Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living Fourth Quarter and Full Year Earnings Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. At this time, I would like to turn the conference over to Jessica Hazel, Vice President, Investor Relations. Please go ahead.

Thank you, and good morning. I'd like to welcome you to the fourth quarter and full year 2024 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 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 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 call participants. Welcome to our fourth quarter and 2024 year-end earnings. We are pleased to close the year by reporting fourth quarter RevPAR at the top and adjusted EBITDA above our previously provided guidance ranges. Dawn will cover the details of these fourth quarter results, while I will focus on our 2024 accomplishments and takeaways, as well as our 2025 expectations. We began last year with a steadfast commitment to our key strategic priorities and an expectation that through these, we would grow profitable occupancy in RevPAR, deliver meaningful adjusted EBITDA growth, and materially improve our adjusted free cash flow, all while remaining uncompromising in our dedication to the health and well-being of our residents and associates. Reflecting on these 2024 financial priorities, weighted average occupancy grew 140 basis points. RevPAR increased 6.1%. Adjusted EBITDA grew over 15% and adjusted free cash flow improved nearly 40%, turning positive for the back half of 2024 in the aggregate. Together, these results demonstrate continued progress towards achieving our ultimate potential and have set the stage for growth momentum in 2025 and beyond. Even so, we have further to go. As we have shared previously, beginning in the second quarter, occupancy fell below our expectations, which impacted our annual financial results. 2024 move-outs, particularly controllable move-outs, were much improved to their 2023 level, and our move-ins remained above their pre-pandemic average. Yet due primarily to a persistent disruption in lead flow from our two largest third-party paid referral partners, 2024 move-ins were below our expectations in the prior year. While we generate the majority of our move-ins internally, lower volume from these third parties meaningfully impacted occupancy beginning in the second quarter. As such, we immediately took action to redeploy…

Thank you, Cindy. Good morning, and thank you for being here today. This morning, I'll walk you through our fourth quarter results, speak to our recent transactions, and then provide commentary for 2025 financial expectations. I'll begin with our fourth quarter revenue. Residency revenue grew 3.9% over the prior year quarter. This revenue increase was despite a 2.2% or approximately 1,100 units reduction in capacity since the beginning of the prior year quarter as we have selectively disposed of certain communities. Consolidated RevPAR grew 5.5%, which was at the top end of our previously provided guidance range. This year-over-year RevPAR growth was driven by a 100 basis point increase in weighted average occupancy and a 4.2% increase in RevPOR compared to the prior year fourth quarter. This marked our twelfth consecutive quarter of triple-digit year-over-year occupancy increases. Compared to the third quarter, occupancy increased 50 basis points sequentially, which is ahead of the normal pre-pandemic seasonality for this period. Both move-ins and move-outs were better than their prior year levels, and as Cindy shared, we had more fourth quarter move-ins than in any of the last eight years for the comparable group. This not only benefited the fourth quarter but provides us with a more favorable starting point for 2025. Our fourth quarter RevPOR growth was relatively in line with our year-to-date trend, reflecting continued occupancy growth from lower acuity move-ins. These residents generally have a lower care rate at move-in but have longer lengths of stay, which benefits occupancy meaningfully over the long term. Specific to the same community portfolio, fourth quarter RevPAR increased 5.2% over the prior year, driven by 90 basis points of occupancy growth and a 4% increase in RevPOR. Moving to fourth quarter expenses. Same community labor expense as a percent of revenue improved 40…

Thank you, Dawn. There are substantial underlying growth opportunities for us to capture, particularly through continued profitable occupancy growth. As we look to 2025 and further into the future, we are unwavering in our commitment to enriching the lives of even more seniors who choose Brookdale to call home, to ensuring that we remain the most attractive place for employees to work and to grow their careers, and to creating additional value for our shareholders in the near term and over the longer term. Operator, please open the call for questions.

Thank you. We will now begin the question and answer session. We'll take our first question from Tao Qiu at Macquarie.

Thank you. Good morning, everyone. I appreciate the annual guidance. With regards to the 4.75% to 5.75% RevPAR guidance in 2025, I'm curious if you could parse out the one-quarter impact from the Ventas lease amendment expected on October 1st. What would be the RevPAR growth without the benefit of that transaction? And if you could also share maybe the assumed range for rates and OpEx growth assumptions for the guidance? Thank you.

Hi, Tao. This is Dawn. Thank you for the question. I think from an annual basis for the Ventas growth, what we expect is, you know, the guide for 4.75% to 5.75% to be move-ins that we've kind of already proven that we can achieve, move-outs that we expect, which as Cindy mentioned, we had set better attrition rate that we're going to pull through. We haven't fully lapped the prior year lead disruption, and, you know, we're early in the flu season. And so we've been doing a really good job with our infection prevention, but it does look like a relatively challenging flu season since the 2018 flu season. This is probably the most challenging. And then on the potential disruption of the fifty-five communities, we've kind of baked that into already our 4.75% to 5.75% range.

Okay. And, you know, Cindy, I think you alluded to the continued favorable supply-demand dynamics, and I think one of your peers is talking about accelerating occupancy in 2025, and that looks like what you are expecting as well. And I think they're also talking about the widening gap between RevPOR and OpEx growth. So in that context, I'm curious, now that a lot of the heavy lifting is completed, you know, how Brookdale can further accelerate growth and create shareholder value beyond 2025 and 2026.

It's a really good question, Tao. And let me just start by going back before I go forward. If you look at our last earnings release that we did, we reported year-over-year occupancy growth of 80 basis points for the month of October. And that was the most current data that we had at the time. And if you look at our January that we just recorded, we saw sort of occupancy growth of 120 basis points. So we're already seeing the acceleration within our portfolio of the occupancy growth. But if I kind of step back and say, what's next? Big picture, what we're really trying to do is to deliver against our key strategic priorities. They've helped guide our profitable growth, and we've made tremendous progress towards getting to positive adjusted free cash flow. What we accomplished so far makes Brookdale truly better and different, and we are going to continue to focus on both its competitors and sharing what makes Brookdale special and unique. Part of that is our mix of product types. Our portfolio is much more heavily skewed towards assisted living and memory care. And for us, the assisted living resident is about two years older, and so we'll continue sort of focusing on the resident experience to capture that share. We're going to expand Brookdale Health Plus to sixty additional communities later this year. That's a big differentiator for us because families are looking for comprehensive care coordination. We are going to continue to implement Brookdale Engagement Plus, and that's going to help our residents build meaningful friendships faster, and it will customize the resident experience so that every resident has a meaningful lifestyle that reflects their unique interests. And then we hired a new head chef last year that is going to allow us to further enhance our already quality and experiential dining with the goal of making each dining opportunity a memorable experience. So that's just part of the things that we're doing on the resident side that are going to allow us to accelerate the growth, to capitalize on the very, very favorable supply-demand environment.

Very exciting. We'll stay tuned. Thank you.

Thanks, Tao. We'll move next to Brian Tanquilut at Jefferies.

Hey. Good morning, guys, and congrats. Cindy, maybe my first question for you is we think about where you stand today. You know, I know coming out of the pandemic, the focus areas were you were addressing the leases and driving free cash flow to positive territory, and you're there at this point. So as we think about the direction or the strategic focus that you have going forward, how should investors be thinking of that right now?

Yeah. I think the way that you open the question was a very good lead-in, Brian. Our primary financial goal in recovering from the pandemic was to get to adjusted free cash flow positive. That's critical for our business for a number of reasons. And I couldn't be more proud of our progress. We could have taken sort of one of two paths. Right? We could have pursued occupancy regardless of whether that occupancy would have driven improved cash flow, or we could have pursued cash flow growth. We chose the path to pursue cash flow growth, and looking back, I'm really confident that that was the right path. If you look at our 2024 RevPAR revenue per available unit, it's 18% higher than 2019, and our operating income per available unit is 8% better than 2019. And these results fully reflect the impact of any units that aren't currently serving residents. So if you look at the second half of 2024, in the aggregate, we delivered positive adjusted free cash flow, and we're expecting a meaningful build on this for the full year of 2025. Now I'm really proud of that, particularly given the impact of the disruption from the paid third-party lead source disruptions that we faced in 2024. At this point, we've more than recovered our pre-pandemic profitability per unit. Now as a company, we have much more opportunity for growth because we have communities that have rooms that aren't currently serving residents. As those units become occupied, it's going to drive higher RevPAR and a higher profitability level. And we're confident in this because there's growing demand for our services. We have a needs-based product mix, and we have a naturally higher average age of move-in that's associated with assisted living as compared to independent living.…

I appreciate that. And then maybe, Cindy, as I think about, you know, a couple of questions here together. As I think about how you view the political landscape and how there are potentially upcoming changes to Medicaid, how does that impact your business, number one? And then maybe as I think about questions we're getting on your occupancy performance, you know, basically trailing some of the NIC data that we're seeing out there. Just curious how you would explain that. And I know some of that's probably mixed related. I just thought to combine those two questions together.

They're really good questions, Brian. Let me start by just giving you a little bit of an insight about how we calculate our occupancy that's different than the industry, and also how our business is different than the industry. If you look at the industry as a whole, 18% of assisted living residents rely on Medicaid to provide services. At Brookdale, that's under 4%. And so this is really important because if you run a Medicaid community, usually, you're running a very high occupancy community, often 95% to 100% occupancy, but it's at a much lower margin. So we don't have that as a big part of our portfolio, which is one structural reason why our occupancy shows naturally lower than the NIC data. Now I'll tell you that also because of our focus on profitability, we absolutely chose to walk away from some Medicaid business because the reimbursement rate did not keep pace with the cost of providing services. And we're really focused on profitable occupancy growth. The other difference when you compare to NIC is the way that shared units are treated. And we're pretty conservative in the way that we report our data. If we have a shared suite, and there's only one person in the suite, we count that as 50% occupied. Others in the industry calculate that as 100% occupied. So that's a pretty big difference. And then kind of moving to the political landscape, there's a lot of things that COVID-19 really brought to light. And I think the most important thing is the critical role that seniors housing plays in the overall healthcare system. And I think this message is going to continue well into the future, even regardless of the outcome of any future elections. But over the last several years, Brookdale and the industry trade association have spent a lot of time educating policymakers about our industry, and we'll continue to do that. In particular, under the last Trump administration, Brookdale worked very closely with HHS and our industry to understand our concerns, and they helped us prioritize the seniors in the COVID response efforts. And we're grateful to Congress. We're grateful to President Trump for the COVID funding that we received, as well as other operators received. As we look at the change in administration, I think we really had the opportunity to continue to build on that. As the largest operator in the industry, we'll be proactive in trying to shape federal policy that could have an impact on seniors in our industry. And we will continue to pursue policy initiatives that increase access to senior living services and expand funding for programs to grow and develop the workforce that we need to provide services. They could be tax credits, which would help seniors afford senior living. And at the same time, we are expecting less regulatory activities at the federal level, and that is something that we view as very positive.

Awesome. Thank you, Cindy.

Thanks, Brian. Next, we'll go to Josh Raskin at Nephron Research.

Hi. Thanks. I wanted to talk about sort of, like, a steady state maybe after, you know, the assumed fifty-five communities in 4Q. But how do you think about your long-term EBITDA growth rate and maybe how many more years do you think you have of what you would consider to be above-average growth in EBITDA, you know, above steady state? And I know in the past, you've talked about that pre-pandemic occupancy rate. You're running just over 500 basis points below that. Is that still a realistic target? And then maybe, you know, when do you think you get to that 84.5%?

So let me start by going back before going forward. That's something I'm doing a lot of today. But 2024 was our third consecutive year of adjusted EBITDA growth in excess of $50 million. And if we deliver even the midpoint of our guidance range, 2025 will be the fourth consecutive year of this $50 plus million growth opportunity. Now when I think about the future going forward, we have been very disciplined about pursuing profitable occupancy growth, and we will continue to do that. Now what's exciting to me about looking forward is that the demographics right in the sweet spot of where our portfolio is positioned haven't hit us yet. Right? Our average age is about two years higher in assisted living, not quite two years, but almost two years higher in assisted living, which is where the majority of the portfolio sits. So as I look forward, I see every year resulting in a growing and improving supply-demand gap. And our job really is to focus on how do we best capture that to better serve more residents and an attractive return to benefit our shareholders.

Okay. So is the fifty million, like, the right and, again, getting back to that five ten, is that so is the five hundred ten basis points occupancy. So that's not, you know, getting back to eighty-four and a half. That's not necessarily the goal, and maybe there's not a time frame. It's much more about, you know, this disciplined profitable growth.

I think it's really more about disciplined profitable growth. And I'm going to say that, you know, we kind of put the eighty-four and a half percent out there to give you a sense of where we were sort of pre-pandemic. But as I mentioned earlier, our profitability on a per-unit basis is already above pre-pandemic at 8% above. So what we are going to look at every single day is how do we profitably grow our business, how do we differentiate Brookdale, to provide a better experience to our residents and our associates so that we will translate into more value for the shareholders. And I think about the occupancy that we're at as a huge opportunity. Right? Because as I get those units in service, I get every dollar of incremental margin. If I had already put those units in service, I would get an increase on the unit, but I wouldn't get a hundred cents on the dollar. So I am so excited about what's coming for us.

And could you just put a little more color? I think you said significant or meaningful adjusted free cash flow in 2025. Is there a range of expectation for that?

Josh, this is Dawn. There isn't a range that we put out there on our adjusted free cash flow, but significant adjusted free cash flow is the expectation. And just to add to that, there's still going to be seasonality. Right? And in the back of the investor deck, we have kind of shown the quarterly pacing. That doesn't mean that we're going to be positive in every quarter of the year. But when you look at the full year as a whole, we're going to have meaningful adjusted free cash flow growth.

Alright. If I could sneak in one last one. I heard you mention something, Brookdale Engagement Plus. Is that a new initiative? Is there any color behind that?

It is. It's a proprietary program that we have. We have launched it in part of our portfolio, but not all of our portfolio. And it is something that allows us to better personalize the experience of the resident. And so what we're able to do is we are able to match residents who have unique interests so that they can form relationships about things that they enjoy and values that they have. And then what we're really trying to do is solve for loneliness. We want our residents to have a meaningful purpose in life and to share their time with friends, and that's what Brookdale Engagement Plus is all about.

Perfect. Thanks.

Thanks. Our next question comes from Ben Hendrix at RBC.

Good morning. Great. Thank you very much. Hi. How are you doing, guys? I just wanted to ask a question about some of the new mentioned earlier. You know, the support queue move-in activities weighted towards lower acuity volume. I just wanted to get an idea of how much that lower acuity mix that you saw was related to this change in internal and hyper-local paid referral sources, and if and how you see that phasing over the course of 2025 given the demographic tailwinds you talked about in programs like Health Plus, which may be more attractive to some of the higher acuity AL volume. Thanks.

It's a good question. I don't think it's related to the change in the referral sources. If you think about our strategy, Brookdale Health Plus is really designed to attract residents who want to live a healthier life for longer. And we're seeing that that increases the length of stay of our residents. If you think about some of the unbundling that we've talked about in memory care as an example, that provides a better value to a lower acuity resident, and so that is skewed towards bringing residents who have a lower need into our community. The trade-off there is lower need needs no lower care initially, but it should mean longer length of stay. One of the things that's really exciting is compared to pre-pandemic, our average age has come down about six months. And so if you think about having younger residents move in with us, we would think that will mean that they will stay with us longer, which should be very positive as we go into the future.

Great. Thank you. And just if I could sneak in one more, you talked about kind of, you know, your low mix in Medicaid. I was wondering if the Ventas leases that you walked away from, do they have an above-average mix of Medicaid volume, and how does that track versus your the portfolio that you've retained? Thanks.

So, what I'll say is we are transitioning a CCRC in the communities with Ventas that we're walking away from. And as you know, skilled nursing has a higher mix of both Medicaid and Medicare. But we haven't really talked about the overall portfolio in terms of Medicaid mix for the transitioning Ventas assets versus the total portfolio.

Thank you.

Thanks, Ben. Next, we'll go to Joanna Gajuk at Bank of America.

Hi. Good morning. Thanks so much for taking the question. So a couple of follow-ups. So on the Q1 comment, so as you mentioned, we are seeing higher flu incidents, right, in January and February. It sounds like you're also seeing that. So would you assume for Q1 occupancy, do you assume sort of typical seasonality down seventy, eighty, but quarter over quarter, Q1, or do you assume even more of a because he's on all the time.

So, Joanna, let me start by talking about the flu, and then Dawn can jump into the occupancy point. So there's no question that in the U.S. as a whole, this is a pretty difficult flu season, probably the worst since 2018 with two peaks. Now what I'm really proud of is that Brookdale is very proactive as it relates to vaccinations of our residents, and a high percentage of our residents normally participate in the vaccination clinics that we have within our communities. We also have infection prevention protocols that we put in place, particularly during respiratory virus season, and we've been able to do that. To date, we haven't had any flu closures at all this season, which I think is a really positive thing. I'll turn it over to Dawn to just answer the specific occupancy question.

Yeah. Yes. Thank you, Cindy. As it relates to our January occupancy, what we're seeing is very strong occupancy. We talked about the move-ins that we saw in the fourth quarter. That they were the best move-ins in the last eight years. And if you look at a reported January occupancy growth, we are 120 basis points year over year. That is comparing to kind of that occupied the October occupancy that we reported that was 80 basis points year over year. So we're kind of seeing that accelerated trend there, as well as the fact that the December to January ten basis points decline is much better than we've seen sequentially over the last two years.

Alright. Thank you for that color. I guess another clarification. So when you were talking about, you know, 2025, the full-year EBITDA guidance, right, and it applies, you know, sort of similar growth in of fifty million dollars year over year. Right? But I guess there's a well, twenty-four million right here over year from the lower rent because of the leases that you are buying right on this accounting change. I can in the lease treatment already took effect in Q4 2024, so year over year in 2025, I guess, was the three quarters. And then there's, I guess, in Q4 of 2025, there's going to be the Ventas, the fifty-five communities being exited. So that would bring us to, like, ten million dollars, like, this operating code, but there's also some, you know, cost that you incurred in 2024. Right? There's the hurricane cost in Q4, but there's some winter storm caused in Q1. Can you walk us through sort of, you know, how to think about these pieces, you know, what's driving the fifty million dollar year-over-year growth in your guidance for EBITDA.

Yeah. Joanna, this is Dawn. I'll start. And we're really excited about the growth that our guidance range is 11% to 15% growth year over year. And as Cindy mentioned, the kind of, like, moving into the midpoint, our fifth straight year of fifty million dollars of adjusted EBITDA growth. I think one of the four, excuse me, the fourth straight year. One of the things that I would just clarify on the Ventas properties is we've drawn a line in the sand as of October 1st. And what the expectation is is maybe some noise on the transition. But, generally, what we're thinking about how we're thinking about it is the NOI impact and the rent impact is generally offsetting. And so as you think about that particular piece in the back half of the year, not a benefit from just the lease expense coming through there. But if you think about our guidance range, we've guided to 4.75% to 5.75% RevPAR. We have talked about kind of the move-ins and move-out expectations there. And then translating that into our adjusted EBITDA, what we're expecting is solid expense management. We've seen moderating costs. Both from the labor perspective, you know, food and utilities, they've moderated, but still are remaining high, but we fully expect to have strong expense management coming through for that growth.

And then if I would just add on natural disasters, there's no question that 2024 was a tough year from a natural disaster perspective as it related to the hurricanes that hit Florida in particular, the wildfires, and the cold weather. But we always put in an estimate for what we think we might incur for natural disasters for the year. And most importantly, we are very focused on doing everything humanly possible to minimize the damage to our communities and to protect our residents during natural disasters. And the asset management team does an incredible job ahead of cold weather, making sure that all of our community associates are trained. They know how to shut the water on if there's a pipe that freezes to really minimize the impact. And I couldn't be more proud of our industry-leading emergency response protocols, including natural disasters.

Thank you. Anytime I please speak to her last question on the leases with Ventas, the changes there. Right? And I guess for 2025, first, you assume G&A costs, you know, increasing. But how should we think about because sort of the runway G&A? I mean, we're talking about, you know, beyond 2025 because I assume there will be more in 2026. But is there any framework that we should consider when we're thinking about, you know, the company adjusting the overhead cost to the, you know, smaller portfolio after you exit the leases on fifty-five communities? Thank you.

Joanna, one of the things that I'm really proud of is that we're always proactive in terms of matching the support that we have to the business that we have. Brookdale, as you know, used to be a much larger company. And we were able to appropriately adjust our infrastructure. And we're always thinking about what's the right infrastructure to support our communities. And so we'll do the same thing going forward.

Thank you.

Thanks, Joanna. And that was our final question for today's Q&A. This concludes today's conference call. Thank you for your participation. You may now disconnect.