Brookdale Senior Living Inc.

Good morning, ladies and gentlemen. My name is Jerome, and I will be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Leaving Second Quarter Earnings Release Call. All participants are in the listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. As a reminder, this conference will be recorded for replay purposes. I would now like to turn it over to Kathy McDonald of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. I'd like to welcome you to the second 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 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. Welcome to our second quarter earnings call. I want to start by saying thank you to everyone who is making a difference to fight COVID-19. Those on the front lines fighting to protect and save lives, the researchers working on vaccines, and to each of you who make a difference by doing your part against the greatest public health emergency in the past century. This includes our inspiring associates who continue to work tirelessly to help ensure the health and well-being of our residents and patients. Before I talk about our operations, I want to discuss the most significant transaction we completed since the beginning of our turnaround. In July, we completed a new multi-part transaction with our largest landlord, Ventus. We believe this transaction is a positive outcome for us. reducing our future lease payment by approximately $500 million over the remaining lease period through 2025, lowering our debt and improving our cash flow. Prior to the Ventas transaction, we built liquidity that enabled us to make an upfront payment with an approximately one-year cash flow payback. We believe this transaction improves Brookdale's financial foundation during an unprecedented time and better positions us to create long-term value for our shareholders. Turning to operations, Brookdale's top priority remains helping to protect the health and well-being of our residents, patients, and associates, and we will not let up on this diligence. Throughout this global pandemic, Brookdale has provided essential and high-quality care and services, and we will continue to do so. Our commitment to health and well-being has required personal sacrifices that were unimaginable just a few short months ago. And yet, we continue to find inspiration and successes in our operations. The three I'd like to highlight are robust testing, increased resident and family engagement, and incorporating incremental innovation. I will start with our COVID-19 baseline testing. With research showing that up to 45% of all individuals who are infected with COVID-19 are asymptomatic, and given the ability of asymptomatic individuals to transmit the virus, unknowingly, we proactively commenced a nationwide resident and associate testing program. We completed baseline testing of residents and associates at all of our communities across 44 states. In addition to following regulatory requirements, we've asked all residents and community-based associates to be tested so that we could identify and quarantine any asymptomatic individuals to help prevent the spread of the virus. Year to date, we have performed over 100,000 tests. This is helping our extensive efforts to identify asymptomatic individuals and help contain COVID-19. And this tireless work from our Brookdale Everyday Heroes helped contribute to a low percentage of residents who contracted the virus. As of the end of July, less than 1% of our residents currently have COVID-19 positive results. I want to recognize the great work that occurred at our communities, resulting in many great outcomes. Baseline testing at all our communities allows us to learn, as well as to minimize the duration and impact a community experiences with a COVID-19 exposure. One of the pleasant surprises we experienced was that of those residents who tested positive for COVID-19, many passed through the full exposure period without becoming symptomatic. Without our comprehensive testing, they would not have even known they were positive. Identifying individuals who are COVID-19 positive made it possible to implement our quarantine protocols for those infected residents and to restrict COVID-19 positive associates from working in our communities and serving our patients. COVID-19 is ever-evolving, and we are still learning every day. We will continue to meet state and local public health officials' testing directives And incrementally, we have built plans to conduct additional testing in certain circumstances. Turning now to our second operational success. Brookdale is focused on leading the way forward with 85% of our communities currently accepting move-ins. The remaining communities are working with prospects and are creating connections with potential residents so they will be able to welcome new seniors when appropriate. We have increased the amount of communications and expanded our use of technology with our residents to connect them with their family and friends. Throughout the pandemic, we made a tremendous effort to connect residents with loved ones through window visits, car parades, and technology to create virtual birthday and anniversary celebrations. We have even connected our residents at different Brookdale communities to each other through our Connections Across America virtual program. More recently, we've begun to welcome visitors at some of our communities where allowed by state and local guidance. In-person connection is very important to combating loneliness and isolation faced by many seniors and amplified during this pandemic. And we know how much our residents want to see their loved ones face to face. Having completed baseline testing is one critical element that helped us move forward responsibly into a new stage of our COVID-19 response. In advance of local communities welcoming visitors, we developed a comprehensive easing of restrictions plan to address numerous safety guidelines, which incorporates applicable government requirements. Given the continuing COVID-19 trends, our focus remains on helping protect our residents and associates. At a high level, the easing of restriction plan requires, first, the licensing and regulatory agency for the community to support reopening steps as applicable. Second, community-wide testing of associates and residents is complete with no current COVID-19 positive results. In addition, we must follow applicable different state and local guidance. And third, When those criteria are met, our community prepares and communicates an appropriate social distancing plan for various areas of the community that may include, but not be limited to, loved one visits, communal staggered dining and resident engagement, apartment visits by prospective residents, and in-house offerings such as salon, fitness center, library, etc. It's important to note that we modify these requirements as necessary to ensure compliance with ever-changing regulatory or executive order requirements and consideration of health official guidance. All of our precautions are to support the health as well as emotional well-being of our residents and our associates. My final operational highlight is about continuing innovation. Brookdale has taken a cautious, clinical and environmental approach to COVID-19 since the beginning. Last quarter, I highlighted that based on research by our clinical team, our company was an early adopter of taking pulse oximeter readings of our assisted living and memory care residents. Recently, our clinical infection control experts identified an over-the-counter product to incorporate into our prevention strategy for memory care residents. Dementia can cause unique challenges with our memory care residents' ability to remember to maintain social distancing, wear masks, and frequently wash their hands. Our associates can apply this lotion-like product to the memory care resident's face and hands several times a day. We believe this hypoallergenic product supports the antimicrobial barrier of the skin. We are pleased to offer this new measure and add to our existing protocols while continuing to monitor and assess the impact and results. Now, let's turn to the financial performance of our operations for the second quarter. I will focus my comments on same community results. As expected, COVID-19 continues to have a significant impact on our performance, including closing our communities, as necessary, to visitors and move-ins to better protect our residents. RevPAR, on a same community basis, was 3.5% lower compared to the second quarter, 2019, and RevPOR, on a same community basis, was 2.3% higher on a year-over-year basis. Our focus continues to be charging a fair price for high-quality care. Move-ins were lower on a year-over-year basis, but we saw improvement as we progressed through the second quarter. April move-ins were approximately 65% lower on a year-over-year basis, while by June, the year-over-year rate of decline was cut by nearly one-half, with June move-ins around 35% lower than a year ago. This demonstrates great progress thanks to our sales and field teams efforts. They are continuing their strong efforts in the face of new US hotspot resurgence. Brookdale's quality of service and our team's hyper local points of difference, including our neighborhood welcome efforts, has resulted in thousands of seniors joining Brookdale communities during the pandemic. We made key enhancements within our connection center operations to provide even more support to our communities. Whether handling calls or web forms from our marketing investments, this team was able to schedule virtual visits for prospects on behalf of our communities. What's clear is that we've been able to meet the demand from prospects who are still exploring senior living options from the convenience of their homes, as well as in-person visits when guidelines allow. Our operational team's care for our residents has resulted in favorable, controllable move-out results for the second quarter compared to the prior year. We believe residents were less likely to move in in the heat of the crisis and united to protect themselves and others. As the world begins to learn to live with the risk of COVID-19, we believe that our move-ins and move-outs will return to a more normal level. The net impact of our same community move-ins and move-outs was a 430 basis point sequential occupancy decline, with each month of the quarter showing significant sequential move-in improvement. For senior housing, in the first half of 2020, we accepted approximately $10 million of federal grants related to the skilled nursing portion of our business. In July, We applied for additional grants to the Provider Relief Fund Medicaid and CHIP allocation. As the largest senior housing operator, Brookdale played a leadership role in emphasizing to HHS, the administration, and congressional members the importance of providing financial relief to the senior housing industry to help protect our nation's seniors against COVID-19. I, along with others in our industry, have invested a significant amount of time explaining the critically important role that senior living is playing on the front lines of the battle against COVID-19, as well as the economics involved. Let me now turn to our healthcare services, starting with our home health business. Lower occupancy in our communities combined with the acute care health systems that shut down or severely limited all elective procedures and limited access to care had a negative impact on our home health revenue. but we are starting to rebuild our census. In the first quarter, our associates started educating patients and referral sources about our strong screening and protocols in order to continue to provide vital services. Given our focus on quality, we are excited to see that 94% of our agencies had four-star or greater ratings by June. With this quality focus, we are reducing the sequential decline in census. In fact, By the end of June, we had built census back to January levels. Our hospice business delivered 3% revenue growth compared to the prior year quarter and sequentially. We are pleased with the recent government funding to support the home health and hospice industries. Through the end of the second quarter, we recognized $17 million of grants as other operating income in our healthcare services segment. Before I turn the call over to Steve, I will address our outlook. With the recent elevation in the U.S. coronavirus growth rate in the South and Southwest, it's too early to speak definitively about exactly when our business will return to a new normal. At its core, our business is essential and primarily needs-based. Our low percentage of positive COVID cases highlights our competitive advantage of quality care for our residents and patients. This news resonates with our lead sources, along with providing our sales associates facts to back up our strong messages. As I mentioned last quarter, with our national scale and quality-focused offerings, this crisis is our opportunity to lead, and we're doing just that. Brookdale associates are united in leading the way forward. rising to this coronavirus challenge by being nimble and reinventing their roles to provide memorable resident experiences. We made great progress through the second quarter, and we focused on the actions that will help us overcome our short-term challenges and create a business that can capitalize on the opportunities ahead. With that, I'll turn the call over to Steve for a more detailed update on our financial performance and outlook.