Brookdale Senior Living(BKD) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Q2 2025 financial statements show revenue growth and improved operating cash flow, offset by a wider net loss and decreased total assets Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2025, shows a decrease in total assets and equity, alongside a slight reduction in total liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $251,888 | $308,925 | | Total current assets | $467,481 | $512,937 | | Total assets | $6,141,466 | $6,335,562 | | Liabilities & Equity | | | | Total current liabilities | $565,722 | $579,763 | | Long-term debt, less current portion | $4,232,238 | $4,022,008 | | Total liabilities | $6,034,686 | $6,121,657 | | Total equity | $106,780 | $213,905 | Condensed Consolidated Statements of Operations The statements of operations for Q2 2025 show increased revenue but a widened net loss, with a substantial increase in net loss for the six-month period Key Operating Results (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $812,944 | $777,541 | $1,626,808 | $1,560,372 | | Income (loss) from operations | $14,907 | $19,162 | $44,483 | $38,408 | | Net loss attributable to stockholders | $(43,024) | $(37,727) | $(108,003) | $(67,293) | | Basic and diluted net loss per share | $(0.18) | $(0.17) | $(0.46) | $(0.30) | Condensed Consolidated Statements of Cash Flows Cash flow statements for H1 2025 show significantly improved operating cash flow, increased investing activities due to acquisitions, and a net decrease in cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $106,966 | $54,524 | | Net cash provided by (used in) investing activities | $(377,154) | $(75,403) | | Net cash provided by (used in) financing activities | $213,910 | $33,715 | | Net (decrease) in cash | $(56,278) | $12,836 | Notes to Condensed Consolidated Financial Statements Notes detail business operations, accounting policies, and financial position, including community portfolio, revenue sources, debt structure, and recent acquisitions - As of June 30, 2025, the company operates 645 senior living communities across the U.S., with a majority (382) being owned properties[17] - Private pay residents are the primary source of revenue, accounting for 93.9% of resident fees in the first half of 2025[30] - Total long-term debt stood at approximately $4.3 billion as of June 30, 2025, with 88.0% ($3.8 billion) being non-recourse property-level mortgage financing[37][38] - In February 2025, the company acquired 25 communities from Diversified Healthcare Trust for $135.0 million and 5 communities from Welltower Inc. for $175.0 million, all of which were previously leased[54][56] Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights improved operating performance and strategic portfolio adjustments, despite a widened net loss, with a focus on liquidity and debt management Overview and Community Transactions This section provides an overview of the company's community portfolio and details recent strategic transactions, including acquisitions and lease amendments - In February 2025, the company acquired 25 communities from Diversified Healthcare Trust for $135.0 million and 5 communities from Welltower for $175.0 million[96][97] - The master lease with Ventas was amended, resulting in the renewal of 65 community leases and the planned transition or sale of the remaining 55 communities, which are now excluded from the same-community portfolio[98] - The company plans to dispose of 12 owned communities currently classified as held for sale within the next twelve months[100] Results of Operations Q2 2025 results show increased resident fees and Adjusted EBITDA, but a wider net loss due to higher expenses and a significant loss on debt extinguishment Q2 2025 vs Q2 2024 Summary Operating Results (in thousands) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Resident fees | $775,614 | $739,709 | 4.9% | | Facility operating expense | $562,317 | $537,507 | 4.6% | | Net income (loss) | $(43,039) | $(37,742) | 14.0% | | Adjusted EBITDA | $117,050 | $97,816 | 19.7% | - The increase in Q2 resident fees was driven by a 4.8% rise in same-community RevPAR, which resulted from a 2.4% increase in RevPOR and a 190 basis point increase in weighted average occupancy[106] - The net loss for the first six months of 2025 increased significantly, primarily due to a $32.8 million loss on extinguishment of a financing obligation from the reacquisition of three communities[130] Liquidity and Capital Resources This section details the company's liquidity position, improved Adjusted Free Cash Flow, significant debt levels, and projected capital expenditures - Total liquidity was $350.0 million as of June 30, 2025, including $251.9 million of unrestricted cash and $98.1 million of availability on the secured credit facility[163] Adjusted Free Cash Flow (in thousands) | Period | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Adjusted Free Cash Flow | $23,688 | $(31,813) | - The company projects full-year 2025 non-development capital expenditures to be between $175.0 million and $180.0 million, net of reimbursements[171] - As of June 30, 2025, the company had $4.3 billion of debt outstanding with a weighted average interest rate of 5.20%, with 88.0% being non-recourse property-level financing[161] Non-GAAP Financial Measures This section defines and reconciles key non-GAAP financial measures, including Adjusted EBITDA for operating performance and Adjusted Free Cash Flow for liquidity assessment Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Description | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Net income (loss) | $(43,039) | $(108,032) | | Adjustments (Taxes, Interest, D&A, etc.) | $149,576 | $337,034 | | Other Adjustments (Impairment, Stock Comp, etc.) | $9,513 | $12,187 | | Adjusted EBITDA | $117,050 | $241,189 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on variable-rate debt, largely mitigated by hedges, with sensitivity analysis provided for SOFR changes - As of June 30, 2025, the company had $1.2 billion of long-term variable rate debt, with 92% subject to interest rate cap or swap agreements[194][195] Annual Interest Expense Increase from SOFR Increase (in millions) | Increase in SOFR (basis points) | Annual Interest Expense Increase | | :--- | :--- | | 100 | $3.6 | | 200 | $5.0 | | 500 | $8.9 | | 1,000 | $13.9 | Controls and Procedures Management concluded disclosure controls were effective, while a new ERP system implementation is causing ongoing changes to internal financial reporting controls - Management concluded that disclosure controls and procedures were effective as of the end of the quarter[199] - The company is implementing a new ERP system, leading to ongoing changes in its internal control over financial reporting[200] PART II. OTHER INFORMATION Legal Proceedings Information regarding legal proceedings, including litigation and claims, is incorporated by reference from Note 8 of the financial statements - Information regarding legal proceedings is detailed in Note 8 to the condensed consolidated financial statements[201] Risk Factors A new material risk factor highlights potential business disruption and negative market perception due to the recent CEO departure and management transition - A new risk factor was added related to the transition of management following the departure of the President and CEO on April 13, 2025, which could harm the business[203] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company acquired shares to cover tax liabilities from vested restricted stock units, with $44.0 million remaining for repurchases Share Repurchases in Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Q2 2025 Total | 243,898 | $5.76 | - All shares purchased were withheld to satisfy tax liabilities on vested restricted stock units, not open market purchases under the public plan[208] - As of June 30, 2025, $44.0 million remained available for future purchases under the company's share repurchase program[208] Other Information This section discloses no Rule 10b5-1 trading arrangements and details the August 2025 amendment to the Tier I Severance Pay Policy for executive officers - On August 5, 2025, the company amended and restated its Tier I Severance Pay Policy for executive officers[207] - Key amendments to the severance policy include providing severance payments for termination with "good reason" equivalent to termination without "cause" and expanding the definition of "good reason" to include significant changes in reporting relationships[207][210] Exhibits This section provides a list of all exhibits filed with the Form 10-Q, including corporate governance documents, debt agreements, and certifications - A list of all exhibits filed with the report is provided, including key agreements and certifications[211]