Extendicare Inc.

Welcome to the Extendicare Inc. 3rd Quarter 2022 Analyst Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll 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 then 0. 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 third quarter 2022 results conference call. With me today are Extended Care's President and CEO, Michael Greer, and our Senior Vice President and CFO, David Bacon. Our Q3 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 accompanied slide presentation, which viewers may advance themselves. A replay of the call will be available later this afternoon until November 25th. 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, and good morning. Before we begin on this November 11th, it is important that we take a moment to acknowledge and remember those who have served our country and had the courage to defend our shared ideals and values in the face of immense personal risk. In our capacity as a seniors care provider, it has been our profound privilege to know and serve many veterans who sacrificed much to defend our freedom and way of life. Today, we honor those heroes for their service to our country and remind ourselves that we owe them our gratitude and respect. Now let's turn to our results for the quarter. Our sector continues to be impacted by multiple challenges. COVID-19 remains an ever-present concern in our homes, even as our society moves on from pandemic-related restrictions. High levels of COVID transmission in the community continue to result in outbreaks in our homes. These outbreaks drive higher costs related to infection control and slow the pace of our occupancy recovery. Also, increased sick leave due to infection or isolation protocols exacerbates sector-wide staffing challenges. Fortunately, widespread vaccination has dramatically reduced the incidence of severe illness. The introduction of bivalent COVID vaccines in September offers a new tool to protect our residents, and uptake of boosters continues to be robust. Throughout the quarter, most of our homes experienced an outbreak. As of yesterday, 12 of our 53 long-term care homes were in outbreak. The shortage of caregivers continues to create challenges for the whole health system. In home healthcare, record low unemployment and labor shortages are making it difficult to grow average daily volume despite the continued strong demand for our services. Staff shortages are also driving increased costs from higher wages and benefits over time and travel costs. Increased spending on recruitment, retention, and training is also adding to pressure on our home healthcare NOI margins. We continue to invest in educating new caregivers through college partnerships and in-house training programs. In addition, various provincial and federal government programs are providing funding to increase staff capacity. However, it will take time for the impacts of these programs to be felt. We will continue to incur elevated COVID-related costs in our ongoing efforts to protect our residents, patients, clients, and staff. until the threat of the pandemic has abated. We have received funding to cover 90% of these costs, leaving a cumulative unfunded COVID cost for continual operations at $22.9 million. As of the end of Q3, the Ontario Ministry of Long-Term Care had fully allocated all the prevention and containment funding it has announced today. While additional funding has not been announced as yet, we expect provincial support for COVID costs to continue as long as outbreaks persist across the LTC sector. Alberta and Manitoba have already indicated their intention to continue to provide pandemic funding support for the foreseeable future. While we are grateful for the support we have received, we will likely continue to experience volatility in our financial and operating results until pandemic impacts recede and the labor market returns to a more balanced state. Turning to slide four, in October, we completed the transition of ownership and operations of our five Saskatchewan long-term care homes to the Saskatchewan Health Authority. The aggregate purchase price of $13.1 million will result in a gain on sale, net of taxes, and closing costs of approximately $4.9 million in Q4. Work continues to prepare for the close of our previously announced transactions with Rivera and Axiom. These transactions will enable us to transition our long-term care operations to a more capital-efficient platform for growth. Regulatory approvals in Ontario and Manitoba are still in progress. In the meantime, we are working with Riviera and Axiom on a comprehensive integration plan to ensure a smooth and expedient transition following approval. We have incurred approximately $5.2 million year to date in strategic transformation costs related to these activities. The aggregate consideration to be paid on closing of these transactions remains an estimated $70 million. At the same time, we continue to return capital to shareholders by purchasing shares under the NCIB that we initiated in June, following the completion of the sale of our retirement living segment. As at November 9th, we had purchased for cancellation approximately 3.6 million common shares at a cost of $25.5 million and representing a weighted average price per share of $7.08. Moving to slide five, we continue to make progress on our 20 long-term care redevelopment projects, which represent 4,248 new or replacement beds. Three of these projects are currently under construction and are progressing toward opening between the third quarter of 23 and the first quarter of 24. Labor shortages and supply chain disruptions did delay our Kingston project into Q4 of 23, and rising construction costs and interest rates have made it challenging to start construction on any additional projects. We remain fully committed to redeveloping our older seabed homes. We are actively engaged with industry partners in the Ontario government to enhance the government's capital funding program to address construction inflation and make these projects economically feasible. We are working to have up to six more projects ready to break ground before the end of 2023 if business conditions are favorable. Now we'll turn to a few operational highlights in slide six. Despite the prevalence of COVID in the community and outbreaks in our homes, long-term care average occupancy improved 90 basis points in the quarter. While navigating the challenges of the pandemic and the tight labor market, we are also faced with inflationary pressures that are significantly impacting our operating costs. Funding rate increases have lagged inflation in our long-term care segment negatively impacting our financial performance with LTC NOI margins down 230 basis points from the prior year. In our home health care segment, an extremely tight labor market, combined with ongoing pandemic-related staff absenteeism and seasonal impacts, resulted in lower average daily volumes of 25% on a sequential basis. In our SGP customer base, we continued to see strong growth during the quarter, up 4.7% from Q2 and up 21% year-over-year. The pandemic continued to cause volatility in our results with ongoing mismatches between costs and funding. Pandemic-related spending increased during the quarter to $22.5 million, up $400,000 from Q2, as outbreaks continued in our long-term care homes throughout the quarter. Our COVID costs were largely funded and included $1.1 million for the prior year, resulting in net unfunded costs of $500,000 in the quarter. With that, I'll turn it over to our CFO, David Bacon, who will comment on our consolidated and segmented financial results for the third quarter. David.