Upon experiencing another “strong” quarter of growth, Brookdale Senior Living is seeing the positive results of its recovery strategy by focusing on profitable and sustainable growth, executives said Tuesday.
During a third-quarter earnings call, Brookdale President and CEO Lucinda “Cindy” Baier said that the Brentwood, TN-based senior living operator’s results are an outcome of its intentional, experience-driven plans, the successful execution of its sales and marketing strategy, and a dedication to its mission.
Third-quarter move-ins outperformed the rate of the previous quarter by more than 5%, along with an almost 6% sequential reduction in move-outs during the quarter.
Occupancy grew every month within the quarter, and sequential increases each month within the quarter accelerated. Third-quarter consolidated weighted average occupancy grew 110 basis points sequentially and 120 basis points year over year, and monthly occupancy increased for seven consecutive months between March and October. The company has seen 920 basis points of average occupancy growing since the inflection point in March 2021.
Including its October results, Executive Vice President and Chief Financial Officer Dawn Kussow said, the company achieved seven consecutive months of sequential occupancy increases this year and 24 consecutive months of occupancy growth year-over-year.
“With these positive results, we continued progress toward our full operational recovery making its way down the income statement, and not only top line,” Baier said. “As we continue to grow occupancy and reduce turnover, we expect productivity will improve, resulting in additional margin growth.”
The company reported making “significant” continued progress on attracting, engaging, developing and retaining staff. Brookdale also made “meaningful improvements” in the third quarter in leadership retention and associate turnover, with year-over-year retention rates for three key community leadership roles — executive director, health and wellness director and sales director — increasing more than 200 basis points, Baier said.
Baier said that although the company is “not yet where we want to be,” full-time hourly employee turnover improved 10 percentage points from the third quarter in 2022 as a result of initiatives and programs implemented earlier in the year. She added that the company recently completed training its community and field leaders to provide tools to foster long-term growth and enhance community operations.
Year-over-year labor costs increased approximately 1%, and other operating expenses increased just under 6%, compared with an almost 11% revenue increase. Contract labor expenses were 35% lower than in the second quarter, according to Kussow.
Facility operating expenses increased in the third quarter compared with the year prior, primarily due to broad inflationary pressures and higher third-party referral source costs associated with resident move-ins, the company reported. Those increases were partially offset by a decrease in the use of contract labor as employee turnover declined and the size of the company’s workforce increased from the prior-year period.
Kussow said that the “impressive revenue-to-expense spread” drove 580 basis points of third-quarter adjusted same-community operating growth to 25.4%. That 580 basis points of growth, she said, was an even larger year-over-year margin improvement than that seen in the second quarter, and it supported the third consecutive quarter of 40%-plus same-community adjusted operating income growth.
“We believe our balance sheet is well-positioned to provide sufficient flexibility as we continue our positive momentum toward full operational and financial recovery from the impact of the pandemic,” Kussow said.
LTC Properties agreement amended
After giving LTC Properties notice of non-renewal of 35 community leases in May, Baier said, the two entities reached a “mutually beneficial agreement” in August under a new lease to continue leasing 10 communities. In October, that master lease agreement was amended to add seven more communities. Baier called the terms a “win-win” for both parties, adding that Brookdale will receive an increased pool of landlord-funded capital investment dollars into those communities.
A future of continued growth
Looking ahead to 2024, Baier said that Brookdale expects to see continued occupancy growth based on supply-demand dynamics and the company’s “unique differentiators.” Continued steady and sustainable occupancy growth will move the company closer to a goal of returning to historical high occupancy, she predicted.
Brookdale intends to “lean into healthcare,” including its Brookdale HealthPlus value-based care coordination program, as a way to best serve residents, the CEO said.
“Looking ahead, it remains undeniable that demand from the target senior demographic is here and rising,” Baier said. “Our disciplined approach to ensuring sustainable forward progress is continuing to yield positive results. We believe 2023 will be a year of solid progress and growth.”
For more coverage of the earnings release, see the McKnight’s Business Daily.
