Q1 2022 Alerislife Inc Earnings Call
Okay.
Good afternoon, and welcome to Ballard's life first quarter 2022 earnings call.
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I'd now like to turn the conference over to Michael could that Derek.
Director of Investor Relations. Please go ahead.
Thank you welcome to <unk> first quarter 2022 conference call.
The agenda for today's call includes a presentation by Jeff Lee, our interim President and Chief Executive Officer, and Chief Financial Officer and Treasurer.
Followed by a question and answer session with research analysts.
I would like to note that the transcription recording or retransmission of today's conference call is strictly prohibited without the prior written consent of the company.
Today's conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 and other securities laws. These forward looking statements are based on alerts lives present beliefs and expectations as of today Wednesday may four 2022.
The company undertakes no obligation to revise or publicly release. The result of any revisions to the forward looking statements made in today's conference call other than through filings with the Securities and Exchange Commission or SEC regarding this reporting period.
Actual results may differ materially from those projected in any forward looking statements.
Additional information concerning factors that could cause those differences is contained in our filings with the SEC.
Investors are cautioned not to place undue reliance upon any forward looking statements.
In addition, this call may contain non-GAAP numbers, including EBITDA adjusted EBITDA, adjusted net income and adjusted earnings per share reconciliations.
Reconciliations of net income to these non-GAAP figures and the components to calculate them are available in our quarterly results news release or Investor presentation available on our website at Www Dot alert life Dot Com I will now turn the call over to Jeff.
Thanks, Michael Good afternoon, everyone and thank you for joining our first quarter conference call.
To begin today's call I want to thank Judy for her years of leadership and vision for both the Lyris life in the senior living industry.
<unk> life has gone through tremendous challenges over the years, including most recently, the COVID-19, pandemic, which uniquely impacted all of us and significantly impacts our plans our people and our business.
At this pivotal time for the senior living industry and our company. It is critical that we continue to maintain our focus on the core business functions of our senior living communities and agility clinics.
To do this we must continue to drive efficiencies and standardized processes that will enable us to better serve our residents and customers and stabilize our financial performance.
Our goal is to narrow our focus in the current environment to capture occupancy growth and drive cost efficiencies.
We are not losing sight of our long term focus on overall strategy.
The short term focus is stabilizing our senior living portfolio and operational excellence.
This includes working with our sales teams across our markets to augment targeting strategies.
Enhanced sales techniques to maximize revenues for a portfolio of senior living communities.
Additionally, we have made significant investments in our operational support functions that we expect will provide our operations team with the tools they need to face present challenges and adapt to the ever changing environment.
Our board recently retained the health care consulting group of Alvarez and Marsal to conduct the operational review.
Alvarez and Marsal is a global consulting firm specializing in turnaround management and operational improvement.
And we are excited to work closely with their team to improve our operational performance by driving efficiencies and standardizing processes that will ultimately enable us to better serve our senior living residents and agility clinic customers.
Moving to operational results for the quarter.
On a sequential quarter basis.
Same property Revpar in our managed portfolio increased four 4%.
Same property Revpar in our own portfolio increased 4%.
Both rate increases and the continued roll back of concession packages offered in previous quarters.
Drive these improvements in <unk>.
More than offset decreases in occupancy from the sequential quarter.
Average occupancy in our owned residential portfolio was 71% a decrease of 100 basis points from the fourth quarter.
On a comparable community basis average occupancy in the managed residential portfolio was 74, 1% approximately in line with both our fourth quarter as well as the industry average for our portfolio is more weighted in independent living in the first quarter.
As we continue to focus on rate in conjunction with occupancy and ask the aggressive concession and discount program implemented in late 2021 expire.
We expect an even further improved EBITDA benefit due to our fixed cost operating structure.
Yeah.
On a consolidated basis, our lifestyle services revenue declined $1 $5 million compared to the fourth quarter due to the approximate 2% Medicare fee schedule rate cut.
As well as the 15% assistant rate cut.
Additionally, revenue decreases were due to lower outpatient revenue as a result of the closure of 17 outpatient clinics.
Now we are in communities that transitioned to new operators during the fourth quarter.
And then additional closure of five outpatient clinics operating in non awareness operating communities during the first quarter.
Overall, our exposure remains limited to government assisted customers approximately five 5% of our total gross revenues are derived from Medicare and Medicaid payment programs.
Recently, CMS has proposed pulling back sniff reimbursement and government assisted financial support.
This is highlighted by the full year 2023, Medicare rate update and phasing out of certain operating waivers.
Given that we now have no exposure to snips, we believe we have less of an impact from the near term regulatory risk facing the industry.
Moving to our financial results for the quarter.
In the first quarter management operating revenues were approximately $38 5 million a decrease of $1 $5 million from the sequential quarter, primarily due to a reduction in lifestyle services revenues driven by the Medicare reimbursement rate cuts I just discussed.
On residential segment.
Total management and operating revenues of $24 $3 million.
Of the $8 $9 million in management fees earned approximately $800000 were attributable to construction management fees as we deployed $25 7 million of capital on behalf of the managed portfolio of this quarter for routine community capital improvements.
As a reminder, our Laris life will continue to receive a 3% capital management fee on all routine capital.
We expect to deploy approximately $7 million to $8 million of capital on behalf of the managed communities for the remainder of 2022.
Our lifestyle services segment reported revenues of $14 1 million.
A decrease of approximately $1 5 million compared to the fourth quarter of 2021.
Looking ahead to the next quarter within our lifestyle services segment clinic in daily visitation levels have trended upward and along with seven expected net openings in the second quarter, we expect revenues to increase by approximately $400000.
General and administrative expense for the first quarter was $18 2 million.
Which included $3 $8 million reimbursed by the agency.
Our net G&A expense was approximately $14 4 million, which represents a decrease of $1 4 million.
Or 9% from the fourth quarter.
Since the second quarter of 2021, we have reduced our gross general administrative costs by $4 6 million.
Our $18 million on an annualized basis.
Which is above our original target of $12 million mentioned previously.
We expect that while we continue to evaluate opportunities to reduce our general administrative costs, we are committed to streamlining our processes and making the necessary investments in our people.
For the first quarter, we reported a net loss of $9 $7 million 31 per share.
Compared to $10 $7 million 34 per share.
Loss in the fourth quarter of 2021 adjusted.
Adjusted EBITDA for the quarter was negative $5 3 million <unk>.
Compared to negative $6 4 million reported for the previous quarter.
Yeah.
Moving to our balance sheet.
During the quarter, we closed on a $95 million secured.
Term loan of which $63 million less closing costs of $3 2 million was immediately available.
In connection with entering this new term loan we terminated our existing senior secured revolving credit facility, which had no borrowings outstanding and was scheduled to mature in June 2022.
Due to timing of funding working capital obligations in conjunction with capital deployments at our owned communities at quarter end, we had approximately $88 1 million of unrestricted cash and cash equivalents.
As we have reduced our current working capital obligations, we don't anticipate any elevated levels of these balances in the near term.
Throughout the remainder of 2022, we expect to invest up to $16 million in our owned portfolio in $2 million to $3 million for investments in technology.
That concludes our prepared remarks, operator, please open the line for questions.
So as of now.
Again, the question and answer session to.
To ask a question you May press Star then one on your telephone keypad is very useful.
Sean Please pick up your handset before pressing Nicky.
Your question. Please press Star then two.
At this time.
I'll pause momentarily to assemble our roster.
Yeah.
Our first question comes from Brian May Hare, B Riley FBR.
Good afternoon, Jeff that's a couple of questions.
We've gotten a lot of questions from investors on the term loan and.
The main question revolves around why was there a need to do that.
Given the cash balance that you have and maybe just renew recast redo our credit facility as opposed to doing a term loan.
Is there anything that you.
You can share with that the potential for acquisitions.
Here, Yeah Capex.
Would facilitate the need for that.
Thanks, Brian Good question I think the answer to that is.
Our line of credit was expiring in June of 2022.
Evaluating the best options for maximum liquidity opportunity.
This opportunity presented itself and we thought it gave us the best.
Financial stability and security.
And a stronger balance sheet and in addition, it gave us the flexibility to look at.
Long term strategic acquisitions as well as the reinvestment of our 21.
Communities.
Okay, and when we think about occupancy in the quarter.
What kind of a headwind there was it mostly omicron or was there something else going on was there any pushback related to.
Trying to drive rates higher.
And how do you see occupancy playing out over the balance of this year.
Yes, I think omicron did definitely had an impact early on in the quarter in January early February timeframe timeframe. We also continue to see.
The demand in.
In the quarter demand was more towards the choice based.
Needs based less on the choice based and if you recall over 50% of our portfolio is is more weighted towards the toy space.
What I will tell you is.
Recently, we're starting to see more trend opening up of the choice based and demand and lead volumes and I would expect.
Continued occupancy improvement throughout the remainder of the year, but not as aggressive as we.
Probably would have originally anticipated.
And I know that Youre doing a lot of Capex. This year I think you might have mentioned $78 million for the balance of this year for the DHT managed properties.
Is there any kind of displacement because you do that.
And that kind of question one.
And then what do you see is the kind of immediate first couple of quarters, maybe balanced in occupancy or move ins following a renovation.
Yeah. The majority of the capital we are looking at is in routine. So it's really in the facility management and making sure the nuts and bolts of the community are operating effectively.
There are additional capital being deployed by D. H C.
For renovations in an app.
Renovations what.
I would say is there isn't any that that I'm aware of that will take a community offline.
So there should be limited impact on the day to day during these renovations.
No I guess I'm thinking about it from kind of my lodging coverage hat, which is.
When a hotel under renovation that kind of take one floor out at a time as opposed to.
Shutting the whole hotel down.
I'm, assuming that you add the occupancy bandwidth.
You may be work on a wing or a group of rooms at a time.
Now without maybe impacting your occupancy per say is is that a right way to think about it.
That's accurate.
Okay, and can you tell us a little bit more in detail what exactly is being done to the facilities.
You talked about having them run a little bit better.
But is there anything kind of cosmetic that's going to give the property may be.
<unk> uplift relative to new competition coming in to any particular market.
I think it's a combination of making sure.
The communities are refreshed and are competitive with to your point.
New products, but also in ensuring we have technology that allows our customers to to expand their service capabilities within the community.
We've gone through a number of investments with Wi Fi technology enablement within the community and enhancing the not just the resident but also their visitor experience as they come into our community.
Okay and you touched upon in your prepared comments, the G&A improvement over the past year.
Do you think that there is any more.
Potential to lower that further or do you think you've pretty much run the course on where you can drive that downtown.
Yes, I think Q1 still had a little bit of an impact on the transition of communities. As we previously stated there is typically a lag between the time when we transition communities to new operators and the support provided so I do anticipate a slight improvement.
And G&A.
In Q2.
But I think you won't see as material of a change as you've seen from Q4 to Q Q1.
Okay, and then maybe last from me yes.
Bringing in Alvarez and Marsal do you have any thoughts or did you give them any guidance as to what you wanted them to drill down on or is it just going to be there.
We're showing up with a blank piece of paper.
And coming back to you with ideas and is this going to be mainly at corporate or is this going to be out in the field as well.
Yes, I think I think they are looking at everything.
Our focus for Alvarez, and Marsal has to really work with management and in reports of the board.
Yeah.
Help with the defined strategy short term strategy that aligns with our long term goals.
Okay, and maybe one more if I might.
The rate increases that you and THC talked about when you reported fourth quarter.
Numbers I think the goal was kind of 5% to 10% uplift in rates is that still the goal Act do you saw the first quarter numbers.
Yes that is still the goal while we've had pockets of pushback on some of our rate I think everyone.
His understanding of just to inflate.
Inflationary times were in.
And as is understanding of why we need to do we need to do.
Okay. Thank you that's all from me.
Again, thank you have a question please press star.
Alright, Dan Wang.
Yeah.
Yeah.
This concludes our question and answer session.
Bank to turn the conference back over to Jeff Lang for any closing remarks.
Thank you for joining us this afternoon, operator that concludes our call.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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