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Sonida Senior Living, Inc. Announces First Quarter 2023 Results

Sonida Senior Living, Inc. (the “Company,” “we,” “our,” or “us”) (NYSE: SNDA) announced results for the first quarter ended March 31, 2023.

“The combination of strong and stable leadership across our operating platform, productive discussions and progress with our lending partners and recent significant margin expansion, position the Company for continued growth in 2023 and beyond,” said Brandon Ribar, President, and CEO. “We believe our continued success lies in our focus on three key areas—driving NOI growth in the existing portfolio, strengthening the balance sheet and participating as an active acquirer in the market.”

Highlights

  • Weighted average occupancy for the Company’s owned portfolio of 62 communities increased 220 basis points to 84.0% year-over-year vs. Q1 2022, and increased 10 basis points sequentially vs. Q4 2022.
  • Resident revenue increased 11.4% year-over-year, and increased 7.4% when excluding $2.0 million and $0.7 million of state grant revenue received in Q1 2023 and Q1 2022, respectively.
  • Net income attributable to common stockholders was $19.8 million (which includes a $36.3 million gain on debt extinguishment), with a net income margin of 31.8% in Q1 2023 as compared to a net loss margin of 30.5% in Q1 2022.
  • Adjusted EBITDA, a non-GAAP measure, was $7.8 million for Q1 2023, an increase of 109.1% year-over-year and 69.1% in sequential quarters.
  • Results for the Company’s same-store, owned portfolio (“same-store”) of 60 communities:
    • Q1 2023 vs. Q1 2022:
      • Revenue Per Available Unit (“RevPAR”) increased 11.4%.
      • Revenue Per Occupied Unit (“RevPOR”) increased 8.9% to $3,966.
      • Community Net Operating Income, a non-GAAP measure, increased $3.3 million. Adjusted Community Net Operating Income, a non-GAAP measure, which excludes $2.0 million and $0.7 million of state grant revenue received in Q1 2023 and Q1 2022, respectively, was $11.4 million and $9.5 million for Q1 2023 and Q1 2022, respectively.
      • Community Net Operating Income Margin and Adjusted Community Net Operating Income Margin (non-GAAP measures adjusted for non-recurring state grant revenue) were 24.1% and 21.2% for Q1 2023, respectively and 20.2% and 19.1% for Q1 2022, respectively.
    • Q1 2023 vs. Q4 2022:
      • RevPAR increased 6.5%.
      • RevPOR increased 6.5% to $3,966.
      • Community Net Operating Income increased $2.8 million. Adjusted Community Net Operating Income, excluding $2.0 million of state grant revenue received in Q1 2023, was $11.4 million and $10.7 million for Q1 2023 and Q4 2022, respectively.
      • Community Net Operating Income Margin and Adjusted Community Net Operating Income Margin (adjusted for non-recurring state grant revenue) were 24.1% and 21.2% for Q1 2023, respectively, and 20.3% and 20.3% for Q4 2022, respectively.

SONIDA SENIOR LIVING, INC.

SUMMARY OF CONSOLIDATED FINANCIAL RESULTS

FIRST QUARTER ENDED MARCH 31, 2023

(in thousands)

 

 

Quarters Ended March 31,

 

Quarter ended December 31,

 

 

2023

 

 

 

2022

 

 

 

2022

 

Consolidated results

 

 

 

 

 

Resident revenue

$

56,606

 

 

$

50,834

 

 

$

53,388

 

Management fees

 

505

 

 

 

628

 

 

 

523

 

Operating expenses

 

43,808

 

 

 

41,929

 

 

 

45,073

 

General and administrative expenses

 

7,063

 

 

 

8,273

 

 

 

6,723

 

Gain (loss) on extinguishment of debt

 

36,339

 

 

 

(641

)

 

 

 

Long-lived asset impairment

 

 

 

 

 

 

 

1,588

 

Income (loss) before provision for income taxes

 

24,214

 

 

 

(16,424

)

 

 

(16,742

)

Net income (loss)

 

24,145

 

 

 

(16,678

)

 

 

(16,574

)

Adjusted EBITDA (1)

 

7,794

 

 

 

3,727

 

 

 

4,609

 

Net cash provided by (used in) operating activities

 

3,249

 

 

 

(690

)

 

 

(5,481

)

Adjusted CFFO (1)

 

(40

)

 

 

(4,160

)

 

 

(3,060

)

Same-Store Results

 

 

 

 

 

Resident revenue (2)

 

56,010

 

 

 

50,497

 

 

 

52,826

 

Community net operating income (NOI) (1)

 

13,471

 

 

 

10,188

 

 

 

10,720

 

Community net operating income margin (1)

 

24.1

%

 

 

20.2

%

 

 

20.3

%

Weighted average occupancy (3)

 

84.2

%

 

 

82.3

%

 

 

84.2

%

(1) Adjusted EBITDA, Community Net Operating Income, Community Net Operating Income Margin, and Adjusted CFFO are financial measures that are not calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). See “Reconciliations of Non-GAAP Financial Measures” for the Company's definition of such measures, reconciliations to the most comparable GAAP financial measures, and other information regarding the use of the Company's non-GAAP financial measures.

(2) Same-store resident revenue excludes $0.6 million, $0.3 million, and $0.6 million for the quarters ended March 31, 2023, March 31, 2022, and December 31, 2022, respectively, related to the revenues earned in the operations of the two Indiana senior living communities acquired by the Company in February 2022.

(3) Weighted average occupancy for all periods presented excludes the operations of the two Indiana senior living communities acquired by the Company in February 2022.

Results of Operations

Three months ended March 31, 2023 as compared to three months ended March 31, 2022

Revenues

Resident revenue for the three months ended March 31, 2023 was $56.6 million as compared to $50.8 million for the three months ended March 31, 2022, an increase of $5.8 million, or 11.4%. The increase in revenue was primarily due to increased occupancy, increased average rent rates, and the acquisition of two communities in Q1 2022.

Management fee revenue for the three months ended March 31, 2023 decreased by $0.1 million as compared to the three months ended March 31, 2022, primarily as a result of managing fewer communities in Q1 2023 versus Q1 2022.

Expenses

Operating expenses for the three months ended March 31, 2023 were $43.8 million as compared to $41.9 million for the three months ended March 31, 2022, an increase of $1.9 million. The increase is primarily due to a $1.3 million increase in labor and employee-related expenses and a $0.6 million increase in utility costs.

General and administrative expenses for the three months ended March 31, 2023 were $7.1 million as compared to $8.3 million for the three months ended March 31, 2022, representing a decrease of $1.2 million. This decrease is primarily due to a $0.9 million decrease in stock-based compensation expense from the prior year quarter due to forfeiture credits in connection with executive personnel changes in 2022, and a $0.3 million net decrease in recurring corporate expenses.

Gain on extinguishment of debt was $36.3 million for the three months ended March 31, 2023. The gain related to the derecognition of notes payable and liabilities as a result of the transition of legal ownership of two communities to Fannie Mae, the holder of the related non-recourse debt.

The Company reported a net income of $24.1 million for the three months ended March 31, 2023, compared to net loss of $16.7 million for the three months ended March 31, 2022. A major factor impacting the comparison of net income for the three months ended March 31, 2023 and March 31, 2022 includes a gain on extinguishment of debt of $36.3 million in 2023.

Adjusted EBITDA for the three months ended March 31, 2023 was $7.8 million compared to $3.7 million for the three months ended March 31, 2022. Adjusted EBITDA excluding COVID-19 expenses was $7.8 million for the three months ended March 31, 2023, compared to $3.9 million for the three months ended March 31, 2022. See “Reconciliation of Non-GAAP Financial Measures” below.

Three months ended March 31, 2023 as compared to three months ended December 31, 2022

Revenues

Resident revenue for the three months ended March 31, 2023 was $56.6 million as compared to $53.4 million for the three months ended December 31, 2022, representing an increase of $3.2 million, or 6.0%. Excluding $2.0 million in state grant revenue received in Q1 2023, resident revenue increased $1.2 million, or 2.2%. The increase in revenue was primarily due to increased occupancy and increased average rent rates.

Management fee revenue for the three months ended March 31, 2023 and December 31, 2022 was $0.5 million.

Expenses

Operating expenses for the three months ended March 31, 2023 were $43.8 million as compared to $45.1 million for the three months ended December 31, 2022, a decrease of $1.3 million. The decrease is primarily due to a $0.2 million decrease in labor costs, a $0.5 million decrease in food costs, a $0.2 million decrease in supplies costs, and a $0.4 decrease in other expenses.

General and administrative expenses for the three months ended March 31, 2023 were $7.1 million as compared to $6.7 million for the three months ended December 31, 2022, an increase of $0.4 million. This increase is primarily as a result of increased employee costs.

Gain on extinguishment of debt was $36.3 million for the three months ended March 31, 2023, as discussed above.

Long-lived asset impairment charge of $1.6 million for the quarter ended December 31, 2022 related to a commitment to sell a community at an agreed-upon selling price below the carrying amount.

The Company reported a net income of $24.1 million for the three months ended March 31, 2023 compared to a net loss of $16.6 million for the three months ended December 31, 2022. A major factor impacting the comparison of net income for the three months ended March 31, 2023 and December 31, 2022 is the $36.3 million of gain on extinguishment of debt during Q1 2023.

Adjusted EBITDA for the three months ended March 31, 2023 was $7.8 million compared to $4.6 million for the three months ended December 31, 2022. Adjusted EBITDA excluding COVID-19 expenses was $7.8 million for the three months ended March 31, 2023 compared to $4.7 million for the three months ended December 31, 2022. See “Reconciliation of Non-GAAP Financial Measures” below.

Significant Transactions for the Three Months Ended March 31, 2023

Foreclosure Proceedings on Fannie Mae Loans

On January 11, 2023, the Company received notice that the foreclosure sales conducted by Fannie Mae had successfully transitioned the remaining two properties to new owners. This event relieved the Company of the existing Fannie Mae debt relating to the two properties. Accordingly, the Company recognized a total of $36.3 million for the gain on debt extinguishments for the quarter ended March 31, 2023. With the transition of these two properties, the 18 total Fannie Mae properties’ foreclosure that commenced in 2020 was completed.

Protective Life Insurance Company Non-recourse Mortgages

During the first quarter of 2023, the Company elected to not make principal and interest payments due under certain non-recourse mortgage loan agreements with an aggregate outstanding principal amount of $69.8 million for four communities as of March 31, 2023. Therefore, the Company is in default on these loans, and has presented the total amount due as current notes payable on the condensed consolidated balance sheet. The Company is currently engaged in discussions with Protective Life Insurance Company, the lender of such debt, in order to resolve this matter.

Liquidity and Capital Resources

Cash flows

The table below presents a summary of the Company’s net cash provided by (used in) operating, investing, and financing activities (in thousands):

 

Three months ended March 31,

 

 

2023

 

 

 

2022

 

Net cash provided by (used in) operating activities

$

3,249

 

 

$

(690

)

Net cash used in investing activities

 

(5,086

)

 

 

(17,924

)

Net cash used in financing activities

 

(3,759

)

 

 

(13,434

)

Decrease in cash and cash equivalents

$

(5,596

)

 

$

(32,048

)

In addition to $13.0 million of unrestricted cash balances on hand as of March 31, 2023, our principal sources of liquidity are expected to be cash flows from operations, COVID-19 or related relief grants from various state agencies, proceeds from debt refinancings or loan modifications, and/or proceeds from the sale of owned assets. In March 2022, the Company completed the refinancing of certain existing mortgage debt on 10 properties, which was amended in December 2022 to include two additional properties.

The Company has implemented plans, which include strategic and cash-preservation initiatives, designed to provide the Company with adequate liquidity to meet its obligations for at least the 12-month period following the date its first quarter 2023 financial statements are issued. While the Company’s plans are designed to provide it with adequate liquidity to meet its obligations for at least the 12-month period following the date its financial statements are issued, the remediation plan is dependent on conditions and matters that may be outside of the Company’s control, and no assurance can be given that certain options will be available on terms acceptable to the Company, or at all. If the Company is unable to successfully execute all of the planned initiatives or if the plan does not fully mitigate the Company’s liquidity challenges, the Company’s operating plans and resulting cash flows along with its cash and cash equivalents and other sources of liquidity may not be sufficient to fund operations for the 12-month period following the date the financial statements are issued.

The Company, from time to time, considers and evaluates financial and capital raising transactions related to its portfolio, including debt refinancings, purchases and sales of assets and other transactions. There can be no assurances that the Company will continue to generate cash flows at or above current levels, or that the Company will be able to obtain the capital necessary to meet the Company’s short and long-term capital requirements.

Recent changes in the current economic environment, and other future changes, could result in decreases in the fair value of assets, slowing of transactions, and the tightening of liquidity and credit markets. These impacts could make securing debt or refinancings for the Company or buyers of the Company’s properties more difficult or on terms not acceptable to the Company. The Company’s actual liquidity and capital funding requirements depend on numerous factors, including its operating results, its capital expenditures for community investment, and general economic conditions, as well as other factors described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 30, 2023.

Conference Call Information

The Company will host a conference call with senior management to discuss the Company’s financial results for the three months ended March 31, 2023, on Thursday May 11, 2023, at 12:30 p.m. Eastern Time. To participate, dial 877-407-0989 (no passcode required). A link to the simultaneous webcast of the teleconference will be available at: https://www.webcast-eqs.com/register/sonidaseniorliving_q12023_en/en.

For the convenience of the Company’s shareholders and the public, the conference call will be recorded and available for replay starting May 12, 2023 through May 26, 2023. To access the conference call replay, call 877-660-6853, passcode 13738670. A transcript of the call will be posted in the Investor Relations section of the Company’s website.

About the Company

Dallas-based Sonida Senior Living, Inc. is a leading owner-operator of independent living, assisted living and memory care communities and services for senior adults. As of March 31, 2023, the Company operated 72 communities, with capacity for approximately 8,000 residents across 18 states, which provide comfortable, safe, affordable environment where residents can form friendships, enjoy new experiences and receive personalized care from dedicated team members who treat them like family. For more information, visit www.sonidaseniorliving.com or connect with the Company on Facebook, Twitter or LinkedIn.

Definitions of RevPAR and RevPOR

RevPAR, or average monthly revenue per available unit, is defined by the Company as resident revenue for the period, divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period.

RevPOR, or average monthly revenue per occupied unit, is defined by the Company as resident revenue for the period, divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period.

Safe Harbor

This release contains forward-looking statements which are subject to certain risks and uncertainties that could cause our actual results and financial condition of Sonida Senior Living, Inc. (the “Company,” “we,” “our” or “us”) to differ materially from those indicated in the forward-looking statements, including, among others, the risks, uncertainties and factors set forth under “Item. 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2023, and also include the following: the impact of COVID-19, including the actions taken to prevent or contain the spread of COVID-19, the transmission of its highly contagious variants and sub-lineages and the development and availability of vaccinations and other related treatments, or another epidemic, pandemic or other health crisis; the Company’s ability to generate sufficient cash flows from operations, additional proceeds from debt financings or refinancings, and proceeds from the sale of assets to satisfy its short- and long-term debt obligations and to make capital improvements to the Company’s communities; increases in market interest rates that increase the cost of certain of our debt obligations; increased competition for, or a shortage of, skilled workers, including due to the COVID-19 pandemic or general labor market conditions, along with wage pressures resulting from such increased competition, low unemployment levels, use of contract labor, minimum wage increases and/or changes in overtime laws; the Company’s ability to obtain additional capital on terms acceptable to it; the Company’s ability to extend or refinance its existing debt as such debt matures; the Company’s compliance with its debt agreements, including certain financial covenants and the risk of cross-default in the event such non-compliance occurs; the Company’s ability to complete acquisitions and dispositions upon favorable terms or at all; the risk of oversupply and increased competition in the markets which the Company operates; the Company’s ability to improve and maintain controls over financial reporting and remediate the identified material weakness discussed in its recent Quarterly and Annual Reports filed with the SEC; the departure of the Company’s key officers and personnel; the cost and difficulty of complying with applicable licensure, legislative oversight, or regulatory changes; risks associated with current global economic conditions and general economic factors such as inflation, the consumer price index, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits, and insurance, interest rates, and tax rates; and changes in accounting principles and interpretations.

For information about Sonida Senior Living, visit www.sonidaseniorliving.com

Sonida Senior Living, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

 

 

Three Months Ended

March 31,

 

 

2023

 

 

 

2022

 

Revenues:

 

 

 

Resident revenue

$

56,606

 

 

$

50,834

 

Management fees

 

505

 

 

 

628

 

Managed community reimbursement revenue

 

4,962

 

 

 

7,022

 

Total revenues

 

62,073

 

 

 

58,484

 

Expenses:

 

 

 

Operating expense

 

43,808

 

 

 

41,929

 

General and administrative expense

 

7,063

 

 

 

8,273

 

Depreciation and amortization expense

 

9,881

 

 

 

9,578

 

Managed community reimbursement expense

 

4,962

 

 

 

7,022

 

Total expenses

 

65,714

 

 

 

66,802

 

Other income (expense):

 

 

 

Interest income

 

194

 

 

 

1

 

Interest expense

 

(8,867

)

 

 

(7,603

)

Gain (loss) on extinguishment of debt, net

 

36,339

 

 

 

(641

)

Gain on sale of assets, net

 

251

 

 

 

 

Other income (expense), net

 

(62

)

 

 

137

 

Income (loss) before provision for income taxes

 

24,214

 

 

 

(16,424

)

Provision for income taxes

 

(69

)

 

 

(254

)

Net income (loss)

 

24,145

 

 

 

(16,678

)

Dividends on Series A convertible preferred stock

 

(1,198

)

 

 

(1,133

)

Undistributed net income allocated to participating securities

 

(3,182

)

 

 

 

Net income (loss) attributable to common stockholders

$

19,765

 

 

$

(17,811

)

 

 

 

 

Weighted average common shares outstanding — basic

 

6,855

 

 

 

6,341

 

Weighted average common shares outstanding — diluted

 

7,168

 

 

 

6,341

 

 

 

 

 

Basic net income (loss) per common share

$

2.88

 

 

$

(2.81

)

Diluted net income (loss) per common share

$

2.76

 

 

$

(2.81

)

Sonida Senior Living, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except per share amounts)

 

 

March 31,

2023

 

December 31,

2022

 

 

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

12,972

 

 

$

16,913

 

Restricted cash

 

12,174

 

 

 

13,829

 

Accounts receivable, net

 

5,924

 

 

 

6,114

 

Prepaid expenses and other

 

2,940

 

 

 

4,099

 

Total current assets

 

36,141

 

 

 

43,566

 

Property and equipment, net

 

610,945

 

 

 

615,754

 

Other assets, net

 

1,611

 

 

 

1,948

 

Total assets

$

648,697

 

 

$

661,268

 

Liabilities and Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

9,246

 

 

$

7,272

 

Accrued expenses

 

31,857

 

 

 

36,944

 

Current portion of notes payable, net of deferred loan costs

 

81,151

 

 

 

46,029

 

Current portion of deferred income

 

3,857

 

 

 

3,419

 

Federal and state income taxes payable

 

260

 

 

 

 

Other current liabilities

 

640

 

 

 

653

 

Total current liabilities

 

127,011

 

 

 

94,317

 

Notes payable, net of deferred loan costs and current portion

 

554,723

 

 

 

625,002

 

Other liabilities

 

95

 

 

 

113

 

Total liabilities

 

681,829

 

 

 

719,432

 

Commitments and contingencies

 

 

 

Redeemable preferred stock:

 

 

 

Series A convertible preferred stock, $0.01 par value; 41 shares authorized, 41 shares issued and outstanding as of March 31, 2023 and December 31, 2022

 

44,748

 

 

 

43,550

 

Shareholders’ deficit:

 

 

 

Authorized shares - 15,000 as of March 31, 2023 and December 31, 2022; none issued or outstanding, except Series A convertible preferred stock as noted above

 

 

 

 

 

Authorized shares - 15,000 as of March 31, 2023 and December 31, 2022; 6,942 and 6,670 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

 

69

 

 

 

67

 

Additional paid-in capital

 

294,964

 

 

 

295,277

 

Retained deficit

 

(372,913

)

 

 

(397,058

)

Total shareholders’ deficit

 

(77,880

)

 

 

(101,714

)

Total liabilities, redeemable preferred stock and shareholders’ deficit

$

648,697

 

 

$

661,268

 

Sonida Senior Living, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022

 

Cash flows from operating activities:

 

 

 

Net income (loss)

$

24,145

 

 

$

(16,678

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

9,881

 

 

 

9,578

 

Amortization of deferred loan costs

 

366

 

 

 

244

 

Gain on sale of assets, net

 

(251

)

 

 

 

Unrealized loss on interest rate cap, net

 

572

 

 

 

 

(Gain) loss on extinguishment of debt

 

(36,339

)

 

 

641

 

Provision for bad debt

 

237

 

 

 

106

 

Non-cash stock-based compensation expense

 

902

 

 

 

1,828

 

Other non-cash items

 

(1

)

 

 

(55

)

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

 

(48

)

 

 

(625

)

Property tax and insurance deposits

 

 

 

 

 

Prepaid expenses and other

 

1,159

 

 

 

1,633

 

Other assets, net

 

62

 

 

 

296

 

Accounts payable and accrued expense

 

1,828

 

 

 

1,700

 

Federal and state income taxes payable

 

260

 

 

 

251

 

Deferred income

 

438

 

 

 

365

 

Other current liabilities

 

38

 

 

 

26

 

Net cash provided by (used in) operating activities

 

3,249

 

 

 

(690

)

Cash flows from investing activities:

 

 

 

Acquisition of new communities

 

 

 

 

(12,342

)

Capital expenditures

 

(5,429

)

 

 

(5,582

)

Proceeds from sale of assets

 

343

 

 

 

 

Net cash used in investing activities

 

(5,086

)

 

 

(17,924

)

Cash flows from financing activities:

 

 

 

Proceeds from notes payable

 

 

 

 

80,000

 

Repayments of notes payable

 

(3,714

)

 

 

(90,579

)

Dividends paid to Series A preferred stockholders

 

 

 

 

(718

)

Deferred loan costs paid

 

 

 

 

(2,137

)

Other financing costs

 

(45

)

 

 

 

Net cash used in financing activities

 

(3,759

)

 

 

(13,434

)

Decrease in cash and cash equivalents and restricted cash

 

(5,596

)

 

 

(32,048

)

Cash, cash equivalents, and restricted cash at beginning of period

 

30,742

 

 

 

92,876

 

Cash, cash equivalents, and restricted cash at end of period

$

25,146

 

 

$

60,828

 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)

This earnings release contains the financial measures (1) Same-Store Community Net Operating Income and Adjusted Community Net Operating Income, (2) Same-Store Community Net Operating Income Margin and Adjusted Community Net Operating Income Margin, (3) Adjusted EBITDA, (4) Adjusted EBITDA excluding COVID-19 impact, (5) Adjusted CFFO, (6) Revenue per Occupied Unit (RevPOR) and (7) Revenue per Available Unit (RevPAR), all of which are not calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Presentations of these non-GAAP financial measures are intended to aid investors in better understanding the factors and trends affecting the Company’s performance and liquidity. However, investors should not consider these non-GAAP financial measures as a substitute for financial measures determined in accordance with GAAP, including net income (loss), income (loss) from operations, or net cash provided by (used in) operating activities. Investors are cautioned that amounts presented in accordance with the Company’s definitions of these non-GAAP financial measures may not be comparable to similar measures disclosed by other companies because not all companies calculate non-GAAP measures in the same manner. Investors are urged to review the following reconciliations of these non-GAAP financial measures from the most comparable financial measures determined in accordance with GAAP.

Same-Store Community Net Operating Income and Same-Store Community Net Operating Income Margin are non-GAAP performance measures for the Company’s portfolio of 60 owned continuing communities that the Company defines as net income (loss) excluding: general and administrative expenses (inclusive of stock-based compensation expense), interest income, interest expense, other income/expense, provision for income taxes, settlement fees and expenses, revenue and operating expenses from the Company’s disposed properties; and further adjusted to exclude income/expense associated with non-cash, non-operational, transactional, or organizational restructuring items that management does not consider as part of the Company’s underlying core operating performance and that management believes impact the comparability of performance between periods. For the periods presented herein, such other items include depreciation and amortization expense, gain(loss) on extinguishment of debt, gain(loss) on disposition of assets, long-lived asset impairment, and loss on non-recurring settlements with third parties. The Same-Store Community Net Operating Income Margin is calculated by dividing Same-Store Community Net Operating Income by same-store community resident revenue. Same-Store Adjusted Community Net Operating Income and Same-Store Adjusted Community Net Operating Income Margin are further adjusted to exclude the impact from non-recurring state grant funds received.

The Company believes that presentation of Same-Store Community Net Operating Income, Same-Store Community Net Operating Income Margin, Adjusted Same-Store Community Net Operating Income, and Adjusted Same-Store Community Net Operating Income Margin as performance measures are useful to investors because (i) they are one of the metrics used by the Company’s management to evaluate the performance of our core portfolio of 60 owned continuing communities, to review the Company’s comparable historic and prospective core operating performance of the 60 owned continuing communities, and to make day-to-day operating decisions; (ii) they provide an assessment of operational factors that management can impact in the short-term, namely revenues and the controllable cost structure of the organization, by eliminating items related to the Company’s financing and capital structure and other items that management does not consider as part of the Company’s underlying core operating performance, and that management believes impact the comparability of performance between periods.

Same-Store Community Net Operating Income, Same-Store Net Community Operating Income Margin, Adjusted Same-Store Community Net Operating Income, and Adjusted Same-Store Community Net Operating Income Margin have material limitations as a performance measure, including: (i) excluded general and administrative expenses are necessary to operate the Company and oversee its communities; (ii) excluded interest is necessary to operate the Company’s business under its current financing and capital structure; (iii) excluded depreciation, amortization and impairment charges may represent the wear and tear and/or reduction in value of the Company’s communities, and other assets and may be indicative of future needs for capital expenditures; and (iv) the Company may incur income/expense similar to those for which adjustments are made, such as gain(loss) on debt extinguishment, gain(loss) on disposition of assets, loss on settlements, non-cash stock-based compensation expense, and transaction and other costs, and such income/expense may significantly affect the Company’s operating results.

(in thousands)

Three Months Ended

March 31,

 

Quarter ended December 31,

 

 

2023

 

 

 

2022

 

 

 

2022

 

Same-store Community Net Operating Income

 

 

 

 

 

Net income (loss)

$

24,145

 

 

$

(16,678

)

 

$

(16,574

)

General and administrative expenses

 

7,063

 

 

 

8,273

 

 

 

6,723

 

Depreciation and amortization expense

 

9,881

 

 

 

9,578

 

 

 

9,508

 

Long-lived asset impairment

 

 

 

 

 

 

 

1,588

 

Interest income

 

(194

)

 

 

(1

)

 

 

(188

)

Interest expense

 

8,867

 

 

 

7,603

 

 

 

9,297

 

(Gain) loss on extinguishment of debt

 

(36,339

)

 

 

641

 

 

 

 

Gain on sale of assets, net

 

(251

)

 

 

 

 

 

 

Other (income) expense

 

62

 

 

 

(137

)

 

 

(1,391

)

Provision for income taxes

 

69

 

 

 

254

 

 

 

 

Settlement fees and expenses, net (1)

 

404

 

 

 

231

 

 

 

294

 

Consolidated community net operating income

 

13,707

 

 

 

9,764

 

 

 

9,257

 

Net operating (income) loss for non same-store communities (2)

 

(236

)

 

 

424

 

 

 

1,463

 

Same-store community net operating income

$

13,471

 

 

$

10,188

 

 

$

10,720

 

Resident revenue

$

56,606

 

 

$

50,834

 

 

$

53,388

 

Resident revenue for non same-store communities (3)

 

(596

)

 

 

(337

)

 

 

(562

)

Same-store community resident revenue

$

56,010

 

 

$

50,497

 

 

$

52,826

 

Same-store community net operating income margin

 

24.1

%

 

 

20.2

%

 

 

20.3

%

 

 

 

 

 

 

COVID-19 relief funds (4)

 

2,037

 

 

 

689

 

 

 

 

Same-store adjusted community net operating income

$

11,434

 

 

$

9,499

 

 

$

10,720

 

Same-store adjusted community net operating income margin

 

21.2

%

 

 

19.1

%

 

 

20.3

%

(1) Settlement fees and expenses relate to non-recurring settlements with third parties for contract terminations, insurance claims, and related fees.

(2) Net operating income for non same-store communities relate to operating income realized in the quarters ended March 2023, March 2022, and December 2022, respectively, related to the operations of the two Indiana senior living communities acquired by the Company in February 2022.

(3) Resident revenue for non-same-store communities relates to revenues earned from the operations for the three months ended March 31, 2023 and 2022, and December 31, 2022, respectively, related to the revenues earned in the operations of the two Indiana senior living communities acquired by the Company in February 2022.

(4) COVID-19 relief revenue are grants and other funding received from third parties to aid in the COVID-19 response and includes state relief funds received.

ADJUSTED EBITDA AND ADJUSTED EBITDA EXCLUDING COVID-19 IMPACT (UNAUDITED)

Adjusted EBITDA and Adjusted EBITDA excluding COVID-19 impact are non-GAAP performance measures that the Company defines as net income (loss) excluding: depreciation and amortization expense, interest income, interest expense, other expense/income, provision for income taxes; and further adjusted to exclude income/expense associated with non-cash, non-operational, transactional, or organizational restructuring items that management does not consider as part of the Company’s underlying core operating performance and that management believes impact the comparability of performance between periods. For the periods presented herein, such other items include stock-based compensation expense, provision for bad debts, gain (loss) on extinguishment of debt, gain on sale of assets, long-lived asset impairment, casualty losses, and transaction and conversion costs.

The Company believes that presentation of Adjusted EBITDA and Adjusted EBITDA excluding COVID-19 impact as performance measures are useful to investors because they are one of the metrics that the Company uses because it provides an assessment of operational factors that management can impact in the short-term, namely revenues and the controllable cost structure of the organization, by eliminating items related to the Company’s financing and capital structure and other items that management does not consider as part of the Company’s underlying core operating performance and that management believes impact the comparability of performance between periods.

Adjusted EBITDA and Adjusted EBITDA excluding COVID-19 impact have material limitations as a performance measure, including: (i) excluded interest is necessary to operate the Company’s business under its current financing and capital structure; (ii) excluded depreciation, amortization and impairment charges may represent the wear and tear and/or reduction in value of the Company’s communities and other assets and may be indicative of future needs for capital expenditures; and (iii) the Company may incur income/expense similar to those for which adjustments are made, such as bad debts, gain(loss) on sale of assets, or gain(loss) on debt extinguishment, non-cash stock-based compensation expense and transaction and other costs, and such income/expense may significantly affect the Company’s operating results.

(In thousands)

Three Months Ended

March 31,

 

Quarter Ended

December 31,

 

 

2023

 

 

 

2022

 

 

 

2022

 

Adjusted EBITDA

 

 

 

 

 

Net income (loss)

$

24,145

 

 

$

(16,678

)

 

$

(16,574

)

Depreciation and amortization expense

 

9,881

 

 

 

9,578

 

 

 

9,508

 

Stock-based compensation expense

 

902

 

 

 

1,828

 

 

 

848

 

Provision for bad debt

 

238

 

 

 

106

 

 

 

251

 

Interest income

 

(194

)

 

 

(1

)

 

 

(188

)

Interest expense

 

8,867

 

 

 

7,603

 

 

 

9,297

 

Long-lived asset impairment

 

 

 

 

 

 

 

1,588

 

(Gain) loss on extinguishment of debt, net

 

(36,339

)

 

 

641

 

 

 

 

Gain on sale of assets, net

 

(251

)

 

 

 

 

 

 

Other (income) expense, net

 

62

 

 

 

(137

)

 

 

(1,391

)

Provision for income taxes

 

69

 

 

 

254

 

 

 

 

Casualty losses (1)

 

 

 

 

625

 

 

 

1,167

 

Transaction and conversion costs (2)

 

414

 

 

 

(92

)

 

 

103

 

Adjusted EBITDA

$

7,794

 

 

$

3,727

 

 

$

4,609

 

COVID-19 expenses (3)

 

33

 

 

 

213

 

 

 

56

 

Adjusted EBITDA excluding COVID-19 impact

$

7,827

 

 

$

3,940

 

 

$

4,665

 

(1) Casualty losses relate to non-recurring insured claims for unexpected events.

(2) Transaction and conversion costs relate to legal and professional fees incurred for transactions, restructure projects, or related projects.

(3) COVID-19 expenses are expenses for supplies and personal protective equipment, testing of the Company’s residents and employees, labor and specialized disinfecting, and cleaning services.

ADJUSTED CFFO (UNAUDITED)

Adjusted Cash Flows From Operations (CFFO) is a non-GAAP liquidity measure that the Company defines as net cash provided by (used in) operating activities adjusted for COVID-19 expenses, transaction and conversion costs, other non-cash items, and changes in operating assets and liabilities.

The Company believes that presentation of Adjusted CFFO as a liquidity measure is useful to investors because it is one of the metrics used by the Company’s management for budgeting and other planning purposes, to review the Company’s historic and prospective sources of operating liquidity, and to review the Company’s ability to service its outstanding indebtedness and make capital expenditures.

Adjusted CFFO has material limitations as a liquidity measure, including: (i) it does not represent cash available for discretionary expenditures since certain non-discretionary expenditures, including mandatory debt principal payments, are not reflected in this measure; and (ii) the cash portion of non-recurring charges generally represent charges/gains that may significantly affect the Company’s liquidity limits the usefulness of the measure for short-term comparisons.

A reconciliation of Net cash provided by (used in) operating activities to Adjusted CFFO is as follows:

 

Quarters ended

March 31,

 

Quarter ended December 31,

(in thousands)

 

2023

 

 

 

2022

 

 

 

2022

 

Net cash provided by (used in) operating activities (1)

$

3,249

 

 

$

(690

)

 

$

(5,481

)

COVID-19 expenses (2)

 

33

 

 

 

213

 

 

 

56

 

Transaction and conversion costs (3)

 

414

 

 

 

(92

)

 

 

103

 

Other non-cash items (4)

 

1

 

 

 

55

 

 

 

 

Changes in operating assets and liabilities

 

(3,737

)

 

 

(3,646

)

 

 

2,262

 

Adjusted CFFO

$

(40

)

 

$

(4,160

)

 

$

(3,060

)

(1) Includes COVID-19 relief revenue and grants received from state relief funds of $2.0 million and $0.7 million for Q1 2023 and Q1 2022, respectively.

(2) COVID-19 expenses are expenses for supplies and personal protective equipment, testing of the Company’s residents and employees, labor and specialized disinfecting and cleaning services.

(3) Transaction and conversion costs relate to legal and professional fees incurred for transactions, restructure projects or related projects.

(4) Other non-cash items include operating lease expense adjustments.

SUPPLEMENTAL INFORMATION

 

 

First Quarter

 

 

(Dollars in thousands)

 

2023

 

 

 

2022

 

 

Increase (decrease)

 

Fourth Quarter 2022

 

Sequential increase (decrease)

Selected Operating Results

 

 

 

 

 

 

 

 

 

I. Same-store community portfolio (1)

 

 

 

 

 

 

 

 

 

Number of communities

 

60

 

 

 

60

 

 

 

 

 

 

60

 

 

 

 

Unit capacity

 

5,592

 

 

 

5,616

 

 

 

(24

)

 

 

5,619

 

 

 

(27

)

Weighted average occupancy (2)

 

84.2

%

 

 

82.3

%

 

 

1.9

%

 

 

84.2

%

 

 

%

Average monthly rent

$

3,966

 

 

$

3,644

 

 

$

322

 

 

$

3,723

 

 

$

243

 

Same-store community net operating income

$

13,471

 

 

$

10,188

 

 

$

3,283

 

 

$

10,720

 

 

$

2,751

 

Same-store community net operating income margin (4)

 

24.1

%

 

 

20.2

%

 

 

3.9

%

 

 

20.3

%

 

 

3.8

%

Same-store community net operating income, net of general and administrative expenses (3)

$

7,310

 

 

$

3,743

 

 

$

3,567

 

 

$

4,627

 

 

$

2,683

 

Same-store community net operating income margin, net of general and administrative expenses (3)

 

13.1

%

 

 

7.4

%

 

 

5.7

%

 

 

8.8

%

 

 

4.3

%

II. Consolidated Debt Information

 

 

 

 

 

 

 

 

 

(Excludes insurance premium financing)

 

 

 

 

 

 

 

 

 

Total variable rate mortgage debt (5)

$

137,453

 

 

$

130,127

 

 

 

N/A

 

 

$

137,652

 

 

 

N/A

 

Total fixed rate debt

$

500,721

 

 

$

543,593

 

 

 

N/A

 

 

$

535,303

 

 

 

N/A

 

(1) Excludes two Indiana senior living communities acquired by the Company in February 2022.

(2) Weighted average occupancy represents actual days occupied divided by total number of available days during the quarter.

(3) General and administrative expenses exclude stock-based compensation expense in order to remove the fluctuation in fair value due to market volatility.

(4) Includes $2.0 million and $0.7 million of state grant revenue received in Q1 2023 and Q1 2022, respectively. Excluding the grant revenue, Q1 2023 same-store community NOI margin was 21.2%.

(5) As of March 31, 2023, the entire balance of our outstanding variable-rate debt obligations were covered by interest rate cap agreements.

 

Contacts

Investor Contact: Kevin J. Detz, Chief Financial Officer, at 972-308-8343

Press Contact: media@sonidaliving.com

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