Good day, and welcome to the Capital Senior Living Second Quarter 2021 Earnings Call Release Conference Call. Today's conference is being recorded. All statements today, which are not historical facts, may be deemed to be forward-looking statements within the meaning of the federal securities law. These statements are made as of today's date, and the company expressly disclaims any obligation to update these statements in the future. Actual results and performance may differ materially from forward-looking statements. Certain of these factors that could cause actual results to differ are detailed in the earnings release the company issued earlier today as well as in the reports the company files with the SEC from time to time, including the risk factors contained in the annual report on Form 10-K and quarterly reports on Form 10-Q. Please see today's press release for the full safe harbor statement, which may be found at the capitalsenior.com/investor-relations and was furnished in an 8-K filing this morning. Also, please note that during this call, the company will present non-GAAP financial measures. For a reconciliation of each non-GAAP measure from the most comparable GAAP measure, please also see today's press release. At this time, I would like to turn the call over to Capital Senior Living's President and CEO, Ms. Kimberly Lody.

Thank you, Doug. Good afternoon, and welcome to our second quarter 2021 earnings call. Joining me today are Brandon Ribar, our Chief Operating Officer; and Tiffany Dutton, our Senior Vice President of Accounting and Finance. As we continue to navigate the COVID-19 pandemic and the emergence of the Delta variant, the talented and dedicated teams at Capital Senior Living demonstrate not only their resilience but their grit and determination every single day to win the recovery despite doing so in an ever-changing and challenging operating environment. I'm pleased to report that with our July average monthly occupancy of 80.4%, we have now delivered 5 consecutive months of occupancy growth, a cumulative increase of 510 basis points from the pandemic low average monthly occupancy of 75.3% in February. July month-end spot occupancy was 81.8% and is a good indicator of continued upward momentum. Comparing sequential average quarterly occupancy by segment, from Q1 2021 to Q2 of 2021, which is the first full quarter of results since completing 3 sets of vaccination clinics in all of our communities, occupancy in our independent living units grew 170 basis points, occupancy in our assisted living units grew 290 basis points, and in our memory care units, occupancy increased 400 basis points. We believe this strong performance is attributed to the excellent care and strong value proposition provided to our residents every day by our community teams, along with the differentiated resident experiences we have recently implemented across the portfolio. We are pleased with this progress and believe we continue to outpace our industry peers in occupancy growth. In our portfolio of 60-owned communities, revenue for the second quarter increased sequentially by $1.3 million or 2.8% from the first quarter of this year. Net operating income for the 60-owned communities, which excludes management fees and includes real estate taxes and insurance, improved to 21.5% in the second quarter of 2021 compared to 20.1% in the first quarter. This represents our first sequential quarterly revenue growth and margin improvement since the onset of COVID, an encouraging sign that recovery has begun to take hold. Turning to G&A. The year-to-date increase of $3.1 million was driven primarily by higher employee benefits and health insurance claims, as these same expenses were extraordinarily low in 2020 due to the COVID-19 pandemic. Excluding the health insurance-related costs in both periods, G&A expenses have declined approximately $1.7 million year-to-date through June 30 compared to the same period last year. As we complete the remaining non-continuing community transitions in the second half of 2021, we expect G&A expenses, excluding employee health insurance claims and transaction-related expenses, to continue to decline. While the hard work we did in 2019 and 2020 is now evident in the statistics of our strong pace of recovery from the pandemic, this is a pivotal time for Capital Senior Living. The company has been operating in a very capital-constrained environment for many years. And while we took decisive actions throughout 2020 to address the company's liquidity by shedding underperforming communities, the COVID-19 pandemic has put additional ongoing stress on our cash resources. Additionally, we have been facing $72 million of maturing mortgage debt with recourse provisions in December of 2021 and another $37 million of nonrecourse mortgage debt maturing in April and May of next year. These pressures on our liquidity have been evident for the past 15 months and since our release of our March 2020 financial results when we expressed doubt about the company's ability to continue as a going concern, and we outlined the significant steps we were taking and continue to take to mitigate this risk. We are now turning the corner on the pandemic with occupancy increasing while new supply is at decade lows and demographic growth is poised to accelerate for the duration of the decade. However, the near-term operating environment remains very costly, uncertain, and challenging due to the proliferation of the Delta variant, limited staff availability in many markets, general inflationary pressures, and the need to invest in our communities to support the trajectory of recovery and further growth. To seize this inflection point and responsibly fund not only the near-term capital requirements to support the recovery from the pandemic but also a long-term growth plan, we require additional capital. On July 22, we announced that Capital Senior Living's Board of Directors conducted a thorough process to explore strategic alternatives for the company and unanimously approved a strategic investment from Conversant Capital, an experienced institutional investor with a successful track record partnering with real estate platforms and their management teams. This strategic investment, along with a proposed rights offering, will raise up to $152.5 million, consisting of $82.5 million in convertible preferred equity and a common rates offering of approximately $70 million, which is partially backstopped by Conversant. In addition, Conversant will provide us a $25 million accordion for future investment. This transaction is subject to shareholder approval and pending approval is expected to close during the fourth quarter of this year. When completed, this capital raise will allow Capital Senior Living to quickly pivot from playing defense to playing offense in 3 important ways: first, by enabling significant investment into our assets to grow earnings. We have a pipeline of select investment projects in our portfolio that we expect to strengthen our competitive position in key markets and provide returns in excess of the cost of this new capital. Second, by fortifying our balance sheet so we have sufficient working capital to fund the near-term pandemic-related recovery, and so we can address near-term debt maturities from a position of strength. And third, by providing capital for accretive acquisitions in an environment where many operators are capital constrained. The strategic investment has already been helpful to us, as yesterday, we finalized the extension of a $40.5 million full recourse bridge loan that was scheduled to mature in just 4 months on December 31. The bridge loan has been extended for 12 months with the option to extend an additional 6 months by meeting certain financial criteria. The terms of the loan are essentially the same as they were previously, but the lender required a loan paydown of approximately $5.3 million, which will be paid in installments over the course of the extension. With this 12-month extension in place, there remains $31.5 million of partial recourse mortgage debt maturing in December of 2021 and approximately $37 million of nonrecourse mortgage debt maturing between now and May of 2022. We believe we can deploy the capital from the strategic investment transaction responsibly and productively to maximize value for our shareholders. The amount of capital raised fundamentally strengthens the company by comprehensively addressing both capital needs of the assets and the balance sheet for the foreseeable future. This provides the catalyst to create an exciting long-term business plan for growth and success. There's never been a better time to be part of Capital Senior Living. Demographic trends are favorable. New supply is at decade lows. Our 3-year transformation to improve operating performance and strengthen our financial foundation is nearly complete, and we are ready for the next chapter, which is focused on exemplary care, engaging resident experiences, and measured, responsible, and sustainable growth. I'll now turn the call over to Brandon to provide more detail on our Q2 operating performance and second-half expectations.

Thank you, Kim, and good afternoon. As you mentioned, we could not be more proud of the ongoing and significant effort and dedication of our local leaders to guide their communities through the ever-evolving operating environment across Senior Living. Throughout Q2 and the early stages of Q3, our local operating teams worked tirelessly to quickly adjust to the more open operating environment with increased tours and family visits within the community. Most importantly for the safety of our communities, more than 90% of our residents are fully vaccinated, and COVID cases remain at low levels in spite of the national rise associated with the Delta variant. We remain focused on educational efforts across our employee base to increase the percentage of fully vaccinated employees while also closely monitoring the landscape related to state, local, and industry vaccine mandates. While the decision to move forward with vaccination as a condition of employment has not yet been finalized, this option is under careful consideration while also weighing the challenging labor environment in certain secondary and tertiary markets. Despite the increase in national COVID cases, our leading indicators related to occupancy remain strong. Lead and tour volume in July reached the highest level in nearly 2 years and move-in volume remained strong. Move-outs in July were at the lowest level since May of 2020. Lead and tour volume remains strong in the early part of August, thanks to the ongoing outreach and digital marketing efforts conducted by our local and regional leadership. While the occupancy gains over the previous 5 months are promising, many of our communities have significant opportunity to continue supporting further growth in our portfolio. The availability of capital to invest in specific communities with near-term occupancy upside is paramount to our growth strategy over the next 12 to 18 months. Capital investment focused on common area refurbishments, upgrading the amenities within our resident units, and conversion of existing units and wings to meet the demands of the growing memory care segment in certain markets present significant near-term growth opportunity. Common area refurbishments of approximately $7 million in 12 communities are slated to begin in Q4 following the completion of our capital raise. We have also targeted 5 communities in Ohio and Wisconsin for conversion of independent living and assisted living units to memory care wings with completion dates inside of 12 months. These conversions will improve our unit mix and fold the recently developed Magnolia Trails memory care programming into more than 65 units across these communities. Collectively, these investments are expected to generate returns exceeding 20% on average. Turning to rate and margin. Rates began to improve in the latter part of Q2 with June rates averaging $3,523, just slightly behind our Q1 average of $3,531. As a direct result of our strategic decision to grow occupancy, Q2 declined slightly sequentially due to the impact of elevated one-time concessions in the first 4 months of the year. Based on move-in data from June and July, the use and size of concessions continue to decrease. We expect rate growth in the second half of 2021 to further improve the margin expansion Kim referenced in her comments. Our in-place rent increases take place as residents renew their leases. And in Q2, our average in-place rent increase was 2%. We expect to continue this level of increase throughout the year. In our previous discussions, we referenced the opportunity to improve margin by maintaining existing labor levels while increasing our occupancy. Adjusted for calendar days, our total labor expense, excluding benefits and workers' compensation, remained flat at $229,000 per day versus Q1. The labor market remains extremely challenging, and our local teams continue to adjust to wage and labor pressure to ensure the retention of our key frontline care and service providers. We are encouraged by our 98.5% retention of executive directors in Q2, as stability in our key leadership roles is a leading indicator of staff stability and strong operating performance. Variable expenses consisting primarily of food, advertising, and marketing, and supply-related items increased 3.7% sequentially, primarily driven by inflationary food expense of 4.3%. The bad debt expense remained strong at 0.3% of revenue and improved from an already low rate of 0.8% in Q1. These key expense metrics, combined with our 2.8% sequential revenue growth, delivered the NOI growth and margin expansion referenced in Kim's comments. Our operating team continues to monitor and adjust to the impact of the Delta variant and increased nationwide COVID cases while remaining focused on the safety and care of our residents and the retention of our frontline staff. Now I'll turn the call over to Tiffany to provide a detailed review of our financials.

Thank you, Brandon. Good afternoon, everyone. During the second quarter, we continued to see increases in traffic and move-ins, and average occupancy for the quarter was 78.1%, an increase of 260 basis points as compared to the previous quarter. The operating environment has remained challenging, so our operations team has continued to do an excellent job in managing the costs within their control and to mitigate the impacts of COVID-19 on their overall results while continuing to prioritize the health and safety of our residents and staff members. The actions we completed over the course of the past 2 years have stabilized our business and positioned us for future growth. As I review our consolidated financials comparing the second quarter of 2021 to the same quarter of 2020, it is important to note that our portfolio consisted of 59 fewer communities for all or part of the second quarter of 2021 compared to the number of communities in the second quarter of 2020. Our reported revenues for the second quarter were $57.5 million compared to $101.5 million in the second quarter of 2020. $39.2 million of the decrease was related to the sales or conversions of 59 properties throughout 2020, partially offset by an increase in management fees and community reimbursement revenue of $8.9 million. Most of the revenue associated with these managed communities, $10.1 million in the second quarter of 2021, was related to the reimbursement of certain operating costs that we paid on their behalf, the offset of which is also included as an expense on our income statement. Our management fee revenue in the second quarter was approximately $800,000. The remainder of the decrease in revenues is due to a decrease in average monthly rate quarter-over-quarter. Resident revenues for the second quarter increased $1.4 million from the previous quarter, which is primarily due to a 260 basis point increase in average occupancy. Operating expenses in the second quarter of 2021 were $37.6 million, a decrease of $33.7 million compared to the second quarter of 2020. The 59 community dispositions accounted for the majority of the decrease in expenses on a combined basis. Operating expenses increased $810,000 or 2.2% during the second quarter compared to the first quarter of 2021. We continue to operate in a tight labor market. Our employee labor costs increased $500,000 sequentially or 2.3% due to increases in benefits and workers' compensation expenses. The remainder of our other expense categories combined to increase $300,000 during the quarter, which primarily resulted from investments in marketing and advertising initiatives to increase occupancy and an increase in food and other variable expenses during the quarter due to our continued occupancy growth. Our net operating income was $10 million and our operating margin, which we define as revenues less operating expenses exclusive of COVID-19 relief funding and costs to the premium later are included, was 28.7%. Our general and administrative expenses for the second quarter of 2021 were $8.8 million compared to $6.4 million in the second quarter of 2020. The increase of approximately $2.4 million is primarily due to increases in employee benefits and health insurance claims, increases in travel and workers' compensation-related expenses, partially offset by decreases in transaction costs, which were related to the lease amendment movements and terminations that were executed last year. Adjusted EBITDA in the second quarter of 2021 was $2.0 million. Adjusted EBITDAR, excluding COVID-19 expenses, was $2.3 million for the quarter. Adjusted CFFO was a negative $7.3 million for the second quarter of 2021. When COVID-19 relief funds and expenses are excluded, adjusted CFFO was a negative $7.1 million in the second quarter. Turning now to liquidity. We had $14.6 million of unrestricted cash at June 30, 2021, a $2.2 million decrease from the $16.8 million unrestricted cash balance we reported at March 31, 2021. The reason for the decrease in cash is twofold. Although our financial position continues to improve, we have operated in a working capital deficit since 2017, which was exacerbated by the COVID-19 pandemic and very substantial doubt about the company's ability to continue as a going concern. To fund the recovery of occupancy lost during the pandemic, we have made capital investments in our properties to address wear and tear caused by this pandemic, to make our apartments rent-ready, and to upgrade certain amenities in order to entice future residents to our properties. We have also made both capital and operating investments related to the implementation of our Magnolia Trails program at certain communities. Our year-to-date capital expenditures through the end of the second quarter totaled $4.7 million. Today, we announced that we have extended the maturity date of the $40.5 million bridge loan with BBVA from December 2021 to December 2022. In conjunction with the extension, we are required to pay $900,000 to establish a debt service reserve and then make a principal paydown of $150,000 term loans for the term of the extension and $1 million on or before December 1, 2021. Subsequent quarter principal paydowns of $500,000 beginning in March 2022 will be required if certain financial metrics are not achieved, the extension of waiver for the failure of the debt service coverage ratio covenant that occurred as of December 31, 2020. We continue to be in active discussions with one of our other lenders regarding the near-term maturity of the other bridge loan, totaling $31.5 million that is currently scheduled to mature in December 2021. In addition, we have begun discussions with current and prospective lenders regarding loans totaling $47.5 million that are currently scheduled to mature in 2022 and 2023. As we look towards the future, we recognize that we require capital to continue to fund our recovery as well as position the company for future growth. As Kim mentioned, we recently announced a strategic investment from Conversant Capital, along with the proposed rights offering that will together raise up to $152.5 million. For more information on the proposed transaction, please see the Form 8-K that was filed with the SEC on July 22. In addition, a preliminary proxy will be filed with the SEC in the coming days. We continue to progress with the transfer of ownership of 18 underperforming properties to Fannie Mae. During the second quarter, we successfully transitioned the legal ownership of an additional 6 properties to Fannie Mae and recognized a $67 million gain on the extinguishment of debt and related liabilities of those communities. Since the end of the quarter, we have completed the transfer of ownership of 4 additional communities, bringing our total dispositions to 13 of the 18 transitioning communities. As legal ownership of the remaining properties transfers to Fannie Mae, which is expected to occur throughout the remainder of 2021, we expect to recognize gains on the extinguishment of debt and related accrued interest on those properties. At June 30, we included $112.7 million in current debt payables and $6.5 million in accrued interest on our balance sheet related to the remaining 9 properties. As we look towards the future, we are beginning to realize the results of the significant improvements we have made to our financial foundation and operating platform during the last 2 years. With the capital from the strategic investment from Conversant Capital, as well as our continued investments in sales and marketing, our new wellness programming, and Magnolia Trails, we are poised to move into the final phase of our transformational plan of growth. We are pleased with the continued improvements in occupancy that we have seen since early this spring and are optimistic about our results in the months ahead. That concludes our prepared remarks. I will now ask our operator, Doug, to open the line for questions.

Our first question comes from the line of Steven Valiquette with Barclays.

I have a couple of questions regarding the quarter, specifically about the operating expenses and margins for the 60 owned communities. In the slide presentation on Page 9, you include real estate taxes and insurance expenses, which leads to a 21.5% NOI margin, an increase of 140 basis points sequentially. However, on Page 10 of the press release, you exclude real estate taxes and insurance, showing an NOI margin of 28.7%, which is an increase of 860 basis points. I'm trying to understand the reasoning behind including or excluding those expenses in different comparisons so that we can have a clearer perspective on this.

Yes. Thanks, Steve. So on Page 9 of the investor presentation, the comparison of the 21.5% versus the 20.1%. The reason that we include real estate taxes and insurance in that NOI calculation is because as we look at our portfolio of assets, our expectation is that those assets should be able to cover those operating expenses with their operating results. When you look at the supplemental information from the press release in the supplemental schedule that you referenced, that's just a pure calculation excluding those two line items. That's kind of a historical operating margin that the company has represented. But we think that the more relevant representation of how the business is doing needs to include those two components of expenses that include real estate taxes and insurance.

Okay, okay. Great. That's helpful. So when those are included then, to the extent that you had, let's call it, just use round numbers, roughly $36 million in quarterly operating expenses in both 1Q and 2Q this year. And then tying that in with your comments just regarding labor expense and also the tight labor market, how should we think about just the raw dollar amount of quarterly operating expenses going forward from here relative to that $36 million trend line that we saw in each of the first 2 quarters?

Yes, Steve, we're assessing that in what is a very dynamic operating environment. We're focused on keeping our labor expenses stable while increasing occupancy. To reference my earlier comments, when excluding the benefits and workers' compensation, our labor expenses remained flat quarter-over-quarter alongside the occupancy increase. We see a chance to reduce the $36 million figure as the overall environment continues to change. There is some uncertainty regarding the Delta variant's potential impact and how the labor market may shift as government support diminishes towards the year's end. We're exploring ways to lower that number to take advantage of the rising revenue and occupancy, but there is considerable variability in the labor market right now.

Okay. Great. Okay. And then I had a few questions around some of the recent investor activity, but I think I'll just follow-up with those offline just to keep things more simplistic for today.

Okay. Great. Thanks, Steve.

That concludes our question-and-answer session. I'd like to hand it back to Ms. Lody for closing remarks.

All right. Thanks, Doug. This concludes today's conference. Thank you, everyone, and have a great day.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.