Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sienna Senior Living Inc (LWSCF, Financial) achieved a year-over-year increase in total same-property NOI by 18.5%, reaching $46.1 million.
- Occupancy rates in retirement homes improved to 88.6%, with further growth to 89% in July, marking the highest monthly occupancy rate in over five years.
- The company saw a significant increase in investor interest, driven by the favorable demographics of an aging population and limited new supply.
- Sienna Senior Living Inc (LWSCF) successfully reduced agency staffing costs by one-third, from $6 million in Q2 2023 to $4 million in Q2 2024.
- The company maintained ample liquidity with $297 million at the end of Q2 2024 and extended the weighted average term to maturity of its debt to 5.5 years.
Negative Points
- Despite improvements, some retirement homes still have lower occupancy rates, with a handful of homes below 80% occupancy.
- The company faces challenges in maintaining and growing margins in the retirement segment due to increased care expenses and marketing spend.
- There is uncertainty regarding the sustainability of recent financial improvements, as one quarter's performance does not constitute a trend.
- Sienna Senior Living Inc (LWSCF) has not made significant acquisitions in the past two years, focusing instead on development projects.
- The company’s debt to adjusted EBITDA ratio remains relatively high at 6.8x, although it has improved from 8x in the previous year.
Q & A Highlights
Q: On the retirement side, do you expect the trend of same-property margins to continue or even improve in the back half of the year?
A: Our focus is on same-property NOI growth, which will come from occupancy and margin growth. While we like the current trend, one quarter doesn't constitute a trend. We expect margins to grow over time but haven't provided specific outlook or timing.
Q: Regarding the increased guidance for the LTC front, was the WSIB payment the main factor, or was there something else?
A: The WSIB refund was part of the increase, but also the stability of our long-term care operations and the increase in OA funding contributed to our confidence in raising the guidance.
Q: Are you seeing any acquisition opportunities that have sparked your interest?
A: We continue to look for opportunities in both long-term care and retirement, including campuses. We have $250 million in active construction and expect to grow in the next 12 to 18 months.
Q: Can you provide more color on the retirement same-property expenses, which were up 10% year over year?
A: The increase was due to more care expenses and elevated marketing spend. We see an opportunity to increase margins by ensuring appropriate charges for care and targeted marketing.
Q: Is Q2 a good run rate for G&A, or were there any one-time items?
A: Q2 is a relatively good run rate, although there was a slight uptick in stock compensation.
Q: On LTC guidance, is it fair to say Q3 and Q4 NOI expectations are unchanged from last quarter?
A: Generally, they would be relatively unchanged, with a slight uptick. The increase in guidance is due to the stability of our operations, OA funding, and controlled agency costs.
Q: How do move-ins and move-outs in Q2 compare to last year?
A: We saw a lower number of move-outs this quarter, which is a positive trend. We expect occupancy to grow as we move into the fall season, focusing on homes with lower occupancy.
Q: Can you provide an estimate of the portion of the portfolio that represents lower-occupied assets?
A: More than half of our portfolio is stabilized at 95%+ occupancy. About 25-30% is close to that, and 8-10 sites are between 75-85% occupancy. Some are market-driven, while others require operational improvements.
Q: Have your plans for the Series A maturing changed now that spreads have come down?
A: We continue to explore all options, including CMHC financing, unsecured revolvers, conventional mortgages, and possibly another issuance of unsecured bonds.
Q: Do you have any expectations of more retroactive adjustments in future quarters?
A: Retroactive adjustments from the government are becoming more common to ensure sector viability. We may see these adjustments once a year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
