Sonida Senior Living Inc. Q2 2024 Earnings Call

August 12, 2024

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Unknown Executive: Jason Finkelstein, Brandon Ribar, Unknown Executive. Greetings and welcome to the Sonida Senior Living second quarter 2024 earnings results call. At this time, all participants are in a listen-only mode. If anyone wants to require operator assistance during the call, please press star one on your telephone key pass. As a reminder, this call is being recorded.

Operator: Greetings and welcome to the Sonida Senior Living second quarter 2024 earnings results call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the call, please press star 1 on your telephone keypad. As a reminder, this call is being recorded. I would now like to turn the call over to Jason Finkelstein, Investor Relations. Thank you, Jason. You may begin.

unknown: Gritty.

Operator: Greetings and welcome to the Sonida Senior Living 2nd Quarter 2024 Earnings Results. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the call, please press star one on your telephone.

Jason Finkelstein: Greetings and welcome to this Danita senior living second quarter 2024 earnings results call. At this time all participants are in a listen only mode. If anyone should require operator assistance during the call. Please press star one on your telephone keypad. As a reminder, this call is being recorded I would now like to turn the call over to Jason Finkelstein.

Operator: As a reminder, this call is being recorded. I would now like to turn the call over to Jason Finkelstein, Investor Relations. Thank you, Jason. You may be, Thank you, operator.

Jason Finkelstein: I would now like to turn the call over to Jason Finkelstein, investor relations.

Unknown Executive: Thank you Jason, you may begin. Thank you, operator.

Speaker Change: Relations. Thank you Jason you may begin.

Jason Finkelstein: Thank you, operator. All statements made today, August 12, 2024, which are not historical facts, may be deemed to be forward-looking statements within the meaning of federal security laws. The company expressly disclaims any obligation to update these statements in the future. Actual results and performance may differ materially from what we're looking to. Certain factors that can cause actual results to differ are detailed in the earnings release that the company issued earlier today, as well as in the reports that 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-C.

Jason Finkelstein: All statements made today, August 12, 2024, which are not historical facts, may be deemed to be forward-looking statements within the meaning of federal security laws. The Company expressly disclaims any obligation to update these statements in the future. Actual results and performance may differ materially from forward-looking figures. Certain factors that can cause actual results to differ are detailed in the earnings release that the company issued earlier today, as well as in the reports that 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.

Jason Finkelstein: Thank you operator, all statements made today August 12, 2024, which are not historical facts may be deemed to be forward looking statements within the meaning of federal securities laws. The company expressly disclaims any obligation to update these statements in the future.

Jason Finkelstein: All statements made today, August 12, 2024, which are not historical facts, may be deemed to be fuller looking statements within the meaning of federal security laws. The company expressly disclaimed any obligation to update these statements in the future. As for results, the performance may differ materially from forward-looking statements. Turn factors that can cause actual results to differ or detailed in the earnings release that the company issued earlier today, as well as in the reports that the company filed with the SEC from time to time. Including the risk factors contained in the annual report on 410J and quarterly reports on 410Q.

Jason Finkelstein: Actual results or performance may differ materially from forward looking statements.

Certain factors that can cause actual results to differ are detailed in the earnings release the company issued earlier today as well as in your reports that the company files with the SEC.

Jason Finkelstein: Including the risk factors located in the annual report on Form 10-K, and quarterly reports on Form 10-Q.

Jason Finkelstein: Please see today's press release for the full state harbor statement, which may be found in the 8-K file from this morning at the company's Investor Relations page found at www.sonida-serenaer-living.com.

Jason Finkelstein: Please see today's press release for the full Safe Harbor Statement, which may be found in the 8K file you saw this morning on the company's Investor Relations page found at www.sonidaseniorliving.com. Also, please note that during this call, the company will present non-GAAP financial measures. For reconciliations of these non-GAAP measures to the most comparable GAAP measure, please also see today's press release. At this time, I'd like to turn the call over to Sonida Senior Living President and CEO, Brandon Ribar. Thank you, Jason.

Jason Finkelstein: Please see today's press release for the full State Harbor Statement, which may be found in the EK filing from this morning on the company's Investor Relations page, found at www.sonidaseniorliving.com. Also, please note that during this call, the company will present non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most comparable GAAP measure, please also see today's question. At this time, I'd like to turn the call over to Sonida Senior Living President, GEO, Brandon Ribar.

Jason Finkelstein: Please see today's press release for the full Safe Harbor statement, which may be found in the 8-K filing from this morning at the company's Investor Relations page Www.

Speaker Change: Www dot so needed here living dot com.

Jason Finkelstein: Also, please note that during this call, the company will present non-GAAP financial measures. Reconciliation of these non-GAAP measures to the most comparable GAAP measure, please also see today's press release.

Speaker Change: Also please note that during this call the company will present non-GAAP.

Speaker Change: It's what measures reconciliations of these non-GAAP.

Speaker Change: Measures to the most comparable GAAP measure. Please also see today's press release.

Brandon Ribar: At this time, I'd like to turn the call over to Sunita, Senior Living President, GE Outer, Brandon Reeval. Thank you, Jason. Hello and welcome to our 2024 second quarter earnings call. I'm joined today by Kevin Dietz, our Chief Financial Officer. Earlier today, we released our Q2 earnings and investor presentation, which will be referenced throughout this call as we discuss our strategic priorities and operating results in addition to updating you on our growth efforts in 2024. You can find our latest presentation at www.sonida-serenaer-living.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.

G: This time I'd like to turn the call over just the neatest senior living President G.

Randy: Yes, Randy repo.

Brandon Ribar: Hello, and welcome to our 2024 second quarter earnings call. I'm joined today by Kevin Detz, our Chief Financial Officer. Earlier today, we released our Q2 earnings and investor presentation, which will be referenced throughout this call as we discuss our strategic priorities and operating results, in addition to updating you on our growth efforts 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 Ribar: Thank you, Jason. Hello, and welcome to our 2024 second quarter earnings call. I'm joined today by Kevin Detz, our Chief Financial Officer. Earlier today, we released our Q2 earnings and investor presentation, which will be referenced throughout this call as we discuss our strategic priorities and operating results, in addition to updating you on our growth efforts 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.

Randy repo: Thank you, Jason Hello, and welcome to our 2024 second quarter earnings call I'm joined today by Kevin <unk>, Our Chief Financial Officer.

Earlier today, we released our Q2 earnings and Investor presentation, which will be referenced throughout this call as we discuss our strategic priorities and operating results. In addition to updating you on our growth efforts in 2024.

Randy repo: You can find our latest presentation encinitas senior living dot com in the Investor Relations section if he would like to follow along.

Randy repo: In addition, we've included supplemental earnings information within our Investor presentation, consistent with the prior quarter released.

Brandon Ribar: In the second quarter, the company delivered considerable progress across both our organic and inorganic, or externally accretive, growth initiatives. First and foremost, the same store portfolio continued generating strong operating results on both a sequential and year-over-year basis, culminating with our highest occupancy in this portfolio's operating history. And operating margins exceeding 28% for the quarter. The same store owned portfolio averaged 86.2% occupancy for the quarter, with June averaging nearly 87% and spot occupancy for June 30th at 87.9%. Average occupancy for the second quarter improved by 220 basis points over year and 30 basis points sequentially, with June occupancy finishing 290 basis points higher than June of 2023.

Brandon Ribar: In the second quarter, the company delivered considerable progress across both our organic and inorganic, or externally accretive, growth initiatives. First and foremost, the same store portfolio continued generating strong operating results on both a sequential and year-over-year basis, culminating with our highest occupancy in this portfolio's operating history and operating margins exceeding 28% for the quarter. The same store-owned portfolio averaged 86.2% occupancy for the quarter, with June averaging nearly 87% and spot occupancy for June 30th at 87.9%.

Randy repo: In the second quarter, the company delivered considerable progress across both our organic and inorganic or externally accretive growth initiatives.

Speaker Change: First and foremost the same store portfolio continue generating strong operating results on both a sequential and year over year basis, culminating with our highest occupancy in this portfolio is operating history and operating margins exceeding 28% for the quarter. The same store owned portfolio averaged 86, 2% occupancy.

Speaker Change: For the quarter with June averaging nearly 87% and spot occupancy for June 30th at 87, 9%.

Brandon Ribar: Average occupancy for the second quarter improved by 220 basis points year over year and 30 basis points sequentially, with June occupancy finishing 290 basis points higher than June of 2023. As a frame of reference, Q4 2019 average occupancy and spot occupancy were around 84%.

Speaker Change: Average occupancy for the second quarter improved by 220 basis points year over year, and 30 basis points sequentially with June occupancy, finishing 290 basis points higher than June of 2023.

Brandon Ribar: As a frame of reference, Q4 2019 average occupancy and spot occupancy were around 84%. The occupancy gains reflect a growing trend of strength across each of our operating regions and the ability to drive recovery in our underperforming communities. The second half of the year is shown continuous positive momentum, and portfolio-wide occupancy of 90% is our next significant goal. Based on our high-quality portfolio and industry-wide supply-demand dynamics, we believe that normalized occupancy can be meaningfully greater than 90% over the next several years. We also experience continued growth on the rate front driven by our March 1st annual rate increases, coupled with a positive releasing spread on new move-ins, leading to year-over-year rate growth of 8.4% for the quarter and 3% sequential improvement from Q1.

Speaker Change: As a frame of reference Q4, 2019 average occupancy in spot occupancy where around 84%.

Brandon Ribar: The occupancy gains reflect a growing trend of strength across each of our operating regions and the ability to drive recovery in our underperforming communities. The second half of the year has shown continuous positive momentum, and portfolio-wide occupancy of 90% is our next significant goal. Based on our high-quality portfolio and industry-wide supply-demand dynamics, we believe that normalized occupancy can be meaningfully greater than 90% over the next several years. We also experienced continued growth on the rate front driven by our March 1st annual rate increases, coupled with a positive release spread on new move-ins, leading to year-over-year rate growth of 8.4% for the quarter and a 3% sequential improvement from Q1.

Speaker Change: The occupancy gains reflect the growing trend of strength across each of our operating regions and the ability to drive recovery in our underperforming communities.

Speaker Change: The second half of the year has shown continuous positive momentum and portfolio wide occupancy of 90% is our next significant goal.

Speaker Change: Based on our high quality portfolio and industry wide supply demand dynamics, we believe that normalized occupancy can be meaningfully greater than 90% over the next several years.

Speaker Change: We also experienced continued growth on the rate front driven by our March 1st annual rate increases coupled with a positive re leasing spread on new move ins leading to year over year rate growth of eight 4% for the quarter and 3% sequential improvement from Q1.

Brandon Ribar: Kevin will provide further detail on our rate strategy as we look to leverage higher occupancy levels to further grow market rates. Finally, with the increased occupancy and rate profile across the portfolio, our operating margin continues to expand. Same-store net operating income increased 31% from Q2 of 2023 and 19% sequentially. We are also encouraged by the 400 basis point margin expansion year-over-year to 28%, and to even further opportunity to improve. Again, Kevin will dive into further detail around the key operating metrics in his comments.

Brandon Ribar: Kevin will provide further detail on our rate strategy as we look to leverage higher occupancy levels to further grow market rates. Finally, with the increased occupancy and rate profile across the portfolio, our operating margin continues to expand. Same store net operating income increased 31% from Q2 of 2023 and 19% sequentially. We are also encouraged by the 400 basis point margin expansion year-over-year to 28% and see even further opportunity to improve. Again, Kevin will dive into further detail around the key operating metrics in his comments.

Kevin Detz: Kevin will provide further detail on our rate strategy as we look to leverage higher occupancy levels to further grow market rates. Finally, with the increased occupancy and rate profile across the portfolio, our operating margin continues to expand. Same-store net operating income increased 31% from Q2 of 2023 and 19% sequentially. We are also encouraged by the 400 basis point margin expansion year over year to 28% and see even further opportunity to improve. Again, Kevin will dive into further detail around the key operating metrics in his comments.

Speaker Change: Kevin will provide further detail on our rate strategy as we look to leverage higher occupancy levels to further grow market rates.

Kevin: Finally, with the increased occupancy and rate profile across the portfolio. Our operating margin continues to expand same store net operating income increased 31% from Q2 of 2023 and 19% sequentially.

We are also encouraged by the 400 basis point margin expansion year over year to 28% and see even further opportunity to improve again, Kevin will dive into further detail around the key operating metrics in his comments.

Brandon Ribar: On our previous earnings call, we outlined three areas of focus to drive growth in our existing portfolio. First, reinforcing the strength and importance of our local and regional leadership teams. Second, further investments in capital and programming to support our community performance. And finally, driving the recovery and stabilization of a concentrated set of under-performing communities. On the people front, local and regional leadership trained and empowered by strong central leadership for on-the-ground decision-making and building and reinforcing overall culture is crucial to our success. Throughout Q2, we experienced continued improvement and retention at the community level and proudly promoted a number of executive directors to regional leadership roles as we completed recent acquisitions.

Unknown Executive: Jason Finkelstein, Brandon Ribar, Unknown Executive Greetings and welcome to the Sonida Senior Living Second Quarter 2024 earnings results call. At this time all participants are in a listen only mode. If anyone wants to require operator assistance during the call, please press star one on your telephone key pass. As a reminder, this call is being recorded. I would now like to turn the call over to Jason Finkelstein, Investor Relations. Thank you Jason, you may begin.

Brandon Ribar: On our previous earnings call, we outlined three areas of focus to drive growth in our existing portfolio. First, reinforcing the strength and importance of our local and regional leadership teams. Second, further investments in capital and programming to support our community performance. And finally, driving the recovery and stabilization of a concentrated set of underperforming communities. On the people front, local and regional leadership, trained and empowered by strong central leadership for on the ground decision making and building and reinforcing overall culture, is crucial to our success.

Brandon Ribar: On our previous earnings call, we outlined three areas of focus to drive growth in our existing portfolio. First, reinforcing the strength and importance of our local and regional leadership teams. Second, further investments in capital and programming to support our community performance. And finally, driving the recovery and stabilization of a concentrated set of underperforming communities. On the people front, local and regional leadership, trained and empowered by strong central leadership for on-the-ground decision-making and building and reinforcing overall culture, is crucial to our success.

Kevin: On our previous earnings call, we outlined three areas of focus to drive growth in our existing portfolio first reinforcing the strength and importance of our local and regional leadership teams second further investments in capital and programming to support our community performance and finally, driving the recovery and stabilization of a concentrated set of.

Kevin: <unk> communities.

Kevin: On the people front local and regional leadership trained and empowered by strong central leadership for all underground decision, making and building and reinforcing overall culture is crucial to our success throughout Q2, we experienced continued improvement in retention at the community level and proudly promoted a number of executive directors to regional leadership roles as we.

Brandon Ribar: Throughout Q2, we experienced continued improvement and retention at the community level and proudly promoted a number of executive directors to regional leadership roles as we completed recent acquisitions. On the capital investment front, in the first half of the year, we invested more than $12 million across both technology and community-based capital expenditures, including both targeted NOI-generating capital and recurring maintenance.

Kevin: Completed recent acquisitions.

Unknown Executive: Thank you operator. All statements may today, August 12, 2024, which are not historical facts, may be deemed to be fuller looking statements within the meeting of federal security laws. The company expressly disclaimed any obligation to update these statements in the future. As for results, the performance may differ materially from forward looking statements. Turn factors that can cause actual results to differ or detailed in the earnings release that the company issued earlier today as well as in the reports that the company filed with the SEC from time to time.

Brandon Ribar: On the capital investment front, in the first half of the year, we invested more than $12 million across both technology and community-based capital expenditures, including both targeted NOI-generating capital and recurring maintenance. We expect these targeted NOI projects, which feature additional or converted resident units, to positively impact performance in 2025. On the programming front, investment in technology to improve the resident experience and simplify our care model continues rolling across a business. This includes both monitoring systems to support fall prevention and employee notification technology to ensure crop response times to meet resident needs. Additionally, a new level of care initiative across each of our Magnolia Trails memory care locations more effectively matches services provided to residents with the cost of care.

On the capital investment front in the first half of the year, we invested more than $12 million across both technology and community based capital expenditures, including both targeted NOI generating capital and recurring maintenance we.

Brandon Ribar: We expect these targeted NOI projects, which feature additional or converted resident units, to positively impact performance in 2025. On the programming front, investment in technology to improve the resident experience and simplify our care model continues rolling across the business. This includes both monitoring systems to support fall prevention and employee notification technology to ensure prompt response times to meet resident needs.

Kevin: We expect these targeted NOI projects, which feature additional or converted resident units to positively impact performance in 2025.

Brandon Ribar: On the programming front, investment in technology to improve the resident experience and simplify our care model continues rolling across the business. This includes both monitoring systems to support fall prevention and employee notification technology to ensure prompt response times to meet resident needs.

Kevin: On the programming front investment in technology to work to improve the resident experience and simplify our care model continues rolling across our business.

Unknown Executive: Including the risk factors contained in the annual report on 410J and quarterly reports on 410Q. Please see today's press release for the full state harbor statement, which may be found in the 8k file is from this morning at the company's Investor Relations page found at www.sonida-serenaer-living.com. Also, please note that during this call, the company will present non-gap financial measures. Reconciliation of these non-gap measures to the most comparable gap measure, please also see today's press release.

Kevin: This includes both monitoring systems to support fall prevention and employee notification technology to ensure prompt response times to meet resident needs.

Brandon Ribar: Additionally, a new level of care initiative across each of our Magnolia Trails memory care locations more effectively matches services provided to residents with the cost of care. The collective impact of these efforts and investments drove significant improvement across our lower performing communities in Q2 and strengthened key operating metrics across the board. I'll briefly comment on the expense side of the business, and Kevin will provide further detail and commentary. However, each of the significant cost components of our operating structure remain stable and in line with our 2024 projections. The total cost of labor declined sequentially by 2% from Q1 as premium labor costs improved. However, labor costs for the quarter increased 3.3% on a year over year basis.

Kevin: Additionally, a new level of care initiatives across each of our Magnolia trails memory care locations more effectively matches services provided to residents with the cost of care.

Brandon Ribar: The collective impact of these efforts and investments drove significant improvement across our lower performing communities in Q2 and strengthened key operating metrics across the board.

Kevin: The collective impact of these efforts and investments drove significant improvement across our lower performing communities in Q2 and strength in key operating metrics across the board.

Brandon Ribar: I'll briefly comment on the expense side of the business, and Kevin will provide further detail and commentary. Each of the significant cost components of our operating structure remain stable and in line with our 2024 projections. The total cost of labor declines sequentially by 2% from Q1 as premium labor costs improved. Labor costs for the quarter increased 3.3% on a year-over-year basis.

Kevin: I'll briefly comment on the expense side of the business and Kevin will provide further detail on commentary each of the significant cost components of our operating structure remains stable and in line with our 2024 projections. The total cost of labor declined sequentially by 2% from Q1 as premium labor costs improved labor costs for the quarter increased three.

Brandon Ribar: At this time, I'd like to turn the call over to Sunita, Senior Living President, GE Outer, Brandon Reeval. Thank you Jason. Hello and welcome to our 2024 second quarter earnings call. I'm joined today by Kevin Dietz, our Chief Financial Officer. Earlier today, we released our Q2 earnings and investor presentation, which will be referenced throughout this call as we discuss our strategic priorities and operating results in addition to updating you on our growth efforts in 2024.

Kevin: 3% on a year over year basis.

Brandon Ribar: Justice. Combined with stability across other major cost categories and a reduction in cost and dependence on third party referral agencies, our overall expense profile is trending well and declining as a percent of revenue. And deployed approximately $50 million of equity at an average basis of less than $125,000 per unit. Each of the assets created further density in attractive existing markets or provided an entry into targeted markets across both Texas and the Southeast. Each acquisition offers material performance upside with a successful application of Sunida's operating model. Development and training for the local leadership teams blended with knowledge of the market at the regional support level and centralized support collectively drive improvement through a combination of occupancy growth, ongoing rate improvement, and effective expense management.

Brandon Ribar: Combined with stability across other major cost categories and a reduction in cost and dependence on third-party referral agencies, our overall expense profile is trending well and declining as a percent of revenue. On the external growth front, we continue to focus on the identification of high-quality, recently constructed communities with significant value-add opportunity at an attractive basis. Collectively, we purchased nine communities either outright or through strategic joint ventures and deployed approximately $50 million of equity at an average basis of less than $125,000 per unit.

Kevin: Bind with stability across other major cost categories, and a reduction in cost and dependence on third party referral agencies. Our overall expense profile is trending well and declining as a percent of revenue.

Brandon Ribar: You can find our latest presentation at www.sonida-serenaer-living.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. In the second quarter, the company delivered considerable progress across both our organic and inorganic or externally accretive growth initiatives. First and foremost, the same store portfolio continued generating strong operating results on both a sequential and year over year basis, culminating with our highest occupancy in this portfolio's operating history.

Kevin: Switching to the external growth front, we continue to focus on the identification of high quality recently constructed communities with significant value add opportunity at an attractive basis.

Kevin: Collectively we purchased nine communities either outright or through strategic joint ventures, and deployed approximately $50 million of equity at an average basis of less than 125000 per unit.

Brandon Ribar: And operating margins exceeding 28% for the quarter. The same store owned portfolio averaged 86.2% occupancy for the quarter with June averaging nearly 87% and spot occupancy for June 30th at 87.9%. Average occupancy for the second quarter improved by 220 basis 0.0 over year and 30 basis points sequentially with June occupancy finishing 290 basis points higher than June of 2023. As a frame of reference, Q4 2019 average occupancy and spot occupancy were around 84%.

Brandon Ribar: Each of the assets created further density in attractive existing markets or provided an entry into targeted markets across both Texas and the southeast. Each acquisition offers material performance upside with a successful application of Sonida's operating model. Development and training for the local leadership teams, combined with knowledge of the market at the regional support level and centralized support, collectively drive improvement.

Brandon Ribar: Each of the assets created further density in attractive existing markets or provided an entry into targeted markets across both Texas and the southeast. Additionally, each acquisition offers material performance upside with the successful application of Sonida's operating model. Development and training for the local leadership teams, combined with knowledge of the market at the regional support level and centralized support, collectively drive improvement. Through a combination of occupancy growth, ongoing rate improvement, and effective expense management, each investment can stabilize at a double-digit cap rate based on what we believe is intractable.

Kevin: Each of the assets created further density in attractive existing markets or provided an entry into targeted markets across both Texas and the southeast.

Kevin: Each acquisition offers material performance upside with the successful application of the needed operating model.

Kevin: Development and training for the local leadership teams blended with knowledge of the market at the regional support level and centralized support collectively drive improvement.

Brandon Ribar: Through a combination of occupancy growth, ongoing rate improvement, and effective expense management, each investment can stabilize at a double-digit cap rate based on what we believe is intractable. We've included a summary of our recent investments in the investor deck, and each deal reflects a specific approach to growth opportunities in this market, from Distressed Purchases through Banking Relationships to Strategic Joint Ventures and Recapitalizations. Our network of relationships continues to deliver creative investment.

Kevin: Through a combination of occupancy growth ongoing rate improvement and effective expense management each investment can stabilize at a double digit cap rate based on what we believe is an attractive basis.

Brandon Ribar: Each investment can stabilize at a double-digit cap rate based on what we believe is interactive basis. We've included a summary of our recent investments in the investor deck, and each deal reflects a specific approach to growth opportunities in this market. From the distress purchases through banking relationships to strategic joint ventures and recapitalizations, our network of relationships continues to deliver a creative investment.

Brandon Ribar: We've included a summary of our recent investments in the investor deck, and each deal reflects a specific approach to growth opportunities in this market, from Distressed Purchases through Banking Relationships to Strategic Joint Ventures and Recapitalizations. Our network of relationships continues to deliver creative investments. Looking ahead, we have a clear line of sight to additional external growth investments within our targeted community acquisition profile along a multifaceted sourcing strategy. Our external growth focus remains both simple and concentrated.

Kevin: We've included a summary of our recent investments in the investor deck and each deal reflects a specific approach to growth opportunities in this market.

Brandon Ribar: The occupancy gains reflect a growing trend of strength across each of our operating regions and the ability to drive recovery in our underperforming communities. The second half of the year is shown continuous positive momentum and portfolio-wide occupancy of 90% is our next significant goal. Based on our high-quality portfolio and industry-wide supply-demand dynamics, we believe that normalized occupancy can be meaningfully greater than 90% over the next several years. We also experience continued growth on the ratefront driven by our March 1st annual rate increases, coupled with a positive releasing spread on new move-ins, leading to year-over-year rate growth of 8.4% for the quarter and 3% sequential improvement from Q1.

Kevin: From distress purchases through banking relationships to strategic joint ventures, and recapitalization, our network of relationships continues to deliver accretive investments.

Brandon Ribar: Looking ahead, we have clear line of sights to additional external growth investments within our targeted community acquisition profile along a multifaceted sourcing strategy. Our external growth focus remains both simple and concentrated: construct a high quality, low leverage, and regionally focused real estate portfolio with a best in class operating team to deliver a creative cash flow growth to our shareholders. We then bring the Sunida operating model to these assets, and as a result, we believe our corporate structure as a pure play senior housing operator, owner, and investor provides significant benefit to shareholders. Additionally, the opportunity to fully control the operations through real estate ownership and reinvest cash flow as a C Corp into a creative acquisition is both distinctive and highly attractive for Sunida as the senior housing market recovery accelerates.

Brandon Ribar: Looking ahead, we have clear line of sight to additional external growth investments within our targeted community acquisition profile along a multifaceted sourcing strategy. Our external growth focus remains both simple and concentrated: construct a high quality, low leverage, and regionally focused real estate portfolio with a best-in-class operating team to deliver accretive cash flow growth to our shareholders. We then bring the Sonida operating model to the desk.

Kevin: Looking ahead, we have clear line of sight to additional external growth investments within our targeted community acquisition profile, along a multifaceted sourcing strategy. Our external growth focus remains both simple and concentrated construct a high quality low leverage and regionally focused real estate portfolio with a best in class operating.

Brandon Ribar: Construct a high quality, low leverage, and regionally focused real estate portfolio with a best in class operating team to deliver creative cash flow growth to our shareholders. We then bring the Sonida operating model to the desk.

Kevin: Team to deliver accretive cash flow growth to our shareholders.

Kevin: We then bring this Anita operating model to these assets and as a result, we believe our corporate structure as a pure play senior housing operator owner and investor provide significant benefit to shareholders.

Brandon Ribar: And as a result, we believe our corporate structure as a pure play senior housing operator, owner, and investor provides significant benefits to shareholders. Additionally, the opportunity to fully control the operations through real estate ownership and reinvest cash flow as a C-Corp into accretive acquisitions is both distinctive and highly attractive for Sonida as the senior housing market recovery accelerates. As alluded to earlier, we believe that the financial success of a community is first and foremost dependent on having a strong local leadership team.

Brandon Ribar: Kevin will provide further detail on our rate strategy as we look to leverage higher occupancy levels to further grow market rates. Finally, with the increased occupancy and rate profile across the portfolio, our operating margin continues to expand. Same-store net operating income increased 31% from Q2 of 2023 and 19% sequentially. We are also encouraged by the 400 basis point margin expansion year-over-year to 28% and to even further opportunity to improve. Again, Kevin will dive into further detail around the key operating metrics in his comments.

Kevin: Additionally, the opportunity to fully control the operations through real estate ownership and reinvest cash flow as a C corp into accretive acquisitions is distinctive and highly attractive for sunita as the senior housing market recovery accelerates.

Brandon Ribar: As alluded to earlier, 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 Sunida tools and programs, are able to stabilize challenge assets. In Q2, we introduced an operational excellence team led by our Chief Clinical Officer focused on the integration of new acquisitions, including training and development on Sunida best practices and technology support systems. The team is comprised of operational, clinical, and sales resources with the experience and track record of successfully driving recovery in underperforming communities.

Brandon Ribar: And key to our success is the hiring and retention of great talent that, together with the needed tools and programs, is able to stabilize the challenge desk. In Q2, we introduced an operational excellence team, led by our chief clinical officer, focused on the integration of new acquisitions, including training and development on Sonida best practices and technology support systems. The team is comprised of operational, clinical, and sales resources with the experience and track record of successfully driving recovery in underperforming communities.

Brandon Ribar: 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 challenge data. In Q2, we introduced an operational excellence team, led by our chief clinical officer, focused on the integration of new acquisitions, including training and development on Sonida best practices and technology support. The team is comprised of operational, clinical, and sales resources with the experience and track record of successfully driving recovery in underperforming communities.

Kevin: As alluded to earlier, 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 needed tools and programs are able to stabilize challenged assets.

Kevin: In Q2, we introduced an operational excellence team led by our Chief clinical officer focused on the integration of new acquisitions, including training and development on the need of best practices and technology support systems. The.

Kevin: The team is comprised of operational clinical and sales resources with the experience and track record of successfully driving recovery in underperforming communities.

Brandon Ribar: Our support teams have identified significant areas for operational improvement in each of our new communities in line with pre-transaction underwriting assumptions. On the financing front, we look forward to expanding our deep banking relationships with four new lenders providing debt capital for the acquisitions referenced in our presentation. We view these relationships as key for evaluating the optimized costs and structure, including overall leverage as we pursue further acquisitions. Each recent transaction was financed with a goal of reducing overall portfolio leverage and improving portfolio loan-to-value and coverage ratios. We are committed to further deleveraging the portfolio over the medium and long term.

Brandon Ribar: Our support teams have identified significant areas for operational improvement in each of our new communities in line with pre-transaction underwriting assumptions. On the financing front, we look forward to expanding our deep banking relationships with four new lenders providing debt capital for the acquisitions referenced in our presentation. We view these relationships as key for evaluating the optimized cost and structure, including overall leverage, as we pursue further acquisitions. Furthermore, each recent transaction was financed with the goal of reducing overall portfolio leverage and improving portfolio loan-to-value and coverage ratios.

Kevin: Our support teams have identified significant areas for operational improvement in each of our new communities in line with pre transaction underwriting assumptions.

Kevin: On the financing front, we look forward to expanding our deep banking relationships with four new lenders, providing debt capital for the acquisitions referenced in our presentation.

Kevin: We view these relationships is key for evaluating the optimized cost and structure, including overall leverage as we pursue further acquisitions.

Brandon Ribar: Each recent transaction was financed with the goal of reducing overall portfolio leverage and improving portfolio loan-to-value and coverage ratios. We are committed to further deleveraging the portfolio over the medium and long term. For the second half of the year, we continue to target similar opportunities to purchase assets outright or through joint venture relationships.

Kevin: Each recent transaction was financed with a goal of reducing overall portfolio leverage and improving portfolio loan to value and coverage ratios. We are committed to further deleveraging the portfolio over the medium and long term.

Brandon Ribar: We are committed to further deleveraging the portfolio over the medium and long term. For the second half of the year, we continue to target similar opportunities to purchase assets outright or through joint venture relationships. The increasing default rate and level of non-performing loans across the market, in addition to the absence of interest rate relief to date in 2024, continues to generate a robust pipeline of growth opportunities that we are positioned to access.

Brandon Ribar: For the second half of the year, we continue to target similar opportunities to purchase assets outright or through joint venture relationships. The increasing default rate and level of non-performing loans across the market, in addition to the absence of interest rate relief today in 2024, continues to generate a robust pipeline of growth opportunities that we are positioned to access.

Kevin: For the second half of the year, we continued to target similar opportunities to purchase assets outright or through joint venture relationships, the increasing default rate and level of nonperforming loans across the market. In addition to the absence of interest rate relief to date in 2024 continues to generate a robust pipeline of growth opportunities.

Brandon Ribar: On the programming front, investment in technology to improve the resident experience and simplify our care model continues rolling across a business. This includes both monitoring systems to support fall prevention and employee notification technology to ensure crop response times to meet resident needs. Additionally, a new level of care initiative across each of our magnolia trails memory care locations more effectively matches services provided to residents with the cost of care. The collective impact of these efforts and investments drove significant improvement across our lower performing communities in Q2 and strengthen key operating metrics across the board.

Brandon Ribar: The increasing default rate and level of non-performing loans across the market, in addition to the absence of interest rate relief to date in 2024, continues to generate a robust pipeline of growth opportunities that we are positioned to access. In summary, the Sonida platform, with its differentiated approach to operating, owning, and investing in senior living communities, positions the company to meaningfully capitalize on near-term market dislocation by layering on value-creating external investments designed to further enhance shareholder returns, reinforced by the powerful trends of a growing senior population against the backdrop of an extended slowdown in construction activity of new properties.

Kevin: We are positioned to access.

Brandon Ribar: In summary, the Sonida platform, with its differentiated approach to operating, owning, and investing in senior living communities, positions the company to meaningfully capitalize on near-term market dislocation by layering on value-creating external investments designed to further enhance shareholder return, reinforced by the powerful trends of a growing senior population against the backdrop of an extended slowdown in construction activity of new properties. Sonida's discipline deployment of balance sheet capital coupled with flexible and creative deal structuring allows us to strategically acquire assets that can favorably impact our portfolio through an expansion of operations and highly attractive returns upon stabilization.

Brandon Ribar: In summary, the Sonida platform, with its differentiated approach to operating, owning, and investing in senior living communities, positions the company to meaningfully capitalize on near-term market dislocation by layering on value-creating external investments designed to further enhance shareholder returns, reinforced by the powerful trends of a growing senior population against the backdrop of an extended slowdown in construction activity of new properties. Sonida's disciplined deployment of balance sheet capital coupled with flexible and creative deal structuring allows us to strategically acquire assets that can favorably impact our portfolio through an expansion of operations and highly attractive returns upon stabilization.

Anita: In summary, this anita platform with its differentiated approach to operating owning and investing in senior living communities.

Anita: <unk> the company to meaningfully capitalize on near term market dislocation by layering on value, creating external investments designed to further enhance shareholder return.

Anita: Reinforced by the powerful trends that are growing senior population against the backdrop of an extended slowdown in construction activity of new properties.

Brandon Ribar: I'll briefly comment on the expense side of the business and Kevin will provide further detail and commentary. Each of the significant cost components of our operating structure remain stable and in line with our 2024 projections. The total cost of labor declines sequentially by 2% from Q1 as premium labor costs improved. Labor costs for the quarter increased 3.3% on a year-over-year base. Justice. Combined with stability across other major cost categories and a reduction in cost and dependence on third party referral agencies, our overall expense profile is trending well and declining as a percent of revenue.

Brandon Ribar: Sonida's disciplined deployment of balance sheet capital coupled with flexible and creative deal structuring allows us to strategically acquire assets that can favorably impact our portfolio through an expansion of operations and highly attractive returns upon stabilization. Our culture, characterized by our commitment to building high-performance teams and delivering a valuable living experience to our residents, will remain the key to ongoing improvement in both our existing and newly acquired communities. I'll now turn it over to Kevin for a discussion of the financial results. Thanks, Brandon.

Anita: So needed disciplined deployment of balance sheet capital, coupled with flexible and creative deal structuring allows us to strategically acquire assets that can favorably impact our portfolio through an expansion of operations in highly attractive returns upon stabilization.

Brandon Ribar: Sonida's culture, characterized by our commitments of building high-performing teams and delivering a valuable living experience to our residents, will remain the key to ongoing improvement in both our existing and newly acquired communities.

Brandon Ribar: Sonida's culture, characterized by our commitment to building high-performance teams and delivering a valuable living experience to our residents, will remain the key to ongoing improvement in both our existing and newly acquired communities. I'll now turn it over to Kevin for a discussion of the financial results.

Speaker Change: <unk> culture characterized by our commitment to building high performing teams.

Speaker Change: And delivering a valuable living experience to our residents will remain the key to ongoing improvement in both our existing and newly acquired communities.

Kevin Dietz: I'll now turn it over to Kevin for discussion of the financial results. Thanks, Brandon. I will be walking through select pages of today's investor presentation, starting with slide 12.

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

Kevin Detz: Thanks, Brandon. I will be walking through select pages of today's investor presentation, starting with slide 12. I wanted to note that most of the financial slides discussed on today's call will be presented on a same store basis, which for comparative purposes excludes the May acquisitions for Macedonia community and the four communities under a joint venture structure. The appendix slides in the broader investor presentation include references to the company's consolidated portfolio, as well as the 12 communities operated under third-party management agreements.

Kevin Detz: I will be walking through select pages of today's investor presentation, starting with slide 12. I wanted to note that most of the financial slides discussed on today's call will be presented on a same-store basis, which for comparative purposes excludes the May acquisitions for the Macedonia community and the four communities under a joint venture structure. The appendix slides in the broader investor presentation include references to the company's consolidated portfolio, as well as the 12 communities operated under third-party management agreements.

Kevin: Thanks, Brandon I'll be walking through select pages of today's investor presentation, starting with slide 12, I wanted to note that most of the financial slides discussed on today's call will be presented on a same store basis, which for comparative purposes exclude the acquisitions of our Macedonia community and the four communities under a joint venture.

Kevin Dietz: I wanted to note that most of the financial slides discussed on today's call will be presented on a same-store basis, which, for comparative purposes, excludes the May acquisitions of our Macedonia community and the four communities under a joint venture structure. The appendix slides in the broader investor presentation include references to the company's consolidated portfolio as well as the 12 communities operated under third-party management agreements. As Brandon mentioned during the outset of the call, the company continues to steadily push up occupancy with another 30 basis point increase from the previous quarter. This 86.2% weighted average occupancy is 230 basis points higher than the prior year Q2 occupancy of 83.9%.

Brandon Ribar: And deployed approximately $50 million of equity at an average basis of less than 125,000 per unit. Each of the assets created further density in attractive existing markets or provided an entry into targeted markets across both Texas and the Southeast. Each acquisition offers material performance upside with a successful application of Sunida's operating model. Development and training for the local leadership teams blended with knowledge of the market at the regional support level and centralized support collectively drive improvement through a combination of occupancy growth, ongoing rate improvement and effective expense management.

Sure.

Kevin: The appendix slides and the broader investor presentation include references to the company's consolidated portfolio as well as the 12 communities operated under third party management agreements.

Kevin Detz: As Brandon mentioned during the outset of the call, the company continues to steadily push up occupancy with another 30 basis points increase from the previous quarter. This 86.2% weighted average occupancy is 230 basis points higher than the prior year Q2 occupancy of 83.9%. These occupancy gains were driven from a significant reduction in move-outs, which has been a continued focus of our community leadership teams, in concert with our chief clinical officer, who joined the team late last year.

Kevin Detz: As Brandon mentioned during the outset of the call, the company continues to steadily push up occupancy with another 30 basis points increase from the previous quarter. This 86.2% weighted average occupancy is 230 basis points higher than the prior year Q2 occupancy of 83.9%. These occupancy gains were driven from a significant reduction in move outs, which has been a continued focus of our community leadership teams in concert with our chief clinical officer, who joined the team late last year.

Kevin: As Brendan mentioned during the outset of the call. The company continues to steadily push up occupancy with another 30 basis point increase from the previous quarter.

Brendan: Its 86, 2% weighted average occupancy is 230 basis points higher than the prior year Q2 occupancy of 83, 9%.

Brandon Ribar: Each investment can stabilize at a double digit cap rate based on what we believe is interactive basis. We've included a summary of our recent investments in the investor deck and each deal reflects a specific approach to growth opportunities in this market from the distress purchases through banking relationships to strategic joint ventures and recapitalizations are network of relationships continues to deliver a creative investment.

Kevin Dietz: These occupancy gains were driven from a significant reduction in move outs, which has been a continued focus of our community leadership teams at concert with our Chief Clinical Officer who joined the team late last year. Specifically, for the second quarter, move outs decreased 19% and 16% from the preceding quarter and comparable quarter in 2023. As of quarter end, only four Anita communities remain less than 75% occupied, which is one of those under 70%. The company continues to focus on elevating rate with a quarter over quarter, red four increase of 3% driven from its March 1st portfolio wide increases and continue success on market rate optimization, particularly in higher occupancy communities.

Speaker Change: These occupancy gains were driven from a significant reduction in move outs, which has been a continued focus of our community leadership teams in concert with our Chief Clinical officer, who joined the team late last year.

Speaker Change: Specifically for the second quarter move outs decreased 19% and 16% from the preceding quarter and comparable quarter in 2023.

Kevin Detz: Specifically, for the second quarter, move-outs decreased 19% and 16% from the preceding quarter and the comparable quarter in 2023. As of quarter end, only four Sonida communities remain less than 75% occupied, with just one of those under 70%.

Brandon Ribar: Looking ahead, we have clear line of sites to additional external growth investments within our targeted community acquisition profile along a multifaceted sourcing strategy. Our external growth focus remains both simple and concentrated construct a high quality low leverage and regionally focused real estate portfolio with a best in class operating team to deliver a creative cash flow growth to our shareholders. We then bring the Sunida operating model to these assets and as a result, we believe our corporate structure as a pure play senior housing operator owner and investor provide significant benefit to shareholders.

Speaker Change: As of quarter end only forced the need of communities remained less than 75% occupied with just one of those under 70%.

Kevin Detz: The company continues to focus on increasing rates with a quarter over quarter RETFOR increase of 3% driven from its March 1st portfolio wide increases and continued success in market rate optimization, particularly in higher occupancy communities. On a year-over-year basis, REV-POR and REV-PAR increased 8.3% and 11.3%, respectively, with the latter reflective of the company's revised level of care program and our assisted and memory care community. The stabilization of labor and occupancy-based expense accounts continues to support incremental NOI growth, with increases of 19% and 31% from the prior quarter and the same quarter last year, respectively.

Kevin Detz: The company continues to focus on increasing rates with a quarter over quarter RETFOR increase of 3% driven from its March 1st portfolio-wide increases and continued success in market rate optimization, particularly in higher occupancy communities. On a year-over-year basis, RENT-POR and RENT-PAR increased 8.3% and 11.3%, respectively, with the latter reflective of the company's revised level of care program and our assisted and memory care community. The stabilization of labor and occupancy-based expense accounts continues to support incremental NOI growth, with increases of 19% and 31% from the prior quarter and the same quarter last year, respectively.

Speaker Change: The company continues to focus on elevating rate with a quarter over quarter Revpar increase of 3% driven from its March 1st portfolio wide increases and continued success on market rate optimization, particularly at higher occupancy communities.

Kevin Dietz: On a year of a year basis, Red Poor and Red Power increased 8.3% and 11.3% respectively, with the latter reflective of the company's revised level of care program in our assisted and memory care communities. The stabilization of later and occupancy-based expense accounts continues to support incremental NOI growth, with increases of 19% and 31% from prior quarter and the same quarter last year, respectively.

On a year over year basis, Revpar and Revpar increased eight 3% at 11, 3%, respectively with the latter reflective of the company's revised level of care program, and our assisted and memory care communities.

Brandon Ribar: Additionally, the opportunity to fully control the operations through real estate ownership and reinvest cash flow as a C corp into a creative acquisition is both distinctive and highly attractive for Sunida as the senior housing market recovery accelerates. As alluded to earlier, 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 Sunida tools and programs are able to stabilize challenge assets.

Speaker Change: The stabilization of later and occupancy base expense accounts continues to support incremental NOI growth with increases of 19% and 31% from prior quarter and the same quarter last year, respectively.

Kevin Dietz: Note that the first quarter is historically the lowest performing due to the seasonality associated with lead volume and higher benefit loads to start the calendar year, as referenced in our May earnings call. Moving ahead to slide 15, resident rates for the quarter increased 9.4% from the same quarter in 2023, driving deeper into care levels. Both assisted living and memory care had double-digit rate increases over the past year. Beyond the reworked level of care platform reference, the company has developed new pricing structures on higher cutie care through its Magnolia Trails program, including the recent extension to our memory care level.

Kevin Detz: Note that the first quarter is historically the lowest performing due to the seasonality associated with lead volume and higher benefit loads to start the calendar year, as referenced in our midday earnings call. Moving ahead to slide 15.

Speaker Change: Note that the first quarter is historically, the lowest performing due to the seasonality associated with lead volume and higher benefit loads to start the calendar year as referenced in our May earnings call.

Speaker Change: Moving ahead to slide 15.

Kevin Detz: Resident rates for the quarter increased 9.4% from the same quarter in 2023. Diving deeper into care levels, both assisted living and memory care had double-digit rate increases over the past year. Beyond the reworked level of care platform reference, the company has developed new pricing structures on higher acuity care through its Magnolia Trails program, including the recent extension to our memory care level. This has led to both assisted living and memory care levels outpacing rate increases in independent living, as well as the same care levels across the industry. Also responsible for driving up the rate profile in these care levels has been the increase in Medicaid rates in Indiana as a result of legislation passed in the summer of 2023.

Speaker Change: Resident rates for the quarter increased nine 4% from the same quarter in 2023.

Brandon Ribar: In Q2, we introduced an operational excellence team led by our chief clinical officer focused on the integration of new acquisitions, including training and development on Sunida best practices and technology support systems. The team is comprised of operational clinical and sales resources with the experience and track record of successfully driving recovery in under performing communities. Our support teams have identified significant areas for operational improvement in each of our new communities in line with pre-transaction underwriting assumptions.

Speaker Change: Diving deeper into care levels, both assisted living and memory care had double digit rate increases over the past year.

Beyond the reworked level of care platform referenced the company has developed new pricing structures on higher acuity care through its Magnolia trails program, including the recent extension to our memory care level.

Kevin Dietz: This has led to both assisted living and memory care levels outpacing rate increases and independent living, as well as the same care levels across the industry. Also responsible for driving up the rate profile of these care levels has been the increase in Medicaid rates in Indiana as a result of legislation passed in the summer of 2023.

Speaker Change: This has led to both assisted living and memory care levels outpacing rate increases and independent living as well as the same care levels across the industry.

Brandon Ribar: On the financing front, we look forward to expanding our deep banking relationships with four new lenders providing debt capital for the acquisitions referenced in our presentation. We view these relationships as key for evaluating the optimized costs and structure, including overall leverage as we pursue further acquisitions. Each recent transaction was financed with a goal of reducing overall portfolio leverage and improving portfolio loan-to-value and coverage ratios. We are committed to further deleverging the portfolio over the medium and long term.

Speaker Change: Also responsible for driving up the rate profile in these care levels has been the increase in Medicaid rates in Indiana as a result of legislation passed in the summer of 2023.

Kevin Dietz: Moving to operating expense trends on slide 16, the cost of incremental labor to incremental revenue continues to show stabilization. For the first time since the industry started experiencing inflationary increases after COVID, the company's direct labor decreased slightly from the first quarter of 2024. This quarter's total hours decreased 110 basis points from Q1 2024, more than offsetting the 100-based point increase in average wage costs for that same period. The company also saw more positive trending on its premium labor, which decreased in sequential quarters this year on the strength of our community leadership teams, controlling over time through our recently developed labor BI tools.

Kevin Detz: Moving to operating expense trends on slide 16, the cost of incremental labor to incremental revenue continues to show stabilization. For the first time since the industry started experiencing inflationary increases after COVID, the company's direct labor decreased slightly from the first quarter of 2024. This quarter's total hours decreased 110 basis points from Q1 2024, more than offsetting the 100 basis point increase in average wage costs for that same period. The company also saw more positive trending on its premium labor, which decreased in sequential quarters this year on the strength of our community leadership teams, controlling overtime with our recently developed labor BI tools.

Speaker Change: Moving to operating expense trends on slide 16, the cost of incremental labor to incremental revenue continues to show stabilization.

Speaker Change: For the first time since the industry started experienced inflationary increases after COVID-19 the companys direct labor decrease slightly from the first quarter of 2024.

Speaker Change: This quarter's total hours decreased 110 basis points from Q1 2024 more than offsetting the 100 basis point increase in average wage costs for that same period.

Kevin Detz: The company also saw more positive trending on its premium labor, which decreased in sequential quarters this year on the strength of our community leadership teams, controlling overtime with our recently developed labor BI tools. We believe both of these trends are sustainable and will be critical to the continued margin expansion as the portfolio's occupancy base grows. On slide 17, non-labor operating expenses are also improving as a percentage of revenue, picking up 140 basis points comparing this quarter to the same quarter in 2023. On an absolute basis, these costs decreased nearly $800,000 in sequential quarters this year.

Speaker Change: The company also saw more positive trending on its premium later, which decreased in sequential quarters. This year on the strength of our community leadership teams controlling overtime to a recently developed labor by tools. We believe both of these trends are sustainable and will be critical to the continued margin expansion as the portfolios at.

Brandon Ribar: In summary, the Sonida platform with its differentiated approach to operating, owning, and investing in senior living communities positions the company to meaningfully capitalize on near-term market dislocation by layering on value-creating external investments designed to further enhance shareholder return, reinforced by the powerful trends of a growing senior population against the backdrop of an extended slowdown in construction activity of new properties. Sonida's discipline deployment of balance sheet capital coupled with flexible and creative deal structuring allows us to strategically acquire assets that can favorably impact our portfolio through an expansion of operations and highly attractive returns upon stabilization. Sonida's culture characterized by our commitments of building high-performing teams and delivering a valuable living experience to our residents will remain the key to ongoing improvement in both our existing and newly acquired communities.

Kevin Dietz: We believe both of these trends are sustainable and will be critical to continued margin expansion as the portfolio's occupancy base grows. On slide 17, non-labor operating expenses are also improving as a percentage of revenue, picking up 140 basis points comparing this quarter to the same quarter in 2023. On an absolute moot basis, these costs decreased nearly $800,000 in sequential quarters this year. Whereas areas such as food costs and real estate taxes have been primary drivers of the favorable improvement over the last 12 to 18 months, we are now seeing reduced commissions on third-party referrals due in part to the evolution of our internal sales strategy, which mayors a strong local market presence with enhanced digital marketing capabilities, as well as a higher overall occupancy base.

Kevin Detz: We believe both of these trends are sustainable and will be critical to the continued margin expansion as the portfolio's occupancy base grows. On slide 17, non-labor operating expenses are also improving as a percentage of revenue, picking up 140 basis points comparing this quarter to the same quarter in 2023. On an absolute basis, these costs decreased nearly $800,000 in sequential quarters this year.

Speaker Change: Kopinski base grows.

Speaker Change: On slide 17, non labor operating expenses are also improving as a percentage of revenue.

Speaker Change: Picking up a 140 basis points comparing this quarter to the same quarter in 2023.

Speaker Change: On an absolute basis these costs decreased nearly $800000 in sequential quarters. This year.

Kevin Detz: Whereas areas such as food costs and real estate taxes have been primary drivers of this favorable improvement over the last 12 to 18 months, we are now seeing reduced commissions on third-party referrals due in part to the evolution of our internal sales strategy, which marries our strong local market presence with enhanced digital marketing capabilities as well as a higher overall occupancy base. Hitting on a few observations from our earnings release this morning, G&A remains below 10% as a percentage of total revenues under management, excluding the non-cash amortization of stock compensation and one-time transaction costs in connection with our recent debt, equity, and acquisition activities.

Kevin Detz: Whereas areas such as food costs and real estate taxes have been primary drivers of this favorable improvement over the last 12 to 18 months, we are now seeing reduced commissions on third-party referrals due in part to the evolution of our internal sales strategy, which marries our strong local market presence with enhanced digital marketing capabilities, as well as a higher overall occupancy base. Hitting on a few observations from the earnings released this morning, G&A remains below 10% as a percentage of total revenues under management, excluding the non-cash amortization of stock compensation and one-time transaction costs in connection with our recent debt, equity, and acquisition activities.

Speaker Change: Whereas areas such as food costs and real estate taxes had been primary drivers of this favorable improvement over the last 12 to 18 months. We are now seeing reduced commissions on third party referrals due in part to the evolution of our internal sales strategy, which marries our strong local market presence with enhanced digital marketing capabilities.

Speaker Change: As well as a higher overall occupancy days.

Kevin Dietz: Hitting on a few observations from the earnings release this morning, GNA remains below 10% as a percentage of total revenues under management, excluding the non-cash amortization of stock compensation and one-time transaction in connection with our recent debt equity and acquisition activity. Just as important, the company should be able to further reduce this G&A to revenue ratio with its recent and expected portfolio growth. These costs already contemplate the company's one-time strategic investments and the growth infrastructure Brandon reference, namely the bolstering of our business development function, which continues to actively grow and convert our acquisition pipeline, and the newly created operational excellence department that has been vital and supported community onboarding to keep our regional leaders focused on our same-store communities.

Speaker Change: Hitting on a few observations from our earnings release. This morning, G&A remains below 10% as a percentage of total revenues under management, excluding the noncash amortization of stock compensation and onetime transaction costs in connection with our recent debt equity and acquisition activities.

Kevin Dietz: I wanted to note that most of the financial slides discussed on today's call will be presented on a same-store basis, which for comparative purposes excludes the may acquisitions of our Macedonia community and the four communities under a joint venture structure. The appendix slides in the broader investor presentation include references to the company's consolidated portfolio as well as the 12 communities operated under third-party management agreements. As Brandon mentioned during the outset of the call, the company continues to steadily push up occupancy with another 30 basis point increase from the previous quarter.

Kevin Detz: Just as important, the company should be able to further reduce this G&A to revenue ratio with its recent and expected portfolio growth. These costs already contemplate the company's one-time strategic investments and the growth infrastructure Brandon referenced, namely the bolstering of our business development function, which continues to actively grow and convert our acquisition pipeline, and the newly created Operational Excellence Department, which has been vital in supporting community onboarding to keep our regional leaders focused on our same-store community. Finally, the remarks on Q2 financial highlights. We will now turn our attention to the balance sheet, as seen on slide 13 and Appendix 5.

Speaker Change: As important the company should be able to further reduce this G&A to revenue ratio with its recent and expected portfolio growth.

Speaker Change: These costs already contemplate the companys onetime strategic investments and the growth infrastructure branded referenced, namely the bolstering of our business development function, which continues to actively grow and convert our acquisition pipeline and the newly created operational excellence Department that has been vital in supporting community Onboarding to keep.

Kevin Dietz: This 86.2% weighted average occupancy is 230 basis points higher than the prior year Q2 occupancy of 83.9%. These occupancy gains were driven from a significant reduction in move outs, which has been a continued focus of our community leadership teams at concert with our chief clinical officer who joined the team late last year. Specifically, for the second quarter, move outs decreased 19% and 16% from the preceding quarter and comparable quarter in 2023.

Speaker Change: Our regional leaders focused on our same store communities.

Kevin Dietz: Concluding the remarks on Q2 financial highlights, we will turn our attention to the balance sheet as seen on slide 13 and Appendix 5. Last week, the company entered into loan modification agreements with one of its lenders on two crossed communities in Texas. The modification included revised maturities and, more importantly, the ability to make a discounted payoff of $18.5 million on the $28.7 million balance, which represents a $10 million or 36% discount on the current loan principle. These two communities represent the last two communities that required material restructuring, with the company having addressed 58 of 60 loans in the past 12 months.

Kevin Detz: Ending the remarks on Q2 financial highlights, we'll turn our attention to the balance sheet, as seen on slide 13 and Appendix 5. Last week, the company entered into loan modification agreements with one of its lenders on two cross communities in Texas. The modification includes revised maturities and, more importantly, the ability to make a discounted payoff of $18.5 million on the $28.7 million balance, which represents a $10 million or 36% discount on the current loan principle.

Speaker Change: Concluding the remarks on Q2 financial highlights.

Speaker Change: We will turn our attention to the balance sheet as seen on slide 13 in appendix five.

Kevin Detz: Last week, the company entered into loan modification agreements with one of its lenders on two cross communities in Texas. The modification included revised maturities and, more importantly, the ability to make a discounted payoff of $18.5 million on the $28.7 million balance, which represents a $10 million or 36% discount on the current loan principle. These two communities represent the last two communities that required material restructuring, with the company having addressed 58 of 60 loans in the past 12 months.

Speaker Change: Last week the company entered into loan modification agreements with one of its lenders on to cross communities in Texas. The modification include revised maturities and more importantly, the ability to make a discounted payoff of $18 $5 million on the $28 7 million dollar balance, which represents a 10 billion.

Kevin Dietz: As of quarter end, only four Anita communities remain less than 75% occupied, which is one of those under 70%. The company continues to focus on elevating rate with a quarter over quarter, red four increase of 3% driven from its March 1st portfolio wide increases and continue success on market rate optimization, particularly in higher occupancy communities, on a year of a year basis, Red Poor and Red Power increased 8.3% and 11.3% respectively, with the latter reflective of the company's revised level of care program in our assisted and memory care communities. The stabilization of later and occupancy-based expense accounts continues to support incremental NOI growth, with increases of 19% and 31% from prior quarter and the same quarter last year respectively.

Speaker Change: Or 36% discount on the current loan principal.

Kevin Detz: These two communities represent the last two communities that required material restructuring, with the company having addressed 58 of 60 loans in the past 12 months. The remaining two loans account for approximately 2.5% of the current principal balance.

Speaker Change: These two communities represent the last two committees that required material restructuring with the company, having addressed 58 of 60 loans in the past 12 months.

Kevin Dietz: The remaining two loans account for approximately 2.5% of the current principal balance. Our total debt is comprised of 71% fixed-rate notes. With the remaining variable rate notes fully hedged, yielding a weighted average interest rate just below 5% for the portfolio. Beyond this, the company continues to focus on delivering its balance sheet with the second of two scheduled $5 million principal payments due under the 2023 Fannie Mae restructuring in May during the quarter. The company's outstanding inventiveness decreased nearly $60 million for roughly 10% on a year of year basis from Q2 2023. This excludes a further reduction of $10 million on the company's principal balance in connection with the DPL option.

Kevin Detz: The remaining two loans account for approximately 2.5% of the current principal balance. Our total debt is comprised of 71% fixed rate notes, with the remaining variable rate notes fully hedged, yielding a weighted average interest rate just below 5% for the portfolio. Beyond this, the company continues to focus on delevering its balance sheet, with the second of two scheduled $5 billion principal payments due under the 2023 Fannie Mae restructuring made during the quarter.

Speaker Change: The remaining two loans account for approximately two 5% of the current principal balance.

Kevin Detz: Our total debt is comprised of 71% fixed rate notes, with the remaining variable rate notes fully hedged, yielding a weighted average interest rate just below 5% for the portfolio. Beyond this, the company continues to focus on de-levering its balance sheet, with the second of two scheduled $5 billion principal payments due under the 2023 Fannie Mae restructuring made during the quarter. The company's outstanding embeddedness decreased nearly $60 million or roughly 10% on a year-over-year basis from Q2 2023. This excludes.

Speaker Change: Our total debt is comprised of 71% fixed rate notes with the remaining variable rate notes fully hedged yielding a weighted average interest rate just below 5% for the portfolio.

Speaker Change: Beyond this the company continues to focus on Delevering its balance sheet with a second half two scheduled 5 billion principal payments due under the 2023, Fannie Mae restructuring made during the quarter.

Kevin Detz: The company's outstanding embeddedness decreased nearly $60 million or roughly 10% on a year-over-year basis from Q2 2023. This excludes a further reduction of $10 million on the company's principal balance in connection with the DPL option. As Evita continues to grow and we acquire assets at reset debt ratios, we expect to de-lever the portfolio even further. As of today, the company is in compliance with all financial covenants required under its mortgage. We continue to be encouraged by the operating trajectory of this portfolio, including our ability to realize performance improvement on the recently acquired community. Back to you, Brandon.

Speaker Change: The Companys outstanding indebtedness decreased nearly $60 million or roughly 10% on a year over year basis from Q2 2023.

Kevin Dietz: Note that the first quarter is historically the lowest performing due to the seasonality associated with lead volume and higher benefit loads to start the calendar year as referenced in our May earnings call. Moving ahead to slide 15, resident rates for the quarter increased 9.4% from the same quarter in 2023, driving deeper into care levels, both assisted living and memory care, had double-digit rate increases over the past year. Beyond the reworked level of care platform reference, the company has developed new pricing structures on higher cutie care through its Magnolia trails program, including the recent extension to our memory care level.

Speaker Change: This excludes.

Kevin Detz: A further reduction of $10 million on the company's principal balance in connection with the DPL option, so that as Evita continues to grow and we acquire assets at reset debt ratios. We expect to de-lever the portfolio even further. As of today, the company is in compliance with all financial covenants required under its mortgage. We continue to be encouraged by the operating trajectory of this portfolio, including our ability to realize performance improvement on the recently acquired community. Back to you, Brandon. Thanks, Kevin.

Speaker Change: A further reduction of $10 million on the Companys principal balance.

Speaker Change: Next year with the GPO option.

Kevin Dietz: As EBITDA continues to grow and we acquire assets at reset debt ratios, we expect to deliver the portfolio even further. As of today, the company is in compliance with all financial covenants required under its portages. We continue to be encouraged by the operating trajectory of this portfolio, including our ability to realize performance improvement on the recently acquired communities.

Speaker Change: As EBITDA continues to grow and we acquire assets at reset debt ratios, we expect to delever the portfolio even further.

Speaker Change: As of today the company is in compliance with all financial covenants required under its mortgages.

Speaker Change: We continue to be encouraged by the operating trajectory of this portfolio, including our ability to realize performance improvements on the recently acquired communities.

Brandon Ribar: Back to you, Brendan. Thanks, Kevin.

Brendan: Back to you Brendan.

Brandon Ribar: 2024 continues to present opportunities for Sonida to deliver on our differentiated approach to both internal and external growth. Our focus and commitment for the second half of 2024 revolve around three key deliverables. The continued improvement of our organic portfolio performance with an expectation to achieve positive all-in cash flow by year end remains a top priority. Second, delivering on the expected performance improvements within recently acquired communities will further build a proven track record for stabilizing distressed assets.

Brandon Ribar: Thanks, Kevin. 2024 continues to present opportunities for Sonida to deliver on our differentiated approach to both internal and external growth. Our focus and commitment for the second half of 2024 revolve around three key deliverables. The continued improvement of our organic portfolio performance with an expectation to achieve positive all-in cash flow by year end remains a top priority. Second, delivering on the expected performance improvements within recently acquired communities will further build a proven track record for stabilizing distressed assets.

Brendan: Thanks, Kevin 2024 continues to present opportunities for us to needed to deliver on our differentiated approach to both internal and external growth.

Brandon Ribar: 2024 continues to present opportunities for Senita to deliver on our differentiated approach to both internal and external growth. Our focus and commitment for the second half of 2024 revolves around three key deliverables. The continued improvement of our organic portfolio performance, with an expectation to achieve positive all-in cash flow by year end, remains a top priority. Second, delivering on the expected performance improvements within recently acquired communities will further build a proven track record for stabilizing distressed assets. Finally, leveraging our broad network to identify attractive acquisitions will provide investors with a differentiated platform to access. The highly attractive market dynamics surrounding the senior living sector in the near term.

Brendan: Our focus and commitment for the second half of 2024 revolves around three key deliverables. The continued improvement of our organic portfolio performance with an expectation to achieve positive all in cash flow by year end remains a top priority.

Brendan: Delivering on the expected performance improvements within recently acquired communities will further build our proven track record for stabilizing distressed assets.

Kevin Dietz: For the first time since the industry started experiencing inflationary increases after COVID, the company's direct labor decreased slightly from the first quarter of 2024. This quarter's total hours decreased 110 basis points from Q1 2024, more than offsetting the 100-based point increase in average wage costs for that same period. The company also saw more positive trending on its premium labor, which decreased in sequential quarters this year on the strength of our community leadership teams, controlling over time through our recently developed labor BI tools.

Brandon Ribar: Finally, leveraging our broad network to identify attractive acquisitions will provide investors with a differentiated platform to access the highly attractive market dynamics surrounding the senior living sector in the near term. We firmly believe Sonida is positioned to fulfill its commitments to residents, employees, and shareholders to continue building a best-in-class operator, owner, and investor in senior living. Thank you all for participating, and this concludes today's conference call.

Brendan: Finally, leveraging our broad network to identify attractive acquisitions will provide investors with a differentiated platform to access the highly attractive market dynamics surrounding the senior living sector in the near term.

Brandon Ribar: We firmly believe Senita is positioned to fulfill our commitments to residents, employees, and shareholders to continue building a best-in-class operator, owner, and investor in senior living.

Brendan: We firmly believe the Nida is positioned to fulfill our commitments to residents employees and shareholders to continue building a best in class, operator owner and Investor in senior living.

Unknown Executive: Thank you all for participating, and this concludes today's conference call.

Thank you all for participating and this concludes today's conference call.

Kevin Dietz: We believe both of these trends are sustainable and will be critical to continued margin expansion as the portfolio's occupancy base grows. On slide 17, non-labor operating expenses are also improving as a percentage of revenue, picking up 140 basis points comparing this quarter to the same quarter in 2023. On an absolute moot basis, these costs decreased nearly $800,000 in sequential quarters this year. Whereas areas such as food costs and real estate taxes have been primary drivers of the favorable improvement over the last 12 to 18 months, we are now seeing reduced commissions on third-party referrals due in part to the evolution of our internal sales strategy, which mayors are strong local market presence with enhanced digital marketing capabilities, as well as a higher overall occupancy base.

Unknown Executive: Thank you.

Operator: Thank you. You may now disconnect your lines. Thank you for your participation.

Speaker Change: Thank you you may now disconnect your lines. Thank you for your participation.

Unknown Executive: You may now disconnect your lines. Thank you for your participation.

Kevin Dietz: These costs already contemplate the company's one-time strategic investments and the growth infrastructure Brandon reference, namely the bolstering of our business development function, which continues to actively grow and convert our acquisition pipeline and the newly created operational excellence department that has been vital and supported community onboarding to keep our regional leaders focused on our same-store communities.

Kevin Dietz: Concluding the remarks on Q2 financial highlights, we will turn our attention to the balance sheet as seen on slide 13 and appendix 5. Last week the company entered into loan modification agreements with one of its lenders on two crossed communities in Texas. The modification included revised maturities and more importantly, the ability to make a discounted payoff of $18.5 million on the $28.7 million balance, which represents a $10 million or 36% discount on the current loan principle.

Kevin Dietz: These two communities represent the last two communities that required material restructuring with the company having addressed 58 of 60 loans in the past 12 months. The remaining two loans account for approximately 2.5% of the current principal balance. Our total debt is comprised of 71% fixed rate notes. With the remaining variable rate notes fully hedged, yielding a weighted average interest rate just below 5% for the portfolio. Beyond this, the company continues to focus on delivering its balance sheet with the second of two scheduled $5 million principal payments due under the 2023 Fannie Mae restructuring May during the quarter.

Kevin Dietz: The company's outstanding inventiveness decreased nearly $60 million for roughly 10% on a year of year basis from Q2 2023. This excludes a further reduction of $10 million on the company's principal balance in connection with the DPL option. As EBITDA continues to grow and we acquire assets at reset debt ratios, we expect to deliver the portfolio even further. As of today, the company is in compliance with all financial covenants required under its portages. We continue to be encouraged by the operating trajectory of this portfolio, including our ability to realize performance improvement on the recently acquired communities.

Brandon Ribar: Back to you, Brendan. Thanks, Kevin. 2024 continues to present opportunities for Senita to deliver on our differentiated approach to both internal and external growth.

Brandon Ribar: Our focus and commitment for the second half of 2024 revolves around three key deliverables. The continued improvement of our organic portfolio performance with an expectation to achieve positive all-in cash flow by year end remains a top priority. Second, delivering on the expected performance improvements within recently acquired communities will further build a proven track record for stabilizing distressed assets. Finally, leveraging our broad network to identify attractive acquisitions will provide investors with a differentiated platform to access. The highly attractive market dynamics surrounding the senior living sector in the near term.

Brandon Ribar: We firmly believe Senita is positioned to fulfill our commitments to residents, employees, and shareholders to continue building a best in class operator, owner, and investor in senior living.

Unknown Executive: Thank you all for participating, and this concludes today's conference call. Thank you. You may now disconnect your lines. Thank you for your participation.

Sonida Senior Living Inc. Q2 2024 Earnings Call

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