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Awesome. All right. Good morning, and welcome again to the 2026 Jeffries Healthcare Services Conference. I'm Brian Tinkilip, Healthcare Services Analyst here at Jeffries. With us this morning is Brookdale Senior Living, largest operator of senior housing facilities or communities, sorry, here in the U.S. Joining us this morning are the company's CEO, Nick Stengel, and Don Cusso, CFO. Nick, maybe I'll start with you. So when we think of the state of the union, what is happening at Brookdale? Yeah, excellent. Thanks, Brian. First, Thanks for having us, and good morning, everyone. Thanks for showing up at 8.30 in the morning. Welcome to Nashville. Hopefully you get a chance to see a little bit more than just this hotel, whether it was yesterday or later today, and wish you guys safe travels home. And for those that are on the webcast, thanks for showing your interest in Brookdale. So as far as State of the Union, we did just have our Q2 call, I guess, a month or so ago. We reaffirmed our overall guidance, REF PAR 8% to 9%. We reafirmed your total full-year guide on the EBITDA, And I'm sure we'll be talking about that a bit more throughout the morning. But the real point is the overall supply-demand dynamics of the industry are holding true. And you see it both, hopefully, in our own numbers. You see it in our competitor peer numbers. And you See it in the NIC numbers as they're reporting overall occupancy growth across the industry. And more specifically for us, we're seeing it in specific markets. So we disclose specific occupancy bans where we have communities that are less than 70%, 70 to 80, et cetera. But what's interesting is our over 90, over 95% occupancy communities are growing. But if you were to tease it out, it's entire markets that are filling up. So what will eventually become, I believe, and we're projecting a national dynamic, is showing up in specific markets where entire markets are 90%, 95%. We see it in our own communities. We see in our peers around there. So that's a lot of the underpinnings as far as the overall state of the union. The other part I'll share, and again, I'm sure we'll maybe have a few more questions. We've gone through a lot changes in the last year. And, in fact, in a few weeks here, I will have been in the position for one year. I joined in early October. And since then, you know, first me coming in as the new CEO, first operating, operational background CEO in probably over a decade, I want to guess, more than a decade. They'd hired a COO, we did the regional change, we shrunk the business by nearly 100 plus communities, which then all your district level, all the GNA, we aligned ops, sales and clinical under one accountability line, one empowerment line, one enablement line, hired a new chief sales officer. Anyway, the picture I'm painting is a lot of changes. In some ways, I would argue disruptive, but I would also argue absolutely necessary to get the full advantage of the supply-demand and the overall macro environment that we're describing. And those changes are getting further and further in our rearview mirror. So when I think of the State of the Union, it's one of now we have the right people. Just as importantly, we havethe right organizational structure to change behavior within our 500-plus communities. We have theright portfolio. we have the right balance sheet and improving balance sheet to do a lot more. Nick, a lot to unpack there, but maybe I'll start with the macro side, just on the supply-demand dynamic that you described. One of the questions we get asked a lot is, what does that mean as it flows through to the occupancy gains that you, as Brookdale, can deliver, given that supply-domain dynamic? And you're right, we see it in the NIC data. We see it with new construction or new builds are not really ramping up. So just curious how you're thinking about the translation of macro into Brookdale. Yeah, great question. The first point I will make, and quite often we do pin down occupancy. It's an absolutely critical component of our industry. But I'll always remind ourselves, our management team, remind investors, remind everybody on this call, REF PAR is truly what drives financial performance. And REF Par, obviously, occupancy being a meaningful part of it, rate being the other part of it. And, oh, by the way, rate is sometimes driven by occupancy. So there's a circular thing going on there. So occupancy, obviously, is a very critical part of it. What we are seeing, again, I alluded to specific markets filling up. So when that happens, obviously there's not much more occupancy to be had when you're sitting in 95, 97, literally 100% occupancy but at that point you are given the freedom, the pricing power to do something different around rate. again staying well within kind of the norms of what consumers will will accept but if their desire to sustain a specific market in a specific community rate has to be where that comes the flip side of it is we also have communities and I'm thinking of places like Texas and Florida where there was a lot of development that occurred in the mid-2010s so 2015-16-17 a lot of money chased where baby boomers were moving there's a lot of development markets crashed in occupancy in that moment because it was a little premature. At that point, you're driving more occupancy. But again, let me just pause on that for a moment. We are over-indexed in Texas and Florida. I just alluded to that. Ten years ago, that was a struggle. But today, it's amazing because there is no new development. So that supply side is pretty much stagnated. In fact, in some markets, they are turning senior living communities into behavioral health. We're actually losing senior living in some of the markets that we continue to operate in. And oh, by the way, baby boomers did move to San Antonio and Austin in Houston. So the occupancy ramp will occur. So in effect, what I'm describing is kind of a bit of a two-speed world. One, where the market is full and you're going to drive rate. One where there's more occupancy to be had. And we are trying to thread that needle, always keeping in mind rev par, which again, our guide is eight to 9% is where what we're striking. Nick, maybe just to double click of that, I'll take the supply side next, right? One of the questions that always comes up is why would a new supply come to market? And we're not seeing it in the data. So just curious how you guys are thinking through the lack of supply growth in senior housing. Yeah. I mean, so it's very clearly not showing up. It's very clearly not shown up in the NIC numbers, N-I-C. I think they're calling for, I think, 0.6%, 0.7% annual growth. Oh, by the way, 80-year-olds are growing at a 5% kegger. So that's where the supply demand disconnect is occurring. So your question is, why is that not happening? There's a handful of things uh first things first obviously the cost of materials so the inflationary pressure the tariffs whatever whatever it is is very costly from a materials perspective cost of labor is probably even the bigger driver uh the labor that is available in construction is going to other projects uh think of data centers think of things of that nature obviously cost of borrowing is a big part of it and when you put all that together the to to pencil a new development deal the rates you would have to charge for a potential customer and again some other publicly traded peers have shared numbers because they do a lot of development and we do not 30 to 40 to 50 percent increase in rates to make a pen a project pencil oh by the way the timeline to do this is three to four to five years so you are making big bets today for something that in theory will pay off in three four or five years or begin paying off and you you will have to drive a rate that's 30, 40%. And that's just the reality we face. The flip side of it is that you can still buy communities below replacement cost. So there's no incentive, there's no impetus to generate new projects generally across our nation, because you can still buy into, just as we have, communities that you Can get below replacement costs. And until that pivots, I think that's the environment we will be in. And eventually, it probably will pivot. The cool thing is, even when it does pivot, though typically we're not competing for that customer and now i would never want a new development open up right across the street from a brookdale that's just not what i want but if it does and it does happen usually they're charging a rate that it's a different customer anyway so we're a little there's a little bit of a defensive mode even if there's uh development that comes online that's awesome maybe donna let nick take a little Bit of a breather here so i'll ask you a question so kind of like on the rev par discussion um i think social security is about to announce their cost of living adjustment for 2027 in the next few days. How should investors think about rate adjustments for 207? I know it's early, but just in the context of whatever social security cost of moving looks like. Yeah, it's a great question, Brian. And we are currently in the process of going through our 2027 budgets and targets and looking exactly at those rates, because we'll give our in-place rate increase every January 1st to our in place residents. And we usually have to give 30, 60, 90 days notice. And so as we're thinking about that, we absolutely take into consideration the cost of living, Social Security increases. But we're also looking at Nick has talked about this, that we're in this two speed world. And we just talked about the supply demand dynamics. That's the backdrop for our industry. So as we think about growing our occupancy and getting in that above 90% occupancy, we're certainly looking at how much can we push our price, because that's where the leverage in the business is coming. And so although it's a consideration, there's many other factors that we're looking at. The markets that we are in, what the supply demand is in those markets, what the occupancy levels are, what their rate increases have been. And then we're also monitoring as we're looking at doing, I think it was three years ago, we did a historical high rate increase. Last year, we said high single digits. So we monitor financial move outs to kind of gauge what the elasticity is with that rate increase, and let me add one more thing, Brian, it's I'm glad you asked this question. It used to be in our industry, and for sure, Brookdale, you would match rate increases to the COLA adjustments like that was that was just that that was the paradigm that we were in probably just around COVID. So COVID changed that. So again, one of the silver linings, I guess, of COVID is we have now divorced that concept. Overall occupancy in the industry, overall demand, that all allowed us to do it. The massive inflationary pressure that occurred around labor in 2022, 2023 kind of broke apart this idea that you have to pin your rate increases to COLA, and that's all customers will allow you to do. We're in a completely different world. And we've now proven that out over the last three, four years. And that will be the paradigm, I think, as an industry, for sure, at Brookdale for 2027 and on. Maybe, Nick, just to tie it to that comment, right? I mean, one of the questions we get asked a lot is affordability and even like the housing market. But I think the missing piece there is the fact that a big chunk of what's paid to you guys in rent is from social security retirement funds, right, for most folks. Just how are you thinking about that, especially as mortgage rates go close to 7%. Housing market's slowing down. Yep. And you didn't say this, but I want to be clear. 94% is private pay. You're saying the private pay is funded through people's social security payments. We're not building the government for 94% of our revenue. So on the affordability question, we're right down the fairway type company. There are companies, and many of them are quite often not-for-profit, that are very good on the lower end. They get a lot of Medicaid. They give charitable donations. They're able to support customers, residents on a different spectrum then there's all the luxury stuff which already alluded a lot of the new development a plus plus locations we are right down the fairway right down the fair way with our product the care and the service we provide especially on the needs-based side I would argue is top of the mark and in fact if anything if that's if you're paying for something with the Brookdale it's on the needs-base side where 75% plus assisted living memory care as opposed to independent living which is more of a choice where that you know that matters but I so that that's the first part I'll say the other part of the affordability you said that a lot of it is funded from social security i think if you do the math it's actually a very small percentage the majority of the funding to pay for for senior living typically is equity in your home so you sell your home you're downsizing uh you're a baby boomer i'm going to imagine you've made quite a bit of money over the last three four five ten years much less decades uh there's a lot and we see it even in our own numbers but for sure industry numbers a lot of nice equity that they've built up in the stock market 401ks oh by the way this is a generation that actually has retirement unlike I think most of us in this room they actually have a defined retirement plan that's not a 401k or their own funded IRA so that's where the the funding so I would argue social security is actually a meaningful very meaningless part especially for the product we provide on the lower end it's probably more meaningful but that's not the space we operate in got it um maybe don i'll go back to script uh one of the questions that we had for you was you despite the dynamic first half environment you maintain guidance for the year um curious you know the tweaks to some of the assumptions what drove those and how you're thinking about the achievability of guidance despite some ofthe adjustments you made to the growth rates? Yeah, it's a great question. When we talked in our second quarter earnings call, we mentioned that our occupancy was moving a little bit slower than what we had expected. A lot of for the reason that Nick has talked about in his opening remarks on our operational priorities, getting the team in place, kind of setting that fundamental team. We saw a little bit of disruption and we saw it in our occupency numbers. However, we did see our rate holding strong and then if you came into if I think back to the first quarter we had the storm so a little bit of headwind with our expenses and then second quarter in our other expense growth a little bit higher than what we what we had expected so all of that saying as we looked to the full year we looked at our expense base coming into the third and fourth quarter and said labor is 65 percent of our costs, and so we need to adjust our labor costs to make sure that it aligns with our occupancy. We took a re-look with our new team in place, our operating team in place, and said, you know, looking at our labor base, how do we look, as we're looking at the roles, and maybe pre-COVID, we maybe saw a little bit of creep in some of the administrative roles. And so we did take a wholesome look, looked at our labour costs and said what can we do for the second half of the year we took specific actions around some of our other things like food and R&M are things that we can control. So for instance, our food costs, a large part of our other expense base, we can use substitution. So if chicken is running higher, we'll substitute out beef. And so kind of taking some actions on the cost side as we're getting that occupancy growth. Now the good news is we just reported our August occupancy up 40 basis points sequentially. So we're seeing the traction on the top line. And then the discipline on the expense side for the back half of the year. I'll add, and I might be repeating myself just a little bit, part of our confidence is we now have the operating platform. We have the organizational structure, the organizational fortitude to drive behavior in communities in a way that maybe we have not had in the past. And again, sometimes in meetings like this, some investors' eyes will start glazing over. But in a company that serves and cares people, we are a people company so who you have in your leadership positions how they're structured absolutely matters and before we had a very again siloed is the cliche but we had you know so you have your ed who's leading their community but they had they would have two three four five bosses they had their sales boss they had a clinical boss they Had an asset management maintenance facility maintenance boss we've cleaned all that up and say no no you have one boss it happens to be called the ddo a district director of operations sales clinical all the all the people report up under that one ddo so there's now a direct line of again empowerment enablement accountability that runs from me as the ceo through mary sue our coo front down through our regional team our district team down into each community because we're looking to drive behavior change whether it's a food thing we're trying to manage quality service or cost whether it's a labor thing we're trying to manage, care, service, or productivity, whatever lever we have to pull, we now have the pipeline to pull it across 500 communities. And again, I would argue that is something that we've only bolstered with all the changes, which again, fundamentally are disruptive, but absolutely necessary to continue doing what we want to do. Nick, I'll use that comment you just made to shift the discussion to the sales leadership change that you made, Because you and I have had chats on, hey, how is occupancy going to grow? And that was one of the things that you've mentioned, that it gives you that confidence that occupancy will continue to rise because of changes you've made. If you can just walk us through, what does a new sales leader bring to the table and what changes look like? Yep. So we have, as of mid-June, Margaret Cabell started as our chief sales officer, and that position was vacant since basically mid-February. So for several months, we did not have anyone in the seat. Now, we obviously had a team. There's great fill-in, but I will tell you it's a meaningful part of our leadership structure is our chief sales officer. And what Margaret brings to the table is, first, very great sales experience. Oh, by the way, she was a CEO and operator in her own right in a much smaller company but has the operating lens as well. But what she brings, and it's actually quite fascinating seeing kind of her work, is she's very action-oriented as opposed to outcome-oriented, which on initial blush, people are like, wait a minute, outcomes matter, closing, yes, but it's not a, hey, go get more move-ins, you're missing your move- ins, why are you missing your movement? Be more like that person who's number one, why are your number 30? That's not what she does, what we do anymore. It's driven by, there's very specific activity, very specific behavior we're expecting from our 500-plus sales workforce, So we have salespeople in every community. Oh, by the way, energizing our operators and clinicians as well. And part of the new adage, part of new moniker we have as a company is even if you don't have sales in your job title, like me, really you are selling and we are all selling. And she's been able to bring that energy around very specific activity and actions. And it comes in the form of calendared events. It comes in front of campaigns. It comes into form of a lot of the things that we maybe had not flexed our muscle as much are active selling. we are leaning in and being far more active with our local sales folks in a way that we just had not done. And again, COVID, there were many reasons that that muscle had atrophied over the years. She's re-energizing it very rapidly under her leadership. Oh, by the way, the org structure we have where she reports to our COO and all the salespeople will report up to the operational line. She now has the ability to drive change across a much bigger spectrum of individuals than when And our previous structure was, you just lead sales. No, she leads the sales efforts for the company, regardless of what your job title might be. That's awesome. Don, as I think about the announced dispositions or the disposition program, it seems like you're getting close to the tail end of that. Any updates you could provide us? Because I think you gave us a targeted timeline of basically Q4. And how do we think aboutthe losses or the drags from these assets as we try to bridge the guidance? Yes, to go back to 2025, we announced 42 dispositions coming into this year. 29 of those dispositions were left. And at the end of our earnings call last quarter, we had nine left that dragged into the back half of the year. We still expect all or mostly all of those to be done by our third quarter call. There might be one or two laggards that go into the fourth quarter. We haven't talked about the impact, but it certainly has been a drag on our adjusted EBITDA, a smaller drag, we'll say, on our justed EBITda and our occupancy as well. Just as we announced the 42 dispositions, really what we looked at was, you know, what are the communities that we have in our portfolio that are either orphaned or underperforming communities? Generally, they were smaller communities where we didn't think the time and the effort in order to turn those communities around were going to be beneficial to us and to shareholders. And so, you know, as you can imagine, the ones that are dragging a little bit are probably the lower performing assets. But fully expect that most or mostly all of those will be done by the third quarter. There might be one or two that slips into the fourth quarter. And then, Nick, as I think about your comments on the cost structure, just the expense line, As we rationalize and complete the divestitures, what does that look like from a corporate overhead or just a broader overhead rationalization perspective? Yeah, so I feel pretty confident we've locked in the corporate GNA, the org structure. And again, it's not just corporate. It's our field leadership structure. I'd describe regions and districts. We structured it contemplating these divestiture. So we'd already kind of built in the structure we wanted. So, in fact, if anything, we're running a little thin because there are more communities that these folks are leading. So as those go away, they'll be even more effective. So really what I'm describing, I feel pretty confident we're pretty well locked in with our G&A. Now, the cool thing is as we grow occupancy and revenue and new acquisitions, I do not project our G & A will grow anywhere near that point. The real lever around expense efficiencies within the communities, and it has to do with labor first and foremost, food, rents, your utilities. There's some other line items, but we're not contemplating more G&A adjustments up or down in any meaningful way. Is that fair, Dawn? Yeah, that's exactly right. And, I mean, maybe just a double click on Nick talked about realigning the operations. Like, that wasn't an ad or a reduction of G&O. We always kind of keep our costs in line with what our, you know, what communities, what our revenue is. but you know it was more of a realignment of the people that we had and not you know adding people or taking people removing people now that makes a lot of sense maybe the next questions for both of you guys during investor day you highlighted some of these capital investment initiatives that you're looking at and how their roic accretive curious where we stand in that in terms of identifying and pursuing those opportunities and how long do you think is that runway Yeah, I'll tackle the first part, and then Don will fill in. So the average age of our buildings is right around 25, 26, 27 years old, which, by the way, is also the industry average. So we're right in line with the overall average of senior living space. Now, fortunately, we don't have – I'm about to say something. I don't think anything older than 30 or 35 years. So it's not – you know, there's no pre-World War II. Like, it's all very functional, far from obsolete. I know there's a – sometimes we go to real estate conferences, and we're asked what our obsolescence rate is. I was like, zero? None of them are obsolete. But you know what? They do start showing wear and tear, and we are investing very meaningfully. We call it first impressions. That's what the program we call it. So from memory, we have 30 projects currently identified that are meaningful, and in our mind, meaningful is anything more than a quarter million dollars of capital investments. We have 30 of those projects. Oh, by the way, the average project cost is around half a million to 600,000 per project, and that's very specifically to fix the aesthetics of the building. I love going to some conferences, and you'll walk in this beautiful hotel in New York. It's a 100-year-old building, and yet it is beautiful because the capital makes it beautiful. So we can take a 25, 26, 27-year old building and make it look just as amazing as one that's new with a very deliberate, comprehensive capital program, andthat's the real point that we've pivoted. Our previous approach was more piecemeal in nature. And some of those, we just didn't have the funds to do something more. So we would literally just replace furniture because that furniture was getting unsafe. Now, would that generate, drive another move in, save a move out? Probably not. But now we have the funding, we have The Balance Sheet, we are the free cash flow to do something different where we'll replace the furniture, replace the carpeting, do some better lighting, change some space from a dead area to a nice little bistro, and we will generate ROI. And again, I say we have about 30 of those projects as far as how many we have i think we're trying to pick up that cadence where every year just like hotels just like this hotel you have a capital deployment plan where you're always refreshing and i think 30 pace feels comfortable any any other comments yeah i would i think that's exactly right um the the 30 pace feel comfortable the one thing that i would add is just pivoting a little bit is that we are we just did an acquisition in doing a little bit more in the way of development capex and so adding in as we're looking at our capital deployment. It is, first and foremost, kind of the first impressions. We see a lot of move-ins generated quickly when you can redo a common area in a community, but some of the development cap-backs, it's, you know, we used to, pre-COVID, spend about $50 million a year, and as we bought this Galleria acquisition, it is more of, as we close the SNF down, we are repositioning the asset itself, and that is some development cap-back, and we are looking at a few more of those projects, not on a very large scale, but certainly something that'll be meaningful. Always looking for kind of double digit returns. But when you do development capex, those returns are coming a little bit, it's a little Bit of a longer period of time, maybe a year to two years before we see those returns, as opposed to first impressions is a little is a Little bit more immediate. Maybe for both of you guys. I mean, if I look at Brookdale, say three years from now, occupancy will be at a much higher level what does that earnings power free cash flow power look like don and nick i'll start one if i i'll go back to um investor day and you know where we we gave out stat a stat that one percent a one percent rate increase is about 27 million dollars of noi and so as we think about you know several years from now we gave um we gave multi-year guidance. We said that we were going to grow our adjusted EBITDA at mid-teens. We're going to get our leverage below six turns. We still expect to do that. And doubling down on the backdrop of the industry dynamics. And so if you think about what we've been talking here, growing occupancy, and as you can grow your occupancy and push your price, $27 million on 1% rate increase is significant and generates a lot of cash flow that we can reinvest. The slide I will always point investors to, I think it's either slide 18 or 19, it jumps around from quarter to quarter, shows the NOI per unit at different occupancy bands. And that's fundamentally what we're talking about here, Brian. So how many communities will we have at a 70% occupancy versus 80% versus 90% in two, three years as compared to today? And I am very confident, because we've already shown that progression, everything will be going up that slide. So at the lowest band, we generate about $3,800 of annual NOI when you're at 70% occupancy. You're barely breaking even. You take that exact same unit, and you plug it into a 95% occupied building, and it's now doing $21,000. So a 4 or 5x increase in NOI. And it's because of the fixed cost operating leverage that exists in our industry, and it'S because of The rate power you have when you have that higher occupancy, And obviously, rev par, when it comes mostly from rate, flows through to NOI far more quickly than occupancy generating rev par. So the math is pretty straightforward. And that slide 18, again, sometimes it's 19, shows that very clearly. Makes sense. So we've got a minute left here. Anything you want to leave the audience or the folks on the webcast with as they think about the Brookdale investment story? Yeah, I guess I'll repeat a couple of things. The overall supply-demand dynamic for the industry holds true today, maybe even more so than it did a quarter ago, a year ago. And it's showing up in our numbers. It's showing in our conversion ratios. It's show up in move-in pace. It's shown up in the move-out pace as well. Folks who in the past may have moved out for another option, that option is starting to dwindle in certain markets. And so a lot of things are starting to show up in a very raw form in our numbers. The supply side, again, Nick publishes great numbers. I think that's the ground truth from a global perspective. But even when you look at specific markets, we're seeing it very, very, you know, it's coming to life in specific markets where, again. I mentioned that it's not only that we have a community that's 95% occupied. We have all the communities in a market 95% plus occupied because there's no supply. there's a lot of demand and there's not a single shovel digging a single senior living community in that market and so that that holds just as true the other part of it is I keep talking about all the changes we've made changes for the better in my mind disruptive in the moment but absolutely critical so excited by kind of where we are coming from where we are today and what this looks like in the next several years awesome well thank you guys so much and we'll see soon