Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Achieved year-over-year same property occupancy growth of 660 basis points, driving operating margin expansion of 280 basis points.
- Same property net operating income grew by 20.6%, and funds from operations increased by 45.3%.
- Employee engagement score reached 57% highly engaged, surpassing the 2025 aspirational target of 55%.
- Marketing strategies led to a 22% increase in personalized tours from marketing sources compared to Q2 2023.
- Successfully integrated five new homes in Quebec, with plans to welcome five more properties later this year.
Negative Points
- Net loss of $2.8 million in Q2 2024, although an improvement from a $7.5 million loss in Q2 2023.
- Higher direct property operating expenses and higher finance costs impacted financial results.
- Deferred tax expense in Q2 2024 compared to a deferred tax benefit in Q2 2023.
- Net loss on asset sales as compared to a net gain in Q2 2023.
- Higher depreciation of property, plant, and equipment.
Q & A Highlights
Q: Quebec really stands out with 43% same property NOI growth. Can you provide some color on what drove that versus other regions?
A: Jeffrey Brown (CFO): Quebec had very strong occupancy growth and managed labor costs effectively, reducing reliance on agency costs. This contributed significantly to the outsized NOI growth.
Q: How should we think about margin expansion as occupancy approaches 95%?
A: Jeffrey Brown (CFO): We believe we can hit 38% same property margin for 2024. As occupancy grows, we expect margins to increase further, potentially reaching low 40s.
Q: Where do you see the debt-to-EBITDA ratio heading by the end of 2024?
A: Jeffrey Brown (CFO): It will likely increase from the current 8.5 times due to planned acquisitions. Our long-term goal is to run the company at about 7.5 times debt-to-EBITDA.
Q: How is the recently acquired Trait-Carré property in Quebec City performing?
A: Vlad Volodarski (CEO): Trait-Carré is performing extremely well with high occupancy. We do not see Quebec City supply being riskier than other regions.
Q: Can you provide an idea of the quantum of dispositions expected over the balance of the year and into 2025?
A: Vlad Volodarski (CEO): We continue to evaluate our properties and will dispose of non-core assets, but the exact quantum is not determined yet. The focus is on generating appropriate value.
Q: Do you think the slowdown in the housing market could create pent-up demand for higher occupancy growth?
A: Vlad Volodarski (CEO): We see strong demand currently. The housing market slowdown is relative to record levels, and we do not see significant pressure on demand for our services.
Q: Is the current G&A run rate sustainable?
A: Jeffrey Brown (CFO): Yes, this is a good run rate. We expect some efficiency-related severance costs in future quarters, but overall, the current G&A level is sustainable.
Q: What led to the margin expansion in Q2?
A: Vlad Volodarski (CEO): Occupancy growth, rent increases, and good control of other expenses, including lower utility costs, contributed to margin expansion.
Q: Can you expand on the strategic acquisitions you are contemplating?
A: Vlad Volodarski (CEO): We are looking at several opportunities across the country. Pricing is in line with market rates, and we are prepared to take short-term dilution for long-term gains.
Q: Would obsolete supply be used as a cheaper alternative for retirement housing?
A: Vlad Volodarski (CEO): Operating costs for smaller, older buildings are high, making it difficult to offer them as affordable alternatives. About 10% of inventory may be considered obsolete over the next 10 years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
