Good morning. My name is Jordan, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living Fourth Quarter 2025 Earnings Call. Today's conference call is being recorded. [Operator Instructions] At this time, I would now 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 Fourth Quarter 2025 Earnings Call. Participating on today's call are Nick Stengle, Brookdale's Chief Executive Officer; Dawn Kussow, our Executive Vice President and Chief Financial Officer; Mary Sue Patchett, our Chief Operating Officer; and Chad White, our Executive Vice President, General Counsel and Secretary. On today's call, we will discuss fourth quarter and full year 2025 results as well as our financial guidance for the 2026 year. We'll also provide 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 described in our annual report on Form 10-K and quarterly reports on Form 10-Q. I direct you to the earnings 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 for joining us on today's call and for your interest in Brookdale. This morning, I'll provide a high-level commentary on our fourth quarter and full year 2025 results. I will also review our strategic priorities and guidance for 2026 and our outlook through 2028. Note that we provided preliminary financial highlights for the fourth quarter and full year 2025 on January 28 in advance of our Investor Day, which we held on January 30. Today's results and guidance is consistent with what we previously shared. Speaking of our Investor Day, I would like to thank everyone who participated, and I'm especially grateful to those that made the trip to Nashville. The engagement and insight provided by our investors, prospective investors and equity analysts, both those that formally cover Brookdale and those that have an interest even if not providing coverage today, was amazing. The Brookdale management team left the event with even stronger conviction in our multiyear projection. For those that were unable to participate, we do have the video recording and presentation available on Brookdale's Investor Relations page. When Brookdale initially provided guidance for 2025 in February of last year, the team guided to RevPAR growth of 4.75% to 5.75% and $430 million to $445 million of adjusted EBITDA. Now as we report the completed year, we finished at the top end of our initial RevPAR guidance at 5.7%, and we handily exceeded our initial adjusted EBITDA expectations, delivering $458 million for the year. Likewise, Brookdale's fourth quarter delivered on our expectations for RevPAR and adjusted EBITDA as the positive trends seen in the first 3 quarters of the year continued into the fourth quarter. Let me start by calling out a few highlights from the quarter. First, I'd like to…

Thank you, Nick. This morning, I first want to recap Brookdale's performance against 2025 targets, then turn to a deeper dive into the fourth quarter, followed by a discussion of our recently issued 2026 guidance and the assumptions that underpin that guidance. As Nick mentioned, we are very pleased with our fourth quarter and full year 2025 financial and operating results. Here's a quick recap of the targets we established for 2025 and how we delivered against them. Our 2025 target for annual RevPAR growth was 4.75% to 5.75%, which we later increased 2x to 5.25% to 6%. Brookdale delivered against that target as we reported 5.7% RevPAR growth on a consolidated basis, coming in above the midpoint of our increased target. Our 2025 target for adjusted EBITDA started at $430 million to $445 million and increased 3x over the course of the year to a range of $455 million to $460 million. Again, we delivered on that goal as we reported adjusted EBITDA of $458 million, also above the midpoint of our increased range. For 2025, we set a goal of generating $30 million to $50 million in adjusted free cash flow. We fell just short of that goal with full year 2025 adjusted free cash flow of $23 million. I would characterize this modest shortcoming as related primarily to working capital timing and refinancing-related interest prepayments. Importantly, the $23 million in adjusted free cash flow generated in 2025 marks our returning to generating positive cash flow for the first time since 2020. 2025 was also an exciting and successful year for Brookdale's portfolio transition as we work to rightsize our footprint by exiting nonstrategic or underperforming owned and leased communities. On the lease side, during 2025, Brookdale exited 58 communities with 6,466 units through lease terminations. Notably, pursuant…

[Operator Instructions] Your first question comes from the line of Josh Raskin from Nephron Research LLC.

I've actually got 2. I guess the first is, and Nick, you started on some of this. Just maybe talk a little bit about the progress you're making around that transition to an operating company. And if you could give some maybe specific examples I heard on the workforce side, but maybe changes around workflows or budgeting and how you guys were approaching that as you came into guidance would be helpful. And then second question, just if you could walk us through expected progress on Health Plus. You gave some great statistics for 2025. But I'm just curious if you could remind us targets for 2026 rollouts. And have you looked at data around rents or rent increases or even retention data in the communities that have rolled out HealthPlus and maybe where they were the year before and sort of any tangible progress that you can point to?

Yes. Excellent. Josh, thanks for the question. I'll tackle the first one first, and we'll go to the second one. So very clearly, and I've articulated this now several times, both in the Q3 call, the Investor Day and even on this call today, this idea that we're an operating company first and foremost. Obviously, we've now described Mary Sue's role as our COO, and she's in the room with us this morning to tackle any really deep dive ops type questions. That is fundamentally kind of how we are thinking of everything. And the regional model really is an extension of that. So not only do we have a dedicated COO wakes up every morning focused on driving great performance, driving great resident and experience driving move-ins. We also have regional teams. And again, I sort of described this in the Investor Day, and it's far more impactful maybe even than a slide can really capture. But it's this idea that we have 6 regional leaders with a dedicated team and truly dedicated team of a sales leader, a clinical leader, an asset management leader, a dining leader, all the different functions so that we can really focus in and be very nimble and very focused on that super hyper-local type decision that a customer faces when they're contemplating senior living. The other part that I just announced during my prepared remarks is we have hired a brand-new position here at Brookdale. It's the Senior Vice President of Strategic Operations. This role will consolidate all our pricing decision-making, the analytics, the reporting, the implementation, how we deploy pricing strategy within all our communities. Now we had a similar structure in the past, but it wasn't truly consolidated under one leader, specifically under operations. Concurrently, in a similar manner, all our labor management, our staffing ratios, our workforce management, overtime control, all those types of things will also be under this role. And probably most importantly, our CapEx decision-making. As I've shared quite a few times now, we are really leaning into this idea of redeploying capital into our communities. And for those that were fortunate enough to be with us at Investor Day and got to do the tour of our Franklin sorry, our Brookdale Green Hills community, I think it showed pretty clearly what you can do with a 16-year-old building when you have a very deliberate and comprehensive capital deployment plan. And we are centralizing all that capital deployment and how we think of it under this role. So it's a very meaningful position that we've now hired under this SVP of Strategic Operations. The second part -- actually, let me pause there. Mary, is there anything to add on Josh's question?

I'm just very excited about this next step for us because it puts all of those specialized functions so that we can go to market to support our regions and winning locally.

And I think the second question was around HealthPlus. So as I shared, we rolled out HealthPlus an additional 58 communities in 2025, expanded our footprint in, I think, 3 new states, if I can recall my prepared remarks. correctly there. As far as going forward, the real focus, Josh, as you recall, for those that listened to the Investor Day, and again, I encourage everyone who has any interest in Brookdale to take a look at our Investor Day presentation and video that's still on our Investor Relations website. We leaned in on this idea of winning markets and pivoting the thinking of how we win by saying we will win the market. And the 2 examples I happened to give at Investor Day were Kansas City and Dallas. Obviously, we're in many more markets where we have some critical density. The HealthPlus plan going forward will be to really fill out those gaps that we may still have in markets and use that as yet another lever to driving performance around care, around service. And the net effect of that, and I think this was the kind of the next part of your question on HealthPlus is we have seen a definite improvement in turnover of residents for one, they enjoy and appreciate the care coordination that's provided, but then there's a very practical objective component where they're just going to the hospital less, they're going to the emergency room less. And those are both areas of, I'll call them, leakage that happens in our industry where folks who are in assisted living or memory care, if they land in an inpatient unit in a hospital because of some acute event, quite often, they don't come back to senior living. They go to a different level of care or unfortunately, sometimes actually pass. So our HealthPlus program is helping quite a bit on our retention of residents, which then in turn drives our occupancy growth.

The one thing I might add to that, Josh, is that we've also seen some really favorable impacts to our associate turnover rates. in our HealthPlus communities. That's actually been very good. Our associates like the technology that's provided. They love the system that's in place. It's been very, very beneficially received. And it's helping on the move-in side as you're able to talk about the benefits of the program and what you can provide to residents. Family members love that, and it's been very, very positively received.

Our question comes from the line of Joanna Gajuk from Bank of America.

So maybe first on the centralized pricing strategy, right? Your peers talk about in-place rent increases in the high single digits. So is that kind of what you were able to push as well? And to that end, have you noticed any change in financial-related move-outs because of that?

Yes, Joanna. Very good question. And I'll characterize what you just said, roughly in line with what we were able to achieve with our in-place rate increases that went effective on January 1. So mid high single digits is definitely aligned. In fact the way I think we'll say it even more clearly, our in-place rate increases for 2026 are more akin to what we did 2 years ago in 2024 and definitely more than what we did last year. And that's a very important metric because our entire resident base gets the same in-place rate increase. And in some ways, underpins our overall RevPORowth for the entire year. The other thing I want to comment on RevPOR growth is as the year progresses and we get new move-ins, those new move-ins are typically replacing residents who moved in on average, let's say, 2 years ago back in 2024 when our occupancy was meaningfully lower, where our discounting was a little bit higher. So typically, as the year will progress, we will be moving in new residents at a different price point than those that are moving out because of the strength in our business, the overall strength in the senior living industry and for sure, the occupancy that we have within Brookdale specifically.

And Joanna, I'll follow up on the financial-related move-outs and our experience there. We, of course, are monitoring as we roll out our rate increase what we would see. And I would just say that it's relatively in line with what we saw when we rolled out kind of the same rate increase 2 years ago. Now what I would also say is if you look at our attrition rates, we've seen some favorability in our attrition rates over the last 2 years. Our attrition rate has been coming down. And so that has been favorable. You can see that in our investor presentation, and we're continuing to see that in 2026.

Great. And I have another one a different topic, I guess, somewhat related. But in terms of your CapEx commentary, so you clearly expect the nondevelopment CapEx to increase from last year. So can you give us a little bit more maybe details there in terms of the number of projects? And I guess, as it relates to going forward, without giving specific numbers, I guess, if you really talk about it. But how should we think about this '27, '28 and so on in terms of how long will it take to touch all locations that need that CapEx?

Yes. So -- so as a real estate company, you always have to reinvest in real estate, no matter the age. And obviously, the older it is, the more you potentially have to do. But the reality is there will always be ongoing real estate capital reinvestment. That's true of any real estate type and senior living for sure, falls in line. It's a fairly highly lived-in type real estate just as hotels are, just as things of that nature. So I'll reiterate what we said we expect to execute to deploy in 2026, the range that I had in my prepared remarks. But the reality is that the real focus and the real shift in mindset under this new SVP of Strategic Operations is really taking that asset management perspective, really take this view of we invest into a portfolio to get a return. So if anything, the spend will pivot more towards these larger projects. And we do have a list. I mean, we've prioritized it. We have the high impact, and it kind of does align with this idea of winning markets. So we're going to deploy our capital in a more deliberate way in the markets that we want to win so we can create an overall market lift for Brookdale. Again, I used Dallas and Kansas City as illustrative markets. They're far more. And obviously, we won't disclose kind of where our strategy is and where we're leaning in. But that's really the real meaningful part. As far as the spend going forward beyond that, I mean, we can't specify a number. But I think if you think of continuing to be roughly in line with what we're doing, feels like a comfortable run rate. We can cover more than enough of the required items while continuing to expand these really high NOI driving type projects.

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

Just a quick question on the occupancy bands. I appreciate all the color on the sub-70 bucket. We've talked about that a lot, but I wanted to focus a little bit more on the 70 to 80 bands, the 90 or so communities there. It seems like there's a lot of earnings power in that bucket. And just wanted to think about the timing and considerations for getting those more meaningfully above 80%. Can you maybe talk about those in terms of their profile for 3Q leadership? Are there geography considerations to think about how your pricing strategy shifts to address that bucket? And just anything you can -- and CapEx needs, anything that is kind of the gating item for getting those over 80?

Yes. Great question, Ben. And by the way, the SWAT communities that we've identified are predominantly in that 70 to 80 and then also the below 70. Now a lot of the below 70, we're disposing. So obviously, we're not putting a lot of SWAT energy into those as they unwind. But the reality is even though we quite often benchmark and use milestones around the less than 70 because that's -- at that point, you're really talking about breakeven. The real magic of flow-through occurs as you enter that 80% point. So the fact that you're highlighting that is definitely top of mind for us as well, where a lot of our efforts with our SWAT team is actually specifically in that mark. And then usually, once it accelerates beyond 85% to 90%, it's never a cruise control or autopilot, but it kind of enters that phase pretty quickly just based on where the community is. So I will tell you that really is kind of the sweet spot of where we focus a lot of our energy is, first, let's get communities above breakeven. That usually happens fairly quickly. And again, we're disposing a lot of them. And then the next point is how do you nudge them? How do you push them beyond that 80% benchmark to get them above.

And Ben, the other thing that I would add is that there are a few communities. Nick was explicit about the 14 communities in the less than 70 that are on the disposition list. The -- I'd say the next largest group on our disposition because, as we said, there's 29 that are coming out in '26 is in that band as well. And so as they continue to move up, and there's a large number of communities in that 70% to 80% band that are already in our SWAT team groups that we're already focused on, whether it's CapEx, it's pricing, it's turnover with our associates to make sure that we're highly focused to continue to move them up. Nick already talked about the progress that we made during the year, and we would expect to continue to make that progress here in '26.

Your next question comes from the line of Brian Tanquilut from Jefferies.

So maybe, Nick, as I think about occupancy that you reported for January, it seems like that kind of tracks your typical seasonality for the December to January move. But as we think about the snowstorms and ice storms that hit the South, how should we be thinking about the recovery that you're seeing there? And what it tells you about the health of the demand equation for the business?

Yes. I appreciate it, Brian. So historically, our January -- sorry, our December to January sequential occupancy trend is around a 30 to 40 basis point decline. And that's pre-pandemic, even since the stabilization post pandemic, that 30 to 40 basis point decline from December to January, very typical, by the way, the industry and for sure, Brookdale. And that's exactly what we achieved this year, 2026. And I'll say that is despite this winter storm. The other reality that occurs in senior living, most move-ins occur at the very end of the month, the last week of the month, and you can see that in our own numbers. If you ever look at our month-end number as compared to the weighted average for the entire month, nearly every month, if not every single month, it's always higher. So the fact that, that big storm that kind of transitioned through Texas, where we have a meaningful footprint through Tennessee, for sure, where we have a meaningful footprint and off to the East right in that last week of January, definitely clipped us. I mean folks didn't have power. Everything was frozen over. There are not many move-ins or tours that occur in that environment. So for sure, that impacted our occupancy gain in January. But the nice thing about our industry and the nice thing about the segment of the industry we're in, we're in a very nondiscretionary needs-based, not many alternatives. And by the way, it was the entire market that was impacted. So folks who needed senior living, assisted living in January, the end of January still need it today. So in fact, we're already seeing it in our February numbers. The pace of move-ins in the first few weeks of February are already ahead of what we typically see, and that's a direct spillover from the January. So I think the better way to look at it is to combine our January and February numbers to get a better sense of how Q1 is progressing. And from our perspective, it's already progressing very nicely as we would expect despite that storm.

[Operator Instructions] Your next question comes from Andrew Mok from Barclays.

I wanted to follow up on the CapEx spend. I think the range you gave implies about $4,400 per unit across the continuing portfolio. Is that the right level we should be thinking about? And then, Nick, I think I heard you say this is a comfortable run rate. So should we be thinking about this as a structural increase in ongoing maintenance CapEx versus a cyclical acceleration?

Yes, Andrew, I'll take the first swing and then Dawn will chime in with some more details. So the per unit number, I think, is right, if you do the math. So 40.

I think, Andrew, we can maybe talk about your units, but I think it's more around that $3,500, $3,600 on a net basis because the number we're giving is a net.

But the real point is we are looking to reinvest in our communities. The -- as we expand our EBITDA and as we expand our cash flow generation, again, overall, thematically, the run rate feels about right, but we're also looking to reinvest. And the real point I think I'm going to make is even on -- we always look at it on an average per unit basis. The reality is we're going to overinvest in some communities. So the number will be much higher in a community that we really lean into. Other communities will be near 0 or something almost meaningless as far as the CapEx. And that's the real point of the shift is less this idea that we have a bolus, a big grouping of CapEx that we deploy in a peanut butter spread type fashion, and it's more we are going to target specific communities in specific markets to drive that return and that NOI. So it's less of a piecemeal approach, which is what we've done a little bit of and more of a comprehensive targeted deliberate approach of our CapEx deployment.

Great. And then just a follow-up. I think I heard in the prepared remarks that rate increases offset an ongoing trend of lower resident acuity. Can you elaborate on what you're seeing on the acuity side? Is this a mix effect of younger seniors moving in or an actual decrease in same resident acuity?

Yes, I can start. And I think from an acuity side, it's -- the comments are around the fact that you have -- as you have a higher acuity resident move out, you generally are having a lower acuity resident move in, which if you look at our RevPOR throughout the year, you can see that in our rate because of the care rate. So as you have someone with a higher acuity that's moving out and a higher care rate and someone lower moving in, you're naturally going to have a lower care rate, which is impacting our RevPOR trending throughout the year. And I think that's -- those are the comments. From the overall acuity level, we obviously monitor our overall acuity as our acuity levels have come down since COVID. We certainly saw them spiking up as we were coming out of COVID, but we certainly have seen them starting to come down. The benefit of that is that you have a longer length of stay with your residents.

Yes. So our overall resident turnover rate is slowly decreasing, which is actually a very positive sign because our length of stay is increasing, which again very much underpins overall occupancy growth. So it's kind of a balance between acuity and length of stay. Obviously, the sicker or the older the resident, the less the length of stay. So it's actually balancing out pretty nicely.

There are no further questions. I'll now turn the call back over to Nick Stengle, CEO, for closing remarks.

Excellent. Thank you, Jordan. Really appreciate everyone joining us today. I appreciate the continued interest and engagement with Brookdale. As I've shared in Investor Day and on previous calls, excited to make the entire management team available to any folks, any stakeholders who have an interest in Brookdale. So please reach out to Mike Grant, and we'll set it up. So with that, let's wrap this up, Jordan. I wish everyone a pleasant Thursday and end of the week.

That concludes today's meeting. You may now disconnect.