Brookdale Senior Living Inc.

Good morning. This is Kathy McDonald. I'm very sorry for the technical delay. Thank you for joining us, and welcome to the second quarter 2021 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 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 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 our 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. 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 that you and those you care about are safe and sound. Welcome to our second quarter 2021 earnings call. The COVID-19 pandemic continues to demonstrate Brookfield's versatility and resilience, and those attributes are proving critical as we continue to win the recovery and help save lives. As the economy reopens and our entire industry is in a lease-up mode, we are operating in an intense and dynamic environment. We will continue to build on and refine our plans to position Brookdale for long-term success. We've made great progress this year to capitalize on the opportunities. I am pleased to report that we have delivered five consecutive months of occupancy growth. The June month end occupancy showed a significant step up, which led to an even stronger July occupancy result. The work has been hard and has placed tremendous demands on our associates. The tenacity of our team members at the communities with the diligence of our regional and corporate associates has helped protect the health and well-being of our residents throughout the pandemic and accelerated the COVID-19 vaccination process so that we could reopen our communities more quickly and with appropriate safety protocols. Thanks to our hard work, the initial phases of recovery occurred earlier than expected, and we have been able to stay focused on achieving our growth objectives. As of July 1st, we further strengthened our liquidity position by over $300 million when we completed the 80% fail and smooth transition of our home health, hospice, and outpatient therapy business to HCA healthcare. We are pleased with this value-enhancing transaction and that high-quality healthcare services continue to be available to our residents. Brookdale's residents will benefit from a seamless offering of services across a broad care continuum. The transaction represents the latest step in our ongoing efforts to drive meaningful shareholder value, significantly improving our liquidity, while positioning our core senior housing operations for sustained growth. At the beginning of the year, I introduced three growth pillars in our plan to put the pandemic behind us. The first pillar, our vaccine clinic strategy, is largely complete. I believe our success with hosting over 2,000 vaccine clinics in four months enabled us to accelerate opening our communities and our occupancy recovery. We remain diligent in helping protect our communities, residents, and associates, especially in light of the Delta variant. We continue to meet with the CDC state and local health officials to help ensure we stay informed of new developments and best practices and implement effective protocols in support of the well-being of our residents and associates. Our ongoing efforts are a testament to our expertise and how helping people with the challenges of aging is one of our core strengths. The second pillar was to sharpen our business edge through sales transformation. As part of our win locally strategy, we have refocused our attention on local outreach engagement. In addition, during the second quarter, we strategically and opportunistically allocated marketing dollars to particular areas, which is delivering strong returns in our leads. Taken together, we believe this helps us achieve occupancy gains that outpace the industry. We are pleased with the sequential improvement in leads, as well as our ability to convert leads to move-in, particularly in assisted living and memory care. The third strategic pillar we announced was to better capitalize on the higher concentration of our portfolio in assisted living and memory care. In addition, we wanted to better capitalize on our demonstrated leadership position for our residents and prospects. We are well equipped to serve appropriate residents with complex medical conditions. We also have industry-leading customer satisfaction, evidenced most recently by our J.D. Power Award for assisted living and memory care communities for ranking highest in customer satisfaction. Our success with this pillar can be seen in our sequential occupancy growth in the assisted living memory care segment, which is approximately 70% of our portfolio today. The outsized recovery in our memory care portfolio is particularly notable. The successful execution of these three strategies means that we are ideally positioned to benefit from the broader recovery. Let me turn to our financial highlights for the second quarter. The industry, as reported by Nick, showed that the second quarter senior housing occupancy increased approximately 10 basis points on a sequential basis for stabilized portfolios. We are pleased Brookdale's occupancy grew significantly faster on a same community basis. During each month within the quarter, our move-ins accelerated. Of note, our same community June move-in volume was the strongest since August 2019. This is particularly positive to see happening in the second quarter since our strongest occupancy growth historically occurs in the third quarter. For the second quarter, on a same community basis, our senior housing occupancy grew 90 basis points with assisted living and memory care occupancy increasing even faster at 110 basis points on a sequential basis. Sequentially, our independent living occupancy percentage was relatively flat for the quarter. We were pleased, however, to see occupancy turn positive in May and accelerate in June. I am proud that we were able to continue managing and maintaining overall rate discipline. While we've seen some competitors within the industry use significant discounts during this pandemic-related lease-up period, our dynamic pricing strategy is working. By focusing on both price discipline and occupancy growth, we believe we will achieve a better sustainable result. Turning to operating expenses, senior housing expenses were slightly lower on a sequential basis. When you bifurcate the key elements of OPEX, the favorability was from a reduction in COVID-19-related expenses that corresponds with a significant drop in cases in our communities. As expected, the expense increase was mainly labor-related, along with slightly higher incremental marketing investments. I want to address labor, since at our core, Brookdale's business depends on people taking care of people. While the general population is worn out from the challenges of the pandemic, those who have been vaccinated are returning to life's normal routines. However, Brookdale's everyday heroes remain on the front line. Our community associates continue to incorporate enhanced protocol to help protect against COVID-19 since our industry helps protect the population that is most vulnerable to this virus due to age and chronic conditions. With the exception of the industry being in lease-up mode, I believe the largest current pressure on the industry is related to labor. We must ensure that the senior living industry continues to be an attractive place for associates to fulfill their purpose, earn competitive compensation and benefits, and grow professionally. With today's intensely competitive environment, we increased our recruiting efforts to fill open positions and actively adjusted wages to remain competitive in the market. Our goal is to ensure that our communities continue to be staffed with full and part-time associates. When we have openings, however, we use contract labor and overtime, which can be expensive. While we feel this near-term pressure, we also believe the environment will improve. In states that ended the enhanced weekly unemployment payments, there has been a recent drop in unemployment claims. As more people return to the workforce and through our extensive internal efforts, we expect that our labor costs will stabilize later this year. As we gain momentum, we are mapping a range of positive Rose Park growth trajectories. We will continue to issue monthly occupancy press releases so you see our progress in a timely manner. The fierce competitive workforce environment will put near-term pressure on our margin, but we expect this will be transitory and that our margins will improve in 2022. At Brookdale, we provide clinically needed support to help manage the challenges of aging, and I strongly believe in the need for senior housing and care. More than one in four seniors isolation, and the increased risk of dementia, stroke, and heart disease that comes with it. Our communities help satisfy seniors' desires for engagement, social and emotional well-being, and we know the power of community. Brookdale is ready to meet seniors where they are, whenever they need us. We are the senior living provider of choice experience, and expertise to help seniors thrive. With that, I'll turn the call over to Steve.

Thanks, Cindy. There are three key takeaways related to our financial results. First, REVPAR growth improved on a sequential basis. We outpaced the industry in occupancy growth while maintaining REVPAR. Occupancy inflected positive earlier in the year than we expected. This momentum is a good sign as we enter the third quarter, which historically delivers the strongest quarterly sequential occupancy growth. Consistent with our pricing strategy, we were able to maintain REV poor on a sequential basis while using targeted discounting in select competitive markets. Second, OPEX. With high resident vaccination rates and fewer COVID-19 cases in our communities versus the first quarter, we were able to significantly reduce COVID-19 costs both on a year-over-year basis and sequential basis. As Cindy detailed, the intensely challenging labor environment largely offset this benefit. Third, liquidity. With the completion of the sale of our healthcare services segment on July 1st, we have incrementally strengthened our liquidity position. Now, let me provide some context for these highlights, starting with occupancy. This is the first time occupancy grew every month in the quarter since 2019. Second quarter weighted average occupancy was 70.4%, up 90 basis points from the first quarter on the same community basis. REVPOR, or rates, was 4.2% better on a year-over-year basis, driven primarily by our annual price increase at the beginning of the year. On a sequential same community basis, we saw rate increase slightly. The annual increase and maintaining rate discipline through the year helps us cover some of the extraordinary costs related to the pandemic. Turning to operating expenses, on the same community basis, the second quarter senior housing operating expense improved 6.1% year-over-year and was slightly favorable sequentially. The primary driver of the favorability was a reduction of COVID-19 costs of approximately $45 million on a year-over-year basis and $17 million on a sequential basis. Excluding COVID-19 costs, labor expense increased sequentially, primarily due to the difficult labor environment as we use contract labor and overtime to mitigate open community positions, along with seasonal increases from an extra workday and the annual merit increase. For other operating expenses, Excluding COVID-19 costs, the sequential increases were due to higher insurance-related expenses along with incremental marketing investments to help win the recovery. Healthcare services operating results were included in the consolidated second quarter report. With the transaction completed on July 1st, going forward, the segment will be removed from consolidated results and the $306 million of net cash proceeds will be reported as net cash provided by investing activities. Turning to G&A. Excluding transaction costs and non-cash stock-based comp, the second quarter increase both year-over-year and sequentially was from higher short-term incentive accruals as we gained occupancy earlier than we expected. G&A expense will be lower in the third quarter as we see the reduction in costs related to healthcare services associates who transitioned with the sale of that business. Adjusted EBITDA for the second quarter was $33 million compared to $45 million for the prior year quarter. The impact of lower senior housing NOI due to the pandemic was significantly mitigated by the benefit of the negotiated cash rent reductions. This highlights both the need and benefit of last year's win-win agreement with VENTAS. Adjusted free cash flow was $168 million lower in the second quarter compared to the prior year period. The largest driver of the difference was due to the CARES Act. $146 million was related to the prior year quarter when we received $85 million of Medicare advance payments, accepted $34 million of provider relief fund grants, and benefited from $27 million of deferred payments under the payroll tax deferral program. In addition, for the current quarter, there was a $14 million use of cash for the initial repayment to the Medicare Advance Payment Program. In the second quarter, non-development capex was $14 million higher than the prior year as we continue to make investments across our communities as planned. Turning to the third key highlight, liquidity. As of June 30th, total liquidity was $388 million compared to $439 million as of March 31st. The change was primarily from the impact of adjusted free cash flow. On July 1st, net proceeds from the sale of our healthcare services business would add $306 million to the quarter end liquidity. To wrap up, let me share some directional financial expectations for the third quarter. With recent occupancy trends, we expect sequential growth in the third quarter to accelerate. We expect rev pour to be flat to slightly down based on the competitive nature of the lease-up environment in the industry. We will continue to monitor market rates and adjust as necessary. With our occupancy and rate expectations rev par, sequential growth could accelerate to nearly double the percentage growth of the second quarter. With the intense labor market competition, we expect higher costs from contract labor and overtime, along with the seasonal extra day and extra holiday in the third quarter. For other operating expenses, we also expect higher marketing investments to help us drive accelerated occupancy gains along with higher seasonal costs such as utilities. G&A expense will be lower as the Healthcare Services Associates transition to HCA Healthcare. Because we expect to provide transition services in connection with the sale, it will take time to see the full indirect expense benefits. Turning to other key drivers of adjusted free cash flow. Annual non-development CapEx investment is expected to remain at approximately $140 million for 2021. And we will book approximately $5 million of state tax expense related to the healthcare services sale in the third quarter. Looking longer term, we remain confident in the growth opportunity of our business based on three key drivers. First, demand. Demand for our communities is returning. We are firmly on the path to recovery and gaining momentum. A notable increase in the senior population is beginning and nearly 65% of the target population lives within 20 minutes of a Brookdale community. Second, new supply has dropped dramatically, and this will provide us a positive tailwind for the next several years. Finally, there is demand for high-quality needs-based services due to a significantly higher presence of chronic conditions and, over time, fewer unpaid caregivers. Importantly, our community associates have the skills and desire to provide these services. With this solid foundation for growth, returning just to 2019 pre-pandemic occupancy and margin levels would drive over $300 million of additional NOI. I will now turn the call back over to Cindy.

Thank you, Steve. In summary, the completion of the HCA healthcare transaction has strengthened our liquidity position as we continue to have an ongoing interest in a growing home health and hospice business. Our senior living business has delivered five months of consecutive occupancy growth. And in the second quarter, we outperformed the industry's sequential occupancy growth. I remain optimistic as we enter the third quarter, which historically has been the highest occupancy growth period of the year. Over the past three years, including the recent healthcare services transaction, we have made significant transformational changes to reshape our business. We are in a better position to capture a larger share of the robust silver wave of senior demographic demand and drive meaningful shareholder value. Operator, if you would open the line for questions. Thank you.

Thank you. As a reminder, if you have a question, please press star 1 on your telephone keypad. Once again, that's star 1. Your first question comes from the line of Josh Raskin from Nefron.

Hi, Josh. Hi, Sandy. Hi. Good morning. Not good evening, so good morning. So my question, I guess first thing, I just want to follow up on Steve's comment. I heard the 2019 occupancy levels, if we were to return there, would drive $300 million of additional NOI. Could you just help us understand what that means and what that's relative to? Is that relative to, you know, the $30 million, $33 million run rate that we saw in the quarter, or what exactly was that intended to say?

Morning, Josh. That's generally what the basis is. So, you know, kind of a run rate close to $500 million or so, and then plus $300 is in the $800 million ballpark.

Okay. Okay. So, okay, I see what you're saying is still $800. So you think that's what the current situation, the pressures, et cetera, and I assume that means labor normalizes or something like that. My question is, how should we think about the risk, and I hate to the downer on the party here, but how should we think about the risk of community closures and the potential for stopping move-ins? And maybe you could just remind us the metrics that the states were using last spring and what triggers sort of that decision for a state to act and stop move-ins. And then I don't know if there's any specific internal Brookdale rules that you guys have in place or rules of thumb where you start thinking about community closures.

Sure, Josh. There's a question that the Delta variant is challenging, but what's different today than at the beginning of the pandemic is that we have added highly effective vaccines to our strategy to help protect residents and associates. Throughout the pandemic, we've been able to demonstrate our ability to balance safety and engagement. And at the conclusion of over 2,000 vaccine clinics, 93% of our residents received the vaccine. So we are building on the steps that we've already taken with a vaccine requirement for our associates with limited exceptions. Given the widespread access to the vaccine, we're in a much better position to handle the pandemic. Now, what we see is that because of all of these things, even if there is a COVID-19 positive resident case, we have the protocols in place in many cases to remain open to new move-ins. So I think that we're monitoring it carefully. We have strong infection control protocols, and we're proceeding accordingly.

I guess, I mean, I was thinking more about, you know, when the state acts and says, you know, because I think if you look back a year, year and a half ago, it was measurements of, you know, ventilators that were available, ICU bed capacity or even hospital occupancy levels and that sort of stuff. So, you know, I think some of it is kind of out of your hands, but it sounds like, Cindy, you think even if Delta continues to rise because of the vaccinations and the protocols you have in place, it sounds like you don't envision a scenario where communities are actually closing.

I'm not saying that we'll never have a Brookdale community closed. I want to be clear about that. It's possible. But what I'm saying is the risk profile is significantly different today, given the high vaccination rates of our associates and the fact that the vaccines are highly effective at preventing severe illness and hospitalization. So we'll work with our local health departments, of course, to make sure that we're doing everything that we can to help protect our residents and associates from But what we have seen and what we've heard in the industry is that the health departments are comfortable with the safety protocols that we have. And they take that into consideration when deciding whether a community needs to close or reopen. And that is different than a year ago in the regard that a year ago the residents didn't have access to the vaccine. And so that's a very big change. And I think the health departments appropriately recognizes that. And we are continuing all of the safety protocols that we put in place during 2020 with hand washing and social distancing and masking. And now our continued focus on vaccines to really help keep our residents as safe as we can, as well as our associates.

Perfect. Thanks.

Thank you. Your next question comes from Tal Q from C4.

Good morning, Sal. Hey, good morning. Thank you for having me on the call. Congrats on the near completion of the vaccine clinics, which is very reassuring in light of the spread of the Delta variant. My first question is regarding the 3Q outlook. I think, Steve, you mentioned sequential increase to doubling 3Q. Were you referring to occupancy or operating income? I missed that part.

Yeah, before Steve answers, I'm going to just ask everybody on the call, I hope you've gotten vaccinated. I hope you've got your family vaccinated, your friends vaccinated. Together, we can really stop COVID if we really focus on vaccination. Steve?

Yep, you bet. So, Tal, I was talking about rev par sequential growth. In the first and second quarter, that was 1.7% rev par growth. And as I mentioned, that could nearly double from second quarter to third quarter.

Got you. So the month-on-month acceleration in occupancy is impressive. Could you talk about the leading indicators you're seeing right now that may have contributed to that improved outlook?

We are definitely seeing an increase in inquiries and leads and visits as well as conversion. So all of those things are coming together to result in improvements in our move-ins on a sequential basis. So we feel like the environment is improving. We feel like our sales transformation efforts are gaining momentum. We think that the marketing investments that we've made are great, and we are just so proud. of the fact that our July occupancy in a single month built almost as much occupancy as the entire second quarter.

Mm-hmm. Gotcha. And the second part was on the RAV4. I think it came in more resilient than I had expected, given the broader discounting environment we're generally seeing right now, especially in the low-acuity products. Could you maybe expand a little bit on your comment regarding dynamic pricing, how the factors driving the price decisions, similar or different compared to apartments or lodgings?

absolutely we are proud of our revpar growth on a year-over-year basis and have maintained pricing discipline we operate in 41 states we've got a variety of community types and a competitive environment is different in every single community you know that our industry has more than 2500 different operators and so our pricing strategy has to be local and it has to reflect the occupancy of our communities, the competitive environment that we're seeing, as well as our ability to move in as many residents as possible at the highest achievable rate. And so we're constantly balancing the rates that we have in a local market, our discounting strategy, and looking to see whether changes in pricing would accelerate our REVPAR growth. And that's something that I think the team is just very focused on.

So did you develop that dynamic pricing mechanism in-house, or are you using any third-party products?

We are not using third-party products.

Hey, Cal, I want to give enough time for the other analysts, so we can follow up with you after the call.

Okay, sounds good. I mean, just one last question for me. The $14 million equity in earnings from unconsolidated investment, is that related to the sale of the two CCRCs and the legacy JV you have with Tuffy?

I believe so. I can get back to you on that. It's the last remaining part of the JV, correct?

Okay, sounds good. Thank you and congrats.

Thanks, Tom. Thanks, Tom. Our next question comes from Ryan Pangoula from Jefferies. Hi, Brian.

Hey, good morning. Yeah, first question, Cindy, just to clarify on the vaccination rates to Josh's question earlier. So it looks like your residents are highly vaccinated in the 90 plus percent range. And then you said majority of the citizens are. But are you putting out a mandate now on vaccination? And are you able to use that maybe from a marketing perspective? And I guess flip side of that, are you concerned that this could drive some increased employee turnover if you are mandating vaccinations?

Yeah. Our North Star is the health and well-being of our residents and our associates. And we have been focused over, oh gosh, since before the vaccines were even available, on education about the importance of vaccines. We've made our vaccines readily available for our residents and associates. And our residents led the way. I mean, 93% resident vaccination rate is just incredible. We have seen a large majority of our associates get vaccinated, but we think with the spread of the Delta variant, it's really time to take the next step and to require our associates to get vaccinated. Now, of course, there will be limited exceptions, including medical and sincerely held religious beliefs, and there are some jurisdictions where we cannot require our associates to get mandated, but we think it's really important for the trust of our residents and their families. So we do think we'll be talking about with prospects as they tour our communities. I hope that we don't lose a single Brookdale associate, but I do recognize that not everyone is going to agree with the decision that we made to require vaccinations. And so we will be proactive about providing education to associates. to understanding where they're coming from, to working through the process on medical and religious accommodations. And if necessary, we will bring additional associates into the Brookdale family because our objective is to have our community staffed with full and part-time associates, and we want them to be vaccinated.

No, I appreciate that. And then I guess on the cost side, Cindy, as we see Delta pick up, are you thinking of ramping up testing or preparing to ramp up testing and ramp up PPE use just as the infection rates across the country are picking up right now?

Yeah, we have masking requirements in our communities for our associates. And so that's been in place since the beginning of the pandemic. And there are state and local requirements as it relates to testing. Now, that's largely focused on unvaccinated individuals. So to the extent that we are having an increasing percentage of our associates and residents vaccinated, those testing costs are higher. um are not necessarily something that would would increase as much but of course it's going to depend on whether we have a positive case in the community and if so that will involve more testing but you know i feel like we've got the right strategy in place we're taking the appropriate steps to manage effectively through the pandemic with the prioritization of the health and well-being of our residents and associates and quite honestly If you think about our medical costs with our health care plans, the more of our associates that we get vaccinated, that should help us over the longer term as well.

Last question.

Do you want to add anything?

Sorry, go ahead. The COVID-related expenses from second quarter to third quarter, kind of pre-Delta variants, We expect it to go down slightly. As Cindy mentioned, there are unknowns. So to the extent it doesn't go down quite as much as was in the projection, my projection, it is to be seen.

Thanks, Steve. Since I got you, just last question for me. We've gotten some questions about your 2022 maturity. So just wondering if you can make any comments on your debt refinancing strategy going forward. You bet.

So looking big picture, we strengthened our liquidity position by over $300 million on July 1st after closing the healthcare services transaction with HCA. And we're evaluating potential uses of that cash, such as deleveraging some communities as we refinance their 2022 maturities, perhaps a small pay down of higher interest rate debt or targeted investments to accelerate growth. We continue to focus on enhancing liquidity through occupancy growth and expense discipline. At the same time, we're pursuing provider relief fund grants. So overall, cash flow and liquidity are a priority, and we'll continue to take proactive steps on the balance sheet while evaluating opportunities and executing on the core business.

Awesome. Thank you.

Thank you so much. Your next question comes from Stephen from Barclays. Hi, Stephen.

Great morning, everybody. Thanks for taking the question here. This was touched on a little bit earlier, but just as far as the July occupancy trends, you know, pretty encouraging. But as we do dig in a little bit deeper on your geographic mix, Texas, Florida and California are the three largest states for Brookdale on number of units. Those states are seeing a lot of the new COVID cases where it's most prevalent, or at least in two of those three states for sure. I guess I'm just curious, as you analyze your own occupancy gains, are you seeing any correlation of better gains in states where there's fewer new COVID cases, and is it perhaps a little slower where those new cases are more prevalent by states? Any trends worth calling out, or is there really no correlation? Just curious to get some additional observations around that. Thanks.

Yeah, it's a good question. I think we've seen the growth in COVID cases is largely among unvaccinated individuals and a much younger population than we saw during 2020. I don't know that we have seen any correlation between increasing COVID trends and our occupancy trends. I think the important thing to remember is that we are a needs-driven business and And so where we have seen the outperformance is really in our memory care communities in particular. Their performance during the second quarter was absolutely phenomenal, and we've got a strategic focus there, which helps, of course. And then what we've seen softness in is really independent living. And that's something I think that's across the industry as well. But I don't think it's related to the surge in the Delta variant. Okay.

So at the end of the day, it's more related to product offering than any geographic mix. Okay. Just wanted to reinforce that. Thanks.

Thanks, Stephen. Your next question comes from Joanna Goodjook from Bank of America.

Good morning, Joanna.

Hey, good morning. Thank you for taking the question here. So if I may just follow up a couple of these things that have been discussed. So one is on the labor side. Obviously, we see a lot of commentary from different providers about pressure. They're equally highlighted. You expect, you know, some continuation of this contract labor pressure, at least in the near term. So can you kind of confirm that, you know, what you see in the market? And also, how do you think about going forward? Do you think that once, like you mentioned, these supplemental benefits, unemployment benefits expired, and it's going to be, you know, somewhat easier to recruit? And can you talk about, you know, any turnover you're seeing or higher turnover you're seeing in different markets?

Yeah, sure. It's all covered by the news. The labor market is fiercely competitive, and we have increased our recruiting efforts to fill open positions. But when we have an opening, we do use overtime and contract labor as necessary. And, of course, we actively adjust wages to remain competitive. Looking forward, we do expect that the labor market will improve gradually as people return to work after the supplemental unemployment increase. benefits end and as schools reopen. So I think that's important to note. So I think all of the things that you've talked about, yes, we see it, we have experienced it, we think it will continue into the third quarter, but we over archingly believe that the labor market will return to more of a normal level in the not too distant future.

Okay, that's helpful there. And I guess to that end, are you seeing, you know, increased interest from, you know, applications and whatnot or inquires for, you know, for jobs in senior housing? I know there's, you know, maybe some shift in interest, people moving, you know, say from nursing homes or elsewhere, high acuity settings to senior housing. Any of that is happening?

you know the quarter has has been a little bit of a roller coaster right i think particularly early in the quarter we didn't see as much interest in our postings when there was an economic incentive to stay on unemployment and there were just massive increases in jobs available in the economy I do think more recently we've seen increased interest in our postings, and so that's something that we're encouraged about. I think the one thing that our industry offers that few others do is that when an associate goes home after a day at Brookdale, they know that they've made a difference in someone's life. Most employers can't offer that. And so we really do attract a workforce that genuinely wants to make a difference and genuinely wants to be part of something bigger than themselves. And when you remove the barrier of supplemental unemployment benefits, moms who have their kids at home and aren't in school, and some of the concerns around the COVID-19 variant that the vaccine helps solve, it's much easier to operate a business.

Thank you. I appreciate it.

Thanks, Joanna. Your next question comes from Frank Morgan from RBC Capital Markets. Good morning, Frank.

Good morning. Most of them might have been answered, but just a couple of random ones here. Going back to the mandatory vaccine, I think you mentioned there are some states where that would not be allowed. Could you share with us what states those are that will not allow you to enforce mandatory vaccines for employers?

So Oregon comes to mind. There are a few states, but top of mind for me is Oregon. And we can follow up with the list with you separately.

Gotcha. Okay. And then I guess I would just be real curious from what you're seeing out in the field when you look at your competitors and during this period where, you know, people are coming back out and move-ins are improving. Any change in their behavior regarding, you know, pricings or incentives? And how do you think they will actually handle, you know, the surge in COVID? And what do you think? Are you hearing that other providers out there are considering doing the mandates for vaccines as well?

Yes. I will say that the environment is pretty competitive. And because we've got 2,500 competitors and many operate five or fewer communities, we see just about everything that you can imagine. Some of the things that we see, quite honestly, we don't think are sustainable. And so that is something that, you know, I think we're taking the strategy that we think will yield the best result in the longest term on a sustainable basis. And we're really proud of the fact that we had such strong occupancy growth outperforming the industry in the second quarter while being able to maintain rate discipline. I do think that a number of people in our industry are going to move to a mandate, a vaccine mandate, and we're seeing that already in healthcare overall. If you look at the statements that have come out from the American Physicians Association, the American Nurses Association, and all sorts of leading healthcare institutions, People recognize that vaccines are important, and more and more healthcare systems, hospital systems are taking that step to help protect their associates as well as their patients and residents.

Maybe one last one. Just in terms of geographic, you know... markets, any particular areas where you're seeing things getting better at a faster rate than average? And by the same token, any markets where it's lagging? Thanks.

You know, I don't know that there is anything that I would say that just jumps out on a market basis. I think that what we tend to see is that our communities that have leadership teams that have been placed tend to recover the quickest. We know in particular at Brookdale, if an executive director has been with us two years or more, they tend to perform better. And so, you know, we've got about two thirds, I think 65% of our executive directors who've been with us for at least two years in our community. And that's really where we see the fastest recovery. Of course, if you go back to our memory care communities, they are just performing incredibly well during the recovery. Where we have a higher concentration of memory care communities, we are performing better. Okay. Are there any more questions, operator?

I think that's it. Thank you for your interest in Brookdale and joining us this morning. Operator, you can now close the call.

This concludes today's conference. You may now disconnect.