Sonida Senior Living, Inc.: Form 10-Q for the period ended Sep 30, 2025

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help provide an understanding of our business and results of operations. This MD&A should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This report, including the following MD&A, contains forward-looking statements regarding future events or trends that should be read in conjunction with the risks, uncertainties and other factors described under “Cautionary Note Regarding Forward-Looking Statements” above in this Quarterly Report on Form 10-Q and “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 17, 2025, as well as “Item. 1A. Risk Factors” in this Quarterly Report on Form 10-Q. Actual results may differ materially from those projected in such statements as a result of such risks, uncertainties and other factors. Unless otherwise specified or where the context otherwise requires, references in this Quarterly Report on Form 10-Q to “our,” “we,” “us,” “Sonida”, the “Company” and “our business” refer to Sonida Senior Living, Inc., together with its consolidated subsidiaries.

Overview

The following discussion and analysis addresses (i) the Company’s results of operations for the three and nine months ended September 30, 2025 and 2024, and (ii) liquidity and capital resources of the Company.

The Company is a leading owner, operator and investor in independent living, assisted living and memory care communities and services for senior adults in the United States in terms of resident capacity. The Company’s operating strategy is to provide value to its senior living residents by providing quality senior living services at reasonable prices, while achieving and sustaining a strong, competitive position within its geographically concentrated regions, as well as continuing to enhance the performance of its operations. The Company primarily provides senior living services to the 75+ population, including independent living, assisted living, and memory care services at reasonable prices. Many of the Company’s communities offer a continuum of care to meet each of their resident’s needs as they change over time. This continuum of care, which integrates independent living, assisted living, and memory care that may be bridged by home care through independent home care agencies, sustains our residents’ autonomy and independence based on their physical and mental abilities.

As of September 30, 2025, the Company owned, managed, or invested in 97 senior housing communities in 20 states with an aggregate capacity of approximately 10,250 residents, including 84 owned senior housing communities (including four through joint venture investments in consolidated entities and four owned through a joint venture investment in an unconsolidated entity) and 13 communities that the Company manages on behalf of a third party.

Significant Financial and Operational Highlights

Operations

During the three months ended September 30, 2025, the Company generated resident revenue of $84.6 million compared to resident revenue of $67.0 million in the three months ended September 30, 2024, representing an increase of 26.3%. The increase in revenue was primarily due to increased average rent rates, increased occupancy, and 19 additional communities acquired during 2024 and 2025.

Weighted average occupancy for the three months ended September 30, 2025 and 2024 for the communities owned by the Company, excluding 2024 and 2025 acquisitions and repositioning projects, was 87.7% and 87.1%, respectively, reflecting continued occupancy growth. The average monthly rental rate for these owned communities for the three months ended September 30, 2025 increased 4.7% when compared to the three months ended September 30, 2024.

During the nine months ended September 30, 2025, the Company generated resident revenue of $245.7 million compared to $190.8 million during the nine months ended September 30, 2024, representing an increase of 28.8%. The increase in revenue was primarily due to increased rent rates and 19 additional communities that were acquired in 2024 and 2025.

Weighted average occupancy for the nine months ended September 30, 2025 and 2024 for the communities owned by the Company, excluding 2024 and 2025 acquisitions and repositioning projects, was 87.2% and 86.3%, respectively, reflecting continued occupancy growth. The average monthly rental rate for the nine months ended September 30, 2025 was 4.9% higher as compared to the nine months ended September 30, 2024.

Management Services

The Company has property management agreements with third parties and its joint ventures pursuant to which the Company manages certain communities on their behalf for a management fee based on gross revenues of the applicable communities, as well as, in some cases, an incentive management fee, and other customary terms and conditions. The Company managed 13 communities on behalf of a third party for each of the nine months ended September 30, 2025 and 2024. The Company also managed four communities on behalf of an unconsolidated joint venture and four communities in consolidated joint ventures for the nine months ended September 30, 2025.

Recent Acquisitions and Community Held for Sale

East Lake Acquisition

In May 2025, the Company acquired one senior living community located in Tarpon Springs, Florida for a purchase price of $11.0 million plus transaction costs of $0.3 million. The asset acquisition was recorded at relative fair value. The Company recorded $9.9 million in “Property and equipment, net” for tangible assets purchased, $1.6 million in “Intangible assets, net” for in-place leases, and $0.2 million in “Other long-term liabilities” for below market leases in the Company’s condensed consolidated balance sheets. The Company mortgaged the property with a $9.0 million interest-only loan due in 36 months, plus two 12-month extensions at the Company’s option subject to meeting certain financial conditions. The interest rate is based on SOFR plus applicable margins from 0.0% to 3.0%. See “Note 7–Debt” in the Notes to Condensed Consolidated Financial Statements.

Alpharetta Acquisition

In June 2025, the Company acquired one senior living community located in Alpharetta, Georgia for a purchase price of $11.0 million plus transaction costs of $0.2 million. The asset acquisition was recorded at relative fair value. The Company recorded $9.1 million in “Property and equipment, net” for tangible assets purchased, $2.1 million in “Intangible assets, net” for in-place leases, and $0.1 million in “Other long-term liabilities” for below market leases in the Company’s condensed consolidated balance sheets. The Alpharetta property was mortgaged with the 2025 Ally Term Loan (defined below) with Ally Bank.

The Jasper Acquisition

In September 2025, the Company acquired one senior living community located in Mansfield, Texas for a purchase price of $15.6 million plus transaction costs of $0.1 million. The asset acquisition was recorded at relative fair value. The Company recorded $14.2 million in “Property and equipment, net” for tangible assets purchased and $1.5 million in “Intangible assets, net” for in-place leases in the Company’s condensed consolidated balance sheets. The Mansfield property was added to our borrowing base for the senior secured revolving credit facility, giving a revised total of 14 communities securing our credit facility. See “Senior Secured Revolving Credit Facility” below.

Assets and Liabilities Held for Sale

As of September 30, 2025, the Company is in negotiations to sell one of its communities, which is expected to close in the next six months, subject to customary closing conditions. In the three months ended September 30, 2025, the community was classified as held for sale and the Company recorded an impairment charge of $4.7 million for the excess of its carrying value over its estimated fair value less estimated disposal costs. This charge was reported on impairment of assets held for sale on the condensed consolidated statement of operations. See “Note 3–Investments, Acquisitions and Assets Held for Sale” in the Notes to Condensed Consolidated Financial Statements.

Recent Financing and Corporate Transactions

Strategic Merger Agreement with CHP

On November 4, 2025, the Company entered into a definitive agreement and plan of merger (the “Merger Agreement”) with CNL Healthcare Properties, Inc., (“CHP”) and its affiliates, a public non-traded real estate investment trust which owns a national portfolio of 69 high-quality senior housing communities. Under the terms of the Merger Agreement, Sonida will acquire 100% of the outstanding common stock of CHP in a stock and cash transaction valued at approximately $1.8 billion, which equates to $6.90 per share of CHP, with approximately 66% of the consideration expected to be in the form of newly issued Sonida common stock and 34% in cash. Specifically, each share of CHP common stock will be converted into $2.32 in cash and a number of shares of Sonida common stock, determined by dividing (a) $4.58 by (b) the volume weighted average price (“VWAP”) of Sonida common stock during a measurement period prior to closing of the transaction and subject to a collar of 15% below the Transaction Reference Price and 30% above the Transaction Reference Price.

The merger currently is expected to close late in the first quarter or early in the second quarter of 2026, subject to customary closing conditions, including the approval of both Sonida and CHP shareholders. See “Note 17–Subsequent Event” in the Notes to Condensed Consolidated Financial Statements.

2025 Ally Term Loan

On August 7, 2025, the Company entered into a senior secured term loan of $137.0 million (“2025 Ally Term Loan”) with Ally Bank (“Ally”) with a closing fee of 0.75%, or $1.0 million. The 2025 Ally Term Loan amended and restated the Company’s then-existing term loan with Ally, dated as of March 10, 2022, as amended. The 2025 Ally Term Loan allowed for an initial term loan advance on the closing date of $122.0 million on 19 communities, which included 18 communities under the then-existing Ally term loan agreement, as well as the Alpharetta community acquired in June 2025. Two additional draws of $7.5 million each will become available subject to achieving certain debt yields and debt service coverages ratios. The 2025 Ally Term Loan has a 36-month maturity date and a variable interest rate of one-month SOFR plus a 2.65% margin (subject to a performance-based stepdown to a 2.45% margin). As of September 30, 2025, the Company has $122.0 million outstanding under the 2025 Ally Term Loan, which matures in August 2028. The Company has the ability to request an increase in the term loan up to $40.0 million to finance additional properties subject to lender due diligence and review.

2025 Mortgage Loan

On May 30, 2025, the Company acquired one senior living community located in Tarpon Springs, Florida. The Company mortgaged the property with a $9.0 million interest-only loan due in 36 months, plus two 12-month extensions at the Company’s option subject to meeting certain financial conditions. The interest rate is based on SOFR plus applicable margins ranging from 0.0% to 3.0%.

Senior Secured Revolving Credit Facility

During 2024, the Company entered into a credit agreement with BMO Bank, N.A. and Royal Bank of Canada for a senior secured revolving credit facility (the “Credit Facility”). The Credit Facility has a borrowing capacity of up to $150.0 million, a term of three years, a leverage-based pricing matrix between SOFR plus 2.10% margin and SOFR plus 2.60% margin and is fully recourse to Sonida Senior Living, Inc. and its applicable subsidiaries. The borrowing base by which borrowing availability under the Credit Facility is determined is generally based upon the value of the senior living communities that secure the Company’s obligations under the Credit Facility. As of September 30, 2025, $86.1 million of borrowings were outstanding under the Credit Facility at a weighted average interest rate of 6.9%, which was secured by 14 of the Company’s senior living communities. During the three months ended September 30, 2025, the Company borrowed $15.6 million under the Credit Facility, at a weighted average interest rate of 6.9%, and repaid $4.5 million of borrowings on August 26, 2025. As of September 30, 2025, we had an additional borrowing capacity of up to $40.9 million under our Credit Facility.

Application of Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements and related notes. Actual results could differ from those estimates. For a discussion of our critical accounting policies and estimates, please refer to our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no significant changes to our critical accounting policies since December 31, 2024.

Recent Accounting Guidance Adopted

See “Note 2–Summary of Significant Accounting Policies” in the Notes to Condensed Consolidated Financial Statements for a discussion of new accounting pronouncements and our assessment of any expected impact of these pronouncements, if known.

Results of Operations

The following discussion should be read in conjunction with our condensed consolidated financial statements and the related notes, which are included in “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q. The results of operations for any particular period are not necessarily indicative of results for any future period.

We use the operating measures described below in connection with operating and managing our business and reporting our results of operations.

Same-Store/Same-Store Community Portfolio is defined by the Company as communities that are consolidated, wholly or partially owned, and operational for the full year in each year beginning as of January 1st of the prior year. Consolidated communities excluded from the same-store community portfolio include the Acquisition Community Portfolio, Repositioning Portfolio, and certain communities that have experienced a casualty event that has significantly impacted their operations. Our management uses same-store community operating results and data for decision making and components of executive compensation, and we believe such results and data provide useful information to investors, because it enables comparisons of revenue, expense, and other operating measures for a consistent portfolio over time without giving effect to the impacts of communities that were not consolidated and operational for the comparison periods, communities acquired or disposed during the comparison periods (or planned for disposition).

Acquisition Community Portfolio is defined by the Company as communities that are wholly or partially owned, acquired in the current year or prior comparison year, and are not operational in both comparison years. An operational community is defined as a community that has maintained its certificate of occupancy and has made at least 80% of its wholly owned or partially owned units available for five consecutive quarters.

Repositioning Portfolio is defined by the Company as communities that are wholly or partially owned, and have undergone or are undergoing strategic repositioning as a result of significant changes in the business model, care offerings, and/or capital re-investment plans, that in each case, have disrupted, or are expected to disrupt, normal course operations. These communities will be included in the Same-Store Community Portfolio once operating under normal course operating structures for the full year in each year beginning as of January 1st of the prior year.

Community Operating Expense is a financial measure not calculated in accordance with GAAP. It is defined by the Company as community operating expenses excluding casualty loss, non-recurring settlement fees, non-income tax and non-property tax. Please see “—Non-GAAP Financial Measures” below for more information.

RevPAR, or average monthly revenue per available unit, is defined by the Company as resident revenue for the period, divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period. Our management uses RevPAR for decision making and components of executive compensation, and we believe the measure provides useful information to investors, because the measure is an indicator of senior housing resident fee revenue performance that reflects the impact of both senior housing occupancy and rate.

RevPOR, or average monthly revenue per occupied unit, is defined by the Company as resident revenue for the period, divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period. Our management uses RevPOR for decision making, and we believe the measure provides useful information to investors, because it reflects the average amount of resident revenue we derive from an occupied unit per month without factoring occupancy rates. RevPOR is a significant driver of our senior housing revenue performance.

Weighted Average Occupancy reflects the percentage of units at our owned communities being utilized by residents over a reporting period. We measure occupancy rates on both a consolidated community portfolio basis and a same-store community portfolio basis. Our management uses weighted average occupancy, and we believe the measure provides useful information to investors, because it is a significant driver of our resident revenue performance.

This section includes the non-GAAP performance measure Adjusted EBITDA. See “—Non-GAAP Financial Measures” below for our definition of the measure and other important information regarding such measure, including reconciliations to the most comparable measure in accordance with GAAP.

Three months ended September 30, 2025 as compared to three months ended September 30, 2024

Summary Operating Results

The following table summarizes our overall operating results for the three months ended September 30, 2025 and 2024:

(in thousands)

(1) See “Non-GAAP Financial Measures.”

The following table summarizes our segment data for the three months ended September 30, 2025 and 2024, including operating results and data on a same-store community portfolio basis.

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)

(1) Q3 2025 and Q3 2024 excludes casualty loss, non-recurring settlement fees, non-income tax and non-property tax of $1.3 million and $0.6 million, respectively.

(2) Excludes four unconsolidated communities.

(3) Excludes four unconsolidated communities, six repositioning communities, and 19 newly acquired communities.

The increase in resident revenue was primarily attributable to an additional 19 operating communities acquired during 2024 and 2025, and a 4.7% increase in same-store average rent rates, comprised of a 5.4% increase in same-store portfolio RevPOR and a 60 basis point increase in same-store weighted average occupancy.

The increase in community operating expense was primarily attributable to an increase in operating expenses related to the 19 additional communities acquired during 2024 and 2025, and a 6.5% increase in same-store community operating expense primarily resulting from increases in labor, service contracts and other expense.

The increase in net loss was primarily attributable to the increase in community operating expense, an increase in transaction, transition and restructuring costs, and an increase in depreciation and amortization expense, partially offset by the increase in resident fees.

The increase in Adjusted EBITDA was primarily attributable to new communities added during the year and an increase in resident fees, partially offset by the increase in community operating expense.

Expenses and Other

(in thousands)

General and administrative expense for the three months ended September 30, 2025 increased as compared to the three months ended September 30, 2024, primarily due to a result of an increase in labor and employee related expenses of $1.2 million to support the Company’s growth initiatives, offset by a $0.4 million decrease in other expenses.

Transaction, transition and restructuring costs increased for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The costs include legal, audit, banking and other costs to support the Company’s recent debt, restructuring, and investments by the Company, and the CHP transaction.

During the three months ended September 30, 2025, the Company recorded non-cash impairment charges of $4.7 million to property and equipment, net to adjust the carrying value of a community classified as held for sale to its fair value, net of estimated disposal costs.

Other income (expense), net for the three months ended September 30, 2025 increased as compared to the three months ended September 30, 2024, primarily due to $1.5 million due to non-operating costs related to the Company’s recent acquisitions, $0.3 million related to our Ally debt amendment, and $0.2 million in other expense. Partially offsetting these expenses was $0.3 million in other income for recognized gross employee retention credits (“ERC”) received from Coronavirus Aid, Relief, and Economic Security (“CARES”) Act funding for businesses that had certain employee costs and were affected by the coronavirus pandemic.

Nine months ended September 30, 2025 as compared to nine months ended September 30, 2024

Summary Operating Results

The following table summarizes our overall operating results for the nine months ended September 30, 2025 and 2024.

(in thousands)

(1) See “Non-GAAP Financial Measures.”

The following table summarizes our segment data for the nine months ended September 30, 2025 and 2024, including operating results and data on a same-store community portfolio basis.

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)

(1) Q3 2025 YTD and Q3 2024 YTD excludes casualty loss, non-recurring settlement fees, non-income tax and non-property tax of $3.4 million and $1.6 million, respectively.

(2) Excludes four unconsolidated communities.

(3) Excludes four unconsolidated communities, 6 repositioning communities, and 19 newly acquired communities.

The increase in resident revenue was primarily attributable to 19 additional communities acquired during 2024 and 2025, and a 6.0% increase in average rent rates, comprised of a 4.9% increase in same-store portfolio RevPOR and a 90 basis point increase in same-store weighted average occupancy.

The increase in community operating expense was primarily attributable to 19 additional communities acquired during 2024 and 2025 and an increase in same-store community operating expense, primarily resulting from increases in labor, utilities, service contracts and other operating expenses.

The increase in net loss was primarily attributable to $4.7 million impairment of assets held for sale in 2025, the gain on extinguishment of debt in 2024 of $38.1 million, an increase in transaction, transition and restructuring costs, and an increase in depreciation and amortization expense, partially offset by the increase in community net operating income.

The increase in Adjusted EBITDA was primarily attributable to increased net operating income due to the new communities added during the year.

Expenses and Other

(in thousands)

Management fee revenue increased primarily as a result of managing one more third-party community as compared to the prior period.

General and administrative expense increased primarily a result of an increase in labor and employee related expenses of $4.3 million to support the Company’s growth initiatives and an increase in stock-based compensation of $0.4 million, offset by a $0.6 million decrease in legal fees and $0.6 million in other expenses.

Transaction, transition and restructuring costs increased for the nine months ended September 30, 2025 compared to the prior period. The costs include legal, audit, banking, and other costs to support the Company’s recent debt, restructuring, and investments by the Company, and the CHP transaction.

During 2025, the Company recorded non-cash impairment charges of $4.7 million to property and equipment, net to adjust the carrying value of a community classified as held for sale to its fair value, net of estimated disposal costs.

Interest expense for the nine months ended September 30, 2025 increased due to the incremental borrowings associated with the Company's recent community acquisitions, partially offset by a decrease in the Company’s SOFR-based variable rate debt.

Gain on extinguishment of debt for the nine months ended September 30, 2024 was related to the derecognition of notes payable and liabilities as a result of the 2024 loan purchase of outstanding indebtedness owed to one of our lenders for seven of the Company’s senior living communities.

The increase in other income for the nine months ended September 30, 2025 included $9.1 million recognized for gross ERC received from the CARES Act funding for businesses that had certain employee costs and were affected by the coronavirus pandemic. Partially offsetting the other income was $2.1 million for business costs related to the Company’s recent acquisitions and debt restructuring.

Liquidity and Capital Resources

In addition to $17.0 million of unrestricted cash as of September 30, 2025, our future liquidity will depend in part upon our operating performance, which will be affected by prevailing economic conditions, and financial, business and other factors, some of which are beyond our control. Principal sources of liquidity are expected to be cash flows from operations, proceeds from our secured Credit Facility, proceeds from equity offerings, including sales of common stock under our ATM sales agreement, proceeds from debt, proceeds from debt refinancings or loan modifications, and proceeds from the sale of owned assets. On April 1, 2024, the Company entered into the At-the-Market Issuance Sales Agreement (the “ATM Sales Agreement”), whereby the Company may sell, at its option, shares of its common stock up to an aggregate offering price of $75.0 million. During August 2024, the Company entered into its Credit Facility in which borrowing availability is determined based upon the value of the senior living communities securing the Credit Facility. As of September 30, 2025, the Company had outstanding borrowings under its Credit Facility of $86.1 million and availability of $40.9 million. These transactions are expected to provide additional financial flexibility for the Company and increase our liquidity position. See “Note 7–Debt” in the Notes to Condensed Consolidated Financial Statements.

As of September 30, 2025, the majority of our outstanding variable-rate debt obligations were covered by our interest rate caps to better manage our exposure to market risks associated with the fluctuations in variable interest rates associated with our debt.

The Company, from time to time, considers and evaluates financial and capital raising transactions related to its portfolio, including debt financings and refinancings, purchases and sales of assets, equity offerings and other transactions. There can be no assurance that the Company will continue to generate cash flows at or above current levels, or that the Company will be able to obtain the capital necessary to meet the Company’s short- and long-term capital requirements.

Recent changes in the current economic environment, and other future changes, could result in decreases in the fair value of assets, slowing of transactions, and the tightening of liquidity and credit markets. These impacts could make securing debt or refinancings for the Company or buyers of the Company’s properties more difficult or on terms not acceptable to the Company. The Company’s actual liquidity and capital funding requirements depend on numerous factors, including its operating results, its capital expenditures for community investment, and general economic conditions, as well as other factors described in “Item 1A. Risk Factors” of our 2024 Annual Report on Form 10-K filed with the SEC on March 17, 2025.

In summary, the Company’s cash flows were as follows (in thousands):

Operating activities

Net cash provided by operating activities for the nine months ended September 30, 2025 was $24.8 million as compared to net cash provided by operating activities of $1.4 million for the nine months ended September 30, 2024. The change of $23.4 million was primarily due to the improvement in net income inclusive of the non-cash adjustments to earnings and the change in accounts payable and accrued expenses receivable during the nine months ended September 30, 2025 compared to the prior year period.

Investing activities

Net cash used in investing activities for the nine months ended September 30, 2025 was $62.0 million, which was primarily due to the acquisition of three communities of $38.2 million, and $24.4 million in ongoing capital improvements, partially offset by a return of investment of $0.6 million in our unconsolidated entity. Net cash used in investing activities of $154.1 million for the nine months ended September 30, 2024 was primarily due to the payment of $102.5 million for an acquisition deposit used to fund the purchase of eight communities on October 1, 2024. Other net cash used in investing activities included the acquisition of four communities of $22.3 million, the acquisition of four unconsolidated entities of $22.4 million, and ongoing capital improvements of $17.9 million, partially offset by a return of on investment of $10.4 million in our unconsolidated entities and $0.6 million from the proceeds from the sale of an unencumbered land parcel in January 2024.

Financing activities

Net cash provided by financing activities for the nine months ended September 30, 2025 was $34.0 million primarily due to proceeds from our Credit Facility of $35.6 million and proceeds from notes payable of $18.1 million in connection with the 2025 Mortgage Loan and 2025 Ally Term Loan, partially offset by repayments of our Credit Facility of $9.5 million, repayments of notes payable of $4.3 million, and dividends paid of $4.2 million. The net cash provided by financing activities for the nine months ended September 30, 2024 was $178.8 million primarily due to net proceeds received from the issuance of common stock of $190.5 million, proceeds of $36.9 million from notes payable, and proceeds from noncontrolling investors in joint ventures of $7.7 million, partially offset by repayments of notes payable of $50.0 million, deferred loan costs paid of $2.5 million, purchases of derivative assets of $1.9 million, and dividends paid of $1.4 million.

Non-GAAP Financial Measures

Community Net Operating Income and Net Operating Income Margin

Community Net Operating Income and Net Operating Income Margin are non-GAAP performance measures that the Company defines as net income (loss) excluding: general and administrative expenses (inclusive of stock-based compensation expense), interest income, interest expense, other income (expense), provision for income taxes, management fees, and further adjusted to exclude income/expense associated with non-cash, non-operational, transactional, or organizational restructuring items that management does not consider as part of the Company’s underlying core operating performance and that management believes impact the comparability of performance between periods. For the periods presented herein, such other items include depreciation and amortization expense, transaction, transition and restructuring costs, gain on extinguishment of debt, loss from equity method investment, casualty loss, non-recurring settlement fees, non-income tax, and non-property tax. Net Operating Income Margin is calculated by dividing Net Operating Income by resident revenue. The Company presents these non-GAAP measures on a consolidated community and same-store community basis.

The following table presents a reconciliation of the Non-GAAP Financial Measures of Net Operating Income and Net Operating Income Margin, in each case, on a consolidated community and same-store community basis to the most directly comparable GAAP financial measure of net income (loss) for the periods indicated:

(Dollars in thousands)

(1) Q3 2025 and Q3 YTD 2025 excludes 3 and 16 senior living consolidated communities acquired by the Company in 2025 and 2024, respectively and the 6 Repositioning communities. Q3 2024 excludes 6 senior living consolidated communities acquired by the Company in 2024 and the 6 Repositioning communities.

(2) Includes casualty loss, non-recurring settlement fees, non-income tax and non-property tax.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP performance measure that the Company defines as net income (loss) excluding: depreciation and amortization expense, interest income, interest expense, other expense/income, provision for income taxes; and further adjusted to exclude income/expense associated with non-cash, non-operational, transactional, or organizational restructuring items that management does not consider as part of the Company’s underlying core operating performance and that management believes impact the comparability of performance between periods. For the periods presented herein, such other items include stock-based compensation expense, provision for credit losses, impairments for assets held for sale, gain on extinguishment of debt casualty losses, and transaction, transition and restructuring costs.

The following table presents a reconciliation of the non-GAAP financial measures of adjusted EBITDA to the most directly comparable GAAP financial measure of net income (loss) for the periods indicated:

(In thousands)

(1) Casualty losses relate to non-recurring insured claims for unexpected events.

(2) Transaction, transition and restructuring costs relate to legal and professional fees incurred for transactions, restructuring projects, or related projects, including the CHP transaction.

Effectiveness of Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to the Company’s management, including the CEO and CFO as appropriate, to allow timely decisions regarding required disclosure.

Based upon the controls evaluation, procedures evaluation and the material weakness described below and in our Annual Report on Form 10-K, which was filed with the SEC on March 17, 2025, the Company’s CEO and CFO have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s disclosure controls and procedures are ineffective. We are in the process of remediating the changes in internal controls over financial reporting and implementing a remediation plan as outlined below as of September 30, 2025; however, internal control remediation testing will not be finalized until late 2025.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. The Company’s system user access controls for certain financial systems, including provisioning and user access review, were not operating effectively. Moreover, the lack of effective user access controls caused insufficient restriction of user and privileged access to our payroll system and data, resulting in a lack of segregation of duties for certain user roles. These control deficiencies could result in a material misstatement of our accounts or disclosures that would not be prevented or detected on a timely basis, and accordingly, we determined that these control deficiencies in aggregate constitute a material weakness.

Other than the changes outlined below, there have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company’s fiscal quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Changes in Internal Controls over Financial Reporting and Remediation Plan

As disclosed in our 2024 Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 17, 2025, we identified a material weakness in our internal control over financial reporting, which has not been remediated as of September 30, 2025. We have implemented the following plan for remediation of the material weakness as of September 30, 2025. Control weaknesses are not considered remediated until enhanced internal controls have been operational for a period of time, are tested and management concludes that these controls are operating effectively. We will continue to monitor the effectiveness of our remediation measures in connection with our future assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures. We will make any changes to the design of our plan and take such other actions that we deem appropriate given the circumstances. We are in the process of implementing our remediation plan and anticipate testing to be completed in late 2025.

• Established a project team to review, evaluate and remediate the material weakness.
• Retained a third-party firm to validate the design of newly implemented controls to remediate the material weakness.
• Restricted user and privileged access to our payroll system to ensure appropriate segregation of duties.
• Further implemented single sign-on user access for key financial systems.
• Enhanced key financial system user access reviews to ensure the completeness and accuracy of users.
• Further reviewed our system user access controls and implemented additional review controls as deemed necessary.

Except as set forth below, there have been no material changes to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.

The following risk factors have been added:

Risks Related to Our Pending Acquisition of CNL Healthcare Properties, Inc. (“CHP” and, such acquisition, the “Acquisition”)

The Acquisition may not be completed in a timely manner or at all, and the Merger Agreement may be terminated in accordance with its terms.

On November 5, 2025, we announced that we had entered into a definitive agreement and plan of merger by and among Sonida, CHP, SSL Sparti LLC, Sparti Merger Sub, Inc., and CHP Merger Corp., dated as of November 4, 2025 (the “Merger Agreement”) to acquire CHP. Pursuant to the Merger Agreement, the Acquisition is subject to certain customary closing conditions, some of which are beyond our control, including (a) the receipt of certain regulatory consents, approvals and authorizations from governmental entities, (b) receipt of both Company and CHP shareholder approval, (c) receipt of an opinion relating to the REIT qualification of CHP, and (d) subject to certain exceptions, the accuracy of the representations and warranties of, and compliance with covenants by, each of the parties to the Merger Agreement. These conditions may not be satisfied or waived in a timely manner or at all, and, accordingly, the Acquisition may be delayed or may not be completed. We may experience delays and challenges in meeting the requirements necessary to complete the Acquisition, and there is no certainty that closing will occur as expected, or at all.

In addition, either the Company or CHP may terminate the Merger Agreement based on the customary termination rights for each party included therein. The Company will be required to pay CHP a termination fee of $30.0 million if the Agreement is terminated by CHP under certain circumstances, including by reason of a breach by the Company.

The number of shares of our common stock that we will issue to former CHP shareholders in the Acquisition is based on a formula and is uncertain.

The number of shares issuable to CHP shareholders in the Transaction is uncertain. Each share of common stock of CHP will be cancelled and converted into the right to receive (in addition to $2.32 in cash) the number of shares of Sonida Common Stock equal to $4.58, divided by the volume weighted average trading price (“VWAP”) of our shares during a measurement period prior to closing of the Acquisition, with the greatest number of shares to be issuable if the VWAP of our shares is $22.73 or less during the relevant measurement period and the lowest number of shares to be issuable if the VWAP of our shares is $34.76 or more during the relevant measurement period. Because the total number of shares issuable to CHP shareholders depends on the VWAP of our shares during the relevant measurement period prior to closing, we do not know the exact number of shares of our common stock that we will be required to issue to CHP shareholders in the Acquisition. The market price of our shares fluctuated prior to and after the date of the announcement of the Merger Agreement and has and will continue to fluctuate from the date of this Quarterly Report on Form 10-Q through the relevant measurement period. It is impossible to accurately predict the market price of our shares and, therefore, impossible to accurately predict the number of our shares that we will issue to the CHP shareholders in the Acquisition. Stock price changes may result from a variety of factors, including, among others, general market and economic conditions, changes in our business, results of operations, financial condition and prospects, market assessments of the likelihood that the Acquisition will be completed, interest rates and other factors generally affecting the price of our common stock and the timing of the Acquisition. Many of these factors are beyond our control. In addition, the market price of our shares may decline as a result of the Acquisition.

The announcement of the Acquisition may adversely affect our business, financial conditions, operations, stock price and market value.

The announcement and pendency of the Acquisition may disrupt our operations by diverting management attention and resources, creating uncertainty among employees, residents, suppliers, operators and other partners, and delaying certain business decisions. If the Acquisition is not completed, we will have incurred significant costs, including fees to advisors and the diversion of management time, without realizing the expected benefits and the price of our common stock may decline and could fluctuate significantly. We may also face adverse market reactions, challenges in retaining employees and maintaining relationships with business partners, and negative impacts on our market position and ability to execute strategic initiatives. In addition, under specified circumstances, we may be required to pay CHP a termination fee, as discussed above. Any of these developments could adversely impact our business, financial condition, stock price, result of operations and market value.

Integration challenges may limit our ability to achieve anticipated benefits of the Acquisition.

After the Acquisition is completed, we may face difficulties combining CHP’s business and operations with our own. Integration could lead to loss of key employees, residents, suppliers, operators or other business relationships, and may disrupt ongoing operations. We may also encounter inconsistencies in standards, controls, and policies, as well as unforeseen liabilities, expenses or regulatory requirements. The integration process could involve higher costs than anticipated or take longer than expected, and it may divert management’s focus and resources away from our existing business. Any such challenges, delays or increased costs could prevent us from realizing the anticipated benefits of the Acquisition and could adversely affect our revenues, expenses, financial condition and results of operations.

The obligations and liabilities of CHP, some of which may be unanticipated or unknown, may be greater than we have anticipated, which may diminish the value of CHP to us.

CHP’s obligations and liabilities, some of which may not have been disclosed to us or may not be reflected or reserved for in CHP’s financial statements, may be greater than we have anticipated, although we are not obligated to close the Transaction if CHP suffers a material adverse change as described in the Merger Agreement. The obligations and liabilities of CHP could have a material adverse effect on CHP’s business or CHP’s value to us or on our business, results of operations or financial condition. We are not entitled to indemnification by CHP. In the event that we are responsible for liabilities substantially in excess of any amounts recovered through any applicable insurance or alternative remedies that might be available to us, we could suffer severe consequences that materially and adversely affect our business, results of operations or financial condition.

During the pendency of the Acquisition, we may not be able to enter into a strategic transaction with another party on more favorable terms because of restrictions in the Acquisition Agreement, which could adversely affect our business prospects.

Covenants in the Merger Agreement may impede our ability to make acquisitions during the pendency of the Acquisition, subject to specified exceptions. As a result, if the Acquisition is not completed, we may be at a disadvantage to our competitors during that period.

Following the Acquisition, our current shareholders will have a significantly lower percentage ownership and voting interest in us than they currently have in the Company and will exercise less influence over management and policies of the Company.

To the extent the interests of the former shareholder of CHP may differ from the interests of the Company’s other shareholders, the Company’s other shareholders may be disadvantaged from any action that the former shareholders of CHP may seek to pursue.