Extendicare Inc. (“Extendicare” or the “Company”) (TSX: EXE) today
reported results for the three months ended March 31, 2021. Results
are presented in Canadian dollars unless otherwise noted.
“The first quarter of this year marked a turning point in the
pandemic for long-term care (LTC) with the success of the
vaccination program for residents and staff. Despite the arrival of
a third wave of COVID-19 across the country, outbreaks and cases
have dropped dramatically in our homes. Nevertheless, the presence
of numerous virus variants means that we must remain vigilant by
maintaining higher staffing levels, enhanced infection control and
regular testing until the threat of the pandemic has passed,” said
President and Chief Executive Officer, Dr. Michael Guerriere.
“We worked tirelessly to keep our residents and team members
safe during the first and second waves of COVID-19. Additional
staff, enhanced infection control procedures and routine testing to
isolate positive cases have been effective in helping to curb the
virus. Tragically, the virus overwhelmed our defenses in some homes
that experienced severe outbreaks where many of our residents and
frontline staff became infected. We continue to mourn residents and
one of our team members who were lost to this virus. We remain
steadfast on driving improvements in the LTC sector in their
memory. We are committed to working with provincial governments and
our partners across the health system to advance much-needed
initiatives to build a better future for our residents and team
members,” added Guerriere.
Investing in Staff and New Homes
During the last year, Extendicare added more than 1,000 new
frontline caregivers to its LTC homes. This positions us well to
enhance our quality of care supported by the Ontario government’s
Long-Term Care Staffing Plan that targets four hours of care per
resident day. We are also making progress in training and hiring
600 new caregivers this year at ParaMed through internal training
programs that were launched last year.
We are moving quickly to advance our long-term plan to replace
aging infrastructure with modern, safer living spaces. Of the 22
LTC redevelopment projects we have proposed to the Ontario
government, nine have received allocations of beds so far. We broke
ground on our new 192-bed Kingston, Ontario LTC home in April, and
construction on our Sudbury new build continues. Four additional
projects are targeted to begin construction before the end of next
year.
“After so many years of advocating for replacement of aging
facilities, it is gratifying to see these projects move forward,”
said Dr. Guerriere. “In total, the nine projects under way
represent a $500 million investment by Extendicare in newer, safer
homes for LTC residents in Ontario. Combined with the marked
expansion of caregivers in LTC and homecare, we are building
capacity to help people live better today and into the future. We
deeply appreciate the new programs and the leadership demonstrated
by the Government of Ontario that make these improvements
possible.”
Protecting our Residents, Clients and
Caregivers
The third wave of COVID-19 has put considerable strain on health
systems across Canada. Emergency measures enacted by Canada’s
federal and provincial governments to combat the spread of COVID-19
remain in place or have been reinstated in most regions. We
continue to work closely with all levels of government, health
authorities, our industry partners and advocacy groups to help
ensure our collective response to the crisis is focused on the
protection and care of our residents, clients and caregivers.
As a result of successful vaccination efforts, case numbers in
Extendicare homes and communities have dropped substantially:
- As of May 11, 2021 there are only
two active resident cases of COVID-19 across our 69 LTC homes and
retirement communities;
- Vaccination efforts are continuing
and approximately 90% of our LTC residents and 86% of our
retirement residents have been fully vaccinated; and
- Extendicare’s extensive education
and awareness campaign for staff, along with the provision of paid
time off and reimbursement of travel expenses for vaccination, have
resulted in approximately 74% of our LTC staff and 67% of our
retirement staff having received at least their first dose.
In addition to ongoing vaccination efforts, we continue to
maintain enhanced infection prevention measures to reduce
transmission risk, especially in light of new variants of concern.
We continue our regular staff testing program to test all LTC
staff, further enhanced with the introduction of rapid testing
capabilities that provide results in 15 minutes and higher testing
frequencies in areas with high levels of community transmission.
Rapid testing is also used to screen all visitors to our homes,
enabling our teams to turn away asymptomatic carriers before the
virus can be transmitted.
The extensive outbreaks we experienced as part of the second
wave early in the first quarter necessitated increased COVID-19
related spending, totalling $46.2 million in Q1 2021. These costs
were partially offset by provincial funding, which for the three
months ended March 31, 2021 totalled $43.9 million. We incurred
$11.9 million in temporary pandemic pay increases for eligible
front-line staff in Q1 2021 offset by funding from Ontario and
Alberta. Since the beginning of the pandemic, we have incurred an
aggregate $120.7 million in COVID-19 related expenses, partially
offset by government programs totalling $88.3 million, resulting in
a cumulative reduction of Adjusted EBITDA of $32.4 million. The
amount and timing of COVID-19 funding has not always aligned with
the incurrence of the costs causing significant volatility in our
results which we expect to continue until the pandemic
subsides.
Q1 2021 Financial Highlights (all comparisons
with Q1 2020)
- Revenue up 18.6% or $50.6 million to
$322.4 million; driven by COVID-19 funding of $55.4 million, LTC
funding enhancements and growth in other operations, partially
offset by a 1.3% decline in home health care average daily volumes
(ADV), timing of LTC flow-through funding, and lower preferred
accommodation revenue in LTC operations.
- Net operating income (NOI)(1) up
$9.9 million to $40.3 million; reflecting the Canada Emergency Wage
Subsidy (CEWS) payments received by ParaMed of $9.7 million, home
health care back-office efficiencies and growth in other
operations, partially offset by increased net COVID-19 costs of
$1.1 million, increased costs of resident care, lower preferred
accommodation revenue in LTC operations and lower home health care
ADV.
- Adjusted EBITDA(1) up $7.6 million
to $27.7 million; reflecting the improvement in NOI noted above,
partially offset by increased wages, insurance and claims reserves,
and increased COVID-19 administrative costs of $0.9 million.
- Earnings from continuing operations
up $7.1 million to $8.3 million; primarily driven by improvements
in NOI and lower finance costs, partially offset by increased
estimated COVID-19 costs in excess of funding, higher
administrative costs.
- AFFO(1) of $19.5 million ($0.22 per
basic share), up $7.9 million; reflecting the increase in earnings
from continuing operations and lower maintenance capex.
Business Updates
The following is a summary of the Company’s revenue, NOI and NOI
margins by business segment for the three months ended March 31,
2021 and 2020, respectively.
|
Three months ended March 31 |
(unaudited) |
|
|
2021 |
|
|
|
2020 |
(millions of dollars, unless otherwise noted) |
Revenue |
NOI |
Margin |
|
Revenue |
NOI |
Margin |
Long-term care |
205.1 |
16.3 |
7.9 |
% |
|
160.2 |
18.4 |
11.5 |
% |
Retirement living |
12.2 |
3.4 |
28.3 |
% |
|
12.0 |
3.7 |
30.8 |
% |
Home health care |
97.7 |
16.0 |
16.3 |
% |
|
93.1 |
4.3 |
4.6 |
% |
Other |
7.4 |
4.6 |
61.7 |
% |
|
6.4 |
3.9 |
60.9 |
% |
|
322.4 |
40.3 |
12.5 |
% |
|
271.8 |
30.4 |
11.2 |
% |
Note: Totals may not sum due to rounding. |
|
|
|
|
|
|
|
Long-Term Care
COVID-19 continued to impact our LTC operations in Q1 2021, as
admissions restrictions led to lower occupancy levels. Increased
costs to protect our staff and residents resulted in lower NOI and
NOI margin compared to the same period last year.
Average occupancy dropped to 82.9% in Q1 2021, from 97.0% in Q1
2020 and 87.7% in Q4 2020, mainly driven by reduced admissions as a
result of COVID-19. Despite lower occupancy levels, our revenue
base was largely preserved through basic occupancy protection
funding from the Government of Ontario, which has been extended
until August 31, 2021. Each of the western provinces in which we
operate have introduced additional funding to offset the impact of
COVID-19, some of which includes funding to address occupancy
shortfalls.
NOI and NOI margin in Q1 2021 were $16.3 million and 7.9%,
respectively, down from $18.4 million and 11.5% respectively in Q1
2020. NOI and NOI margin decreased in the quarter largely as a
result of the impact of COVID-19, resulting in increased costs of
resident care and lower preferred accommodation revenue. Increased
costs associated with COVID-19 and pandemic pay programs, estimated
at $47.4 million, were $0.8 million in excess of COVID-19 related
funding of $46.6 million.
Home Health Care
Our home health care volumes continued to recover in Q1 2021,
despite the Wave 2 lockdowns early in the quarter. Since the peak
impact of the pandemic on home health care volumes in Q2 2020, we
have seen a gradual recovery in our ADV levels. ADV was 1.7% higher
than in Q4 2020, but down 1.3% from the same prior year quarter.
ADV has continued to improve in April, with ADV for the four weeks
ended May 2, 2021 up 2.7% over Q1 levels.
In Q1 2021, revenue increased to $97.7 million, up 4.9% from Q1
2020, driven by COVID-19 and pandemic pay funding of $8.8 million,
partially offset by $3.0 million in Q1 2020 revenue from our
expired B.C. home health care contracts.
NOI and NOI margin increased to $16.0 million and 16.3%,
respectively, in Q1 2021, up from $4.3 million and 4.6%,
respectively, in Q1 2020. The improvement in NOI reflects CEWS
payments received by ParaMed of $9.7 million in Q1 2021 and lower
back-office costs, offset by lower ADV and net costs of $0.2
million associated with COVID-19.
We are seeing the benefits of our completed cloud-based
scheduling and clinical management system, particularly with
improved efficiency in our back-office operations and growing
virtual care services. Excluding the impact of CEWS, COVID-19
related funding and expenses and Q4 2020 one-time charges, NOI
margins in Q1 2021 were 7.3%, up from 5.8% in Q4 2020 and 4.6% in
Q1 2020. We expect that as the impact of COVID-19 abates, our
workforce capacity improves and volumes recover, these benefits
will become more prominent.
Retirement Living
Our retirement living operations continue to deliver solid
financial results despite the negative impacts of the pandemic on
occupancy levels and costs.
In Q1 2021, revenue increased marginally, while NOI dipped
slightly as a result of the ongoing challenges of the pandemic on
occupancy levels and operating costs, in addition to increased
costs of labour and utilities.
Restrictions on in-person tours and move-in protocols resulted
in lower average occupancy in both the stabilized and lease-up
communities, down 60 bps and 20 bps, respectively, compared to Q4
2020. For the month of April 2021, we saw a modest uptick in
average occupancy by 20 bps to 84.3% from 84.1% in Q1 2021, due to
growth from lease-up communities. Despite the impact of the
pandemic, average occupancy of our stabilized communities has
remained above 90% throughout, and ended the quarter at 91.0%, up
30 bps from the end of 2020.
Other Operations
Our other operations continued to perform well in Q1 2021, as
revenue increased to $7.4 million, up 15.0% from the same quarter
last year, largely driven by customer growth in our SGP Purchasing
Partner Network (SGP). NOI also increased in the quarter, up 16.4%
to $4.6 million, as our growing SGP client base and lower travel
and business promotion costs offset increased staff costs. The
number of third-party residents served by SGP increased to
approximately 81,100 at the end of Q1 2021, up 11.3% from the end
of Q1 2020 and 2.8% from the end of 2020.
Financial Position
As at March 31, 2021, Extendicare had cash and cash equivalents
on hand of $141.3 million and access to a further $71.3 million in
undrawn demand credit facilities. In addition, on May 11, 2021, the
Company entered into commitment letters for an aggregate of $95.9
million in committed construction financing for our Sudbury and
Kingston LTC redevelopment projects. As a result, we are well
positioned with strong liquidity and no scheduled debt maturities
until Q1 2022.
Select Financial Information
The following is a summary of the Company’s consolidated
financial information for the three months ended March 31, 2021 and
2020.
(unaudited) |
Three months endedMarch 31
(2) |
(thousands of dollars unless otherwise noted) |
2021 |
|
2020 |
|
Revenue |
322,381 |
|
271,818 |
|
Operating expenses |
282,117 |
|
241,435 |
|
NOI (1) |
40,264 |
|
30,383 |
|
NOI margin (1) |
12.5 |
% |
11.2 |
% |
Administrative costs |
12,541 |
|
10,252 |
|
Adjusted EBITDA (1) |
27,723 |
|
20,131 |
|
Adjusted EBITDA margin (1) |
8.6 |
% |
7.4 |
% |
Earnings from continuing operations |
8,323 |
|
1,237 |
|
per basic share ($) |
0.09 |
|
0.01 |
|
per diluted share ($) |
0.09 |
|
0.01 |
|
Earnings from discontinued operations, net of
tax |
– |
|
4,669 |
|
Net earnings |
8,323 |
|
5,906 |
|
per basic share ($) |
0.09 |
|
0.07 |
|
per diluted share ($) |
0.09 |
|
0.07 |
|
AFFO (1) |
19,545 |
|
11,630 |
|
per basic share ($) |
0.22 |
|
0.13 |
|
per diluted share ($) |
0.21 |
|
0.13 |
|
Current income tax expense included in FFO |
2,827 |
|
2,073 |
|
FFO effective tax rate |
15.4 |
% |
18.4 |
% |
Maintenance capex |
1,033 |
|
1,755 |
|
Cash dividends declared per share |
0.12 |
|
0.12 |
|
Payout ratio (1) |
55 |
% |
92 |
% |
Weighted average number of shares (thousands) |
|
|
Basic |
89,929 |
|
89,644 |
|
Diluted |
100,520 |
|
100,023 |
|
(1) Non-GAAP Measures:
Extendicare assesses and measures operating results and financial
position based on performance measures referred to as “net
operating income”, “NOI”, “NOI margin”, “Adjusted EBITDA”,
“Adjusted EBITDA margin”, “AFFO”, “AFFO per share”, and “payout
ratio”. In addition, the Company assesses its return on investment
in development activities using the non-GAAP financial measure “NOI
Yield”. These are not measures recognized under GAAP and do not
have standardized meanings prescribed by GAAP. These non-GAAP
measures are presented in this document because either: (i)
management believes that they are a relevant measure of the ability
of Extendicare to make cash distributions; or (ii) certain ongoing
rights and obligations of Extendicare may be calculated using these
measures. Such non-GAAP measures may differ from similar
computations as reported by other issuers and, accordingly, may not
be comparable to similarly titled measures as reported by such
issuers. They are not intended to replace earnings (loss) from
continuing operations, net earnings (loss), cash flow, or other
measures of financial performance and liquidity reported in
accordance with GAAP. Detailed descriptions of these terms can be
found in Extendicare’s disclosure documents, including its
Management’s Discussion and Analysis, filed with the securities
regulatory authorities; these documents are available at
www.sedar.com and on Extendicare’s website at
www.extendicare.com. |
(2) Comparative figures have been re-presented to
reflect discontinued operations. |
Extendicare’s disclosure documents, including its Management’s
Discussion and Analysis, may be found on SEDAR’s website at
www.sedar.com under the Company’s issuer profile and on the
Company’s website at www.extendicare.com under the
“Investors/Financial Reports” section.
May Dividend Declared
The Board of Directors of Extendicare today declared a cash
dividend of $0.04 per share for the month of May 2021, which is
payable on June 15, 2021, to shareholders of record at the close of
business on May 31, 2021. This dividend is designated as an
“eligible dividend” within the meaning of the Income Tax Act
(Canada).
Conference Call and Webcast
On May 13, 2021, at 11:30 a.m. (ET), Extendicare will hold a
conference call to discuss its 2021 first quarter results. The call
will be webcast live and archived online at www.extendicare.com
under the “Investors/Events & Presentations” section.
Alternatively, the call-in number is 1-800-319-4610 or
416-915-3239. A replay of the call will be available approximately
two hours after completion of the live call until midnight on May
28, 2021. To access the rebroadcast dial 1-800-319-6413 followed by
the passcode 6652#.
About Extendicare
Extendicare is a leading provider of care and services for
seniors across Canada, operating under the Extendicare, Esprit
Lifestyle, ParaMed, Extendicare Assist, and SGP Purchasing Partner
Network brands. We are committed to delivering quality care
throughout the health continuum to meet the needs of a growing
seniors population. We operate or provide contract services to a
network of 120 long-term care homes and retirement communities (69
owned/51 contract services), provide approximately 8.3 million
hours of home health care services annually, and provide group
purchasing services to third parties representing approximately
81,100 senior residents across Canada. Extendicare proudly employs
more than 23,000 qualified, highly trained and dedicated
individuals who are passionate about providing high quality care
and services to help people live better.
Forward-looking Statements
This press release contains forward-looking statements
concerning anticipated financial events, results, circumstances,
economic performance or expectations with respect to Extendicare
and its subsidiaries, including, without limitation, statements
regarding its business operations, business strategy, and financial
condition, including anticipated timelines, costs and financial
returns in respect of development projects, and in particular
statements in respect of the impact of measures taken to mitigate
the impact of COVID-19, the availability of various government
programs and financial assistance announced in respect of COVID-19,
the impact of COVID-19 on the Company’s operating costs, staffing,
procurement, occupancy levels and volumes in its home health care
business, the impact on the capital and credit markets and the
Company’s ability to access the credit markets as a result of
COVID-19, increased litigation and regulatory exposure and the
outcome of any litigation and regulatory proceedings.
Forward-looking statements can be identified because they generally
contain the words “anticipate”, “believe”, “estimate”, “expect”,
“intend”, “objective”, “plan”, “project”, “will” or other similar
expressions or the negative thereof. Forward-looking statements
reflect management’s beliefs and assumptions and are based on
information currently available, and Extendicare assumes no
obligation to update or revise any forward-looking statement,
except as required by applicable securities laws. These statements
are not guarantees of future performance and involve known and
unknown risks, uncertainties and other factors that may cause
actual results, performance or achievements of Extendicare to
differ materially from those expressed or implied in the
statements. Risks and uncertainties related to the effects of
COVID-19 on Extendicare include the length, spread and severity of
the pandemic; the nature and extent of the measures taken by all
levels of governments and public health officials, both short and
long term, in response to COVID-19; domestic and global credit and
capital markets; the Company’s ability to access capital on
favourable terms or at all due to the potential for reduced revenue
and increased operating expenses as a result of COVID-19; the
availability of insurance on favourable terms; litigation and/or
regulatory proceedings against or involving the Company, regardless
of merit; the health and safety of the Company’s employees and its
residents and clients; and domestic and global supply chains,
particularly in respect of personal protective equipment. Given the
evolving circumstances surrounding COVID-19, it is difficult to
predict how significant the adverse impact will be on the global
and domestic economy and the business operations and financial
position of Extendicare. For further information on the risks,
uncertainties and assumptions that could cause Extendicare’s actual
results to differ from current expectations, refer to “Risk
Factors” in Extendicare’s Annual Information Form and “Forward
Looking-Statements” in Extendicare’s Q1 2021 Management’s
Discussion and Analysis filed by Extendicare with the securities
regulatory authorities, available at www.sedar.com and on
Extendicare’s website at www.extendicare.com. Given these risks and
uncertainties, readers are cautioned not to place undue reliance on
Extendicare’s forward-looking statements.
Extendicare contact:David Bacon, Senior Vice
President and Chief Financial OfficerPhone: (905) 470-4000; Fax:
(905) 470-4003Email:
david.bacon@extendicare.comwww.extendicare.com
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