Sienna Senior Living Inc.

Ladies and gentlemen, welcome to Chena Senior Living Inc's Q2 2023 conference call. Today's call is hosted by Nate and Jane, President and Chief Executive Officer, and David Hong, Chief Financial Officer of Chena 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 statement or information. Please refer to the forward-looking information or 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 and financial statements for the period, which are posted on CDAR and can be found on the company's website, shenaliving.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 for the company to host, remarks on the company website under events and presentations. With that, I will now turn the call to Mr. Cheng. Please go ahead, Mr. Cheng.

Thank you, Mark. Good morning, everyone, and thank you for joining us on our call today. There's tremendous growth potential for our company with demand for the care and services we provide expected to rise for many years. Earlier this year, we outlined in detail where we see the potential for expanding our net operating income and how we believe our strategic initiatives will support such expansion. The solid financial performance during the second quarter and the positive indicators for the balance of the year highlight that we are on the right track. Our long-term care operations benefited from a stabilizing operating environment. Average occupancy has now reached 98% in the second quarter, with occupancy exceeding the required level for full government funding at all of our homes. Further supporting our results were annual government funding increases and funding related to prior periods, as well as reduced agency staffing costs as a result of better rates and our ability to fill vacant positions through increased hiring. Same property NOI in a long-term care segment increased by 13.9% in Q2 compared to prior year. For the second half of this year, we expect long-term care same property NOI growth in the low single digits compared to prior period. The operating environment has improved significantly, and we have made great strides in reducing costs wherever possible. We still have funding shortfalls as a result of inflation and continue to work with other sector participants and the government to address these shortfalls. Moving to retirement, with respect to occupancy in our retirement segment, consistently high levels of resident move-ins and the improved performance of the 12 joint venture residences we acquired last year were partially offset by an approximately 18% year-over-year increase of resident move-outs, predominantly into long-term care. Average occupancy in the company's same property portfolio was 86.9% in the second quarter, up marginally 10 basis point year-over-year. With the operating environment stabilizing and many long-term care facilities now at full occupancy, we expect the level of resident move-outs to long-term care to normalize during the second half of this year. Same property NOI in retirement segment increased by 4% in the second quarter, largely as a result of annual rental rate increases. Our marketing and sales teams continue to generate strong interest in our retirement residences. Community outreach efforts, such as open houses and lunch and learns with community partners, And our robust sales platform will support occupancy growth during the second half of the year. We're also providing targeted on-site sales support to homes with lower occupancy. Lead indicators have strengthened significantly during the second quarter, and qualified leads are up approximately 23% year-over-year. We're starting to see this positive trend reflected in our current occupancy numbers. Average same-property occupancy was up 10 basis points in July, and further gains are expected in August. Based on our updated occupancy forecast, we expect average same property occupancy for the full year in 2023 to be approximately 88%. We further anticipate an approximate 100 to 150 basis point year-over-year growth in the retirement operating margins for the full year in 2023. Moving to slide eight, among the major improvements during the second quarter were the reduction of agency staffing costs and G&A expenses. Since the beginning of the year, we reduced the number of agencies we are working with from over 100 to less than 15 and negotiated improved contract terms such as enforcing a minimum fill rate threshold while reducing hourly rates. Year over year, we were able to reduce overall agency costs by approximately 40%. Filling vacancies with permanent team members rather than temporary agency staff was a key reason for this improvement. Agency staff also has a negative impact on team members' morale and resident satisfaction, and we will do everything possible to further reduce our reliance on agency staff. Our investment in an automated centralized scheduling and call-out system has significantly improved our ability to fill staffing gaps with our own team members before shifts go to external agency staff. It also provides tighter controls on overtime and offer insights into future staffing needs. We also reduced G&A expenses resulting from a restructuring at our corporate office. This restructuring led to a workforce reduction of approximately 10% of non-union employees at our head office. Operational efficiencies and a reduced reliance on pandemic-related support were the key reasons for the restructuring, which was completed in the first quarter of this year. Moving to our team members, investments to improve team member engagement and fostering a positive workplace culture remains a priority for us. This is reflected in a number of our initiatives. In connection with our Share Ownership and Rewards program, approximately 800 team members received Ciena shares in the second quarter. To date, approximately 63% of all eligible team members are now shareholders. We also announced the winner of SPARC, a program that allows our team members to share ideas on how Ciena can grow and improve. We received nearly 170 ideas during the first round of submissions. piloted eight of them, and ultimately identified four inaugural winners. Their ideas range from reducing food waste, enhancing resident engagement, to improving the hiring process of new team members. We look forward to implementing some of the best ideas across our operations. Building a talent pipeline for the future is crucial in our sector, which remains extremely competitive. As part of a talent acquisition strategy, We have improved our onboarding process and have enhanced our campus recruitment campaigns at key universities and colleges. We have placed approximately 460 students at our residences in the second quarter and hope to hire many of them once they graduate. We also believe that the appeal of our purpose, vision, and values differentiates Ciena and helps us attract and retain a highly engaged workforce in a competitive recruitment market. Our recruitment initiatives have earned us the recognition for having the best talent acquisition team in the health and wellness category by LinkedIn Talent Awards. This is a testament to the strength of our recruitment team. Moving to development, our strategy of owning a diversified portfolio of private paid retirement residences and publicly funded long-term care communities is reflected in our development initiatives in Ontario. We currently have 275 million of development projects under construction. with a development project in Niagara Falls scheduled to be completed in the fourth quarter of this year. Pre-leasing activities for 150-suite retirement residents have been strong, and we expect the first residents to move in later this year. In addition, construction of a long-term care community in North Bay with 160 long-term care beds and our campus of care in Brantford comprising of 160 long-term care beds and 147 retirement suites is fully underway. Once all three projects are operational, they're expected to lower Ciena's AFO for payout ratio by mid to high single digits and will further add to the long-term stability of our cash flow and dividend. With that, I'll turn it over to David for an update on our operating and financial results.

Thank you, Nitin, and good morning, everyone. I will start on slide 13 for financial results. In Q2 2023, total adjusted revenues increased by 10.1% year-over-year to $198.3 million. This increase was largely due to rental rate growth and additional revenue from a full quarter of contributions from the 12 joint venture properties we acquired in Q2 2022 in our retirement segment, as well as flow-through funding for increased direct resident care and annual inflationary funding increases in our long-term care segment. Total net operating income increased by 13.7% to $38.9 million this quarter compared to Q2 2022, mainly due to same property NOI growth, a full quarter of contributions from 12 joint venture retirement residences, as well as the acquisition of a campus of care in Q1 2023. Same property NOI in our long-term care segment increased by 13.9% to $20.5 million in Q2 2023, due to a more stabilized operating environment and lower net pandemic expenses, which included a retroactive funding adjustment of $1.4 million for expenses, including $1 million incurred in Q1 2023 and $400,000 incurred last year. Our retirement same property NOI increased by 4% to $16.6 million in Q2 2023 compared to last year, primarily as a result of rate growth, improved performance of the 12 retirement properties acquired in Q2 2022, partially offset by an elevated level of resident move-outs to long-term care during the first six months of the year. Starting this June, occupancy and operating results of our 50% share in the 12 retirement residences have been reflected in our same property results. Moving to slide 14, During Q2 2023, operating funds from operations increased by 24% to $21.4 million compared to last year, primarily due to higher NOI and lower general and administrative costs as a result of the restructuring in Q1 2023, offset by higher interest expense. OSFO per share increased by 24.1% to 29.4 cents in Q2 2023. Adjusted funds from operations increased by 14.1% to $19.6 million compared to last year. The increase was due to a higher OFFO offset by higher maintenance costs and a decrease in construction funding income. AFFO per share increased by 13.6% to 26.8 cents in Q2 2023, In line with our strong results, we were able to significantly improve our ASFO payout ratio, lowering it to 87.3% in Q2 2023. This was an 11.9% point decrease compared to a year ago. With respect to our debt metrics, we lowered our debt to annualized adjusted EBITDA to 8.0 times in Q2 2023 from 9.2 times in Q2 2022. and increased our interest coverage ratio to 3.5 times from 3.4 times a year ago. We also maintained ample liquidity of approximately $276 million as at June 30th, 2023. And in addition, we paid off the remaining balance of our unsecured term loan during the quarter and entered it into low-cost mortgage financing with CMHC. At this time, we have no major debt maturities until the fourth quarter of 2024. We ended Q2 with a debt-to-growth book value of 44% and $1.1 billion of unencumbered assets. Our solid balance sheet and limited debt expiries over the next 15 months positions us well to execute on our strategic initiatives. With that, I will now turn the call back to Nitin for his closing remarks.