On the surface, it looks like Brookdale Senior Living posted decent results for the third quarter. Weighted average occupancy for the quarter increased by 180 basis points sequentially to 76.4%, and by 390 basis points from the year-ago quarter. RevPar increased by 9.7% year over year, and contract labor plunged sequentially by over 40%. But, overall weighted average occupancy is still low at 76.4%, and to get to true profitability again, it needs to get to 85%, which is a long way to go.
When looking at same-community results (which includes the vast majority of their communities), community operating expenses increased by 11.1% year over year, while revenue increased by 9.9%. That revenue increase is a combination of census and rate increases. Without either one of them, we would hate to see what the net impact would have been. And then sequentially, same-community operating expenses increased by $12.7 million with a $12.4 million revenue increase. So, despite reducing agency labor costs, it has obviously been
expensive to hire new employees.
We always like to look at month-end occupancy, because that seems to be the best indicator for momentum into the next month. October was the first time since this past January that month-end occupancy actually declined, dropping by 20 basis points to 78.2%. In October 2021, month-end occupancy increased by 30 basis points from the previous month. In addition, the spread between weighted-average and month-end occupancy was 100 basis points last month, the lowest since January. The average for 2022 so far is a 129-basis point difference, with month end always higher. We don’t know what this means other than a possible slowdown prior to the
winter months.
The other thing we didn’t like was that the adjusted EBITDA in the third quarter decreased slightly sequentially, from $42.3 million to $40.0 million in the third quarter. Also, the community operating margin declined from the third quarter 2021, to 19.2%. With census increasing, rates increasing and agency labor decreasing, we would expect an improvement in margin at the community level.
One other thing to be aware of with the numbers is that in the income statement there was $61.1 million of Provider Relief Funds for the third quarter. So, to get a true picture of what is actually happening, that has to be removed. The earnings report had little impact on the share price, which is still in the doldrums.
