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AlerisLife Inc. Announces Third Quarter 2022 Results

Combined Sequential Quarter End Occupancy Growth of 180 Basis Points

Sequential Quarter Management and Operating Revenues Growth of $1.8 Million, or 4.6%

Restructuring Plan on Track as Adjusted EBITDA Improvements Continue

AlerisLife Inc. (Nasdaq: ALR) today announced its financial results for the three months ended September 30, 2022.

“We continued to make steady progress implementing our plan to improve our operating results and drive efficiencies in our organization throughout the third quarter,” said Jeff Leer, President and Chief Executive Officer. “Owned and managed community occupancy increased 290 basis points and 160 basis points, respectively, or 180 basis points across all residential senior living communities, as we continue to enhance our sales and marketing strategies. We also rounded out our executive team with the addition of Heather Pereira as our new Chief Financial Officer and Philip Benjamson as our new Chief Operating Officer. We ended the quarter with sufficient liquidity to execute on our restructuring plan and, following approximately $3.8 million of capital improvements invested in our owned senior living communities in the third quarter, we had $79.1 million of cash at quarter-end and no debt maturities until 2025."

Third Quarter Summary of Financial Results:

  • Quarter-end occupancy in ALR's owned senior living communities grew 290 basis points, or bps, relative to the end of the second quarter.
  • Quarter-end occupancy for the managed portfolio increased 160 bps relative to the end of the second quarter.
  • Net loss for the third quarter of 2022 was $8.5 million, or $0.27 per diluted share, which included $1.6 million of costs related to the restructuring plan implemented as a result of Alvarez & Marsal's, or A&M's, operational review, compared to a net loss of $8.8 million, or $0.28 per diluted share, for the second quarter of 2022, and a net loss of $10.2 million, or $0.32 per diluted share, for the third quarter of 2021, which included a $3.3 million loss from a termination of a lease and $1.2 million of restructuring expenses related to the repositioning of ALR's residential service offerings, partially offset by $0.8 million which was reimbursed by Diversified Healthcare Trust, or DHC.
  • Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the third quarter of 2022 was $(4.1) million compared to $(4.4) million for the second quarter of 2022 and $(7.0) million for the third quarter of 2021. Adjusted EBITDA, as described further below, was $(0.5) million for the third quarter of 2022 compared to $(1.3) million for the second quarter of 2022 and $(3.3) million for the third quarter of 2021. EBITDA and Adjusted EBITDA are non-GAAP financial measures. Reconciliations of net loss determined in accordance with U.S. generally accepted accounting principles, or GAAP, to EBITDA and Adjusted EBITDA for the third quarter of 2022 and 2021 are presented later in this press release. The reconciliation of net loss to EBITDA and Adjusted EBITDA for the second quarter of 2022 is presented in the Form 8-K that ALR furnished on August 3, 2022.
  • RevPAR (resident fee revenues for the corresponding portfolio for the period divided by the average number of available units for the corresponding portfolio for the period, divided by the number of months in the period) for the comparable managed communities for the third quarter of 2022 was $3,200 compared to $3,077 for the second quarter of 2022 and $2,941 for the third quarter of 2021, an increase of 4.0% and 8.8%, respectively.
  • RevPAR for the comparable owned communities for the third quarter of 2022 was $2,801 compared to $2,560 for the second quarter of 2022 and $2,354 for the third quarter of 2021, an increase of 9.4% and 19.0%, respectively.

Substantially all of ALR's business is conducted by its two segments: (i) its residential segment through its Five Star Senior Living, or Five Star, brand and (ii) its lifestyle services segment primarily through its brands Ageility Physical Therapy Solutions and Ageility Fitness, or collectively Ageility, and Windsong Home Health. The following tables present data on the owned and leased and managed senior living communities that ALR operates through its Five Star brand, including comparable community data, as well as data on the rehabilitation locations that ALR operates through its Ageility brand, including comparable outpatient location data.

Summary of Operational Results

 

 

As of and for the Three Months Ended

 

 

September 30, 2022

 

June 30, 2022

 

September 30, 2021

Residential Segment:

 

 

 

 

 

 

Five Star:

 

 

 

 

 

 

Number of living units (end of period)

 

 

 

 

 

 

Independent living

 

 

10,422

 

 

 

10,460

 

 

 

10,628

 

Assisted living

 

 

7,734

 

 

 

7,696

 

 

 

9,402

 

Memory care

 

 

1,817

 

 

 

1,817

 

 

 

2,454

 

Skilled nursing

 

 

 

 

 

 

 

 

284

 

Total living units

 

 

19,973

 

 

 

19,973

 

 

 

22,768

 

 

 

 

 

 

 

 

RevPAR

 

 

 

 

 

 

Owned and Leased (1)

 

$

2,801

 

 

$

2,560

 

 

$

2,411

 

Managed

 

$

3,200

 

 

$

3,077

 

 

$

3,046

 

Quarter End Occupancy

 

 

 

 

 

 

Owned and Leased

 

 

78.4

%

 

 

75.5

%

 

 

72.9

%

Managed

 

 

77.0

%

 

 

75.4

%

 

 

73.8

%

 

 

 

 

 

 

 

Comparable Communities (2):

 

 

 

 

 

 

RevPAR

 

 

 

 

 

 

Owned

 

$

2,801

 

 

$

2,560

 

 

$

2,354

 

Managed

 

$

3,200

 

 

$

3,077

 

 

$

2,941

 

Quarter End Occupancy

 

 

 

 

 

 

Owned

 

 

78.4

%

 

 

75.5

%

 

 

72.9

%

Managed

 

 

77.0

%

 

 

75.4

%

 

 

74.6

%

Operating Margin (3):

 

 

 

 

 

 

Owned

 

 

(15.9

)%

 

 

(20.1

)%

 

 

(24.4

)%

Managed

 

 

4.7

%

 

 

8.4

%

 

 

7.1

%

 

 

As of and for the Three Months Ended

 

 

September 30, 2022

 

June 30, 2022

 

September 30, 2021

Lifestyle Services Segment:

 

 

 

 

 

 

Ageility:

 

 

 

 

 

 

Number of Clinics and Locations (4)

 

 

 

 

 

 

Inpatient clinics

 

8

 

 

10

 

 

10

 

Outpatient locations

 

 

203

 

 

 

202

 

 

 

223

 

Number of Visits (in thousands)

 

 

 

 

 

 

Inpatient clinics

 

 

21

 

 

 

23

 

 

 

20

 

Outpatient locations

 

 

156

 

 

 

153

 

 

 

147

 

 

 

 

 

 

 

 

Comparable Outpatient Locations (5):

 

 

 

 

 

 

Caseload as a % of occupancy (6)

 

 

24.6

%

 

 

24.3

%

 

 

24.6

%

Operating margin (3)

 

 

(1.2

)%

 

 

(0.6

)%

 

 

10.0

%

___________________________

(1)

 

The three months ended September 30, 2021 includes four leased communities with approximately 200 living units previously leased from HealthPeak Properties, Inc., or HealthPeak. The lease with HealthPeak was terminated on September 30, 2021.

(2)

 

Comparable Communities includes financial data for 20 owned senior living communities and 120 managed senior living communities that ALR continuously owned or managed and operated through its Five Star brand since July 1, 2021, exclusive of 59 skilled nursing facility, or SNF, living units that have been closed in one former Continuing Care Retirement Community, or CCRC.

(3)

 

Operating margin is defined as operating revenue less operating expenses divided by operating revenue in each case for the business segment. For the Residential segment, it is inclusive of 59 SNF living units, which have been closed in one former CCRC. It is exclusive of Provider Relief Funds from the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, and other government grants recognized as other operating income. In addition, it excludes restructuring expenses for the three months ended September 30, 2021 of $0.2 million for the comparable managed communities. Managed operating margin does not represent ALR's operating margin and is included to provide supplemental information regarding the operating results of the Five Star senior living communities from which ALR earns residential management fees.

(4)

 

During the three months ended September 30, 2022, ALR opened six outpatient locations, closed five outpatient locations and closed two inpatient clinics.

(5)

 

Comparable outpatient locations includes financial data for 185 outpatient rehabilitation locations that ALR continuously operated since July 1, 2021.

(6)

 

Represents the average number of Ageility customers divided by average total occupancy at each of the senior living communities where ALR operates Ageility outpatient rehabilitation locations. Occupancy is defined as the average total number of residents residing at the senior living communities.

Operational Review

During the quarter ended June 30, 2022, ALR engaged the healthcare consulting arm of A&M to provide a comprehensive operational review of ALR's business and make recommendations to ALR's Board of Directors. The recommendations made by A&M included general and administrative cost reductions, a corporate reorganization that is designed to enhance accountability and certain operational changes to support team members to ensure the delivery of high-quality experiences to residents and customers and to increase occupancy at ALR's senior living communities, as further described below:

  • Reduce costs annually by a target of approximately $2.0 million, net of investments to be made of approximately $3.3 million as described below, by:
    • Streamlining redundant business processes and reducing investments in non-core functions,
    • rationalizing information technology systems to those that directly support core business functions, ensuring their optimal utilization, and
    • continually assessing general and administrative expenses to identify cost savings opportunities.
  • Invest approximately $3.3 million to refocus on ALR's core business and invest strategically in projects, processes and systems that will enhance ALR's ability to successfully operate ALR's residential and lifestyle services businesses, including:
    • Enhancing the executive leadership team with a Chief Operating Officer to oversee field and national operations and a Chief Financial Officer,
    • investing in a scalable and agile national operations infrastructure to drive operational excellence and results, and
    • establishing a centralized sales function with reinstituted regional sales support to focus on both sales and marketing efforts.

Based on A&M's operational review, on August 3, 2022, ALR announced a restructuring plan which includes the elimination of certain positions in its corporate team. ALR expects to complete this restructuring by the middle of 2023. As of the date of this press release, ALR made the following progress with respect to the restructuring plan:

  • Aligned several functions, including sales, marketing, clinical and resident programming, under the national operations support function;
  • Deployed sales support functions to directly support community level sales directors to focus on improved tour to move-in conversion rate;
  • Appointed a Chief Financial Officer, effective September 19, 2022, and a Chief Operating Officer, effective October 17, 2022. In addition, ALR continues to invest in the sales and marketing function, including hiring a Vice President of Marketing, effective October 3, 2022, and five sales directors; and
  • Implemented approximately $2.6 million of labor and non-labor annual cost savings, net of approximately $1.8 million in labor investments.

In addition to the restructuring plan, ALR achieved further cost savings of $4.9 million from the elimination of certain unfilled positions.

In connection with implementing its restructuring plan, ALR expects to incur non-recurring cash expenses of up to $3.0 million. These expenses are expected to include up to $0.4 million of retention payments, up to $2.0 million of severance, benefits and transition expenses and up to $0.6 million of other restructuring expenses. For the three months ended September 30, 2022, ALR recognized $1.6 million of expenses related to the restructuring plan, including $0.1 million of retention payments, $1.4 million of severance, benefits and transition expenses, and $0.1 million of other restructuring expenses, which was recorded in restructuring expenses in ALR's condensed consolidated statements of operations. Additionally, ALR recognized costs of $0.6 million related to the implementation of the A&M operational review for the three months ended September 30, 2022, which are recorded in general and administrative expenses in ALR's condensed consolidated statements of operations.

Summary of Senior Living Communities and Outpatient Rehabilitation Locations

Presented below is a summary of the communities, units, average occupancy, quarter end occupancy, revenues and residential management fees for the Five Star senior living communities ALR manages for DHC, as of and for the three months ended September 30, 2022 (dollars in thousands):

 

 

Total

 

 

Communities

 

Units

 

Average Occupancy

 

Quarter End Occupancy

 

Community Revenues (1)

 

Management Fees

Independent and assisted living communities

 

120

 

17,889

 

75.3%

 

77.0%

 

$

171,684

 

$

9,477

___________________________

(1)

 

Managed senior living communities' revenues do not represent ALR's revenues and are included to provide supplemental information regarding the operating results of the Five Star senior living communities from which ALR earns residential management fees.

Presented below is a summary of the Ageility outpatient rehabilitation locations ALR operated as of and for the three months ended September 30, 2022 (dollars in thousands):

 

 

As of and for the

Three Months Ended September 30, 2022

 

 

Number of Locations

 

Total

Revenue (1)(2)

 

Caseload as a % of occupancy (3)

 

EBITDA Margin (4)

Outpatient Locations in DHC Owned Communities Managed by Five Star

 

94

 

$

7,789

 

25.9

%

 

(0.2

)%

Outpatient Locations at ALR Owned Communities

 

15

 

 

868

 

29.9

%

 

4.6

%

Outpatient Locations at Other Communities (5)

 

94

 

 

4,124

 

21.7

%

 

(8.3

)%

Total Outpatient Locations

 

203

 

$

12,781

 

24.3

%

 

(2.5

)%

___________________________

(1)

 

Excludes revenue of $1,590 earned during the three months ended September 30, 2022 for ten Ageility inpatient rehabilitation clinics (inclusive of two inpatient rehabilitation clinics that were closed during the three months ended September 30, 2022).

(2)

 

Total Ageility revenue includes fitness revenue. Total Ageility revenue excludes home health care services, which is part of the lifestyle services segment.

(3)

 

Represents the average number of Ageility customers divided by average total occupancy at each of the senior living communities where ALR operates Ageility outpatient rehabilitation locations. Occupancy is defined as the average total number of residents residing at the senior living communities.

(4)

 

EBITDA Margin is a non-GAAP financial measure and represents rehabilitation locations that are in service as of September 30, 2022. A reconciliation of EBITDA Margin is presented later in this press release.

(5)

 

Other communities includes outpatient rehabilitation locations at senior living communities not owned or managed by ALR.

Conference Call Information:

At 1:00 p.m. Eastern Time on November 3, 2022, ALR's President and Chief Executive Officer, Jeffrey Leer, and Senior Vice President, Chief Financial Officer and Treasurer, Heather Pereira, will host a conference call to discuss ALR's third quarter 2022 financial results.

The conference call telephone number is (877) 329-4332. Participants calling from outside the United States and Canada should dial (412) 317-5436. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. Eastern Time on November 10, 2022. To hear the replay, dial (412) 317-0088. The replay pass code is 3979235.

A live audio webcast of the conference call will also be available in a listen-only mode on ALR’s website, www.alerislife.com. Participants wanting to access the webcast should visit ALR’s website about five minutes before the call. The archived webcast will be available for replay on ALR’s website following the call for about a week. The transcription, recording and retransmission in any way of ALR's third quarter ended September 30, 2022 financial results conference call are strictly prohibited without the prior written consent of ALR. ALR’s website is not incorporated as part of this press release.

About AlerisLife:

AlerisLife enriches and inspires the lives of its older adult customers across the United States by delivering an exceptional and enhanced resident experience to senior living residents, while also offering lifestyle services to the younger choice-based consumer. The Company is headquartered in Newton, Massachusetts. For more information, visit www.alerislife.com.

 

AlerisLife Inc.

Condensed Consolidated Statements of Operations

(amounts in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

September 30,

 

Nine Months

Ended September 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

REVENUES

 

 

 

 

 

 

 

 

Lifestyle services

 

$

14,546

 

 

$

15,382

 

 

$

43,330

 

 

$

52,388

 

Residential

 

 

17,514

 

 

 

16,320

 

 

 

48,994

 

 

 

49,755

 

Residential management fees

 

 

9,477

 

 

 

11,220

 

 

 

27,380

 

 

 

37,997

 

Total management and operating revenues

 

 

41,537

 

 

 

42,922

 

 

 

119,704

 

 

 

140,140

 

Reimbursed community-level costs incurred on behalf of managed communities

 

 

137,768

 

 

 

177,231

 

 

 

396,352

 

 

 

585,662

 

Other reimbursed expenses

 

 

3,354

 

 

 

5,678

 

 

 

10,869

 

 

 

27,750

 

Total revenues

 

 

182,659

 

 

 

225,831

 

 

 

526,925

 

 

 

753,552

 

 

 

 

 

 

 

 

 

 

Other operating income

 

 

2

 

 

 

 

 

 

44

 

 

 

7,795

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Lifestyle services expenses

 

 

14,562

 

 

 

13,536

 

 

 

42,112

 

 

 

45,414

 

Residential wages and benefits

 

 

10,156

 

 

 

8,547

 

 

 

27,942

 

 

 

30,456

 

Other residential operating expenses

 

 

5,804

 

 

 

7,184

 

 

 

18,126

 

 

 

22,418

 

Community-level costs incurred on behalf of managed communities

 

 

137,768

 

 

 

177,231

 

 

 

396,352

 

 

 

585,662

 

General and administrative

 

 

17,015

 

 

 

21,817

 

 

 

53,205

 

 

 

66,956

 

Restructuring expenses

 

 

1,570

 

 

 

1,220

 

 

 

1,944

 

 

 

16,859

 

Depreciation and amortization

 

 

3,088

 

 

 

2,983

 

 

 

9,535

 

 

 

8,912

 

Total operating expenses

 

 

189,963

 

 

 

232,518

 

 

 

549,216

 

 

 

776,677

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(7,302

)

 

 

(6,687

)

 

 

(22,247

)

 

 

(15,330

)

 

 

 

 

 

 

 

 

 

Interest, dividend and other income

 

 

225

 

 

 

84

 

 

 

434

 

 

 

244

 

Interest and other expense

 

 

(1,474

)

 

 

(507

)

 

 

(3,757

)

 

 

(1,379

)

Unrealized (loss) gain on equity investments

 

 

(1,997

)

 

 

22

 

 

 

(3,679

)

 

 

555

 

Realized gain on sale of debt and equity investments

 

 

1,573

 

 

 

 

 

 

1,528

 

 

 

193

 

Gain (loss) on termination of lease

 

 

498

 

 

 

(3,277

)

 

 

777

 

 

 

(3,277

)

Loss before income taxes

 

 

(8,477

)

 

 

(10,365

)

 

 

(26,944

)

 

 

(18,994

)

(Provision) benefit for income taxes

 

 

(31

)

 

 

164

 

 

 

(99

)

 

 

(194

)

Net loss

 

$

(8,508

)

 

$

(10,201

)

 

$

(27,043

)

 

$

(19,188

)

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding—basic and diluted

 

 

31,875

 

 

 

31,618

 

 

 

31,825

 

 

 

31,567

 

 

 

 

 

 

 

 

 

 

Net loss per share—basic and diluted

 

$

(0.27

)

 

$

(0.32

)

 

$

(0.85

)

 

$

(0.61

)

AlerisLife Inc.

Reconciliation of Non-GAAP Financial Measures

(dollars in thousands)

(unaudited)

Non-GAAP financial measures are financial measures that are not determined in accordance with GAAP. ALR believes the non-GAAP financial measures presented in the tables below are meaningful supplemental disclosures because they may help investors better understand changes in ALR’s operating results and its ability to meet financial obligations or service debt, make capital expenditures and expand its business. ALR believes that EBITDA, Adjusted EBITDA, EBITDA Margin and Net Income (Loss) Margin also may help investors better understand its financial performance, including by allowing investors to compare ALR's performance between periods and against the performance of other companies on both a GAAP and non-GAAP basis. ALR management uses EBITDA, Adjusted EBITDA, EBITDA Margin and Net Income (Loss) Margin to evaluate ALR’s financial performance and compare ALR’s performance over time and to the performance of other companies. ALR calculates EBITDA, Adjusted EBITDA, EBITDA Margin and Net Income (Loss) Margin as shown below or later in this press release. These measures should not be considered as alternatives to net income (loss) or operating income (loss), as indicators of ALR’s operating performance or as measures of ALR’s liquidity. Also, EBITDA, Adjusted EBITDA, EBITDA Margin and Net Income (Loss) Margin as presented may not be comparable to similarly titled amounts calculated by other companies.

ALR believes that net income (loss) is the most directly comparable financial measure, determined according to GAAP, to ALR’s presentation of EBITDA and Adjusted EBITDA. The following table presents the reconciliation of these non-GAAP financial measures to net income (loss) for the three and nine months ended September 30, 2022 and 2021.

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net loss

 

$

(8,508

)

 

$

(10,201

)

 

$

(27,043

)

 

$

(19,188

)

Add (less):

 

 

 

 

 

 

 

 

Interest and other expense

 

 

1,474

 

 

 

507

 

 

 

3,757

 

 

 

1,379

 

Interest, dividend and other income

 

 

(225

)

 

 

(84

)

 

 

(434

)

 

 

(244

)

Provision (benefit) for income taxes

 

 

31

 

 

 

(164

)

 

 

99

 

 

 

194

 

Depreciation and amortization

 

 

3,088

 

 

 

2,983

 

 

 

9,535

 

 

 

8,912

 

EBITDA

 

 

(4,140

)

 

 

(6,959

)

 

 

(14,086

)

 

 

(8,947

)

Add (less):

 

 

 

 

 

 

 

 

Separation costs (1)

 

 

 

 

 

 

 

 

1,319

 

 

 

 

Unrealized loss (gain) on equity investments

 

 

1,997

 

 

 

(22

)

 

 

3,679

 

 

 

(555

)

(Gain) loss on termination of leases

 

 

(498

)

 

 

3,277

 

 

 

(777

)

 

 

3,277

 

Transaction costs (2)

 

 

574

 

 

 

 

 

 

1,278

 

 

 

 

Net restructuring expenses (3)

 

 

1,568

 

 

 

407

 

 

 

1,468

 

 

 

4,515

 

Long-lived asset impairment (4)

 

 

 

 

 

 

 

 

 

 

 

890

 

Adjusted EBITDA

 

$

(499

)

 

$

(3,297

)

 

$

(7,119

)

 

$

(820

)

___________________________

(1)

 

Costs incurred for the nine months ended September 30, 2022 represent those related to the separation of our former President and Chief Executive Officer during the second quarter of 2022.

(2)

 

The three and nine months ended September 30, 2022 includes costs incurred related to the comprehensive operational review by A&M and are included in general and administrative expenses in the condensed consolidated statements of operations.

(3)

 

The three and nine months ended September 30, 2022 and 2021 includes (i) costs incurred related to the repositioning of ALR's residential service offerings, which are reported net of reimbursed expenses received from DHC of $2 and $476, respectively, for the three and nine months ended September 30, 2022, and $813 and $12,344, respectively, for the three and nine months ended September 30, 2021, and (ii) costs incurred related to the restructuring plan executed as a part of A&M's operational review. All of these costs are included in restructuring expenses in the condensed consolidated statements of operations.

(4)

 

The nine months ended September 30, 2021 represents one previously leased community that had a fire on April 4, 2021.

AlerisLife Inc.

Reconciliation of Non-GAAP Financial Measures

(dollars in thousands)

(unaudited)

ALR believes that net income (loss) is the most directly comparable financial measure, determined according to GAAP, to ALR’s presentation of EBITDA, Net Income (Loss) Margin and EBITDA Margin. The following table presents the reconciliation of these non-GAAP financial measures to net income (loss) for the three months ended September 30, 2022 for Ageility.

 

 

Three Months Ended

September 30, 2022

Lifestyle services:

 

 

Revenue

 

$

14,546

 

Less: Home health services

 

 

175

 

Less: Inpatient rehabilitation clinics (1)

 

 

1,590

 

Total Ageility revenue (2)

 

$

12,781

 

 

 

 

Ageility:

 

 

Net loss

 

$

(413

)

Add: Depreciation

 

 

98

 

EBITDA

 

$

(315

)

 

 

 

Net Loss Margin (3)

 

 

(3.2

)%

EBITDA Margin (4)

 

 

(2.5

)%

___________________________

(1)

 

Revenue for ten Ageility inpatient rehabilitation clinics that were operated by Ageility during the three months ended September 30, 2022 (inclusive of two inpatient rehabilitation clinics that were closed during the three months ended September 30, 2022).

(2)

 

Total Ageility revenue includes revenue from outpatient rehabilitation locations and fitness.

(3)

 

Net Loss Margin is defined by ALR as net loss for the period divided by total revenue for the period.

(4)

 

EBITDA Margin is defined by ALR as EBITDA for the period divided by total revenue for the period.

AlerisLife Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share amounts)

(unaudited)

 

 

 

September 30,

 

December 31,

 

 

 

2022

 

 

 

2021

 

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

79,126

 

 

$

66,987

 

Restricted cash and cash equivalents

 

 

21,317

 

 

 

24,970

 

Accounts receivable, net

 

 

9,676

 

 

 

9,244

 

Due from related person

 

 

56,497

 

 

 

41,664

 

Debt and equity investments, of which $7,100 and $7,609 are restricted, respectively

 

 

10,890

 

 

 

19,535

 

Prepaid expenses and other current assets

 

 

21,817

 

 

 

24,433

 

Total current assets

 

 

199,323

 

 

 

186,833

 

 

 

 

 

 

Property and equipment, net

 

 

162,785

 

 

 

159,843

 

Operating lease right-of-use assets

 

 

5,796

 

 

 

9,197

 

Finance lease right-of-use assets

 

 

2,773

 

 

 

3,467

 

Restricted cash and cash equivalents

 

 

991

 

 

 

982

 

Restricted debt and equity investments

 

 

2,715

 

 

 

3,873

 

Other long-term assets

 

 

8,155

 

 

 

12,082

 

Total assets

 

$

382,538

 

 

$

376,277

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

16,367

 

 

$

37,516

 

Accrued expenses and other current liabilities

 

 

44,861

 

 

 

31,488

 

Accrued compensation and benefits

 

 

33,413

 

 

 

34,295

 

Accrued self-insurance obligations

 

 

26,701

 

 

 

31,739

 

Operating lease liabilities

 

 

501

 

 

 

699

 

Finance lease liabilities

 

 

1,351

 

 

 

872

 

Due to related persons

 

 

2,500

 

 

 

3,879

 

Current portion of debt

 

 

437

 

 

 

419

 

Total current liabilities

 

 

126,131

 

 

 

140,907

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

Accrued self-insurance obligations

 

 

27,007

 

 

 

34,744

 

Operating lease liabilities

 

 

5,331

 

 

 

9,366

 

Finance lease liabilities

 

 

2,351

 

 

 

3,050

 

Long-term debt

 

 

67,161

 

 

 

6,364

 

Other long-term liabilities

 

 

227

 

 

 

256

 

Total long-term liabilities

 

 

102,077

 

 

 

53,780

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

Common stock, par value $0.01: 75,000,000 shares authorized, 32,609,009 and 32,662,649 shares issued and outstanding, respectively

 

 

326

 

 

 

327

 

Additional paid-in-capital

 

 

462,144

 

 

 

461,298

 

Accumulated deficit

 

 

(308,107

)

 

 

(281,064

)

Accumulated other comprehensive (loss) income

 

 

(33

)

 

 

1,029

 

Total shareholders’ equity

 

 

154,330

 

 

 

181,590

 

Total liabilities and shareholders' equity

 

$

382,538

 

 

$

376,277

 

AlerisLife Inc.

Residential Segment Data

(dollars in thousands, except per unit amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

Owned and Leased Senior Living Communities

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

17,514

 

 

$

16,094

 

 

$

15,386

 

 

$

14,883

 

 

$

16,320

 

Other operating income (1)

 

 

2

 

 

 

 

 

 

42

 

 

 

 

 

 

 

Operating expenses

 

 

20,182

 

 

 

18,861

 

 

 

19,371

 

 

 

18,574

 

 

 

17,895

 

Operating loss

 

 

(2,666

)

 

 

(2,767

)

 

 

(3,943

)

 

 

(3,691

)

 

 

(1,575

)

Operating margin

 

 

(15.2

)%

 

 

(17.2

)%

 

 

(25.6

)%

 

 

(24.8

)%

 

 

(9.7

)%

Number of communities (end of period)

 

 

20

 

 

 

20

 

 

 

20

 

 

 

20

 

 

 

20

 

Number of living units (end of period) (2)

 

 

2,084

 

 

 

2,087

 

 

 

2,100

 

 

 

2,100

 

 

 

2,099

 

Average occupancy

 

 

76.0

%

 

 

72.5

%

 

 

71.0

%

 

 

72.0

%

 

 

69.9

%

Quarter end occupancy

 

 

78.4

%

 

 

75.5

%

 

 

72.1

%

 

 

72.7

%

 

 

72.9

%

RevPAR (3)

 

$

2,801

 

 

$

2,560

 

 

$

2,443

 

 

$

2,349

 

 

$

2,411

 

RevPOR (4)

 

$

3,604

 

 

$

3,492

 

 

$

3,444

 

 

$

3,192

 

 

$

3,375

 

 

 

 

 

 

 

 

 

 

 

 

Managed Senior Living Communities (5):

 

 

 

 

 

 

 

 

 

 

Residential management fees

 

$

9,477

 

 

$

8,971

 

 

$

8,932

 

 

$

9,482

 

 

$

11,220

 

 

 

 

 

 

 

 

 

 

 

 

Community-level revenues

 

 

171,684

 

 

 

165,179

 

 

 

162,552

 

 

 

161,907

 

 

 

210,160

 

Other operating income (1)

 

 

125

 

 

 

75

 

 

 

199

 

 

 

602

 

 

 

786

 

Community-level expenses (6)

 

 

164,044

 

 

 

151,906

 

 

 

152,892

 

 

 

159,329

 

 

 

203,756

 

Community operating income

 

 

7,765

 

 

 

13,348

 

 

 

9,859

 

 

 

3,180

 

 

 

7,190

 

Community operating margin

 

 

4.5

%

 

 

8.1

%

 

 

6.1

%

 

 

2.0

%

 

 

3.4

%

Number of communities (end of period)

 

 

120

 

 

 

120

 

 

 

120

 

 

 

121

 

 

 

159

 

Number of living units (end of period) (2)

 

 

17,889

 

 

 

17,886

 

 

 

17,899

 

 

 

18,005

 

 

 

20,669

 

Average occupancy

 

 

75.3

%

 

 

74.1

%

 

 

74.1

%

 

 

73.7

%

 

 

72.2

%

Quarter end occupancy

 

 

77.0

%

 

 

75.4

%

 

 

74.6

%

 

 

74.8

%

 

 

73.8

%

RevPAR (3)

 

$

3,200

 

 

$

3,077

 

 

$

3,027

 

 

$

2,919

 

 

$

3,046

 

RevPOR (4)

 

$

4,158

 

 

$

4,109

 

 

$

4,084

 

 

$

3,875

 

 

$

4,129

 

___________________________

(1)

 

Other operating income represents income recognized for funds received under the CARES Act and other government grants.

(2)

 

Includes living units categorized as in service. As a result, the number of living units may vary from period to period for reasons other than the acquisition or disposition of senior living communities.

(3)

 

RevPAR is defined by ALR as resident fee revenues for the corresponding portfolio for the period divided by the average number of available units for the corresponding portfolio for the period, divided by the number of months in the period. Data for the three months ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021 exclude income received by senior living communities under the CARES Act and other government grants.

(4)

 

RevPOR is defined by ALR as resident fee revenues for the corresponding portfolio for the period divided by the average number of occupied units for the corresponding portfolio for the period, divided by the number of months in the period. Data for the three months ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021 exclude income received by senior living communities under the CARES Act and other government grants.

(5)

 

Managed senior living communities, other than ALR's residential management fees, represents financial data of senior living communities managed for DHC and does not represent financial results of ALR. Managed senior living communities' data is included to provide supplemental information regarding the operating results of the senior living communities from which ALR earns residential management fees.

(6)

 

The three months ended September 30, 2022, June 30, 2022, December 31, 2021 and September 30, 2021 includes restructuring expense of $2, $474, $966, and $813, respectively.

AlerisLife Inc.

Comparable Communities Residential Segment Data

(dollars in thousands, except per unit amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

2021

 

Owned Senior Living Communities (1):

 

 

 

 

 

 

 

 

 

 

Number of communities (end of period)

 

 

20

 

 

 

20

 

 

 

20

 

 

 

20

 

 

 

20

 

Number of living units (end of period) (2)

 

 

2,084

 

 

 

2,087

 

 

 

2,100

 

 

 

2,100

 

 

 

2,099

 

Average occupancy

 

 

76.0

%

 

 

72.5

%

 

 

71.0

%

 

 

72.0

%

 

 

70.4

%

Quarter end occupancy

 

 

78.4

%

 

 

75.5

%

 

 

72.1

%

 

 

72.7

%

 

 

72.9

%

RevPAR (3)

 

$

2,801

 

 

$

2,560

 

 

$

2,443

 

 

$

2,349

 

 

$

2,354

 

RevPOR (4)

 

$

3,604

 

 

$

3,492

 

 

$

3,444

 

 

$

3,192

 

 

$

3,270

 

 

 

 

 

 

 

 

 

 

 

 

Managed Senior Living Communities (1)(5):

 

 

 

 

 

 

 

 

 

 

Number of communities (end of period)

 

 

120

 

 

 

120

 

 

 

120

 

 

 

120

 

 

 

120

 

Number of living units (end of period) (2)

 

 

17,889

 

 

 

17,886

 

 

 

17,899

 

 

 

17,899

 

 

 

17,899

 

Average occupancy

 

 

75.3

%

 

 

74.1

%

 

 

74.1

%

 

 

74.1

%

 

 

73.4

%

Quarter end occupancy

 

 

77.0

%

 

 

75.4

%

 

 

74.6

%

 

 

75.2

%

 

 

74.6

%

RevPAR (3)

 

$

3,200

 

 

$

3,077

 

 

$

3,027

 

 

$

2,900

 

 

$

2,941

 

RevPOR (4)

 

$

4,158

 

 

$

4,109

 

 

$

4,084

 

 

$

3,831

 

 

$

3,922

 

___________________________

(1)

 

Includes data for Five Star senior living communities that ALR has continuously owned or managed since July 1, 2021. The summary of operations for comparable communities excludes 59 SNF living units that have been closed in one former CCRC that Five Star presently manages as an assisted living community.

(2)

 

Includes living units categorized as in service. As a result, the number of living units may vary from period to period for reasons other than the acquisition or disposition of senior living communities.

(3)

 

RevPAR is defined by ALR as resident fee revenues for the corresponding portfolio for the period divided by the average number of available units for the corresponding portfolio for the period, divided by the number of months in the period. Data for the three months ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021 exclude income received by senior living communities under the CARES Act and other government grants.

(4)

 

RevPOR is defined by ALR as resident fee revenues for the corresponding portfolio for the period divided by the average number of occupied units for the corresponding portfolio for the period, divided by the number of months in the period. Data for the three months ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021 exclude income received by senior living communities under the CARES Act and other government grants.

(5)

 

Residential segment data for comparable managed senior living communities represents financial data of senior living communities managed for DHC and does not represent financial results of ALR. Managed senior living communities' data is included to provide supplemental information regarding the operating results of the senior living communities from which ALR earns residential management fees.

AlerisLife Inc.

Lifestyle Services Segment Data

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

2021

 

Lifestyle Services (1):

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

14,546

 

 

$

14,645

 

 

$

14,139

 

 

$

15,626

 

 

$

15,382

 

Outpatient

 

 

11,837

 

 

 

11,753

 

 

 

11,165

 

 

 

12,848

 

 

 

12,747

 

Fitness

 

 

944

 

 

 

941

 

 

 

881

 

 

 

890

 

 

 

853

 

Other

 

 

1,765

 

 

 

1,951

 

 

 

2,093

 

 

 

1,888

 

 

 

1,782

 

Operating expenses (2)

 

 

14,672

 

 

 

14,438

 

 

 

13,334

 

 

 

14,045

 

 

 

13,348

 

Operating (loss) income

 

 

(126

)

 

 

207

 

 

 

805

 

 

 

1,581

 

 

 

2,034

 

Operating margin (3)

 

 

(0.9

)%

 

 

1.4

%

 

 

5.7

%

 

 

10.1

%

 

 

13.2

%

Number of inpatient clinics (end of period)

 

 

8

 

 

 

10

 

 

 

10

 

 

 

10

 

 

 

10

 

Number of outpatient locations (end of period)

 

 

203

 

 

 

202

 

 

 

201

 

 

 

205

 

 

 

223

 

Number of fitness locations (end of period)

 

 

67

 

 

 

76

 

 

 

73

 

 

 

60

 

 

 

61

 

___________________________

(1)

 

Includes Ageility rehabilitation locations and fitness operations as well as home healthcare operations.

(2)

 

The three months ended December 31, 2021 and September 30, 2021 includes restructuring expenses of $23 and $(310), respectively.

(3)

 

Operating margin is defined as operating revenue less operating expenses divided by operating revenue in each period.

AlerisLife Inc.

Comparable Lifestyle Services Segment Data

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

2021

 

Lifestyle Services (1)(2):

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

12,183

 

 

$

12,057

 

 

$

11,533

 

 

$

12,892

 

 

$

12,823

 

Outpatient

 

 

11,091

 

 

 

10,944

 

 

 

10,520

 

 

 

11,825

 

 

 

11,754

 

Fitness

 

 

917

 

 

 

898

 

 

 

835

 

 

 

832

 

 

 

795

 

Other

 

 

175

 

 

 

215

 

 

 

178

 

 

 

235

 

 

 

274

 

Operating expenses

 

 

12,291

 

 

 

12,095

 

 

 

11,251

 

 

 

11,621

 

 

 

11,563

 

Operating (loss) income

 

 

(108

)

 

 

(38

)

 

 

282

 

 

 

1,271

 

 

 

1,260

 

Operating margin (3)

 

 

(0.9

)%

 

 

(0.3

)%

 

 

2.4

%

 

 

9.9

%

 

 

9.8

%

Number of outpatient locations (end of period)

 

 

185

 

 

 

185

 

 

 

185

 

 

 

185

 

 

 

185

 

Number of fitness locations (end of period)

 

 

62

 

 

 

73

 

 

 

73

 

 

 

51

 

 

 

57

 

___________________________

(1)

 

Includes Ageility outpatient rehabilitation locations and fitness operations as well as home healthcare operations that ALR has continuously operated since July 1, 2021.

(2)

 

Excludes eight Ageility inpatient rehabilitation clinics.

(3)

 

Operating margin is defined as operating revenue less operating expenses divided by operating revenue in each period.

AlerisLife Inc.

Owned Senior Living Communities as of and for the Three Months Ended September 30, 2022

(dollars in thousands)

(unaudited)

No.

 

Community Name

 

State

 

Property Type (1)

 

Living Units

 

Residential Revenues (4)

 

Gross Carrying Value

 

Net Carrying Value

 

Date Acquired

 

Most Recent Renovation

1

 

Morningside of Decatur (2)

 

Alabama

 

AL

 

49

 

$

414

 

$

7,805

 

$

4,232

 

11/19/2004

 

2021

2

 

Morningside of Auburn (2)

 

Alabama

 

AL

 

42

 

 

415

 

 

2,339

 

 

1,119

 

11/19/2004

 

1997

3

 

The Palms of Fort Myers (2)

 

Florida

 

IL

 

218

 

 

1,965

 

 

7,452

 

 

3,912

 

4/1/2002

 

1988

4

 

Five Star Residences of Banta Pointe (3)

 

Indiana

 

AL

 

121

 

 

859

 

 

12,052

 

 

7,235

 

9/29/2011

 

2006

5

 

Five Star Residences of Fort Wayne (2)

 

Indiana

 

AL

 

154

 

 

1,000

 

 

9,355

 

 

5,726

 

9/29/2011

 

1998

6

 

Five Star Residences of Clearwater

 

Indiana

 

AL

 

88

 

 

400

 

 

15,259

 

 

9,780

 

6/1/2011

 

1999

7

 

Five Star Residences of Lafayette

 

Indiana

 

AL

 

109

 

 

665

 

 

12,406

 

 

7,961

 

6/1/2011

 

2000

8

 

Five Star Residences of Noblesville (2)

 

Indiana

 

AL

 

151

 

 

1,232

 

 

14,005

 

 

8,588

 

7/1/2011

 

2005

9

 

The Villa at Riverwood (2)

 

Missouri

 

IL

 

112

 

 

754

 

 

5,056

 

 

3,231

 

4/1/2002

 

1986

10

 

Voorhees Senior Living (2)

 

New Jersey

 

AL

 

91

 

 

909

 

 

20,591

 

 

13,883

 

7/1/2008

 

1999

11

 

Washington Township Senior Living

 

New Jersey

 

AL

 

93

 

 

994

 

 

26,586

 

 

17,178

 

7/1/2008

 

1998

12

 

Carriage House Senior Living (2)

 

North Carolina

 

AL

 

98

 

 

1,075

 

 

10,065

 

 

5,319

 

12/1/2008

 

1997

13

 

Forest Heights Senior Living (2)

 

North Carolina

 

AL

 

111

 

 

875

 

 

16,328

 

 

10,457

 

12/1/2008

 

1998

14

 

Fox Hollow Senior Living (2)

 

North Carolina

 

AL

 

74

 

 

1,253

 

 

26,639

 

 

17,816

 

7/1/2000

 

1999

15

 

Legacy Heights Senior Living (2)

 

North Carolina

 

AL

 

116

 

 

895

 

 

7,845

 

 

3,641

 

12/1/2008

 

1997

16

 

Morningside at Irving Park (2)

 

North Carolina

 

AL

 

91

 

 

869

 

 

3,848

 

 

1,565

 

11/19/2004

 

1997

17

 

The Devon Senior Living

 

Pennsylvania

 

AL

 

84

 

 

566

 

 

33,437

 

 

14,686

 

7/1/2008

 

1985

18

 

The Legacy of Anderson (2)

 

South Carolina

 

IL

 

101

 

 

662

 

 

11,840

 

 

6,994

 

12/1/2008

 

2003

19

 

Morningside of Springfield (2)

 

Tennessee

 

AL

 

54

 

 

565

 

 

19,114

 

 

11,633

 

11/19/2004

 

1984

20

 

Huntington Place

 

Wisconsin

 

AL

 

127

 

 

1,152

 

 

2,499

 

 

1,502

 

7/15/2010

 

1999

 

 

Total

 

 

 

 

 

2,084

 

$

17,519

 

$

264,521

 

$

156,458

 

 

 

 

___________________________

(1)

 

AL is primarily an assisted living community and IL is primarily an independent living community.

(2)

 

Encumbered property under ALR's $95,000 Loan.

(3)

 

Encumbered property under ALR's mortgage note having an aggregate principal amount outstanding of $6,659 as of September 30, 2022.

(4)

 

Excludes funds received under the CARES Act recognized as other operating income.

Warning Concerning Forward-Looking Statements

This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever ALR uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, "will", “may” and negatives or derivatives of these or similar expressions, ALR is making forward-looking statements. These forward-looking statements are based upon ALR’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by ALR’s forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond ALR's control. For example:

  • This press release includes statements regarding the comprehensive operational review performed by A&M and the restructuring plan ALR has implemented as a result and has begun to execute. In addition, Mr. Leer notes the recent additions of ALR's Chief Financial Officer and Chief Operating Officer. ALR may not be able to successfully execute the restructuring plan on the timing it expects or at all, the costs to implement the restructuring plan may be more than it expects and it may not realize the benefits it anticipates from the restructuring plan.
  • Mr. Leer refers to the steady progress ALR has made in implementing its plan to improve its operating results and drive efficiencies in its organization throughout the third quarter of 2022, noting improvements in occupancy in both ALR's owned and managed senior living communities. However, this progress may not continue and its operating results may not improve and occupancy could decline as a result of current economic conditions, including inflation, high interest rates, geopolitical risks and possible economic recession.
  • Mr. Leer states that ALR ended the quarter with sufficient liquidity to execute on the restructuring plan and that it has no debt maturities until 2025. However, the costs to implement the restructuring plan may be more than it anticipates, it may not generate sufficient cash flow from its operations, and its current liquidity may prove to be insufficient.

The information contained in ALR’s filings with the Securities and Exchange Commission, or SEC, including under “Risk Factors” in ALR’s periodic reports, or incorporated therein, identifies other important factors that could cause ALR’s actual results to differ materially from those stated in or implied by ALR’s forward-looking statements. ALR’s filings with the SEC are available on the SEC’s website at www.sec.gov.

You should not place undue reliance upon forward-looking statements.

Except as required by law, ALR does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

Contacts

Michael Kodesch, Director, Investor Relations

(617) 796-8245

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