Q4 2023 Sonida Senior Living Inc Earnings Call

Operator: Good day, and welcome to the Sonida Senior Living fourth quarter and full year 2023 earnings conference. Today's conference is being recorded. All statements today which are not historical facts may be deemed forward-looking statements within the meaning of the federal security law, statements are made as of today's date, expressly, without any obligation to update these statements.

Good day and welcome to this Anita senior living fourth quarter and full year 'twenty twenty-three earnings conference call.

Today's conference is being recorded.

All statements today, which are not historical facts may be deemed forward looking statements within the meaning of the federal security laws. These statements are made as of today's date and the company expressly disclaims any obligation to update these statements in the future.

Operator: Actual results and performance may differ materially from those projected. Certain of these factors could cause actual results to differ are detailed in the earnings release the company issued earlier this year, as well as the reports in the company files. SEC from time to time, including the risk factors, in the annual report on Form 10-K and quarterly reports on Form 10. Please see today's press release for the full Safe Harbor Statement, which may be found at www.sonidaseniorliving.com, forward slash investor hyphen related, was furnished in an 8K filing. Also, please note that during this call, the company will present non-GAAP financial results. For the reconciliations of each non-GAAP measure from the most comparable GAAP, please also see today's. At this time, I'd like to turn the call over to Sonida Senior, living CEO. Brandon, Thank you. Thank you, Rob.

Actual results and performance may differ materially from forward looking statements.

Certain of these factors could cause actual results to differ are detailed in the earnings release the company issued earlier today as well as the reports in 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 please please see today's press release for the full Safe Harbor statement, which may be found at www, So nida senior living dotcom forward Slash Investor Hyphen relations.

And was furnished in an 8-K filing this morning.

Also please note that during this call the company will present non-GAAP financial measures.

For the reconciliation 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 send need of senior living CEO Brandon Ribar. Thank you you may begin.

Brandon M. Ribar: Thank you, Rob Hello, and welcome to our 2023 fourth quarter and full year earnings call I'm joined today by Kevin <unk>, Our Chief Financial Officer.

Brandon M. Ribar: Hello, and welcome to our 2023 fourth quarter and full year earnings call. I'm joined today by Kevin Detz, our chief financial officer. Earlier today, we posted our 2023 earnings and investor presentation, which will be referenced throughout this call as we discuss our strategic priorities and operating results for the year, as well as our focus on growth in 2024. You can find our latest presentation at SonidaSeniorLiving.com in the investor relations section if you would like to follow along. In addition, we've included supplemental earnings information within our investor presentation consistent with the prior quarter release.

Brandon M. Ribar: Earlier today, we posted our 2023 earnings and Investor presentation, which will be referenced throughout this call as we discuss our strategic priorities and operating results for the year as well as our focus on growth in 2024 you.

Brandon M. Ribar: You can find our latest presentation at <unk> senior living Dot com in the Investor Relations section. If you would like to follow along in addition, we've included supplemental earnings information within our Investor presentation, consistent with the prior quarter release.

Brandon M. Ribar: Our results in 2023 not only paved the way for growth in 2024 and beyond, but they reinforced the strength of our Sonida culture and our collective leadership teams. Our strategic focus on building exceptional teams across each operating and support discipline, delivering value to our residents and our local team members, and translating those efforts into real margin improvement through operational excellence resulted in the strongest year-over-year performance improvement in the company's recent history. I could not be prouder of each team member across the Sonida family.

Brandon M. Ribar: Our results in 2023, not only paved the way for growth in 2024 and beyond they reinforced the strength of our sneaker culture and our collective leadership teams our strategic focus on building exceptional teams across each operating and support discipline delivering value to our residents and our local team members and translating those.

Brandon M. Ribar: Efforts into real margin improvement through operational excellence resulted in our strongest year over year performance improvement in the company's recent history I could not be prouder of each team member across the Sydney to family.

Brandon M. Ribar: We achieved more than 10% revenue growth on a same-store basis and, even more importantly, doubled our adjusted EBITDA year-over-year from $17 million in 2022 to $34 million in 2023, while delivering outstanding care and services to our residents across the country. Additionally, the company delivered cash flow from operations exceeding $10 million in 2023, a $13 million improvement from 2022. I'm incredibly thankful for the contributions of the entire local, regional, and central support teams.

Brandon M. Ribar: We achieved achieved more than 10% revenue growth on a same store basis, and even more importantly doubled our adjusted EBITDA year over year from $17 million in 2000 $22 million to $34 million in 2023, while delivering outstanding care and services to our residents across the country.

Brandon M. Ribar: Additionally, the company delivered cash flow from operations exceeding $10 billion in 2023, a $13 million improvement from 2022.

Brandon M. Ribar: I am incredibly thankful for the contributions from the entire local regional and central support teams the balance required to increase the recovery trajectory on revenue and margin complete significant restructuring of the balance sheet raise additional growth capital and positioning the platform for long term expansion is reflective of a high performing management team.

Brandon M. Ribar: The balance required to increase the recovery trajectory on revenue and margin, complete a significant restructuring of the balance sheet, raise additional growth capital, and position the platform for long-term expansion is reflective of a high-performing management team ready to continue building something special. We emerge today free from going concern language in our financials, with capital available to invest in our portfolio and pursue external growth opportunities. I'll focus my comments today on a few of our 2023 company accomplishments and provide further detail on Sonida's goals for an exciting growth phase over the next 18 to 24 months. Kevin will provide greater detail on our operating results and key financial achievements in 2023. Most important to our strategic plan, we continue to invest in and develop leadership across each of our disciplines. In the past year and a half, we've changed the culture of the organization by empowering key regional and local leaders.

I'm ready to continue building something special we emerged today for you from going concern language in our financials with capital available to invest in our portfolio and pursue external growth opportunities.

Brandon M. Ribar: I'll focus my comments today on a few of our 2023 company accomplishments and provide further detail on <unk> goals for an exciting growth phase over the next 18 to 24 months, Kevin will provide greater detail on our operating results and key financial achievements in 2023.

Kevin: Most important to our strategic plan, we continue to invest and develop leadership across across each of our disciplines over the past year and a half we've changed the culture of the organization by empowering key regional and local leaders. This cultural transformation has resulted in 100% retention of our regional operations and sales leaders and <unk>.

Brandon M. Ribar: This cultural transformation has resulted in 100% retention of our regional operations and sales leaders and improved our community leadership retention by nearly 10% year-over-year. Our business thrives with, first and foremost, the support and buy-in of our team. We completed significant investments in our real estate portfolio and expanded the number of units to meet an increasing demand for memory care services in two key markets. Additionally, we invested in multiple technology solutions to support ongoing improvement in resident safety and experience, while enhancing our operational efficiency to manage the cost of operations moving forward. All of these efforts are foundational to our plan to build a differentiated operating platform that delivers value through operations, real estate ownership, and meaningful investment opportunities in the senior living space.

Kevin: Grooved, our community leadership retention by nearly 10% year over year.

Kevin: Our business only thrives with first and foremost the support and buy in of our team.

Kevin: We completed significant investments in our real estate portfolio and expanded the number of units to meet an increasing demand for memory care services into key markets.

Kevin: <unk>, we invested in multiple technology solutions to support ongoing improvement and residents' safety and experience, while enhancing our operational efficiency to manage the cost of operations moving forward.

Kevin: All of these efforts are foundational to our plan to build a differentiated operating platform that delivers value through operations real estate ownership and meaningful investment opportunities in the senior living space.

Brandon M. Ribar: Let's now look at the various levers for Sonida's organic and inorganic growth in 2024 and beyond, detailed on pages 19 through 22 of the investor presentation. Within our existing portfolio, which remains our primary focus, further margin expansion through rate and occupancy growth stand at the forefront. Our rate increases on existing rental contracts were effective for nearly 80% of our private pay residents on March 1st, 2024, and thus far, attrition rates related to affordability remain in line with expectations. One of our 2024 goals centers around driving occupancy improvement in a handful of underperforming assets that account for 40% of all vacant units. A combination of shifting sales focus, further capital investment where appropriate, and heightened outbound marketing is being deployed to accelerate the recovery of these Our team is not only focused on addressing lower performing communities but also enabling our strongest performing communities to reach their full potential.

Kevin: Let's now look at the various levers for Sydney as organic and inorganic growth in 2024 and beyond detailed on pages 19 through 22 of the Investor presentation.

Kevin: Within our existing portfolio, which remains our primary focus further margin expansion through rate and occupancy growth stand at the forefront.

Kevin: Our rate increases on existing rental contracts were effective for nearly 80% of our private pay residents on March one 2024, and thus far attrition rates related to affordability remain in line with expectations.

Kevin: One of our 2024 goals centers around driving occupancy improvement in a handful of underperforming assets that account for 40% of all vacant units by.

A combination of shifting sales focus further capital investment where appropriate and heightened outbound marketing are being deployed to accelerate the recovery of these communities. Our team is not only focused on addressing lower performing communities, but also enabling our strongest performing communities to reach their full potential during the fourth quarter more than half of our.

Brandon M. Ribar: During the fourth quarter, more than half of our portfolio averaged occupancy of 90% or greater, with these communities consistently achieving the highest marks in customer experience and employee engagement. We believe that, over time, we can drive portfolio-wide occupancy in excess of 90%. These expectations align well with current industry trends, new supply at a 10-year low, high construction costs, and the constrained availability of affordable financing. Continued investment in our clinical and resident programming will further support these growth efforts. Our clinical teams and residents have recognized immediate benefits with the arrival of our chief clinical officer in Q4.

Kevin: Our portfolio averaged occupancy of 90% or greater with these communities consistently achieving the highest marks in customer experience and employee engagement. We believe that overtime, we can drive portfolio wide occupancy in excess of 90%.

Kevin: These expectations aligned well with current industry trends new supply at a 10 year low high construction costs and the constrained availability of affordable financing.

Kevin: Continued investment on our clinical and resident programming will further support these growth efforts, our clinical teams and residents have recognized the immediate benefit with the arrival of our Chief clinical officer. In Q4. The addition of a talented experienced leader will further expand our clinical offerings and tailor our services to the needs of our residents.

Brandon M. Ribar: The addition of a talented, experienced leader will further expand our clinical offerings and tailor our services to the needs of our residents. Our clinical focus in 2024 is highlighted by retention and further development of our local clinical leadership and ensuring the effectiveness and consistency of our local processes to proactively identify changes in resident health requiring action. We expect further margin expansion driven by continued operational improvements, specifically additional rate and occupancy growth combined with the utilization of our labor management technology and protocols to contain cost inflation. Additionally, capital investments in the three to four million dollar range will fund the conversion or opening of approximately 100 additional units in 2024. We anticipate a 12 to 18 month payback on these investments based on our experience with similar capital projects over the last two years.

Kevin: Our clinical focus in 2024 as highlighted by retention and further development of our local clinical leadership and ensuring the effectiveness and consistency of our local processes to proactively identify changes in resident health requiring action.

Kevin: We expect further margin expansion driven by continued operational improvements specifically additional rate and occupancy growth combined with the utilization of our labor management technology and protocols to contain cost inflation.

Kevin: Additional capital investments in the $3 million to $4 million range will fund conversion or opening of approximately 100 additional units in 2024, we anticipate a 12 to 18 month payback on these investments based on our experience with similar capital projects over the last two years.

Brandon M. Ribar: Shifting to external growth opportunities, on slides 20 through 22 of our investor presentation, we highlight the profile of communities targeted for acquisition, the various sourcing channels currently offering accretive investment opportunities, and the versatility we bring as a balance sheet investor, JV partner, and premier operator. We continue to focus on the Midwest, Southeast, and the South as primary markets to further densify our existing footprint, targeting newer construction, multiproduct communities serving the upper-middle and high-income resident base.

Kevin: Shifting to external growth opportunities on slides 20 through 22 of our Investor presentation. We highlight the profile of communities targeted for acquisition the various sourcing channels currently offering accretive investment opportunities and the versatility, we bring as a balance sheet investor JV partner and Premier operator, we.

Kevin: To focus on the Midwest southeast and the South as primary markets to further densify, our existing footprint targeting newer construction multi product communities, serving the upper middle and high income resident base, our programming created to bring joyful living to our independent and assisted living residents and our trademark Magnolia trails memory care.

Brandon M. Ribar: Our programming created to bring joyful living to our independent and assisted living residents and our trademark Magnolia Trails memory care program will support operational improvement in newly acquired communities. In the current environment, we see opportunistic investments as the most compelling and are focusing largely on underperforming but quality assets at significant discounts to replacement costs. While these assets may be cash flow neutral or negative up front, Sonida identifies situations where our systems and processes can structurally improve margin as well as quality of care and resident experience, and we anticipate stabilizing at double-digit NOI yields on cost. We believe that the financial success of a community is first and foremost dependent on having a strong local leadership team, and key to our success is the hiring and retention of great talent that, together with Sonida's tools and programs, is able to stabilize challenged assets.

Kevin: Program will support operational improvement and newly acquired communities.

Kevin: In the current environment, we see opportunistic investments as most compelling and are focusing largely on underperforming, but quality assets at significant discounts to replacement cost. While these assets may be cash flow neutral or negative upfront Sydney to identify situations, where our systems and processes construction really improve margin as well as quality.

Kevin: <unk> of care and resident experience and we anticipate stabilizing at double digit NOI yields on cost we believe that the financial success of our community is first and foremost dependent on having a strong local leadership team and key to our success is the hiring and retention of great talent that together with the neatest tools and programs.

Kevin: <unk> are able to stabilize challenged assets.

Brandon M. Ribar: We expect to capitalize on three primary avenues of inorganic growth, acquisitions, joint ventures, and third-party management. We will enter into third-party management agreements selectively and strategically, and on acquisitions and joint ventures, we are focused on the disciplined deployment of balance sheet capital at high rates of return and in assets that have strategic or qualitative benefits to our portfolio. We see a growing opportunity set to partner with lenders and existing asset owners who are seeking fresh capital and new operators to enhance recovery value on their portfolios. One core principle is focusing on regional densification, where we are able to benefit from our scale, implement our full suite of labor management tools, and thus grow our portfolio without costly recruiting and without meaningful changes to G&A.

Kevin: We expect to capitalize on three primary avenues of inorganic growth acquisitions joint ventures, and third party management, we will enter into third party management agreement selectively and strategically and on acquisitions and joint ventures are focused on disciplined deployment deployment of balance sheet capital at high rates of return.

Kevin: And in assets that have strategic or qualitative benefits to our portfolio, we see a growing opportunity set to partner with lenders and existing asset owners, who are seeking fresh capital and new operators to enhance recovery value on their portfolios.

Kevin: One core principle is focusing on regional Densification, where we were able to benefit from our scale implement our full suite of labor management tools, and thus grow our portfolio without costly recruiting and without meaningful changes to G&A.

Brandon M. Ribar: Market volatility continues, with owners, operators, and capital providers reaching key decision points, and Sonida continues to engage in discussions to identify potential near-term opportunities. With approximately $18 billion in senior living debt maturing in 2024 and 2025, based on the latest NIC data, and capital availability remaining tight, Sonida is positioned to provide value as an operator, owner, and investor in the current market. As of today, we have clear visibility on transactions including more than 700 units with expected closing dates in the second quarter of 2024. These potential transactions include outright purchase, joint venture ownership, and third-party management, all in key markets targeted for expansion.

Kevin: Market volatility continues with owners operators and capital providers, reaching key decision points and Sunita continues to engage in discussions to identify potential near term opportunities.

Kevin: With approximately $18 billion in senior living debt maturing in 2024, and 2025 based on the latest Nic data and capital availability remaining tight so nida is positioned to provide value as an operator owner and investor in the current market.

Kevin: As of today, we have clear visibility on transactions, including more than 700 units with expected closing dates in the second quarter of 2020 for these potential transactions include outright purchase joint venture ownership and third party management all in key markets targeted for expansion, we look forward to sharing additional details as the track.

Brandon M. Ribar: We look forward to sharing additional details as the transactions are finalized in the coming weeks and months. The Sonida transformation, driven by operational improvement and significant balance sheet restructuring and de-levering efforts, can best be summarized on slide 10 of our Supplemental Investor Information. The pro forma capitalization table reflects a debt structure with attractive interest rates and minimal debt maturing until the end of 2026, combined with significant equity value in the business.

Kevin: Actions are finalized in the coming weeks and months.

Kevin: The sunita transformation, driven by operational improvement and significant balance sheet restructuring and Delevering efforts can best be summarized on slide 10 of our supplemental investor information the pro forma capitalization table reflects the debt structure with attractive interest rates and minimal debt maturing until the end of 2026.

Kevin: Combined with significant equity value in the business.

Brandon M. Ribar: In summarizing our year-end 2023 performance and 2024 outlook, we remain optimistic about the industry as a whole and the Sonida platform. The ongoing retention and development of our leadership teams and the effective rollout of new resident programming and technology remain paramount to continuing the growth trends achieved in 2023. Our team is excited to continue building a best-in-class operating platform to achieve the full potential in each of our 71 communities while expanding our footprint through strategic and accretive growth opportunities. I'll now turn it over to Kevin for a discussion of the financial results. Thanks, Brandon.

Kevin: In summarizing our year end 2023 and performance in 2024 outlook, we remain optimistic about the industry as a whole and the <unk> platform the ongoing retention and development of our leadership teams and the effective rollout of new resident programming and technology remain Paramount to continuing the growth churn trends achieved in 2023.

Kevin: Our team is excited to continue building a best in class operating platform to achieve the full potential in each of our 71 communities, while expanding our footprint through strategic and accretive growth opportunities.

Kevin: I'll now turn it over to Kevin for a discussion of the financial results.

Kevin: Thanks Brandon.

Kevin Detz: Expanding the discussion around the company's performance and balance sheet, let's jump back to slide six of the investor presentation. Before I dive into the numbers, I want to take a moment to recognize the incredible work and commitment by the team over the last 18 months. In early 22, the company was at a critical inflection point and had just recapitalized and was still working out the devastating impact of COVID-19. In less than two years, the company has carefully rebuilt its corporate support team and culture with the injection of new contributors and leaders to write the next chapter of the company.

Kevin: Expanding the discussion around the company's performance and balance sheet, let's jump back to slide six of the investor presentation.

Kevin: Before I dive into the numbers I want to take a moment to recognize the incredible work and commitment by the team over the last 18 months and early 'twenty. Two the company was at a critical inflection point in having just recapitalized and still working out a devastating impact from COVID-19, and less than two years. The company has carefully rebuilt its corporate support team.

Kevin: And culture with the injection of new contributors and leaders to write the next chapter of the company.

Kevin Detz: The company's finance and accounting functions have quickly evolved from a group of hired contractors to best-in-class professionals serving as business partners. I am extremely proud of the collective success attained and look forward to continued evolution as the company executes on its strategic growth plan. Finally, I would be remiss if I did not thank our business partners and lenders, particularly Fannie Mae and Ally Bank, for all their support, creativity, and temporary flexibility as the company is poised to soon realize all-in cash flow generation. Over the course of the last nine months, we have made incredible strides in addressing our debt and overall capitalization. To summarize, the company temporarily modified its liquidity covenants under the Allied Term Loan to provide the runway required to execute a material restructuring of the economic terms in its Fannie Mae mortgages. During the fourth quarter, the company entered into a purchase and sale agreement to acquire all remaining loans on its Protective Life portfolio. The purchase price represented a 48% discount on the total indebtedness of $77.4 million.

Kevin: The company's finance and accounting functions have quickly evolved from a group of hired contractors to best in class professionals, serving as business partners to our incredible operations team.

Kevin: I am extremely proud of the collective success attained and look forward to continued evolution as the company executes on its strategic growth plans.

Kevin: Finally, I would be remiss, if I did not thank our business partners and lenders, particularly Fannie Mae and ally bank for all their support creativity and temporary flexibility as the company is poised to soon realized all in cash flow generation.

Kevin: Over the course of the last nine months, we have made incredible strides in addressing our debt and overall capitalization.

Kevin: To summarize the company company temporarily modified its liquidity covenants under the ally term loan to provide runway required to execute immaterial restructuring of the economic terms and its Fannie Mae mortgages.

Kevin: During the fourth quarter the company entered into a purchase and sale agreement to acquire all remaining loans on its protective life portfolio.

Kevin: The purchase price represented a 48% discount of the total indebtedness of $77 4 million.

Kevin Detz: In February 2024, the company closed on this transaction and concurrently financed $24.8 million of the loan purchase price as part of its existing term loan with Ally Bank. As a result of the modifications made to 56 of the company's 60 community loans, management has meaningfully improved cash flow, leverage ratios, and terms across its debt portfolio. Specifically, the company extended its average remaining loan term to 3.7 years and de-levered the company by $55 million since January of 2023, including a $5 million pay down in connection with the Fannie Mae modification. The foundational work on the company's debt, which is further highlighted on slides 10 through 12, instilled confidence in Sonida's largest investors, leading to the aggressive private placement raise executed last month, which has been earmarked for growth in 2024.

Kevin: In February 2024, the company closed on this transaction and concurrently finance [laughter] finance $24 8 million of the loan purchase price as part of its existing term loan with ally Bank.

Kevin: As a result of the modifications made to 56 of the company's 60 community loans.

Kevin: Management has meaningfully improved cash flow leverage ratios and term across its debt portfolio.

Kevin: Specifically the company extended its average remaining loan term to three seven years and Delever. The company by 55 million since January of 'twenty, three including a $5 million pay down in connection with the Fannie Mae modification.

Kevin: The foundational work on the Companys debt, which is further highlighted on slides 10 through 12 instill confidence since India's largest investors leading to the offensive private placement raised executed last month, which in large part has been earmarked earmarked for growth in 2024.

Kevin Detz: From a financial reporting perspective, the debt and equity transactions allowed the company to address any risk associated with its end-of-year cash balance and its ability to continue as a going concern, as further disclosed in today's 10-K and accompanying auditor opinion on the financial statements. Despite continued macroinflationary pressures, management reduced G&A as a percentage of revenue and adjusted to include stock comp and one-time transaction costs from 11.8% to 10.5% on a year-over-year basis.

Kevin: For my financial reporting perspective, the debt and equity transactions have allowed the company to address any risks associated with its end of year cash balance and its ability to continue as a going concern as further discussed disclosed in today's 10-K and accompanying auditor opinion on the financial statements.

Kevin: Despite continued macro inflationary pressures management reduce G&A as a percentage of revenue and adjusted to include stock comp and.

Kevin: One time transaction cost from 11, 8% to 10, 5% on a year over year basis.

Kevin Detz: Rounding out slide six and addressing some of our performance highlights on slides eight and nine, I'm pleased to report continued occupancy and rate growth. Beyond the year-over-year occupancy increase of 160 basis points and with an eye towards 2024, we are encouraged by achieving an average occupancy of nearly 86% for the last quarter of the year. On the rate side, we realize the benefit of aggressive but responsible rate optimization. Rev.

Kevin: Rounding out slide six and addressing some of our performance highlights on slide eight and nine.

Kevin: I'm pleased to report continued occupancy and rate growth beyond the year over year occupancy increase of 160 basis points and with an eye towards 2024, we are encouraged by achieving an average occupancy of nearly 86% for the last quarter of the year.

Kevin: On the right side, we realized the benefit of aggressive but responsible rate optimization.

Kevin: Revpar increased 10% year over year and should further expand in 2024 with the company having successfully migrated to a resident wide March 1st rate renewal anniversary.

Kevin Detz: Poore increased 10% year-over-year and should further expand in 2024 with the company having successfully migrated to a resident-wide March 1st rate renewal anniversary. Comparing year-over-year margins, the company expanded its NOI margin by 520 basis points, or 460 basis points on an adjusted NOI margin basis, which excludes the one-time impact from state grant receipts. For the fourth quarter of 23, annualized NOI and margin were $66.8 million and 27.4%, respectively. These figures include non-recurring credits recognized in connection with one-time real estate tax settlements and workers' comp troughs as a result of the most recent actuarial report. Excluding these non-recurring credits, the effective NOI margin for the quarter was 25.7%.

Kevin: Comparing year over year margins the company expanded its NOI margin by 520 basis points or 460 basis points on an adjusted NOI margin basis, which excludes the one time impact from state Grant receipts.

Kevin: For the fourth quarter of 'twenty, three annualized NOI and margins were $66 8 million and 27, 4% respectively. These figures include nonrecurring credits recognized in connection with one time real estate tax settlements and workers comp true ups as a result of the most recent actuarial reports.

Kevin: Excluding these nonrecurring credits effective NOI margin for the quarter was 25, 7%.

Diving deeper into revenue growth drivers, we move to slide 14, the company identified two primary initiatives as part of its revamped revenue management process aimed at better aligning our revenue model with the increasing cost of care for our residents first we successfully raised base resident rates by eight three.

Kevin Detz: Diving deeper into revenue growth drivers, we move to slide 14. The company identified two primary initiatives as part of its revamped revenue management process, aimed at better aligning our revenue model with the increasing cost of care for our residents. First, we successfully raised base resident rates by 8.3% year over year.

Kevin: Percent year over year.

Kevin: Second through the simplification and formalization of our assisted living level of care program, we were able to capture an additional $1 9 million and care revenue.

Kevin Detz: Second, through the simplification and formalization of our assisted living level of care program, we were able to capture an additional $1.9 million in care revenue. Expansion of tech-based clinical labor productivity pilots in 23 will set up the company to further capture the true clinical cost of resident care and related revenue in 2024. Diving into more of the margin drivers, we'll move ahead to slide 15 to discuss year-over-year labor trends. We are extremely pleased that, in this tight labor market and hyperinflationary period, we have been able to control our labor costs. Total labor excluding benefits moved from a 22-year high mark of 47.5% of revenues to just under 46% in 2023. Contract labor, which decreased nearly $6 million year-over-year, continues to be limited to a handful of communities where market-specific labor constraints persist.

Kevin: Expansion of Tech based clinical labor productivity pilots in 'twenty three will set up the company to further capture the true clinical cost of resident care and related revenue in 2024.

Kevin: Diving into more of the margin drivers, we will move ahead to slide 15 to discuss year over year labor trends.

Kevin: We are extremely pleased that in this tight labor market and hyper inflationary period, we have been able to control our labor costs total labor excluding benefits moved from a 22 high Mark of 47, 5% of revenues to just under 46% and 23.

Kevin: Contract labor, which decreased nearly $6 million year over year continues to be limited to a handful of communities where market specific labor constraints persists and.

2024, the company is focused on optimizing labor hours to meet the real time needs of our residents amidst higher occupancy levels, which should support a lower incremental cost per resident.

Kevin: Thread technology partnerships and internally developed labor dashboards. We are also focused on addressing the premium labor cost base.

Kevin Detz: In 2024, the company is focused on optimizing labor hours to meet the real-time needs of our residents amidst higher occupancy levels, which should support a lower incremental cost per resident. Through our technology partnerships and internally developed labor dashboards, we are also focused on addressing the premium labor cost base, which remains an industry headwind coming out of COVID. Premium Labor was $9.5 million for the year, and it includes the cost of shift bonuses, overtime, and spot bonuses that would otherwise be replacements for lower-rated employee salaries and wages.

Kevin: <unk> remains an industry headwind coming out of Covid.

Kevin: Premium labor was $9 5 million for the year and includes the cost of ship bonuses overtime and spot bonuses that would otherwise be replacements for lower rated employee salaries and wages.

Kevin: Moving ahead to all other expenses on slide 16.

As a percentage of revenue our non labor expenses have decreased 300 basis points from 35% and 22 to 27, 5% and 23 <unk>.

Kevin Detz: Moving ahead to all other expenses on slide 16, as a percentage of revenue, our non-labor expenses have decreased 300 basis points from 30.5% in 2022 to 27.5% in 2023. Despite the headwinds of elevated inflation over the same period, management implemented various strategic and tactical initiatives discussed on previous calls to create a non-labor base that should provide for incremental margin on both expanded occupancy for same-store communities as well as inorganic community acquisition. Moving on to slide 17, you'll see some presentation changes from prior earnings calls to reflect the favorable pro forma impact on our leverage profile as a result of the Protective Life loan purchase completed last month. As a result of the February 2nd transaction, our debt is comprised of 72% fixed rate debt with the remaining variable rate debt fully hedged, yielding a weighted average interest rate of 5% for the portfolio. Most importantly, the company continues to execute on its long-term strategy of de-levering the balance. Finally, as of today, the company is in compliance with all financial covenants required under its mortgages.

Kevin: Despite the headwinds of elevated inflation over the same period management implemented various strategic and tactical initiatives discussed on previous calls to create a non labor base that should provide for incremental margin on both expanded occupancy for same store communities as well as inorganic community acquisitions.

Kevin: Moving on to slide 17, you'll see some presentation changes from prior earnings calls to reflect the favorable pro forma impact on our leverage profile as a result of protective life loan purchase completed last month.

Kevin: As a result of the February 2nd transaction, our debt is comprised of 72% fixed rate debt with the remaining variable rate debt fully hedged yielding a weighted average interest rate of 5% for the portfolio.

Kevin: Most importantly, the company continues to execute on its long term strategy of Delevering the balance sheet.

Kevin: Finally as of today the company is in compliance with all financial covenants required under its mortgages.

Kevin: In summary, the company continues to be encouraged by the consistent improvement across all significant kpis over the last 12 months.

Kevin: The expected continuation of revenue and margin growth combined with the company's modified debt structure has to need are firmly positioned to take advantage of both organic and inorganic opportunities in the marketplace to drive shareholder value in 2024 as Brandon detailed in his comments back to you Brendan.

Brandon M. Ribar: In summary, the company continues to be encouraged by the consistent improvement across all significant KPIs over the last 12 months. The expected continuation of revenue and margin growth, combined with the company's modified debt structure, has Sonida firmly positioned to take advantage of both organic and inorganic opportunities in the marketplace to drive shareholder value in 2024, as Brandon detailed in his comments. Back to you, Brandon. Thanks, Kevin. 2023 was a transformational year for Sonida.

Brendan: Thanks, Kevin 2023 was a transformational year for Sydney to we achieve significant performance milestones, while accomplishing key strategic objectives, and delivering industry, leading care and services to our residents.

Kevin: These achievements included balance sheet optimization through the comprehensive restructuring and modification of our debt and culminating in a $47 $75 million equity private placement that closed in the first quarter of 2020 for the operational developments and greatly strengthened balance sheet establish sunita as a differentiator to.

Operator: We achieved significant performance milestones while accomplishing key strategic objectives and delivering industry-leading care and services to our residents. These achievements included balance sheet optimization through the comprehensive restructuring and modification of our debt and culminating in the $47.75 million equity private placement that closed in the first quarter of 2024. The operational developments and greatly strengthened balance sheet established Sonida as a differentiated operator, owner, and investor in senior living and positioned the company to capitalize on near-term dislocation, which will drive the next chapter of value creation. Rob, please open the line for questions at this time.

Kevin: <unk> owner and Investor in senior living and position the company to capitalize on near term dislocation, which will drive the next chapter of value creation for our shareholders.

Rob Please open the line for questions at this time.

Rob: Thank you at this time well be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue.

Rob: You May press star two if you'd like to remove your question from the queue.

Rob: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment. Please about what he poll for questions.

Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone. For confirmation, tell them to indicate your line is in the question; you may press star two if you'd like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button.

Rob: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Rob: One moment, please while we poll for questions.

Rob: Okay.

Rob: Okay.

Rob: Yeah.

Speaker Change: Hi, I'm waiting for the queue.

Speaker Change: And it'll be another moment.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: We do have a question from Steve Monroe with 11. Please proceed with your question.

Operator: One moment, please, while we poll. As a reminder, if you'd like to ask a question, please press star 1 on your telephone.

Steve Monroe: Hey, guys.

Steve Monroe: Good go and great progress.

Operator: I'm waiting for the, We do have a question from Steve Monroe with 11. Please proceed with your, Hey guys, good going, great progress. I might have missed it, but did you say what your current occupancy is as of today as opposed to the end of the fourth quarter? We did not, Steve.

Steve Monroe: Might have missed it but did you say what's your current occupancy is as of today.

Speaker Change: Those two in the fourth quarter.

Speaker Change: We did not Steve.

Brandon M. Ribar: Okay, can you disclose that or not? We can't at this time. OK. All right, and any kind of forecast of where you think it might be at the end of the year? Which you're hoping to get to.

Steve Monroe: Okay can you disclose that or no.

Speaker Change: We can't at this time.

Speaker Change: Okay Alright.

Speaker Change: Alright, and then any kind of forecast and where you think it might be at the end of the year.

Speaker Change: Which you are hoping to get to.

Brandon M. Ribar: Yes, Steve, we're not providing guidance at this time. I think, you know, our goal is to continue to see progress similar to, you know, as we did in 2023. So, you know, we think that, as we referenced earlier, the March increases came through without any material concerns around attrition on that front. So I think we'll be in a position to provide additional numbers here in the near future just around how Q1 is playing out as well. Okay, and then the Q2 acquisitions or joint ventures or whatever that you're expecting to close in Q2. Is there anything in the pipeline for the rest of the year after that? There is a significant pipeline at this point in time, Steve.

Speaker Change: Yes, Steve.

Steve Monroe: We're not providing guidance at this time I think we are our goal is to continue to see progress similar to as we did in 2023.

Steve Monroe: We think that.

Speaker Change: As we referenced the March increases came through without any material concerns around attrition on that front.

Steve Monroe: So I think we'll be in a position to provide additional numbers here in the near future just around how Q1 is playing out as well.

Speaker Change: Okay, and then the Q2 acquisitions or joint ventures or whatever.

Speaker Change: You are expecting to close in Q2s or anything in the pipeline for the rest of the year after that.

Speaker Change: And Theres a significant pipeline at this point in time, Steve where we're excited about all the opportunities that we're taking a look at.

Brandon M. Ribar: We're excited about all the opportunities that we're taking a look at. So those units represent just things that we have under LOI currently, and that excludes all the other things in the pipeline that we're looking at for the remainder of the year, as well as the second quarter. Okay, and then for any acquisitions, do you have any lenders in mind that you're working with or, Um, not that far yet? I think we have a couple of different options, and there are cases where the lenders want to continue to stay in the transaction and are offering financing that's based on the existing structure. And then we also have relationships with our existing banking partners and others interested in what Sonida has been accomplishing that are building a relationship with us that are also offering opportunities to finance deals moving forward. So it's both seller financing and existing banks staying in, and then new opportunities as well. Okay, and how did you get your real estate taxes to go down by a million dollars? That didn't happen with me.

Speaker Change: So those units represent just things that we have under LOI currently and that excludes.

Speaker Change: All the other things in the pipeline that we're looking at for the remainder of the year.

Speaker Change: As well as the second quarter.

Steve Monroe: Okay, and then for any any acquisitions do you have any lenders in mind that you're working with or.

Speaker Change: Not that far yet.

Speaker Change: I think there we have a couple of different options and so there are cases, where the lenders want to continue to stay in the transaction and our offering.

Speaker Change: <unk> financing from the <unk> based on the existing structure and then we also have relationships with them you know.

Speaker Change: Our existing banking partners and others interested in and what's the need has been accomplishing that are building a relationship with us that also are offering.

Speaker Change: Opportunities to finance deals moving forward. So it's both seller financing.

Speaker Change: An existing bank staying in and then new opportunities as well.

Speaker Change: Okay, and how did you get your real estate taxes to go down by a.

Speaker Change: A $1 million that doesn't have it with me.

Speaker Change: [laughter], Yeah, I think that was all part of the the tactical.

Kevin Detz: Yeah, I think that was all part of the tactical initiatives that we rolled out when the new management team got here, and so that was just kind of a hard scrubbing of all the accounts. Part of what we did was consolidate our vendor relationships and look for favorable pricing that way. And so I think it was really aggressive monitoring and even litigation at some point that ultimately got us all those one-time credits that will effectively run rate in the form of lower taxes moving forward in the coming years.

Speaker Change: The tactical initiatives that we rolled out when the new management team got here and so that was just kind of a hard scrubbing of all the accounts.

Speaker Change: Part of what we did was consolidate our vendor relationships and look for favorable pricing that way and so I think it was a really aggressive.

Speaker Change: Monitoring and even litigation some point that ultimately got US all those one time credits that will effectively run rate in the in the form of lower taxes moving forward in the out years.

Kevin Detz: Well, that's all I got. Thank you. Thank you, Steve. Thank you, Steve. There are no further questions that... This concludes today's conference. Thank you all for participating. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Speaker Change: Right.

Speaker Change: That's good that's all I got thank you.

Speaker Change: Thank you Steve Thanks, Steve.

Speaker Change: Okay.

Speaker Change: There are no further questions at this time.

Speaker Change: This concludes today's conference. Thank you all for participating.

Speaker Change: Yeah.

Speaker Change: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.