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spk04: Welcome to the Brookdale Senior Living first quarter earnings call. My name is Victoria and I will be coordinating your call today. If you'd like to ask a question, please press star followed by one on your telephone keypad. If you wish to withdraw your question, please press star two. If you have joined us online, please press the red flag icon. When preparing to ask your question, please ensure that your line is unmuted locally. I'll now pass over to your host, Cathy McDonald, to begin.
spk01: Please go ahead. Thank you and good morning. I'd like to welcome you to the first quarter 2022 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 the 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. Now, I will turn the call over to Cindy.
spk03: Thank you, Kathy. Good morning to all of our shareholders, analysts, and other participants. I hope you and your loved ones are healthy and happy. Welcome to our first quarter 2022 earnings call. We are pleased to report revenue growth in the first quarter, continued strong recovery indicators, and significant achievements against our 2022 priorities. COVID-19 continued to play a role in the first quarter. with the Omicron variant causing the pandemic's highest peak of US cases to date. For Brookdale, thanks to the hard work of our associates and a concerted effort to learn from and advance our mitigation and prevention efforts, we continued our strong infection control. Indeed, over the past two years, we've gone to great lengths to learn how to navigate the challenges of COVID-19 using highly effective tools to help protect our residents, and reduce cases in our communities. With second booster shots approved for seniors, our clinical team diligently and promptly worked to schedule clinics for our residents. We've made good progress and are working to complete these clinics for all of our communities as soon as possible. Moreover, with the increased worldwide awareness of viral infections and the related impact on seniors, coupled with our community's strong infection controls, The impact of seasonal flu has been low in 2022. I am grateful for our associates who continue to go above and beyond to make the health and well-being of our residents their top priority. Our business depends on people taking care of people, and I am so thankful for the leaders within Brookdale who make our caring culture a reality. As I have mentioned, we have already made great strides on our 2022 strategic priorities Our first strategic priority, to get every available room in service at the best profitable rate, is directly linked to our financial highlights for the first quarter. RevPAR increased 11% compared to the prior year quarter and grew 5% on a sequential basis. We were pleased to deliver the best first quarter sequential occupancy results in 10 years. Our lead funnel is robust. With first quarter inquiries exceeding pre-pandemic levels, we continue to refine our programs to build a strong pipeline to attract residents wherever they are in their decision-making journey. Move-in volume accelerated in February, and for the first quarter, we exceeded pre-pandemic averages in lead-to-visit and visit-to-move-in conversions. Our sales, marketing, and operational teams excelled to achieve more than 2,000 move-ins in March, the highest March move-ins in our history. What is truly remarkable about this first quarter's positive occupancy news is that it occurred simultaneously with our implementing rate increases necessary to help mitigate higher labor costs and rising inflation. The credit goes to our executive directors who did all it took to make sure residents and their families understood the rationale of our rate increase. I'll now move to our second strategic priority, to attract, engage, develop, and retain the best associates. When it comes to adding talent, I'm pleased with our progress in the first quarter. Our net hires nearly doubled on a sequential basis. And we grew our workforce by 2.5% during the first quarter, which, with more than 33,000 associates, was and continues to be a sizable undertaking. These results are a testament to our intense recruiting efforts, competitive compensation packages, and, where possible, flexible schedule offerings. We have been aggressively focused on building our team, and I'm pleased to report that we have had net positive hires every month. since last November. That said, we are not done yet, as the competition for talent remains intense. We are continuing to focus on our associate value proposition to retain our talented associates, and we plan to continue increasing the number of Brookdale associates. This focus will help us reduce contract labor and accelerate our profitable growth strategy. Speaking of contract labor, while Omicron put additional pressure on an already difficult labor environment, our first quarter contract labor expenses improved slightly on a sequential basis, all the while ensuring we continue to appropriately staff our communities. As our new hires move through the recruiting process, including accepting an offer, officially joining our team, and completing their training, and we satisfy the contractual requirements for agency staffing, We expect to see contract labor moderate in the second quarter and decline more substantially in the second half of the year. We continue to refine our actions to attract and retain the best associates. I'll now move to our third strategic priority, earning resident and family trust and satisfaction by providing valued, high-quality care and personalized service. In a recent study, a significant percentage of healthcare providers rated Brookdale as having the top COVID-19 response in the industry. And we continue our endeavor to be a learning organization. To deliver continuous improvement through incremental and sometimes breakthrough changes, we request feedback from our residents and their families. To that end, we often pull our residents and their families to better understand their views and needs. Thanks to strong engagement, we have been able to glean meaningful insight, including from a recent survey in which we received more than 22,000 responses. We are hard at work analyzing the results to determine where we can enhance our already strong customer focus. In summary, with exceptionally strong RevPAR growth in the first quarter and tangible progress against our strategic priorities, We expect our momentum to continue to accelerate as the year progresses. We are continuing to make progress and we are reaffirming our previous annual guidance. Brookdale is well positioned to win in this dynamic and competitive market. By helping our residents live their best lives and providing compelling career opportunities for associates, we will continue to deliver long-term value for our shareholders. I will now turn the call over to Steve.
spk06: Thanks, Cindy. Let me start with three key takeaways. First, REVPAR increased 11% in the first quarter compared to the prior year quarter. This growth was from the compounding effect of both a strong 5% net rate increase and a nearly 400 basis point occupancy increase through March. We are pleased occupancy momentum continued in April. REVPAR on a sequential basis Increased 5%, mainly driven by the January 1st rate increase for in-place residents. Occupancy was nearly flat, representing much better performance compared to a pre-pandemic first quarter seasonal decline. Second, expenses. On a sequential basis, facility operating expenses were 5% higher. However, contract labor was slightly lower. The rate increase mitigated higher operating costs resulting in a sequential adjusted EBITDA increase of approximately 4%. Third, there is a significant top line growth opportunity given the favorable supply demand tailwinds. With growth of our target population for the rest of this decade and a relative decline in new senior housing units under construction, the runway for strong revenue growth is compelling. Now, let me provide context for these highlights on a same community basis starting with revenue. Occupancy was 390 basis points better than the prior year quarter and nearly flat on a sequential basis. The sequential result is outstanding when you consider the pre-pandemic context where the first quarter occupancy generally declined sequentially by approximately 80 basis points. REVPAR, or rate, was more than 5% better than the prior year quarter and on a sequential basis. Combining the occupancy and rate growth, our REVPAR grew 5% on a sequential basis and 11% on a year-over-year basis. Turning to operating expense, starting with labor, on the same community basis, the first quarter labor expense increased nearly 4.5% sequentially. The key drivers of the sequential labor increase were we realized a full quarter impact of the market rate adjustments we initiated in the fourth quarter. This was important to remain competitive in local markets. Health insurance expense was higher. With the first quarter net hires nearly doubling sequentially, we continued to use contract labor as new associates were onboarded and trained. And, as mentioned earlier, slightly lower contract labor helped partially mitigate these labor expense increases. Same community, other facility operating expenses increased 8% sequentially. There were three main drivers. Higher COVID-19 related expenses, higher investments in marketing and customer acquisition costs, and seasonally higher utilities. In total, senior housing operating expenses increased 5%. The first quarter G&A expense, excluding transaction and organizational restructuring costs, and non-cash stock-based comp was lower compared to the prior year quarter. The decline was primarily due to reducing expenses following the sale of our healthcare services business in 2021. On a sequential basis, G&A increased due to typical first quarter increases for payroll taxes and the bonus accrual reset at the beginning of the year. In addition, healthcare costs were higher as we initiated our 2022 plan. Adjusted EBITDA for the first quarter increased 6% compared to the prior year quarter and increased 4% on a sequential basis. Turning to adjusted free cash flow, working capital was a significant sequential benefit where the use of cash dropped $82 million. The largest driver of the working capital change was the fourth quarter cash payment of $35 million for CARES Act repayments and recoupments, mainly related to the payroll tax deferral program. Turning to liquidity, our liquidity position remains strong. As of March 31st, total liquidity was $476 million, slightly better than a year ago. And it is important to note we have a negligible amount of debt maturities for the balance of the year. Turning to our 2022 guidance, we are reaffirming guidance expectations of annual REVPAR growth between 10 and 12 percent and adjusted EBITDA in the range of $240 to $260 million. This range excludes the benefit of future government grants. At the midpoint, adjusted EBITDA would increase 80 percent from 2021. Within our annual guidance, Let me share some high-level sequential expectations from the first quarter to the second quarter. With occupancy inflecting positive in March and momentum continuing in April, we expect our sequential occupancy growth in the second quarter will be better than the first to second quarter growth of 2021, which was 90 basis points. For REVPOR, because the positive impact of our January 1st rate increase is reflected in our first quarter results, we expect REVPOR to be relatively flat on a sequential basis. For OPEX, as we continue making progress on our Net Higher initiative, we expect contract labor to decrease, partially offset by the community's annual merit increase, which occurred in mid-March and will have a full quarter impact in the second quarter. Summing up the second quarter, with increased occupancy and lower operating expenses, we expect a sizable sequential increase in adjusted EBITDA. I will now turn the call back over to Cindy.
spk03: I continue to strongly believe in the long-term opportunities for senior housing and thus for all our valued stakeholders. As I mentioned earlier, we are a learning organization. We took what we learned from the first year of the pandemic to drive a strong recovery in 2021. With that enhanced knowledge, in 2022, we are committed and believe we are well on our way to executing with excellence against our strategic initiatives and improving our performance at an accelerated pace.
spk01: Victoria, we are ready for questions.
spk04: Perfect. We will now start our Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad. If you have joined us online, please press the red flag icon. When preparing to ask your question, please ensure that your line is unmuted locally. And our first question comes from Brian Taculut from Jefferies. Please go ahead. Your line is open.
spk07: Hey, good morning, guys. Just a First question for me, I guess, Cindy, as I think about your EBITDA performance for the quarter, I look at the historical trends where normally Q1 represents roughly 25% of the annual EBITDA, but obviously we're in different times. So maybe you can just help us bridge from your Q1 performance and how you gain confidence that you can hit the full year guidance for earnings. Good morning, Brian.
spk03: Thank you so much for your question. As I think about our guidance for the year what without giving sort of individual line item guidance. I think this is a good way to think about it. If you think about our first quarter we had 37 million of EBITDA and you multiply that by four quarters. But what that doesn't include is the build in occupancy. And so if you look at the occupancy gain in the middle of the range. the rate is already sort of baked into the run rate. And if you think about what we said previously, we're expecting occupancy growth at least as good as last year. So that's the biggest part of the ramp between our first quarter results and where we expect to end the year. Second, we expect to lower our net labor costs. And really, when you think about this, both Omicron And the intensely competitive labor market resulted in us using more contract labor in the first quarter than we historically do. Now it's improved from the fourth quarter, but it was still elevated. And so we're expecting our contract labor to come down sequentially with most of the improvement in the back half of the year. And so we'll have less contract labor, which is two to three times as expensive. That'll be offset by our merit, our annualized market adjustment, and the variable staff increase with higher occupancy. So the third thing is lower COVID expenses. And if you think about the $10 million of COVID expenses we had in the first quarter, that's higher than we normally have. And given sort of the experience that we've had with COVID, we would expect that to be less throughout the year. Perhaps half as much less. And so, if you think about all that, that will get you to the middle of the hiring range. The last thing that I really want to highlight, and this really sort of gets to the contract labor issue, is just the progress that we've made on net hires. We have improved the number of Brookdale associates every single month since November, and that includes all the way through April, which isn't part of this reporting period. And sort of Q4 to Q1, our net hires doubled. Now, why that's important is if you think about net hires, it takes a little while to get them on board, and then they have to be trained. And while they're training, essentially you have to pay the worker to train, and at the same time, you have to have that contract labor, which is two to three times as expensive. So that should help you understand sort of how we see our first quarter results bridging into our guidance for the year.
spk07: I appreciate that, Collar. And then I guess my second question, Cindy, as I think about You know, rising rate environment and, you know, potential recession on the horizon. Maybe if you can share with us your thoughts on, you know, the experience that Brookdale had in the past on what that does to your business, both from a move-ins or an interest level perspective. And then maybe just, you know, as you look at your maturities coming up, you know, how you're planning around a rising rate environment.
spk03: Yeah, let me start with sort of the rising rate environment. I think the thing that we are encouraged by is that this year our residents got their highest increase that they've had in Social Security for a while, almost 6%, and that gives them increased purchasing power. We always focus on making sure that we're providing value for the services that we offer, and that's something that's incredibly important. Now, we try to forecast what our costs are going to be before we do our rate increase. And what's good for our residents is they have a consistent monthly expense every month. And in some ways, that's much more comforting than people who are seeing sort of massive inflation in gasoline prices or food costs. But really, we do pay a lot of attention to affordability. Steve, I'll turn it over to you now.
spk06: Yeah, you bet. So at the end of Q1, roughly 62% of our debt was fixed and 38% variable. So the interest impact of increasing rates on the company for every 100 basis points of LIBOR or SOFR leads to an annualized interest expense of approximately $15 million. Looking at the current yield curve, which Changes frequently, we estimate interest expense will be roughly $10 million higher than 2021. Just for context, even with a higher 2022 interest expense, our debt interest is still $20 million lower than it was in 2019. And I think you asked about maturities. We implemented our positive refinancing plan in 2021, where we don't have any remaining 2022 maturities, and we don't expect our 2023 maturities, a little over $200 million, to be a net use of cash.
spk07: Got it. And then last question for me, as I think about seasonality factors in occupancy, how are you planning around that? What are your expectations? I know it's a little different this time around, but Just thinking about this for modeling purposes, and I know Cindy, in the past, you used to give statistics on inbound calls and inquiries and conversion. Maybe you can just share any color in that. Thanks.
spk03: Yeah, let me start by saying I was completely pleased with our first quarter performance on move-ins. If you think about sort of our normal pre-pandemic seasonality, what we would have expected expected to see is about an 80 basis points decline between Q4 and Q1. And we were nearly flat. So that was just fabulous from my perspective. Now, if you look at sort of our seasonality, what you've seen is since March of 2021 to April of 2022, we've built 450 basis points of occupancy. And we certainly do expect that our occupancy performance this year will be at least as good as last year. And in the second quarter, we think even stronger than the second quarter of last year. What we're really seeing from the inquiry side on inquiries, they are about 6% higher than our three-year pre-pandemic average, which is really good. And our resident move-ins are about 3% higher. So we're seeing a very encouraging outlook. And I think that relates to the fact that We now have a million new seniors entering our target potential market this year, every year for the next decade. And at the same time, we're seeing that the pandemic impacted demand. And so we've got a bit of a tailwind from the slowdown in construction as a result of the pandemic.
spk07: Awesome. Thank you.
spk03: Thanks, Brian.
spk04: Thank you so much for your question. Our next question comes from Joshua Raskin from Netflix Research, LLC. Please go ahead. Your line is open. Good morning, Josh.
spk08: Good morning. This is actually Marco on for Josh. Thanks for taking the question. Based on our math, it looks like the midpoint of guidance implies an EBITDA margin of about 9.5% to 10%. In light of the current debt levels, it appears that margins would have to increase significantly perhaps even doubled to reach a more sustainable level of leverage. So as you think about the levers to get there, should we expect to see this accomplished primarily through higher occupancy growth? Or do you think that rate can outpace cost growth and be a driver as well in the next few years? Thanks.
spk03: Absolutely. There's no question that our leverage is impacted by the pandemic and the impact of the pandemic on our adjusted EBITDA As I explained to Brian, I do think that the occupancy gain is a significant factor that will improve our leverage, particularly as it has a very strong rate associated with it that we saw. Second, we expect to improve our labor costs as we go throughout the year, and that will also improve sort of our bottom line leverage. We're always focused on making sure that we are creating an attractive value proposition for our residents, but we do have a lot of built-in leverage in our communities based on the occupancy rate. So as our occupancy goes up, our overall margin rates will improve, and that will help leverage.
spk08: Thanks. And then if I could just ask one more quick one around contract labor and Other than your associates quarantining, were there any other drivers for the use of the contract labor in the quarter? We're just trying to understand how much of the contract labor pressure is directly COVID-related.
spk03: Absolutely. We are focused on increasing the number of associates that we have in Brookdale. So that is something that we started in the fourth quarter of last year with great progress for every month since November. So we're looking to increase the number of associates we have. Quarantining was absolutely a factor. We did have extra labor costs associated with Omicron during January and February in particular. But what I think we're really focused on is making sure that we have enough associates so that they've got the flexibility to take the shifts that they want. And we've got adequate Brookdale associates who can do that. So I think those are really the two things that we really focus on. And of course, the general market environment is something that we always pay a lot of attention to. It's been widely publicized that nurses are in very, very tight supply. And so that's one area where we use contract labor more than other places.
spk08: Okay, great. Thank you.
spk03: Thank you so much, Marco.
spk04: Thank you, Marco, for your question. Our next question comes from Taoki at Stifel. Please go ahead.
spk10: Thank you. Good morning, everyone. I wanted to follow up on another part of the guidance, which is in the top line. You know, it sounds like we are seeing earlier occupancy deal than previous years, and also second quarter is expected to be stronger than the step up last year. And just thinking about the general, you know, the competitive environment, I think last year operators are offering many concessions. Do you expect you and your competitors to be less promotional going into the strong leasing season, given the, you know, the strong demand so far? And does that make you more optimistic that you may get to the top range of that 10 to 12% level outlook?
spk03: Thanks for the question. We are really happy that our occupancy has turned positive and inflected positive earlier this year than in our past. Historically, what we would see is occupancy decline until about April or May, and then it would inflect and turn positive. So certainly what we're seeing is improvement there. What we're really also seeing is the price competition in the market is less than it was at the height of the pandemic and we're seeing less discounting. I think that reflects the fact that the occupancy in the senior housing industry is rebounding. And I also think that reflects the recognition that there's inflation in the market. And so it's really unprecedented. that we would be able to grow occupancy and put in an above-normal rate increase. And so we're feeling pretty good about top-line growth.
spk10: Got it. My next question is about the partnerships. You guys brought HCA on board last year with the JV, and it sounds like you may get another partner in United Healthcare and other companies that do acquire LHC. With the growing penetration of Medicare Advantage and the healthcare delivery moving to a value-based care model, have you thought about how you could leverage the relationship with ACA and potentially United and others to grow referrals, coordinate care, improve quality of resident experiences, or maybe ultimately participate in potential Medicare savings you may help your healthcare system and managed care partners achieve? We appreciate any insight you can share on the broader book deal strategy on this topic.
spk03: It's a really good question. We are focused on the health and well-being of our residents. What we're really trying to do is allow them to live the best quality of life they can and to improve their health span. And we know that the things that we do in our community has real value to the lives that our residents lead, whether it's proper nutrition to the dining room, whether it's exercise through the BFIT programs. whether it's preventing isolation and encouraging social connection, that's really important in terms of health outcomes. And so we're excited about the partnership that we have with HCA, with LHC, and the possibility for an even deeper relationship with UnitedHealthcare. Because if you think about it, with Medicare Advantage plans, what is happening is providers are taking on more risk. And so when you recognize the value that our product provides to the health outcomes of our residents, that's something that is real value. We're still in the very early innings of it, and we do think that as Medicare Advantage grows and as we become much more closely integrated with the healthcare continuum, good things will happen.
spk10: Got you. Thank you. That's all.
spk04: Thank you. Thank you for your question. Our next question comes from Stephen Valenquist at Barclays. Please go ahead.
spk02: Great. Thanks. Good morning, everybody. So, yeah, I know that pricing and REVPOR have already been touched on a few times this morning. But just to maybe think about things beyond 22 a little bit, there is a growing vibe among some investors and even some conjecture from at least some of the There are senior housing companies that are talking about the potential for a multi-year cycle of end-resident annual rate increases trending well above historical averages in the current inflationary environment. I know it's hard to predict any sort of multi-year trend, but I'm wondering, at least for 2023, do you have any sort of preliminary view on whether your REVPOR growth in 2023 could mimic what we're seeing in 2022? Or is there already a bias that maybe 22 is a unique year and maybe 23 increases could be less than what you're experiencing in 22? Just want to get your preliminary thoughts around that.
spk03: Thanks. Thank you for the question, Steve. As we look to the future, the most important thing is to make sure that we are providing an attractive value proposition for our residents. And that takes into consideration everything that's happening in the macro environment, whether it's rising interest rates, rising labor costs, rising food costs, the like. But at the same time, it's important to make sure that we have an affordable product. So we'll be balancing the cost of providing our service with the resident focus and making sure that it's affordable. Now, I do think that residents are likely to see a higher than normal increase in their Medicare, which would give them a higher ability to see some inflation in their cost of services.
spk02: Okay. Okay, that's helpful. Thanks.
spk04: Thank you. Perfect. Thank you for your question. Our next question comes from Ben Hendricks at RBC Capital Markets. Please go ahead.
spk09: Hey, thanks, guys. Steve, just a quick follow-up question on your second quarter comments. You mentioned the sizable sequential increase in adjusted EBITDA for the second quarter. I was wondering if you could in that vein, kind of add a little bit of more color around the op-ex contracts, labor decreases partially offset by merit increases. Can you kind of think about how kind of the magnitude of those impacts in the second quarter?
spk06: Sure. So kind of a few ways to triangulate the impact of labor as you look between first quarter and second quarter. As we've said, even with the additional labor needs associated with growing occupancy, we still expect total labor expense will decrease from the first quarter results as we reduce contract labor. So that's one triangulation point. And kind of taking occupancy growth out of it and just looking at the labor rates, we expect improvement in labor costs per occupied unit. So that's kind of the rate of labor, if you will, and we expect improvement over the next few quarters as we take contract labor out and that normalizes. And kind of a third way to triangulate the impact of labor costs is at a high level, as labor expense decreases from Q1, we expect that to drive NOI margin expansion throughout the year. So, again, coming it up, as we increase occupancy and delta receiver expense, we expect to see a sizable sequential increase in EBITDA.
spk09: Great. Thank you very much for that. That's helpful. I also just wanted to have one more follow-up, kind of just more broadly. I know you saw some occupancy mix shift towards kind of more needs-based AL and memory care. Can you just talk about the dynamics kind of driving that, how much of that is kind of structural and strategic versus, you know, or also how much impact, how you're thinking about labor with regard to that makeshift. Thanks.
spk03: Sure. Brookdale at its core is largely assisted living and memory care. That's intentional, and it's a product where we think we are clearly differentiated. We are excited that we are seeing sort of the move-ins for our independent living product. return close to our historical norms, but our growth in memory care was certainly outsized during the quarter, and we're quite excited by that. I think that is something that we've had a lot of opportunity as we move forward. We have a lot of built-in leverage in our portfolio that we can take advantage of, and as the move-ins continue to improve, that will give us better financial results.
spk00: Thank you. Thank you.
spk04: Thank you, Ben, for your question. We will now move on to our final question from Joanna Gayuk at Bank of America. Please go ahead.
spk05: Thank you. Thanks for taking the questions here. So actually, first, I'm going to just quick follow up on this last comment. So you're talking about the shift to these higher acuity type services, memory care specifically. And with that, obviously, comes a high demand for this skilled labor, right, specifically nurses. So how do you handle that? I guess it sounds like currently you have to kind of rely on contract labor because of the shortages of nurses across, you know, healthcare continuum. So how do you kind of solve for that? Are you seeing more interest from these nurses to kind of come to senior housing versus maybe some other settings because of the burnout and whatnot? Yeah. So kind of any color, kind of how do you, you know, how you position to attract businesses in order to grow the member care and assisted living, you know, going forward?
spk03: Absolutely. The thing that I will say is unique about senior living is something we call the second paycheck, and that is the relationship that you have with residents and families. That is something that is unmatched for nursing in any other care setting. And so it's necessary to have appropriate recruiting efforts, attractive compensation and benefits. It's important to make sure there's schedule flexibility and then to make sure they've got the support that they have within the community. And so as we improve our staffing of Brookdale associates and we rely less on contract labor, I think that'll also bode well for our nurses because they will be having Brookdale associates to care for our residents.
spk05: And I guess staying on the topic of hire, so it was good to hear you increase your workforce by two and a half percent. It's pretty good traction there. So just curious, any kind of high level thoughts, you know, what resonates the best with these new hires, like why they come into senior housing? And I guess, I assume it's probably, I mean, I'm curious to hear your thoughts whether these are mostly, you know, new hires, like younger, are those younger workers? And with that, you know, we're hearing obviously younger people more interested in the economy, you know, jumping jobs and also flexibility. And you mentioned flexibility in some of, one of your responses. So what exactly can you offer to these younger people, you know, coming into working in senior housing and, you know, and what's driving this, you know, pretty good growth in that hire? Thank you.
spk03: Thanks for the question. At the top level, one of our strategic priorities to attract, engage, develop, and retain the best associates. And so when you think about the net hires, we've been focused on the things that we're doing to retain our existing associates. And the top two things that we've done to retain our existing associates are targeted wage increases to improve retention. That helps us with our net hires. And then we have technology that we've put in place that allows our part-time associates to pick the shifts that they may want. And that includes not just the Brookdale communities that they work at most of the time, but also surrounding communities. And if you think about the top two things that we've done to increase new hires, we have increased the number of recruiters that we have in the local markets to help our communities with their recruiting efforts. And we also have increased short-term incentives to support recruiting in certain markets. These two things obviously are yielding great benefits because, as we said, every single month from November to April, we've increased the net hires at Brookdale.
spk05: No, this is great. Thank you. And the very last one, sorry. Any comment on any other cost areas in terms of inflation? Obviously, we're hearing cost inflation across the board, so anything there to kind of pull out and what do you expect in terms of the magnitude of inflation? of those cost increases for the year. Thank you.
spk03: Yeah, so first he takes that question. The one thing I can't believe that I didn't say is Brookdale has unmatched opportunities for career progression within Brookdale. And that's better than any other company within senior living. And we were recognized by Training Magazine for their Apex Training Award. This is the second year in the row that we've gotten that award. But really we're focused on allowing people to progress from either a server or a caregiver to a med tech and a CNA by providing training and supporting that development opportunity. So that's something that's really important. With regard to inflation, I'm going to turn that over to Steve.
spk06: You bet. Morning, Joanna. So really, expense and capital. Expense after labor costs, which we've already hit on. The next biggest categories of expense are food and utilities. Of course, those categories are really just a fraction of the labor costs. And while food inflation has increased, so far we've been able to mitigate that pressure due to our scale benefit of a larger number of communities. And utilities, to date we haven't seen a significant increase in rates. However, in the future we do anticipate increases with rising energy costs and just the geopolitical uncertainty. We'll continue to get actions to partially mitigate these rising utility costs through sustainability investments such as lighting and water consumption. As far as CapEx, We are seeing a moderate inflation risk and we're also seeing some supply chain risk leading to increased lead times for things like, I don't know, furniture and appliances. However, we have been able to generally manage these risks through product substitution and pricing protection given our large existing contracts. So that's kind of how we see inflationary pressure as we go forward. And again, we're reiterating our 2022 EBITDA guidance, which contains those assumptions.
spk05: Thank you so much. Appreciate it.
spk03: So I think that is the last question that we have. And what I'd like to say is thank you so much to all of our Brookdale associates, particularly our mothers in advance of Mother's Day. And I want to thank the mothers and grandmothers who've chosen to call Brookdale home. So have a great day. Thank you.
spk04: Thank you, everybody, for joining today's conference call. You may now disconnect.
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