Sonida Senior Living (NYSE: SNDA) reported an uptick in senior housing revenue less than three months after issuing a going concern notice, and in 2023 the company is focusing on key fundementals related to its financial health.
On an earnings call with investors and analysts Thursday, Sonida leadership noted progress and a newly-honed focus in three areas: Margin expansion, a strengthened balance sheet and future portfolio expansion via acquisitions.
To strengthen the balance sheet, CEO Brandon Ribar said during the earnings call that Sonida will look to create a “more attractive debt profile” with a potential lender restructuring in “the near term.”
“Our goal is to present Sonida as a primary transaction partner in the near term,” Ribar added during the call.
The company also reported all debt held by Sonida was either fixed or variable with a full hedge in place to limit exposure to prolonged high interest rates, according to Sonida Chief Financial Officer (CFO) Kevin Detz.
“We strongly believe that the successful execution of these ongoing initiatives should enable the company to remove any doubts on its ability to continue as a going concern, accelerate the trajectory on cash flow generation and allow for the swift pivot to strategic growth,” Detz said.
Growth opportunities for Sonida will come in the form of a combination of new strategic management arrangements and acquiring real estate within a “creative investment profile,” Ribar said.
In the immediate-term, Ribar told Senior Housing News that Sonida “would like to differentiate our product type” and add “a couple more” communities via acquisition in existing markets operated by the company.
“I’d say that in the current environment where we’re really focused on the organic portfolio and finalizing discussions and working through the lender component of this,” Ribar told SHN.
Sonida’s resident revenue grew 11.4% in the first quarter of 2023 compared with the same period last year. Within its same-store owned 60-community portfolio, Sonida reported revenue per available room (RevPAR) increased 11.4% and revenue per occupied room (RevPOR) increased 8.9% compared to the same period last year.
Community net operating income (NOI) increased $3.3 million within Sonida’s same-store owned portfolio. Compared to the fourth quarter of last year, RevPAR and RevPOR both increased 6.5%, while occupancy remained at 84.2% in the first quarter, flat from 4Q22, but up from 82.3% in 1Q22.
Sonida reported community net operating income margin and community net operating income margin of 24.1% and 21.2% in 1Q23, up from 20.2% and 19.1%, respectively.
Sonida’s stock price rose to $6.70 per share on Thursday at market close.
Staffing success, new rate base
As it relates to staffing, Sonida has made continual progress for the last few quarters, Ribar said. He noted that as of today, there were just eight vacant leadership positions out of 330 on the company’s payroll.
Turnover is also down 10% portfolio-wide, Ribar said, a fact that has helped the company trim labor expenses and grow NOI margins to 23.7% in the first quarter of 2023.
In the first quarter, Sonida removed 50% more agency labor positions, which follows a 25% reduction in contract labor at the community level that came in Q422.
While also having success on retention, Detz noted that Sonida realized more applicants for open positions, with a shift towards high quality candidates.
Sonida leadership is also in the midst of a review on resident rates, with a re-leasing spread increasing 2% each of the last two quarters. About 38.1% of resident leases were renewed as of March 1. That comes after the company consolidated its lease renewal periods into a single, annual date in March.
“It’s just kind of the way we do business now,” Detz said.. “So I do feel like there is some more opportunity as this gets further and further ingrained in the culture of the company.”
With its increase in rates, Sonida implemented a new level of care program that simplified its four levels of care with clear requirements for admission coupled with new monitoring and technology. All of that is aimed at giving residents a sense of the value of the services they are getting.
“I think you’re only successful in getting through, the rate increases if your residents really feel like they’re getting a quality product and receiving really good value,” Ribar said.
With operators having some tough decisions ahead of them for the remainder of the year in terms of transitioning assets, Ribar said the company has a goal of presenting Sonida as a “primary transaction partner in the near-term.”
Just what those options could be remains unclear, but ultimately depends on the opportunity at-hand with a specific operator, from transitioning management of a community to Sonida or pursuing an outright acquisition, Ribar said.
“It depends on the nature or the interests of the owners,” Ribar said.
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