Sonida Senior Living, Inc. (the “Company,” “we,” “our,” or “us”)
(NYSE: SNDA) announced results for the second quarter ended June
30, 2023.
“The Company’s consistent occupancy and revenue growth
year-over-year and the additional financial flexibility created by
successful agreements with our two largest lending partners enable
us to continue building on our strong operational momentum and
prepare for strategic expansion,” said Brandon Ribar, CEO and
President. “Demand for senior housing continues to accelerate, and
inventory supply remains slow. With our strong, stable leadership
across the portfolio and dedication to operational excellence,
Sonida is well positioned to serve the growing aging population and
drive significant operating income growth for the Company.”
Second Quarter Highlights
- Weighted average occupancy for the Company’s consolidated
portfolio increased 120 basis points to 83.9% year-over-year.
- Resident revenue increased $5.0 million, or 9.5%
year-over-year.
- Net loss for the second quarter was $12.2 million.
- Adjusted EBITDA, a non-GAAP measure, was $7.5 million for Q2
2023, an increase of 78.0% year-over-year.
- Net cash provided by operating activities was $5.5 million
year-to-date as compared to a use of cash of $2.1 million for the
same period in 2022.
- Results for the Company’s consolidated portfolio of
communities:
- Q2 2023 vs. Q2 2022:
- Revenue Per Available Unit (“RevPAR”) increased 9.9% to
$3,300.
- Revenue Per Occupied Unit (“RevPOR”) increased 8.3% to
$3,932.
- Community Net Operating Income, a non-GAAP measure, increased
$2.9 million. Adjusted Community Net Operating Income, a non-GAAP
measure, which excludes $0.4 million and $0.5 million of state
grant revenue received in Q2 2023 and Q2 2022, respectively, was
$13.5 million and $10.6 million for Q2 2023 and Q2 2022,
respectively.
- Community Net Operating Income Margin and Adjusted Community
Net Operating Income Margin (non-GAAP measures with the latter
adjusted for non-recurring state grant revenue) were 23.8% and
23.2%, for Q2 2023, respectively, and were 20.4% and 19.6% for Q2
2022, respectively.
- Q2 2023 vs. Q1 2023:
- RevPAR increased 0.5% to $3,300.
- RevPOR increased 0.6% to $3,932.
- Community Net Operating Income increased $0.2 million. Adjusted
Community Net Operating Income, excluding $0.4 million and $2.0
million of state grant revenue received in Q2 2023 and Q1 2023,
respectively, was $13.1 million and $11.4 million for Q2 2023 and
Q1 2023, respectively.
- Community Net Operating Income Margin and Adjusted Community
Net Operating Income Margin (adjusted for non-recurring state grant
revenue) were 23.8% and 23.2% for Q2 2023, respectively, and 23.7%
and 20.9% for Q1 2023, respectively.
SONIDA SENIOR LIVING,
INC.
SUMMARY OF CONSOLIDATED
FINANCIAL RESULTS
THREE MONTHS ENDED JUNE 30,
2023
(in thousands)
Three Month Ended June
30,
Three Month Ended March
31,
2023
2022
2023
Consolidated results
Resident revenue (1)
$
56,960
$
51,996
$
56,606
Management fees
531
600
505
Operating expenses
44,662
41,510
43,808
General and administrative expenses
6,574
9,439
7,063
Gain (loss) on extinguishment of debt
—
—
36,339
Income (loss) before provision for income
taxes (1)
(12,159
)
(7,410
)
24,214
Net income (loss) (1)
(12,212
)
(7,410
)
24,145
Adjusted EBITDA (1) (2)
7,538
4,236
7,794
Net cash provided by (used in) operating
activities
2,288
(1,380
)
3,249
Community net operating income (NOI)
(2)
13,549
10,642
13,402
Community net operating income margin
(2)
23.8
%
20.4
%
23.7
%
Weighted average occupancy
83.9
%
82.7
%
84.0
%
(1) Includes $0.4 million, $0.5 million,
and $2.0 million of state grant revenue received in Q2 2023, Q2
2022, and Q1 2023, respectively.
(2) Adjusted EBITDA, Community Net
Operating Income, and Community Net Operating Income Margin are
financial measures that are not calculated in accordance with U.S.
Generally Accepted Accounting Principles (“GAAP”). See
“Reconciliation 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.
Results of Operations
Three months ended June 30, 2023 as compared to three months
ended June 30, 2022
Revenues
Resident revenue for the three months ended June 30, 2023 was
$57.0 million as compared to $52.0 million for the three months
ended June 30, 2022, an increase of $5.0 million, or 9.5%. The
increase in revenue was primarily due to increased occupancy and
increased average rent rates.
Expenses
Operating expenses for the three months ended June 30, 2023 were
$44.7 million as compared to $41.5 million for the three months
ended June 30, 2022, an increase of $3.2 million, or 7.7%. The
increase is primarily due to a $2.3 million increase in labor and
employee-related expenses and $0.9 million in other expenses.
General and administrative expenses for the three months ended
June 30, 2023 were $6.6 million as compared to $9.4 million for the
three months ended June 30, 2022, representing a decrease of $2.8
million. This decrease is primarily due to a $1.6 million decrease
in stock-based compensation expense from the prior period and a
$1.2 million net decrease in recurring corporate expenses.
The Company reported a net loss of $12.2 million for the three
months ended June 30, 2023, compared to net loss of $7.4 million
for the three months ended June 30, 2022. A major factor impacting
the comparison of net loss for the three months ended June 30, 2023
and June 30, 2022 includes federal grants received of $9.1 million
in Q2 2022.
Adjusted EBITDA for the three months ended June 30, 2023 was
$7.5 million compared to $4.2 million for the three months ended
June 30, 2022. See “Reconciliation of Non-GAAP Financial Measures”
below.
Six months ended June 30, 2023 as compared to six months
ended June 30, 2022
Revenues
Resident revenue for the six months ended June 30, 2023 was
$113.6 million as compared to $102.8 million for the six months
ended June 30, 2022, an increase of $10.8 million, or 10.5%. The
increase in revenue was primarily due to increased occupancy and
increased average rent rates.
Expenses
Operating expenses for the six months ended June 30, 2023 were
$88.5 million as compared to $83.4 million for the six months ended
June 30, 2022, an increase of $5.1 million, or 6.1%. The increase
is primarily due to a $3.6 million increase in labor and
employee-related expenses, a $0.4 million increase in service
contracts, a $0.5 million increase in computer software/internet
costs and $0.6 million increase in other expenses.
General and administrative expenses for the six months ended
June 30, 2023 were $13.6 million as compared to $17.7 million for
the six months ended June 30, 2022, representing a decrease of $4.1
million. This decrease is primarily due to a $2.6 million decrease
in stock-based compensation expense from the prior year period and
a $1.5 million net decrease in recurring corporate expenses.
The Company reported a net income of $11.9 million for the six
months ended June 30, 2023 compared to a net loss of $24.1 million
for the six months ended June 30, 2022, primarily due to the $36.3
million of gain on extinguishment of debt during the three months
ended March 31, 2023.
Significant Transactions
Fannie Mae Loan Modification
On June 29, 2023, the Company entered into a binding forbearance
agreement with the Federal National Mortgage Association (“Fannie
Mae”) and (“Fannie Forbearance”) for all 37 of its encumbered
communities, effective as of June 1, 2023. Under the Fannie
Forbearance, Fannie Mae agreed to forbear on its legal and
equitable remedies otherwise available under the community loan
agreements and mortgages and Master Credit Facility (“MCF”) in
connection with reduced debt service payments made by the Company
during the Fannie Forbearance period, which expires on October 1,
2023. The Fannie Forbearance is the first of a two-step process to
modify all existing mortgage agreements with Fannie Mae under a
proposed loan modification agreement, as defined in the Fannie
Forbearance (“Loan Modification Agreement”). The terms outlined in
the agreed upon term sheet accompanying the Fannie Forbearance will
be included in the proposed subsequent Loan Modification Agreement.
In the second step, the Company and Fannie Mae have agreed to
exercise commercially reasonable efforts to enter into the Loan
Modification Agreement for each of their existing mortgage
agreements before October 1, 2023. The execution of the Loan
Modification Agreement is subject to certain conditions, including
Sonida continuing to perform under the Forbearance Agreement, the
completion of the definitive documentation, and the absence of any
other events of default under the community mortgages and MCF. The
forbearance and subsequent loan modification provide the Company
with additional financial flexibility and increases its liquidity
position.
Under the terms of the Fannie Forbearance and anticipated Loan
Modification Agreement, the mortgage principal payments on 18
community mortgages, ranging from July 2024 to December 2026, will
be extended to December 2026. The remaining 19 communities under
the MCF have existing maturities in December 2028. The Company will
not be required to make scheduled principal payments due under the
18 community mortgages and 19 communities under the MCF through the
revised maturity date of December 2026 and 36 months from June 1,
2023, respectively. The monthly interest rate will be reduced by a
1.5% weighted average on all 37 communities for 12 months.
Ally Loan Amendment
On June 29, 2023 and concurrent with the Fannie Forbearance, the
Company executed a second amendment (“Ally Amendment”) to its
refinance facility (“Ally Term Loan”) and limited payment guaranty
with Ally Bank (“Second Amended and Restated Limited Payment
Guaranty”) with terms that include a waiver of its current $13.0
million liquid assets requirement through June 30, 2024. During the
waiver period (June 30, 2023 through July 1, 2024, the “Waiver
Period”), a new and temporary liquid assets minimum threshold will
be established at $6.0 million and measured weekly. Beginning on
July 1, 2024, a new liquid assets requirement of $7.0 million will
be effective, with such threshold increasing $1.0 million per month
through the earlier of the release of the Waiver Period or December
31, 2024. In addition, the Company must replace its current $2.3
million interest rate cap (“IRC”) on the $88.1 million notional
value of the Ally Term Loan at a 2.25% SOFR strike rate once the
current IRC expires on November 30, 2023. On July 3, the Company
funded the $2.3 million interest rate cap reserve to Ally Bank.
Conversant Equity Commitment
In connection with the Fannie Forbearance and Ally Amendment
signed on June 29, 2023, the Company entered into a $13.5 million
equity commitment agreement (“Equity Commitment”) with Conversant
Dallas Parkway (A) LP and Conversant Dallas Parkway (B) LP,
(together “Conversant”) for a term of 18 months. The Equity
Commitment had a commitment fee of $675,000 payable through the
issuance of 67,500 shares of common stock of the Company. Sonida
shall have the right, but not the obligation, to utilize
Conversant’s equity commitment and may draw on the commitment in
whole or in part. The Company made a $6.0 million equity draw on
July 3, 2023 in exchange for 600,000 shares of common stock of the
Company.
The foregoing description of the Fannie Forbearance, the Ally
Amendment, Second Amended & Restated Limited Payment Guaranty,
and Equity Commitment and related transactions contemplated do not
purport to be complete and are subject to, and qualified in their
entirety by, the full text of the Fannie Forbearance, the Ally
Amendment, Second Amended and Restated Limited Payment Guaranty,
and Equity Commitment which are filed as Exhibits 10.1, 10.2, 10.3
and 10.4, respectively, to the Company’s Form 8-K filed on July 5,
2023, incorporated herein by reference.
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):
Six months ended June
30,
2023
2022
Net cash provided by (used in) operating
activities
$
5,537
$
(2,070
)
Net cash used in investing activities
(9,355
)
(24,491
)
Net cash used in financing activities
(6,304
)
(19,946
)
Decrease in cash and cash equivalents
$
(10,122
)
$
(46,507
)
In addition to $7.2 million of unrestricted cash on hand as of
June 30, 2023, our future liquidity will depend in part upon our
operating performance, which will be affected by prevailing
economic conditions, including those related to the COVID-19
pandemic, and financial, business and other factors, some of which
are beyond our control. Principal sources of liquidity are expected
to be cash flows from operations, proceeds from debt refinancings
or loan modifications, proceeds from the issuance of common or
preferred stock, COVID-19 or related relief grants from various
state agencies, and/or proceeds from the sale of owned assets. In
June 2023, the Company entered into the Fannie Forbearance, the
Ally Amendment, Second Amended and Restated Limited Payment
Guaranty, and the Equity Agreement, as disclosed above. These
transactions are expected to provide additional financial
flexibility to the Company and increase its liquidity position. In
March 2022, the Company completed the refinancing of certain
existing mortgage debt, which was further amended in December 2022
and June 2023.
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 second quarter 2023
financial statements are issued. While the Company’s plans are
designed to provide it with adequate liquidity to meet its
financial obligations, 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 and modifications, purchases
and sales of assets and other transactions. There can be no
assurance 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 and
“Item. 1A. Risk Factors” in our Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 2023, filed with the SEC on
August 14, 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 June 30, 2023, on Monday August 14, 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_q22023_en/en.
For the convenience of the Company’s shareholders and the
public, the conference call will be recorded and available for
replay starting August 15, 2023 through August 29, 2023. To access
the conference call replay, call 877-660-6853, passcode 13740287. 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 June 30,
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 “Item. 1A.
Risk Factors” in our Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2023, filed with the SEC on August
14, 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, including the Company’s ability to
complete the modifications to its loan agreements; 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
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
Revenues:
Resident revenue
$
56,960
$
51,996
$
113,566
$
102,830
Management fees
531
600
1,036
1,228
Managed community reimbursement
revenue
5,363
7,041
10,325
14,063
Total revenues
62,854
59,637
124,927
118,121
Expenses:
Operating expense
44,662
41,510
88,470
83,439
General and administrative expense
6,574
9,439
13,637
17,712
Depreciation and amortization expense
9,927
9,671
19,808
19,249
Managed community reimbursement
expense
5,363
7,041
10,325
14,063
Total expenses
66,526
67,661
132,240
134,463
Other income (expense):
Interest income
188
2
382
3
Interest expense
(8,558
)
(7,920
)
(17,425
)
(15,523
)
Gain (loss) on extinguishment of debt,
net
—
—
36,339
(641
)
Gain on sale of assets, net
—
—
251
—
Other income (expense), net
(117
)
8,532
(179
)
8,669
Income (loss) before provision for
income taxes
(12,159
)
(7,410
)
12,055
(23,834
)
Provision for income taxes
(53
)
—
(122
)
(254
)
Net income (loss)
(12,212
)
(7,410
)
11,933
(24,088
)
Dividends on Series A convertible
preferred stock
—
(1,134
)
—
(2,267
)
Undeclared dividends on Series A
convertible preferred stock
(1,230
)
—
(2,428
)
—
Undistributed net income allocated to
participating securities
—
—
(1,419
)
—
Net income (loss) attributable to
common stockholders
$
(13,442
)
$
(8,544
)
$
8,086
$
(26,355
)
Weighted average common shares outstanding
— basic
6,381
6,358
6,374
6,350
Weighted average common shares outstanding
— diluted
6,381
6,358
6,856
6,350
Basic net income (loss) per common
share
$
(2.11
)
$
(1.34
)
$
1.27
$
(4.15
)
Diluted net income (loss) per common
share
$
(2.11
)
$
(1.34
)
$
1.18
$
(4.15
)
Sonida Senior Living,
Inc.
Condensed Consolidated Balance
Sheets (Unaudited)
(in thousands, except per
share amounts)
June 30, 2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents
$
7,203
$
16,913
Restricted cash
13,417
13,829
Accounts receivable, net
7,586
6,114
Prepaid expenses and other assets
5,008
4,099
Derivative assets
1,600
2,611
Total current assets
34,814
43,566
Property and equipment, net
606,069
615,754
Other assets, net
1,226
1,948
Total assets
$
642,109
$
661,268
Liabilities and Equity
Current liabilities:
Accounts payable
$
10,005
$
7,272
Accrued expenses
36,008
36,944
Current portion of notes payable, net of
deferred loan costs
88,636
46,029
Deferred income
4,142
3,419
Federal and state income taxes payable
61
—
Other current liabilities
554
653
Total current liabilities
139,406
94,317
Notes payable, net of deferred loan costs
and current portion
547,381
625,002
Other liabilities
77
113
Total liabilities
686,864
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 June 30, 2023 and December 31, 2022
45,978
43,550
Shareholders’ deficit:
Authorized shares - 15,000 as of June 30,
2023 and December 31, 2022; none issued or outstanding, except
Series A convertible preferred stock as noted above
—
—
Authorized shares - 15,000 as of June 30,
2023 and December 31, 2022; 7,178 and 6,670 shares issued and
outstanding as of June 30, 2023 and December 31, 2022,
respectively
72
67
Additional paid-in capital
294,320
295,277
Retained deficit
(385,125
)
(397,058
)
Total shareholders’ deficit
(90,733
)
(101,714
)
Total liabilities, redeemable preferred
stock and shareholders’ deficit
$
642,109
$
661,268
Sonida Senior Living,
Inc.
Condensed Consolidated
Statements of Cash Flows (Unaudited)
(in thousands)
Six Months Ended June
30,
2023
2022
Cash flows from operating
activities:
Net income (loss)
$
11,933
$
(24,088
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
19,808
19,249
Amortization of deferred loan costs
788
519
Gain on sale of assets, net
(251
)
—
Write-off of other assets
—
535
Unrealized loss on interest rate cap,
net
1,103
45
(Gain) loss on extinguishment of debt
(36,339
)
641
Provision for bad debt
334
522
Non-cash stock-based compensation
expense
1,503
4,067
Other non-cash items
(1
)
4
Changes in operating assets and
liabilities:
Accounts receivable, net
(1,807
)
(1,387
)
Prepaid expenses and other assets
1,316
700
Other assets, net
294
(301
)
Accounts payable and accrued expense
6,100
(2,524
)
Federal and state income taxes payable
61
(421
)
Deferred income
723
352
Other current liabilities
(28
)
17
Net cash provided by (used in)
operating activities
5,537
(2,070
)
Cash flows from investing
activities:
Acquisition of new communities
—
(12,342
)
Capital expenditures
(9,698
)
(12,149
)
Proceeds from sale of assets
343
—
Net cash used in investing
activities
(9,355
)
(24,491
)
Cash flows from financing
activities:
Proceeds from notes payable
—
80,000
Repayments of notes payable
(5,893
)
(94,247
)
Purchase of common stock
—
(219
)
Dividends paid on Series A convertible
preferred stock
—
(2,985
)
Purchase of interest rate cap
—
(258
)
Deferred loan costs paid
(327
)
(2,180
)
Other financing costs
(84
)
(57
)
Net cash used in financing
activities
(6,304
)
(19,946
)
Decrease in cash and cash equivalents and
restricted cash
(10,122
)
(46,507
)
Cash, cash equivalents, and restricted
cash at beginning of period
30,742
92,876
Cash, cash equivalents, and restricted
cash at end of period
$
20,620
$
46,369
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (UNAUDITED)
This earnings release contains the financial measures (1)
Community Net Operating Income and Adjusted Community Net Operating
Income, (2) Community Net Operating Income Margin and Adjusted
Community Net Operating Income Margin, (3) Adjusted EBITDA, (4)
Revenue per Occupied Unit (RevPOR) and (5) Revenue per Available
Unit (RevPAR), all of which are not calculated in accordance with
U.S. 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,
net cash provided by (used in) operating activities, or revenue.
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.
Community Net Operating Income and Consolidated Community Net
Operating Income Margin are non-GAAP performance measures for the
Company’s consolidated owned portfolio of 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 impacts 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
Community Net Operating Income Margin is calculated by dividing
Community Net Operating Income by community resident revenue.
Adjusted Community Net Operating Income and 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 Community Net
Operating Income, Community Net Operating Income Margin, Adjusted
Community Net Operating Income, and Adjusted 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
consolidated owed portfolio of communities, to review the Company’s
comparable historic and prospective core operating performance of
the consolidated owned 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 impacts
the comparability of performance between periods.
Community Net Operating Income, Net Community Operating Income
Margin, Adjusted Community Net Operating Income, and Adjusted
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
June 30,
Three Months Ended March
31,
2023
2022
2023
Consolidated Community Net Operating
Income
Net income (loss)
$
(12,212
)
$
(7,410
)
$
24,145
General and administrative expenses
6,574
9,439
7,063
Depreciation and amortization expense
9,927
9,671
9,881
Interest income
(188
)
(2
)
(194
)
Interest expense
8,558
7,920
8,867
Gain on extinguishment of debt
—
—
(36,339
)
Gain on sale of assets, net
—
—
(251
)
Other (income) expense (1)
117
(8,532
)
62
Provision for income taxes
53
—
69
Settlement fees and expenses, net (2)
559
39
404
Other taxes
161
(483
)
(305
)
Consolidated community net operating
income
13,549
10,642
13,402
Resident revenue
$
56,960
$
51,996
$
56,606
Consolidated community net operating
income margin
23.8
%
20.4
%
23.7
%
COVID-19 state relief grants (3)
411
524
2,037
Adjusted community net operating
income
$
13,138
$
10,118
$
11,365
Adjusted community net operating income
margin
23.2
%
19.6
%
20.8
%
(1) Includes $9.1 million federal relief
funds received for Q2 2022.
(2) Settlement fees and expenses relate to
non-recurring settlements with third parties for contract
terminations, insurance claims, and related fees.
(3) 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 (UNAUDITED)
Adjusted EBITDA is a 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 impacts 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’s
impact as a performance measure is useful to investors 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 has 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
June 30,
Three Months Ended
March 31,
2023
2022
2023
Adjusted EBITDA
Net income (loss)
$
(12,212
)
$
(7,410
)
$
24,145
Depreciation and amortization expense
9,927
9,671
9,881
Stock-based compensation expense
601
2,240
902
Provision for bad debt
96
416
238
Interest income
(188
)
(2
)
(194
)
Interest expense
8,558
7,920
8,867
Gain on extinguishment of debt, net
—
—
(36,339
)
Gain on sale of assets, net
—
—
(251
)
Other (income) expense, net (1)
117
(8,532
)
62
Provision for income taxes
53
—
69
Casualty losses (2)
456
(114
)
—
Transaction and conversion costs (3)
130
47
414
Adjusted EBITDA
$
7,538
$
4,236
$
7,794
(1) Includes COVID-19 relief revenue and
grants received from federal relief funds of $9.1 million for Q2
2022.
(2) Casualty losses relate to
non-recurring insured claims for unexpected events.
(3) Transaction and conversion costs
relate to legal and professional fees incurred for transactions,
restructure projects, or related projects.
SUPPLEMENTAL
INFORMATION
Second Quarter
(Dollars in thousands)
2023
2022
Increase (decrease)
First Quarter 2023
Sequential increase
(decrease)
Selected Operating Results
I. Consolidated community
portfolio
Number of communities
62
62
—
62
—
Unit capacity
5,753
5,774
(21
)
5,749
4
Weighted average occupancy (1)
83.9
%
82.7
%
1.2
%
84.0
%
(0.1
)%
RevPAR
$
3,300
$
3,002
$
298
$
3,282
$
18
RevPOR
$
3,932
$
3,629
$
303
$
3,909
$
23
Consolidated community net operating
income
$
13,549
$
10,642
$
2,907
$
13,402
$
147
Consolidated community net operating
income margin (3)
23.8
%
20.4
%
3.4
%
23.7
%
0.1
%
Consolidated community net operating
income, net of general and administrative expenses (2)
$
7,576
$
3,443
$
4,133
$
7,241
$
335
Consolidated community net operating
income margin, net of general and administrative expenses (2)
13.3
%
6.6
%
6.7
%
12.8
%
0.5
%
II. Consolidated Debt
Information
(Excludes insurance premium
financing)
Total variable rate mortgage debt (4)
$
137,253
$
130,261
N/A
$
137,453
N/A
Total fixed rate debt
$
499,078
$
540,714
N/A
$
500,721
N/A
(1) Weighted average occupancy represents
actual days occupied divided by total number of available days
during the quarter.
(2) General and administrative expenses
exclude stock-based compensation expense in order to remove the
fluctuation in fair value due to market volatility.
(3) Includes $0.4 million, $0.5 million,
and $2.0 million of state grant revenue received in Q2 2023, Q2
2022, and Q1 2023, respectively. Excluding the grant revenue, Q2
2023 consolidated community NOI margin was 23.2%.
(4) As of June 30, 2023, the entire
balance of our outstanding variable-rate debt obligations were
covered by interest rate cap agreements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230814447134/en/
Investor Contact: Kevin J. Detz, Chief Financial Officer, at
972-308-8343 Press Contact: media@sonidaliving.com.
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