Brookdale Senior Living Inc. (NYSE:BKD) Q1 2024 Earnings Call Transcript

Brookdale Senior Living Inc. (NYSE:BKD) Q1 2024 Earnings Call Transcript May 8, 2024

Brookdale Senior Living Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Hello, all, and welcome to the Brookdale Senior Living 1Q 2024 Earnings Call. My name is Harry, and I’ll be your operator today. [Operator Instructions]

I’d now hand the call over to Jessica Hazel, Vice President of Investor Relations, to begin. Please go ahead.

Jessica Hazel: Thank you, and good morning. I’d like to welcome you to the First Quarter 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 and 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 of the full safe harbor statement.

Also, please note that during this call, we’ll 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.

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Q&A Session

Now I’ll turn the call over to Cindy.

Lucinda Baier: Thank you, Jessica. Good morning to all of our shareholders, analysts and other call participants. Welcome to our first quarter 2024 earnings call. In the first quarter, we made great progress on our key strategic priorities, which are designed to not only pave the way for operational excellence and sustainable long-term growth, but also to support the health and well-being of our residents and associates. At Brookdale, our unwavering commitment is and has been the health and well-being of our residents and associates. We know that aging presents new challenges for seniors and they, along with their families, often struggle with their evolving needs. Many times, these needs include a significant increase in chronic conditions, increased healings of loneliness and isolation and support to complete even the most basic activities of daily living.

At Brookdale, we take pride in our ability to help seniors manage these challenges of aging through high-quality care and personalized services, all in a home-like setting, surrounded by a community of friends. But our commitment doesn’t stop with our residents. Our business depends on people taking care of people, and as such, our greatest asset is our associates. Each Brookdale associate has the meaningful privilege to truly enrich our residents’ lives with compassion, respect, excellence and integrity. Our mission embodies Brookdale’s commitment to a culture of caring and excellence. Through our key strategic priorities and our relentless dedication to the health and well-being of our residents and associates, we’re seeing meaningful positive outcomes being realized for our residents and associates in our community operations and throughout our financial results.

I’ll share with you many of these positive first quarter outcomes, including an accelerating year-over-year occupancy growth trend, another year of favorable rate growth that is supporting profitable census increases and our continued triple-digit same-community margin expansion. It remains undeniable that demand from the target senior demographic is here and rising. We remain focused on our goal to meet this growing demand and to be the nation’s first choice in senior living. With the strong start to the new year, including the sustainable growth we continue to deliver, I’m filled with tremendous optimism for our ability to capture the incredible opportunity that lies ahead.

In the first quarter, we maintained an intense focus on our key strategic priorities. Building on our strong momentum from 2023 and with the continued successful execution of these priorities, we’re proud to report another quarter of positive operational performance, where we once again delivered results within or better than our previously provided guidance ranges. Using our strategic framework as a guide, I’m proud to share with you our recent progress and noteworthy accomplishments. Beginning first with our priority to get every available room in service at the best profitable rate.

In the first quarter, on a same community basis, RevPAR grew 6.3% over the prior year, which supported operating income margin of 27.6%, our highest reported adjusted margin rate since the initial impact of the pandemic. As Dawn will share, this represents an important milestone on our road to pre-pandemic margins and beyond.

Our effective January 1 rate increase, coupled with 150 basis points of year-over-year same-community occupancy growth and continued appropriate expense management, contributed to these strong results. We were very pleased that our year-over-year occupancy increased every month of the first quarter, accelerating from our fourth quarter growth level and exceeding our initial expectations. There continues to be robust demand for our services and a recognition for the strong value proposition that Brookdale provides, resulting in more seniors choosing to call Brookdale home.

In the first quarter, our move-ins exceeded pre-pandemic levels by 7.5%. Though not quite as high as our prior year first quarter move-in level, we’re still pleased with the strong demand that we’re seeing. We’re also grateful that first quarter move-outs improved relative to both the prior year and pre-pandemic levels. By holding steadfast to our commitment to consistent and profitable year-over-year occupancy increases while continuing to meet our residents’ needs, provide high-quality care and personalized service and remain in compliance with applicable regulations, we’re building a significant runway for future revenue and operating income growth as we serve more seniors in the quarters and decades to come.

Turning to our next strategic priority to attract, engage, develop and retain the best associates. A simple philosophy resonates within Brookdale: If we take care of our associates, they, in turn, will take care of our residents. That is why this strategic priority remains critical to our long-term success. With this in mind, I’m very pleased with our incredible progress to attract, engage, develop and retain the best associates, which has already had a positive impact on our operations performance and financial results while simultaneously strengthening our teams and creating lasting benefits for the future.

The pandemic significantly affected the workforce in our industry, leading to a nationwide shortage of health care workers. In 2022, we increased our internal workforce by approximately 15% with nearly 5,000 net hires, which supported more shifts being filled by our own Brookdale associates rather than contract labor. Then in 2023, we refined the Executive Director role, introduced enhanced leadership training and focused on enhancing our associate onboarding experience to support better turnover and retention, particularly within the first 90 days.

During the first quarter, we’ve been pleased with our continued improvement in key 3 leadership retention, which includes our Executive Director, Health and Wellness Director and Sales Director, and in our associate turnover. As part of this, we’re incredibly proud that our trailing 12-month Executive Director retention rate through the first quarter has reached nearly 70% retention. This is critical, as we’ve found that when an Executive Director is in place at least 2 years, those communities have higher overall profitability. Given the significant progress we’ve made over the last 2 years to stabilize our overall workforce, in 2024, we’re refreshing our hourly training to be more engaging and personalized for our associates while ensuring that we continue to provide high-quality care and maintain regulatory compliance. It’s still early, but we’re excited about this opportunity and the impact it will have for our associates’ productivity and growth in their career opportunities.