Q3 2022 Brookdale Senior Living Inc Earnings Call

November 8, 2022

[music].

Yeah.

Welcome to the Brookdale senior living third quarter two earnings call. My name is Harry and I'll be coordinating your call today.

If you would like to ask a question during the Q&A you may do so by pressing star one on your telephone keypad.

Now I'd like to hand over to Kathy Macdonald again, Kathy. Please go ahead.

Thank you and good morning, I'd like to welcome you to the third quarter earnings call for Brookdale senior living joining us today are Cindy Baier, our president and Chief Executive Officer, and Steve Swain, Our executive Vice President and Chief Financial Officer, All statements today, which are not historical facts.

May be deemed to be forward looking statements within the meaning of the federal Securities laws. These statements are made as of today's date and we expressly disclaim any obligation to update these statements in the future actual results and performance may differ materially from forward looking statements certain of the factors that could cause actual.

Results to differ are detailed in the earnings release, we issued yesterday as well as in the reports we filed with the SEC from time to time, including the risk factors contained in our annual report on Form 10-K, and quarterly report on Form 10-Q, I direct you to the release for the full Safe Harbor statement.

Also please note that during this call we will present non-GAAP financial measures for reconciliations of each non-GAAP measure from the most comparable GAAP measure I direct you to the release and supplemental information, which may be found at Brookdale dotcom forward Slash investor and was furnished on an 8-K yesterday now.

I will turn the call over to Cindy.

Thank you Kathy good morning to all of our shareholders analysts and other participants I hope you and your loved ones are healthy and happy welcome to our third quarter 2022 earnings call. We appreciate you joining us today. We're pleased to report that we saw a number of operational improvements during the third quarter. Despite newmar.

There is challenges from Hurricanes in our senior housing revenue growth was strong for the third quarter as Revpar increased 10% for the quarter and year to date compared to the prior year periods.

Weighted average occupancy grew at nearly the same sequential rate as last year, even with hurricane Ian impacting the last week of the quarter year to date Revpar was four 5% better than last year, which helped mitigate the continuing impacts of inflation and the challenging labor markets.

Adjusted EBITDA, excluding government grants increased 16% compared to the prior year quarter.

In addition, we recognized phase four provider relief funds in the third quarter.

Sequentially. The other operating income increase of $58 million helped deliver a 111% increase to adjusted EBITDA and the grants resulted in positive adjusted free cash flow. We are pleased that the contract labor declined more than 40% from the second to third quarter and offset nearly.

All of the sequential incremental cost most notably the extra calendar day, which was also a holiday that said with the impacts from the extended labor recovery Hurricane and expenses and higher general repair and maintenance costs, we find it necessary to revise and tightened our adjusted EBITDA guidance for the year.

Let me turn to our third quarter financial highlights Revpar increased 10% compared to the prior year quarter, and we continued on a strong path of occupancy recovery.

The third quarter's weighted average occupancy increased 390 basis points compared to the prior year period.

September marked the 11th consecutive month of year over year growth move ins or 7% higher than in the third quarter of 2021 in fact on a same community basis. The third quarter saw the most quarterly movements in the Companys history as reported by Nic The industries.

Third quarter senior housing occupancy increased 110 basis points on a sequential basis, we are delighted that brookdale again exceeded industry growth by increasing sequential occupancy by 180 basis points, our strong topline execution plus the benefit of both supply and demand tailwind is.

In our higher move in volume.

Turning to labor, our third quarter total labor costs were nearly flat on a sequential basis the contract labor reduction mitigated the incremental sequential cost most notably the extra calendar day, which was also a holiday as we continued to increase net hires to resolve contract labor we saw an increase.

And training hours for the new associates, which resulted in some overlapping hours.

By quarter, we've worked hard to dramatically reduce contract labor from the peak in December 2021 by filling more shifts with dedicated Brookdale associates, while maintaining strong standards of service and providing high quality care sequentially.

Sequentially contract labor declined more than 40% for the third quarter as.

As mentioned earlier, we are continuing our successful program of increasing net hires and decreasing our reliance on contract labor.

Despite ongoing challenges in the U S labor market, we achieved 11 consecutive months of positive net hires through September .

Year to date, our net hires exceeded 4500, increasing our employed workforce by 14% since year end.

Large and consistent Brookdale workforce is good for our residents because the culture of caring and relationships between residents and our associates are part of the many benefits of senior living.

Well, we continued to make steady progress, we're not where we want to be with labor.

Contract labor usage is declining, but our progress is slower than expected.

Associate turnover remains elevated and we're working to reduce it which will decrease training costs and improved workforce productivity comp.

Competition for community Associates remains fierce and wage pressure continues as a result of the highly competitive labor market.

Although other industries are reporting some stabilization in the labor market the senior living industry has yet to experience stabilization.

With the steady progress we've made in the U S job openings shrinking we do expect less labor pressure in 2023.

Our pricing actions for 2023 will incorporate expected labor and inflationary costs as.

As we ended the quarter hurricane in the fifth most powerful storm ever to make landfall in the U S impacted our operations.

It was a slow moving storm, which caused widespread destruction.

Given that Brookdale had 77 communities within the projected path of the storm I am grateful that we were able to help protect our residents and associates as well as our communities.

It's important to take a moment to thank our many dedicated associates, who cared passionately and acted courageously to help protect our residents and each other during and after hurricane Ian we evacuated nine communities and 85% of the residents who chose to relocate with US were welcomed by other brookdale.

Communities within Florida.

I want to express deep appreciation for our associates from evacuated communities, who traveled with our residents during the evaluation and stayed to care for them.

I also want to say a special thank you to our associates at host communities, who worked hard to make sure that evacuated residents will continue to feel a sense of normalcy during the evacuation.

With Brookdale size and scale I'm also grateful for our corporate and field teams, who mobilized to help make sure that our residents would have beds to sleep in and nutritious food to eat.

Our associates worked hard to make a difficult time easier for residents by assisting with obtaining medication and personal items as well as helping care for residents pets planning and execution are critical to success, our asset management teams pre stage supplies and work closely with fuel and water vendors.

Where appropriate maintenance teams stayed in our communities to accelerate the recovery.

We know residents want to return home as quickly as possible. After the storm passes at the same time, we have a robust process to ensure the communities safe and comfortable so we can provide a positive resident welcome home experience I'm happy to share that residents have returned home all nine previously evacuated commute.

Turning to our 2020 to annual guidance in our press release, you will see that we have updated and tightened our guidance range, we expect double digit revpar growth for the full year as we continue to make occupancy gains combined with the existing strong annual rate increase we incorporated third quarter operating results and.

Updating our fourth quarter expectations due to an extended labor recovery as well as hurricane Ian cost. We are taking many steps to manage labor costs appropriately in the fourth quarter barring a significant disruptive COVID-19 variant Serge we expect to continue reducing premium labor have a large.

Brookdale workforce and as occupancy continues to increase expect to see more efficiencies in our operations as interest rates increase and the overheated labor market cools, we expect less wage pressure.

Reflecting on the aftermath of hurricane in most of the communities in the past had some level of damage and we along with our trusted partners are working tirelessly to complete repairs.

We bear hurricane expenses below the deductible limits in summary, even though we reduced guidance the middle of our range will deliver a sizable year over year. Adjusted EBITDA increase we are still in the early stages of what we expect to be a long and prosperous tailwind we have strong occupancy momentum.

And our 2023 pricing will incorporate inflationary impacts the demographic demand and need for our services are indisputable and with tight capital markets. The current benefit from low new supply will extend for several years I will now turn the call over to Steve. Thanks.

Thanks, Andy I'm glad to be back from medical leave and sincerely grateful for all of the thoughtful wishes as well as the outstanding Brookdale team, who stepped up in my absence.

Let me now provide three key takeaways for the quarter.

First revpar increased 10% in the third quarter compared to the prior year quarter.

Second expenses on a sequential basis.

<unk> operating expenses increased about two 5% along with broad inflationary pressure. The most notable items included seasonally higher utilities and labor expenses from an additional calendar day, which was also a holiday.

Third sequentially, we recognised an incremental $58 million of other operating income primarily driven by provider relief funding received in August .

As of September 30th our total liquidity was nearly $400 million.

Now let me provide context for these highlights on a same community basis, starting with revenue.

Occupancy increased 400 basis points compared to the prior year quarter and sequentially increased 190 basis points.

<unk> por or rate improved 4% compared to the prior year quarter on a sequential basis Revpar was lower by 40 basis points. This was about half of the first to second quarters change due to the benefit of stronger third quarter moving rates with positive demographic tailwind pricing power and only 2% of.

Our communities currently exposed to new construction starts we see a long runway for revenue growth.

Turning to operating expenses, starting with labor third quarter labor expenses increased 1% on a sequential basis.

Reduced contract labor by more than 40%, which mitigated increases for an additional calendar day, which was also a holiday and direct labor and overlapping costs due to training new associates as our permanent workforce stabilizes, we'd expect further reductions in contract labor lower overtime and improve productivity.

Other facility operating expenses increased 6% sequentially four factors were the primary drivers of this change.

<unk> inflationary pressure accelerated to a new multi decade high in September utility.

Utilities repairs and maintenance expenses were also higher due to seasonality and record heat waves, an extra day in the quarter drove incremental food and supply costs and COVID-19 related expenses were higher SBA five cases peaked in the third quarter.

The fourth quarter. Other opex is expected to be less sequentially due to lower seasonal expenses, such as utilities supplies and repairs.

Partially offset by hurricane in remediation and evacuation costs sequentially adjusted EBITDA increased 111%, excluding the benefit of government grants adjusted EBITDA increased 16% compared to the prior year quarter.

Adjusted free cash flow turned positive in the quarter. This $53 million sequential improvement was primarily driven by our acceptance of provider relief funds, partially offset by higher interest expense due to rising interest rates turning to liquidity as of September 30th total liquidity was 300.

$96 million compared to $412 million at the end of the second quarter in October we refinanced all of our 2023 debt maturities with the exception of one highly covered loan secured by an asset plan for sale. The maturity runway has now been cleared for nearly two years.

Considering that our next agency debt maturity is September 2024.

Throughout the pandemic and recovery period, we have successfully executed plans to support liquidity cash flow and liquidity are a priority and we will continue to be now let me summarize our revised 2022 guidance.

We expect annual Revpar growth to be approximately 10%, while historically the fourth quarter sequential occupancy trend was flat. This year, we expect to deliver over 50 basis points of sequential growth on a year over year basis, we expect the fourth quarter to be well over a 300 basis point improvement.

The impact of Hurricane in is included in our updated guidance. We currently expect approximately $8 million of expense net of expected insurance recovery and $10 million of non development Capex.

Hurricane costs below deductible limits on a community by community basis, because of the storm had such a wide breadth. It impacted 70 communities each with a separate deductible barring a significant disruptive flew our COVID-19 variance surge the fourth quarter facility operating expenses are expected to be lower in the third.

Quarter due to a continued reduction of premium labor lower seasonal utilities, along with more efficiency and our operational workforce.

We expect annual adjusted EBITDA to be in the range of $250 million to $260 million.

Annual non development Capex is now expected to be around $170 million, including hurricane related investments.

This increase is expected to be offset by lower development and capex.

Aligned with our previous guidance, we expect net interest expense to be $6 million higher than the third quarter 2022.

There are two unique working capital uses of cash in the fourth quarter. We have a final cares act government repayment of $32 million and we hedged the October refinancing with an interest rate swap, which will have a onetime net impact of $6 million in the fourth quarter. As we are in November I'll provide a.

<unk> early 2023 indicators, we believe we will see another strong year of occupancy growth with higher operational expenses. This year, we expect 2023 rate increases will be greater than 2022.

The new in place residents rates are effective January one and will incorporate expected labor and inflationary cost increases.

As Sandy noted with U S job openings falling we expect the 2023 labor market pressure to improve.

From a cash flow perspective, we have no debt maturities in 2023, except for one highly covered loan secured by an asset plan for sale over the past two years, we have demonstrated our ability to grow occupancy. Additionally, our senior population is growing rapidly and new construction has slowed significantly.

Where our communities will see minimal competition from new builds.

With these trends combined with pricing power Brookdale as growth outlook is strong.

I'll now turn the call back over to Cindy.

To summarize Steve's remarks, we believe continued occupancy growth in 2023, coupled with a strong in place resident rate increase on January one we will drive significant EBITDA and adjusted free cash flow growth. We've seen move in success with our AI, driven analytics pilot, which accelerates resident socialization.

And engagement by connecting new and existing residents with common interests.

Our overarching focus is the health and wellbeing of our residents and associates and we are continuing to innovate.

As an example, we are seeing improved outcomes and our health plus communities, such as lower emergency room, or urgent care, yes, and lower hospitalization rates when compared to similar populations.

Our innovation is another way to differentiate our services and we look forward to expanding this program to additional communities in 2023 as we close our prepared remarks I want to thank all of our associates, both corporate and field for their commitment to enriching the lives of the seniors we serve.

Operator, we will now open up the call for questions.

If you'd like to ask a question. Please dial star followed by one on your telephone keypad now and please ensure you're on mute locally when prepared to ask your question.

First question is from the line of Brian <unk> of Jefferies. Please go ahead.

Hey, good morning.

Yes. Good morning, So I guess my first question is for Steve first.

As I think about the guidance adjustment for the year in your Q3 performance. Maybe if you can just walk me through how you are bridging sequentially and how youre thinking about that EBITDA.

Progression.

Thanks.

Sure. Thanks, Good morning, Brian .

Middle of the guidance.

Implies $60 million of EBITDA in the fourth quarter I'll start with the third quarter's EBITDA run rate of about $40 million.

Without brands and bridge, the $20 million to Q4 EBITDA.

Three components first revenue, we expect fourth quarter occupancy growth to be over 50 basis points on a sequential basis, that's well over 300 basis points on a year over year basis.

So that math is pretty straightforward.

Is labor.

Half and expect to continue reducing premium labor.

Have a.

Our larger brookdale workforce and see more efficiencies in.

Our operational workforce, thereby reducing overlapping expenses and.

And third.

Other facility Opex, we expect a lower seasonal utilities and repairs.

Generally be offset.

By Hurricane.

Which is in the neighborhood of $7 million of net impact.

So these components should bridge you to the fourth quarter guidance.

Got it and then Steve as I think about 2023 I know, it's early to think about guidance, but given what you just gave us on the other.

The bridge from Q3 to Q4, maybe adjusting for that $7 million Hurricane Ian number. So, let's just say $67 million is that the right baseline to sequentially build earnings off of as I think about.

2023, I mean is that the right ballpark for like annualized put against some growth expectations are there.

So I don't want to get too far.

Ahead of my skis, So I'll give you a little color on 2023.

It appears were at the beginning of somewhat.

Super cycle, meaning we believe occupancy growth coupled with strong rate increases will drive EBITDA in 2023. So by way of example, let me connect a couple of dogs for sharper picture of Q1.

Stated.

For 2023 rate increase will be greater than 2022 so.

For perspective, 2020, two's average in place resident rate.

Was in the high single digits.

And for perspective that led to a sequential revpar increase of five 4%.

Over the past couple of months, our 60 day and 90 day rates notification letters were mailed out to residents and our 30 day letters will be mailed on or before December one this.

This year 2023 to average in place resident rate increases will be over 10%. So this of course will have a significant benefit to the bottom line.

Got it okay.

And then last question for me as I think about labor.

It sounds like things are on the macro level that should be driving some improvement.

In terms of what's left in terms of opportunity to bring contract labor down and maybe just overall.

Facility operating expenses on a dollar basis, maybe if you can just walk us through whats left and what are the initiatives that you're putting in place to drive that I mean, very impressive 40% decline in contract labor in Q3, but yes, how much juice is left.

On that factor.

There's a lot of opportunity and our goal has been to attract.

Develop and retain the best associates, that's been pretty consistent at Brookdale, but it's fair to say that our contract labor peak in December of last year and on a monthly basis. We've now brought our contracts and paper down by 75% from the peak.

The most effective thing that we've done to drive that improvement as our focus on net hires and we've hired more than 4500, new Brookdale associates this year and a 14% increase in our workforce. The reason that focusing on net hires is so important is because if you think about just the cost of.

Premium labor and if you compare it to the cost of a full time Brookdale associates contract labor can be two to three acts overtime is one and a half time. So what we need to do is keep increasing our fulltime brookdale associates on a part time Brookdale associates to so that we can work more hours on that standard hours.

Right.

Saying that we need to do if we need to improve our turnover.

The realities that we face is the pandemic has been particularly hard on healthcare and senior living and so we.

We have seen at elevated turnover rate and what we need to do is bring that back down. So we're very focused on that we have.

Increased compensation to make sure that we're paying appropriate market rate. We're looking at our benefit we are getting career pathing opportunities that are unmatched in our history to our associates by prepaying training for CNA is in Med Tech.

And that people can grow their career with us and we need to make sure that people understand that they can have a good life with brookdale and they can lose the quality of life, they want to while still serving our seniors and being United by our mission will keep our focus on that.

Thank you.

Thanks.

Our next question is from the line of Josh Raskin of Nephron Research. Please go ahead.

Gosh.

Hey, good morning, Jackie that Marco here on for Josh Thanks for taking the question.

If you look at slide eight of the Investor deck.

There is $275 million in annual increments.

<unk> revenue of the business is able to get back.

To that pre pandemic occupancy level of 84, 5%.

And $430 million, if you're able to get back to the peak occupancy of 89%.

I'm just wondering if you could provide some general thoughts on how we should think about the timing of getting back to those occupancy levels.

When those revenues will flow through to the reported results.

Good to hear from you I am sorry that we Miss Josh, but it's great to have you on the call.

Think about the <unk>.

Road to recovery. There is no question that we're firmly on the road to recovery and I think that the last two years are indicative of the progress that we can make.

I'm really pleased about the fact that we've had such strong occupancy growth since we have inflected in March of 2021, we've seen 780 basis points of occupancy improvement and we have in the third quarter has seen the strongest move ins in our company's history.

So I do think that we're at a time now where.

Supply and demand are tailwind as opposed to headwinds with that 18, babygrow demographic and the constricted supply as a result of both COVID-19, as well as rising interest rates. So our expectation is that we will keep pushing to see move ins increase.

And if you think about us.

Is out.

We've worked through the vast majority of our higher acuity move outs as a result of the pandemic. That's one of the things that tempered our progress in 2022, because people knew again with us when they had higher acuity. Therefore, the time before they needed additional services or the past.

With shorter than we've seen historically, so I think that will be.

Something that is more normal for us moving forward.

Okay.

Okay, great. Thank you and then if I could just squeeze one more quick one in.

I was just wondering if you could give some thoughts on how you view the current market for divestitures and whether youre seeing any inbound interest in <unk>.

It also would be helpful. If you could speak to.

Brookdale is appetite for reducing debt in light of the lower EBITDA levels. Thank you.

I think that the.

The biggest opportunity that we have in front of US is the huge opportunity that is in front of us and if you think about slide eight.

That shows the revenue opportunity at today's market rates and as Steve mentioned, we're expecting to pass through a stronger than average.

And a stronger than 2022 market rate increase in 2023 now that's not to say that we will never sell real estate there may be.

Munity here or there that doesn't fit with our strategy and that.

That we choose to dispose off but it's not as big a part of our future.

Future as it was.

And I think that.

Do you think about leverage levels, the real issue with the leverage at the level of our adjusted EBITDA not the level of our debt. So as we improve our adjusted EBITDA, our leverage ratios will drop just by the improved performance and we do see a path to strong improvements in profitability and cash flow.

Okay, great. Thanks very much.

Thanks Luca.

Our next question is from the line of Steven Valiquette of Barclays. Steven. Please go ahead.

Great. Thanks, good morning, everybody.

I think so.

Hi, Good morning, just a few questions here first on.

Just to kind of clarify around the hurricane impact.

Does any of that from a just an EBITDA perspective flow into 2023. It is all of that sort of normalize that you're exiting the fourth quarter just wanted to confirm yes or no. It is a hurricane impact bleed into next year or not.

Then the other question is kind of more of a semantics question I guess I was curious the way you described the rate increases for 'twenty three to the actual and resident lease contracts actually show like specific rate increase components for either inflation adjustments or labor I wont call. It a surcharge.

It's a show components like that or is it just sort of one rate just with the.

And overall percent increase without really much explanation for why it's going up a level. It's gone I'm just curious on the semantics or the components around the.

The verbiage in the contracts themselves. Thanks.

So I'm going to take.

Question first and then we'll go to the Hurricane question.

But each and every resident right individually.

And as you might imagine it is important to us that our residents understand the rationale for our rate increases so our executive directors will sit down with our residents and explain sort of the pressure that we've seen in labor costs. The other inflationary costs that we're bearing.

And we will share with them their integral rate increase now usually there is two components to it.

Two a resident's rate and Thats rent and care care as you might imagine changes more regularly as our residents.

Support needs increase.

But there are one on one discussions at the at the individual resident level.

Unlike some of our competitors the vast majority of our resident rate increases are January one.

So virtually all of our in place resident rent increases occur there, we do start selling market rates in October one so that will give us the benefit for the fourth quarter. Now if you think about the hurricane costs and Steve can correct me on that with regard to Opex. We would expect most of that virtually all of that there might be something.

Tiny that goes into 2023, but virtually all of it should be in 2022, because really what that is the incremental labor and repairs and maintenance now as it relates to capex that might not occur sort of 2023, sometimes that treehouse 2022, sometimes that trails into the following year as Steve is there anything you would add to that.

No thats it.

It's really capex that might bleed into 2023, we have.

70 communities impacted so there'll be a handful that it still has a lot of capex cost.

Or would there be any loss of revenue, though from <unk> into 'twenty three as far as.

Hurricane impact or this insurance or to make you whole on that.

So we have business interruption insurance and.

As we said in the prepared comment all nine of our communities have residents who have returned home from the Hurricane now as we think about it we probably lost about 40 moving at the end of September from.

People, who are in the process, but it didn't move in that last week of September and then when you relocate residents or with families have personal catastrophes you may lose some residents because they are family has moved away.

And that I don't think thats, something thats material, but.

I also want to say that there is absolutely zero.

Got it okay. Thanks.

Okay.

I should also say we are seeing strong activity in the state of Florida. So I want to make sure that you have on the positive and we usually do see that after a hurricane.

Thank you. Our next question is from the line of <unk> of Stifel.

Please go ahead.

Hey, good morning, Jeff and well come back to Steve.

So my first question is really a classic clarification on the rig question earlier you.

You mentioned the two pieces, there where you will see higher rent growth on January 1st.

And I think third quarter, you can look at the care revenue that was kind of affected by the normalizing acuity. So how should we think about the care pushing out there right now in terms of that progression throughout the year and next year and secondarily in those thinking about discounts are moving.

How has that evolved over the year and maybe your outlook for next year ago.

Yeah, Let me just start by saying care revenue is generally between 15 and 20% of our overall revenue and we did see during 2022.

Our revenue activity in the third quarter was consistent with our pre pandemic.

The acuity of our residents. So we think that is an impact that we've really already experienced in 2022 and I'll leave the rest of the question to Steve you bet.

You mentioned.

We have seen some lower care revenue due to the higher acuity.

<unk> that moved in during the pandemic now moving out but we expect.

These are needs based move outs to stabilize.

As recent move ins.

Have reflected residents.

Lower acuity kind of back to the pre pandemic level.

Lower acuity residents move in.

We should see longer length of stay and a kind of a stabilized care revenue.

As far as the kind of the year.

Year over year dollar amount on the rates.

Mentioned that rent.

Is over we're going to be over 10% in 2023, and generally speaking that's a weighted average number that includes.

What I just gave you both rent and care.

The second part of that question is really about discounts on that moving so now that we see a little bit of deceleration on the LPG side do you feel like you need to do more discounting.

Sorry to boost occupancy.

Well I think it's important to know that like October 1st we started selling at a higher rate and so what that means is that the new move ins are higher relative to our existing residence than they have been previously now we are seeing.

Generally an improvement in discounting.

Across the country, but theres always a community or a market where there may be a new competitor. We're discounting is both necessary and appropriate but our goal is to always maximize revpar the balance growing occupancy and rate and I think that we've demonstrated in our history that we have done.

Wow.

By only taking this out where it's necessary to get a better growth of revpar.

Throughout the year, we have.

<unk> seen sequential improvement in.

Re lease rates.

We've seen particular strength.

Compared to in place resident rates in Al offer instance.

So we do think that we are.

At the beginning of a super cycle, if you will where we we have occupancy growth and strong rate performance.

Great Super cycle like that.

Right.

So my second question is on Labor Cindy you mentioned, the 14% growth in full time employee this year I don't know if it is possible to quantify.

Any additional hiring that you anticipate for next year to replace contract labor and also anticipate additional outcome to recovery.

Yeah, It's a really good question.

It is.

I want to keep hiring associated until we're able to staff as many hours.

Regular wages as possible and the reason that that is not an absolute number of people is because the workforce has changed compared to the pre pandemic.

And people want to work when they want to work where they want to work at how they want to work. So even if you've got the same number of associates. They may not work as many hours if they are part time.

And there's always a little bit of friction in terms of when you are scheduled to open in where somebody wants to fill that particular schedule. The other thing thats different from the pandemic as we have more people who need to quarantine.

So that we can sort of keep them away from north of that when they may be in Texas from infection and so it will take more workers to.

To sort of staff, our communities, but that doesn't mean more.

Alright, what should have as we stabilize as we should have a lower cost per hour because we're working to eliminate that premium labor and that's the play that we're trying to make so I think we hang for a little bit and we will.

Constantly make sure that we've got the right mix of employees and the right location.

Great and last one if I may and seem to look at 2022, so far.

Just as we saw probably was getting better compared to prior years, we had another unprecedented year engine. So let me crawl hurricane inflation, which certainly makes forecasting very difficult.

As you think about next year, what is your guidance philosophy and do you expect to provide.

<unk> guidance as many of your peers are still guiding quarter to quarter.

No I will say that I have never experienced.

100 year pen.

<unk> 40, a year.

Inflation fifth worst hurricane and the United States unprecedented labor market pressure.

And it is really challenged our ability to provide guidance. That's been helpful. If I could get at a time machine and go back I, probably would have given guidance for the quarter as opposed to the year.

Having said that we will evaluate what the right position is for guidance.

February and we'll try to make the best decision for our shareholders. Our goal is to try to share with you what what.

We know or what we think we know and Theres no question that this year's operating environment with a lot harder than we expected.

Great. Thank you everyone.

Thanks.

Our next question is from the line of Joanna <unk> Bank of America. Please go ahead.

Hey, good morning, Thank you so much.

Hey, good morning, Thank you so much for that.

I think the questions here, sorry, if I if I missed the discussion.

Through next year.

Previously you were talking about you expect the increases to be higher than that this year from <unk>.

Heard some other operators talking about you know raising rents by 10%.

Pulling it forward to increase employee going forward into this year actually.

So how should we think about.

What books, though there's plenty to do in terms of the magnitude of the rent increases for next year and any potential for the timing change of these increases thank you.

Yeah, I think the first thing to address is timing and what's different about brookdale is the vast majority a rate increase for January one. So if I had anniversary increases that weren't going to take place until June or July of next year I might think about whether putting a mid year rate increase.

Was the right thing to do when we evaluated that internally, we thought that there was <unk>.

Q3 2022 Brookdale Senior Living Inc Earnings Call

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