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.

Thank you, David. The Canadian senior living sector continues to evolve at a fast pace. Amid the changing landscape, we are reaffirming our strategy to grow a balanced portfolio in which our retirement and long-term care operations each make a significant contribution to the company's overall net operating income. With deep experience and skill in each segment, we run two distinct business lines which are deeply aligned with respect to a newly defined purpose to cultivating happiness in daily life. It conveys our belief that our role does not stop at providing the highest quality of service and care to a resident. It goes much further. Each and every day, we'll strive to bring happiness into our residents' lives by enabling our team to put their passion for their work into action and by supporting families to bring joy into our homes. In retirement and long-term care, we are committed to helping residents discover happiness through personalization, choice, and community engagement in a comfortable home-like setting. And in doing so, each and every day, it supports our vision to be Canada's most trusted and most loved senior living provider. Moving to our focus on ESG, our key focus to create positive changes for our stakeholders and the communities we serve is also highlighted in Ciena's second ESG report, which was published yesterday. The need for quality seniors care and services has never been greater, and I feel confident about our long-term growth potential and position to meet the needs of Canadian seniors during a time of unprecedented growth. Yesterday we announced that Dino Chiazza, who had led Ciena's chair of the board of directors, has decided to step down after 12-year tenure on Ciena's board. On behalf of our board and our management team, I would like to express my gratitude to Dino for his guidance that supported Sienna's growth and transformation. His extensive experience, wisdom, and leadership over the past 12 years, and especially through the pandemic, shaped our organization and positioned us well in the fast-growing Canadian civil living sector. As a token of our appreciation and in recognition of Dino's commitment to this company and leadership in this sector, we're introducing the Ciena Senior Living Dino Chiazza Scholarship of $50,000, which will fund education and training for 10 PSWs across Ontario, BC, and Saskatchewan. We are so very pleased to honor Dino through this program and to be able to support the people serving the senior living sector. Shelley Jamieson, who joined Ciena as an independent director in November of 2021, has been appointed as company's new chair, and I would like to sincerely thank Shelley for taking on this role. As we pursue our vision to become Canada's most trusted and most loved senior living provider, I'm looking forward to working with Shelley, whose impressive expertise in senior living, healthcare, and government will guide us as we continue to grow our company and to add value to our operating platform. We are not pleased to answer any questions you may have.

Thank you. As a reminder, to ask a question at this time, please press star 11 on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from Jonathan Kelcher with PD Securities. Your line is now open.

Thanks. Good afternoon. Good afternoon, John. First question, just on the margins for retirement home, just want to confirm. So the 50 to 100 basis points potential you're looking for the back half of this year, that's off the 38.3% you had in Q2?

That's correct, Jonathan. It would be off the 38.3%.

Okay, and then the 2 to 3 million in pandemic costs, do you expect that more on long-term care or retirement?

It's going to be a combination of both. In the long-term care side, it would more be in BC, and then we would expect some pandemic costs as well in retirement. So it would be both segments.

okay and that 50 to 100 obviously is exclusive of the uh the pandemic cost uh it would uh yes it would be exclusive of the pandemic cost okay and then longer longer term given that we're in the i guess seventh wave of of this thing now and and the costs seem to be sort of a recurring thing um at what point does it sort of become more of a permanent cost, and how should we think about margins longer term?

Hi, Jonathan. Good afternoon. So what we are seeing is that costs decline year over year. So this wave, we have around 22 residences in outbreak, but what we're finding, the outcome to be very different than what we had, especially in the first, second, and the Omicron wave, where in most cases, the cases are very mild to moderate, and it's more around Just outbreak management to make sure that doesn't spread and people can dine in social settings and others. So we do continue to see a reduction in that cost. And in Ontario and time to time in BC and sometimes in retirement, we do get funding to offset these pandemic costs. So we continue to remain hopeful and confident that eventually this cost will grind down closer to zero. And if it does become permanent, for example, for whatever reason, then we would expect funding change in long-term care, and we would expect to be passing on this cost to the end resident as well.

Okay. That's helpful. I'll turn it back. Thanks. Thank you.

Thank you. Our next question comes from the line of Scott Frumson with CIBC. Your line is now open.

Hi, thanks. Just a question on the retirement resident occupancy. Can you comment on what kind of incentives you offered and basically how you've been so successful in driving occupancy gains?

So thank you, Scott. Good afternoon. I know we get this question asked often by investors, so let me just say for the record. So we are not driving occupancy by offering incentives, and I would say quite the opposite. So, you know, we might do one-time programs in a community here and there, not very different than market, could be a month free or some help with move-in. Really, our occupancy drive is driven by the RSVDA platform, which is personalization, our own choice, inviting the local community. And the third part, that's really where all the local networks, working closely with the doctor's offices, the hospitals, making sure that the people who are visiting, we are speaking to them often. So it really is a lot of that work on the field and our sales team and marketing team have done an incredible job of that.

And have you seen tangible benefits of the new brand?

What has been surprising to us in a good way was that even though we officially launched the brand in April, We started to see the benefit even before that because internally we've been talking about the brand for close to a year. And a lot of frontline managers and leaders have been part of it. So we didn't realize it, but our team started selling it if the brand already existed, even though before we officially launched the website and others. So we did see the benefit. Our leads were up significantly once we started speaking about the brand and putting some of the programs into place. So we definitely see the benefit of in the past and continue to see that going forward as well.

Thanks. And finally, how do you see the current macro environment with inflation and rates and labor availability? How do you see that changing your plans, if at all, for development?

Sure, and this is where we truly believe that having a diversified portfolio is a huge strength. It's one plus one does not equal two because we have seen just in a short period of my nine years at Ciena, we have seen different cycles where you have good growth and long-term care, stable, predictable. So it becomes, well, no one is interested in long-term care at the moment because retirement is growing with double digits. Then you have multiple markets which are oversupplied and retirement occupancy declines and you have negative NOI growth. And then suddenly everyone likes long-term care because it's stable, predictable, and then the cycle goes back and forth. So we have seen that enough in the last just even eight or nine years that we feel having both of them is a natural offset against market conditions in Rising inflationary costs. Obviously, retirement would be good because you can pass on that. Eventually, that cost to the end resident and long-term care become challenging. In an economic uncertainty, where we would be headed, it looks like, long-term care, the stability and predictability, whether it's debt rating, whether it's our cash flow, whether it's a dividend, it definitely supports that. And from a development perspective, you know, our development is mostly tied to long-term care homes in Ontario other than a few partnerships with others. And we remain committed to that development, and we do expect that funding cost to change over time because the current funding program is not adequate given the construction cost.

Thanks, Minton. That's helpful. We'll turn it over. Thank you.

Thank you. Our next question comes from Himeshu Gupta with Scotiabank. Your line is open.

Thank you and good afternoon. So just a question on the long-term care. I mean, long-term care margins have come down in the first two quarters. How should we think about the LTC margins on a four-year basis? And are there some expenses which are yet to be recovered from the government there?

Sure. Thanks for that question. Just on a full-year basis, we would anticipate that our margins would be similar to what they were in the first half of the year, around 13%. One thing that you should consider is that, you know, in Q4 of last year, we started receiving flow-through funding from the government for direct care hours. So that had the effect. And, of course, there's no margin on... on that funding. So it has the impact of increasing our revenues, but there's no impact to our NOI, and as a result of that, decreases our NOI margin. So all that to say that, you know, going forward, we would anticipate that the margin for the second half of the year would be similar as the first half.

Okay. And is that something structural, or do you see that recover back in 2023 from the margin perspective?

Yeah, no, it's not structural. Again, some of the margin compression is because of the flow-through funding that we're starting to get for direct care hours. We anticipate that as government funding increases back for other accommodations, we would see that margin expansion happening again in 2023 and beyond when the government starts funding for our other accommodations.

The only thing I would add to that, Himanshu, I think going forward it will be important because there's significant, especially in Ontario, there's significant funding changes as it relates to their care hours. And, you know, you cannot, there is no margin in care. So what happens is our funding is going to go up, but it's going to be flowed through. So either it's going to be spent or you have to give it back to the government. So I think what we might have to start measuring is margin dollars versus percentage because we do expect Let's say if suddenly everything went back to pre-pandemic, but direct care hours are not going to fall, our margin would decline just mathematically. So we can start providing a bit more. We'll look at how better we can provide some more information in our disclosure as well to help with that.

Okay. Thank you. Thank you for that. And then just to clarify, there was no shortfall, NY shortfall, because of occupancy protection. I mean, you're not meeting 97% has not impacted NY margin at all in Q2.

Yeah, that's correct. We took a small provision in the second quarter for, you know, a handful of homes that we don't, that may not achieve the 97%, but nothing significant.

Okay, thank you. And then, you know, sticking to margins, but shifting to retirement home, just a clarification that 50 to 100 basis point guidance gets you to almost 39% kind of levels. But that includes the impact of pandemic expenses of $2 to $3 million, because that's spread across retirement home and LTC. Like, is that correct to say that?

Yes, sorry, I should clarify that it would be 50 to 100 basis points on top of the 38.3%, just to clarify.

Yeah, but it includes the impact of pandemic expenses as well.

That's right, it would, because the 38.3% also is inclusive of the 38, is within the 38.3%.

Exactly, okay, fantastic. That's what I was going to clarify. Thanks for that. Last question on the occupancy discussion. I mean, obviously, you've done a good job there. Just wondering, you have, I think, two or three properties in the greater Ottawa region, maybe four. I think what I could calculate here. How's the occupancy doing in the Ottawa region for your portfolio?

Yeah, I mean, our occupancy in Ottawa region is also going up, obviously, as a, you know, so let's say if stabilized in the rest of the provinces, 95, 96, in Ottawa might be a bit lower. But we did see occupancy gains in Ottawa as well.

Okay, that's great to hear. And maybe one last question here. You know, we keep hearing about the staffing shortage. Is that a bigger issue in the retirement home, or is it a bigger issue in the long-term care?

I would say it's a bigger, I mean, it's really the issue is in both. It becomes a bigger issue in long-term care because for the same amount of beds, like 160-bed long-term care home is going to nearly have 160 staff members and 160 retirement suite might have 50 or 60. So I think that the quantum becomes higher just because there are more people, but as a percentage, it would be similar. And where it becomes challenging, especially for nurses, because In a long-term care home, a 160-bed long-term care home, at any given time, you would have multiple nurses in the home. And in retirement, there might only be one. So once you're missing that one person, now you are in a significant challenge and you're relying on agencies. I would say it's in both. In one case, it's more volume, but the impact is quite similar in both portfolios.

Okay, fair enough. Thank you. Thank you so much.

Thank you.

Thank you. Our next question comes from the line of Pammy Burr with RBC. Your line is now open.

Thanks. Hi, everyone. Nitin, I think you mentioned some softening in the occupancy and the retirement portfolio that you acquired. Can you just comment on maybe what were some of the drivers behind that? And then I'm not sure if you mentioned it, but how much it slipped?

Sure. It would be hard for me to comment because it came in at a lower occupancy than where we expected it to be at. I wouldn't know the reasons why it started lower. Having said so, what we are saying is that we feel confident in bringing that back up. It does take... two or three months to you know integrate things i get the sales and marketing program going usually it would take even longer i was recently in many of those uh properties and i and i and i expected to hear a lot of integration pains and in most cases i heard uh things went extremely well uh you know they felt very welcome to uh to the spirit and sienna family so we think Instead of having a six-month integration plan, we expect that it will be shorter, which is good news. And it's a bit early for us to confirm as to where we can grow that occupancy the next 12 months, but we remain confident and optimistic that we can start bringing it closer to overall Espira platform occupancy.

Okay. And just in terms of maybe building on those comments around driving the occupancy, what can you share in terms of maybe what you plan to do differently that will help drive the occupancy in those assets? And ultimately, that's the 6% targeted yield.

Sure. I would say, again, I don't know what was being done before, so that's not for me to comment on. I think what what we would be focusing on is putting the same sales and marketing platform that we have for Espira homes in those homes. So when we underwrote that, that was our expectation. So that's what gives us the confidence that we can get those homes at a similar level that we have the rest of the Espira platform at.

Okay. I will turn it back. Thank you.

Thank you.

Thank you. As a reminder, to ask a question at this time, please press star 1-1. Our next question comes from the line of Tal Woolley with National Bank. Your line is open.

Hi, good afternoon, everyone.

Hi, good afternoon, Tal.

You know, I was just curious if you think on the horizon there'll be any sort of steps taken to maybe rein in agency usage or maybe regulate it a little bit more just because it's not just an issue, obviously, for long-term care and retirement. It's a big issue in hospitals or any sort of healthcare setting right now. What's What's the thinking, or what's sort of the, maybe the OLTCA's view and your view around that? Anything in the works on that front?

Sure, so that has been a discussion for a long period of time, and they are, I don't think they're very good examples in Canada at the moment, but U.S., for example, I think they have for a couple of years now, because they have seen this happening even before For example, they put a maximum rate of agency cost regardless of which sector you're in, and that has a huge impact. So if people are going to work in agency because they want a lot more flexibility than they have, that would make sense and that doesn't happen. And you can never make it to zero because if people call out at the last minute, at that time you're calling agency staff. But what we're seeing happening in healthcare broadly, whether it's hospitals, home care, long-term care retirement is that people are leaving because suddenly you don't have to follow all the union agreements and everything else. You can just go to its agency. And because the regulations, you know, you cannot do certain things unless you have a nurse on your floor. So it doesn't really matter what the cost is. You pay for it. And we, you know, I think last year we, just Siena, we paid around close to $50 million in agency costs. And a lot of it is funded by government. So I think it's in everyone's best interest, you know, to bring that down because it is not, in most cases, not benefiting the end, you know, team worker anyways because a lot of it gets lost in the middle. So we continue to advocate for it internally. We continue to advocate with the associations and with government whenever we have the forum.

Okay. And then I guess one of the other surprises, I think maybe, I mean, I'm curious to hear your perspective on it, is just the fact that there was no accommodation premium increase I'm just wondering if you can sort of maybe put that into context historically and whether it was surprising to the industry at large.

Yeah, I mean, it definitely was surprising because we are, especially when you're in an inflationary environment, And I think this is where a bit of a lesson in long-term care is important for all of us, that we always say that long-term care is stable, predictable over a period of time. So you would have years where you're below CPI and the years which you're above. For example, there was a period of time in 2014 where the private accommodation number increased by 5 or 6% a year without having any increases for nearly 15 years, so there was a bit of a catch-up. We understand government is also facing similar economic conditions as the rest of the industries are. So for example, food has gone up significantly and there was a big focus on ensuring the food costs got funded. There was a big focus on care costs, so that's where the care hours are increasing. We continue to advocate for better funding for OA as well because that's where You pay for utilities. That's where you pay for insurance and all of that, which has gone up significantly. So, again, if history tells us anything, it will be that over time they will be caught up. But you're correct 100% that there is a shortfall for the current time period.

And with the Class C beds, I'm just wondering – Is there any concern around lending on those assets as we get closer to 2025 and if the redevelopment process kind of needs to go through another rethink here in terms of the formula? Is there anything that the industry is going to have to manage in terms of trying to figure out how lending is going to work?

Just to clarify, I guess the second part of the question is the first part on the current seahomes. Is that the question?

Yeah. I'm just thinking it's probably already pretty clear that the industry is not going to get through the entirety of the current seabed by 2025. But my understanding is that there's a bit of a challenge around refinancing loans on some of these homes, you know, like because the licenses expire in 2025.

Sure. So, I mean, we are in a fortunate situation on the first side where we do not have any financing need on any of our C-homes, so they're all in encumbered. And we did it for the purpose because, you know, we want to make sure we can develop as need be. The construction cost has gone up significantly, so the current funding does not work, and that's across the sector. I don't think that's going to be news for anyone. We do continue to feel confident that eventually there is going to be the right program. We continue some of the pre-work that is needed for many of our sites, so we are committed to this program, but it has to make financial sense to ensure that we can borrow. it has the right return for people involved in it. So I think everyone recognizes this is not a surprise for anyone that the cost has gone up and the funding formula has to change. And we do expect that to change.

Okay. And then just lastly, the SOAR grant, do you expect that to be an annual thing?

Yeah, so the way it is structured is that it is a one-time grant for any who has completed a year. So it's a one-time from, you know, if you start it, you're only going to get it one time. But then team members have a chance to actually do a matching program where we would match up to a certain dollar amount. So I think this initial number is obviously much bigger because you were catching up. I think the second grant might be bigger in relative, not bigger than $1.6 million, but bigger to the ones follow after that because there were some team members who actually do a matching program where we would match up to a certain dollar amount. So I think this initial number is obviously much bigger because we were catching up. I think the second grant might be bigger in relative, not bigger than 1.6 million, but bigger to the ones follow after that because there were some team members who wanted to wait to see how things work because there's obviously administrative process in getting those shares granted. So we do expect the second tranche to be, you know, a little bit bigger than others. And after that, it should be a much smaller number because you're really granting it to people who have less than a year in the company.

Okay. But it will be sort of an ongoing expense then?

That's correct.

Okay. Perfect. Thanks very much, Nitin. Thank you.

Thank you. And I'm currently showing no further questions at this time. I'd like to turn the call back over to Nitin Jain for closing remarks.

Thank you, Shannon. Thank you, everyone, for joining our call today. On behalf of our men, thank you for joining our call today. On behalf of you for your continued support, and I hope you have a great rest of the summer.

This concludes today's conference call. Thank you for participating. You may now disconnect. The conference will begin shortly. To raise your hand during Q&A, you can dial star 11.