8-K
Brookdale Senior Living Inc. (BKD)
| UNITED STATES<br>SECURITIES AND EXCHANGE COMMISSION<br>Washington, D.C. 20549 | |||||||||
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| FORM | 8-K | ||||||||
| CURRENT REPORT<br>Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934 | |||||||||
| Date of Report (Date of earliest event reported) | May 8, 2023 | Brookdale Senior Living Inc. | |||||||
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| (Exact name of registrant as specified in its charter) | Delaware | 001-32641 | 20-3068069 | ||||||
| --- | --- | --- | |||||||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | 111 Westwood Place, | Suite 400, | Brentwood, | Tennessee | 37027 | ||
| --- | --- | --- | --- | --- | |||||
| (Address of principal executive offices) | (Zip Code) | Registrant's telephone number, including area code | (615) | 221-2250 | |||||
| --- | --- | --- | --- | ||||||
| (Former name or former address, if changed since last report.) | |||||||||
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): | |||||||||
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||||||
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||||||
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||||||
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 Par Value Per Share | BKD | New York Stock Exchange |
| 7.00% Tangible Equity Units | BKDT | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Section 2 - Financial Information
Item 2.02 Results of Operations and Financial Condition.
On May 8, 2023, Brookdale Senior Living Inc. (the "Company") issued a press release announcing its first quarter 2023 financial results and announcing a conference call to review these results. A copy of the press release is furnished herewith as Exhibit 99.1.
Supplemental information related to the Company's first quarter 2023 results is furnished herewith as Exhibit 99.2.
The information furnished pursuant to this Current Report on Form 8-K (including the exhibits hereto) shall not be considered "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any filing by the Company under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, unless the Company expressly sets forth by specific reference in such filing that such information is to be considered "filed" or incorporated by reference therein.
Section 7 - Regulation FD
Item 7.01 Regulation FD Disclosure.
The information set forth in Item 2.02 of this report is incorporated herein by reference.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press Release dated May 8, 2023
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BROOKDALE SENIOR LIVING INC. | |||
|---|---|---|---|
| Date: | May 8, 2023 | By: | /s/ Chad C. White |
| Name: | Chad C. White | ||
| Title: | Executive Vice President, General Counsel and Secretary |
Document
Exhibit 99.1
Brookdale Announces First Quarter 2023 Results
Nashville, Tenn., May 8, 2023 - Brookdale Senior Living Inc. (NYSE: BKD) ("Brookdale" or the "Company") announced results for the quarter ended March 31, 2023.
HIGHLIGHTS
•Delivered first quarter 2023 financial results above expectations.
•Revenue per available unit (RevPAR) and revenue per occupied unit (RevPOR) increased year-over-year 12.9% and 8.6%, respectively, on a consolidated basis.
•No mortgage debt maturities until September 2024 through proactive financing management.
“Thanks to our passionate community of associates and strong leadership teams, we delivered a meaningful improvement in first quarter Adjusted EBITDA over the prior year. We are firmly on the path to continued recovery, and with these results, we have gained momentum,” said Lucinda ("Cindy") Baier, Brookdale’s President and CEO. “Our scale, clinical expertise, and innovative healthcare services set us apart from our competitors, and we plan to leverage our strengths and maximize compelling demographic tailwinds to create significant value for our shareholders. I am grateful for the trust that our residents place in Brookdale and look forward to serving a growing number of residents in the second quarter and years to come.”
SUMMARY OF FIRST QUARTER FINANCIAL RESULTS
Consolidated summary of operating results and metrics:
| Year-Over-Year<br>Increase / (Decrease) | Sequential<br>Increase / (Decrease) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in millions, except RevPAR and RevPOR) | 1Q 2023 | 1Q 2022 | Amount | Percent | 4Q 2022 | Amount | Percent | |||||
| Resident fee revenue | $ | 713.4 | $ | 637.0 | $ | 76.4 | 12.0% | $ | 657.9 | $ | 55.5 | 8.4% |
| Facility operating expense | 530.8 | 512.8 | 18.0 | 3.5% | 531.7 | (0.9) | (0.2)% | |||||
| General and administrative expense | 48.6 | 45.1 | 3.5 | 7.8% | 40.4 | 8.2 | 20.3% | |||||
| Net income (loss) | (44.6) | (100.0) | (55.4) | (55.4)% | (25.7) | 18.9 | 73.5% | |||||
| Adjusted EBITDA (1) | 88.6 | 37.2 | 51.4 | 138.2% | 46.6 | 42.0 | 90.1% | |||||
| RevPAR | $ | 4,551 | $ | 4,032 | $ | 519 | 12.9% | $ | 4,199 | $ | 352 | 8.4% |
| Weighted average occupancy | 76.3% | 73.4% | 290 bps | n/a | 77.1% | (80) bps | n/a | |||||
| RevPOR | $ | 5,963 | $ | 5,493 | $ | 470 | 8.6% | $ | 5,446 | $ | 517 | 9.5% |
(1) Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP. See "Reconciliations of Non-GAAP Financial Measures" for the Company's definition of such measure, reconciliations to the most comparable GAAP financial measure, and other important information regarding the use of the Company's non-GAAP financial measures.
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Same community(2) summary of operating results and metrics:
| Year-Over-Year<br>Increase / (Decrease) | Sequential Increase / (Decrease) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in millions, except RevPAR and RevPOR) | 1Q 2023 | 1Q 2022 | Amount | Percent | 4Q 2022 | Amount | Percent | |||||
| Resident fee revenue | $ | 698.6 | $ | 617.8 | $ | 80.8 | 13.1% | $ | 644.1 | $ | 54.5 | 8.5% |
| Facility operating expense | $ | 516.0 | $ | 496.4 | $ | 19.6 | 3.9% | $ | 509.4 | $ | 6.6 | 1.3% |
| RevPAR | $ | 4,551 | $ | 4,025 | $ | 526 | 13.1% | $ | 4,196 | $ | 355 | 8.5% |
| Weighted average occupancy | 76.5% | 73.4% | 310 bps | n/a | 77.3% | (80) bps | n/a | |||||
| RevPOR | $ | 5,949 | $ | 5,481 | $ | 468 | 8.5% | $ | 5,431 | $ | 518 | 9.5% |
(2) The same community senior housing portfolio includes operating results and data for 635 communities consolidated and operational for the full period in both comparison years. Consolidated communities excluded from the same community portfolio include communities acquired or disposed of since the beginning of the prior year, communities classified as assets held for sale, certain communities planned for disposition, certain communities that have undergone or are undergoing expansion, redevelopment, and repositioning projects, and certain communities that have experienced a casualty event that significantly impacts their operations. To aid in comparability, same community operating results exclude natural disaster expense.
Recent consolidated occupancy trend:
| 2022 | ||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | |||||||||||||||||||||||
| Weighted average | 73.4 | % | 73.3 | % | 73.6 | % | 73.9 | % | 74.6 | % | 75.2 | % | 75.9 | % | 76.4 | % | 76.9 | % | 77.2 | % | 77.0 | % | 77.0 | % | ||||||||||
| Month end | 74.2 | % | 74.4 | % | 75.0 | % | 75.3 | % | 76.2 | % | 76.6 | % | 77.1 | % | 77.9 | % | 78.4 | % | 78.2 | % | 78.1 | % | 78.1 | % | 2023 | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||||||||||||||
| Jan | Feb | Mar | Apr | |||||||||||||||||||||||||||||||
| Weighted average | 76.6 | % | 76.3 | % | 76.1 | % | 76.2 | % | ||||||||||||||||||||||||||
| Month end | 77.6 | % | 77.4 | % | 77.6 | % | 77.6 | % |
OVERVIEW OF FIRST QUARTER RESULTS
•Resident fee revenue.
•1Q 2023 vs 1Q 2022:
◦Resident fees increased primarily due to the increases in RevPOR and occupancy.
◦The increase in RevPOR was primarily the result of in-place rate increases.
◦The increase in occupancy primarily reflects the impact of the Company's execution on key initiatives to rebuild occupancy lost due to the COVID-19 pandemic.
•1Q 2023 vs 4Q 2022: Resident fees increased primarily due to the increase in RevPOR, reflecting in-place rate increases, partially offset by an 80 basis point decrease in weighted average occupancy consistent with historical seasonal trends.
•Facility operating expense.
•1Q 2023 vs 1Q 2022: The increase was primarily due to broad inflationary pressure, partially offset by a decrease in the use of premium labor, primarily contract labor.
•1Q 2023 vs 4Q 2022: The decrease in facility operating expense was primarily due to a decrease in natural disaster expense as a result of expenses incurred in the prior period for Hurricane Ian and Winter Storm Elliott, partially offset by a 1.3% increase in same community facility operating expense.
•General and administrative expense.
•1Q 2023 vs 1Q 2022: The increase was primarily attributable to an increase in organizational restructuring costs primarily for severance costs for the Company's senior leadership changes.
•1Q 2023 vs 4Q 2022: The increase was primarily attributable to an increase in estimated incentive compensation costs and the increase in organizational restructuring costs previously discussed.
•Net income (loss).
•1Q 2023 vs 1Q 2022: The decrease in net loss was primarily attributable to the net impact of the revenue and facility operating expense factors previously discussed and a decrease in asset impairment expense compared to the prior year period. These changes were partially offset by an increase in debt interest expense compared to the prior year period.
•1Q 2023 vs 4Q 2022: The increase in net loss was primarily attributable to the $73.9 million non-cash gain on sale of communities recognized in the fourth quarter of 2022 for the amendment of leases for 16 communities offset by the net impact of the resident fee revenue and facility operating expense factors previously discussed.
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•Adjusted EBITDA.
•1Q 2023 vs 1Q 2022: The increase in Adjusted EBITDA was primarily attributable to the net impact of the resident fee revenue and facility operating expense factors previously discussed, partially offset by an increase in cash facility operating lease payments primarily due to the reclassification of lease costs for 16 communities from financing leases to operating leases as a result of a lease amendment subsequent to the prior year period.
•1Q 2023 vs 4Q 2022: The increase in Adjusted EBITDA was primarily attributable to the increase in resident fee revenue. These amounts were partially offset by a $6.5 million increase in cash facility operating lease payments primarily due to the reclassification of lease costs and the increase in general and administrative expense previously discussed.
LIQUIDITY
The table below presents a summary of the Company’s net cash provided by (used in) operating activities, non-development capital expenditures, net, and Adjusted Free Cash Flow.
| Year-Over-Year<br>Increase / (Decrease) | Sequential<br>Increase / (Decrease) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| ($ in millions) | 1Q 2023 | 1Q 2022 | Amount | 4Q 2022 | Amount | |||||
| Net cash provided by (used in) operating activities | $ | 24.0 | $ | (23.3) | $ | 47.3 | $ | (48.6) | $ | 72.6 |
| Non-development capital expenditures, net | 62.9 | 39.3 | 23.6 | 39.3 | 23.6 | |||||
| Adjusted Free Cash Flow (3) | (21.2) | (53.5) | 32.3 | (103.6) | 82.4 |
(3) Adjusted Free Cash Flow is a financial measure that is not calculated in accordance with GAAP. See "Reconciliations of Non-GAAP Financial Measures" for the Company's definition of such measure, reconciliations to the most comparable GAAP financial measure and other important information regarding the use of the Company's non-GAAP financial measures.
•Net cash provided by (used in) operating activities.
•1Q 2023 vs 1Q 2022: The change in net cash provided by (used in) operating activities was primarily attributable to an increase in resident fee revenue compared to the prior year period, partially offset by an increase in facility operating expense and an increase in debt interest expense compared to the prior year period.
•1Q 2023 vs 4Q 2022: The change in net cash provided by (used in) operating activities was primarily attributable to an increase in resident fee revenue compared to the prior period and $31.6 million paid during the fourth quarter of 2022 for previously deferred payroll taxes for 2020, partially offset by an increase in insurance premium payments due to the timing of annual payments.
•Non-development capital expenditures, net. The increase in non-development capital expenditures, net of lessor reimbursements, was primarily attributable to an increase in remediation costs at the Company's communities resulting from natural disasters primarily from the impact of Winter Storm Elliott and a decrease in reimbursements from lessors.
•Adjusted Free Cash Flow.
•1Q 2023 vs 1Q 2022: The $32.3 million change in Adjusted Free Cash Flow was primarily attributable to the change in net cash provided by (used in) operating activities and an increase in reimbursement from the Company's property and casualty insurance policies, partially offset by the increase in non-development capital expenditures, net.
•1Q 2023 vs 4Q 2022: The $82.4 million change in Adjusted Free Cash Flow was attributable to the change in net cash provided by (used in) operating activities, excluding $24.9 million of changes in prepaid insurance premiums financed with notes payable, and an increase in reimbursement from the Company's property and casualty insurance policies. These amounts were partially offset by the increase in non-development capital expenditures, net.
•Total liquidity. Total liquidity of $438.6 million as of March 31, 2023 included $362.2 million of unrestricted cash and cash equivalents, $69.0 million of marketable securities, and $7.4 million of availability on the Company's secured credit facility. Total liquidity as of March 31, 2023 decreased $14.0 million from December 31, 2022, primarily attributable to negative $21.2 million of Adjusted Free Cash Flow.
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TRANSACTION AND FINANCING UPDATE
The Company completed the sale of its one remaining entrance fee community (306 units) on May 1, 2023. The Company received cash proceeds of $12.3 million, net of $29.6 million in mortgage debt repaid and transaction costs, at closing.
Subsequent to the three months ended March 31, 2023, the Company and Welltower Inc. ("Welltower") entered into amendments to the Company’s existing lease arrangements pursuant to which the Company continues to lease 74 communities. In connection with the amendments, the Company extended the maturity of one lease involving 39 communities from December 31, 2026 until June 30, 2032. As a result, the Company's amended lease arrangements provide that the current term for 69 of the communities will expire on June 30, 2032 and the current term for five of the communities will expire on December 31, 2024. The amendments did not change the amount of required lease payments over the previous term of the leases or the annual lease escalators. In addition, Welltower agreed to make available a pool in the aggregate amount of up to $17.0 million to fund costs associated with certain capital expenditure projects for 69 of the communities. Upon reimbursement of such expenditures, the annual minimum rent under the lease will prospectively increase by the amount of the reimbursement multiplied by the sum of the then current SOFR (subject to a floor of 3.0%) and a margin of 4.0%, and such amount will escalate annually consistent with the minimum rent escalation provisions of the 39 community lease.
The Company expects the amended leases for 35 of such communities to be prospectively reclassified as operating leases subsequent to the amendment. The Company expects the reclassification of such lease costs to operating lease classification will result in an approximately $19.0 million increase in cash paid for operating leases for the remainder of 2023 and an offsetting decrease in cash paid for financing leases.
The amendments replaced the net worth covenant provisions requiring the Company to maintain at least $400.0 million of stockholders' equity with a consolidated tangible net worth covenant requiring the Company to maintain at least $2.0 billion of tangible net worth, generally calculated as stockholders' equity plus accumulated depreciation and amortization less intangible assets and further adjusted for certain other items. Such calculation is generally similar to the tangible net worth covenants within certain of the Company’s long-term debt documents. So long as it maintains tangible net worth as defined in the leases of at least $1.5 billion, the Company will also be able to cure any breach by posting collateral with Welltower. As of March 31, 2023, the Company had tangible net worth of approximately $4.4 billion using the definition in the leases.
2023 OUTLOOK
For the second quarter 2023, the Company is providing the following guidance:
| Second Quarter 2023 Guidance | |
|---|---|
| RevPAR year-over-year growth | 11.5% - 12.0% |
| Adjusted EBITDA | $72 million - $77 million |
In the aggregate, the Company expects its full-year 2023 non-development capital expenditures, net of anticipated lessor reimbursements, to be approximately $200.0 million, excluding reimbursable remediation costs at the Company's communities resulting from 2022 natural disasters. The Company anticipates up to an additional $20.0 million in remediation costs at the Company's communities resulting from recent natural disasters, and such costs are expected to be reimbursed from the Company's property and casualty insurance policies in 2023 or 2024.
This guidance gives effect to the estimated impact of the lease accounting change associated with the lease amendment and the sale of the entrance fee community, both described in the Transaction and Financing Update herein, and excludes future acquisition or disposition activity. Reconciliation of the non-GAAP financial measure included in the foregoing guidance to the most comparable GAAP financial measure is not available without unreasonable effort due to the inherent difficulty in forecasting the timing or amounts of items required to reconcile Adjusted EBITDA from the Company's net income (loss). Variability in the timing or amounts of items required to reconcile the measure may have a significant impact on the Company's future GAAP results.
SUPPLEMENTAL INFORMATION
The Company will post on its website at brookdaleinvestors.com supplemental information relating to the Company's first quarter results, an updated investor presentation, and a copy of this earnings release. The supplemental information and a copy of this earnings release will also be furnished in a Form 8-K to be filed with the SEC.
EARNINGS CONFERENCE CALL
Brookdale's management will conduct a conference call to discuss the financial results for the first quarter on May 9, 2023 at 9:00 AM ET. The conference call can be accessed by dialing (833) 470-1428 (from within the U.S.) or (929) 526-1599 (from outside of the U.S.) ten minutes prior to the scheduled start and referencing the access code "049343".
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A webcast of the conference call will be available to the public on a listen-only basis at brookdaleinvestors.com. Please allow extra time before the call to download the necessary software required to listen to the internet broadcast. A replay of the webcast will be available through the website following the call.
For those who cannot listen to the live call, a replay of the webcast will be available until 11:59 PM ET on May 16, 2023 by dialing (866) 813-9403 (from within the U.S.) or +44 (204) 525-0658 (from outside of the U.S.) and referencing access code "653070".
ABOUT BROOKDALE SENIOR LIVING
Brookdale Senior Living Inc. is the nation’s premier operator of senior living communities. The Company is committed to its mission of enriching the lives of the people it serves with compassion, respect, excellence, and integrity. The Company, through its affiliates, operates independent living, assisted living, memory care, and continuing care retirement communities. Through its comprehensive network, Brookdale helps to provide seniors with care and services in an environment that feels like home. The Company’s expertise in healthcare, hospitality, and real estate provides residents with opportunities to improve wellness, pursue passions, and stay connected with friends and loved ones. Brookdale, through its affiliates, operates and manages 673 communities in 41 states as of March 31, 2023, with the ability to serve more than 60,000 residents. Brookdale's stock trades on the New York Stock Exchange under the ticker symbol BKD. For more information, visit brookdale.com or connect with Brookdale on Facebook at facebook.com/brookdaleseniorliving or Twitter at twitter.com/brookdaleliving.
DEFINITIONS OF REVPAR AND REVPOR
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. 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, the impacts of the COVID-19 pandemic, including the response efforts of federal, state, and local government authorities, businesses, individuals, and the Company on the Company's business, results of operations, cash flow, revenue, expenses, liquidity, and its strategic initiatives, including plans for future growth, which will depend on many factors, some of which cannot be foreseen, including the duration, severity, and breadth of the pandemic and any resurgence or variants of the disease, the impact of COVID-19 on the nation’s economy and debt and equity markets and the local economies in the Company's markets, the development, availability, utilization, and efficacy of COVID-19 testing, therapeutic agents, and vaccines and the prioritization of such resources among businesses and demographic groups, government financial and regulatory relief efforts that may become available to business and individuals, including the Company's ability to qualify for and satisfy the terms and conditions of financial relief, perceptions regarding the safety of senior living communities during and after the pandemic, changes in demand for senior living communities and the Company's ability to adapt its sales and marketing efforts to meet that demand, the impact of COVID-19 on the Company's residents’ and their families’ ability to afford its resident fees, including due to changes in unemployment rates, consumer confidence, housing markets, and equity markets caused by COVID-19, changes in the acuity levels of the Company's new residents, the disproportionate impact of COVID-19 on seniors generally and those residing in the Company's communities, the duration and costs of the Company's response efforts, including increased equipment, supplies, labor, litigation, testing, vaccination clinic, health plan, and other expenses, greater use of contract labor, overtime, and other premium labor due to COVID-19 and general labor market conditions, the impact of COVID-19 on the Company's ability to complete financings and refinancings of various assets, or other transactions or to generate sufficient cash flow to cover required debt, interest, and lease payments and to satisfy financial and other covenants in its debt and lease documents, increased regulatory requirements, including the costs of unfunded, mandatory testing of residents and associates and provision of test kits to the Company's health plan participants, increased enforcement actions resulting from COVID-19, government action that may limit the Company's collection or discharge efforts for delinquent accounts, and the
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frequency and magnitude of legal actions and liability claims that may arise due to COVID-19 or the Company's response efforts; 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 (including due to the pandemic), 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, including due to the pandemic; 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; 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 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 the pandemic or 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; costs to respond to, and adverse determinations resulting from, government reviews, audits and investigations; the cost and difficulty of complying with increasing and evolving regulation; changes in, or its failure to comply with, employment-related laws and regulations; unanticipated costs to comply with legislative or regulatory developments; the risks associated with current global economic conditions and general economic factors such as inflation, the consumer price index, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits, and insurance, interest rates, and tax rates; 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.
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Condensed Consolidated Statements of Operations
| Three Months Ended<br>March 31, | ||||
|---|---|---|---|---|
| (in thousands, except per share data) | 2023 | 2022 | ||
| Resident fees | $ | 713,404 | $ | 636,974 |
| Management fees | 2,577 | 3,329 | ||
| Reimbursed costs incurred on behalf of managed communities | 34,954 | 37,141 | ||
| Other operating income | 2,328 | 376 | ||
| Total revenue and other operating income | 753,263 | 677,820 | ||
| Facility operating expense (excluding facility depreciation and amortization of $79,317 and<br><br>$79,932, respectively) | 530,807 | 512,764 | ||
| General and administrative expense (including non-cash stock-based compensation expense of<br><br>$3,104 and $3,885, respectively) | 48,619 | 45,126 | ||
| Facility operating lease expense | 46,127 | 41,564 | ||
| Depreciation and amortization | 84,934 | 85,684 | ||
| Asset impairment | — | 9,075 | ||
| Costs incurred on behalf of managed communities | 34,954 | 37,141 | ||
| Income (loss) from operations | 7,822 | (53,534) | ||
| Interest income | 5,326 | 95 | ||
| Interest expense: | ||||
| Debt | (50,315) | (33,157) | ||
| Financing lease obligations | (6,552) | (12,058) | ||
| Amortization of deferred financing costs | (1,940) | (1,542) | ||
| Change in fair value of derivatives | (904) | 3,403 | ||
| Equity in earnings (loss) of unconsolidated ventures | (577) | (4,894) | ||
| Non-operating gain (loss) on sale of assets, net | — | (294) | ||
| Other non-operating income (loss) | 3,149 | (27) | ||
| Income (loss) before income taxes | (43,991) | (102,008) | ||
| Benefit (provision) for income taxes | (572) | 1,976 | ||
| Net income (loss) | (44,563) | (100,032) | ||
| Net (income) loss attributable to noncontrolling interest | 14 | 19 | ||
| Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders | $ | (44,549) | $ | (100,013) |
| Basic and diluted net income (loss) per share attributable to Brookdale Senior Living Inc. common stockholders | $ | (0.20) | $ | (0.54) |
| Weighted average shares used in computing basic and diluted net income (loss) per share | 224,578 | 185,916 |
Page 7
Condensed Consolidated Balance Sheets
| (in thousands) | March 31, 2023 | December 31, 2022 | ||
|---|---|---|---|---|
| Cash and cash equivalents | $ | 362,235 | $ | 398,850 |
| Marketable securities | 69,009 | 48,680 | ||
| Restricted cash | 29,374 | 27,735 | ||
| Accounts receivable, net | 52,618 | 55,761 | ||
| Assets held for sale | 23,555 | — | ||
| Prepaid expenses and other current assets, net | 129,640 | 106,067 | ||
| Total current assets | 666,431 | 637,093 | ||
| Property, plant and equipment and leasehold intangibles, net | 4,493,002 | 4,535,702 | ||
| Operating lease right-of-use assets | 565,641 | 597,130 | ||
| Other assets, net | 160,785 | 167,137 | ||
| Total assets | $ | 5,885,859 | $ | 5,937,062 |
| Current portion of long-term debt | $ | 87,711 | $ | 66,043 |
| Current portion of financing lease obligations | 24,683 | 24,059 | ||
| Current portion of operating lease obligations | 177,894 | 176,758 | ||
| Liabilities held for sale | 19,455 | — | ||
| Other current liabilities | 397,533 | 374,345 | ||
| Total current liabilities | 707,276 | 641,205 | ||
| Long-term debt, less current portion | 3,772,254 | 3,784,099 | ||
| Financing lease obligations, less current portion | 218,349 | 224,801 | ||
| Operating lease obligations, less current portion | 575,603 | 616,973 | ||
| Other liabilities | 71,523 | 85,831 | ||
| Total liabilities | 5,345,005 | 5,352,909 | ||
| Total Brookdale Senior Living Inc. stockholders' equity | 539,320 | 582,605 | ||
| Noncontrolling interest | 1,534 | 1,548 | ||
| Total equity | 540,854 | 584,153 | ||
| Total liabilities and equity | $ | 5,885,859 | $ | 5,937,062 |
Page 8
Condensed Consolidated Statements of Cash Flows
| Three Months Ended March 31, | ||||
|---|---|---|---|---|
| (in thousands) | 2023 | 2022 | ||
| Cash Flows from Operating Activities | ||||
| Net income (loss) | $ | (44,563) | $ | (100,032) |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||
| Depreciation and amortization, net | 86,874 | 87,226 | ||
| Asset impairment | — | 9,075 | ||
| Equity in (earnings) loss of unconsolidated ventures | 577 | 4,894 | ||
| Distributions from unconsolidated ventures from cumulative share of net earnings | — | 561 | ||
| Amortization of entrance fees | (508) | (726) | ||
| Proceeds from deferred entrance fee revenue | 324 | 1,036 | ||
| Deferred income tax (benefit) provision | 244 | (2,304) | ||
| Operating lease expense adjustment | (10,805) | (8,307) | ||
| Change in fair value of derivatives | 904 | (3,403) | ||
| Loss (gain) on sale of assets, net | — | 294 | ||
| Non-cash stock-based compensation expense | 3,104 | 3,885 | ||
| Property and casualty insurance income | (3,295) | (43) | ||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable, net | 3,143 | 1,185 | ||
| Prepaid expenses and other assets, net | (7,602) | (4,734) | ||
| Prepaid insurance premiums financed with notes payable | (19,305) | (16,629) | ||
| Trade accounts payable and accrued expenses | (1,386) | (2,630) | ||
| Refundable fees and deferred revenue | 14,092 | 5,907 | ||
| Operating lease assets and liabilities for lessor capital expenditure<br>reimbursements | 2,244 | 1,490 | ||
| Net cash provided by (used in) operating activities | 24,042 | (23,255) | ||
| Cash Flows from Investing Activities | ||||
| Purchase of marketable securities | (49,674) | (125,990) | ||
| Sale and maturities of marketable securities | 30,000 | 129,000 | ||
| Capital expenditures, net of related payables | (49,700) | (39,956) | ||
| Investment in unconsolidated ventures | — | (82) | ||
| Proceeds from sale of assets, net | — | 710 | ||
| Property and casualty insurance proceeds | 6,422 | — | ||
| Other | 933 | 155 | ||
| Net cash provided by (used in) investing activities | (62,019) | (36,163) | ||
| Cash Flows from Financing Activities | ||||
| Proceeds from debt | 25,519 | 25,258 | ||
| Repayment of debt and financing lease obligations | (23,322) | (21,440) | ||
| Payment of financing costs, net of related payables | (346) | (76) | ||
| Payments of employee taxes for withheld shares | (1,680) | (4,145) | ||
| Net cash provided by (used in) financing activities | 171 | (403) | ||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | (37,806) | (59,821) | ||
| Cash, cash equivalents, and restricted cash at beginning of period | 474,548 | 438,314 | ||
| Cash, cash equivalents, and restricted cash at end of period | $ | 436,742 | $ | 378,493 |
Page 9
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, gain/loss on facility operating lease termination, operating lease expense adjustment, non-cash stock-based compensation expense, gain/loss on sale of communities, 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; and (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.
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.
Page 10
The table below reconciles the Company's Adjusted EBITDA from net income (loss).
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | March 31, 2023 | December 31, 2022 | March 31, 2022 | |||
| Net income (loss) | $ | (44,563) | $ | (25,651) | $ | (100,032) |
| Provision (benefit) for income taxes | 572 | (473) | (1,976) | |||
| Equity in (earnings) loss of unconsolidated ventures | 577 | 1,429 | 4,894 | |||
| Loss (gain) on debt modification and extinguishment, net | — | 1,357 | — | |||
| Non-operating loss (gain) on sale of assets, net | — | 16 | 294 | |||
| Other non-operating (income) loss | (3,149) | (10,375) | 27 | |||
| Interest expense | 59,711 | 63,256 | 43,354 | |||
| Interest income | (5,326) | (3,870) | (95) | |||
| Income (loss) from operations | 7,822 | 25,689 | (53,534) | |||
| Depreciation and amortization | 84,934 | 88,215 | 85,684 | |||
| Asset impairment | — | 12,256 | 9,075 | |||
| Loss (gain) on sale of communities, net | — | (73,850) | — | |||
| Operating lease expense adjustment | (10,805) | (9,567) | (8,307) | |||
| Non-cash stock-based compensation expense | 3,104 | 3,559 | 3,885 | |||
| Transaction and organizational restructuring costs | 3,568 | 262 | 373 | |||
| Adjusted EBITDA(4) | $ | 88,623 | $ | 46,564 | $ | 37,176 |
(4) Adjusted EBITDA includes a $2.3 million, $4.9 million, and $0.4 million benefit for the three months ended March 31, 2023, December 31, 2022, and March 31, 2022, respectively, of government grants and credits recognized in other operating income.
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. Additionally, Adjusted Free Cash Flow excludes cash used to purchase interest rate cap instruments, as well as any cash provided by settlements of interest rate cap instruments.
Page 11
The table below reconciles Adjusted Free Cash Flow from net cash provided by (used in) operating activities.
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | March 31, 2023 | December 31, 2022 | March 31, 2022 | |||
| Net cash provided by (used in) operating activities | $ | 24,042 | $ | (48,562) | $ | (23,255) |
| Net cash provided by (used in) investing activities | (62,019) | (9,936) | (36,163) | |||
| Net cash provided by (used in) financing activities | 171 | 138,229 | (403) | |||
| Net increase (decrease) in cash, cash equivalents,<br> and restricted cash | $ | (37,806) | $ | 79,731 | $ | (59,821) |
| Net cash provided by (used in) operating activities | $ | 24,042 | $ | (48,562) | $ | (23,255) |
| Distributions from unconsolidated ventures from cumulative share of net earnings | — | — | (561) | |||
| Changes in prepaid insurance premiums financed with notes payable | 19,305 | (5,552) | 16,629 | |||
| Changes in assets and liabilities for lessor capital expenditure reimbursements under operating leases | (2,244) | (4,494) | (1,490) | |||
| Non-development capital expenditures, net | (62,912) | (39,335) | (39,326) | |||
| Property and casualty insurance proceeds | 6,422 | — | — | |||
| Payment of financing lease obligations | (5,852) | (5,615) | (5,490) | |||
| Adjusted Free Cash Flow (5) | $ | (21,239) | $ | (103,558) | $ | (53,493) |
(5) Adjusted Free Cash Flow includes:
•$13.4 million, $1.4 million, and $0.8 million benefit for the three months ended March 31, 2023, December 31, 2022, and March 31, 2022, respectively, from government grants and credits received.
•$1.8 million recoupment for the three months ended March 31, 2022 of accelerated/advanced Medicare payments.
•$31.6 million paid during the three months ended December 31, 2022 for deferred payroll taxes for the year ended December 31, 2020.
•$3.6 million, $0.3 million, and $0.4 million for the three months ended March 31, 2023, December 31, 2022, and March 31, 2022, respectively, for transaction and organizational restructuring costs
Contact:
Jessica Hazel
VP Investor Relations
(615) 564-8104
Jessica.Hazel@brookdale.com
Page 12
a1q23supplemental
Supplemental Information 1st Quarter 2023 Exhibit 99.2
2 Overview 3 Segment Overview 6 Senior Housing 7 General and Administrative ("G&A") Expense 12 Capital Expenditures 13 Cash Facility Lease Payments 14 Capital Structure 15 Definitions 16 Appendix: Non-GAAP Financial Measures 18 Table of Contents
3 Managed 4,725 Owned 31,598 Leased 20,584 Managed 32 Owned 346 Leased 295 673 communities 56,907 units Important Note Regarding Non-GAAP Financial Measures • Adjusted EBITDA and Adjusted Free Cash Flow are financial measures that are not calculated in accordance with GAAP. See "Definitions" and "Non-GAAP Financial Measures" for the definitions of such measures and other important information regarding such measures, including reconciliations to the most comparable GAAP measures. 2022 2023 1Q23 vs 1Q22 ($ in 000s, except RevPAR and RevPOR) 1Q 2Q 3Q 4Q Full Year 1Q Better B (Worse) (W) Resident fee revenue $ 636,974 $ 640,388 $ 650,248 $ 657,919 $ 2,585,529 $ 713,404 $ 713,404 12.0 % Other operating income $ 376 $ 8,411 $ 66,759 $ 4,923 $ 80,469 $ 2,328 NM Net income (loss) $ (100,032) $ (84,283) $ (28,374) $ (25,651) $ (238,340) $ (44,563) 55.5 % Net cash provided by (used in) operating activities $ (23,255) $ 11,577 $ 63,521 $ (48,562) $ 3,281 $ 24,042 NM Adjusted EBITDA $ 37,176 $ 50,714 $ 106,851 $ 46,564 $ 241,305 $ 88,623 138.4 % Adjusted Free Cash Flow $ (53,493) $ (48,463) $ 4,129 $ (103,558) $ (201,385) $ (21,239) 60.3 % RevPAR $ 4,032 $ 4,071 $ 4,150 $ 4,199 $ 4,113 $ 4,551 12.9 % Weighted average occupancy 73.4% 74.6% 76.4% 77.1% 75.4% 76.3% 290 bps RevPOR $ 5,493 $ 5,459 $ 5,432 $ 5,446 $ 5,457 $ 5,963 8.6 % 1Q 2023 weighted average occupancy (consolidated communities) Occupancy Band Community Count % of Period End Communities Greater than 95% 76 12% 90% > 95% 66 10% 85% > 90% 71 11% 80% > 85% 71 11% 75% > 80% 69 11% 70% > 75% 89 14% Less than 70% 199 31% Total 641 100% Overview As of March 31, 2023 Consolidated: 52,182 Consolidated: 641
4 2022 2023 1Q23 vs 1Q22 ($ in 000s) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Resident fee revenue $ 636,974 $ 640,388 $ 650,248 $ 657,919 $ 2,585,529 $ 713,404 12.0 % Management fee revenue 3,329 3,329 2,967 2,395 12,020 2,577 (22.6) % Other operating income 376 8,411 66,759 4,923 80,469 2,328 NM Facility operating expense (512,764) (513,664) (525,510) (531,667) (2,083,605) (530,807) (3.5) % Combined Segment Operating Income 127,915 138,464 194,464 133,570 594,413 187,502 46.6 % General and administrative expense (1) (40,868) (37,904) (37,582) (36,564) (152,918) (41,947) (2.6) % Cash facility operating lease payments (see page 14) (49,871) (49,846) (50,031) (50,442) (200,190) (56,932) (14.2) % Adjusted EBITDA (2) 37,176 50,714 106,851 46,564 241,305 88,623 138.4 % Transaction and Organizational Restructuring Costs (373) (229) (346) (262) (1,210) (3,568) NM Interest expense, net (see page 14) (45,120) (46,909) (51,054) (55,912) (198,995) (51,541) (14.2) % Payment of financing lease obligations (5,490) (5,610) (5,506) (5,615) (22,221) (5,852) (6.6) % Changes in working capital (3) (272) (552) (2,581) (51,578) (54,983) 8,247 NM Non-Development Capital Expenditures, net (see page 13) (39,326) (45,686) (43,819) (39,335) (168,166) (62,912) (60.0) % Property and casualty insurance proceeds — — — — — 6,422 NM Other (4) (88) (191) 584 2,580 2,885 - 6 (658) NM Adjusted Free Cash Flow (5) $ (53,493) $ (48,463) $ 4,129 $ (103,558) $ (201,385) $ (21,239) 60.3 % Adjusted EBITDA and Adjusted Free Cash Flow (1) Excluding non-cash stock-based compensation expense and Transaction and Organizational Restructuring Costs, see page 12. (2) Adjusted EBITDA includes government grants and credits recognized during the respective periods as presented in other operating income. (3) Excludes changes in prepaid insurance premiums financed with notes payable and lessor capital expenditure reimbursements under operating leases. (4) Primarily consists of proceeds from business interruption insurance and state income tax (provision) benefit. (5) In addition to government grants and credits received, the Company’s Adjusted Free Cash Flow for 2022 includes the impacts of repayment of temporary liquidity relief pursuant to the Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”), primarily including $31.6 million paid during the fourth quarter of 2022 for deferred payroll taxes for the year ended December 31, 2020. As of December 31, 2022, the Company has no remaining obligations for the deferred payroll tax program. (6) The allocation of financing lease payment amounts for the May 2023 amendment is preliminary based on management’s estimates derived from the information available at this time and is subject to revision upon finalization of the Company’s accounting and financial reporting processes and reviews for the second quarter of 2023. 2023 Impact 2022 Amendment 2023 Amendment Combined Impact ($ in millions) FY 2023 2Q23 3Q23 4Q23 FY 2023 Cash facility operating lease payments $ (22) $ (5) $ (7) $ (7) $ (41) Adjusted EBITDA (22) (5) (7) (7) (41) Interest expense, net(6) 22 1 1 1 25 Payment of financing lease obligations(6) — 4 6 6 16 Adjusted Free Cash Flow $ — $ — $ — $ — $ — As a result of a lease amendment in the fourth quarter of 2022, for the full year 2023: • Cash facility operating lease payments: include $22 million of reclassified cash lease payments • Interest expense, net: exclude $22 million of the reclassified cash lease payments • Adjusted EBITDA: negatively impacted by $22 million • Adjusted Free Cash Flow: no impact As a result of a lease amendment in May 2023 with a prospective change in lease classification, for the remainder of 2023: • Cash facility operating lease payments: include $19 million of reclassified cash lease payments • Interest expense, net: exclude $3 million of the reclassified cash lease payments (6) • Payment of financing lease obligations: exclude $16 million of the reclassified cash lease payments (6) • Adjusted EBITDA: negatively impacted by $19 million • Adjusted Free Cash Flow: no impact from the change in lease classification
5 (1) Resident fee revenue excluded from definitions of RevPAR and RevPOR is $1.1 million. (2) All Other primarily includes communities operated by the Company pursuant to management agreements. (3) Adjusted EBITDA for the first quarter of 2023 includes $2.3 million of government grants and credits recognized in other operating income. (4) Excludes changes in prepaid insurance premiums financed with notes payable and lessor capital expenditure reimbursements under operating leases. 1Q 2023 ($ in 000s) Total Senior Housing Owned Portfolio Senior Housing Leased Portfolio Corporate All Other (2) Resident fee revenue (1) $ 713,404 $ 418,624 $ 294,780 $ — $ — Management fee revenue 2,577 — — — 2,577 Other operating income 2,328 1,885 443 — — Facility operating expense (530,807) (319,727) (211,080) — — Combined Segment Operating Income 187,502 100,782 84,143 — 2,577 General and administrative expense (excluding non-cash stock-based compensation expense and transaction costs) (see page 12) (41,947) (22,857) (16,095) — (2,995) Cash facility operating lease payments (56,932) — (55,654) (1,278) — Adjusted EBITDA (3) 88,623 77,925 12,394 (1,278) (418) Transaction and Organizational Restructuring Costs (3,568) — — (3,568) — Interest expense, net (51,541) (50,315) (6,250) 5,024 — Payment of financing lease obligations (5,852) — (5,668) (184) — Changes in working capital (4) 8,247 — — 8,247 — Non-Development Capital Expenditures, net (62,912) (27,135) (14,734) (21,043) — Property and casualty insurance proceeds 6,422 — — 6,422 — Other (658) (184) — (474) — Adjusted Free Cash Flow $ (21,239) $ 291 $ (14,258) $ (6,854) $ (418) Adjusted EBITDA and Adjusted Free Cash Flow Distribution
6 2022 2023 1Q23 vs 1Q22 ($ in 000s, except RevPAR and RevPOR) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Total Senior Housing and All Other Revenue (1) $ 640,303 $ 643,717 $ 653,215 $ 660,314 $ 2,597,549 $ 715,981 11.8 % Other operating income $ 376 $ 8,411 $ 66,759 $ 4,923 $ 80,469 $ 2,328 NM Combined Segment Operating Income $ 127,915 $ 138,464 $ 194,464 $ 133,570 $ 594,413 $ 187,502 46.6 % Combined segment operating margin 20.0 % 21.2 % 27.0 % 20.1 % 22.2 % 26.1 % 610 bps Combined segment adjusted operating margin (2) 19.9 % 20.2 % 19.6 % 19.5 % 19.8 % 25.9 % 600 bps Senior Housing Segments (see page 7) Revenue $ 636,974 $ 640,388 $ 650,248 $ 657,919 $ 2,585,529 $ 713,404 12.0 % Other operating income $ 376 $ 8,411 $ 66,759 $ 4,923 $ 80,469 $ 2,328 NM Operating Income $ 124,586 $ 135,135 $ 191,497 $ 131,175 $ 582,393 $ 184,925 48.4 % Operating margin 19.5 % 20.8 % 26.7 % 19.8 % 21.8 % 25.8 % 630 bps Adjusted operating margin (2) 19.5 % 19.8 % 19.2 % 19.2 % 19.4 % 25.6 % 610 bps Number of communities (period end) 645 641 641 641 641 641 (0.6) % Total Average Units 52,586 52,368 52,158 52,166 52,320 52,177 (0.8) % RevPAR $ 4,032 $ 4,071 $ 4,150 $ 4,199 $ 4,113 $ 4,551 12.9 % Weighted average occupancy 73.4 % 74.6 % 76.4 % 77.1 % 75.4 % 76.3 % 290 bps RevPOR $ 5,493 $ 5,459 $ 5,432 $ 5,446 $ 5,457 $ 5,963 8.6 % All Other All Other Segment Operating Income (comprised solely of management fees) $ 3,329 $ 3,329 $ 2,967 $ 2,395 $ 12,020 $ 2,577 (22.6) % Resident fee revenue under management (3) $ 52,898 $ 54,284 $ 52,712 $ 50,758 $ 210,652 $ 54,820 3.6 % Segment Overview (1) Excludes reimbursed costs on behalf of managed communities. (2) Excludes other operating income. (3) Not included in consolidated reported amounts.
7 2022 2023 1Q23 vs 1Q22 ($ in 000s, except RevPAR and RevPOR) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Independent Living Revenue $ 124,404 $ 125,578 $ 128,106 $ 129,705 $ 507,793 $ 140,602 13.0 % Other operating income $ 2 $ 1,159 $ 9,520 $ 225 $ 10,906 $ 54 NM Segment Operating Income $ 37,684 $ 38,709 $ 46,395 $ 36,162 $ 158,950 $ 46,833 24.3 % Segment operating margin 30.3 % 30.5 % 33.7 % 27.8 % 30.6 % 33.3 % 300 bps Segment adjusted operating margin (1) 30.3 % 29.9 % 28.8 % 27.7 % 29.2 % 33.3 % 300 bps Number of communities (period end) 68 68 68 68 68 68 — % Total Average Units 12,568 12,569 12,569 12,569 12,569 12,571 — % RevPAR $ 3,299 $ 3,330 $ 3,397 $ 3,440 $ 3,367 $ 3,728 13.0 % Weighted average occupancy 74.6 % 76.0 % 78.3 % 79.1 % 77.0 % 78.6 % 400 bps RevPOR $ 4,423 $ 4,380 $ 4,337 $ 4,348 $ 4,371 $ 4,741 7.2 % Assisted Living and Memory Care Revenue $ 432,132 $ 434,454 $ 442,097 $ 446,409 $ 1,755,092 $ 486,777 12.6 % Other operating income $ 356 $ 6,412 $ 49,721 $ 4,141 $ 60,630 $ 2,027 NM Segment Operating Income $ 76,863 $ 87,588 $ 130,039 $ 85,468 $ 379,958 $ 124,593 62.1 % Segment operating margin 17.8 % 19.9 % 26.4 % 19.0 % 20.9 % 25.5 % 770 bps Segment adjusted operating margin (1) 17.7 % 18.7 % 18.2 % 18.2 % 18.2 % 25.2 % 750 bps Number of communities (period end) 558 554 554 554 554 554 (0.7) % Total Average Units 34,817 34,598 34,398 34,406 34,555 34,414 (1.2) % RevPAR $ 4,136 $ 4,183 $ 4,281 $ 4,322 $ 4,230 $ 4,710 13.9 % Weighted average occupancy 73.0 % 74.2 % 76.2 % 76.8 % 75.1 % 75.9 % 290 bps RevPOR $ 5,665 $ 5,636 $ 5,621 $ 5,623 $ 5,636 $ 6,204 9.5 % CCRCs Revenue $ 80,438 $ 80,356 $ 80,045 $ 81,805 $ 322,644 $ 86,025 6.9 % Other operating income $ 18 $ 840 $ 7,518 $ 557 $ 8,933 $ 247 NM Segment Operating Income $ 10,039 $ 8,838 $ 15,063 $ 9,545 $ 43,485 $ 13,499 34.5 % Segment operating margin 12.5 % 10.9 % 17.2 % 11.6 % 13.1 % 15.6 % 310 bps Segment adjusted operating margin (1) 12.5 % 10.0 % 9.4 % 11.0 % 10.7 % 15.4 % 290 bps Number of communities (period end) 19 19 19 19 19 19 — % Total Average Units 5,201 5,201 5,191 5,191 5,196 5,192 (0.2) % RevPAR $ 5,109 $ 5,115 $ 5,105 $ 5,221 $ 5,138 $ 5,490 7.5 % Weighted average occupancy 73.2 % 73.4 % 73.3 % 73.8 % 73.4 % 73.4 % 20 bps RevPOR $ 6,976 $ 6,970 $ 6,966 $ 7,073 $ 6,997 $ 7,482 7.3 % Senior Housing Segments (1) Excludes other operating income.
8 2022 2023 1Q23 vs 1Q22 ($ in 000s, except RevPAR and RevPOR) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Revenue $ 617,848 $ 623,473 $ 636,112 $ 644,127 $ 2,521,560 $ 698,556 13.1 % Other operating income 358 8,136 65,283 4,827 78,604 2,289 NM Revenue and other operating income 618,206 631,609 701,395 648,954 2,600,164 700,845 13.4 % Community Labor Expense (334,258) (335,214) (338,846) (340,291) (1,348,609) (338,198) (1.2) % Other facility operating expense (162,169) (163,157) (172,393) (169,064) (666,783) (177,850) (9.7) % Facility operating expense(2) (496,427) (498,371) (511,239) (509,355) (2,015,392) (516,048) (4.0) % Same Community Operating Income $ 121,779 $ 133,238 $ 190,156 $ 139,599 $ 584,772 $ 184,797 51.7 % Same Community adjusted operating income(3) $ 121,421 $ 125,102 $ 124,873 $ 134,772 $ 506,168 $ 182,508 50.3 % Same Community operating margin 19.7 % 21.1 % 27.1 % 21.5 % 22.5 % 26.4 % 670 bps Same Community adjusted operating margin(3) 19.7 % 20.1 % 19.6 % 20.9 % 20.1 % 26.1 % 640 bps Total Average Units 51,173 51,175 51,163 51,164 51,169 51,165 — % RevPAR $ 4,025 $ 4,061 $ 4,144 $ 4,196 $ 4,107 $ 4,551 13.1 % Weighted average occupancy 73.4 % 74.7 % 76.5 % 77.3 % 75.5 % 76.5 % 310 bps RevPOR $ 5,481 $ 5,440 $ 5,415 $ 5,431 $ 5,442 $ 5,949 8.5 % Same Community Operating Income / Adjusted Operating Income ($ in millions) $121.8 $133.2 $190.2 $139.6 $184.8 Same Community Other Operating Income Same Community Adjusted Operating Income 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 Same Community RevPAR / Weighted Average Occupancy $4,025 $4,061 $4,144 $4,196 $4,55173.4% 74.7% 76.5% 77.3% 76.5% RevPAR Weighted Average Occupancy 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 Senior Housing: Same Community (1) (1) Same Community portfolio reflects 635 communities which represents 99.1% of the Company's total consolidated communities. (2) Excludes natural disaster expense, consisting primarily of remediation of storm damage, of $8.1 million and $0.6 million for the full year 2022 and the first quarter of 2023, respectively. (3) Excludes other operating income. (2) (3)
9 2022 2023 1Q23 vs 1Q22 ($ in 000s, except RevPAR and RevPOR) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Independent Living Revenue $ 124,404 $ 125,578 $ 128,106 $ 129,705 $ 507,793 $ 140,602 13.0 % Other operating income 2 1,159 9,520 225 10,906 54 NM Community Labor Expense (51,787) (53,229) (53,865) (55,084) (213,965) (54,936) (6.1) % Other facility operating expense (35,015) (34,817) (37,300) (36,978) (144,110) (38,688) (10.5) % Facility operating expense (86,802) (88,046) (91,165) (92,062) (358,075) (93,624) (7.9) % Same Community Operating Income $ 37,604 $ 38,691 $ 46,461 $ 37,868 $ 160,624 $ 47,032 25.1 % Same Community operating margin 30.2 % 30.5 % 33.8 % 29.1 % 31.0 % 33.4 % 320 bps Same Community adjusted operating margin (2) 30.2 % 29.9 % 28.8 % 29.0 % 29.5 % 33.4 % 320 bps Total Average Units 12,568 12,569 12,569 12,569 12,569 12,571 — % RevPAR $ 3,299 $ 3,330 $ 3,397 $ 3,440 $ 3,367 $ 3,728 13.0 % Weighted average occupancy 74.6 % 76.0 % 78.3 % 79.1 % 77.0 % 78.6 % 400 bps RevPOR $ 4,423 $ 4,380 $ 4,337 $ 4,348 $ 4,371 $ 4,741 7.2 % Assisted Living and Memory Care Revenue $ 425,903 $ 430,045 $ 440,184 $ 444,647 $ 1,740,779 $ 484,271 13.7 % Other operating income 356 6,293 49,473 4,140 60,262 2,026 NM Community Labor Expense (241,407) (240,113) (243,098) (243,477) (968,095) (241,308) — % Other facility operating expense (108,988) (109,386) (116,096) (112,556) (447,026) (119,997) (10.1) % Facility operating expense (350,395) (349,499) (359,194) (356,033) (1,415,121) (361,305) (3.1) % Same Community Operating Income $ 75,864 $ 86,839 $ 130,463 $ 92,754 $ 385,920 $ 124,992 64.8 % Same Community operating margin 17.8 % 19.9 % 26.6 % 20.7 % 21.4 % 25.7 % 790 bps Same Community adjusted operating margin (2) 17.7 % 18.7 % 18.4 % 19.9 % 18.7 % 25.4 % 770 bps Total Average Units 34,281 34,282 34,280 34,281 34,281 34,280 — % RevPAR $ 4,141 $ 4,181 $ 4,280 $ 4,324 $ 4,232 $ 4,709 13.7 % Weighted average occupancy 73.0 % 74.2 % 76.2 % 76.9 % 75.1 % 76.0 % 300 bps RevPOR $ 5,676 $ 5,634 $ 5,619 $ 5,622 $ 5,638 $ 6,199 9.2 % CCRCs Revenue $ 67,541 $ 67,850 $ 67,822 $ 69,775 $ 272,988 $ 73,683 9.1 % Other operating income — 684 6,290 462 7,436 209 NM Community Labor Expense (41,064) (41,872) (41,883) (41,730) (166,549) (41,954) (2.2) % Other facility operating expense (18,166) (18,954) (18,997) (19,530) (75,647) (19,165) (5.5) % Facility operating expense (59,230) (60,826) (60,880) (61,260) (242,196) (61,119) (3.2) % Same Community Operating Income $ 8,311 $ 7,708 $ 13,232 $ 8,977 $ 38,228 $ 12,773 53.7 % Same Community operating margin 12.3 % 11.2 % 17.9 % 12.8 % 13.6 % 17.3 % 500 bps Same Community adjusted operating margin (2) 12.3 % 10.4 % 10.2 % 12.2 % 11.3 % 17.1 % 480 bps Total Average Units 4,324 4,324 4,314 4,314 4,319 4,314 (0.2) % RevPAR $ 5,207 $ 5,231 $ 5,240 $ 5,391 $ 5,267 $ 5,693 9.3 % Weighted average occupancy 73.7 % 74.1 % 74.2 % 74.8 % 74.2 % 74.5 % 80 bps RevPOR $ 7,063 $ 7,059 $ 7,067 $ 7,210 $ 7,100 $ 7,638 8.1 % Senior Housing Segments: Same Community (1) (1) Same Community portfolio reflects 68 Independent Living communities, 551 Assisted Living and Memory Care communities, and 16 CCRC communities. (2) Excludes other operating income.
10 2022 2023 1Q23 vs 1Q22 ($ in 000s, except RevPAR and RevPOR) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Revenue $ 370,337 $ 374,231 $ 379,913 $ 386,244 $ 1,510,725 $ 418,624 13.0 % Other operating income 300 5,240 38,372 3,670 47,582 1,885 NM Facility operating expense (304,715) (307,694) (314,480) (319,835) (1,246,724) (319,727) (4.9) % Owned Portfolio Operating Income $ 65,922 $ 71,777 $ 103,805 $ 70,079 $ 311,583 $ 100,782 52.9 % Owned Portfolio operating margin 17.8 % 18.9 % 24.8 % 18.0 % 20.0 % 24.0 % 620 bps Owned Portfolio adjusted operating margin (1) 17.7 % 17.8 % 17.2 % 17.2 % 17.5 % 23.6 % 590 bps Additional Information Interest expense: property level and corporate debt $ (33,157) $ (35,693) $ (41,330) $ (47,689) $ (157,869) $ (50,315) (51.7) % Community level capital expenditures, net (see page 13) $ (20,907) $ (25,934) $ (24,568) $ (20,341) $ (91,750) $ (27,135) (29.8) % Number of communities (period end) 347 346 346 346 346 346 (0.3) % Total Average Units 31,635 31,694 31,588 31,596 31,629 31,597 (0.1) % RevPAR $ 3,893 $ 3,928 $ 3,999 $ 4,066 $ 3,971 $ 4,405 13.2 % Weighted average occupancy 72.5 % 73.6 % 75.4 % 76.4 % 74.5 % 75.8 % 330 bps RevPOR $ 5,370 $ 5,333 $ 5,301 $ 5,324 $ 5,332 $ 5,814 8.3 % Senior Housing Owned Portfolio Interest Coverage(2) as of March 31, 2023 1.47x Interest Coverage(2) as of March 31, 2023 (excluding other operating income) 1.19x Net Debt as of March 31, 2023 (see page 15) $3,418,016 (1) Excludes other operating income. (2) Interest Coverage is calculated based on the trailing-twelve months Owned Portfolio Operating Income adjusted for an implied 5% management fee and capital expenditures at $350/unit, divided by the trailing-twelve months property level and corporate debt interest expense.
11 2022 2023 1Q23 vs 1Q22 ($ in 000s, except RevPAR and RevPOR) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Revenue $ 266,637 $ 266,157 $ 270,335 $ 271,675 $ 1,074,804 $ 294,780 10.6 % Other operating income 76 3,171 28,387 1,253 32,887 443 NM Facility operating expense (208,049) (205,970) (211,030) (211,832) (836,881) (211,080) (1.5) % Leased Portfolio Operating Income $ 58,664 $ 63,358 $ 87,692 $ 61,096 $ 270,810 $ 84,143 43.4 % Leased Portfolio operating margin 22.0 % 23.5 % 29.4 % 22.4 % 24.4 % 28.5 % 650 bps Leased Portfolio adjusted operating margin (1) 22.0 % 22.6 % 21.9 % 22.0 % 22.1 % 28.4 % 640 bps Additional Information Cash facility lease payments on leased portfolio (see page 14) $ (65,509) $ (65,582) $ (65,632) $ (66,197) $ (262,920) $ (67,572) (3.1) % Community level capital expenditures, net (see page 13) $ (12,572) $ (12,503) $ (13,128) $ (8,773) $ (46,976) $ (14,734) (17.2) % Number of communities (period end) 298 295 295 295 295 295 (1.0) % Total Average Units 20,951 20,674 20,570 20,570 20,691 20,580 (1.8) % RevPAR $ 4,242 $ 4,291 $ 4,381 $ 4,402 $ 4,329 $ 4,775 12.6 % Weighted average occupancy 74.8 % 76.0 % 77.9 % 78.2 % 76.7 % 77.2 % 240 bps RevPOR $ 5,672 $ 5,646 $ 5,626 $ 5,630 $ 5,643 $ 6,188 9.1 % Lease Coverage as of March 31, 2023 0.88x Lease Coverage as of March 31, 2023 (excluding other operating income) 0.76x Operating and financing lease obligations as of March 31, 2023 (see page 20)(2) $ 957,945 Facility Lease Maturity Information (Leased Portfolio as of March 31, 2023) Initial Lease Maturities Community Count Total Units Cash Facility Lease Payments (3) 2023(4) 35 1,468 $ 14,908 2024 7 904 15,329 2025 121 10,291 106,580 2026(5) 41 1,994 33,782 2027 24 2,555 46,963 Thereafter 67 3,372 47,046 Total 295 20,584 $ 264,608 Senior Housing Leased Portfolio (1) Excludes other operating income. (2) Amount recognized on consolidated balance sheet reflects the discounted future minimum lease payments and the residual value for financing lease obligations. (3) Cash facility lease payments for the twelve months ended March 31, 2023. (4) The Company did not exercise its lease renewal option for 35 communities, representing approximately 2.8% of total consolidated units. The leases mature on December 31, 2023. (5) Amounts do not reflect a lease amendment in May 2023, which extended the maturity of one lease involving 39 communities from December 31, 2026 until June 30, 2032.
12 (1) G&A allocations are calculated based on the proportional amount of resident fee revenue (consolidated and under management) attributable to the segment or portfolio. G&A allocations presented herein exclude non-cash stock-based compensation expense and Transaction and Organizational Restructuring Costs. (2) Not included in consolidated reported amounts. Consolidated, unless otherwise noted 2022 2023 1Q23 vs 1Q22 ($ in 000s) 1Q 2Q 3Q 4Q Full Year 1Q B(W) G&A expense allocations (1) Senior Housing Owned Portfolio allocation $ 21,938 $ 20,419 $ 20,311 $ 19,928 $ 82,596 $ 22,857 (4.2) % Senior Housing Leased Portfolio allocation 15,795 14,523 14,453 14,017 58,788 16,095 (1.9) % All Other allocation 3,135 2,962 2,818 2,619 11,534 2,995 4.5 % Subtotal G&A expense allocations 40,868 37,904 37,582 36,564 152,918 41,947 (2.6) % Non-cash stock-based compensation expense 3,885 3,619 3,403 3,559 14,466 3,104 20.1 % Transaction and Organizational Restructuring Costs 373 229 346 262 1,210 3,568 NM General and administrative expense $ 45,126 $ 41,752 $ 41,331 $ 40,385 $ 168,594 $ 48,619 (7.7) % 2022 2023 1Q23 vs 1Q22 1Q 2Q 3Q 4Q Full Year 1Q B(W) Resident fee revenue $ 636,974 $ 640,388 $ 650,248 $ 657,919 $ 2,585,529 $ 713,404 12.0 % Resident fee revenue under management (2) 52,898 54,284 52,712 50,758 210,652 54,820 3.6 % Total (consolidated and under management) (2) $ 689,872 $ 694,672 $ 702,960 $ 708,677 $ 2,796,181 $ 768,224 11.4 % G&A Expense as a Percentage of Resident Fee Revenue (Consolidated and Under Management) G&A expense (excluding non-cash stock-based compensation expense and Transaction and Organizational Restructuring Costs) 5.9% 5.5% 5.3% 5.2% 5.5% 5.5% 40 bps G&A expense (including non-cash stock-based compensation expense and Transaction and Organizational Restructuring Costs) 6.5% 6.0% 5.9% 5.7% 6.0% 6.3% 20 bps G&A Expense
13 ($ in 000s, except for community level capital expenditures, per average unit) 2022 2023 1Q23 vs 1Q22 1Q 2Q 3Q 4Q Full Year 1Q B(W) Community level capital expenditures, including allocations (1) Senior Housing Owned Portfolio $ 20,907 $ 25,934 $ 24,568 $ 20,341 $ 91,750 $ 27,135 (29.8) % Senior Housing Leased Portfolio 12,572 12,503 13,128 8,773 46,976 14,734 (17.2) % Community level capital expenditures, net (A) 33,479 38,437 37,696 29,114 138,726 41,869 (25.1) % Corporate capital expenditures (2) 5,847 7,249 6,123 10,221 29,440 21,043 NM Non-Development Capital Expenditures, net (1) 39,326 45,686 43,819 39,335 168,166 62,912 (60.0) % Development Capital Expenditures, net 861 1,829 1,667 1,836 6,193 519 39.7 % Total capital expenditures, net (1) 40,187 47,515 45,486 41,171 174,359 63,431 (57.8) % Property and casualty insurance proceeds — — — — — (6,422) NM Cash paid for capital expenditures, net of property and casualty insurance proceeds received $ 40,187 $ 47,515 $ 45,486 $ 41,171 $ 174,359 $ 57,009 (41.9) % Capital Expenditures Reconciliation to Statements of Cash Flow Total capital expenditures, net $ 40,187 $ 47,515 $ 45,486 $ 41,171 $ 174,359 $ 63,431 Lessor reimbursements: non-development capital expenditures 4,697 7,136 7,094 6,723 25,650 2,244 Change in related payables (4,928) 2,244 1,141 (1,542) (3,085) (15,975) Total cash paid for capital expenditures $ 39,956 $ 56,895 $ 53,721 $ 46,352 $ 196,924 $ 49,700 (24.4) % Senior Housing Total Average Units (B) 52,586 52,368 52,158 52,166 52,320 52,177 (0.8) % Community level capital expenditures, net, per average unit (A/B) $ 637 $ 734 $ 723 $ 558 $ 2,651 $ 802 (25.9) % Capital Expenditures (1) Amounts are presented net of lessor reimbursements. (2) Includes remediation costs at communities resulting from natural disasters of $9.7 million and $16.3 million for the full year 2022 and the first quarter of 2023, respectively.
14 (1) Classification of amounts in 2023 prospectively impacted by a lease amendment in the fourth quarter of 2022, with no impact to total cash facility lease payments. See page 4. (2) Includes cash lease payments for leases of corporate offices and information technology systems and equipment. 2022 2023 1Q23 vs 1Q22 ($ in 000s) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Operating Lease Obligations Facility operating lease expense $ 41,564 $ 41,538 $ 41,317 $ 40,875 $ 165,294 $ 46,127 Operating lease expense adjustment 8,307 8,308 8,714 9,567 34,896 10,805 Cash facility operating lease payments (1) 49,871 49,846 50,031 50,442 200,190 56,932 (14.2) % Financing Lease Obligations Interest expense: financing lease obligations 12,058 11,994 11,916 12,093 48,061 6,552 Payment of financing lease obligations 5,490 5,610 5,506 5,615 22,221 5,852 Cash financing lease payments (1) 17,548 17,604 17,422 17,708 70,282 12,404 29.3 % Total cash facility lease payments (2) $ 67,419 $ 67,450 $ 67,453 $ 68,150 $ 270,472 $ 69,336 (2.8) % Interest Expense Reconciliation to Income Statement Interest expense: financing lease obligations $ 12,058 $ 11,994 $ 11,916 $ 12,093 $ 48,061 $ 6,552 45.7 % Interest income (95) (778) (2,192) (3,870) (6,935) (5,326) NM Interest expense: debt 33,157 35,693 41,330 47,689 157,869 50,315 (51.7) % Interest expense, net 45,120 46,909 51,054 55,912 198,995 51,541 (14.2) % Amortization of deferred financing costs 1,542 1,520 1,528 1,856 6,446 1,940 Change in fair value of derivatives (3,403) (973) (4,901) 1,618 (7,659) 904 Interest income 95 778 2,192 3,870 6,935 5,326 Interest expense per income statement $ 43,354 $ 48,234 $ 49,873 $ 63,256 $ 204,717 $ 59,711 (37.7) % Cash Facility Lease Payments
15 $476 $412 $396 $453 $439 03/31/2022 06/30/2022 09/30/2022 12/31/2022 03/31/2023 Total Liquidity ($ in millions) (1) Includes the carrying amount of debt of which 91.6%, or $3.5 billion, represented non-recourse property-level mortgage financings. (2) The weighted average fixed cap and swap rate is 4.14%. (3) Amount includes maturities and recurring principal payments and excludes $28 million in deferred financing costs, net. (4) Reflects rates as of March 31, 2023. (5) Excludes convertible senior notes and includes the amortizing notes component of tangible equity units of $23.9 million. (6) Excludes operating lease obligations related to certain non-facility leases for which the related lease expense is included in Adjusted EBITDA. Important Note Regarding Non-GAAP Financial Measures. Adjusted EBITDA, Adjusted EBITDA after cash financing lease payments, Net Debt, and Adjusted Net Debt are financial measures that are not calculated in accordance with GAAP. See "Definitions" and "Non- GAAP Financial Measures" for the definitions of such measures and other important information regarding such measures, including reconciliations to the most comparable GAAP measures. Leverage Ratio ($ in 000s) Twelve Months Ended March 31, 2023 Annualized Leverage Cash facility operating lease payments (see page 14) (207,251) Adjusted EBITDA 292,752 Cash financing lease payments (see page 14) (65,138) Adjusted EBITDA after cash financing lease payments (A) $ 227,614 As of March 31, 2023 Debt $ 3,859,965 Cash and cash equivalents (362,235) Marketable securities (69,009) Restricted cash held as collateral against existing debt (10,705) Net Debt (B) 3,418,016 15.0 x (B/A) Operating and financing lease obligations (see page 20) (6) 967,722 Adjusted Net Debt $ 4,385,738 Debt ($ in millions) Principal Payments (3) Weighted Rate (4) 2023 $ 81 6.58 % 2024 311 4.73 % 2025 574 6.83 % 2026 305 2.67 % 2027 960 5.74 % Thereafter 1,657 4.97 % Total $ 3,888 5.27 % Capital Structure $225 $2,082 $1,424 $129 Debt Structure (1) ($ in millions) As of March 31, 2023 Weighted Rate Fixed rate debt (5) 4.21 % Variable rate debt 7.15 % Fixed rate convertible senior notes 2.00 % Total debt 5.27 % 54% 37% Fixed rate debt (5) Variable rate debt with interest rate caps and swaps (2) Variable rate debt - unhedged 3% Line of credit available to draw Cash and cash equivalents and marketable securities 6% Fixed rate convertible senior notes
16 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, gain/loss on facility operating lease termination, operating lease expense adjustment, non-cash stock-based compensation expense, gain/loss on sale of communities, and Transaction and Organizational Restructuring Costs. 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. Adjusted Net Debt is a non-GAAP financial measure that the Company defines as Net Debt, plus operating and financing lease obligations. Operating and financing lease obligations exclude operating lease obligations related to certain non-facility leases for which the related lease expense is included in Adjusted EBITDA. Combined Segment Operating Income is defined by the Company as resident fee and management fee revenue and other operating income of the Company, less facility operating expense. Combined Segment Operating Income does not include general and administrative expense or depreciation and amortization. Community Labor Expense is a component of facility operating expense that includes regular and overtime salaries and wages, bonuses, paid-time-off and holiday wages, payroll taxes, contract labor, employee benefits, and workers' compensation. Development Capital Expenditures means capital expenditures for community expansions, major community redevelopment and repositioning projects, and the development of new communities. Amounts of Development Capital Expenditures are presented net of lessor reimbursements. Interest Coverage is calculated based on the trailing-twelve months Owned Portfolio Operating Income adjusted for an implied 5% management fee and capital expenditures at $350/unit, divided by the trailing-twelve months property level and corporate debt interest expense. Lease Coverage is calculated based on the trailing-twelve months Leased Portfolio Operating Income, excluding resident fee revenue, other operating income, and facility operating expense of communities disposed during such period adjusted for an implied 5% management fee and capital expenditures at $350/unit, divided by the trailing-twelve months cash facility lease payments for both operating leases and financing leases, excluding cash lease payments for leases of communities disposed during such period, corporate offices, information technology systems and equipment, vehicles, and other equipment. Leased Portfolio Operating Income is defined by the Company as resident fee revenue and other operating income, less facility operating expense for the Company’s Senior Housing Leased Portfolio. Leased Portfolio Operating Income does not include general and administrative expense or depreciation and amortization. Net Debt is a non-GAAP financial measure that the Company defines as the total of its debt and the outstanding balance on the line of credit, less unrestricted cash, marketable securities, and cash held as collateral against existing debt. NM means not meaningful. Non-Development Capital Expenditures is 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. Non-Development Capital Expenditures does not include capital expenditures for community expansions, major community redevelopment and repositioning projects, and the development of new communities (i.e. Development Capital Expenditures). Amounts of Non-Development Capital Expenditures are presented net of lessor reimbursements. Owned Portfolio Operating Income is defined by the Company as resident fee revenue and other operating income, less facility operating expense for the Company’s Senior Housing Owned Portfolio. Owned Portfolio Operating Income does not include general and administrative expense or depreciation and amortization. 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. Definitions
17 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. Same Community information reflects operating results and data of a consistent population of communities by excluding the impact of changes in the composition of the Company's portfolio of communities. The operating results exclude natural disaster expense and related insurance recoveries. The Company defines its same community portfolio as communities consolidated and operational for the full period in both comparison years. Consolidated communities excluded from the same community portfolio include communities acquired or disposed of since the beginning of the prior year, communities classified as assets held for sale, certain communities planned for disposition, certain communities that have undergone or are undergoing expansion, redevelopment, and repositioning projects, and certain communities that have experienced a casualty event that significantly impacts their operations. Same Community Operating Income is defined by the Company as resident fee revenue and other operating income, less facility operating expense (excluding natural disaster expense and related insurance recoveries) for the Company's Same Community portfolio. Same Community Operating Income does not include general and administrative expense or depreciation and amortization. Segment Operating Income (Loss) is defined by the Company as segment revenue and other operating income less segment facility operating expense. Segment Operating Income (Loss) does not include general and administrative expense or depreciation and amortization. All Other Segment Operating Income consists primarily of the previously reported Management Services segment and excludes revenue for reimbursements for which the Company is the primary obligor of costs incurred on behalf of managed communities, and there is no facility operating expense associated with the All Other category. See the Segment Information note to the Company’s consolidated financial statements for more information regarding the Company’s segments. Senior Housing Leased Portfolio represents Brookdale leased communities and does not include owned or managed communities. Senior Housing Operating Income is defined by the Company as segment revenue and other operating income less segment facility operating expense for the Company’s Independent Living, Assisted Living and Memory Care, and CCRCs segments on an aggregate basis. Senior Housing Operating Income does not include general and administrative expense or depreciation and amortization. Senior Housing Owned Portfolio represents Brookdale owned communities and does not include leased or managed communities. Total Average Units represents the average number of units operated during the period. Transaction and Organizational Restructuring Costs are general and administrative expenses. 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. Definitions
18 Appendix: Non-GAAP Financial Measures This Supplemental Information contains the financial measures Adjusted EBITDA, Adjusted EBITDA after cash financing lease payments, Adjusted Free Cash Flow, Net Debt, and Adjusted Net Debt (each as defined in the "Definitions" section), 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, net cash provided by (used in) operating activities, short-term debt, long-term debt less current portion, or current portion of long-term debt. Investors are cautioned 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. Investors are urged to review the reconciliations set forth in this Appendix of these non-GAAP financial measures from the most comparable financial measures determined in accordance with GAAP and to review the information under "Reconciliations of Non-GAAP Financial Measures" in the Company’s earnings release dated May 8, 2023 for additional information regarding the Company’s use and the limitations of such non-GAAP financial measures.
19 2022 2023 Twelve Months Ended March 31, 2023($ in 000s) 1Q 2Q 3Q 4Q Full Year 1Q Net income (loss) $ (100,032) $ (84,283) $ (28,374) $ (25,651) $ (238,340) $ (44,563) $ (182,871) Provision (benefit) for income taxes (1,976) 1,190 (300) (473) (1,559) 572 989 Equity in (earnings) loss of unconsolidated ventures 4,894 2,439 2,020 1,429 10,782 577 6,465 Loss (gain) on debt modification and extinguishment, net — — — 1,357 1,357 — 1,357 Non-operating loss (gain) on sale of assets, net 294 (961) 56 16 (595) — (889) Other non-operating (income) loss 27 111 (1,877) (10,375) (12,114) (3,149) (15,290) Interest expense 43,354 48,234 49,873 63,256 204,717 59,711 221,074 Interest income (95) (778) (2,192) (3,870) (6,935) (5,326) (12,166) Income (loss) from operations (53,534) (34,048) 19,206 25,689 (42,687) 7,822 18,669 Depreciation and amortization 85,684 86,623 86,922 88,215 347,444 84,934 346,694 Asset impairment 9,075 2,599 5,688 12,256 29,618 — 20,543 Loss (gain) on sale of communities, net — — — (73,850) (73,850) — (73,850) Operating lease expense adjustment (8,307) (8,308) (8,714) (9,567) (34,896) (10,805) (37,394) Non-cash stock-based compensation expense 3,885 3,619 3,403 3,559 14,466 3,104 13,685 Transaction and Organizational Restructuring Costs 373 229 346 262 1,210 3,568 4,405 Adjusted EBITDA (1) $ 37,176 $ 50,714 $ 106,851 $ 46,564 $ 241,305 $ 88,623 $ 292,752 Interest expense: financing lease obligations (12,058) (11,994) (11,916) (12,093) (48,061) (6,552) (42,555) Payment of financing lease obligations (5,490) (5,610) (5,506) (5,615) (22,221) (5,852) (22,583) Adjusted EBITDA after cash financing lease payments $ 19,628 $ 33,110 $ 89,429 $ 28,856 $ 171,023 $ 76,219 $ 227,614 Other operating income $ 376 $ 8,411 $ 66,759 $ 4,923 $ 80,469 $ 2,328 $ 82,421 Adjusted EBITDA and Adjusted EBITDA after Cash Financing Lease Payments Reconciliations Appendix: Non-GAAP Financial Measures (continued) (1) Adjusted EBITDA includes government grants and credits recognized in other operating income.
20 Net Debt and Adjusted Net Debt Reconciliations ($ in 000s) As of March 31, 2023 Long-term debt (including current portion) $ 3,859,965 Cash and cash equivalents (362,235) Marketable securities (69,009) Cash held as collateral against existing debt (10,705) Net Debt 3,418,016 Operating and financing lease obligations 996,529 Operating lease obligations related to certain non-facility leases for which the related lease expense is included in Adjusted EBITDA (28,807) Adjusted Net Debt $ 4,385,738 Operating and financing lease obligations $ 996,529 Operating lease obligations related to certain non-facility leases for which the related lease expense is included in Adjusted EBITDA (28,807) Adjusted operating and financing lease obligations 967,722 Operating and financing lease obligations related to corporate office and information technology leases (9,777) Operating and financing lease obligations for Leased Portfolio $ 957,945 Appendix: Non-GAAP Financial Measures (continued)
21 2022 2023 ($ in 000s) 1Q 2Q 3Q 4Q Full Year 1Q Net cash provided by (used in) operating activities $ (23,255) $ 11,577 $ 63,521 $ (48,562) $ 3,281 $ 24,042 Net cash provided by (used in) investing activities (36,163) (43,838) 22,508 (9,936) (67,429) (62,019) Net cash provided by (used in) financing activities (403) (17,690) (19,754) 138,229 100,382 171 Net increase (decrease) in cash, cash equivalents and restricted cash $ (59,821) $ (49,951) $ 66,275 $ 79,731 $ 36,234 $ (37,806) Net cash provided by (used in) operating activities $ (23,255) $ 11,577 $ 63,521 $ (48,562) $ 3,281 $ 24,042 Distributions from unconsolidated ventures from cumulative share of net earnings (561) — — — (561) — Changes in prepaid insurance premiums financed with notes payable 16,629 (5,377) (5,700) (5,552) — 19,305 Changes in operating lease assets and liabilities for lessor capital expenditure reimbursements (1,490) (3,367) (4,367) (4,494) (13,718) (2,244) Non-development capital expenditures, net (39,326) (45,686) (43,819) (39,335) (168,166) (62,912) Property and casualty insurance proceeds — — — — — 6,422 Payment of financing lease obligations (5,490) (5,610) (5,506) (5,615) (22,221) (5,852) Adjusted Free Cash Flow (1) $ (53,493) $ (48,463) $ 4,129 $ (103,558) $ (201,385) $ (21,239) (1) Adjusted Free Cash Flow includes: Cash received - government grants and credits $ 782 $ 4,593 $ 62,750 $ 1,409 $ 69,534 $ 13,354 Cash payments - deferred payroll taxes $ — $ — $ — $ (31,553) $ (31,553) $ — Cash recouped - Medicare advances $ (1,848) $ (1,240) $ — $ — $ (3,088) $ — Adjusted Free Cash Flow Reconciliation Appendix: Non-GAAP Financial Measures (continued) Brookdale Senior Living Inc. 111 Westwood Place Brentwood, TN 37027 (615) 221-2250 brookdale.com