Brookdale Senior Living Inc.

Good morning, ladies and gentlemen. My name is Lance, and I will be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Leaving First Quarter Earnings Call. All participants are in a listen-only mode. We will open the lines for questions at the end of the call, and instructions will follow at that time. As a reminder, this conference will be recorded for replay purposes. I would now like to turn the call over to Kathy McDonald of Investor Relations. Kathy, you may begin.

Thank you, and good morning, everyone. I'd like to welcome you to the first quarter 2019 earnings call for Brookdale Senior Living. Joining us today are Cindy Beyer, 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 these factors that could cause actual results to differ are detailed in the earnings release we issued yesterday, 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 10-K and quarterly reports 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.com forward slash investor. and was furnished on an 8K yesterday. With that, I would like to turn the call over to Cindy.

Thank you, Kathy. Good morning to all of our shareholders, analysts, and other participants. This morning, I'll provide an update on our first quarter results, our strategy, and leadership additions. Let me start with the industry outlook. The senior housing industry will continue to have headwinds with elevated openings and new deliveries in 2019, making for a difficult competitive landscape. According to NIC, first quarter occupancy for the industry was largely unchanged on a sequential basis. For assisted living, improvement was from properties in the lease-up period, while stabilized properties occupancy declined. The industry's starts and opens dropped sequentially by around 35% in the first quarter. Within 20 minutes of Brookdale's communities, the reduction was even better. The industry's construction pipeline continues to shrink quarter by quarter. Within 20 minutes of Brookdale's communities, we saw over a 10% drop in early 2017, but construction in the pipeline has remained stubbornly high since then. This is because the largest construction pressure is in the assisted living and memory care sectors where we have a larger concentration. The good news is that many industry experts are expecting supply-demand equilibrium within the next 12 months. In fact, NIC projects that assisted living absorption will overtake inventory growth in the second half of 2019. Let me now focus specifically on Brookdale's operations. For the first quarter, our same community rev pour increased 3.1% on a year-over-year basis. We intentionally increased rates at levels higher than prior years to mitigate lower occupancy and higher labor investments. When combining the impact of in-place rate increases with occupancy changes, we outperformed the industry. Our results are consistent with our plan. This is the right strategy for our portfolio based on our proprietary analysis. When we look at rate and care pricing upon move-in, our rates are better than our competitors and move-ins improved sequentially by nearly 3%. We are pleased that our independent living occupancy remained at 90% on a sequential basis, 150 basis point improvement versus first quarter 2018 on a same community basis. We have demonstrated that we can be successful and return to growth. We've updated our new supply chart so that it's easier to understand our top 20 markets. As a group, these markets are performing better than our overall portfolio. We are in the last year of our three-year program of making above-industry investments in labor, and we are seeing the benefit in our retention rates. For the executive directors and health and wellness directors, trailing 12-month retention was above 70% for the seventh consecutive quarter. In addition, the investments we are making in our associates, especially resident facing roles, resulted in a 360 basis point improvement in voluntary turnover compared to the first quarter of 2018. We also started to improve the retention rate for our sales professionals as our initiatives are beginning to take hold. The initial sign of sales retention rates improving is the first step on our important and urgent sales cycle improvement. Turning to our leading indicators, improving our sales cycle is one of our top priorities, and we are pleased with the sequential improvement in leads, first visits, and move-ins. Compared to a year ago, leads were softer from our aggregators, and our fourth quarter sales professional retention rate impacted our move-ins. Our highest priority continues to be improving the sales pipeline to pivot to growth. The months of March and April showed early signs that the changes we made within our organization are taking hold. For controllable moveouts, our goal for 2019 is to maintain the excellent results we delivered in 2018. So I'm pleased with our team's strength to exceed our goal for the first quarter with a 50 basis point improvement compared to the first quarter of 2018. Briefly turning to our healthcare services segment, in the first quarter, our revenue improved 1% on a year-over-year basis and 3% on a sequential basis. In addition, our segment operating margin returned to near the first quarter 2018 levels. As I wrap up our first quarter results, let me say we are proud to be the leading senior living healthcare operator that intentionally owns real estate, and our associates are the key to Brookdale's turnaround. I'm pleased to announce that we have made significant progress on enhancing our leadership team with three amazing additions. This week, Diane Johnson-May joined Brookdale as our Executive Vice President of Human Resources. She had over 30 years of experience with Kraft Foods, including serving as the Executive Vice President and Chief Human Resources Officer. Diane brings a strong consumer focus and significant experience in attracting and motivating a large distributed workforce. I know Diane will help us drive our strategic priority of attracting, engaging, developing, and retaining the best associates. Next, Rick Wigington will join Brookdale as our Senior Vice President of Sales. He will join us at the end of May. Senior living is a unique industry, and it's critically important that our sales leader has deep industry expertise and a proven track record. Rick has over a decade of success in our industry, and will be extremely valuable to improve our sales cycle, which is critical to our turnaround strategy. I am very excited that we recruited an energetic sales leader who will partner well with our operations team. In June, Anna Jean O'Neill will join us as vice president of our hospice business. She joins us from a live hospice where she has been president and CEO for the past seven years. Anna Jean has phenomenal experience, and we are thrilled that she brings her expertise in compassionate end-of-life care to Brookdale. We are proud of our growth in hospice, and we believe Anna Jean and the team will be able to accelerate our hospice growth. I am extremely excited about these three new leaders joining Brookdale because there is no substitute for passionate, dedicated leaders with a proven track record of success. in key operational roles. Brookdale was able to attract these talented leaders because they see the long-term opportunity of our business and want to be part of our success as a mission-driven company devoted to serving seniors. In summary, we are bringing in high-quality leaders with strong industry expertise to fill key positions so that we can improve our execution and build on the areas where we are already successful. We are making progress on all of our strategic priorities, and we reiterate our 2019 annual guidance. I'm excited that our industry is approaching the positive demand curve for senior housing, and that we at Brookdale are working on turning around our company to be ready for the positive demographic growth. I'll turn the call over to Steve.