Q1 2022 Sonida Senior Living Inc Earnings Call
Good day and welcome to so neither senior living first quarter 2022 conference call.
Today's conference is being recorded.
All statements today, which are not historical facts may be deemed to be forward looking statements within the meaning of the federal securities laws.
These statements are made as of today's date and the company expressly disclaims any obligation to update these statements in the future.
Actual results and performance may differ materially from forward looking statements.
Certain of these factors that could cause actual results to differ are detailed in the earnings release the company issued earlier today as well as in the reports the company files with the SEC from time to time, including the risk factors contained in the annual report on Form 10-K, and quarterly reports on Form 10-Q.
Please see today's press release for the full Safe Harbor statement, which may be found at www dot So neatest senior living dotcom forward slash invest dash relations.
And was furnished in the 8-K filing this morning.
Also please note that during this call the company will present non-GAAP financial measures for reconciliations of each non-GAAP measure from the most comparable GAAP measure. Please also see today's press release.
At this time I'd like to turn the call over to so neatest senior living President and CEO Ms Kimberly loaded.
Thank you Doug good afternoon, or good afternoon, everyone and welcome to our conference call to discuss the need of senior living first quarter 2022 results. Joining me today are Brandon Ribar, our chief operating officer, and our new Chief Financial Officer, Kevin deeds there.
Is a lot of good news this quarter. Most importantly, we've now delivered four consecutive quarters of occupancy and revenue growth clearly demonstrating that our COVID-19 recovery and growth strategy is succeeding same store occupancy for the quarter is 82, 3%, a 680 basis point improvement compared to 75.
Five 5% during the same quarter last year.
Same store resident revenue increased 12% compared to the same quarter last year due to the strong occupancy increase as well as solid performance on rate growth revenue per occupied unit increased three 2% compared to the first quarter of 2021 keep in mind that so need is in place rent increases the cursor.
We're out the year on a rolling basis as resident leaves US retail this provides us with ongoing flexibility to consider community and market situations in the level of rent increases at renewal time.
Breaking down the Revpar increase a bit more our in place rent increases are pacing at about 5% through the first quarter. In addition market rates for new move ins. During the same period are also about 5% higher than the corresponding rate for the exact same apartment recently vacated so we feel good about our exit.
Houston had rate increases through the first three months of the year, both in terms of in place renewals as well as market rents for new move ins.
Importantly, our same store portfolio has begun to deliver margin expansion same store net operating income increased 13% sequentially from the fourth quarter of 2021 and NOI margin increased 200 basis points from the low point of 18, 2% in the fourth quarter of 21% to 22% in the.
First quarter of 2020 two.
Our COVID-19 recovery strategy, what's your focus heavily on occupancy and revenue growth knowing that NOI would follow.
I mentioned earlier, we've now delivered four consecutive quarters of occupancy and revenue growth. We believe that our performance in the first quarter of 2022 marks the beginning of incremental NOI expansion as we continue to grow occupancy and revenue while also managing costs, especially contract labor costs that have been very elevated in recent.
Right.
Our community leadership teams have been working hard to reduce the need for contract agency staffing by focusing intense effort on recruiting hiring training and retaining new team members.
As a result net hires have been strongly positive in both of the most recent two quarters indicate not only further reduction in the utilization of possibly premium labor, but also most importantly stability and consistency in our workforce.
Speaking of the amazing team members, we Havent Sunita I'd like to highlight a couple of results from our recent companywide resident satisfaction survey conducted by an independent third party organization for all levels of care of craft, our organization, 92% of respondents agreed or strongly agree that their community.
Like how.
For our communities with our unique Magnolia trails memory care program, our satisfaction scores surpassed the 2022 industry memory care benchmarks in activities Caregiving and safety. We are very proud of these results and even more proud of the people working in our communities because the satisfaction scores direct.
We reflect our unrelenting commitment to excellence.
We believe that by continuing to focus on three major priorities, we will provide short and long term incremental value for our investors employees and residents are top priority is the health wellness and engagement of our residents and team members with continued development of our people centric culture and differentiated resident programming.
Second is delivering occupancy recovery to pre pandemic levels by the end of 2022.
And third as NOI expansion, we expect to improve our net operating income sequentially throughout the year by growing occupancy increasing raised responsibly deploying innovative staffing solution and diligently managing expenses.
Lastly, I'm delighted to welcome Kevin Dede, So neatest, Chief Financial Officer, Kevin joined the company on May 1st and he along with existing and new team members are already providing significant value to the business I'll now turn the call over to Kevin for a couple of introductory comments and then we'll go to Brandon for more insight on our operations.
Thank you for those kind words kit to pick up where can left off the first quarter results are proving out that the company is continuing to progress from the inflection point caused by the pandemic.
Along with the recapitalization late last year and great work to provide debt maturity runway has been equally excited to joined the company in this pivotal an exciting time.
Having spent the last eight years and hospitality management I've been extremely impressed with the breadth and depth of talent in our community teams.
Looking forward to working with Kim Brendan and the entire leadership team to execute on the Companys growth strategy.
Part of this growth strategy includes a keen focus on our cost to serve corporate G&A maximizing our incremental margins on growth well well raise occupancy pushup.
At this time I will turn it over our Chief operating officer Brendan Rebar.
Thank you Kevin and good afternoon.
While we are all hopeful the first quarter marks the end of the most impactful stages of the pandemic I'm. So pleased with the resilience of our local and regional operating teams through yet another period of operating headwinds.
The challenges of the labor markets driven by accelerated Covid cases could easily install the ongoing improvement in our operating metrics.
We not only achieved occupancy improvement over Q4 2021 in a traditionally down quarter for senior living but also delivered sequential improvement in Revpar and operating margin in the face of the operating headwinds.
Even more encouraging performance trends within rate volume and key labor metrics all moved favorably during March and April positioning us well for sequential improvement as Kim referenced.
In Q1, we also completed and integrated our first acquisition in nearly five years with the purchase of 157 independent living units across two communities in the Indianapolis MSA.
With both an expected yield on cost exceeding 10% at stabilization and <unk> contribution in the low teens. We are confident this acquisition will return value to our shareholders. We are encouraged by early results from our sales and marketing efforts as the communities, we're able to improved nine percentage points of occupancy in the first two months is part.
The city the team.
Our goal is to continue to identify similar acquisition opportunities in markets, where we operate today or markets, where we don't currently operate that have similar characteristics to our current portfolio.
As Tim referenced we are pleased with both sequential revenue growth of two 2% as well as year over year revenue improvement of more than $5 million or 12% for the first quarter of 2022.
Portfolio occupancy improved in each of the first four months of 2022 and we are pleased to 30 of the 76 communities, we own or manage have achieved or exceeded the 90% occupancy mark and baked in.
In comparison, just 16 of our communities were at or above 90% at the end of Q1 2021.
Ongoing sales and marketing support and capital investment in our communities with occupancy upside continues to be the focus for 2022.
Key indicators related to demand remain encouraging as lead and tour volume for Q1 increased 18% and 11%, 11% respectively over the same period in 2021 and generated a 13% year over year increase in total move ins.
Our strategic focus on increased generation of move ins through market outreach and digitally generated lead led to a year over year increase in move ins generated from our own efforts and less reliance on third party aggregators.
One of our 2022 goals is to invest capital in several of our communities to continue to enhance our competitive position. These.
These projects began in late 2021, and we now have nearly $8 million in revenue enhancing capital projects, either completed or underway with completion dates in Q2 and Q3 we.
We are pleased that our projects have been only minimally impacted by various supply chain issues in the marketplace.
During our recent discussion of your end results, we referenced positive movement in key labor metrics over the last six months.
Year over year for Q1, total labor costs increased $3 $2 million and more than 65% of the increase was related to contract labor and overtime after.
After another difficult quarter on the labor front, we are cautiously optimistic that Q2 is showing signs of overall improvement.
Net hires remained positive in third party contract agency dollars are expected to decrease sequentially throughout the year.
Further implementation of flexible employee friendly staffing models that improve resident service and reduce the cost of premium labor are underway across additional Sydney to communities in Q2.
We have experienced accelerated candidate flow and stability in communities previously requiring use of the third party agency.
Our internal recruiting and retention strategies have also increased retention of existing employees. In early 2022 early trends for Q2 show a favorable reduction in year over year employee turnover.
Finally, non labor related expenses, consisting primarily of food marketing facility maintenance and supply related items decreased just under 1% sequentially with overall food cost declining 8% from the fourth quarter of 2021.
In early 2022, we completed the implementation of an updated menu management and meal costing technology to further enhance our resident experience and expense management processes.
While labor pressure continued to impact margin recovery in the current operating environment. Our team is pleased with sequential margin expansion and 13% growth both sequentially and year over year.
Our goals for 2022 remained consistent across all communities deliver excellent resident care and services through a dedicated stable team of employees.
Chief revenue growth driven by continued occupancy improvement and ongoing revpar increase and improve margin through creative stable staffing models and strong expense management practices in this high inflation environment.
We will now move to the question and answer portion of the call. Operator. Please open the line for questions at this time.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the starkey.
Your first question comes from the line of Steven Valiquette with Barclays. Please proceed with your question.
Yeah. Thanks, good afternoon, everyone and thanks for taking the questions.
Hey, Steve.
Hi, I guess just to start off.
You guys had that footnote that in April of 'twenty. Two you received another $9 million in relief funds, which is obviously pretty positive.
Would you expect any additional funds beyond that and the rest of the 22 or do you think that's it and also if you can just remind us.
This is the public health emergency potentially and so at some point this year.
Remind us around the material impact on the company in one way or the other or if that's just kind of a lot of that from your perspective, the way you're thinking about that right now.
Yeah. So at.
At this point, we don't expect additional funds from the cares act from the federal level there are state programs.
That are currently underway that we have applied for and we would expect to receive some funding from the state programs.
In fact, we received some in in the second quarter. So you know, we would see that sort of spread out through the rest of the year, but in terms of a big you know.
Uh huh.
Nearly $10 million or disbursement to us for the remainder of this year I don't see that happening and then in terms of the public health emergency D ending by the end of the year.
That's really a non event for us the one thing that we did do during the pandemic is we did participate in the deferral.
Certain income taxes.
Weighted to you know employee wages.
And we do need to repay $3 $7 million of that by the end of this year, we've already repaid at first $3 $7 million, we made that payment at the end of last year.
Got it.
Okay have you guys I think addressed the labor expense.
Trends for our next quarter or two of kind of where you leave it out for the first quarter. So I think we'll leave that topic alone for now maybe the other.
One just to touch on quickly would just be around.
Some of your property acquisitions.
Obviously, you had a couple in Indiana and a few in Arkansas should investors expect any additional property acquisitions between now and the end of the year or do you think which if completed will keep you guys fairly busy for now as far as the integration process et cetera.
Well, we're continuing to look for acquisition opportunities, we have pretty specific criteria in terms of what we're looking for are we wanted to make sure that.
If we do acquire another community or communities.
The fundamentals are there that we can layer on our platform that we've developed here over the last couple of years and really see that improvement in the operations similar to what Brandon reference for the Indiana community.
With their nine percentage point increase in occupancy just in the first couple of months that they've been with us and on our platform and then just a note of clarification. The Arkansas communities are ventas communities that we added to our portfolio managed communities back in December .
So from a managed perspective, we're also interested in continuing to grow that portfolio.
But our primary focus is on looking for good acquisition candidates either in markets, where we currently operate and we feel like you know additional footprint would be helpful.
Or in markets, where we don't operate today, but that the market has characteristics similar to our overall portfolio meeting their middle market I'm. The same general characteristics that we have in the portfolio.
And then.
Just to add a couple of additional comments or color to that.
We are looking to reduce the average age of the portfolio through those acquisitions. So over time and we're also looking to de lever.
As we add to the portfolio and to do that over time as well.
Got it.
Okay, Alright, that's it for me thanks.
Alright, great. Thanks, Steve.
There are no further questions in the queue I'd like to hand, the call back over to Kim loading for closing remarks.
Alright, great well. This concludes today's conference I want to thank everyone for attending and have a great day.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
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