Business Wire | Aug 6, 2020 07:01AM EDT

Five Star Senior Living Inc. Announces Second Quarter 2020 Results

Aug. 06, 2020

NEWTON, Mass.--(BUSINESS WIRE)--Aug. 06, 2020--Five Star Senior Living Inc. (Nasdaq: FVE) today announced its financial results for the quarter ended June 30, 2020.

Katherine Potter, President and Chief Executive Officer, made the following statement regarding the second quarter 2020 results:

"We are extremely proud of and encouraged by our team members' perseverance and dedication during the quarter as the safety and well-being of our residents, clients and team members remains our number one priority. We made significant adjustments to address the unique challenges presented by the COVID-19 pandemic, while still focusing on achieving our strategic initiatives. We remain committed to adapting to these challenges and maintaining an exceptional resident experience that we believe is the key driver of our financial performance. We reported net income per share of $0.10 and adjusted EBITDA of $7.1 million in the second quarter of 2020. Our rehabilitation and wellness services division, Ageility Physical Therapy Solutions, or Ageility, continues to be a key area of growth, generating $19.3 million in revenues during the quarter representing a 5.6% increase over the prior year pro forma results, and Ageility's second quarter operating margins of 21.7% compared to prior year quarter pro forma margins of 10.1%.

Our balance sheet remains strong following the completion of our restructuring transaction with DHC at the beginning of this year, with $76.1 million of cash, $7.4 million of mortgage notes and no balance outstanding on our $65.0 million revolving credit facility as of June 30, 2020. We are well positioned to navigate the COVID-19 pandemic while focusing on the key pillars of our strategy: optimizing senior living operations, growing externally through complementary service offerings like our rehabilitation and wellness services and investing in our owned and leased communities."

Overview and Results for the Quarter EndedJune 30, 2020:

* The COVID-19 pandemic has had and continues to have a significant effect on FVE and the senior living industry as a whole. FVE's highest priority continues to be maintaining the health and well-being of its residents, clients and team members. As a result, FVE experienced an increase in direct costs to prepare for, prevent the spread of and respond to the COVID-19 pandemic, through purchasing personal protective equipment, testing supplies, disposable food supplies and professional services costs, as well as infectious disease prevention cleaning and sanitation costs in addition to increased labor costs. FVE incurs these costs for its owned and leased communities, rehabilitation and wellness services division and for its corporate operations, and those costs that relate to its managed senior living communities are incurred by Diversified Healthcare Trust, or DHC. FVE experienced a decline in occupancy and average monthly senior living revenue per available unit (RevPAR) throughout the quarter at the senior living communities it operates and manages. FVE also experienced the temporary closure of Ageility clinics for in-person services. The duration and extent of the effects of the COVID-19 pandemic remain unknown and the negative trends are expected to continue throughout the third quarter of 2020.

* FVE has taken a number of actions to support its team members, residents and communities, including the following:

* providing free meals to team members;

* providing COVID-19 emergency leave to team members, including paid leave to team members if they were exposed to or tested positive for COVID-19 and offering flexible work schedules;

* offering free COVID-19 testing to team members;

* recognizing and rewarding team members with bonuses in addition to FVE's total rewards package;

* promoting access to mental health services and other benefits to support team members' mental and physical well-being;

* hosting virtual all-hands meetings to communicate FVE's policies, procedures and guidelines related to COVID-19 response and re-opening efforts and to ensure team members are supported with assistance and guidance;

* implementing new virtual group activities for residents that allow for engagement while maintaining social distancing;

* expanding effective communication channels to residents and communities;

* providing devices and connectivity options for interaction with family members, virtual programming opportunities and distance learning; and

* focusing on learning and development opportunities.

* FVE has taken a number of actions to mitigate the effects of the COVID-19 pandemic, including the following:

* restricting access to senior living communities to essential visitors and team members, and only reopening communities when it is determined safe to do so in accordance with applicable federal, state and local regulations and guidelines, and FVE internal criteria;

* temporarily closing Ageility clinics for in-person services and only easing restrictions when it is determined safe to do so and in accordance with federal, state and local regulations;

* enhancing infectious disease prevention and control policies, procedures and protocols;

* providing additional and enhanced training to team members at all levels of the organization;

* working with vendors to provide adequate supplies and personal protective equipment to senior living communities and Ageility clinics;

* deferring the payment of $8.8 million of payroll taxes as permitted by the CARES Act, of which $1.7 million will not be reimbursable from DHC; and

* effectively transitioning to virtual sales and marketing activities and thoughtfully proceeding with resident move-ins, when appropriate.

* Combined senior living revenues and management fees for communities FVE leased from DHC prior to January 1, 2020, and since that date manages on behalf of DHC, for the quarter ended June 30, 2020 decreased to $35.3 million from $267.0 million for the same period in 2019, primarily due to the conversion of the formerly leased senior living communities to managed communities as a result of the Restructuring Transactions, as described in the Selected Pro Forma Condensed Consolidated Financial Information and Other Data in the Supplemental Information of this press release. Additionally, the decline in revenues as compared to the same period of the prior year are impacted by the sales of 15 communities in the third quarter of 2019 that FVE previously leased from DHC. Senior living revenues at communities FVE leased or owned continuously since April 1, 2019 was $19.5 million, which represents a $1.3 million or 6.0% decrease from the same period in 2019, primarily due to decreases in occupancy as a result of the COVID-19 pandemic. Revenues decreased $3.5 million compared to the June 30, 2019 pro forma results, which consider the financial results as if the Restructuring Transactions had closed on January 1, 2019, and is primarily attributable a decline in occupancy and RevPAR due to the COVID-19 pandemic.

* Rehabilitation and wellness services revenues for the second quarter of 2020 increased to $19.3 million from $11.5 million for the same period in 2019, primarily due to the impact of $6.7 million of inpatient clinic revenue at communities FVE previously leased from DHC during the second quarter of 2019, which was previously eliminated in consolidation accounting prior to the Restructuring Transactions, as well as the opening of 64 net new outpatient clinics. These increases were partially offset by revenue declines resulting from the reduction of in-person visits as a result of the COVID-19 pandemic. Revenues increased $1.0 million compared to the June 30, 2019 pro forma results, which consider the financial results as if the Restructuring Transactions had closed on January 1, 2019, and is primarily attributable to opening 64 net new clinics since July 1, 2019 offset by a decline in revenue as a result of the reduction of in-person visits due to the COVID-19 pandemic.

* The U.S. Department of Health and Human Services, or HHS, through the CARES Act Provider Relief Fund, distributed funds to healthcare providers to offset lost revenue and increased healthcare related costs associated with COVID-19. FVE received general distribution payments under the CARES Act related to rehabilitation and wellness services totaling $1.7 million and recognized $1.5 million in other operating income associated with these funds.

* Net income for the second quarter of 2020 was $3.0 million, or $0.10 per diluted share, compared to net income of $5.0 million, or $0.16 per diluted share, for the June 30, 2019 pro forma results.

* Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the second quarter of 2020 was $5.0 million compared to $9.3 million for the June 30, 2019 pro forma results. Adjusted EBITDA, as described further below, was $7.1 million for the second quarter of 2020 compared to $9.8 million for the June 30, 2019 pro forma results. EBITDA and Adjusted EBITDA are non-GAAP financial measures. Reconciliations of net income determined in accordance with GAAP to EBITDA and Adjusted EBITDA for the quarters ended June 30, 2020 and 2019 are presented later in this press release.

* As of June 30, 2020, FVE had unrestricted cash and cash equivalents of $76.1 million, including $4.7 million of targeted skilled nursing facility (SNF) distribution funds under the CARES Act primarily related to SNFs that FVE previously leased from DHC during 2018 and 2019 for which FVE is evaluating its eligibility to retain those funds. In the event FVE determines it is are not eligible to retain the funds received, FVE will remit the funds to HHS by August 20, 2020. In addition, FVE had no amounts outstanding on its revolving credit facility and $7.4 million outstanding on a mortgage note.

Conference Call Information:

At 1:00 p.m. Eastern Time this afternoon, President and Chief Executive Officer, Katherine Potter, Executive Vice President, Chief Financial Officer and Treasurer, Jeffrey Leer, and Senior Vice President and Chief Operating Officer, Margaret Wigglesworth, will host a conference call to discuss FVE's second quarter 2020 results.

The conference call telephone number is (877) 329-4332. Participants calling from outside the United States and Canada should dial (412) 317-5436. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. Eastern Time on Thursday, August 13, 2020. To hear the replay, dial (412) 317-0088. The replay pass code is 10145299.

A live audio webcast of the conference call will also be available in a listen-only mode on FVE's website, www.fivestarseniorliving.com. Participants wanting to access the webcast should visit FVE's website about five minutes before the call. The archived webcast will be available for replay on FVE's website following the call for about a week. The transcription, recording and retransmission in any way of FVE'ssecond quarter2020conference callarestrictly prohibited without the prior written consent ofFVE. FVE's website is not incorporated as part of this press release.

About Five Star Senior Living Inc.:

FVE is a senior living and rehabilitation and wellness services company. As of June 30, 2020, FVE operated 265 senior living communities (30,660 living units) located in 32 states, including 241 communities (28,348 living units) that it managed and 24 communities (2,312 living units) that it owned or leased. FVE operates communities that include independent living, assisted living, continuing care retirement and skilled nursing communities. Additionally, FVE's rehabilitation and wellness services segment includes Ageility Physical Therapy SolutionsTM, or Ageility, a division of FVE, which provides rehabilitation and wellness services within FVE communities as well as to external customers. As of June 30, 2020, Ageility operated 206 outpatient rehabilitation clinics and 40 inpatient rehabilitation clinics. FVE is headquartered in Newton, Massachusetts.

Five Star Senior Living Inc.

Condensed Consolidated Statements of Operations

(amounts in thousands, except per share amounts)

(unaudited)

Three Months Ended June Six Months Ended June 30, 30,

2020 2019 2020 2019

REVENUES

Senior living $ 19,590 $ 263,008 $ 40,587 $ 529,171

Management fees 15,705 4,024 32,756 8,007

Rehabilitation and 19,268 11,488 40,652 22,260 wellness services

Total management and 54,563 278,520 113,995 559,438 operating revenues

Reimbursedcommunity-level costs 224,104 77,219 456,120 151,824 incurred on behalf ofmanaged communities

Other reimbursed 6,417 - 12,414 - expenses

Total revenues 285,084 355,739 582,529 711,262

Other operating income 1,499 - 1,499 -

Total revenues and 286,583 355,739 584,028 711,262 other operating income



OPERATING EXPENSES

Senior living wages 9,705 137,259 19,505 273,637 and benefits

Other senior living 8,331 71,301 11,573 146,967 operating expenses

Rehabilitation andwellness services 15,451 9,265 32,471 17,619 expenses

Community-level costsincurred on behalf of 224,104 77,219 456,120 151,824 managed communities

General and 23,567 20,548 46,432 47,050 administrative

Rent 1,378 33,262 2,555 87,804

Depreciation and 2,703 2,941 5,404 11,106 amortization

Loss on sale of senior - 101 - 101 living communities

Long-lived asset - 112 - 3,260 impairment

Total operating 285,239 352,008 574,060 739,368 expenses



Operating income 1,344 3,731 9,968 (28,106) (loss)



Interest, dividend and 182 415 521 571 other income

Interest and other (409) (906) (791) (1,812) expense

Unrealized gain (loss) 867 (38) (595) 328 on equity investments

Realized gain on saleof debt and equity 116 144 95 236 investments

Loss on termination of - - (22,899) - leases



Income (loss) beforeincome taxes and 2,100 3,346 (13,701) (28,783) equity in earnings ofan investee

Benefit (provision) 902 705 (506) (785) for income taxes

Equity in earnings of - 130 - 534 an investee

Net income (loss) $ 3,002 $ 4,181 $ (14,207) $ (29,034)



Weighted averageshares 31,460 5,007 31,454 5,005 outstanding-basic

Weighted averageshares 31,582 5,142 31,454 5,005 outstanding-diluted



Net income (loss) per $ 0.10 $ 0.84 $ (0.45) $ (5.80) share-basic

Net income (loss) per $ 0.10 $ 0.81 $ (0.45) $ (5.80) share-diluted

Five Star Senior Living Inc.

Reconciliation of Non-GAAP Financial Measures

(dollars in thousands)

(unaudited)

Non-GAAP financial measures are financial measures that are not determined in accordance with GAAP. FVE believes the non-GAAP financial measures presented in the table below are meaningful supplemental disclosures because they may help investors better understand changes in FVE's operating results and its ability to pay rent or service debt, make capital expenditures and expand its business. These non-GAAP financial measures may also help investors make comparisons between FVE and other companies on both a GAAP and non-GAAP basis. FVE believes that EBITDA and Adjusted EBITDA are meaningful financial measures that may help investors better understand its financial performance, including by allowing investors to compare FVE's performance between periods and to the performance of other companies. FVE management uses EBITDA and Adjusted EBITDA to evaluate FVE's financial performance and compare FVE's performance over time and to the performance of other companies. FVE calculates EBITDA and Adjusted EBITDA as shown below. These measures should not be considered as alternatives to net income (loss) or operating income (loss), as indicators of FVE's operating performance or as measures of FVE's liquidity. Also, EBITDA and Adjusted EBITDA as presented may not be comparable to similarly titled amounts calculated by other companies.

FVE believes that net income (loss) is the most directly comparable financial measure, determined according to GAAP, to FVE's presentation of EBITDA and Adjusted EBITDA. The following table presents the reconciliation of these non-GAAP financial measures to net income (loss) for each of the three and six months ended June 30, 2020 and 2019.

Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

Net income (loss) $ 3,002 $ 4,181 $ (14,207) $ (29,034)

Add (less):

Interest and other expense 409 906 791 1,812

Interest, dividend and (182) (415) (521) (571) other income

(Benefit) provision for (902) (705) 506 785 income taxes

Depreciation and 2,703 2,941 5,404 11,106 amortization

EBITDA 5,030 6,908 (8,027) (15,902)

Add (less):

Long-lived asset - 112 - 3,260 impairment

Loss on sale of senior - 101 - 101 living communities

Severance ^(1) 282 393 282 393

Litigation settlement ^(2) 2,473 - 2,473 -

Unrealized (gain) loss on (867) 38 595 (328) equity investments

Loss on termination of - - 22,899 - leases ^(3)

Transaction costs ^(4) 175 1,133 1,270 8,808

Adjusted EBITDA $ 7,093 $ 8,685 $ 19,492 $ (3,668)



(1) Costs incurred for the three months ended June 30, 2020 represent those related to a reduction in workforce.

(2) Represents costs incurred related to the settlement of a lawsuit and is included in other senior living operating expenses in our condensed consolidated statements of operations. The agreed upon settlement remains subject to a final definitive settlement agreement and to court and regulatory approvals.

(3) Represents the excess of the fair value of the Share Issuances of $97,899 compared to the consideration of $75,000 paid by DHC, as described in the Selected Pro Forma Condensed Consolidated Financial Information and Other Data in the Supplemental Information of this press release.

(4) Includes costs incurred related to the Restructuring Transactions as described in the Selected Pro Forma Condensed Consolidated Financial Information and Other Data in the Supplemental Information of this press release.

Five Star Senior Living Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share amounts)

(unaudited)

June 30, December 31,

2020 2019

ASSETS

Current assets:

Cash and cash equivalents $ 76,114 $ 31,740

Restricted cash and cash equivalents 23,858 23,995

Accounts receivable, net of allowance 9,387 34,190

Due from related person 73,466 5,533

Debt and equity investments 21,739 21,070

Prepaid expenses and other current assets 19,118 17,286

Assets held for sale - 9,554

Total current assets 223,682 143,368



Property and equipment, net 162,037 167,247

Equity investment of an investee 11 298

Restricted cash and cash equivalents 781 1,244

Restricted debt and equity investments 6,887 7,105

Right of use assets 19,459 20,855

Other long-term assets 4,254 5,676

Total assets $ 417,111 $ 345,793



LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 15,567 $ 30,440

Accrued expenses and other current liabilities 49,525 55,981

Accrued compensation and benefits 48,287 35,629

Accrued self-insurance obligations 27,755 23,791

Lease liabilities 2,977 2,872

Due to related persons 592 2,247

Mortgage note payable 375 362

Security deposits and current portion of continuing 409 434 care contracts

Liabilities held for sale - 12,544

Total current liabilities 145,487 164,300



Long-term liabilities:

Accrued self-insurance obligations 33,381 33,872

Lease liabilities 18,161 19,671

Mortgage note payable 6,980 7,171

Other long-term liabilities 8,996 798

Total long-term liabilities 67,518 61,512



Shareholders' equity:

Common stock, par value $0.01 316 52

Additional paid-in-capital 459,801 362,450

Accumulated deficit (257,697) (245,184)

Accumulated other comprehensive income 1,686 2,663

Total shareholders' equity 204,106 119,981

Total liabilities and shareholders' equity $ 417,111 $ 345,793

Five Star Senior Living Inc.

Supplemental Financial Data

(dollars in thousands)

(unaudited)

Management and Operating Revenues by Product Type

Three Months Ended June 30, 2020

Management and Senior Management Rehabilitation TotalOperating Revenues by living fees and wellness revenuesProduct Type: services

Independent andassisted living $ 19,590 $ 9,086 $ - $ 28,676 community revenues

Continuing careretirement community - 5,487 - 5,487 revenues

Skilled nursing - 1,132 - 1,132 facility revenues

Rehabilitation andwellness services - - 19,268 19,268 revenues

Total management and $ 19,590 $ 15,705 $ 19,268 $ 54,563 operating revenues



Three Months Ended June 30, 2019

Management and Senior Management Rehabilitation TotalOperating Revenues by living fees and wellness revenuesProduct Type: services

Independent andassisted living $ 127,653 $ 3,178 $ - $ 130,831 community revenues

Continuing careretirement community 97,186 846 - 98,032 revenues

Skilled nursing 38,169 - - 38,169 facility revenues

Rehabilitation andwellness services - - 11,488 11,488 revenues

Total management and $ 263,008 $ 4,024 $ 11,488 $ 278,520 operating revenues



Six Months Ended June 30, 2020

Management and Senior Management Rehabilitation TotalOperating Revenues by living fees and wellness revenuesProduct Type: services

Independent andassisted living $ 40,587 $ 18,649 $ - $ 59,236 community revenues

Continuing careretirement community - 11,824 - 11,824 revenues

Skilled nursing - 2,283 - 2,283 facility revenues

Rehabilitation andwellness services - - 40,652 40,652 revenues

Total management and $ 40,587 $ 32,756 $ 40,652 $ 113,995 operating revenues



Six Months Ended June 30, 2019

Management and Senior Management Rehabilitation TotalOperating Revenues by living fees and wellness revenuesProduct Type: services

Independent andassisted living $ 253,538 $ 6,277 $ - $ 259,815 community revenues

Continuing careretirement community 194,681 1,730 - 196,411 revenues

Skilled nursing 80,952 - - 80,952 facility revenues

Rehabilitation andwellness services - - 22,260 22,260 revenues

Total management and $ 529,171 $ 8,007 $ 22,260 $ 559,438 operating revenues

Five Star Senior Living Inc.

Supplemental Financial Data

(dollars in thousands)

(unaudited)

Comparable Management and Operating Revenues by Product Type ^(1)

Three Months Ended June 30, 2020

Management and Senior Management Rehabilitation TotalOperating Revenues by living fees and wellness revenuesProduct Type: services

Independent andassisted living $ 19,516 $ 3,932 $ - $ 23,448 community revenues

Continuing careretirement community - 1,101 - 1,101 revenues

Rehabilitation andwellness services - - 15,690 15,690 revenues

Total management and $ 19,516 $ 5,033 $ 15,690 $ 40,239 operating revenues



Three Months Ended June 30, 2019

Management and Senior Management Rehabilitation TotalOperating Revenues by living fees and wellness revenuesProduct Type: services

Independent andassisted living $ 20,766 $ 3,113 $ - $ 23,879 community revenues

Continuing careretirement community - 732 - 732 revenues

Rehabilitation andwellness services - - 11,099 11,099 revenues

Total management and $ 20,766 $ 3,845 $ 11,099 $ 35,710 operating revenues



Six Months Ended June 30, 2020

Management and Senior Management Rehabilitation TotalOperating Revenues by living fees and wellness revenuesProduct Type: services

Independent andassisted living $ 39,847 $ 7,823 $ - $ 47,670 community revenues

Continuing careretirement community - 2,342 - 2,342 revenues

Rehabilitation andwellness services - - 32,051 32,051 revenues

Total management and $ 39,847 $ 10,165 $ 32,051 $ 82,063 operating revenues



Six Months Ended June 30, 2019

Management and Senior Management Rehabilitation TotalOperating Revenues by living fees and wellness revenuesProduct Type: services

Independent andassisted living $ 41,245 $ 6,028 $ - $ 47,273 community revenues

Continuing careretirement community - 1,486 - 1,486 revenues

Rehabilitation andwellness services - - 20,895 20,895 revenues

Total management and $ 41,245 $ 7,514 $ 20,895 $ 69,654 operating revenues

(1) The tables for the three months ended June 30, 2020 and 2019 include data for senior living communities and rehabilitation and wellness services clinics that FVE has continuously owned, continuously leased or continuously managed since April 1, 2019. The tables for the six months ended June 30, 2020 and 2019 include data for senior living communities and rehabilitation and wellness services clinics that FVE has continuously owned, continuously leased or continuously managed since January 1, 2019.

Five Star Senior Living Inc.

Senior Living Segment Data

(dollars in thousands, except per unit amounts)

(unaudited)

Three Months Ended

June 30, March 31, December September June 30, 31, 30,

2020 2020 2019 2019 2019



Owned andLeased Communities

Independent andassisted living communities:

Revenues $ 19,590 $ 20,997 $ 249,726 $ 257,601 $ 263,008

Operating 20,165 17,470 220,389 250,841 244,404 expenses

Operating (575) 3,527 29,337 6,760 18,604 income

Operating (2.9) % 16.8 % 11.7 % 2.6 % 7.1 %margin

Number ofcommunities 24 24 190 190 205 (end of period)

Number ofliving units 2,312 2,312 20,948 20,948 21,912 (end of period)^(1)

Occupancy 78.3 % 81.3 % 82.9 % 82.9 % 83.0 %

RevPAR ^(2) $ 2,813 $ 2,938 $ 3,974 $ 3,943 $ 3,984



ManagedCommunities ^ (3)

Independent andassisted living communities:

Management fees $ 9,086 $ 9,563 $ 3,221 $ 3,207 $ 3,178

Community-level 174,648 184,455 81,188 81,380 81,926 revenues

Community-level 139,175 143,105 65,899 64,491 61,006 expenses

Communityoperating 35,473 41,350 15,289 16,889 20,920 income

Communityoperating 20.3 % 22.4 % 18.8 % 20.8 % 25.5 %margin

Number of ^ ^communities 191 (4) 193 (4) 69 68 68 (end of period)

Number ofliving units 18,148 ^ 18,395 ^ 8,106 7,937 7,853 (end of period) (4) (4)^(1)

Occupancy 79.1 % 82.9 % 84.0 % 85.3 % 85.9 %

RevPAR ^(2) $ 3,208 $ 3,360 $ 3,401 $ 3,448 $ 3,477



Continuing careretirement communities:

Management fees $ 5,487 $ 6,337 $ 888 $ 846 $ 846

Community-level 110,729 123,498 27,502 26,436 26,980 revenues

Community-level 99,071 103,946 24,998 25,002 24,379 expenses

Communityoperating 11,658 19,552 2,504 1,434 2,601 income

Communityoperating 10.5 % 15.8 % 9.1 % 5.4 % 9.6 %margin

Number ofcommunities 39 40 9 9 9 (end of period)

Number ofliving units 8,936 9,301 2,231 2,231 2,231 (end of period)^(1)(5)

Occupancy 79.1 % 83.4 % 83.5 % 82.8 % 83.6 %

RevPAR ^(2) $ 4,131 $ 4,426 $ 4,109 $ 3,950 $ 4,031

Skilled nursingfacilities ^ (6):

Management fees $ 1,132 $ 1,151 $ - $ - $ -

Community-level 24,554 22,956 - - - revenues

Community-level 22,009 21,854 - - - expenses

Communityoperating 2,545 1,102 - - - income

Communityoperating 10.4 % 4.8 % - % - % - %margin

Number ofcommunities 11 11 - - - (end of period)

Number ofliving units 1,264 1,264 - - - (end of period)^(1)(7)

Occupancy 70.1 % 73.3 % - % - % - %

RevPAR ^(2) $ 6,475 $ 6,054 $ - $ - $ -



Total managed communities:

Management fees $ 15,705 $ 17,051 $ 4,109 $ 4,053 $ 4,024

Community-level 309,931 330,909 108,690 107,816 108,906 revenues

Community-level 260,255 268,905 90,897 89,493 85,385 expenses

Communityoperating 49,676 62,004 17,793 18,323 23,521 income

Communityoperating 16.0 % 18.7 % 16.4 % 17.0 % 21.6 %margin

Number of ^ ^communities 241 (4) 244 (4) 78 77 77 (end of period)

Number ofliving units 28,348 ^ 28,960 ^ 10,337 10,168 10,084 (end of period) (4) (4)^(1)

Occupancy 78.7 % 82.6 % 83.9 % 84.7 % 85.4 %

RevPAR ^(2) $ 3,644 $ 3,820 $ 3,556 $ 3,559 $ 3,600



(1) Includes living units categorized as in service. As a result, the number of living units may vary from period to period for reasons other than the acquisition or disposition of senior living communities.

(2) RevPAR, or average monthly senior living revenue per available unit, is defined by FVE as resident fee revenues for the corresponding portfolio for the period divided by the average number of available units for the period, divided by the number of months in the period. Data for the period ended December 31, 2019, excludes approximately $4,200 of deferred resident fees and deposits recognized due to the Restructuring Transactions.

(3) Senior living segment data for managed communities, other than FVE's management fees, represents financial data of communities we manage for the account of DHC and does not represent financial results of FVE. Managed communities data is included to provide supplemental information regarding the operating results and financial condition of the communities from which we earn management fees.

(4) Includes one active adult community with 168 units.

(5) Includes 2,186 skilled nursing units in communities where assisted living and independent living services are the predominant services provided.

(6) FVE did not manage skilled nursing facilities prior to January 1, 2020.

(7) Includes 53 assisted living and independent living units in communities where skilled nursing services are the predominant services provided.

Five Star Senior Living Inc.

Comparable Communities Senior Living Segment Data

(dollars in thousands, except per unit amounts)

(unaudited)

Three Months Ended

June 30, March 31, December September June 30, 31, 30,

2020 2020 2019 2019 2019

Owned and Leased Communities ^(1):

Number ofcommunities (end of 24 24 24 24 24 period)

Number of livingunits (end of 2,312 2,312 2,312 2,312 2,312 period) ^(2)

Occupancy 78.3 % 81.3 % 81.4 % 81.3 % 81.3 %

RevPAR ^(3) $ 2,813 $ 2,930 $ 2,941 $ 2,954 $ 2,993



Managed Communities ^(1)(4):

Number ofcommunities (end of 75 75 75 75 75 period)

Number of livingunits (end of 9,689 9,697 9,700 9,700 9,616 period) ^(2)

Occupancy 80.1 % 83.9 % 84.5 % 85.5 % 86.1 %

RevPAR ^(3) $ 3,398 $ 3,548 $ 3,559 $ 3,561 $ 3,603



(1) Includes data for senior living communities that FVE has continuously owned, continuously leased or continuously managed since April 1, 2019.

(2) Includes living units categorized as in service. As a result, the number of living units may vary from period to period for reasons other than the acquisition or sale of senior living communities.

(3) RevPAR is defined by FVE as resident fee revenues for the corresponding portfolio for the period divided by the average number of available units for the period, divided by the number of months in the period.

(4) Senior living segment data for comparable managed communities represents financial data of communities we manage for the account of DHC and does not represent financial results of FVE. Managed communities data is included to provide supplemental information regarding the operating results and financial condition of the communities from which we earn management fees.

Five Star Senior Living Inc.

Rehabilitation and Wellness Services Segment Data

(dollars in thousands)

(unaudited)

Three Months Ended

June 30, March 31, December September June 30, 31, 30,

2020 2020 2019 2019 2019

Rehabilitationand Wellness Services:

Revenues ^(1) $ 19,268 $ 21,384 $ 13,978 $ 12,447 $ 11,488 (2)

Otheroperating 1,499 - - - - income

Operating 16,259 17,616 12,384 10,861 9,650 expenses

Operating 4,508 3,768 1,594 1,586 1,838 income^ (1)

Operating 21.7 % 17.6 % 11.4 % 12.7 % 16.0 %margin ^(1)

Number ofinpatient 40 41 41 41 45 clinics (endof period)

Number ofoutpatient 206 203 190 171 142 clinics (endof period)



(1) Includes Ageility clinics and home health operations.

(2) Prior to the effective date of the Transaction Agreement (as defined below), revenue related to inpatient clinics at communities we previously leased from DHC was eliminated in consolidation pursuant to GAAP.

Five Star Senior Living Inc.

Owned Senior Living Communities as of and for the Three Months Ended June 30,2020

(dollars in thousands)

(unaudited)

Property Senior Gross Net Year BuiltNo. Community State Type ^ Living Living Carrying Carrying Date or Most Name (1) Units Revenues Value Value Acquired Recent Renovation

Morningside 11/19/1 of Decatur Alabama AL 49 $ 337 $ 3,629 $ 2,169 2004 1999 ^(2)

2 Morningside Alabama AL 42 404 2,289 1,566 11/19/ 1997 of Auburn 2004

The Palms3 of Fort Florida IL 218 1,864 30,658 15,369 4/1/2002 1988 Myers ^(2)

Five Star4 Residences Indiana AL 121 819 18,234 12,837 9/29/ 2006 of Banta 2011 Pointe ^(3)

Five Star5 Residences Indiana AL 154 1,185 25,644 17,898 9/29/ 1998 of Fort 2011 Wayne ^(2)

Five Star6 Residences Indiana AL 88 371 9,747 5,593 6/1/2011 1999 of Clearwater

Five Star Residences7 of Indiana AL 109 577 15,531 10,704 6/1/2011 2000 Lafayette ^ (2)

Five Star Residences8 of Indiana AL 151 1,332 25,142 17,850 7/1/2011 2005 Noblesville ^(2)

The Villa9 at Missouri IL 110 646 6,865 3,246 4/1/2002 1986 Riverwood ^ (2)

Carriage10 House North AL 98 1,078 8,401 5,429 12/1/ 1997 Senior Carolina 2008 Living

Forest11 Heights North AL 111 921 13,567 8,986 12/1/ 1998 Senior Carolina 2008 Living

Fox Hollow North12 Senior Carolina AL 77 941 11,029 7,323 7/1/2000 1999 Living ^(2)

Legacy13 Heights North AL 116 1,536 12,631 8,221 12/1/ 1997 Senior Carolina 2008 Living ^(2)

Morningside North 11/19/14 at Irving Carolina AL 91 789 6,813 3,796 2004 1997 Park

Voorhees15 Senior New Jersey AL 104 1,058 10,242 6,175 7/1/2008 1999 Living ^(2)

Washington16 Township New Jersey AL 103 920 10,168 6,169 7/1/2008 1998 Senior Living ^(2)

The Devon17 Senior Pennsylvania AL 84 722 6,828 3,865 7/1/2008 1985 Living

18 The Legacy South IL 101 574 1,354 477 12/1/ 2003 of Anderson Carolina 2008

Morningside19 of Tennessee AL 54 427 3,654 1,785 11/19/ 1984 Springfield 2004 ^(2)

20 Huntington Wisconsin AL 127 774 17,461 11,415 7/15/ 1999 Place 2010

Total 2,108 $ 17,275 $ 239,887 $ 150,873



(1) AL is primarily an assisted living community and IL is primarily an independent living community.

(2) Encumbered property under our $65,000 revolving credit facility.

(3) Encumbered property under our $7,355 mortgage note.

Selected Pro Forma Condensed Consolidated Financial Information and Other Data

As previously announced, FVE entered into a transaction agreement, or the Transaction Agreement, with DHC to restructure our business arrangements pursuant to which, effective January 1, 2020:

* FVE's then existing five master leases with DHC as well as FVE's existing management and pooling agreements with DHC were terminated and replaced with new management agreements for all of these senior living communities, together with a related omnibus agreement, the New Management Agreements;

* FVE issued 10,268,158 of its common shares to DHC and an aggregate of 16,118,849 of its common shares to DHC's shareholders of record as of December 13, 2019, or together, the Share Issuances; and

* as consideration for the Share Issuances, DHC provided to FVE $75.0 million by assuming certain of FVE's working capital liabilities and through cash payments. Such consideration, the New Management Agreements and the Share Issuances are collectively referred to as the Restructuring Transactions.

The following is a summary of selected financial and other data presented on a pro forma basis after giving effect to the completion of the Restructuring Transactions. The unaudited pro forma condensed consolidated statement of operations includes adjustments related to the Restructuring Transactions described above, and assumes that the Restructuring Transactions occurred as of January 1, 2019. In the opinion of management, all adjustments necessary to reflect the effects of the Restructuring Transactions have been included. The unaudited pro forma condensed consolidated statement of operations and the selected financial and other data are primarily based on, and should be read in conjunction with, FVE's unaudited condensed consolidated financial statements and accompanying notes included in FVE's Quarterly Report on Form 10-Q for the three months ended June 30, 2019.

The historical consolidated financial information for FVE included in the unaudited condensed consolidated pro forma statement of operations and selected financial and other data has been adjusted to give effect to pro forma events that are (1) directly attributable to the Restructuring Transactions, (2) factually supportable and (3) expected to have a continuing impact on FVE's results of operations. The unaudited pro forma condensed consolidated statement of operations and pro forma selected financial and other data should be read in conjunction with the accompanying notes. The unaudited pro forma condensed consolidated statement of operations and other selected financial and other data are provided for informational purposes only.

Five Star Senior Living Inc.

Condensed Consolidated Statement of Operations

(amounts in thousands, except per share amounts)

(unaudited)

Three Months Ended June 30,

2020 Pro Forma 2019 ^(1)

REVENUES

Senior living $ 19,590 $ 20,767

Management fees 15,705 18,044

Rehabilitation and wellness services 19,268 18,239

Total management and operating revenues 54,563 57,050

Reimbursed community-level costs incurred on behalf 224,104 253,836 of managed communities

Other reimbursed expenses 6,417 -

Total revenues 285,084 310,886

Other operating income 1,499 -

Total revenues and other operating income 286,583 310,886



OPERATING EXPENSES

Senior living wages and benefits 9,705 9,504

Other senior living operating expenses 8,331 5,228

Rehabilitation and wellness services expenses 15,451 16,016

Community-level costs incurred on behalf of managed 224,104 253,836 communities

General and administrative 23,567 16,204

Rent 1,378 989

Depreciation and amortization 2,703 2,749

Total operating expenses 285,239 304,526



Operating income 1,344 6,360



Interest, dividend and other income 182 415

Interest and other expense (409) (249)

Unrealized gain (loss) on equity investments 867 (38)

Realized gain on sale of debt and equity 116 144 investments



Income before income taxes and equity in earnings 2,100 6,632 of an investee

Benefit (provision) for income taxes 902 (1,766)

Equity in earnings of an investee - 130

Net income $ 3,002 $ 4,996

Add (less):

Interest and other expense 409 249

Interest, dividend and other income (182) (415)

(Benefit) provision for income taxes (902) 1,766

Depreciation and amortization 2,703 2,749

EBITDA $ 5,030 $ 9,345

Add (less):

Severance 282 393

Litigation settlement 2,473 -

Unrealized (gain) loss on equity investments (867) 38

Transaction costs 175 -

Adjusted EBITDA $ 7,093 $ 9,776



Weighted average shares outstanding-basic 31,460 31,395

Weighted average shares outstanding-diluted 31,582 31,530

Net income per share-basic $ 0.10 $ 0.16

Net income per share-diluted $ 0.10 $ 0.16

(1) See following reconciliation.

Five Star Senior Living Inc.

Pro Forma Condensed Consolidated Statement of Operations

(amounts in thousands, except per share amounts)

(unaudited)

Three Months Ended June 30, 2019

As Reported Restructuring Note Pro Forma Transactions

REVENUES

Senior living $ 263,008 $ (242,241) 2(a) $ 20,767

Management fees 4,024 14,020 2(b) 18,044

Rehabilitation and wellness 11,488 6,751 2(c) 18,239 services

Reimbursed community-levelcosts incurred on behalf of 77,219 176,617 2(d) 253,836 managed communities

Total revenue 355,739 (44,853) 310,886



OPERATING EXPENSES

Senior living wages and 137,259 (127,755) 2(e) 9,504 benefits

Other senior living 71,301 (66,073) 2(f) 5,228 operating expenses

Rehabilitation and wellness 9,265 6,751 2(c) 16,016 services expenses

Community-level costsincurred on behalf of 77,219 176,617 2(d) 253,836 managed communities

General and administrative 20,548 (4,344) 2(g) 16,204

Rent 33,262 (32,273) 2(h) 989

Depreciation and 2,941 (192) 2(i) 2,749 amortization

Loss on sale of senior 101 (101) - living communities

Long-lived asset impairment 112 (112) -

Total operating expenses 352,008 (47,482) 304,526



Operating income 3,731 2,629 6,360



Interest, dividend and 415 - 415 other income

Interest and other expense (906) 657 2(j) (249)

Unrealized loss on equity (38) - (38) investments

Realized gain on sale of 144 - 144 debt and equity investments



Income before income taxesand equity in earnings of 3,346 3,286 6,632 an investee

Benefit (provision) for 705 (2,471) 2(k) (1,766) income taxes

Equity in earnings of an 130 - 130 investee

Net income $ 4,181 $ 815 $ 4,996

Add (less):

Interest and other expense 906 (657) 249

Interest, dividend and (415) - (415) other income

(Benefit) provision for (705) 2,471 1,766 income taxes

Depreciation and 2,941 (192) 2,749 amortization

EBITDA $ 6,908 $ 2,437 $ 9,345

Add (less):

Loss on sale of senior 101 (101) - living communities

Long-lived asset impairment 112 (112) -

Severance 393 - 393

Unrealized loss on equity 38 - 38 investments

Transaction costs 1,133 (1,133) -

Adjusted EBITDA $ 8,685 $ 1,091 $ 9,776



Weighted average common 5,007 26,388 2(l) 31,395 shares outstanding (basic)

Weighted average commonshares outstanding 5,142 26,388 2(l) 31,530 (diluted)

Net income per share $ 0.84 $ 0.16 (basic)

Net income per share $ 0.81 $ 0.16 (diluted)

See accompanying notes.

Five Star Senior Living Inc.

Notes to Pro Forma Condensed Consolidated Statement of Operations

(in thousands, except per share amounts)

(unaudited)

Note 1. Basis of Presentation

The unaudited pro forma condensed consolidated statement of operations was derived from FVE's historical financial statements prepared in accordance with GAAP, and should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in FVE's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.

The unaudited pro forma condensed consolidated statement of operations is presented for informational purposes only and is not necessarily indicative of what FVE's actual results of operations would have been had the Restructuring Transactions described herein been completed as of the assumed dates, or of FVE's expected results of operations for any future period. Differences could result from many factors, including future changes in FVE's capital structure, operating expenses, revenues and cash flows.

Note 2. Pro Forma Restructuring Transactions Adjustments

The unaudited pro forma condensed consolidated statement of operations includes adjustments related to the Restructuring Transactions described herein, including the conversion of all of FVE's then existing leases and management arrangements with DHC to the New Management Agreements and the Share Issuances.

FVE's historical consolidated financial information has been adjusted in the pro forma condensed consolidated statement of operations to give effect to events that are (1) directly attributable to the Restructuring Transactions, (2) factually supportable and (3) expected to have a continuing impact on the results of operations.

Pro Forma Condensed Consolidated Statement of Operations

a. Senior living revenues

The adjustment to senior living revenues is related to the termination and conversion of the then existing master leases to the New Management Agreements. The resulting revenues earned will be recognized and reported as management fee revenues in FVE's condensed consolidated statements of operations.

b. Management fees

Adjustments to management fee revenues are comprised as follows:

Three Months Ended June 30, 2019

Adjustment to increase management fee revenues for existingmanagement agreements from 3% to 5% per the New Management $ 1,573 Agreements

5% management fee relating to the termination and conversionof the then existing master leases to the New Management 12,112 Agreements

3% construction management fee relating to the terminationand conversion of the then existing master leases to the New 335 Management Agreements

Net adjustment to management fee revenues $ 14,020

c. Rehabilitation and wellness services revenues and rehabilitation and wellness services expenses

Adjustments to rehabilitation and wellness services revenues and expenses are attributable to Ageility inpatient clinics at communities where FVE leased and operated the business and where revenues and expenses were previously considered to be intercompany revenues and expenses and hence were eliminated pursuant to consolidation accounting. Upon the consummation of the Restructuring Transactions, and consistent with the existing managed communities, these revenues and

Five Star Senior Living Inc.

Notes to Pro Forma Condensed Consolidated Statement of Operations

(in thousands, except per share amounts)

(unaudited)

expenses earned at these inpatient clinics will no longer constitute intercompany revenues and expenses and thus will not be eliminated in consolidation and will be recognized and reported as rehabilitation and wellness services revenue and rehabilitation and wellness services expenses in FVE's condensed consolidated statements of operations.

d. Reimbursed community-level costs incurred on behalf of managed communities and community-level costs incurred on behalf of managed communities

Adjustments to both reimbursed community-level costs incurred on behalf of managed communities and community- level costs incurred on behalf of managed communities are related to the conversion of FVE's master leases with DHC to the New Management Agreements, which provide for reimbursement of FVE's direct costs and expenses related to such communities, inclusive of certain costs that are directly attributable to managing the communities, including personnel-related costs.

e. Senior living wages and benefits

The adjustment to senior living wages and benefits is related to the conversion of all FVE's leases with DHC to the New Management Agreements. Certain of these expenses will be recognized and reported as community-level costs incurred on behalf of managed communities in FVE's condensed consolidated statements of operations (with an offsetting reimbursement from DHC recognized as revenues in the condensed consolidated statements of operations). See 2.d above.

f. Other senior living operating expenses

Adjustments to other senior living operating expenses are related to the conversion of all FVE's leases with DHC to the New Management Agreements and include, but are not limited to, utilities, housekeeping, dietary, repairs and maintenance, insurance and community-level administrative costs. These costs are reimbursable costs and treated as described in 2.d above.

g. General and administrative

Adjustments to general and administrative expenses are comprised as follows:

Three Months Ended June 30, 2019

Adjustment of certain reimbursable costs to directly $ (3,252) support managed communities

Adjustment to remove non-recurring transaction costs wepreviously incurred relating to the Restructuring (1,133) Transactions

Increase in management fee to The RMR Group LLC due to 41 increase in Ageility revenue

Net adjustment to general and administrative expenses $ (4,344)

h. Rent

The reduction to rent expense is for rent under the then existing master leases converted to the New Management Agreements.

Five Star Senior Living Inc.

Notes to Pro Forma Condensed Consolidated Statement of Operations

(in thousands, except per share amounts)

(unaudited)

i. Depreciation and amortization

In connection with the Transaction Agreement, on April 1, 2019, we sold $49,200 of assets to DHC. Prior to that sale, we recorded depreciation and amortization expense with respect to those assets in operating expenses in our condensed consolidated statements of operations. Adjustments to depreciation and amortization expense reflect the amounts previously recognized during the periods presented for depreciation and amortization expense with respect to those assets.

j. Interest and other expense

Interest and other expense has been adjusted to give effect to the assumed repayment of our outstanding borrowings under our credit facility.

k. Provision for income taxes

Adjustments to provision for income taxes reflect the income tax effect of the pro forma adjustments based on the estimated effective tax rate of approximately 26.1% for the three months ended June 30, 2019.

l. Weighted average common shares outstanding - basic and diluted

The increase in FVE's basic and diluted weighted common average shares outstanding is a result of the issuance of 10,268,158 and 16,118,849 common shares to DHC and to the applicable DHC shareholders, respectively, in connection with the completion of the Restructuring Transactions based on the number of FVE common shares outstanding on December 31, 2019. FVE's diluted weighted common average shares outstanding is also impacted by the potentially dilutive restricted unvested common shares of 135,541 for the three months ended June 30, 2019. This diluted share impact is directly related to FVE's 2014 Equity Compensation Plan and was originally excluded from the as reported numbers as to include them would be antidilutive.

Warning Concerning Forward-Looking Statements

This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever Five Star Senior Living Inc. uses words such as "believe", "expect", "anticipate", "intend", "plan", "estimate", "will", "may" and negatives or derivatives of these or similar expressions, FVE is making forward-looking statements. These forward-looking statements are based upon FVE's present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by FVE's forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond FVE's control. For example:

* Ms. Potter states in this press release that FVE has made significant adjustments to address the challenges presented by the COVID-19 pandemic, while still focusing on achieving its strategic initiatives, and remains committed to adapting to these challenges and maintaining an exceptional resident experience that FVE believes is the key driver of financial performance. This may imply that the adjustments made are adequate to protect FVE from potential liabilities and declines in financial results. FVE may not be able, or may fail, to make all the necessary changes to adequately protect itself from the potential challenges and impacts of the COVID-19 pandemic. Further, these challenges or other reasons may prevent FVE from focusing on achieving its strategic initiatives and. even if it is able to maintain its focus, it may not succeed in achieving those initiatives and those initiatives may not yield the results FVE expects.

* Ms. Potter's statement that FVE generated $7.1 million of Adjusted EBITDA and that the rehabilitation and wellness services division continues to be a key area of growth may imply that FVE will be profitable in the future and that its rehabilitation and wellness services division will grow; however, FVE's business remains subject to various risks, including overall macro-economic factors in addition to market conditions of the senior living and rehabilitation and wellness industries, and consumer demand and preferences of older adults in addition to the continuing impact of the COVID-19 pandemic. As a result, FVE may not be profitable in the future, its rehabilitation and wellness services division may fail to grow and any growth it may realize may not be profitable to FVE.

* Ms. Potter states that FVE had $76.1 million cash on hand and no balances outstanding on its $65.0 million revolving credit facility as of June 30, 2020 and FVE believes the company is well positioned to navigate its operations through the COVID-19 pandemic while focusing on the key pillars of its strategy. This may imply that FVE has adequate cash and availability under its revolving credit facility; however, FVE's business remains subject to various risks, some of which are beyond FVE's control, including the disruption of the COVID-19 pandemic and economic downturn. In addition, FVE's ability to borrow under its revolving credit facility is subject to it satisfying certain conditions and limited to the amount of qualified collateral; the maximum borrowing capacity was $51.8 million as of June 30, 2020 and may be lower in amount or not available in the future.

* This press release states that negative trends due to the COVID-19 pandemic are expected to continue throughout at least the third quarter of 2020. The extent and duration of the COVID-19 pandemic or the severity and duration of its economic impact cannot be predicted, but are expected to be substantial.

* FVE notes several actions and preparations it has taken or made in response to, and in anticipation of, the COVID-19 pandemic and its expected continued impact. These statements may imply that FVE will be able to mitigate the negative impacts of the COVID-19 pandemic. However, these actions and preparations may not be adequate to sufficiently mitigate the negative impact of the COVID-19 impact.

The information contained in FVE's filings with the Securities and Exchange Commission, or SEC, including under "Risk Factors" in FVE's periodic reports, or incorporated therein, identifies other important factors that could cause FVE's actual results to differ materially from those stated in or implied by FVE's forward-looking statements. FVE's filings with the SEC are available on the SEC's website at www.sec.gov.

You should not place undue reliance upon forward-looking statements.

Except as required by law, FVE does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

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CONTACT: Five Star Senior Living Inc. Michael Kodesch, Director, Investor Relations (617) 796-8245