The second day of the Jefferies 2025 Healthcare Services Conference. I'm Brian Tanquilut, Healthcare Services Analyst here at Jefferies. Joining us today is Brookdale Senior Living, the largest operator of senior housing facilities in the United States, and with us this morning is Dawn Kussow, the company's Chief Financial Officer, and Chad White, Executive Vice President and General Counsel. Dawn, thanks for being here. Chad, thanks. Thank you. Thank you very much for having us. We appreciate you. Let's start with State of the Union and maybe a little bit of an intro into who Brookdale Senior Living is and just anything you could share with the audience. It's a great question and this is really an exciting time for people in the Brookdale story. If you haven't been in the Brookdale story, here is just a little bit of background with the macro-economic backdrop and where the company has evolved to. We are really excited about the investment. We really have come out of all of the challenges that we've had coming through COVID between our revenue and expense challenges. We've reached the inflection point of about 80% occupancy. Our second quarter, we reported 80% occupancy on average for the quarter. The reason why that's important is because we are a high fixed- cost business. At that 80% occupancy rate is generally where we're covering our fixed costs. As you start to grow your occupancy, the flow through of that revenue becomes a lot higher. With the high fixed- cost business, with the adjusted EBITDA growth that we've shown, we've improved our leverage. With the leverage improvement that translates into shareholder value, we've also been very proactive with our balance sheet. We proactively manage our debt. We don't have any debt maturities due until June of 2026. We've also been rationalizing our portfolio to make sure that as we sit in front of this macro-economic backdrop, we're moving forward with the portfolio that makes the most sense for us. That has all been translating into improved cash flow. We were cash flow positive in the first quarter and then again in the second quarter with that 80% occupancy. Just kind of validating as we've grown occupancy, that cash flow has improved. If you don't know, the macro-economic backdrop that we sit against is really very favorable. The supply demand is very favorable to us in that the supply is less. We've had construction builds decrease since 2017, and new starts are at an all-time low. That's all while all of the baby boomers are first turning 80 this year. We expect a million new baby boomers to turn 80 every year. As that senior population grows by 1 million new residents or 1 million new seniors every year through 2026, the supply and demand tailwinds are extremely favorable for the industry and we expect to take advantage of that. For those new to the Brookdale story, we've been a publicly- traded company since 2005. We're really the conglomerate of three companies that came together. They offered a variety of product types, IL, AL and, CCRC. In 2014, we were at over 1,100 communities. We've rationalized that portfolio down to 645 communities. In the second quarter of 2025, we were down to 645 communities. We expect to be at about 550 communities through the middle of next year. We're the largest operator, as Brian said, and we really differentiate ourselves with the care that we give. We offer a variety of product types, IL, AL, memory care, skilled nursing, and through our CCRCs. We're heavily weighted in our needs base with IL and, excuse me, AL, and memory care being over 70% of our product type that we offer. From a strategy perspective, I would say, you know, really we've been rationalizing our portfolio, like I said, 645 communities down to 550 communities by the middle of next year. We've been doing that really as our leases have been coming due. We've really looked at the portfolios or the communities within our leases, what made the most sense for us and also aligning our interests with our lessor interests in getting CapEx reimbursement from our lessor. Having the lessor reimburse us for CapEx that we're putting into their communities benefits us from a cash flow perspective. We were over 50% leased assets historically. We'll now be at 70% owned assets by the middle of next year. That's really to position us to take advantage of the macro-economic background or the backdrop that we see coming forward. We've been focused on growing our occupancy. You saw that in our second quarter results, we reported 80% occupancy. In our monthly results, we continue that occupancy growth with August occupancy being 81.5% quarter- to- date. Really focusing on making sure that we've increased our occupancy, we're providing resident and family experience, capital deployment, rationalizing our portfolio, and with our increased results, reducing our leverage is where our focus has been. Yeah, one thing I would add on, I think that's really important and a key differentiator for Brookdale in the market is our innovative Brookdale HealthPlus program. It's a program that we've rolled out over the last several years, sort of unique in the senior living industry. Also, as I mentioned, a key differentiator. It's basically a care coordination program, proactive care coordination. Each of our Brookdale HealthPlus communities will have it in about 190 by year end of this year. Of our communities has an RN care manager, registered nurse care manager who helps proactive care coordination with our residents. This can be a number of things. One, you want to make sure that your residents have an annual wellness visit completed. You want to make sure that you're helping to manage chronic conditions appropriately, communicating with residents, family members, healthcare providers, et cetera. All of that sounds great, but what's more important about it is the outcomes that we're seeing there. We've seen that compared to residents who live in a community or live outside the community in their own homes, Brookdale HealthPlus residents actually have fewer urgent care visits. It's 80% reduction in urgent care visits, 66% reduction in hospitalizations. Those are key and important as we participate more in the value-based care program world that we're in. We're very, very excited about the results of HealthPlus. It's something I think that we will continue to roll out as we work through the next few years. We'll also have an opportunity to continue improving resident satisfaction and outcomes, which we think ultimately will lead to longer lengths of stay. One of the things I'll mention is early on, as we look at Brookdale HealthPlus communities compared to our non-HealthPlus communities, you'll see we've had increased move-ins in those communities and better associate turnover. Our associates love it, particularly our health-focused associates, our care associates. They know we're providing great high-quality care through the program and it results in lower turnover, which is great. That's great, great intro, lots to unpack there. Maybe let's start with occupancy. Now you're north of 80%. What do you think is a timeline or the path to getting back to pre-pandemic levels of occupancy, and how does that translate into margins or the profitability or kind of like earnings power of the business. Yeah, I think one of the big attractions to Brookdale is, I mean, the earnings power that we have, particularly as we get above that 80% occupancy. The leverage in the business is extremely high and you'll start to see that. We started to see that in our 2Q results, but more so as we get above that 80% occupancy. We certainly wouldn't give a specific timeline, but we certainly do expect to get back to our pre-pandemic occupancy, our historical high occupancy of 89%. In our August press release, you saw our same community occupancy, which is really our underlying portfolio that we expect to move forward with at 82.2% occupancy, which is 260 basis points year-over-year growth. The other thing that we also, as we've been strategizing on our occupancy growth, is really focusing on the bands. We've been talking a lot about that 80% growth, but we had a bunch of communities in the under 70% occupancy bands and we'll report that on our supplement. As we've gotten our SWAT teams out, we've differentiated communities and really put a high focus on getting the below 70% occupied communities above that 80%. We certainly would want a strategy on pricing in order to make sure that we're filling those units and then maybe a different strategy on pricing as we get into those higher occupied units because the flow through is so much higher as you get that higher occupancy. Maybe just to follow up on that, how are you thinking about the pricing power of the business today? You talked about the supply, demand, imbalance or equation in the business. Right. Does Brookdale or do providers, are you seeing more pricing power? What kind of flexibility are you giving to your community managers to be more competitive in the local market, especially when you think about the occupancy bands? It's a great question and something we've been talking about quite a bit both internally and externally. As we differentiate, we certainly will give the pricing power to the communities on expectations around discounting levels at that higher occupancy band. It's also dependent upon what markets they're in and the size of the community, but certainly on the below 70% occupied or the lower occupied, I'd rather have a pricing strategy to fill up that building in order to cover the costs and get the leverage out of the business as we grow that. It will be more dynamic in that as we grow that occupancy, that strategy will change. Our EDs have what we call a toolbox, so they always have parameters that they can go into their toolbox in order to look at what discounting or what type of incentive they may want to offer. That'll differ by occupancy band. That makes a lot of sense. Maybe just to double click on this discussion, right, if I think about RevPOR and sort of the expense at the clinic or at the facility level or community level, how are you thinking about maintaining that spread and what does that look like as RevPOR goes up? Great question. I think a couple things to remember is that we're always trying to balance rate and occupancy and what that flow through is. We are very highly focused on making sure that that RevPOR growth will be in excess of our expense per growth. If you look at 2025 year- to- date, our RevPOR growth was 2.6% on an expense per growth of 2%. That's year- to- date. If you look at the quarters, it may not always be linear. The one thing about our business model is we give our pricing increases on January 1st. You'll get a lot of economic value from that price increase because we give them to, that's just across the company as opposed to our expense base. There's a level of variability. 65% of our expenses are labor, and things like the number of days in a quarter or holidays matter because that impacts your labor costs and generally is a headwind as you think about the labor pacing throughout the year. We are in the budgeting season for 2026 talking about our rate increases for 2026 that'll go out and very conscious of making sure that our RevPOR growth would be in excess of that expected expense per growth. As we think about pricing just to that point, when as you contemplate 2026, I mean, Social Security is a big factor there. How are you thinking about that? You know, how should investors be forecasting or kind of like anticipating what kind of rate growth we should be e xpecting for next year. It certainly does play a factor. There are a lot of things that play factors into our rate increase process: occupancy, Chad talked about the NPS scores, location, what competition is doing, and COLA is one of the other factors. We always generally have a spread between the COLA and then what our rate increase is. We just do our pricing, really. Our pricing actions happen at the resident level. You may look at a community and look at the different factors, occupancy, net promoter score, and say, all right, this is generally what we would want from a pricing perspective, but we will go down to the resident level to see what their experience has been as we roll out those price increases and strategize to get to what our total targeted rate increase is expected to be. Chad, maybe I'll turn to you. I think if I look back to the second quarter, the move-ins early in the quarter were a little softer than you expected. I think you ramped up discounting activity mid-quarter, and that's clearly benefiting Q3 based on what we've seen so far. I think you've said in the past that you're going to moderate that at some point. Maybe if you can give us an update on discounting and promotion activity at the Brookdale facility. Yeah, yeah. Dawn talked a little bit about this. I think early on in the second quarter we did see a little bit of slowness. We had the tariff announcements and some of the uncertainty in the market on that. You saw as we reported in Q2 and then into August, really strong, really strong move in growth, really strong occupancy improvements. We are very focused on driving profitable occupancy. Early on we did take a number of actions. We certainly didn't do a fire sale or anything like that. We took a number of actions to put in some incentive programs and other things to drive move-in activity. I think it did exactly what we hoped it would do early on. As Dawn mentioned, what we've done since then is we've really tried to look at our tiers of occupancy across the company. Where you have higher occupancy, you really are trying to focus on driving rate and lower discounting in those communities. As Dawn also mentioned, as you're in these lower occupied communities, it really does make a lot of sense to try to get that occupancy up above that 70% or to that 80% level. You might have targeted incentive programs there. We're very pleased with what we've seen this year through that program. It's sort of translating, we think will translate into positive results for the company. What I would add is that we're also, you know, as we're balancing margin or we're balancing pricing with our occupancy. If you look at our NOI on a per unit basis, we are ahead of where we were pre-pandemic, and that's on a lower occupancy base. A lot of our strategy was around making sure that we were driving profitable occupancy growth, holding our rate kind of coming in, and now it's more shifted a little bit as the occupancy bands and really that differentiation to make sure ultimately it's about driving our NOI and capitalizing on that NOI growth. Maybe Dawn, I'll follow up on that really quickly as we think about the consolidations that you're planning, trying to get these communities that are sub 70% occupancy up to 80% or even 90%. Where do you think margins eventually could go, or what is the goal for margins? I think that if you look in our supplement, I think it was actually last quarter we've taken the page out, but our NOI pre-pandemic margins were where we would expect that we can get back to. We have made a lot of progress on the flow through on that margin, and we would fully expect that we can continue to make that. Like I said, with our NOI on a per unit basis being ahead of where we were pre-pandemic, as you grow your occupancy, the flow through becomes exponential and the leverage in the business is high. Getting back to pre-pandemic margins is certainly something that we would expect. That's awesome. Maybe let's shift gears a little bit back to this story on consolidating the portfolio. You're right. I remember when you guys had, what, 1,100+ communities and, what, 50% ownership, right? Now you're at 70% ownership. Is the goal eventually to be a 100% owned portfolio strategy? I don't think I would say that the goal is to be 100% owned. I think it's to have the right portfolio that we think we can win with. We've spent a lot of time looking at certainly where we've had the opportunity to convert leased to owned. That makes a lot of economic sense for us. You can replace high-cost leased financing with lower-cost secured debt financing, and that makes a lot of sense. Long term, you get the benefits of that ownership of that property. We've also spent a lot of time rationalizing our lease portfolio. As Dawn has talked about a number of times, we were able to get landlord funding for CapEx. That's aligning our interests with the landlord, allows us to invest more in those properties, and to create better results. We've spent a lot of time adjusting the leases, getting them to a place where we think we can win with those properties and create cash flow and positive cash flow that our shareholders will benefit. Whether it's owned or leased really is not as important as just making sure that you've got it optimized for growth in the future. Chad, maybe I'll follow up on that point you made. We get the question a lot from investors asking about the age of your portfolio and the CapEx spending that you're putting into the communities to make them competitive. As supply additions in the market slow down, how do you feel about the competitive dynamics in the business given what you're able to invest in these communities today? It is really important to continue investing in the communities. We have to invest in the assets to make sure they remain competitive, to make sure they're the standard we would expect for our residents and our associates to have. We spent a lot of time talking about our First Impressions program and some of the investments we've made in there. Last year we started this First Impressions program. We put $5 million additional CapEx in for some really quick wins. The numbers we've seen, the results from those investments have been really impressive and they've really helped drive occupancy, drive NOI growth at those communities where we've put it in. We added another $10 million this year. We'll look at doing more of that in the future. We have about 500 projects underway. What's important is making sure that you're spending the right amount of CapEx in the communities to make sure that they're market ready. One of the things when you talk about First Impressions, that's really paint, carpet, new furniture, things like that, landscaping, things that you could do pretty quickly to enhance the appeal of the communities and to make sure they're ready to welcome new residents. Dawn, maybe sticking to the discussion on just cash flows and capital. I think you've mentioned in the past that the goal of the company now is to deleverage the balance sheet. Right. Anything you can share with us in terms of leverage targets, how you're thinking about cost of capital, any refinancings, and some of your upcoming maturities. Absolutely. It's a great question and we absolutely are focused on delevering. If you looked at the leverage progress that we've made over the last two years, it's been substantial. With our current guidance range, we'll be at a low 9x, and that's coming down from just under 20 x of a turn coming out of COVID. The single biggest way that we can delever our business is to grow our adjusted EBITDA. For every 10% of adjusted EBITDA growth, it's about a turn on our leverage right now. Focusing on continuing to operate and having durable, sustainable operations and that growth in our adjusted EBITDA is the single biggest way that we can delever our business. We will get some benefit on our leverage as we are disposing of some of the assets that we've talked about in the second quarter. Call it 14 assets this year, another 28 assets over the course of the next 12- 18 months. We're rationalizing the Ventas lease, very public. As those assets transition off, we would expect to get a little bit of a benefit in our leverage, but certainly focused on making sure. I think the one thing that as we've been talking about is just the operational leverage that we have in the business. As you grow the adjusted EBITDA and as you continue to get that higher flow through above the 80% occupancy, that leverage comes down rather quickly when you look two and three years out. One of the things that we offer at this conference is the ability for the audience to ask questions. Anyone in the audience with questions, please raise your hand and we'll try to get you a mic. No one so far. All right, I've got more questions then. Chad, you talk about HealthPlus, clearly. Yes, really exciting, differentiated. Just curious, what are you seeing in terms of the performance, maybe at the occupancy rate level, of communities with Brookdale HealthPlus and without Brookdale HealthPlus? How are you thinking about EBITDA flow through? I know you talked about value-based care. Value-based care has become a little bit of a murky water kind of situation right now. If you can just explain what that exactly means for Brookdale. Yeah, we haven't given a ton of this publicly, but I'll give sort of the concept and spend a minute on that. Certainly, when we look at occupancy, the move-ins at our HealthPlus communities compared to our non-HealthPlus communities have been better, have been stronger. It's important in the sales process. We spend a lot of time as we roll out HealthPlus training the sales team, working through with families, and families love to hear it. I mean, at the end of the day, if you know that your loved one's going to have better health outcomes, you're going to have less spend going out to an ER visit, for example, or to a hospitalization because the chances are you're getting higher quality care, you're getting better outcomes there. That's important. We think long- term occupancy, both short term, you're seeing it on the move-ins. I think long term it leads to longer lengths of stay is what our thesis is on that. On the other side of it, on the value-based care side, one of the things that we are doing and we've been working on over several years is entering into agreements with payors and trying to work through value-based care arrangements so that we are getting PMPM payments on our programs and things that we do, we get incentive payments. If we've actually hit certain levels, we can get that, that helps offset the cost of HealthPlus. We think long term will also be something that can add value at Brookdale. That makes a lot of sense. How does secured delivery happen with HealthPlus? I know, Dawn, you have both been here for a while when you sold the home- health business to HCA. Is this outsourced or are you having to rebuild clinical staff? Yeah, no, it's really a different way of how we operate the building from a clinical standpoint. Each of the HealthPlus communities has access to an RN care manager. That person helps coordinate care, making sure that a resident gets the immunizations that they need, the wellness visits that they need, those sort of things, helping to coordinate and communicate with their primary care providers and other doctors if there's an issue that goes on. At the end of the day, we've changed our protocols, our operating protocols. Our existing staff continues to provide the care that they normally would. Sometimes we will have opportunities to partner with provider groups. Some of our communities obviously have individual providers who make rounds in the community. Sometimes you'll find a nurse practitioner who comes in the communities. Ultimately, most of the care is still provided by Brookdale Associates, our care staff. We have this supplement with the RN care manager who's helping to coordinate care within the broader healthcare system. Got it. Maybe, Dawn, I'll shift gears here a little bit. One of the discussions from the last few quarters is just a marketing strategy that you've laid out where obviously historically Brookdale was highly dependent on third party referrals. Now you guys are driving marketing yourselves. If there's anything, any update you can share with us in terms of the progress or successes that you're seeing with the marketing strategies. Yeah, Brian, it's a great question. We have leads that come both internally and externally, and we monitor how much is coming from a third party in order to make sure that we diversify. We certainly have a couple big aggregators that we talked quite a bit about last year. We have certainly been looking at our marketing spend. As we have been differentiating our occupancy bands, the same goes with our marketing spend. Is what marketing spend? Where do we want to go spend? Do we want to go to the Pacific Northwest? Do we want to go to the South? Our digital marketing, we can pivot rather quickly, and we get a lot of good feedback from our digital marketing, our digital marketing spend, and then also our direct mail spend. As we differentiated these occupancy bands, the below 70, the why do we need more leads in that particular region? We've been pivoting that spend there. The other thing that we talked a little bit about is really kind of trying to market to our current resident and focus on our current resident. I think that that's a little bit more on the internal side of our marketing group and our resident and family engagement group have been focused on kind of the first 90 days of a resident's experience. It's very critical to make sure that they have a really good experience as we track. If somebody has a good experience in the first 90 days, it's no different than an associate. They have a tendency to stay longer. Making sure that that resident experience is good, whether they have a billing issue, they have a dining issue, they need a TV in their room, whatever the case is, we're taking care of it. We're highly attentive. We started to, not that we haven't been, but just a little bit more proactive in making sure that that experience has been positive. Yeah, we're very pleased that we've seen over the last couple of years continued improvement in our Net Promoter Score results. That's our key measure that we use to track resident and family member satisfaction, and we're making great progress on that. That is something we're highly focused on. It's two sides of the coin, right? You certainly want to have new residents move in and join your community, but you also want to be providing very high quality, excellent care and service to your existing residents so that they stay with you longer. Makes a lot of sense. Dawn, we've got a minute and fifty seconds here. One of the questions that we ask the companies that have been here so far is what do you think are the one or two or three things that are underappreciated by investors about the Brookdale story? Any closing comments or thoughts that you want to leave the audience? I think that it's really important to understand really our value proposition. If you look at not only this year, but two years, three years out, we are just at the precipice of the fact that we have this macro-economic backdrop that is extremely favorable to seniors housing. The supply is low, it will continue to decrease. New starts are at an all-time low and the demand is only growing. The fact that we have been at this 80% occupancy, we've been continuing to grow occupancy at a rapid pace, the flow- through in the business is just very high. That is giving us the cash flow that we need to turn around and reinvest in our communities or do some other strategic initiatives. It's giving us lower leverage, which is a return to our shareholders. I think we're just at the precipice of making that turn, having durable, sustainable operational growth. We're really excited about where the stack is going to go and where Brookdale is going to go. Awesome. Thank you so much. Really appreciate you guys being here. Thank you.