Brookdale Senior Living Inc. Q1 FY2025 earnings call

• Board executed planned leadership transition and initiated CEO search with Spencer Stuart. - Board appointed two new independent directors and Frank Bumstead will not seek reelection. - Strategies: - Improving operating performance: Piloting new pricing promotions in select communities, intensifying efforts in communities above 80% occupancy, deploying SWAT team approach in communities below 80% occupancy, conducting cost structure review, expanding HealthPlus offering. - Optimizing real estate portfolio: Exiting 55 leased communities and divesting 14 non-core owned communities by year-end, current leased portfolio generates positive adjusted free cash flow, reviewing another modest group of assets. - Capital reinvestment: Investing $5 million in late 2024 and planning to invest additional $10 million in 2025 through first impressions program, development team working on plan to keep communities competitively positioned. - Reducing leverage: Working to reduce leverage through adjusted EBITDA and cash flow growth and applying asset sale proceeds toward debt reduction. - Ensuring high quality environments: Receiving accolades like being in U.S. News & World Report Best of Senior Living and Newsweek Most Loved Workplace, improving residents' and family's likeliness to recommend rating each month.

Consolidated RevPAR grew 4.9% in the first quarter, driven by accelerating year-over-year weighted average occupancy growth. First quarter adjusted EBITDA was $124 million, 27% above the prior year quarter. Adjusted free cash flow was positive $4 million, a $30 million increase over the prior year quarter. Same community RevPAR increased 4.5% over the prior year, with same community weighted average occupancy at 80% in the first quarter. Same community operating income margin expanded 90 basis points year-over-year to 29%, the highest in five years. Revenue contribution from different segments was not explicitly broken down in terms of percentage in the transcript.

• 2025 consolidated RevPAR growth expected in the range of 5% to 5.75% over the prior year. - Adjusted EBITDA guidance raised to $440 million to $450 million. - Adjusted free cash flow expected in the range of $30 million to $50 million assuming relatively neutral working capital and current estimate for transaction, legal and organizational restructuring costs. - Considered seasonal factors including day count, annual associate merit increases, and utilities expense, with an estimated $10 million adjusted EBITDA headwind between first and second quarters. - Assumes Ventas non-renewal communities disposition on October 1, and disposition timing of 14 communities may impact results.

• Macro-economic uncertainty which could impact actual results. - Variability in asset disposition timing, as sales process often takes time and some communities are in early stages. - Uncertainty related to natural disaster season which may influence results.

Q: Ben Hendrix asked about pricing strategy and guardrails.

A: Dawn Kussow said they are doing targeted pricing promotions, piloting strategies, and balancing rate while protecting expense growth. Denise Warren added it's more targeted in smaller areas with piloting to increase occupancy and get larger flow through at 80% occupancy threshold.

Q: Ben Hendrix followed up on fresh impressions investment.

A: Denise Warren said fresh impressions are included in CapEx guidance of $175 million to $180 million, targeted at community level to increase occupancy, and budgeting for 2026 rate will be done mid to end of the year.

Q: Brian Tanquilut asked about margin seasonality.

A: Denise Warren said first quarter is usually the highest margin due to least number of days, and there's a $10 million adjusted EBITDA headwind between first and second quarters due to day count, associate merit increases, and utilities expense.

Q: Brian Tanquilut asked about RevPOR performance and pricing power.

A: Dawn Kussow said they are balancing pricing power and occupancy, with RevPOR growth reflecting successful price increase in January and focused on getting rate in excess of expense growth.

Q: Andrew Mok asked about occupancy initiatives and RevPAR guidance.

A: Dawn Kussow said SWAT groups were underway late 2024 and being rolled out more, dynamic pricing is scaled up, first impressions investment is underway. And RevPAR guidance is based on expectation that fourth quarter year-over-year RevPAR and occupancy will be better than first quarter.

Q: Andrew Mok asked about dynamic pricing strategy.

A: Denise Warren said they have always done targeted pricing and are being more active now with repricing up or down in different markets.

Q: Tao Qiu asked about asset dispositions and CEO search.

A: Chad White said they are working on disposition of 14 non-core or underperforming owned communities with early stages but expecting improvements in adjusted EBITDA, etc. Denise Warren said board is looking for a CEO with operational expertise and strategic vision, and CEO search will take at least six months.

Q: Joanna Gajuk asked about EBITDA guidance raise and macro factors.

A: Dawn Kussow said it's due to first quarter outperformance in occupancy and expense management, and they are cautious due to macro-economic uncertainty. Denise Warren added April occupancy was favorable but they are being cautious with guidance.

Q: Joanna Gajuk asked about SWAT teams examples.

A: Denise Warren said removing barriers like CapEx deployment, speed in filling roles, and pricing is part of what SWAT teams are doing, and Chad White said they are rolling out learnings to additional communities.

Q: Josh Raskin asked about CEO search and pricing piloting magnitude.

A: Denise Warren talked about CEO search taking six months and being focused on operations, and said pricing piloting is more targeted and conscious of rate positioning.