Sonida Senior Living, Inc.

Good day, and welcome to the Sunita Senior Living Second Quarter 2022 Earnings Conference Call. Today's conference is being recorded. All statements today, which are not historical facts, may be deemed to forward-looking statements within the meaning of the federal securities laws. These statements are made as of today's date, and the company expressly disclaims any obligation to update these statements in the future. Actual results and performance may differ materially from forward-looking statements. Certain of these factors that could cause actual results to differ are detailed in the earnings release the company issued earlier today, as well as in the reports the company files with the SEC from time to time, including the risk factors contained in the annual report on Form 10-K and quarterly reports on Form 10-Q. Please see today's press release for the full Safe Harbor Statement. which may be found at www.sanitaseniorliving.com slash investor relations, and was furnished in an 8K filing this morning. Also, please note that during this call, the company will present non-GAAP financial measures. For reconciliations of each non-GAAP measure from the most comparable GAAP measure, please also see today's press release. At this time, I would like to turn the call over to Sanita Senior Living, President and CEO, Ms. Kimberly Lodi.

Thank you, Alex. Good afternoon, everyone, and welcome to Sonita Senior Living's second quarter 2022 earnings call. I hope you and your families are well, and we appreciate your joining us today. We're very pleased to report another quarter of good news driven by strong occupancy gains, double digit revenue growth, and continued discipline in managing community operating expenses. all of which resulted in sequential margin expansion and EBITDA growth. Clearly, our growth and margin expansion strategies are succeeding as we have now delivered five consecutive quarters of occupancy and revenue growth and two consecutive quarters of margin expansion. On the same store basis, which excludes the two Indiana assets we purchased earlier this year, we are just 50 basis points from our pre-pandemic occupancy. reporting 83.2% occupancy for the second quarter of 2022, up 510 basis points compared to the prior year quarter and 90 basis points higher than the first quarter of this year. We continue to outperform the industry in occupancy recovery from the pandemic. With this strong occupancy gain and corresponding rate growth, we have increased same-store REVPAR 11.3% and REVPOR 4.4%. Sequentially, we improved RevPAR 200 basis points and RevPOR 80 basis points from the first quarter of this year. Rate growth has been a positive driver for our business, starting at a lower level earlier in the year and gaining momentum each month with market rate increases and in-place renewals. We believe there is still opportunity to push rates higher in 2022, given positive supply and demand dynamics, as well as the tangible value provided by our care teams and resident programs. Most importantly, we have now reported two consecutive quarters of margin expansion with a sequential increase of 40 basis points compared to the first quarter of 2022 and 240 basis points of improvement from the margin low point in the fourth quarter of 2021. EBITDA also grew meaningfully, 13.7% sequentially from the first quarter due to continued improvement in operations. Our community teams have done an excellent job managing operating expenses in a very difficult labor and inflationary environment. One of the many notable achievements in the quarter is our 41% reduction in contract labor expenses compared to the first quarter of this year. Our teams have stayed diligent and focused on our goal of completely eliminating contract labor in our communities by the end of 2022. Another achievement is our continued strong trend of net positive hires in each of the past three quarters. Our people-centered culture attracts talented employees who want to be part of our winning Sonita teams. Reducing the use of agency staffing while adding to our dedicated Sonita workforce enables our communities to have stable, consistent, skilled, and caring individuals to provide excellent care and services to our residents and their families. We have expanded our community workforce by about 6% since the beginning of the year. Bonita's success is based on three fundamental pillars. First, prioritizing the health, wellness, and engagement of our residents and team members. Second, a strong collaborative people-centered culture. And third, unique experiences for residents and their families through differentiated resident programming. Continuing our unwavering focus on these three pillars will enable us to achieve pre-pandemic occupancy in our portfolio by the end of 2022, while also continuing to expand NOI margins sequentially throughout the year. Focusing on demand for a moment, our leading indicators continue to trend positively as evidenced by our strong occupancy growth. Comparing these indicators to where they were for the same store portfolio in the second quarter of 2019, So prior to the pandemic in 2020 and the subsequent start of the recovery during 2021, every leading indicator is substantially higher than the second quarter 2019 baseline for the same set of communities. Leads are 18% higher, tours are 32% higher, and move-ins are 33% higher. The marketing and sales strategies developed and executed by our teams represent a significant and sustainable core competency for the business. In closing, to consider the company's future trajectory, it is important to reflect on the past for a brief moment. Nearly four years ago, I accepted the position as CEO of Sonita with a mandate to affect a transformation of the company's operations and balance sheet. And we have done just that. By eliminating expensive and underperforming triple net leases and reducing our debt, we pruned the portfolio to a core set of high performing assets from which the company can grow. We completely overhauled the company's sales and marketing activities, which are now driving sustainable growth. We fought through a horrendous pandemic while also developing differentiated resident programming and enhancing the experience we provide to our residents and their families. We raised nearly $155 million in new capital to invest in our business, and we rebranded the company to communicate our value proposition more effectively to those we serve. With that work essentially complete, our operations on a clear and positive trajectory, our balance sheet significantly improved, and solid leadership teams in place across the company, I've decided that the time is right for me to transition the CEO role. I'm delighted that our current Chief Operating Officer, Brandon Rebar, has been promoted to CEO effective September 2nd. Brandon and I have celebrated the achievements and persevered through the troughs while working shoulder to shoulder these last three years on many key operational and financial items that have transformed the company and set the foundation for its future growth. Brandon's leadership skills, operational expertise, and business acumen will serve the company and the industry very well in the future. I care deeply about Sonita Senior Living, its residents, employees, and investors, and and I remain confident about Zunita's continued success. I'll now turn the call over to Brandon to discuss the key operational areas for the second quarter, as well as his thoughts for the future.

Thank you so much, Kim, and good afternoon. As Kim referenced, the business continues to show solid improvement for a fifth consecutive quarter. Our initial occupancy and rate goals for 2022 continue on an achievable trend line, with opportunity to surpass those goals with a strong second half of the year. With consistent occupancy improvement and in-place rate increases exceeding 5%, our local leadership teams continue to deliver on their top-line operating commitments. Additionally, rates for new residents have exceeded those of the previous residents on a same-unit basis by more than 5%, realizing higher market rates across the board. The year-over-year and sequential rate improvement Kim referenced remain consistent with our ongoing commitment to achieve responsible and sustainable rate growth. As we enter the second half of the year, nearly two-thirds of our owned portfolio is currently operating above 85% occupancy, and additional opportunity to increase rate in these communities will be a primary focus. Key indicators related to demand remain encouraging as lead volume in Q2 increased 14% sequentially and 28% over the same period in 2021. Continued improvement in the stability of our local care and service providers remains the highest priority from an operations perspective. Further NOI expansion in 2022 can be accelerated with ongoing reduction in our premium labor costs. A 41% reduction in contract labor sequentially in Q2 represents material progress, but we are not yet to our goal of contract elimination across the portfolio. Other premium pay, including ship premiums and overtime, also improved in Q2. However, these metrics remain elevated from pre-pandemic results in late 2019 and early 2020. Net hires in Q2 were nearly two and a half times Q1 net hires and support further improvement expectations in Q3. Turnover trends in Q2 show a favorable reduction in year-over-year turnover of more than five percentage points. Overall, we are pleased that total labor costs remained flat sequentially while revenue and occupancy grew. Additionally, total labor costs were up $2.7 million year-over-year in Q2 versus the $3.2 million year-over-year increase we reported in Q1. On the resident and customer experience front, we were pleased with the results of our portfolio-wide resident satisfaction surveys and encouraged that so many of our communities achieved the U.S. News and World Report best in senior living recognition. The survey also provided a roadmap for creating additional value around our resident experience. Ongoing capital and systems investments focused on the physical environment, technology infrastructure, and resident dining experience will deliver even greater value to our residents. The operating environment in Q2 remained turbulent on both the COVID and cost front. However, our team is pleased with margin expansion and total dollar NOI growth, both sequentially and year over year. And finally, I want to thank Kim and the Sunita team for all their support as we move forward with the next chapter in our transformation. Kim's leadership over the last eight years, nearly four as CEO, have positioned the company to grow and expand in the years ahead. I'm fortunate to work every day with talented, compassionate, and highly motivated teams at our local, regional, and central locations. And I firmly believe the continued development of our people-centered culture and delivering high-value services and experiences for our residents and their families will drive results that continue to exceed industry performance trends. In the near term, we will provide additional detail around our go-forward strategic objectives and look forward to sharing our vision for growing this Onida platform. And speaking of talented team members, I will now turn the call over to Kevin to provide a financial update.