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

Third is our strategic priority to earn resident and family trust and satisfaction by providing valued, high-quality care and personalized service. At Brookdale, we remain committed to continuous improvement, and we believe feedback is a gift. Thanks to strong engagement for our residents and their families, including approximately 65,000 internal and third-party satisfaction surveys over the past 12 months, we’re able to gain meaningful insights. These insights enable us to appropriately address areas of opportunity within our communities, and we’ve been pleased with the progress we’ve made to continually improve resident satisfaction. Most recently, our internal resident satisfaction ratings increased each month of the first quarter. I believe this reflects the positive outcomes of our continued efforts in this critical area and speaks to our dedication to compassionate, high-quality care and personalized service.

While we believe our customer focus is strong, we feel a deep sense of pride when our industry leadership is recognized externally, whether that’s when our individual communities are acknowledged as the best of, or when one of our differentiated Brookdale programs receive a notable recognition. In just the last few weeks, we’ve been honored with 3 unique external distinctions. First, our Clear Bridge Alzheimer’s and Dementia Care Training was recently certified by the Alzheimer’s Association for its demonstrated commitment to providing evidence-based training with a person-centered focus. We’re proud of our industry-leading expertise in the care of those with Alzheimer’s and other related dementias.

Today, Brookdale operates more than 9,000 memory care units that support residents and their families who are impacted by these diseases. The number of seniors who need these services is growing rapidly. By 2030, the CDC expects 8.5 million Americans will be living with Alzheimer’s disease. We’re confident in the effectiveness of our Alzheimer’s and Dementia Care program to support those living with these chronic conditions, and we’re honored to have this certification of our Clear Bridge Training.

Second, Brookdale was recognized once again with the most communities on U.S. News & World Report “Best of” Senior Living Listings. This year, more Brookdale communities were recognized as a “Best Of” winner than ever in our history, and we’re proud to lead the industry in community recognition for the third year in a row. I believe this is a testament to the trust our residents and their families place in us, the quality of the care we’re providing and the unique Brookdale programs that we believe support improved resident outcomes.

Third, as yet another recognition of our differentiated programs, Argentum awarded Brookdale as a 2024 Best of the Best winner for our innovative Brookdale HealthPlus program, noting that innovative programs like this show unparalleled passion and commitment to providing an optimal environment for the residents and families we serve. As I’ve shared before, Brookdale HealthPlus delivers measurable positive outcomes, and we believe that over the long term, through programs like HealthPlus, we’ll further improve the quality of life for our residents, increase the satisfaction of our customers and their loved ones, while also reducing costs to residents, their families and the overall health care system and delivering value to our shareholders. We’re very proud of this Argentum Best of the Best Award as we strive to continue to differentiate ourselves through clinical excellence and an emphasis on value-based care.

In summary, we entered 2024 with a clear vision, an intense focus and a dedication to continued positive results. Already this year, we’ve delivered meaningful positive outcomes across our key strategic priorities. With the first quarter annualized, we’ve recovered 97% of our 2019 adjusted EBITDA. At the same time, we’re keenly focused on the incredible opportunity ahead of us from recovering our pre-pandemic occupancy and margins. Our consistent forward progress each quarter reinforces my confidence that the plans we’re executing, combined with industry supply and demand dynamics, and Brookdale’s key differentiators will drive significant growth for decades to come. We’re excited to continue our positive momentum in the second quarter and throughout 2024.

I’ll now turn the call over to Dawn.

Dawn Kussow: Thank you, Cindy. Good morning, and thank you for being here today. Cindy shared highlights of our positive first quarter operational and financial progress. I’ll provide additional color on our first quarter results, and then I’ll speak to our second quarter guidance.

Beginning with first quarter revenue. Resident fee revenue grew 4.3% over the prior year first quarter. At the top end of our previously provided first quarter guidance range, consolidated RevPAR grew 6.7% over the prior year first quarter, which was attributable to a 160 basis point increase in weighted average occupancy and a 4.4% RevPOR growth. Marking our tenth consecutive quarter of year-over-year occupancy growth, the first quarter’s 160 basis point increase reflects a positive acceleration of our recent occupancy growth trends.

We’re also pleased to report that the sequential occupancy change from the fourth quarter of 2023 to the first quarter of 2024 was meaningfully better than normal pre-pandemic seasonality for this period. Specific to first quarter RevPOR, as a reminder, while higher than historic norms, we implemented a lower average January 1 rate increase than in the prior year. We remain focused on ensuring appropriate pricing to match the services we deliver in our communities while remaining affordable to our residents and appropriately addressing our costs. As reflected in our results, this year’s January 1 increase effectively supported continued RevPOR growth, improved year-over-year financial move-outs and strong flow-through, as evidenced by our margin growth.

Specific to our same community portfolio, first quarter RevPAR increased 6.3% over the prior year, driven by 150 basis points of occupancy growth and a 4.3% increase in RevPOR. We’re pleased with our continued top line progress, including first quarter occupancy that was better than normal seasonality, strong demand and year-over-year improvement in controllable attrition.

Moving to first quarter expenses. Consolidated facility operating expense was $543 million, while same community facility operating expense, as shown on Page 8 of our financial supplement, was $528 million. Same community labor expense as a percent of revenue improved 150 basis points compared to the prior year first quarter. This was a result of favorable flow-through of top line growth given the fixed cost nature of our business, reductions in contract labor and overtime and the favorable impact of improved leadership retention and hourly associate turnover. We’re very pleased to realize these favorable outcomes from our strategic priorities, particularly considering the year-over-year incremental expense increase from leap day.