Extendicare Inc.

Thank you for standing by. This is the conference operator. Welcome to the Standard Care, Inc. First Quarter 2023 Analyst Conference Call. As a reminder, all participants are in listen-only mode and the conference 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 then zero. I would now like to turn the conference over to Jillian Fountain, Vice President, Investor Relations. Please go ahead.

Thank you, operator. And good morning, everyone. Welcome to Extended Care's first quarter 2023 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 Q1 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 May 19. The replay numbers and passcodes have been provided in our press release and an archived recording of this call will also be made 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. I'm pleased to report that in the first quarter we saw improvement in our financial results and growth in our key operating metrics across all our business segments. This was supported by continued easing of pandemic impacts and a significant recovery of our 2022 unfunded COVID costs. I'll begin our presentation today with an update on COVID-19 funding and its impact on our operations. While outbreaks were prevalent throughout the winter, they dropped off significantly as we entered the second quarter. Accordingly, the Ontario government updated COVID-19 guidance for long-term care homes to phase out many prevention and containment measures at the end of the quarter, including the elimination of biweekly testing of asymptomatic staff and relaxing of certain screening and physical distancing requirements. with clear signs that the pandemic is transitioning to endemic status, we've been able to resume the more vibrant social interaction in our homes that our residents and their families have missed for so long. These changes mean pandemic-related costs across the business are winding down. Although some infection control protocols adopted during the pandemic have become permanent, The April 1st step-up in direct care funding in Ontario will address any related costs. With fewer outbreaks, occupancy has continued to recover, including improvement in our preferred accommodation occupancy. Accordingly, both the Ontario and Manitoba governments announced the end of pandemic funding effective April 1st. Funding related to prior period COVID-19 costs once again drove volatility in our financial results this quarter. We recognized $13.1 million in prevention and containment funding related to costs incurred last year, resulting in a net recovery of COVID costs of $12.1 million in the quarter. We are grateful for the funding we have received from provincial governments to support long-term care throughout the pandemic. We do not anticipate any further material recovery of COVID-19 costs. Turning to our strategic transactions on slide four, we continue to advance through the regulatory approval process in Ontario and Manitoba in connection with our previously announced strategic partnerships with Axiom and Revera. We anticipate being able to close both transactions in Q3 this year. This will mark a key milestone for extended care as we transition to a less capital intensive growth model to meet the increasing care needs of an aging population. In anticipation of regulatory approval, we have advanced a comprehensive integration plan so we are ready to effect a smooth transition soon after approval is received. These transactions are consistent with our strategy to leverage our deep expertise and scale to drive higher margin growth in our managed services segment. This capital efficient business model will provide extended care with greater flexibility to allocate capital to growth initiatives, including acquisitions. The aggregate consideration to be paid on closing of these transactions remains an estimated $70 million. Though we were not active under our NCIB in Q1, we purchased an additional 520,800 common shares for cancellation subsequent to the quarter end. Since the bid launched in June 2022, we've returned $38.4 million to shareholders. Moving to slide five, we continue to pursue our redevelopment agenda with the launch of our fourth redevelopment project in Peterborough. The new 256-bed long-term care home will replace the existing 172 Class C home that we currently operate in that community. Total investment in the project is estimated to be $96.6 million, and construction is scheduled to commence in the second quarter with projected completion in Q4 2025. Together with our Sudbury, Kingston, and Stittsville projects, the four homes will comprise 960 new beds, replacing 834 Class C beds. We continue to work to break ground on up to three further projects this year to take advantage of the time-limited capital funding supplement of $35 per diem available in Ontario. Tendered construction costs and receipt of applicable regulatory approvals will largely determine whether and when they might proceed. We are also working to advance the balance of our 20 project portfolio to ensure they are construction ready in anticipation of capital funding that may be made available in the future. Turning to operational highlights on slide six, performance improved in each of our business segments in the first quarter. Outbreaks in our homes eased throughout the quarter, enabling us to improve long-term care occupancy by 60 basis points over Q4 2022. Underlying the significant recovery of unfunded COVID costs in the first quarter, we continue to experience staffing challenges and inflationary pressures that impact our operating costs. The Ontario government increased long-term care funding by 2% effective April 1st, lagging the inflationary cost increases of the past few years that are weighing on long-term care margins. We continue to work with other sector participants and the government to identify solutions and align funding to better address continued cost pressures. In our home healthcare segment, we experienced a 2% sequential quarterly increase in our average daily volumes, representing growth of 6.1% from the prior year period. While labour market shortages remain our most significant challenge, our retention and recruiting programs have enabled our return to growth. We are experiencing strong demand for our services, driven by demographic trends and the health services backlog which developed over the course of the pandemic. Accordingly, in its March budget, the Ontario government announced that it's accelerating a $569 million investment in home health care funding, including $300 million allocated for contract rate increases to help stabilize staffing in the sector. Although we are not yet clear on the exact details and timing of this rate increase, the funding will help us to meet the growing needs for home health services across the province. Finally, in our managed services segment, we continue to experience strong growth in our SGP customer base, which increased 1.9% from Q4 and 13.1% from the prior year period. With that, I'll turn it over to our CFO, David Bacon, to discuss our first quarter results in more detail.