Five Star Senior Living Inc. Announces First Quarter 2021 Results

First Quarter Total Management and Operating Revenues of $50.5 Million

First Quarter Net Income of $3.3 Million and Net Income Per Diluted Share of $0.10

Recently Announced Strategic Plan Will Reposition Senior Living Management Business and Completely Exit the Skilled Nursing Business

Five Star Senior Living Inc. (NASDAQ:FVE) today announced its financial results for the quarter ended March 31, 2021.

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

"Our recently announced strategic business plan is designed to further improve our senior living operations as we reshape our management business to focus on areas of operational strength as well as direct our efforts towards where we see the strongest market opportunities with the active, aging adult population. We believe this sharpened focus on larger and lower acuity communities will not only highlight our expertise as a senior living operator, but also support the evolution of our services business to better serve our target demographic and continue to diversify our revenue sources.

We are pleased to have completed all vaccination clinics across our communities and proud of our organization for its dedicated response throughout the COVID-19 pandemic. Our commitment to safety and wellness underscores our ongoing mission to enrich the resident experience at our communities and drive the recovery and future success of our business. We are encouraged to see positive momentum with move-ins and occupancy trends over the course of March and April, with 90 net positive moves since March 31st in our comparable communities.

Our rehabilitation and wellness services will continue to be an integral part of our company as we implement our strategic plan. In the first quarter, Ageility opened eight net new outpatient rehabilitation clinics. This segment represents approximately 39% of our total management and operating revenues. Our financial position remains strong with $109.5 million of unrestricted cash on our balance sheet and no amounts outstanding on our revolving credit facility. We feel confident in our ability to execute our strategic plan throughout 2021 and beyond."

First Quarter Highlights:

• As of May 1, 2021, all of FVE's senior living communities have completed vaccination clinics and over 85% of FVE's residents have received a COVID-19 vaccine. At May 1, 2021, all of FVE's owned, leased and managed senior living communities were accepting new residents in at least one service line of business (independent living, assisted living or memory care). Combined senior living revenues and management fees, including those for communities FVE manages on behalf of Diversified Healthcare Trust, or DHC, for the first quarter ended March 31, 2021 decreased to $30.9 million from $38.0 million for the same period in 2020, primarily due to decreased average occupancy resulting from the impact of the COVID-19 pandemic as well as the impact of the sale of nine senior living communities and closure of seven senior living communities in 2020 that FVE previously managed on behalf of DHC. Spot occupancy at communities FVE owns and leases as of March 31, 2021 was 68.2%, which represents a 150 basis points decrease as compared to December 31, 2020. Spot occupancy at the communities FVE manages on behalf of DHC was 70.2% as of March 31, 2021, which is a 60 basis points decrease when compared to December 31, 2020.

• Rehabilitation and wellness services revenues for the first quarter of 2021 decreased to $19.6 million from $21.4 million for the same period in 2020, primarily due to a reduction of inpatient clinic visits as a result of the COVID-19 pandemic partially offset by the opening of 21 net new Ageility physical therapeutic clinics since January 1, 2020. For the first quarter of 2021, Ageility opened 8 net new outpatient rehabilitation clinics.

• Net income for the first quarter of 2021 was $3.3 million, or $0.10 per diluted share, compared to a net loss of $17.2 million, or $0.55 per diluted share, for the first quarter of 2020, which included $22.9 million of one-time expenses related to the termination of leases for communities FVE previously leased from DHC. Net income for the first quarter of 2021 was impacted by $7.8 million of Provider Relief Funds received and recognized under the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, primarily for our senior living communities, which continued to experience a reduction of revenues and increased expenses related to decreased occupancy and other impacts of the COVID-19 pandemic.

• Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the first quarter of 2021 was $6.8 million compared to $(13.1) million for the first quarter of 2020. Adjusted EBITDA, as described further below, was $6.9 million for the first quarter of 2021 compared to $12.4 million for the first quarter of 2020. EBITDA and Adjusted EBITDA for the first quarter of 2021 includes $7.8 million of Provider Relief Funds received and recognized under the CARES Act. 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 first quarters of 2021 and 2020 are presented later in this press release.

• As of March 31, 2021, FVE had unrestricted cash and cash equivalents of $109.5 million. In addition, FVE had no amounts outstanding under its $65.0 million revolving credit facility.

Strategic Plan

On April 9, 2021, FVE announced a new strategic plan, or the Strategic Plan, to reposition its senior living management business to focus on larger independent living, assisted living and memory care communities as well as stand-alone independent living and active adult communities.

Pursuant to the Strategic Plan, FVE intends to, among other things, (i) amend its management arrangements with DHC to transition 108 senior living communities, with approximately 7,500 living units, that FVE currently manages for DHC, to new operators, (ii) close and reposition 27 skilled nursing units, with approximately 1,500 living units, in continuing care retirement communities, or CCRCs, that FVE will continue to manage for DHC, (iii) close 37 Ageility inpatient rehabilitation clinics in certain transitioning communities and (iv) eliminate certain positions in FVE's corporate, regional and divisional teams as well as impacted units and clinics.

In connection with implementing the Strategic Plan, FVE expects to incur non-recurring cash expenses of up to $20.5 million, approximately $15.0 million of which FVE expects DHC will reimburse. These expenses are expected to include up to $7.5 million of retention bonus payments, up to $10.2 million of severance, benefits and transition expenses, and up to $2.8 million of restructuring expenses, of which FVE expects DHC to reimburse approximately $5.9 million, $7.5 million and $1.6 million, respectively. FVE expects to complete the transitions and closures contemplated by the Strategic Plan, or the Transition, by the end of 2021.

Presented below is a summary of the units FVE operated (owned, leased and managed) as of March 31, 2021 and the projected number of units to be operated after the Transition, as if it had been completed as of January 1, 2021:

Presented below is a summary of the communities, units, average occupancy, spot occupancy, revenues and management fees for the communities FVE manages for DHC as of March 31, 2021 and for the communities to be managed for DHC after the Transition as if it had been completed as of January 1, 2021 (dollars in thousands):

Following the Transition, FVE will continue to manage 120 senior living communities for DHC, representing 17,906 living units and approximately 60% of FVE's management fee revenues as of March 31, 2021, and to operate its existing owned portfolio of 20 communities with approximately 2,100 living units. FVE expects to partially offset the resulting revenue loss from fees we earn from the 108 transitioning senior living communities with expense reductions to right-size operations.

The 120 senior living communities that FVE will continue to manage for DHC after the Transition outperformed the total DHC managed portfolio (exclusive of the pending closing and repositioning of approximately 1,500 skilled nursing facility units in 27 of the CCRCs) for the quarter ended March 31, 2021 with approximately 400 basis points higher operating margin and EBITDA margin.

In addition to the Transition of 108 managed communities owned by DHC, the landlord of our four leased senior living communities with 203 living units is currently marketing these properties for sale and we are unlikely to operate those four communities long-term.

Presented below is a summary of FVE's Ageility rehabilitation clinics as of March 31, 2021 and the number of clinics to be operated after the Transition as if it had been completed as of January 1, 2021 (dollars in thousands):

Conference Call Information:

At 1:00 p.m. Eastern Time on May 6, 2021, our President and Chief Executive Officer, Katherine Potter, Executive Vice President and Chief Operating Officer, Margaret Wigglesworth, and Executive Vice President, Chief Financial Officer and Treasurer, Jeffrey Leer, will host a conference call to discuss FVE's first 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 May 13, 2021. To hear the replay, dial (412) 317-0088. The replay pass code is 10153734.

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's first quarter ended March 31, 2021 financial results conference call are strictly prohibited without the prior written consent of FVE. 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 March 31, 2021, FVE operated 252 senior living communities (29,265 living units) located in 31 states, including 228 communities (26,963 living units) that it managed and 24 communities (2,302 living units) that it owned or leased. FVE operates independent living, assisted living, and memory care communities, continuing care retirement communities and skilled nursing facilities. Additionally, FVE's rehabilitation and wellness services segment includes Ageility Physical Therapy Solutions^TM, or Ageility, a division of FVE, which provides rehabilitation and wellness services within FVE communities as well as to external customers. As of March 31, 2021, Ageility operated 215 outpatient rehabilitation clinics and 37 inpatient rehabilitation clinics in 28 states. FVE is headquartered in Newton, Massachusetts.

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 U.S. generally accepted accounting principles, or 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 meet FVE's financial obligations 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, 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 the three months ended March 31, 2021 and 2020.