With a major adjustment to its portfolio behind it, Five Star Senior Living (Nasdaq: FVE) is focused on getting back to good.
The provider logged a $33.2 million net loss in the first quarter of 2019 but other metrics, such as occupancy and revenue, trended upward, and the company’s share price got a lift on the news.
In April, the Newton, Massachusetts-based senior living provider inked a lease restructuring and ownership agreement with Senior Housing Properties Trust (Nasdaq: SNH). The move, which included a rent reduction and a new credit facility, was aimed at helping the senior living operator regain its footing after a prolonged period of operational troubles that weighed down the company’s bottom line, imperiled its listing on the Nasdaq stock exchange and even led to doubt over its ability to continue on as a going concern.
But Five Star is now better positioned for the future with the restructuring in the rear view mirror, according to CEO Katie Potter.
“While the restructuring of our business arrangement with SNH is the long-term solution to our financial challenges, it is only the first step in our transformation,” Potter said during Wednesday’s earnings call. “I’m confident that we’ll continue to make progress and with one major hurdle behind us.”
As of March 31, Five Star operated 284 senior living communities with in 32 states, composed of 208 owned or leased and 76 managed communities.
For the first quarter of 2019, Five Star logged a total occupancy of 82.9%, which is up 120 basis points from the 81.7% occupancy it saw during the same period in 2018.
Senior living revenue for the first quarter of 2019 was $276.9 million, up 0.9% from the $274.5 million Five Star reported during the same period in 2018. The increase was primarily due to gains in occupancy and average monthly rates and an increase in revenues from ancillary services, such as the provider’s growing rehab and wellness division, Ageility, which earned $10.4 million in revenues during Q1.
The provider also made gains in turnover, with companywide rates falling to 35% in the first quarter of 2019. That’s a significant drop from the company’s 57% turnover rate in January and 63% in March, 2018, Potter noted. In the first quarter of 2019, Five Star hired 18 new executive directors.
At the same time, the company’s wages and benefits grew 5.5%, year-over-year, in the first quarter of 2019.
“We invested in our team members through increases in base pay and are already benefiting from this investment through talents of new hires and a noticeable reduction in companywide team member turnover,” Potter said.
Five Star this week also appointed of Jeffrey Leer as CFO, executive vice president and treasurer. He succeeds former CFO Rick Doyle, who will remain a Five Star non-officer employee through Dec. 31, to aid in the transition. Leer joins the company roughly five months after Five Star named Katie Potter as its new CEO.
The provider made some progress on other initiatives this quarter.
Five Star won J.D. Power senior living certifications for eight more of its communities during the first quarter of this year. The provider picked up its first three certifications earlier this year in February.
“While our goal is to continue to add to the number of Five Star communities that received its value certification, our primary focus is to drive operational excellence consistent with the over 170 J.D. Power operational best practices,” Potter said.
The operator also announced it is now collaborating with the MIT AgeLab C3 Connected Home Logistics Consortium.
“Participation in this collaboration will further our understanding of the needs of older adults and how our services can evolve to support those needs, wherever they may call home,” Potter said. “Additionally, this collaboration furthers the commitment to our team members to foster our culture of innovation.”
Five Star’s share price gained 4.1% to land at 62 cents by the time the markets closed Wednesday.