Subsequent Event Highlights

Investment in Joint Venture

On July 1, 2024, the Company entered into a joint venture ("Palatine JV") with affiliates of Palatine Capital Partners ("Palatine Investor"), which acquired four senior living communities located in Texas (3) and Georgia (1). The Palatine JV acquired these communities with $12.5 million of cash and financing of $21.8 million of senior mortgage debt. The Company is a 51% owner in the joint venture and contributed $6.4 million in cash for the investment. The Company will manage the four communities in exchange for a management fee calculated as a percentage of gross revenue and an additional incentive management fee.

Loan Modification

On August 5, 2024, the Company entered into loan modification agreements ("Texas Loan Modification") with one of its lenders on two owned communities in Texas. The original loan terms included maturities of April 2025 and October 2031, as well as cross-default provisions with each other. The Texas Loan Modification includes revised loan maturities of December 2025 on both communities, with the Company’s option to make a discounted payoff ("Texas DPO") of the outstanding loan principal on or prior to November 1, 2024. The Texas DPO amount of $18.5 million represents a discount of 36% on the total principal outstanding of $28.7 million on these two loans (as of July 31, 2024).

BMO Loan

On July 24, 2024, the Company entered into a loan agreement with BMO Bank N.A. in the amount of $8.7 million that is secured by two of the Company’s communities.

Registration Statement

On July 19, 2024, the Company filed a prospectus which is part of a registration statement that we filed with the Securities and Exchange Commission, or the ("SEC"), using a "shelf" registration process. Under the shelf registration process, we may sell any combination of the securities described in the prospectus in one or more offerings up to a total dollar amount of $500.0 million. The Company cannot provide any assurances that it will issue any securities pursuant to the registration statement.

At-the-Market Equity Offerings

On July 1, 2024, the Company sold 51,127 shares pursuant to the ATM Sales Agreement at an average sales price of $27.50 per share for net proceeds of $1.4 million, inclusive of $35 thousand in commissions paid to its Agent.

Results of Operations

Three months ended June 30, 2024 as compared to three months ended June 30, 2023

Revenues

Resident revenue for the three months ended June 30, 2024 was $63.1 million as compared to $57.0 million for the three months ended June 30, 2023, representing an increase of $6.1 million, or 10.7%. The increase in revenue was primarily due to increased occupancy and, to a lesser extent, increased average rent rates, and one additional owned community that was acquired in May 2024. For the three months ended June 30, 2023, the Company received approximately $0.4 million in various relief funds received from state departments due to financial distress impacts of COVID-19 ("State Relief Funds"). For the three months ended June 30, 2024, the Company received no State Relief Funds.

Managed community reimbursement revenue for the three months ended June 30, 2024 was $6.4 million as compared to $5.4 million for the three months ended June 30, 2023, representing an increase of $1.0 million or 18.5%. The increase was primarily a result of managing more communities in the three months ended June 30, 2024 compared to the prior period.

Expenses

Operating expenses for the three months ended June 30, 2024 were $46.0 million as compared to $44.7 million for the three months ended June 30, 2023, representing an increase of $1.3 million, or 2.9%. In our consolidated community portfolio, the labor component of our operating expense increased approximately $1.2 million period-over-period. The additional increase of $0.1 million was for other expenses.

General and administrative expenses for the three months ended June 30, 2024 were $9.2 million as compared to $6.6 million for the three months ended June 30, 2023, representing an increase of $2.6 million. The increase was primarily a result of an increase in labor and employee related expenses of $1.0 million, a $0.6 million increase in stock-based compensation expense, a $0.3 million increase in transaction costs, and a net increase in other expenses of $0.7 million.

Interest expense for the three months ended June 30, 2024 was $9.0 million as compared to $8.6 million for the three months ended June 30, 2023, representing an increase of $0.4 million primarily due to the change in fair value of our interest rate cap ("IRC") and the ending of the Fannie Interest Abatement Period ending on May 31, 2024.

As a result of the foregoing factors, the Company reported net loss of $9.8 million and $12.2 million for the three months ended June 30, 2024 and June 30, 2023, respectively.

Adjusted EBITDA for the three months ended June 30, 2024 was $11.4 million compared to $7.5 million for the three months ended June 30, 2023, driven primarily by continued improvement in operations. See "Reconciliation of Non-GAAP Financial Measures" below.

Six months ended June 30, 2024 as compared to six months ended June 30, 2023

Revenues

Resident revenue for the six months ended June 30, 2024 was $123.8 million as compared to $113.6 million for the six months ended June 30, 2023, representing an increase of $10.2 million, or 9.0%. The increase in revenue was primarily due to increased occupancy, one additional owned community that was acquired in May 2024, and to a lesser extent, increased average rent rates. For the six months ended June 30, 2023, the Company received $2.4 million in State Relief Funds. For the six months ended June 30, 2024, the Company received no State Relief Funds.

Managed community reimbursement revenue for the six months ended June 30, 2024 was $12.5 million as compared to $10.3 million for the six months ended June 30, 2023, an increase of $2.2 million, or 21.4%. The increase was primarily a result of managing more communities in the six months ended June 30, 2024 as compared to the prior period.

Expenses

Operating expenses for the six months ended June 30, 2024 were $92.3 million as compared to $88.5 million for the six months ended June 30, 2023, representing an increase of $3.8 million, or 4.3%. The increase is primarily attributable to the increase in labor over this period.

General and administrative expenses for the six months ended June 30, 2024 were $16.4 million as compared to $13.6 million for the six months ended June 30, 2023, representing an increase of $2.8 million. The increase was primarily a result of an increase in labor and employee related expenses of $1.6 million, an increase in stock-based compensation of $0.3 million, an increase in transaction costs of $0.3 million, and a net increase in other expenses of $0.6 million.

Interest expense for the six months ended June 30, 2024 was $17.6 million as compared to $17.4 million for the six months ended June 30, 2023, representing an increase of $0.2 million primarily due to the change in fair value of our IRC.

Gain on extinguishment of debt for the six months ended June 30, 2024 was $38.1 million. The gain relates to the derecognition of notes payable and liabilities as a result of the loan purchase from one of our lenders. Gain on extinguishment of debt for the six months ended June 30, 2023 was $36.3 million and related to the derecognition of notes payable and liabilities as a result of the transition of legal ownership of two communities to Fannie Mae, the holder of the related non-recourse debt.

As a result of the foregoing factors, the Company reported net income of $17.2 million and $11.9 million for the six months ended June 30, 2024 and June 30, 2023, respectively.

Liquidity, Capital Resources, and Subsequent Events

Liquidity

Increase in Authorized Shares of Common Stock

On March 21, 2024, following receipt of stockholder approval at the Special Meeting of the Company’s stockholders held on March 21, 2024, the Company filed an amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended, with the Delaware Secretary of State to increase the number of authorized shares of the Company’s common stock from 15,000,000 shares to 30,000,000 shares. The charter amendment became effective upon filing.

Securities Purchase Agreement

On February 1, 2024, the Company entered into a securities purchase agreement (the "Securities Purchase Agreement") with Conversant Dallas Parkway (A) LP, Conversant Dallas Parkway (B) LP (together, "Conversant") and several other shareholders (together, the "Investors"), pursuant to which the Investors agreed to purchase from the Company, and the Company agreed to sell to the Investors, in a private placement transaction pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, an aggregate of 5,026,318 shares of the Company’s common stock at a price of $9.50 per share (the "Private Placement").

As of June 30, 2024, the Private Placement has been completed with gross cash proceeds of $47.7 million received. The Company used these proceeds in connection with the 2024 Loan Purchase described below, continued investments in community improvements, broader community programming, other general corporate purposes, and working capital.

At-the-Market Sales

On April 1, 2024, the Company entered into the ATM Sales Agreement, whereby the Company may sell, at its option, shares of its common stock up to an aggregate offering price of $75.0 million. On April 5, 2024, the Company sold 382,000 shares pursuant to the ATM Sales Agreement at $27.50 per share for net proceeds of $10.2 million, inclusive of $0.3 million in offering costs. On May 14, 2024, the Company sold 234,375 shares pursuant to the ATM Sales Agreement at an average sales price of $32.00 per share for net proceeds of $7.2 million, inclusive of $0.3 million in offering costs. These transactions are expected to provide additional financial flexibility to the Company and increase our liquidity position. On July 1, 2024, the Company sold 51,127 shares pursuant to the ATM Sales Agreement at an average sales price of $27.50 per share for net proceeds of $1.4 million, inclusive of $35,000 in commissions paid to its Agent.

2024 Loan Repurchase Agreement

On February 2, 2024, the Company completed the purchase of the total outstanding principal balance of $74.4 million from the lender that was secured by seven of the Company’s senior living communities for a purchase price of $40.2 million (such transaction, the "2024 Loan Purchase"). In addition to aggregate deposits of $1.5 million made in December 2023 and January 2024, the Company funded the remaining cash portion of the purchase price (including one-time closing costs) with $15.4 million of net proceeds from the sale of the shares at the first closing of the Private Placement. The Company obtained additional debt proceeds through its existing loan facility with Ally Bank for the remaining portion of the purchase price, as described below.

Ally Term Loan Expansion

On February 2, 2024, the Company expanded the existing loan facility with Ally by $24.8 million to partially fund the 2024 Loan Purchase. The expanded Ally debt facility is secured by six of the Company’s senior living communities involved in the 2024 Loan Purchase.

On May 22, 2024, the Company executed an amendment ("Ally Fourth Amendment") to the Ally term loan agreement. Ally Bank successfully syndicated a portion of its total term loan commitment to Cross River Bank. Following the syndication, Ally Bank and Cross River Bank owned 67.5% and 32.5% of the outstanding principal balance, respectively.

Cashflows

The table below presents a summary of the Company’s net cash provided by (used in) operating, investing, and financing activities (in thousands):

In addition to $9.5 million of unrestricted cash as of June 30, 2024, our future liquidity will depend in part upon our operating performance, which will be affected by prevailing economic conditions, and financial, business and other factors, some of which are beyond our control. Principal sources of liquidity are expected to be cash flows from operations; proceeds from equity offerings; proceeds from debt, debt refinancings, loan modifications, or credit facilities; and proceeds from the sale of owned assets.

The Company, from time to time, considers and evaluates financial and capital raising transactions related to its portfolio, including debt refinancings, purchases and sales of assets, equity offerings, and other transactions. There can be no assurance that the Company will continue to generate cash flows at or above current levels, or that the Company will be able to obtain the capital necessary to meet the Company’s short and long-term capital requirements.

Recent changes in the current economic environment, and other future changes, could result in decreases in the fair value of assets, slowing of transactions, and the tightening of liquidity and credit markets. These impacts could make securing debt or refinancings for the Company or buyers of the Company’s properties more difficult or on terms not acceptable to the Company. The Company’s actual liquidity and capital funding requirements depend on numerous factors, including its operating results, its capital expenditures for community investment, and general economic conditions, as well as other factors described in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 27, 2024.

Conference Call Information

The Company will host a conference call with senior management to discuss the Company’s financial results for the three months ended June 30, 2024, on Monday, August 12, 2024, at 11:00 a.m. Eastern Time. To participate, dial 877-407-0989 (no passcode required). A link to the simultaneous webcast of the teleconference will be available at: https://www.webcast-eqs.com/register/sonidaseniorliving_q22024_en/en.

For the convenience of the Company’s shareholders and the public, the conference call will be recorded and available for replay starting August 13, 2024 through August 26, 2024. To access the conference call replay, call 877-660-6853, passcode 13743708. A transcript of the call will be posted in the Investor Relations section of the Company’s website.

About the Company

Dallas, Texas-based Sonida Senior Living, Inc. is a leading owner, operator and investor in independent living, assisted living and memory care communities and services for senior adults. As of June 30, 2024, the Company operated 78 senior housing communities in 19 states with an aggregate capacity of approximately 8,700 residents, including 66 owned senior housing communities (4 through a joint venture) and 12 communities that the Company third-party manages, which provide compassionate, resident-centric services and care as well as engaging programming. For more information, visit www.sonidaseniorliving.com or connect with the Company on Facebook, Twitter or LinkedIn.

Definitions of RevPAR and RevPOR

RevPAR, or average monthly revenue per available unit, is defined by the Company as resident revenue for the period, divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period.

RevPOR, or average monthly revenue per occupied unit, is defined by the Company as resident revenue for the period, divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period.

Safe Harbor

This release contains forward-looking statements which are subject to certain risks and uncertainties that could cause our actual results and financial condition of Sonida Senior Living, Inc. (the "Company," "we," "our" or "us") to differ materially from those indicated in the forward-looking statements, including, among others, the risks, uncertainties and factors set forth under "Item. 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (the "SEC") on March 27, 2024, and also include the following: the Company’s ability to generate sufficient cash flows from operations, proceeds from equity issuances and debt financings, and proceeds from the sale of assets to satisfy its short- and long-term debt obligations and to fund the Company’s acquisitions and capital improvement projects to expand, redevelop, and/or reposition its senior living communities; increases in market interest rates that increase the cost of certain of our debt obligations; increased competition for, or a shortage of, skilled workers, including due to general labor market conditions, along with wage pressures resulting from such increased competition, low unemployment levels, use of contract labor, minimum wage increases and/or changes in overtime laws; the Company’s ability to obtain additional capital on terms acceptable to it; the Company’s ability to extend or refinance its existing debt as such debt matures; the Company’s compliance with its debt agreements, including certain financial covenants, and the risk of cross-default in the event such non-compliance occurs; the Company’s ability to complete acquisitions and dispositions upon favorable terms or at all, including the possibility that the expected benefits and our projections related to such acquisitions may not materialize as expected; the risk of oversupply and increased competition in the markets which the Company operates; the Company’s ability to improve and maintain controls over financial reporting and remediate the identified material weakness discussed in its recent Quarterly and Annual Reports filed with the SEC; the cost and difficulty of complying with applicable licensure, legislative oversight, or regulatory changes; risks associated with current global economic conditions and general economic factors such as inflation, the consumer price index, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits, and insurance, interest rates, and tax rates; the impact from or the potential emergence and effects of a future epidemic, pandemic, outbreak of infectious disease or other health crisis; and changes in accounting principles and interpretations.

For information about Sonida Senior Living, visit www.sonidaseniorliving.com or connect with the Company on Facebook, Twitter or LinkedIn.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)

This earnings release contains the financial measures (1) Community Net Operating Income and Adjusted Community Net Operating Income, (2) Community Net Operating Income Margin and Adjusted Community Net Operating Income Margin, (3) Adjusted EBITDA, (4) Revenue per Occupied Unit (RevPOR) and (5) Revenue per Available Unit (RevPAR), all of which are not calculated in accordance with U.S. GAAP. Presentations of these non-GAAP financial measures are intended to aid investors in better understanding the factors and trends affecting the Company’s performance and liquidity. However, investors should not consider these non-GAAP financial measures as a substitute for financial measures determined in accordance with GAAP, including net income (loss), income (loss) from operations, net cash provided by (used in) operating activities, or revenue. Investors are cautioned that amounts presented in accordance with the Company’s definitions of these non-GAAP financial measures may not be comparable to similar measures disclosed by other companies because not all companies calculate non-GAAP measures in the same manner. Investors are urged to review the following reconciliations of these non-GAAP financial measures from the most comparable financial measures determined in accordance with GAAP.

Community Net Operating Income and Community Net Operating Income Margin are non-GAAP performance measures for the Company’s consolidated owned portfolio of communities that the Company defines as net income (loss) excluding: general and administrative expenses (inclusive of stock-based compensation expense), interest income, interest expense, other income/expense, provision for income taxes, settlement fees and expenses, revenue and operating expenses from the Company’s disposed properties; and further adjusted to exclude income/expense associated with non-cash, non-operational, transactional, or organizational restructuring items that management does not consider as part of the Company’s underlying core operating performance and impacts the comparability of performance between periods. For the periods presented herein, such other items include depreciation and amortization expense, gain(loss) on extinguishment of debt, gain(loss) on disposition of assets, long-lived asset impairment, and loss on non-recurring settlements with third parties. The Community Net Operating Income Margin is calculated by dividing Community Net Operating Income by resident revenue. Adjusted Community Net Operating Income and Adjusted Community Net Operating Income Margin are further adjusted to exclude the impact from non-recurring state grant funds received.

The Company believes that presentation of Community Net Operating Income, Community Net Operating Income Margin, Adjusted Community Net Operating Income, and Adjusted Community Net Operating Income Margin as performance measures are useful to investors because (i) they are one of the metrics used by the Company’s management to evaluate the performance of our core consolidated owed portfolio of communities, to review the Company’s comparable historic and prospective core operating performance of the consolidated owned communities, and to make day-to-day operating decisions; (ii) they provide an assessment of operational factors that management can impact in the short-term, namely revenues and the controllable cost structure of the organization, by eliminating items related to the Company’s financing and capital structure and other items that management does not consider as part of the Company’s underlying core operating performance, and impacts the comparability of performance between periods.

Community Net Operating Income, Net Community Operating Income Margin, Adjusted Community Net Operating Income, and Adjusted Community Net Operating Income Margin have material limitations as a performance measure, including: (i) excluded general and administrative expenses are necessary to operate the Company and oversee its communities; (ii) excluded interest is necessary to operate the Company’s business under its current financing and capital structure; (iii) excluded depreciation, amortization, and impairment charges may represent the wear and tear and/or reduction in value of the Company’s communities, and other assets and may be indicative of future needs for capital expenditures; and (iv) the Company may incur income/expense similar to those for which adjustments are made, such as gain (loss) on debt extinguishment, gain(loss) on disposition of assets, loss on settlements, non-cash stock-based compensation expense, and transaction and other costs, and such income/expense may significantly affect the Company’s operating results.

SAME-STORE NET OPERATING INCOME AND SAME-STORE NET OPERATING INCOME MARGIN (UNAUDITED)

Same-Store Net Operating Income and Same-Store Net Operating Income Margin are non-GAAP performance measures for the Company’s portfolio of 61 owned continuing communities that the Company defines as net income (loss) excluding: general and administrative expenses, interest income, interest expense, other income/expense, provision for income taxes, settlement fees and expenses, and further adjusted to exclude income/expense associated with non-cash, non-operational, transactional, or organizational restructuring items that management does not consider as part of the Company’s underlying core operating performance and that management believes impact the comparability of performance between periods. For the periods presented herein, such other items include stock-based compensation expense, depreciation and amortization expense, long-lived asset impairment, gain on extinguishment of debt, loss from equity method investment, and other income (expense), net.

The Company believes that presentation of Same-Store Net Operating Income and Same-Store Net Operating Income Margin as performance measures are useful to investors because (i) they are one of the metrics used by the Company’s management to evaluate the performance of our core portfolio of 61 owned continuing communities, to review the Company’s comparable historic and prospective core operating performance of the 61 owned continuing communities, and to make day-to-day operating decisions; (ii) they provide an assessment of operational factors that management can impact in the short-term, namely revenues and the controllable cost structure of the organization, by eliminating items related to the Company’s financing and capital structure and other items that management does not consider as part of the Company’s underlying core operating performance, and that management believes impact the comparability of performance between periods.

Same-Store Net Operating Income and Same-Store Net Operating Income Margin have material limitations as a performance measure, including: (i) excluded interest is necessary to operate the Company’s business under its current financing and capital structure; (ii) excluded depreciation, amortization and impairment charges may represent the wear and tear and/or reduction in value of the Company’s communities, and other assets and may be indicative of future needs for capital expenditures; and (iii) the Company may incur income/expense similar to those for which adjustments are made, such as gain(loss) on sale of assets, gain(loss) debt extinguishment, loss on equity method investment, non-cash stock-based compensation expense, and transaction and other costs, and such income/expense may significantly affect the Company’s operating results.

ADJUSTED EBITDA (UNAUDITED)

Adjusted EBITDA is a non-GAAP performance measures that the Company defines as net income (loss) excluding: depreciation and amortization expense, interest income, interest expense, other expense/income, provision for income taxes; and further adjusted to exclude income/expense associated with non-cash, non-operational, transactional, or organizational restructuring items that management does not consider as part of the Company’s underlying core operating performance and impacts the comparability of performance between periods. For the periods presented herein, such other items include stock-based compensation expense, provision for bad debts, gain on extinguishment of debt, gain on sale of assets, long-lived asset impairment, casualty losses, and transaction and conversion costs.

The Company believes that presentation of Adjusted EBITDA’s impact as a performance measure is useful to investors because it provides an assessment of operational factors that management can impact in the short-term, namely revenues and the controllable cost structure of the organization, by eliminating items related to the Company’s financing and capital structure and other items that management does not consider as part of the Company’s underlying core operating performance and that management believes impact the comparability of performance between periods.

Adjusted EBITDA has material limitations as a performance measure, including: (i) excluded interest is necessary to operate the Company’s business under its current financing and capital structure; (ii) excluded depreciation, amortization and impairment charges may represent the wear and tear and/or reduction in value of the Company’s communities and other assets and may be indicative of future needs for capital expenditures; and (iii) the Company may incur income/expense similar to those for which adjustments are made, such as bad debts, gain(loss) on sale of assets, or gain on debt extinguishment, non-cash stock-based compensation expense and transaction and other costs, and such income/expense may significantly affect the Company’s operating results.

 

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Contacts

Jason Finkelstein
Ignition Investor Relations
[email protected]