Good day, and welcome to the Sonida Senior Living Fourth Quarter and Full Year 2021 Earnings Release Conference Call. Today's conference is being recorded. All statements today, which are not historical facts may be deemed to be forward-looking statements within the meaning of the federal securities laws. These statements are made as of today's date, and the Company expressly disclaims any obligation to update these statements in the future. Actual results and performance may differ materially from forward-looking statements. Certain of these factors that could cause actual results to differ are detailed in the earnings release the Company issued earlier today as well as in the reports the Company files with the SEC from time-to-time, including the risk factors contained in the annual report on Form 10-K and quarterly reports on Form 10-Q. Please see today's press release for the full safe harbor statement, which may be found at www.sonidaseniorliving.com/investor-relations and was furnished in an 8-K filing this morning. Also, please note that during this call, the Company will present non-GAAP financial measures. For reconciliations of each non-GAAP measure from the most comparable GAAP measure, please also see today's press release. At this time, I would like to turn the call over to Sonida Senior Living's President and CEO, Ms. Kimberly Lody.

Thank you, Paul. Good afternoon, everyone, and welcome to our fourth quarter and full year 2021 earnings call. Joining me today is Brandon Ribar, our Chief Operating Officer. 2021 was transformational for Sonida Senior Living in many ways. Most importantly, with our success early in the year and quickly and efficiently facilitating multiple COVID-19 vaccination clinics at all of our communities, which resulted in an almost immediate drop in resident cases to nearly zero as well as the drop in severity of cases when they did occur. Our high standards of infection control in all areas of our communities continue to help protect our residents and team members from the personal health impact of this terrible infectious disease and its variance. Despite the emergence of multiple new variants and a difficult operating environment throughout 2021, our pandemic recovery strategy to immediately and quickly drive occupancy improvement by utilizing short-term incentives to encourage move-ins was successful. We increased occupancy from the low point of 75.3% in February of 2021 to 81.6% in December. Clearly, the work we did prior to the pandemic to strengthen our sales, marketing, clinical and operating processes quickly delivered significant occupancy growth. We were also able to maintain the integrity of our rates and grow revenue 5.3% in the fourth quarter of 2021 as compared to the same quarter in 2020. Our focus continues to be responsible increases in market rates and in-place rents, while managing the current circumstances of elevated operating expenses. In November, we closed on a strategic investment from Conversant Capital and raised, along with the shareholder rights offering, $154.8 million for the Company. The proceeds from these transactions significantly strengthened the Company's liquidity and positions us to further fund our growth strategy to invest in our assets to enhance our competitive position and…

Thank you, Kim, and good afternoon. As you mentioned, the fourth quarter of 2021 brought to conclusion in operational and financial transformation nearly three years in the making. We are so proud of the achievements of each of our communities throughout the most challenging operating period in recent memory. The positive energy and tireless dedication to our residents and staff that each one of our leadership teams bring to bear on a daily basis drives the optimism across Sonida for continued improvement in operating results in 2022. While plenty of work remains to continue occupancy and margin recovery across all of our communities, many of our local teams have already exceeded their pre-pandemic operating metrics. On a portfolio level, increased pressure in the operating environment related to cost and availability of labor and general inflation prevented margin expansion in Q4. However, the continued occupancy and revenue growth positions our communities well for a 2022 recovery. Further development of labor management and staffing capabilities throughout 2021 in combination with adjustments to our local wage scale have shown promising results in the early months of 2022 with positive net hires of 259 team members in Q4 2021 and Q1 2022 combined. Revenue growth continued by -- driven by continued occupancy improvement and ongoing RevPOR increase, coupled with gains on the labor front remain the priority for delivering margin improvement in 2022. The early stage of significant capital investment across many of our key communities has already provided an occupancy boost in a traditionally challenging quarter for senior living. As Kim mentioned, occupancy gains in each of the first three months of 2022, coupled with achievement of continued rate improvement support our NOI growth expectations. In our previous discussions, we referenced the opportunity to improve margin by maintaining existing labor levels while increasing…

Thank you. We will now be conducting our question-and-answer session [Operator Instructions]. Our first question comes from Steven Valiquette with Barclays. Please proceed with your question.

So a couple of questions here. First, I guess it's good to see that you're doing some acquisition activity kind of in the middle of the balance sheet cleanup, I guess, for lack of a better phrase. Maybe just spend a minute talking about the strategic rationale for acquiring the two properties in Indiana. Then I've got a couple of follow-ups after that.

Sure. One of the core components of our strategy with respect to the development of the portfolio is to tuck-in acquisitions into our footprint in markets that we would consider strategic. So where we already have a high level of density, but maybe have additional opportunity to add more communities, help support and just sort of leverage the platform of the organization or possibly even going into additional new markets where we don't have quite as much density. In all cases, what we're looking for in those acquisitions is the opportunity to take a community that may be underperforming maybe had some difficulty during the pandemic and is struggling to recover from that and be able to layer into that community, the operating platform that we've worked to develop here over the last three years, and by doing that really see the improvement in those operating metrics for those acquired communities pretty quickly.

Okay. That's helpful.

I just might add to quickly, just specific to those two Indiana, the Indiana opportunity. I think just the attractive kind of purchase metrics also aligned with where we're looking going forward just on a cost per unit basis. And then also, as we think about looking at a stabilized yield on cost of the investment and the near-term benefit on a free cash flow basis, those are some of the other key components of that acquisition that were attractive to us.

Okay. Got it. Okay. And then just jumping around here a little bit. The -- obviously, it's encouraging to see the going concern risk language removed. I guess I was curious whether there was a specific quantitative threshold that was reached that allows the Company to remove that language? Or is it more of just a broad qualitative and quantitative assessment instead of those rigid benchmarks, just kind of more of a question of curiosity, I guess?

Yes. It's really both quantitative and qualitative. On the quantitative side, certainly, the cash infusion and the capital raise helped boost our liquidity, the ability for us to refinance all of the near-term maturities through all of 2022 and 2023 maturities. So, we don't have any mortgage debt maturities coming due until the middle of 2024 that helped quite a bit. We also received $9.1 million in Phase IV CARES funds. And of course, the environment itself is becoming a much -- I won't say it's an easy environment to operate in, but it is becoming easier as time goes on and we put more distance between the worst part of the pandemic and the current operating environment. So, all of those things, together really allowed us to remove that going concern. And actually I'll add one -- actually, I will add one more thing to that, Steve, not only that, those were sort of the financial metrics, but also the operational performance of the Company has improved significantly, as we've seen RevPAR improve and RevPOR, the occupancy growth, all of those things really contribute to feeling good about the trajectory that the Company is on and the momentum that's behind us.

Okay. Great. Okay. And then final question for me. I think at one point, you expressed previously that you would start giving some more detailed guidance in 2022. It looks like you obviously gave a few metrics here around some occupancy goals by the end of the year, and you also talked about the NOI and NOI margin progression throughout the year. You also talked about some of those strategic priorities on Page 7 in the slide deck. I guess I'm curious whether or not you might give additional details on guidance or just kind of what you're providing today is what we should just generally expect for this year as far as just targets and things to help us kind of just model things out et cetera?

Yes. For the time being, I would say, utilize the indicators of the framework that we provided around the goals. So just to reiterate those, our goal is to be at pre-pandemic occupancy at or before the end of 2021 or 2022, sorry, and we feel really good about the momentum that we have to get there. Our healthy growth expectations based on rate and being able to achieve the rates that we are putting out there in the marketplace, both in-place rent increases as well as market rates, but being responsible with that to make sure that we continue to hold on to our residents. And then as Brandon mentioned, a big part of our focus this year is around the labor piece, just like I think everyone in our industry and making sure that we eliminate contract labor or get it as close to being as eliminated as we possibly can. We did that back in 2019. We're at zero contract labor at the end of 2019. So we've done that one. We can do it again. Managing wage increases and so that when you think about all of those things in and the out, so contract labor coming down, over time coming down. Managing wage increases to ensure that we've got good staff and then deploying some of the labor technology that we put in place here in recent months to help us manage labor hours. We feel like we should begin to see NOI improve here over the course of the year. Again, sort of the trajectory of that, not quite ready to put that out there yet, but we do think that it will improve incrementally throughout the year.

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Kimberly Lody for any closing comments.

All right, very good. Well, this concludes today's conference. I want to thank everyone for attending and have a great day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.