Combined Sequential Quarter End Occupancy Growth of 180 Basis Points

Sequential Quarter Management and Operating Revenues Growth of $1.8 Million, or 4.6%

Restructuring Plan on Track as Adjusted EBITDA Improvements Continue

AlerisLife Inc. (Nasdaq: ALR) today announced its financial results for the three months ended September 30, 2022.

“We continued to make steady progress implementing our plan to improve our operating results and drive efficiencies in our organization throughout the third quarter,” said Jeff Leer, President and Chief Executive Officer. “Owned and managed community occupancy increased 290 basis points and 160 basis points, respectively, or 180 basis points across all residential senior living communities, as we continue to enhance our sales and marketing strategies. We also rounded out our executive team with the addition of Heather Pereira as our new Chief Financial Officer and Philip Benjamson as our new Chief Operating Officer. We ended the quarter with sufficient liquidity to execute on our restructuring plan and, following approximately $3.8 million of capital improvements invested in our owned senior living communities in the third quarter, we had $79.1 million of cash at quarter-end and no debt maturities until 2025."

Third Quarter Summary of Financial Results:

• Quarter-end occupancy in ALR's owned senior living communities grew 290 basis points, or bps, relative to the end of the second quarter.
• Quarter-end occupancy for the managed portfolio increased 160 bps relative to the end of the second quarter.
• Net loss for the third quarter of 2022 was $8.5 million, or $0.27 per diluted share, which included $1.6 million of costs related to the restructuring plan implemented as a result of Alvarez & Marsal's, or A&M's, operational review, compared to a net loss of $8.8 million, or $0.28 per diluted share, for the second quarter of 2022, and a net loss of $10.2 million, or $0.32 per diluted share, for the third quarter of 2021, which included a $3.3 million loss from a termination of a lease and $1.2 million of restructuring expenses related to the repositioning of ALR's residential service offerings, partially offset by $0.8 million which was reimbursed by Diversified Healthcare Trust, or DHC.
• Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the third quarter of 2022 was $(4.1) million compared to $(4.4) million for the second quarter of 2022 and $(7.0) million for the third quarter of 2021. Adjusted EBITDA, as described further below, was $(0.5) million for the third quarter of 2022 compared to $(1.3) million for the second quarter of 2022 and $(3.3) million for the third quarter of 2021. EBITDA and Adjusted EBITDA are non-GAAP financial measures. Reconciliations of net loss determined in accordance with U.S. generally accepted accounting principles, or GAAP, to EBITDA and Adjusted EBITDA for the third quarter of 2022 and 2021 are presented later in this press release. The reconciliation of net loss to EBITDA and Adjusted EBITDA for the second quarter of 2022 is presented in the Form 8-K that ALR furnished on August 3, 2022.
• RevPAR (resident fee revenues for the corresponding portfolio for the period divided by the average number of available units for the corresponding portfolio for the period, divided by the number of months in the period) for the comparable managed communities for the third quarter of 2022 was $3,200 compared to $3,077 for the second quarter of 2022 and $2,941 for the third quarter of 2021, an increase of 4.0% and 8.8%, respectively.
• RevPAR for the comparable owned communities for the third quarter of 2022 was $2,801 compared to $2,560 for the second quarter of 2022 and $2,354 for the third quarter of 2021, an increase of 9.4% and 19.0%, respectively.

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

Summary of Operational Results

Operational Review

During the quarter ended June 30, 2022, ALR engaged the healthcare consulting arm of A&M to provide a comprehensive operational review of ALR's business and make recommendations to ALR's Board of Directors. The recommendations made by A&M included general and administrative cost reductions, a corporate reorganization that is designed to enhance accountability and certain operational changes to support team members to ensure the delivery of high-quality experiences to residents and customers and to increase occupancy at ALR's senior living communities, as further described below:

• Reduce costs annually by a target of approximately $2.0 million, net of investments to be made of approximately $3.3 million as described below, by:
  • Streamlining redundant business processes and reducing investments in non-core functions,
  • rationalizing information technology systems to those that directly support core business functions, ensuring their optimal utilization, and
  • continually assessing general and administrative expenses to identify cost savings opportunities.
• Invest approximately $3.3 million to refocus on ALR's core business and invest strategically in projects, processes and systems that will enhance ALR's ability to successfully operate ALR's residential and lifestyle services businesses, including:
  • Enhancing the executive leadership team with a Chief Operating Officer to oversee field and national operations and a Chief Financial Officer,
  • investing in a scalable and agile national operations infrastructure to drive operational excellence and results, and
  • establishing a centralized sales function with reinstituted regional sales support to focus on both sales and marketing efforts.

Based on A&M's operational review, on August 3, 2022, ALR announced a restructuring plan which includes the elimination of certain positions in its corporate team. ALR expects to complete this restructuring by the middle of 2023. As of the date of this press release, ALR made the following progress with respect to the restructuring plan:

• Aligned several functions, including sales, marketing, clinical and resident programming, under the national operations support function;
• Deployed sales support functions to directly support community level sales directors to focus on improved tour to move-in conversion rate;
• Appointed a Chief Financial Officer, effective September 19, 2022, and a Chief Operating Officer, effective October 17, 2022. In addition, ALR continues to invest in the sales and marketing function, including hiring a Vice President of Marketing, effective October 3, 2022, and five sales directors; and
• Implemented approximately $2.6 million of labor and non-labor annual cost savings, net of approximately $1.8 million in labor investments.

In addition to the restructuring plan, ALR achieved further cost savings of $4.9 million from the elimination of certain unfilled positions.

In connection with implementing its restructuring plan, ALR expects to incur non-recurring cash expenses of up to $3.0 million. These expenses are expected to include up to $0.4 million of retention payments, up to $2.0 million of severance, benefits and transition expenses and up to $0.6 million of other restructuring expenses. For the three months ended September 30, 2022, ALR recognized $1.6 million of expenses related to the restructuring plan, including $0.1 million of retention payments, $1.4 million of severance, benefits and transition expenses, and $0.1 million of other restructuring expenses, which was recorded in restructuring expenses in ALR's condensed consolidated statements of operations. Additionally, ALR recognized costs of $0.6 million related to the implementation of the A&M operational review for the three months ended September 30, 2022, which are recorded in general and administrative expenses in ALR's condensed consolidated statements of operations.

Summary of Senior Living Communities and Outpatient Rehabilitation Locations

Presented below is a summary of the communities, units, average occupancy, quarter 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 September 30, 2022 (dollars in thousands):

Presented below is a summary of the Ageility outpatient rehabilitation locations ALR operated as of and for the three months ended September 30, 2022 (dollars in thousands):

Conference Call Information:

At 1:00 p.m. Eastern Time on November 3, 2022, ALR's President and Chief Executive Officer, Jeffrey Leer, and Senior Vice President, Chief Financial Officer and Treasurer, Heather Pereira, will host a conference call to discuss ALR's third quarter 2022 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 November 10, 2022. To hear the replay, dial (412) 317-0088. The replay pass code is 3979235.

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 third quarter ended September 30, 2022 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 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 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. ALR believes that EBITDA, Adjusted EBITDA, EBITDA Margin and Net Income (Loss) Margin also may help investors better understand its financial performance, including by allowing investors to compare ALR's performance between periods and against the performance of other companies on both a GAAP and non-GAAP basis. ALR management uses EBITDA, Adjusted EBITDA, EBITDA Margin and Net Income (Loss) 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, EBITDA Margin and Net Income (Loss) Margin as shown below or later in this press release. 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, EBITDA Margin and Net Income (Loss) 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 and nine months ended September 30, 2022 and 2021.

AlerisLife Inc.

Reconciliation of Non-GAAP Financial Measures

(dollars in thousands)

(unaudited)

ALR believes that net income (loss) is the most directly comparable financial measure, determined according to GAAP, to ALR’s presentation of EBITDA, Net Income (Loss) Margin and EBITDA Margin. The following table presents the reconciliation of these non-GAAP financial measures to net income (loss) for the three months ended September 30, 2022 for Ageility.