Q1 2024 Extendicare Inc Earnings Call
Speaker Change: [music].
Operator: Thank you for standing by. This is the conference operator. Welcome to Extendicare Inc.'s first quarter 2024 Analyst Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Jillian Fountain, Vice President, Investor Relations. Please go ahead.
Thank you for standing by this is the conference operator, welcome to extended care, Inc. First quarter 2024 at Analyst Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded after the presentation there'll be an opportunity to ask questions to join the question.
Speaker Change: Q you May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing Star then zero I would now like to turn the conference over to Jillian Fountain, Vice President of Investor Relations. Please go ahead.
Jillian E. Fountain: Thank you, Operator, and good morning, everyone. Welcome to Extendicare's 2024 First Quarter Results Conference Call. With me today are Extendicare's President and CEO, Michael Guerriere, and our Senior Vice President and CFO, David Bacon.
Jillian E. Fountain: Thank you operator, and good morning, everyone welcome to extended Care's 2024, our first quarter results conference call.
Jillian E. Fountain: With me today are extended Kersey, President and CEO, Michael Greer, and our senior Vice President and CFO David Bacon.
Jillian E. Fountain: Our Q1 results were released yesterday and are available on our website, as is a live audio webcast of today's call, along with an accompanying slide presentation. An archived recording will also be available on our website following today's call. As well, replay numbers and passcodes for this call have been provided in our press release to access an archived recording until May 31st. Before we get started, please be reminded that today's call may include forward-looking statements, a non-GAAP measure, and other financial measures.
Q1 results were released yesterday and are available on our website as of July the audio webcast of today's call along with an accompanying slide presentation.
Speaker Change: A recording will also be available on our website following today's call.
Speaker Change: As you all replay numbers and Passcodes for this call is provided in our press release to access an archived recording until may 31st.
Jillian E. Fountain: Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. We have identified such factors as well as details of non-GAAP and other financial measures in our public filings with the securities regulators and suggest that you refer to those filings. With that, I'll turn the call over to Mike.
Speaker Change: Before we get started please be reminded that today's call may include forward looking statements and non-GAAP and other financial measures such forward looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today, we have identified such factors as well.
Speaker Change: Details of non-GAAP and other financial measures in our public filings with securities regulators and suggest that you refer to this fall.
Mike: With that I'll turn the call over to Mike.
Michael R. Guerriere: Thank you, Jillian, and good morning. We were very happy with our Q1 results. Our strong start to the year is a direct result of our strategy to grow our services business while leveraging our joint ventures with Axiom to support long-term care redevelopment. Year-over-year double-digit growth in our home care and managed services segments, combined with the sale of another long-term care redevelopment project into the JV with Axiom, represent continued progress in our journey toward a less capital-intensive, higher-margin business model.
Mike: Thank you Jillian and good morning.
Mike: We were very happy with our Q1 results.
Mike: Our strong start to the year is a direct result of our strategy to grow our services business, while leveraging our joint ventures with axiom to support long term care redevelopment.
Mike: Year over year double digit growth in our home care and managed services segments combined with the sale of another long term care redevelopment project into the JV with axiom represent.
Speaker Change: <unk> continued progress in our journey toward a less capital intensive higher margin business model.
Michael R. Guerriere: The strategic transformation that started in 2022 has strengthened our balance sheet, providing us with greater flexibility in our capital allocation decisions. The demand for our services is clear, with managed services segment NOI doubling to $8.7 million on a year-over-year basis. Our redevelopment program has good momentum with the opening of Countryside, our new 256-bed long-term care home in Sudbury in March, the sale of our 256-bed Orleans project into the Axiom joint venture in April, and the sale of the vacated Class C home in Sudbury following the opening of Sutt Countryside.
Speaker Change: The strategic transformation that started in 2022 has strengthened our balance sheet.
Speaker Change: Providing us with greater flexibility in our capital allocation decisions.
Speaker Change: The demand for our services is clear with managed services segment, NOI doubling to $8.7 million on a year over year basis.
Speaker Change: Our redevelopment program has good momentum with the opening of country side, our new 256, bad long term care home in Sudbury in March.
Speaker Change: The sale of our 256 bed Orleans project into the axiom joint venture in April.
Speaker Change: And the sale of the vacated class C home in Sudbury, following the opening of Sun country side.
Michael R. Guerriere: Taken together, these transactions demonstrate efficient capital allocation as we recycle capital from the sale of replaced legacy Class C homes into new redevelopment projects that we pursue through the Axiom Joint Venture, where we earn development fees during construction, then management fees to operate the home, in addition to our 15% ownership interest.
Speaker Change: Taken together these transactions demonstrate efficient capital allocation.
Speaker Change: We recycled capital from the sale of replaced legacy classy homes into new redevelopment projects that we pursue through the axiom joint venture.
Speaker Change: Where we earn development fees during construction.
Speaker Change: Management fees to operate their home in addition to our 15% ownership interest.
Michael R. Guerriere: These transactions, supported by our strong operational performance, helped strengthen our balance sheet in the quarter and improved our payout ratio to 69% on a trailing 12-month basis. As we continue to execute on our strategic agenda and focus on delivering strong operating results, we are well positioned for growth across all our business segments in 2024. As you can see on slide four, we delivered strong growth across the business in Q1, driven by increasing demand for the services we provide.
Speaker Change: These transactions supported by our strong operational performance helped strengthen our balance sheet in the quarter and improved our payout ratio to 69% on a trailing 12 month basis.
Speaker Change: As we continue to execute on our strategic agenda and focus on delivering strong operating results, we are well positioned for growth across all our business segments in 2024.
Speaker Change: As you can see on slide four we delivered strong growth across the business in Q1, driven by increasing demand for the services we provide.
Michael R. Guerriere: In long-term care, Q1 occupancy levels increased by 90 basis points to 97.5 percent, above the threshold for full funding at the home level. This is a strong result considering the seasonal impact the winter months can have on occupancy.
Speaker Change: And long term care Q1 occupancy levels increased 90 basis points to 97, 5%.
Speaker Change: Above the thresholds for full funding at the home level.
Speaker Change: This is a strong result, considering the seasonal impact the winter months can have on occupancy.
Michael R. Guerriere: In home health care, we continue to drive strong growth with average daily volumes increasing 11.4% from the prior year. Our volume growth continues to outpace demographic trends as we work to address significant unmet demand for services. We expect this to continue throughout the year as home health care services help to mitigate the significant capacity challenges faced by the rest of the health system. Volume growth is a direct result of our focus on retention and recruitment to increase capacity.
Speaker Change: In home Health care, we continue to drive strong growth.
With average daily volumes, increasing 11, 4% from the prior year.
Speaker Change: Our volume growth continues to outpace demographic trends as we work to address significant unmet demand for services.
Speaker Change: We expect this to continue throughout the year as home health care services helped to mitigate the significant capacity challenges faced by the rest of the health system.
Our volume growth is a direct result of our focus on retention and recruiting to increase capacity.
Michael R. Guerriere: The success of these programs is evidenced by record-high additions of new care staff in Q1, which gives us capacity for growth in future quarters. In our managed services segment, we also saw strong results following the Revera and Axiom transactions which closed last year. Net operating income doubled that of the prior year period, and the number of Extendicare assist beds grew 64% to just under 10,000 beds. The number of third-party and joint venture beds served by SGP increased year over year by 23.7 percent, driven by both organic growth and the strategic transaction. After adjusting for one-time items, our managed services and home healthcare segments were responsible for 56% of NOI in the quarter.
Speaker Change: The success of these programs as evidenced by record high additions of new care staff in Q1, which gives us capacity for growth in future quarters.
Speaker Change: In our managed services segment. We also saw strong results following the revere and axiom transactions, which closed last year.
Speaker Change: Net operating income doubled that of the prior year period, and the number of extended care assist beds grew 64% to just under 10000 beds.
Speaker Change: The number of third party and joint venture bed served by S. G. P increased year over year by 23, 7% driven by both organic growth and the strategic transactions.
Speaker Change: After adjusting for one time items, our managed services in the home health care segments were responsible for 56% of NOI in the quarter.
Michael R. Guerriere: As we continue to execute on our redevelopment plan, we expect the proportion of NOI coming from services in these two segments to gradually increase. Rate increases are supporting margin recovery in long-term care as we recruit staff and reduce agency use. Increased care volumes combined with rate increases drove continued improvement in pyramid NOI margins. We expect these trends will continue to strengthen home care margins in the coming quarters. Managed services margins are in the 50 to 55% range, which we expect will be the norm for this segment.
Speaker Change: As we continue to execute on our redevelopment plan, we expect the proportion of NOI coming from services in these two segments to gradually increase.
Speaker Change: Rate increases are supporting margin recovery and long term care as we recruit staff and reduce agency use.
Speaker Change: In food care volumes combined with rate increases drove continued improvement in pyramid NOI margins.
Speaker Change: We expect these trends will continue to strengthen home care margins in the coming quarters.
Managed services margins are in the 50% to 55% range that we expect will be the norm for this segment.
Michael R. Guerriere: Turning to long-term care funding on slide five, we've spoken for several quarters about the need to address the funding gap that arose from the significant inflationary pressures on our operating costs. This gap put a strain on our operating margins in long-term care in recent years. In March, the Ontario government announced a number of funding enhancements that go a long way to address the impact of inflation. On April 1st, the government implemented a 6.6% blended funding increase across all funding envelopes, resulting in an incremental annual revenue of approximately $21.3 million.
Speaker Change: Turning to long term care funding on slide five we've spoken for several quarters about the need to address the funding gap that arose from the significant inflationary pressures on our operating costs.
Speaker Change: This GAAP put a strain on our operating margins and long term care in recent years.
Speaker Change: In March the Ontario government announced a number of funding enhancements that go a long way to address the impact of inflation.
Speaker Change: On April 1st the government implemented a 6.6% blended funding increase across all funding envelopes, resulting in incremental annual revenue of approximately $21.3 million.
Michael R. Guerriere: We estimate $12 million of this amount is applicable to the other accommodation envelopes, representing an 11.5% increase, sufficient to address most of the inflationary gap and help to restore our net operating income to historic levels. Additionally, in Q1, the Ontario government provided one-time funding of just over $2,500 per bed to help relieve financial pressures and address key priorities, including capital and operating needs in long-term care homes. As a result, we recognized one-time funding of approximately $12.2 million in the quarter, of which $9.2 million was retroactive to April 1 last year.
Speaker Change: We estimate $12 million of this amount is applicable to the other accommodation envelope reps.
Speaker Change: Representing an 11, 5% increase sufficient to address most of the inflationary gap and help to restore our net operating income to historic levels.
Speaker Change: Additionally, in Q1, the Ontario government provided onetime funding of just over $2500 per bed to help relieve financial pressures and address key priorities, including capital and operating needs in long term care homes.
Speaker Change: As a result, we recognized onetime funding of approximately $12 $2 million in the quarter of which $9 2 million was retroactive to April one last year.
Michael R. Guerriere: In addition to the operating funding changes, Ontario reinstated the $35 per bed per day time-limited enhancement to the capital funding subsidy, which is available for all new projects that receive government approval to construct before November 30th, 2024. A significant investment in home health care was also included in the Ontario budget, but rate details have yet to be announced. All of these funding increases will help return the senior care sector to long-term financial sustainability.
Speaker Change: In addition to the operating funding changes, Ontario reinstated the $35 per bed per day time limited enhancement to the capital funding subsidy, which is available for all new projects that have received government approval to construct before November 30 of 2024.
Speaker Change: Our significant investment in home Health care was also included in the Ontario budget, but rate details have yet to be announced.
Speaker Change: All of these funding increases will help return the seniors care sector to long term financial sustainability.
Michael R. Guerriere: On slide six, we detail the considerable progress we've made in recent months on our redevelopment. We were delighted to open Extendicare Countryside at the end of March. This is our new 256-bed home in Sudbury, held in the Axiom Joint Venture. It was heartwarming to see the reactions of residents as we welcomed them to their new home.
Speaker Change: On slide six we detail the considerable progress we've made in recent months on our redevelopment program.
Speaker Change: We were delighted to open extended care country side at the end of March.
Speaker Change: This is our new 256 bed home in Sudbury held in the axiom joint venture.
Speaker Change: It was hard for me to see the reactions of residents as we welcomed to their new home.
Michael R. Guerriere: Subsequent to quarter end, we completed the sale of our fifth redevelopment project into the Axiom JV for cash proceeds of $20.1 million. This is a 256-bed home under construction in the Ottawa area. Additionally, in April, we completed the sale of the vacated Sudbury Class C home for cash proceeds of $5.3 million. We now have five homes in joint ventures with Axiom currently under construction in Ontario, consisting of 1,280 new beds slated to replace 1,121 Class C beds.
Speaker Change: Subsequent to quarter end, we completed the sale of our fifth redevelopment project into the axiom JV for cash proceeds of $21 million.
Speaker Change: This is a 256 bed homes under construction in the Ottawa area.
Speaker Change: Additionally in April we completed the sale of the vacated Sudbury class C home for cash proceeds of $5 $3 million.
Speaker Change: We now have five homes in the joint ventures with axiom currently under construction in Ontario, consisting of 1200 80, new beds slated to replace 1100 21 class C beds.
Michael R. Guerriere: We remain on track to open two of these homes later this year in Kingston and Stittsville and anticipate closing the sale of the vacated Kingston Class C building for estimated proceeds of $3.8 million later this year. We continue to advance our remaining 15 redevelopment projects in Ontario, consisting of 3,032 new beds that will replace 2,211 Class C beds. With the increased operating funding and the enhanced capital subsidy in place until November, we are targeting to begin construction on up to four new projects this year. Construction costs, interest rates, and applicable regulatory approvals will be pivotal in determining whether and when new projects will meet the financial conditions necessary to proceed.
Speaker Change: We remain on track to open two of these homes later this year in Kingston, and Statesville and anticipate closing the state the sale of the vacated Kingston classy building for estimated proceeds of $3.8 million later this year.
Speaker Change: We continue to advance our remaining 15 redevelopment projects in Ontario, consisting of 3032 new beds.
Speaker Change: That will replace 2211 class C beds.
Speaker Change: With the increased operating funding and the enhanced capital subsidy in place until November we.
Speaker Change: We are targeting to begin construction on up to four new projects this year.
Speaker Change: Construction costs interest rates and applicable regulatory approvals will be pivotal in determining whether and win new projects will meet the financial conditions necessary to proceed.
Michael R. Guerriere: Given the pace of long-term care redevelopment in Ontario, the government has acknowledged the need for Class C long-term care homes to remain in service beyond June 2025, when the current licenses expire. Accordingly, it is offering license extensions of up to five years to qualified operators. As such, we have submitted our request for license extensions for all of our remaining Class C homes while we continue to progress our redevelopment agenda. At this point, I'll turn it over to David Bacon to discuss our results in more detail.
Speaker Change: Given the pace of long term care redevelopment in Ontario.
Speaker Change: The government has acknowledged the need for the class C. Long term care homes to remain in service beyond June 20, <unk> 25, when the current licenses expire.
Speaker Change: Accordingly, it is offering license extensions of up to five years to qualify to operators.
Speaker Change: As such we have submitted our request for license extensions for all of our remaining class C homes, while we continue to progress our redevelopment agenda.
Speaker Change: At this point I'll turn it over to David Bacon to discuss our results in more detail.
David E. Bacon: Thanks, Michael. I'll start by reviewing our consolidated results for the quarter. As Michael mentioned, our Q1 results were impacted by a number of favorable one-time and out-of-period funding and compensation items. However, keep in mind that last year's Q1 results were also impacted by one-time items, including COVID recoveries and prior period LTC funding. We've summarized these in the appendix to this presentation, and I've referenced them on the applicable financial results slide. Given these impacts, when I speak to the year-over-year variances, I will include references to our results excluding the impact of these one-time items.
David E. Bacon: Thanks, Michael.
David E. Bacon: I'll start by reviewing our consolidated results for the quarter.
David E. Bacon: As Michael mentioned, our Q1 results were impacted by a number of favorable one time and out of period funding and compensation items keep.
David E. Bacon: Keep in mind that last year's Q1 results were also impacted by one time items, including Covid recoveries.
Speaker Change: Prior period L. P C funding.
Speaker Change: We summarize these in the appendix to this presentation and I've referenced them on the applicable financial results slides.
Speaker Change: Given these impacts when I speak to the year over year variances I will include references to our results excluding the impact of these one time items.
David E. Bacon: On a reported basis, consolidated Q1 revenue increased by 13.1% to $367.1 million. Excluding the impact of out-of-period items and COVID recoveries, our revenues increased by $50.3 million, or 17.2%, driven primarily by an increase in home health care, average daily volumes and billing rates, growth and managed services, and improved long-term care occupancy levels.
Speaker Change: On a reported basis consolidated Q1 revenue increased by 13, 1% to $367 1 million.
Speaker Change: Excluding the impact of out of period items, and Covid recoveries, our revenues increased by $50 3 million or 17, 2%.
Speaker Change: Resulting from operating improvements in all of our business segments, driven primarily by an increase in home health care average daily volumes in billing rates growth in managed services have improved long term care occupancy levels.
David E. Bacon: Our Q1 NOI increased $200,000 to $44.7 million, with a margin of 12.2% compared to 13.7% in the prior year. Excluding the impact of the out-of-period items in COVID recoveries, our NOI improved year-over-year by $9 million, or 34.9%, reflecting the growth across all of our sectors. Our reported adjusted EBITDA for Q1 decreased by $800,000.
Speaker Change: Our Q1, NOI increased 200000 to $44 7 million with margin of 12, 2% compared to 13, 7% in the prior year.
Speaker Change: Excluding the impact of the other period items and Covid recoveries, our NOI improved year over year by $9 million or 34, 9%, reflecting the growth across all of our segments.
Speaker Change: Our reported adjusted EBITDA for Q1 decreased by 800000.
David E. Bacon: Excluding the impact of out-of-period items and COVID recoveries, our adjusted EBITDA increased by $8 million, or 65.1%, reflecting the improvement in adjusted NOI, partially offset by modestly higher admin costs. Our AFFO basic share in Q1 was $0.21 compared with $0.24 in the same period last year, and on an adjusted basis, AFFO increased year-over-year by $0.04 per share to $0. Turning to our individual segments, starting with long-term care, excluding the impact of COVID funding received in Q1 2023 and an increase in prior period funding, our revenue increased year-over-year by $19.8 million, driven by funding increases, timing of spending, and our improved occupancy.
Speaker Change: Excluding the impact of out of period items, and Covid recoveries, our adjusted EBITDA increased by $8 million or 65, 1%, reflecting the improvement in adjusted NOI, partially offset by modestly higher admin costs.
Speaker Change: Alright, that's all per basic share in Q1 was 21 cents compared with 24 cents in the same period last year and on an.
Speaker Change: The adjusted basis.
Speaker Change: <unk> increased year over year by <unk> <unk> per share to <unk> 12 in Q1.
Speaker Change: Turning to our individual segments, starting with long term care.
Speaker Change: Excluding the impact of Covid funding received in Q1, 2023, and an increase in prior period funding our revenue increased year over year by $19 8 million driven by funding increases timing of spending and our improved occupancy.
David E. Bacon: NOI, as reported, declined by $8.4 million to $25.3 million, with an NOI margin of 12.3%. Excluding the net impact of COVID recoveries and an increase in prior period funding year over year. NOI increased by $400,000 as a result of funding enhancements and increased occupancy, partially offset by higher operating costs. The corresponding NOI margins declined to 7.9% in the quarter from 8.5% last year, due in part to margin compression from higher flow-through funding levels and our higher operating costs.
Speaker Change: NOI as reported declined by $8 4 million to $25 3 million.
Speaker Change: The NOI margin of 12, 3%.
Speaker Change: Excluding the net impact of Cobra recoveries and increase in our prior period funding year over year.
Speaker Change: NOI increased by 400000 as a result of funding enhancements and increased occupancy partially offset by higher operating costs.
Speaker Change: A corresponding NOI margins declined to seven 9% in the quarter from eight 5% last year due in part to margin compression from higher flow through funding levels and our higher operating costs.
David E. Bacon: As Michael mentioned earlier, thanks to the recent funding announcement from the Ontario government, the 11.5% increase in our OA funding is a much-needed recognition of the cumulative inflationary impacts we have been experiencing in many of our operating costs over the past few years. And the increase starting in Q2 will help to restore our NOI, which is critical to support the advancement of our redevelopment agenda. Turning now to our home health care segment, revenue in the first quarter increased by $36.1 million.
Speaker Change: As Michael mentioned earlier, thanks to the recent funding announcement from the Ontario government. The 11, 5% increase in our OE funding as much needed recognition of the cumulative inflationary impacts we have been experiencing in many of our operating costs over the past few years.
Speaker Change: The increase starting in Q2 will help to restore our NOI, which was critical to support the advancement of our redevelopment agenda.
Speaker Change: Turning now to our home health care segment revenue in the first quarter increased by $36 1 million.
David E. Bacon: Excluding the benefit of $13.6 million of revenue to support one-time compensation costs paid to our home health care staff in connection with the 6.7% rate increase we received in Q4 of last year, our revenue increased by $22.5 million, driven by 11.4% year-over-year growth in our volumes and our bill rate increases. NOI increased by $4.3 million to $10.8 million, and adjusting for the flow-through impact of the one-time compensation to staff in Q1, our NOI margin was 8.3%, an increase of 230 basis points over the same quarter last year.
Speaker Change: Excluding the benefit of $13 6 million of revenue to support one time compensation costs paid to our home health care staff in connection with the six 7% rate increase we received in Q4 of last year, our revenue increased by $22 5 million driven by 11, 4% year over there.
Speaker Change: Growth in our volumes and our bill rate increases.
NOI increased by $4 3 million to $10 8 million and adjusting for the flow through impact of the onetime compensation to staff in Q1, our NOI margin was eight 3% an increase of 230 basis points over the same quarter last year.
David E. Bacon: Turning to our managed services segment, we reported significant growth in both revenue and NOI this quarter, thanks to the addition of the new homes from last year's Rivera and Axiom transactions and continued organic growth in SGP. Did Q1 revenue increase by $7.4 million or 76.5%? And our NOI doubled to $8.7 million. This quarter's NOI margin was 50.7%, an increase of 550 basis points over the same period last year.
Speaker Change: Turning to our managed services segment, we reported significant growth in both revenue and NOI. This quarter. Thanks to the addition of the new homes from last year's Rivera, and axiom transactions and continued organic growth and S. G. P.
Speaker Change: Our Q1 revenue increased by seven 4 million or 76, 5%.
Speaker Change: And our NOI doubled to $8 7 million.
This quarter's NOI margin was 57% an increase of 550 basis points over the same period last year.
Speaker Change: Okay.
David E. Bacon: Finally, turning to our financial position, we ended the quarter with a strong liquidity position with cash of $91 million and access to a further $68 million in our credit facilities. In the first quarter, we successfully completed an extension to 2027 of approximately $20.4 million in mortgages that were maturing in 2025, further improving our maturity profile. Subsequent to the end of the quarter, we received cash proceeds of approximately $25.4 million from our redevelopment-related transactions, which added to our liquidity position.
Finally, turning to our financial position, we ended the quarter with a strong liquidity position with cash of $91 million and access to a further $68 million and our credit facilities.
Speaker Change: In the first quarter, we successfully completed an extension to 2027 of approximately $24 million in mortgages that were maturing in 2025 further improving our maturity profile.
Speaker Change: Subsequent to the end of the quarter, we received cash proceeds of approximately 25 20.
Speaker Change: $25 4 million from our redevelopment related transactions.
Speaker Change: Added to our liquidity position.
David E. Bacon: Additional, and as Mike indicated, additional proceeds are expected from the sale of the land and building associated with the Class C home in Kingston once the new home is open later this year. Our strong operating results, solid debt metrics, and the added flexibility from our strategic transactions have us well positioned as we continue to assess our options for the convertible debentures that mature in the second quarter of 2025. With that, I'll pass the call back to Michael for his closing remarks.
Speaker Change: Additional and as Mike indicated additional proceeds are expected from the sale of land and the building associated with the class C home in Kingston once the new home has opened later this year.
Speaker Change: Our strong operating results solid debt metrics and the added flexibility from our strategic transactions have us well positioned as we continue to assess our options for the convertible debentures that mature in the second quarter of 2025.
Speaker Change: With that I'll pass the call back to Michael for his closing remarks.
Michael R. Guerriere: Thanks, David.
Michael R. Guerriere: A very positive start to the year gives us confidence that we have the right strategy and the team we need to execute against our plan. Continued growth and strong operating results demonstrate our ability to capitalize on the growing need for our services to drive shareholder value. The operating funding increases in Ontario largely address the inflationary gap that has weighed on our operating margins in recent years. With the final funding increase to staff our homes to provide four hours of direct care per resident day, we are well positioned to provide excellent quality care to our residents.
Michael R. Guerriere: The very positive start to the year gives us confidence that we have the right strategy and the team we need to execute against our plan.
Michael R. Guerriere: Continued growth and strong operating results demonstrate our ability to capitalize on the growing need for our services to drive shareholder value.
Michael R. Guerriere: The operating funding increases in Ontario, largely address the inflationary gap that has weighed on our operating margins in recent years.
Michael R. Guerriere: With the final funding increase to staff our homes to achieve four hours of direct care per resident day, we are well positioned to provide excellent quality care to our residents.
Michael R. Guerriere: These investments are critical to ensure the long-term care sector is on sound financial footing, enabling us to expand capacity to meet the needs of the growing senior population. The need for the critical services we provide has never been more apparent. And we have never been better positioned to answer the call. Of course, we could not do so without our dedicated team members, whose professionalism and compassion are central to achieving our mission of helping people live better. With that said, we're happy to take any questions that you might have.
Michael R. Guerriere: These investments are critical to ensure the long term care sector is on sound financial footing, enabling us to expand capacity to meet the needs of the growing seniors population.
Speaker Change: The need for the critical services, we provide has never been more apparent.
Speaker Change: And we have never been better positioned to answer the call.
Speaker Change: Of course, we could not do so without our dedicated team members, whose professionalism and compassion are central to achieving our mission of helping people live better.
Speaker Change: With that we're happy to take any questions that you might have.
Operator: Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. We will pause for a moment as callers join the queue. Our first question comes from Jonathan Kelcher of TD Cowan. Please go ahead.
Speaker Change: Thank you.
Speaker Change: I will begin the question and answer session to join the question queue.
Speaker Change: That's star then one on your telephone keypad, you'll hear a tone acknowledging your request.
Speaker Change: You are using a speakerphone please pick up your handset before pressing any keys.
Speaker Change: Your question. Please press Star then two.
Speaker Change: We'll pause for a moment as callers join the queue.
Speaker Change: Our first question comes from Jonathan Culture of TD Cowen. Please go ahead.
Jonathan Kelcher: Thanks. Good morning. First question, just on long term care. Just trying to get a sense of what a good quarterly NOI run rate is. So if you look at the $15.5 million, and I think in the MD&A you talk about the 11.5% increase to adding 12 million, should we think of 15.5% as a starting place for that, and it being additive to that?
Jonathan Culture: Thanks, Good morning.
Jonathan Kelcher: First question just on on the long term care just trying to get a.
Jonathan Kelcher: So.
Jonathan Kelcher: What a good corridor or in quarterly NOI run rate is.
Speaker Change: So if we if you look at the $15 5 million.
Speaker Change: And I think in the MD&A you talk about.
Speaker Change: Uh huh.
Speaker Change: The 11, 5% increase adding $12 million is that is that shall.
Should we think it was $15 five as a starting place for that and it being additive to that.
David E. Bacon: Yeah, I'd say a portion of that, the $12 million number is an annualized number, just to clarify. I think that there'll be a large portion of the $12 million that will fall to the bottom line, but there still are cost increases that will go against that as we think about, as our collective agreements have increases that come throughout the year, they tend to be staggered. And so there is going to be some of that that doesn't fall on the bottom line.
Speaker Change: Yeah.
Speaker Change: I'd say a portion of that the 12 million number is a annualized number.
Speaker Change: Uh huh.
Speaker Change: To clarify.
Speaker Change: I think that there'll be a large portion of the 12.
Speaker Change: Will fall to the bottom line, but there still are cost increases that will go against that as we think about.
Speaker Change: As you know our collective agreements have increases that come throughout the year. They they tend to be staggered.
Speaker Change: And so there is going to be some.
Speaker Change: Some of that that doesn't fall to the bottom line. So.
David E. Bacon: So I think that, you know, 15, is a reasonable starting point, but I wouldn't take the full $9 million through. I think there's going to be some spending against that as we still have some increases coming later in the year.
Speaker Change: So I think that 15.
Speaker Change: <unk> is a reasonable starting point, but I wouldn't take the full 9 million through against I think theres going to be some some spending against that as we as we still have some increases coming later in the ear.
Jonathan Kelcher: 9, 9 million or 12
Speaker Change: Nine 9 million or $12 million.
David E. Bacon: Well, sorry, well, I'm thinking in your contribution. Sorry, John, I'm thinking the nine months. Okay, okay, fair enough. Twelve annualized, yeah, just mixing the annualized versus the nine.
Speaker Change: Sorry, well light I'm thinking in year contribution sorry, John I'm thinking the nine months. So okay. Okay, well 12 is annualized yes, just mixing the annualized nurses.
Speaker Change: So it definitely owes so we should sort of think about it.
Jonathan Kelcher: So we should sort of think about 15 and a half, sort of think about 17 and a half-ish. Is 17 to 18, is that a fair way to think about it?
Speaker Change: For 17.
Speaker Change: Sure.
Speaker Change: Is 17 to 18 is that is that a fair way to think about it.
David E. Bacon: Yeah, we don't, I think it will be north of 15. 17, 18, I mean, it's not a bad number, but we don't have a number or guidance that we can give on that, but it is going to be north of 15.
Speaker Change: Yeah.
Speaker Change: It will be north of 15.
Speaker Change: 17, 18, that'd be nuts, they have there.
Speaker Change: It's not a bad number but it's not.
Speaker Change: But we don't have a number that or guidance that we give on that but it is going to be north of the therapy.
Jonathan Kelcher: Okay, I was getting the right way to think about it. Okay, and then on the home health care. We've had two good quarters of volume increases in sort of the 3% ranges. Can we sort of think of that pace going, like I think, Mike, in your opening remarks, you talked about getting a bunch of new staff that's coming on in Q1. Can we think about 3% volume growth, or does that pace slow?
Speaker Change: Okay.
Speaker Change: The right way to think about it okay and then on the on the home health care.
Speaker Change: We've had two.
Speaker Change: Good quarters.
Speaker Change: <unk> increases in the sort of the 3% range as we sort of think of that pace I think.
Mike: Mike in your in your opening remarks, you talked about getting a.
Speaker Change: Bunch of new stuff coming.
Speaker Change: Coming on in Q1 can we think about.
Speaker Change: 3% volume growth was or does that pace slow.
Michael R. Guerriere: So at some point, Jonathan, the pace will slow, and we're not sure exactly what that point is. And what it'll slow to is probably somewhere in the 5% growth per year, which is what we think the overall market will grow at just because of demographic reality. But we are still seeing a considerable gap in care. There is still a considerable need that isn't being met across the healthcare system. So, you know, our view is that we're going to see an accelerated pace of growth, at least for the next year, and it's just, it's hard for us to see when that catch-up point is going to happen. But, you know, right now, I don't see any slowing down at that pace.
Speaker Change: So at some point, Jonathan that pace will slow.
Jonathan: And we're not sure exactly what that point is and what it'll slow too is probably somewhere in the 5%.
Speaker Change: Growth per year, which is what we think the overall market.
We will grow.
Speaker Change: Just because of demographic.
Speaker Change: Realities.
Speaker Change: But we are still seeing a considerable gap.
Speaker Change: GAAP in care, there's still.
Speaker Change: Considerable need that isn't being Matt across the health care system.
So you know our view is that we're going to see an accelerated pace of growth at least for the next year.
And we're just it's hard for us to see when when that catch up point is going to happen.
Speaker Change: But but you know right now I don't see any slowing down of that pace of growth.
Jonathan Kelcher: Okay, and are you able to hire in order to accommodate all that growth? I guess that's a real question, right?
Speaker Change: Okay.
Michael R. Guerriere: Can your staff and your hours be as much? Thank you. Bye.
Speaker Change: You're you're able to stop.
Speaker Change: In order to accommodate all that growth that's I guess, that's a real question.
Speaker Change: Stop in your hours as much.
Speaker Change: And you're saying yeah, we're word.
Jonathan Kelcher: Yeah, we're seeing, I mean, I made the comment that, you know, we added more people in Q1 than we have in any previous quarter. So, you know, we are able, with our training programs and recruiting, on top of better retention, we're seeing lower attrition in our staff as well. So that is all combining to make for big increases in our capacity. So I think that, you know, what you've seen in terms of the run rate over the last six quarters gives you an indication that, you know, we are able to find the staff and add capacity at that pace.
Speaker Change: Yeah, we're seeing I mean, I made the comment that you know we added more people in Q1 than we have.
Speaker Change: In any previous quarter so.
Speaker Change: We are able with our training programs and and and recruiting on top of better retention, we're seeing we're seeing lower attrition.
Speaker Change: In in our staff as well so that is all combining to to.
Speaker Change: To make for a big increases in our in our capacity. So I think that you know what you've seen in terms of.
Speaker Change: The run rate over the last six quarters gives you an indication that that you know we are able to find the staff and and and add capacity at that pace I think that's a reasonable Ah.
Jonathan Kelcher: I think that's a reasonable kind of growth expectation in terms of what we're able to do with our staff additions. And then on the home health care increases, the funding increases that you are looking for from the government, should we think of those as something that's going to be additive to NOI or will it be more like more flow through, like just straight?
Speaker Change: Kind of.
Speaker Change: Growth.
Speaker Change: Our expectation in terms of.
Speaker Change: Of what we're able to do with with our staff additions.
Speaker Change: Okay, and then on the home health care increases you funding increases that you are.
Speaker Change: Looking at corporate and the government should we think of those as.
Speaker Change: Something that's gonna be additive to NOI or or will it be more like or flow through.
Speaker Change: St.
Speaker Change: And for the hard work and life.
Michael R. Guerriere: Hard for us to predict, Jonathan, because they haven't announced, or they have announced a large quantum of investment in the sector, but we don't know how it will be applied. I think there's a very good chance that it'll be an April 1 rate increase, similar to what we've seen in previous years, which at this point would be additive to our NOI to some degree, but certainly, we're increasing wages and increasing the staff complement, so exactly how that will play out is going to wait to see what those rate increases are and how they're structured.
Speaker Change: Hard first to predict.
Johnson: Johnson, because they haven't announced like they've announced the large quantum of investment in the sector, but we don't know.
Speaker Change: How it will.
Speaker Change: Kind of be applied.
Speaker Change: I think there's a very good chance that that it'll be an April one rate increase similar to what we've seen in previous years, which at this point.
Would be additive to our NOI to some degree.
Speaker Change: But.
Speaker Change: Certainly we're in.
Speaker Change #100: Increasing wages and increasing.
Speaker Change #100: You know the staff complement.
Speaker Change #100: Complement so.
Speaker Change #100:
Speaker Change #101: Exactly how that battle play out really is going to wait to see what what you know.
Speaker Change #101: Now what those rate increases are and how they're how they're structured.
Jonathan Kelcher: Okay, and then last one for me, you talked about potentially starting four new projects. Would those be, well, I guess two-part here, would those be on the balance sheet or, potentially, in the JV? And secondly, how should we think about your total CapEx spend for this year?
Speaker Change #102: Okay, and then last one for me you talked about potentially starting for new projects.
Speaker Change #103: Be well.
Speaker Change #103: Well I guess, two part here, where those would those be on balance sheet or or.
Speaker Change #104: Essentially in the JV.
Speaker Change #104: And secondly.
Speaker Change #105: How how should we think about your total capex spend for this year.
David E. Bacon: Yeah, Jonathan, on the first part of your question, I mean, our intention is to have those new projects start and be done in the JV. So it'll just be more of a timing situation in terms of just getting through a successful tender. And if everything aligns that we're going to move ahead on those projects, we'd be starting a process to move them into the JV. It'll just be a question of timing, so it could be a bit transient, but they will end up in the JV.
Speaker Change #105: Yes.
Speaker Change #105: Your first part of the question I mean, our intention is to have those new projects.
Speaker Change #106: I'll start and be done in the J D.
Speaker Change #107: So it'll just be more of a timing situation in terms of just getting through.
Speaker Change #108: A successful tender and if everything aligns that there were going to move ahead on those projects, we'd be we'd be starting the process to move them into the JV.
Speaker Change #108: It'll just be a question of timing so it could be a bit transient, but every you know.
They will all end up in the JV.
David E. Bacon: We're hoping a little faster than Arlene's project was, and we're working with Axiom and the government around just trying to streamline that process so that we can move things faster. So that's where the intention is.
Speaker Change #109: We're hoping a little faster than Barro Orleans project was and you know, we're working with axiom and the government are around just trying to streamline that process. So that we can move things faster.
Speaker Change #109: So so that's.
Speaker Change #109: Thats, where the intention is in terms of Capex for the year I think there's no change in our kind of maintenance capex outlook on the growth kind of Capex side.
David E. Bacon: In terms of CapEx for the year, I think there's no change in our kind of maintenance CapEx outlook on the growth side of CapEx. We're targeting the four projects. We don't know if all four will go through or are in the tendering process now, but it'll take a couple of months to crystallize that.
Speaker Change #109: You know, where we're targeting the four projects. We don't know if all four will go through or in the tendering process now, but it'll take a couple of months to get.
Speaker Change #110: Crystallize that so if you look at sort of our cost per bed sort of in the $3 80 to 400000 range with just under 1000 beds, we're looking at doing.
Jonathan Kelcher: So if you look at sort of our cost per bed, sort of in the $380,000 to $400,000 range, we have just under about 1,000 beds we're looking at doing. So call it $400 billion of potential construction, and our 15% share of that. If you think about project debt, call it 75%. You're talking about $100 million of equity, so our pro rata share could be somewhere between $10 to $15, depending on how many go, but that's over the life of the project. Not really. Even if we green light whatever subset of those four projects by year, the impact this year would be pretty modest from a growth CapEx perspective.
Jonathan Kelcher: Okay, that is very helpful. I'll turn it back on. Thanks.
Speaker Change #110: So call.
Speaker Change #111: Call It 400 billion ish of potential construction or 15% share of that.
Speaker Change #111: If you think about project that at call it 75%.
Speaker Change #112: You're talking about $100 million of equity so our pro rata share could be somewhere between 10 to 15, depending on how many go but that's over the life of the project. So.
Speaker Change #113: I really don't even if we green light that the.
Speaker Change #114: Three you know whatever subset of those four projects by year end that the impact this year would be pretty modest from a from a growth capex perspective.
Speaker Change #114: Oh.
Speaker Change #115: Oh, Okay. That's very helpful I'll turn it back thanks.
Operator: Our next question comes from Pammi Bir of RBC Capital Markets. Please go ahead. Thanks.
Speaker Change #116: Our next question comes from.
Speaker Change #117: Of RBC capital markets. Please go ahead.
Pammi Bir: Thanks. Hi everyone. Most of my questions have been answered. Really just one follow-up in long-term care. You know, when you spoke about the one-time funding that you picked up in the quarter, it did seem to drop. The NOI levels did seem to drop from Q4. You know, while there is some seasonality in that, was there anything sort of one-time related that might have impacted the quarter? And is there any sort of maybe reversal or adjustment anticipated, if at all, with respect to that in the next, in Q2 or throughout the year?
Speaker Change #118: Thanks, everyone.
Speaker Change #118: Everyone.
Most of my questions.
Speaker Change #119: I have been answered really just one follow up and long term care you know when you start the <unk>.
Speaker Change #120: One time funding that you picked up in the quarter.
Speaker Change #120: It did seem to drop the NOI levels did seem to drop from Q4.
Speaker Change #121: You know while there is some seasonality and that was there anything sort of one time related that might have impacted the quarter and.
Speaker Change #121: Is there any sort of.
Speaker Change #121: Maybe a reversal or adjustment anticipated if at all with respect to that.
Speaker Change #122: The next in Q2 or.
Speaker Change #123: Throughout the year.
David E. Bacon: Outside of the one-time in Ontario we adjusted for, I wouldn't say there's anything one-time in Q1. There are a couple of things weighing on the margin percentage when you're looking at it either year-over-year or Q4. On a year-over-year basis, the step up in the flow-through funding impacts probably accounts for about half of that 60-basis point drop is really just all the added flow-through and funding from a year-over-year. But we are experiencing some elevated operating costs still, particularly in the West, in our LTC operations where we don't have the benefit of the flow-through kind of impacts.
Speaker Change #124: Yeah, they're there.
Speaker Change #125: Beside of the one time in Ontario, we adjusted for.
Speaker Change #125: I wouldn't say there was anything one time in Q1, there's a couple of things weighing on the margin percentage when you're looking at either year over year Q4. So.
Speaker Change #126: On a year over year basis, the step up in in.
The flow through funding impacts probably accounts for about half of that sort of a 60 basis point drop is really just all the added flow through and funding from an year over year.
Speaker Change #127: But we knew we are experiencing some elevated operating costs still particularly in the west in our LTC operations, where we don't have the benefit of the flow through kind of impacts.
Speaker Change #128: So some of some select homes in the west are still running at a higher operating cost than we'd like and we're working through those there are a couple of markets.
David E. Bacon: Some select homes in the West are still running at higher operating costs than we'd like, and we're working through those. There are a couple of markets and areas that still have high agency use, higher than we want it to be, but they're isolated to a handful of homes, but they do have a bit of an overhang. So I think as we move forward, they're not one-time events, Pammi, but there's a lot of work and effort going into focusing on those handful of homes to get the operating cost structure back in alignment.
Speaker Change #129: And areas that still have a agency by agency use higher than we want it to be.
Speaker Change #130: But the other isolated to a handful of homes, but they do have a bit of a.
Speaker Change #131: An overhang so I think as we move forward, they're not one time pardon me, but where there's a lot of work and effort being going into two focusing on those handful of homes to get the operating cost structure back in alignment.
David E. Bacon: The other thing I'd add is that we've got a lot of good news, and it's on the Ontario side of LTC funding and the budget. We are still waiting for the April 1st funding increases in Manitoba and Alberta and similar cost pressures obviously in the West with inflation and a lot of hope that there's some recognition that we need a bit of a catch up there too. So there could still be some news in the rate increases when they come that might be a bit of a bit of an, we're hoping for a bit of an outsized adjustment to rates in the West to give a bit of recognition to the inflation pressures we're experiencing there as well.
Speaker Change #132: The other last thing I'd add is you know we've got a lot of good news and and you know it's it's on the Ontario side on LTC in the in the funding and budget.
Speaker Change #133: Are still waiting for the April 1st funding increases in Manitoba, Alberta, So and similar cost pressures, obviously in the west with inflation in <unk>.
Speaker Change #134: A lot of hope that there's some recognition that that we need a bit of a catch up there too.
Speaker Change #134: So there could still be some some news in the rate increases when they come that that might be a bit of a we're hoping for a bit of an outsized adjustment to rates in the west to give a bit of recognition to the inflation pressures we were experiencing there as well. So so nothing really one time to some good block and tackle work in the field than I am.
David E. Bacon: So nothing really special this time, just some good block and tackle work in the field and a handful of homes where cost structures still need to get aligned, and we're waiting for the funding announcements in the West.
Speaker Change #135: Full of homes, where cost structure is still need to get aligned and we're waiting for the funding announcements in the west.
Pammi Bir: Got it. Yeah, no, that's very helpful. I think in the West, with respect to, I guess, the funding increases that you're still waiting for, is there any sense that there may be, again, a bit of a catch-up, sort of one-time announcement, or is it really just more forward-looking that you get, you know, a bump like you did in Ontario on the OA envelope?
Speaker Change #136: Got it yeah, no that's that's very helpful.
Speaker Change #136: Think of them in the west.
Speaker Change #136: With respect to I guess, the funding increases that you're still waiting for is there any sense that there may be.
Speaker Change #136:
Speaker Change #136: There's a catch up sort of one time.
Speaker Change #137: Announcement or is it really just more forward looking that you get a bump like you did in Ontario on the Oi envelope.
David E. Bacon: I'd say the latter. I think the expectations in the West are going to be more around perspective rate increases effective for April as opposed to something catching us up. I think that's probably how we feel at the moment.
Speaker Change #137: I'd say, it's a lot I'd say the ladder I think in both the expectations in the west are going to be more around.
Speaker Change #137: Perspective rate increases effective for April as opposed to something catching us up.
Speaker Change #138: I think I think that's probably how we feel at the moment.
Speaker Change #138: Okay.
Pammi Bir: All right. Thanks very much. I will all turn it back.
Speaker Change #139: Alright, thanks, very much I'll turn it back.
Speaker Change #139: Okay.
Operator: Once again, if you have a question, please press star then 1. This concludes the question and answer session. I would like to turn the conference back over to Jillian Fountain for any closing remarks.
Speaker Change #140: Once again, if you have a question. Please press Star then one.
Speaker Change #141: This concludes our question and answer session I would like to turn the conference back over to Jillian fountain for any closing remarks.
Jillian E. Fountain: Thank you operator.
Jillian E. Fountain: That concludes our call for today. As a reminder, this presentation is available on our website, as are the call-in numbers for the archived recording. Thank you for joining us, and please don't hesitate to contact Vesta Relations if you have any questions.
Speaker Change #142: That concludes our call for today.
Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Jillian E. Fountain: As a reminder, this presentation is available on our website as I would call in numbers for an archived recording.
Operator: ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? [inaudible] ?? ?? ?? ?? ?? ?? ?? ??
Jillian E. Fountain: Thank you for joining us and please don't hesitate to contact.
Speaker Change #143: That's the relationship do you have any questions.
Speaker Change #143: Thank you.
Speaker Change #144: This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Speaker Change #144: [music].
Speaker Change #144: Yeah.
Speaker Change #144: Yeah.
Speaker Change #144: Okay.
Speaker Change #144: Yeah.
Speaker Change #144: Okay.
Speaker Change #144: Okay.
Speaker Change #144: Okay.
Speaker Change #144: [noise].
Speaker Change #144: Yeah.
Speaker Change #144: Okay.
Speaker Change #144: Okay.
Speaker Change #144: [music].
Speaker Change #144: Yeah.