Brookdale Senior Living Inc. Q2 FY2021 Earnings Call

Good morning. This is Kathy MacDonald. I’m very sorry for the technical delay. Thank you for joining us. And welcome to the Second Quarter 2021 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. All statements today, which are not historical facts, 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. Actual results and performance may differ materially from forward-looking statements. Certain of the factors that could cause actual results to differ are detailed in the earnings release we issued yesterday as well as in the reports we file with the SEC from time to time, including the risk factors contained in our Annual Report on Form 10-K and quarterly reports on Form 10-Q. I direct you to the release for the full Safe Harbor statement. Also, please note that during this call, we will present our non-GAAP financial measures. For reconciliations of our non-GAAP measure from the most comparable GAAP measure, I direct you to the release and supplemental information, which may be found at brookdale.com/investor and was furnished on an 8-K yesterday. Now I will turn the call over to Cindy.

Thank you, Kathy. Good morning to all of our shareholders, analysts and other participants. I hope that you and those you care about are safe and sound. Welcome to our second quarter 2021 earnings call. The COVID-19 pandemic continues to demonstrate Brookdale’s versatility and resilience, and those attributes are proving critical as we continue to win the recovery and help save lives. As the economy reopens and our entire industry is in a lease-up mode, we are operating in an intense and dynamic environment. We will continue to build on and refine our plans to position Brookdale for long-term success. We’ve made great progress this year to capitalize on the opportunities. I am pleased to report that we have delivered five consecutive months of occupancy growth. The June month end occupancy showed a significant step up, which led to an even stronger July occupancy result. The work has been hard and has placed tremendous demands on our associates. The tenacity of our team members at the communities, together with the diligence of our regional and corporate associates, has helped protect the health and wellbeing of our residents throughout the pandemic and accelerated the COVID-19 vaccination process so that we can reopen our communities more quickly and with appropriate safety protocols. Thanks to our hard work, the initial phases of recovery occurred earlier than expected and we have been able to stay focused on achieving our growth objectives. As of July 1, we further strengthened our liquidity position by over $300 million when we completed the sale and smooth transition of our home health, hospice and outpatient therapy business to HCA Healthcare. We are pleased with this value-enhancing transaction and that high-quality healthcare services continue to be available to our residents. Brookdale’s residents will benefit from a seamless offering of services across a broad care continuum. The transaction represents the latest step in our ongoing efforts to drive meaningful shareholder value, significantly improving our liquidity, while positioning our core senior housing operation for sustained growth. At the beginning of the year, I introduced three growth pillars in our plan to put the pandemic behind us. The first pillar, our vaccine clinic strategy, is largely complete. I believe our success with hosting over 2,000 vaccine clinics in four months enabled us to accelerate opening our communities and our occupancy recovery. We remain diligent in helping protect our communities, residents, and associates, especially in light of the Delta variant. We continue to meet with the CDC, state and local health officials to help ensure we stay informed of new developments and best practices and implement effective protocols in support of the wellbeing of our residents and associates. Our ongoing efforts are a testament to our expertise and how helping people with the challenges of aging is one of our core strengths. The second pillar was to sharpen our business edge through sales transformation. As part of our "win locally" strategy, we have refocused our attention on local outreach and engagement. In addition, during the second quarter, we strategically and opportunistically allocated marketing dollars to particular areas, which is delivering strong returns in our leads. Taken together, we believe this helped us achieve occupancy gains that outpaced the industry. We are pleased with the sequential improvement in leads as well as our ability to convert leads to move-ins, particularly in assisted living and memory care. The third strategic pillar we announced was to better capitalize on the higher concentration of our portfolio in assisted living and memory care. In addition, we wanted to better capitalize on our demonstrated leadership position for our residents and prospects. We are well-equipped to serve appropriate residents with complex medical conditions. We also have industry-leading customer satisfaction evidenced most recently by our J.D. Power Award for Assisted Living and Memory Care Communities for ranking highest in customer satisfaction. Our success with this pillar can be seen in our sequential occupancy growth in the assisted living and memory care segment, which is approximately 70% of our portfolio today. The outsized recovery in our memory care portfolio is particularly notable. The successful execution of these three strategies means that we are ideally positioned to benefit from the broader recovery. Let me turn to our financial highlights for the second quarter. The industry, as reported by NIC, shows that second quarter senior housing occupancy increased approximately 10 basis points on a sequential basis for stabilized portfolios. We are pleased Brookdale’s occupancy growth was significantly faster on a same community basis. During each month within the quarter, our move-ins accelerated. Of note, our same community June move-in volume was the strongest since August 2019. This is particularly positive and we typically see our strongest occupancy growth historically occurs in the third quarter. For the second quarter on a same community basis, our senior housing occupancy grew 90 basis points with assisted living and memory care occupancy increasing even faster at 110 basis points on a sequential basis. Sequentially, our independent living occupancy percentage was relatively flat for the quarter. We were pleased, however, to see occupancy turn positive in May and accelerate in June. I am proud that we were able to continue managing and maintaining overall rate discipline. While we’ve seen some competitors within the industry use significant discounts during this pandemic-related lease-up period, our dynamic pricing strategy is working. By focusing on both price discipline and occupancy growth, we believe we will achieve a better sustainable result. Turning to operating expenses. Senior housing expenses were slightly lower on a sequential basis. When you bifurcate the key elements of OpEx, the favorability was a reduction in COVID-19 related expenses that corresponded with a significant drop in cases in our communities. As expected, the expense increases were mainly labor related along with slightly higher incremental marketing investments. I want to address labor since our core Brookdale business depends on people taking care of people. While the general population is worn out from the challenges of the pandemic, those who have been vaccinated are returning to life’s normal routines. However, Brookdale’s everyday heroes remained on the frontline. Our community associates continue to incorporate enhanced protocols to help protect against COVID-19 since our industry helps protect the population that is most vulnerable to this virus due to age and chronic conditions. With the industry being in lease-up mode, I believe the largest current pressure on the industry is related to labor. We must ensure that the senior living industry continues to be an attractive place for associates to fulfill their purpose, earn competitive compensation and benefits, and grow professionally. With today’s intensely competitive environment, we increased our recruiting efforts to fill open positions and actively adjusted wages to remain competitive in the market. Our goal is to ensure that our communities continue to be staffed with full and part-time associates. When we have openings, however, we use contract labor and overtime, which can be expensive. While we feel this near-term pressure, we also believe the environment will improve. In states that ended the enhanced weekly unemployment payments, there has been a recent drop in unemployment claims. As more people return to the workforce and through our extensive internal effort, we expect that our labor costs will stabilize later this year. As we gain momentum, we are mapping a range of positive RevPAR growth trajectories. We will continue to issue monthly occupancy press releases so you can see our progress in a timely manner. The fierce competitive workforce environment will put near-term pressure on our margin, but we expect this will be transitory and then our margins will improve in 2022. At Brookdale, we provide clinically needed support to help manage the challenges of aging. And I strongly believe in the need for senior housing and care — more than one in four seniors are at risk for social isolation and the increased risk of dementia, stroke and heart disease that comes with it. Our communities help satisfy seniors’ desires for engagement, social and emotional wellbeing and we know the power of community. Brookdale is ready to meet seniors where they are, whenever they need us. We are the senior living provider of choice with the experience and expertise to help seniors thrive. With that, I’ll turn the call over to Steve.

Thank you, Cindy. There are three key takeaways related to our financial results. First, RevPAR growth improved on a sequential basis. We outpaced the industry in occupancy growth, while maintaining RevPAR. Occupancy inflected positive earlier in the year than we expected. This momentum is a good sign as we enter the third quarter, which historically delivers the strongest quarterly sequential occupancy growth. Consistent with our pricing strategy, we were able to maintain RevPAR on a sequential basis, while using targeted discounting in select competitive markets. Second, OpEx. With high resident vaccination rates and fewer COVID-19 cases in our communities versus the first quarter, we were able to significantly reduce COVID-19 costs, both on a year-over-year basis and on a sequential basis. As Cindy detailed, the intensely challenging labor environment largely offset this benefit. Third, liquidity. With the completion of the sale of our healthcare services segment on July 1, we have incrementally strengthened our liquidity position. Now let me provide some context for these highlights, starting with occupancy. This is the first time occupancy grew every month in the quarter since 2019. Second quarter weighted average occupancy was 70.4%, up 90 basis points from the first quarter on a same community basis. RevPAR, or rates, was 4.2% better on a year-over-year basis driven primarily by our annual price increase at the beginning of the year. On a sequential same community basis, we saw rates increase slightly. The annual increase and maintaining rate discipline through the year helps us cover some of the extraordinary costs related to the pandemic. Turning to operating expenses. On a same community basis, the second quarter senior housing operating expense improved 6.1% year-over-year and was slightly favorable sequentially. The primary driver of the favorability was a reduction of COVID-19 costs of approximately $45 million on a year-over-year basis and $17 million on a sequential basis. Excluding COVID-19 costs, labor expense increased sequentially, primarily due to the difficult labor environment as we used contract labor and overtime to mitigate open community positions along with seasonal increases from an extra workday and the annual merit increase. For other operating expenses, excluding COVID-19 costs, the sequential increases were due to higher insurance-related expenses along with incremental marketing investments to help win the recovery. Healthcare services operating results were included in the consolidated second quarter report. With the transaction completed on July 1, going forward the segment will be removed from consolidated results and the $306 million of net cash proceeds will be reported as net cash provided by investing activities. Turning to G&A, excluding transaction costs and non-cash stock-based comp, the second quarter increased both year-over-year and sequentially due to higher short-term incentive accruals as we gained occupancy earlier than we expected. G&A expense will be lower in the third quarter as we see the reduction in costs related to healthcare services associated with the transition from the sale of that business. Adjusted EBITDA for the second quarter was $33 million compared to $45 million for the prior year quarter. The impact of lower senior housing NOI due to the pandemic was significantly mitigated by the benefit of the negotiated cash rent reductions. This highlights both the need and benefit of last year’s win-win agreement with Ventas. Adjusted free cash flow was $168 million lower in the second quarter compared to the prior year period. The largest driver of the difference was due to the CARES Act. $146 million was related to the prior year quarter, when we received $85 million of Medicare Advanced Payments, accepted $34 million of Provider Relief Fund grants and benefited from $27 million of deferred payments under the payroll tax deferral program. In addition for the current quarter, there was a $14 million use of cash for the initial repayment to the Medicare Advanced Payments program. In the second quarter, non-development CapEx was $14 million higher than the prior year as we continue to make investments across our communities as planned. Turning to the third key highlight, liquidity. As of June 30, total liquidity was $388 million compared to $439 million as of March 31. The change was primarily from the impact of adjusted free cash flow. On July 1, net proceeds from the sale of our healthcare services business added $306 million to the quarter-end liquidity. To wrap up, let me share some directional financial expectations for the third quarter. With recent occupancy trends, we expect sequential growth in the third quarter to accelerate. We expect RevPAR to be flat to slightly down based on the competitive nature of the lease-up environment in the industry. We will continue to monitor market rates and adjust as necessary. With our occupancy and rate expectations, RevPAR sequential growth could accelerate to nearly double the percentage growth of the second quarter. With the intense labor market competition, we expect higher costs from contract labor and overtime, along with the seasonal extra day and extra holiday in the third quarter. For other operating expenses, we also expect higher marketing investments to help us drive accelerated occupancy gains along with higher seasonal costs, such as utilities. G&A expense will be lower as the healthcare services associates transition to HCA Healthcare. Because we expect to provide transition services in connection with the sale, it will take time to see the full indirect expense benefit. Turning to other key drivers of adjusted free cash flow. Annual non-development CapEx investment is expected to remain at approximately $140 million for 2021. And we will book approximately $5 million of state tax expense related to the healthcare services sale in the third quarter. Looking longer-term, we remain confident in the growth opportunity of our business based on three key drivers. First, demand. Demand for our communities is returning, we are firmly on the path to recovery and gaining momentum. A notable increase in the senior population is beginning and nearly 65% of the target population lives within 20 minutes of a Brookdale community. Second, new supply has dropped dramatically and this will provide us a positive tailwind for the next several years. Finally, there is demand for high-quality needs-based services due to a significantly higher presence of chronic conditions and over time, fewer unpaid caregivers. Importantly, our community associates have the skills and desire to provide these services. With this solid foundation for growth, returning just to 2019 pre-pandemic occupancy and margin levels would drive over $300 million of additional NOI. I will now turn the call back over to Cindy.

Thank you, Steve. In summary, the completion of the HCA Healthcare transaction has strengthened our liquidity position, as we continue to have an ongoing interest in a growing home health and hospice business. Our senior living business has delivered five months of consecutive occupancy growth and in the second quarter, we outperformed the industry in sequential occupancy growth. I remain optimistic as we enter the third quarter, which historically has been the highest occupancy growth period of a year. Over the past three years, including the recent healthcare services transaction, we have made significant transformational changes to reshape our business. We are in a better position to capture a larger share of the robust silver wave of senior demographic demand and drive meaningful shareholder value. Operator, if you would open the line for questions. Thank you.

Thank you. The conference call is now open for questions. Your first question comes from the line of Josh Raskin from Nephron.

Hi, Josh.

Hi, good morning. So my question — I guess, firstly, I just want to follow up on Steve’s comment, I heard the 2019 occupancy levels if we were returned, there would drive $300 million of additional NOI. Could you just help us understand what that means and what that’s relative to? Is that relative to the $30 million, $32 million run rate that we saw in the quarter or what exactly was that intended to say?

Good morning, Josh. That’s generally what the basis is. So kind of a run rate close to $500 million or so and then plus $300 million is $800 million ballpark.

Okay, okay. So actually what you’re saying, is it’s still $800 million. So you think that’s what the current situation, the pressures, et cetera. And I assume that means labor normalizes or something like that. My question, how should we think about the risk — and I hate to be the downer on the party here — but how should we think about the risk of community closures and the potential for stopping move-ins? And maybe you could just remind us the metrics that the states were using last spring and what triggers sort of that decision for a state to act and stop move-ins. And then I don’t know if there’s any specific internal Brookdale rules that you guys have in place or rules of thumb, where you start thinking about community closures.

Sure, Josh. There’s no question that the Delta variant is challenging, but what’s different today than at the beginning of the pandemic is that we have added a highly effective vaccine strategy to help protect residents and associates. Throughout the pandemic, we’ve been able to demonstrate our ability to balance safety and engagement. As a result of over 2,000 vaccine clinics, 93% of our residents received the vaccine. So we are building on the steps that we’ve already taken with a vaccine requirement for our associates with limited exceptions. Given the widespread access to the vaccine, we’re in a much better position to handle the pandemic. Now what we see is that because of all of these things, even if there is a COVID-19 positive resident case, we have protocols in place in many cases to remain open to new move-ins. So I think that we’re monitoring it carefully, we have strong infection control protocols and we’re proceeding accordingly.

I guess, I mean, I was thinking more about when the state acts and says, because I think if you look back a year, year and a half ago, it was measurements of ventilators that were available, ICU bed capacity or even hospital occupancy levels and that sort of stuff. So I think some of it is kind of out of your hands, but it sounds like, and do you think even if Delta continues to rise, because of the vaccinations and the protocols you have in place, it sounds like you don’t envision a scenario where Brookdale communities are actually closing.

I’m not saying that we’ll never have a Brookdale community closed. I want to be clear about that — that’s possible. But what I’m saying is the risk profile is significantly different today, given the high vaccination rates of our residents and associates and the fact that the vaccines are highly effective at preventing severe illness and hospitalization. So we’ll work with our local health departments, of course, to make sure that we’re doing everything that we can to help protect our residents and associates. What we have seen and what we’ve heard in the industry is that the health departments are comfortable with the safety protocols that we have. They take that into consideration when deciding whether a community needs to close or reopen. That is different than a year ago in that residents didn’t have access to the vaccine. And so that’s a very big change. We are continuing all of the safety protocols that we put in place during 2020 with hand washing, social distancing and masking, and now our continued focus on vaccines to really help keep our residents as safe as we can as well as our associates.

Perfect. Thanks.

Your next question comes from Tao Qiu with Stifel.

Good morning, Tao.

Hey, good morning. Thank you for having me on the call. Congrats on the new conclusion of the vaccine clinics, which is very reassuring in light of the spread of the Delta variant. My first question is regarding the 3Q outlook. I think, Steve, you mentioned sequential increase to a doubling in 3Q — what are you referring to? Occupancy or operating income? I missed that part.

Yes. Before Steve answers, I’m going to just ask everybody on the call, I hope you’ve gotten vaccinated. I hope you’ve got your family vaccinated, your friends vaccinated. Together, we can really stop COVID if we really focus on vaccination. Steve?

You bet. So Tao, I was talking about RevPAR sequential growth. In the first and second quarter that was 1.7% RevPAR growth and I mentioned that it could nearly double from the second quarter into the third quarter.

Got you. So the month-on-month acceleration in occupancy is impressive. Could you talk about the leading indicators you’re seeing right now that may have contributed to that improved outlook?

We are definitely seeing an increase in inquiries and leads and visits as well as conversion. So all of those things are coming together to result in improvements and our move-ins on a sequential basis. So we feel like the environment is improving. We feel like our sales transformation efforts are gaining momentum. We think that the marketing investments that we’ve made are paying off and we are just so proud of the fact that our July occupancy in a single month built almost as much occupancy as the entire second quarter.

Got you. And the second part that was on the RevPAR — it came in more resilient than I had expected given the broader discounting environment, especially in lower acuity products. Could you expand a little bit on your comment regarding dynamic pricing? What are the factors driving your price decisions and how are they different compared to apartments or hotels?

Absolutely. We are proud of our RevPAR growth on a year-over-year basis and have maintained pricing discipline. We operate in 41 states. We’ve got a variety of community types and the competitive environment is different in every single community. Our industry has more than 2,500 different operators. Our pricing strategy has to be local and it has to reflect the occupancy of our communities, the competitive environment that we’re seeing, as well as our ability to move in as many residents as possible at the highest achievable rate. We’re constantly balancing the rates that we have in a local market, our discounting strategy, and looking to see whether changes in pricing would accelerate our RevPAR growth. That’s something that I think the team is just very focused on.

So did you develop that dynamic pricing mechanism in-house or are you using any third-party products?

We developed it in-house. We are not using third-party products.

Hey, Tao, I wanted to give enough time for the other analysts so we can follow up with you after the call.

Okay. Sounds good. I mean, just one last question from me: the $14 million equity earnings from consolidated investment, is that related to the sale of the JV?

I believe so. I can’t comment in detail here, but that would be related to your last remaining part of the JV, correct?

Okay. Sounds good. Thank you and congrats.

Thanks, Tao.

Your next question comes from Brian Tanquilut with Jefferies.

Hi, Brian.

Hey, good morning. Yes, first question, Cindy, just to clarify on the vaccination rates relative to Josh’s question earlier. So it looks like your residents are highly vaccinated in the 90% plus range. And then you said the majority of associates are, but are you putting out a mandate now on vaccination? And are you able to use that maybe from a marketing perspective? And then I guess the flip side of that, are you concerned that this could drive some increased employee turnover if you are mandating vaccinations?

Yes. Our North Star is the health and wellbeing of our residents and our associates. We have been focused since before the vaccines were even available on education about the importance of vaccines. We’ve made vaccines readily available for our residents and associates, and our residents led the way — 93% resident vaccination is incredible. We have seen a large majority of our associates get vaccinated, but with the spread of the Delta variant, it’s really time to take the next step and to require our associates to get vaccinated. Now, of course, there will be limited exceptions, including medical and sincerely held religious beliefs. And there are some jurisdictions where we cannot require our associates to be mandated, but we think it’s really important for the trust of our residents and their families. So we do think we’ll be talking about this with prospects as they evaluate our communities. I hope that we don’t lose a single Brookdale associate, but I do recognize that not everyone is going to agree with the decision to require vaccinations. We will be proactive about providing education to associates, understanding where they’re coming from and working through the process on medical and religious accommodation. If necessary, we will bring additional associates into the Brookdale family, because our objective is to have our community staffed with full and part-time associates and we want them to be vaccinated.

I appreciate that. And then, I guess, on the cost side, Cindy, as we see Delta pick up, are you thinking of ramping up testing or preparing to ramp up testing and ramp up PPE use just as infection rates across the country are picking up right now?

Yes. We have masking requirements in our communities for our associates. That’s been in place since the beginning of the pandemic and there are state and local requirements as it relates to testing, which is largely focused on unvaccinated individuals. To the extent that we are having an increasing percentage of our associates and residents vaccinated, those testing costs are not necessarily something that would increase as much. But of course it’s going to depend on whether we have a positive case in the community. If so, that will involve more testing. But I feel like we’ve got the right strategy in place. We’re taking the appropriate steps to manage effectively through the pandemic with the prioritization of the health and wellbeing of our residents and associates. Quite honestly, if you think about our medical costs with our healthcare plans, the more of our associates that we get vaccinated, that should help us over the longer term as well.

Sorry, go ahead.

Yes, Cindy. The COVID-related expenses from second quarter to third quarter, pre-Delta variant, we expect them to go down slightly. As Cindy mentioned, there are unknowns, so to the extent it doesn’t go down quite as much as projected, my projection is to be seen.

Thanks, Steve.

Got it. And then Steve, last question for me: we’ve gotten some questions about your 2023 maturity. So just wondering if you can make any comments on your debt refinancing strategy going forward.

You bet. So looking big picture, we strengthened our liquidity position by over $300 million on July 1 after closing the healthcare services transaction with HCA. We’re evaluating potential uses of that cash, such as de-leveraging some communities as we refinance their 2022 maturities, perhaps a small pay down of higher interest rate debt or targeted investments to accelerate growth. We continue to focus on enhancing liquidity through occupancy growth and expense discipline. At the same time, we’re pursuing Provider Relief Fund grants. Overall, cash flow and liquidity are a priority and we’ll continue to take proactive steps on the balance sheet while evaluating opportunities and executing in our core business.

Awesome. Thank you.

Thank you so much.

Your next question comes from Steve Valiquette with Barclays.

Hi Steven, how are you doing?

Great. Good morning, everybody. Thanks for taking the question here. This was touched on a little bit earlier, but just as far as the July occupancy trends are pretty encouraging, but as we dig in a little bit deeper on your geographic mix — Texas, Florida and California are the three largest states for Brookdale by number of units. Those states are seeing a lot of the new COVID cases where it’s most prevalent — at least in two of those three states for sure. Just curious as you analyze your own occupancy gains, are you seeing any correlation of better gains in states where there’s fewer new COVID cases and is it perhaps a little slower where those new cases are more prevalent by state? Any trends worth calling out or is there really no correlation? Just curious to get some additional observations around that. Thanks.

Thanks for the question. I think we’ve seen the growth in COVID cases is largely among unvaccinated individuals and a much younger population than we saw during 2020. I don’t know that we have seen any correlation between increasing COVID trends and our occupancy trends. I think the important thing to remember is that we are a needs-driven business. Where we have seen outperformance is really in our memory care communities in particular — their performance during the second quarter was absolutely phenomenal. We’ve had a strategic focus there, which helps of course. What we’ve seen softness in is really independent living and that’s something I think is across the industry as well. But I don’t think it’s related to the surge in the Delta variant.

Okay. So at the end of the day, it’s more related to product offering than any geographic mix. Okay. Just wanted to reinforce that. Thanks.

Thanks, Steven.

Your next question comes from Joanna Gajuk with Bank of America.

Good morning, Joanna.

Hey, good morning. Thank you for taking the question. So if I may just follow up a couple of the things that have been discussed. One is on the labor side — we see a lot of commentary from different providers about pressure and you expect some continuation of this contract labor pressure at least in the near-term. Can you confirm what you see in the market and how do you think about going forward? Do you think that once supplemental unemployment benefits expire it will be somewhat easier to recruit? Also can you talk about turnover — are you seeing higher turnover and is it different by market?

Yes. The labor market is fiercely competitive and we have increased our recruiting efforts to fill open positions. When we have openings, we do use overtime and contract labor as necessary, and we actively adjust wages to remain competitive. Looking forward, we do expect the labor market will improve gradually as people return to work after the supplemental unemployment benefits end and as schools reopen. So I think that’s important to note. We have experienced increased turnover in parts of the market given broader economic opportunity, but more recently we’ve seen increased interest in our job postings. One thing our industry offers that few others do is that when an associate goes home after a day at Brookdale they know that they’ve made a difference in someone’s life. That attracts a workforce that genuinely wants to make a difference. When you remove barriers such as supplemental unemployment benefits and childcare issues, it’s much easier to operate the business.

Okay. That’s helpful. Are you seeing increased interest from applicants moving from higher acuity settings like nursing homes to senior housing?

The quarter has been a little bit of a roller coaster. Early in the quarter, we didn’t see as much interest in our postings when there was an economic incentive to stay on unemployment and there were massive increases in jobs available in the economy. More recently we’ve seen increased interest in our postings, which is encouraging. We attract talent that wants to make a difference, and as the external pressures ease we expect recruitment to continue to improve.

Thank you. Appreciate it.

Your next question comes from Frank Morgan with RBC Capital Markets.

Good morning, Frank.

Good morning. Most of my questions might have been answered, but just a couple of random ones here. Going back to the mandatory vaccine — I think you mentioned there are some states where that would not be allowed. Could you share what states those are that will not allow you to enforce mandatory vaccines for employees?

So Oregon comes to mind as a state where there are more restrictions. There are a few jurisdictions with limitations. We can follow up with you separately with a more detailed list.

Got you. And then I’d be curious from what you’re seeing out in the field, when you look at competitors during this period where people are coming back out and move-ins are improving, any change in their behavior regarding pricing or incentives and how do you think they will actually handle the surge in COVID? Are you hearing other providers considering mandates for vaccines as well?

The environment is pretty competitive and because we’ve got many small operators, we see a lot of different behaviors. Some short-term discounting we see we don’t think is sustainable. We’ve taken a strategy we believe will yield the best long-term sustainable results, and we’re proud of outperforming the industry in occupancy growth while maintaining rate discipline. I do think a number of people in our industry will move to vaccine mandates. We’re already seeing that in healthcare overall, with hospital systems and leading healthcare institutions taking that step to protect associates and patients.

Maybe one last question: in terms of geographic markets, any particular areas where you’re seeing things getting better faster than average and, by the same token, any markets where it’s lagging?

I don’t see anything that jumps out on a market basis broadly. We tend to see communities with strong, long-tenured leadership recover the quickest. Executive Directors who’ve been with us two years or more tend to perform better. We have about 65% of our Executive Directors with at least two years of tenure, and that’s where we see the fastest recovery. Our memory care communities are performing incredibly well during the recovery, so markets with a higher concentration of memory care have performed better.

Thanks.

I think that’s it. So thank you for your interest in Brookdale and joining us this morning. Operator, you can now close the call.

This concludes today’s conference. You may now disconnect.