BKD - Earnings call transcript Q4 2018 | Brookdale Senior Living Inc.

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Kathy MacDonald

Thank you, and good morning, everyone. I would like to welcome you to the Fourth Quarter and Full Year 2018 Earnings Call for Brookdale Senior Living.

Joining us today are Cindy Baier, our President and Chief Executive Officer, and Steve Swain, our Executive Vice President and Chief Financial Officer. I would like to point out that all statements today, which are not historical facts including our earnings guidance 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. may from performance statements. and results differ forward-looking materially Actual as results could are Form we Certain the we risk well annual time-to-time that on in on SEC actual with issued the to the filed as factors release other factors reports including earnings Form cause XX-K differ XX-Q. from quarterly reports the detailed yesterday, our contained in report in and Living's I statement. earnings to direct Senior release Harbor Brookdale full the for Safe you we call, will both Also please this note during non-GAAP and measures. present financial that GAAP

reconciliations from Cindy. like on For furnished to the comparable turn to GAAP found supplemental of release information, be over would was earnings and our you the call direct X-K most at each non-GAAP brookdale.com/investor may which yesterday. measure measure, With to our and I I that,

Cindy Baier

introduced update you, This our morning Good I review other XXXX welcome we and that as XXXX, to significant shareholders, all year I'll outlook. our successfully fourth February in our the as launched morning, earnings we are well provide the participants, of end Kathy. terminated strategy on Thank After and business progress strategic and strategy, transformative. quarter which on executed changes early turnaround our call. analysts, and to in XXXX a

details We are within results our also and so our mission to renewed who results. residents. the will financial We delivered guidance the focus our critical provide care associates, of on our Steve our to delivering ranges.

future we rallying which extraordinary, Last unified path, We amount operations on parallel locally, necessary our a the time real became with Brookdale the priority So, initiatives a the operational focus On a year, highlight let estate foundation real for of position yet for focus to estate team. spent success. me on set call these we results. an strategy. our made laid how the on winning for Brookdale and foundation

of debt proceeds more assets our line XX in and costs, control with repayment change to portfolio, we net $XXX $XXX end, and completion we to in are restructured of owned goal. million year by communities sold move objective nearing transaction and million our generating For other sell provisions. leases restricted We

managed the the we operated interim were disposed am management fourth to off agreements I new under give agreement management communities what numerous To accomplished. being we that operators. quarter. For majority terminated XXXX the during team our XXX transitioned in occurring portfolio, perspective, proud of or with communities

team leading for estate consulted focus reviews alternatives several over different explored our real much the acquisition communities. change less completed XXXX than have years, closings, celebrate Brookdale now will XXXX, and clear. many several enhancing believe in confident The disruption For the new to our plan, conducted was past Brookdale create to XXX and there Emeritus mix, the be community big financing requirements. and on owned This about continue management was the years we from review successful, capital the to with too did that to of allow shareholder and real XX% we staff operators. smaller With the reviews. transactions XXXX a significant deliver it numerous our speculation estate became than recent immediately be me and successful In In value. will been intentionally identified experienced transitions successes, portfolio on vast so We've portfolio actively banking such operations. leased the advisors and us to previously returns. that accomplishments to the we remaining is planned of portfolio. whether finish door our close to completed. so majority over be connection let improved investment we'll we XXXX past our board to that XXXX, with are has have expect long-term we community-by-community reduced after portfolio the We With optimal sharpen

mind look at separating In for the estate another our that internally raised new from the commonly to arise the an to whether the advisors transaction this company's real committed structure. would is with to industry, as potential an are mandate PropCo/OpCo entered truly ideas and operations review a to review We understand of that transaction. needed all or continually unlock assess we our value REIT real shareholders. this portion an public Recently, referred shareholders. We of with ideas into PropCo/OpCo by estate open our and we completed outside

we on identified few provide analysis, key considerations PropCoRIET operator transaction that we of To trade recommended and shareholder I'd was RIDEA Based a its by pursue review, this structures. this this operation, and time based for separation on would lease uncertain comprehensive by that A of has with managed key advisor, confidential including our We review not shareholder well our create publicly range concerning obligations. PropCo/OpCo who at regard of an an this like transaction to is performed an review, value. detailed to viability transaction. a look external and transparency team do we In at is this separation information financial Our lot analysis likely REIT share structural deficiencies. this lease a structures, and of were assisted operating additional additional the effort spent to in on transactions. company during potential wouldn't time, potential is advisable another we debt the and a a PropCo/OpCo believe who as views PropCo/OpCo result triple-net the it single connection with due and a into in advocated to

existing leases of PropCo from a third-party the perspective. a near potential operating company, of create and new you lease new in funding CapEx viability factoring First, the This with consider along flow and would the must needs. challenging potential long-term obligations any certainly cash with situation

of OpCo. viability the influenced Second, perceived by the PropCo's valuations will be

diversify. operator as its size well addition, PropCo initial grow to higher In need the single leverage usual as [Technical Difficulty] than REiT its ability consider to a and sub-scale you its profile exposure limit to of to the

for realistically expected PropCo the value entities. trading assess OpCo You must and

of just I valuation would mentioned relative All create peers. issues pressure to these

and to depending operating a the sizable transaction of time. possible this burden our Third, it operator. along the change transaction. at taxable see losses path of net the deal, Even provisions for that substantial value be be transaction utilizing could not is implementation the these will Ultimately, given type surviving this with simply that on a structure of control factors, a potentially through did we unlocking of triggering other

term, value, our strategic executing on to continually Simply remain near value over we turnaround focused strategy. through is assess stated, While we will will enhance ways operational to best priorities. way the shareholder shareholder our the create

the said, constructive pleased to shareholders be in they is, we the we choice Board The are Our with accelerating of recent committed and nation's listening may our first perspective real the of our we from that vision estate. pacing ideas senior senior announcement this are of end, remain living to a That or owns reality I'm that have. To destaggering intentionally Directors. is living. evaluating our that being healthcare to operator feedback

feedback Board voluntarily we of made this Our consideration Nominating Committee decision Corporate and shareholder received. Governance after

adversity living XXXX line about snowstorm, Let season me community of where costs. and and and XXXX. and including top industry talk strong briefly for weather significant openings in our facing operating drove in keep new retain wildfires. hurricanes drove reduced challenges, XXXX, elevated our and in outpaced attributable And healthcare turn successes higher ongoing nation's have our associates. new seniors unemployment, industry priority while five We've safe the to our intact, move-outs. nutrition to headwinds, our families safe, now we flu related of withstood incredibly excellence expected saw seniors how are our In during on thousands that early competitive engaging to informed. the wildfires. keeping details planning hurricanes the attract most focus best This programming with and openings, disasters. of the to the proper In ensure good There each and a demand. winter to that large keep areas last the their the senior years, severe proud very the macroeconomic in resident of team operations continuing I'am logistics of and proud protecting and progress pressure and I'm executing despite these deaths made regimens no during addressed are there provide comfortable, natural controllable to our XXXX, were medicines low residents team's and

two seen our Directors In the plan three-year these Wellness complete six a We've with third XXX month continued the quarter the trend XXXX. investment benefit point Health year-over-year This basis positions in for of track Executive of higher of communities. are rate XX XXXX, in Directors retention and saw the this we quarters our of the above from retention past XXXX. We trailing quarter and fourth on basis. XX% on improvement to

As of XXX position. we just our Executive only year-end, open nearly That's had communities. XX of X% Director

and XXXX understanding, sales the retention leaders skill, high-quality associates time Director of turnover coach associates we've Director sales control successes person. We with sales realignment, replicate Health Directors. Wellness will Our associate our focus providing drive allowing this to sales to our more now communities. district to the and the with our with leads them dashboards be and our Executive analyzed Sales we and are improved sales visits recent tools of our span and to With in

the and messaging are position together strategy offer the point been of programming, compelling This This most experience. have to impactful and focusing systemically in. our the including critical associates plan organization experience in business relationship we dining the how connections sales of our of on a undertaking, difference. right research refined and all qualities a moving brand, to and and is customer using quarter, resident package each to from will sales large we the our customer message prospects. our We support communicate all our researching, phases a care prospects, to customers In contacting personal of and develop promote Brookdale has of a address visiting we our providing best-in-class communities community, attractive this further fourth

meet this operations are better senior through guiding cohesive in living phases that community provider other do all are No journey is to We in associates and the our needs. their to of choosing customers Brookdale. sales than ensuring suited one right team their

execution, patients. top indicators. reason Community our a three Mary further to leading the communities operations of and we retention associate team EVP our me Sue of performance. month, of last are strength started operations. with reporting aligning the Patchett, to the The this, sales drive organization exists residents to and and There's strong leaders retention Brookdale sales To rates our the operations achieve serve our Given to brings between correlation that

the For we've full improved indicators. our of four three year XXXX, lead

the maintain of generating achieved move to For is plans I'd as the we focus marketing out organization's results XXXX strong sales return we and move the noted. XXXX, with just more our controllable out goal in action on move-ins

the mix, Services quarter, known results, our our a therapy In Healthcare while Ancillary we our sequential fourth as segment, to Turning Services, with in impacted revenue XXXX, previously we on industry are we our mix. shifted in basis. this stabilized case line now

services strong expect continued in expect to in to XXXX growth grow our addition business to healthcare our We our business to we new markets. addition continued organic expand hospice into growth in plan in where

over few Before about provide to this expectation. I the to comments call Steve, summary like turn I'd year's a

in the new This will highlights significant openings investments. guidance XXXX, to XXXX projects starts will in our of difficult level driven which call. from that competitive we housing third necessary and be as Expected for aligned value our community continue improve Yet adjusted CapEx continue communities early to the cash our a headwinds have provided with their to industry to additional quarter appropriate free infrastructure fall. XXXX These making is include flow continue will we protect building our improvement are indications to of portfolio. support senior results community The in ensure Our landscape. the major that are condition operations. our strategy by year, I've

occupancy over to move-ins now. estate working call advance is to sales restructuring accelerate cycle, us, behind I'll our especially Steve, the that the turn turnaround. and real related the are we mostly Now to

Steve Swain

Thank today you, focus on remarks primary Cindy. topics. the My will three

First, of the fourth and highlights full XXXX quarter year financial results.

despite guidance. year's on our comments on We strong real and few guidance. provide We to pressures. a last highlights. our the on notes, full a update third year occupancy XX%, resident's senior given XXXX rent about financing, year especially a achieved that in a expand year-over-year to progress. of rent. new importance progress, the completion and facility living, and This a borrowing wage quarter results our and improve an XX in real And XXX resident's proceeds within finally, credit will context financial competition. strategy. pricing community independent I'll driven an with point three fourth estate and increase fourth is structure the sequential highlight increase by working Freddie our initiatives, first our was flexibility lowered point XXXX assisted basis to year. achievements our convertible drove in living same Starting and care We increased to We Cindy's increases. of our means achieve the executed I both oversupply estate the with the goal. Second, saw our costs Mac XXXX basis memory discipline in saw financing which our good occurred basis, nearing net quarter price living committed improvement we We turnaround largely These quarter. and for the This for late paid are shows of than and industry capital mark-to-market lines: our positive We greater existing quarter all the the positive from independent off on product full mark-to-market revenue was

with about Let real estate Starting that our in our more announced last me we initiatives detail owned talk portfolio. year.

are of of transaction repayment costs. debt sales million. nearing on proceeds $XXX goal million net of of of our end providing $XXX proceeds, We the and XXXX, By closed of had we community net completion

located portfolio states. completed including fourth we are close conditions across that customary And in satisfied. XX sale XX communities under in communities, have a currently diligence we and Specifically several eight quarter we and on Park communities the contract for of first quarter, expect closed and owned will closing Battery once the

in Turning portfolio. uneconomic lastly communities In another six of HCP leased announced to we terminated terminations lease XXXX. managed to are completed quarter, communities. originally lease Separately, fourth remaining XX the for the the related we portfolio. And the

transitioned of to our mainly our Welltower. in quarter, and beginning terminations. that's we of estate and During through communities with XXX numerous communities previous Since operators, to new real integral average, that fourth end the the our the HCP days. XXXX, perspective, disposed three put XXXX, quarter short, and fourth community sales one announcements was related off to To In consolidated the lease transformation plan we in XXXX. through every on

To fee three resulted to than the transitions of $XXX context for in the million. less quarter adjusted quarters compared quarter financial the flow quarter, positively and adjusted In EBITDA. were prior $XX fourth fact, free to cash the by impacted XXXX, in fourth results more the first million resident combined. year XXXX $X less revenue provide But the dispositions these million

quarter billion mainly reported in due This company changes fourth sales quarter communities With fewer fourth compared portfolio mind, terminations. these the and in revenue in and $X.X was to result lease significant our of total to $X.X XXXX is decrease asset of billion X% XXXX. the

real results. reported focus comparability, and best strategy to execution results, quarter estate same Housing X.X% fourth the to Same improved Independent of has basis. Senior revenue of operations quarter in to on analyze the the compared way XX% X.X% increased prior occupancy sequential our to improved is the year on living community the to a Moving community quarter. because impacted

quarter, resulted prior-year rates impact For spite positive quarter, due in our of care discipline revenue occupancy primarily and same price earlier of prior memory communities competitive in year The RevPAR. assisted occupancy. throughout When increased and growth fourth and lower to of grew XXXX average compared the year pressures was quarter quarter, and the oversupply X% a nearly taken continue negatively RevPAR to the dispositions fourth community with to reported industry than living and in over to declines. this reflects, RevPOR increases quarter, the strong fourth

in respective compared our reflect X.X% to compensation close the in-place The Xst, the as mark-to-market effect support the strongly quarter rates full plus the and earlier, mark-to-market associates. community X% went intentional fourth XXXX. the a made in-place a new wage pricing implementation the investment prior resident pressure improve In periods. year to pricing increases As was tight we and to community industry expense for positive. as quarter key we of best compensation associates ability due helped increased in the the associates increases These mentioned for for Same by higher to recruit resident-facing XXXX labor to first early our XXXX expect industry. was above market, investments fourth result January rent This on gap the in residents. market the our between and the rent influenced into retain our quarter, to year

community fourth periods. same the to year the Our full same facility as X.X% prior and expense the in our for increased for portfolio operating X.X% quarter compared year

year, related the referral facility weather expense, as normal in and were our revenue offset to the XXXX, pay by For to and a key higher costs insurance due primarily energy, of increased and partially increases part these of slight operating community leadership in increased growth. early severe investments higher inflation repairs expense result cost

community decreased Our year quarter the operating to respective income the same and full compared for X.X% the X.X% for prior year as fourth periods.

was Moving our known as Services basis. an Care shifted Revenue case sequential annual lower Ancillary mix quarter on rate Throughout segment, our the to although Services. lower stabilized managed Health care. year, to a X.X% on the basis, it previously

PDGM a average impacted mix shift now wide proposed growth, revenue this implement to position While and line in in places with CMS's our XXXX. is us in the better industry industry

due to margin intentional So our shift, mix our even though encounters patient our increased decreased.

Brookdale from had impact In of that, after new large performance transitions healthcare dispositions . community addition, services our soon one certain operators services a in community healthcare Brookdale's a XXXX. replaced away on is the of volume These biproduct transitioned meaningful

fourth compared as of increased for year functions. see consolidation. these XX% associated centralized periods. related intake the from for consolidating year and to hospice continued primary From it increase Its in full quarter perspective, prior encounters our segment's setup strongly. Looking to increased the and savings expense grow patient labor costs drivers the the business, with expense the an centralizing XXXX, we the respective at In for facility intake operating to XX% expect to and

XXXX the G&A in $XX normal excluding and to The XXXX. in extending liquidity, cost credit net-neutral prior compares letter mortgage the and This X% G&A quarter, transactions credit in costs in the lease three supplement quarter We as lower The salaries higher we the In substitute early million. annualized in flow EBITDA to to the prior variable attributes the and quarter, remove We fourth year-over-year $XXX were to transaction savings general our $XX same as by million. a impact by the structure, the in our offset and and and senior strategic recognized the key a $X Freddie and few due of million industry cash restructuring paid quarter. in and lower quarter. transactions. related costs year free made facility. Mac also more diversifying expense, operating the million mainly to the the quarter adjusted fourth million key of restated providing Mac facility, expenses project fourth our $XX negative through million important achieved million EBITDA and by In below $XX assets expanded off facility. were quarter, organizational leadership hurricane the year transaction is and for goal the administrative rationalization financing We decline XX along communities we quarter, to we negative flexibility $X.X in mainly drivers compared was For intentional, of million, of variable in of bonus. normalized $X $XXX $XX play convertible XX new collateral of million notes. credit partially inflation were or $XXX and Adjusted of reported our sales XXXX, million EBITDA of community our adjusted exposure. was $XX.X adjusted This lower prior term to second flexibility role million fourth to benefits. asset we $X capital robust Freddie points fourth This basis of a million investments key community fixed of excluding with approximately and terminations, financing above created rate while obtained disposals interest we our Then in completed G&A. amended million but A follows. driven lowered

I the impacted Beyond factors disposition interest expense and adjusted related positively that described flow. cash free lower EBITDA, adjusted CapEx impacted non-development

Our at due to prior cash adjusted proportionate reduction, was the free to million of compared quarter share proceeds $X year lower $X quarter the million other Of fourth CCRCs to XXXX, interest $X flow of unconsolidated the venture was fee of million. ventures. ventures million $XX entrance the the of in due in million of $XX and equity sale was approximately our

additional liquidity, $XXX December asset the and September down purchased be opportunistic of total we In of was primarily shares pressure, $X.X of conditions. As XXst of average Brookdale an approximately paying by including were revolver million and from future was shares stock December, price based market $X.XX increase an at debt. of market and million, again the a on capacity could line opportunistically when experiencing result sale XXXX, of proceeds, XXth. lower offset increase The partially credit $XXX million

maturities debt reasonable the have debt is outstanding approximately asset-backed We mortgage non-recourse debt. XX% our years, total over next of five

Our sheet provide positioned continue turn is to the balance around well as sufficient we flexibility to business.

to XXXX Turning guidance.

two yesterday's XXXX that in changes release, guidance. I our highlight in noted As impact want to press

First, we XXXX. lease effective new the adopted January standard Xst accounting

will in result of XXXX $XX with in of result million $XX to impact one-time $XX EBITDA, adjusted free record cash an in additional decrease million This related operating adjusted for million a to resident but generally accounting flow. expenses, revenue facility contracts. to a As and expect the of we additional change this no an adoption,

definition cash adjusted changes in operations Beginning in our is be we will for discontinue adjustment. flow working of in change XXXX, of we adjusted flow, working our to free the more capital. second cash to cash definition provided current capital The adjust In line with by free practice. traditional

expected changes flow to adjusted impact our to to meaningful changes assumptions. working While standard. provide details new the expected are have on for neutral guidance XXXX volatility by lease quarter, and full I'll accounting normalizing the are be after capital year of free now cash

with outlook the industry Our reflects on turnaround full macroeconomic continued broader context our in headwinds. execution year strategy

headwinds Cindy industry mentioned, continue. As

and our some forecast show However, internal mix half. the in improvement second

In wage addition, upward low to industry dispositions the our pressure this this unemployment guidance continue the on of rates previously provided will With expected includes press inflation. put release, impact we planned of backdrop, communities. in announced pending our

We of be free negative transaction adjusted adjusted expect for range the including in XXXX adjusted to million EBITDA, million. our $XXX to million excluding million. transaction $XXX million negative proportionate million flow, $XX the of $XX $XX in range range free costs cash flow. to to in cash EBITDA the be of ventures million $XX to Adjusted costs and share to $XXX And of for unconsolidated million to $XX be

neutral the CapEx XXXX that free highlighted last $XX The flow guidance a have be XXXX. spend incremental for incremental will adjusted quarter, at high been in watermark cash of the year. we would million Excluding CapEx

on our website. to guidance listed this is flexibility to around of key as found balance underlying I'll positioned current necessary. want to already that I has our Cindy we've turn some details and investor share we in business. is sheet provide our more As sufficient discussed, our the can in be presentation, well investment which reiterate assumptions the continue

estate the Slide view communities successfully process. deck of our the that the for are our First, most In currently is our significant impact is investor transactions our impacting on closing items real based general, one pro XXXX sale. result initiatives. on in under of reflecting of after in XX forma a outlook contract

XXXX will you help have for in transactions, we year forma While understanding partial our operations. pro will continuing the results

modest we growth expect continuing our from revenue Second, operations.

However, revenue consolidated the because decline. reported dispositions, will impact of of our

within this flu senior occupancy expect to assumptions year, we our season. a less For housing, incorporates of the improve severe

we to in-place year adjustments rent increases we industry. the In XXXX. we full impacted slightly slightly same At expect to compared throughout in to will of loss line in shift the mark-to-market average revenue to deliver with down offset expect performance XXXX's to through year. improved However, rate a was we larger time, recapture XXXX, all compared healthcare occupancy improve business, mix by as negatively as don't the be pass to when expect case by services be significant growth our XXXX, the

amount negative to be dispositions. of as markets. also In growth continue our hospice from mainly the XXXX, gain experienced We will licenses our large on our we and scale a impact business expand from existing

We under operating pressure during to margins line expenses. top expect our from operating year both our facility and remain the

We X.X%. expect to year industry the by our investments X% community This above costs, be the including grow in labor to final benefits total year will of make to three plan associates.

satisfaction retention the and two controllable years, of higher Executive the higher these of Over past Wellness by lower with investments benefit resident we've move-outs. rates demonstrated seen Directors Health and directors' with along

that expenses, rationalization to XXXX. late is G&A excluding items stock-based to and impact highlight will free up that on our cash and a based a to XXXX few G&A compared inflation expect compensation be flow. additional cost by non-cash want transaction also we offset in bonus, We This cost partially slightly I our XXXX. initiated normalized

expense occurred lease expect real rate from XXXX primarily estate lower we the our by lease interest or First, and and offset rising a to combined those escalators. assumptions transactions XXXX amortization occur are somewhat in and that interest planned

costs to million our approximately in expect transaction be Second, $XX we XXXX.

near outlook related part lease significant I standard XXXX disciplined CapEx. free of cash Third a to our flow. Cindy bottoms-up $XXX adjusted million. million accounting $XX The term the review our of XXX CapEx that impact be new non-development is communities Again, this already not we will to our With on incremental as final an have mentioned mentioned, communities. XXXX plus on our around last expect includes a investments CapEx in call,

an XXXX. aggressive plan We action have in

to locally in to also in growth turn passion is to an Cindy. the operating leverage win and it time associates in However, now back invest to drive future to over for order our call exciting I'd share XXXX. like

Cindy Baier

projected positive an seeing a we points you, industry. know Recently, living positive to our and reported a in data shareholders and NIC in Thank believe approaching. occupancy position want independent intersect are growth I that forecast and to inventory absorption with also the in are is improved strong crest housing the assisted living Steve. in we as in We Silver of senior annual the trend to flatten XXXX. Wave

We introduced digital our committed XXXX, in roadmap strategy. to are multi-year and are to turnaround the I committed we February

we that, living. Let leader in be the me close by first saying choice aspire always the senior and we to nation's are

and happy we are are patients We residents, for have to Operator, proud an our line to and the families and their to answer questions. open questions seniors. I please unwavering America's Steve now. commitment serve

Operator

[Operator Instructions]

Cindy Baier

question the for as Steve we will address polling one received is overnight. that operator questions, And

Steve Swain

So, reflects for X% middle guidance and We're investor The now caller. occupancy dispositions forma run levels. timing adjusted rate adjusted $XXX and Annualized question fourth other first range. run $XX rate pro which start add number EBITDA to guidance in $XXX EBITDA. fourth thanks, factors adoption, adjusted the The of is found rate million XX XXXX expense Then page. estimate to $XXX.X page forma, our million. approximately you of to EBITDA decline of your million the community our To start guidance growth EBITDA for with nets $XXX occupancy, gets assumptions is growth, among other will fourth deck. quarter million, increase, million or equates in $XXX forma regarding the rate our of accounting quarter ready our you EBITDA million. adjusted on Cindy. The quarter growth. pro the EBITDA of could run pro things, most Due rate recent lease

Operator

line your question of And of Jefferies. Plagman comes from first Jason the

open. Your line now is

Jason Plagman

EBITDA. clarification. morning. very core And that good about last That Hi, my was first be question was helpful. thanks the to That going for

So as far should anything know from, as guide don't mind we through digging EBITDA that the flow detail. I the the of keep quarterly, you just into in but throughout as cadence we year? XXXX

Steve Swain

Yes, cadence years, should think be, thanks for so point. start question. good that's should the The a I mirror prior EBITDA

numbers. that As this in I'm you in cash including and numbers cash our to there want capital year free as working will variability far at looking flow, as free we're remind the some historical flow I be

for year use generally million a instance, it use of was The first a last cash. quarter cash, is $XX of

Jason Plagman

what And program, undertaking then, XXXX Okay, that's describe impact operational can any disruption you you're income you CapEx of the from type those major then, And or the as in expect that of far helpful. projects? projects do some there? statement just as

Cindy Baier

This Jason, for thanks question. is the Cindy. Hi

with So safety, as windows, end-of-life integrity plumbing include exterior like pavement, offset water that doors thing. call which and HVAC, got gets the exterior life have major projects added some is, and projects, And that's systems, heaters that suppression drainage. by including and as resident enhancement of CapEx. We skin, fire lower we then refurbs nurse landscaping around our lighting well roofs, some really paint, sort partially apartment to the envelope the building and walls fences do corporate building

our, and Now that on and fact Usually have the so invest and the we're is your residents campaign a improve to CapEx we associate a exciting our investing duct capitalize in when new you for capitalize that you our something CapEx. plan coming. communities can prospects, both is what we that community we're partner on hoping And rate. it's that's retention actually, happens

Jason Plagman

of a know one I And of part have helpful. part as review. where commented but the, guess taxpayer Can last within then that's years I today? me, that will be in NOLs XX-K, become delayed? ago was a this to years, that's been would but I the from the trajectory the you know few been strategic those several Okay, do Brookdale on stand cash you,

Steve Swain

we three of about over period needing periods, these NOLs. to the, foresee planning On our multi-year don't planning use a years,

Jason Plagman

And the level year? of just of from absolute to NOLs year, the then as of end

Steve Swain

$X billion. little $X It's over little billion. It's over

Jason Plagman

That's thanks. it from Okay, me.

Operator

you so much. Thank

next question Stifel. line of from of Vanacore Chad comes Your the

now line open. is Your

Chad Vanacore

all. Hey, morning, good

Cindy Baier

you, How Chad? are

Chad Vanacore

Cindy. you, Thank

comparing a occupancy your portfolio, improvement looking saw from you at sequential in quarter. then, But and to occupancy. assets lease owned that declines in that have a sequential Just the last managed

terminations was leased primarily related by there? shedding was still low HCP you've So portfolio, overall? else some assets, to something is that there going that lease improved occupancy on Or

Cindy Baier

communities. leased does something with relates economic around to do portfolio the to HCP have the condition primarily really it, it So, essentially the but competitive

Chad Vanacore

All right.

in competition? lighting you're a communities, some seeing actually So those of of

Cindy Baier

We well competitive you directors. around in There's an on if to you'll as had question in our activity. of that our sales occupancy the impact rate no was were see that, that turnover directors as So at our attributable elevated starts that saw look our retention presentation, investor communities. some QX, sales

we into got new good improve. XXXX, the sight so, around pipeline and supply analysis. end that communities industry's based news the supply our we've decreasing Brookdale's opens And And will of the near see is do pipeline proprietary line our on think of we that

Chad Vanacore

Okay.

effect think up what's question one And busy XXXX dispositions, adjusted is say another? one How XXX of year dispositions or is or guidance? And restructuring, communities. more ancillary way mentioned you you assumed a roughly guidance I of timeline. How terms reasonable had much much is so. that in in guidance is, you then then X% So,

Cindy Baier

with start So, then can me big picture, kind jump in. the of and Steve let

included have to Ventas at In I with had Welltower our we we look assets XX slightly year, prune and our As that portfolio those in agreements the last restructuring, both ability are the certainly held-for-sale. assets portfolios.

set to are We Ventas those. in would they coming given time year and market assets we the the have of that and the to reached working half the likely on an initial back transition. of That's like marketing do marketing

don't changes management agreement the interim exit I our of massive structures. in see then other portfolio So

year first the until to we new when the terminated leases that expect year, want last then landlords took could the happen anything to As would that? add a we Steve, in more management find that's to communities you and you over operator of do half of something the the second. know, we

Steve Swain

to fair relatively you down our page column a company. XX, and it also the that's P&L, Cindy. C. although EBITDA, the And revenue for so The, see impact. has is held-for-sale, That's that the total on on it's When on minimis amount de EBITDA can you right, number assets impact get of our

Operator

much. so you Thank

question next Nephron Your comes Josh from of Research. the Raskin line of

is line Your now open.

Josh Raskin

guess alternatives that this And that. through obviously years morning. question with sound it the external the Good of of that's really it a now, our over is, stuff, and nothing advisors last value sell couple the like whole analysis actually came attempting we've and strategy. enhancing PropCo/OpCo was all sort gone of strategic Thanks. doesn't to I sounds like there

XXXX? can't here, and to some at going I'm same-store was be I of feel a up sense in what just still one I actually G&A has that's be And I case. it I controls. missing sort investments so, guess, imagine I a to point. because it. urgency There don't the on hearing about this offsetting basis get comes initiatives, curious of think factor. thing am what And and I We're I bonuses operations just, down to on So really don't cost

little thinking to come? maybe bit So a and about investments these you and the G&A how on are payoff guys the starts when

Cindy Baier

me let Josh, start. So

on So, cost we very focused are control.

in behind Let we reduction with of at we million that's and me $XX G&A end the We to first, adjustments our the and the G&A force start of made plan in G&A get year. cut But another that XXXX compensation of XXXX. largely bonus which is a pay not people us will important based did sort bonuses to XXXX. package fully in includes benefit recognize compensation, have that a it and those

performance. that and we make for sure expectations We to we're want paying high have

in when a our full budget we we So are for guidance. into XXXX, baking bonus

a not our deliver down will pay don't will G&A come numbers, our because we if bonus. Now we

cut remember second a you certain high is, run need the thing and occupancy have think to about step a very When the function. a need communities, structure communities you you our cost costs. a our in that's community, to below level, fixed investments shrink that that Now can't you

community XXxX. You still need to operate your

to meals and three your you in dining room. staff, a You to have still still need day nursing serve need

occupants, our million And the so, million we improved on adjusted sure flow communities, not from you the deal to place we will, revenue we which both and and we is, when cash free improvement to occupancy $XX EBITDA associates that One and serve a may have occupancy. have in in we free contract our focused making improvement there's because adjusted both costs, EBITDA improvement If that turnover, we we why improve are our we residents because on roughly people much when That's with a cannot so go the we To community. putting extent plan drive competition adjusted adjusted too and in have faster our thing right that to we're we and then and labor around competition than have and flow. to have rate have in three overtime cash to to able very the staff to the realize that's a meals without $XX on staff. nurse day. leave

around to growth the of has So and but hurt because turn occupancy our business, on believe me, under to focused invest the we're control, cost we have business. our investment hurt profile

Josh Raskin

business the ratios, I Now of and fixed cost certainly understand etcetera. staffing idea

the that it it, second you of We're commentary around industrywide. competition. around kind is trend said kind of question some a but the certainly hearing slightly some guess now into REITs better I So that. I wouldn't appreciate leads have have inflections the calling some healthcare a which mine, of results potential, seeing well made of are in call market, I yet,

as to from I relative do your so specific to lag? why to of markets hearing mix other understand in and there relative are industry, et is we're the Why REITs?. cetera. the of think the still factors some competition So, the Brookdale AO/IL you a But seeing pervasive what more larger

Cindy Baier

saying. environment. competitive what absolutely improving me I about saying, let by are They're REITs agree start So an the with right

If you even in important concentration over look we business, quarter, by occupied XX% manage, owned improvement. care a note our AL It's that and the fourth that's as at results living we our communities our were to that leased. consolidated an independent sequential and our reflected year-over-year a improvement managed of are communities, Including the memory then well all higher as

market, So in a primary lot seeing what still the of competition. there's is, we're

result of results are we improved markets Our seeing and a as that. secondary are improving

laid look make quite to well. compete you So why we're so the we And we out by to that believe that making and that, the comparable, confident on at that effectively. we're need path if we the doing continuing is investments

going are to shareholders. We drive our value for

Josh Raskin

what more just the sort then for me one long-term And of of put Got plan. and risk it. Are interesting And about of you a apologize very of hasn't not for you're move kind it of estate, third question seniors. and questions. off I senior a my to of taking I with that different that's happening together used We to of of got and obviously, opinion that's announcement the sort it, ancillary But of sort or Are thinking medical guys positive more doing your you from couple healthcare saw And guys services opportunities. Again, advantage this ultimate topic, have set housing providers opportunities payments coming thinking got sort this kind company together me. company, are that opportunities dramatic selling bundle well. in real advantage. audience services now types about you business, be take in big been ancillary? captive guess you're the to you

Cindy Baier

absolutely. Absolutely,

first I So in that where if thing of we do get have what right to said we is go back a XXXX, the to existing February to to you portfolio have to our win.

opportunity we It's for States. and to sort our whether do Medicare need that partner it's the those have United a services we communities third-party. own to plan improve in we residents the on whether a residents us, services in our one or traction additional of with gaining and and deliver communities. Advantage to then We those products operation in potential have is the

see XXXX, we business us can you'll see the about long-term to value go incremental profit, So as and through shareholders. cash add things vocal our drive that our us more to be you to flow

Operator

much. so you Thank

line of of Bank the America. from comes question next Gajuk Joanna Your of

line now open. Your is

Joanna Gajuk

Thanks question. morning. for so the taking Good much

here questions the on two So rate. CapEx

REIT I million $XXX net of that's the mean that's Correct? funding. of the So net,

Cindy Baier

That is correct. Joanna. you, Thank

Joanna Gajuk

to essentially I received, the $XXX million is plan you the then And fund, correct? use the guess profits you that already

Cindy Baier

that $XXX I to for is CapEx a cash are investments that operate our effectively. will fair of the So we're the fungible million cash view say that necessary making but under it's communities critically to portion fund comes that balance.

Joanna Gajuk

of million CapEx to in I'm come level way And sort the million I versus then kind $XX mean, about expect of the down XX for enough. 'XX thinking XXXX? so the "XX is increased we should ' Right. it, $XXX

Cindy Baier

XXXX Joanna. be we do will So high that's We XXXX, down think XXXX. XXXX of be that, XXXX. but XXXX not a watermark, XXXX an the good or increase will between less a come question, than see We will from sort and think

between XXXX as and it think of come and XXXX will So in. think XXXX that's we where

Joanna Gajuk

way. talk line glean investments makes these labor the after for, us sense. what's into about Okay, underlying in to X% And for of Or item these think making guidance you're is what to the that I inflation it in growth costs was up mean, run that outlook of this the X%. exclude what's kind kind there? understand 'XX actually labor other the way costs markets, a about that even incremental grow rate included I it investments, in X.X% your i.e. the if there you to is to then there? item

Cindy Baier

really is think that are fair inflation is much components there we resident course, that And some and a I wage some got X% X.X%to going So, day. markets that benefits. got some some that got that something the it's at We've better then of are say rate, you've are not increases, to wage markets have different. lower. into that our that labor for is that's are normal to than and terribly few wage higher And that we've look

Joanna Gajuk

on last I right. the the Healthcare services Ancillary question may All or Services If squeeze segment. the

But mix, in right margins XXXX? I changes you change? in and reimbursement ahead Home obviously But beyond? business we about for be of pressure do given in them. you. Health already think going guess and were the XXXX margins the the you do Or investments some to Thank would PDGM the think to it you XXXX. to you're there's even should So you incremental already think making with So that, have like how some margins made weak sounds

Cindy Baier

services is good news the ratios, relates to that with we're our level that we line focus the changes industry in for that, where nursing and still business to in is XXXX provide. the the with as XXXX, in therapy made we to have it of So we

consistent. keep an have new so, that model, a on look revenue, but expect by dollars reduce at so you to cost And we there's we margin will amount, no as similar payment our impact question

to that. that at see to continue And and from so effectively on adjust capitalize compete you'll come us business our how to look the opportunities

Operator

Frank of your Thank question from much. line Morgan And you so RBC. next the comes of

open. is line now Your

Anton Hie

Lot on have mine Hey, least wanted here. addressed, Antoine on get for of Frank at back to and Hie but bit been a come clarification it's items of I two

throughout But into Just to of of is quarterly improved you that throughout occupancy improving construction that on you improving or we help to cadence some will you normal the the year. be slowdown back built assumptions sort occupancy Is of maybe XXXX. mentioned the throughout referencing occupancy as the of, deliveries that that see hoping as Could you just square the guidance think environment these EBITDA the that could, year? down just similar that up some the suggesting progression year.

Steve Swain

couple question. Yes. in we assumptions seen XXXX The of we've years. Thanks forecast trends year follow your that over the past assumed for the occupancy the

So first then the and grows pressure the some the of year. rest quarter throughout in

So that a to go better as year. would EBITDA you lead throughout you the

X, had residents. Just remember January that when in our quarter the our is for we first rate in-place increase

there. So that will be a tailwind

Cindy Baier

in. a forward. think rate bit fair say little little throughout a were it as the of the goes in mark-to-market pulled you is deteriorate how affects result January did and bit because see But of We of normally, But residents you increases as that we the about you the that of our Xst coming there's year to rate that QX increases year. in positive then do the sort a rest new year, during rate

Anton Hie

rate those pulling to reception increases forward the bit? is How a

Cindy Baier

every much do pretty We it year.

we and most in rate larger be increases. seen that increase with an We of thing protect were sustain Now that we year's they rate the will higher good the believe normal rate. difference haven't very that happy a if we as really this that normal than result the to important rate, we and than drive increases attraction value able resident to were were so

to understand their people that Now, right the our have pay get pay like we that communities staffing had the residents have I more. in right actually associates. We've think to to residents and

received residents rationale very the our a increase the onto executive as why And and the rate communicate leader, And it explain to all necessary because of you company directors they program are comprehensive was think. with that's to why so to are as rate for to would we And and and explain industry's for well train tend expect, increase, the rate reasons well, large for as understand. I they we do. as about how increase as, us we happened had a we the

Anton Hie

Okay. another And everybody rate. of that's if kind of 'XX then, obviously sort offering with top run for the rebuilding Steve, EBITDA will. mind year of you mean being I

the the we of with jumping-off start but ish XX kind I the annualized. of fourth $XXX add one-time Is a to But back sort from stepping adjustment XXX there? million quarter unconsolidated is a then grow point So, think million unreasonable into forma we from like, the am I once rate right, is this we add reasonable run accounting kind of lease from to and in back think ventures. issue XXXX pro

Steve Swain

our of when And million and ends top guidance the above you $XXX when million add are both ranges. top that's you the our add, the the and consolidated of JV $XX

Cindy Baier

the that happen in say hit to fair it's $XX so will million that will in XXXX. But only not XXXX, recur

as to appropriate add about like? it's think model what your that looks to So you XXXX

Steve Swain

beyond. XXXX and Correct.

Anton Hie

in earlier. communities construction Okay, you're one But you considerably, about some touched bit one, kind of or what and this of slowing seeing great. markets seeing Thank there? you. you're the a could you final talk And little where then are on deliveries secondary your in what stopping

Cindy Baier

improving primary we the of presentation, are kind relative and to some page of a slide in XX, markets trends in shows markets. secondary we have that the see markets and the secondary occupancy our can investor the You that

can So you dig that's something into in detail. great

Anton Hie

you. thank Okay,

Cindy Baier

very Thank much. you

Operator

your And from line comes of next of the Hambly Thank Stephens. you. question Dana

open. now is line Your

Dana Hambly

talked converting to a start more to bit. more pay move-ins quarter pay leads were your But Hi, year where first start XXXX you on becoming about you going more, leads up is you of year down little there? move-ins? fourth more think good the on a attention. learn XXXX efficient of a a With be morning. on in becoming the looking to just to focus discovery Or efficient slides, more at little I visits Cindy, big the and this move-ins about stable, one being bit,

Cindy Baier

competition and that think we to had lot in in at got bit. lead sales how in terms also It's decline more convert of a and right large grow, aggregator aggregators from our a turnover say of we we move-ins. we've the a flow directors learnings due quarter, to tend from very suffered fourth XXXX that from our the strategy much our to I And fair happy grow lower albeit quickly, saw rate. large our to we're

fourth quarter. so our move-ins the affected that And in

to I that sales, is under Now, about Mary the think think Sales team realignment excited Sue will critically Patchett. I'm But sales report I important. is of is what our amazing execution. really which operations at still

at year So now proficient. for a it we've associates strategy right them execution, because sales know we associates, sales and got while coaching we will the our mentoring that our first additional add come to takes new

and But at additional about their bit leading. each corporate best. prescriptive that, little get a we're adding care our more training, industry Brookdale of can local types. product is certification We've been you we're on the So little more they the add it memory the from of they that value community bit focus additional why how also right. why so is can To support a support of having folks different local a adding sell

We of scale have anyone that because Why better else. offers. Brookdale better the other than and than is size AL programs competitors,

in with to move-ins pretty going excited do we're about So XXXX. what we're

Dana Hambly

then, that the fourth Cindy move with aggregator? experimented Is quarter? or mentioned in Okay. And is you permanent you something a the that

Cindy Baier

as move from the much Brookdale a that we aggregator. wasn't as saw the it come It was, by in leads

private So company. it's

those were aggregate. know to anyone leads, residents. happy All we got And they Brookdale we've we we make share you than convert Brookdale more So expect, plan sure sent faster action as leads. our an that we lower. than make are and we once And fair that get know new getting what they we of in is leads else them would saw the don't the necessarily that

Dana Hambly

there that lower or on technology the of I about a Okay. shareholder enhance there on light one that secret? value is or was, there top that know, And any you note experience on is your was pages investments don't can shed and then that would in creation, costs? think I resident the

Steve Swain

it secret, sure that could monitoring to It's be help but enough. to not trips continually just and have to, technology monitoring WiFi necessarily and they from follows monitoring to we at look top to residents use our anything that our slips, making is our robust ways

So they and loved friends their family and ones. communicate can with

Cindy Baier

of excited and electronic about residency really things we've working time been our add, that on our quite well. Let of tested the this is for one agreement. rollout going We've me it I'm in also the some some communities now of

pain the Our that bills, that in first making electronically bill of data new the sure complicated point are will it's resident agreement they us the to because quality allowing residency satisfaction capture that residents a by and by as signs improving resident it's improve industry right.

doing customer we're what to sure make we're residents of example one that just and improving focused that's our on So delighting really our service.

Dana Hambly

that now? Yeah. Is that roll to out rolled out or you're just starting

Cindy Baier

have during are rollout working and on plans pilot The successful XXXX. been we

the and into it very as can getting hard team the aggressive they to about be communities. pushing I'm are going as So our

Dana Hambly

CapEx have from how level. a know color you All do XXXX I obviously lot about questions CapEx But I a the appreciate longer the an term, Last me, Okay. just maintenance idea XXXX. right. or and of think all there, on with so community on CapEx per unit just

it $XXXX to in longer of think XXXX, XXXX next the couple obviously what's years. number the right runs around But think I up term, about? and bumping

Cindy Baier

Yeah.

to about that. likely XXXX. that we want I we're granular I of in much below what above that previously, think sort but more $XXXX it's get than spending talked

with what can you out additional as a come on information that's time will definitely passes. But expect. thumbnail We

Dana Hambly

you much. very helpful. That's Thank right. All

Cindy Baier

Thank you much. so

Operator

you the Cindy over you. remarks. closing it's Thank And to

Cindy Baier

with our of with execution and line the range. in year plan one results in in now posted the are We our we're pleased guidance turnaround

were improvements we and our the demand. on business we to signs along continued make reflect this seen made have our have for we to strategy. affirms belief and in our As Everything that with supply in point improvement that in

few and our and are portfolio last Over starting success. great and the on year, focused operational a on restructure key to to our optimize team show made leases initiatives they we progress we

our As by controllable experience. evidenced move-outs

for very of sales initiatives to operational confident progress only will our our are XXXX and the that We help further turnaround.

excited and also an demographic few to will supply and only improve within increase and are year the the we that are the will play the about tailwinds both within We continue evidence healthcare. spending Health next that will over years. tremendous seeing demand equation next care we role is coming important senior housing

well you plan the believe for win this ends combination the industry-leading of With will that value our create Operator, we locally approaching. silver our call. and to to be leverage drive operating position, firmly We significant our wave that us the joining Thank for shareholders. morning. and positioned

Operator

a Have day. presenters. much great so you Thank

Brookdale Senior Living (BKD) 16 Feb 192018 Q4 Earnings call transcript