Dr. Michael Guerriere reports

EXTENDICARE ANNOUNCES 2023 SECOND QUARTER RESULTS

Extendicare Inc. has released results for the three and six months ended June 30, 2023.

Second quarter highlights:

• Home health care volume growth continued, with Q2 average daily volume (ADV) of 27,102, an increase of 4.1 per cent from first quarter 2023 and 7.7 per cent from Q2 2022.
• Long-term-care (LTC) occupancy continued to recover, improving to 97.2 per cent, an increase of 60 basis points from Q1 2023 and 470 bps from Q2 2022.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) declined by $3.3-million to $14.8-million. Removing one-time items from Q2 2022 of workers compensation rebates of $3.9-million and a recovery of COVID-19 costs of $600,000, adjusted EBITDA increased $1.2 million, reflecting higher home health care ADV and rate increases, partially offset by cost increases in excess of financing in LTC operations and higher administrative costs.
• Construction commenced on a new 256-bed LTC home to replace a 172-bed Class C home in Peterborough, Ont.

Subsequent events:

• Revera transactions closed on Aug. 1, 2023, adding 56 LTC homes and approximately 7,000 beds to its Extendicare Assist and SGP Purchasing Partner Network managed service portfolio.
• The Axium transaction received regulatory approval and is anticipated to close in third quarter 2023, subject to customary closing conditions.

"The close of the Revera transactions significantly advances Extendicare's strategy to focus on LTC and home health care using a less-capital-intensive, higher-margin business model," said Dr. Michael Guerriere, president and chief executive officer. "The addition of 56 homes to our managed services segment adds scale and expertise to Extendicare as we enhance delivery of the high-quality care that Canada's seniors deserve.

"We are encouraged by the continued growth in our home health care segment, enabled by improvements in staff recruiting and retention," added Dr. Guerriere. "We are still adapting our LTC operations to the end of COVID-19 prevention and containment funding, primarily by reducing the use of higher-cost agency staff. This, together with elevated costs stemming from inflationary pressures and rate increases that lag inflation, is putting pressure on LTC margins."

Strategic transactions with Revera and Axium

The company closed the previously announced Revera transactions on Aug. 1, 2023, which added 56 LTC homes and approximately 7,000 beds to its higher-margin managed service segment. The total aggregate cash consideration was approximately $32.6-million, net of holdbacks, plus assumption of approximately $37.1-million in debt (Extendicare's share of joint venture debt).

Subsequent to quarter-end, regulatory approval was also received for the previously announced transaction with Axium to form a joint venture, Axium Extendicare LTC LP, to redevelop certain of Extendicare's Class C LTC homes. Extendicare and Axium amended the previously announced purchase and sale agreement to include a 256-bed Peterborough LTC redevelopment project that commenced construction in May, 2023, increasing the total number of homes and beds to be acquired by the limited partnership to four Class C home redevelopment projects comprising an aggregate of 960 financed LTC beds currently under construction in Sudbury, Kingston, Stittsville and Peterborough, Ont. The Axium transaction is anticipated to close in Q3 2023, subject to customary closing conditions. Axium will own an 85-per-cent interest in the joint venture with Extendicare retaining a 15-per-cent managed interest. The company will continue to undertake all development activities in respect of the joint venture homes and will provide managed services to operate the homes upon completion of construction.

Commitment to redevelopment in Ontario

Extendicare commenced construction of its new Peterborough 256-bed LTC home during Q2 2023. Together with its Sudbury, Kingston and Stittsville projects, these four homes will replace 834 Class C LTC beds with 960 new beds at an estimated net investment of $281.1-million.

It is targeting to start an additional project in 2023 under the enhanced capital funding subsidy that is in place until Aug. 31, 2023. While enhancements to the capital funding subsidies beyond August, 2023, have not been announced, it continues to advance the balance of its redevelopment portfolio to be ready to make use of any future enhancements to the capital funding program that may be made available, including one additional project that could be ready to start construction in 2023, subject to construction tender results and regulatory and municipal approvals.

Home health care volume growth

In the second quarter, it saw growth in ADV and margin recovery, demonstrating continued strong demand for services and its growing capacity, as pandemic impacts on the labour market moderate. ADV in the second quarter was 27,102, marking a 4.1-per-cent increase relative to Q1 2023 and up 7.7 per cent from Q2 2022.

The investments it has made in recruiting and retention programs and technology are expected to support continued growth of its home health care segment in the near term and beyond. As pandemic impacts subside, it expects the historical seasonality in its ADV and staffing levels to return, with its third quarter typically experiencing a drop in sequential ADV as vacations temporarily lower staffing capacity and certain client programs are suspended during the summer months.

Select financial information

The attached table is a summary of the company's consolidated financial information for the three and six months ended June 30, 2023, and 2022.

Extendicare's disclosure documents, including its management's discussion and analysis, may be found on SEDAR+'s website under the company's issuer profile and on the company's website under the investors/financial reports section.

August dividend declared

The board of directors of Extendicare today declared a cash dividend of four cents per share for the month of August, 2023, which is payable on Sept. 15, 2023, to shareholders of record at the close of business on Aug. 31, 2023. This dividend is designated as an eligible dividend within the meaning of the Income Tax Act (Canada).

Conference call and webcast

On Aug. 11, 2023, at 11:30 a.m. ET, Extendicare will hold a conference call to discuss its first quarter 2023 results. The call will be webcast live and archived on-line at the Extendicare website under the investors/events and presentations section. Alternatively, the call-in number is 1-800-319-4610 or 416-915-3239. A replay of the call will be available approximately two hours after completion of the live call until midnight on Aug. 25, 2023. To listen to the rebroadcast, dial 1-800-319-6413 followed by the passcode 0291 followed by the number sign.

About Extendicare Inc.

Extendicare is a leading provider of care and services for seniors across Canada, operating under the Extendicare, ParaMed, Extendicare Assist and SGP brands. It is committed to delivering quality care throughout the health continuum to meet the needs of a growing seniors population. It operates or provides managed services to a network of 126 long-term-care homes and retirement communities (53 owned/73 managed services), provides approximately 9.5 million hours of home health care services annually, and provides group purchasing services to third parties, representing approximately 122,785 beds across Canada. Extendicare proudly employs approximately 22,000 qualified, highly trained and dedicated individuals who are passionate about providing high-quality care and services to help people live better.

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