• Adjusted EBITDA Growth: Increased 20% over the prior year quarter.
• Adjusted Free Cash Flow: Improved 26% over the prior year to negative $6 million.
• Resident Fee Revenue: Grew 4.2% over the prior year quarter.
• Consolidated RevPAR: Increased 6.4% over the prior year quarter.
• Same-Community Adjusted Operating Income: Increased 13% over the prior year quarter.
• Adjusted Operating Income Margin: Grew 160 basis points to 27.4%.
• Occupancy Growth: 160 basis points increase in weighted average occupancy year-over-year.
• Same-Community RevPAR: Increased 5.9% over the prior year.
• Same-Community Labor Expense: Improved 190 basis points as a percent of revenue compared to the prior year.
• Total Liquidity: $346 million as of June 30.
• Third Quarter RevPAR Guidance: Expected growth of 6.25% to 6.75% over the prior year.
• Third Quarter Adjusted EBITDA Guidance: Expected to be in the range of $90 million to $95 million.

• Warning! GuruFocus has detected 5 Warning Signs with BKD.

Release Date: August 09, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Brookdale Senior Living Inc (NYSE:BKD) reported a 20% growth in adjusted EBITDA over the prior year quarter, showcasing strong financial performance.
• The company achieved its 11th consecutive quarter of year-over-year same-community adjusted operating income growth, indicating consistent operational improvement.
• Brookdale HealthPlus program is expanding, with plans to grow from 49 to 130 communities by year-end, enhancing resident care and satisfaction.
• The company has successfully extended its lease with Omega Healthcare Investors until 2037, securing $80 million in CapEx funding, which will benefit cash flow and liquidity.
• Brookdale Senior Living Inc (NYSE:BKD) is well-positioned to capitalize on demographic trends, with the aging U.S. population expected to drive demand for senior living services.

Negative Points

• Second quarter same-community year-over-year occupancy growth was not as strong as in the first quarter, indicating potential challenges in maintaining occupancy momentum.
• The company faced disruptions in lead flow from paid third-party referral sources, impacting move-ins and requiring increased marketing spend.
• Brookdale Senior Living Inc (NYSE:BKD) reported a negative adjusted free cash flow of $6 million for the second quarter, highlighting ongoing financial challenges.
• The company anticipates higher marketing expenses in the third quarter, which could impact short-term profitability.
• Hurricane-related costs and seasonal expenses are expected to present headwinds to third-quarter adjusted EBITDA growth.

Q & A Highlights

Q: Can you discuss the valuations of the three small dispositions in the quarter and potential future sales to reduce debt? A: Lucinda Baier, CEO, explained that the three communities disposed of were small and not necessarily representative of the entire portfolio. Brookdale is generally satisfied with its current assets but remains open to opportunities that improve shareholder value. The company aims to deleverage primarily through the expansion of adjusted EBITDA.

Q: How does Brookdale HealthPlus impact rates and retention, and are there other healthcare services you plan to offer? A: Lucinda Baier, CEO, highlighted that Brookdale HealthPlus attracts residents who value fewer urgent care visits and hospitalizations. This program is expected to increase occupancy and associate retention, leading to better profitability. Brookdale receives revenue from Medicare Advantage plans for quality metrics, and while they are excited about healthcare practitioners in their communities, they are focused on capturing current opportunities.

Q: Can you provide additional data on marketing ramp and conversion trends, and explain the timing of marketing expense recognition? A: Lucinda Baier, CEO, noted that occupancy improved from June to July, and marketing spend is being aligned with key selling seasons. Dawn Kussow, CFO, added that marketing expenses are being shifted to the third quarter, impacting the timing of expense recognition but not the annual cash spend.

Q: Why did you renew the Omega Healthcare Investors lease early, and what about the Ventas lease renewal? A: Lucinda Baier, CEO, stated that renewing the Omega lease early allows Brookdale to access $30 million in rent-free CapEx, improving cash flow and liquidity. For the Ventas lease, Brookdale will only renew if it generates positive cash flow after CapEx, ensuring decisions benefit shareholders.

Q: How should we think about occupancy trends given the advantages of HealthPlus and caregiver retention? A: Dawn Kussow, CFO, expects a seasonal uptick in occupancy from the second to third quarter, better than pre-pandemic levels. Lucinda Baier, CEO, added that Brookdale's private pay model results in slightly different occupancy trends compared to the industry, which includes Medicaid residents.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.