Q1 2025 Brookdale Senior Living Inc Earnings Call
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Audra: Good morning, my name is Audra and I will be your conference operator today.
Audra: At this time I would like to welcome everyone to the Brookdale Senior Living First Quarter 2025 earnings call.
Audra: Today's conference is being recorded. All lines have been placed on mute to forget any that grand noise. After the secrets remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key, followed by the number one on your telephone chat. If you would like to withdraw your question, press star one again.
Speaker Change: At this time, I would like to turn the conference over to Jessica Hazel, Vice President of the History Relations. Please go ahead.
Jessica Hazel: Thank you and good morning. I'd like to welcome you to the first quarter 2025 earnings call for Brookdale Senior Living.
Denise Warren: Joining us today are Denise Warren, our interim chief executive officer, and chairman of the board. Dawn Kussow, our executive vice president, and chief financial officer. And Chad White, our executive vice president, General Counsel and Secretary.
Denise Warren: 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.
Denise Warren: Certain of the factors that could cause actual results to differ are detailed in the earnings release we issued yesterday.
Denise Warren: As well as in the reports we file with the SEC from time to time, including the risk factors contained in our annual report on form 10K and quarterly reports on form 10K.
Denise Warren: I direct you to the release for the full Safe Harbor Statement.
Denise Warren: Also, please note that during this call, we will present non-GAAP financial measures.
Denise Warren: For reconciliations of each non-GAAP measure from the most comparable gap measure, I direct you to the release and supplemental information which may be found at BrookdaleInvestors.com and was furnished on an 8K yesterday.
Denise Warren: We don't intend to comment further on that matter today. The purpose of today's call is to discuss our first quarter results and strategy. Accordingly, we ask that you keep questions limited to this area. I'll hand the call over to Denise.
Denise Warren: Thank you, Jessica, and good morning, everyone. Welcome to our first quarter 20-25 earnings call.
Speaker Change: It's a pleasure to join you today as interim CEO . I'm also pleased to be accompanied by Dawn Kussow, our Chief Financial Officer, and Chad White, our General Counsel. Both integral members of the Office of the CEO .
Speaker Change: Today, I will begin by reviewing our April 14th press release after which I will discuss our strategy and how we are evaluating ways to unlock value at Brookdale.
Speaker Change: Chad also will be answering questions, and we are excited for you to get to know him better.
Speaker Change: Before we begin, I do want to note that we are pleased with the team's efforts in the quarter which enabled us to deliver a wreath par and adjusted EBITDA that exceeded our expectations as well as positive adjusted free cash flow.
Speaker Change: And not to still Dawn's thunder, but given the solid start to the year we are happy to be able to raise our annual guidance.
Now turning to our April 14th press release.
Speaker Change: As you read, the board executed a planned leadership transition and initiated a search for a new CEO .
Speaker Change: Over the past several years we made significant strides in streamlining our operations, simplifying our business model, rationalizing our lease portfolio, and addressing our debt materities.
Speaker Change: Although much progress has been made, there is more work ahead, and the board believed now was the right time to select our next leader.
with our search well underway.
Speaker Change: We are focused on identifying a candidate with the proven experience.
Speaker Change: and Skills necessary to push continued operational improvements across our portfolio and the strategic vision to drive Brookdale into the next decade.
Speaker Change: By capitalizing on the intrinsic value of our own real estate and by leveraging compelling industry dynamics, we are confident that the right leader will propel Brookdale to the next level.
Speaker Change: To that end, Spencer Stewart, whom we initially contacted in late to 2024 to aid in succession planning, has compiled a robust list of potential candidates that the CEO Search Committee is carefully evaluating.
Speaker Change: While we are eager to conclude this process, our priority is ensuring we identify the right leader to leave Brookdale and unlocking the company's intrinsic value.
Speaker Change: We anticipate the search will take a minimum of six months.
Speaker Change: In the meantime, I am honored to have been asked to serve as interim CEO .
Speaker Change: Working closely with Dawn and Chad in the office of the CEO , we are fully committed to managing day-to-day operations with the strength of the broader team while advancing Brookdale's strategy.
I will elaborate further on our strategic plans shortly.
Speaker Change: In addition to the CEO transition, the board continued its proactive refreshment by appointing two new independent directors who bring expertise and insights that are already adding value.
Speaker Change: Josh Hausman is a seasoned healthcare investor and Mark Fioravanti is a veteran leader in hospitality and real estate.
Speaker Change: Additionally, we announced that long-term director, Frank Bumstead, will not seek re-election at the 2025 annual meeting of stockholders
We are grateful for Frank's many contributions to Brookdale.
Speaker Change: This ongoing update to our board with four new independent directors appointed over the past 12 months underscores our commitment to infusing fresh expertise and diverse perspectives.
Speaker Change: When Frank Sipsown at our annual meeting, our board will have an average tenure of less than four years.
Speaker Change: The board, the management team and I, as interim CEO , are dedicated to executing Brookdale strategy and to delivering meaningful shareholder value.
Speaker Change: We regularly assess the strategic options available to us to enhance shareholder value and we will continue to do so.
Speaker Change: Currently, we are focused on improving our operating performance, optimizing our real estate portfolio, reinvesting capital into our communities, and reducing our leverage.
Speaker Change: We believe these are key to ensuring high quality environments for our residents and our associates, as well as critical components to improving shareholder value.
to refuse each [inaudible]
First Improving Operating Performance Ed Sheer,
Speaker Change: Our primary goal is to accelerate profitable occupancy growth through improved revenue management, discipline and expense management.
Speaker Change: Drinks and Operational Accountability and Strategic Investments to elevate the resident experience.
Speaker Change: and for select communities below 80% occupancy we are deploying a SWAT team approach.
Speaker Change: Many of these communities are already assigned to a high opportunity response team.
Speaker Change: Established in late 2024 with the clear aim of reaching break even swiftly.
Speaker Change: Our tactics include exploring new lease up strategies, making targeted first impressions investments.
Speaker Change: and deploying support center resources to uncover further occupancy and rate improvements.
Speaker Change: Dawn will provide additional information, particularly on the below 70% occupancy communities in her remarks.
Speaker Change: We are conducting a thorough review of our cost structure to ensure we are appropriately managing expenses relative to our ongoing portfolio size.
Speaker Change: We are working to ensure that each location is led by a highly qualified executive director and are leveraging the recently launched training and certification program for executive directors.
Speaker Change: We are expanding our health plus offering to 58 additional communities in 2025, which we expect will improve the quality of life and extend the length of stay of our residents.
Second
Speaker Change: Optimizing our Real Estate portfolio, we consistently evaluate our portfolio to focus management efforts on assets that can yield the greatest value for shareholders.
Speaker Change: At times, there are assets that are better suited to other owners or lessees.
Speaker Change: Recall our portfolio once comprised of more than 1,000 communities, the majority of which were
Speaker Change: We now operate 619 communities, off which 236 are leased and 383 are owned.
Speaker Change: By year and, we expect to have exited another 55-least communities and evested another 14 non-core
Many with signed LOIs.
Speaker Change: As a result, by 2025 year in, we expect 75% of our consolidated portfolio units will be owned.
Speaker Change: Recently, restructurings also minigated many unfavorable terms that existed in our previous lease agreements that tracked back to our pre-public days.
Speaker Change: Adjusted free cash flow, and we expect the cash generation potential of the least portfolio to improve further following the Ventus 55 Investiture.
Speaker Change: In addition, our real estate team is reviewing another modest group of assets that may love longer, along with our strategic model.
Speaker Change: The proceeds from asset sales will be directed toward debt repayment, capital reinvestment and liquidity enhancement.
Speaker Change: In parallel, on the acquisition front, we are continuously seeking assets that will enhance our adjusted EVA DAW and adjusted free cash flow.
Speaker Change: Over the past six months we acquired 41 previously leased communities that benefited our financial growth opportunity and provided us flexibility to better manage our portfolio.
Speaker Change: We also will consider strategic partnerships, joint ventures, and other alternatives that we see as value creating opportunities.
For example, in late to 2024, we invested $5 million.
Speaker Change: and currently plan to invest an additional $10 million in 2025 through our first impressions program to help accelerate occupancy and rate improvements.
Speaker Change: Our development team is also working on a plan to ensure that our communities remain competitively positioned in our core markets for the long term.
Speaker Change: Please note, our first impressions program is in addition to normal maintenance capital programs.
4. Reducing Leverage
Speaker Change: with the majority of our debt refinanced through the end of 2026.
Speaker Change: Reducing leverage still remains a critical component of the natural flexibility and resilience.
Speaker Change: In preparation for the 2027 refinancing cycle, an operational SWAT team is working with each asset in our loan pool to optimize their collateral value.
Fifth
Ensuring high quality environments for our residents and associates
Delivering a high quality living and working environment is paramount.
This commitment is evident in the various accolades we received.
Speaker Change: including four straight years of more communities being recognized in the US news and world report best up senior living category than any other provider. Thank you very much.
Speaker Change: and by being named by Newsweek as a most loved workplace for the second consecutive year.
Speaker Change: In every month of this year, we have improved our residents and families' likeness to recommend rating over the prior year.
Speaker Change: In conclusion, our board is fully engaged in capitalizing on powerful industry dynamics and on unlocking the value we see in our portfolio.
Speaker Change: Our management team is energized by the opportunities ahead and we are grateful for the tremendous support and feedback we have received from our shareholders.
Speaker Change: Feedback is a gift, and we will use it to grow and to improve.
Speaker Change: We look forward to continuing to update you throughout the year on our progress.
Speaker Change: Thank you for your time today and your continued support of Brookdale.
Please do not hesitate to reach out at any time.
With that, I'll now turn the call over to Dawn.
Dawn Kussow: Good morning and thank you for joining us today. Brookdale had a strong start to the year driven by meaningful financial growth and operational improvements
Dawn Kussow: Both Rev, Power, and Adjusted Ebida exceeded our expectations for the first quarter, giving us confidence to raise our annual guidance ranges.
Dawn Kussow: Additionally, adjusted free cash flow was positive, which is a significant milestone as adjusted free cash flow has generally been negative in the first quarter.
Dawn Kussow: We are excited about our achievements as we started 2025 and are optimistic about the remainder of the year.
Dawn Kussow: But before I speak to that, I'll walk you through details of our first quarter financials.
I'll begin with first quarter revenue, consolidated REV-PAR.
Dawn Kussow: Which is the basis for our annual guidance range, grew 4.9% in the first quarter driven by an ongoing acceleration in year-over-year weighted average occupancy growth.
Dawn Kussow: First quarter movements were 3% above the prior year and 12% above the historic average while move out value but controllable and non-controllable was also beneficial to the quarter.
Dawn Kussow: As a result, consolidated weighted average occupancy increased 140 basis points to 79.3% in the first quarter.
Dawn Kussow: Our year-over-year growth trend accelerated from the fourth quarter and the favorable gap to the prior year grew every month this year to date, including April .
Dawn Kussow: First quarter, Consolidated Rev. 4 grew 3% over the prior year quarter, reflecting both resident rate increases as well as the ongoing trend of lower resident acuity.
Dawn Kussow: Of the 59, 55 are the Ventus communities that we will not be operating by year end.
Dawn Kussow: Dequentially, same community rev par increased 4.5% from the fourth quarter, a growth rate that surpassed the large seniors housing rates.
Dawn Kussow: Another significant achievement is our first quarter same community weighted average occupancy of 80% which was flat to the fourth quarter occupancy. Results that are significantly better than normal seasonality for this period. This is a milestone threshold that reflects our progress towards strong consistent cash flow generation.
Moving to Expenses
Dawn Kussow: Same community expense per Occupied Unit or X-Pore increased just 1.6% over the prior year first quarter, compared to the 2.8% Rev-Pore growth I just noted, reflecting a favorable Rev-Pore to X-Pore's spread.
Dawn Kussow: These positive first quarter labour results were a trend continuation of the year over year improvement we delivered in every quarter of 2024.
Dawn Kussow: Contributing to our favorable labor performance was the leverage of occupancy growth and the benefit we are reaping from meaningful improvements in reducing associate turnover over the last two years.
as a person of revenue.
Dawn Kussow: First quarter, same community other facility operating expense was flat to the prior year.
Dawn Kussow: While pleased with these results, we remain focused on driving ongoing improvements within our cost structure.
Dawn Kussow: First quarter, same community operating income was 7.6% better than the prior year, an operating income margin expanded 90 basis points year over year to a 29% margin, which is the highest same community operating income margin achievement in five years.
Dawn Kussow: Tequentially, from the fourth quarter, Dame Community Operating Income grew 14.6% well above the growth rate of the large seniors housing rates.
Dawn Kussow: There is seasonality associated with operating income margin, particularly as you compare first quarter to second quarter, when our labor expense base is impacted by the full impact of annual associate merit increases as well as an extra day of expenses.
Dawn Kussow: However, we are pleased with this achievement and remain optimistic that we will return to our historic margin levels
Now, moving beyond same community level results.
Dawn Kussow: First quarter, General and Administrative Expense, as reflected in our adjusted EBITDA results, was relatively flat to the prior year quarter.
Dawn Kussow: As a percent of revenue, general and administrative expense improved 20 basis points to the first quarter of 2024.
Dawn Kussow: We remain prudently focused on an appropriate cost structure for the expected changes in our portfolio and are seeing the benefits of these efforts reflected in our first quarter results.
Dawn Kussow: Lastly, cash operating lease payments for $57 million, which was in line with our previously
Dawn Kussow: As reported in yesterday's press release, first quarter adjusted EBITDA was $124 million or 27% above the prior year quarter. We are pleased to have delivered the significant growth in the first quarter adjusted EBITDA which was above internal expectations and analyst consensus estimates.
Dawn Kussow: And believe it is a reflection of the strategic initiatives that we are executing to grow profitable occupancy.
Dawn Kussow: To that end, the first quarter adjusted free cash flow increased $30 million over the prior-year quarter to a positive $4 million, which was also above our internal expectations and analyst consensus estimates.
Dawn Kussow: As a result of the proactive and strategic management of our Consolidated Portfolio, both owned and lease portfolios generated positive adjusted free cash flow in the first quarter.
Dawn Kussow: By delivering positive first quarter adjusted free cash flow, our confidence to achieve meaningfully positive adjusted free cash flow in 2025 is even stronger.
Dawn Kussow: As of March 31st, total liquidity was $306 million. The primary driver in the liquidity bridge to December 31st, 2024, was the use of cash to support the funding of completed acquisitions.
Dawn Kussow: As a reminder, in the fall of last year we announced the planned acquisition of 41 communities from three previously-least portfolios.
Dawn Kussow: We completed one of the three acquisitions in December 2024 for 11 communities
Dawn Kussow: In February , we closed the remaining two acquisitions, which included 30 communities for a total purchase price of $310 million.
Dawn Kussow: This was funded with $69 million of cash on hand and $241 million of mortgage debt financing.
Dawn Kussow: Even with these transactions, our adjusted annualized leverage improved in the first quarter as a direct result of our significant increase in adjusted evita
Dawn Kussow: Another benefit from our recent acquisitions that will further unlock value is the execution of a capital recycling opportunity of certain communities, including some of those we recently acquired out of leases.
Dawn Kussow: As part of this, we identified 14 communities that are appropriate for disposition by the end of 2025.
Dawn Kussow: These communities were selected as being non-core, underperforming or more appropriately owned by a smaller operator.
Dawn Kussow: In general, they have fewer than 40 units each, they are in tertiary markets, and they have weighted average occupancy below 70 percent.
Dawn Kussow: Collectively for the trailing four quarters, the 14 communities have negative adjusted Yvita and negative unlevered cash flows.
Dawn Kussow: While the sales proceeds will be relatively minor, given their below average size, these dispositions are expected to result in favorable financials, including improvements in adjusted EBITDA, adjusted free cash flow, and leverage.
Dawn Kussow: Given that the sales process often takes time, and we are still in the early stages for these communities, this expected benefit is not built into our 2025 guidance ranges.
Dawn Kussow: We are selectively evaluating additional disposition opportunities to further unlock value from our own assets in the future and will provide visibility into these considerations when appropriate.
Dawn Kussow: Lastly, before turning to our guidance, I wanted to comment on our commitment to more quickly address the less than 70% occupancy band as shown on page three of our financial supplement.
Dawn Kussow: We are highly focused on these 143 low-occupied communities within our portfolio.
Dawn Kussow: We have addressed 28 of the communities in this band through the Ventos Lease Negotiation or asset recycling that I just spoke to and would not expect the assets to be in our portfolio by year end.
Dawn Kussow: Of the remaining 115 communities in this band, in the first quarter 27% or 31 communities were part of a high opportunity group that was established near year end.
Dawn Kussow: More specifically, we formed a multidisciplinary critical response team to improve the performance from occupancy down through cash flows of 65 total communities which were largely across the lower occupancy bands.
Dawn Kussow: We'll only several months in. The program has already started delivering impressive results, and we are replicating the high opportunity response team program in additional communities beginning this quarter to drive operational improvements more broadly throughout the portfolio.
Dawn Kussow: for the remaining 84 communities that were in the first quarter.
Dawn Kussow: More than one third of those need only one, two or three units filled to achieve 70% or higher occupancy and Denise has spoken to the action plans we are taking to drive accelerated occupancy growth in these and other communities.
Dawn Kussow: Now, turning to our 20-25 expectations. As reflected in yesterday's press release, given our strong first quarter results, we have improved our annual guidance for both year-over-year, Rev Pargros, and for adjusted EBITDA.
Dawn Kussow: We now expect 2025 Consolidated Rev Pargros in the range of 5 to 5.75% over the prior year.
Denise Warren: Team Strata Organization are committed to the plans Denise spoke about to accelerate occupancy growth and we have reflected that commitment in our expectations.
Denise Warren: We remain optimistic that both weighted average occupancy and rev power growth, compared to the respective prior year quarters, will be even stronger in the fourth quarter of 2025 than we just delivered in the first quarter.
Denise Warren: Our RAISE 2025 adjusted EBITDA guidance range of $440 to $450 million dollars incorporate to these favorable tabline expectations.
Denise Warren: We remain diligent and focused on profitable occupancy growth, and as a result, we expect continued leverage from our increasing occupancy given the high fixed cost nature of our industry.
Denise Warren: When thinking about our annual guidance, and specifically when modeling the second quarter expectations compared to the first quarter results, it's important to remember three seasonal factors as shown on the last page of our investor presentation.
Denise Warren: First, when considering the day count for each quarter of the fiscal year, the first quarter includes the fewest number of work days and the quarterly day count increases from there. This is important because our revenue is largely based upon monthly resident fees, whereas our expense structure is driven by daily expenses, largely in labor, but also in other operating expenses.
Denise Warren: We benefit sequentially from lower second quarter utilities expense, which helps to offset some of the impact from the extra day and the annual merit increases.
Denise Warren: We estimate the net impact from these three seasonal factors to be approximately $10 million of an adjusted evita headwind between the first and second quarters.
Denise Warren: Even considering these normal seasonal factors as reflected in our raised guidance ranges, we are optimistic about our full-year expectations.
We believe the plans we've introduced
Denise Warren: The confidence we have for sustainable growth and the cash generation power of our communities will support substantial value creation for shareholders and deliver meaningful benefits to our company, including the ability to reinvest in our communities and further reduce leverage.
Denise Warren: Specific to 2025, we expect to deliver positive adjusted free cash flow in the range of $30 to $50 million, assuming relatively neutral working capital for the year and our current estimate for 2025 transaction, legal and organizational restructuring costs.
which include costs related to stakeholder relations advisory matters.
Denise Warren: As we've set these revised annual guidance ranges, we have worked to balance our optimism for the potential to deliver even better annual results than our raised guidance as a result of our year-to-date progress.
Denise Warren: We are confident in our plans, but we are acutely aware that these are uncertain times, and believe our guidance ranges are appropriate.
Denise Warren: Lastly, I'd like to highlight three other factors that may influence our actual 2025 results.
Denise Warren: First, I'll note our guidance reflects a normalized natural disaster season. Second, as I shared last earnings call, our guidance assumes an October 1st disposition date for all vent-tests, non-renewal communities.
Denise Warren: At the timing of these community dispositions varies from this guidance assumption, there may be variability in results either positive or negative
Denise Warren: Third, the disposition timing of the 14 communities we have in varying stages of the sales process could also modestly impact our 2025 results.
Denise Warren: These dispositions generally take time and for the majority of these communities, we are in the early stages, but there is a possibility for fourth quarter impact that is not currently reflected in our annual guidance.
In closing, we are pleased with our first quarter results [inaudible]
Denise Warren: and our confident and our strategic and operational plans to support another year of solid adjusted EBITDA growth. Positive adjusted free cash flow in the first quarter provided us even more optimism about our 2025 cash flow expectations and our ability to generate growing cash flow in the years to come.
Operator, we will now open the call for questions.
Speaker Change: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.
We'll go first to Ben Hendrix at RBC.
Ben Hendricks: Great, thank you very much. I just hope you get a little bit more color on your pricing strategy. Brookdale has operated a lot a couple of years with
Speaker Change: Pretty solid, you know, pricing discipline. And I just wanted to kind of talk about the pricing promotions you're putting through for the rest of the year and how you're thinking about the guard rails around rate at the local level and how much flexibility you can add into pricing and still hit that 80% occupancy threshold in a profitable way.
Speaker Change: Yes, hi, Ben. This is Dawn. That's a great question. I would start with, if you look at our same store, we're excited that year over year, our red pour grew 2.8%, which was over our export of 1.6%. So reflecting the price increase that we successfully put in in January . I think as we think about the year and the guardrails, Denise had some specific comments around how we're thinking about pricing.
Speaker Change: Thank you. There's following up on that, looking at a little longer term, but just the first impressions, investment and issues. How do you, what's the timeline that you expect at the impact rates and what should we expect on the back of those types of investments, some increase in rev, poor, or maybe in line with 24 levels perhaps next year? Thanks.
Speaker Change: Yeah, a couple things. I think on the fresh impressions we certainly have included that in our CAPEX guidance of 175 to 180.
Speaker Change: at the community level to increase occupancy. We'll get to our 2026 rate as we start our budgeting process, which won't be until, you know, as mid to the end of the year as we work through that budgeting process.
Speaker Change: No nothing yet that I would comment on on the rate increase for 26.
Speaker Change: Ben, I would say this chat, I would say that it's really, we're very optimistic.
Speaker Change: about the long-term prospects here for what we're doing with the Fresh Impressions and First Impressions program. What's more important, I think, for that is that it's really helping us.
Speaker Change: to accelerate our occupancy growth. And so I think as we think about it, it's really with the supply-demand dynamics that we're in in the market, it is a real tool that we can use to make sure that our product is competitive and is actually growing occupancy.
Great, thanks very much and congrats on the quarter [inaudible]
Thank you, Ben.
Thank you for watching. I'll see you next time.
We'll take our next question from Brian Tanquilut at Jeffries.
Speaker Change: Good morning guys and congrats on a good quarter. Maybe just to follow up on some of Ben's questions. So as we think about
Speaker Change: Maybe some of the comments you made on the seasonality of margins. Just curious how we should be thinking about the progression of that over the course of the year. I understand that you have some, you know, what you call this, basic bonus payments.
Speaker Change: instead of adjustments that it's a kick-in in Q2. So curious how to think about seasonality of expenses and margins over the course of the year.
Speaker Change: And so of course the first quarter has the least number of days and so typically we've seen that as our highest margin
Speaker Change: So as I think about that for the rest of the year, what I would point back to is
Speaker Change: The seasonality that we've laid out in the investor presentation and the expense seasonality that we would expect with more days.
Speaker Change: in Q2 through Q4. The largest I spoke to in my prepare remarks is the $10 million headwind related to days and then the merit increase that we see that comes in Q2.
Speaker Change: Got it. And then, as I think about Dawn the Rep for performance here, you know, obviously good during the quarter I mean is this a sign that you're you're gaining pricing power or is there less discounting and promoing happening in the market? So you're in is that is that what that is?
Speaker Change: But certainly looking at making sure that we're focused on, again, our pricing power is, or our prices are in excess of our expense growth. That's important to get the margin expansion that we expect.
Speaker Change: and that we would be leaning in and more targeted markets where we think that we can do that.
Awesome. Thank you.
Thanks, Brian.
We'll move next to Andrew Mok at Barclays.
Hi, good morning.
Speaker Change: Promotions is kind of one of the forward-looking ones, but I think there are a number of other initiatives So just trying to get a better sense of that. Thanks
Denise Warren: Yeah, I'd say that they've been evolving. We talked about, I think the Denise talked about the high opportunity, the SWAT groups.
Speaker Change: That had started that was underway late 2024 and so with the positive results that we've seen, it is proof of concept.
Speaker Change: We are rolling out more SWAT teams with more communities so that that piece is underway so that was
Speaker Change: Underway and still ongoing. The dynamic pricing and the initiatives, we've always done a level of initiatives with targeted pricing. I think that that is been, we've been more active with that.
Speaker Change: And so I think that that is something that is probably scaled up a little bit. And then the first impressions, we talked about $5 million that we spent at the end of last year and identified another $10 million that we would have with that increased investment in the first quarter, so that is underway as well.
Speaker Change: Great, and Rev-Par finished the quarter at the 4.9% toward the low end of the guidance range, but you increase the guidance assumption for the full year. So can you talk about the underlying drivers and visibility into higher rev-Par for the balance of the year? Thanks, sir.
Speaker Change: That Rev Par, to be better, that year over year Rev Par grows to be better in the fourth quarter with the expected increased occupancy we expect through the year.
Speaker Change: So that's both on the same store basis and the result of the divestitures like both of those should be driving the best car out in the fourth quarter.
Speaker Change: Yeah, we remember we guide on consolidated, we are not guiding on same store.
Speaker Change: One thing I'll mention on the same store, it excludes Event House, but there is an assumption in our consolidated Rev Par range that says the Event House communities will transition on 10-1. We know that that is not realistic, but to the extent that it's significantly varies, there could be some level of variability, but that is the assumption on our Rev Par
Speaker Change: Great, and I wanted to follow up on kind of the dynamic pricing strategy. So teachers to hear like why now is the right time to get more active here when it seems like strong demand and pricing powers working more to your advantage. So can you talk to the specific characteristics of these markets? Are you not seeing as much pricing power or their different competitive dynamics versus the rest of the portfolio? Thank you.
Speaker Change: Yep, I, yes, I would say that we have always been looking at repricing our communities up or down.
Speaker Change: And so there's an opportunity to go up or down as we're looking at all of the different markets.
Speaker Change: I think more actively as we're looking at things a little bit different.
Speaker Change: Looking at different markets and whether there are some sort of strategies that we can roll out, I don't think it's anything significantly different, just maybe a little bit more active on some of the thoughts about that repricing. Again, that would be either up or down that we're doing this.
Great. Thanks for all the colour.
Great, thank you.
We'll move next to Tao Qiu at McCory.
Thanks for joining us.
Tao Chiu: Thank you, good morning. I'd like to drill down on the low 70% bucket. I think Dawn, you mentioned the size of the portion is 1 to 3% away from 70%. For the remainder, what percentage have structural challenges such as smaller assets?
Speaker Change: I'm going to track it geographically, similar to the 14 assets you identified for sale. In other words, why not be more aggressive with the dispositions? What is the market appetite for these assets today?
Speaker Change: The other, there's another 22% that are already in a high opportunity group that we're focused on.
Speaker Change: I think that we spoke to kind of the real estate strategy. I'm not leaning in on what that look is going to be, but it's certainly something that we would look at as part of that real estate strategy that Denise talked about. Yeah, Tao, good morning, V.
Speaker Change: Denise mentioned that one of our key initiatives that we're focused on is optimizing our real estate portfolio. We see tremendous
Speaker Change: intrinsic value here at Brookdale that we are going to work to continue to unlock and
Speaker Change: So one of the things we talked about is we're working on disposition transactions involving
But we expect those to be completed by your end.
Speaker Change: I'll say many of those are already under LLI and some are even further along in the process than that, so that's a good thing. The sales proceeds for that group are relatively minor.
Speaker Change: But as a group, the disposition of those communities will improve our Adjustability of a DAW, our Adjustability Cash Flow, and our leverage. It's a win-win for unlocking value as you generate cash proceeds.
Speaker Change: and improve the performance of the remaining portfolio, just to your question there. So, we've already also begun work on identifying additional opportunities for portfolio optimization. There's a modest group of other non-core own assets that we believe can be monetized.
Speaker Change: to further unlock value. So we're looking at that, and obviously that is looking at occupancy rates, performance, NOI opportunities, et cetera, markets. We take a variety of factors to look at, but that is something we're actively working on. It's too early for us to share additional details on that next group of assets.
But it is something that we're really focused on
Speaker Change: I got it. I appreciate the color. So I'm just to clarify, so none of the disposition benefits from either from an EBITL casual perspective is in guidance, right?
Correct.
Speaker Change: Okay. My second question is for Dawn. Could you share with us your thoughts on the CEO's search? What kind of experience and skills that it's about prioritizing today and how should we think about the checking business strategy going forward?
Speaker Change: Yes, I can do that. So as I say to them, my remarks, we started late last fall working with Spencer Stewart, Outlining Succession Planning that the company might need. And so when we are looking at the candidates, which we've already had a good look at about, I think 15 or 16 candidates
Speaker Change: And the Board Search Committee is in the process of narrowing those down into the ones that we want to interview and to push forward through the process.
Speaker Change: So we are really looking for someone that can give us the operational expertise [inaudible]
Speaker Change: because we do believe there's a lot more work that can be done on the operations down in the community level, while at the same time getting someone that has the strategic vision.
Got it. Thank you.
Thank you, Tao.
Speaker Change: and we'll go next to Joanna Gajuk at Bank of America.
Joanna Gajuk: Hi, good morning. Thanks so much for taking a question. So I guess first, just to clarify, so you raise your EBITDA guidance right by $7.5 million. So is that essentially for your performance in the first quarter?
Speaker Change: Our occupancy was down 10 basis points when you'd normally see it down 70 to 80 basis points, so we saw that availability in our occupancy, and then of course our expense management. And so, as we looked at that out performance, we certainly re-forecasted the full year.
and it felt comfortable lifting the range by two percent.
Speaker Change: Now, the one thing that I would add is that there is, and we're acknowledging, as we thought about the guidance raised, there is a backdrop of macroeconomic uncertainty that we certainly didn't ignore, just acknowledging where we're at and what that impact could potentially be on the full year just because there's a lot of unknown.
Speaker Change: But we're very optimistic about our plans and wanted to balance the global uncertainty with our forecast.
I was going to have to follow up on that comment about that.
, and Monica Barlow.
You know, kind of, I guess, turn for the words during the season, that's...
Speaker Change: Usually very busy for senior housing during the summer months from June through August September . So that's how you're thinking about it, that as of now you're not seeing it, but things might change and that's going to be doing the time one, you know, the time that's actually critical.
Speaker Change: Joanna, that's exactly right. I think just acknowledging the level of macroeconomic uncertainty, I would again point to, as you did, our April occupancy was up 30 basis points sequentially and 90 basis points here over a year. The last time we saw...
Speaker Change: Obviously, we're pleased with that. We will continue to stay focused on our expense management, but making sure that we are cautious as we thought about our guidance for the full year.
Speaker Change: Thank you. And if I may last a follow-up on these SWAT teams and sounds like you you getting already some traction and you see any Q1 results on the occupancy front
Speaker Change: So, can you give us some examples of what exactly was done differently that was not done before in this particular community that allowed, you know, I guess what you call, you know, some early indication of success there, thank you.
Speaker Change: Yeah, I think what I would say is we certainly have, as you have a SWAT team and focused on something removing of barriers, as Chad talked about.
Speaker Change: You know, some of the fresh impression or the the cat-backs deployment or the the speed at which a role is filled or the speed at which we we've moved on pricing. I think removing some of the barriers is probably the biggest thing that I would point to.
Speaker Change: just because as you have one group focused and available to react.
Speaker Change: quickly on 619 properties that we had 65 communities in the group.
that was helpful in getting results quicker.
Speaker Change: Well, and importantly, we're taking the learnings that we had from that group and rolling that out to additional communities so that we can further accelerate our occupancy improvement and that is something we're all committed to as a management team to continuing to improve our operating results.
Speaker Change: We're very pleased with where we were in the first quarter in the progress we're making and that was a big big part of it with early impressive results from that first court group and we're moving forward.
Speaker Change: And I guess those actions are sustainable often like once the swap team is gone, you know, whatever they kind of identify and that I mean I understand like, you know, topics being deployed like that sustainable, but maybe these other items like, you know, how sustainable those changes are. Thank you.
Speaker Change: If we've done a common area of renovation, those are things that are long-term and helpful and I think that we think that everything, that it would be absolutely sustainable which is why we're scaling it [inaudible]
Thank you.
Thanks, Joanna.
Next, we'll move to Josh Raskin at Nefron Research.
Josh Raskin: Hi, thanks. Good morning. The big picture question to start with just can you speak to the process around you know strategy and operational improvements and sort of who's leading that charge how that's being done and also how does this ongoing CEO search impact that is that you know accelerate the need to make changes before or is there some you know thought around slowing things down to incorporate the new CEO etc. So that's all for today.
Josh Raskin: Yep, I can start and then Denise or Chad can add if they feel, but I think the office of the CEO , the strategy.
has not changed from focusing on occupancy and growth.
Speaker Change: as we're looking at the operational deployment of some of the strategies that Denise talked about.
The broader team is very excited and very engaged.
Speaker Change: and I think that as a management group, we are very focused on moving forward. Again, that is the day-to-day with.
Speaker Change: Chennai, Denise is in the office every day as well.
Speaker Change: focusing a lot on that high level and moving forward with some of the initiatives that she talked about as well in making sure that the teams are motivated and have the tools that they need in order to move forward.
All right, I have a team sport.
Yes, very much. This is Denise Josh.
Speaker Change: It very much is a team sport. You know, one of the things I have has been amplified since I've been here and this is my fourth week is how great the team is.
Speaker Change: We have an exceptional leadership team and they work very well together. They're excited, they're engaged and everybody is pushing forward.
Speaker Change: You know, changes we make will be tweaks to operations like the high opportunity response teams. They will start to have a true operations person engaged in that team.
Speaker Change: and we will be digging deeper down into those communities for the true operational improvements, which...
Speaker Change: to I believe Joanna's question earlier of the sustainability of that initiative.
Speaker Change: So we will do that, you know, we are working very closely with Teddy and his team [inaudible]
Speaker Change: on Portfolio Optimization. There are assets in the Portfolio that would be better owned by someone else or have a different lecy.
and so we will be working on pulling that together.
Speaker Change: We did have great results from the Hort in the first quarter, and I think by embedding more operations folks into that.
Speaker Change: and looking at the next segment of opportunity will really push us forward and drive it.
My background is Operations and Finance and Finance.
Speaker Change: On the CEO's search, we think it will take six months. You know, I laugh until people I live on the beach and the view from my porch is a lot better than the view of the Brookdale parking lot.
Speaker Change: But I am here for the team and will be through the summer.
Speaker Change: and so I'll probably get back home just in time for the winter time.
Speaker Change: But that's okay because you know, this is a great company and we have great people, we have great assets and we have so much intrinsic value that needs to be opened up and released here that it is worth spending my summer here. Thank you very much.
Speaker Change: All right, I'm a fan of Nashville, so I'll put that in there. But my micro, my more micro question is the magnitude of these pricing, these piloting the new promotions.
Speaker Change: You know to boost the occupancy and select communities like is there a way to give us some sense of magnitude like you know like number of months of rent and you know Just any sort of parameters that you have in terms of what it takes to induce more occupancy and some of these select communities you talked about
Yeah.
Speaker Change: James, what I would say, it's more targeted. I would say that we are conscious of, as I had mentioned before, pricing up or down.
Speaker Change: I think that it is more targeted in that we're looking at where is our rate where we have the opportunity to do some pricing. That's one of the things I would mention to mention about on the high opportunity.
Speaker Change: where we were at a little bit higher than our consolidated rate in order to make sure that we could.
Speaker Change: Reduce Rate to, again, Protect Our Rev Poor, ensuring that our rate was in excess of our expense growth. It's one of the things that we're highly focused on, so...
Speaker Change: I wouldn't over index on the efforts that we have. We always have ongoing efforts on the reprisings and we've been doing that for the years.
Speaker Change: I would just say it's maybe a little bit more targeted and accelerated a little bit more but I wouldn't overindex on that.
Speaker Change: In this concludes the Q and A session, and today's conference call. Thank you for your participation. You may not just connect to the next session.
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