Good morning, ladies and gentlemen. My name is Misty and I will be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living First Quarter Earnings Release Call. At this time all lines are on mute. We will open the lines for questions at the end of the call. As a reminder, this conference will be recorded for replay purposes. I would now like to turn the conference over to Kathy MacDonald of Investor Relations.

Thank you and good morning everyone. I’d like to welcome you to the first quarter 2020 earnings call for Brookdale Senior Living. Joining us today are Cindy Baier, 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 these 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/investor and was furnished on an 8-K yesterday. With that, I would like to turn the call over to Cindy.

Thank you Kathy. Good morning to all of our shareholders, analysts, and other participants. Welcome to our first quarter 2020 earnings call. I want to start by saying thank you to all those on the front lines fighting to protect and save lives from this devastating pandemic. We are grateful to the healthcare professionals, first responders, public servants, essential employees, and others who are working so very hard. We are also so very grateful for the extraordinary efforts of our Brookdale everyday heroes who are on the front lines taking actions to help protect our residents, patients, and associates. Our Brookdale associates have demonstrated their commitment to serve its leadership through their tireless efforts to serve those in our care and to enrich lives when our precious seniors need us most. I would also like to thank our tens of thousands of residents, patients, and their families for their support during this precedented time. Given the significant and disproportionate impact of COVID-19 on seniors and that Brookdale is the largest senior living operator in the U.S., we believe we are serving in an unique and vital role during this crisis. Our associates dedication, resilience, and agility has been incredible as we work around the clock to continuously incorporate new information from around the world into our protocols and practices. We are a collaborative organization that is enhancing our approach to this pandemic by partnering with leading hospitals and healthcare systems, government and regulatory agencies, as well as others within our industry so that we can integrate the best thinking and practices into our business to best protect our residents, patients, and associates. Our emergency command center has been up and running since February and has done a phenomenal job of reinforcing our existing strong practices, educating the communities on new…

Thanks, Cindy. Let me start with a summary of the quarter. Our senior housing financial performance in January and February was in line with our expectations. However, in March as we took higher precautionary measures to help protect our residents, patients, and associates from COVID-19, we started to see an impact on move ins in the last couple weeks of the quarter. Even with the impact of COVID-19, senior housing, same community revenue grew 2% in the first quarter on a year-over-year basis and 2.4% on a sequential basis. In addition to COVID's impact on move ins, our occupancy decreased more than the industry, as Cindy mentioned. We believe our price discipline in the fourth quarter and into this year enabled us to deliver a strong first quarter RevPAR growth with in-place resident rent increases effective January 1st. Same community operating income, while lower compared to the prior year quarter, improved nearly 4% sequentially, along with a slight operating margin improvement. As expected, our healthcare services segment faced the challenges we discussed on the last earnings call with the implementation of PDGM reimbursement in our home health business. And the pandemic also had an impact on the home health business. On our last earnings call we noted that we were considering increasing opportunistic share repurchases. During the first quarter under the existing program, we purchased $18 million of shares, which is nearly what we purchased in the full year 2019. In light of the ongoing pandemic, by mid-March we announced that we had suspended further repurchases. During the quarter, we completed the sale of our interest in 14 unconsolidated entry fee CCRC communities and received $100 million of income from the termination of our management agreement. This income associated with the transaction will not recur. I'll focus the rest of…

Thank you, Steve. Our financial results reflect the early, strong, and diligent actions we've taken to help protect our residents, patients, and associates. Given the rapidly changing business environment as a result of the Corona virus, we provided more information including monthly data for the first quarter and events subsequent to our first quarter. This included April month end occupancy at 80%. We are striving to be transparent about the state of our business today so that you can walk the path with us, measuring our progress as we work our way through the complexities created by the COVID-19 pandemic. We look forward to our recovery and to future growth. Even through the toughest times when nearly all states had shelter in place orders, we still had move-in. As testing becomes more available we expect to see an increase in the number of COVID-19 positive citizens. While we expect that that growth rate of COVID-19 positive cases in the U.S. will have new peak, we do believe that our country will learn to manage the risk. As our society turns to a new normal, we look forward to welcoming more patients and more residents into our communities. Operator, please open the line for questions.

[Operator Instructions]. Your first question comes the line of Frank Morgan with RBC Capital Markets.

Good morning. Appreciate the comments about COVID, and if I did my math right you're probably less than 500 COVID positive patients in your portfolio. Just curious if you could provide any color around where that might be regionally, is it more prevalent in certain parts of the country? And then also, I also appreciate the commentary about April occupancy at 80%, just to parse that a little bit further could you see any kind of variation or change across the weeks of that April timeframe, you've had a lot of service providers commenting about how things sort of bottomed out and might even be inflecting a little bit off of a bottom, so just curious color there? And then the final one, just on -- you commented and you did have move ins during this period, I'm just curious was that a regional thing or was that broad based? Thanks.

Thank you, Frank. Let me see if I can answer all of your questions. So first, regarding parts of the country, it's fair to say that when there was an intense community wide transmission of COVID-19 our communities had a bigger impact in those communities. Having said that, we're very pleased that less than 1% of our residents were infected with COVID-19 but certainly higher in those markets where there was a lot of person to person transmission outside of our communities. Second, as we look at occupancy across the weeks, I want to say that I have been very, very grateful for sort of the continued positive momentum of our total number of move outs. You know, I always thought of COVID-19 as something to think about relative to a normal flu season and our death related move outs relative to a normal flu season has been higher than a mild flu season, but less significant or less -- a smaller number than an intense or severe flu season. And when we look at our total move out, believe it or not, the total number of move outs that we had on a year-over-year basis improved every quarter from February to March and March to April. And so I think that reflects the fact that our residents and families appreciate the strong infection control protocols that we have in our communities. At the same time as you would expect, as the country went into lockdown, there was an impact on our move in. And that's important for a few reasons, but if you think about our portfolio on an aggregate basis, we need to replace about 4.5% of our residents across the whole portfolio. And so for IL that's 2.8% because they have a longer length of stay. For…

Thank you.

Your next question is from the line of Steven Valiquette with Barclays.

Hey thanks. Good morning, Cindy and Steve. Let me commend you on all the work you're doing to still provide care on the front lines to the pandemic. Just a quick question here regarding the higher expenses related to COVID-19, I mean it does seem pretty fair that virtually every provider in the industry is likely witnessing the same elevated cost trends, seems to be the case from all the other companies that have talked about their operations as well. I guess I'm curious if there is any sense across the industry that end market pricing with the residents is improving at all or may improve to offset these higher costs, care to give more color on the pricing side of the higher expense? Thanks.

Thanks so much for the question. We don't have a lot of information about what our competitors are doing relating to pricing as it relates to COVID-19 specifically. We do think that this is an unprecedented pandemic and there's no question that our costs have gone up as we've had to buy a lot of personal protective equipment. We've had to increase our sanitation expenses and start to deliver meals to our residents in their rooms. And for us actually the costs increased more in the second quarter than they did in the first quarter. The first quarter was really sort of getting that initial supply. We got that in place in March and then as the lockdown continued and we needed to increase labor, we saw labor costs increase in April as well not just from a premium pay that we put in place in select communities, but also from just the time required to screen residents and associates for temperature, residents for pulse oximeter, and just to make sure that our communities were safe. Now my expectation is that our customer is largely a fixed income customer and so I'm not confident that the incremental costs will be passed on to that customer and that's one of the reasons why we have been so aggressive reaching out to Congress and to the administration for help to support our efforts in protecting our seniors during the COVID-19 pandemic. Now we're very grateful for the support that we've received but that support has primarily been in our home health and our hospice business and that makes sense because the government could look at the Medicare revenues and so they had a good way to push funds out to support those businesses. But because senior living is a private pay business with the exception of our staff [ph]. They just haven't yet seen exactly how to help us. And so we're hopeful there's no guarantee but we're working very hard to see if we can get some government support for all these incremental costs given the heroic efforts that our teams have made to protect the most vulnerable population and to date the cost in senior living has been borne by the operators rather than the seniors and rather than the public.

Okay, one other quick question, just around COVID-19 is that residential real estate could soften a little bit in the aftermath of COVID-19 as far as economic impacts. I am curious if there is any historical rule of thumb for Brookdale for just approximately what percent of residents that are moving in typically need to sell a single family resident first before moving into one of your facilities and how should we…

Our experience with residents having to sell a primary residence was much more intense in the continuing care retirement communities and the entry fee business in particular as a note we sold the vast majority of the entry fee communities at the end of January. And so that is less exposure that we have today than we did at the beginning of the year. Now we recognize that most of our residents fund their stay with us through pensions and other fixed income savings and so we haven't necessarily seen that residents have to sell their home to afford our services but we do think that the ability to sell a home and to convert those assets into cash is helpful to us if that makes sense.

Okay, I appreciate the color. Thank you.

Thanks Steve.

And your next question comes from the line of Jason Plagman with Jefferies.

Hi Jason.

Hey, good morning. Just wanted to ask about how you are thinking about either the timing or milestones that you are kind of monitoring that will indicate when you think you can be comfortable ramping up sales activities or move in might start to increase on a month over month basis or return to a more normal pace is that depending on testing or additional supply to CPE [ph], just wondering what we can kind of -- the milestones that you want to see before we start to resume normal, more normal sales activities?

That's a really good question Jason. So the first thing I will recognize is that the 24x7 nature of COVID-19 news create a lot of panic in the U.S. and that was something that I think was difficult for not just our residents and families but also for our associates. So I think that as COVID-19 is not on the news 24x7 that's important for us. I think the second thing is as the economy starts to reopen I think that's good for our business in terms of move ins because as people were sheltering in place at home it was perhaps easier to take care of Mom or Dad when they were home and will return to live at more of a normal activity as not. Now from an inspection perspective as the economy reopen we have to be very careful to increase our vigilance as there is more community wide transmission. So we take that into consideration as well. But one of the things that we have done is we have announced that we would like to do testing of all of our residents and associates in our communities. We believe that this is important to demonstrate the quality, if there's someone who's impacted by COVID-19 we want to segregate those and prevent the spread of the virus within our communities. But we believe that testing is a big part of the answer. Now once testing is widely available and to the extent that we can test new residents and visitors and residents and associates in the community I think that gives us a much easier way to open up our communities, because if you know that somebody does not pose a risk to your residents and associates it's easier to let them into the communities. And it's certainly hard to move into a community knowing that you may not be able to see your family other than through a window or a virtual visit. So, I think once we get testing in place that will be very helpful for our business. I think the other thing that will be helpful is understanding how to treat people who do get the virus particularly in our age range. So if there is either a vaccine for there are improved treatment protocols that will help us as well because it's a risk based decision that people need to make. And so all of those things will help us.

That's helpful. And then have you seen any early signs of some resumption of more normal sales pipeline in some of the states that have begun to reopen, you know, Florida in fact a couple of your largest states. Just wondering if you've seen any change in the last couple weeks in those states as they began to reopen somewhat?

So most of our move-ins occurred at the end of the month. So I wouldn't want to take any trends from that but what I can tell you is our sales people are much more optimistic today than they were four or five weeks ago and it feels like the economy reopening is allowing things to get to a little bit more of a normal pace. Now I don't want to say that that May move ins are going to be normal because I still expect our movements in May to be down. But I do think that kind of the discussion of the sales team, the tenor of that seems to be improving somewhat.

Okay, and then last one from me, as far as the discussion about potential support from Congress, any color you can provide on the potential methodology how that would work, would it be on a per unit basis or just what's being discussed, I'm just trying to think through how any potential funding could be allocated?

The allocation to date for the other like hospitals and home health hospice has been done based on revenue. And I think that's because the revenue data was readily available given that it came from Medicare. What the industry has requested is that the relief come in an FTE basis. And I think that recognizes the more intense nature of assisted living or memory care than independent living. So there's a bigger impact for the COVID-19 response. But I can't tell you what will ultimately happen. The one thing that I'm sure about is that there are a lot of people lobbying and a lot of industries trying to get government support. And so until the government decides how it wants to handle it, HHS in particular we just won't know if we're going to get support. And if we do get support how it will ultimately be determined.

Well that makes sense.

Like it -- we're talking about -- if we're talking about Jason, support, one thing I do want to mention and we try to put this in our investor presentation on Page 10, you'll note that we got $29 million of public health and social services emergency fund that supports hospice, home health, and Snif [ph]. And the way that that allocation was done is it was done based on 2019 revenues. Now I'm not sure that we're going to keep all the money that we've received. We're still working through the specifics of what are the requirements for that. So I just want to be clear that even once you get the money there's no guarantee that you get to keep all of it. And certainly the Medicare accelerated, advance payment programs and the payroll tax deferral program those are going to have to be repaid, some over a shorter period than others.

Yeah, got it. Thanks.

Thank you

And your last question comes from Josh Raskin with Nephron Research.

Hi, good morning Cindy. First question just on conversations you've had with REITs and I know you guys -- huge process of doing this in recent years but has there been any more recent conversations around opportunities for terms or flexibility or just any sort of color on what you're hearing from them?

So we've noted that some of the REITs have given rent deferrals for operators that have significant liquidity issues. We have not yet had any discussions with the REITs. But we do recognize that the environment changed dramatically as a result of COVID-19 and so that's something that is recognized. We also recognized that retailers are having discussions with their landlords about rent concessions and so clearly it's something that we have on our radar screen but I can't make any commitments as to what if anything could happen.

Should I read into that positively that you guys don't feel like you're at the point where you need to have that conversation, is that a fair way to characterize that?

I think it's fair to say that we've got strong liquidity and as you know Steve mentioned that we have taken some very significant actions to preserve our liquidity including drawing our credit line. We were pleased that our liquidity was bolstered by our Healthpeak transaction. We have adjusted our CAPEX primarily because we don't necessarily want to introduce additional risk into our communities but also to help our liquidity. And then we suspended our share repurchase in the middle of March to bolster our liquidity. So certainly we're paying attention to all of those things. But I don't think that we're in the same position as many operators who are trying to figure out how to fund payroll and acquire the supplies they needed to fight the COVID-19 pandemic.

That's perfect and then just last question from me on the competitive environment/reaction to this. I'm just curious if there's been any marketing across the industry, if everyone just sort of shut it down, has there been any discounting or any actions to try and improve retention or slow down move outs, is it just simply not a price conversation at this point?

I can only speak to us. This is not about price, this is about quality, this is about protecting our residents, our patients, our associates. We provide strong value for the services that we charge and so our approach has been to be paid fairly for the services that we offer. I'm sure there are people in the industry who are discounting but I haven’t talked to them and I think that that would be shortsighted because this is not an issue of price, this is an issue of protecting our nation's seniors and getting good value for the services so seniors can have a better life and have support for the things that have become harder for them.

It's perfect, thank you so much.

Thanks Josh.

We have no further questions at this time.

So, thank you very much for joining our call today. I am extremely passionate that in extraordinary times like this pandemic our team has demonstrated the strength of humanity through kindness and devotion to our beloved residents, patients, and associates. Our business has been and will continue to be taking care of people, people taking care of people. We are making a difference in the fight against COVID and I am so very proud of our Brookdale team. Thank you. That concludes our call.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.