Brookdale Senior Living Inc. 10-Q

Item 1. Financial Statements BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except stock amounts) September 30, 2025 December 31, 2024 Assets (Unaudited) Current assets Cash and cash equivalents $ 253,448 $ 308,925 Marketable securities — 19,879 Restricted cash 41,815 39,871 Accounts receivable, net 67,556 51,891 Assets held for sale 68,790 — Prepaid expenses and other current assets, net 105,330 92,371 Total current assets 536,939 512,937 Property, plant and equipment and leasehold intangibles, net 4,323,569 4,594,401 Operating lease right-of-use assets 1,052,240 1,133,837 Restricted cash 36,064 31,044 Goodwill 27,321 27,321 Other assets, net 36,575 36,022 Total assets $ 6,012,708 $ 6,335,562 Liabilities and Equity (Deficit) Current liabilities Current portion of long-term debt $ 104,018 $ 40,779 Current portion of financing lease obligations 1,283 37,007 Current portion of operating lease obligations 81,110 111,104 Trade accounts payable 84,765 65,515 Accrued expenses 304,528 264,384 Refundable fees and deferred revenue 62,068 60,974 Total current liabilities 637,772 579,763 Long-term debt, less current portion 4,159,357 4,022,008 Financing lease obligations, less current portion 24,579 266,895 Operating lease obligations, less current portion 1,127,091 1,174,204 Deferred tax liability 7,383 9,604 Other liabilities 61,868 69,183 Total liabilities 6,018,050 6,121,657 Preferred stock, $ 0.01 par value, 50,000,000 shares authorized at September 30, 2025 and December 31, 2024; no shares issued and outstanding — — Common stock, $ 0.01 par value, 400,000,000 shares authorized at September 30, 2025 and December 31, 2024; 248,053,116 and 210,547,351 shares issued and 237,525,591 and 200,019,826 shares outstanding (including 28,929 and 27,972 unvested restricted shares), respectively 2,480 2,105 Additional paid-in-capital 4,356,139 4,352,991 Treasury stock, at cost; 10,527,525 shares at September 30, 2025 and December 31, 2024 ( 102,774 ) ( 102,774 ) Accumulated deficit ( 4,262,576 ) ( 4,039,847 ) Total Brookdale Senior Living Inc. stockholders' equity (deficit) ( 6,731 ) 212,475 Noncontrolling interest 1,389 1,430 Total equity (deficit) ( 5,342 ) 213,905 Total liabilities and equity (deficit) $ 6,012,708 $ 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 September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Resident fees $ 775,140 $ 743,729 $ 2,328,208 $ 2,227,679 Management fees 2,698 2,676 7,941 7,910 Reimbursed costs incurred on behalf of managed communities 35,327 37,762 103,824 108,950 Total revenue 813,165 784,167 2,439,973 2,344,539 Facility operating expense (excluding facility depreciation and amortization of $ 90,248 , $ 83,479 , $ 264,637 , and $ 245,089 , respectively) 566,985 548,282 1,686,289 1,628,339 General and administrative expense (including non-cash stock-based compensation expense of $ 2,633 , $ 3,403 , $ 9,701 , and $ 10,651 , respectively) 50,866 44,929 153,713 137,325 Facility operating lease expense 51,993 51,937 157,520 154,397 Depreciation and amortization 94,792 90,064 278,621 264,219 Asset impairment 62,696 934 65,060 2,642 Loss (gain) on sale of communities, net ( 139 ) — ( 182 ) — Loss (gain) on facility operating lease termination, net 4,480 — 4,480 — Costs incurred on behalf of managed communities 35,327 37,762 103,824 108,950 Income (loss) from operations ( 53,835 ) 10,259 ( 9,352 ) 48,667 Interest income 3,020 4,663 9,587 14,155 Interest expense: Debt ( 58,089 ) ( 54,171 ) ( 170,396 ) ( 161,405 ) Financing lease obligations ( 1,764 ) ( 5,062 ) ( 9,114 ) ( 15,233 ) Amortization of deferred financing costs ( 3,747 ) ( 2,337 ) ( 11,089 ) ( 6,928 ) Change in fair value of derivatives 26 ( 4,746 ) ( 1,087 ) ( 2,004 ) Gain (loss) on debt modification and extinguishment, net ( 326 ) ( 2,267 ) ( 35,661 ) ( 2,267 ) Non-operating gain (loss) on sale of assets, net — 20 — 923 Other non-operating income (loss) 144 3,584 3,562 7,121 Income (loss) before income taxes ( 114,571 ) ( 50,057 ) ( 223,550 ) ( 116,971 ) Benefit (provision) for income taxes ( 167 ) ( 677 ) 780 ( 1,086 ) Net income (loss) ( 114,738 ) ( 50,734 ) ( 222,770 ) ( 118,057 ) Net (income) loss attributable to noncontrolling interest 12 14 41 44 Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders $ ( 114,726 ) $ ( 50,720 ) $ ( 222,729 ) $ ( 118,013 ) Basic and diluted net income (loss) per share attributable to Brookdale Senior Living Inc. common stockholders $ ( 0.48 ) $ ( 0.22 ) $ ( 0.95 ) $ ( 0.52 ) Weighted average shares used in computing basic and diluted net income (loss) per share 237,487 228,124 234,326 226,939 See accompanying notes to condensed consolidated financial statements. 5 BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (Unaudited, in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Total equity (deficit), balance at beginning of period $ 106,780 $ 341,673 $ 213,905 $ 405,153 Common stock: Balance at beginning of period $ 2,480 $ 2,077 $ 2,105 $ 1,988 Shares issued for settlement of prepaid stock purchase contracts — 9 296 76 Shares issued for warrant exercise — 12 57 21 Restricted stock and restricted stock units, net — — 31 19 Shares withheld for employee taxes — — ( 9 ) ( 6 ) Balance at end of period $ 2,480 $ 2,098 $ 2,480 $ 2,098 Additional paid-in-capital: Balance at beginning of period $ 4,353,523 $ 4,346,116 $ 4,352,991 $ 4,342,362 Compensation expense related to restricted stock grants 2,633 3,403 9,701 10,651 Shares issued for settlement of prepaid stock purchase contracts — ( 9 ) ( 296 ) ( 76 ) Shares issued for warrant exercise — ( 12 ) ( 57 ) ( 21 ) Restricted stock and restricted stock units, net — — ( 31 ) ( 19 ) Shares withheld for employee taxes ( 17 ) ( 20 ) ( 6,169 ) ( 3,419 ) Balance at end of period $ 4,356,139 $ 4,349,478 $ 4,356,139 $ 4,349,478 Treasury stock: Balance at beginning and end of period $ ( 102,774 ) $ ( 102,774 ) $ ( 102,774 ) $ ( 102,774 ) Accumulated deficit: Balance at beginning of period $ ( 4,147,850 ) $ ( 3,905,205 ) $ ( 4,039,847 ) $ ( 3,837,912 ) Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders ( 114,726 ) ( 50,720 ) ( 222,729 ) ( 118,013 ) Balance at end of period $ ( 4,262,576 ) $ ( 3,955,925 ) $ ( 4,262,576 ) $ ( 3,955,925 ) Noncontrolling interest: Balance at beginning of period $ 1,401 $ 1,459 $ 1,430 $ 1,489 Net income (loss) attributable to noncontrolling interest ( 12 ) ( 14 ) ( 41 ) ( 44 ) Balance at end of period $ 1,389 $ 1,445 $ 1,389 $ 1,445 Total equity (deficit), balance at end of period $ ( 5,342 ) $ 294,322 $ ( 5,342 ) $ 294,322 Common stock share activity Outstanding shares of common stock: Balance at beginning of period 237,454 197,201 200,020 188,253 Shares issued for settlement of prepaid stock purchase contracts — 841 29,636 7,550 Shares issued for warrant exercise — 1,163 5,702 2,105 Restricted stock and restricted stock units, net 74 39 3,226 1,912 Shares withheld for employee taxes ( 2 ) ( 3 ) ( 1,058 ) ( 579 ) Balance at end of period 237,526 199,241 237,526 199,241 See accompanying notes to condensed consolidated financial statements. 6 BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Nine Months Ended September 30, 2025 2024 Cash Flows from Operating Activities Net income (loss) $ ( 222,770 ) $ ( 118,057 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Loss (gain) on debt modification and extinguishment, net 35,661 2,267 Depreciation and amortization, net 289,710 271,147 Asset impairment 65,060 2,642 Deferred income tax (benefit) provision ( 2,221 ) ( 48 ) Operating lease expense adjustment ( 13,384 ) ( 39,061 ) Change in fair value of derivatives 1,087 2,004 Loss (gain) on sale of assets, net ( 182 ) ( 923 ) Loss (gain) on facility operating lease termination, net 4,480 — Non-cash stock-based compensation expense 9,701 10,651 Property and casualty insurance income ( 3,691 ) ( 6,281 ) Changes in operating assets and liabilities: Accounts receivable, net ( 15,664 ) ( 4,610 ) Prepaid expenses and other assets, net ( 13,183 ) ( 6,414 ) Prepaid insurance premiums financed with notes payable ( 7,610 ) ( 7,930 ) Trade accounts payable and accrued expenses 35,319 5,071 Refundable fees and deferred revenue 1,140 2,789 Operating lease assets and liabilities for lessor capital expenditure reimbursements 20,038 7,732 Net cash provided by operating activities 183,491 120,979 Cash Flows from Investing Activities Purchase of marketable securities — ( 39,191 ) Sale and maturities of marketable securities 20,000 40,000 Capital expenditures, net of related payables ( 137,872 ) ( 150,938 ) Acquisition of assets ( 311,028 ) — Proceeds from sale of assets, net 8,133 7,017 Property and casualty insurance proceeds 3,691 6,297 Change in lease acquisition deposits, net 5,000 ( 2,000 ) Purchase of interest rate cap instruments ( 3,563 ) ( 9,282 ) Proceeds from interest rate cap instruments 4,466 14,816 Other ( 176 ) ( 235 ) Net cash provided by (used in) investing activities ( 411,349 ) ( 133,516 ) Cash Flows from Financing Activities Proceeds from debt 320,774 264,038 Repayment of debt and financing lease obligations ( 127,371 ) ( 259,390 ) Payment of financing costs, net of related payables ( 7,880 ) ( 6,309 ) Payments of employee taxes for withheld shares ( 6,178 ) ( 3,425 ) Net cash provided by (used in) financing activities 179,345 ( 5,086 ) Net increase (decrease) in cash, cash equivalents, and restricted cash ( 48,513 ) ( 17,623 ) Cash, cash equivalents, and restricted cash at beginning of period 379,840 349,668 Cash, cash equivalents, and restricted cash at end of period $ 331,327 $ 332,045 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 623 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 September 30, 2025, the Company owned 372 communities, representing a majority of the Company's community portfolio, leased 221 communities, and managed 30 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 September 30, 2025. ($ in millions) Notional balance $ 892.8 Weighted average fixed cap rate 4.26 % Weighted average remaining term 0.9 years Estimated asset fair value (included in other assets, net) $ 2.7 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 September 30, 2025. ($ in millions) Notional balance $ 230.0 Fixed interest rate 4.06 % Remaining term 1.0 year 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. Property, Plant and Equipment and Leasehold Intangibles During the three and nine months ended September 30, 2025 and 2024, the Company evaluated property, plant and equipment and leasehold intangibles for impairment and identified properties with a carrying value of the assets in excess of the estimated future undiscounted net cash flows expected to be generated by the assets primarily due to an expectation that certain underperforming communities will be disposed of resulting in a change in their intended holding periods. As a result of this change in intent, the Company compared the estimated fair value of the assets to their carrying value for these identified properties and recorded an impairment charge for the excess of carrying value over estimated fair value. The estimates of fair values of the property, plant and equipment of these communities were determined based on valuations provided by third-party pricing services and are classified within Level 3 of the valuation hierarchy. The Company recorded property, plant and equipment and leasehold intangibles non-cash impairment charges in its operating results of $ 62.7 million and $ 65.1 million for the three and nine months ended September 30, 2025, respectively. 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 September 30, 2025 and December 31, 2024, respectively. Fair value of the long-term debt is approximately $ 4.3 billion and $ 3.8 billion as of September 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. 9 4. Revenue Resident fee revenue by payor source is as follows. Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Private pay 94.0 % 93.8 % 94.0 % 93.9 % Government reimbursement 4.8 % 4.9 % 4.8 % 4.7 % Other third-party payor programs 1.2 % 1.3 % 1.2 % 1.4 % Refer to Note 13 for disaggregation of revenue by reportable segment. 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 $ 49.0 million and $ 53.8 million, including $ 24.1 million and $ 29.4 million of monthly resident fees billed and received in advance, as of September 30, 2025 and December 31, 2024, respectively. For the nine months ended September 30, 2025 and 2024, the Company recognized $ 52.8 million and $ 47.0 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 September 30, 2025 and December 31, 2024, net property, plant and equipment and leasehold intangibles consisted of the following. (in thousands) September 30, 2025 December 31, 2024 Land $ 550,589 $ 532,719 Buildings and improvements 5,829,815 5,667,855 Furniture and equipment 1,238,870 1,182,026 Resident in-place lease intangibles 268,182 281,041 Construction in progress 48,354 32,965 Assets under financing leases and leasehold improvements 849,260 1,245,791 Property, plant and equipment and leasehold intangibles 8,785,070 8,942,397 Accumulated depreciation and amortization ( 4,461,501 ) ( 4,347,996 ) Property, plant and equipment and leasehold intangibles, net $ 4,323,569 $ 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 $ 94.8 million and $ 90.1 million for the three months ended September 30, 2025 and 2024, respectively, and $ 278.6 million and $ 264.2 million for the nine months ended September 30, 2025 and 2024, respectively. The Company recognized $ 62.7 million and $ 65.1 million for the three and nine months ended September 30, 2025, respectively, of non-cash impairment charges in its operating results for its property, plant and equipment and leasehold intangibles assets primarily due to the planned disposition of certain underperforming communities resulting in a change in their intended holding periods. The Company recognized $ 0.9 million and $ 2.6 million for the three and nine months ended 10 September 30, 2024, respectively, of non-cash impairment charges in its operating results for its property, plant and equipment and leasehold intangibles assets primarily due to property damage sustained at certain communities. As of September 30, 2025, four communities in the Assisted Living and Memory Care segment and two communities in the CCRCs segment were classified as held for sale, resulting in $ 68.8 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. 6. Debt Long-term debt consists of the following. (in thousands) September 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 September 30, 2025 and December 31, 2024, respectively $ 2,698,526 $ 2,599,028 Variable rate mortgage notes payable due 2026 through 2030; weighted average interest rate of 6.71 % and 6.89 % as of September 30, 2025 and December 31, 2024, respectively 1,208,546 1,110,642 Convertible notes payable due October 2026; interest rate of 2.00 % as of both September 30, 2025 and December 31, 2024 23,297 23,297 Convertible notes payable due October 2029; interest rate of 3.50 % as of both September 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 September 30, 2025 and December 31, 2024 775 9,449 Notes payable for insurance premium financing due 2025; interest rate of 6.16 % as of September 30, 2025 5,524 — Deferred financing costs, net ( 42,738 ) ( 49,074 ) Total long-term debt 4,263,375 4,062,787 Current portion 104,018 40,779 Total long-term debt, less current portion $ 4,159,357 $ 4,022,008 As of September 30, 2025, the current portion of long-term debt within the Company's condensed consolidated financial statements includes $ 36.0 million of mortgage notes payable secured by assets held for sale. As of September 30, 2025, the long-term debt, less current portion within the Company's condensed consolidated balance sheet includes $ 98.8 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 September 30, 2025, 88.1 %, or $ 3.8 billion, of the Company's total debt obligations represented non-recourse property-level mortgage financings. As of September 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 September 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. 11 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 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 September 30, 2025, the Company is in compliance with the financial covenants of its debt agreements. 7. Leases As of September 30, 2025, the Company operated 221 communities under long-term leases ( 212 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 September 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 nine months ended September 30, 2025 and 2024. 12 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 September 30, Nine Months Ended September 30, Operating Leases (in thousands) 2025 2024 2025 2024 Facility operating expense $ 1,971 $ 1,999 $ 6,105 $ 6,095 Facility lease expense 51,993 51,937 157,520 154,397 Operating lease expense 53,964 53,936 163,625 160,492 Operating lease expense adjustment (1) 4,685 12,489 13,384 39,061 Changes in operating lease assets and liabilities for lessor capital expenditure reimbursements ( 8,706 ) ( 6,432 ) ( 20,038 ) ( 7,732 ) Operating net cash outflows from operating leases $ 49,943 $ 59,993 $ 156,971 $ 191,821 (1) Represents the difference between the amount of cash operating lease payments and the amount of operating lease expense. Three Months Ended September 30, Nine Months Ended September 30, Financing Leases (in thousands) 2025 2024 2025 2024 Depreciation and amortization $ 715 $ 2,651 $ 3,949 $ 8,421 Interest expense: financing lease obligations 1,764 5,062 9,114 15,233 Financing lease expense $ 2,479 $ 7,713 $ 13,063 $ 23,654 Operating cash outflows from financing leases $ 1,764 $ 5,062 $ 9,114 $ 15,233 Financing cash outflows from financing leases 304 273 890 800 Changes in financing lease assets and liabilities for lessor capital expenditure reimbursement ( 35 ) — ( 40 ) — Total net cash outflows from financing leases $ 2,033 $ 5,335 $ 9,964 $ 16,033 The aggregate amounts of future minimum lease payments (without giving effect to the 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 September 30, 2025 are as follows (in millions). Year Ending December 31, Operating Leases Financing Leases 2025 (three months) $ 57.1 $ 1.8 2026 183.5 7.2 2027 186.4 6.4 2028 183.9 6.3 2029 186.4 6.3 Thereafter 1,096.1 15.6 Total lease payments 1,893.4 43.6 Imputed interest and variable lease payments ( 685.2 ) ( 38.4 ) Non-cash gain on future sale of property — 20.7 Total lease obligations $ 1,208.2 $ 25.9 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 13 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. 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 recorded $ 7.0 million in litigation expense for the three months ended December 31, 2024, representing its estimate of the Company’s ultimate cost to resolve such litigation, net of estimated probable insurance recoveries. The final outcome of the pending class action litigation is dependent on many factors that are difficult to predict. Accordingly the Company’s ultimate cost related to these matters may be materially different than the amount of the Company’s current estimate and accruals. The Company continues to vigorously defend against the pending putative class action cases. 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. 14 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, and on August 12, 2025, the Sixth Circuit granted the motion to dismiss the appeal as moot in light of the settlement of the Templin Action. 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 Three months ended September 30, 2025 13 $ 7.75 $ 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 September 30, 2025, the potentially dilutive common stock equivalents for the Company also included warrants and prepaid stock purchase contracts. As of September 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 September 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 nine months ended September 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 September 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 September 30, 2025, the Company had no outstanding prepaid stock purchase contracts and $ 0.8 million payable in 2025 for the senior amortizing notes component of the Units. 15 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 September 30, Nine Months Ended September 30, (in thousands) 2025 2024 2025 2024 Weighted average common shares outstanding 237,487 197,894 224,556 194,261 Weighted average minimum shares issuable under purchase contracts — 30,230 9,770 32,678 Weighted average shares outstanding - basic 237,487 228,124 234,326 226,939 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 September 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 — 12.6 Restricted stock and restricted stock units 4.1 6.4 Incremental shares issuable under purchase contracts — 5.2 Total 63.0 62.5 11. Income Taxes The difference between the Company's effective tax rate for the three and nine months ended September 30, 2025 and 2024 was primarily due to an increase in the benefit recorded on operational losses during the three and nine months ended September 30, 2025. The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 27.8 million for the three months ended September 30, 2025, which was partially offset by an increase to the valuation allowance of $ 27.5 million. The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 52.7 million for the nine months ended September 30, 2025, which was partially offset by an increase to the valuation allowance of $ 50.5 million. The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 12.2 million for the three months ended September 30, 2024, which was offset by an increase to the valuation allowance of $ 12.5 million. The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 28.9 million for the nine months ended September 30, 2024, which was partially offset by an increase to the valuation allowance of $ 28.8 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 September 30, 2025 and December 31, 2024 was $ 572.0 million and $ 521.5 million, respectively. The increase in the valuation allowance for the nine months ended September 30, 2025 and 2024 is the result of current operating losses during the nine months ended September 30, 2025 and 2024 and by the anticipated reversal of future tax liabilities offset by future tax deductions. 16 The Company recorded interest charges related to its tax contingency reserve for cash tax positions for the three and nine months ended September 30, 2025 and 2024 which are included in income tax expense or benefit for the period. As of September 30, 2025, tax returns for years 2020 through 2024 are subject to future examination by tax authorities. In addition, the net operating losses from prior years are subject to adjustment under examination. 12. Supplemental Disclosure of Cash Flow Information Nine Months Ended September 30, (in thousands) 2025 2024 Supplemental Disclosure of Cash Flow Information: Interest paid $ 173,696 $ 178,106 Income taxes paid, net of (refunds) $ 1,415 $ 1,212 Capital expenditures, net of related payables: Capital expenditures - non-development, net $ 128,382 $ 144,634 Capital expenditures - development, net 13 624 Capital expenditures - non-development - reimbursable from lessor 20,078 8,014 Trade accounts payable ( 10,601 ) ( 2,334 ) Net cash paid $ 137,872 $ 150,938 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 $ ( 195 ) $ ( 362 ) Property, plant and equipment and leasehold intangibles, net ( 7,756 ) ( 6,291 ) Other liabilities — 559 Non-operating loss (gain) on sale of assets, net — ( 923 ) Loss (gain) on sale of communities, net ( 182 ) — Net cash received $ ( 8,133 ) $ ( 7,017 ) Supplemental Schedule of Non-cash Operating, Investing, and Financing Activities: Non-cash lease transactions, net: Prepaid expenses and other assets, net $ ( 871 ) $ — Property, plant and equipment and leasehold intangibles, net ( 171 ) 427,444 Operating lease right-of-use assets 1,925 170,867 Financing lease obligations ( 57 ) ( 452,897 ) Operating lease obligations ( 306 ) ( 145,414 ) Accrued expenses ( 5,000 ) — Loss (gain) on facility operating lease termination, net 4,480 — Net $ — $ — 17 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) September 30, 2025 December 31, 2024 Reconciliation of cash, cash equivalents, and restricted cash: Cash and cash equivalents $ 253,448 $ 308,925 Restricted cash - current 41,815 39,871 Restricted cash - non-current 36,064 31,044 Total cash, cash equivalents, and restricted cash $ 331,327 $ 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 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 September 30, Nine Months Ended September 30, (in thousands) 2025 2024 2025 2024 Revenue: (1) Independent Living $ 156,996 $ 150,380 $ 472,248 $ 448,870 Assisted Living and Memory Care 531,941 510,084 1,596,638 1,528,147 CCRCs 86,203 83,265 259,322 250,662 All Other 38,025 40,438 111,765 116,860 Total revenue $ 813,165 $ 784,167 $ 2,439,973 $ 2,344,539 Community labor expenses: Independent Living $ 60,261 $ 57,706 $ 178,659 $ 171,473 Assisted Living and Memory Care 260,274 249,091 772,218 740,764 CCRCs 46,913 45,639 139,437 137,222 Other facility operating expenses: (2) Independent Living 45,232 43,927 134,256 129,673 Assisted Living and Memory Care 130,982 129,225 391,475 382,002 CCRCs 23,323 22,694 70,244 67,205 Total facility operating expenses $ 566,985 $ 548,282 $ 1,686,289 $ 1,628,339 Segment operating income: (3) Independent Living $ 51,503 $ 48,747 $ 159,333 $ 147,724 Assisted Living and Memory Care 140,685 131,768 432,945 405,381 CCRCs 15,967 14,932 49,641 46,235 All Other 2,698 2,676 7,941 7,910 Total segment operating income 210,853 198,123 649,860 607,250 General and administrative expense (including non-cash stock-based compensation expense) 50,866 44,929 153,713 137,325 Facility operating lease expense: Independent Living 9,649 9,815 29,072 28,592 Assisted Living and Memory Care 38,827 38,543 117,834 114,238 CCRCs 3,227 3,369 9,748 9,584 Corporate and All Other 290 210 866 1,983 Depreciation and amortization: Independent Living 28,097 23,526 80,427 68,430 Assisted Living and Memory Care 53,004 51,110 157,500 150,089 CCRCs 9,147 8,843 26,710 26,569 Corporate and All Other 4,544 6,585 13,984 19,131 Asset impairment: Independent Living 14,624 233 14,624 233 Assisted Living and Memory Care 47,883 701 49,647 2,409 CCRCs 189 — 789 — Loss (gain) on sale of communities, net ( 139 ) — ( 182 ) — Loss (gain) on facility operating lease termination, net 4,480 — 4,480 — Income (loss) from operations $ ( 53,835 ) $ 10,259 $ ( 9,352 ) $ 48,667 19 Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2025 2024 2025 2024 Interest expense: Independent Living $ 15,750 $ 16,301 $ 46,952 $ 48,666 Assisted Living and Memory Care 37,438 36,617 112,290 108,995 CCRCs 5,056 5,997 15,425 17,756 Corporate and All Other 5,330 7,401 17,019 10,153 Total interest expense $ 63,574 $ 66,316 $ 191,686 $ 185,570 Capital expenditures: Independent Living $ 10,599 $ 10,853 $ 33,441 $ 35,824 Assisted Living and Memory Care 28,547 29,158 87,207 93,398 CCRCs 3,690 4,402 11,995 13,750 Corporate and All Other 4,347 4,210 15,830 10,300 Total capital expenditures $ 47,183 $ 48,623 $ 148,473 $ 153,272 As of (in thousands) September 30, 2025 December 31, 2024 Assets: Independent Living (4) $ 1,165,714 $ 1,252,736 Assisted Living and Memory Care 3,810,548 3,983,311 CCRCs 631,390 640,720 Corporate and All Other 405,056 458,795 Total assets $ 6,012,708 $ 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 September 30, 2025 and December 31, 2024. 20