Lucinda Baier: I’d like to close by saying thank you. Thank you to our residents and their families for entrusting us with their care and allowing us the privilege to serve them, to our 36,000 associates for their dedication and commitment to enriching the lives of those we serve, to our shareholders for their continued support in advancing our mission. And lastly, a special thank you to Guy Sansone and Marc Bromley for their years of service to Brookdale’s Board of Directors as they notified us that they will not be standing for reelection and will be retiring from our Board at our 2024 Annual Meeting. Guy and Marc have played an important role at Brookdale, and we’re grateful for their contributions.
Operator, please open the line for questions.
Operator: [Operator Instructions] And our first question today is from the line of Ben Hendrix of RBC.
Benjamin Hendrix: Great. And congratulations on the quarter. Just wanted to get some more details on the factors that give you confidence in outperforming the seasonal occupancy trends for the remainder of the year. Is that largely driven by staff retention efforts and advances you’ve made there? Or are there other market dynamics? And then just related to that, clearly, strong performance in controllable move-outs this quarter. Is the overall move-out rate kind of where it needs to be at this point? Or how much room to run do we have there?
Lucinda Baier: Ben, thanks so much for the question. This is Cindy. I’ll start with a response to the controllable move-out rates, and then Dawn can jump in. I’m really proud of the progress that we made this quarter, and quite honestly, since our recovery began in March of 2021. We’d still like to see improvement in both controllable and noncontrollable move-outs relative to pre-pandemic. I think it makes sense to say that we’re making progress, and we’re focused on improving resident satisfaction, and that is one of the ways that we think that our results will improve.
It’s also important to note that this year’s rate increase was more aggressive than historical norms, but less aggressive than last year, and I think that played a critical role in helping us with controllable move-outs.
Now Dawn, if you want to address the rest of the question?
Dawn Kussow: Yes, Ben. Thinking about our overperformance in the fourth quarter to first quarter, where we had the 50 basis point decline in our occupancy. As Cindy mentioned in her prepared remarks, our move-ins were 7.5% better than our pre-pandemic move-ins. So we were very happy with that — with the strong move-ins. On a move-out perspective, I think we saw less on the financial move-out compared to the prior year. And so we continue to see that supply and demand, coupled with the fact that the rate was — that rate increase was lower than the prior year. Additionally, Cindy talked about in her prepared remarks our retention and turnover progress, and we think that, that is playing into that favorability, and we’d expect to continue — that to continue throughout the year.
Operator: Our next question today is from the line of Joanna Gajuk of Bank of America.
Joanna Gajuk: So I guess staying on occupancy for a second. So you mentioned you expect this positive, I guess, experience from Q1 to continue in Q2, and you talk about you expect the growth sequentially. Because when I look at historical data in 2018, 2019, actual occupancy was down quarter-over-quarter, I guess, because of the new supply pressure there. But last year, right, Q2 versus Q1 was up 20 basis points. So is that — is this what you’re referring to? Kind of is that the magnitude we should be thinking about in terms of the growth of Q2 versus Q1 occupancy?
Dawn Kussow: I think, Joanna, how you’ve to think about it is we — it would generally be similar in trend as prior year, maybe not similar in percent. If you think about what has happened Q2 into Q1 of ’22 into ’23, we’re relatively flat coming because we were recovering from the pandemic. We’re seeing that favorability. So not coming down from Q4 into Q1 of this year. We’re making that turn, if you’ll, sooner. So that’s evidenced by the April occupancy that we just published last night, where our average occupancy was consistent with March. And then you can see our ending occupancy was up 10 basis points over March. So we’d expect to make that turn sooner. We’re making that turn sooner, and we’d expect that you’ll see that in our Q2 occupancy.
Joanna Gajuk: Right. That makes sense. And to that and when it comes to the occupancy, continued to surprise to the upside, right, like improvement is happening at a faster rate in those quarters. So I guess, as it relates to the prior question, but can you give us your views of like the main drivers? I understand you’ve obviously been working hard on this, not just this last quarter, but for the last couple of years. But any specific examples you can point to in terms of what’s happening? Obviously, the new supply not being there is helping, but any other industry level drivers versus the company specific and to that?
And in your slides, right, you’ve this mention of targeting — coming back to 2019, and I guess you added — thinking about kind of returning to not really the ’19, because that was again impacted by the robust new construction happening across the industry, but really to the prior peak, so I guess it was 2014 or ’15. So any updated views in terms of how long it’s going to take you to either get to the 84%, call it or higher occupancy?
Lucinda Baier: Yes, Joanna, let me start, and then Dawn can jump in if she has something to add. First, our goal really is to get back to our 2019 profitability. And as I mentioned, we were incredibly proud of the fact that this quarter, if you annualize our first quarter results, we’re back to 97% of pre-pandemic. And if you look at our same community adjusted operating income on a per unit basis, then you annualize the first quarter results, we’re actually better than 2019.
And so unlike many in the industry, we really focused on recovering the cash flow of our business. And so we focused very hard on what was the rate that we were charging for the services. And what were the costs that went into making a resident experience differentiated from our competition, and I think that has boded well. What I can tell you that as a team, there really are those 3 priorities that are really going to drive our recovery, right? We’ve to make sure that everyone in the company is focused on getting every unit available in service at the best profitable rate as quickly as we can. That’s going to be easier in some markets than others, but everybody is focused on that.
