Sonida Senior Living, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter results filing. Sonida owned and operated 61 senior housing communities and managed 10 others across 18 states, with capacity for approximately 8,000 residents.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $255.3 million | $238.4 million |
| Resident revenue | $232.0 million | $208.7 million |
| Net loss | $21.1 million | $54.4 million |
| Operating cash flow | $10.7 million | $(2.6) million |
| Capital expenditures | $17.9 million | $24.6 million |
| Cash and cash equivalents at year-end | $4.1 million | $16.9 million |
| Debt, before deferred loan costs | $633.8 million | $676.3 million |
- Resident revenue rose 11.2%, primarily from higher occupancy and rental rates. For communities owned in both years, weighted-average occupancy increased to 84.6% from 83.0%, and average monthly rent was 9.6% higher.
- Total expenses were $276.5 million. Operating expenses were $177.3 million; labor costs in the consolidated community portfolio increased $7.2 million, or 6.9%.
- Interest expense increased 9.4% to $36.1 million. Year-end debt included $137.3 million of variable-rate debt; all variable-rate debt was covered by interest-rate caps.
- Net loss narrowed, but results included a $36.3 million gain on debt extinguishment. In 2022, other income included $9.1 million of federal Provider Relief Fund grants. These unusual items limit the comparability of reported losses.
- Cash, cash equivalents and restricted cash totaled $17.8 million at year-end, of which $13.7 million was restricted. Cash and cash equivalents alone were $4.1 million.
Material changes and financing developments
- Fannie Mae modified loans covering 37 communities: certain maturities were extended to December 2026, scheduled principal payments were suspended under specified terms, and interest was reduced and deferred during an abatement period. A further $5.0 million principal payment was due June 1, 2024; the agreements also include guarantees and cash-escrow requirements.
- Ally Bank waived the former $13.0 million liquid-assets minimum for a limited period, subject to a temporary $6.0 million threshold and potential excess-cash sweeps if breached. The company also had to maintain interest-rate-cap reserves.
- At December 31, 2023, Sonida was in default on three Protective Life mortgages. On February 2, 2024, it purchased all seven Protective Life loans, with $74.4 million outstanding principal, for $40.2 million; Ally provided $24.8 million of additional financing. The filing says debt was reduced by $49.6 million by the filing date.
- A 2023 equity commitment from Conversant totaled $13.5 million; Sonida drew $10.0 million, leaving $3.5 million available at year-end.
- In February and March 2024, the company issued 5,026,318 shares at $9.50 per share for approximately $47.8 million gross proceeds. Part funded the Protective Life loan purchase; remaining proceeds were intended for capital spending, working capital, acquisitions and general corporate purposes.
Outlook, risks and unusual items
- Management reported that 2023 operating losses and working-capital deficits raised substantial doubt about the company’s ability to continue as a going concern. After occupancy gains, March 2024 rent increases, the private placement and the Protective Life loan purchase, management concluded it had adequate cash to meet obligations for 12 months after issuance of the financial statements.
- Management expects continued labor-cost and inflationary pressure in 2024, including pressure from higher wages, premium labor and increased staffing needs as occupancy grows. It also cited planned continued community investment and growth initiatives; the filing does not provide quantified earnings or revenue guidance.
- Internal control over financial reporting and disclosure controls were deemed ineffective at year-end because of a continuing material weakness in the financial close and revenue transaction processes, linked in part to accounting staffing challenges. Management expects remediation by the end of 2024.
- Other key risks include substantial debt and refinancing needs, covenant and cross-default exposure, interest rates, competition, resident affordability and attrition, staffing, regulation, insurance costs, cybersecurity, and geographic concentration. Approximately 89.6% of 2023 resident revenue was from private-pay sources.
- Sonida recorded a $6.0 million non-cash impairment charge for one owned community, versus $1.6 million in 2022. It also recorded $2.9 million of state COVID-related relief funds as resident revenue in 2023; direct COVID-related costs were approximately $0.1 million.
- Series A preferred stock carries an 11% cumulative annual dividend. Undeclared 2023 dividends of approximately $5.0 million were added to its liquidation preference, bringing the year-end carrying amount to $48.5 million.
Important facts for investors to verify
- Post-filing liquidity, cash balances, and compliance with the Fannie Mae and Ally minimum-liquidity, escrow, and repayment terms.
- Whether the Protective Life loan purchase and related Ally financing were completed as described, and the resulting debt, collateral and debt-service obligations.
- Occupancy, rent growth and labor-cost trends, including whether rate increases can offset wage and other expense inflation.
- Progress toward remediating the material weakness and improving the financial reporting close and revenue controls.
- The terms, remaining availability and dilution effects of equity financing, including the 2024 private placement and Series A preferred stock obligations.