Brookdale Senior Living Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Brookdale Second Quarter 2022 Earnings Call. My name is Irene and I will be coordinating this event. If you would like to ask a question on today's call, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by number two. I would now like to turn the conference over to our host, Cathy MacDonald, Senior Vice President of Investor Relations. Kathy, please go ahead.

Thank you and good morning. I'd like to welcome you to the second 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 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. 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 you and your loved ones are healthy and happy. Welcome to our second quarter 2022 earnings call. We are pleased to report that with strong sequential occupancy gains, revenue growth outpaced only a slight increase in facility operating expenses, even with a tough labor environment. Margins expanded and we delivered a meaningful sequential adjusted EBITDA increase. We had significant success of increasing net hires substantially. In addition, we decreased our reliance on contract labor on a sequential basis. Even so, we have not seen labor cost reduction and therefore expect that improvement to begin later in the year. Because of the continued challenging labor environment, we revised our operational adjusted EBITDA guidance for the balance of this year. At the same time, we are pleased that last week we received additional provider relief funds, which is included in our updated guidance. We are very thankful for federal and state grants that support our important efforts to help protect our residents and associates. Let me turn to our second quarter highlights. We are pleased that REVPAR increased more than 10% compared to the prior year quarter. We continued on the strong path of occupancy recovery. The second quarter's year-over-year weighted average occupancy increased 420 basis points on a same community basis. We delivered the best second quarter sequential weighted average occupancy growth in more than 10 years. We achieved 2000 move-ins in March, which at that time was the highest month for move-ins since the beginning of the pandemic. For the second quarter, we sustained this rate, averaging more than 2,000 move-ins per month. As reported by NIC, the industry's second quarter senior housing occupancy increased 80 basis points on a sequential basis. We are pleased that Brookdale exceeded industry growth by increasing occupancy 120 basis points on a same community basis. We also exceeded our three-year pre-pandemic average move-in performance by 9%. This is evidence of both strong demand and the strength of Brookdale's execution and brand. Our lead funnel remains strong with second quarter inquiries and visits that exceeded pre-pandemic levels. As we enter the third quarter, which is normally the best selling season, We are well positioned for occupancy acceleration, barring a significant disruptive COVID-19 variant surge. Turning to labor, our turnover is higher than our historical norms, and we are focused on taking actions to improve associate retention. Throughout the pandemic, our team managed through numerous challenging situations and remained focused on providing high-quality care to our residents. For this, I want to thank our associates across the country for their dedication and hard work. Despite ongoing challenges in the U.S. labor market, we achieved eight consecutive months of net hires. We significantly accelerated our hiring in the second quarter, where net hires were more than 2.5 times those of the first quarter and five times better than the fourth quarter of 2021. We increased our workforce by 10% since year end, with more than 3000 net hires on a year to date basis, allowing us to fill more shifts with Brookdale associates. These efforts contributed to our ability to markedly reduce contract labor in the second quarter, while continuing to ensure that we meet the needs of our residents and provide high quality care. Not only are we rebuilding our workforce, we are creating a stronger team. While we are proud of this progress, we are not where we want to be. Contract labor usage is declining, but at a slower pace than desired, and we are experiencing some increase in overtime usage. At the same time, given the currently highly competitive nature of the labor market, we are seeing wage pressure and higher sign-on, coverage, and retention bonuses. Through continued focus and discipline, I am confident we will overcome the current US labor pressures over time. As our labor pressure is a structural issue, inflationary adjustments we are seeing will be factored into the determination of our 2023 revenue rates. For new residents, we historically increased rates on October 1st, with the majority of our in-place residents receiving new rates effective at the beginning of each year. In addition to winning the recovery through driving revenue growth and appropriately controlling costs, we are pursuing incremental value creation through innovation. Healthcare and senior living is critically important, given the acuity of the population we serve. Our goal at Brookdale is to help our residents improve their health spans. With the growing trend of more healthcare services being provided at home, We are building on the knowledge we gained throughout the pandemic to continue to evolve our service offering to residents in their Brookdale homes, especially with the support of our nurses who make up 10% of our workforce. Our Health Plus program, which we have been piloting in certain communities, involves registered nurse care managers working to help improve residents' quality of life and helping prevent avoidable emergency room visits or hospitalizations. We do this in partnership with a resident's family and their health care providers. In communities that rolled out this pilot program, the data revealed that residents had fewer urgent care or emergency room visits and fewer hospitalizations than Brookdale-like residents in private housing. Importantly, we are seeing longer lengths of stay in Health Plus communities as our residents are improving their health spans. These longer lengths of stay also help drive our occupancy rates health plus isn't the only innovative project in our pipeline, we are expanding a technology based falls prevention and detection program to additional communities after successfully completing a pilot to improve health outcomes. In addition, we are currently piloting Ai driven analytics to accelerate resident socialization and engagement. by connecting new and existing residents based on common interests. Moving to technology innovations that support our associates, we now offer flexibility via digital scheduling for our hourly associates. Turning to our 2022 guidance, we are pleased with the progress we are making with our net move-ins and move-outs and our occupancy. Although we have been able to pass through some of our inflationary costs to our residents via rate increases, we continue to be challenged by the U.S. labor environment. We remain highly focused on addressing labor costs within the realities of the current labor market and overall conditions in the U.S. economy. We look forward to providing updates on our progress in the coming quarters. Our REVPAR growth expectation of 10% to 12% remains unchanged as we continue to make occupancy gains combined with a strong annual rate increase. While the COVID-19 variants continue to evolve and are becoming an ever present part of our operating environment, I am incredibly proud of the leaders at Brookdale who have risen to the challenges and continued to learn and innovate for the benefit of our residents, associates, and shareholders. We are making positive steps forward on our path to recovery, continuing to innovate and capitalize on new opportunities in our evolving world. Our residents show us every day the importance of lifelong learning, growth, and the power of fortitude. A team of dedicated individuals working together can accomplish incredible things. We have that team at Brookdale. I will now turn the call over to Steve.