Extendicare Inc.

Thank you for standing by. This is the conference operator. Welcome to Extendicare, Inc. Third Quarter 2023 Analyst 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, 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 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 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 accompanied slide presentation, which viewers may advance themselves. A replay of the call will be available later this afternoon until November 24. The replay numbers and passcodes have been provided in our press release, and an archive 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 Mike.

Thank you, Jillian, and good morning. Our third quarter results reflect substantial improvement in our financial performance across all our operating segments, with improving operating margins and strong growth that reflect the compelling market opportunity emanating from the growing demand for seniors' care. This quarter also marks a significant milestone in our strategic transformation, with the close of the Revera and Axiom transactions. Our Q3 results give us a first look at the impact of having the 56 Riviera and joint venture homes as part of our managed services portfolio. Our long-term care operations continue to recover from pandemic-related impacts. Occupancy improved 60 basis points from Q2 to 97.8%, up 430 basis points from the prior year. Cost management initiatives and moderating inflation are driving better margins. Notably, our teams have made steady progress in lowering the use of high-priced agency staff as we recruit full-time care professionals to staff our homes. While better alignment of costs and funding in the quarter improved long-term care margins, we are still contending with funding increases that have fallen behind inflation in recent years. We continue to work with the government and sector partners to address the ongoing funding gap in a joint effort to return the long-term care sector to its historical financial stability. Our home health care segment continues to perform well, overcoming the seasonal softness usually experienced in the summer months to deliver its fourth quarter of consecutive volume growth. Average home health care daily volumes increased 1% from the previous quarter and were up 9.3% from the prior year. Our technology-enabled back office proved highly scalable, allowing us to reduce costs while expanding volumes. Along with government rate increases that offset increased operating costs, we are making steady progress in restoring operating margins to historical norms. We expect continued strong demand for our services, supported by demographic trends, which will continue to drive growth in the coming years. SGP added significantly to its market share in the quarter, increasing its third-party and joint venture beds served by 11.6% from Q2, up 20.5% from the prior year. On slide four, we look at the impact of closing the Riviera and Axiom transactions. which were key steps in our strategic transformation to focus on long-term care and home healthcare using a less capital-intensive, higher-margin business model. These transactions set in place a foundation to support growth as demographics increase demand for the services that extended care provides. We will focus on expanding long-term care managed services building new homes utilizing the joint venture partnerships to support capital requirements, and growing our home healthcare services. Our managed service offerings include management contracts, redevelopment services, consulting services, and the SGP Purchasing Partnership. The Axiom transaction closed on September 13th, at which time the limited partnership joint venture formed with Axiom acquired our four Class C home redevelopment projects under construction. The projects comprise an aggregate 960 funded long-term care beds in Sudbury, Kingston, Stittsville, and Peterborough. We realized a gain of $8.7 million with net cash proceeds to Extendicare of $59 million. The partnership with Axiom provides us with a more capital-efficient business model for the redevelopment of our C-class long-term care homes, with Extendicare retaining a 15% managed interest in each new home. We will continue to undertake all development and construction management activities in respect of the homes sold into the joint venture earning development fees in our managed services segment during construction. On completion, Extended Care will operate the homes, earning recurring management fees and SGP revenues over the life of the home. Note that Extended Care continues to own and operate the legacy C-class long-term care homes, which are to be replaced by the redevelopment projects sold into the joint venture. The revenue in NOI from those legacy homes will continue to appear in our results until the developed home opens. At that time, the seabed home will close and recurring management fees and SGP revenues earned from the joint venture will enhance our managed services segment revenue in NOI. Our 15% share of the joint venture AFFO will also be included in our results. We will then work to monetize the closed C-class homes, selling or repurposing the property for alternative uses to generate additional proceeds or sources of revenue. As previously reported, the Rivera transactions closed on August 1st, adding 56 homes and approximately 7,000 beds to our managed services segment. We acquired a 15% managed interest in 25 of these homes through an existing limited partnership joint venture with Axiom. The recurring fees earned for managing these homes since the close on August 1st are reflected in our managed services segment in the quarter, adding approximately $4 million of revenue and $2 million in NOI. We are working to complete full integration of the operations and IT platforms supporting the 56 homes and approximately 9,000 team members by the end of 2024. Moving to slide five, subsequent to the end of the third quarter, we broke ground on a new 256-bed home in Orleans, Ontario. which qualified for the capital funding subsidy program that ended in August. This home is expected to open in Q2 2026 and will replace a 240-bed Class C home in the Ottawa area, bringing to five the number of extended care projects under construction. We anticipate that the home will be sold into the Axiom joint venture. This new Ottawa project, together with the four projects recently sold into the JV, total 1,216 new beds under construction, replacing 1,074 Class C long-term care beds in Ontario. The temporary enhancements to the Ontario government's capital funding program expired at the end of August. While no successor program has been announced as yet, We continue to advance the remaining 15 homes in our redevelopment portfolio in anticipation of future funding availability. Construction costs, interest rates, and applicable regulatory approvals will be pivotal in determining whether and when our other projects might be financially viable to proceed. Additionally, as part of the Revera transactions, we have the option to purchase, alone or with Axiom, all future long-term care redevelopment projects that proceed in connection with Revera's 30 Class C long-term care homes that we now manage. With that, I'll turn it over to our CFO, David Bacon, to discuss our first quarter results in more detail.