Extendicare Inc.

Thank you for standing by. This is the conference operator. Welcome to the Extendicare Inc. Third Quarter Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Gillian Fountain, Vice President, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Extended Care's third quarter 2020 results conference call. With me today is Extended Care's President and CEO, Michael Greer, and Senior Vice President and CFO, David Bacon. Our third quarter 2020 results were disseminated yesterday and are available on our websites. The audio webcast of today's call is also available on our website, along with an accompanying slide presentation, which viewers may advance themselves. A replay of the call will be available later this afternoon until November 27th. The replay numbers and passcodes have been provided in our press release, and an archived recording of this call will also be available on our website. Before we get started, please be reminded that today's call may include forward-looking statements. such statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. We have identified such factors in our public filings with the securities regulators and suggest that you refer to those filings. As we discuss our performance, please bear in mind that all figures are in Canadian dollars unless otherwise noted. With that, I'll turn the call over to Michael.

Thank you, Gillian, and good morning, everyone. Before we get to our third quarter results, I'll take a moment to discuss our efforts in relation to the COVID-19 pandemic and to thank our hardworking and committed team members. As you are all aware, the battle with COVID-19 virus is far from over, and in recent days, we have seen record numbers of new cases across Canada. As the numbers have risen in our communities, we have seen a resurgence of outbreaks in long-term care homes. Combating the recent surge is the top priority for our organization. We learned a lot from the first wave and we have used that experience to the maximum extent possible to prepare us to meet the challenges posed by the second wave. We are focused on mitigating the spread of the virus using measures such as universal masking, maintaining sufficient levels of personal protective equipment, single site employer policies, limiting long-term care occupancy to no more than two residents per room, and regular staff testing in our Ontario homes in cooperation with the local public health authorities. Staff testing is important to identify positive staff who in many cases are asymptomatic to minimize the potential for the virus to enter our homes. We have also assembled a team of specialized managers to provide rapid, effective assistance to homes experiencing COVID-19 challenges. This team has experience dealing with outbreaks and can quickly provide support and proven solutions to limit the impact of an outbreak on our residents and staff. We've also increased staffing levels in our long-term care homes and are investing in the education and training of a new pool of skilled caregivers. As part of our ongoing efforts, we created a new role in the organization, and in October welcomed Dr. Matthew Morgan to our executive team as our first chief medical officer. Dr. Morgan is focused on developing clinical strategies to better manage outcomes for residents, clients, and their families. He will also work to establish deeper relationships with our medical directors in long-term care, and strengthen medication management practices in all of our lines of business. As a specialist in internal medicine with a master's in clinical epidemiology, Dr. Morgan brings extensive experience and clinical expertise to our executive team. I look forward to the contributions he will make in support of our residents, clients, and valued team members. Our staff continue to work tirelessly providing the crucial care and comfort our residents and clients require. With restrictions on visitations, their presence and company are an important lifeline for many, and their ability to provide care with true compassion and kindness under very challenging circumstances is commendable. I'm deeply grateful for the work they do and thank all of our care providers for their ongoing hard work and devotion to our mission. While our actions have helped mitigate the impact of COVID-19 in our long-term care homes, the sharp rise of cases in surrounding communities has caused a resurgence of outbreaks. Of our 69 long-term care homes in retirement communities, 12 long-term care homes are in outbreak, the majority of which are limited to fewer than three active cases of COVID-19 among the residents and staff. We are also working closely with some of our extended care assist clients to help them manage outbreaks in their homes. In the third quarter, the Ontario government launched an independent commission into COVID-19 and the long-term care sector. In recent weeks, the commission issued an interim report which recommended increased funding for long-term care staff stronger collaboration with hospitals and improved infection control, including priority access to COVID-19 testing for long-term care residents and staff. We were happy to have an opportunity to present to the Commission and fully support its interim recommendations. The Ontario government has already announced plans to implement some of these recommendations. With that context, Let's turn to our third quarter results starting on slide four. The impact of COVID-19 continues to be felt across our operations, driving lower occupancy levels in our retirement communities and long-term care homes and lower volumes in our home health care business. The costs of combating the pandemic have totaled $42.5 million to date, exceeding related funding by $19.8 million. from governments where we operate. Despite the impact of COVID-19, we've continued to see improved financial performance year-over-year in our retirement living operations due to lease-up activity and in our contract services and group purchasing operations due to a growing client base. As we indicated last quarter, due to revenue declines in our home health care segment, our Paramed subsidiary qualified for funding under the Canadian Emergency Wage Subsidy Program. Paramed received $50.8 million this quarter, which is recorded as a reduction in operating expenses. David will provide more detail on this later in the call. Moving to slide five in our long-term care operations, the impact of COVID-19 remained evident in Q3, as occupancy levels continued to decline and costs to protect residents and staff exceeded COVID funding programs by $15.5 million year-to-date. Occupancy levels at our long-term care homes declined to 90%, down from the usual run rate above 97%, and a further decline from the 93.5% recorded in the second quarter. Despite the reduction in occupancy, our funding is largely protected currently as governments recognize the need to reduce wardroom occupancy during the pandemic. Following the Commission's interim recommendations, the Ontario government committed to increase funding over the next four years to enable an average of four hours of care per resident day. The Ontario government has also committed to introduce programs to accelerate the education and recruitment of thousands of additional healthcare workers that will be needed to meet the new objective. As part of its 2020-21 budget, the Ontario government reconfirmed previously announced targeted funding for COVID-19 costs through to Q1 2021. While the budget did not include specific investments to achieve the four hours of care previously announced. The government did confirm that an implementation plan will be released as part of the government staffing strategy in December of this year. Moving to long-term care redevelopment on slide six, I note that for many years Extendicare has joined with others in the sector in advocating for solutions. to address the aging infrastructure and shortage of long-term care beds across Canada. During the quarter, the Ontario government moved a step closer to addressing this issue with announcements from the Ministry of Long-Term Care in respect of its redesigned capital development funding program. The Ministry's revised program provides for increases in the per diem bed construction funding subsidies and a new capital development grant to offset some of the construction costs, both of which improve the economics for development projects. The Ministry announced funding for the program with a $1.75 billion investment to redevelop 12,000 long-term care beds and add an additional 8,000 long-term care beds over the next five years. As previously announced, we have submitted applications for 22 projects that in total would build over 4,200 beds, replacing all of our existing C-class beds and adding just over 900 new beds to our portfolio. In October, we received our first approval, allowing us to commence construction on a new 256-bed long-term care home in Sudbury later this month. This home will replace the 234-bed extended care Falcon Bridge home and will include 154 private rooms with the balance of the beds in semi-private accommodation. Construction is expected to be completed in Q4 2022 at an estimated cost of $62.3 million net of a capital grant provided by the government under their capital funding program. The Sudbury project is one of six projects at an advanced stage in the government's approval process that we hope to have under construction before the end of 2022. We continue to work closely with our industry partners and government to further refine the new capital development funding program, in particular to address specific requirements for certain geographic regions and to streamline related approval and licensing processes. Turning to slide seven, our paramed operations continue to be impacted by COVID-19, with comparable average daily volumes down by 9.9% this quarter from Q3 last year. In addition, higher operating costs and COVID expenses further negatively impacted our home health care results. The peak impact of COVID-19 on our average daily volumes occurred in April, And since that time, we've experienced a steady increase in our average daily volumes, increasing by 11.6% in Q3 compared to Q2 2020, and up 5.2% since the end of the third quarter. However, while referrals from our clients have recently returned to pre-COVID levels, our workforce capacity is recovering more slowly, constrained by COVID-related factors. Nevertheless, we continue to make steady progress toward pre-pandemic business volumes. To address the continued growth in demand for home care services, we are making long-term investments to address the shortage of personal support workers that has challenged our industry for many years, recently exacerbated by the pandemic. We have developed in-house programs and partnered with colleges to create a new supply of skilled caregivers. To attract a broader pool of interested students, Paramed is covering tuition and providing paid on-the-job training, followed by full employment upon the completion of the program. To date, we have put approximately 200 new caregivers through the program, and we expect to increase this to more than 600 students per year as we partner with additional colleges. Note also that we are targeting to complete the final stage of the rollout of our new cloud-based platform in Paramed's Alberta operations in the fourth quarter. This will complete the final phase of the transformation project that we postponed in the early stages of the pandemic. Turning to slide 8 and our retirement living operations, COVID-19 restrictions on in-person tours and enhanced infection control protocols led to occupancy pressures and increased costs this quarter. However, continued improvements in our lease-up communities year over year contributed to overall growth in financial performance. Stabilized average occupancy remains below prior year levels, but improved in Q3 2020 compared to Q2, as in-person tour restrictions were lifted in Ontario for most of the third quarter. However, in recent weeks, the increase in COVID-19 cases in Ontario has led to the re-imposition of restrictions on in-person tours in certain markets, leading to a reduction in stabilized occupancy by 140 basis points since the end of September. We will continue to actively market our properties and conduct virtual tours, but expect the ongoing restrictions will continue to impact our occupancy in the short term. On slide 9, our assist contract services and SGP group purchasing services continue to perform well, with steady growth in revenue and NOI, exceeding a 9% cumulative average growth rate over the past eight quarters. At the end of Q3, SGP, together with our partners, provided cost-effective products and services to approximately 79,400 senior residents across Canada, up 23.5% from the same quarter last year and up 5.6% from the second quarter of 2020. We continue to develop opportunities to expand SGP and assist through additional services and product offerings, and by expanding the reach of our sales team into other geographies. I'll now turn to David Bacon, our Chief Financial Officer, to provide additional insights into our financial results from the quarter.