Brookdale Senior Living Inc. Q2 FY2025 earnings call

Improving Operating Performance

• Focus on profitable occupancy via revenue yield management, expense oversight, accountability, and strategic investment.
• SWAT teams working on underperforming communities; occupancy bands improved with fewer communities in less than 70% band and more in over 95% band.
• G&A expenses reduced by $850k Q2 vs Q1, down $1.2M from 2Q '24.

Optimizing Real Estate Portfolio

• Consolidated portfolio at 617 communities (235 leased, 382 owned). Plan to exit 55 leased assets by year-end, with adjusted transition timeline.
• Closed sale of 1 owned community, 1 leased property transitioned, 13 assets under contract, 28 additional assets identified for disposition.

Capital Reinvestment

• Invested $49M in Q2 in capital projects, over 500 capital-related projects underway.

Reducing Leverage

• Reduced adjusted annualized leverage from 9.7x to 9.3x in Q2.

Elevating Quality

• Recognitions for culinary experts, operators, and CFO; industry recognizing top talent.

Shareholder Engagement and CEO Search

• Director nominees received majority support; CEO search committee reviewed ~50 candidates, aim to conclude process in coming months.

Brookdale delivered solid second quarter performance. Same community weighted average occupancy for Q2 was 80.7%, growing 190 basis points year-over-year. June month-end occupancy was 82.8% (240 basis points higher than June 2024) and July was ~83.3% (260 basis points higher than July 2024). RevPOR on a same community basis grew 2.4% year-over-year. Adjusted EBITDA grew 19.7% quarter-over-quarter and 23.4% for the first half of the year. Adjusted free cash flow was $20 million for Q2 (vs negative $6 million in 2024 Q2); first half adjusted free cash flow was $24 million vs negative $32 million in 2024. Leased portfolio also generated positive adjusted free cash flow in Q1 and Q2 2025.

RevPAR and Adjusted EBITDA

• Raised 2025 RevPAR growth guidance to 5.25%-6% over prior year.
• Raised adjusted EBITDA guidance to $445M-$455M.

Ventas Community Transitions

• Revised guidance for Ventas community transitions, now expecting negative adjusted EBITDA impact of ~$2M vs previous, without which adjusted EBITDA would be higher by ~$2M.

Occupancy and Leverage

• Expect continued leverage from increasing occupancy due to industry's high fixed cost nature.

• Delays in Ventas community transition timeline could further impact consolidated results.
• Macroeconomic uncertainty and market conditions could affect move-ins and occupancy.
• Variability in working capital and timing of expense and revenue recognition.

Q: What's been done differently operationally since stepping in?

A: Focus on SWAT teams, daily standups between operations/sales/marketing, increased accountability, empowering field teams to make decisions, and culture focus on operational improvements.

Q: Thoughts on balancing rate and occupancy?

A: Bifurcate portfolio to focus on under 70% occupancy bands to get to 80%, and over 80% to perform exceptionally; focus on pricing in higher bands while getting under 70% up.

Q: Drivers of cash flow and capital priorities?

A: Favorable working capital changes and better operating performance; capital priorities include reinvestment in communities, CapEx for fresh impressions, and using proceeds from dispositions for growth and debt repayment.

Q: Local market strategy and differentiators?

A: Differentiate through quality of care, Brookdale Health Plus care coordination program (in ~200 communities by year-end), improving NPS, and local ED decision-making.

Q: Bridging RevPAR and plan for collateralized assets up for refinancing?

A: Ventas dispositions benefit RevPAR; second SWAT team focuses on improving operational performance of collateralized assets to remove them from the collateral pool for unencumbered use later.