Capital Senior Living(SNDA) - 2018 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported total consolidated revenue of $115.1 million for Q4 2018, a decrease of $1.9 million or 1.6% compared to Q4 2017, primarily due to lower financial occupancy [30] - Operating expenses increased by $4.7 million or 6.6% in Q4 2018 to $76.1 million, with casualty expenses being $1 million higher than the prior year [31] - Adjusted EBITDA was $35.2 million in Q4 2018, down from $39.4 million in Q4 2017, while adjusted CFFO was $6.9 million compared to $12.3 million in Q4 2017 [34] Business Line Data and Key Metrics Changes - Same community revenues decreased by 2.3% compared to Q4 2017, with a modest increase in average monthly rent of 0.7% but a decline in same community occupancy by 270 basis points [35] - The company eliminated approximately 250 positions across field operations to better match labor expenses to current revenue levels, with no caregiver positions affected [42] Market Data and Key Metrics Changes - In the Dallas market, financial occupancy declined by approximately 270 basis points in Q4 2018 compared to Q4 2017, while occupancy in Omaha increased significantly from 85.7% to 92.8% year-over-year [37][38] - Occupancy in Texas communities outside of Dallas increased by approximately 70 basis points in Q4 2018 compared to Q4 2017 [39] Company Strategy and Development Direction - The company is focusing on a strategy summarized as SING (Stabilize, Invest, Nurture, Grow) to improve operating performance and financial foundation [6][16] - Key initiatives include optimizing labor utilization, restructuring sales management, and implementing new business systems for better transparency and accountability [11][12][14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic conditions in the senior living industry, with supply outpacing demand and rising labor costs expected to persist for the next 12 to 18 months [5][6] - The company expects to manage operating expenses to increase in the 2% to 3% range in 2019, with a starting financial occupancy of 84.5% in December 2018 [54] Other Important Information - The company closed on a master credit facility in December 2018 to refinance fixed-rate debt on 19 communities, which is part of an ongoing effort to strengthen its financial foundation [46][49] - The company plans to allocate approximately $25 million to $30 million in capital expenditures for 2019, focusing on necessary physical infrastructure needs and community improvements [81] Q&A Session Summary Question: Concerns about occupancy drop and competition - Management acknowledged the challenging environment and noted that execution was lacking, particularly in Dallas and Indianapolis markets [60][61] Question: Insights on cost-cutting initiatives - Management indicated that the reduction in force would help minimize labor cost increases, with additional savings expected from food procurement initiatives [69][70] Question: CapEx plans for 2019 - The company plans to spend approximately $25 million to $30 million on CapEx in 2019, focusing on physical infrastructure and community improvements [81]