NASHVILLE, Tenn., Aug. 8, 2024 /PRNewswire/ — Brookdale Senior Living Inc. (NYSE: BKD) (“Brookdale” or the “Company”) announced results for the quarter ended June 30, 2024.
RevPAR, or average monthly senior housing resident fee revenue per available unit, is defined by the Company as resident fee revenue for the corresponding portfolio for the period (excluding revenue for private duty services provided to seniors living outside of the Company’s communities and entrance fee amortization), divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period.
RevPOR, or average monthly senior housing resident fee revenue per occupied unit, is defined by the Company as resident fee revenue for the corresponding portfolio for the period (excluding revenue for private duty services provided to seniors living outside of the Company’s communities and entrance fee amortization), divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period.
SAFE HARBOR
Certain statements in this press release and the associated earnings call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding the Company’s intent, belief, or expectations. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “could,” “would,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “believe,” “project,” “predict,” “continue,” “plan,” “target,” or other similar words or expressions, and include statements regarding the Company’s expected financial and operational results. These forward-looking statements are based on certain assumptions and expectations, and the Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although the Company believes that expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its assumptions or expectations will be attained and actual results and performance could differ materially from those projected. Factors which could have a material adverse effect on the Company’s operations and future prospects or which could cause events or circumstances to differ from the forward-looking statements include, but are not limited to, events which adversely affect the ability of seniors to afford resident fees, including downturns in the economy, housing market, consumer confidence, or the equity markets and unemployment among resident family members; changes in reimbursement rates, methods, or timing under governmental reimbursement programs including the Medicare and Medicaid programs; the effects of senior housing construction and development, lower industry occupancy, and increased competition; conditions of housing markets, regulatory changes, acts of nature, and the effects of climate change in geographic areas where the Company is concentrated; terminations of the Company’s resident agreements and vacancies in the living spaces it leases; failure to maintain the security and functionality of the Company’s information systems, to prevent a cybersecurity attack or breach, or to comply with applicable privacy and consumer protection laws, including HIPAA; the Company’s ability to complete its capital expenditures in accordance with its plans; the Company’s ability to identify and pursue development, investment, and acquisition opportunities and its ability to successfully integrate acquisitions; competition for the acquisition of assets; the Company’s ability to complete pending or expected disposition, acquisition, or other transactions on agreed upon terms or at all, including in respect of the satisfaction of closing conditions, the risk that regulatory approvals are not obtained or are subject to unanticipated conditions, and uncertainties as to the timing of closing, and the Company’s ability to identify and pursue any such opportunities in the future; risks related to the implementation of the Company’s strategy, including initiatives undertaken to execute on the Company’s strategic priorities and their effect on its results; the impacts of the COVID-19 pandemic, including on the nation’s economy and debt and equity markets and the local economies in our markets, and on us and our business, results of operations, cash flow, revenue, expenses, liquidity, and our strategic initiatives, including plans for future growth, which will depend on many factors, some of which cannot be foreseen, including the pace and consistency of recovery from the pandemic and any resurgence or variants of the disease; limits on the Company’s ability to use net operating loss carryovers to reduce future tax payments; delays in obtaining regulatory approvals; disruptions in the financial markets or decreases in the appraised values or performance of the Company’s communities that affect the Company’s ability to obtain financing or extend or refinance debt as it matures and the Company’s financing costs; the Company’s ability to generate sufficient cash flow to cover required interest, principal, and long-term lease payments and to fund its planned capital projects; the effect of any non-compliance with any of the Company’s debt or lease agreements (including the financial or other covenants contained therein), including the risk of lenders or lessors declaring a cross default in the event of the Company’s non-compliance with any such agreements and the risk of loss of the Company’s property securing leases and indebtedness due to any resulting lease terminations and foreclosure actions; the inability to renew, restructure, or extend leases, or exercise purchase options at or prior to the end of any existing lease term; the effect of the Company’s indebtedness and long-term leases on the Company’s liquidity and its ability to operate its business; increases in market interest rates that increase the costs of the Company’s debt obligations; the Company’s ability to obtain additional capital on terms acceptable to it; departures of key officers and potential disruption caused by changes in management; increased competition for, or a shortage of, associates (including due to general labor market conditions), wage pressures resulting from increased competition, low unemployment levels, minimum wage increases and changes in overtime laws, and union activity; environmental contamination at any of the Company’s communities; failure to comply with existing environmental laws; an adverse determination or resolution of complaints filed against the Company, including putative class action complaints, and the frequency and magnitude of legal actions and liability claims that may arise due to COVID-19 or the Company’s response efforts; negative publicity with respect to any lawsuits, claims, or other legal or regulatory proceedings; costs to respond to, and adverse determinations resulting from, government inquiries, reviews, audits, and investigations; the cost and difficulty of complying with increasing and evolving regulation, including new disclosure obligations; changes in, or its failure to comply with, employment-related laws and regulations; the risks associated with current global economic conditions and general economic factors on the Company and the Company’s business partners such as inflation, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits, and insurance, interest rates, tax rates, geopolitical tensions or conflicts, and uncertainty surrounding federal elections; the impact of seasonal contagious illness or an outbreak of COVID-19 or other contagious disease in the markets in which the Company operates; actions of activist stockholders, including a proxy contest; as well as other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission, including those set forth in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in such SEC filings. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect management’s views as of the date of this press release and/or associated earnings call. The Company cannot guarantee future results, levels of activity, performance or achievements, and, except as required by law, it expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained in this press release and/or associated earnings call to reflect any change in the Company’s expectations with regard thereto or change in events, conditions, or circumstances on which any statement is based.
Condensed Consolidated Statements of Operations
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except per share data)
2024
2023
2024
2023
Resident fees
$ 739,709
$ 710,161
$ 1,483,950
$ 1,423,565
Management fees
2,616
2,510
5,234
5,087
Reimbursed costs incurred on behalf of managed communities
35,216
33,999
71,188
68,953
Other operating income
—
4,122
—
6,450
Total revenue and other operating income
777,541
750,792
1,560,372
1,504,055
Facility operating expense (excluding facility depreciation and
amortization of $81,706, $77,846, $161,610, and $157,163,
respectively)
537,507
531,118
1,080,057
1,061,925
General and administrative expense (including non-cash stock-
based compensation expense of $3,975, $2,969, $7,248, and
$6,073, respectively)
46,664
45,326
92,396
93,945
Facility operating lease expense
50,964
50,512
102,460
96,639
Depreciation and amortization
88,028
84,448
174,155
169,382
Asset impairment
—
520
1,708
520
Loss (gain) on sale of communities, net
—
(36,296)
—
(36,296)
Costs incurred on behalf of managed communities
35,216
33,999
71,188
68,953
Income (loss) from operations
19,162
41,165
38,408
48,987
Interest income
4,714
6,115
9,492
11,441
Interest expense:
Debt
(53,778)
(52,256)
(107,234)
(102,571)
Financing lease obligations
(5,110)
(5,453)
(10,171)
(12,005)
Amortization of deferred financing costs
(2,334)
(1,899)
(4,591)
(3,839)
Change in fair value of derivatives
(345)
5,173
2,742
4,269
Equity in earnings (loss) of unconsolidated ventures
—
(1,153)
—
(1,730)
Non-operating gain (loss) on sale of assets, net
199
860
903
860
Other non-operating income (loss)
199
3,197
3,537
6,346
Income (loss) before income taxes
(37,293)
(4,251)
(66,914)
(48,242)
Benefit (provision) for income taxes
(449)
(275)
(409)
(847)
Net income (loss)
(37,742)
(4,526)
(67,323)
(49,089)
Net (income) loss attributable to noncontrolling interest
15
16
30
30
Net income (loss) attributable to Brookdale Senior Living Inc.
common stockholders
$ (37,727)
$ (4,510)
$ (67,293)
$ (49,059)
Basic and diluted net income (loss) per share attributable to
Brookdale Senior Living Inc. common stockholders
$ (0.17)
$ (0.02)
$ (0.30)
$ (0.22)
Weighted average shares used in computing basic and diluted
net income (loss) per share
226,789
225,404
226,340
224,994
Condensed Consolidated Balance Sheets
(in thousands)
June 30, 2024
December 31, 2023
Cash and cash equivalents
$ 290,018
$ 277,971
Marketable securities
19,727
29,755
Restricted cash
43,959
41,341
Accounts receivable, net
49,782
48,393
Prepaid expenses and other current assets, net
89,343
80,908
Total current assets
492,829
478,368
Property, plant and equipment and leasehold intangibles, net
4,256,490
4,330,629
Operating lease right-of-use assets
603,816
670,907
Other assets, net
97,751
93,531
Total assets
$ 5,450,886
$ 5,573,435
Current portion of long-term debt
$ 60,939
$ 41,463
Current portion of financing lease obligations
1,123
1,075
Current portion of operating lease obligations
199,226
192,631
Other current liabilities
360,797
364,947
Total current liabilities
622,085
600,116
Long-term debt, less current portion
3,679,102
3,655,850
Financing lease obligations, less current portion
150,240
150,774
Operating lease obligations, less current portion
584,556
683,876
Other liabilities
73,230
77,666
Total liabilities
5,109,213
5,168,282
Total Brookdale Senior Living Inc. stockholders’ equity
340,214
403,664
Noncontrolling interest
1,459
1,489
Total equity
341,673
405,153
Total liabilities and equity
$ 5,450,886
$ 5,573,435
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30,
(in thousands)
2024
2023
Cash Flows from Operating Activities
Net income (loss)
$ (67,323)
$ (49,089)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
Depreciation and amortization, net
178,746
173,221
Asset impairment
1,708
520
Equity in (earnings) loss of unconsolidated ventures
—
1,730
Distributions from unconsolidated ventures from cumulative share of net earnings
—
430
Amortization of entrance fees
—
(732)
Proceeds from deferred entrance fee revenue
—
477
Deferred income tax (benefit) provision
(360)
188
Operating lease expense adjustment
(26,572)
(22,362)
Change in fair value of derivatives
(2,742)
(4,269)
Loss (gain) on sale of assets, net
(903)
(37,156)
Non-cash stock-based compensation expense
7,248
6,073
Property and casualty insurance income
(2,688)
(3,927)
Other non-operating (income) loss
—
(2,542)
Changes in operating assets and liabilities:
Accounts receivable, net
(1,390)
7,550
Prepaid expenses and other assets, net
(855)
11,711
Prepaid insurance premiums financed with notes payable
(15,702)
(13,004)
Trade accounts payable and accrued expenses
(14,380)
3,782
Refundable fees and deferred revenue
(1,563)
13,021
Operating lease assets and liabilities for lessor capital expenditure reimbursements
1,300
2,244
Net cash provided by (used in) operating activities
54,524
87,866
Cash Flows from Investing Activities
Purchase of marketable securities
(19,591)
(110,754)
Sale and maturities of marketable securities
30,000
65,100
Capital expenditures, net of related payables
(95,973)
(109,825)
Acquisition of assets, net of cash acquired
—
(574)
Proceeds from sale of assets, net
7,017
43,059
Property and casualty insurance proceeds
2,704
8,789
Purchase of interest rate cap instruments
(8,513)
(3,019)
Proceeds from interest rate cap instruments
9,129
3,423
Other
(176)
(109)
Net cash provided by (used in) investing activities
(75,403)
(103,910)
Cash Flows from Financing Activities
Proceeds from debt
81,271
25,532
Repayment of debt and financing lease obligations
(41,077)
(72,917)
Payment of financing costs, net of related payables
(3,074)
(676)
Payments of employee taxes for withheld shares
(3,405)
(1,861)
Net cash provided by (used in) financing activities
33,715
(49,922)
Net increase (decrease) in cash, cash equivalents, and restricted cash
12,836
(65,966)
Cash, cash equivalents, and restricted cash at beginning of period
349,668
474,548
Cash, cash equivalents, and restricted cash at end of period
$ 362,504
$ 408,582
Non-GAAP Financial Measures
This earnings release contains the financial measures Adjusted EBITDA and Adjusted Free Cash Flow, which are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). Presentations of these non-GAAP financial measures are intended to aid investors in better understanding the factors and trends affecting the Company’s performance and liquidity. However, investors should not consider these non-GAAP financial measures as a substitute for financial measures determined in accordance with GAAP, including net income (loss), income (loss) from operations, or net cash provided by (used in) operating activities. The Company cautions investors that amounts presented in accordance with the Company’s definitions of these non-GAAP financial measures may not be comparable to similar measures disclosed by other companies because not all companies calculate non-GAAP measures in the same manner. The Company urges investors to review the following reconciliations of these non-GAAP financial measures from the most comparable financial measures determined in accordance with GAAP.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP performance measure that the Company defines as net income (loss) excluding: benefit/provision for income taxes, non-operating income/expense items, and depreciation and amortization; and further adjusted to exclude income/expense associated with non-cash, non-operational, transactional, cost reduction, or organizational restructuring items that management does not consider as part of the Company’s underlying core operating performance and that management believes impact the comparability of performance between periods. For the periods presented herein, such other items include non-cash impairment charges, operating lease expense adjustment, non-cash stock-based compensation expense, and transaction and organizational restructuring costs. Transaction costs include those directly related to acquisition, disposition, financing, and leasing activity, and are primarily comprised of legal, finance, consulting, professional fees, and other third-party costs. Organizational restructuring costs include those related to the Company’s efforts to reduce general and administrative expense and its senior leadership changes, including severance.
The Company believes that presentation of Adjusted EBITDA as a performance measure is useful to investors because (i) it is one of the metrics used by the Company’s management for budgeting and other planning purposes, to review the Company’s historic and prospective core operating performance, and to make day-to-day operating decisions; (ii) it provides an assessment of operational factors that management can impact in the short-term, namely revenues and the controllable cost structure of the organization, by eliminating items related to the Company’s financing and capital structure and other items that management does not consider as part of the Company’s underlying core operating performance and that management believes impact the comparability of performance between periods; (iii) the Company believes that this measure is used by research analysts and investors to evaluate the Company’s operating results and to value companies in its industry; and (iv) the Company uses the measure for components of executive compensation.
Adjusted EBITDA has material limitations as a performance measure, including: (i) excluded interest and income tax are necessary to operate the Company’s business under its current financing and capital structure; (ii) excluded depreciation, amortization, and impairment charges may represent the wear and tear and/or reduction in value of the Company’s communities, goodwill, and other assets and may be indicative of future needs for capital expenditures; and (iii) the Company may incur income/expense similar to those for which adjustments are made, such as gain/loss on sale of assets, facility operating lease termination, or debt modification and extinguishment, non-cash stock-based compensation expense, and transaction and other costs, and such income/expense may significantly affect the Company’s operating results.
The table below reconciles Adjusted EBITDA from net income (loss).
Three Months Ended
(in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
Net income (loss)
$ (37,742)
$ (29,581)
$ (4,526)
Provision (benefit) for income taxes
449
(40)
275
Equity in (earnings) loss of unconsolidated ventures
—
—
1,153
Non-operating loss (gain) on sale of assets, net
(199)
(704)
(860)
Other non-operating (income) loss
(199)
(3,338)
(3,197)
Interest expense
61,567
57,687
54,435
Interest income
(4,714)
(4,778)
(6,115)
Income (loss) from operations
19,162
19,246
41,165
Depreciation and amortization
88,028
86,127
84,448
Asset impairment
—
1,708
520
Loss (gain) on sale of communities, net
—
—
(36,296)
Operating lease expense adjustment
(13,483)
(13,089)
(11,557)
Non-cash stock-based compensation expense
3,975
3,273
2,969
Transaction and organizational restructuring costs
134
351
123
Adjusted EBITDA
$ 97,816
$ 97,616
$ 81,372
Adjusted Free Cash Flow
Adjusted Free Cash Flow is a non-GAAP liquidity measure that the Company defines as net cash provided by (used in) operating activities before: distributions from unconsolidated ventures from cumulative share of net earnings, changes in prepaid insurance premiums financed with notes payable, changes in operating lease assets and liabilities for lease termination, cash paid/received for gain/loss on facility operating lease termination, and lessor capital expenditure reimbursements under operating leases; plus: property and casualty insurance proceeds and proceeds from refundable entrance fees, net of refunds; less: non-development capital expenditures and payment of financing lease obligations. Non-development capital expenditures are comprised of corporate and community-level capital expenditures, including those related to maintenance, renovations, upgrades, and other major building infrastructure projects for the Company’s communities and is presented net of lessor reimbursements. Non-development capital expenditures do not include capital expenditures for: community expansions, major community redevelopment and repositioning projects, and the development of new communities.
The Company believes that presentation of Adjusted Free Cash Flow as a liquidity measure is useful to investors because (i) it is one of the metrics used by the Company’s management for budgeting and other planning purposes, to review the Company’s historic and prospective sources of operating liquidity, and to review the Company’s ability to service its outstanding indebtedness, pay dividends to stockholders, engage in share repurchases, and make capital expenditures, including development capital expenditures; and (ii) it provides an indicator to management to determine if adjustments to current spending decisions are needed.
Adjusted Free Cash Flow has material limitations as a liquidity measure, including: (i) it does not represent cash available for dividends, share repurchases, or discretionary expenditures since certain non-discretionary expenditures, including mandatory debt principal payments, are not reflected in this measure; (ii) the cash portion of non-recurring charges related to gain/loss on facility lease termination generally represent charges/gains that may significantly affect the Company’s liquidity; and (iii) the impact of timing of cash expenditures, including the timing of non-development capital expenditures, limits the usefulness of the measure for short-term comparisons.
The table below reconciles Adjusted Free Cash Flow from net cash provided by (used in) operating activities.
Three Months Ended
(in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
Net cash provided by (used in) operating activities
$ 55,670
$ (1,146)
$ 63,824
Net cash provided by (used in) investing activities
(68,457)
(6,946)
(41,891)
Net cash provided by (used in) financing activities
(20,375)
54,090
(50,093)
Net increase (decrease) in cash, cash equivalents,
and restricted cash
$ (33,162)
$ 45,998
$ (28,160)
Net cash provided by (used in) operating activities
$ 55,670
$ (1,146)
$ 63,824
Distributions from unconsolidated ventures from
cumulative share of net earnings
—
—
(430)
Changes in prepaid insurance premiums financed with
notes payable
(7,617)
23,319
(6,301)
Changes in assets and liabilities for lessor capital
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