Brookdale Senior Living Inc.

Good morning, ladies and gentlemen. My name is Misty, and I will be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living First Quarter Earnings Release Call. At this time, all lines are on mute. We will open the lines for questions at the end of the call. As a reminder, this conference will be recorded for replay purposes. I would now like to turn the conference over to Kathy McDonald of Investor Relations.

Thank you and good morning, everyone. I'd like to welcome you to the first quarter 2020 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 filed 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. Welcome to our first quarter 2020 earnings call. I want to start by saying thank you to all those on the front line fighting to protect and save lives from this devastating pandemic. We are grateful to the healthcare professionals, first responders, public servants, essential employees, and others who are working so very hard. We are also so very grateful for the extraordinary efforts of our Brookdale Everyday Heroes who are on the front line taking actions to help protect our residents, patients, and associates. Our Brookdale associates have demonstrated their commitment to servant leadership through their tireless efforts to serve those in our care and to enrich lives when our precious seniors need us most. I would also like to thank our tens of thousands of residents, patients, and their families for their support during this unprecedented time. Given the significant and disproportionate impact of COVID-19 on seniors and that Brookdale is the largest senior living operator in the U.S., we believe we are serving in a unique and vital role during this crisis. Our associates' dedication, resilience, and agility has been incredible as we work around the clock to continuously incorporate new information from around the world into our protocols and practices. We are a collaborative organization that is enhancing our approach to this pandemic by partnering with leading hospitals and healthcare systems. government and regulatory agencies, as well as others within our industry so that we can integrate the best thinking and practices into our business to best protect our residents, patients, and associates. Our Emergency Command Center has been up and running since February and has done a phenomenal job of reinforcing our existing strong practices, educating the communities on new enhancements like monitoring pulse oximeter readings of our residents, researching the most effective cleaning protocols for implementation in the communities, and determining what personal protective equipment, or PPE, is most appropriate and when to use it. We are also closely monitoring compliance with the rapidly changing federal, state, and local guidelines. We update our policies and procedures to incorporate new information and communicate and train our field teams as quickly as possible. Together, our local, regional, and corporate associates have stepped up to ensure that we are doing everything we can to support our communities and agencies. With communities in 45 states, we are managing through rolling state peaks, which started in the West, quickly expanded to the East Coast, then through Florida and Texas, and are currently growing in the Midwest. While we cannot predict how this pandemic will ultimately affect our communities, so far, our precautions have limited the spread of COVID-19. As of the end of April, Less than 1% of our residents had tested positive. I am incredibly proud of our associates and cannot express the depth of my admiration for the work of Brookdale's amazing team. We are grateful for individuals who recovered after contracting the virus, and we mourn those who were lost to it. Our hearts go out to their families and loved ones. It is truly humbling to care for the most vulnerable segment of the population. Next, I'd like to talk about our experience of fighting COVID-19 in three sections, prepare, act, and lead. I will start with our preparation. In January, before the World Health Organization declared a global health emergency, our team had issued a preventative action plan to our communities. This included a primer about the coronavirus, our strong established flu and infectious disease prevention and control protocols, environmental cleaning precautions, and advised screening visitors and associates who had recently traveled internationally. We started engaging with our network of leading medical centers and professionals to benchmark their efforts in order to complement the internal expertise of our clinical team. I am very excited that Dr. Jordan Asher joined our board in the first quarter with a perfectly timed skill set to augment the existing board expertise. I already greatly appreciate his deep experience advice, and strategic insights. For example, as we were preparing our response efforts, we discussed the models surrounding the potential spread of the virus and the implications for our prevention efforts. In February, our Emergency Command Center team increased our level of preparedness. Early steps included Q&A for residents, their families, patients and associates, posting a message to self-identify symptoms at community entrances, and hygiene flyers and videos. We also began increased monitoring of our supply chain to ensure availability of critically needed items. Due to nationwide demand, when our supplier for masks and gowns materially reduced the levels of product that we could buy, We aggressively sourced product from other suppliers, albeit at a large multiple of the cost that we normally pay. The next series of preemptive steps included increasing communication frequency with our constituents, increasing daily observations for symptoms, limiting the size of visitor groups, canceling sponsored outings, and converting our resident engagement from in-person to virtual engagements. As I will mention in more detail, we also began to advocate that policymakers should prioritize senior living when it comes to PPE, testing, and other critical resources, given the potential impact of COVID-19 vulnerable population we serve. Those efforts, which remain ongoing, included numerous communications and discussions with members of Congress, the administration, and their staff, along with state-level officials. By early March, we had moved into our second phase, action. As the Centers for Disease Control and shared new information about COVID-19, we created specific community guidelines, coronavirus-specific cleaning and environmental sanitation protocols, and for our assisted living and memory care residents, in addition to frequent temperature readings, we incorporated taking pulse oximeter readings. We increased the frequency of our communication with our field teams to guide them through the changing procedures and requirements. We also began creating videos to communicate information broadly with associates, residents, patients, families, and the public. In early March, we posted our first video, a demonstration of the proper handwashing technique, to our website. As part of our action phase, we posted 19 separate videos during March and April. By the middle of March, we filed an 8 to provide our update regarding the pandemic. We were moving from limiting access in select communities to a full no visitors directive, except for medically essential and compassionate care visits across all communities. We continued aggressively increasing our supply of PPE and provided direction to our communities on determining the appropriate PPE to use. All associates are now directed to wear masks in our communities. While this is just a small selection of the vigilant actions we have taken, it demonstrates our commitment to help protect the health and well-being of our residents, patients, and associates. The third section is leading in the industry. We are fighting a global health crisis, and we strongly believe that it takes all of us working together to try to control the spread of COVID-19. We believe that we were the first senior living operator to launch a website dedicated to providing updates including video demonstrations of best practices and messages from our Brookdale leaders. We shared our web link with our peers, reporters, and the public at large. It was very important to us to share our knowledge and ideas with anyone interested, especially for small senior housing operators that may not have the resources that we have. Our command center and our clinical leader were panelists on Argentum's first webinar for the industry on best practices. From a resident standpoint, because connection is so important during this time, we also significantly increased our social media engagement. The likes, comments, and sharing of our content tripled our historic average. In addition, Facebook notified us that after their marketing department saw our programs and content, they selected us to be featured as an exemplary leader of social media for COVID-19 response. We are confident that our early response and communications have helped reduce the spread of the virus and ultimately saved lives. Another area that became evident early on in this crisis is that our industry does not have a loud enough voice in Washington, D.C., who understands the industry to inform policymakers regarding the senior living industry and its vitally important role in protecting this vulnerable population. Industry-wide, approximately one million seniors live in an independent living assisted living, or memory care setting. Many have overlooked senior housing's role on the front line with our infection prevention and control efforts as being part of the healthcare system. Others incorrectly grouped predominantly private pay senior housing communities with largely government supported nursing homes. Our industry's two largest trade associations Several influential members of the industry and I, as the leader of the largest senior living operator in the U.S., have spent an enormous amount of time advocating for the industry. We have requested priority access to testing kits, PPE, and prioritized government financial relief, among other topics. We thank the many government officials and their staff members who continue to listen to our requests and are helping us make progress on addressing the urgent needs of what is truly a clinically essential service industry. Our focus through the unprecedented environment is, most importantly, to help keep our residents, patients, and associates safe. Secondly, with our strong healthcare infection protocols, we look to keep the reputation of senior living attractive for future residents to consider. Now, let's turn to the financial performance of our operations for the first quarter. REVPAR, on a same community basis, increased 2.4% sequentially, and on a year-over-year basis, grew 2%. However, while we were pleased with this increase, we were looking for higher occupancy in the REVPAR mix. NIC senior housing stabilized occupancy decreased 30 basis points on a sequential basis compared to Brookdale's same community decrease of 150 basis points. In our previous earnings call, we talked about maintaining overall price discipline in the fourth quarter 2019. in advance of the annual price increases, which were effective January 1st. We continued this discipline in the first quarter. With competitors' actions negatively affecting our late fourth quarter move-in volume, and therefore our starting occupancy for January, combined with our higher non-controllable move-outs, we lost more occupancy than expected. In the second half of March, as we restricted non-essential access to our communities, our sales team redesigned the entire sales process, continued to nurture new and existing leads, and nimbly moved to virtual tours. While visits have slowed, we are continuing to welcome move-ins, albeit at a significantly lower volume and mostly for residents with urgent needs. Our conservative approach to safety may have resulted in fewer tours and sales. However, our commitment to quality and the protection of our residents, patients, and associates is unwavering and remains our top priority. We believe our approach will support a stronger sales story as the economy begins to reopen. Non-controllable moveouts were higher than the prior year quarter, while our controllable moveouts were favorable to the prior year quarter, and we have seen the trend continue in April. For the first quarter, REVPOR growth on a same community basis increased 4.3% sequentially, and on a year-over-year basis increased 3.1%. Our community teams executed the price increases smoothly. Let me now turn to our healthcare services business, starting with our home health business. As foreshadowed in our previous earnings call, we expected some noise in the first quarter with the implementation of a new PDGM model and the announced segment organizational changes. In January and February, we saw sequential census progress, but in the later part of the quarter, key medical referrals dropped significantly as the coronavirus spread throughout the United States. With widespread adoption of stay-at-home orders, various medical procedures were suspended and patients started to cancel their appointments. Our associates are working hard to educate patients and referral sources of our strong screening in order to continue to provide vital services. Our hospice business delivered 6.7% revenue growth compared to the prior year quarter and maintained census similar to the fourth quarter. We are pleased with the recent government actions to support the home health and hospice industries. First, the 2% Medicare sequestration has been suspended starting in May and for the balance of the year. By law, physician assistants and nurse practitioners will be eligible to certify home health. This expands the pool of available providers to support home care services. Third, the ability to utilize telehealth for hospice recertification. The last operational topic that I want to address is our associates. Their pictures may not be on the front page of the newspaper, but they are truly important. our everyday heroes. I am incredibly grateful for the determination and dedication of our team members to crush COVID. For communities, our focus is to give all the support we can. I want to give a heartfelt recognition to our command center team for their extraordinary and comprehensive efforts to build tools interpret thousands of lines of regulatory and medical documents, create step-by-step guidelines, collaborate with the communities to work through any questions they have, role play through scenarios, and remove barriers identified by the communities. For individual associates, we are providing PPE at communities, bearing their copay cost of COVID-19 testing, if needed. and all of our executive leadership team have made significant contributions to the associate compassion programs in case individuals need a little help along the way. As unemployment rises in the U.S., we are looking to hire more than 4,500 new associates. Many will fill existing open roles and others, like the newly created room service attendant role, will enhance our resident experience during social distancing dining. Before I turn the call over to Steve, I'd like to address expectations for recovery. As state and local leaders implement plans to reopen business, we are thinking through our own internal decision framework. We support government recommendations that the senior housing industry should be in the final wave of the three-phase approach. As state and local economies begin to emerge, we will remain diligent to protect our residents, patients, and associates, restrict non-essential access to our communities, while continuing to allow move-ins for those residents who can self-isolate for 14 days upon arrival. I have confidence in Brookdale and in the important role our communities will continue to play long after COVID-19 is gone. The majority of our business is needs-based, and those needs will continue. After the pandemic is behind us, we expect to reorient to a growth trajectory and to be stronger as we have better positioned ourselves as a trusted industry leader with our healthcare referral partners. In Brookdale's 40-plus year history, we've operated through challenging environments, mobilized our teams, and proven our ability to navigate efficiently and effectively in uncertain times. We have the most experienced and resilient team in senior living leading through this storm. With that, I'll turn the call over to Steve for a more detailed update on our financial performance.