Brookdale Announces Second Quarter 2022 Results

NASHVILLE, Tenn., Aug. 8, 2022 /PRNewswire/ -- Brookdale Senior Living Inc. (NYSE: BKD) ("Brookdale" or the "Company") announced results for the quarter ended June 30, 2022.

• Second quarter consolidated revenue per available unit (RevPAR) increased 10.3% year-over-year.
• Second quarter consolidated weighted average occupancy increased 410 basis points year-over-year.
• Sequentially, net hires were more than 2.5 times higher and the use of contract labor decreased.
• The Company accepted approximately $60.0 million in Phase 4 Provider Relief Fund grants on August 5, 2022.

"For the second quarter, we were pleased to have outperformed the industry in sequential occupancy growth," said Lucinda ("Cindy") Baier, Brookdale's President and CEO. "With our strong occupancy performance, we continue to make significant progress toward accelerating our recovery, even as we continue to navigate the challenging labor environment. To that end, I'm also pleased with the progress we have made in our net hire initiative, which has increased our workforce by 10% since the start of the year. We recently received Phase 4 Provider Relief Fund grants and have updated our guidance to reflect this income and our labor expectations. I want to thank our team members for their extraordinary efforts and dedication to help our residents live their best lives. With greater demographic demand and lower new supply, I'm very excited about the compelling growth trajectory for Brookdale."

Same Community Senior Housing (Independent Living (IL), Assisted Living and Memory Care (AL/MC), and CCRCs)

The table below presents a summary of operating results and metrics of the Company's same community senior housing portfolio.⁽¹⁾

• Resident fees.
• 2Q 2022 vs 2Q 2021:
• Same community resident fees increased due to the increases in occupancy and RevPOR.
• The increase in occupancy primarily reflects the impact of the Company's execution on key initiatives to rebuild occupancy lost due to the COVID-19 pandemic.
• The increase in RevPOR was primarily the result of in-place rate increases.
• 2Q 2022 vs 1Q 2022:
• Same community resident fees increased due to the increase in occupancy, partially offset by lower RevPOR due to discounting and lower resident acuity.
• Same community weighted average occupancy increased 120 basis points, representing the Company's best second quarter sequential occupancy growth in more than ten years.
• Facility operating expense.
• 2Q 2022 vs 2Q 2021:
• The increase was primarily due to higher labor expense primarily resulting from an increase in the use of contract labor and overtime as well as merit and market wage rate adjustments.
• An increase in food costs due to increased occupancy and higher prices during the period and an increase in repairs and maintenance costs also contributed to the increase in same community facility operating expense.
• 2Q 2022 vs 1Q 2022:
• The increase in same community facility operating expense was primarily due to an increase in food costs resulting from increased occupancy and higher prices during the period, as well as an increase in marketing costs due to seasonal spending.
• Same community labor expense was nearly flat sequentially as increases in costs from hours worked by associates, recent wage rate adjustments, and an additional day of expense during the second quarter of 2022 were offset by a decreased use of contract labor and a moderation of COVID-19 related labor costs.
• The Company's same community senior housing portfolio incurred $1.9 million, $10.0 million, and $8.3 million of incremental direct costs during the second quarter of 2022, first quarter of 2022, and second quarter of 2021, respectively, to respond to the COVID-19 pandemic.

Consolidated

The table below presents a summary of consolidated operating results.

• Senior housing resident fee revenue.
• The changes in senior housing resident fee revenue were primarily due to the same community operating results discussed above.
• The disposition of nine communities through sales of owned communities and lease terminations since the beginning of the second quarter of 2021 resulted in $5.8 million less in resident fees during the second quarter of 2022 compared to the second quarter of 2021.
• The disposition of five communities since the beginning of the first quarter of 2022 resulted in $1.8 million less in resident fees during the second quarter of 2022 compared to the first quarter of 2022.

The table below sets forth the Company's recent consolidated occupancy trend.

• Other operating income. The Company recognized $8.4 million of government grants and employee retention credits as other operating income during the second quarter of 2022, compared to $0.4 million of government grants during the first quarter of 2022 and $1.3 million of government grants and credits during the second quarter of 2021.
• Senior housing facility operating expense.
• The changes in senior housing facility operating expense were primarily due to the same community operating results discussed above.
• The disposition of nine communities resulted in $5.8 million less in facility operating expenses during the second quarter of 2022 compared to the second quarter of 2021.
• The disposition of five communities resulted in $1.8 million less in facility operating expenses during the second quarter of 2022 compared to the first quarter of 2022.
• Net income (loss).
• 2Q 2022 vs 2Q 2021: The increase in net loss was primarily attributable to a decrease in equity in earnings of unconsolidated ventures compared to the prior year period. The increase was partially offset by a decrease in general and administrative expense primarily attributable to a decrease in compensation costs primarily as a result of reductions in the Company's corporate headcount related to the HCS Sale and in estimated incentive compensation costs compared to the prior year period as well as the net impact of the revenue, other operating income, and facility operating expense factors previously discussed.
• 2Q 2022 vs 1Q 2022: The decrease in net loss was primarily attributable to the net impact of the revenue, other operating income, and facility operating expense previously discussed and decreases in asset impairment expense and general and administrative expense as a result of a decrease in estimated incentive compensation costs compared to the prior period.
• Adjusted EBITDA.
• 2Q 2022 vs 2Q 2021: The increase in Adjusted EBITDA was primarily attributable to the increases in senior housing resident fee revenue and other operating income and the decrease in general and administrative expense due to a decrease in compensation costs primarily as a result of reductions in the Company's corporate headcount related to the HCS Sale and in estimated incentive compensation costs compared to the prior year period. These items were partially offset by the increase in senior housing facility operating expense.
• 2Q 2022 vs 1Q 2022: The increase in Adjusted EBITDA was primarily attributable to the increases in other operating income and resident fee revenue and the decrease in general and administrative expense, partially offset by the increase in facility operating expense.

The table below presents a summary of the Company's net cash provided by (used in) operating activities, non-development capital expenditures, net, and Adjusted Free Cash Flow.

• Net cash provided by (used in) operating activities.
• 2Q 2022 vs 2Q 2021: The increase in net cash provided by operating activities was primarily attributable to an increase in same community revenue and a decrease in general and administrative expense compared to the prior year period. These changes were partially offset by an increase in same community facility operating expense and a decrease in distributions from unconsolidated ventures compared to the prior year period.
• 2Q 2022 vs 1Q 2022: The change in net cash provided by (used in) operating activities was primarily attributable to a decrease in insurance premium payments due to the timing of annual payments, an increase in same community revenue, and an increase in government grants received compared to the prior period.
• Non-development capital expenditures, net. The increase in non-development capital expenditures, net was primarily attributable to increased investment in the Company's communities due to unit upgrades as the Company increases move-ins and routine maintenance expenditures.
• Adjusted Free Cash Flow.
• 2Q 2022 vs 2Q 2021: The $6.2 million change in Adjusted Free Cash Flow was primarily attributable to the increase in net cash provided by operating activities, excluding a decrease in distributions from unconsolidated ventures compared to the prior year period. The change was partially offset by the increase in non-development capital expenditures, net compared to the prior year period.
• 2Q 2022 vs 1Q 2022: The $5.0 million change in Adjusted Free Cash Flow was primarily attributable to the change in net cash provided by (used in) operating activities, excluding $22.0 million of changes in prepaid insurance premiums financed with notes payable. The change was partially offset by the increase in non-development capital expenditures, net compared to the prior period.
• Total Liquidity.
• Total liquidity of $411.7 million as of June 30, 2022 included $238.8 million of unrestricted cash and cash equivalents, $165.5 million of marketable securities, and $7.4 million of availability on the Company's secured credit facility. Total liquidity as of June 30, 2022 decreased $64.2 million from March 31, 2022, primarily attributable to negative $48.5 million of Adjusted Free Cash Flow, $9.6 million of payments of mortgage debt, and $6.0 million of cash paid for the acquisition of a previously leased community.
• On August 5, 2022, the Company accepted approximately $60.0 million of Phase 4 grants from the general distribution of the Public Health and Social Services Emergency Fund ("Provider Relief Fund") administered by the U.S. Department of Health and Human Services ("HHS"), under which grants have been made available to eligible healthcare providers for healthcare related expenses or lost revenues attributable to COVID-19. The Company expects to recognize the Phase 4 grants in income during the third quarter of 2022.

The Company updated its full year 2022 Adjusted EBITDA guidance to include approximately $60.0 million in Phase 4 Provider Relief Fund grants accepted on August 5, 2022, which it expects to recognize in income during the third quarter of 2022, and to incorporate year-to-date results and revised expectations for the remainder of 2022. The Company maintains its full year 2022 RevPAR growth guidance.

This guidance excludes the potential impact of any future acquisition or disposition activity. Reconciliation of the non-GAAP financial measure included in the foregoing guidance to the most comparable GAAP financial measure is not available without unreasonable effort due to the inherent difficulty in forecasting the timing or amounts of items required to reconcile Adjusted EBITDA from the Company's net income (loss). Variability in the timing or amounts of items required to reconcile the measure may have a significant impact on the Company's future GAAP results.

The Company will post on its website at www.brookdaleinvestors.com supplemental information relating to the Company's second quarter 2022 results, an updated investor presentation, and a copy of this earnings release. The supplemental information and a copy of this earnings release will also be furnished in a Form 8-K to be filed with the SEC.

Brookdale's management will conduct a conference call to discuss the financial results for the second quarter 2022 on August 9, 2022 at 9:00 AM ET. The conference call can be accessed by dialing (844) 200-6205 (from within the U.S.) or (929) 526-1599 (from outside of the U.S.) ten minutes prior to the scheduled start and referencing the access code "332634".

A webcast of the conference call will be available to the public on a listen-only basis at www.brookdaleinvestors.com. Please allow extra time before the call to download the necessary software required to listen to the internet broadcast. A replay of the webcast will be available through the website following the call.

For those who cannot listen to the live call, a replay of the webcast will be available until 11:59 PM ET on August 16, 2022 by dialing (866) 813-9403 (from within the U.S.) or +44 (204) 525-0658 (from outside of the U.S.) and referencing access code "027713".

Brookdale Senior Living Inc. is the nation's premier operator of senior living communities. The Company is committed to its mission of enriching the lives of the people it serves with compassion, respect, excellence, and integrity. The Company operates independent living, assisted living, memory care, and continuing care retirement communities. Through its comprehensive network, Brookdale helps to provide seniors with care and services in an environment that feels like home. The Company's expertise in healthcare, hospitality, and real estate provides residents with opportunities to improve wellness, pursue passions and stay connected with friends and loved ones. Brookdale operates and manages 674 communities in 41 states as of June 30, 2022, with the ability to serve more than 60,000 residents. Brookdale's stock trades on the New York Stock Exchange under the ticker symbol BKD. For more information, visit brookdale.com or connect with Brookdale on Facebook or Twitter.

RevPAR, or average monthly senior housing resident fee revenue per available unit, is defined by the Company as resident fee revenue for the corresponding portfolio for the period (excluding revenue from the former Health Care Services segment, revenue for private duty services provided to seniors living outside of the Company's communities, and entrance fee amortization), divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period.

RevPOR, or average monthly senior housing resident fee revenue per occupied unit, is defined by the Company as resident fee revenue for the corresponding portfolio for the period (excluding revenue from the former Health Care Services segment, revenue for private duty services provided to seniors living outside of the Company's communities, and entrance fee amortization), divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period.

Certain statements in this press release and the associated earnings call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding the Company's intent, belief or expectations. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "could," "would," "potential," "intend," "expect," "endeavor," "seek," "anticipate," "estimate," "believe," "project," "predict," "continue," "plan," "target," or other similar words or expressions. These forward-looking statements are based on certain assumptions and expectations, and the Company's ability to predict results or the actual effect of future plans or strategie