Brookdale Senior Living Inc. 10-Q

Item 1. Financial Statements BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except stock amounts) June 30, 2025 December 31, 2024 Assets (Unaudited) Current assets Cash and cash equivalents $ 251,888 $ 308,925 Marketable securities — 19,879 Restricted cash 37,268 39,871 Accounts receivable, net 56,061 51,891 Assets held for sale 9,710 — Prepaid expenses and other current assets, net 112,554 92,371 Total current assets 467,481 512,937 Property, plant and equipment and leasehold intangibles, net 4,499,987 4,594,401 Operating lease right-of-use assets 1,079,826 1,133,837 Restricted cash 34,406 31,044 Goodwill 27,321 27,321 Other assets, net 32,445 36,022 Total assets $ 6,141,466 $ 6,335,562 Liabilities and Equity Current liabilities Current portion of long-term debt $ 59,238 $ 40,779 Current portion of financing lease obligations 1,253 37,007 Current portion of operating lease obligations 91,914 111,104 Trade accounts payable 83,479 65,515 Accrued expenses 268,152 264,384 Refundable fees and deferred revenue 61,686 60,974 Total current liabilities 565,722 579,763 Long-term debt, less current portion 4,232,238 4,022,008 Financing lease obligations, less current portion 24,882 266,895 Operating lease obligations, less current portion 1,141,653 1,174,204 Deferred tax liability 7,698 9,604 Other liabilities 62,493 69,183 Total liabilities 6,034,686 6,121,657 Preferred stock, $ 0.01 par value, 50,000,000 shares authorized at June 30, 2025 and December 31, 2024; no shares issued and outstanding — — Common stock, $ 0.01 par value, 400,000,000 shares authorized at June 30, 2025 and December 31, 2024; 247,982,005 and 210,547,351 shares issued and 237,454,480 and 200,019,826 shares outstanding (including 16,026 and 27,972 unvested restricted shares), respectively 2,480 2,105 Additional paid-in-capital 4,353,523 4,352,991 Treasury stock, at cost; 10,527,525 shares at June 30, 2025 and December 31, 2024 ( 102,774 ) ( 102,774 ) Accumulated deficit ( 4,147,850 ) ( 4,039,847 ) Total Brookdale Senior Living Inc. stockholders' equity 105,379 212,475 Noncontrolling interest 1,401 1,430 Total equity 106,780 213,905 Total liabilities and equity $ 6,141,466 $ 6,335,562 See accompanying notes to condensed consolidated financial statements. 4 BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Resident fees $ 775,614 $ 739,709 $ 1,553,068 $ 1,483,950 Management fees 2,623 2,616 5,243 5,234 Reimbursed costs incurred on behalf of managed communities 34,707 35,216 68,497 71,188 Total revenue 812,944 777,541 1,626,808 1,560,372 Facility operating expense (excluding facility depreciation and amortization of $ 88,180 , $ 81,706 , $ 174,389 , and $ 161,610 , respectively) 562,317 537,507 1,119,304 1,080,057 General and administrative expense (including non-cash stock-based compensation expense of $ 3,089 , $ 3,975 , $ 7,068 , and $ 7,248 , respectively) 54,973 46,664 102,847 92,396 Facility operating lease expense 52,653 50,964 105,527 102,460 Depreciation and amortization 92,853 88,028 183,829 174,155 Asset impairment 577 — 2,364 1,708 Loss (gain) on sale of communities, net ( 43 ) — ( 43 ) — Costs incurred on behalf of managed communities 34,707 35,216 68,497 71,188 Income (loss) from operations 14,907 19,162 44,483 38,408 Interest income 2,919 4,714 6,567 9,492 Interest expense: Debt ( 57,648 ) ( 53,778 ) ( 112,307 ) ( 107,234 ) Financing lease obligations ( 1,750 ) ( 5,110 ) ( 7,350 ) ( 10,171 ) Amortization of deferred financing costs ( 3,712 ) ( 2,334 ) ( 7,342 ) ( 4,591 ) Change in fair value of derivatives 29 ( 345 ) ( 1,113 ) 2,742 Gain (loss) on debt modification and extinguishment, net ( 115 ) — ( 35,335 ) — Non-operating gain (loss) on sale of assets, net — 199 — 903 Other non-operating income (loss) 2,060 199 3,418 3,537 Income (loss) before income taxes ( 43,310 ) ( 37,293 ) ( 108,979 ) ( 66,914 ) Benefit (provision) for income taxes 271 ( 449 ) 947 ( 409 ) Net income (loss) ( 43,039 ) ( 37,742 ) ( 108,032 ) ( 67,323 ) Net (income) loss attributable to noncontrolling interest 15 15 29 30 Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders $ ( 43,024 ) $ ( 37,727 ) $ ( 108,003 ) $ ( 67,293 ) Basic and diluted net income (loss) per share attributable to Brookdale Senior Living Inc. common stockholders $ ( 0.18 ) $ ( 0.17 ) $ ( 0.46 ) $ ( 0.30 ) Weighted average shares used in computing basic and diluted net income (loss) per share 234,737 226,789 232,719 226,340 See accompanying notes to condensed consolidated financial statements. 5 BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited, in thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Total equity, balance at beginning of period $ 148,135 $ 375,448 $ 213,905 $ 405,153 Common stock: Balance at beginning of period $ 2,445 $ 2,035 $ 2,105 $ 1,988 Shares issued for settlement of prepaid stock purchase contracts — 32 296 67 Shares issued for warrant exercise 31 9 57 9 Restricted stock and restricted stock units, net 6 1 31 19 Shares withheld for employee taxes ( 2 ) — ( 9 ) ( 6 ) Balance at end of period $ 2,480 $ 2,077 $ 2,480 $ 2,077 Additional paid-in-capital: Balance at beginning of period $ 4,351,874 $ 4,342,191 $ 4,352,991 $ 4,342,362 Compensation expense related to restricted stock grants 3,089 3,975 7,068 7,248 Shares issued for settlement of prepaid stock purchase contracts — ( 32 ) ( 296 ) ( 67 ) Shares issued for warrant exercise ( 31 ) ( 9 ) ( 57 ) ( 9 ) Restricted stock and restricted stock units, net ( 6 ) ( 1 ) ( 31 ) ( 19 ) Shares withheld for employee taxes ( 1,403 ) ( 8 ) ( 6,152 ) ( 3,399 ) Balance at end of period $ 4,353,523 $ 4,346,116 $ 4,353,523 $ 4,346,116 Treasury stock: Balance at beginning and end of period $ ( 102,774 ) $ ( 102,774 ) $ ( 102,774 ) $ ( 102,774 ) Accumulated deficit: Balance at beginning of period $ ( 4,104,826 ) $ ( 3,867,478 ) $ ( 4,039,847 ) $ ( 3,837,912 ) Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders ( 43,024 ) ( 37,727 ) ( 108,003 ) ( 67,293 ) Balance at end of period $ ( 4,147,850 ) $ ( 3,905,205 ) $ ( 4,147,850 ) $ ( 3,905,205 ) Noncontrolling interest: Balance at beginning of period $ 1,416 $ 1,474 $ 1,430 $ 1,489 Net income (loss) attributable to noncontrolling interest ( 15 ) ( 15 ) ( 29 ) ( 30 ) Balance at end of period $ 1,401 $ 1,459 $ 1,401 $ 1,459 Total equity, balance at end of period $ 106,780 $ 341,673 $ 106,780 $ 341,673 Common stock share activity Outstanding shares of common stock: Balance at beginning of period 234,003 193,013 200,020 188,253 Shares issued for settlement of prepaid stock purchase contracts — 3,152 29,636 6,709 Shares issued for warrant exercise 3,058 942 5,702 942 Restricted stock and restricted stock units, net 637 95 3,152 1,873 Shares withheld for employee taxes ( 244 ) ( 1 ) ( 1,056 ) ( 576 ) Balance at end of period 237,454 197,201 237,454 197,201 See accompanying notes to condensed consolidated financial statements. 6 BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Six Months Ended June 30, 2025 2024 Cash Flows from Operating Activities Net income (loss) $ ( 108,032 ) $ ( 67,323 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Loss (gain) on debt modification and extinguishment, net 35,335 — Depreciation and amortization, net 191,171 178,746 Asset impairment 2,364 1,708 Deferred income tax (benefit) provision ( 1,905 ) ( 360 ) Operating lease expense adjustment ( 8,699 ) ( 26,572 ) Change in fair value of derivatives 1,113 ( 2,742 ) Loss (gain) on sale of assets, net ( 43 ) ( 903 ) Non-cash stock-based compensation expense 7,068 7,248 Property and casualty insurance income ( 3,487 ) ( 2,688 ) Changes in operating assets and liabilities: Accounts receivable, net ( 4,169 ) ( 1,390 ) Prepaid expenses and other assets, net ( 8,500 ) ( 855 ) Prepaid insurance premiums financed with notes payable ( 15,094 ) ( 15,702 ) Trade accounts payable and accrued expenses 7,755 ( 14,380 ) Refundable fees and deferred revenue 757 ( 1,563 ) Operating lease assets and liabilities for lessor capital expenditure reimbursements 11,332 1,300 Net cash provided by operating activities 106,966 54,524 Cash Flows from Investing Activities Purchase of marketable securities — ( 19,591 ) Sale and maturities of marketable securities 20,000 30,000 Capital expenditures, net of related payables ( 96,283 ) ( 95,973 ) Acquisition of assets ( 311,028 ) — Proceeds from sale of assets, net 1,047 7,017 Property and casualty insurance proceeds 3,487 2,704 Change in lease acquisition deposits, net 5,000 — Purchase of interest rate cap instruments ( 2,681 ) ( 8,513 ) Proceeds from interest rate cap instruments 3,197 9,129 Other 107 ( 176 ) Net cash provided by (used in) investing activities ( 377,154 ) ( 75,403 ) Cash Flows from Financing Activities Proceeds from debt 320,739 81,271 Repayment of debt and financing lease obligations ( 95,351 ) ( 41,077 ) Payment of financing costs, net of related payables ( 6,708 ) ( 3,074 ) Payments of employee taxes for withheld shares ( 4,770 ) ( 3,405 ) Net cash provided by (used in) financing activities 213,910 33,715 Net increase (decrease) in cash, cash equivalents, and restricted cash ( 56,278 ) 12,836 Cash, cash equivalents, and restricted cash at beginning of period 379,840 349,668 Cash, cash equivalents, and restricted cash at end of period $ 323,562 $ 362,504 See accompanying notes to condensed consolidated financial statements. 7 BROOKDALE SENIOR LIVING INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Description of Business Brookdale Senior Living Inc. together with its consolidated subsidiaries ("Brookdale" or the "Company") is an operator of 645 senior living communities throughout the United States. The Company is committed to its mission of enriching the lives of the people it serves with compassion, respect, excellence, and integrity. The Company operates and manages independent living, assisted living, memory care, and continuing care retirement communities ("CCRCs"). The Company's senior living communities and its comprehensive network help to provide seniors with care, connection, and services in an environment that feels like home. As of June 30, 2025, the Company owned 382 communities, representing a majority of the Company's community portfolio, leased 235 communities, and managed 28 communities. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for quarterly reports on Form 10-Q. In the opinion of management, these financial statements include all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position, results of operations, and cash flows of the Company for all periods presented. Certain information and footnote disclosures included in annual financial statements have been condensed or omitted. The Company believes that the disclosures included are adequate and provide a fair presentation of interim period results. Interim financial statements are not necessarily indicative of the financial position or operating results for an entire year. These interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 19, 2025. Principles of Consolidation The condensed consolidated financial statements include the accounts of Brookdale and its consolidated subsidiaries. The ownership interest of consolidated entities not wholly-owned by the Company are presented as noncontrolling interests in the accompanying unaudited condensed consolidated financial statements. Intercompany balances and transactions have been eliminated in consolidation, and net income (loss) is reduced by the portion of net income (loss) attributable to noncontrolling interests. Use of Estimates The preparation of the condensed consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, revenue, asset impairments, self-insurance reserves, performance-based compensation, allowance for credit losses, depreciation and amortization, leasing transactions, income taxes, and other contingencies. Although these estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from the original estimates. Reclassifications Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the Company's condensed consolidated financial position or results of operations. 3. Fair Value Measurements Interest Rate Derivatives The Company's derivative assets include interest rate cap and swap instruments that effectively manage the risk above certain interest rates for a portion of the Company's long-term variable rate debt. The Company has not designated the interest rate cap and swap instruments as hedging instruments and as such, changes in the fair value of the instruments are recognized in earnings in the period of the change. The interest rate derivative positions are valued using models developed by the respective 8 counterparty that use as their basis readily available observable market parameters (such as forward yield curves) and are classified within Level 2 of the valuation hierarchy. The Company considers the credit risk of its counterparties when evaluating the fair value of its derivatives. The following table summarizes the Company's Secured Overnight Financing Rate ("SOFR") interest rate cap instruments as of June 30, 2025. ($ in millions) Notional balance $ 893.5 Weighted average fixed cap rate 4.27 % Weighted average remaining term 0.9 years Estimated asset fair value (included in other assets, net) $ 3.2 As of December 31, 2024, the estimated fair value of the SOFR interest rate cap instruments was $ 4.1 million included in other assets, net. The following table summarizes the Company's SOFR interest rate swap instrument as of June 30, 2025. ($ in millions) Notional balance $ 230.0 Fixed interest rate 4.06 % Remaining term 1.3 years Estimated fair value (included in other liabilities) $ ( 1.1 ) As of December 31, 2024, the estimated fair value of the SOFR interest rate swap instrument was $( 0.1 ) million included in other liabilities, net. Long-term debt The Company estimates the fair value of its debt primarily using a discounted cash flow analysis based upon the Company's current borrowing rate for debt with similar maturities and collateral securing the indebtedness. The Company estimates the fair value of its convertible senior notes based on valuations provided by third-party pricing services. The Company had outstanding long-term debt with a carrying amount of approximately $ 4.3 billion and $ 4.1 billion as of June 30, 2025 and December 31, 2024, respectively. Fair value of the long-term debt is approximately $ 4.2 billion and $ 3.8 billion as of June 30, 2025 and December 31, 2024, respectively. The Company's fair value of long-term debt disclosure is classified within Level 2 of the valuation hierarchy. 4. Revenue Resident fee revenue by payor source is as follows. Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Private pay 93.9 % 94.1 % 93.9 % 94.0 % Government reimbursement 4.8 % 4.6 % 4.8 % 4.6 % Other third-party payor programs 1.3 % 1.3 % 1.3 % 1.4 % Refer to Note 13 for disaggregation of revenue by reportable segment. 9 The payment terms and conditions within the Company's revenue-generating contracts vary by contract type and payor source, although terms generally include payment to be made within 30 days. Resident fee revenue for recurring and routine monthly services is generally billed monthly in advance under the Company's independent living, assisted living, and memory care residency agreements. Resident fee revenue for standalone or certain healthcare services is generally billed monthly in arrears. Additionally, certain of the Company's revenue-generating contracts include non-refundable fees that are generally billed and collected in advance or upon move-in of a resident under the Company's independent living, assisted living, and memory care residency agreements. Amounts of revenue that are collected from residents in advance are recognized as deferred revenue until the performance obligations are satisfied. The Company had total deferred revenue (included within refundable fees and deferred revenue within the condensed consolidated balance sheets) of $ 54.8 million and $ 53.8 million, including $ 29.1 million and $ 29.4 million of monthly resident fees billed and received in advance, as of June 30, 2025 and December 31, 2024, respectively. For the six months ended June 30, 2025 and 2024, the Company recognized $ 48.4 million and $ 42.8 million, respectively, of revenue that was included in the deferred revenue balance as of January 1, 2025 and 2024, respectively. 5. Property, Plant and Equipment and Leasehold Intangibles, Net As of June 30, 2025 and December 31, 2024, net property, plant and equipment and leasehold intangibles consisted of the following. (in thousands) June 30, 2025 December 31, 2024 Land $ 557,695 $ 532,719 Buildings and improvements 5,980,404 5,667,855 Furniture and equipment 1,246,878 1,182,026 Resident in-place lease intangibles 279,000 281,041 Construction in progress 37,571 32,965 Assets under financing leases and leasehold improvements 910,253 1,245,791 Property, plant and equipment and leasehold intangibles 9,011,801 8,942,397 Accumulated depreciation and amortization ( 4,511,814 ) ( 4,347,996 ) Property, plant and equipment and leasehold intangibles, net $ 4,499,987 $ 4,594,401 Long-lived assets with definite useful lives are depreciated or amortized on a straight-line basis over their estimated useful lives (or, in certain cases, the shorter of their estimated useful lives or the lease term) and are tested for impairment whenever indicators of impairment arise. The Company recognized depreciation and amortization expense on its property, plant and equipment and leasehold intangibles of $ 92.9 million and $ 88.0 million for the three months ended June 30, 2025 and 2024, respectively, and $ 183.8 million and $ 174.2 million for the six months ended June 30, 2025 and 2024, respectively. The Company recognized $ 0.6 million for the three months ended June 30, 2025 of non-cash impairment charges in its operating results for its property, plant and equipment and leasehold intangibles assets and did no t recognize any impairment charges for the three months ended June 30, 2024. The Company recognized $ 2.4 million and $ 1.7 million for the six months ended June 30, 2025 and 2024, respectively, of non-cash impairment charges in its operating results for its property, plant and equipment and leasehold intangibles assets. As of June 30, 2025, 12 communities in the Assisted Living and Memory Care segment were classified as held for sale, resulting in $ 9.7 million of net property, plant and equipment and leasehold intangibles assets being recognized as assets held for sale within the condensed consolidated balance sheet. The closings of the sales of the communities are subject to the satisfaction of various closing conditions, including (where applicable) the receipt of regulatory approvals. There can be no assurance that the transactions will close or, if they do, when the actual closings will occur. 10 6. Debt Long-term debt consists of the following. (in thousands) June 30, 2025 December 31, 2024 Fixed rate mortgage notes payable due 2026 through 2047; weighted average interest rate of 4.74 % and 4.65 % as of June 30, 2025 and December 31, 2024, respectively $ 2,713,084 $ 2,599,028 Variable rate mortgage notes payable due 2026 through 2030; weighted average interest rate of 6.77 % and 6.89 % as of June 30, 2025 and December 31, 2024, respectively 1,216,769 1,110,642 Convertible notes payable due October 2026; interest rate of 2.00 % as of both June 30, 2025 and December 31, 2024 23,297 23,297 Convertible notes payable due October 2029; interest rate of 3.50 % as of both June 30, 2025 and December 31, 2024 369,445 369,445 Tangible equity units senior amortizing notes due 2025; interest rate of 10.25 % as of both June 30, 2025 and December 31, 2024 1,530 9,449 Notes payable for insurance premium financing due 2025; interest rate of 6.16 % as of June 30, 2025 13,704 — Deferred financing costs, net ( 46,353 ) ( 49,074 ) Total long-term debt 4,291,476 4,062,787 Current portion 59,238 40,779 Total long-term debt, less current portion $ 4,232,238 $ 4,022,008 As of June 30, 2025, the long-term debt, less current portion within the Company's condensed consolidated balance sheet includes $ 98.9 million of mortgage debt scheduled to mature in January 2026 for which the Company has the unilateral option to extend the maturity for one year subject to the satisfaction of certain conditions. As of June 30, 2025, 88.0 %, or $ 3.8 billion, of the Company's total debt obligations represented non-recourse property-level mortgage financings. As of June 30, 2025, $ 1.9 million of letters of credit and no cash borrowings were outstanding under the Company's $ 100.0 million secured credit facility. The Company also had separate letter of credit facilities providing up to $ 85.0 million of letters of credit as of June 30, 2025 under which $ 68.9 million had been issued as of that date. 2025 Mortgage Financings In February 2025, the Company obtained an aggregate of $ 130.1 million of debt secured by non-recourse first priority mortgages on five communities. The debt bears interest at a fixed rate of 6.47 %, is interest only for the first five years , and matures in March 2035. In February 2025, the Company obtained $ 161.0 million of debt secured by first priority mortgages on 36 communities. The loan bears interest at a variable rate based on SOFR plus a margin of 300 basis points, and is interest only for the first year. The debt has an initial three-year term and two one-year extension options, exercisable subject to certain performance criteria, with a final maturity date, including extension options, of February 2030. At the time of closing, the Company repaid $ 50.0 million of outstanding mortgage debt on 11 communities, which held a final maturity date of February 2029. Financial Covenants Certain of the Company's debt documents contain restrictions and financial covenants, such as those requiring the Company to maintain prescribed minimum liquidity and net worth levels and debt service ratios, and requiring the Company not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community, and/or entity basis. In addition, the Company's debt documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements and maintain insurance coverage. The Company's failure to comply with applicable covenants, subject to cure provisions in certain instances, could constitute an event of default under the applicable debt documents. Many of the Company's debt documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including 11 documents with other lenders and lessors). Furthermore, the Company's mortgage debt is secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries. As of June 30, 2025, the Company is in compliance with the financial covenants of its debt agreements. 7. Leases As of June 30, 2025, the Company operated 235 communities under long-term leases ( 226 operating leases and 9 financing leases). The substantial majority of the Company's lease arrangements are structured as master leases. Under a master lease, numerous communities are leased through an indivisible lease. In certain cases, the Company guarantees the performance and lease payment obligations of its subsidiary lessees under the master leases. An event of default related to an individual property or limited number of properties within a master lease portfolio may result in a default on the entire master lease portfolio. The leases relating to substantially all of the Company's leased communities are fixed rate leases with annual escalators that are fixed. The Company is responsible for all operating costs, including repairs and maintenance, property taxes, and insurance. The leases generally provide for renewal or extension options, or in certain cases, purchase options. The community leases contain other customary terms, which may include assignment and change of control restrictions, maintenance and capital expenditure obligations, termination provisions and financial covenants, such as those requiring the Company to maintain prescribed minimum liquidity and net worth levels and lease coverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community and/or entity basis. In addition, the Company's lease documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements and maintain insurance coverage. The Company's failure to comply with applicable covenants could constitute an event of default under the applicable lease documents. Many of the Company's lease documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors). Certain leases contain cure provisions, which generally allow the Company to post an additional lease security deposit if the required covenant is not met. Furthermore, the Company's leases are secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries. As of June 30, 2025, the Company is in compliance with the financial covenants of its long-term lease agreements. Lease right-of-use assets are reviewed for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company did not recognize any such impairment charges for the three and six months ended June 30, 2025 and 2024. A summary of operating and financing lease expense (including the respective presentation on the condensed consolidated statements of operations) and net cash outflows from leases is as follows. Three Months Ended June 30, Six Months Ended June 30, Operating Leases (in thousands) 2025 2024 2025 2024 Facility operating expense $ 2,075 $ 2,176 $ 4,134 $ 4,096 Facility lease expense 52,653 50,964 105,527 102,460 Operating lease expense 54,728 53,140 109,661 106,556 Operating lease expense adjustment (1) 4,846 13,483 8,699 26,572 Changes in operating lease assets and liabilities for lessor capital expenditure reimbursements ( 9,319 ) ( 1,051 ) ( 11,332 ) ( 1,300 ) Operating net cash outflows from operating leases $ 50,255 $ 65,572 $ 107,028 $ 131,828 (1) Represents the difference between the amount of cash operating lease payments and the amount of operating lease expense. 12 Three Months Ended June 30, Six Months Ended June 30, Financing Leases (in thousands) 2025 2024 2025 2024 Depreciation and amortization $ 709 $ 2,898 $ 3,234 $ 5,770 Interest expense: financing lease obligations 1,750 5,110 7,350 10,171 Financing lease expense $ 2,459 $ 8,008 $ 10,584 $ 15,941 Operating cash outflows from financing leases $ 1,750 $ 5,110 $ 7,350 $ 10,171 Financing cash outflows from financing leases 297 265 586 527 Changes in financing lease assets and liabilities for lessor capital expenditure reimbursement ( 5 ) — ( 5 ) — Total net cash outflows from financing leases $ 2,042 $ 5,375 $ 7,931 $ 10,698 The aggregate amounts of future minimum lease payments (without giving effect to the potential early termination by Ventas, Inc. ("Ventas") of certain of the Company's community leases with maturity dates of December 31, 2025), including community, office, and equipment leases, recognized on the condensed consolidated balance sheet as of June 30, 2025 are as follows (in millions). Year Ending December 31, Operating Leases Financing Leases 2025 (six months) $ 116.7 $ 3.6 2026 182.9 7.2 2027 185.9 6.4 2028 183.4 6.3 2029 185.9 6.3 Thereafter 1,093.1 15.5 Total lease payments 1,947.9 45.3 Imputed interest and variable lease payments ( 714.3 ) ( 39.9 ) Non-cash gain on future sale of property — 20.7 Total lease obligations $ 1,233.6 $ 26.1 Diversified Healthcare Trust Portfolio Acquisition In September 2024, the Company entered into a definitive agreement to acquire 25 senior living communities that were leased by the Company from Diversified Healthcare Trust for a purchase price of $ 135.0 million. Effective February 27, 2025, the Company successfully closed the acquisition. The Company funded the acquisition of the 25 communities through proceeds from mortgage financings and cash on hand. Refer to Note 6 for information on the mortgage financing. Previously, these communities were held in a triple-net lease with annualized cash rent payments of $ 10.2 million and an initial maturity of December 31, 2032. The leases for the 25 communities were previously classified as operating leases and were prospectively classified as financing leases subsequent to the amendment of the leasing arrangement through the date of acquisition. Welltower Portfolio Acquisition In September 2024, the Company entered into a definitive agreement to acquire five senior living communities that were leased by the Company from Welltower Inc. for a purchase price of $ 175.0 million. Effective February 27, 2025, the Company successfully closed the acquisition. The Company funded the acquisition of the five communities through proceeds from mortgage financings and cash on hand. Refer to Note 6 for information on the mortgage financing. Previously, these communities were held in a triple-net lease with annualized cash rent payments of $ 13.7 million and an initial maturity of December 31, 2024, which had been extended through the acquisition date. 13 The definitive agreement included the finalization of the purchase price under the provisions of a purchase option arrangement with a variable price component based upon the fair value of the assets. The leasing arrangements for three of these communities were accounted for as failed sale-leaseback transactions as the Company did not transfer control of the underlying assets under a sale and leaseback arrangement with a purchase option. For the three months ended March 31, 2025, the Company recognized a $ 32.8 million loss on extinguishment of the financing obligation for the amount by which the repurchase price exceeded the previously recognized financing obligation for such three communities. 8. Litigation The Company has been and is currently involved in litigation and claims incidental to the conduct of its business, which it believes are generally comparable to other companies in the senior living and healthcare industries. In addition, the Company has been and currently is involved in putative class action litigation regarding staffing at the Company's communities and compliance with consumer protection laws and the Americans with Disabilities Act (and similar state laws). Certain claims and lawsuits allege large damage amounts, seek injunctive relief, and may require (and have required) significant costs to defend and resolve. The Company continues to vigorously defend against the putative class action cases. Based on the information that has been received as of the date hereof related to certain pending putative class action litigation discussed above, the Company recorded $ 7.0 million in litigation expense for the three months ended December 31, 2024, representing its current estimate of the Company’s ultimate cost to resolve such litigation, net of estimated probable insurance recoveries. The final outcome of the litigation is dependent on many factors that are difficult to predict. Accordingly the Company’s ultimate cost related to this matter may be materially different than the amount of the Company’s current estimate and accruals. The Company maintains general liability, professional liability, excess liability, and other insurance policies in amounts and with coverage and deductibles the Company believes are appropriate, based on the nature and risks of its business, historical experience, availability, and industry standards. The Company's current policies provide for deductibles for each claim and contain various exclusions from coverage. The Company uses its wholly-owned captive insurance company for the purpose of insuring certain portions of its risk retention under its general and professional liability insurance programs. Accordingly, the Company is, in effect, self-insured for claims that are less than the deductible amounts, for claims that exceed the funding level of the Company's wholly-owned captive insurance company, and for claims or portions of claims that are not covered by such policies and/or exceed the policy limits. The senior living and healthcare industries are continuously subject to scrutiny by governmental regulators, which could result in reviews, audits, investigations, enforcement actions, or litigation related to regulatory compliance matters. In addition, the Company is subject to various government reviews, audits, and investigations to verify compliance with Medicare and Medicaid programs and other applicable laws and regulations. The Centers for Medicare & Medicaid Services ("CMS") has engaged third-party firms to review claims data to evaluate appropriateness of billings. In addition to identifying overpayments, audit contractors can refer suspected violations to government authorities. In addition, states' Attorneys General vigorously enforce consumer protection laws as those laws relate to the senior living industry. An adverse outcome of government scrutiny may result in citations, sanctions, other criminal or civil fines and penalties, the refund of overpayments, payment suspensions, termination of participation in Medicare and Medicaid programs, and damage to the Company's business reputation. The Company's costs to respond to and defend any such audits, reviews, and investigations may be significant. In June 2020, the Company and several current and former executive officers were named as defendants in a putative class action lawsuit alleging violations of the federal securities laws filed in the federal court for the Middle District of Tennessee. The lawsuit asserted that the defendants made material misstatements and omissions concerning the Company’s business, operational and compliance policies, compliance with applicable regulations and statutes, and staffing practices that caused the Company’s stock price to be artificially inflated between August 2016 and April 2020. The district court dismissed the lawsuit and entered judgment in favor of the defendants in September 2021, and the plaintiffs did not file an appeal. Between October 2020 and June 2021, alleged stockholders of the Company filed several stockholder derivative lawsuits in the federal courts for the Middle District of Tennessee and the District of Delaware, which were subsequently transferred to the Middle District of Tennessee and consolidated into two lawsuits, styled Davis v. Baier et al. , No. 3:20-cv-00929 (M.D. Tenn.) (the “ Davis Action”) and Templin v. Baier et al. , No. 3:21-cv-00373 (M.D. Tenn.) (the “ Templin Action”). The complaints in the Davis Action and the Templin Action incorporated substantively similar allegations to the securities lawsuit previously described. In January 2024, the court dismissed the Davis Action and the plaintiffs subsequently filed an appeal in the United States Court of Appeals for the Sixth Circuit. On July 9, 2025, the court approved a settlement of the Templin Action and entered a judgment dismissing the case with prejudice. The appeal in the Davis Action was stayed pending the completion of the settlement approval proceedings in the Templin Action; the parties informed the Sixth Circuit that they anticipate moving to dismiss the appeal as moot in light of the settlement of the Templin Action. 14 9. Stock-Based Compensation Grants of restricted stock units and stock awards under the Company's 2024 Omnibus Incentive Plan were as follows. (in thousands, except for weighted average amounts) Restricted Stock Unit and Stock Award Grants Weighted Average Grant Date Fair Value Total Grant Date Fair Value Three months ended March 31, 2025 2,806 $ 5.12 $ 14,366 Three months ended June 30, 2025 175 $ 6.29 $ 1,100 10. Earnings Per Share Potentially dilutive common stock equivalents for the Company include convertible senior notes, unvested restricted stock, and restricted stock units. Prior to June 30, 2025, the potentially dilutive common stock equivalents for the Company also included warrants and prepaid stock purchase contracts. As of June 30, 2025, $ 23.3 million in aggregate principal amount of the Company's 2.00 % convertible senior notes due 2026 (the "2026 Notes") remain outstanding and the maximum number of shares issuable upon settlement of the 2026 Notes is 3.9 million (after giving effect to 1.0 million additional shares that would be issuable upon conversion in connection with the occurrence of certain corporate or other events). As of June 30, 2025, $ 369.4 million in aggregate principal amount of the Company’s 3.50 % convertible senior notes due 2029 (the “2029 Notes”) remain outstanding and the maximum number of shares issuable upon settlement of the 2029 Notes is 55.0 million (after giving effect to 13.9 million additional shares that would be issuable upon conversion in connection with the occurrence of certain corporate or other events). On July 26, 2020, the Company issued to Ventas a warrant (the "Warrant") to purchase 16.3 million shares of the Company’s common stock, $ 0.01 par value per share, at a price per share of $ 3.00 . During the six months ended June 30, 2025, the Company issued 5.7 million shares of common stock, upon the exercise of the Warrant by Ventas for the remaining 11.1 million shares, net of shares withheld to satisfy the aggregate exercise price. As of June 30, 2025, the Company had no outstanding warrants. During the three months ended December 31, 2022, the Company issued 2,875,000 of its 7.00 % tangible equity units (the "Units") at a public offering price of $ 50.00 per Unit for an aggregate offering of $ 143.8 million. Each Unit was comprised of a prepaid stock purchase contract and a senior amortizing note with an initial principal amount of $ 8.8996 . In March 2025, the Company elected to exercise its right to settle the remaining outstanding 2,291,338 prepaid stock purchase contracts, pursuant to the early settlement right in the purchase contract agreement, and the Company delivered 29,636,386 shares of the Company's common stock upon settlement. As of June 30, 2025, the Company had no outstanding prepaid stock purchase contracts and $ 1.5 million payable in 2025 for the senior amortizing notes component of the Units. Basic earnings per share ("EPS") is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding, after giving effect to the weighted average minimum number of shares issuable upon settlement of the prepaid stock purchase contract component of the Units. The following table summarizes the computation of basic weighted average shares presented in the condensed consolidated statements of operations. Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2025 2024 2025 2024 Weighted average common shares outstanding 234,737 194,788 217,983 192,425 Weighted average minimum shares issuable under purchase contracts — 32,001 14,736 33,915 Weighted average shares outstanding - basic 234,737 226,789 232,719 226,340 15 Diluted EPS includes the components of basic EPS and also gives effect to dilutive common stock equivalents. Diluted EPS reflects the potential dilution that could occur if securities or other instruments that are convertible into common stock were exercised or could result in the issuance of common stock. For the purposes of computing diluted EPS, weighted average shares outstanding do not include potentially dilutive securities that are anti-dilutive under the treasury stock method or if-converted method, and performance-based equity awards are included based on the attainment of the applicable performance metrics as of the end of the reporting period. The Company has the following potentially outstanding shares of common stock, which were excluded from the computation of diluted net income (loss) per share attributable to common stockholders in both periods as a result of the net loss. As of June 30, (in millions) 2025 2024 2026 Notes at initial conversion rate 2.9 28.4 Incremental shares issuable upon certain events for 2026 Notes 1.0 9.9 2029 Notes at initial conversion rate 41.1 — Incremental shares issuable upon certain events for 2029 Notes 13.9 — Warrants — 14.6 Restricted stock and restricted stock units 4.5 6.5 Incremental shares issuable under purchase contracts — 5.3 Total 63.4 64.7 11. Income Taxes The difference between the Company's effective tax rate for the three and six months ended June 30, 2025 and 2024 was primarily due to an increase in the benefit recorded on operational losses during the three and six months ended June 30, 2025. The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 9.1 million for the three months ended June 30, 2025, which was partially offset by an increase to the valuation allowance of $ 8.3 million. The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 24.9 million for the six months ended June 30, 2025, which was partially offset by an increase to the valuation allowance of $ 23.0 million. The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 9.1 million for the three months ended June 30, 2024, which was offset by an increase to the valuation allowance of $ 9.2 million. The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 16.7 million for the six months ended June 30, 2024, which was partially offset by an increase to the valuation allowance of $ 16.3 million. The Company evaluates its deferred tax assets each quarter to determine if a valuation allowance is required based on whether it is more likely than not that some portion of the deferred tax asset would not be realized. The Company's valuation allowance as of June 30, 2025 and December 31, 2024 was $ 544.5 million and $ 521.5 million, respectively. The increase in the valuation allowance for the six months ended June 30, 2025 and 2024 is the result of current operating losses during the six months ended June 30, 2025 and 2024 and by the anticipated reversal of future tax liabilities offset by future tax deductions. The Company recorded interest charges related to its tax contingency reserve for cash tax positions for the three and six months ended June 30, 2025 and 2024 which are included in income tax expense or benefit for the period. As of June 30, 2025, tax returns for years 2020 through 2023 are subject to future examination by tax authorities. In addition, the net operating losses from prior years are subject to adjustment under examination. 16 12. Supplemental Disclosure of Cash Flow Information Six Months Ended June 30, (in thousands) 2025 2024 Supplemental Disclosure of Cash Flow Information: Interest paid $ 117,100 $ 117,143 Income taxes paid, net of (refunds) $ 1,256 $ 1,213 Capital expenditures, net of related payables: Capital expenditures - non-development, net $ 89,941 $ 102,916 Capital expenditures - development, net 12 433 Capital expenditures - non-development - reimbursable from lessor 11,337 1,300 Trade accounts payable ( 5,007 ) ( 8,676 ) Net cash paid $ 96,283 $ 95,973 Acquisition of assets: Property, plant and equipment and leasehold intangibles, net $ 1,028 $ — Financing lease obligations 277,208 — Loss on debt modification and extinguishment, net 32,792 — Net cash paid $ 311,028 $ — Proceeds from sale of assets, net: Prepaid expenses and other assets, net $ — $ ( 362 ) Property, plant and equipment and leasehold intangibles, net ( 1,004 ) ( 6,311 ) Other liabilities — 559 Non-operating loss (gain) on sale of assets, net — ( 903 ) Loss (gain) on sale of communities, net ( 43 ) — Net cash received $ ( 1,047 ) $ ( 7,017 ) Restricted cash consists principally of escrow deposits for interest rate caps, real estate taxes, property insurance, capital expenditures, and debt service reserves required by certain lenders under mortgage debt agreements, deposits as security for self-insured retention risk under general and professional liability programs, property insurance programs, and workers' compensation programs, and regulatory reserves for certain CCRCs. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sums to the total of the same such amounts shown in the condensed consolidated statements of cash flows. (in thousands) June 30, 2025 December 31, 2024 Reconciliation of cash, cash equivalents, and restricted cash: Cash and cash equivalents $ 251,888 $ 308,925 Restricted cash - current 37,268 39,871 Restricted cash - non-current 34,406 31,044 Total cash, cash equivalents, and restricted cash $ 323,562 $ 379,840 13. Segment Information The Company has three reportable segments: Independent Living; Assisted Living and Memory Care; and CCRCs. Operating segments are defined as components of an enterprise that engage in business activities from which it may earn revenues and incur expenses; for which separate financial information is available; and whose operating results are regularly reviewed by the chief operating decision maker to assess the performance of the individual segment and make decisions about resources to be allocated to the segment. Independent Living . The Company's Independent Living segment includes owned or leased communities that are primarily designed for middle to upper income seniors who desire to live in a residential setting that feels like home, without the efforts 17 of ownership. The majority of the Company's independent living communities consist of both independent and assisted living units in a single community, which allows residents to age-in-place by providing them with a broad continuum of senior independent and assisted living services to accommodate their changing needs. Assisted Living and Memory Care. The Company's Assisted Living and Memory Care segment includes owned or leased communities that offer housing and 24-hour assistance with activities of daily living for the Company's residents. The Company's assisted living and memory care communities include both freestanding, multi-story communities, as well as smaller, freestanding, single story communities. The Company also provides memory care services at freestanding memory care communities that are specially designed for residents with Alzheimer's disease and other dementias. CCRCs. The Company's CCRCs segment includes large owned or leased communities that offer a variety of living arrangements and services to accommodate a broad spectrum of physical ability and healthcare needs. Most of the Company's CCRCs have independent living, assisted living, memory care, and skilled nursing available on one campus. All Other. All Other includes communities operated by the Company pursuant to management agreements. Under the management agreements for these communities, the Company receives management fees as well as reimbursement of expenses it incurs on behalf of the owners. 18 The following tables set forth selected segment financial data. Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2025 2024 2025 2024 Revenue: (1) Independent Living $ 158,135 $ 149,542 $ 315,252 $ 298,490 Assisted Living and Memory Care 531,318 507,191 1,064,697 1,018,063 CCRCs 86,161 82,976 173,119 167,397 All Other 37,330 37,832 73,740 76,422 Total revenue $ 812,944 $ 777,541 $ 1,626,808 $ 1,560,372 Community labor expenses: Independent Living $ 60,114 $ 56,627 $ 118,398 $ 113,767 Assisted Living and Memory Care 259,234 245,099 511,944 491,673 CCRCs 46,231 45,529 92,524 91,583 Other facility operating expenses: (2) Independent Living 44,423 42,581 89,024 85,746 Assisted Living and Memory Care 129,377 125,937 260,493 252,777 CCRCs 22,938 21,734 46,921 44,511 Total facility operating expenses $ 562,317 $ 537,507 $ 1,119,304 $ 1,080,057 Segment operating income: (3) Independent Living $ 53,598 $ 50,334 $ 107,830 $ 98,977 Assisted Living and Memory Care 142,707 136,155 292,260 273,613 CCRCs 16,992 15,713 33,674 31,303 All Other 2,623 2,616 5,243 5,234 Total segment operating income 215,920 204,818 439,007 409,127 General and administrative expense (including non-cash stock-based compensation expense) 54,973 46,664 102,847 92,396 Facility operating lease expense: Independent Living 9,692 9,346 19,423 18,777 Assisted Living and Memory Care 39,424 37,787 79,006 75,695 CCRCs 3,248 3,090 6,520 6,215 Corporate and All Other 289 741 578 1,773 Depreciation and amortization: Independent Living 26,494 22,861 52,331 44,904 Assisted Living and Memory Care 52,855 49,956 104,495 98,979 CCRCs 8,831 8,889 17,563 17,726 Corporate and All Other 4,673 6,322 9,440 12,546 Asset impairment: Assisted Living and Memory Care 377 — 1,764 1,708 CCRCs 200 — 600 — Loss (gain) on sale of communities, net ( 43 ) — ( 43 ) — Income (loss) from operations $ 14,907 $ 19,162 $ 44,483 $ 38,408 19 Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2025 2024 2025 2024 Interest expense: Independent Living $ 15,614 $ 16,179 $ 31,202 $ 32,365 Assisted Living and Memory Care 37,181 36,376 74,852 72,378 CCRCs 5,012 5,955 10,369 11,759 Corporate and All Other 5,274 3,057 11,689 2,752 Total interest expense $ 63,081 $ 61,567 $ 128,112 $ 119,254 Capital expenditures: Independent Living $ 12,571 $ 12,251 $ 22,841 $ 24,971 Assisted Living and Memory Care 32,134 33,192 58,660 64,240 CCRCs 4,844 4,815 8,306 9,348 Corporate and All Other 8,592 3,333 11,483 6,090 Total capital expenditures $ 58,141 $ 53,591 $ 101,290 $ 104,649 As of (in thousands) June 30, 2025 December 31, 2024 Assets: Independent Living (4) $ 1,210,872 $ 1,252,736 Assisted Living and Memory Care 3,904,546 3,983,311 CCRCs 629,304 640,720 Corporate and All Other 396,744 458,795 Total assets $ 6,141,466 $ 6,335,562 (1) All revenue is earned from external third parties in the United States. (2) Other facility operating expenses is primarily comprised of costs for food, utilities, maintenance, real estate taxes, insurance, marketing, paid referral fees, and other costs of operating the Company's communities. (3) Segment operating income is defined as segment revenues less segment facility operating expenses (excluding facility depreciation and amortization) and costs incurred on behalf of managed communities. (4) The Company's total carrying amount of goodwill is included within the Independent Living segment and was $ 27.3 million as of both June 30, 2025 and December 31, 2024. 20