Sienna Senior Living Inc.

Ladies and gentlemen, welcome to CNO Senior Living, Inc.' 's second quarter 2022 conference call. Today's call is hosted by Nitin Jain, President and Chief Executive Officer, and David Hung, Chief Financial Officer of CNO Senior Living, Inc. Please be aware that certain statements or information discussed today are forward-looking and actual results could differ materially. The company does not undertake to update any forward-looking statements or statements. Please refer to the forward-looking information and risk factors section in the company's public filings, including its most recent MD&A and AIF for more information. You will also find a more fulsome discussion of the company's results in its MD&A financial statements for the period, which are posted on CDAR and can be found on the company's website, cnliving.ca. Today's call is being recorded and a replay will be available. Instructions for accessing the call are posted on the company's website, and the details are provided in the company's news release. The company has posted slides which accompany the host's remarks on the company website on the events and presentations. With that, I will now turn the call to Mr. Jain. Please go ahead, Mr. Jain.

Thank you, Shannon. Good afternoon, everyone, and thank you for joining us on our call today. Our second quarter results reflect the continued improvements across our operations. and highlight the benefits of running a large, diversified operating platform. Our solid results come at a time of economic uncertainty and highlight the stability of our long-term care operations and the growth potential inherent in our retirement platform. This was highlighted in our year-over-year same property net operating income growth of 19.7% in our retirement portfolio and 2.7% growth in our long-term care portfolio. Average same property retirement occupancy increased by 820 basis points to 87.1% year-over-year in second quarter of this year, leading to significant NOI growth despite higher labor costs and inflationary pressures. Occupancy further increased to 88.6% in July, a level not seen since well before the pandemic. In line with the positive occupancy trend, we updated our occupancy forecast for the retirement portfolio increasing into approximately 89 to 90 percent by the end of 2022 from the previous guidance of 87 to 89 percent our sales and marketing teams have been generating strong interest in our residences by building and maintaining excellent relationships in the local communities their efforts coupled with strong demand resulted in an increase in rent deposits in our same property portfolio 14 and then and an increase in movements of approximately 19 year-over-year compared to q2 2021 We also expect our new Espira retirement brand to support continued occupancy growth by offering personalization and expanded choices to residents. In late April, we launched a new website for Espira and started rolling out new signature programs. The immediate response from prospective residents and families has been compelling. Initial results indicate that qualified leads have increased by approximately 26% during the first month after the launch compared to the same period in 2021. Our teams have also worked tirelessly to integrate the 12 retirement residences we acquired during the quarter into the Espira platform. Average Q2 occupancy was approximately 82% at the acquired residences, or 84.1%, excluding one retirement residence that is currently in visa. While this reflects some softening in recent months, we are confident that occupancy trends will become more consistent with the overall portfolio once these residences and team members are fully integrated into the Espira platform. Now moving to slide seven. In our long-term care communities, resident admissions progress steadily throughout this quarter. Average same property occupancy reached 95.5% in the second quarter. And in February of 2022, the government of Ontario reinstated occupancy targets of 97% required for full funding. Given the long waiting list for long-term care beds, we anticipate to meet the required occupancy targets at majority of our care communities for full funding this year with limited impact on NOI. Moving to our development plan, over the past year, we prioritized our plans to redevelop our aging Class C long-term care portfolio in Ontario. Our plans include over $600 million in capital investments, and to date, we have received bed license allocations from the Ministry of Long-Term Care for 12 of our long-term care communities with a total of 2,600 beds, including approximately 1,800 for renewals and over 800 for new beds. Current supply chain issues and high inflation have slowed the development momentum in recent months, including at a project in North Bay where construction started last year. We are closely monitoring cost escalations with respect to material and labor and their impact on our construction starts, estimated development yields, and the economic feasibility of our current and future projects. Staffing will remain one of the biggest challenges for some time, and we have been very active on many fronts to bridge the existing labor gap. Externally, we continue to advocate for faster immigration and expedited placements of internationally educated nurses. Internally, we are making important investments with respect to our staff scheduling and call-out software to support our scheduling initiatives. We are currently implementing a new system that will provide greater visibility to staffing on a real-time basis. This new technology will help us fill staffing gaps more seamlessly and faster. It will also help us better monitor agency staffing and improve scheduling for our own team members. The new system is expected to be completed later in 2022 across all of our long-term care communities and will be rolled into our retirement platform after that. We expect competition for talent to further intensify in the years ahead, and we will continue with enhanced recruitment campaigns at key colleges and universities. During the first six months of 2022, over 1,100 students were placed at our care communities and retirement residences, many of whom we hope to hire once they graduate. Our recruitment strategy is also focused on strengthening our employer brand. We do this by more clearly communicating what it means to be part of Ciena with a goal to become the employer of choice in Canadian's senior living sector. We plan to achieve this objective by offering a compelling team member experience and by nurturing our purpose-driven culture. Making sure our team members feel supported and appreciated has never been more important and is reflected in many of our initiatives, such as our share ownership program, SOAR. Subsequent to the approval of SOAR by our shareholders at the annual general meeting in April, shares in the amount of $1.6 million were issued to team members as part of our initial $3 million commitment. With that, I'll turn it over to David for an update on our operating and financial results.

Thank you, Nitin, and good afternoon, everyone. I will start on slide 11 for financial results. Sector fundamentals continue to strengthen during the second quarter. Increasing demand for quality seniors living in many of our key markets, coupled with our successful marketing, sales, and rebranding initiatives are reflected in Ciena's second quarter results. At the same time, intense competition for talent, cost pressures, and decades high inflation continue to impact our operations. In Q2 of 2022, total adjusted revenues increased by 10.7% year-over-year to $180.2 million. This increase was largely due to occupancy and rental rate growth and additional revenue from the 12 properties we acquired this quarter in our retirement segment and flow-through funding for increased direct care provided to residents, as well as higher preferred accommodation revenues from increased occupancy in our long-term care segment. partly offset by lower revenues as a result of two properties that we sold earlier in 2022. Total net operating income increased by 10.3% to $34.2 million this quarter compared to last year. Our retirement segment contributed $3.6 million of this increase, mainly through same property NOI growth of $2.5 million and $0.9 million of additional NOI from our 12 new retirement properties. Our LTC segment was stable with total LTC NOI lower by $.4 million compared to the last year. Retirement saving property NOI increased by 19.7% to $15.1 million compared to last year, primarily due to occupancy improvements and annual rental rate increases in line with market conditions, as well as lower net pandemic expenses. This was partially offset by higher costs for agency staffing, culinary costs, utilities, insurance, and marketing costs. Rent collection levels remained high at approximately 99%. Ciena's long-term care same property NOI increased by 2.7% to $18 million compared to last year, primarily due to increases in preferred accommodation revenues from increased occupancy, offset partly by higher utilities and insurance costs. Over the past two years, we have seen significant cost pressures, including higher agency costs due to staffing shortages, increased insurance premiums, and rising utility costs, in addition to generally high inflation in line with the overall market. With respect to our retirement portfolio, we expect that continued occupancy gains, rental rate increases, and improving operating environment will help mitigate these cost pressures, and we expect operating margins to moderately improve by 50 to 100 basis points during the second half of 2022 compared to the second quarter. We further anticipate that net pandemic-related expenses will range from $2 to $3 million in the third quarter of the year as a result of recent increase in COVID-19 cases. Moving on to slide 12, during the second quarter of 2022, operating funds from operations increased by 14% to $17.3 million compared to last year, primarily due to higher NOI, partly offset by higher current income tax expense as well as higher administration expenses. Q2 OSFO per share increased by 5% to 23.7 cents. Adjusted funds from operations increased by 22% to 17.2 million compared to last year due to higher OSFO as well as lower maintenance costs. ASFO per share increased by 12% to 23.6 cents in Q2 2022, resulting in an ASFO payout ratio of 99%. Looking at our debt metrics on slide 13, our debt to gross book value decreased by 210 basis points to 43.4% at the end of Q2 2022 compared to 45.5% at the end of Q2 2021, mainly due to mortgage repayments, largely with proceeds from property dispositions earlier in the year. Debt to adjusted EBITDA increased to 9.5 years in Q2 2022 compared to 7.4 years in Q2 2021. And interest coverage ratio increased to 3.2 times in Q2 2022 compared to 3.1 times in Q2 2021. Our debt is well distributed between unsecured debentures, credit facilities, unsecured term loans, conventional mortgages, and mortgages insured by the Canada Mortgage and Housing Corporation. And our debt maturities are staggered with the next significant expiry being our $90 million unsecured term loan due in May 2023. Refinancing of this loan, which was used to support the acquisition of our 12 retirement residences, is well underway. I will now turn the call back to Nitin for his closing remarks.