Brookdale Senior Living(BKD) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2024, adjusted EBITDA grew 15% year-over-year to $92.2 million, which is roughly the midpoint of the previously provided guidance range [11][44] - Adjusted free cash flow for the third quarter was$ 14 million, an increase of $11 million compared to the prior year [48] - RevPAR increased by 5.9% over the prior year, with same-community RevPAR growing 5.6% [11][38] Business Line Data and Key Metrics Changes - The number of communities operating with the Brookdale HealthPlus program more than doubled, leading to improved clinical outcomes [8][21] - Same-community RevPOR grew 4.2%, which was an acceleration from the second quarter [16][39] - Labor expense as a percentage of revenue improved by 140 basis points compared to the prior year [40] Market Data and Key Metrics Changes - The company experienced a sequential occupancy growth of 80 basis points, which was better than historical seasonal trends [7][37] - Move-ins improved from the second quarter but remained below the prior year, primarily due to softness from two large paid third-party referral sources [12][70] - The industry experienced a sequential deceleration in average asking rent growth, while Brookdale's RevPOR growth accelerated [16][39] Company Strategy and Development Direction - The company is focused on returning to pre-pandemic occupancy levels while maintaining profitable occupancy growth [15][30] - Brookdale plans to acquire 41 communities to enhance cash flow and reduce exposure to escalating lease costs [24][26] - The strategic priorities for 2025 include maximizing occupancy, retaining top associates, and ensuring high-quality care [30][32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future occupancy and adjusted EBITDA growth, despite challenges from third-party referral sources [18][34] - The company is committed to managing expenses while meeting resident needs and maintaining regulatory compliance [32][41] - Management noted that the competitive landscape has seen increased discounting, potentially influenced by external factors such as the presidential election [91] Other Important Information - The company successfully refinanced the majority of its debt maturities without extension options through 2026 [10][57] - Brookdale HealthPlus has shown significant clinical outcomes, including 80% fewer emergency room visits and 66% fewer hospitalizations compared to seniors living at home [21][99] - The company expects to close the acquisition transactions by year-end, which will be immediately accretive to adjusted free cash flow [54][55] Q&A Session Summary Question: Can you walk us through the income statement regarding the lease reclassification and its impact on 2025? - Management confirmed that the$ 8 million benefit to adjusted EBITDA in Q4 is a timing difference, with a corresponding increase in interest expense expected in 2025 [66][67] Question: What is the strategy regarding the pressured third-party referral sources? - Management clarified that the decline in move-ins from third-party sources is not cost-related and that they are implementing internal marketing strategies to offset this decline [70][74] Question: How should we interpret the RevPAR guidance and the competitive pricing environment? - Management indicated that while RevPAR is expected to grow, they anticipate a sequential decline in RevPOR due to changes in resident acuity [75][76] Question: What are the expectations for occupancy growth in Q4? - Management expects occupancy to increase sequentially, aligning with year-to-date RevPOR growth [84][85] Question: Can you elaborate on the impact of the Google algorithm change on third-party referrals? - Management noted that a recent Google algorithm change has negatively affected lead generation for one of the major third-party referral sources [87][88]