On this page of StockholderLetter.com we present the 5/1/2023 shareholder letter from Brookdale Senior Living Inc. — ticker symbol BKD. Reading current and past BKD letters to shareholders can bring important insights into the investment thesis.

 •  5/1/2023 Letter Continued (Full PDF)
 •  4/29/2024 BKD Stockholder Letter
 •  5/14/2025 BKD Stockholder Letter
 •  More "Hospital & Medical Practitioners" Category Stockholder Letters
 •  BKD Benford's Law Stock Score = 77

BKD 5/1/2023 Shareholder/Stockholder Letter Transcript:

Annual Report
2022
brookdale.com

Our Mission
Enriching the lives of those we serve
with compassion, respect, excellence and integrity

Fellow Shareholders,
As I write this letter, my thoughts focus on the striking difference between
what we believe will be Brookdale   s future and its recent past, including the
heavy impacts from the pandemic and its follow-on effects.
the healthcare industry, contributing to a
nationwide shortage of healthcare employees
that continues today.1 Brookdale   s North Star
has always been the health and well-being
of our residents and associates. Our business
exists to serve those who, because of age and
comorbidities, are among the most vulnerable
populations. As we have been aggressively
working to increase our internal workforce,
we were required to supplement our associate
base with contract labor     a necessary, but
quite expensive, endeavor that signi   cantly
pressured our margins.
Looking forward, our vision and expectation
is for Brookdale to be the nation   s    rst choice
in senior living; thriving in an environment with
robust demand growing at a greater pace
than new supply.
While we have made meaningful progress
on our path to recovery this past year, we
are expecting a marked improvement in
our    nancial results in 2023 and beyond.
I   ll share with you the challenges we faced
and successfully overcame, and the path
we see forward.
There is no doubt COVID-19 had a massive
negative impact on our business. Through
Brookdale   s extraordinary efforts, coupled
with those of others in our industry, we
obtained government support to largely
cover incremental expenses we incurred to
help protect our associates and the seniors
we serve from COVID-19. Unfortunately, we
experienced roughly $1 billion of estimated
lost revenue and a sizeable occupancy gap
compared to pre-pandemic levels. The
occupancy gap matters because the majority
of our operating expenses are    xed, requiring
a base level of recurring resident revenues
to cover.
While many companies were impacted by the
pandemic, I think it is fair to say Brookdale
was located near the center of the storm.
Brookdale   s recurring revenue model also
means that we will experience the impact
of the pandemic long after other companies
recover. To drive the business forward, we
entered 2022 focused on three imperatives
to further our recovery and improve our
   nancial strength.
First, we needed to rebuild occupancy. This
was critical not only to achieve our vision, but
also to generate appropriate cash in   ows to
cover costs. In 2022, the number of seniors
moving into our communities accelerated
signi   cantly, resulting in same community
The devastating effects of the pandemic
created an intense strain on workers across
1

reaching its lowest level since 1969 and an
estimated 100,000+ reduction in senior living
workers in the United States.1 Our workforce
increase is a testament to our intense
recruiting efforts, competitive compensation
packages and, where possible, flexible
schedule offerings.
move-in volume that exceeded the three-year
pre-pandemic average by 7%. Weighted
average occupancy increased 390 basis
points, which supported a 10% year-over-year
increase in same community revenue. We are
pleased to have delivered this improvement
and believe it underscores the tremendous
efforts of our Brookdale associates.
Finally, as I reflect on the pandemic years, I
think about capital and liquidity. Throughout
the pandemic, we proactively managed our
liquidity, including execution of a number
of significant transactions. In periods of
uncertainty, an appropriate level of capital
is critical, and cash is the lifeblood of any
business. During 2022, our results fell well
below expectations due to unprecedented
labor challenges and other inflationary
impacts. Additionally, interest rates increased
at the fastest pace in decades, which is very
significant for capital-intensive businesses like
ours. In 2022, we successfully refinanced all
our 2023 agency debt maturities, clearing the
maturity runway for us through September
2024. That said, we knew additional capital
would be required to help ensure that we can
achieve the bright future we see ahead. As a
result, we determined it was prudent to fortify
our balance sheet and bolster our liquidity and
Second, we had to establish a rate for our
services that would provide value to our
residents while appropriately incorporating
the rising cost of those services (as we
expected them to be at the time of annual rate
increases). Simply put, our goal always has
been to balance mission and margin. The full
force of the disrupted labor market and the
significant broad inflationary costs on our
business were not predicted. As a result, the
2022 rate increase did not generate the
margin improvement we anticipated.
Third, we needed to replace contract labor
with full- and part-time Brookdale associates.
Although this took us longer than expected,
I am incredibly proud that we increased the
size of our internal workforce by
approximately 15% during 2022, particularly
given unprecedented labor market challenges,
including the general unemployment rate
2

net worth positions through the tangible
equity units offering in the fourth quarter.
We recognize how difficult this was for our
shareholders, many of whom are Brookdale
associates; yet we believe the offering was
necessary and, when combined with the
successful execution of our plans, will help
us drive long-term shareholder value creation.
Looking ahead, we have a strong foundation
for material improvement to our year-overyear results, beginning in the first quarter
of 2023.
First, our in-place resident rate increase on
January 1 appropriately incorporated cost
pressures from the incredibly tight labor
market, inflationary environment and rapid
increase in interest expense that occurred
during 2022, as well as our expectations for
general inflation in 2023. Second, we expect
our nearly 5,000 net hires in 2022 will support
improved productivity, reduce premium labor
expense, and increase resident and family
satisfaction in 2023, all while continuing to
ensure we meet our residents    needs and
provide high quality care and service. Third,
we expect our unwavering recovery efforts
to deliver continued occupancy growth,
which will better leverage our fixed costs
in the second half of the year.
Three
Strategic
Priorities
These operating results should translate into
material improvements in cash flow; and given
our expected 2023 occupancy increase, we
anticipate that we will drive sustained growth
and end the year even stronger than we started.
Looking out further, I see a business that can
thrive because Brookdale residents get to live
among a community of friends while receiving
high quality services, personalized care,
and access to comprehensive health and
well-being support. I see a passionate, strong
and diverse associate base filled with missiondriven servant leaders who are able to do well
by doing good. This should translate into solid
margins and cash flow, which, in turn, will
strengthen our balance sheet and create
3
1
Get every available
room in service at the
best profitable rate
2
Attract, engage,
develop and retain
the best associates
3
Earn resident and
family trust and
satisfaction by
providing valued high
quality care and
personalized service



 5/1/2023 Letter Continued (Full PDF)