On Friday the 13th (kind of cute, isn’t it), Brookdale Senior Living announced some major C-Suite changes, including the removal of Steven Swain as EVP and CFO effective February 24th, with the current Chief Accounting Officer taking over those roles while remaining the CAO. In addition, Kevin Bowman is out as EVP of Community Operations (basically the COO) effective January 12th. The two division VPs for the East and West will now report directly to CEO Cindy Baier.
We are not sure what happened, but this seems a little like blaming these two senior executives for the 50% plunge in Brookdale’s share price as a result of the recent dilutive equity raise. We don’t know where this equity raise was formulated, but if it was from Swain, coming back from a medical leave, then we do believe he should have known better. Regardless, it had to be approved by the CEO and the Board, so the buck has to stop somewhere. But the Board and the CEO never seem to take responsibility for mishaps, plunging share values and changing earnings guidance. This has got to change, because Brookdale is too important of a company for our industry.
In the Friday the 13th announcement, Ms. Baier started off by stating that “Brookdale is a learning organization.” We are not sure what she and the Board have really learned, especially about increasing shareholder value. The announcement then went on to explain that full-year EBITDA for 2022 will be modestly below the previous guidance range. This is because fourth quarter operating expenses will end up being about 1% higher than the third quarter, while previous guidance had looked for a slight improvement in expenses in the fourth quarter. Maybe yet another change in guidance was the cause for Swain’s departure as CFO, but the reality is that forecasting expenses is a crap shoot today given energy and food inflation, plus the ongoing labor cost unknown.
But if these terminations are the “meaningful actions to streamline our organization to drive improved efficiency and better align our expenses with revenue,” well, this just does not seem to be what will do it, other than cutting some G&A expense. Ms. Baier and the Board really need to take a hard look at what ails the company, and the steps necessary to fix it, soon. This should have happened by March 2021 when census across the industry hit a record bottom. Time is running out, and there is no one else to put on the chopping block. Who are they going to blame for the next misstep?
Stifel Nicolaus doesn’t like it either, cutting their recommendation from Buy to Hold. We need Brookdale to succeed. By the way, the stock hit a new 52-week low on the 17th, to $2.51 a share.
