Brookdale Announces Third Quarter 2024 Results
NASHVILLE, Tenn., Nov. 6, 2024 /PRNewswire/ -- Brookdale Senior Living Inc. (NYSE:BKD) ("Brookdale" or the "Company") announced results for the quarter ended September 30, 2024.
HIGHLIGHTS
Third quarter consolidated weighted average occupancy grew 130 basis points over the prior year quarter and 80 basis points sequentially over the second quarter.
Same community operating income increased 10.1% over the prior year period, when excluding prior period grant income, marking three years of consecutive quarters of year-over-year growth.
Net cash provided by operating activities increased 45% to $66.5 million, and Adjusted Free Cash Flow(1) of $13.9 million was five times the amount for the prior year period.
Brookdale named to Newsweek's Most Loved Workplaces list.
"At Brookdale, we are deeply committed to creating value for our shareholders by providing high-quality care and services to our residents, ensuring that we are an attractive place for employees to work, and improving both our capital structure and capital allocation," said Lucinda ("Cindy") Baier, Brookdale's President and CEO. "In the third quarter, this included not only our day-to-day operations, but also helping to ensure our residents' and associates' health and safety through multiple major hurricanes, being named a Most Loved Workplace by Newsweek, meaningfully growing Adjusted Free Cash Flow, more than doubling our number of Brookdale HealthPlus communities, and negotiating multiple accretive transactions that will benefit Brookdale and our shareholders in the immediate-term and over the long-term."
SUMMARY OF THIRD QUARTER FINANCIAL RESULTS
Consolidated summary of operating results and metrics:
Year-Over-Year
Increase / (Decrease)
Sequential
Increase / (Decrease)
($ in millions, except RevPAR and RevPOR)
3Q 2024
3Q 2023
Amount
Percent
2Q 2024
Amount
Percent
Resident fees
$ 743.7
$ 717.1
$ 26.6
3.7 %
$ 739.7
$ 4.0
0.5 %
Facility operating expense
548.3
537.4
10.9
2.0 %
537.5
10.8
2.0 %
Cash facility operating lease payments
64.4
64.6
(0.2)
(0.3) %
64.4
—
— %
Net income (loss)
(50.7)
(48.8)
1.9
3.9 %
(37.7)
13.0
34.4 %
Adjusted EBITDA (1)
92.2
80.2
12.0
15.0 %
97.8
(5.6)
(5.7) %
RevPAR
$ 4,869
$ 4,596
$ 273
5.9 %
$ 4,835
$ 34
0.7 %
Weighted average occupancy
78.9 %
77.6 %
130 bps
n/a
78.1 %
80 bps
n/a
RevPOR
$ 6,171
$ 5,919
$ 252
4.3 %
$ 6,193
$ (22)
(0.4) %
(1)
Adjusted Free Cash Flow and Adjusted EBITDA are financial measures that are not calculated in accordance with GAAP. See "Non-GAAP Financial Measures" for the Company's definition of such measures, reconciliations to the most comparable GAAP financial measures, and other important information regarding the use of the Company's non-GAAP financial measures.
Same community(2) summary of operating results and metrics:
Year-Over-Year
Increase / (Decrease)
Sequential Increase / (Decrease)
($ in millions, except RevPAR and RevPOR)
3Q 2024
3Q 2023
Amount
Percent
2Q 2024
Amount
Percent
Resident fees
$ 730.9
$ 691.9
$ 39.0
5.6 %
$ 725.9
$ 5.0
0.7 %
Facility operating expense
$ 536.9
$ 515.7
$ 21.2
4.1 %
$ 527.1
$ 9.8
1.9 %
RevPAR
$ 4,859
$ 4,601
$ 258
5.6 %
$ 4,826
$ 33
0.7 %
Weighted average occupancy
78.9 %
77.9 %
100 bps
n/a
78.1 %
80 bps
n/a
RevPOR
$ 6,155
$ 5,909
$ 246
4.2 %
$ 6,177
$ (22)
(0.4) %
(2)
The same community senior housing portfolio includes operating results and data for 611 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:
2023
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Weighted average
76.6 %
76.3 %
76.1 %
76.2 %
76.6 %
76.8 %
77.1 %
77.6 %
78.2 %
78.6 %
78.4 %
78.3 %
Month end
77.6 %
77.4 %
77.6 %
77.6 %
78.1 %
78.2 %
78.5 %
79.3 %
79.7 %
79.5 %
79.6 %
79.3 %
2024
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Weighted average
78.0 %
77.9 %
77.9 %
77.9 %
78.1 %
78.2 %
78.6 %
78.9 %
79.2 %
79.4 %
Month end
79.3 %
79.2 %
79.1 %
79.2 %
79.5 %
79.7 %
79.9 %
80.4 %
80.5 %
80.8 %
OVERVIEW OF THIRD QUARTER RESULTS
Resident fees.
3Q 2024 vs 3Q 2023:
Resident fees increased primarily due to the increases in RevPOR and occupancy, partially offset by the disposition of communities, primarily through lease terminations, since the beginning of the prior year period, which resulted in $14.6 million less in resident fees during the third quarter of 2024.
The increase in RevPOR was primarily the result of the current year rate increase.
The increase in occupancy primarily reflects the impact of the Company's execution on key initiatives to rebuild occupancy lost due to the pandemic.
3Q 2024 vs 2Q 2024: Resident fees increased primarily due to the 80 basis point increase in weighted average occupancy, an improvement from normal pre-pandemic seasonality trends, partially offset by the slight decrease in RevPOR.
Facility operating expense.
3Q 2024 vs 3Q 2023:
The increase in facility operating expense was primarily due to broad inflationary pressure and an increase in marketing expense.
These increases were partially offset by the disposition of communities since the beginning of the prior year period, which resulted in $12.8 million less in facility operating expense during the third quarter of 2024, and a decrease in the use of premium labor, primarily contract labor.
3Q 2024 vs 2Q 2024: The increase in facility operating expense was primarily due to an additional day of expense during the third quarter of 2024, seasonally higher utilities expense, and an increase in marketing expense.
Net income (loss).
3Q 2024 vs 3Q 2023: The increase in net loss was primarily due to the increase in facility operating expense, a decrease in property insurance proceeds, a decrease in the fair value of interest rate derivatives in the current period, and an increase in depreciation and amortization expense, partially offset by the increase in resident fees and a decrease in asset impairment expense.
3Q 2024 vs 2Q 2024: The increase in net loss was primarily due to the increase in facility operating expense, a larger decrease in the fair value of interest rate derivatives, and an increase in debt modification costs recognized during the current period for the refinancing of mortgage debt previously scheduled to mature in September 2025, partially offset by the increase in resident fee revenues and an increase in property insurance recoveries.
Adjusted EBITDA.
3Q 2024 vs 3Q 2023: The increase was primarily due to the increase in resident fees, partially offset by the increase in facility operating expense and a $2.6 million decrease in other operating income for state government grants recognized during the prior year period.
3Q 2024 vs 2Q 2024: The decrease was primarily due to the increase in facility operating expense, partially offset by the increase resident fees.
LIQUIDITY
Year-Over-Year
Increase / (Decrease)
Sequential
Increase /(Decrease)
($ in millions)
3Q 2024
3Q 2023
Amount
2Q 2024
Amount
Net cash provided by operating activities
$ 66.5
$ 45.8
$ 20.7
$ 55.7
$ 10.8
Non-development capital expenditures, net
41.7
47.2
(5.5)
52.3
(10.6)
Adjusted Free Cash Flow
13.9
2.5
11.4
(5.5)
19.4
Net cash provided by operating activities.
3Q 2024 vs 3Q 2023: The increase in net cash provided by operating activities was primarily due to the increase in resident fees and an increase in lessor reimbursements for capital expenditures for operating leases, partially offset by the increase in facility operating expense.
3Q 2024 vs 2Q 2024: The increase in net cash provided by operating activities was primarily due to higher monthly resident fees billed and received in advance, an increase in lessor reimbursements for capital expenditures for operating leases, and an increase in resident fees, partially offset by the increase in facility operating expense.
Non-development capital expenditures, net.
3Q 2024 vs 3Q 2023: The decrease in non-development capital expenditures, net of lessor reimbursements, was primarily due to a $6.7 million increase in lessor reimbursements.
3Q 2024 vs 2Q 2024: The decrease in non-development capital expenditures, net of lessor reimbursements, was primarily due to a $5.7 million increase in lessor reimbursements and a decrease in replacements of major building systems.
Adjusted Free Cash Flow.
3Q 2024 vs 3Q 2023: The change in Adjusted Free Cash Flow was primarily due to the increase in net cash provided by operating activities, partially offset by a decrease in property insurance proceeds.
3Q 2024 vs 2Q 2024: The change in Adjusted Free Cash Flow was primarily due to the increase in net cash provided by operating activities and the decrease in non-development capital expenditures, net of lessor reimbursements.
Total liquidity. Total liquidity of $324.1 million as of September 30, 2024 included $254.7 million of unrestricted cash and cash equivalents, $29.7 million of marketable securities, and $39.7 million of availability on the Company's secured credit facility. Total liquidity as of September 30, 2024 decreased $21.8 million from June 30, 2024, primarily due to a mortgage debt financing transaction in which the Company obtained a $182.5 million loan to refinance $197.1 million of debt scheduled to mature in 2025 and repayments of $10.1 million of mortgage debt, partially offset by $13.9 million of Adjusted Free Cash Flow.
TRANSACTION AND FINANCING UPDATE
Agreements to Acquire Currently Leased Assets
In September 2024, the Company entered into three definitive agreements to acquire 41 communities (2,789 units) that are currently leased by the Company for a combined purchase price of $610.0 million, as further described in the press release issued on September 30, 2024. These three transactions are expected to close by year-end, subject to the satisfaction of customary closing conditions for real estate transactions. The Company expects to fund these acquisitions through the assumption of existing mortgage debt, the net cash proceeds from the sale of the 3.50% convertible senior notes due 2029 (the "2029 New Notes"), proceeds from non-recourse mortgage financing on certain of the assets, and cash on hand. The Company expects these three transactions will result in an approximately $46.6 million decrease in cash paid for operating and financing leases for the twelve months ending December 31, 2025 compared to the previously required estimated 2025 lease payments and assuming the renewal of the lease for five of the communities at the end of its current term on December 31, 2024. The leases for 36 of the communities were previously classified as operating leases and have been prospectively classified as financing leases subsequent to the amendment of the leasing arrangements. The Company expects the amendment of the leasing arrangements will result in an approximately $8.1 million and $32.8 million decrease in cash paid for operating leases for the three months ending December 31, 2024 and the twelve months ending December 31, 2025, respectively, as a result of the reclassification of lease costs due to financing lease classification and the expected acquisition transactions.
Convertible Senior Notes
On September 30, 2024, the Company entered into privately negotiated agreements with certain of the holders of its outstanding 2.00% convertible senior notes due 2026 (the "2026 Notes") to exchange a portion of its existing 2026 Notes for a newly issued series of 2029 New Notes, as further described in the press release issued on September 30, 2024. On October 3, 2024, the Company issued $369.4 million aggregate principal amount of its 2029 New Notes. At closing, $219.4 million principal amount of the 2029 New Notes were issued in exchange for $206.7 million principal amount of the 2026 Notes and $150.0 million principal amount of the 2029 New Notes were issued for cash. The Company's net cash proceeds from ...
