Thank you, and good morning. I'd like to welcome you to the second quarter earnings call for Brookdale Senior Living. Joining us today are Denise Warren, Interim CEO and Chairman of the Board; Dawn Kussow, Executive Vice President and Chief Financial Officer; and Chad White, EVP, General Counsel and Secretary. 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 Brookdale expressly disclaims any obligation to update these statements in the future. Actual results and performance may differ materially from the forward-looking statements. Certain of the factors that could cause the actual results to differ are detailed in the earnings release Brookdale issued yesterday as well as in the reports Brookdale files with the SEC from time to time, including the risk factors contained in its 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, Brookdale will present non-GAAP financial measures. For reconciliations of each non-GAAP measure from the most comparable GAAP measure, I direct you to the release and supplemental information, which may be found at brookdaleinvestors.com and was furnished on an 8-K yesterday. Now I will turn the call over to Denise.

Good morning, and welcome to Brookdale's Second Quarter 2025 Earnings Call. It's a pleasure to be here today as Interim CEO. I'm joined by two integral members of the office of the CEO; Dawn Kussow, our Chief Financial Officer; and Chad White, our General Counsel. This morning, I'll provide a high-level review of our second quarter results, followed by an update on the strategic priorities we outlined during the Q1 earnings call. I also will provide updates on a couple of other items of interest. After my remarks, Dawn will present a detailed overview of our second quarter financials, including guidance ranges and our outlook for the remainder of the year. Chad will join us for the Q&A session. Now for second quarter highlights. Brookdale delivered solid second quarter performance. Despite the backdrop surrounding our Annual Shareholder Meeting, the team remained focused and made progress on improving our operations and financial results. We also continued our ongoing portfolio optimization plan. Same community weighted average occupancy for the second quarter came in at 80.7%, growing 190 basis points over the prior year quarter. June month-end same-community occupancy came in at 82.8%, which was 240 basis points higher than month-end occupancy in June 2024. July month-end occupancy came in at approximately 83.3%, which was 260 basis points higher than month-end occupancy in July of '24. Recall, roughly the 80% occupancy mark is a critical inflection point for cash flow generation at Brookdale. While delivering occupancy growth, we also held the rate as RevPOR on a same-community basis grew 2.4% year-over-year. Now that our consolidated portfolio has weighted average occupancy greater than 80%, our focus will be on ensuring rate growth outpaces expense growth while not sacrificing occupancy. We are pleased to report that adjusted EBITDA for the company grew 19.7% quarter-over-quarter and is up 23.4% for the first half of the year. Most importantly, we continue to generate positive adjusted free cash flow for the second quarter in a row. Adjusted free cash flow came in at $20 million for the quarter versus a negative $6 million for the 2024 second quarter. For the first 6 months of the year, our adjusted free cash flow is $24 million versus a negative $32 million for the same period last year. Note, our leased portfolio also generated positive adjusted free cash flow for both the first and the second quarters of 2025. Moving on to updates on our strategy. As outlined last quarter, we believe our 5-part strategy remains central to unlocking Brookdale's intrinsic value. To review each. One, improving operating performance. Operational excellence is critical to the success of Brookdale. Higher occupancy, improved rates and robust cash flow will generate the capital necessary for reducing leverage and reinvesting in our business. We are working to accelerate profitable occupancy through revenue yield management, disciplined and appropriate expense oversight, strengthened operational accountability and targeted strategic investment. Last quarter, we outlined a plan to pilot new incentives and pricing promotions to boost occupancy in selected communities. Many translated this statement into Brookdale is 'slashing rate,' so I'll try to be more clear this quarter. Brookdale is not slashing rate. We remain focused on profitable occupancy and maximizing fixed cost leverage to grow EBITDA and free cash flow. Maximizing fixed cost leverage means we must maintain an occupancy rate greater than 80% while continuing to ensure rate growth that exceeds expense growth. We saw the results of this effort during the quarter where both occupancy and rate grew over the prior year period. A further indicator of improved performance for the quarter can be seen in our occupancy bands. To elaborate, in Q1, there were 143 communities in our less than 70% occupancy band. That number improved by 10% or 14 communities to 129 during the second quarter. 50 of these are slated for disposition through either lease terminations or asset sales and 38 are working with our SWAT teams. Of the remaining 41, 19 require only 1, 2 or 3 move-ins to advance to the next category. Looking at the other end of the spectrum, those communities with greater than 95% occupancy grew from 73 in the first quarter to 88 in the second quarter, an increase of 15 communities or 21% improvement. Two SWAT teams are now in place, covering 137 communities. Team 1 is focused on underperforming high-opportunity locations requiring immediate attention. These properties have seen a 350 basis point occupancy increase and 7% RevPAR growth since Q4 when the team began its work. Team 2 is mainly dedicated to communities that collateralize our upcoming debt refinancings. In this group, we are working to enhance performance to maximize collateral value. These properties saw sequential occupancy growth of 200 basis points and enjoyed 150 basis points of sequential RevPAR growth since the team began its work in May. We are making progress on structuring a permanent distressed asset team that will move across the portfolio, shoring up communities where performance is starting to wane. With a portfolio of just under 600 assets by the end of the year, there always will be some that need extra care and attention. We expect to have this team up and running by the end of the quarter. We are continuing a rigorous cost review to align our expenses with the size of our portfolio. As part of this effort, G&A expenses were reduced by $850,000 in Q2 versus Q1 and are down $1.2 million from 2Q '24. In each case, G&A expense excludes transaction, legal and organizational restructuring costs, which do include costs incurred around our Annual Shareholder Meeting and severance. We are aware further progress needs to be made on our cost structure, and we will continue to focus our efforts on this area during the third quarter. Number two, optimizing our real estate portfolio. We continue to streamline our portfolio to focus on communities with the strongest long-term value creation potential. As of June 30, Brookdale's consolidated portfolio was at 617 communities, 235 leased and 382 owned. As announced previously, we plan to exit 55 leased assets by year-end. We received the transition schedule for these locations in early July and based upon our review, it appears the communities with the most challenged performance will be transitioning later in the year. This compares to our original assumption for guidance modeling purposes that all communities would transition on October 1. As such, we expect to have additional negative pressure on our consolidated financials during the transition time. Dawn has incorporated this new timeline in the updated guidance that she will speak to in a few minutes. During Q2, we closed on the sale of 1 owned community and the transition of 1 leased property. Of the remaining 13 previously announced dispositions, all but one are under contract. Also, we've recently identified another 28 assets that will be leaving the portfolio and expect those to transition over the next 12 to 18 months. As with the original 14 community dispositions announced last quarter, we believe the exit of this additional group will result in improved occupancy, RevPAR, adjusted EBITDA and adjusted free cash flow while generating cash proceeds that can be used for capital reinvestment and debt repayments. Note, of the 41 assets to be sold, 27 are in the under 70% occupancy band. Three, capital reinvestment. Reinvestment in our communities is essential to maintaining market relevance and quality and to accelerating profitable occupancy growth. In Q2, we invested $49 million into capital projects and have over 500 capital-related projects underway from aesthetic upgrades to larger renovations. Four, reducing leverage. Deleveraging enhances financial resilience and shareholder value. While it will not happen overnight, we are working to reduce leverage meaningfully through continued adjusted EBITDA and cash flow growth as well as portfolio optimization. To that end, during the second quarter, we reduced our adjusted annualized leverage from 9.7x to 9.3x. Recall, approximately 88% of our debt is nonrecourse, secured by property-level mortgages. Upon asset sales, mortgage obligations are fully repaid and excess proceeds may be deployed toward growth, reinvestment or further debt reduction. As noted earlier, during the quarter, we sold 1 owned asset, have LOIs or purchase agreements on an additional 13 assets and have identified another 28 for disposition. As we have demonstrated, we are committed to taking appropriate actions to unlock the intrinsic value of our real estate to drive shareholder value creation, and we will continue to look for ways to optimize our portfolio and reduce our leverage profile. Nearly all of our debt is refinanced through 2026, and the team has made excellent progress working with our lenders on the 2027 tranches. Number five, elevating quality for residents and associates. Almost 50,000 seniors call Brookdale home and over 36,000 associates choose us as their employer. This quarter, two of our culinary experts were recognized with Senior Housing News' DISHED Dining Innovation Awards. Bethany Johnson, a District Director of Operations in Florida, was selected by the Florida Senior Living Association as Outstanding Operator of the Year for 2025. Our very own CFO, Dawn Kussow, was inducted into the McKnight's Women of Distinction Hall of Fame Class for 2025, recognizing her outstanding talent and service to Brookdale. We are pleased the industry is recognizing the top talent that serves our residents every day. Moving on to shareholder engagement and the CEO search. We are grateful that each of our director nominees received the support of a majority of our shareholders at this year's annual meeting, and we appreciate the constructive feedback we received throughout the process. This feedback is instrumental in how we will shape Brookdale's path forward. Management and the Board consider the feedback received from all shareholders to be important, and we will use it to further strengthen our governance and our operations, and we will refine how we communicate Brookdale's value proposition. As you review the information contained in our investor deck and supplement, we hope you will recognize many of your suggestions. Lastly, the CEO Search Committee has reviewed approximately 50 potential candidates, casting a wide net across senior housing, health care, hospitality and real estate. The committee and full Board have interviewed a number of candidates. And with the annual meeting now behind us, we aim to conclude the process in the coming months. Out of respect for all participants in the process, we will not take questions on the search during today's call. To close, Brookdale's strategy is taking hold and driving improved performance. We are energized by our strong momentum and the promising opportunities for growth that lie ahead. Thank you for your interest in and support of Brookdale. With that, I'll turn the call over to Dawn.

Thank you, Denise. We were pleased with our continued operational progress, particularly with our occupancy growth during the quarter, which accelerated in May and June. Our operational improvements have been meaningful, and we are seeing the changes in our results. As a result of our progress, occupancy and adjusted EBITDA exceeded our expectations for the quarter, giving us confidence to raise our annual guidance ranges for the second quarter in a row. We had several operational successes this quarter. Our second quarter consolidated average occupancy of 80.1% is the first time we have delivered quarterly weighted average occupancy above 80% on a consolidated basis since the first quarter of 2020. The 80 basis point sequential occupancy growth was the strongest second quarter growth since 2022 and is evidence that our operational SWAT teams and other initiatives to drive occupancy continue to be effective. As a result of these efforts, our sequential occupancy growth was better than the industry average as reported by Nick and better than the healthcare REIT's consolidated SHOP portfolio results. Our same-community portfolio, which excludes the Ventas transition assets, the 12 assets held for sale and 3 other communities had quarterly occupancy of 80.7%, a sequential increase of 70 basis points. We delivered $20 million of adjusted free cash flow, which is our second consecutive quarter of positive adjusted free cash flow. We also showed continued improvement in our occupancy bands with 14 or 10% fewer communities included in the less than 70% band for the second quarter of 2025 compared to the first quarter, while our over 95% occupancy band also grew by 15 communities or 21% and we had continued adjusted annualized leverage improvement. As a result, we have improved our annual guidance for both year-over-year RevPAR growth and for adjusted EBITDA, we are pleased with our continued progress and are optimistic about the remainder of the year. But before I speak to that, I'll walk you through the details of our second quarter financials. I'll begin with second quarter revenue. Consolidated RevPAR grew 5.1% above the prior year in the second quarter, driven by an ongoing acceleration in year-over-year weighted average occupancy growth of 200 basis points. Second quarter move-ins were 7% above the prior year and 9% above historic average, while move-out volume was also beneficial to the quarter. Our consolidated weighted average occupancy increased 200 basis points year-over-year to 80.1% in the second quarter. Year-over-year, our monthly occupancy growth continued to accelerate during the second half of the quarter and continued through July with a 250 basis point increase compared to July 2024. We saw softness in our move-ins early in the second quarter. Consequently, we implemented strategic and selective incentives in addition to the other initiatives we've discussed to help drive move-in growth as we entered the important summer selling season. We expect these incentives to moderate as we move forward. June was a very strong move-in month with June consolidated month-end occupancy at 82.2%. The full accretive impact of these positive occupancy results will be realized in the third quarter, while most of the cost of the strategic and selective incentives we had in place to help drive outsized occupancy performance in June is reflected in our second quarter results. Second quarter consolidated RevPOR grew 2.4% over the prior year quarter, reflecting both resident rate increases, the ongoing trend of lower resident acuity and to a lesser extent, the impact of the strategic and selective initiatives. I'll now pivot to same-community results. There are 70 communities included in our consolidated portfolio that are excluded from our same-community portfolio. Of the 70, 55 are the Ventas leased communities that we will not operate by year-end. Second quarter same-community RevPAR increased 4.8% over the prior year, driven by 190 basis points of occupancy growth and a 2.4% increase in RevPOR. Our second quarter same-community weighted average occupancy continued to accelerate with 70 basis points of sequential growth, which was significantly better than normal seasonality for this period. Moving to expenses. On a same-community basis, expense per occupied unit or ExPOR increased 2.3% over the prior year second quarter compared to the 2.4% RevPOR growth, reflecting a positive RevPOR to ExPOR spread. Nevertheless, we recognize that there is more work to be done. Second quarter same-community operating income was 4.9% better than the prior year, while the operating income margin was flat. There is seasonality associated with operating income margin, particularly as you compare first quarter to second quarter when our labor expense base is impacted by the full impact of annual associate merit increases as well as an extra day of expenses. Remember that 2024 was a leap year with the same number of days in the first and second quarter of 2024. Consequently, the second quarter of 2024 did not see the same seasonal sequential operating income margin decline that we typically see from first quarter to second quarter. 2025 results reflected a more normalized year. Now moving beyond same community level results. We continue to see improvement in our general and administrative expense as reflected in our adjusted EBITDA results. As a percent of revenue, general and administrative expense improved 40 basis points to the second quarter of 2024, excluding noncash stock-based compensation expense and transaction, legal and organizational restructuring costs. We remain prudently focused on an appropriate cost structure for the expected changes in our portfolio and are seeing the benefits of these efforts reflected in our second quarter results. Lastly, cash operating lease payments were $57 million. As reported in yesterday's press release, second quarter adjusted EBITDA was $117 million or 20% above the prior year quarter. We're very pleased to have delivered the significant growth in second quarter adjusted EBITDA, which was above internal expectations and analyst consensus estimates and believe it is a reflection of our improving operational performance. To that end, second quarter adjusted free cash flow increased $25 million over the prior year quarter to a positive $20 million. We still expect $30 million to $50 million of adjusted free cash flow for the full year 2025. Notably, both our owned and leased portfolios were adjusted free cash flow positive. As of June 30, total liquidity was $350 million, a $44 million sequential increase. The primary drivers of our increase in liquidity were a positive adjusted free cash flow and a new letter of credit facility, which freed up capacity on our line of credit. With our strong adjusted EBITDA results, we continue to make progress on our adjusted annualized leverage, improving almost 0.5 turn sequentially to 9.3x. With meaningful adjusted EBITDA growth and the cash flow generation power that comes from 80-plus percent occupancy, we expect annualized leverage to significantly decline over the coming years, with additional deleveraging to result from the disposition transactions Denise previously mentioned. Lastly, before turning to our guidance, I want to comment on updates to our investor presentation. As we worked with many of our shareholders recently, we have added Slide 16 to 18 to our presentation. The slides articulate Brookdale's significant value proposition given the robust supply and demand tailwinds. With limited new supply and growing demand, we see significant long-term organic growth potential, particularly as we move communities higher in the occupancy bands and drive higher RevPOR and operating income due to the significant operating leverage of our fixed cost structure. Turning now to 2025 expectations. As reflected in yesterday's press release, given our strong second quarter results, we have improved our annual guidance for both year-over-year RevPAR growth and for adjusted EBITDA. We now expect 2025 RevPAR growth in the range of 5.25% to 6% over the prior year. Teams throughout our organization are committed to the plans Denise spoke about to accelerate profitable occupancy growth, and we have reflected that commitment in our expectations. Also reflected in our RevPAR guidance range is the normal sequential step down in RevPOR dollars each quarter of the year as newer residents generally move in with lower acuity and therefore, have a lower care rate than existing residents. We remain optimistic that both weighted average occupancy and RevPAR growth compared to the respective prior year quarters will be even stronger in the fourth quarter of 2025 than we just delivered in the second quarter. Our raised 2025 adjusted EBITDA guidance range of $445 million to $455 million incorporates these favorable top line expectations. Our initial guidance for 2025 assumed an October 1, 2025, transition date for all 55 Ventas nonrenewal communities to be transitioned or sold. Our revised guidance range gives effect to updated expectations on the actual timing of the various transitions, which are now expected to have a negative adjusted EBITDA impact of approximately $2 million as compared to our previous guidance. Without the impact of this change, our updated adjusted EBITDA guidance would have been higher by approximately $2 million. To the extent that the transition timeline is not achieved as expected, it may further impact our consolidated results. We remain diligent in our focus on profitable occupancy growth. And as a result, we expect continued leverage from our increasing occupancy given the high fixed cost nature of our industry. When thinking about our annual guidance and specifically when modeling the second half of the year compared to the first half results, it is important to remember a few factors, many of which are shown on the last page of our investor presentation. As reflected in our revised guidance, one cannot simply double the first half performance to determine full-year expectations. First, when considering the day count of the fiscal year, the second half of the year has 3 additional workdays and 2 incremental holidays compared with the first half of the year. This is important because our revenue is largely based upon a monthly resident fee, whereas our expense structure is driven by daily expenses, largely in labor, including premium pay for holidays, but also in other operating expenses. Second, the first half of the year includes 1 full quarter impact of Community Associates merit increase, while the second half of the year has 2 full quarters of that impact. Third, there is variability in utilities expense between quarters with higher expense in the third quarter due to the hotter temperatures and declining expense in the fourth quarter with moderating temperatures. Fourth, as the official hurricane season begins in June and runs through November, we've assumed a moderate level of natural disaster expenses as we think about our full-year guidance. Lastly, note that G&A rationalization savings pertaining to the Ventas transitions will be spread throughout the year with some savings already recognized in the first half of 2025. In contrast, the corresponding operating income step down from divesting Ventas Communities will largely impact the fourth quarter. Specific to the third quarter, the impact from these seasonal factors, an extra day and holiday in the third quarter compared to the second quarter and seasonally high utilities is expected to be nearly $10 million of an adjusted EBITDA headwind between the second and third quarters. In closing, we are pleased with our second quarter results and are confident in our strategic and operational plans to support another year of solid adjusted EBITDA growth. We are operating with purpose and are confident in our ability to build sustainable long-term value for our shareholders. Operator, we will now open the call for questions.

And your first question comes from the line of Brian Tanquilut with Jefferies.

Maybe first question, Denise. As I think about the successes that you've shown in driving occupancy, what have you been doing differently since maybe you've stepped into the role and just operationally, what kind of initiatives and the different strategies you've rolled out since?

That's an excellent question, Brian. Since I arrived, we have concentrated significantly on the SWAT teams. One group began operating in the fourth quarter, and we have reinforced our expectations for them to focus on driving profitable occupancy, rather than just occupancy. We also established a second SWAT team to target additional assets that will be up for refinancing in 2027. The aim is to enhance the collateral value before we need to renew them, not necessarily to maintain borrowing at that level, but to extract collateral assets from the pool. Additionally, we have introduced a new emphasis on accountability, which includes daily standup meetings among our operations, sales, and marketing teams. This allows us to monitor each area’s efforts toward increasing profitable occupancy. If someone is lagging, we can assist them in catching up, share ideas, and remove obstacles. The SWAT teams are also dedicated to eliminating barriers arising from being a large, complex organization like Brookdale. For those groups needing the most assistance, we can facilitate quicker hiring, fill executive director positions, and support their capital expenditure efforts. There are many detailed measures we can implement to enhance our focus. A key part is instilling a heightened sense of urgency. We have also made significant strides in improving the organizational culture by empowering those who interact with our residents daily to make decisions. These field personnel are crucial as they understand the issues and know how to address them. We need to grant them operational responsibility for decision-making, while still providing guidance from Brentwood. However, we cannot fully grasp what is happening in the facilities from Brentwood alone; we need to be on-site more often and collaborate closely with our executive directors and field operators to achieve the operational improvements necessary.

No, that makes a lot of sense, Denise. And then maybe as I think about just the last part of your comment, right, you kind of giving that level of independence to the community. How should we be thinking about the philosophy between balancing rate and occupancy going forward? And then maybe to drill that down a little bit more, what is that doing in terms of like the occupancy bands within the Brookdale portfolio? And how do you expect that to trend going forward?

Sure. As Dawn said earlier, the occupancy band focus is really important to us. And we brought that up over the last couple of months surrounding our Annual Shareholder Meeting and talking with a number of investors over that time period. Our less than 70% occupancy bands, we have to get them up. And we have to get them up because we don't start covering our fixed costs until we hit that 80% mark. And so we need to get those properties moving. And I think you saw that from the change in those communities from 143 in the first quarter to 129 in the second quarter. And then I believe we eliminated what we were doing within that 129 mix to further improve that occupancy going into the third quarter. You also saw that we have bifurcated the portfolio, and we're focused on the communities that are greater than 80% occupancy. And you saw that the ones that are actually greater than 95% had a significant move in the occupancy bands there because when you look at what falls to the EBITDA more quickly, it's the ones that have covered their fixed costs. So we have to bifurcate the portfolio to get the under 70% up to 80% and to get the over 80% to really performing exceptionally well, where we're more focused on pricing in those avenues than we are in the under 70% while we're getting them up. And I think Dawn has some additional comments around those occupancy bands, too.

I believe we made significant strides in those occupancy bands. Our main focus is on maximizing pricing, especially in the higher levels. However, for those under 70%, we may need some targeted incentives and spotlight units to improve their performance to reach 80%, allowing them to start generating cash flow. In the under 70% band, we have shared some insights on our actions. When analyzing the data, there are very few communities below that threshold. Additionally, we included new slides in our investor presentation to clarify the value proposition in terms of profitability for the units in the under 70 and 70 to 80 bands, highlighting our potential for future growth from improving the 70% to above 80%, as Denise mentioned.

And your next question comes from the line of Ben Hendrix with RBC Capital Markets.

I appreciate all the commentary about the profitable occupancy strategy hitting 80% definitely translating to solid cash flow performance. But just wanted to drill in a little bit on the pricing component of that. You talked about this 10 basis point spread between the RevPOR and ExPOR and wanted to get some indication. Is that kind of like how we should think about that 10 basis point spread, how we should think about pricing in the intermediate term? Or is there like a higher target spread there once we cure some of these lower occupancy bands? Just any thoughts on how we think about that normalizing out for the longer term.

Ben, this is Dawn. That's a great question. I would like to highlight a couple of points. Denise and I discussed our focus on margin growth as we aim to continue improving our margins. We achieved growth in net operating income, and we do anticipate margin expansion, especially as we approach 2026. Regarding the 10 basis point difference between RevPOR and ExPOR, there is some variability in our expenses since we are self-insured. Last year, we experienced some external noise which we had more clarity on early in the year, affecting certain incentive plans. Considering that margin spread, we certainly expect to see some growth between the two. As we progress through the year, increase our occupancy, and concentrate on our pricing and targeted incentives, we definitely expect improvement.

Yes. And Ben, this is Chad. The other thing I would say on this, I think it's really important with the supply-demand fundamentals of the industry over the longer term, we see a real opportunity here to increase pricing over the rate of expense inflation. And you'll see in the new slide that Dawn mentioned that we added, one of the new slides we added into the investor deck on Slide 17 sort of shows what some of that impact is to creating value for the company going forward. We see a lot of ability that over the longer term as we look at rate and pricing, if we can continue to deliver rate growth greater than our expense growth, that really compounds over time and creates a lot of value.

Great, I appreciate that commentary. I have a follow-up regarding your marketing and targeted pricing efforts. You've made significant progress with move-in activity. Can you discuss the advancements you've made related to controllable move-outs and whether these targeted pricing actions have helped in managing move-out activity?

Yes. I would say that regarding our controllable move-outs, we have seen some improvement in our overall attrition rate. Our controllable move-outs have fluctuated a bit from quarter to quarter. However, we are seeing progress in our NPS scores and the turnover in our communities, and we expect to continue to see improvements in our controllable move-outs.

Also, Ben, we have asked our marketing department to put together a program to focus on retention of our residents because reducing those controllable move-outs is very important to our occupancy numbers, and it is a lot less expensive to keep the residents that you have than to go out and get new ones. And so we are heavily going to focus on how do we retain not only our great employees but also our residents in our facilities longer.

And your next question comes from the line of Andrew Mok with Barclays.

I appreciate all the color on the sub 70% occupancy band. Are there any targets you can share for how many communities you think you can move out of that lower band over the next 12 months outside of the Ventas lease communities? And I think I heard in the prepared remarks that there was some softness in move-ins early in the quarter. Can you elaborate on what you're seeing there and how that impacts the occupancy outlook for the balance of the year?

Yes, thank you. This is Dawn. We provided insight regarding the communities with occupancy below 70%. Denise mentioned that there are 50 communities involved between disposition groups one and two and the Ventas communities. We anticipate that the 14 communities we discussed last quarter from the Ventas and disposition group one will be offloaded by the end of the year. The other dispositions are projected to take about 12 to 18 months, so let's consider it 18 months for those 50 communities to be transitioned out. We expect our SWAT efforts to be effective in moving these assets out, with 38 of them in the lower occupancy band. Whether this occurs by the end of the year or early next year, we expect to see progress. For communities with one, two, or three units, there's some variability, as occupancy could increase or decrease by those amounts. Our main focus is on ensuring that the smaller communities rise above that occupancy threshold. Significant progress was achieved in the second quarter, and we expect this trend to continue throughout the year, both operationally and through our disposition strategies.

And can you comment on the softness that you quoted?

I appreciate the reminder. The softness in the market, as we noted in our first quarter earnings call in April, was influenced by macroeconomic uncertainty and ongoing tariff discussions. We observed some easing of that uncertainty, coupled with our operational focus, which led to an increase in occupancy move-ins towards the end of May and particularly in June. This increased activity is reflected in our results, with a 50 basis point increase in occupancy from May to June and a further 60 basis point increase from June to July on a consolidated basis. Looking ahead to the quarter, we expect occupancy to accelerate as we enter the summer selling season. Given the strong June performance and the move-ins we've observed, we anticipate these trends will translate into improved economics in the coming months, especially during the third quarter.

Great. And maybe just one more on the cash flow. I think operating cash flow finished above $80 million in the quarter and increased 50% year-over-year. It looks like there were some favorable working capital changes in addition to the better operating performance. Can you flesh out the drivers there? And with the better cash flow profile, how are you thinking about the capital priorities from here, including growth and maintenance CapEx?

I will begin with the adjusted free cash flow. There is certainly some variability in working capital, especially since we just concluded our activist site in July, which involves some accruals related to leadership changes and severance. We anticipate that working capital will stabilize in the normal course of business, though some variability will always be present. The primary factor affecting the change in adjusted free cash flow is the performance of our operations. As we witness improvements in the business, including a 20% year-over-year increase in adjusted EBITDA, we expect our adjusted free cash flow to increase accordingly. We have not altered our guidance. As we generate cash flow and consider our strategy, Denise addressed some of this in our prepared remarks regarding asset dispositions. We are assessing our capital expenditures, having discussed an additional $10 million earmarked for fresh impressions and front-of-the-house improvements earlier in the year. We will continue to evaluate how we deploy that capital or if there are other initiatives we might want to pursue.

We will definitely utilize some of the proceeds from the sales along with our increasing cash flow to reinvest in the portfolio. We have observed positive outcomes from our initial investments in high-potential projects. The SWAT team efforts have focused on evaluating the facilities and property conditions, determining if they need updates such as new carpet, paint, or furniture. We have been making these types of investments to enhance the appearance of our buildings, which I believe is positively influencing our results. Moving forward, we will continue to reinvest wisely, creating more opportunities for growth.

And your next question comes from the line of Joanna Gajuk with Bank of America.

Actually, a question first a follow-up on the free cash flow. So with EBITDA guidance higher, why is the adjusted free cash flow guidance not going up? Is it those items you had mentioned around the severance and proxy fight or is there something else?

That's exactly right, Joanna, is that there's just the level of variability with the working capital.

Could you provide some insight into the costs we've seen this quarter? You've mentioned that there are some cost burdens, and you anticipate that the benefits will materialize over the remainder of the year. Can you help us quantify these additional costs, including those related to marketing or other initiatives, to better understand the cost structure moving forward?

I think, Joanna, what we discussed for the current quarter focuses on the incentives we implemented. We adjusted our marketing spending, possibly incurring a small increase in marketing costs, but redirected efforts towards digital advertising in some markets and direct mail in others. However, there is a timing difference in the usual incentives you would expect compared to when we will see the economic benefits from occupancy increases. The occupancy improvements occurred later in June, so you'll notice the financial benefits from these increases in July. Because the spending occurred earlier in the quarter and the occupancy gains came later, there's a timing issue at play.

Okay. So there was nothing else to call out when it comes to the cost?

Correct.

And your next question comes from the line of Josh Raskin with Nephron Research.

I was wondering if you could speak to your local market strategy and maybe how that's evolved under the new leadership. I'm specifically interested in how you differentiate Brookdale from peers at the local level beyond just sort of pricing and maybe what resonates most with prospective residents and families in terms of additional services and things that you guys are providing?

Yes, I'll begin. Thank you for the question, Josh. I think our differentiation lies primarily in the quality of care we provide. As Denise mentioned, our emergency departments are integrated into local markets, which allows decision-making to happen at the ED level. This ensures that they are well-connected and knowledgeable about local strategies, discounting, capital expenditures, and our improving NPS scores, which vary by market. The quality of care we deliver to our residents truly sets Brookdale apart. With the rollout of Health Plus in our communities, we expect to have it available in nearly 200 locations by the end of the year, and we see this as a key differentiator that we promote at the local level.

Yes. It's absolutely a key differentiator. I think it's something that we will be continuing to focus on. Dawn mentioned that we're rolling this out. We'll have it in almost 200 of our communities by year-end. We are seeing that the feedback, Brookdale Health Plus is a unique innovative program. It's our care coordination program that I think has been very well received in terms of it improves resident outcomes. We believe it will actually improve length of stay, and it's also improving our financial results. And so we think it's a key differentiator for Brookdale. It's something that we're going to continue to lean in on very heavily. It's something that I think we're already seeing anecdotally, the comments we received from the field where we have a Health Plus community. It is something that is differentiating us from a sales standpoint and able to lead to new move-ins. And ultimately, it's something good for residents. I mean our residents who've had in Brookdale Health Plus communities get 80% fewer urgent care visits, 66% fewer hospitalizations. Those are really key things that you can sell to residents and family members that if you come to a Brookdale community, you are going to be getting a better quality experience. You won't be spending a lot of money going out to ER visits and hospitalizations because we're driving improved results there. And so we really are focused on our residents. We're really focused on driving resident satisfaction. Dawn mentioned earlier, we're seeing improvements in our Net Promoter Score ratings this year that have continued over the last couple of years. We're continuing to focus on that. And so ultimately, it's driving a great resident experience and making sure that we're focused on them.

That's perfect. And I apologize for bringing up the discounting again, but could you share any metrics, such as the percentage of move-ins that received discounts compared to last year or the average percentage discount versus last year? Any information that could help us track this would be appreciated, especially with the current attention on that 10 basis point spread.

Right, I think that we certainly wouldn't put anything out regarding discounting because there's always this kind of a level of discounting that we have. You see that in our step down in our RevPOR. Maybe looking at the RevPOR step down is something that I would point to. Again, we'll focus on that. If I look at the ExPOR, RevPOR year-over-year, Josh, what I would say is that there is some level of variability in the base here that's causing that to be a little bit closer than we would like. Just again, last year, we saw the move-in disruption from the third-party referrals. We had some visibility into our incentive plans. And so again, there's variability quarter-by-quarter, but we're certainly very focused on making sure that we are appropriately discounting, which is why I think Denise is talking about, Chad talked about the incentives that we're running are more local. They're more targeted at the occupancy bands as opposed to spread throughout. We're being very conscious of where that is being done and what we're doing.

And your next question comes from the line of Tao Qiu with Macquarie Group.

Could you help us bridge the 5% RevPAR growth that you achieved in the first half of the year to your higher full-year RevPAR guidance range given the trade-off in occupancy and rate we saw? And also, how much of the lift will be coming from organic performance and how much from asset and lease divestment? If you could also talk about kind of the EBITDA and free cash flow expectation for the dispositions. I heard some headwind mentioned on the timing of the Ventas lease transition, but just wanted to size up the potential benefits in the second half.

That's a great question. I believe the link to RevPAR is primarily related to Ventas. We made it clear that the transition of the 55 communities from Ventas would positively impact our metrics, occupancy, and RevPAR. This transition will serve as a bridge in our modeling from the first half to the second half of the year. Historically, if you analyze the trends from the second quarter to the third quarter, the decrease we expect from the third quarter to the fourth quarter could also be seen in our projections for 2025, similar to what we anticipate in 2024. I also expect the impact from the transition communities associated with Ventas to be more pronounced in the fourth quarter.

Got it. And Denise, I heard that earlier comment about the work you're doing on the collateralized assets up for refinancing in 2027. I think you said that the plan is to bring them out of the collateral pool. Just wondering if you could elaborate a little bit more on the plan there. And also curious, the second SWAT team that you deploy there, are they doing anything different versus Team 1?

Okay. Yes. As you know, about 88% of our debt is nonrecourse and is held as mortgages at the property level. And so we have a debt pool that is coming up in 2027. And how do you uphold the amount of your loan is through your collateral value. So the higher your collateral value, the more dollars you can receive from that loan. Our intention is not to receive more dollars from the loan, but to pull assets out of the collateral pool. So we will hold them as unencumbered assets that we can then use later on for additional growth or whatever we need to do as an unencumbered asset. So that's how we're focused on driving the performance of the collateral pool so we can remove assets, hold them as unencumbered to use later on. And the second SWAT team, it's really no different than the first SWAT team. You're still working on how do you improve the operational performance. It's just a different set of assets and each asset has its own need. And they are very much our local needs. Some might need dining room chairs, some might need paint and wallpaper, some might need a total redo. It runs the gamut, and it really is property by property by property.

Thank you, and ladies and gentlemen, that ends our question-and-answer session for today. Ladies and gentlemen, this now concludes today's conference call. You may now disconnect.