Brookdale Senior Living Inc.

Good morning, my name is Jordan and I'll be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living fourth quarter 2025 earnings call. Today's conference call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. At this time, I would now like to turn the conference over to Mike Grant, Brookdale's Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to Brookdale Senior Living's fourth quarter 2025 earnings call. Participating on today's call are Nick Stangle, Brookdale's Chief Executive Officer, Don Cusso, our Executive Vice President and Chief Financial Officer, Mary Sue Patchett, our Chief Operating Officer, and Chad White, our Executive Vice President, General Counsel, and Secretary. On today's call, we will discuss fourth quarter and full year 2025 results, as well as our financial guidance for the 2026 year. We'll also provide other general business updates. During today's call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. 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 after market yesterday, as well as in our Securities and Exchange Commission filings, including the risk factors described in our annual report on Form 10-K, and quarterly reports on Form 10-Q. I direct you to the earnings release for the full Safe Harbor Statement. Also, please note that during this call, management will discuss non-GAAP financial measures. For reconciliations of each non-GAAP measure to the most comparable GAAP measure, I direct you to the earnings release and to the company's quarterly supplemental financial information, which may be found at brookdaleinvestors.com and was furnished on an 8K yesterday. With that, it is my pleasure to turn the call over to our CEO, Nick Stengel.

Thank you, Mike. Good morning. I appreciate everyone for joining us on today's call and for your interest in Brookdale. This morning, I'll provide a high-level commentary on our fourth quarter and full year 2025 results. I will also review our strategic priorities and guidance for 2026 and our outlook through 2028. Note that we provided preliminary financial highlights for the fourth quarter and full year 2025 on January 28th in advance of our Investor Day, which we held on January 30th. Today's results and guidance is consistent with what we previously shared. Speaking of our Investor Day, I would like to thank everyone who participated and am especially grateful to those that made the trip to Nashville. The engagement and insight provided by our investors, prospective investors, and equity analysts, both those that formerly cover Brookdale and those that have an interest, even if not providing coverage today, was amazing. The Brookdale management team left the event with even stronger conviction in our multi-year projection. For those that were unable to participate, we do have the video recording and presentation available on Brookdale's investor relations page. When Brookdale initially provided guidance for 2025 in February of last year, the team guided to REVPAR growth of 4.75% to 5.75%, and $430 to $445 million of adjusted EBITDA. Now, as we report the completed year, we finished at the top end of our initial REF PAR guidance at 5.7%, and we handily exceeded our initial adjusted EBITDA expectations, delivering $458 million for the year. Likewise, Brookdale's fourth quarter delivered on our expectations for REF PAR and adjusted EBITDA, as the positive trends seen in the first three quarters of the year continued into the fourth quarter. Let me start by calling out a few highlights from the quarter. First, I'd like to highlight occupancy. Our trend of steadily improving occupancy growth continues, and we also continue to see positive movement in addressing our opportunity communities. Our fourth quarter occupancy achieved a weighted average of 82.5% and 83.5% on a same community basis. our highest level since the beginning of the pandemic in Q1 2020. Notably, our consolidated fourth quarter occupancy represents a 310 basis point improvement over the prior year quarter and a 70 basis point improvement from the preceding sequential quarter of 2025. We closed the last day of the quarter with a consolidated occupancy of 83.7% or 84.3% on the same community basis. As our longer-term investors will recall, the 80% occupancy level roughly marks a meaningful inflection point for Brookdale's margins and cash flow generation due to the fixed cost leverage in our operating model, so we are excited about our continued occupancy progress. While much of this occupancy growth is underpinned by overall market dynamics associated with increasing demand from baby boomers and continued stagnation in inventory growth, Our own internal focus on occupancy growth has accelerated our ability to capture the opportunity that exists within the senior living industry. In previous calls and events, we described our SWAT teams. These are internal teams that use a structured process that includes a top-to-bottom review of a community to determine performance opportunities with tools including capital investment, leadership and marketing assessment, as well as pricing recalibration. As a result of this process and our previously announced disposition and lease termination activity, we continue to see good progress across our occupancy bands. Consolidated communities where occupancy is below 70% declined from 23% of total in the first quarter of 2025 to just 15% of total consolidated communities in the fourth quarter of 2025. At the other end of the spectrum, 25% of communities exceeded 90% occupancy in the first quarter of 2025, and that percentage increased to 34% by the fourth quarter of 2025. For the fourth quarter, 80 communities remained below the 70% occupancy threshold. Of those, 14 are expected to be sold during the first half of 2026, and 21 are working with our SWAT teams. Excluding communities to be sold or working with SWAT teams, A further 17 need three or fewer move-ins to move out of the sub-70% occupancy band. Adjusted EBITDA is the second item I would like to highlight. For 2025, Brookdale grew adjusted EBITDA 19% to $458 million, a level that exceeded the midpoint of our final guidance for the year, a guidance level that was increased three times earlier in the year. Notably, this 19% growth also marks our fourth consecutive year of double-digit adjusted EBITDA growth. I do want to acknowledge that we fell just short of our adjusted free cash flow guidance of $30 to $50 million. Don will provide more color on this metric, but the shortfall is related primarily to timing issues and working capital, and we still delivered significantly positive adjusted free cash flow of $23 million, our first positive year since 2020. Next, I would like to provide an update on how Brookdale is progressing against our five strategic priorities. Number one, excelling operationally. Number two, optimizing our real estate portfolio. Number three, reinvesting capital into our communities. Number four, reducing leverage. And number five, elevating quality for residents and associates. Starting with Brookdale excelling operationally. You've already heard about our significant improvements in occupancy and adjusted EBITDA during 2025. there's still plenty of room for improvement as we sprint through various occupancy target milestones. To that end, during the fourth quarter of 2025, we brought on an experienced chief operating officer, Mary Sue Patchett. This is the first time in over 10 years that Brookdale has had a COO and clearly aligns with the fact that we are, first and foremost, an operating company. Concurrently, we implemented a new regional operating structure with six distinct regional leadership teams, that encompass all functions integral to senior living operations. The net effect of these two changes is to have a company that can concurrently draw on the deep resources we have as the largest operator in senior living, while also having the nimbleness to operate in a manner similar to six regional companies of roughly 100 communities each. Additionally, we have created and hired the new position of Senior Vice President of Strategic Operations. under a single leader that reports directly to Mary Sue several functions that are key to operations excellence. Chief among them is centralizing our pricing strategy, pricing analytics, and pricing implementation, and our labor management. Additionally, this role consolidates prioritization and decision-making for all capital investments that go into our communities. This organizational structure will create a true asset management approach similar to how a portfolio manager would view investment decisions in their portfolio of assets. At the end of the day, these moves will define and sharpen our organization for faster responsiveness and greater accountability. Our second strategic objective is to optimize our real estate portfolio as we continue to focus our portfolio on communities with the strongest long-term value creation potential. By the middle of 2026, we anticipate that we will have 517 communities in our consolidated portfolio, meaning communities that we either own or lease. As of December 31st, Brookdale's consolidated portfolio included 548 communities, 370 owned and 178 leased, a reduction of two owned and 43 leased communities since the end of the third quarter of 2025. The significant decline in the lease portfolio represents the completion of our previously disclosed master lease reset with Ventas, from which we will continue to lease 65 communities going forward. As we shared last quarter, during the first half of 2026, we anticipate the sale of 29 owned communities, and we expect those transactions to generate approximately $200 million of proceeds. These sales mark the final meaningful streamlining of our portfolio, bringing us to our ongoing portfolio of 517 owned and leased communities. As we previously stated, the exit of these groups of assets will result in improved occupancy, REVPAR, and adjusted EBITDA, all while generating cash proceeds that can be used for capital investment. Note, of the 29 assets that remain to be sold at the end of 2025, 14 were in our under 70% occupancy band. Turning now to capital investments. Our total non-development capex for 2025 was $170.7 million, most of which was reinvested into capital projects in our communities. Capital investment remains a priority, and we are particularly focused on ensuring that investments are prioritized to community projects that result in improved NOI, in addition to necessary life safety and structural improvements. These larger projects often fall under what we call first impressions. or upgrades to public spaces that update aesthetics and functionality as opposed to the smaller piecemeal replacements we may have favored historically. We believe these larger projects can have an outsized impact on growing occupancy and community level NOI. For 2026, we are projecting non-development capital investment of approximately $175 to $195 million, an increase from 2025 as we believe investing today will help us capture enhanced occupancy growth and rate into the future. Reducing leverage is the next strategic objective that I would like to comment on. Brookdale's adjusted annualized leverage at the end of 2025 was 8.9 times adjusted EBITDA on a trailing 12-month basis, a meaningful improvement from the 9.9 times ratio at the end of the prior year. We will continue to reduce leverage meaningfully as our adjusted EBITDA continues to grow. As a reminder, we believe we can drive leverage to under six times by the end of 2028, primarily through adjusted EBITDA expansion. Notably, 90% of our total debt is non-recourse debt secured by property-level mortgages. Don will provide a deeper update, but following recent refinancing activity, all of our mortgage debt is refinanced through 2026 and our team has made excellent progress toward working with our lenders on the 2027 tranches. The next strategic objective I will discuss is elevating quality for our residents and associates. One of the broadest measures of service delivery quality that we look at is our Net Promoter Score, or NPS. Since 2022, our NPS score has risen steadily, and it is now 19 points higher, which is very strong improvement in the eyes of our most important constituents our residents. This improvement doesn't happen by accident. We survey our residents consistently to understand what would drive a better product, and we listen and respond through our offerings. We have improved consistently in such areas as food, where we have been recognized by outside rating services, such as U.S. News and World Report for high performance in food and dining across all our care segments, independent living, assisted living, and memory care. Another example of Brookdale's ability to elevate quality is the continued expansion of our Health Plus platform, which works to improve residents' quality of life through care coordination and chronic condition management, resulting in the prevention of avoidable emergency room visits and hospitalizations. During 2025, we rolled Brookdale Health Plus into 58 additional communities across eight states, including three new states. This brings the Brookdale Health Plus platform to a current total of over 180 communities served. Finally, we aim to elevate quality for our associates. One of the best measures of associates experience at Brookdale is employee turnover. Turnover of our key three community leaders, meaning the executive director and the leaders of sales and clinical, improved again in 2025. Our key three turnover has improved 390 basis points over the past two years. Overall associate turnover across all positions also declined in 2025, and we have now nearly returned to the levels experienced before the pandemic. To close out my remarks, I want to comment on the financial guidance for 2026 that we provided in our earnings release last night and also pre-released in advance of our investor day. I will also comment on our longer-term financial outlook. As we look to 2026 and the next several years, we are excited about our outlook. 1946 marked the start of the baby boom with over 600,000 more Americans born in 1946 than were born in 1945. 2026 is the year the first baby boomers hit the 80-year age mark. This age is an important benchmark for Brookdale as over half of our move-ins occur at between 80 to 90 years of age. Our average age at move-in is about 83 years. The demand outlook is robust. starting this year, but also looking many years into the future. Demographic reports show that the population of 80-plus-year-old Americans will grow at a 4%-plus compounded annual rate for the next decade. On the other side of the equation, senior housing supply growth has severely stagnated, and the rate of unit growth at the end of 2025 was just 0.6%, a historical low. Comparing the 80-year-old and greater population growth of 4%-plus with the current unit growth of 0.6%, indicates a strong trend toward increasing occupancy for the entire senior living industry. For 2026, Brookdale is projecting REVPAR growth of 8% to 9%, which is an improvement over the most recent years. Don will dive into the specifics, but the 8% to 9% REVPAR should include a balance of positive occupancy and pricing with some mixed support from last year's lease terminations and completed and ongoing dispositions. Occupancy and pricing and exits of cost inflation are both very positive drivers of EBITDA, particularly once communities are above 80% occupancy, the approximate level at which we leverage our fixed costs. As such, we believe we will be able to attain mid-teen adjusted EBITDA growth from our $445 million 2025 baseline level to $502 to $516 million for 2026. As we look out over the next several years, We expect these trends to continue. As such, we are reiterating our expectation that we can drive mid-teens adjusted EBITDA growth through 2028. Additionally, based on that expansion of adjusted EBITDA, we believe we can end 2028 at under six times leverage. Every day, we are thankful for our residents, our associates, and also our shareholders. Each of you puts your trust in us, and we don't take that lightly. We remain confident in the intrinsic value of the company, which is built upon a bedrock of specialized and scarce real estate. We remain confident in our ability to serve and care for seniors with excellence while being an employer of choice. And we remain confident in our ability to drive durable shareholder value. Now it is my pleasure to turn the call over to our CFO, Don Cuso, for more details on our financial performance and outlook.