Sienna Senior Living Inc.

Ladies and gentlemen, welcome to Ciena Senior Living Inc's Q3 2022 conference call. Today's call is hosted by Nitin Jain, President and Chief Executive Officer, and David Hung, Chief Financial Officer of Ciena 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 information. Please refer to the forward-looking information and risk factors section in the company's public filings, including its most recent MD&A and AIS, for more information. You will also find a more fulsome discussion of the company's results in its MD&A and financial statements for the period, which are posted on CDAR and can be found on the company's website, siennaliving.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 under events and presentations. With that, I will now turn the call over to Mr. Jain. Please go ahead, Mr. Jain.

Thank you, Josh. Good afternoon, everyone, and thank you for joining us on our call today. As we are heading into the final months of 2022, we are adjusting our business to a more challenging economic climate. While labor shortages and inflation are putting pressure on our operating margins, we continued to generate strong occupancy results, maintained a solid balance sheet, and increased our liquidity by $100 million. We also rolled out a number of initiatives that will help us stand apart as an operator and an employer of choice in Canadian senior living. Average same-property occupancy in a retirement portfolio grew for the fifth consecutive quarter to a level we have not seen in over three years, and a further increase to 88.6% in October. We expect to end the year at a similar occupancy level in our same property portfolio. With respect to our 2022 acquisitions, we achieved a 490 basis point occupancy increase during the third quarter, excluding one property in Lisa. This was the first full quarter of owning the 12 retirement residences we acquired in Ontario and Saskatchewan, and after experiencing some initial softness, the strong occupancy gains in Q3 is a clear indication of the successful integration of these residences into our platform. Going forward, we expect the occupancy trends for acquisition to be in line with the overall retirement portfolio. Our sales and marketing team continue to generate strong interest in our residences as we are heading into the late fall and winter months. Excellent relationships in the local communities and our Respira brand and signature programs help support our sales initiatives and qualified leads have increased by approximately 26% year over year. Moving to long-term care, in our long-term care communities, resident admissions progress steadily throughout the third quarter. Average occupancy reached 96.7% in the third quarter, and in February of 2022, the government of Ontario reinstated occupancy targets for 97% required for full funding, and we anticipate to meet the required targets at the vast majority of our care communities. We're currently closely monitoring a number of government funding changes and their potential impact on operating results. Ciena and other participants in our sector have been working with the Ontario government to funding increase to accommodate inflationary pressures, both for operating costs and construction costs of our redevelopment projects. While rising development costs have impacted the timing of our construction starts, we remain optimistic about our ability to redevelop Class C homes in Ontario. The implementation of a new long-term care platform is well underway. The platform changes are focused in four areas, the move-in experience, food and dining, well-being, and visits and connections. Our initial efforts have focused on how we help residents settle in. We have a new platform-wide standard aimed at decreasing anxiety of residents and families and making them feel welcome and at home. Early feedback to date has been positive. Our transformation of dining, what we call Savor It, is also an immediate area of focus. We have hired an executive chef to lead this work, And we also aim to bring more of a hospitality-like feel to our dining rooms. Staffing will likely remain one of our biggest challenges for some time, and we have been active on many fronts to bridge the existing labor gap. We are making significant investments in attracting and retaining employees who are passionate about working with seniors. We are currently implementing a new scheduling and call-out technology, which will help us fill staffing gaps more seamlessly and faster. It'll also help us to better monitor agency staffing and improve scheduling of our team members. The implementation is nearly complete across the long-term care communities with the rollout at our retirement residences to follow in 2023. We expect competition for talent to further intensify in the months and years ahead, and we've been working on a number of other initiatives. These include offering additional shifts to part-time team members and a pilot program that supports the placement of Ukrainian refugees at our communities. Moving to Spark, our team members have told us that they want to share their ideas on how to grow and improve Ciena. And as a result, we created our own version of Dragon's Den named Spark. During the first round of submissions last month, we received a total of 170 ideas. Not only did we get some outstanding submissions, it showed us a clear trend of what's top of mind for our team members. Over the coming weeks, we'll select the number of ideas to be piloted with the goal to implement the best at our company. 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. Long-term care, long-term fundamentals in Canadian senior living and at Siena remain strong, as was reflected in the growth of our retirement occupancy and long wait lists supporting steady resident admissions in our long-term care segments. However, intense competition for talent, cost pressures and decades high inflation continue to affect our operations. In Q3 2022, total adjusted revenues increased by 11% year over year to $189.2 million. This increase was largely due to occupancy and rental rate growth and additional revenue from the 12 properties we acquired in Q2 in our retirement segment, as well as flow through funding for increased direct care provided to residents and higher preferred accommodation revenues from increased occupancy in our long-term care segment, partly offset by lower revenues as a result of a property that we sold earlier in 2022. Total net operating income increased by 4.8% to $35 million this quarter compared to last year. Our retirement segment contributed $3.7 million of this increase, mainly through same property NOI growth and additional NOI from our 12 new retirement properties. Our long-term care segment decreased by $2 million year over year, mainly due to higher operating costs and the sale of the long-term care community earlier in 2022. Retirement-same property NOI increased by 14% to $15 million compared to last year, primarily due to occupancy improvements and annual rental rate increases. This was partly offset by higher costs for agency staffing, food, utilities, insurance, and marketing. Rent collection levels remain high at approximately 99%. We expect continued cost pressures to remain for some time due to labor shortages, increased insurance premiums, higher utility rates, and high overall inflation. We also expect continued unfunded pandemic expenses in Q4 in our retirement portfolio of less than $1 million. At the same time, we anticipate that occupancy gains and rental rate increases will help mitigate some of these pressures in our retirement segment. Considering all factors, we expect Q4 operating margins in our retirement segment to be similar to Q3. CNS Long-Term Care's same property NOI decreased by 9% to $17.8 million in Q3 2022 compared to last year, primarily due to higher operating costs in particular with respect to labor, utilities, and insurance, as well as higher unfunded pandemic costs because of lower government funding. This was partly offset by an increase in preferred accommodation of revenues as a result of higher occupancy. We expect cost pressures to remain for some time in our long-term care operations and have been actively working with other sector participants and the Ontario government for funding to reflect the current inflationary conditions and offset significant cost increases. We are also working with the Ontario Ministry of Long-Term Care to better understand the full details of a recent announcement to not reopen the third and fourth beds in the Class C homes and its financial implications. We currently have approximately 350 third and fourth beds in Ontario which could be impacted by this announcement. The extent of the impact will depend on how the government will implement the funding reductions. In addition, we expect continued unfunded pandemic expenses of between $3 to $4 million in Q4 2022 in our long-term care segment. Moving to slide 12, during Q3 2022, operating funds from operations decreased by 1.8% to $17.9 million compared to last year, primarily due to higher administrative expenses, higher interest expenses, as well as higher income taxes. This was partly offset by an increase in NOI this year, mainly as a result of our acquisitions. Q3 OFFO per share decreased by 9.6% to $0.246. Adjusted funds from operations increased by 5.7% to $16.6 million compared to last year. The increase was due to the timing of maintenance costs, partly offset by lower OFFO. ASFO per share decreased by 3% to 22.7 cents in Q3 2022, largely as a result of our 2022 equity offerings. Looking at our debt metrics on slide 13, Our debt to gross book value decreased by 230 basis points to 43.3% at the end of Q3 2022, compared to 45.6% at the end of Q3 2021, mainly as a result of our 2022 equity offering to finance our acquisitions and mortgage repayments with proceeds from property dispositions earlier in the year. Debt to adjusted EBITDA increased to nine times in Q3 2022 compared to 7.8 times in Q3 2021. And the interest coverage ratio decreased marginally to 3.3 times in Q3 2022 compared to 3.4 times in Q3 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 within the next significant expiry being our $90 million unsecured term loan due in May 2023, which was used to support the acquisition of our 12 retirement residences. On October 26, 2022, we upsized our unsecured revolving credit facility by $100 million to $300 million and extended its maturity by two years to March 2027. This will provide additional financial flexibility as we refinance upcoming debt and support our strategic objectives in a more challenging operating environment. This has increased our current liquidity to approximately $350 million. I will now turn the call back to Nitin for his closing remarks.