Capital Senior Living Overcomes Punishing Flu Season to Increase Move-Ins

Capital Senior Living (NYSE: CSU) is optimistic about occupancy growth—as well as its ability to curb the negative effects of future flu seasons.

The Dallas-based senior living operator is striving for a “culture of continuous improvement,” according to CEO Larry Cohen, who suggested during the company’s fourth-quarter and full-year 2017 earnings call on Tuesday that Capital Senior Living is in the midst of several upswings.

The company’s flu prevention and response plan, for instance, has proven enormously effective, according to executives. At the same time, occupancy is up, and the operator expects that growth to continue well into 2018.

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Still, there’s room for improvement, and many of the company’s current initiatives aren’t designed to be completed too swiftly.

“The initiatives we have in place are not a one-quarter event,” Cohen said.

Highly effective flu response

Notably, Capital Senior Living managed to largely avoid negative repercussions of the recent severe flu season that hurt occupancy elsewhere throughout the industry.

Ventas Inc.’s (NYSE: VTR) SHOP same-store cash NOI, for example, is expected to decline this year, due partly to the full-year occupancy impact of a severe flu season. Brentwood, Tennessee-based Brookdale Senior Living (NYSE: BKD), meanwhile, closed its communities to new admissions for more than 1,000 days over the first 45 days of the first quarter of this year, compared to 800 days for entire first quarter of 2017, Lucinda Baier, Brookdale’s CEO as of Feb. 28, said during the provider’s latest earnings call.

Capital Senior Living, on the other hand, successfully got ahead of the flu.

“As soon as the CDC issued a health advisory on the 2017-2018 flu epidemic we launched a comprehensive prevention and response plan,” Cohen explained.

Relying on the aforementioned plan, the operator limited the number of flu infections to just 2.7% of its residents—and only two residents have died from the flu, Cohen said. Less than 0.5% of Capital Senior Living residents were hospitalized with the flu.

“Despite the worst flu season since 2009, year-to-date we had the lowest amount of occupancy loss over the last three years,” Cohen said.

In the second quarter of 2017, Capital Senior Living missed revenue projections by approximately $330,000 primarily due to a harsh flu season earlier that year. Going forward, Cohen suggested on Tuesday, senior living providers across the country should play a larger role in protecting their residents and staff from the illness.

“It’s something that happens every year, it should not be an excuse,” Cohen said. “It’s part of our business, it’s part of our DNA, it’s what we do. …[W]e have the responsibility of taking precautions and having the best measures possible to protect the wellness and health of residents and our employees.”

Occupancy optimism

Capital Senior Living’s fourth-quarter 2017 revenue of $117 million missed analysts’ expectations by approximately $1.7 million; its fourth-quarter earnings per share of negative 7 cents, meanwhile, beat analysts’ expectations by 3 cents.

So far, occupancy has proven to be a bright spot for Capital Senior Living in 2018. January move-ins were up 36% from the average number of move-ins over the past three Januaries, Carey Hendrickson, the company’s senior vice president and CFO, noted during the earnings call.

“We feel good about where we are and are expecting to see growth in occupancy throughout the year,” Cohen added.

As of market close on Tuesday, Capital Senior Living’s share price had fallen 2 cents to $11.26.

Written by Mary Kate Nelson

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