Sienna Senior Living Inc. (SIA) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the conference call for Sienna Senior Living Inc.'s 2020 Annual Meeting of Shareholders. Today's call is hosted by Dino Chiesa, Chair of the Board of Directors; Lois Cormack, President and Chief Executive Officer; and Nitin Jain, Chief Financial Officer and Chief Investment Officer of Sienna Senior Living Inc. Instructions for accessing the call are posted on the company's website, and the details are provided in the company's news release. The company has posted slides, which accompany the host's remarks on the company's website under Events & Presentations. [Operator Instructions] With that, I would like to turn the conference call over to Mr. Chiesa. Please go ahead, Mr. Chiesa.

Thank you very much. Good morning, ladies and gentlemen, and welcome to the annual meeting of shareholders of Sienna's Senior Living. I want to thank you for dialing in today, and hope everyone is safe. My name is Dino Chiesa. I am Chair of the Board of Directors of Sienna, and will act as Chair of today's meeting. Now before I proceed any further, and on behalf of the entire Board of Directors, I would like to commend all of our team members on the remarkable efforts and dedication over the past weeks and months. Seniors with underlying health conditions have been disproportionately impacted by COVID-19. And nowhere more acutely than at long-term care and retirement residences. Our company had over 12,000 people who have shown extraordinary commitment and compassion in caring for society's most vulnerable population. Our team has been nothing short of heroic, and they have mine and the Board's gratitude. I also want to thank Sienna's management team who have worked and continue to work tirelessly in the face of this unprecedented challenge. The steadfast leadership and dedication of our management team is sincerely appreciated. Now while our annual meeting has been webcast before, this is the first meeting of shareholders with all participants observing public health guidance on physical distancing. For this, we thank you. Now before we begin, please be aware that certain information to be presented or discussed today may be forward-looking. If you logged into the webinar, I refer you to the cautionary note on the presentation slide. The cautionary note applies to our presentation and discussions this morning. For everyone else, I'd pause here while the note is read.

Thank you, Dino. Certain information in this presentation may contain forward-looking information. Actual results could differ materially from conclusions, forecasts or projections and forward-looking information. And certain material factors or assumptions were applied in drawing conclusions or making forecasts or projections as reflected in the forward-looking information. Additional information about the material factors, assumptions and/or risks that could cause actual results to differ materially from the conclusions, forecast or projections in the forward-looking information. And the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information are as disclosed in the company's disclosure documents filed on SEDAR from time to time, including but not limited to the company's most recent annual information report.

Thank you. I will begin by introducing the people that would traditionally be joining me at the head table. With us today is Lois Cormack, a member of the Board of Directors and President and Chief Executive Officer of Sienna. Then there is Nitin Jain, the Chief Financial Officer and Chief Investment Officer of Sienna; and Cristina Alaimo, the Vice President, General Counsel and Secretary of Sienna. In addition to Lois Cormack and myself, we are also pleased to have other members of our Board of Directors in attendance by teleconference today, all of whom are nominees for reelection to the Board at today's meeting. They are Janet Graham, Brian Johnston, Paula Jourdain Coleman, Jack MacDonald and Stephen Sender. The format for today's meeting will be split into 2 parts. First, I will deal with the formal aspects of the meeting, following which there will be a presentation by Lois Cormack and Nitin Jain. At the end of that presentation, we would normally take questions from shareholders; however, our management team and staff are focused on managing the ongoing COVID-19 crisis which they will discuss during their remarks. I also note that we have withdrawn guidance. So we are not today in a position to discuss outlook. Accordingly, and as always, shareholders or analysts should continue to reach out to management with any questions they may have. But we'll be -- we'll not be holding a question-and-answer session today. I will now begin with the formal part of the meeting. I'll start with the appointment of Secretary and Scrutineer. I now call the meeting to order. With the permission of the meeting, Cristina Alaimo, the company's secretary, will act as Secretary of the meeting and Computershare Trust Company of Canada, represented of Matthew Gemmell, will act as Scrutineer. The Secretary has advised me that we receive the affidavit availing for Computershare confirming that the notice calling the meeting and related material provided to shareholders of record on the record date for the meeting. I direct the secretary to attach the affidavit as a schedule to the minutes of this meeting. With the consent of the meeting, I will dispense with the reading of the notice of the calling of the meeting. The Secretary has advised me that a quorum is present for the meeting based on the shareholders we note to be in attendance, including by proxy and documented in the preliminary report of the Scrutineer. A final report will be prepared following this call. The final report of the scrutineer will be filed as part of the record of the meeting. On this basis, I declare the meeting to be properly constituted for the transaction of business. On behalf of the Board, I thank those shareholders who have chosen to attend the meeting today. I also thank those who've submitted their proxies in advance, as there will be no voting by telephone or webcast at the meeting. Voting results for resolution to be voted on today will be formally announced by press release following the meeting. Based on reporting by the Scrutineer, the designated proxy holder for the meeting is holding proxies demonstrating voting in an abundance of favorability for all matters to be voted on. Accordingly, we'll try to move through the formal meeting items quickly to make the best use of our time. We will have 1 meeting attendee, Karen Hon, make the motions for the meeting matters. The first item of business is the presentation of the consolidated financial statements of Sienna for the period ending December 31, 2019, and the related auditor's report. A copy of the financial statements were provided to those shareholders who requested a paper copy, and the statements are available electronically on SEDAR. Shareholders are not being asked to take any action regarding the financial statements, but if any shareholder has any questions related to the financial statements, it may be sent to Sienna's Investor Relations team at [email protected]. That's investors plural. We will now proceed with the election of the directors. The management information circular sets out information for the 7 nominees for election to the Board. Since I am advised that no nominations other than those submitted by management were received by the company prior to the advance notice deadline in the company's articles, the nominees continue to be only the following 7 nominees: Lois Cormack, Janet Graham, Brian Johnston, Paula Jourdain Coleman, Jack MacDonald, Stephen Sender and myself, Dino Chiesa. Once elected, these nominees will hold office until the next annual meeting of shareholders or until successors are elected or appointed. All corporations listed on the Toronto Stock Exchange are required to elect directors individually. Consistent with this requirement, shareholders have been provided with the opportunity to vote or withhold their vote for each nominee on an individual basis. In addition, consistent with Sienna's commitment to its governance practices, the Board has adopted what is common and referred to as a majority voting policy. Under that policy, a director is required to tender his or her resignation if he or she is elected with more votes withheld than are casted in favor of his or her election. Based on the proxies received for the election of directors, if elected, none of the nominees would have to tender their resignation under Sienna's majority voting policy. In light of this, I propose that we proceed with a single motion to elect the nominees and vote on the matter by show of hands. May I have a motion for the election of each of the 7 persons nominated as directors.

I so move.

Thank you. The proxy received for the voting of Directors show an abundance of favorability for the election of each nominee. Accordingly, the motion is carried. I declare Lois Cormack, Janet Graham, Brian Johnston, Paula Jourdain Coleman, Jack MacDonald, Stephen Sender and myself, Dino Chiesa, duly elected as Director of Sienna Senior Living Inc. to hold office until the next annual meeting of shareholders or until successors are duly elected or appointed. We will now proceed with the appointment of auditors and the authorization of the Board to fix the remuneration. The directors on the recommendation of the audit committee proposed that PricewaterhouseCoopers LLP be reappointed as the auditor of Sienna and that the director will be authorized to fix the remuneration. May I have a motion for such reappointment and authorization.

I so move.

The proxy received show an abundance of favorability for the resolution. Accordingly, the motion is carried. I declare that PricewaterhouseCoopers LLP are reappointed as the auditors of Sienna and that the directors are authorized to fix the remuneration. The next item is to hold a nonbinding advisory vote on the company's approach to executive compensation. The full text of the advisory resolution is set forth in the management circular for this meeting. Since the vote is advisory, it will not be binding on the Board, but the compensation, governance and nominating committee of the company will take into account the results of the vote when considering future executive compensation arrangements. I will now ask for a motion to be made to approve the resolution to hold a nonbinding advisory vote on the approach of executive compensation as set out in the management circular.

I so move.

A resolution is required to be passed by the affirmative vote of a majority of the votes cast at the meeting. The proxies received show an abundance of favorability for the resolution. Accordingly, the motion is carried. I declare that the nonbinding advisory resolution on the approach of executive compensation as set out in the management circular is passed by the affirmative vote of a majority of the votes cast. Ladies and gentlemen, we have now completed the formal part of the meeting. If there is no further business, I will ask for a motion to terminate the meeting.

I so move.

I declare the motion carried and the annual meeting of the shareholders of Sienna Senior Living Inc. terminated. On behalf of the Management and the Board, I would like to thank you all for attending today. And that concludes the formal part of the meeting. Before I call upon Lois Cormack, Sienna's President and CEO, to make a presentation, I would like again to once again acknowledge and express my gratitude and that of the entire Board to each and every one of our team members who are working tirelessly to provide care, comfort and compassion to the seniors living in our residences. We're really humbled by your commitment and thankful for your ongoing efforts. With that, I will now ask for Lois to provide her remarks. Thank you. Lois?

Lois, you might be on mute.

Sorry. Thank you, Dino, and good morning, everyone, and thank you for attending our AGM by teleconference and by webinar this morning. We are hosting this AGM in the midst of a global crisis, as COVID-19 continues to have significant impact around the globe. In Canada, nowhere have these impacts been felt more than at long-term care and retirement residences. Seniors Living is at the epicenter of this crisis that is having a devastating impact on all levels of society. Our team is working day and night to safeguard residents, their colleagues and themselves against this virus. It takes superhuman efforts to be considered a hero. I've been humbled by the work being done every single day by our 12,000 team members. Their dedication to the residents, to each other and their resolve in fighting COVID-19 are nothing less than heroic. Our team members are working very long hours and juggling responsibilities at home with the incredible demand of a very challenging situation in every residence. They are making a remarkable difference in people's lives in the midst of the crisis. They have my deepest gratitude and admiration and that of families and of the communities that we serve. Before I go any further, I'd like to pause for a moment to acknowledge all of those that have been lost to COVID-19. They include the most vulnerable in our society, our seniors and people with underlying medical conditions, and they include health care workers, our heroes who lost their lives fighting this pandemic. One of those heroes was Christine Mandegarian, who tragically passed away last week. She was a selfless, kind personal support worker, who dedicated her entire career to the residents, families and her colleagues at Altamont for 31 years. Words cannot express the magnitude of this loss. I'd like to pause now for a moment of silence to remember all of those lives lost to COVID-19. Today, there are hundreds of long-term care and retirement homes across Canada that have COVID-19 positive cases. There's absolutely nothing more important to us than the health and safety of residents and of our team members. Our fight against COVID-19 is ongoing, and it is difficult, particularly, given the ability of this virus to spread and disproportionately affect vulnerable seniors. Sienna has been diligent in implementing extensive infection prevention and other precautionary measures to try and stop the spread of COVID-19. And we continue to work collaboratively with the provincial governments, our sector associations, regulatory authorities and others to help shape and implement important policies and protocols to manage this situation. Some of the many precautions that we have implemented include limiting nonessential visitors, which we know is very difficult for families and residents alike; active screening of staff and essential visitors; enhanced cleaning protocols; universal masking; enhanced health monitoring, including temperature checks for team members and for residents; and physical distancing of residents and team members to every extent possible. We have also spent significant time and effort in securing and distributing adequate personal protective equipment for all of our residences. While this has been challenging, we have been able to procure what is required to ensure that our team members have been and continue to be protected with the required equipment in accordance with the provincial guidelines and directives. We will continue to focus on this and are pleased that this sector is now a priority for the delivery of personal protective equipment. As of today, our team members have capped COVID-19 out of all residences in British Columbia. In Ontario, 8 long-term care and 1 retirement residents have 1 or more positive cases out of a total of 83 Sienna residences. This represents 11% of our residences that are COVID positive. 2 long-term care residences in Ontario have now successfully contained this virus and subsequently been declared of outbreak status -- clear of outbreak status by public health authorities. Thank you to the tremendous work of these teams. Despite the remarkable efforts of team members and the measures that we have taken, we continue to face a serious challenge at some residences, where there are a number of positive cases, including Altamont Care Community in Scarborough. And tragically, a number of deaths, including that of our valued longtime team member. We will continue to fight this battle in every way possible. And we are grateful for the support of our local hospital, public health authorities, local health authorities and all levels of government in this effort. In addition to the extensive measures in place to safeguard team members and residents, we have been working hard to provide residents with as much care service as possible by trying to arrange for much needed staffing in all residences. This has been tremendously challenging with the pre-existing staffing shortages in the entire sector, which have been further compounded by the pandemic and the move to working in a single location. Despite our best efforts, we continue to experience staffing shortages, particularly in the COVID-positive residences. We are doing everything possible to access more staff and are now working with hospitals and local health authorities to shore up care for residents and assist team members who are working very long hours. We are incredibly grateful for this support and hope that all of those efforts will help us meet staffing requirements and resident needs in the coming days and weeks. We are grateful for the support and recognition of the provincial government, which have enacted a number of helpful directives and measures, including committing funds to assist with the extraordinary cost to manage the pandemic. To date, the Ontario government has announced $243 million in additional long-term care funding and $20 million in funding to the retirement sector. The British Columbia government has also made commitments associated with the move to single site work locations and has requested the tracking of all expenses relating to the pandemic costs incurred by operators. We look forward to more information about how these funds will be allocated. I would also like to acknowledge the outpouring of support that we have received from members of the communities that we serve. Our residents and team members have been moved by the parade of cars, the posters with words of gratitude and encouragement. These gestures are so important. They energize our team members and lift their spirit. I offer a heartfelt thank you to these community members and to all of our municipal partners who are providing real leadership in each community. Today, we are singularly focused on the health and safety of residents and team members and on preventing the spread of this virus. We are now in the process of testing more residents and more staff in accordance with the Ontario government's COVID-19 action plan for long-term care homes. As a result of this increased testing, we do expect to be in a position of reporting and managing more positive cases in the coming days. Now is not the time to discuss anticipated future occupancy rates or financial expectations given the current crisis and uncertainty. What is important today is continuing to deliver essential services to vulnerable seniors and to protect them from this pandemic. With that context, I will ask Nitin Jain, our Chief Financial Officer, to speak briefly about Sienna's financial position.

Thank you, Lois, and good morning, everyone. First, I would like to echo Lois' sentiment and express my gratitude for the tremendous efforts being made by our incredible team. Your commitment and dedication are an inspiration for all of us. As Lois indicated, we expect to provide a more fulsome discussion of our expectations and key metrics in the coming weeks and months as the crisis subsides. Today, however, I will focus my remarks on how Sienna is positioned to weather this storm, ensure that we continue to have the resources to support our seniors and our team members. I'll focus on our financial position, liquidity and debt profile as these provide our business the strong foundation that allows us to fulfill our mission of delivering essential services to seniors. Over the last several years, we have been focused on ensuring Sienna has a strong balance sheet by lowering our debt, staggering our debt maturity, diversifying and improving our debt profile and increasing the company's liquidity. We ended 2019 with an interest coverage ratio of 3.9x, a debt to gross book value of 46% and debt to adjusted EBITDA ratio of 6.7x. These are important indicators in terms of how we manage and our ability to service our debt. To further support Sienna's liquidity and financial flexibility, in March 19, 2020, we entered into a credit agreement for a $200 million unsecured revolving credit facility for a 5-year term. It has contributed to increasing the company's liquidity to over $215 million, comprised of both cash on hand and available credit lines. In terms of debt, we have limited debt maturing during the remainder of 2020. We believe that we will continue to have access to multiple sources of financing. Our debt capitalization is well distributed between unsecured and secured debentures, credit facilities, conventional mortgages and CMHC insured mortgages. With respect to Sienna's equity, we have all witnessed the global stock market volatility and impact on share prices everywhere, including Sienna. As a result, we have temporarily suspended our dividend reinvestment plan in order to prevent dilution at the current stock price. In 2019, Sienna's AFFO payout ratio was 66%, leaving a room in case of a temporary decline in AFFO. The payout ratio is a key indicator of company's ability to pay its dividend. Given the uncertainty and duration of COVID-19 pandemic, we have withdrawn our previous financial guidance for the 2020 fiscal year. To ensure that we're dedicating all of our resources to the current crisis, we're not considering new developments, acquisitions and may also delay future expansion projects. While it's impossible to predict the ultimate impact of this crisis with any specificity at this time, we are confident with our financial profile we are well positioned to weather this storm. With that, Lois, will provide her closing remarks.

Thank you, Nitin. Through this crisis, we have strengthened existing relationships and created new one. These relationships will last long past this pandemic and will further strengthen our ability to deliver essential services. Despite the gravity of the current situation, we want to be clear that we are optimistic about Sienna's future beyond this crisis. Providing care, services and accommodation for vulnerable seniors fulfills an important role in society. And this need will continue to grow. We are privileged to have 12,000 talented and dedicated team members who no matter what the magnitude of the challenge are driven to be there for our residents. In return, they are receiving an outpouring of support and appreciation from residents, families and each community that we serve, who despite the stresses of this situation continue to show their gratitude in many different ways. This is what is helping to fuel our team as they deal with the magnitude of this extraordinary situation. I want to acknowledge and thank the executive team who are providing strong, steadfast leadership to the company at this time. Mark Lugowski, EVP of Retirement, who just joined Sienna last week; Joanne Dykeman; Olga Giovanniello; Nitin Jain; Cristina Alaimo; and Nancy Webb. I also want to acknowledge the Board of Directors for their unwavering commitment to the mission of the company. In closing, I would like to thank from the bottom of my heart Sienna's entire team for the difference that they are making in society. And to our valued partners in the health care sector in government and in our communities. Never has it been more important to work together around our common goal of fighting this pandemic. I want to thank you, our shareholders, for your ongoing support of Sienna. We are committed to sharing information about this evolving situation with all of our stakeholders, and please reach out directly at any time. Thank you, Jonathan. This concludes the meeting. I'll now turn it back to you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.