AlerisLife : Announces Fourth Quarter and Year End 2021 Results – Form 8-K – marketscreener.com

02/24/2022 | 06:14am EST

AlerisLife Inc. Announces Fourth Quarter and Year End 2021 Results

210 Basis Point Growth in Sequential Quarter Average Occupancy for Owned Communities

150 Basis Point Growth in Sequential Quarter Average Occupancy for Managed Communities

Completed Company Rebrand to AlerisLife

$95.0 million Term Loan Closed Subsequent to Year End Further Enhances Liquidity

Newton, MA (February 23, 2022): AlerisLife Inc. (Nasdaq: ALR) today announced its financial results for the three months ended December 31, 2021.

Katherine Potter, President and Chief Executive Officer, made the following statement:

“We achieved several strategic milestones during and subsequent to the end of the fourth quarter, including rebranding ourselves as AlerisLife and announcing strategic collaborations and partnerships to enhance our resident experience and expand our lifestyle services offering. We also enhanced our leadership team with the addition of a new Chief People Officer and a new Chief Customer Officer, and we hope to leverage their experience to further expand our services and customer base.

During the fourth quarter, average occupancy for the 20 senior living communities owned by AlerisLife increased 210 basis points from the third quarter. Average occupancy for the 120 comparable community managed portfolio increased 70 basis points from the third quarter. We believe the disruption associated with transitioning management of certain communities owned by Diversified Healthcare Trust is now behind us and we continue to see a sustained improvement in macroeconomic fundamentals. As a result, we remain focused on optimizing our core competencies, including continuing to deliver an exceptional and enhanced resident experience to senior living and active adult residents, while also offering lifestyle services to choice-based consumers.

We remain well capitalized to continue executing our strategic transformation, as we ended the year with unrestricted cash and cash equivalents of $67.0 million. Additionally, subsequent to quarter end, we closed on a $95.0 million term loan, $63.0 million of which was immediately outstanding. This loan not only enhanced our liquidity and flexibility, but gives us additional capital to pursue the development and expansion of our lifestyle services offering.”

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Fourth Quarter Summary of Financial Results:

•Net loss for the fourth quarter of 2021 was $10.7 million, or $0.34 per share, which included $2.3 million of expenses in connection with the Reposition phase of the strategic plan announced on April 9, 2021, or the Strategic Plan, partially offset by $1.0 million reimbursed by Diversified Healthcare Trust, or DHC, compared to net income of $2.9 million, or $0.09 per share, for the fourth quarter of 2020.

•Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the fourth quarter of 2021 was $(7.5) million compared to $5.8 million for the fourth quarter of 2020. Adjusted EBITDA, as described further below, was $(6.4) million for the fourth quarter of 2021 compared to $5.2 million for the fourth quarter of 2020.

•EBITDA and Adjusted EBITDA are non-GAAP financial measures. Reconciliations of net loss determined in accordance with GAAP to EBITDA and Adjusted EBITDA for the fourth quarter of 2021 and 2020 are presented later in this press release.

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

As of and for the Three Months Ended
December 31, 2021 September 30, 2021 December 31, 2020
Five Star
Residential Segment:
Month End Occupancy
Owned and Leased 72.7 % 72.9 % 69.7 %
Managed 74.8 % 73.8 % 70.8 %

Comparable Communities (1)

Month End Occupancy
Owned 72.7 % 72.9 % 70.2 %
Managed 75.2 % 74.6 % 74.2 %

Operating Margin (2)

Owned (25.2) % (5.1) % (20.6) %
Managed 3.5 % 7.1 % 11.1 %
As of and for the Three Months Ended
December 31, 2021 September 30, 2021 December 31, 2020
Ageility:
Lifestyle Services Segment:
Number of Clinics

Inpatient (3)

10 10 37
Outpatient 205 223 207
Number of Visits (in thousands)

Inpatient (3)

21 20 76
Outpatient 148 147 150

Comparable Clinics (4)

Average revenue per clinic (in thousands) $ 69.2 $ 69.3 $ 72.1

Operating margin (3)

9.1 % 10.2 % 13.2 %

_______________________________________

(1) Comparable communities provides data for 20 owned senior living communities and 120 managed senior living communities that ALR continuously owned or managed and operated through its brand Five Star since October 1, 2020, exclusive of 107 senior living communities with approximately 7,400 living units that ALR previously managed for DHC that were transitioned to new operators in 2021 and one senior living community with approximately 100 living units that ALR managed for DHC that was closed in February 2022, and exclusive of 1,532 skilled nursing facility, or SNF, units that have been closed and are in the process of being repositioned in 27

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Continuing Care Retirement Communities, or CCRCs, that ALR will continue to manage. See “Strategic Plan Update” below for an update on the progress made with respect to the Strategic Plan. Comparable communities also excludes four leased communities with approximately 200 living units previously leased from HealthPeak. The lease with HealthPeak was terminated on September 30, 2021.

(2) Operating margin is defined as operating revenue less operating expenses for the business unit divided by operating revenue. 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 income. It is inclusive of 1,532 SNF units, which have been closed and are in the process of being repositioned, in 27 CCRCs that ALR will continue to manage. In addition, it excludes restructuring expenses for the three months ended December 31, 2021 of $0.3 million and for the three months ended September 30, 2021 of $0.2 million for the comparable managed communities.

(3) All inpatient rehabilitation clinics will be closed as part of the Strategic Plan. During the three months ended June 30, 2021, 27 inpatient clinics were closed as part of the Strategic Plan. There were no inpatient clinics closed during the six months ended December 31, 2021.

(4) Comparable clinics includes financial data for 183 outpatient rehabilitation clinics that ALR continuously operated since October 1, 2020 and excludes data for 27 inpatient rehabilitation clinics that were closed during the three months ended June 30, 2021 and an additional ten inpatient rehabilitation clinics that are expected to be closed per the Strategic Plan commencing in August 2022. In addition, comparable clinics also excludes 17 outpatient rehabilitation clinics that were closed in December 2021 in senior living communities that were transitioned to a new operator in 2021 or closed in February 2022.

Company Rebrand and Name Change

On January 25, 2022, ALR changed its name from Five Star Senior Living Inc. to AlerisLife Inc. Aleris, a Latin word meaning “to foster, nourish and develop,” represents our expansion from primarily a senior living owner and operator to a more diversified and comprehensive partner, which aims to offer each of ALR’s customers choice-based services regardless of their residential location or age.

Term Loan

On January 27, 2022, ALR entered into a credit and security agreement, or the Credit Agreement, and closed on a $95.0 million senior secured term loan, or the Loan, $63.0 million of which was funded upon the effectiveness of the Credit Agreement, including approximately $3.2 million in closing costs. The remaining proceeds include $12.0 million for capital improvements and an opportunity for another $20.0 million that is available to us upon achieving certain financial thresholds. The maturity date of the Loan is January 27, 2025. Subject to the payment of an extension fee and meeting certain other conditions, ALR may elect to extend the stated maturity date of the Loan for two one-year periods. ALR is required to pay interest on outstanding amounts at a base rate of the Secured Overnight Financing Rate, or SOFR (subject to a minimum base rate of 50 basis points), plus 450 basis points.

Strategic Plan Update

On April 9, 2021, ALR announced the Strategic Plan, including to:

•Reposition ALR’s senior living management service offering to focus on larger independent living and assisted living as well as active adult communities, and exit skilled nursing by transitioning 108 senior living communities to new operators and closing approximately 1,500 SNF living units in retained CCRCs;

•Evolve through investment in an enhanced scalable corporate shared service center to support operations and growth and to deliver differentiated, customer focused senior living resident experiences across a segmented portfolio of communities; and

•Diversify with a focus on revenue diversification opportunities, including growing ALR’s rehabilitation services and expanding lifestyle services to provide a choice based, financially flexible senior living resident experience and reach customers outside of senior living communities.

At December 31, 2021, ALR changed the name of its segments to better describe the business and operations of those segments. The segment formerly known as senior living is now known as residential and the segment formerly known as rehabilitation and wellness services is now known as lifestyle services. There were no changes in the composition of the segments.

During and subsequent to the year ended December 31, 2021, ALR made the following progress with respect to the Reposition phase of the Strategic Plan:

1.Amended the management arrangements with DHC on June 9, 2021,

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2.Transitioned the management of 107 senior living communities with approximately 7,400 living units to new operators, of which 38 communities with approximately 2,600 living units were transitioned during the three months ended December 31, 2021, and closed one senior living community with approximately 100 living units in February 2022,

3.Closed all 1,532 SNF living units in 27 managed CCRCs and began collaborating with DHC to reposition these SNF units,

4.Closed 27 of the 37 planned Ageility inpatient rehabilitation clinics, and

5.For the remaining ten Ageility inpatient rehabilitation clinics, entered into agreements with the new operators to continue to provide these services through August 2022.

In connection with the Reposition phase of the Strategic Plan, 36.6% of positions were transitioned or eliminated in the residential segment, 10.8% in the lifestyle services segment and 27.9% in corporate resulting in restructuring expenses of $2.3 million recorded in the three months ended December 31, 2021, of which $1.0 million was reimbursed by DHC. In addition, ALR expects to realize expense reductions associated with these roles, including insurance and information technology license subscriptions.

During and subsequent to the year ended December 31, 2021, ALR made the following progress with respect to the Evolve phase of the Strategic Plan:

1.Completed enhancements to the corporate technology infrastructure,

2.Invested in critical areas of the residential experience at Five Star senior living communities, including community wireless connectivity, resident transportation services and re-designed senior living community common areas and resident units, deploying $11.7 million and $103.4 million of capital in the owned and managed communities, respectively,

3.Invested in digital marketing infrastructure to effectively reduce cost per digital lead by approximately 70.0%,

4.Entered into a culinary services partnership with Compass Group to transform the senior living resident dining experience,

5.Entered into a collaboration with Dispatch Health to enable senior living resident access to ambulatory care services in their community,

6.Standardized certain administrative functions through centralization efforts to enhance operating efficiency, and

7.Subsequent to year end, hired a Chief People Officer and a Chief Customer Officer.

During the year ended December 31, 2021, ALR made the following progress with respect to the Diversify phase of the Strategic Plan:

1.Opened 15 net new Ageility outpatient rehabilitation clinics, exclusive of the closure of 17 Ageility outpatient rehabilitation clinics in December 2021 in Five Star senior living communities that were transitioned to new operators in 2021 or closed in February 2022, bringing the Ageility outpatient rehabilitation clinic total to 205, as of December 31, 2021, and

2.Grew Ageility fitness revenues to $3.3 million or a 38.1% increase over the same period in 2020.

Following the completion of the Reposition phase of the Strategic Plan, ALR continues to manage 120 senior living communities for DHC, representing 17,899 living units and approximately 96.2% of ALR’s residential management fees for the three months ended December 31, 2021, and ALR continues to own 20 senior living communities with 2,100 living units.

Presented below is a summary of the units owned and managed by ALR as of December 31, 2021 following the completion of the Reposition phase of the Strategic Plan:

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Total Units (1)

Independent living 10,423
Assisted living 7,715
Memory care 1,861
Total 19,999

_______________________________________

(1) The units operated as of December 31, 2021 include 20 Five Star senior living communities that are owned by ALR and 120 Five Star senior living communities managed by ALR for DHC and excludes 107 Five Star senior living communities with approximately 7,400 living units that ALR previously managed for DHC that were transitioned to new operators during the year ended December 31, 2021 and one senior living community with approximately 100 living units that was closed in February 2022.

Presented below is a summary of the communities, units, average occupancy, month 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 December 31, 2021 after the completion of the Reposition phase of the Strategic Plan (dollars in thousands):

Total
Communities Units Average Occupancy Month End Occupancy

Community Revenues (1)

Management Fees (2)

Independent and assisted living communities (3)

120 17,899 74.1% 75.2% $ 155,729 $ 9,121
Total 120 17,899 74.1% 75.2% $ 155,729 $ 9,121

_______________________________________

(1) Represents the revenues of the Five Star senior living communities ALR managed for DHC. 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.

(2) Excludes residential management fees of $361 for the three months ended December 31, 2021 for the 38 senior living communities with approximately 2,600 living units that were transitioned to new operators during the three months ended December 31, 2021 and one senior living community with approximately 100 living units that was closed in February 2022.

(3) Excludes one CCRC with approximately 100 living units that was closed in February 2022.

Presented below is a summary of the Ageility rehabilitation clinics ALR operated as of and for the three months ended December 31, 2021 and the number of clinics to be operated after the implementation of the Reposition phase of the Strategic Plan (dollars in thousands):

As of and for the

Three Months Ended December 31, 2021
Retained
Number of Clinics

Total Revenue (3)

Average Revenue per Clinic

Adjusted EBITDA Margin(5)

Number of Clinics

Total Revenue (1)(3)

Average Revenue per Clinic

Adjusted EBITDA Margin(5)

Inpatient Clinics in DHC Communities 10 $ 1,654 $ 165 28.1% $ $ -%
Outpatient Clinics in DHC Communities 91 8,030 88 10.9% 91 8,030 88 10.9%

Outpatient Clinics in Transitioned Communities(2)

28 1,613 58 8.9% 28 1,293 46 14.7%
Total Clinics at DHC Communities 129 11,297 88 13.1% 119 9,323 78 11.5%
Outpatient Clinics at ALR Owned Communities 15 845 56 8.4% 15 845 56 8.4%

Outpatient Clinics at Other Communities (4)

71 3,249 46 2.9% 71 3,233 46 3.3%
Total Clinics 215 $ 15,391 $ 72 10.7% 205 $ 13,401 $ 65 9.3%

_______________________________________

(1) Excludes revenue of $1,654 earned during the three months ended December 31, 2021 for ten Ageility inpatient rehabilitation clinics, which are expected to be closed commencing in August 2022 as part of the Strategic Plan, revenues of $320 earned during the three months ended December 31, 2021 for 17 Ageility outpatient rehabilitation clinics that were closed in December 2021 in Five Star senior living communities that were transitioned in 2021 or closed in February 2022, and revenues of $16 earned during the three months ended December 31, 2021 for three Ageility outpatient rehabilitation clinics that were closed during the three months ended December 31, 2021.

(2) As part of the Strategic Plan, 107 Five Star senior living communities managed for DHC were transitioned to new operators in 2021 and one senior living community was closed in February 2022. These transitioned communities had 45 Ageility outpatient rehabilitation clinics. As of December 31, 2021 Ageility continues to operate 28 of these clinics. The remaining 17 clinics were closed in December 2021 in senior living communities that were transitioned to new operators in 2021 or closed in February 2022.

(3) Total Ageility revenue excludes home healthcare services, which are a part of the lifestyle services segment.

(4) Other communities includes outpatient rehabilitation clinics at senior living communities not owned or managed by ALR.

(5) Adjusted EBITDA Margin is a non-GAAP financial measure. A reconciliation of operating margin to Adjusted EBITDA Margin is presented later in this press release.

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ALR currently expects to continue to diversify revenue through growth of its lifestyle service offerings, including opening new outpatient rehabilitation clinics and expanding its fitness and other home-based service offerings within and outside of Five Star senior living communities. Fitness offerings started as an extension of Ageility’s outpatient rehabilitation services and, while representing only 5.7% of segment revenues for the three months ended December 31, 2021, fitness revenues increased to $0.9 million or 30.7% when compared to the same period in 2020, representing 3.4% of segment revenue. Since January 1, 2020, Ageility has opened 32 net new outpatient rehabilitation clinics, 17 of which were opened in 2020, and 15 of which were opened during the year ended December 31, 2021 (exclusive of the 17 outpatient rehabilitation clinics that were closed in December 2021 in senior living communities that were transitioned in 2021 or closed in February 2022).

Conference Call Information:

At 1:00 p.m. Eastern Time on February 24, 2022, ALR’s President and Chief Executive Officer, Katherine Potter, and Executive Vice President, Chief Financial Officer and Treasurer, Jeffrey Leer, will host a conference call to discuss ALR’s fourth quarter 2021 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 March 3, 2022. To hear the replay, dial (412) 317-0088. The replay pass code is 1968786.

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’sfourth quarter endedDecember 31, 2021financial results conference callarestrictly 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 and active adult 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.

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AlerisLife Inc.

Condensed Consolidated Statements of Operations

(amounts in thousands, except per share amounts)

(unaudited)

Three Months Ended December 31, Year Ended December 31,
2021 2020 2021 2020
REVENUES
Lifestyle services $ 15,626 $ 20,256 $ 68,014 $ 82,032
Residential 14,883 17,903 64,638 77,015
Residential management fees 9,482 14,822 47,479 62,880
Total management and operating revenues 39,991 52,981 180,131 221,927
Reimbursed community-level costs incurred on behalf of managed communities 137,195 226,264 722,857 916,167
Other reimbursed expenses 3,855 6,645 31,605 25,648
Total revenues 181,041 285,890 934,593 1,163,742
Other operating income 1,936 7,795 3,435
OPERATING EXPENSES
Lifestyle services expenses 13,908 16,492 59,322 66,853
Residential wages and benefits 8,514 11,186 38,970 41,819
Other residential operating expenses 7,893 7,870 30,311 28,116
Community-level costs incurred on behalf of managed communities 137,195 226,264 722,857 916,167
General and administrative 18,762 20,784 85,718 85,835
Restructuring expenses 2,337 36 19,196 1,448
Depreciation and amortization 2,961 2,913 11,873 10,997
Total operating expenses 191,570 285,545 968,247 1,151,235
Operating (loss) income (10,529) 2,281 (25,859) 15,942
Interest, dividend and other income 114 132 358 757
Interest and other expense (304) (461) (1,683) (1,631)
Unrealized gain on equity investments 175 640 730 480
Realized gain on sale of debt and equity investments 25 3 218 425
Loss on termination of leases (1) (3,278) (22,899)
(Loss) Income before income taxes and equity in losses of an investee (10,520) 2,595 (29,514) (6,926)
(Provision) benefit for income taxes (40) 308 (234) (663)
Equity in losses of an investee (177) (177)
Net (loss) income $ (10,737) $ 2,903 $ (29,925) $ (7,589)
Weighted average shares outstanding-basic 31,662 31,495 31,591 31,471
Weighted average shares outstanding-diluted 31,662 31,612 31,591 31,471
Net loss per share-basic $ (0.34) $ 0.09 $ (0.95) $ (0.24)
Net loss per share-diluted $ (0.34) $ 0.09 $ (0.95) $ (0.24)

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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 U.S. generally accepted accounting principles, or 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. These non-GAAP financial measures may also help investors make comparisons between ALR and other companies on both a GAAP and non-GAAP basis. ALR believes that EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are meaningful financial measures that may help investors better understand its financial performance, including by allowing investors to compare ALR’s performance between periods and to the performance of other companies. ALR management uses EBITDA, Adjusted EBITDA and Adjusted EBITDA 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 and Adjusted EBITDA Margin as shown below. 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 and Adjusted EBITDA 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 months and year ended December 31, 2021 and 2020.

Three Months Ended December 31, Year Ended December 31,
2021 2020 2021 2020
Net (loss) income $ (10,737) $ 2,903 $ (29,925) $ (7,589)
Add (less):
Interest and other expense 304 461 1,683 1,631
Interest, dividend and other income (114) (132) (358) (757)
(Benefit) provision for income taxes 40 (308) 234 663
Depreciation and amortization 2,961 2,913 11,873 10,997
EBITDA (7,546) 5,837 (16,493) 4,945
Add (less):

Severance (1)

282

Litigation settlement (2)

2,473
Unrealized gain on equity investments (175) (640) (730) (480)

Loss on termination of leases (3)

1 3,278 22,899

Net restructuring expenses (4)

1,370 36 5,885 1,448

Long-lived asset impairment (5)

890
Adjusted EBITDA $ (6,350) $ 5,233 $ (7,170) $ 31,567

_______________________________________

(1) Costs incurred for the year ended December 31, 2020 represent those related to a reduction in workforce.

(2) Represents costs incurred related to the settlement of a lawsuit and is included in other residential operating expenses in ALR’s condensed consolidated statements of operations. The settlement was approved by the court, and paid by ALR, on May 12, 2021.

(3) For the 2021 periods, represents the lease termination expenses related to the termination of four leased communities on September 30, 2021 as well as the write off of certain assets at those communities. For the 2020 periods, represents the excess of the fair value of the ALR shares issued to DHC as of January 1, 2020 of $97,899, compared to the consideration of $75,000 paid by DHC as part of the transaction agreement to restructure ALR’s business arrangements with DHC, or the Restructuring Transactions.

(4) Includes costs incurred related to the Strategic Plan and the Restructuring Transactions for the three months and year ended December 31, 2021 and 2020, respectively, and are included in restructuring expenses in the Condensed Consolidated Statements of Operations, net of reimbursed expenses of $966 and $13,311 for the three months and year ended December 31, 2021, respectively, from DHC.

(5) Represents asset impairments related to one leased community that had a fire on April 4, 2021.

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AlerisLife Inc.

Reconciliation of Non-GAAP Financial Measures

(dollars in thousands)

(unaudited)

ALR believes that net income 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 for the three months ended December 31, 2021 for Ageility.

Three Months Ended December 31, 2021
Total Retained
Lifestyle services:

Revenue (1)

$ 15,626 $ 15,290
Less: Home health services 235 235

Less: Inpatient rehabilitation (2)

1,654

Total Ageility revenue (3)

$ 15,391 $ 13,401
Ageility:
Net income $ 1,515 $ 1,150
Add: Depreciation 113 88
EBITDA 1,628 1,238
Add: Restructuring expenses 22 8
Adjusted EBITDA $ 1,650 $ 1,246
Adjusted EBITDA Margin 10.7 % 9.3 %

_______________________________________

(1) Retained excludes revenues of $320 earned during the three months ended December 31, 2021 for 17 Ageility outpatient rehabilitation clinics that were closed in December 2021 in senior living communities that were transitioned to new operators in 2021 or closed in February 2022, and revenues of $16 earned during the three months ended December 31, 2021 for three Ageility outpatient rehabilitation clinics that were closed during the three months ended December 31, 2021.

(2) Retained excludes revenue for ten Ageility inpatient rehabilitation clinics that are expected to be closed commencing in August 2022 as part of the Strategic Plan.

(3) Total Ageility retained revenue includes revenue from outpatient rehabilitation clinics and fitness.

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AlerisLife Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share amounts)

(unaudited)

December 31, December 31,
2021 2020
ASSETS
Current assets:
Cash and cash equivalents $ 66,987 $ 84,351
Restricted cash and cash equivalents 24,970 23,877
Accounts receivable, net 9,244 9,104
Due from related person 41,664 96,357
Debt and equity investments, of which $7,609 and $11,125 are restricted, respectively 19,535 19,961
Prepaid expenses and other current assets 24,433 28,658
Total current assets 186,833 262,308
Property and equipment, net 159,843 159,251
Operating lease right-of-use assets 9,197 18,030
Finance lease right-of-use assets 3,467 4,493
Restricted cash and cash equivalents 982 1,369
Restricted debt and equity investments 3,873 4,788
Other long-term assets 12,082 3,967
Total assets $ 376,277 $ 454,206
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 37,516 $ 23,454
Accrued expenses and other current liabilities 31,488 42,208
Accrued compensation and benefits 34,295 70,543
Accrued self-insurance obligations 31,739 31,355
Operating lease liabilities 699 2,567
Finance lease liabilities 872 808
Due to related persons 3,879 6,585
Mortgage note payable 419 388
Total current liabilities 140,907 177,908
Long-term liabilities:
Accrued self-insurance obligations 34,744 37,420
Operating lease liabilities 9,366 17,104
Finance lease liabilities 3,050 3,921
Mortgage note payable 6,364 6,783
Other long-term liabilities 256 538
Total long-term liabilities 53,780 65,766
Commitments and contingencies
Shareholders’ equity:
Common stock, par value $0.01: 75,000,000 shares authorized, 32,662,649 and 31,679,207 shares issued and outstanding, respectively 327 317
Additional paid-in-capital 461,298 460,038
Accumulated deficit (281,064) (251,139)
Accumulated other comprehensive income 1,029 1,316
Total shareholders’ equity 181,590 210,532
Total liabilities and shareholders’ equity $ 376,277 $ 454,206

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AlerisLife Inc.

Residential Segment Data

(dollars in thousands, except per unit amounts)

(unaudited)

Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2021 2021 2021 2021 2020
Owned and Leased Senior Living Communities
Independent and assisted living communities:
Revenues $ 14,883 $ 16,320 $ 16,378 $ 17,057 $ 17,903

Other operating income (1)

2 7,774 1,715
Operating expenses 18,574 17,895 21,012 20,414 21,181
Operating (loss) income (3,691) (1,575) (4,632) 4,417 (1,563)
Operating margin (24.8) % (9.7) % (28.3) % 17.8 % (8.0) %
Number of communities (end of period) 20 20 24 24 24

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

2,100 2,099 2,251 2,302 2,302

Average occupancy

72.0 % 69.9 % 68.1 % 68.3 % 71.5 %
Month end occupancy 72.7 % 72.9 % 69.7 % 68.2 % 69.7 %

RevPAR (3)

$ 2,349 $ 2,411 $ 2,425 $ 2,479 $ 2,596

RevPOR (4)

$ 3,192 $ 3,375 $ 3,524 $ 3,630 $ 3,550

Managed Senior Living Communities(5)

Residential management fees $ 9,482 $ 11,220 $ 12,927 $ 13,850 $ 14,822
Community-level revenues 161,907 210,160 243,947 259,966 278,637

Other operating income (1)

602 786 16,564 1,617 12,520

Community-level expenses (6)

159,329 203,756 237,461 247,171 261,678
Community operating income 3,180 7,190 23,050 14,412 29,479
Community operating margin 2.0 % 3.4 % 8.8 % 5.5 % 10.1 %
Number of communities (end of period) 121 159 228 228 228

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

18,005 20,669 25,482 26,963 26,969
Average occupancy 73.7 % 72.2 % 69.5 % 69.5 % 72.2 %
Month end occupancy 74.8 % 73.8 % 71.3 % 70.2 % 70.8 %

RevPAR (3)

$ 2,919 $ 3,046 $ 3,086 $ 3,213 $ 3,355

RevPOR (4)

$ 3,875 $ 4,129 $ 4,389 $ 4,623 $ 4,543

_______________________________________

(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 period, divided by the number of months in the period. Data for the three months ended December 31, 2020, March 31, 2021, June 30, 2021, September 30, 2021 and December 31, 2021 exclude income received by 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 period, divided by the number of months in the period. Data for the three months ended December 31, 2020, March 31, 2021, June 30, 2021, September 30, 2021 and December 31, 2021 exclude income received by 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 December 31, 2021, September 30, 2021, and June 30, 2021 includes restructuring expense of $966, $813 and $11,531, respectively.

11

AlerisLife Inc.

Comparable Communities Residential Segment Data

(dollars in thousands, except per unit amounts)

(unaudited)

Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2021 2021 2021 2021 2020

Owned Senior Living Communities(1):

Number of communities (end of period) 20 20 20 20 20

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

2,100 2,099 2,099 2,099 2,098

Average occupancy

72.0 % 70.4 % 68.3 % 68.9 % 72.4 %
Month end occupancy 72.7 % 72.9 % 70.1 % 69.0 % 70.2 %

RevPAR (3)

$ 2,349 $ 2,354 $ 2,357 $ 2,421 $ 2,549

RevPOR (4)

$ 3,192 $ 3,270 $ 3,413 $ 3,515 $ 3,445

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)

17,899 17,899 17,898 17,906 17,910

Average occupancy

74.1 % 73.4 % 72.9 % 72.7 % 75.6 %
Month end occupancy 75.2 % 74.6 % 73.3 % 73.2 % 74.2 %

RevPAR (3)

$ 2,900 $ 2,941 $ 2,961 $ 2,946 $ 3,054

RevPOR (4)

$ 3,831 $ 3,922 $ 4,018 $ 4,051 $ 3,954

_______________________________________

(1) Includes data for Five Star senior living communities that ALR has continuously owned or managed since October 1, 2020. Per the Strategic Plan, the summary of operations for comparable communities excludes (i) 107 Five Star senior living communities managed for DHC with approximately 7,400 units that were transitioned to new operators during the six months ended December 31, 2021 and one senior living community with approximately 100 units that was closed in February 2022, and (ii) 1,532 SNF units in 27 CCRCs that were closed during the six months ended September 30, 2021 and are in the process of being repositioned that ALR will continue to manage for DHC. The leases for four communities with approximately 200 living units which were terminated on September 30, 2021 are also excluded from comparable communities.

(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 period, divided by the number of months in the period. Data for the three months ended December 31, 2020, March 31, 2021, June 30, 2021, September 30, 2021 and December 31, 2021 exclude income received by 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 period, divided by the number of months in the period. Data for the three months ended December 31, 2020, March 31, 2021, June 30, 2021, September 30, 2021 and December 31, 2021 exclude income received by 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.

12

AlerisLife Inc.

Lifestyle Services Segment Data

(dollars in thousands)

(unaudited)

Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2021 2021 2021 2021 2020

Lifestyle Services(1):

Revenues $ 15,626 $ 15,382 $ 17,453 $ 19,553 $ 20,256
Outpatient 12,848 12,747 13,688 13,098 13,449
Fitness 890 853 827 733 681
Other 1,888 1,782 2,938 5,722 6,126

Other operating income (2)

19 221

Operating expenses (3)

14,045 13,348 17,517 16,338 16,613
Operating (loss) income 1,581 2,034 (64) 3,234 3,864
Operating margin 10.1 % 13.2 % (0.4) % 16.5 % 18.9 %
Number of inpatient clinics (end of period) 10 10 10 37 37
Number of outpatient clinics (end of period) 205 223 218 215 207
Number of fitness locations (end of period) 60 61 43 42 14

_______________________________________

(1) Includes Ageility rehabilitation clinics and fitness operations as well as home healthcare operations.

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

(3) The three months ended December 31, 2021, September 30, 2021 and June 30, 2021 includes restructuring expenses of $23, $(310) and $1,720, respectively.

AlerisLife Inc.

Comparable Lifestyle Services Segment Data

(dollars in thousands)

(unaudited)

Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2021 2021 2021 2021 2020

Lifestyle Services(1):

Revenues $ 12,891 $ 12,952 $ 13,887 $ 13,200 $ 13,480
Outpatient 11,808 11,854 12,779 12,211 12,539
Fitness 849 824 800 708 659
Other 234 274 308 281 282

Other operating income (2)

20 44
Operating expenses 11,677 11,653 12,314 11,419 11,848
Operating income 1,214 1,299 1,573 1,801 1,676
Operating margin 9.4 % 10.0 % 11.3 % 13.6 % 12.4 %
Number of inpatient clinics (end of period)
Number of outpatient clinics (end of period) 183 183 183 183 183
Number of fitness locations (end of period) 52 58 40 40 14

_______________________________________

(1) Includes Ageility outpatient rehabilitation clinics and fitness operations as well as home healthcare operations. Comparable outpatient includes data for 183 outpatient rehabilitation clinics that ALR has continuously operated since October 1, 2020, exclusive of 27 inpatient rehabilitation clinics that were closed during the three months ended June 30, 2021 and an additional ten inpatient rehabilitation clinics that are expected to be closed commencing in August 2022 as part of the Strategic Plan. In addition, comparable clinics also excludes 17 Ageility outpatient rehabilitation clinics that were closed in December 2021 in senior living communities that were transitioned in 2021 or closed in February 2022.

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

13

AlerisLife Inc.

Owned Senior Living Communities as of and for the Three Months Ended December 31, 2021

(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)(5)

Alabama AL 49 $ 296 $ 7,307 $ 3,971 11/19/2004 2021
2

Morningside of Auburn (5)

Alabama AL 42 294 2,090 1,018 11/19/2004 1997
3

The Palms of Fort Myers (2)(5)

Florida IL 218 1,651 7,218 3,866 4/1/2002 1988
4

Five Star Residences of Banta Pointe (3)

Indiana AL 121 763 10,938 6,411 9/29/2011 2006
5

Five Star Residences of Fort Wayne (2)(5)

Indiana AL 154 998 9,077 5,689 9/29/2011 1998
6 Five Star Residences of Clearwater Indiana AL 88 356 14,182 9,028 6/1/2011 1999
7

Five Star Residences of Lafayette (2)

Indiana AL 109 502 11,719 7,558 6/1/2011 2000
8

Five Star Residences of Noblesville (2)(5)

Indiana AL 151 1,142 13,507 8,481 7/1/2011 2005
9

The Villa at Riverwood (2)(5)

Missouri IL 112 663 4,968 3,309 4/1/2002 1986
10

Voorhees Senior Living (2)(5)

New Jersey AL 104 907 19,607 13,372 7/1/2008 1999
11

Washington Township Senior Living (2)

New Jersey AL 93 815 26,170 17,321 7/1/2008 1998
12

Carriage House Senior Living (5)

North Carolina AL 98 949 9,869 5,330 12/1/2008 1997
13

Forest Heights Senior Living (5)

North Carolina AL 111 713 16,187 10,676 12/1/2008 1998
14

Fox Hollow Senior Living (2)(5)

North Carolina AL 77 1,000 25,554 17,262 7/1/2000 1999
15

Legacy Heights Senior Living (2)(5)

North Carolina AL 116 637 7,660 3,677 12/1/2008 1997
16

Morningside at Irving Park (5)

North Carolina AL 91 776 3,750 1,605 11/19/2004 1997
17 The Devon Senior Living Pennsylvania AL 84 500 32,667 15,129 7/1/2008 1985
18

The Legacy of Anderson (5)

South Carolina IL 101 567 10,953 6,395 12/1/2008 2003
19

Morningside of Springfield (2)(5)

Tennessee AL 54 431 18,579 11,636 11/19/2004 1984
20 Huntington Place Wisconsin AL 127 836 2,422 1,519 7/15/2010 1999
Total 2,100 $ 14,796 $ 254,424 $ 153,253

_______________________________________

(1) AL is primarily an assisted living community and IL is primarily an independent living community.

(2) Encumbered property under ALR’s $65,000 revolving credit facility, which was terminated on January 27, 2022.

(3) Encumbered property under ALR’s $6,783 mortgage note.

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

(5) Encumbered property under ALR’s $95,000 Loan which closed on January 27, 2022.

14

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 AlerisLife 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 actions that have occurred, the progress that has been made and steps that are expected to be taken in connection with the implementation and execution of ALR’s Strategic Plan and anticipated benefits related to the Strategic Plan. ALR may not be able to implement all or components of the Strategic Plan in a timely manner or at all, the costs of such initiatives may be more than it expects, it may not realize the benefits it anticipates from the Strategic Plan, and it may not be able to achieve its objectives following implementation and execution of the Strategic Plan.

•Ms. Potter states that ALR believes the disruption associated with community transitions is now behind it and sees sustained improvements in macroeconomic fundamentals. However, these trends may not continue and improvements could decline due to a variety of factors, including as a result of the COVID-19 pandemic. Moreover, ALR may not benefit to the extent it expects from these improvements even if they are sustained.

•Ms. Potter states that ALR is focused on optimizing its core competencies. However, ALR may not achieve the optimization it seeks and any optimization it may realize may not produce the benefits it expects.

•The outperformance of our retained portfolio realized for the quarter ending December 31, 2021 compared to the total DHC managed portfolio for that period may not be achieved in future periods.

•This press release states that ALR expects to continue to diversify revenue through expanding its outpatient rehabilitation business and growth of its other lifestyle services offerings including opening new outpatient rehabilitation clinics and expanding its fitness and other home-based service offerings within and outside Five Star senior living communities. ALR may not be able to achieve these objectives, including if its growth is adversely impacted by the COVID-19 pandemic, and if it does not have sufficient resources to fund the expansion or does not identify new opportunities to grow or diversify the business.

•Ms. Potter cites improvements to occupancy, which may imply that ALR will realize similar or better occupancies in future periods. However, ALR and the senior living industry have experienced occupancy challenges throughout the COVID-19 pandemic and that may continue. In addition, ALR’s business is subject to various risks, including changing trends and demands of older adults, competition and other risks, many of which are outside ALR’s control. As a result, ALR may not experience similar or better occupancies in future periods.

•Ms. Potter states that ALR is well capitalized, which may imply that it will maintain sufficient liquidity. However, as noted above, ALR’s business is subject to risks. In addition, some of ALR’s initiatives require capital investment and ALR has recently experienced operating losses and operating losses in the past. As a result, ALR may not maintain its current liquidity levels and its capitalization may decline.

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.

15

Contact:
Michael Kodesch, Director, Investor Relations

(617) 796-8245

16

Disclaimer

AlerisLife Inc. published this content on 24 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 February 2022 11:12:45 UTC.

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Analyst Recommendations on ALERISLIFE INC.

Financials (USD)

Sales 2021 940 M
Net income 2021 -23,5 M
Net Debt 2021
P/E ratio 2021 -3,68x
Yield 2021
Capitalization 86,4 M 86,4 M
Capi. / Sales 2021 0,09x
Capi. / Sales 2022 0,11x
Nbr of Employees 15 500
Free-Float 57,7%
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Technical analysis trends ALERISLIFE INC.

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Income Statement Evolution

Consensus

Sell

consensus flch

Buy

Mean consensus BUY
Number of Analysts 2
Last Close Price 2,72 $
Average target price 6,00 $
Spread / Average Target 121%

EPS Revisions

Managers and Directors

Katherine E. Potter President & Chief Executive Officer
Jeffrey C. Leer Chief Financial Officer, Treasurer & Executive VP
Adam David Portnoy Chairman & Co-Managing Director
Priti Jindal Medical Director
Barbara D. Gilmore Independent Director

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