All right. Good afternoon, and hopefully everyone's still awake, and we're all drinking coffee, right? Our next fireside chat is Guardian Pharmacy Services. With us today is Fred Burke, the company's CEO. Fred, thank you for doing this. Brian, thank you. It's great. Always nice to see you here in Nashville. Well, this is a great conference that you've put together. It's been really productive for us. I appreciate that. Thank you for including us. All right. What about we do a state of the union? How are things going at Guardian? Well, we had a very momentous first half in that we implemented the IRA and the fixes that we had negotiated for that. And proud to say that the forecasting that we had done with our data analytics platform panned out to be the case. A lot of changes, a lot of moving parts, but I am very proud of our company and its skill set to be able to predict something like that. Fred, someone was signaling to me, by the way, that maybe we should start with an intro into Guardian for those who are not very familiar with your story. So what is Guardian? Sure. We are a specialty institutional pharmacy that focuses our service on assisted living facilities, who require a completely different type of service than what most long-term care pharmacies are geared to serve, which is skilled nursing facilities. We've been at this for 22 years. We were founded 22 years ago with this in mind, and we've grown step by step over this past two decades, planting flags and now serving 38 states. We grow both organically, which is very important in our DNA. We do that by selling new assisted living facilities to use our pharmacy service. And marginally, we've benefited from industry tailwinds, such as the occupancy rebound from COVID. And we focus on an important service to assisted living, which is to have a high adoption rate of residents using the pharmacy service. And then we have benefited greatly from growth through contiguous greenfield startups, and we do M&A. So we've grown from the one initial pharmacy to 60 or so today. That's amazing. Maybe a few things to unpack there. So when we think of the growth algorithm or your growth outlook for your business, how should investors think about that, and what are those drivers? You mentioned silver tsunami as part of the senior housing space, penetration. Yeah, if you can just unpack all that for us. It is complicated by the IRA. Let's pretend the IRA didn't exist. Our growth algorithm is we feel like we can grow organically in the highest single digits, and we have done that since inception. We do that through the things I mentioned before, selling new facilities to use our pharmacy service and the contiguous greenfield startups, increasing the adoption rate from when we take on the facility up to our corporate average of 90%, and at the margin, a little bit of benefit from the occupancy rebound. We augment that growth with M&A and have been able to deliver since inception mid double digit, mid-teens growth. But we are looking and guiding to low teen revenue growth. All of that is assuming the IRA didn't exist. We have this one-time anomaly, really three-time anomaly with the three tranches, that is arresting reported revenue growth. In the first half of the year, we grew 2% revenue, but if you were to adjust it for the effect of the IRA, it would be the low double digit that I just mentioned. Down on the EBITDA, it is a different story. Here, it is driven almost exclusively by organic because most of the acquisitions come on board with a very low profitability level. Maybe a few things there. Let's start with the IRA, right? Like you said, it has been a growth limiter on the top line. But you have done a very good job offsetting that with contractual adjustments with your PBM partners. As we think of the remaining IRA adjustments over the next few years, how should investors think about the earnings impact of future cuts to drug pricing? We have covered those as well, the future tranches. The terms of revenue, the tranche 2, the 27 drugs will be about 50% of the effect of tranche 1, and 28 tranche will be 50% of 27. That's on the revenue line. Margin is intact. The margin profile is intact. Awesome. Maybe Fred Burke, one of the things that we've talked a lot about is the durability of your revenue base, the durability of demand, and the predictability of it. Because once a patient is in your service, that patient's with you for really until they have to pass, right? Right. How do you think about the life cycle of your revenue and the patient base that you serve? Well, it's an interesting point. The average length of stay in assisted living is 22 months. If you were to translate that into what other companies might call churn, we have 50% or so, 40% of our residents transitioning each year. That's a major driver of the business. It's an opportunity for us to make a major impact on the drug regimen, because when patients transition from care from the community into assisted living, one of the first things we do, it adds tremendous value, is comprehensive drug regimen review. Usually the first time anyone's ever looked at a patient holistically. In that experience, we find and correct a lot of problems. Our data analytics team has developed the program to track that, and we report that, and it's quite amazing the value add that we bring. Fred, one of the things that we appreciate, we love about your business is the diversity of your client base. I think some investors have been asking us, do you have client concentration among the big, or partner concentration among the big senior housing facilities? Number one, do you mind addressing that topic? The second is, what are you seeing in terms of the occupancy growth of the industry and how that's translating into revenue growth for your business? Sure. We have a very diverse customer base. In fact, I saw Nick at lunch in Brookdale, and he reminded me, "Be sure and tell people that Brookdale represents 5% or less of our customer base." They, of course, are far and away the largest operator in the assisted living space. So we have a very diverse customer base. In terms of occupancy, we're seeing the rebound from COVID, where we had a sharp decline in occupancy rates, and it's come back to now pre-COVID levels. Different operators have slightly different occupancy rates. But that represents a, I'll call it marginal tailwind for us. If you run the numbers, basis points of occupancy translates into a little bit of revenue growth, but it's not the main driver. The selling activity is the main driver. What we are hopeful is that the market forces will come into play as this occupancy rate increases up to that friction point, that it'll bring capital and growth needed for this silver tsunami, as you called it. These cohorts, the post-WW2 births, are now hitting 80 years of age, and we're going to need some more assisted living capacity. No, that makes a lot of sense. Maybe one of the things that you touched on as another driver of growth is resident adoption rates, right? Yes. You partner with an assisted living facility. You're one of their preferred providers, or you are the preferred provider, but not every single resident uses you guys in those situations. How do you drive that? Well, it's a very important service that we render to assisted living because a high adoption rate improves the effectiveness of the med pass and reduces the risk. As you can imagine what one of these med carts would look like if you've got polypharmacy in there. So it's an important service that we render and our customers, in this case, assisted living facilities, are our partner, and we provide them with the tools that they need to make the sale of the pharmacy at the best time, which is upon transition of care. It's videos, it's brochures, it's explanations of why it's in your mother's best interest to use this specialty pharmacy that has engineered a special platform for us to properly administer the meds to your mom. No, that's great. Maybe shifting gears a little bit, given the strength of your balance sheet, how do we think about capital allocation priorities and how are you thinking about balancing capital between acquisitions, greenfield, and maybe other uses of capital going forward? We're in a very fortunate position. We have no debt, and we've built since our IPO two years ago, when cash was very low, $5 million, I think, up to nearing $100 million in our last report. So we have the financial wherewithal to pursue our growth plans, either acquisition and/or contiguous greenfield startups. And we're fortunate to be in that position. Maybe let's double-click on the greenfield startups for a minute here. What exactly is the strategy? How do you do that? What are the economics around these greenfields? Because the way we look at it is these are very compelling, high ROIC openings. If you can walk us through that. Sure. The way this happens is a pharmacy is generally serving a 2-3 hour radius, all the facilities in that radius, and they might begin to serve some facilities that are a little further out. A good example would be Cincinnati and Columbus, Ohio, which is one of our recent contiguous greenfield startups. At a certain point, there's enough scale to warrant bricks and mortar in Columbus, and that in turn gives us a foothold to properly serve that market, other customers as well. There are benefits to growing this way in that we can implement our processes and our systems and our culture from the get-go. What we have to do is sell to achieve the scale such that we can achieve our corporate profitability. It's very efficient way to grow. It's capital light, and it allows us to maintain that service level. The other side of your growth is acquisitions. As you said, you've done some acquisitions over the years. You announced one recently here in Nashville, actually. If you don't mind just talking about that deal and what that looks like and what does it do for Guardian? Okay. Maybe let's start with our typical acquisition, because Nautilus is not. It's different. Our typical acquisition is an operator who is doing a great job serving their market. But unfortunately, it's very difficult to achieve a significant level of profitability as a single unit operator. We want someone who wants to continue with the business, to grow it, very collegial and open to the value adds that we can bring. In that situation, it takes us 3, 4 years to implement the various buckets of improvement that we offer. In short, they fall into the camps of purchasing, where we can help them lower the cost of their drugs, reimbursement, where we enjoy better reimbursement, tools and data analytics that help them run their pharmacy better and improve their margins, and then finally, access to national accounts through our national account program. That's the typical acquisition target that we're looking for, and we've just been so pleased with the operators that we've found to join the Guardian family. Most recent couple in the Pacific Northwest are coming along beautifully, and we love to grow that way. Now, turning to this most recent announcement, which is Nautilus Pharmacy here in Nashville, in fact. This is a little different in that this was a pharmacy serving assisted living by mail, and that's very difficult to do. The patients have a high acuity level, lot of changes, DCs, change of strength, new drugs added, very complicated and difficult to serve that way. So what we're going to do is put those facilities that they serve into 18 of our pharmacies around the country. And we're very pleased with the team. We'll be very happy to keep much of their team that were extremely competent, so that's a welcome addition as well. But the actual pharmacy facility itself will discontinue operations. Fred, on something like that, it's pretty synergistic, I'm guessing, right? Basically, it's almost like what we call on the retail pharmacy side, a patient list acquisition. Is that- Right. File buy. Yeah, file buy. Very much so. Is that the right way to think about that? It is. There was some customer concentration that will require some hiring in a couple of our pharmacies, Northern Virginia and here in Tennessee. But by and large, we are talking about one, two, or three additional assisted living facilities in these 18 or 16 of the 18 pharmacies. The economics of that are very attractive. It is asset light, very accretive quicker than the When we intake a new facility, there are costs, upfront costs associated with it, so we have that with this as well, but it will accrete very quickly. Sounds good. Maybe I will move on to the next M&A question. You have been very public about an interest in Omnicare in the past. Obviously, that stalking horse bid ended up winning during the court process. When we think of the opportunities that that is opening up for you, whether it is winning new business or potentially maybe some acquisition opportunities down the road, how are you strategizing around that? As you mentioned, we were a bidder as well, but not for the entire entity. The court, for good reasons, would pick the stalking horse bidder. But we are assuming, and to be totally upfront and transparent, we have had no conversations with the winner, the stalking horse winner, because the deal has not even closed yet. But we are assuming that they will be privy to our bid and that some of these assets are non-strategic to them and they may be interested in divesting those. So we are keeping our powder dry and standing by for that possibility. If that does not, and/or even if that does not manifest itself, once the deal closes, we will be able to sell. Our sales teams can be unleashed to sell in the pharmacies. Sounds good. Maybe back to the greenfield discussion as we think about growth. You've made a push into the West Coast recently. How do we think about your goals in terms of geographic expansion? Well, you can see the areas where we have the need to plant flags. Yes, the Pacific Northwest was one that we had our very important customers asking us to go there. So that's a major driver of it. A key element of it is having the people and the human capital to either make an acquisition of an existing pharmacy or launch a greenfield startup. But we're going to continue to do that. Our mission is to build out our footprint across the United States, and there are several remaining pockets of opportunity. No, that makes sense. Maybe just since you mentioned that, the manpower or the human capital aspect of your business, you hosted us and a few investors at your Jacksonville facility a month or so ago. It was very evident to us that localized approach to the relationship building and running the operations. Maybe if you can walk us through that strategy and why Guardian likes that approach versus a more centralized or a nationalized approach to operations. I believe that that's one of our keys to success, is the local decision making close to the customer. We call it our local autonomy model, where we vest the general manager or president of our pharmacy, along with the functional leaders, great latitude to serve their customers the way their customers want to be served. That's a core cultural component of Guardian that we value very greatly and will continue. We have to work on that. It requires great people running our pharmacies, which we have. I think people walk away from those pharmacy visits, in Jacksonville, we did another one in Cincinnati, really blown away by the caliber of the teams. It's such an embedded secret sauce and key component of Guardian's success. I can't tell you how proud I am of the local teams that run these pharmacies and how important that is to our success. Yeah, I'll share this with you, Fred. I think to me, the surprise was how close they are with the executive directors at the assisted living facilities, right? Maybe as we think about that, how do you build those relationships? I know you have a sales force, but walk us through the sales process because you called that out as a growth driver. Yes. One of the hardest things for an assisted living ED to do is change pharmacies, because it's historically been very difficult. We believe that we have the process and approach that makes it a lot less painful. The way that the selling process works is to establish a standard of service, to be the world-class leader in a market, and then establish relationships with all the various facilities and wait for that moment when they finally decide that they'd like to change pharmacies, and they'll pick us for that. Once we now have a working relationship with an assisted living facility, we also have a team of account managers who I think remember you met, and these people are in these facilities day to day and do establish very close relationships, not only with the caregivers in the facility, but the residents themselves. Yeah, makes a lot of sense. Maybe I'll shift gears here really quickly. Last week, I saw that you filed an 8-K about the share lock-up. Maybe if you can walk us through that, and how should investors be interpreting the lock-up that you guys announced? Sure. Investors should know that we have been and will continue to be very prudent and measured in liquidity. Our company has a large amount of inside ownership. We have 250 employee owners. Very proud of that. It is a key element of our success. Here at Jefferies, I think you would agree, we have been very measured and responsible in the way that we have increased the flow, and we intend to continue to do that. This particular lock-up is an extension of the previous one. It involves the founders. That would be the outside investors and myself and the co-founders of the company, the EOs, and the principal employee shareholders. It really is just a continuation of what we have done since becoming public. No, that makes a lot of sense. We have a few minutes here left, Fred. I guess I will pass it to you and leave the floor for you to share any parting thoughts for the audience as they think about the Guardian Investment story and if there is anything you think is underappreciated by the investment community. I will say that I believe it is very hard for us to communicate and brag about our local teams, but I covered that already. I think you saw that on the visit. It is really an amazing foundational element of our success. I think the financial profile is interesting with our cash conversion and the fact that we do have a very clean balance sheet with the ability to take advantage of growth opportunities. Those are important things. The other is that our success is being driven by the value add that we are bringing. I mentioned one element of the value add is getting residents on the proper drug regimen. This accrues greatly to their benefit in terms of better care, better outcomes, and it also helps them financially if we can get them on their payors' formulary, lowering their co-pays, et cetera. The other part of the equation is then to make sure they adhere to it, and that is where our tech-enabled platform to help pass the meds safely and effectively and efficiently comes into play. These are very high value add services, not only to the facilities and their residents, but also to the payors. They are deriving great benefit from what we do, and I think over time, as we have been able to establish direct contracts with the payors, we are now in a better position to articulate the value add that we are bringing, and that is accruing to the company's benefit as well. Well, that's amazing. Fred, thank you so much. Really appreciate your time. Thank you. We learned a lot from you today. Thanks. Appreciate it. Thank you all.