Good morning or good afternoon and welcome to the Brookdale Senior Living Third Quarter 2023 Earnings Call. My name is Adam and I will be your operator for today. [Operator Instructions] I will now hand over to Jessica Hazel to begin. So Jessica, please go ahead when you are ready.

Thank you, and good morning. I'd like to welcome you to the third quarter 2023 earnings call for Brookdale Senior Living. Joining us today are Cindy Baier; our President and Chief Executive Officer and Dawn Kussow; 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 filed 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 brookdaleinvestors.com and was furnished on an 8-K yesterday. Now, I will turn the call over to Cindy.

Thank you, Jessica. Good morning to all of our shareholders, analysts and other participants. Welcome to our third quarter 2023 earnings call. We are making great progress on our three strategic priorities, which are: First, get every available room in service at the best profitable rate; second, attract, engage, develop and retain the best associates; and third, earn resident and family trust and satisfaction by providing valued high-quality care and personalized service. I believe that this progress is evidenced by our strong year-to-date results as well as another quarter of consistently delivering against our commitments. For the third quarter, we are pleased to note that both RevPAR and adjusted EBITDA exceeded our previously provided guidance ranges. Additionally, we were pleased to deliver positive adjusted free cash flow for the quarter. And while there will continue to be quarterly variability in working capital, which benefits us in some quarters and presents a headwind in others, we are seeing the positive results of our recovery strategy that focuses on profitable and sustainable growth. On the top line, same community RevPAR increased 10.8% over the prior year third quarter. We had strong occupancy growth and have remained disciplined in our rate management. More specifically, Brookdale grew same community occupancy 120 basis points sequentially compared to the 60 basis points of NIC stabilized sequential occupancy growth. These results are an outcome of our intentional experience-driven plans, the successful execution of our sales and marketing strategies and the dedication to our mission by our more than 36,000 associates. Third quarter move-ins outperformed our pre-pandemic average by more than 5%, signifying the demand for our services and a desire to be part of a Brookdale community, where neighbors can become friends and make meaningful connections with one another. Additionally, we delivered a nearly 6% sequential reduction…

Thank you, Cindy. Good morning, and thank you for being here today. I'm proud to share with you Brookdale's third quarter results, which represent our continued positive momentum and progress this year. Beginning with third quarter revenue, resident fee revenue grew more than 10% above the prior year quarter to $717 million. Other operating income which is largely comprised of federal and state grants was $2.6 million in the third quarter compared to $67 million in the prior year third quarter. The prior year amount included $61 million of phase four provider relief funds. We were pleased to report third quarter consolidated RevPAR growth of 10.7%, which outperformed our previously provided guidance range. This strong performance was attributable to a 120 basis point year-over-year weighted average occupancy increase and a 9% year-over-year RevPOR increase. Both move-in and move-out volume improved compare to the second quarter, which supported a 110 basis point sequential occupancy increase. Additionally, occupancy not only grew every month within the quarter as expected, but sequential increases each month of the quarter accelerated, including the October results that we reported yesterday, we have achieved seven consecutive months of sequential occupancy increases this year and 24 consecutive months of year-over-year occupancy growth. Specific to our same community portfolio, third quarter RevPAR increased 10.8% over the prior year, driven by 140 basis points of occupancy growth and an 8.9% increase in RevPOR. We are very pleased with these top line results particularly when compared to industry performance. Moving to expenses. Third quarter consolidated facility operating expense was $537 million. Within same community facility operating expense as shown on Page 8 of our financial supplement, year-over-year labor costs increased approximately 1% and other operating expenses increased just under 6% compared to the nearly 11% revenue increase. This impressive revenue to expense…

Thank you, Dawn. In summary, we are extremely pleased with our performance so far this year, from our steady occupancy increases to our consecutive quarters of year-over-year same community, adjusted operating margin growth to our positive adjusted free cash flow in the third quarter. Our disciplined approach to ensuring sustainable forward progress is continuing to yield positive results. As Dawn and I have said since the first quarter, we believe 2023 will be a year of solid progress and growth. I am proud to be delivering just that. Operator, we will now open up the call for questions.

Thank you. [Operator Instructions] The first question today comes from Joanna Gajuk from Bank of America. Joanna, your line is open. Please go ahead. Q – Unidentified Analyst: This is Naomi [ph] on for Joanna. And I just had a couple of questions first one, regarding the rent increases for next year. So as I guess you guys said that, the increases next year will likely moderate as inflation decelerates. So is it fair to assume 4% to 5% rent increases next year? And if your target customer is more middle market, how much can they afford?

Good morning. Thank you for the question. We aren't commenting on our in-place resident rate increases yet, because we are in the process of communicating those to our current residents as we speak. But what I can say is that, we did increase our market rate early October for new move-ins. This is part of our standard pricing policy. And what we shared in our prepared remarks was that the increase in our new selling rates was lower this year, than the increase in selling rates than we had last year in the fourth quarter. And we evaluate market pricing in the context of supply, demand and other factors. And we're always very focused on making sure that our services remain affordable for the residents that we serve. Q – Unidentified Analyst: All right. Thank you. I'm just going to ask one quick follow-up. So last time, you suggested that in some markets, you have use discounting to help drive occupancy. Has the discounting activity picked up during Q3?

What I'll say is that with the company the size and scale of Brookdale with almost 672 communities in 41 states, we see a little bit of everything throughout the year. But I think our teams have remained very disciplined in matching the competition where necessary to drive occupancy but also making sure that we're getting the strongest rate for our units. And what you see more than anything else is really the mix of our portfolio and where occupancy is growing faster than others. So I feel pretty good about what we're doing about remaining disciplined about the rate. Q – Unidentified Analyst: All right. Thank you so much.

Thank you.

[Operator Instructions] The next question comes from Josh Raskin from Nephron Research. Josh, your line is open. Please go ahead.

Thanks. Good morning. I was wondering could you walk us through supply and sort of construction environment. I'm kind of -- I'm trying to figure out how long do you think it takes for this sort of lull in construction to past? Do you think you really need to see interest rates start moving the other way? And then, are there any markets where construction is still maybe not normal course of business but still going on?

It's a really good question, Josh. And we feel great about the supply-demand environment. If you look at Page 12 of our Investor deck, what you'll see is that starts are down 78% from the peak and opens are 52% lower than the peak. And I think that's a combination of factors that is availability of construction, labor construction costs, high interest rates and tightening credit. And if you think about the time it takes to go from start to finish of a new community, it can take as long as three years right now to get started. So I think that Brookdale is well positioned for steady and sustainable growth, given that we have one million new customers entering our target market every single year through 2030 and it is going to be quite a bit before we actually see an increase in new construction, at least that's my view.

Okay. So three years is kind of the lead time. But there's no more -- are there markets where you're still seeing reasonable levels of construction not just one-offs but any sort of growth markets?

I think, overall, what we're seeing is across the country, we're seeing the opens are 52% lower than the peak. But of course, in any market you may see a new competitor opening but we've got fewer of our communities exposed to new competition than we did in the past.

Okay. And then second question can you speak to the acuity trends of your residents? I'm assuming the newer residents come in they use less services but maybe how long does that take for that sort of ramp up over the life of a specific resident stay?

What I am grateful for is that our acuity levels have come down since we have exited the pandemic and they are back to pre-pandemic levels, if not slightly better than that. I will say that the acuity changes very much by the level of care that resident enters and the acuity that they come into the community with. But if you think about the fact that our length of stay ranges from let's say a little under 1.5 to three years, it very much by product type. But we do traditionally review our acuity of our residents at least quarterly. And so you'll see as the age in place their care needs change, and then when new residents move-in they traditionally have a lower level of care than our existing residents. And that's one of the reasons why if you kind of look at Brookdale's revPAR throughout the year, you'll see care charges become smaller which breaks our revPAR a little down as you go from first quarter to fourth quarter.

Okay. Perfect. Thanks.

Thank you.

This concludes today's Q&A session and does conclude today's call. Thank you very much for your attendance. You may now disconnect your lines.