footprint.

Although the Omicron wave has had a short-term impact during Q1 of 2022, we are bullish about our market positioning and prospects for organic growth in the next 2 years. It is already abundantly clear that the post-pandemic period will see substantial expansion, transformation and consolidation in the long-term care and retirement sector. As the only national pharmacy services company fully dedicated to this sector, we are well-positioned to grow with our existing customers as they expand, add new customers and play a leadership role in supporting our home operator partners through this transformational period.

Turning to some of the specific financial highlights for the most recent quarter, revenue for the fourth quarter grew 109% year-over-year to just under $97 million, with growth driven primarily by a 97% year-over-year increase in the average number of beds serviced to 96,310. I will note that in addition to our acquisitions, this increase included the contribution from more than 3,000 beds onboarded during the last 4 months of the year from new contract wins. Adjusted EBITDA for the fourth quarter increased 86% year-over-year to $7.6 million. Normalized for certain non-recurring costs, adjusted EBITDA was $8.7 million, which represents a year-over-year increase of 114%. This growth was driven primarily by the organic and acquisitive growth I just described, including cost savings synergies of approximately $200,000 from the integration of the Medical Pharmacies business.

The strong fourth quarter contributed to a year that saw us achieve by far the largest year-over-year growth in the history of our company. As I noted earlier, our bed count doubled from the end of 2020 to the end of 2021. And since the end of 2018, our bed count has more than tripled. That has translated into a similar growth trajectory for revenue and an even more significant improvement in our earnings profile with 2021 adjusted EBITDA more than 500% higher than 2018. Importantly, 2021 adjusted EBITDA reflects only 4 months' contribution from the medical pharmacy's acquisition and nominal synergies from that transaction. The full year contribution from the integration of medical pharmacies and the other growth and optimization efforts underway, which I will speak to in a few minutes, give us confidence that we will continue this trajectory in the next phase of our growth story.

On our last call, I discussed the details of our largest and most significant acquisition to date, that of the long-term care pharmacy business of medical pharmacies in mid-August. The acquisition added approximately 36,000 beds. As I noted earlier, the business is contributing as expected with incremental run rate annualized revenue of $150 million and adjusted EBITDA of $10 million to $12 million, with contribution to date tracking at the high end of that range. In addition, we expect to generate annualized synergies of approximately $5 million, the majority of which will be realized through consolidation of facilities in the same geographic areas. We have made considerable progress on the integration so far. By year end, we completed the consolidation of 5 sites, 4 of those in the fourth quarter, with 5 more scheduled to occur throughout the first half of this year.

Beyond site consolidation, the other integration projects remain on track for completion by the end of the third quarter. As we expected, we are already realizing meaningful financial and non-financial benefits from blending the strengths and capabilities of our 2 teams together. Beyond the financial synergies, this transaction has afforded us a unique opportunity to redefine what market leadership looks like in our sector to create an unmatched national service offering and position ourselves as a world-class institutional pharmacy partner for our customers as they provide exceptional care for their residents. As I noted earlier, consolidation and other cost savings synergies contributed approximately $200,000 to Q4 adjusted EBITDA. We expect further synergies from integration activities to be realized fairly evenly throughout the first 9 months of the year and that the full $5 million in annualized synergies will be reflected in the fourth quarter of this year.

Central to the world-class institutional pharmacy capabilities we are building is the move to a more efficient and standardized operating model and the use of leading-edge technology to increase capacity and automation, lower costs, improve quality, and deliver a seamless and consistent service experience to our customers. Beyond the current wave of site consolidation, the scale provided to us by our various acquisitions has enabled us to commence this transformation and modernization of our fulfillment network and operating model.

Next month, we will take a significant first step with the opening of a new state-of-the-art high-volume facility in Burlington, Ontario, that will have the capacity to service more than 30,000 beds out of a single location. For context, the largest of the 30-plus sites we currently operate in Canada, services approximately 10,000 beds. The centerpiece of the new Burlington facility will be the first Canadian installation of the BD Rowa Dose medication packaging system, which is currently being used by large institutional pharmacies in the United States and Europe. We have initially purchased 2 of these systems, but we believe there is a much broader opportunity to utilize this technology across our network.

We expect that the combination of both the technology itself and the ability to service a much higher number of beds out of a single location or locations will generate meaningful operating and labor efficiencies and serve as an important driver of enhanced operating margins over time. Importantly, they will also enable safety and quality improvements in our operations, free up pharmacists' time to focus on resident-based initiatives and further strengthen our service offering to our home operator partners and residents. We look forward to reporting on our progress in this transformational initiative in the quarters ahead.

Subsequent to quarter end, there were 3 additional highlights that I would like to discuss. First, I am very pleased to report that in recent weeks, we secured long-term contract extensions with our 2 largest customers, which in aggregate represent approximately 15,000 total beds serviced. The extensions are for an average of 5.5 years from the end of 2021. We are grateful for this affirmation of confidence and trust in us by 2 leading national home operators. We believe these extensions underscore the value we are currently providing to our partners, the dedicated focus and commitment we have to Canadian seniors care pharmacy, and recognition of the unique service platform that we are continuing to build and strengthen every day.

Second, as part of our growth strategy, we continue to pursue opportunities to expand the scope of our service and product offering to our home operator partners. In January, we expanded our medical supplies business under a new brand, Revicare, focused primarily on the underserved retirement home market. Revicare offers residents in these homes an expanded product offering, including incontinence products, nutritional supplements, wound care and other medical supplies.

Lastly, I am pleased to note that the Ontario Ministry of Health has again decided to postpone the previously scheduled changes to long-term care pharmacy funding. The changes, which were originally scheduled to come into effect on April 1, 2021, were postponed until April 1 of this year, and the changes have again been postponed to April 1, 2023. We applaud this decision, which reflects the government's commitment to long-term care and its recognition of the essential role that long-term care pharmacies play in delivering care to the most vulnerable members of society. This postponement will support our ability to provide the same exceptional service offering to our customers and their residents during what continues to be a very challenging period.

I would now like to turn the call over to Andrew to discuss our Q4 results in more detail. Andrew?

[Andrew Mok, executive]

Thank you, David, and good morning, everyone. Before I begin, a reminder that our financial statements and MD&A for the fourth quarter and year-end have been filed with SEDAR and are also available on our website.

In the interest of time, I will confine my discussion primarily to the fourth quarter. Revenue for the fourth quarter of 2021 increased $50.5 million or 109% to $96.9 million from $46.4 million for the fourth quarter of 2020. This increase was primarily the result of the contribution from the medical pharmacy's acquisition that we completed in August, the contributions of the SmartMeds and Rexall long-term care pharmacy acquisitions completed in the second quarter and organic growth from more than 3,000 beds from new contracts that were onboarded throughout the second half of the year.

Adjusted EBITDA for the fourth quarter increased $3.5 million or 86% to $7.6 million from $4.1 million for the same period in the prior year. Again, growth was driven primarily by the contributions from the acquisitions completed during the year, all of which were in line with our expectations as well as organic growth. As David mentioned, adjusted EBITDA benefited from approximately $200,000 of the total $5 million in expected cost-saving synergies from the medical pharmacy's acquisition.

The year-over-year increase in adjusted EBITDA for Q4 was partially offset by $1.1 million in non-recurring costs, including certain labor costs related to the integration of the Medical Pharmacy's business, allowances for expected credit losses that were impacted by COVID-19 and inventory cost-related adjustments. These costs are not expected to recur in future periods. Excluding these one-time costs, adjusted EBITDA for Q4 would have been $8.7 million, which would have represented a year-over-year increase of 114% and adjusted EBITDA margin of 9%.

Turning to our balance sheet as at December 31 was $35.6 million, down $4.3 million from $39.9 million at the end of the third quarter. The sequential decrease is primarily related to the repayment of the vendor takeback note issued as part of the Remedy's acquisition completed in 2020. I will also note here that cash flow from operations for the year was $7.3 million, which was up significantly from the -- just above breakeven in 2020. Net debt at December 31 was $57.6 million, which was consistent with the third quarter of 2021. And with the incremental growth in adjusted EBITDA in Q4, net debt to annualized run rate adjusted EBITDA improved to 1.9x, down from 2.1x at the end of Q3, and down from 2.8x at the end of Q2.

And with that, I will now turn the call over to David for some concluding comments. David?

[David Murphy, executive]

Thank you, Andrew. Our success and growth, not just in 2021, but over the past several years, is the result of both a clear and consistent strategy and the talent and capabilities throughout our organization to execute on that strategy. We have repeatedly proven our ability to identify, transact and integrate acquisitions that are highly synergistic in the drive scale and efficiency. And we have repeatedly demonstrated our ability to both retain and extend existing customer contracts as well as win new contracts. As much as the growth and expansion of our business has transformed our financial profile, it has also solidified our leadership position in the sector, providing a significantly larger and stronger foundation for our continued growth. As the clear national leader, we are well positioned to leverage our superior pharmacy services offering and unmatched national network to execute on the significant organic and acquisition opportunities that remain available to us.

I will note here that the recent Omicron wave of COVID-19 has had a short-term impact on our ability to further grow our bed counts. During the first quarter of 2022, many of our homes have dealt with outbreaks, which has impacted day-to-day operations and lowered occupancy rates. Our January bed count was reduced by approximately 1,500 beds compared to Q4 of 2021. We did see an improvement in February and are expecting a similar improvement in March and a full normalization in Q2.

Average bed count for the first quarter of 2022 is expected to be approximately 95,000. However, we regard this as a very short-term headwind. As the Omicron wave has subsided, we are again seeing increased activity in terms of both renewables of existing customer contracts and opportunities to win new business. There remain several hundred thousand beds within our addressable markets that are not currently serviced by CareRx. We are confident that we have the differentiated capabilities and value proposition necessary to win many of those contracts in the months and years ahead.

Importantly, we are also seeing a surge of new licenses being granted for long-term care beds and new construction and redevelopment projects underway across the country. As the market leader with established partnerships with the leading Canadian home operators, we are well positioned to grow together with these partners during this period of accelerated market expansion. There has also been an increase in acquisitions within the seniors living sector. And again, in virtually all cases, the acquirers are current partners of ours, who will look to us for pharmacy support as they expand and grow.

Finally, I would note that our acquisition pipeline remains very robust and active, and we are confident in our ability to continue our track record of disciplined, accretive deals this year and in future years. As we get closer to achieving our original goal of 100,000 beds serviced well ahead of the original target of the end of 2023, we have set our growth aspirations higher. We are now focused on achieving 130,000 beds serviced and $500 million in annualized revenue by 2024. Our team is very confident in our ability to achieve this objective, while also continuing to improve operating margins.

Finally, I'd like to close by once again thanking the entire CareRx team. I have made similar remarks in each of the past 3 years because they have delivered 3 consecutive extraordinary years. Our success is a direct reflection of the talent, dedication and resilience of our remarkable team, a team that grew in both size and strength during 2021. Building CareRx into a market leader has taken an incredible amount of hard work and long hours. But our team has consistently responded to the challenge bought into our vision and embodied our Care values. I'm grateful to be part of this team and I'm excited for the next chapter of our growth story together.

With that, I would now like to open the call to questions. Operator?

[Operator]

[Operator Instructions] And your first question comes from David Newman from Desjardins.

[David Newman, analyst]

Andrew, old results and outlook. So I guess the first question I've got is to unpack your path toward the 130,000 bed target by 2024. A lot of good things going on here. I mean, first of all, the revenue per bed was up. You saw the extensions. Are you seeing the larger RFPs come back onto the front burner? And I think you've always said that there'd be 5,000, 8,000 beds from small home operators at some point. So maybe just a path forward on expectations on RFPs and some of the smaller wins.

[David Murphy, executive]

Sure. And let me first just pause and say on behalf of CareRx, we wish you all the best in your next endeavors. To answer your question, the 130,000 beds in the first place we look at primarily as an organic growth target. We do believe we'll be able to execute on acquisitions, but we do believe there is an organic path to that level of growth, as you mentioned that couple hundred thousand beds that are not currently serviced by us. So primarily now, they're actually smaller, midsized chains. And so in general, those are 3-year contracts or less. A significant number of them are expiring every quarter. And so we see the pipeline as very active. In some cases, RFPs are the means by which customers make a decision and in some cases they're not.

And really, it's for us regardless of the selling method. It's about telling our story in terms of differentiation. So we're very bullish that a lot of these activities will happen starting as early as the spring. Big RFPs. There's a couple that I can think of that are going to happen in the next few months. But as I said, we don't look at ourselves entirely confined to the RFP process. We have the largest, best sales team in the country selling what we think is the best service offering in the country. And so we believe customers will respond to that and want to be part of our team. And so that 130,000 beds are something we feel very confident about. And if we need to supplement it with acquisitions, then we'll do so.

[David Newman, analyst]

And just generally speaking, the larger RFPs that are going to hit the tape here, when and how many beds might come up [ per bed ]?

[David Murphy, executive]

I think there's probably few enough that I -- speaking to them, David, as being a little too specific. I don't like to talk about specific customers. But it's certainly between 5 and 10; it's probably the -- 5,000 to 10,000 is probably the right number there.

[David Newman, analyst]

Okay. And then second of all, you talked about acquisitions in the space, which might actually be a nice entry or bolster some provinces where you don't have a significant presence. So maybe talk about one in particular, I'm not going to name the names, but obviously, it does get you into other provinces in a more meaningful way. Maybe just a comment on that, too.

[David Murphy, executive]

Yes. It's a good question. I think our current [Technical Difficulty] are Manitoba. We have a very small business in Saskatchewan and then Quebec East. I would say the majority of our acquisition pipeline is still within our existing geographies, but we do see the market, I guess, you could say between Ontario and Alberta as opportunities for us. And so we may very well focus there, both organic and from an acquisition perspective.

[David Newman, analyst]

Okay. Just one more question for me before I hand over the line. Just on the margin front, a bit of a random walk here, you're at 9-ish level now. It does look like you could get up to certainly north of 12% at some point. And is this, just kind of thinking about it, is this a combination of not only operating leverage as you go to 130,000, but also with the mega site. And I would assume that the synergies only relate to the current consolidations, not what you'll get out of the mega sites. So, maybe just kind of the random walk on the whole -- on the margin improvement expectation.

[David Murphy, executive]

Sure. I'll answer the last part of your question first. Yes, the $5 million in synergies just relates to the integration of medical pharmacies and doesn't relate to the work we're doing on the Burlington site or other high-volume initiatives. The path to 12% margins really is 3 -- there's 3 buckets. The first is completing that integration, which as you know is on track. Second is adding more beds to the network. Obviously, Omicron, as I mentioned, has resulted in a bit of a slow start to this year, but we're still very bullish on what we can do this year to add beds to our network.

So bed growth, I don't think it's our view that we need to get to 130,000 beds to get to that 12% margin, but we obviously need to grow beyond our current level. And then lastly, as you said, the remaking of our fulfillment networks. And that the big step in that is the Burlington facility, the big first step in that. But we do see – we can imagine a future where we have perhaps more of these larger sites, more of these higher speed packaging machines, and they just drive not just better quality and better service, but obviously significant margin expansion. So I don't think we're going to provide guidance on the individual components of the path to 12%, but those 3 buckets really are what get us to 12%, hopefully, as soon as the end of this year.

[David Newman, analyst]

Or plus-plus, right?

[David Murphy, executive]

Oh, for sure. Yes. It's similar to our bed count goal. We want to get to the first goal first and then we can start to set expectations accordingly, but we don't want to stop there.

[Operator]

And your next question comes from Doug Cooper from Beacon Securities.

[Doug Cooper, analyst]

Congratulations on a nice quarter. First of all, just on the average, David alluded to the average bed -- revenue per bed was just over $1,000, so that was the best. I guess in the last 7 quarters or so by my calculations, do you see some of these, you talked about on your presentation some of these, I'll call it ancillary revenues through Revicare, is that helping boost some of the revenue per bed?

[David Murphy, executive]

Doug, good question. I think around the edges, there might be some positive contributions from both, be a bed mix and also things like Revicare. I would say though, as it relates to Q4, most of what you're seeing is some seasonality, which I think has always existed, but perhaps is more amplified now that we have a larger bed count. The number of weekdays in a quarter, just because of our sort of clinical and dispensing activities happen primarily on weekdays, does tend to drive revenue. And so I think historically, I don't have a calendar in front of me, but I think Q4 is the high watermark in terms of number of weekdays in the quarter. So I would characterize most of this, unfortunately, as seasonality that probably should be reflected in quarter-to-quarter model. But we are obviously focused on trying to get revenue per bed higher and we were able to do that in Q4 and we'll continue to try to work on that.

[Doug Cooper, analyst]

Okay. So you got $200,000 of the synergies of the $5 million synergies in Q4. So in other words, there's $4.8 million to come, I'm assuming. So if based on sort of run rate revenue of $96.9 million annualized, it's $388 million; $8.7 million annualized, it's just under, let's call it, $35 million plus the $4.8 million of synergies to come. So without doing anything, without adding any more beds, assuming they normalize, obviously, from Omicron, you're at $40 million, just under $400 million of revenue, is that accurate? Isn't my math, right?

[David Murphy, executive]

Yes. I think, broadly speaking, that's right. I think, just to confirm, the synergies, the $200,000 in synergies that was in the quarter, so that would be annualized to $800,000. So some of that synergy number is already in the run rate, but yes, I think your math is right. We need to get this integration completed and certainly that's where we should be without needing to add any further beds, [ but we ] expect to do so.

[Andrew Mok, executive]

I think the one thing I would add there, Doug, is in terms of the math that you're doing, we're achieving that -- rest of that $5 million throughout this year such that by Q4 will -- that will be into the run rate. So it's not going to contribute $5 million in 2020. So we're not going to quite add that this year. But on a run rate basis by Q4, we would without any additional growth.

[Doug Cooper, analyst]

Yes, got it. Just in terms of free cash flow, how much of your EBITDA is expected to flow to free cash flow in 2022? And I guess I'm just trying to get an idea of how quickly you can delever, assuming you don't do any acquisitions and so forth?

[David Murphy, executive]

Yes. I'll let Andrew walk you through the more detailed picture. I think high level, we continue to be very confident that we will be free cash flow positive by the end of this year and a healthy generator of free cash flow in 2023 and beyond, and that will permit a number of things, including deleveraging of the capital. I would say that the main reason why we're not going to get there until the end of this year is mostly just both the integration activity underway and also the CapEx related to the Burlington facility. So a very good use of cash, but it will make it a slightly higher or heavier CapEx year in the first half of this year, leading into the end of the year. So let me let -- ask Andrew to provide some more detail on that walk.

[Andrew Mok, executive]

Yes. I think David hit on all the main components of it, Doug, but for the first 3 quarters of this year, while we expect to generate positive operating cash flow, we're not expecting to be free cash flow positive because of both the remaining cost to complete the MPGL transition and integration project as well as some of the CapEx requirements David mentioned, including the new Burlington site, obviously being the largest, but also some other leasehold improvement activities at some of the other sites that we're consolidating as well. But we've always said, and we still continue to believe that by Q4, we'll be free cash flow positive.

[Doug Cooper, analyst]

Okay. And my final one, just, David, you mentioned some new commitments by governments to build new facilities. You've always talked about sort of 400,000 beds across the country. How much new construction and new beds should we be expecting to add, say, over the next 3 to 5 years?

[David Murphy, executive]

It's a really good question that I should have a better answer to, Doug. I think perhaps let us come back to that in the first quarter. I think we are seeing a lot of expansion, Ontario in particular, but I don't want to ballpark that without some precision, but I think the history of at least my time in this sector has always been that there's fairly robust growth forecast for what number of beds is going to be added over the next 5 years, but the actual addition of those beds is very lumpy. It does feel like we are in a lump, so to speak, in terms of a surge of activity. But we'll try to address that more comprehensively in terms of what it means for market growth in May for the Q1 release.

[Operator]

And your next question comes from Sepehr Manochehry from Eight Capital.

[Sepehr Manochehry, analyst]

Congrats on the fourth quarter and annual results. I wanted to touch on some of the drivers of revenue growth, mainly on -- with the recent addition of Revicare as an offering. I want to understand, obviously, incontinence products historically are something you've offered and that does fit within the model of limiting the time that nurses need to spend on taking care of these seniors because they have access to these products that limit their time on incontinence care. Is the focus on there to really support operators and the nurses with more product offerings? Or is it to really offer the seniors themselves more direct access, say more on the retirement home side to a range of products?

[David Murphy, executive]

Sepehr, that's a great question. I would say it's both, but it's a little more of the latter of the 2 themes you presented. So for the most part, our view, and I have some experience in the past life around the medical supply sectors. Our view is in retirement homes, so not long-term care per se, but in retirement homes. This is a relatively underserviced market in terms of options available to homes and their residents that are directly shipped into the homes and our needed items, both for either necessity or convenience in terms of care. For the most part -- and I'm generalizing, for the most part, these are things that residents source directly themselves as opposed to relying on the nursing arms of the homes to provide for them. So I think the sell, so to speak, is both to the homes, but also to the individual residents to be able to give them a one-stop-shop without leaving their home or their room to get what they need to make their day-to-day life more comfortable. That's the main focus.

[Sepehr Manochehry, analyst]

Got it. And the nature of that, you kind of alluded to it, is it that they have a one dispensation location on the property of the elderly care facility, at the retirement home? Or is it that it's actually delivered to their unit within the retirement facility and it's kind of...

[David Murphy, executive]

Generally, there isn't something on site. So it's generally something that they get themselves in some way, either they drive themselves if they're still able to, a family member or a caregiver brings it to them, or there's some sort of home delivery aspect to it, which again, we believe, gives us an opportunity to offer something that's much more comprehensive and convenient.

[Sepehr Manochehry, analyst]

Sorry, yes, and that was -- my question is that, is your offering kind of at the one central dispensation site in the retirement facility? Or is your offering an at-the-door service essentially, going from [indiscernible]?

[David Murphy, executive]

It will be delivered to the home with the same truck as everything else from a medication perspective that we deliver.

[Sepehr Manochehry, analyst]

Understood. Understood. Okay. And then I saw the mention of wound care. Is that kind of sitting within the same model as some of the incontinence care products where wound care helps limit costs from bedsores and it just really offers these care providers a risk mitigation strategy as well? Or is that also kind of things that you see as higher market products that seniors look to buy themselves?

[David Murphy, executive]

Yes. I think primarily it is both. That is wound care is a critical category as it relates to nursing in terms of reducing adverse incidents, but there are also sort of, call it, day-to-day household products in that category that residents may procure themselves. So as I said, this is primarily sort of individual resident base, but there are -- obviously, all the retirement homes have some nursing arm to them regardless of how independent or active their resident base are and we're trying to make their lives easier.

[Sepehr Manochehry, analyst]

Understood. Understood. And is this something that's being piloted with like a big customer similar to what you did to the virtual care? Or is this something that's been now offered to all your retirement homes?

[David Murphy, executive]

All of our homes. So we -- as you know, we did have an established business in this sector with a different brand, which had better penetration in certain parts of the country and certain customers, but it already existed. So I would think about this as an expansion and rebranding of that. And so it really is east and west of, by which I mean Ontario and Western Canada, most of our retirement homes are participating in some manner.

[Sepehr Manochehry, analyst]

Understood. And just the last one from me. Is the 30,000-goal inclusive of entrance into kind of additional institutional clients like group homes or penitentiaries? Or is that really a focus on senior homes when you think about that number?

[David Murphy, executive]

Good question. We continue to believe we have opportunities for greater penetration in other congregate care settings. But I would say, for the most part, the 130,000 is our existing business and our existing geographies. And as you know, we did do a little bit of non-seniors' home business in sectors like corrections and group homes. So growing that is part of the strategy. But I wouldn't characterize the goal as some sort of step change in that space that hopefully would be incremental to the 130,000 goal.

[Operator]

And your next question comes from Tania Gonsalves from Canaccord Genuity.

[Tania Gonsalves, analyst]

Most of my questions have been asked, but a couple from me. One, you did mention in your prepared remarks that M&A has accelerated in the home operator space. You said, for the most part, the acquirers are companies that you already -- or homes you already work with. In the event that the acquirer is not a home that you already work with, what would be the process by which that contract gets transferred? So let's see in the event of Sienna acquiring some of those extended care homes earlier this year. I don't know whether or not you work with Sienna. But assuming that you did not, what would happen to your extended care contract for those homes?

[David Murphy, executive]

Yes, so a good question. I think Sienna is a very strong national partner of ours in that specific case. But your question was more broad. I mean I think generally speaking I would say 2 things. One, the contracts are still valid, so I don't think an acquisition necessarily changes anything on day one. But I think you can expect in most cases the homes will step back and look at their entire portfolio and want to make a decision to have, in most cases, a single partner for those homes. So again, we look at that as in almost all cases a good thing because it gives us an opportunity to convince existing customers, who have maybe bought homes or bought parts of another operator's portfolio that we've earned the right to service their entire portfolio. So the contracts still are valid to answer your question, Tania. But I think it provides an opportunity for a sole source sort of win once the integration is complete and those contracts expire.

[Tania Gonsalves, analyst]

Understood. Okay. So we're just waiting for renewal then for that to change hands.

[David Murphy, executive]

That's fair, yes.

[Tania Gonsalves, analyst]

Okay. And then on the non-recurring expenses that you mentioned, that $1.1 million, could you give us an idea of how that would split between the OpEx line items, just to get a better sense of how each of your expense line items are going to be tracking through 2022?

[David Murphy, executive]

Sure. Yes, I'll let Andrew answer that for you. I mean, high level, the 3 buckets that we highlighted, I think the impact was almost exactly the same or just to add up to that $1.1 million, but Andrew can trace it through the P&L more specifically. Andrew?

[Andrew Mok, executive]

Yes, David. This morning, Tania, David mentioned, the 3 components that we highlighted were relatively similar in size. But in terms of how it's split in the P&L, about 2/3 of that would have been in the cost of healthcare services line and the other 1/3 would have been in the G&A line.

[Tania Gonsalves, analyst]

Perfect. And because we did have the effects of Omicron kind of continue into Q1, I'm not sure if any of those non-recurring expense is related to that and because integration is continuing, do you think we will see any more non-recurring or large, sizable non-recurring cost drag into the Q1 period?

[David Murphy, executive]

No, it's not our expectation that we will. I think our sense of Q1 is it's going to look a lot like Q4 on a normalized basis, not factoring in those non-recurring costs, except as I mentioned, our bed count is a little lower, but our synergies should be a little higher. So I think the -- all 3 of the categories of non-recurring costs, we're confident that they aren't going to stretch into any part of 2022.

[Operator]

[Operator Instructions] And your next question comes from Kyle McPhee from Cormark.

[Kyle McPhee, analyst]

Just a follow-up on Burlington facility. So is this largely added capacity to support your growth runway? Or are you also going to be consolidating a lot of your volume at other existing facilities in relatively short order to use up that 30,000-bed capacity?

[David Murphy, executive]

Yes. Good question, Kyle. I think it is both, and as usual I would be hesitant before we make public comments about site consolidation, we want to talk to our teams and talk to our customers. I would tell you; we think the majority of that capacity will be used by this time next year. So it's definitely organic growth, but one way or the other, we believe that we will use that capacity in relatively short order.

[Kyle McPhee, analyst]

Got it. Okay. And then in terms of -- so I guess we should expect some ongoing one-time restructuring and integration costs associated with that, beyond what we would already be expecting related to Medical Pharmacies?

[David Murphy, executive]

I think in some respects, yes. But I think it's to a much less degree than the 2 big site consolidations [Technical Difficulty] and Medical Pharmacies.

[Kyle McPhee, analyst]

Okay. And then we were talking about the EBITDA bridge to free cash flow. Can you just specifically outline what your CapEx budget is for this year?

[David Murphy, executive]

Yes, I'll turn that over to Andrew. I don't think we've ever been that specific, but I think we can probably speak to it broadly.

[Andrew Mok, executive]

Yes. As David mentioned, I think we historically have kind of given specific guidance on CapEx in terms of the number. What I probably could tell you, Kyle, is if you look at our 2021 CapEx on a total basis, it was about $8 million when you include both fixed assets and intangibles. So I think that that's probably a good post for what [indiscernible] expect in 2022. Obviously, there was only about 4 months of the Medical Pharmacies business in our 2021 results. But I think that would probably be a good guide for you. Obviously, it's going to be a little bit higher in 2022 just because of some of the -- like the Burlington site and some of our other site consolidation activities, but we did have some of that at the beginning of 2021 as well when we were finishing the Remedy's integration. So I think that 2021 kind of is a good guidepost for what you would expect in 2022.

[Operator]

And there are no further questions at this time. Mr. Murphy, you may proceed.

[David Murphy, executive]

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.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you very much for participating and ask that you please disconnect your lines. Have a great day.