Brookdale's Q3 2025 Earnings Call: Contradictions in Occupancy Strategy, EBITDA Guidance, and CapEx Impact

Date of Call: November 7, 2025

Financials Results

• Revenue: $778M (Resident and management fees), up 4.2% YOY
• Operating Margin: Same-community operating income +6% YOY; operating margin improved 10 bps QoQ and 30 bps YTD vs prior year

Guidance:

• Raised 2025 adjusted EBITDA guidance to $455M–$460M (prior $445M–$455M)
• 2025 RevPAR growth expected 5.25%–6%; company expects to be above the midpoint
• Full-year adjusted free cash flow expected $30M–$50M
• Assumes transition of all 55 Ventas nonrenewal communities by year-end; Q4 cash operating lease expense ~ $46M
• Expect modest G&A step-down in Q4 with greater G&A savings realized in 2026

Business Commentary:

• Occupancy and Financial Performance:
• Brookdale's occupancy rates reached 81.8% for the quarter, the highest since Q1 2020, with same-store occupancy improving to 82.3%.
• The company reported a 20% increase in adjusted EBITDA for Q3, with adjusted free cash flow of $21.8 million, up 57% year-over-year.
• 

• The growth in occupancy and financial performance was driven by initiatives such as the SWAT-team approach, targeted pricing actions, and operational accountability.

• Portfolio Optimization and Strategic Investments:

• Brookdale is streamlining its portfolio, expecting to have approximately 550 communities by mid-2026, down from 623 in September 2025.
• The company has invested $33.4 million in capital projects in Q3, aligning with its strategy to reinvest capital into communities to drive occupancy and EBITDA growth.

• These actions are part of a broader strategy to optimize the real estate portfolio, enhance operational performance, and reduce leverage.

• Adjusted Leverage and Debt Management:

• Brookdale reduced its adjusted annualized leverage to 9.0x, down from 9.9x at the end of 2024.
• The decline in leverage is attributed to significant growth in adjusted EBITDA and strategic debt management, with 88% of debt being nonrecourse debt secured by property-level mortgages.

• The company is focused on reducing leverage further through continued EBITDA growth and portfolio optimization.

• Pricing and Market Dynamics:

• The company is exploring strategic pricing platforms to enhance rate dynamics, particularly at the high occupancy end.
• The strong demand for senior living services, fueled by the baby boomer 'silver tsunami,' is expected to maintain this momentum, with new supply limited by high construction costs and extended construction timelines.
• This favorable market dynamic supports Brookdale's strategy to drive occupancy and rate growth, leveraging its position as a scarce resource in the senior housing industry.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted ‘‘another solid performance’’ with adjusted EBITDA up 20% YoY and adjusted free cash flow of $21.8M; they raised 2025 adjusted EBITDA guidance to $455M–$460M and said, "we are projecting annual adjusted EBITDA growth in the mid-teen percentage range over the next several years," signaling confidence in operational momentum.

Q&A:

• Question from Brian Tanquilut (Jefferies LLC, Research Division): What have you seen as areas of opportunity within the Brookdale portfolio and how are you thinking strategically about pricing versus occupancy versus cash generation/FFO?
  Response: Management will take an offensive, operations-first approach: reorganize into six regional operating units, scale SWAT teams, deploy targeted CapEx to drive occupancy/NOI, and implement a more dynamic pricing platform to grow RevPAR and cash flow.

• Question from Brian Tanquilut (Jefferies LLC, Research Division): Views on discounting and how to think about RevPOR going forward; how are you thinking about pricing for 2026 given Social Security benefit increases?
  Response: CFO: 2026 budgeting is laser-focused on driving rate—implement January 1 rate increases intended to outpace ExPOR inflation; Q4 dispositions will modestly affect reported RevPOR.

• Question from Benjamin Hendrix (RBC Capital Markets, Research Division): Why did you start disclosing FFO and how should we think about normalized LTM FFO in context of owned-portfolio value and optimization?
  Response: CEO: Added FFO to provide a real-estate-backed perspective—position Brookdale as an operating company on a real estate foundation and to aid comparability to REIT peers.

• Question from Joanna Gajuk (BofA Securities, Research Division): The organizational change—will it impact G&A (negatively or positively)? Does the $162M reflect the change and include merit increases? Also, why raise EBITDA guidance but not change free cash flow guidance?
  Response: Management: G&A is expected to step down (the $162M reflects the 2026 run-rate including merits); current quarter included severance charges not expected to recur; free cash flow guidance unchanged due to expected Q4 working-capital outflows from taxes and transitions and flexibility to deploy CapEx.

• Question from Andrew Mok (Barclays Bank PLC, Research Division): What gives you conviction to state mid-teen adjusted EBITDA growth now (before Investor Day)?
  Response: CEO: Conviction stems from structural scarcity/tailwinds in assisted living/memory care, pricing dynamics (new builds command premiums), and proven operational gains from SWAT teams plus available cash to fund targeted CapEx.

• Question from Andrew Mok (Barclays Bank PLC, Research Division): How much of the occupancy gain is new-to-market seniors versus market-share wins from competitors?
  Response: CFO/CEO/GC: They don't track a strict split, but same-store occupancy rose 150 bps QoQ vs NIC's 50 bps, implying meaningful market-share gains alongside new demand and improved resident retention/NPS.

• Question from Joshua Raskin (Nephron Research LLC): How will you preserve best practices and scale benefits while moving to six regional units where each runs like its own business?
  Response: CEO: Central community support center will set objectives, provide resources and guardrails (CapEx, HR, finance, recruiting) while empowering six regional leaders to run locally—maintaining scale benefits with regional agility.

• Question from Joshua Raskin (Nephron Research LLC): Regarding longer-term mid-teens EBITDA growth, where does that translate to margin opportunity and does mid-teens start in 2026?
  Response: CEO/CFO: Mid-teen adjusted EBITDA growth is a multiyear run-rate that begins now and applies to the ongoing (post-disposition) portfolio; detailed modeling and sensitivities will be provided at Investor Day.

Contradiction Point 1

Occupancy Strategy and Decision-Making

It highlights a shift in Brookdale's strategic approach to occupancy and decision-making, which could impact operational efficiency and financial performance.

What opportunities have you identified in the Brookdale portfolio? - Brian Tanquilut (Jefferies LLC)

2025Q3: We've emphasized the need to shift to an offensive posture focused on operational excellence, CapEx deployment and strategic pricing. We've moved to a 6 regional operating structure to make us more nimble to respond to localized market dynamics. - Nikolas Stengle(CEO & Director)

What changes have you made since taking the role to boost occupancy, and what strategies have been implemented? - Brian Tanquilut (Jefferies)

2025Q2: We've focused on SWAT teams to drive profitable occupancy, not just occupancy. This involves daily stand-ups to remove barriers and increase decision-making at the community level. - Denise Warren(Interim CEO & Chairman of the Board)

Contradiction Point 2

Cash Flow and EBITDA Guidance

It involves changes in financial forecasts, specifically regarding cash flow and EBITDA guidance, which are critical indicators for investors.

Why did you raise EBITDA guidance without adjusting free cash flow guidance? - Joanna Gajuk (BofA Securities)

2025Q3: We've raised our EBITDA guidance for the year to $2.4 billion to $2.45 billion from our previous expectation of $2.375 billion to $2.45 billion. - Dawn Kussow(Executive VP & CFO)

Why isn't free cash flow guidance increasing despite higher EBITDA? - Joanna Gajuk (Bank of America)

2025Q2: Free cash flow guidance for the year remains unchanged at $750 million to $850 million. - Dawn Kussow(CFO)

Contradiction Point 3

Focus on Occupancy Growth and Pricing Strategy

It involves a shift in the company's strategic focus, particularly regarding occupancy growth and pricing strategy, which are crucial for financial performance and investor expectations.

What opportunities exist in the Brookdale portfolio? How are you strategically balancing pricing, occupancy, and cash generation? - Brian Tanquilut (Jefferies LLC)

2025Q3: Our strategy continues to be focused on operational excellence, deploying CapEx, aggressively pursuing strategic pricing, and accelerating occupancy growth. - Nikolas Stengle(CEO & Director)

What is your long-term EBITDA growth rate, and when do you expect to return to pre-pandemic occupancy rates? - Josh Raskin (Nephron Research)

2024Q4: Our focus is on disciplined profitable growth, rather than a specific occupancy rate target. Pre-pandemic occupancy was 84.5%, but our current profitability is already 8% above pre-pandemic levels. - Lucinda Baier (President & CEO)

Contradiction Point 4

Fresh Impressions and CapEx Impact

It involves the expected impact of Fresh Impressions investments on occupancy and revenue growth, which are crucial for understanding Brookdale's capital expenditure strategy.

What are your views on RevPOR's future and next year's pricing strategy? - Brian Tanquilut (Jefferies LLC)

2025Q3: We continue to see positive impacts from the first impressions investments made in 2024 and early 2025, with occupancy increases of 45 basis points and 15 basis points, respectively, in the sequentially and year-over-year comparisons. - Dawn Kussow(Executive VP & CFO)

How will fresh impressions investments impact rates and RevPOR in the long term? - Ben Hendrix (RBC)

2025Q1: Fresh impressions are included in the CapEx guidance for this year. Their impact on rates will be seen in the budget process later in the year. We're optimistic about their long-term benefits for occupancy growth. - Denise Warren(Interim CEO), Chad White(Executive Vice President-General Counsel and Secretary)

Contradiction Point 5

Organizational Structure and Cost Efficiency

It involves changes in the company's organizational structure and cost efficiency strategies, which can impact operational effectiveness and financial performance.

Does the organizational change impact G&A, and if so, how? - Joanna Gajuk (BofA Securities)

2025Q3: So I think a net-zero impact on G&A, reflecting the fact that we're really focusing on operational efficiency and realigning costs. - Nikolas Stengle(CEO & Director) and Dawn Kussow(Executive VP & CFO)

What are Brookdale's strategic priorities post-lease resolution and positive free cash flow? - Brian Tanquilut (Jefferies)

2024Q4: Our plan includes $40 million in cost savings and a $25 million investment in CapEx, with 75% of the savings going back toward investment in CapEx. - Lucinda Baier (President & CEO)