Sienna Senior Living Inc.

Ladies and gentlemen, welcome to CNS Senior Living Incorporated's first quarter 2024 conference call. Today's call is hosted by Nathan Jane, President and Chief Executive Officer, and David Hong, Chief Financial Officer of Siena 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 statement or information. Please refer to the forward-looking information and risk factor sections 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 CEDAR Plus and can be found on the company's website, sianaliving.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 presentation. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Again, to ask a question, press star one. With that, I will turn the call to Mr. Jane. Please go ahead, Mr. Jane.

Thank you, Kath. Good morning, everyone, and thank you for joining us on our call today. We are off to a great start in this year. Our first quarter results highlight that we have transitioned into a period of stability and growth. We are grateful to the governments of Ontario and British Columbia who continue to prioritize seniors and the growing need for long-term care. The recent funding announcements recognize the exceptional cost pressures operators in long-term care have experienced over the past four years. As for our retirement business, we continue to benefit from strong demand and limited new supply in many of our key markets. Construction starts of new retirement residences are at multi-year low, and combined with an aging population, we anticipate notable occupancy gains across our retirement platform in the coming years. Our success would not be possible without our 12,000 strong team members who are our greatest strength and at the core of everything we do. Creating a workspace where they can put their passion for their work into action is something we strive for each and every day. Moving to slide five, our results show the significant progress we have made in closing the gap left behind by the pandemic. Supporting our results for fully occupied long-term care homes with higher revenue from preferred accommodations and significantly reduced staffing agency cost as a result of our ability to fill vacant positions with our own team members. The strong results also reflect notable one-time government funding from both Ontario and BC. As a result, our same property NOI increased by $27.6 million to $63.9 million year-over-year. The recent funding announcements from the government of Ontario and BC are expected to have a lasting impact on the sector and well-being of our Canadian seniors. A total of $13.4 million of one-time funding in Ontario and $13.6 million of retroactive funding from the government of British Columbia are included in our Q1 2024 results. Essentially, the governments are reimbursing us for the remaining unfunded pandemic costs and recognizing the significant cost escalations due to inflation over the past four years. Recent funding announcements also include enhancements to the construction funding subsidy of up to $35 per day for next 25 years, and a 6.6% increase in the level of care funding. The level of care funding increase includes a 4.5% increase in the flow-through funding envelope and an 11% increase in the other accommodation funding envelope, where a shortfall in recent years put significant pressure on long-term care operators. Supported by these improvements, we expect to add up to 400 new care staff positions across Ciena. The funding improvements will benefit seniors in Ontario and have a positive impact on the redevelopment momentum of Ontario's older long-term care homes. This will also support the Ontario government's important goal of building new and redeveloped long-term care spaces and enable us to advance a redevelopment program. As such, we are very pleased to move forward with the redevelopment of a Cedarville long-term care home in Keswick, Ontario, where we expect to start construction in Q4 2024. CWL is located on a campus comprising of 130 suite retirement residents and a 60-bed Class B long-term care home. We will redevelop the current long-term care home into a new state of the art community that can accommodate 160 residents. The project has an expected development yield of approximately 8%. This will be our third long-term care redevelopment project, adding to the two projects currently under construction in North Bay and Brantford. which we expect to complete in the second half of 2025. Combined, these projects will support the government's important goal of building new and redeveloped long-term care spaces for the benefit of Ontario seniors. Moving to retirement, at our retirement operations, same property occupancy grew to 88.1% in Q1. This was an improvement of 30 basis points year over year. Monthly, same property occupancy increased for the past three months and reached 88.9% in April. We are making good progress in leasing suites at our recently completed retirement residence in Niagara Falls, which is currently in a lease-up. Looking forward, we continue to make steady progress towards our goal of stabilized occupancy of 95%. This is a level that is aligned with industry-wide forecasts for the Canadian retirement sector. An aging population and limited new supply as a result of very few construction starts in recent years are the key reasons for this expected increase in occupancy. Our intensified focus on homes with lower occupancy, in addition to annual rent increases, contributed to the increase in same property NOI year over year in the quarter. Now moving to slide nine. Team member engagement and retention are a core focus of our initiatives. We're always looking for new ways to differentiate Ciena in a competitive labor market. In Q1, we introduced a program called Learning Bytes. Through this program, we are providing one hour of learning per month to all of our team members in addition to the job-specific training. This is just one of many initiatives that we introduced at Ciena in recent years to ensure we are aligned with our 12,000 strong team members. At a signature program, SOAR and SPARC remain very successful. The second round of SPARC, Ciena's version of Dragon's Den, is well underway. 175 ideas were submitted in the most recent round and we are currently implementing pilot programs for those top submissions of our finalists. Ideas range from National Hiring Day to creating digital resident folders and more. With respect to SOAR, our shared ownership program, which is unique in the Canadian senior living sector, thousands of our eligible team members have now received shares with the next round of awards taking place later this month. We believe that initiatives like these were the key drivers for the 11% reduction in turnover in 2023. Combined with various recruitment programs, including the placement of internationally educated nurses, these initiatives played a significant role in reducing our reliance on staffing agencies. Agencies' costs have returned to pre-pandemic level, and it is our goal to keep agency staffing at a minimum, which will have a lasting impact on Ciena's culture and our residents' quality of life. With that, I'll turn it over to David for an update on our results.

Thank you, Nitin, and good morning, everyone. I will start on slide 11 for financial results. In Q1 2024, total adjusted revenues increased by 19.9% year-over-year to $239.4 million. This increase was largely due to rental rate and occupancy growth as well as increased care revenue in our retirement segment and significant one-time and retroactive funding in addition to annual inflationary funding increases and higher preferred accommodation revenue in our LPC segment. Total net operating income increased to $63.5 million this quarter, compared to $36.3 million in Q1 2023. NOI in our long-term care segment increased by $27 million in Q1 2024 due to significant one-time and retroactive funding, higher preferred accommodation revenues, and lower staffing agency costs. Year over year, we reduced our total agency staffing costs from approximately $10.3 million in Q1 2023 to $6.1 million in Q1 2024. Agency costs, which are predominantly covered by flow-through government funding, have now returned to pre-pandemic levels. In our retirement segment, same-property NOI increased by 8%. $0.5 million in Q1 2024 compared to last year, primarily as a result of rate growth as well as improved occupancy. Moving to slide 12, during Q1 2024, operating funds from operations increased by 99.1% to $36.7 million compared to last year, primarily due to higher NOI. OSFO per share increased by 98.8% to 50.3 cents in Q1 2024. Adjusted funds from operations increased by 94.4% to $35.4 million compared to last year. The increase was due to higher OFFO offset by a decrease in construction funding income. AFFO per share increased by 94.8% to $0.485 in Q1 2024. In line with our results, our AFFO payout ratio decreased to 48.2% in Q1 2024. Moving to slide 13, with respect to our debt metrics, we have seen notable improvements and further strengthened our balance sheet. We maintained ample liquidity with $303 million at the end of Q1 2024 and extended the weighted average term to maturity for our debt to 5.7 years from five years in Q1 2023. Our debt to adjusted EBITDA was 7.1 times at the end of Q1 2024, compared to 8.8 times at the end of Q1 2023, And our debt to service coverage ratio was 3.4 times in Q1 2024 compared to 1.8 times in Q1 2023. We ended Q1 2024 with a debt to adjusted gross book value of 44.3% and $1 billion of unencumbered assets. This provides financial flexibility and supports our refinancing initiatives at attractive rates. In particular, as we're actively exploring opportunities to refinancing our upcoming debt expiry in the fourth quarter of 2024. We have the ability to refinance a portion of our expiring debt with proceeds from a new financing or up financing of assets with CMHC insured mortgages at interest rates significantly below those of other financing options. Our strong financial position will also support the redevelopment of our older long-term care homes. We will continue to prudently manage capital and stagger construction starts to ensure our debt ratios remain strong as we support the Ontario government with this important initiative. With that, I will turn the call back to Nitin for his closing remarks.