Thank you. Welcome to Five Star Senior Living's third quarter 2020 results.

The agenda for today's call includes a presentation by President and CEO, Katie Potter; Executive Vice President, CFO and Treasurer, Jeff Leer; and Senior Vice President and COO, Margaret Wigglesworth. Following by question-and-answer session with research analysts.

I would like to note that the transcription, recording or retransmission of today's conference call is strictly prohibited without the prior written consent of Five Star. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws.

These forward-looking statements are based on Five Star's present beliefs and expectations as of today, Thursday, November 6, 2020. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call other than through filings with the Securities and Exchange Commission, or SEC, regarding this reporting period.

Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our filings with the SEC.

Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, this call may contain non-GAAP numbers, including EBITDA, adjusted EBITDA and pro forma EBITDA.

Reconciliations of net income attributable to common shareholders to these non-GAAP figures and the components to calculate them are in our quarterly result news release available on our website at www.fivestarseniorliving.com. I will now turn the call over to Katie.

Thanks Olivia, and thanks, everyone, for joining us on our earnings call for the third quarter of 2020. As our nation continues to face the evolving threat of the COVID-19 pandemic, businesses that serve older adults, including Senior Living, remain significantly impacted.

While many states across the country have loosened restrictions and some businesses have returned to a degree of normal activity, challenges remain for Senior Living community leaders as they work to safeguard the health and well-being of our most vulnerable population while providing rewarding daily life experiences. I feel immense gratitude for the extraordinary efforts displayed across the Five Star platform and pride for how we have adapted and worked to overcome unforeseen challenges.

The Senior Living industry continuing to experience widespread deterioration in occupancy, which in turn is putting pressure on top line revenue. Compounding occupancy challenges are increased operating costs, driven by safety protocols to mitigate the spread of COVID-19.

Throughout the pandemic Five Star priority has been the health and well being of our residents, clients, team members, partners and potential customers, and our low rates of COVID-19 cases are evidence of our success. We remain steadfast in adhering to our operational protocols, including regular testing of our team members and residents, and securing reserves of personal protective equipment or PPE to be prepared for potential spikes during the rest of 2020 and into 2021.

During the third quarter, Five Star proved its strength and durability as we advanced our response to the pandemic adverse effects on occupancy, revenues and expenses. I'd like to share a few business highlights that we believe position Five Star favorably in this environment.

First, Five Star reported positive financial results for the third quarter, and our balance sheet remains strong. While the financial benefits from our restructuring transactions with DHC, as well as our growth and rehabilitation and wellness services segments and continued focus on expense management.

We were able to generate positive cash flow in both sequential quarter and year-over-year growth in net income. For the third quarter of 2020, we reported adjusted EBITDA of $6.8 million and net income of $0.12 per diluted share.

Our financial position also continues to improve with $95.8 million of unrestricted cash, only $7.3 million of outstanding debt obligations, and no amounts outstanding on our revolving credit facility. We believe we are well positioned with the necessary financial resources to support our business needs during the lasting effects of the pandemic.

Next, we continue to position ourselves to rebound in the new normal, we have remained focused on providing an exceptional resident experience. As we adjust to the impact of COVID-19.

Our knowledge of how to manage and mitigate the spread the virus improves every day. And I'm confident in our ability to achieve operational stability and long term growth.

In addition, our rehabilitation wellness services division provides revenue stream diversification, and both flexibility and stability in this challenging operating environment. Despite restrictions across Senior Living communities, we were pleased to successfully open three net new agility outpatient clinics, bringing our total to 249 and to see increases in average daily visits throughout the quarter.

Our rehabilitation wellness services revenues have remained strong with a 15.8% increase over the prior year pro forma results and a 9.6% sequential increase. Demand for rehabilitation services remained high as COVID quarantine and restrictions have resulted in a loss of mobility and de-conditioning among Senior Living residents.

According to the National Center for Assisted Living, there are nearly 29,000 assisted living communities in the United States, which we believe provide for a substantial opportunity to continue to increase our agility footprint. We are focusing on expansion within our current networks, which was delayed due to the COVID-19 restrictions, as well as actively exploring new strategic partnerships.

Lastly, we are committed to preserving a motivated and customer focused workforce. Our talented team members are fundamental to our ability to manage through the unprecedented and challenging times.

We acknowledge the resolve, commitment and care that it takes to be successful in this environment. And we continue to focus on providing compelling compensation, rewards and recognition for exceptional efforts and resources to support our team members.

As the COVID-19 pandemic and related economic hurdle continued to develop, we will adapt and refine our strategy to meet the challenges presented. Our priority as always remains providing a safe and fulfilling experience for our residents, clients and team members.

Now I'd like to turn the call over to Margaret to review our Senior Living operations for the quarter.

Thanks, Katie, and good afternoon, everyone. Before I start, I'd like to affirm Katie sentiments and thank our team for their hard work and dedication during these difficult times.

And particularly they're focused on providing our residents and their families with a safe and supportive environment. I'll begin with an update on COVID-19 in our communities.

As of October 31, approximately 0.6% of our resident population is positive for COVID-19. And over the course of the pandemic, we have seen a significant rate of recovery as defined by the CDC guidelines.

Generally, we've seen geographic concentrations of cases similar to those which the CDC has highlighted as areas significantly impacted by the virus. As of October 31, five states represent 43% of our cases, and include Florida, Georgia, South Carolina, North Carolina and Texas.

The rate of new cases week over week did decline during the third quarter. However, we're seeing evidence of continued fluctuation over the last month, primarily in communities located in the Midwest and southeastern United States.

But we believe that the regimented protocols we have implemented will help to mitigate widespread exposure. On last quarter's call, we presented our three phase approach to reopening our community.

Reopening requires finding a delicate balance of providing essential safety, while creating a fulfilling experience for our residents, and a welcoming environment for prospective residents. Our testing and screening programs are robust with a three pronged protocol.

First, we follow the guidelines of state and local governments when and wherever testing is mandated. Second, we test any resident or team members showing symptoms and in the event of a positive COVID case, the entire community is then tested weekly until it clears two consecutive weeks with no new cases.

Third, we've also adopted routine surveillance testing, by which we test a rotating group of 25% of a community's team member population per week to cover the entire employee base over the course of a month. In the event of a positive case, the community follows the protocol of testing all residents and team members until it's clear two consecutive weeks without a COVID positive case.

As of October 31, we have administered more than 146,000 residents and team member tests over the course of the pandemic, which have resulted in a low confirmed case rate of only 2.4%. We believe this is a testament to the conservative approach we have taken as we navigate our evolving response.

Our slow and steady reopening strategy has resulted in communities being able to remain open once restrictions are lifted, which we believe will be a benefit to our business and all stakeholders in the long term. While COVID-19 continued to put pressure on our Senior Living segment, we did see declines in occupancy began to decelerate during the third quarter.

Average occupancy in our comparable community over lease portfolio decreased 360 basis points from last quarter and 660 basis points from the prior year. Comparable community average occupancy in our managed communities' decreased 340 basis points from last quarter and 880 basis points from the prior year.

To address the decline in occupancy, we've been focused on our sales and marketing efforts. Although average weekly sales fleets are down from pre pandemic levels, we were encouraged to see average sales fleets per month for the third quarter increased by 33% over second quarter rates.

In addition to this positive trend, conversion rates remained fairly consistent with pre pandemic levels. The lag time between leads in new move-ins is typically 12 weeks, so we're hopeful to see an acceleration of move-ins during the fourth quarter.

As of October 31, 96% of our communities are setting new resident move-ins at least one line of business. RevPAR continues to be challenged as a result of occupancy declines with comparable community revPAR for the owned and leased portfolio, down 9.8% from the same period last year, and comparable community revPAR in our managed portfolio down 9.5%.

However, we've been able to successfully maintain rate for our occupied units and new move-in despite the pressure this has put on growing near term occupancy of competitors have offered deep concessions to attract new residents. We believe our commitment to preserving rates better positions our senior living operations for long term stability once occupancy levels normalize.

While we are optimistic to see some slowdown in occupancy declines, we remain cautious and aware of the continued spread of COVID-19 in many areas of the country. As we work to safely move our communities through the reopening process and address occupancy declines.

We believe that our conservative and structured approach to mitigating the pandemic and the investments we are making in our team members will not only benefit our residents and clients, but also best prepare our business to capitalize on opportunities and generate long term growth. I'll now turn the call over to Jeff for a discussion of the financial results.

Thank you, Margaret. The following financial presentation will compare our third quarter 2020 results with the pro forma third quarter 2019 as of the transaction with DHC had close on January 1 2019 to better evaluate this quarter's results.

This morning we report a net income of $3.7 million or $0.12 per diluted share for the third quarter of 2020, a 7.2% increase compared to net income of $3.5 million or $0.11 per diluted share for the same period last year. This also represents a 23.8% increase from last quarter.

Adjusted EBITDA for the third quarter was $6.8 million, a decrease of $323,000 or 4.5% from $7.2 million from the prior year period. Third quarter management and operating revenues were approximately $55 million, a decrease of $1.6 million or 2.8% from the prior year largely due to DHC sale of 15 communities in the third quarter of 2019 and the sales of five communities for the first three quarters of 2020, coupled with declines in occupancy in our Senior Living segments, as a result of the COVID-19 pandemic, offset by an increase in our rehabilitation and wellness services revenues.

On a comparable committee basis, management and operating revenues increased $4.6 million or 12.7%. Also driven by growth in our rehabilitation and wellness services segment.

Our rehabilitation and wellness services segment reported revenues of $21.1 million, of which agility, rehabilitation and fitness comprise $20.8 million and is an increase of $2.9 million, or 15.8%, compared to $18.2 million in the prior year period, primarily attributable to opening 35 net new clinics into July 1 2019. And the stabilization of clinics opened in the fourth quarter of 2019.

On a sequential basis, third quarter rehab and wellness services revenues increased $1.9 million, or 9.6% over the second quarter. Our Senior Living segment reported total revenues of $274.2 million, of which $18.5 million was derived from communities that we own or lease from third parties and $15.3 million was attributable to management fees earned from community managed on behalf of DHC and represent a 12% decline compared to the prior year period, and a 4% decline on a sequential basis.

Of the $15.3 million in management fees earned, $573,000 was attributable to construction management fees that represent 3% of capital projects managed on behalf of DHC. Construction projects managed on behalf of DHC total $19.1 million and represents a 29% increase in capital spend on sequential basis.

We do anticipate that continued restrictions placed on our communities. In addition to close management of liquidity needs to respond to the financial impacts of COVID-19 will cause it slowed construction management programs throughout the remainder of 2020 and into the first quarter of 2021.

As a result, we are now budgeting roughly $34 million of CapEx spend in the communities we manage on behalf of DHC for the remainder of 2020. Now turning to operating expenses, we incurred $291.6 million of total operating expenses in the third quarter, a decrease of 7.5% from the prior year period, and an increase of 2.2% from last quarter.

While we have continued to focus on managing expenses, including labor costs in response to decreased occupancy across our communities. Our increase in expenses from the previous quarter is largely due to increase self insured health insurance costs of $1.8 million and $200,000 of medical supplies primarily related to COVID-19 testing, and infectious disease protocols at our communities.

Year-to-date, we have secured approximately $15.1 million of PPE to protect our residents and team members during the pandemic. Of this amount $4 million has been deployed to our communities for use and the remaining amounts relate to prefunded PPE reserves set aside to combat potential increase fees throughout Q4 and into Q1 2021.

The majority of this prefunded PPE will be reimbursed by DHC as it is delivered to the communities we manage. Our third quarter COVID-19 related expenses were approximately $4.3 million, including $3.6 million spent on PPE and medical supplies.

As relates to health insurance, our self insured program, we bear the costs of medical claims and experience higher than normal claims volumes coupled with certain higher dollar value claims in the third quarter, resulting in a total cost of $22.1 million inclusive of approximately $2 million of COVID-19 testing of team members at our community and for which $18.5 million is reimbursed by DHC. These costs represent an increase of 40.3% over the same period in the previous year, and an 88.9% increase on a sequential basis.

We believe that the pandemic continues to put pressure on our self insured Health Insurance Program that likely will continue into the fourth quarter. General and administrative expense for the third quarter was $19.9 million, which included $6.6 million reimbursed by DHC.

Excluding these reimburse costs G&A expense was $13.3 million, which we believe is indicative of our normalized run rate for G&A. Interest expense for the third quarter was $379,000 due to cost associated with the unused capacity on a revolving credit facility.

Year-to-date, DHC has spent approximately $56.7 million of capital at our managing Senior Living communities. Additionally, in the third quarter, we invested $1 million of capital comprised of $738,000 invested in our owned and leased portfolio, $116,000 in a rehabilitation wellness services segment, and $157,000 of investments in our shared services plan.

Moving to our balance sheet; as of September 30, we had approximately $95.8 million of unrestricted cash and cash equivalents for which $12.9 million represent the amount of funding by DHC, the current working capital needs that were paid shortly after quarter end. We have only $7.3 million of outstanding debt obligations in the form of one mortgage note maturing at 2032.

And as of today, we do not have any borrowings outstanding on our credit facility. We believe this financial position, along with our stable and growing rehabilitation and wellness services revenues, will support our business as we continue to see adverse effects on our senior living segment from the ongoing COVID-19 pandemic.

That concludes our prepared remarks. Operator, we are ready to open the line for questions.

Hi, this is Kyle on for Brian. Thanks for all the helpful detail.

I was curious if you could talk a little bit about the current pipeline for new agility clinics? And it looks like you've been opening about two or three per quarter during the pandemic, would you say that's a fair run rate per quarter in the current environment going forward?

Yes. Kyle we expect to open three to four clinics per quarter.

Great, thank you. And then I was just curious with move-ins and leads.

Have you seen a continuation in leads picking up so far in the current quarter?

I guess we have, leads are up and we're hoping that we'll be able to convert those leads to move-ins during Q4. Thank you.

And this does conclude our question-and-answer session. So I would like to turn the conference back over to Katie Potter for any closing comments.

Thank you for joining us today. The COVID-19 pandemic presents new and changing hurdles and the leadership team and I are incredibly proud of our entire team here at Five Star for their dedication and adaptability as we work to keep our residents, clients and each other safe.

We believe that our growing knowledge and carefully planned response in the face of this crisis, coupled with our strategic business plan and financial stability will support long term sustainability and continued growth of our business. We wish collective health and wellness to all.

Operator that concludes our call.