Brookdale Senior Living Inc. (BKDT): Capturing the Incredible Opportunity Ahead

Published on September 24, 2024 | Ticker: BKDT

Brookdale Senior Living Inc. (BKDT) is the nation's premier operator of senior living communities, with a strong focus on delivering high-quality care and personalized services to its residents. The company's unwavering commitment to the health and well-being of its residents and associates has been the driving force behind its strategic priorities, which have translated into meaningful positive outcomes in the first quarter of 2024.

Financials

In the first quarter of 2024, Brookdale reported annual revenue of $3,006,756,000 and an annual net loss of $189,011,000. The company's annual operating cash flow was $162,923,000, while its annual free cash flow was -$70,282,000. These financial results reflect the company's continued progress in its recovery from the pandemic's impact, as well as its strategic focus on operational excellence and sustainable long-term growth.

Strategic Priorities and Performance

During the first quarter, Brookdale maintained an intense focus on its key strategic priorities, which include getting every available room in service at the best profitable rate, attracting and retaining the best associates, and earning resident and family trust through the provision of high-quality care and personalized service. The company's execution of these priorities has resulted in a strong operational performance, with the first quarter annualized results recovering 97% of the company's 2019 adjusted EBITDA.

On a same-community basis, Brookdale's RevPAR grew 6.3% year-over-year in the first quarter, supported by a 150-basis-point increase in occupancy and a 4.3% increase in RevPOR. This top-line growth, coupled with continued expense management, contributed to a 140-basis-point year-over-year expansion in the company's adjusted operating margin, which reached 27.6% in the first quarter. Brookdale's first quarter adjusted EBITDA of $98 million exceeded the top end of its guidance range, driven by favorable labor expense.

Associate Retention and Resident Satisfaction

Brookdale's strategic focus on attracting, engaging, developing, and retaining the best associates has had a positive impact on its operations and financial results. The company's trailing 12-month Executive Director retention rate reached nearly 70% in the first quarter, a critical milestone as the company has found that communities with Executive Directors in place for at least two years have higher overall profitability. Additionally, the company has seen improvements in key leadership retention and associate turnover, which have supported more shifts being filled by Brookdale's own associates rather than contract labor.

The company's commitment to earning resident and family trust through the provision of high-quality care and personalized service is also evident in its performance. Brookdale's internal resident satisfaction ratings increased each month of the first quarter, reflecting the positive outcomes of the company's continuous improvement efforts. Furthermore, the company's industry-leading expertise in Alzheimer's and dementia care, as evidenced by the Alzheimer's Association's certification of its Clear Bridge Alzheimer's and Dementia Care Training, has been recognized externally, along with the company's Brookdale HealthPlus program, which was awarded the Argentum Best of the Best distinction.

Outlook

Looking ahead, Brookdale has provided guidance for the second quarter of 2024, expecting RevPAR growth of 6.25% to 6.75% over the prior year and adjusted EBITDA in the range of $93 million to $98 million. The company anticipates that its second-quarter weighted average occupancy will increase sequentially from the first quarter, representing favorable performance compared to normal pre-pandemic seasonality. While the company expects a sequential step-down in RevPOR from the first quarter, it remains confident that its top-line expectations will support another quarter of meaningful year-over-year revenue growth.

Liquidity

Brookdale's liquidity position remains strong, with total liquidity of $355 million as of March 31, 2024, compared to $341 million at the end of 2023. The company has no mortgage debt maturities without extension options until September 2025, providing it with financial flexibility to continue executing its strategic priorities.

Conclusion

The company's focus on operational excellence, coupled with its industry-leading expertise and differentiated programs, positions Brookdale well to capture the incredible opportunity ahead. With the strong start to 2024 and the sustainable growth the company continues to deliver, Brookdale's management is filled with tremendous optimism for the future.

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