Brookdale Senior Living's Q3 2025: Contradictions Emerge on Organizational Structure, G&A Impact, and EBITDA Growth

Date of Call: None provided

Financials Results

• Revenue: $778M resident and management fees, up 4.2% YOY
• Operating Margin: Operating income margin improved 10 basis points year-over-year; year-to-date operating margin up 30 basis points; typical Q2->Q3 seasonal margin decline noted

Guidance:

• Raised 2025 adjusted EBITDA guidance to $455M-$460M (up $7.5M at midpoint)
• Expect 2025 RevPAR growth of 5.25%-6%, with results above the midpoint
• Full-year 2025 adjusted free cash flow expected $30M-$50M
• Assume transition of all 55 Ventas non-renewal communities by year-end
• Q4 cash operating lease expense expected ~ $46M; G&A to step down modestly in Q4 with fuller savings in 2026

Business Commentary:

* Occupancy Growth and Strategic Initiatives: - Brookdale Senior Living's occupancy for Q3 achieved a weighted average of 81.8%, marking the highest level since 2020, with same-store occupancy reaching 84.0%. - This growth is attributed to efforts like the SWAT team approach, targeted pricing actions, and operational accountability, which have reduced the number of communities below the 70% occupancy threshold from 143 to 89 since Q1.

• Revenue and Expense Growth:
• Resident and management fees increased by 4.2% over Q3 2024, driven by a 5.9% increase in revpar, despite a 1.6% decline in total available units due to portfolio optimization.

• The increase in revenue was driven by improved occupancy rates and higher resident rates offsetting lower resident acuity.

• EBITDA and EBITDA Margin Improvement:

• Brookdale's adjusted EBITDA increased 20% year-over-year in Q3, with same-store occupancy growing 150 basis points.

• This improvement is due to operational efficiencies, targeted capital investments, and strategic pricing actions, resulting in a positive spread between realized revenue and expenses per occupied unit.

• Portfolio Optimization and Disposition Strategy:

• As part of its ongoing portfolio optimization, Brookdale plans to reduce its portfolio to 550 communities by mid-2026 from 623 communities currently, with a focus on communities with strong long-term value creation potential.
• The strategy aims to improve occupancy, revpar, EBITDA, and adjusted free cash flow while generating cash proceeds for capital reinvestment and debt repayments.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted occupancy at 81.8% consolidated (82.3% same-community), adjusted EBITDA up 20% YOY to $111.1M, and raised full-year adjusted EBITDA guidance to $455-$460M; CEO emphasized operational momentum (SWAT teams, targeted CapEx, dynamic pricing) and industry supply scarcity driving multi-year upside.

Q&A:

• Question from Brian Tanquilut (Jefferies): Maybe my first question, Nick, as I think about the fact that you’ve been here in the job for a month now, just curious, number one, what have you seen as areas of opportunity within the Brookdale portfolio? Number two, how are you thinking about strategically the whole philosophical debate between pricing focus versus occupancy versus cash generation, FFO, all these things?
  Response: Management will take an offensive operating stance: reorganize into six regional operating units under one ops leader, deploy targeted CapEx and SWAT teams, and implement a more dynamic pricing platform to drive occupancy, RevPAR and NOI, using positive cash flow to reinvest.

• Question from Ben Hendricks (RBC Capital Markets): One thing that we noticed on the release was a new FFO disclosure. I just wanted to get some insight on your decision to start disclosing that metric, how you’re thinking about the normalized LTM figure in the context of the owned portfolio value, and where you think that could go as the optimization ensues. Thanks.
  Response: They added FFO to provide an operating-company-on-real-estate perspective—helping compare Brookdale’s operating performance and owned-portfolio value against real-estate peers.

• Question from Joanna Gajuk (Bank of America): When you mentioned this organizational change that you are just making, I guess, that started this quarter, did I get it right? It’s going to impact G&A, and I wasn’t quite sure whether you were trying to say negatively or positively. It sounds like quarter over quarter. I have a follow-up on next year. The 162 reflects the change. It sounds like that’s a net zero impact. The 162 also reflects any merit increases that you would do. This is not like a starting point. This is actually your kind of initial view of that number into next year. Also on the guidance: you did raise your EBITDA, right? You expect to be at the higher or the above, I guess, midpoint of the Rev Par. There was no change to pre-cash flow guidance. Why is that? Is there something that’s offsetting that beneficial effect of the EBITDA being higher? And then maturities in 2026—plans?
  Response: G&A is expected to step down to roughly $162M in 2026 (includes merit/inflation assumptions) after restructuring; cash-flow guidance remains unchanged because Q4 seasonal working-capital outflows and disposition-related cash impacts offset higher EBITDA, and near-term bank debt will be extended/refinanced with small loans rolled into broader refinancings.

• Question from Andrew Mok (Barclays): Appreciate all the comments around mid-teen EBITDA growth over the next few years. Nick, you noted that you’re going to be digging into the business in the coming months and presumably share that at the investor day. What gives you conviction to make that statement now before? And why do that before the investor day? Also, do you have a sense for how much of your occupancy gain is coming from seniors that are new to senior housing versus market share gains from competitors?
  Response: Conviction for mid‑teens EBITDA growth stems from structural scarcity (limited new supply), Brookdale’s heavy assisted/memory mix and demonstrated execution (SWAT teams, targeted CapEx, pricing); occupancy gains likely include market-share wins given Brookdale’s sequential same-store growth (150bps) materially outpaced NIC comps (~50bps).

• Question from Josh Raskin (Nephron Research): How do you maintain best practices and sort of that broader organizational benefit that you get from scale as you move to these six regional units where everyone’s running their own business? Also on EBITDA margin growth: you’re laying out this longer-term mid-teens EBITDA growth rate. I’m just curious, sort of starting at, let’s call it, 15% margin corporate-wide this year. Where does that longer-term target go? What do you think is the opportunity there? Then should we assume mid-teens growth starts in 2026?
  Response: The company preserves scale by centralizing resources and guardrails at the Community Support Center while empowering six regional leaders; mid‑teens adjusted EBITDA growth is a multi‑year run rate that begins now (ongoing-portfolio basis) with detailed modeling to be provided at the investor day.

Contradiction Point 1

Organizational Change and G&A Impact

It involves the impact of organizational changes on G&A expenses, which affects operational efficiency and financial performance.

How will the organizational changes affect G&A expenses, and why hasn't the pre-cash flow guidance changed despite the EBITDA increase? - Joanna Gajuk(Bank of America)

2025Q3: The organizational change has resulted in a net neutral impact on G&A, with no additional headcount, aiming to align with the operating company focus. - Don Cusso(CFO)

Why isn't adjusted free cash flow guidance rising with higher EBITDA? - Joanna Gajuk(BoFA)

2025Q2: We are being very mindful and very conservative how we are using our cash. And we are really focused on making sure that we deliver on the financial goals that we've set for 2025. - Dawn Kussow(CFO)

Contradiction Point 2

Focus on Occupancy and Pricing Strategy

It highlights changes in the company's strategic focus on occupancy and pricing, which are crucial for revenue growth and market positioning.

How should we balance pricing and occupancy strategies moving forward? - Brian Tanquilut(Jefferies)

2025Q3: We are focused on moving under 70% occupancy communities to above 80%, ensuring rate growth outpaces expense growth. Dawn added that they are focused on targeting incentives in less than 70% occupancy bands to drive occupancy. - Denise Warren(Interim CEO and Chairman of the Board) and Dawn Kussow(CFO)

How should we balance pricing and occupancy strategies going forward? - Brian Tanquilut(Jefferies)

2025Q2: We are focusing on moving under 70% occupancy communities to above 80%, ensuring rate growth outpaces expense growth. Dawn added that they are focused on targeting incentives in less than 70% occupancy bands to drive occupancy. - Denise Warren(Interim CEO and Chairman of the Board) and Dawn Kussow(CFO)

Contradiction Point 3

EBITDA Growth Expectations

It involves changes in financial forecasts, specifically regarding EBITDA growth expectations, which are critical indicators for investors.

What supports your expectation of mid-teens EBITDA growth over the next few years? - Andrew Mok (Barclays)

2025Q3: I think that's a great question. I think we've taken a very strategic, multi-year view of our business. We had quite a bit of momentum coming into '24 and '25. And as we began the year, we have now turned the offense on. - Nick Spangle(CEO)

How are you balancing rate increases with occupancy targets in your pricing strategy? - Ben Hendrix (RBC)

2025Q1: We are modeling this year to grow EBITDA 2% to 4% over the prior year, and we are not modeling any incremental disposals. - Dawn Kussow(CFO)

Contradiction Point 4

Organizational Structure and Efficiency

It pertains to the company's approach to organizational structure and efficiency, which can impact operating performance and cost management.

How will best practices and organizational benefits be maintained during the shift to regional units? When does long-term EBITDA margin growth begin, and is 2026 the expected start year? - Josh Raskin (Nephron Research)

2025Q3: We are changing our organizational structure to 13 regional units, which will allow us to empower regional leaders to be responsible for their on-the-ground execution and performance. - Nick Spangle(CEO)

What should investors focus on regarding Brookdale's post-pandemic strategic direction, given the emphasis on leases and positive cash flow? - Brian Tanquilut (Jefferies)

2024Q4: As we continue to enhance our operations, we are building a support structure that allows us to scale effectively. We are very well positioned to continue to deliver great results. - Lucinda Baier(CEO)

Contradiction Point 5

Pricing Strategy and Occupancy Focus

It involves changes in the company's pricing strategy and focus on occupancy growth, which are critical for financial performance and investor expectations.

What opportunities exist in the Brookdale portfolio, and how do you balance pricing, occupancy, and cash generation (FFO) in your strategy? - Brian Tanquilut (Jefferies)

2025Q3: Our strategy is to become an operating company that is focused on operating excellence and strategic pricing. - Nick Spangle(CEO)

What is your pricing strategy? How do you balance price hikes and occupancy goals? - Ben Hendrix (RBC)

2025Q1: Our pricing strategy continues to be realizing rate growth in excess of our expense growth. - Dawn Kussow(CFO)