Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong Q2 financial performance with a 13.3% increase in revenue to $348.5 million.
- Significant growth in net operating income (NOI) and margins across all operating segments.
- Long-term care occupancy levels increased to 97.8%, returning to historical levels.
- Home health care segment saw a 10.8% increase in average daily volumes and a return to double-digit margins.
- Managed Services segment revenue and NOI more than doubled, driven by strategic transactions and organic growth.
Negative Points
- Labor shortages delayed the opening of new homes in Kingston and Stittsville to Q4.
- Pending rate increases for long-term care in Western provinces and home health care in Ontario, creating uncertainty.
- Seasonal softness expected in home health care volumes during summer months.
- Continued dependency on government funding increases to offset cumulative cost inflation.
- Challenges in reducing agency staff costs, particularly in Western Canada.
Q & A Highlights
Q: Do you anticipate any issues in getting extensions for the Class C properties?
A: No, we don't anticipate any issues. We haven't received those license extensions yet, but we don't foresee any problems. (Michael Guerriere, President and CEO)
Q: Who bought the Sudbury asset, and what is the buyer's profile?
A: The Sudbury asset was bought by a local investor and philanthropist who intends to repurpose the building for student housing. (David Bacon, CFO)
Q: What sort of margins do you think the long-term care business can run on a stabilized basis?
A: We expect margins to return to the 10.5% to 11% range, which would take us back to historical norms. Our year-to-date results provide a more indicative view of our NOI margins coming out of Q2. (David Bacon, CFO)
Q: How should we think about volume growth and margins for the home health care segment in the back half of the year?
A: We expect year-over-year growth to remain in the same zone for a couple more quarters before easing off to underlying demographic trends of 4-5%. Margins are expected to stay in double digits, with room for gradual improvement. (Michael Guerriere, President and CEO)
Q: Was there any timing difference in terms of spending in the Q2 long-term care figure?
A: Yes, there was a bit of movement between Q1 and Q2 due to the timing of the Easter holiday, which impacted statutory holiday pay. Additionally, we made significant improvements in reducing agency costs. (David Bacon, CFO)
Q: How much were you able to reduce agency costs?
A: We reduced our agency spend by about $1.5 million between Q1 and Q2 and closer to $3 million year-over-year. This has been a significant focus, especially in Western Canada. (David Bacon, CFO)
Q: Is $74 million to $75 million a reasonable starting point for annualized long-term care NOI?
A: Yes, based on our first half of the year normalized for out-of-period items, we are running at about $37 million of absolute NOI, which annualizes to $74 million to $75 million. We expect further growth from pending rate increases in Alberta and Manitoba. (David Bacon, CFO)
Q: Do you expect the home health care rate increase to be a huge catch-up like LTC, or more in line with inflation?
A: We expect it to be more in line with our labor costs, which will be more than CPI but not as significant as the LTC catch-up. (Michael Guerriere, President and CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
