Good morning. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living Third Quarter 2025 Earnings Call. Today's conference call is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mike Grant, Brookdale's Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Brookdale Senior Living's Third Quarter 2025 Earnings Call. Participating on today's call are Nick Stengle, Brookdale's recently appointed Chief Executive Officer; Dawn Kussow, our Executive Vice President and Chief Financial Officer; and Chad White, our Executive Vice President, General Counsel and Secretary. On this call, we will discuss financial results for the third quarter of 2025 as well as updated financial guidance for the 2025 year. We'll also provide you with other general business updates. During today's call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. These statements are made as of today's date, and we expressly disclaim any obligation to update these statements in the future. Actual results and performance may differ materially from forward-looking statements. Certain of the factors that could cause actual results to differ are detailed in the earnings release we issued after market yesterday as well as in our Securities and Exchange Commission filings, including the risk factors included in our annual report on Form 10-K and quarterly reports on Form 10-Q. I direct you to the release for the full safe harbor statement. Also, please note that during this call, management will discuss non-GAAP financial measures. For reconciliations of each non-GAAP measure to the most comparable GAAP measure, I direct you to the earnings release and to the company's quarterly supplemental financial information, which may be found at brookdaleinvestors.com and was furnished on an 8-K yesterday. With that, it is my pleasure to turn the call over to our CEO, Nick Stengle.

Thank you, Mike. Good morning. I appreciate everyone joining us for today's call, my first as Brookdale's CEO. This morning, I'll provide a high-level review of our third quarter results, followed by an update on the 5 strategic priorities originally outlined by the Brookdale leadership team during the Q1 earnings call earlier this year. Before that, I'd like to start by thanking the 35,000 Brookdale associates who provide the amazing care and service every single day in all hours of the day that is the hallmark of what it means to be a Brookdale associate. I would also like to thank the roughly 49,000 residents and their families who put their trust in Brookdale. And finally, I would like to thank our shareholders for their continued support and insight. I'd also like to take a moment and recognize the interim office of the CEO comprised of our Board Chair, Denise Warren; our CFO, Dawn Kussow; and our General Counsel, Chad White, who, since mid-April of this year, jointly assumed the CEO function. This team did a fantastic job of refining and executing Brookdale's strategy in addition to their primary roles during a period of transition. The team remained focused and made excellent progress on improving our culture, our operations, our portfolio optimization and our financial results. I am excited for the opportunity to work alongside these strong leaders and continue the trajectory they have set Brookdale on. Since joining Brookdale early last month, I've spent my time getting to know our people and culture, getting to know our investors, connecting with our communities and residents and digging into the business. I'll take a moment now to briefly introduce myself and answer some questions I've heard frequently since joining Brookdale, specifically why Brookdale and why now. Let me start with my…

Thank you, Nick. The team is excited to have you onboard. As Nick described, we are very pleased with our third quarter financial results. In particular, occupancy and adjusted EBITDA exceeded our expectations, providing us the confidence to increase our fiscal 2025 guidance range. Specifically, we're increasing our guidance for full year 2025 adjusted EBITDA to a revised range of $455 million to $460 million from a prior range of $445 million to $455 million, and we expect to come in above the midpoint of our RevPAR range of 5.25% to 6% of year-over-year growth. In the third quarter, we grew our occupancy 170 basis points sequentially on a consolidated level and by 150 basis points on a same community level, capitalizing on the summer selling season. We also expanded our consolidated adjusted EBITDA by $18.8 million or 20% year-over-year. We have made significant progress on our lower occupied communities, both through performance improvements and portfolio optimization efforts, and we expect to see the impact of margin flow-through as these changes progress. We're pleased with our continued progress and are optimistic about the remainder of the year. Before getting into results, I'd like to give you an update on our previously announced actions to rightsize our portfolio. As a reminder, we expected to transition 55 communities leased from Ventas by the end of 2025 year as well as 42 communities owned by Brookdale that we have identified as noncore and that, for a variety of reasons, would be better fit for a different owner/operator. These communities would transition both during 2025 and 2026. During the third quarter, we transitioned 13 Ventas assets with approximately 1,400 units and exited 10 communities with 242 units. During the next month, we expect to transition the remaining 42 Ventas communities, of which 30 were…

[Operator Instructions] Your first question comes from the line of Brian Tanquilut with Jefferies.

Congrats on the quarter, and Nick, excited to work with you here. So maybe my first question, Nick, as I think about the fact that you've been here in the job for a month now, just curious, number one, what have you seen as areas of opportunity within the Brookdale portfolio. And number two, how are you thinking about strategically the whole philosophical debate between pricing focus versus occupancy versus cash generation, FFO, all these things?

Awesome. Thanks, Brian. So I have been here just over a month, literally 1 month and 1 day today, but I'll tell you a clear picture is already evolving in that short period. We will share a lot more details during the Investor Day that I mentioned during the prepared remarks. And I did also mention the 5 strategic priorities, which kind of define the overall framework of what I'll call the vision, the strategy. But the real vision, the real pivot here is that we're going to be changing the underpinnings of that framework. And what I mean by that is we're going to take a far more offensive posture as a company. We're going to be driving the business as opposed to reacting to the business. Part of this is doubling down on this cultural mindset that we are first and foremost an operating company that is built upon a real estate foundation. Maybe I'll talk to that a little bit more in a second. I would like to share maybe a few examples of what I mean when I say we're going to be more offensive. And the first item is around our organizational structure. Now as I say that, I'm going to admit that's not what typically grabs the headlines or what shows up in the analyst reports, but it is what defines what a company is. It defines how companies think, how they operate, the culture, and all of that is changing. Unfortunately, some of that predates me during the transition period, but we're going to continue doing a lot of that. And a lot of that does start really at the very top. It starts with me, first and foremost, as the CEO, both my experience and my approach and just doubling down on…

I appreciate that. It's very, very insightful. Maybe, Dawn, as I think about Q3 results, right, and I think about RevPOR, just thinking about kind of like the bands that you showed in actually this very good presentation that Mike put together. Some of the slides, you show the occupancy bands. And curious what kind of views you had on discounting and how we should be thinking about RevPOR going forward. Then maybe just as I think about Q1 or 2026, just seeing social security raise benefits by 2.8%, how you're thinking about pricing for next year.

Yes, that's a great question. Thank you, Brian. I think for our fourth quarter, we obviously are going to -- and I said in my prepared remarks, we'll get a little bit of a benefit as the dispositions come off in our RevPOR. But certainly, we are very laser focused on the budgets for 2026. And as Nick said in all of his comments, just going through the budget process now, certainly very focused on making sure that we're driving rate at the high occupancy and driving rate across the organization and ensuring that we have that in-place rate increase is [ what ] put in on January 1. That will give us our single biggest economic benefit next year and just making sure that, that is going to be in excess of what we expect for our ExPOR for the year.

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

To start with, congratulations and welcome to Nick. We're certainly looking forward to working with you. One thing that we noticed on the release was a new FFO disclosure. I just wanted to get some insight on your decision to start to closing that metric, how you're thinking about the normalized LTM figure in the context of the owned portfolio value and where you think that could go as the optimization ensues.

Yes, Ben, glad you noticed that and glad you asked the question. I was listening to Welltower's earnings call last week, the recording of it. And Shankh mentioned -- I'm going to paraphrase this. He said something along the lines of Welltower is now an operating company in a real estate wrapper. I think that's the word he used, which I think is a pretty appropriate characterization of the evolution that Welltower has been on over the last few years, which got me thinking about Brookdale and kind of how we would kind of describe ourselves. And obviously, we're the largest operator. Everyone knows that, largest operator in senior living, have been that way even despite the dispositions of late. But the part that we have to keep reminding ourselves and other folks is we're also the third largest owner of senior living real estate. Welltower, Ventas obviously being 1 and 2. We are the third -- next largest owner in that senior living real estate. So the way I would say it, I would say we are an operating company built upon a foundation of real estate. And that foundation of real estate, as I kind of mentioned a couple of times now, is becoming a more and more scarce resource. It's becoming a more and more valuable resource. And as such, we thought it would be helpful to provide an additional perspective on how we view our own performance internally and how we view the value of our company as compared to other real estate companies. And we thought that FFO is -- provides such a view into the company.

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

So maybe first, I guess, a couple of follow-ups. When you mentioned this organizational change that you are just making, I guess, that started this quarter, so did I get it right, it's going to impact G&A? And I wasn't quite sure whether you were trying to say negatively or positively. It sounds like quarter-over-quarter. And then I have a follow-up on next year.

Joanna, I'll take a first crack at the question and then Dawn may add a few more specifics. So our G&A is reducing. I think on Slide 18 or 19, we talk about $162 million projected for the year, which is a reduction. As I was describing that organizational change, we actually removed a layer and removed some folks in a layer and consolidated it. So in effect, it's kind of a net 0 G&A cost when it comes to the organizational component that I described very explicitly. So there's no increased cost. And the commentary was not even really about saving dollars or spending dollars. It was more about a mindset of a company who's an operating company underpinned by real estate. I'll continue using that term. I like it, that we are an operating company. So we're going to structure our way -- ourselves that way. We're not adding additional heads. We're not adding additional positions. To accomplish that, we're just refocusing folks that we are 6 regions with the functional expertise, and we're 6 regions running 100 communities each. Dawn, anything to add on the [ extra dollars ]?

Yes. And Nick's exactly right. I think on Slide 18, we have what we expect for the $162 million for 2026. As you do the math on, that will be a step down. As you think about 2025 run rate and then merit increases, the cost of inflation coming into 2026, that will be a step down. And then the other thing that I would just point out is, in the current quarter, you'll see we did take some restructuring charges or some severance costs in our add-back. So that's just a direct result, just not an impact for the ongoing run rate.

Okay. So that was my question here. So the $162 million reflects the change. It sounds like that's a net 0 impact. And then the $162 million also reflects any like merit increases that you would do.

Absolutely. Absolutely, yes.

So that's kind of like the number. Okay. So this is not like a starting point. This is actual like your kind of initial view of that number into next year.

Yes.

Okay. Perfect. And then a couple of -- I guess, on the guidance, so you did raise your EBITDA, right, and you expect to be at the higher -- or the above, I guess, midpoint of the RevPOR. But then there was no change to free cash flow guidance. So why is that? Is there something that's offsetting that beneficial effect of the EBITDA being higher?

Yes, Joanna. We do -- as you recall, the fourth quarter is generally a working capital cash outflow. We have a couple of things mainly ongoing as our real estate tax payments come through in the fourth quarter. And then we do expect this quarter -- or excuse me, the fourth quarter of this year to have a little bit of a negative working capital impact just simply from the transition of the dispositions. And then I think it also allows, as Nick was talking about in his comments here, some flexibility on our CapEx and our CapEx spend, so the ability to strategically deploy more CapEx as we identify that.

All right. That makes sense. And I guess a little bit different topic, but a follow-up to something in prepared remarks about your maturities, right? So you do have some maturities coming up in 2026. I guess there's a bank debt. So maybe can you talk about your plans to address the 2026 maturities?

Absolutely. As you recall, the bank debt, we have some extension options on. We would plan to extend that bank debt and then go and refinance that debt. The single asset loan that we've got coming due in the third quarter of '26, it's a very small loan. We would expect to roll that into the refinancings that we're doing but very much focused on that bank debt and the early 2027 debt that's coming due in our refinancings this year.

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

Appreciate all the comments around mid-teen EBITDA growth over the next few years. Nick, you noted that you're going to be digging into the business in the coming months and presumably share that at the Investor Day. What gives you conviction to make that statement now before -- and why do that before the Investor Day?

Yes. So obviously, we'll go into far more details of kind of how we're viewing this, how I'm viewing this at that Investor Day, and hope you guys can join in, Andrew, where we'll kind of lay it out. And I don't want to continue just repeating things, but I mean, the first thing is just the undeniable market dynamics. We -- I've used the word scarcity a few times now. As an industry, we're running headlong into it, and it starts next year. So as we look at our -- the progression, as we look at where we are, there's just -- there's a reality there, especially for our company since we're so heavy in assisted living and memory care. I think we're about 70% mix. That is not a discretionary spend. You cannot delay or defer it. The alternatives are not good. So prospective residents that need that care, that need that service have to go somewhere, and we are going to be ready to serve them and care for them. Oh, by the way, as you look at the NIC data, NIC as in N-I-C, it's -- we always kind of get a little bit of a hit as a company because we do lag it, so not an exciting place to be. But I'm going to pivot that and say, hey, that's runway. That is opportunity for us. As our competitors fill up and are no longer able to take residents and we have openings right across the street, right across the town, then that provides even more tailwind, more opportunity for us to fill those spots. Then the other reality is kind of as we're looking at the business over the next 1, 2, 3 years, even though new starts are down, there are constructions…

Great. And if I could, a follow-up on the occupancy gains. It's been obviously very strong there the last couple of quarters. Do you have a sense for how much of your occupancy gain is coming from seniors that are new to senior housing versus market share gains from competitors?

Yes. I would say -- I don't know that we track it exactly that way. But I don't know that we have that breakout of the occupancy of the gains but certainly excited that we're at 170 basis points of sequential occupancy for the quarter, expect to get a little bit of an occupancy lift in the second -- or in the fourth quarter with the dispositions that we're seeing and excited to come off of a strong summer selling season. As you saw in our release, that flowed into our October occupancy, so we're still continuing to see that strength.

Yes. And Andrew, this is Chad. One thing I would mention and add to that is we've really also seen continued improvement in our controllable move-outs. So we are delivering very strong satisfaction. Resident satisfaction is really important for us. We're driving strong growth year-over-year in our NPS scores. And so not only are we attracting new residents, and we're excited for that. We want to serve more seniors. We're actually delighting and satisfying our existing residents as well and seeing strong growth in that, which is also helping and support that occupancy growth.

Yes. Well said, Chad. Let me add one more thing. And it doesn't answer your question directly on this market share point, but I do want to point out, and I think it's aligned with this. Our sequential occupancy growth on the same-store communities grew 150 basis points from Q2 to Q3. NIC, again, N-I-C, not me, NIC data, N-I-C data, kind of the comp set, they grew 50 basis points. So we grew sequentially 3x the overall market. So I have to believe there's a market share component to that, but it'd be hard to tease out exactly what that looks like.

Your last and final question comes from the line of Josh Raskin with Nephron Research.

I'll add my congrats as well to Nick. I guess the first question I have would be how do you maintain best practices and sort of that broader organizational benefit that you get from scale as you move to these 6 regional units where everyone is running their own business.

Yes. Great question, Josh. And as you can tell, org design is very important to me. It's because we have a single operational leader that reports to me and the 6 regional leaders that in turn report to this 1 leader. Again, it's this idea that we have to be regional to be nimble to be able to focus on specific regions, all while underpinned with the strength that Brookdale has to offer and the resources we have to offer and the guidance. And it's all about empowerment. So what I've already been telling the team, and again, I've been here 1 month, 1 day is we, at the CSC, we set the goal. We set the objective. We help pave the road. And again, I'm using analogies here. I mean by pave the road, we give the CapEx. We give the resources, finance and HR and our recruiting resources. We put up the guardrails. So those are our policies. But then we let these 6 regional leaders run down the road. And as long as they're going down the road towards where we want them to go and we're all aligned, it works beautifully. So it's a good question. But I'll tell you, in my experience, the most successful companies are ones that have a structure similar to this. You don't want to centralize everything so far up in the ivory tower that you lose connection with what's happening in the communities. At the end of the day, the customers, our residents make decisions 650 times across 650 communities. So by doing this, we just get 1, 2, 3 steps closer to that decision.

All right. That's perfect. And then I've got a sort of EBITDA margin growth question. You're laying out this longer-term mid-teens EBITDA growth rate. I'm just curious, sort of starting at, let's call it, 15% margin corporate-wide this year, where does that longer-term target go? What do you think is the opportunity there? And then should we assume mid-teens growth starts in 2026?

Yes. So I'll say yes. Yes. So my prepared comments made that pretty clear. So mid-teen growth, it's a multiyear run rate, and it starts -- well, it starts now. And we -- again, at the Investor Day, we'll model it out in a lot more detail, do some sensitivities around it, that type of nature. And I think Dawn wants to say something as well.

Yes. Josh, I just would clarify that -- just to make sure that it's on the ongoing portfolio because we do have a level of disposition noise that's going on. So we did add Slide 18 to the investor presentation, so just to call that to your attention that we put that in there for a level of clarity of kind of the starting point of the ongoing portfolio, broke it out between owned and leased. So you could probably start there. And then we gave you some insight into what we expect for G&A and lease expense for 2026 as well.

Ladies and gentlemen, I would now turn the call back over to Nick Stengle for closing remarks.

Well, excellent. Appreciate it, Rebecca. So I guess I'll close this by the way I opened it, and I want to thank all our associates providing amazing care every single day. I mean this only works because of them. I want to thank the residents, the 49,000 residents, the families that continue to trust us and the prospective residents that will be trusting us and then our investors. Really appreciate the support, the insight, kind of the interest in Brookdale. So with that, Rebecca, I think we can close the call. I wish everyone a pleasant weekend.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.