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Sonida Senior Living on Better Financial Footing With ‘Significant Pipeline’ Ahead in 2024

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Sonida Senior Living’s (NYSE: SNDA) recent moves to put the operator on better footing have led to margin improvements and a stronger financial and growth year in 2024.

Thanks to efforts including a $50 million equity private placement from Conversant Capital, the company is now looking ahead to future growth in 2024 and beyond. And progress for the full year of 2023 represented the “strongest year over year performance improvement in the company’s recent history,” he added.

“We emerge today free from going-concern language in our financials, with capital available to invest in our portfolio and pursue external growth opportunities,” Sonida CEO Brandon Ribar said during the company’s fourth-quarter earnings call with investors and analysts Wednesday.

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With a better financial footing under it, the company is now turning its collective focus to a “handful of underperforming assets” that account for 40% of vacant units, Ribar said. That will include shifting sales focuses, capital investments and “heightened outbound marketing.”

“We believe that over time, we can drive portfolio wide occupancy in excess of 90%,” Ribar said.

Sonida also is looking ahead in 2024 to a “significant pipeline” of opportunities, including among current partners.

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The company posted a net loss in the fourth quarter of $14.6 million. The company’s stock price dipped 10.25% Wednesday to land at $28.99 per share.

Driving revenue growth

Two primary initiatives that were part of a “revamped revenue management process” have helped the company boost margins and improve revenue in 2024: Resident rate growth of 8.3% last year; and the “simplification and formalization” of Sonida’s assisted living level of care program that led to capturing $1.9 million in additional care revenue.

“Expansion of tech based clinical labor productivity pilots in 2023 will set up the company to further capture the true clinical costs of resident care and related revenue in 2024,” Detz said.

Operating expenses in the fourth quarter of 2023 were almost $44.4 million, compared to operating expenses of $45.1 million in the fourth quarter of 2022.

That decrease was due to lower real estate taxes, utility costs and other expenses. It was partially offset by a $1.4 million increase in labor and employee-related expenses, according to management.

The lower real estate taxes were part of “tactical initiatives” the company initiated, Detz said.

“It was really aggressive monitoring and even litigation at some point that ultimately got us all those one time credits, that will effectively run rate in the form of lower taxes moving forward in the out years,” he added.

Detz said Sonida was able to temporarily modify its debt liquidity covenants in order to “execute a material restructuring” of the economic terms and the mortgages it has with Fannie Mae, and during the fourth quarter was able to acquire the remaining loans on its Protective Life portfolio at a 48% discount.

“As a result of modifications made to 56 of the company’s 60 community loans, management has meaningfully improved cash flow, leverage ratios and term across its debt portfolio,” he said.

Because of these changes, Sonida’s average loan term is now 3.7 years.

“The operational developments and greatly strengthened balance sheet established Sonida as a differentiated operator, owner and investor in senior living, and positioned the company to capitalize on near term dislocation,” Ribar said.

Revenue per available room (RevPAR) increased by 12.6% to $3,470 between the fourth quarter of 2022 and the same period in 2023. Revenue per occupied room (RevPOR) increased by 10% to $4,042 in that time.

All told, resident revenue for 2023 was $232 million, an 11.2% increase from 2022’s $208.7 million.

Additionally, Sonida saw an increase in its average weighted occupancy year over year, closing the fourth quarter out at 85.9% compared to 83.9% last year.

Looking ahead, Ribar noted there is a “significant pipeline” for the remainder of 2024 for potential joint ventures and acquisitions.

“There are cases where the lenders want to continue to stay in the transaction and are offering financing,” he said. “And then we also have relationships with our existing banking partners and others interested in what Sonida has been accomplishing that are building a relationship with us and also are offering opportunities to finance deals.”

Staffing progress

During the earnings call, Ribar noted that shifting to an emphasis on cultural changes was beneficial for leadership teams, which saw a 100% retention of regional operations and sales leaders in 2023. Additionally, the retention for community leaders saw a 10% year over year increase.

Sonida has also been seeing success with a program aimed at part-time staff, and focusing on smaller but “greater” staff in communities. The program, which allows part-time staff to pick and choose their hours and the communities they will be working in, has been well received, Ribar previously told SHN.

By shifting that focus, Sonida has utilized scheduling technology to “create a more efficient way for people to work part time” while cutting back the use of more expensive agency staff.

Through using the Stogo platform, Ribar previously noted part-time staff turnover saw a 10 percentage point reduction throughout 2023.

Additionally, Detz said labor costs for Sonida decreased from 47.5% in 2022 to under 46% in 2023, and the amount spent on contract labor decreased by around $6 million year over year. At this time, agency usage is limited to a “handful” of Sonida’s 71 communities where “market specific labor constraints persist.”

“We believe that the financial success of a community is first and foremost dependent on having a strong local leadership team,” Ribar said during the earnings call. “And [the] key to our success is the hiring and retention of great talent that together with Sonida’s tools and programs are able to stabilize challenged assets.”

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