Five Star Senior Living Inc.

Good afternoon and welcome to the Five Star Senior Living Third Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. I would now like to turn the call over to Michael Kodish, Director of Investor Relations. Please go ahead.

Thank you. Welcome to Five Star Senior Living's third quarter 2021 conference call. The agenda for today's call includes a presentation by President and CEO Katie Potter, Executive Vice President and COO Margaret Wigglesworth, and Executive Vice President, CFO, and Treasurer Jeff Lear, followed by a question and answer session with research analysts. I would like to note that the transcription, recording, or retransmission of today's conference call is strictly prohibited without the prior written consent of the company. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on Five Star's present beliefs and expectations as of today, Thursday, November 4, 2021. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call, other than through filings with the Securities and Exchange Commission, or SEC, regarding this reporting period. Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, this call may contain non-GAAP numbers including EBITDA, adjusted EBITDA, adjusted net income, and adjusted earnings per share. Reconciliations of net income to these non-GAAP figures and the components to calculate them are available in our quarterly results news release or investor presentation available on our website at 5starseniorliving.com. I'll now turn the call over to Katie.

Thanks, Michael. Good afternoon, everyone, and thank you for joining us for our third quarter 2021 conference call. As we enter the eighth month of our strategic plan to reposition our business and meet the needs and desires of our evolving customer, I am pleased to say that our transformation is taking shape. To begin today's commentary, I wanted to spend a moment summarizing the environmental drivers behind this strategic direction before moving into the achievements made this quarter within each phase of the plan, reposition, evolve, and diversify. Even before the pandemic began, the demographic makeup of our customer base was undergoing a significant shift. Specifically, the median age of our resident has steadily increased, while the average length of stay is decreasing, resulting in incremental resident turnover. This dynamic not only impacts the growth and consistency of our revenues, but also drives additive unit costs and marketing expenses. In 2004, OSHA reported that the median age of an assisted living resident was 84 years old. In 2019, the median age increased by over three years to 87.1 years old. As of 2019, the average length of stay in an assisted living community was 22 months, while the average length of stay in independent communities was over a year longer at 37 months. Given these dynamics, we believe we can drive a more efficient business by focusing on a younger and lower acuity customer. Additionally, today's customer is seeking a more independent lifestyle with access to a vast array of what we call concierge services. which provides them options to choose the services they want or need, as well as financial flexibility. These services are designed to enhance and customize the resident experience, differentiate our offering from the competition, and provide us the opportunity to engage the customer earlier in their aging process. In communities that offer high quality service options, such as our agility rehabilitation services, residents are healthier, stay longer, and drive ancillary revenues relative to residents at communities without these service offerings. Prior to the pandemic, internal data showed that after adding an agility clinic, the average length of stay at a community increased by 31%, compared to that same or similar community without a clinic. In addition, communities that have partnered with agility have seen a 36% reduction in the rate of falls, which translates to fewer residents requiring hospital visits or higher levels of care. The goal of this organizational transformation is straightforward. We are repositioning our business to meet the present and future demands of the older adult customer. Operationally, we will continue to focus on areas of strength, secure top talent throughout the organization, establish a scalable and efficient operating structure, and continue to decrease our G&A as we invest in our corporate infrastructure that is both scalable and sustainable. Now, moving into the actions taken during and subsequent to the third quarter to achieve these goals. We are nearly complete with the repositioning phase of our three-prong strategy. As of today, we have successfully transitioned 99 of the 108 smaller, higher-acuity communities to third-party operators, with the balance expected to be completed before year-end. Following the completion of this process, our senior living segment will be approximately 52% independent living units, a significant increase from 38% independent living units prior to the repositioning phase taking effect. As a reminder for the balance of this phase, we closed all of the skilled nursing units in the CCRCs that we will continue to manage on behalf of GHC and expect to completely exit the skilled nursing business by year end. As we begin to wrap up these repositioning efforts, we are now starting to turn more attention to the evolved phase of our strategic plan by investing in our corporate infrastructure to scale and support operations. An example of our work in this phase includes the implementation of corporate enterprise resource planning systems, which we expect will automate certain high volume manual transactional functions and save between $5 and $7 million in G&A costs annually. Also, we are focused on making community investments to enhance the resident experience, such as improved wireless connectivity, upgrading resident transportation services, and modernizing common areas and resident units. Our partner, Diversified Healthcare Trust, has been publicly vocal about its commitment to the senior living space and plans to contribute a significant amount of capital to improve the competitive nature of the communities we manage on their behalf. Finally, before I turn the call over to Margaret to provide an operational update, I wanted to spend some time discussing the final phase of our strategic plan, Diversify. As our customer demands change, we need to be agile and anticipate these needs in order to attract and retain residents within the communities we own and manage, in addition to engaging with customers outside these communities earlier in the aging process. In reference to the earlier comments I made, we are concentrating on revenue diversification opportunities that synergistically drive performance at our senior living communities and provide us with the opportunity to engage with customers sooner, such as agility rehabilitation services. While we have nothing to announce at this time, we are actively pursuing an expansion of our concierge services. In the meantime, we continue to actively grow our rehabilitation and wellness services segment This quarter, we successfully opened five net new agility outpatient rehabilitation clinics up to net new clinics from the second quarter. We expect to continue to expand our agility footprint and have experienced additional growth from our agility fitness offering. Finally, we will retain all of the 45 agility outpatient clinics located in transitioning communities. I'll now turn the call over to Margaret to walk through an operational update for the third quarter.