Brookdale Senior Living Inc.

Hello, everyone. Thank you for joining us and welcome to the Brookdale Senior Living First Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Mike Grant, Brookdale's Vice President of Investor Relations. Mike, please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to Brookdale Senior Living's first quarter 2026 earnings call. Participating on today's call are Nick Stengel, Brookdale's Chief Executive Officer, Don Crusoe, our Executive Vice President and Chief Financial Officer, and Chad White, our Executive Vice President, General Counsel, and Secretary. On today's call, we will discuss first quarter 2026 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. And good morning, everyone. I appreciate you for joining us on today's call and for your interest in Brookdale. Before I get into the details of the quarter, I would like to highlight that I have been Brookdale CEO for just over seven months. During this time, we have continued the transformational pivot that began nearly a year ago towards Brookdale being first and foremost, an operating company, while also acknowledging and taking advantage of the fact that we are a company that is built upon a foundation of specialized senior housing real estate that is becoming increasingly scarce with each passing quarter. Brookdale's pivot has included meaningful changes in our structure, which in turn define the company that we are. While some of these changes were temporarily disruptive during the fourth quarter and the first couple months of 2026, as any structural change can be, they are absolutely critical in properly positioning our company for this very moment and for the future. As I will describe in more detail shortly, we are already seeing the positive impacts of these changes in our March and April results. And those results give us renewed confidence in the annual guidance and multi-year projections we presented earlier this year. Let me recap some of these changes. First, in October, we implemented our regional leadership structure and redefined reporting relationships at all levels of our company. We created six geographic regions, each led by a single regional vice president of operations and a dedicated regional leadership team encompassing all the key functions of a senior living company. We reposition ourselves, in effect, as six companies of roughly 85 communities each, while still supported with the resources available from our corporate headquarters team. Second, in November, we hired Mary Sue Patchett to the role of chief operating officer, Brookdale's first COO in over a decade. Then, in short order, we further bolstered our operations first approach by formally aligning the operating model at every layer of the company. Practically, this means that our operations team, our sales team, and our clinical team share a common structure and alignment at every level of the company. At the executive level, this means that our head of sales and head of clinical now both report into our COO. This improved structure makes a clear connection with a single line of enablement and a single line of accountability from our executive leadership team, namely me as the CEO, down into each of our communities. With this significant reorganization, many of our community executive directors and other key field leaders experienced a change in their reporting relationships. While absolutely critical for our future success, there is no doubt that the cumulative effect of all these changes did temporarily impact our results in Q4 and early Q1. In February, we also created a new position and hired our Senior Vice President of Strategic Operations. This new role consolidates three critical facets of any senior living company, our pricing, our labor management, and our capital deployment under a single accountable leader. Through all of this, We have also continued to dispose of the leased and owned communities that were previously announced, as well as exiting much of our third-party managed business that I will describe in further detail shortly. From the start of 2025 through today, Brookdale has exited from over 100 communities, including owned, leased, and managed, and that represents a lot of work and a lot of distraction for all our leaders. In short, after a year of near constant change, Not to mention me stepping in as the third CEO to serve in that time period. The table is now set for Brookdale to fully capitalize on the supply and demand realities that exist in the senior living industry. We have the team we want, and we have the portfolio of communities we want. For all these reasons, we remain confident in our 2026 annual guidance of 8% to 9% REVPAR growth and adjusted EBITDA range of $502 to $516 million. as well as with our multi-year growth outlook of mid-teens annual growth of adjusted EBITDA. Now jumping to our results. The quarter's occupancy got off to a slower start in January and into February. While facing the seasonal slowdown that typically occurs in these months, this year we also faced a combination of atypical events, including two meaningful winter storms, absorption of the significant annual in-place rate increase we implemented effective January 1st, and our numerous ongoing leadership and structural changes and initiatives that I just described. Our consolidated first quarter occupancy of 82.1% improved by 280 basis points over the prior year's first quarter. On the same community basis, our first quarter occupancy was 82.7%, up 170 basis points from 81.0% in the prior year quarter. Looking ahead, the key selling season in senior housing is roughly May through September. Historically, April occupancy tends to be up slightly sequentially, but this year we experienced a relatively stronger April. As we included in our earnings release, April consolidated occupancy increased 30 basis points sequentially to 82.3% on a consolidated basis, while we improved 30 basis points to 82.8% on a same community basis. This strengthening occupancy in April is reflective of improved execution tied to the organizational changes we have made in continuing overall strengthening in market conditions. Switching to the expense side, labor and other facility operating expenses declined year over year along with our reduction in units, but also showed minor deleveraging as a percent of revenue based on lower occupancy and also due to the pace of changes at Brookdale, including our new operations organizational structure, our ERP implementation, and the many changes to our leadership team. Frankly, our expense and productivity management during the first two months of the quarter were negatively impacted by all of these changes, and we have taken decisive action steps. We are already seeing the initial positive impact of our efforts as our senior housing operating margin for March was on target after lagging our budget for the first two months of the quarter. We also made progress on overtime and contract labor sequentially, and there's more opportunity ahead to improve labor utilization as occupancy continues to grow. Additionally, the winter storms, which impacted our occupancy as previously discussed, also impacted us on the cost side through elevated utility expenses, repair and maintenance expenses, including general repairs, snow removal and tree work, and also food expenses. Total direct additional costs from the storm were approximately $3 to $4 million during the quarter. Next, I would like to take a moment to discuss our managed portfolio. While it is a small portion of our revenue and operating income, it will be helpful to provide some additional color. For some background, in managed communities, the manager earns a fee, typically a mid-single digit percentage of revenue, meaning that the manager does not participate at a meaningful economic level in the upside or downside of a given community. As our longer-term holders know, we have actively decreased our participation in managed contracts from 229 managed communities at the end of 2017 to just seven communities as of today, and we expect to reduce that number even further. As a result of our reduction of managed communities, you will see that during the first quarter we booked an exit fee of $2.5 million in management fees. Looking forward, we anticipate management fees to be roughly $1 million for the remainder of 2026. We have already taken internal steps to ensure that our organizational structure and our GNA are right-sized to account for this reduction in management fees, and we don't expect any impact to our adjusted EBITDA guidance from this change. Factoring in all the items I've just highlighted, Brookdale's adjusted EBITDA improved 5.6% over the first quarter of 2025, despite a 14% year-over-year decrease in our weighted average consolidated unit count. Additionally, it is important to note that the underlying performance was better than that as the first quarter of 2025 benefited from early G&A rationalization that we took in advance of the revenue reduction that occurred later in the year with our planned dispositions of communities. Per my comments on management fees and additional G&A rationalization, the second quarter's adjusted EBITDA growth will be in a similar range to that of the first quarter, and then we expect more robust improvement in the second half of the year. We have added a slide, slide 12, to our quarterly investor presentation that speaks to the pacing of quarters in 2026. Again, we remain confident with our guidance of 8% to 9% rev par growth and $502 to $516 million of adjusted EBITDA for the full year of 2026. Turning now to our service delivery, Brookdale continues to define excellence in senior living. In early April, Brookdale had 294 of our communities recognized for the best senior living award by US News and World Report. This is the fifth consecutive year that Brookdale has garnered the most awards of any senior living operator. We're incredibly proud of this recognition. and we are thankful to our over 30,000 community associates who deliver this outstanding level of service every day. In addition to this external validation, Brookdale's internally tracked metrics also have continued to strengthen. Our February and March 2026 trailing 12-month Net Promoter Scores, or NPS, were our highest levels achieved since we resumed monthly surveys following the COVID pandemic in 2022. Similarly, our associate turnover and key three leader turnover have continued to improve and are now the lowest since the beginning of the COVID pandemic. These improved metrics are indicative of the success of our recent organizational changes and the cultural transformation we have undertaken. Taken together, they are leading indicators of the accelerating improvement in resident satisfaction, occupancy, and operating margin that we expect over the remainder of the year. At Brookdale, we are truly excited for our future, both this year and in the coming years. Equally, we are appreciative for each of our residents, associates, and shareholders for your trust in our team. As a company, we remain on track to unlock the intrinsic value of Brookdale's specialized services and real estate assets. I will now turn the call over to Brookdale CFO, Don Cusso, for more details on our financial performance and outlook.