Brookdale Senior Living Inc (BKD) 2021 Q1 法說會逐字稿

Good morning, ladies and gentlemen. My name is Dexter, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Brookdale Senior Living Third Quarter Earnings Call. (Operator Instructions) As a reminder, this conference will be recorded for replay purposes.

I would now like to turn the call over to Ms. Kathy MacDonald, Investor Relations. Please go ahead.

Thank you, and good morning. I'd like to welcome you to the first quarter 2021 earnings call for Brookdale Senior Living. Joining us today are Cindy Baier, our President and Chief Executive Officer; and Steve Swain, our Executive Vice President and Chief Financial Officer.

All statements today, which are not historical facts, may be deemed to be forward-looking statements within the meaning of the federal securities laws. These statements are made as of today's date, and we expressly disclaim any obligation to update these statements in the future. Actual results and performance may differ materially from forward-looking statements. Certain of the factors that could cause actual results to differ are detailed in the earnings release we issued yesterday as well as in the reports we filed with the SEC from time to time, including the risk factors contained in our annual report on Form 10-K and quarterly reports on Form 10-Q. I direct you to the release for the full safe harbor statement.

Also, please note that during this call, we will present non-GAAP financial measures. For reconciliations of each non-GAAP measure from the most comparable GAAP measure, I direct you to the release and supplemental information, which may be found at brookdale.com/investor and was furnished on an 8-K yesterday.

Now I will turn the call over to Cindy.

Thank you, Kathy. Good morning to all of our shareholders, analysts and other participants. Welcome to our first quarter 2021 earnings call. I am pleased that occupancy began to grow by the end of the first quarter and continued in April. For the last year, we have been in the toughest battle in the company's history. We have been fighting for the health and well-being of our residents, patients and associates. While the battle is not over, we have created and implemented highly effective tools to help us reduce COVID-19 cases, including hosting thousands of vaccination clinics in our communities, so our residents, patients and associates could receive the life-saving COVID-19 vaccines.

I want to say thank you to our 42,000 associates for their extraordinary leadership throughout the pandemic. Together, our frontline, regional and corporate associates stepped up and rapidly executed a series of carefully considered actions to do everything we could to support those who live in or served by and work within our communities and agencies. I'm especially grateful to our associates, who recently led through the historic ice storms in Texas. I'm so proud of everything you have accomplished. I would also like to thank our residents, patients and their families for their partnership, trust and support during this unprecedented year, the genuine affection for our associates and the core attitude that you express means a great deal to us. We are also beyond grateful for the scientists, who created the vaccines, the people that produce them, the government agencies who prioritize shots for our community residents and associates as well as CVS Health, public health departments and other pharmacy partners, who helped administer these life-saving vaccines. With more Americans vaccinated every day, we're hopeful the end of the pandemic is within sight, and I am proud of Brookdale's unique and vital role during this crisis.

Let's review our journey. Just over a year ago, we closed all of our communities to nonessential guests to help protect against the novel coronavirus that was ravaging the country and the world. Today, I'm thrilled that all of our communities have reopened to loved ones. We have resumed many of our residents favorite group activities and social events. You can feel the renewed sense of hope and vitality in our communities. We believe that the COVID-19 vaccines are critically important in changing our business trends. Early on, we realized the importance of vaccines, and we took a leadership role in successfully advocating for priority vaccine access for assisted living residents and associates and work closely with public and private officials to improve the vaccine rollout. I am incredibly proud of Brookdale's herculean effort to schedule the clinics and educate individuals within our communities at lightening fast speeds. Through unwavering perseverance, in less than 4 months, we hosted at least 3 clinics in every one of our communities and over 125,000 COVID-19 vaccine doses were administered to our residents and associates. With 93% of our residents benefiting from the protection of these life-saving vaccines, we have made a significant positive impact in helping our nation's seniors reduce their chances of contracting COVID-19. I believe our relentless focus on making vaccines available as quickly as possible saved many lives. The benefit of the vaccine clinics is already reflected in the 97% decline of resident COVID-19 cases in our communities since the peak in mid-December. With the high vaccination rate, we believe that we have broken the link with COVID-19 case trends in the metropolitan areas surrounding our communities. Our 695 communities across the country combined has an incredibly small number of current cases. We are pleased with these results. Yet, we remain diligent with our science-based approach to help protect our communities through PPE use, cleaning protocols and other best practices. As always, the health and well-being of our residents and associates is our top priority.

Let me turn to our financial highlights for the first quarter. We continue to deliver sequential move-in improvement every month since November. Move-in increased 29% from the fourth quarter to the first quarter. This is significant progress, particularly in light of the fact that the first quarter started with the pandemic's third wave ravaging the nation. Our sales force transformation is delivering results. The team is driving positive momentum with leads and visits increasing sequentially. I'm proud our sales associates are attracting many seniors to Brookdale so that we could help more people navigate the challenges of aging.

In March, net move-ins and move-outs, also known as MIMO, turned positive. What is especially exciting about March is that the net MIMO was positive in each of our 3 senior living segments. This is the first positive net MIMO since before the pandemic began. I am delighted that we concluded March with sequential occupancy growth, and we accomplished this while maintaining rate discipline. We continue to focus on driving occupancy improvement and our profitable growth strategy.

Now turning to an update on government grants. To date, providers have been able to request funding for COVID-19 expenses and lost revenue for the first and second quarters of 2020. The Provider Relief Fund portal has not yet opened to submit third and fourth quarter 2020 requests. When the portal opens, we are prepared to file our requests as soon as possible. We are grateful that the bipartisan Senate letter to HHS signed by a full quarter of the Senate, requested a portion of the remaining Provider Relief Fund to be dedicated to senior living. In addition, 59 representatives signed the companion House letter. As the largest senior living operator, we will continue to be an advocate for the senior living industry, reinforcing the vital role our industry plays in the health care continuum and its critical role to help protect a vulnerable population.

Before I turn the call over to Steve, I'd like to address our Health Care Services transaction expectations and our senior living outlook for recovery. Starting with our Health Care Services. The transaction to sell a majority stake of Brookdale Health Care Services to HCA Healthcare continues to be on track for a midyear closing. Our teams are working well together on the transition plan, and we remain excited about the benefits of this transaction for our residents and patients. When the transaction closes, we expect to receive approximately $300 million in net cash proceeds, which will strengthen Brookdale's liquidity position. For our senior living business, we are seeing the first green shoots of growth. Demand for our communities is returning and gaining momentum. Independent market research showed unaided awareness for Brookdale is 2.5x higher than that of a next identified competitor. Our sales force transformation is taking hold as seen in our sequential move-in growth every month since November. With our recent occupancy growth and net MIMO result, we believe that we are at a positive inflection point. On a sequential basis, we expect growth in the second quarter and stronger growth in the third quarter. While we can't tell you the exact timing of the recovery, based on our recent experience and with the dramatically lower construction starts and the accelerating demographic tailwind, I am confident that demand will continue to improve. I am very optimistic about our future. Our business, at its core, is providing high-quality needs-based services for a rapidly growing senior population. We enable seniors to spend more time doing the things that give their life meaning and provide joy by helping them manage the challenges of aging. We will continue to make the best of our leadership position, especially with our clinical and operational expertise.

I'll now turn the call over to Steve.

Thanks, Cindy. There are 3 takeaways related to first quarter results. Occupancy inflected positive in March and the positive growth continued in April, we maintained a great discipline with our pricing strategy, and we continue to face a challenging labor environment. However, as occupancy grows, margins will improve based on operating leverage.

Let me provide context for the 3 highlights, starting with occupancy. Looking back to January of this year, the country, including our industry, felt the pressure of the third wave resurgence. Even so, we are pleased with the strengthening move-ins during the first quarter and into April. With the benefit of our communities completing 100% of first vaccine clinics in February, our occupancy decline rapidly moderated. In March, net move-ins and move-outs, or net MIMO, turned positive for the first time since the beginning of the pandemic, and by March month end, occupancy had turned positive on a sequential basis. While COVID-19-related occupancy losses that occurred over the past year will have a negative impact on year-over-year comparisons, the positive net MIMO in March was an important milestone.

Turning to rate or RevPOR. The first quarter was 2.9% higher year-over-year and 3.3% higher on a sequential same community basis. For most of our communities, our annual price increase took effect at the beginning of the year, the rate increases will help mitigate higher labor costs and lower occupancy. While market conditions remain dynamic, we have balanced rate discipline with targeted discounting to respond to the competitive environment in specific markets. The third key highlight is OpEx. On a same community basis, the first quarter senior housing operating expense improved 1% year-over-year. The primary driver of the favorability was from variable costs such as supplies and food and was linked to lower occupancy levels that occurred as we progressed through 2020. The variable cost favorability more than offset higher wage rates resulting from the difficult labor environment and incremental work and staffing related to the pandemic.

Let me briefly discuss our Health Care Services segment results. The revenue decrease was mainly impacted by the pandemic with fewer services within our communities due to lower occupancy, along with the impact of the severe winter storm in Texas. To mitigate a significant portion of the revenue loss, the team continued their strong cost controls, matching their operating expenses to the current business and payment model. For senior housing and Health Care Services combined, in the first quarter of this year, we recognized $11 million of CARES Act-related income. $9 million was for the employee retention credit associated with wages paid through the end of September 2020, along with approximately $2 million related to government grants. As Cindy mentioned, we look for HHS to provide updates on the use of the remaining Provider Relief Fund and the opportunity to submit requests to mitigate second half 2020 COVID-related expenses and lost revenue.

Turning to G&A. Over the past few years, we took actions to reduce our G&A cost to match our smaller community footprint. The last significant transaction was related to the Healthpeak unconsolidated CCRC venture completed in the first quarter 2020. This transaction delivered the majority of our year-over-year G&A reduction as well as tighter controls and G&A costs.

Adjusted EBITDA for the first quarter 2021 was $35 million compared to $185 million for the prior year quarter, of which $100 million was from the onetime management termination fee related to the Healthpeak transaction I just mentioned. The other major driver of lower adjusted EBITDA is lower revenue due to the pandemic. Adjusted free cash flow was $56 million lower in the first quarter compared to the prior year period. Two items helped to mitigate the impact of lower EBITDA. The working capital change was a benefit of $49 million. This favorability was mainly due to lower accounts payable payments and timing of payroll. Nondevelopment CapEx was $33 million lower than the prior year due to timing of elected projects.

Turning to liquidity. As of March 31, total liquidity was $439 million compared to $575 million at year-end. The $137 million change was primarily from $67 million of infrequent items, including pay down of debt and letters of credit and our annual insurance funding, $51 million of negative adjusted free cash flow and $19 million of ongoing debt principal payments. As I described last quarter, the expected sale of our Health Care Services segment will provide approximately $300 million of liquidity and will be reported as net cash provided by investing activities.

To wrap up, let me share high-level comments about the second quarter 2021. With our recent occupancy growth, we believe we are at a positive inflection point. On a sequential basis, we expect growth in the second quarter and stronger growth in the third quarter. In the second quarter, we expect a sizable step down in COVID-related expenses due to the low number of active cases in our communities. We anticipate CapEx projects will accelerate in the second quarter now that our communities are open, and we expect to see continued move-in growth.

Annual nondevelopment CapEx investment remains at approximately $140 million for 2021. For working capital in 2020, we benefited from 2 CARES Act programs that require repayment. We received accelerated medicare payments, and we elected to defer payment of the employer portion of the social security payroll tax. The program balances related to the Health Care Services segment will be deducted from the sale proceeds. As of quarter end, these amounts were $84 million. The remaining senior housing program balances of $76 million will be paid half in 2021 and half in 2022. For Health Care Services, we will continue reporting results as a segment until the transaction closes, which we expect to occur midyear, subject to final regulatory approvals. Upon the closing of the transaction, the net proceeds of approximately $300 million will strengthen our liquidity position. We are encouraged by several leading business indicators. Occupancy has inflected to positive growth. We maintained rate discipline through the toughest part of the pandemic and expect our pricing strategy will continue to provide benefits in the future. Construction has decidedly slowed. For instance, according to NIC, assisted living units under construction is at a 6-year low. When looking within 20 minutes of Brookdale's owned and leased portfolio, construction starts have dropped 80% from the peak. The current low construction starts will provide a tailwind for several years. The upcoming baby boomer opportunity is strong with nearly 1 million potential new residents starting within a year. And we are seeing increasing needs-based demand from higher acuity care, where 75% of residents are diagnosed with at least 2 chronic diseases.

And now I will turn the call back over to Cindy.

I am incredibly proud of our associates and cannot express the depth of my admiration for their tremendous dedication. They have focused on what matters most, enriching the lives of those we serve, our residents, patients and their families. We are coming through the pandemic with grit and determination, and it puts a smile on all of our faces to have begun a new year that promises a return to enrichment and growth in our communities. Thank you.

Dexter, we are now ready for opening the line for questions.

Operator Instructions) First question comes from the line of Steven Valiquette from Barclays.

Congrats on these results. A quick question for me. Just as we think about the occupancy recovery over the remainder of 2021, can you talk about the relationship between the occupancy gains and the NOI margin? Should we assume the same relationship on the way up this year that we saw on the way down between those 2 metrics last year in 2020? Or are there some other different dynamics this year either on pricing or labor expense trend that might alter the correlation between those 2?

Steven that's an insightful question. Let me start, and then Steve can jump in. First of all, we're very grateful to see the 100 basis points of occupancy growth from the end of February through April. What we know to be true is we are currently at safety staffing levels. And so we'll be able to build occupancy without having the same relationship to labor that we've had in historical years. So initially, our revenue gain will drive more dollars of adjusted EBITDA and cash flow, at least until we get to a higher occupancy level. Steve can talk to you a little bit about some of the trends that we expect with labor costs because it is, as we said in the call, a very dynamic and tight labor market.

You bet. Steve, as Cindy mentioned, due to maintaining the base level staffing that we saw earlier in the pandemic and really throughout, our labor became less variable at lower occupancy. However, as we increase occupancy levels throughout the rest of 2021, we do expect improved operating leverage. So as we improve this operating leverage, we expect NOI margins to stabilize in the second quarter and then expand through the second half of 2021.

Steve, did you have any other follow-up question? Or did that answer the multiple items you asked?

Yes, that was helpful.

Your next question comes from the line of Joanna Gajuk from Bank of America.

So yes, actually on that topic, labor topic, really hearing from other health care providers about the type of market. So can you just flesh it out for us? How much was your contract labor cost this quarter? How does it compare to Q4? Kind of what do you expect going forward? And when do you think this number will come down to your point, like, at least for some time, you might not really need to hire more staff, but can you kind of talk about whether there's openings, I guess, and as you try to replace that [alerts] as the contract labor with employees kind of what you see in the market in terms of ability to hire people?

Yes. And I will say that the use of contract labor fluctuated during the quarter. If you think about what was happening in our communities, at the beginning of January, we were at the top of the third wave of the pandemic. And so we had extra labor for special resident care area. And then if you think about just the massive amount of work that goes into hosting thousands of vaccination clinics, we needed a lot of labor that we normally wouldn't have had in our communities. So the good news is that with the 97% reduction in positive resident cases, we will need less labor to take care of COVID-positive residents. Also, the vaccination clinics are behind us now. And so it's really just a matter of keeping our incoming residents vaccinated. So we'll see less demand for some of that special labor that we saw as a result of COVID-19. But it is fair to say that it is harder to hire workers today than it has been in the last year. And we're seeing a number of postings, where applicants won't show up for interviews, or they won't return calls. And so we really have to put our best foot forward to keep our community staff with appropriate mission-driven people. But when we have openings, we have to fill our shifts. And so Steve can now talk a little bit about what he sees from a financial perspective as the year progresses.

You bet. Joanna, so when you look at the labor expense line, you are -- I break it into 2 pieces, rate and volume. As Cindy described a little bit about the rate. So wage rate, use of overtime, contract labor, premium pay, all of those go into what I consider the rate. And generally speaking, when you add it all up, we are seeing similar pressure that the industry sees. And as Cindy mentioned, kind of across the country, the same rate pressure in that same percentage headwind. If you look at the volume variables, such as work activity as a function of occupancy. Like I mentioned, we had to maintain a base level staffing during the pandemic, even as occupancy went -- decreased. So again, as we increase occupancy in the second half of 2021, we should see improved operating leverage. The last piece is, in the second quarter, we expect a sizable 50% step down in COVID-related expenses, and that's due to fewer cases driving less work activity, which is another volume-related metric.

That's a great color. And if I may follow-up on the commentary. Just to clarify comments about -- I think it was about occupancy, wasn't sure that you expect growth, I guess, in Q2 and a stronger growth in Q3. So I assume that sequential increases in occupancy you're talking about, correct?

That's our plan. Yes. Absolutely.

Okay. Because the way I was thinking about it, right? So obviously, there's pent-up demand, just people sitting on the sidelines and waiting to be able to move-in. So I guess that's how you're thinking about it? There's kind of things started to open up? And that's why April you saw 50 bps improvement? And then would you expect this kind of, maybe, improving on the monthly basis. So then when you have, I guess, Q3 full kind of 3 quarters of this improvement, that's why you're saying like a stronger growth rate Q3 from Q2. That's how you're kind of get into that.

Yes. The way that I think about it, Joanna, is first, there's tremendous need for our services. We are a need-driven business because we have a higher concentration of assisted living and memory care than other operators in the business. The second thing that's important is only 11% of senior choose senior living. So there's a pretty small penetration in the overall demand for the services. Third, there were really 2 reasons why people didn't choose to move during the pandemic. The first was the fear of contracting COVID-19, and so people were sheltering in place in their homes, keeping their social interactions as small as possible, the vaccination is a game changer for that, particularly among the age that we serve, most seniors have been vaccinated at this point, much different than sort of younger workforce. The second reason that people may have chosen not to move is they were concerned about not being able to see their family and friends. And so think about moving into a new setting and not knowing when you'll be able to see your daughter or hug your grandchildren, that was something that many people just chose not to make that decision. Today, 100% of our communities are open. So residents can be confident that they'll get to see family and friends, and that is very good. I think also, if you think about what's happening in the broader market in the U.S., if people are trying to go back to work, and so returning to the offices, it looks like about 80% of workers are now back in their offices or workplace. And so if that continues to work, there will be fewer people at home to take care of mom or dad. So for all of those reasons, we see demand continuing to strengthen. And I can't tell you exactly what the recovery will look like. I am optimistic, though, that there are a lot of people who need our help. And it is safer now than it has been in the past to venture out of your home and fewer caregivers. So all of that should bode for a nice recovery. It's also important to note that because our occupancy is lower, we have a smaller headwind from move-out, and we think that reduction in headwind is about 70 basis points. There are many reasons why I'm just so excited about our future.

We have a question from Brian Tanquilut with Jeffries.

Congratulations on good quarter, obviously. Cindy, I guess my question for you. I remember, we used to talk about your strategy with Brookdale Health Services, and how having that offering was part of the pitch for Brookdale, right? So as you sell it to HCA, I guess 2 questions, number one, how does that strategy change? Or how do you check that box as you pitch it to potential residents? And then the second part of my question is, from an expense perspective, should we expect a corresponding drop-off in G&A at some point, kind of corporate level allocation related to BHS.

Yes. Let me start with the strategic question. So the most important thing is that our residents have access to high-quality services. And we originally started offering home health and hospice at the request of our residents. As you know, we will retain a 20% interest in the BHS business once we sell 80% of the business to HCA Healthcare. But what has really changed over the last several years is the integration of health care and the ability to offer our residents a better integrated health care experience through this partnership with HCA. And so it's really exciting to us that our residents will still have a high-quality health care provided by BHS, home health and hospice. But by being part of the HCA Healthcare network, they'll have improved access to physicians, hospitals, lab services that should make their experience even better than it is today. I think we learned a lot about tele health during COVID-19. I think we've learned a lot over the last several years about having doctors and nurse practitioners around in our communities. And so being able to have this strategic relationship with such a high-quality health care provider is just so encouraging for our business. Now if you think about the G&A question, part of the back office of BHS is shown within our G&A statistics. And so of course, those people will go with the BHS business to HCA. And we've always been very thoughtful about making sure that we manage our G&A to match our business, and we'll continue to do that.

That does make a lot of sense. And then I guess my second question for Steve, as I think about the free cash flow number for the quarter, obviously, a little pressure there. But as I think about laying out the improvement expectation for the rest of the business, how should we be thinking about the cash flow progression? And then I guess the flip side of that, just on CapEx, I know you said a little bit of acceleration, but longer term, how are you thinking about potentially ramping up CapEx to drive growth in your businesses?

Brian, so to think about cash flow and kind of the outlook for the rest of the year, occupancy and RevPAR growth is key. And we believe occupancy inflected, as both Cindy and I mentioned, in March. That was a huge positive first step of the leading indicator. So on a sequential basis, certainly, we expect growth, as we discussed with Joanna, in the second quarter and even stronger growth in the third quarter for the reasons Cindy mentioned and seasonality. As far as the RevPOR goes, we expect that to be stable. So as -- and we'll keep you updated throughout the second quarter on occupancy. So that's 1 piece. Cash was also use by COVID expense, and we expect to see a 50% step down in COVID-related expense in the second quarter due to the lower number of cases, as I mentioned, and expect another sizable step down in the third quarter. And then from one of the first calls -- first questions, we expect NOI margins to stabilize in the second quarter and expand in the second half. A little more broadly, we continue to pursue government funding, as Cindy and I both mentioned in the -- in our prepared remarks, the grants that we've received today had only cover the first half of 2020. So we're hopeful for incremental funding in -- to cover some of the costs in the second half -- from the second half of 2020 and 2021. The -- and the CapEx piece, we had -- we're -- if you look at the CapEx per unit, when you add in the amount of landlord reimbursements, we're at some of the kind of the historical levels. We lowered some of our CapEx because we had fewer move-ins over the past year. CapEx is certainly driven by move-ins as we turn units. We will, of course, keep an eye on CapEx as we go through the rest of the year, but we still have $140 million as guidance for 2021. Really -- to sum it up, throughout the pandemic, we have taken proactive steps to strengthen our financial position. Cash flow and liquidity are a priority, and we'll continue to take priority steps in the future.

Your next (technical difficulty).

This is actually Marco on for Josh. During the quarter, it looks like you generated about $25 million in adjusted EBITDA. If you exclude the benefit from CARES Act grants, but there was also $27 million COVID expenses. So if we were to think about a quarterly run rate of roughly $52 million excluding those items, how do you think about EBITDA growing off that base through the balance of the year?

Well, the biggest driver in that is the timing of the occupancy recovery, and we're very excited about the fact that we had 100 basis points of occupancy growth from the end of February to the end of April. We see positive and encouraging signs about the level of demand that is in the market. And our expectation is that we will win the recovery. So that's the biggest driver. Steve, what else do you want to add?

That's really it, Marco. The -- to drive EBITDA, just use the pieces that I stepped Brian through. During the pandemic, there were a lot of variables that we couldn't necessarily predict. So we ran multiple scenarios. Fast forward to now, there are still unknowns, and they still show a wide range of potential outcomes. Although the range is getting tighter, we're still not quite ready to issue guidance. But in the meantime, every month, we will be posting occupancy. So you'll be able to keep track of the biggest driver of financials.

Great. Very helpful. And if I could just sneak one more in. I was wondering if you could talk about some of the differences you're seeing in terms of uptake for health care services among residents who have been vaccinated?

Do you mean home health and hospice service? Is that the question? Or do you mean going out to doctors and things like that?

For the home health and hospice side.

We have a 93% vaccination rate among our residents. And so we are seeing strong resident vaccination and haven't really taken the time to look for whether there's a difference in the home health or hospice penetration (technical difficulty) vaccinated.

And your last question is from Frank Morgan with RBC Capital Markets.

I hopped on late, so I apologize if this has already been asked. But I'm curious, the fact that you had such an aggressive and proactive vaccination program in place and got your facilities completely vaccinated. Do you think that gave you sort of an early jump on local competition where -- as move-in started occurring, do you think that in any way influenced their decision to consider Brookdale first over other facilities? I'm just curious, was that an advantage? And then when I think about going forward and sustaining the occupancy growth from here, what is the pricing environment like that you see from these competitors that hopefully you got to jump on with vaccination rates? And then I'll ask another one.

Yes, absolutely. Our aggressive vaccine campaign was a huge tailwind for us. We know that we had residents moved in to get vaccinated with us. We know that health care providers were reluctant to refer to senior living until there was vaccination. So we think that the efforts that we did to get senior living prioritized, to be the first to receive the vaccine was important. The work that we did with CVS to make sure that our clinics were the first that were executed. Our work with the state and local health departments to remove barriers when there was a prioritization of skilled nursing over assisted living, our willingness to jump in and take every slot that was available, really, really helped us. And I think it helped us on few fronts. First, it helped us on getting people comfortable with moving into senior living, but more importantly, it helped us with protecting our existing residents. And so if you think about the 97% reduction in COVID-positive cases from December through now, that has just been a game changer. And we were ahead of that in the industry. We executed 2.5x faster than our industry in the first month, and so that was really important. And your second question, Frank, was?

Yes, just in terms of the rate environment, you have advantage there. And what are your competitors doing locally on rates...

The entire industry is in lease up. And we have 90% of our competitors operate 5 or fewer communities. So you can imagine that it is a lease-up environment. Everything you can imagine is happening. Now what has been successful for us historically is to maintain rate discipline, and that has been successful. That doesn't mean that we won't discount. We will discount on a selective basis, where it's necessary to help us grow occupancy, but we'll do that in a very targeted way. And I think that's been something that's been pretty successful. But I think the next several months are going to be very competitive from a pricing perspective as the industry is under pressure.

Got you. And then secondly, as you started to see this recovery, are there any particular geographic areas where you're seeing it more than others in terms of this improvement in the occupancy?

Sure, Frank. More broadly, the -- we look at rural to urban, and we are seeing a little bit more recovery in the urban-type environment as opposed to rural. Now rural didn't go down as much in occupancy, but it's being -- it's a little bit slower to recover.

And I think that our occupancy recovery is largely due to the strength of the local teams, right? So we know that when we have executive directors that have been placed for 2 or more years, they have a much better performance than their peers. And that's why we focus so much on the retention rate of our executive directors and our health and wellness directors. We also found great success with our health and wellness directors being involved with local medical professionals and talking about our success with COVID vaccination clinics as well as the health of their residents. And so that's been something that's been very strong. And then the sales transformation is also something that we think is going to help. So where you got a strong sales leader in the community that helps as well.

So I think that is the end of our questions, I want to just close by saying, if you or your family or your friends haven't yet gotten vaccinated, please give hope a shot. Thank you.

Dexter that ends our call.

Okay. This concludes today's conference call. Thank you for joining. You may now disconnect.

Thank you and have a great day. Bye.