Extendicare Inc.

Welcome to the Extended Care, Inc. Third Quarter 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 one 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 Jillian Fountain, Vice President, Investor Relations. Please go ahead.

Thanks, operator, and good morning, everyone. Welcome to Extendicare's third quarter 2021 results conference call. With me today are Extendicare's President and CEO, Michael Greer, and Senior Vice President and CFO, David Bacon. Our Q3 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 November 19th. 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. Before we review our third quarter results, I will highlight our ongoing efforts to ensure the safety of our residents, clients, and staff as we continue to navigate the COVID-19 pandemic and work to keep the virus out of our homes. In August, we announced that COVID-19 vaccination would become mandatory for all long-term care and retirement home staff across Canada. Those not vaccinated by October 12th were placed on unpaid leave. Currently, all staff working in our long-term care homes and retirement communities are vaccinated. Prior to the implementation of our policy, we had made significant progress on our vaccination campaign, and as a result, we were able to implement our policy with minimal disruption to operations. The high vaccination rates for both residents and staff along with our continued commitment to active symptom screening, testing and infection control, are effectively limiting the impact of the fourth wave in our homes and communities. We have also made significant progress in delivering third doses to our residents to further boost their immunity to the virus. Currently, four of our 69 long-term care homes and retirement communities are recovering from outbreaks. there are currently no active cases of COVID-19 among the residents and staff of those homes. The four long-term care homes in outbreak are in Alberta, where there continue to be heightened numbers of COVID-19 cases in the community. Our ongoing vaccination campaign in Paramed is going well, thanks to the positive response of our team members to the program. Our goal is full vaccination for our home healthcare team. To achieve this, we support team members by offering educational resources, reimbursement of expenses, and paid time off for vaccine appointments to remove all barriers to vaccination. As well, vaccination is a condition of employment for all new hires across Pyramid. As of October 28th, 92% of Pyramid staff have at least one dose of vaccine and more are being vaccinated each week. Turning to slide four, I'll begin our third quarter update by highlighting several important new announcements made in the last month by the government of Ontario that are related to long-term care. On October 6th, Ontario announced the first phase of funding for increased staffing levels as part of its $4.6 billion long-term care staffing plan. Starting in this month, the government is providing additional funding to support an initial increase to three hours of direct care per resident day, with subsequent increases planned each April 1st until four hours per resident day is reached in 2025. This means that the additional staff we brought on board during the pandemic will be supported by this new funding on a permanent basis, allowing them to deliver the high-quality care our residents need and deserve. These additional team members are already familiar with our homes and processes and have been an integral part of addressing the challenges brought on during the pandemic. On the long-term care redevelopment front, on October 20th, the Ontario government announced a new call for applications for new and upgraded long-term care beds under the Long-Term Care Home Capital Development Funding Program that was announced in 2020. We currently have three long-term care redevelopment projects under construction and six additional projects with bed license allocations that are at advanced stages of planning and approvals. We intend to resubmit our remaining 13 redevelopment projects into this new call for applications by the end of this year. And then just yesterday, the Ontario government announced its fall economic update and allocated an additional $3.7 billion in funding starting in 2024-25 toward the commitment to build 30,000 net new beds and 28,000 upgraded long-term care beds across the province by 2028. This brings its total investment in new homes to $6.4 billion. On October 28th, the Ontario government introduced Bill 37, the Providing More Care, Protecting Seniors and Building More Beds Act. In addition to detailing the commitment to increase direct care hours and build new long-term care beds, it outlines measures to improve transparency and accountability in the long-term care sector. The proposed legislation strengthens the Resident's Bill of Rights and introduces new requirements for annual resident, family, and caregiver surveys. It also establishes new compliance and enforcement tools. We believe that the proposed legislation is an important and positive step toward ensuring seniors get the quality of care they need and deserve. Our strategy is aligned with the government's key pillars as we continue to focus on our redevelopment agenda and work to implement the increase in direct hours of care. We believe the enhanced accountability and transparency included in the proposed legislation puts a clear focus on the quality of care, accountability, and support for caregivers that's required to restore public trust in the sector after the devastation caused by the pandemic. We are committed to doing our part to make this happen. Finally, on October 28th, the Ontario government extended the $3 per hour pandemic wage premium for frontline PSWs until March 31st of next year. Extending the wage premium recognizes the ongoing contributions by long-term care and home health care frontline team members and supports our efforts to increase staffing capacity, particularly in our home health care segments. Now let's turn to the financial highlights on slide five. With the marked decrease in COVID-19 cases during the quarter, our pandemic-related spending decreased by approximately $10 million from Q2 levels to $32.4 million and was largely offset by provincial funding, which included $5.1 million related to costs incurred in Q1. As a result, costs exceeded COVID-related government funding by only $700,000 this quarter, an improvement of $8.8 million over Q2. While COVID-19 costs are declining, We will continue to incur elevated costs as we remain committed to our ongoing efforts to protect residents, clients, and staff until the threat of the pandemic has passed. We anticipate further recovery of unfunded pandemic costs retroactive to prior periods. However, the amounts and timing of any recoveries are uncertain and may not cover all of the costs incurred. Occupancy levels at our long-term care homes and retirement communities continue to recover from the lower levels we experienced at the height of the pandemic, with average occupancy in long-term care up 360 basis points from Q2. Our home health care average daily volumes were marginally higher than Q2, despite the seasonal softness we experienced in the summer months. Lower back office costs and the additional operating day in the quarter contributed to the sequential improvement in NOI margins of 180 basis points from Q2 after adjusting for wage subsidy payments and net COVID costs. Our SGP customer base continued to grow in Q3, up 5.9% from Q2 and up 11.4% year over year. NOI in our other operations segment was down this quarter compared to Q2 and prior year as a result of investments in growth initiatives to capitalize on future opportunities in this segment. Moving on to slide six, we continue to work with the provinces to address the pressing need to replace aging infrastructure with new modern homes to meet the current and future demand for senior services. In total, we have 22 long-term care redevelopment projects in Ontario that we are actively advancing with the goal of building more than 4,200 new long-term care beds, 3,285 of which would replace aging Class C beds across the province. Last week, we commenced construction of a new long-term care home in Stittsville, near Ottawa. This new 256-bed home will replace a 240-bed Class C home nearby with completion expected in the first quarter of 2024. This project joins two other homes already under construction in Kingston and Sudbury. Together, these three projects will replace 684 Class C beds with 704 new beds requiring a net investment of approximately $179 million. We have a further six projects in advanced stages of approvals in Ontario, with a goal of commencing construction on all six before the end of 2023. These projects represent an estimated $285 million in additional net investment. We are currently working to resubmit our remaining 13 projects by the end of the year in response to the newly announced call for applications by the Ontario government. We continue to work with our industry partners and the government to address those projects that are facing economic barriers that affect their feasibility under the current capital funding program, including diseconomies of small scale in rural areas and very high land acquisition costs in the GTA. Moving to slide seven and our long-term care operations, lower rates of COVID-19 in the community and easing of pandemic-related restrictions resulted in a decline in costs and an increase in admissions during the quarter. COVID-19-related costs were $23.2 million in the quarter, down 29% from Q2. As I mentioned earlier, $5.1 million of funding received this quarter related to pandemic costs incurred in Q1. As a result, COVID funding received by the long-term care segment in Q3 was in excess of COVID costs by $800,000. Average occupancy across our long-term care homes increased to 89% in Q3, up 360 basis points from Q2. In October, the Ontario government extended basic occupancy protection until January 31st next year. We will not return to full occupancy in homes with ward-style three- and four-bed rooms, which takes 185 beds out of circulation in Ontario until such time as the homes are redeveloped. It is not yet clear what impact the removal of these beds will have on funding, after January 31st. The initial phase of the Ontario government's long-term care staffing plan comes into effect this month, which provides us with the funding to make permanent the additional staff we added throughout the pandemic. The increased funding will be provided through the nursing and program flow-through envelopes and takes us to three hours of care per resident day with subsequent increments in April of each year. On October 14th, the Saskatchewan Health Authority and Extendicare announced our intention to transition the delivery of long-term care services operated at our five long-term care homes in Saskatchewan to the SHA. We are working collaboratively with them during the transition to keep the focus on the needs of residents, families, and staff. Although terms of the transfer are under negotiation, Our exit from the five long-term care homes in that province is not anticipated to have a material impact on our financial results. David will address this in more detail in his comments. Turning to slide eight, our paramed volumes increased slightly last quarter, as traditionally slower summer months were offset by a resumption in volume growth in September. In comparison to the prior year quarter, our average daily volumes were up 11.4%. Adjusted NOI margins were 9.7%, up from 7.9% in Q2 when COVID-related costs and revenues are excluded. David will also provide more detail on these margin improvements. Our volume growth continues to be constrained by the staffing challenges facing the industry. Nursing shortages are increasingly becoming a challenge across the entire healthcare sector, as demographic trends and the stresses of the pandemic cause nurses to leave the profession at a time when demand for their services is on the rise. We are focusing our attention on recruiting and retention programs for nurses to counter these market dynamics. We are encouraged by the progress of our PSW college partnerships and in-house HSW training programs. In the first nine months of this year, more than 470 new caregivers graduated from these programs and joined our frontline paramed team. We remain on track to achieve our target of 600 graduates in 2021. In addition, More than 460 PSW students are getting experience in our long-term care homes. They are currently enrolled in various federal and provincial programs aimed at expanding the workforce in the long-term care sector, and we intend to offer these students employment upon graduation. We continue to encourage our employees who have been on pandemic-related leave to return to work. The extension of the $3 per hour pandemic wage premium for PSWs in Ontario may encourage more employees to return to active duty, particularly in home healthcare. Lastly, I want to mention the recent home healthcare rate increases. Subsequent to the end of the third quarter, we received notice that home healthcare rates in Ontario and Alberta have increased retroactive to April 1st, 2021. Ontario rates have increased by approximately 1.9% and Alberta rates increased by 1%. These rate changes and the retroactive amounts will be included in our Q4 2021 results. I'll now turn it over to David Bacon, our Chief Financial Officer, to provide further insight into our consolidated and segmented financial results for the third quarter. David.