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Ladies and gentlemen, thank you for standing by. Welcome to the Brookdale Second Quarter 2024 Earnings Call. All lines have been placed on mute during the presentation portion of the call with an opportunity for question-and-answer at the end. [Operator Instructions] I would now like to hand this conference call over to our host, Jessica Hazel, Head of Investor Relations. Please go ahead.

Thank you, and good morning. I’d like to welcome you to the second quarter 2024 earnings call for Brookdale Senior Living. Joining us today are Cindy Baier, our President and Chief Executive Officer; and Dawn Kussow, our Executive Vice President and Chief Financial Officer. All statements today, which are not historical facts, may be deemed to be forward-looking statements within the meaning of the federal securities laws. 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 and certain of the factors that could cause actual results to differ are detailed in the earnings release we issued yesterday as well as in the reports we file with the SEC from time to time, including the risk factors contained in our annual report on Form 10-K and quarterly reports on Form 10-Q. I direct you to the release of the full safe harbor statement. Also, please note that during this call, we will present non-GAAP financial measures. For reconciliations of each non-GAAP measure from the most comparable GAAP measure, I direct you to the release and supplemental information, which may be found at brookdaleinvestors.com and was furnished on an 8-K yesterday. Now I will turn the call over to Cindy.

Thank you, Jessica. Good morning to all of our shareholders, analysts and other call participants. Welcome to our second quarter 2024 earnings call. I am proud to speak to Brookdale’s accomplishments in our financial results, in our community operations and in our strategic priorities. This morning, I will provide a few highlights for each of these areas and then offer additional insights on a couple of key topics, beginning with our financials. Second quarter adjusted EBITDA grew a meaningful 20% over the prior year quarter and adjusted free cash flow improved 26%, taking this a step further through consistent occupancy growth, continued RevPOR increases and quarter after quarter of operating margin expansion we have nearly doubled our adjusted EBITDA in just two years from the second quarter of 2022. Brookdale’s progress towards full recovery from the impact of the pandemic has been powerful. This marked our 11th consecutive quarter of year-over-year same-community adjusted operating income growth while supporting resident satisfaction, meeting our resident needs, providing high-quality care and personalized service, and remaining in compliance with applicable regulations. We are incredibly proud of this as we continue to strive towards our full potential. I believe these results reflect the further strengthening of our community operations and the successful execution of our strategic priorities. Specifically, we are showing tremendous progress in key areas that support the ongoing and future success of our communities. In the second quarter, we achieved our fourth consecutive quarter of trailing 12-month Q3 leadership retention improvement and our fifth consecutive quarter of hourly associate turnover improvement compared to the prior year periods. This is very impactful because as retention and turnover improve, our associates become naturally more proficient in their roles, which we believe translates into improved operational performance; stronger relationships with our residents and other associates; increased resident satisfaction; and ultimately, better financial results. At our core, we are a business of people serving people. And throughout our organization, we remain focused on cultivating a culture that promotes servant leadership and attracts the best associates who also believe that serving our residents is a privilege and take pride in providing high-quality personalized services. Another important way that we are positively impacting our associates, residents and their families is through our Brookdale HealthPlus program. As a reminder, Brookdale HealthPlus is an innovative care delivery model that is designed to help improve residents’ quality of life through evidence-based preventive care coordination. With plans to grow our HealthPlus communities from 49 at the start of 2024 to 130 by year-end, we have been diligently introducing new medical record technology, implementing new community processes and successfully training our associates for the HealthPlus platform. This month, approximately 50 of the planned communities will launch HealthPlus and the excitement among associates and residents is palpable. We are so proud to introduce impactful programs like HealthPlus that enhance our residents’ lives, enhance associate satisfaction and solidify our position as an industry leader. As I just shared, we’ve made incredible progress in our recovery since the depths of the pandemic. At the same time, I know we can do better. I want to take a moment to discuss our recent occupancy results as well as our continued thoughtful approach to long-term growth. While we are pleased that our occupancy performance in the second quarter exceeded our traditional pre-pandemic performance, our second quarter same-community year-over-year occupancy growth wasn’t as strong as we experienced in the first quarter of the year. During the second quarter, our move-ins associated with leads from some paid third-party referral sources were relatively soft compared to our historical experience. Once we identified this trend, we took action, including working closely with these critical partners to improve performance; launching incremental sales initiatives and increasing our planned marketing spend. We believe that we have taken the right actions and have begun to see the benefits from our response and incremental investments. Importantly, our move-ins for the second quarter continued to exceed our pre-pandemic results and we saw improvement within the quarter in response to our initiatives. As a result, we remain incredibly optimistic about our future growth potential. We believe that delivering move-ins that are above pre-pandemic levels represents a strengthening demand from the earliest wave of the baby boomer demographic. While 30% of our move-ins are individuals, who are below the age of 80, the average age of new residents entering our communities is 84. Given this, it’s easy to visualize the opportunity for many years of occupancy growth as we capture the unprecedented demand for our services as this population ages into our average new resident age. Clearly, we currently see the benefits from higher demand and understanding the coming demographic wave. We are being extraordinarily disciplined to the fact that as occupancy grows, so must our cash flow. Following the multiyear impact of the pandemic to not only our census, but also our cost structure, the targeted efforts I have consistently highlighted over the last 18 months are aimed at delivering an appropriate return for the services we are providing and are purposely being established before the expected rapid surge in demand. Accordingly, we remain dedicated to ensuring that our pricing actions at the company level, the community level and with each resident, who moves into our communities, are appropriate for our cost structure and that we are focused on being good stewards of the revenue we receive from our residents by managing expenses prudently and appropriately so that we can demonstrate a strong value proposition to our residents, a compelling career opportunity to our associates and a solid return for our shareholders. As is evident in our results, this dedication to disciplined growth is producing meaningful recovery. If you were to annualize our 2024 first half senior housing results, the operating income we are delivering per available unit would be 11% higher than our 2019 full year level. That’s incredible. It shows that our thoughtful approach to the balance between occupancy growth and profitability is working and is sustainable. We believe this places us profoundly ahead of our peers in terms of a meaningful organic growth opportunity as we fully recover occupancy and even exceed our pre-pandemic occupancy levels. With continued sustainable occupancy increases, we are setting ourselves up to deliver powerful operating income growth, as outlined in our investor presentation. That, in turn, will continue to support significant adjusted EBITDA and cash flow growth, annualized leverage reductions and value creation for our shareholders, future residents and associates for many years to come. This gives me tremendous optimism for our future. The senior living industry is experiencing a positive and growing gap between supply and demand. And this imbalance has more potential for occupancy increases than we have ever seen. Additionally, Brookdale’s unique company strengths and industry-leading programs will continue to differentiate us as a leader within our highly fragmented industry. On the supply side, senior housing inventory growth has stalled at near record lows and industry construction starts have fallen to levels not seen since the impact of the Great Recession. In the second quarter, less than 2% of our communities were exposed to new construction within a 20-minute drive time, given elevated interest rates, high labor and supply cost and lengthy predevelopment and construction time lines, our expectation is that we will have constrained new supply for many years to come. At the same time that there is constrained supply, we are entering a period of unprecedented target demographic growth on the demand side. The U.S. population is aging at the fastest rate in more than a century, providing a historically unparalleled need for senior living. More than one million new seniors are expected to enter our target market every year through 2036 with the first baby boomers turning 80 next year. Along with substantial growth in the aging population, there will be a growing need for the services that we provide. Aging in place is becoming increasingly more difficult with the U.S. Census Bureau reporting an estimated 28% of older adults in the United States living alone and child less. Further, the CDC reports that 66% of residential care community residents have at least two chronic health conditions. Leading industry studies have shown that when aging adult choose a senior living community and receive services to meet their needs, they are less frail and vulnerable. Brookdale is uniquely positioned to capitalize on these macro dynamics. As the nation’s largest senior housing operator in a highly fragmented industry, where our scale and expertise sets us apart, our communities are well established within their markets. Additionally, our higher mix of needs-based product offerings, primarily assisted living and memory care distinguish us from the industry, which is skewed towards lower acuity products. This is so important given the rising difficulties faced by today’s seniors and Brookdale’s ability to serve these diverse needs with our strong clinical expertise, personalized services and resident engagement programs and innovative health care models like Brookdale HealthPlus. As I look ahead, I am confident in our long-term growth outlook, supported by muted inventory supply, strong demand fundamentals and our unique Brookdale differentiators. Today, I am pleased to share that we beneficially extended our 24 community triple-net lease with Omega Healthcare Investors until 2037. As part of this amended lease, Omega has agreed to make available a pool of up to $80 million of new landlord-funded CapEx funding over the life of the lease. $30 million of this pool will be available prior to July 2028 on a rent-free basis. The terms of the amended lease will meaningfully benefit both our cash flow and our liquidity over the life of the lease, and most directly, in the near term. We value our relationship with Omega and are grateful for their willingness to work together to achieve such a mutually beneficial positive outcome on a high-quality portfolio of assets, which are well positioned largely in our core markets. In summary, as I think about the supply and demand dynamics and what our proven ability to deliver meaningful growth will mean for our current year, the next three to five years and even further, I am profoundly optimistic for Brookdale’s future and the lasting impact we can achieve for our current and future residents and associates. I believe that remaining disciplined in our commitment to profitable occupancy growth remains the best path forward and that by being thoughtful in our approach to growth, we are continuing to position Brookdale to deliver incredible results not just over the near term, but for many years to come. I’ll now turn the call over to Dawn.

Thank you, Cindy. Good morning. And thank you for being here today. We were pleased with our second quarter, which included continued steady and sustainable year-over-year gains. This morning, I will walk you through our second quarter results, and then I will speak to our third quarter expectations. Beginning with revenue, second quarter resident fee revenue grew 4.2% over the prior year quarter. This revenue increase was despite a 2.1% or 1,100 unit reduction in capacity compared to the prior year quarter as a result of owned and leased community dispositions since the beginning of the prior year period. Consolidated RevPAR grew 6.4%, which was in line with our previously provided guidance range. Second quarter RevPAR growth was attributable to a 160 basis point increase in weighted average occupancy and 4.3% RevPOR growth over the prior year quarter. This marked our tenth consecutive quarter of triple-digit year-over-year occupancy increases. Compared to the first quarter, occupancy grew 20 basis points sequentially, consistent with pre-pandemic normal seasonality, second quarter RevPOR declined moderately in addition to reflecting larger, sequential occupancy increases in our lower acuity and therefore, lower rate service level offerings. Lastly, regarding consolidated revenue, as a reminder, in last year’s second quarter we recognized $4.1 million of state grants within other operating income, which benefited our prior year revenue. Specific to our same community portfolio second quarter RevPAR increased 5.9% over the prior year, driven by 130 basis points of occupancy growth and a 4.1% increase in RevPOR. When compared to the prior year second quarter, move-outs were significantly improved while move-ins were lower, largely due to the disruption in lead flow from our paid third-party referral sources that Cindy spoke to. Still, we are pleased that both move-ins and move-out volumes remained better than pre-pandemic levels which continues to support our expectation for meaningfully higher demand as we move further into the baby boomer demand cycle. Moving to expenses. Same-community labor expense as a percent of revenue improved 190 basis points compared to the prior year second quarter. This positive performance versus the prior year continues to be a result of favorable flow-through of revenue increases given the fixed cost nature of our business, reductions in premium labor and the favorable impact of improved leadership retention and hourly associate turnover. We are very pleased with our continued progress in each of these areas while continuing to meet our residents’ needs provide high-quality care and maintain regulatory compliance. Second quarter same-community Other facility operating expense as a percent of revenue was 30 basis points higher than the prior year, driven largely by ongoing elevated estimated insurance expense and the outsource of our data centers, which I spoke to on our last call. Despite these factors, by remaining dedicated to the appropriate management of our expenses, we, once again, delivered significant adjusted operating income growth and margin expansion. Compared to the prior year quarter, same-community adjusted operating income increased 13% and adjusted operating income margin grew 160 basis points to 27.4%. This marked our 11th consecutive quarter of year-over-year adjusted operating income growth. Moving beyond community level expenses. Second quarter general and administrative expense, excluding noncash stock-based compensation expense, was relatively flat to the prior year. As a percent of resident fee revenue, this represented a 10 basis point improvement year-over-year. Lastly, cash operating lease payments were $64 million, flat to the first quarter. These financial results culminated in second quarter adjusted EBITDA of $98 million, which was at the top end of our previously provided guidance range. Compared to the prior year second quarter, adjusted EBITDA increased $16 million or 20%. We are very pleased with our year-over-year adjusted EBITDA growth. Our adjusted EBITDA recovery has been so strong that if we were to annualize our first half results, we would be within 3% of our full year 2019 adjusted EBITDA on a lower occupancy and community base. This growth is translating into meaningful improvements in adjusted free cash flow. Second quarter adjusted free cash flow improved 26% over the prior year to negative $6 million. As of June 30, total liquidity was $346 million. Turning to the third quarter. In yesterday’s press release, we guided to third quarter RevPAR growth of 6.25% to 6.75% over the prior year and adjusted EBITDA in the range of $90 million to $95 million. We expect third quarter weighted average occupancy to provide a meaningful sequential improvement to the second quarter. This expectation reflects the confidence we have in our community sales leaders, the anticipated impact of our targeted sales and marketing initiatives and the continued benefit from growing demand. We believe that RevPOR will be relatively flat to slightly down sequentially as is normal course during the year as higher acuity residents who have been with us longer move out and lower acuity residents move in. Our third quarter RevPAR guidance will support meaningful year-over-year resident fee revenue and adjusted EBITDA growth as well as positively impacting sequential revenue and adjusted EBITDA. Moving to our adjusted EBITDA guidance. While our revenue expectations positively impact third quarter adjusted EBITDA compared to the second quarter, there are a number of expense considerations included in our guidance range. First, as outlined on the last page of our investor presentation, there are three seasonal differences between the third quarter and the second quarter that present a material headwind to our sequential adjusted EBITDA growth. These include an extra day, which results in incremental expense, largely labor, across 619 consolidated communities with only a minor impact to revenue. An extra holiday, which, similar to an extra day, leads to meaningful additional labor expense and higher utilities expense, given the hotter summer months compared to the milder spring months, which are normal course for the period fully offset the adjusted EBITDA benefit we will receive sequentially from the flow-through of incremental revenue even at the top end of our RevPAR guidance range. Additionally, while not material for the year, but a consideration for the quarter is the impact of our marketing initiatives. This affects the third quarter in two ways. First, we’re adding additional marketing expense to support our incremental sales initiatives that Cindy spoke to. And second, we’ve shifted marketing expense associated with customer acquisition costs from fees paid to third-party referral sources to other marketing and advertising channels. This shift while having no incremental cash cost for the year affects the timing of the recognition of expenses, which we reflected in our guidance range. Lastly, our third quarter adjusted EBITDA guidance incorporates our current estimate for expenses related to July’s hurricane. Finally, as it relates to our outlook, we continue to anticipate approximately $180 million of net non-development capital expenditures in 2024. With the $100 million of net non-development CapEx spend, which has occurred through the second quarter, we expect meaningfully lower cash usage for CapEx during the second half of this year. Cindy shared with you our favorable outlook for long-term occupancy and operating income growth. As she shared, these expectations will create significant value in our financials and for all Brookdale stakeholders. As we achieve our pre-pandemic peak occupancy and return to even just the mid-point of each segment’s range of pre-pandemic operating margin on our current RevPOR level, we would deliver significant operating income growth. More specifically, on Slide 26 of our investor presentation, we show a future annualized senior housing operating income of $1.1 billion from just the simple assumptions. This growth in operating income would largely flow through to adjusted EBITDA and given our current debt level, this adjusted EBITDA growth would result in reduced annualized leverage by up to 4 turns. I believe this represents a powerful opportunity and it provides me with tremendous optimism for Brookdale’s future. In closing, we are proud to have delivered another quarter of strong year-over-year growth and we are confident in achieving the long-term growth opportunity, which we have outlined. I’ll now turn the call back over to Cindy.

I am grateful for the hard work and passion of all our Brookdale associates who made lives better every single day, and I am proud of our accomplishments towards full recovery from the impact of the pandemic. With each quarter, we are continuing to yield positive results while building a significant runway for future revenue and operating income increases. We remain intensely focused on sustainable growth. And through that, I see a clear path into a long and successful future for Brookdale. Operator, we will now open up the call for questions.

Thank you. [Operator Instructions] Our first question comes from the line of Josh Raskin of Nephron Research. Your line is now open. Please go ahead.

Hi, thanks. Good morning. I wanted to follow-up on the three small, I know small dispositions in the quarter, but I’m curious if you could talk to sort of valuations and then how you’re thinking about potential sales in the future? Is there sort of an opportunity to reduce debt going forward through dispositions?

Hi Josh, it’s Cindy. Thank you so much for the question. There’s three communities that we disposed of in the quarter were very small communities. And I think valuation really depends on the asset, the size, the market. And so I don’t think these are necessarily representative of the entire Brookdale portfolio. When I think about our portfolio going forward, we are generally happy with the assets that we are operating. Having said that, we are always looking for ways to improve shareholder value. And so if the opportunity presents itself to improve our portfolio will obviously take the opportunity to do so. Now there are some constraints around that, right? Our leases are master leases. And so generally, what that means is you have to renew all or none of the lease. And with our owned assets, we do think about sort of what the potential upside opportunity that we have. And as you can see, we’ve had such strong performance with being 11% higher on a same community adjusted operating income basis than we were in 2019. So we think we will delever primarily through the expansion of adjusted EBITDA, and we’ve made great progress on that so far.

Okay. So not making outgoing call, but always willing to listen. And then I guess just a second question, just thinking about Brookdale HealthPlus, I appreciate the update and the review this morning. But that and maybe even broader healthcare services and how you’re thinking about that for your residents. Do you think there’s an opportunity to increase rates? Or is it a retention? I know you don’t explicitly charge for Brookdale HealthPlus, but I have to assume that, that can lead to a higher rate? And again, are there other services that you think you’d want to get back into.

It’s a great question. So when I think about Brookdale HealthPlus, I think about how great it is for the residents who wouldn’t want their mom to have 78% fewer urgent care ER visits and 36% fewer hospitalizations than a senior – a similar senior living at home. So I think what we attract is we attract a resident who finds that value appropriate. So we’re seeing more people move into our HealthPlus communities. We think that we will have a longer length of stay of the residents in our HealthPlus communities, which should translate into higher occupancy. On the associate side, what we’re seeing is that our associates love HealthPlus as well and so we’re seeing better retention of our associate base. So all of those things should work together to create better profitability for our HealthPlus communities. And when we look at the rate that we get at our HealthPlus communities, we want to make sure that we’re providing an attractive value proposition for our residents, but we are also getting revenue from Medicare Advantage plans because the lower health care costs of our health care – our HealthPlus residents translate into better outcomes for their plans. As I think about the health care services that we would want to provide in our communities, we’re excited that we’ve got a number of health care practitioners rounding in our communities because it makes health care more convenient for the residents that they serve, whether we would physically want to own those services like we traditionally did with home health and hospice. I think that remains to be seen. We’re doing such a great job on the core of our business today that we want to capture the opportunity that’s in front of us.

And I’m sorry, just a follow-up. The revenue from the MA plans, how – what – how is that coming through? The actual plans are paying you?

So we get a per member per month for every – in – where we have a contract for every resident who’s also enrolled in Medicare Advantage plan we have a partnership with. And that is a basic fee, and then we get paid for quality metrics. And our quality has just been off the chart. So we’ve been very pleased with that revenue stream, off the charts in a good way.

Yes.

Thanks, Josh.

Thank you. The next question comes from Tao Qiu of Macquarie. Your line is now open. Please go ahead.

Thank you. Good morning, everyone. Cindy, with your marketing ramp expected in the third quarter, could you provide some additional data points around leading indicators such as leads and visits? And maybe talk about the conversion trends into quarter and into the third quarter? And Dawn, could you also elaborate on the changes I heard in terms of the timing of marketing expense recognition due to the shift from third-party internal marketing spend? Thank you.

Sure. Tao, good morning. Thanks so much for the question. As you can see in our earnings release, our occupancy improved 40 basis points from June to July on a weighted average basis. And for comparison, that compared to a 20 basis point sequential increase between Q1 and Q2. So I do think that July has gotten better than what we saw in the second quarter. When I think about what we’re doing with marketing, essentially, we are trying to make sure that we’re matching our marketing spend with the key selling season. As you would expect, with the presidential election, it’s going to be a little bit more expensive to get advertising in the second quarter, but we’re seeing strong conversion by the sales team. And in fact, our conversions have improved relative to historical performance.

And Tao, when we think about the marketing spend in my prepared remarks, I just said that we had been shifting that marketing spend. And so how that shift is going to happen is we would expect our third quarter year-over-year marketing spend is going to be somewhat higher as our incremental expense from the additional sales initiatives is going to impact that quarter. And so just kind of shifting the expense into the third quarter. But as I said in my prepared remarks, not a change in the cash for the year.

Got you. That’s helpful. The second question, the current lease with Omega Healthcare Investors from through end of 2027. So you have two more years to go. Could you maybe talk about the rationale behind the early renewal? And what is the magnitude of that contingent rent adjustment in 2028? And also with regards to the Ventas lease renewal decision during November, I think Ventas has spoken publicly about expecting a high single-digit rent reset or nothing renewal. Any update from your end in terms of if that portfolio makes sense to you under those terms? Thanks.

Thanks, Tao. Let me start by saying we are very grateful for the partnership that we have with Omega. And if you look at the assets in the Omega lease, it’s 24 communities. It’s a little over 2,500 units and the assets are really a high-quality portfolio that is largely located in our core markets. The benefit to Brookdale of renewing now as opposed to waiting until closer to the initial expiration is that Omega is funding $30 million of CapEx that will be available to Brookdale on a rent-free basis. And so what that will do in the near-term is it will improve our cash flow performance as well as our liquidity so that is a very attractive offer for us. And then if you look at the full $80 million of CapEx that’s available to us over the term of the lease, we think that that will be a lease that will meaningfully benefit both our cash flow and our liquidity over the whole life of the lease. So good partnership, good assets, good renewal, a true win-win. Moving to the Ventas portfolio, we have been clear that we will only renew leases that are positive for Brookdale. So we look at positive as are they generating positive cash flow after CapEx? And so that’s something that is very important to us that positive cash flow. And if you look at Page 5 of the supplement, you can look at our entire lease book, and you can see that in the first quarter, our lease portfolio in the aggregate lost $15 million of cash flow. So when we ultimately make the Ventas decision, it will be a decision that is based on what is best for Brookdale shareholders.

Got it. So if you were to bring you the lease, it will be a win-win transaction, both parties similar to what you do with HI?

Absolutely. Thank you.

Thank you. The next question comes from the line of Joanna Gajuk of Bank of America. Your line is open. Please go ahead.

Hi. Good morning. Thanks for taking the questions. Maybe first, just a follow-up on this discussion around the marketing expenses and the timing. So it sounds like it was shifted about – I want to confirm, was it shifted from Q2 to Q3 or from Q4 to Q3?

So the first thing I want to say before Dawn jumps in, is normally in a year marketing expenses are higher in Q3 than they are in Q2 because that’s the key selling season. And given that we’re giving quarterly guidance, it’s important to understand sort of the pacing of the marketing expense in the year. And then if you look at sort of year-over-year, we do expect to spend more in marketing expenses this Q3 than we did last year. And then I’ll let Dawn go into the specifics.

Thank you, Joanna, for the question. And I think just to clarify, again, not an incremental cash spend. But we’ve shifted our marketing expense into the third quarter. And from a customer acquisition cost, which generally we had recognized over a period of, let’s say, about a year to more of a direct expense. And so that’s the shift that we’re seeing is that instead of kind of amortizing that expense over a 12-month period, it’s going to come through – we would expect those costs to come through in the third quarter, which is why it’s adding an additional headwind to the third quarter, but no additional cash, if that makes sense.

Yes, that makes sense. Yes. So amortizing over a long period of time versus expensing everything in the quarter. That makes sense. And then – and I guess, are you willing to kind of quantify that headwind in the quarter? And also, you mentioned – you assume some additional cost for the hurricane impact in July. So is there an amount or a range that you’re assuming in guidance for these two items?

Yes. I think we have not publicly said exactly what dollar amounts are. I think the best way to think about the marketing expense would be just as Cindy said is that we would expect our third quarter expense. Typically, we see a higher marketing expense in the third quarter. We would expect that year-over-year to be a little bit higher than what we saw last year. And that’s how I think about the marketing expense. On the hurricane, how I would think about that is, generally, as we think about hurricanes, of course, we’re in the hurricane season. We are – we have additional labor. We have additional generator costs. Our insurance costs on our property loss might get impacted. But generally, if you are looking at a quarter, it is certainly a consideration. But as you think about the full year, probably less material to the full year. And let me just step back and say one of our most important priority is always the health and well-being of our residents and associates. And so far, in the third quarter we’ve had two hurricanes, Hurricane Barrel in July and then Hurricane Debby in August. So what happens when we have a hurricane is we bring staff into the communities to shelter in place because we want to make sure that they’re not traveling when it’s dangerous to do so, and we want to make sure that we’ve got appropriate associates to support our residents. And then if for whatever reason, power is lost, we want to make sure that we’ve got generators and sometimes we rent incremental generators to power our communities. And if you just remember, Houston, it took them a little longer to restore power than we’ve traditionally seen. So there’s some excess costs there, but we’re very grateful that we didn’t have any catastrophic damage in either Hurricane Barrel or Hurricane Debby, but we do recognize that there’s just some incremental costs when a storm does occur.

No, that makes sense. Yes, I understand there’s hurricane season, we have to do with every year, but it sounds like last year, maybe third quarter didn’t have incremental cost. So that’s why you [indiscernible] and I guess, obviously, you already know there are two that impacted your communities, okay.

And giving quarterly guidance, I think we’re trying to make sure that you understand the differences between sort of Q2 and Q3 and year-over-year. So we’re probably talking about seeing that if we were giving annual guidance, we might not highlight as much, but just given three months is a relatively short period. We want to make sure you’re clear on how we’re thinking about the quarter.

Right, that make sense. If I may, on the occupancy discussion, right, it sounds like Q2 growth sequentially was better than historical. But I guess [indiscernible] improving, but still below where things were at 2019? And then given to your point about the low new supply coming in after this industry, should I think about occupancy stable I think at level above 2019, because that’s where a lot of new supply was coming in. So I guess when you think about that target, because I guess it was 84%, but before that it was even higher. But how long I guess will it take to get to at least 2019 if not supposedly higher occupancy levels because of this new supply being compressed?

The first point that I’ll make is that our primary focus is always the health and well-being of our residents and associates. But if you think about our financial performance, we have been focused on rebuilding our adjusted EBITDA and our adjusted free cash flow. And so it’s less for us about occupancy for occupancy, say, and more about occupancy because it builds the cash flow that builds a sustainable business. And so I do think that we will get to the 2019 levels and personally, I think we’ll even get to the historical high levels that we’ve outlined on Page 25 of our investor deck. Now I can’t predict exactly how long it will take to get there, but what I can say is that we’re very focused on providing high-quality services to the residents that we serve. Doing that with associates who are engaged and who have a passion for serving our residents and that is translating into a strong financial recovery and we have so much opportunity in front of us that we’ve demonstrated that we have built a sustainable path to achieve that.

[indiscernible] on the occupancy?

And Joanna, the one thing that I would add to Cindy’s comments is as she pointed to, I think, Slide 25 and 26 in our investor presentation, really show where that adjusted EBITDA recovery is. And as we said in our prepared remarks, if you annualize the first half of our adjusted EBITDA, we’re within 3% of the 2019. And that’s on a much lower occupancy level. So really 2024 and 2025, those slides in our investment presentation are showing that opportunity that we have in front of us. And then we’ve also added a new Slide 14 to the investor presentation as well that I would point to that is really showing the adjusted EBITDA trailing 12 months growth that we’ve had and particularly around the leverage impact and just what that growth to our adjusted EBITDA is doing to our leverage.

Yes. No, this was a very helpful slide. Thank you. But just one, sorry, a follow-up on the occupancy because also another slide there talks about communities breakdown by different occupancy levels, so I guess, if there’s still, I guess, call it, a little bit less than 30% of communities that are below 70% occupancy. So are these always the same? And can this really improve and get out of this, I guess, bucket of below 70%, but it seems like it’s kind of like just around the same percent of total portfolio that stays below 70%. So I don’t know if there’s something structural or how you plan to address that bucket? Thank you.

It’s not always the same communities. They do change over time. And I will say that a small community has a disproportionate impact of being in a lower occupancy band because if you have a single resident death or a couple of resident deaths or move-outs, it can affect the percentage. But what I know that we are focused on is we are focused on how do we achieve our pandemic recovery and how do we drive sustainable improvement in our adjusted EBITDA and our adjusted free cash flow. And that isn’t always making sure that every community is operating at a high occupancy percentage because if you’ve got a 19-bed [ph] community, the lower occupancy just doesn’t have a big impact on the financial results of the company. So what our teams are focused on is what are the actions that we can take to drive improved resident satisfaction. How can we improve our associate satisfaction, so our associates stay with us longer and then seeing that translate into better financial returns for the benefit of our shareholders?

Thank you so much for taking the question.

Thanks, Joanna.

Thank you, Joanna.

[Operator Instructions] Our next question comes from the line of Ben Hendrix of RBC Capital Markets. Your line is now open. Please go ahead.

Great. Thank you very much. Just a quick question on the pacing of occupancy trend. We saw a little better seasonal step up in June to July last year, it seems like you appreciate all the commentary about the demographics and then also your differentiated positioning. Just wondering if kind of given the advantages you have with HealthPlus, with the caregiver retention, quality metrics, marketing. If we should be – if it’s reasonable to, I guess, target or expect an X basis point favorability in trend over the intermediate term versus the broader industry trends in terms of occupancy improvement. Is there a target in there that you’re focused on? Thanks.

Thank you for the question, Ben. What I would say is that we would expect to have that similar to last year. We would expect to have that second to third quarter seasonal uptick in our occupancy. And I think in my prepared remarks, we had meaningful sequential improvement. And so I would be thinking about it as better than pre-pandemic kind of given where our occupancy is at.

And then I would just add a comment to what Dawn said, Ben. And that is that Brookdale is largely a private pay operator. 94% of our revenues come from private pay residents payments. And if you look at the industry overall, one in five assisted living residents is a Medicaid resident, and so Medicaid communities tend to run at a bit higher occupancy, which is just other structural reason that our occupancy is slightly different than the industry.

Thank you very much.

Thanks Ben.

Thanks Ben.