Extendicare Inc.

Thank you for standing by. This is the conference operator. Welcome to the Extendicare Inc. second quarter 2021 analyst conference call. As a reminder, all participants are in a 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 zero. I would now like to turn the conference over to Gillian Fountain, Vice President, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Extended Care's second quarter 2021 results conference call. With me today are Extended Care's President and CEO, Michael Greer, and Senior Vice President and CFO, David Bacon. Our Q2 results were disseminated yesterday and are available on our website. 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 August 20. 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. With that, I'll turn the call over to Michael.

Thank you, Gillian, and good morning, everyone. Before we get to our second quarter results, I will provide an update on our activities related to the pandemic. Thanks to the outstanding commitment of our team to protect themselves and those we care for, our ongoing vaccination campaign has been very successful. High rates of resident and staff vaccination have allowed us to welcome families and visitors back into our homes, and none of our long-term care homes or retirement communities are currently in outbreak. As of August 5th, more than 90% of our long-term care and retirement residents were fully vaccinated. 86% of our long-term care staff, 80% of our retirement staff, and 86% of our pyramid staff have received at least one dose. As a result of our extensive education and awareness campaign, Along with the provision of paid time off and expenses to get to a vaccination clinic, more of our staff are stepping up to be vaccinated each week. To complement our vaccination program, we are maintaining elevated staffing in all of our homes to address the continued need for screening, testing, and infection control protocols. Surveillance testing continues to play an important role in keeping our homes and communities safe, now with a particular focus on those who are not yet fully vaccinated. In our ongoing efforts to address the significant staffing challenges facing the industry, we've made significant progress expanding college partnerships and clinical preceptorships to ensure a strong pipeline of new PSWs. In the first half of 2021, we hired more than 300 new caregivers in Paramed from the in-house HSW training programs we launched last year. We are also participating in various new federal and provincial programs aimed at expanding the seniors care workforce in the long-term care sector. Currently, we have more than 250 students enrolled in extended care internships, and we plan to offer employment to them upon graduation. While we are encouraged by the progress this quarter on vaccinations and prevention of outbreaks in our homes, we remain vigilant in our ongoing efforts to protect our residents, clients and staff from COVID-19. The experience of other countries demonstrates that the risk of a fourth wave in Canada, driven by the Delta variant, is very real. We will continue our campaign to drive vaccination rates higher and we will test unvaccinated staff and visitors in an effort to prevent the virus from reentering our homes. With that, let's turn to the second quarter highlights starting on slide four. As the severity of the pandemic receded, the magnitude of its impact on our operations has moderated significantly across the company. With the dramatic decrease in COVID-19 outbreaks in Q2 2021, Our pandemic-related spending decreased to 42.8 million, down from 58.1 million in Q1. However, our costs in the most recent quarter exceeded COVID-related government funding by $9.5 million. We did not receive any funding related to prior period COVID-19 costs in the quarter. We do anticipate that we will receive further funding for net COVID costs from the first half in future quarters. Restrictions eased in the latter half of Q2, and as a result, occupancy levels at our long-term care homes and retirement communities improved. This positive dynamic continued into the summer. We are very pleased with the continuing recovery of our home health care operations, with our average daily volumes increasing 3.7 percent from Q1. exiting the quarter in line with pre-pandemic levels. With the increase in volumes and our continued focus on back office efficiency, our home health care NOI margins widened another 60 basis points this quarter. As you can see on slide five, we continue to advance our long-term care redevelopment program to replace aging infrastructure with new modern homes designed to provide improved functionality, safety and comfort for our residents. During the second quarter, we commenced construction of a new long-term care home located in Kingston, with the completion targeted for the first quarter of 2023. This new 192-bed home will replace and expand an existing 150-bed Class C home. The new Kingston project, together with our Sudbury project that commenced in Q4 of last year, will replace 384 Class C beds with 448 new beds at an estimated investment of $120 million. In May 2021, we successfully closed $95.9 million in construction financing to support these first two projects. This bolstered our strong liquidity position and, more importantly, demonstrates support for the sector and the new Ontario Capital Funding Program. We continue to advance a further 20 applications with the Ministry of Long-Term Care to replace the remainder of our C-class homes in Ontario. Not all of these projects are feasible under the current Capital Funding Program. We continue to work with our industry partners and the government to address the shortcomings in the current program, which relate primarily to small projects and high costs in urban areas. In addition to Sudbury and Kingston, which are already underway, we have seven projects in advanced stages of approvals with the Ontario Ministry, on which we hope to begin construction before the end of 2023. Moving to slide six and our long-term care operations, the reduction in outbreaks and easing of pandemic-related restrictions resulted in a drop in COVID-19-related costs and in increased admissions during the second quarter. COVID-19-related costs were $32.7 million in Q2, down 32% from Q1. Though these costs continue to exceed related funding, As I mentioned before, we anticipate receiving additional government funds to cover the shortfall in future quarters. Occupancy levels at our long-term care homes increased to 85.4% in Q2, up 250 basis points from Q1 this year. As lengthy wait lists for long-term care in many of the communities where we operate, we expect average occupancy levels to continue to increase as long as rates of COVID-19 in the community remain low. We will not return to full occupancy in homes with ward-style three or four bedrooms. We have limited admissions to a maximum of two residents per room in all of our homes. We expect funding in Ontario to continue at the current level for these ward-style rooms beyond August 2021, when the current basic occupancy protection funding expires. However, no formal announcement has been made to that effect as yet. While we are seeing steady occupancy improvements, it is likely that not all of our Ontario long-term care homes will return to levels above 97% before the end of August. As a result, we may experience some reduction in funding for those few homes that do not achieve the required occupancy threshold. We continue our recruiting efforts to add frontline caregivers to our long-term care homes to support ongoing COVID prevention measures and the recovery of our long-term care occupancy levels. Increased staffing also positions us well to respond to the Ontario government's plan to provide funding for four hours of care per resident day. The sector is awaiting further details about the new staffing plan, which we anticipate will come later this year. Turning to slide seven, our paramed volumes have returned to pre-pandemic levels, up 24% from the worst hit pandemic quarter in Q2 of 2020. Despite this recovery, we are still not keeping up with the demand. due to ongoing workforce capacity constraints, particularly in nursing. Our Q2 average daily volumes were 25,264, up 3.7% from the prior quarter. Our NOI margins, adjusted for pandemic-related items, continued to improve this quarter, up 60 basis points to 7.9% when compared to Q1 of this year. The investments made in our cloud-based systems and our continued focus on improving back-office efficiency position us to support future volume growth without increasing overhead costs, enabling further margin improvement as volumes increase. Our pace of volume growth will continue to be moderated by the staffing challenges facing the industry. As I mentioned earlier, we are gratified by the progress of our PSW college partnerships and in-house HSW training programs. And we continue to focus on encouraging employees who have been on pandemic-related leave to return to work. I now turn to David Bacon, our Chief Financial Officer, to provide insight into our consolidated and segmented financial results for the second quarter.