Five Star Senior Living Inc.
Q1 2021 Earnings Call Transcript

Published: 9 May 2021

[Operator:]

Good day, and welcome to the Five Star Senior Living First Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. I would now like to turn the conference over to Olivia Snyder, Manager of Investor Relations. Please go ahead, ma’am.

[Olivia Snyder:]

Thank you. Welcome to Five Star Senior Living’s first 2021 earnings call. The agenda for today’s call includes a presentation by President and CEO, Katie Potter, Executive Vice President and COO, Margaret Wigglesworth; and Executive Vice President, CFO and Treasurer, Jeff Leer, followed by a question-and-answer session with research analysts.

[Katie Potter:]

Thanks, Olivia. And thanks everyone for joining us on our earnings call for the first quarter of 2021. A few weeks ago, we announced the next step in the transformation of our business as a provider of senior living and rehabilitation and wellness services that support, enrich, and inspire the lives of older adults as they age. This transformation builds on the initial restructuring of our business arrangements with Diversified Healthcare Trust in 2019, which provided financial stability and will now better position Five Star to capitalize on the growing population of older adults and their changing needs and preferences. Our three-pronged strategy, reposition, evolve, and diversify begins with the repositioning of our senior living management services offering and the continued growth of our agility outpatient rehabilitation services to align with our areas of strength and favorable market opportunities. It continues by prioritizing the evolution of our choice-based financially flexible resident experience and our shared services infrastructure to support improved operations. Finally, our strategy focuses our future growth on the diversification of our revenues by continuing to build out our services offering and reach a broader customer base.

[Margaret Wigglesworth:]

Thanks, Katie, and good afternoon, everyone. As our senior living and rehabilitation and wellness services continue to adapt to the COVID-19 environment. We believe we have responded quickly to the changing needs of our residents and clients, and have laid solid groundwork for our paths to recovery.

[Jeff Leer:]

Thank you, Margaret. As Katie highlighted, the recently announced repositioning of our senior living management business heralds positive strategic change to drive long term growth in value creation. The transitioning communities represent approximately 40% of our management fee revenues from DHC for the quarter ended March 31, but less than 15% of our total top line revenues. We expect to offset some of this revenue decline with cost savings and reductions in our G&A expense as we reorganize our corporate and regional functions.

[Operator:]

Thank you. And the first question will come from Kyle Menges with B. Riley FBR. Please go ahead.

[Kyle Menges:]

Hi, this is Kyle on for Brian. Good afternoon.

[Katie Potter:]

Hey, Kyle.

[Kyle Menges:]

So Katie, in your prepared remarks, you mentioned that you’d like to expand management of communities on behalf of others besides DHC. What kind of opportunities are you currently seeing to do that? And what five portfolios make the most sense?

[Katie Potter:]

Kyle, I think right now, we’re really focused on completing the repositioning and improving operations within that portfolio. I think when other owners can see the our operational strength coming through in that portfolio, that we’re going to be able to identify opportunities, but as I say, right now, we’re prioritizing the repositioning and improving operations there.

[Kyle Menges:]

That makes sense. And then I thought 85% of residents have been vaccinated. If you take out those 108 communities, you plan to transition. Is it still about that 85% after you take those out?

[Margaret Wigglesworth:]

Yes, Kyle, this is Margaret. It is 85% across the board.

[Kyle Menges:]

Okay, thank you. And then, what percent of staff have been vaccinated at this point? And do you think you could mandate that all staff get vaccinated? And are you seeing that from other industry players?

[Margaret Wigglesworth:]

We’re just below 50% of our team members being vaccinated. And we do see other operators mandating the vaccine and we see the benefit of that, at this particular point in time, we’re continuing to evaluate whether or not that makes sense for us.

[Kyle Menges:]

Great. And then I was also curious, at the 108 communities you plan to transition? How many agility clinics are in that portfolio? And then how many do you think you could possibly retain after those communities are transitioned?

[Katie Potter:]

Now there’s 44 outpatient clinics in those communities. And frankly, we expect to retain most if not all of them, we’ve had, we highlighted in our remarks, agility’s been an excellent area of growth for us and is really a benefit at the community. So we think the operators that DHC transitions to will see that as well. And so we’re hopeful that all 44 remain intact.

[Kyle Menges:]

Great, thanks. That’s all for me.

[Operator:]

This concludes our question and answer session. I would like to turn the conference back over to Katie Potter for any closing remarks. Please go ahead, ma’am.

[Katie Potter:]

Thank you for joining us this afternoon. As we embark on the strategies discussed today, we are excited for what the future holds. And confident that this sharpened focus will showcase Five Star’s operational strengths align with market opportunities and changing consumer preferences and evolve our services offering for continued growth. We look forward to updating you on our progress in the coming months.

[Operator:]

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.