Sienna Senior Living Inc.

Ladies and gentlemen, welcome to Ciena Senior Living Incorporated third quarter 2023 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 Incorporated. 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 MDNA and AIF for more information. You will also find a more fulsome discussion of the company's results in its MDNA 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's website under Events and Presentations. With that, I will now turn the call over to Mr. Jain. Please go ahead, Mr. Jain.

Thank you, Krista. Good morning, everyone, and thank you for joining us on our call today. Our third quarter marks Ciena's fourth consecutive quarter of improvements in AFFO per share. Our relentless efforts to bring down agency costs, improve team member engagement, and growing occupancy are all reflected in a strong third quarter. Our results, which include a 7% increase in same property net operating income, And a nearly 12% increase in our operating funds from operations per share highlight that our initiatives are effective. Agency costs have essentially returned to pre-pandemic levels. Team member engagement improved for the third consecutive year. Our long-term care operations ran at full occupancy and are now fully stabilized. And our retirement occupancy is growing, with rental rates increasing in line with inflation. At the same time, our balance sheet remains strong, and essentially all of our debt and key financial metrics have improved year over year. This has allowed us to act on strategic growth projects and opportunities despite a challenging capital markets environment. Focusing on strategic growth and expansion, on November 1st, we made our inaugural entry into the Alberta market. We entered into a management contract for a 70-suite retirement residence in a prime location in Calgary, which is owned by Sabra Healthcare REIT. Sabra is the largest joint venture partner, and this transaction underscores a strong relationship. We are also in the process of increasing our ownership interest in Nicola Lodge in the greater Vancouver area. We currently own 40% of this 256-bed, best-in-class long-term care community, and we will acquire the remaining 60% in two separate transactions. The first tranche is expected to take place in Q1 2024. with the second transaction to close between November 2024 and March 2026. Nicola Lodge was built in 2016 and offers long-term care with specialized services for bariatric care, dementia, and mental health care. In addition, we are making good progress on the development front in Ontario. We are approaching the finish line with respect to our retirement residence in Niagara Falls. We own 70% of this project in partnership with the Reichman Group. Construction will be completed later this month, and the first residents are expected to move into the beginning of 2024. With respect to the long-term care developments, we are on track with the construction of long-term care redevelopment in North Bay and our campus of care project in Brantford, Ontario. Regarding additional long-term care redevelopment in Ontario, we continue to advocate for government funding that is aligned with the significant cost pressures we've been experiencing in both capital and operating platforms. Moving to slide six, our long-term care operations are benefiting from a stabilizing operating environment. Average occupancy has reached 98.4% in the third quarter, with occupancy exceeding the required level for full government funding. Further support are results for annual government funding increases with higher preferred accommodation revenues. In addition, significant reduced agency cost as a result of better rates and our ability to fill vacant positions within our own team members have further improved our results. Same property NOI in a long-term care segment increased by 6.1 percent in Q3 2023 compared to last year. We expect long-term care same property NOI growth to be in the mid to high single digits for the full year in 2023. Moving to retirement, average occupancy in our same property retirement portfolio has improved by four consecutive months since the middle of the year and reached 88 percent in October. Consistently high levels of resident move-ins have supported this positive trend. After two quarters of elevated levels of resident move-outs to LPC, we are making steady progress towards fully stabilizing same-property occupancy. CN also continues to lead Canadian and U.S. peers in terms of our retirement occupancy performance. On average, we are approximately 470 basis points ahead of our North American peers in the listed senior living sector. Same property NOI in our retirement segment increased by 7.9% in Q3 compared to prior year, largely as a result of rental rate increases as well as a successful cost management strategy. Annual rent increases in line with inflation will further help offset the cost pressures we have been experiencing. Our marketing and sales teams continue to generate strong interest in our retirement residences. Qualified leads are up approximately 30% year over year in Q3. Based on the positive occupancy trends in July, our targeted average same property occupancy for Q4 is approximately 88%. We further anticipate an approximate 100 to 150 basis point increase year over year in the retirement operating margins for the full year in 2023. Moving to our team members, our continued focus on team culture, which while reducing our reliance on agencies, is reflected in our operating results. The investments we have made in our team, like SOAR, which is our stock ownership program, SPARK, our program that empowered team members to share their ideas on how to grow and improve the company, our recognition program through SPOT Awards, and a continued focus on team member communication through a team member app and our quarterly town halls held across every shift, have all played a significant role in our improving team culture. In our most recent team member engagement survey in October, two things stood out. Our team members' engagement score improved for a third year in a row with improvements across all drivers of engagement. And second, the participation rate increased by 10 percentage points to 72% this year, the highest participation we have ever had since we started conducting surveys. A key driver for our team members is their ability to do meaningful work, for which they gave an average score of 9.1 out of 10. Feedback from these surveys provide important insights and allows us to build and implement action plans to improve engagement and team member experience. Moving to slide nine, with a highly engaged team and a significant improved operating environment, we have been able to make major headways to bring down agency costs. Year over year, we reduced costs by nearly 60% in the third quarter. At 4.8 million, agency costs have essentially returned to pre-pandemic levels in Q3 2023. Over the past year, we also drastically reduced the number of agencies we are working with and negotiated improved contract terms, such as enforcing a minimum fill rate threshold while reducing hourly rates. But most importantly, we are filling vacancies with permanent team members rather than temporary 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 offers insight into future staffing needs. And with that, I'll turn it over to David for an update to our results.

Thank you, Nitin, and good morning, everyone. I will start on slide 11 for financial results. In Q3 2023, total adjusted revenues increased by 5.6% year-over-year to $199.8 million. This increase was largely due to rental rate growth and increased care revenue in our retirement segment, as well as flow-through funding for direct care, annual inflationary funding increases, and higher occupancy in our long-term care segment. Total net operating income increased by 8% to $37.8 million this quarter compared to Q3 2022, mainly due to same property NOI growth and the acquisition of a campus of care in Q1 2023. Same property NOI in our long-term care segment increased by 6.1% to $19.2 million in Q3 2023 due to funding increases, high occupancy levels in our long-term care homes, which enable us to receive full funding, and higher preferred accommodation revenues. Our retirement same property NOI increased by 7.9% to $18.3 million in Q3 2023 compared to the last year, primarily as a result of rate growth as well as an increase in care revenue and was further supported by lower net pandemic and incremental agency expenses. Moving to slide 12, during Q3 2023, operating funds from operations increased by 11.8% to $20.1 million compared to the last year, primarily due to higher NOI and lower general and administrative costs as a result of restructuring initiatives that we completed in Q1. offset by current higher taxes as a result of higher income as well as interest expenses. OSFO per share increased by 11.8% to 27.5 cents in Q3 2023. Adjusted funds from operations increased by 18.4% to $19.6 million compared to last year. The increase was due to higher OFFO, lower spend on maintenance capital as a result of timing, partly offset by a decrease in construction funding income. ASFO per share increased by 18.5% to 26.9 cents in Q3 2023. In line with our strong results, we significantly improved our ASFO payout ratio to 87.0% in Q3 2023. Moving to slide 13, strengthening of our balance sheet. We entered into financings with lower cost CMHC insured mortgages and paid down credit facilities. We maintained ample liquidity at $324 million at the end of Q3. We increased our debt service coverage ratio to two times per year, year over year from 1.8 times in Q3 2022. We decreased our debt to adjusted EBITDA to 8.3 times from nine times in Q3 2022. And we extended the weighted average term to maturity of our debt to 5.7 years from 4.9 years in Q3 2022. We ended Q3 with a debt to gross book value of 44.4% and $1 billion of unencumbered assets. With no major debt maturities until Q4 of 2024 and strengthening debt metrics, we are well positioned to execute on our strategic initiatives. With that, I will turn the call back to Nitin for his closing remarks.