CSU - Earnings call transcript Q3 2018 | Sonida Senior Living, Inc.

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Operator

Good day, and welcome to the Capital Senior Living, Third Quarter 2018 Earnings Release Conference Call. Today’s conference is being recorded. The forward-looking statements in this release are subject to certain risks and uncertainties that could cause results to differ materially, including but not without limitation to the company’s ability to find suitable acquisition properties at favorable terms, financing, licensing, business conditions, risks of downturns in economic conditions generally, satisfaction of closing conditions, such as those pertaining to licensure, availability of insurance at commercially reasonable rates, and changes in accounting principles and interpretations among others, and other risks and factors identified from time to time in our reports filed with the Securities and Exchange Commission. At this time, I would like to turn the call over to Mr. Larry Cohen. ahead. go Please

Larry Cohen

good for and thank for you Thank third afternoon. quarter us our XXXX joining you And earnings call.

to during several While we processes. strengthen continue operate challenging and a we industry our made platform progress operational the broad-based on quarter initiatives to in environment,

basis report achieved we decreases key metrics. sequential in in quarter, we rate on occupancy other While the and are growth a modest in disappointed to financial

to navigate issues difficult industry are we the continue headwinds, head-on. addressing we As

more detail, plans excellent in managing are executing and As expenses, residence. action discuss Brett and remained care revenue, we on our to our growing to reduce providing will services our expenses our revenue increase and committed and we’ve to

moment are term and the extend rate with and place addressing expense we level limit the of to platform as end supplies, including all and practices, transparency that aspects risk nearest to categories our starts. contracts Senior our be construction in the as we and in place, Important and Our NIC information completing want level population when annual by taking now between integrated the the growth demand with in are to were industry service a business we nationally elder quarter expected a such accelerates. of as to higher Senior of are is already to able normal midst growth operational XXXX gap rate I in The strengthen XX are the major our housing seniors year. XX my be reported on quarter of the food, the the an XXXX. senior the and I our XXnd starts construction last debt of Consistent that advantage a foundation. maturities Living in at populations Living is initiatives of operational and to week implementation provide years expect Fundamentally, the in us dynamics with third improvement take interest system second track by lowest aspects also steps business celebrated take of system data duration, Capital to and Capital share of necessary the supply will of senior an this timing a since analysis. anniversary CRM in lower the and cost decline CEO. financial housing Senior

company Living’s our real will will announced, have over to we January to me term Brett in now leave accomplished. Lee. our strength Officer, I company retire the dedicated As The Capital all team confidence and am XXXX. turn I Senior the long gives honor the Operating of call team previously and Chief effective been prospects. X, has from of our a I It proud

Brett Lee

Thank you good everyone. and Larry afternoon

the becomes fourth We We that strong continuing success more slows up a performance, foundational quarter of term continue our incentives year and fees that have the of we we market while demand. top which quarter of concessions industry industry strike and care emerges as in move-ins current competition growth will to holding on of worked in the the with balance differentiation use mismatch and the have platform will company are taking decisive elements supply occupancy markets, recognize where markets third and a while rate in short the a typically we lead pronounced. strong position. competitive anticipate our challenging level term enters time maintaining the for a rate and to as actions some operating of between selective and pricing and the over short from improve volume the revenue most competitive importance of for sustained increasing in believe both We new set to in implement line cases

the of of to term strengthen are and challenging be and times years our come. out months working come sales the both and to in we organizational in more the innovations Some near successful, improvements in greatest organization to

outreach, a optimize major and spending on increased CRM all plan lead of accountability social reviewed certain revenue local new force enhance system media with diversifying information We begun and sales facilities. the on continue and marketing retrained conversions detailed These the community to our partnerships to organizations includes actionable cycle in health to sales drive and the growth to resources data effort care the with in the to the in lead community sources an tactics other serve timely and guide developed and advancement has digital a and the to sales teams a effort our daily focused shortening remainder have have plans leaderships increased community greater provide number our our our that markets our for process outreach, the growth throughout through sales of leads drive of will and as community markets. are strategies of core Each and year. post through

least outperformed demonstrated in terms the overall As quarter occupancy Larry NIC Capital in and greatest growth. in rate slight to occupancy achieving four of environment. our mentioned, peers our third operate ground holds a at where competitive Furthermore, some Dallas also that third communities; to in hold of demonstrating Senior communities, able relative for Capital Omaha were all quarter, while concentration gain a we which are Indianapolis, Senior the including our of Living the quarter, very we Living major markets Cincinnati second

the developed to ongoing controls line remainder we be in expense of compete diligently Each and to critical an year. strong in our operations comprehensive working cost of in focused growth, these success quarter occupancy we efficiencies throughout an expenses go we While a has for in We and for fourth revenue. we and manage environment with savings we demonstrated to notably also further ability as the most community enhancing plan locally the will significant efforts and as our are on wages, know that pressures, expense to both top XXXX companywide drive are forward. drive XXXX,

effects the third see the plan an see turnover resulted of expect We increase reduction associated make to utilization. and to to continue wage in and pressure in some greater contract stabilize in quarter, time. to over targeted contract which labor an We investments in labor

a designed are to a to will local new procurement of of supplies. reduce systematically increase and use and savings contracts the going the addition driver centralized prescriptive company to platform the implemented of In forward. and effect, reduce plans, more our formulary model centralized this utilization operating be GPO through has the our value of of cost gain desired begun scale The economies year earlier having to costs

of produce these made When cost to seen We for new expect year for compared a will of remainder we also These these the the anticipate and canned system and to approximately quarter. implemented, same our of result have the for reduce products with the a medical food spend. as percentage to period in savings quality in the continue we variation a that menu initiatives savings. produce savings food our national in a grow led third We in and vendor food annualized better fully quarter in similar $XXX,XXX change initiatives additional partnership costs to XXXX, X% a manager our new supplies. food reduction in

national to larger consolidate to leverage as scale to local our service company contracts, agreements continue regional pricing. also into our better We drive our efforts better and a

continued implementation evaluating solid We we the finalizing drivers the utilities In for XXXX. elevator contracts. Cable will service these and be key will quarter, have of laundry savings now services agreements service, national as Television agreement, We National of well that regionalization contracts fourth additional waste anticipate management, control. as of be for pest a

emerge the to will some in head industry midterm, our through Hendrickson, to more are our in the Carey are face company. to quarter detail. may taking that we I effective now continue us winds that operating the call allow confident financial stronger over and today understand more we third walk will short a to CFO, turn the actions we results to While

Carey Hendrickson

you, Thank Brett.

The non-GAAP two measures two communities we restores our that interruption their to exclude measures Harvey insurance loss. the economic press higher are communities in conversion. impacted undergoing As include licensed or the since the up lease Houston and business non-GAAP noted Hurricane company’s by of renovation units significant continue release,

statistical the two Hurricane company quarter the Harvey. XXXX, in of the the on show revenue impacted lease-up communities a for million we XXXX. impacted consolidated Houston the and that and was Approximately for total million measures $XXX.X or the reported two due third million measures those XX meaningful. two However, of of Page they third The by in quarter communities results less release quarter exclude of the $XXX,XXX and the them revenue to over third are decrease of make in earnings XXXX. of of of communities decrease since that $X.X half was the Houston ‘XX the the was the lost third statistical X.X% associated with of include stage of $X.X to hurricane initial Revenue quarter

late As the third during a came the of XXXX. hurricane reminder, in August through quarter

BI began communities Both residents expenses previous $XX.X business primarily third quarter that to X.X% the $X.X July, progress. expenses quarters making revenue The in these a expenses admitting total BI and the due occupancy. year-over-year is million. and income net restore we and revenue of hurricane. good include quarter in million consolidated As Operating the million operating cover lease-up the decrease the in of in adjustment communities. had to only the since prior lower interruption XXXX goal the or to these continued our remainder at third The in $X.X the communities loss recorded insurance while are this of credit of which to increased we hurricane, operating we credit is average to

expense third and XXXX. of to healthcare $X.X better and the general third form costs transaction revenue of $XXX,XXX percentage of G&A under X.X% management quarter XXXX. in was both for to XXXX compared our as to and decreased quarter as a in expenses XXXX Our the the of excluding third claims in in experience million XXXX, quarter quarter third $X.X to years, expense a third were compared of G&A third administrative million the quarter the compared Due X% the quarter

the adjusted the was to third third XXXX last in quarter to $XX.X million ‘XX million of year. $XX.X was third of $XX.X $X.X quarter quarter compared EBITDAR adjusted the quarter the in million our of compared third of in million XXXX, and CFFO in Our

same the community same in third We quarter points XXXX. X.X% to decreased Looking while as than and revenues community increase monthly quarter XXXX. year-over-year, basis occupancy modest community of rent was XXX had a at the third lower X.X% of compared same our results, average

employee community versus X.X%; XXXX the the costs in increased of Our quarter quarter increased labor X.X% XXXX same expenses quarter in XXXX. the third of third third

conversion of of care, only to actually had X.X%. have If increased you that units higher exclude labor costs the communities our employee levels

While noted continue our at in wage pressure the labor increase effects for Brett costs see particularly we do to greater certain markets, caregivers. to as reasonable level, a of continue

are cover contract labor the this the have but We a currently savings number overtime we the addressing lag though in expect and wage of select of significant investment. reductions adjustments pressure, slightly wage communities made at that most to the may most

to We other where similar need in be made XXXX. are evaluating markets adjustments may

initiatives Our remarks. ahead was initiative due and we which to in this food to is in The in Brett that Brett line third to the with our this the quarters platform his his the newly decreased new in expectations earlier approximately centralized due increase this quarter expect implemented related year we third noted X% in to the as procurement remarks. $XXX,XXX, savings the that in cost quarter discussed

other income utilities, operating community our operating Same large over cost third decreased to the X.X% year. quarter structure decreased XXXX Our quarter quarter in third XXXX. as last X.X% compared the the third in net of expense the of

which Our was XX sequentially was quarter the the same from communities second in increase of financial of XX.X% XXXX. basis points quarter, occupancy third for an

million Looking briefly including with at cash the of cash. ended the we and sheet, restricted quarter balance equivalents, $XX.X cash

$X.X quarter million expenditures. we capital spent During the on third

after. is our rates September At two balance $XX.X rate interest maturing and was our years except $XXX.X million September all The with interest debt of X.X was XX% a of duration in of for at average loans debt at million. average fixed debt that of Our approximately mortgage at XX XXXX bridge X.X%. totaled our approximately debt XX approximately weighted

portfolio. As release, we to practices ways consistent our strengthen our business continue we noted asset and for financial to look with normal our our foundation in optimize

and and by are As all part maturities, of this effort close December. Facility we Facility a on maturities, which will term XXXX late to The XXXX our of of Credit XXXX expect fixed Master a majority Credit maturities. nearest our debt address Master

In result of the nearest net addition cash these $XX interest to expanding duration rate in risk will and approximately million. maturities, proceeds on eliminating transaction term

term place. million on seniors to challenging value. in generate valued on cash the supplemental Due XXXX, to for it net will a for expect divest The long to industry, fourth through in the market expect in and to that fundamentals proceeds. be to assets so result the of housing we fourth respect assets one remains loan number into senior close attractive quarter highly remain planning We private are strong to limited a also for we housing and in in the environment continued $X.X we operating XXXX. the approximately community quarter which Concurrently

October third point basis the our in the second month-to-month to those fourth occupancy indicators to historical continue occupancy financial had we were While each relative quarter as actively occupancy the performance of weak to September address financial however, markets, are be which for uneven. We in patterns our quarter key XX competitive conditions compared and physical can quarter; a increase for months. in unique

our As quarter are communicated. Brett CFFO XXXX noted, our near results. efforts to previously expect working We at diligently impact a end low full on and that fourth the or adjusted expect be control of to year range these the expenses, to have we positive currently we

and our excellent to managing residents. services expenses We head-on and to are competitive providing committed are care addressing issues our and

the forward, execution the and open on we now all more call shareholders While ahead are focused of the challenges advantage strengthening company of recognize coming benefit demand increase drive stakeholders. our I’ll and and to make diligently and a stronger, we work take processes enhance progress turn to growth supply that, for our questions. our there the opportunities We going to the do, of Senior our is working metrics. and position are platform for on building Living Capital With to continue to to and

Operator

our Bank go Thank you. from Joanna Please question [Operator with first Gajuk ahead. take Instructions]. We’ll America. of

Larry Cohen

Hi Joanna.

Joanna Gajuk

decelerated Good How you that said matter I you, the afternoon. of What year, your lower quarter? you I you of guidance, last So expect you that less to some with be then, decelerate this X%. the comment to for range Larry? are so prior increase, improvement describe showed there? year-over-year was guess than point, metrics creative the the you pricing, surprise how in Hi! know on mean would actually the around the towards end the

frame the your So shaped quarter for how can expectations. internal just you up

Larry Cohen

range Yeah quarter well, the it was Joanna. of within our – for expectations, third it was within our

is as You fourth did we my weakest know as expect level the into the physical and a our with really, the the factors. into and we were – quarter along, as what fourth went occupancy really quarter, translate noted from months in and those standpoint occupancy But occupancy. September quarter about I go it’s really projections that’s what rate, we of what and big mostly at are achieve what influencing we can October financial remarks

So at previously range near be low communicated. that’s that the really that why we we or would end of expect to

Joanna Gajuk

is on about that taking on Because in XX% has so this so about talk I QX some talk call place. been the pricing, the And or markets. know you then you discounting you guess Right, so can occupancy.

can frame So has you since just then? happened what

Larry Cohen

of It them. So we and in we thanks we kind markets a how of up discounting historical but above anything Joanna, have there thoughtful be something our every competitive of to discount is environment that that across concessions and when industry, request being VP me to terms rate, of the and what up very you’ve implementing is utilize are is question for of Operations of comes would through our which many and President considered are Carey review run we heard that’s in And Sales. selective reviewed for the very in as the Vice process kind if the is review. a

percentage terms of competitive last XX%. in months markets, XX% the of over more of some markets, XX% So our a actually from of overall our seen percentage, of in the to in an to couple average down reduction discounting down hyper in we’ve

rates markets. we some talk some loss slowing, to as at head some seeing we but occupancy also in So seen Carey work are in about you those preserve you’ve of

the working found right balance going between the to balance think two now. strike and we we’re really those So we forward

Joanna Gajuk

the cost then flipside, somewhat labor the bases. guess on Right. in And of same than the a right of so store cost, on X.X% the was on better X.X% I growth slightly QX

or costs. in of characterize expected of you all seeing So you as pressure labor in there? sort trends there the terms terms how would in of it’s trend, Are

Carey Hendrickson

trends that we and been the Carey that similar into and is to fourth this I have would continue expect say we know you trend experiencing would quarter. similar Joanna,

We our going But adjustments we looking of know overtime pressure in are beginning impacting address certain need do we are time. much. markets talked – wage both are marks, this – to but we in we are labor I address point that to contract in isn’t we some the as think we believe and make looking there. a it, and are in it to both seeing of our is are about Brett to we the cost at pressure labor reductions to that offset lot you increase wage and that But and very aware

Larry Cohen

expense labor costs. the pressure wage think of markets. our this opportunity of job contract good mentioned really a last down as time I Carey some biggest become forward our did drive Yeah, base in rebasing has for is more to utilization We as year to us labor going improve pronounced contract

us allow costs going that those that again these and really forward. to creep that reduce seen to investments premium targeted and will so think a making start bit start have out I pay up We we’re to balance

Joanna Gajuk

back to the I’ll Alright, queue go thanks.

Larry Cohen

you. Thank

Operator

go with from question our take Please we’ll next Stifel. Vanacore ahead. Chad And

Chad Vanacore

apologize, going after But did planned remarks. I to the mention more divestitures. you on hopped because I’m there, your right about Hey prepared

You should said stabilized expect or those number of expect limited to we we be group? assets many underperforming can assets. How and the

Larry Cohen

Yeah, the analyze each. as Chad our assets. This large the ongoing potential so number our of specific part limited sell a of review associated assets We and number anticipate set sale a is we we’ll portfolio. know not into of normal optimization you I that circumstances with assets. are assets of consistently the of

so company. quarter significant the don’t Some that reinvest then we have of it will doing and that to could specific don’t our could looking and limited We as for well we communities timetable our as the specific to people number of said consider be that sell, a proceeds, we so. there’s long term success portfolio, but that some as a in assets I our are number be no generate for

do looking XXXX. We in are just to that

Chad Vanacore

way at is adding had XXXX Okay, with to there – you is do leverage this pretty about, there. comfortable or loans adding but leverage? kind mentioned What you of additional are some some high queued already adding there up to your without

Larry Cohen

Well we to foundation risk Chad, the because cash duration that’s know which give is then think extent to XXXX, important. our and to maturities us helps nearest you can, rate does do most strengthen trying interest financial the which term to us looking to – we is proceeds what some extend that. to It so address to we are XXXX’s and XXXX’s and we do do are our and try those really nearest term also

our of that be through going sales debt off flip to balance the side some asset on of sheet. are the We taking

of opposite standpoint. kind direction in the moving there a from that’s So debt

Chad Vanacore

the loans? and When average as for the pricing then company weighted of X.X%. do have anticipate you on Alright, new you far these debt goes, about whole as

Larry Cohen

we’ll and Well, wait have you know to see.

probably tenure that around the that. rising XXX terms that, and and between tenure a treasury important. around would haven’t XXX historic that XXX I’d the now on and is would you where but range it at rate, than maybe higher historically somewhere environment the the right be kind of be We to rate could basis But little of know and make a that’s expect say right is I’d be low so a set

Chad Vanacore

really little that’s just Alright bit. side growth and and have your things, margin the expense contracted a of hampered then on

doing Can a what reminder else control plan expenses? do give to So us there? you on you

Larry Cohen

in and in in food of some continue supply additional the procurement as spend, are Yeah, our this making vendor greater optimizations further optimize some that you’ll GPO we see to Chad, our and of spend well terms platform our as that there remarks through changes. will utilization gain are but centralized efficiencies

side markets. into side lot our mostly a labor go as most was a that labor of have regionalization And and at increases of bit our competitive on contracts, nationalization then around uptick additional also execute server on We biggest an again opportunities saw the we the where in XXXX. contract will the in we

to to labor as time, make investments a there’s our at slightly targeted So be as a regular rate wage, XXXX costs so we more if proposition we exchange there in we’re anticipate paying we value that even people higher will be as these as we premium we contract it’s get go competitive today a going that into and well. the a for generator value for anticipate that

Chad Vanacore

if Brett, same year-over-year. contract break is look expense, that store operating I labor out that X.X% labor is you it? Does excluding at or plus include So

Brett Lee

include like. overtime are utilization shortages some Yeah, and of in labor pressure premium and does excludes, but that the pay the of also seeing and our so it we effect

we as make as in investments. these premium those anticipate again well there a so that And reduction pay be will we costs

Chad Vanacore

thanks taking questions. Alright, for the

Larry Cohen

Thank Absolutely. you.

Operator

line follow-up open. Hello Instructions]. your take Chad with go I’m we’ll from question [Operator is Chad, And sorry Vanacore a ahead. Stifel. Please

Chad Vanacore

since figured question. I another Joanna sneak I like here, looks as just me well and might Okay, it then in

do where just kind occupancy, burning the expect here, previously thinking those from to of stabilize of be discounted growth rate given you then where far now year? about that the off your as discounts you end to to So and are as you had

Larry Cohen

much competitive essentially concessions a burn we we’ve most pricing short most pressure. period. environments competitive to very XX in the markets rates sure In that off to at most our rate exercise where our be utilizing a for are lower but continue make market day to back So in been seeing our done and the some part term and we’ve historical that of through going a we’re kind levels discounting,

So a markets months last each a in one lot again, even few an of detailed the at the fashion, in we’ve is, strategy think be our value in on needs serve. solely but pricing proposition that competing competing is our to very those look look the we of discipline to and where to competitive what markets over really price, of our greater time our spent not at what level seniors we environment, value on putting review

So couple significant although will the competitive the reduction we’ve at markets, kind in that where the we’ve fourth quarter, terms that it maintain discounting a will doing. seen of levels been over of those I in been. last amount continue of use in of especially we our strategically months most anticipate we’ve tools And the to

Chad Vanacore

thanks. Alright,

Operator

no Instructions]. to [Operator closing further to for additional remarks. I’d Mr. any at and questions we And as call Cohen this have back seeing like time, turn the over

Larry Cohen

questions I in interest your to Senior Living. for you us if much. have you afternoon. a and all Thank free Feel very additional contact you Thank wish Capital you you. Thank good

Operator

for Once does conference. again, your participation. you conclude that Thank today’s

You your phone disconnect may lines. now

Sonida Senior Living (SNDA) 6 Nov 182018 Q3 Earnings call transcript