AlerisLife Inc. Announces Fourth Quarter and Year End 2021 Results

210 Basis Point Growth in Sequential Quarter Average Occupancy for Owned Communities

150 Basis Point Growth in Sequential Quarter Average Occupancy for Managed Communities

Completed Company Rebrand to AlerisLife

$95.0 million Term Loan Closed Subsequent to Year End Further Enhances Liquidity

AlerisLife Inc. (Nasdaq: ALR) today announced its financial results for the three months ended December 31, 2021.

Katherine Potter, President and Chief Executive Officer, made the following statement:

“We achieved several strategic milestones during and subsequent to the end of the fourth quarter, including rebranding ourselves as AlerisLife and announcing strategic collaborations and partnerships to enhance our resident experience and expand our lifestyle services offering. We also enhanced our leadership team with the addition of a new Chief People Officer and a new Chief Customer Officer, and we hope to leverage their experience to further expand our services and customer base.

During the fourth quarter, average occupancy for the 20 senior living communities owned by AlerisLife increased 210 basis points from the third quarter. Average occupancy for the 120 comparable community managed portfolio increased 70 basis points from the third quarter. We believe the disruption associated with transitioning management of certain communities owned by Diversified Healthcare Trust is now behind us and we continue to see a sustained improvement in macroeconomic fundamentals. As a result, we remain focused on optimizing our core competencies, including continuing to deliver an exceptional and enhanced resident experience to senior living and active adult residents, while also offering lifestyle services to choice-based consumers.

We remain well capitalized to continue executing our strategic transformation, as we ended the year with unrestricted cash and cash equivalents of $67.0 million. Additionally, subsequent to quarter end, we closed on a $95.0 million term loan, $63.0 million of which was immediately outstanding. This loan not only enhanced our liquidity and flexibility, but gives us additional capital to pursue the development and expansion of our lifestyle services offering.”

Fourth Quarter Summary of Financial Results:

• Net loss for the fourth quarter of 2021 was $10.7 million, or $0.34 per share, which included $2.3 million of expenses in connection with the Reposition phase of the strategic plan announced on April 9, 2021, or the Strategic Plan, partially offset by $1.0 million reimbursed by Diversified Healthcare Trust, or DHC, compared to net income of $2.9 million, or $0.09 per share, for the fourth quarter of 2020.

• Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the fourth quarter of 2021 was $(7.5) million compared to $5.8 million for the fourth quarter of 2020. Adjusted EBITDA, as described further below, was $(6.4) million for the fourth quarter of 2021 compared to $5.2 million for the fourth quarter of 2020.

• EBITDA and Adjusted EBITDA are non-GAAP financial measures. Reconciliations of net loss determined in accordance with GAAP to EBITDA and Adjusted EBITDA for the fourth quarter of 2021 and 2020 are presented later in this press release.

Substantially all of ALR's business is conducted by its two segments: (i) residential (formerly known as senior living) through its brand Five Star Senior Living, or Five Star, and (ii) lifestyle services (formerly known as rehabilitation and wellness services) primarily through its brands Ageility Physical Therapy Solutions, and Ageility Fitness, or collectively Ageility, as well as Windsong Home Health. The following tables present data on the owned and managed senior living communities that ALR operates through Five Star, including comparable community data, as well as data on the rehabilitation clinics that ALR operates through Ageility, including comparable clinic data.

Company Rebrand and Name Change

On January 25, 2022, ALR changed its name from Five Star Senior Living Inc. to AlerisLife Inc. Aleris, a Latin word meaning "to foster, nourish and develop," represents our expansion from primarily a senior living owner and operator to a more diversified and comprehensive partner, which aims to offer each of ALR's customers choice-based services regardless of their residential location or age.

Term Loan

On January 27, 2022, ALR entered into a credit and security agreement, or the Credit Agreement, and closed on a $95.0 million senior secured term loan, or the Loan, $63.0 million of which was funded upon the effectiveness of the Credit Agreement, including approximately $3.2 million in closing costs. The remaining proceeds include $12.0 million for capital improvements and an opportunity for another $20.0 million that is available to us upon achieving certain financial thresholds. The maturity date of the Loan is January 27, 2025. Subject to the payment of an extension fee and meeting certain other conditions, ALR may elect to extend the stated maturity date of the Loan for two one-year periods. ALR is required to pay interest on outstanding amounts at a base rate of the Secured Overnight Financing Rate, or SOFR (subject to a minimum base rate of 50 basis points), plus 450 basis points.

Strategic Plan Update

On April 9, 2021, ALR announced the Strategic Plan, including to:

• Reposition ALR's senior living management service offering to focus on larger independent living and assisted living as well as active adult communities, and exit skilled nursing by transitioning 108 senior living communities to new operators and closing approximately 1,500 SNF living units in retained CCRCs;

• Evolve through investment in an enhanced scalable corporate shared service center to support operations and growth and to deliver differentiated, customer focused senior living resident experiences across a segmented portfolio of communities; and

• Diversify with a focus on revenue diversification opportunities, including growing ALR's rehabilitation services and expanding lifestyle services to provide a choice based, financially flexible senior living resident experience and reach customers outside of senior living communities.

At December 31, 2021, ALR changed the name of its segments to better describe the business and operations of those segments. The segment formerly known as senior living is now known as residential and the segment formerly known as rehabilitation and wellness services is now known as lifestyle services. There were no changes in the composition of the segments.

During and subsequent to the year ended December 31, 2021, ALR made the following progress with respect to the Reposition phase of the Strategic Plan:

1. Amended the management arrangements with DHC on June 9, 2021,
2. Transitioned the management of 107 senior living communities with approximately 7,400 living units to new operators, of which 38 communities with approximately 2,600 living units were transitioned during the three months ended December 31, 2021, and closed one senior living community with approximately 100 living units in February 2022,
3. Closed all 1,532 SNF living units in 27 managed CCRCs and began collaborating with DHC to reposition these SNF units,
4. Closed 27 of the 37 planned Ageility inpatient rehabilitation clinics, and
5. For the remaining ten Ageility inpatient rehabilitation clinics, entered into agreements with the new operators to continue to provide these services through August 2022.

In connection with the Reposition phase of the Strategic Plan, 36.6% of positions were transitioned or eliminated in the residential segment, 10.8% in the lifestyle services segment and 27.9% in corporate resulting in restructuring expenses of $2.3 million recorded in the three months ended December 31, 2021, of which $1.0 million was reimbursed by DHC. In addition, ALR expects to realize expense reductions associated with these roles, including insurance and information technology license subscriptions.

During and subsequent to the year ended December 31, 2021, ALR made the following progress with respect to the Evolve phase of the Strategic Plan:

1. Completed enhancements to the corporate technology infrastructure,
2. Invested in critical areas of the residential experience at Five Star senior living communities, including community wireless connectivity, resident transportation services and re-designed senior living community common areas and resident units, deploying $11.7 million and $103.4 million of capital in the owned and managed communities, respectively,
3. Invested in digital marketing infrastructure to effectively reduce cost per digital lead by approximately 70.0%,
4. Entered into a culinary services partnership with Compass Group to transform the senior living resident dining experience,
5. Entered into a collaboration with Dispatch Health to enable senior living resident access to ambulatory care services in their community,
6. Standardized certain administrative functions through centralization efforts to enhance operating efficiency, and
7. Subsequent to year end, hired a Chief People Officer and a Chief Customer Officer.

During the year ended December 31, 2021, ALR made the following progress with respect to the Diversify phase of the Strategic Plan:

1. Opened 15 net new Ageility outpatient rehabilitation clinics, exclusive of the closure of 17 Ageility outpatient rehabilitation clinics in December 2021 in Five Star senior living communities that were transitioned to new operators in 2021 or closed in February 2022, bringing the Ageility outpatient rehabilitation clinic total to 205, as of December 31, 2021, and
2. Grew Ageility fitness revenues to $3.3 million or a 38.1% increase over the same period in 2020.

Following the completion of the Reposition phase of the Strategic Plan, ALR continues to manage 120 senior living communities for DHC, representing 17,899 living units and approximately 96.2% of ALR's residential management fees for the three months ended December 31, 2021, and ALR continues to own 20 senior living communities with 2,100 living units.

Presented below is a summary of the units owned and managed by ALR as of December 31, 2021 following the completion of the Reposition phase of the Strategic Plan:

Presented below is a summary of the communities, units, average occupancy, month end occupancy, revenues and residential management fees for the Five Star senior living communities ALR manages for DHC, as of and for the three months ended December 31, 2021 after the completion of the Reposition phase of the Strategic Plan (dollars in thousands):

Presented below is a summary of the Ageility rehabilitation clinics ALR operated as of and for the three months ended December 31, 2021 and the number of clinics to be operated after the implementation of the Reposition phase of the Strategic Plan (dollars in thousands):

ALR currently expects to continue to diversify revenue through growth of its lifestyle service offerings, including opening new outpatient rehabilitation clinics and expanding its fitness and other home-based service offerings within and outside of Five Star senior living communities. Fitness offerings started as an extension of Ageility's outpatient rehabilitation services and, while representing only 5.7% of segment revenues for the three months ended December 31, 2021, fitness revenues increased to $0.9 million or 30.7% when compared to the same period in 2020, representing 3.4% of segment revenue. Since January 1, 2020, Ageility has opened 32 net new outpatient rehabilitation clinics, 17 of which were opened in 2020, and 15 of which were opened during the year ended December 31, 2021 (exclusive of the 17 outpatient rehabilitation clinics that were closed in December 2021 in senior living communities that were transitioned in 2021 or closed in February 2022).

Conference Call Information:

At 1:00 p.m. Eastern Time on February 24, 2022, ALR's President and Chief Executive Officer, Katherine Potter, and Executive Vice President, Chief Financial Officer and Treasurer, Jeffrey Leer, will host a conference call to discuss ALR's fourth quarter 2021 financial 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 March 3, 2022. To hear the replay, dial (412) 317-0088. The replay pass code is 1968786.

A live audio webcast of the conference call will also be available in a listen-only mode on ALR’s website, www.alerislife.com. Participants wanting to access the webcast should visit ALR’s website about five minutes before the call. The archived webcast will be available for replay on ALR’s website following the call for about a week. The transcription, recording and retransmission in any way of ALR's fourth quarter ended December 31, 2021 financial results conference call are strictly prohibited without the prior written consent of ALR. ALR’s website is not incorporated as part of this press release.

About AlerisLife:

AlerisLife enriches and inspires the lives of its older adult customers across the United States by delivering an exceptional and enhanced resident experience to senior living and active adult residents, while also offering lifestyle services to the younger choice-based consumer. The Company is headquartered in Newton, Massachusetts. For more information, visit www.alerislife.com.

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

ALR believes that net income (loss) is the most directly comparable financial measure, determined according to GAAP, to ALR’s presentation of EBITDA and Adjusted EBITDA. The following table presents the reconciliation of these non-GAAP financial measures to net income (loss) for the three months and year ended December 31, 2021 and 2020.

 AlerisLife Inc.

Reconciliation of Non-GAAP Financial Measures

(dollars in thousands)

(unaudited)

ALR believes that net income is the most directly comparable financial measure, determined according to GAAP, to ALR’s presentation of EBITDA and Adjusted EBITDA. The following table presents the reconciliation of these non-GAAP financial measures to net income for the three months ended December 31, 2021 for Ageility.