Yahoo Finance Omega Healthcare Investors Inc (OHI) Q1 2024 Earnings Call Transcript Highlights: Key Financial ...
Funds Available for Distribution (FAD): $0.65 per share, indicating better than expected performance with potential for future increases.
Dividend Payout Ratio: Currently at 103%, projected to decrease to mid-90% range in upcoming quarters.
Adjusted Funds From Operations (AFFO): $0.68 per share for Q1; full year guidance maintained at $2.70 to $2.80 per share.
Revenue: $243 million for Q1, up from $218 million in Q1 2023, driven by operator restructurings and new investments.
NAREIT Funds From Operations (FFO): $153 million or $0.60 per share, consistent year-over-year.
Adjusted FFO: $176 million or $0.68 per share for the quarter.
Balance Sheet Strength: Ended Q1 with over $360 million in cash and $1.4 billion in credit facility borrowing capacity.
Debt Profile: 99% of $5.1 billion debt at fixed rates; net funded debt to annualized adjusted normalized EBITDA at 5.03x.
Investment Activities: $55 million in new investments during Q1, funded by balance sheet cash and equity issuance.
Operator EBITDAR Coverage: Improved to 1.33x for core portfolio as of end of December 2023.
Portfolio Occupancy: Recovered to 80.8% as of mid-April 2024 from a low of 74.6% in January 2022.
Release Date: May 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
First quarter FAD of $0.65 per share exceeded expectations, indicating potential for future growth.
Revenue for the first quarter increased to $243 million from $218 million in the previous year, driven by operator restructurings and new investments.
Strong balance sheet with over $360 million in cash and over $1.4 billion in credit facility borrowing capacity as of the end of the quarter.
Completed $55 million in new investments during the first quarter, enhancing the company's asset portfolio.
Occupancy and rent coverage metrics for key tenants continue to improve, suggesting a positive trend in operational performance.
Negative Points
Dividend payout ratio remains slightly elevated at 103%, although it is expected to decrease in upcoming quarters.
Some operators are still on a cash-basis, making it challenging to predict full year 2024 FAD accurately.
The final rule for skilled nursing facility minimum staffing did not include industry suggestions, potentially increasing future operational challenges.
A small percentage of operators are below 1x EBITDAR coverage, indicating potential risk in rent collection.
Uncertainties in operator transitions and negotiations, such as with LaVie, could affect future financial stability.
Q & A Highlights
Q: Could you share some details of what the investment pipeline looks like today in terms of size fee simple acquisitions versus loans and maybe opportunities in the U.K. since we've seen some more deals there by you recently? A: (Daniel J. Booth - Secretary & COO) The pipeline today is as active as we've seen it in many years, spread across SNFs, senior housing, the U.S., and the U.K. We don't assign a dollar amount to the number of deals, but it's substantial with a lot of deals flowing in at the moment.
Q: On the operator transitions, have you found it more challenging recently to find replacement operators given some of the uncertainty facing skilled nursing on the regulatory and labor availability front? A: (Daniel J. Booth - Secretary & COO) It depends. Guardian was a restructure that took place in three parts over several years. For the most part, what we've restructured over the last several years hasn't been really challenging. We're not in big restructure mode currently, except for the remaining portfolio, so we're not seeing a lot of challenges.
Q: What's the timeline for the Guardian rent increase potential? A: (Daniel J. Booth - Secretary & COO) The increase could happen this year. It's a revenue-based kicker, so it's too early to predict where they're going to come out in terms of increasing revenues. We do expect there to be some increase in the number over 2024.
Q: Could you clarify how we should think about the trajectory of FAD or FFO over this year, especially trying to understand if the current Guardian rent was baked into the guide? A: (Robert O. Stephenson - CFO, Treasurer & Assistant Secretary) From a guidance standpoint, we gave a range of $270 million to $280 million. At the low end, you would have the one aspect of Guardian at the higher end. We have a number of operators on a cash basis. The impact of the $55 million of first quarter acquisitions and the $165 million of acquisitions announced in the second quarter should flow from there.
Q: Are the acquisitions done so far this year immediately accretive to earnings? A: (Robert O. Stephenson - CFO, Treasurer & Assistant Secretary) Yes, we would expect them to be immediately accretive. We're quoting 10% yield numbers as the starting point, and that's what you'll see going forward. The lion's share of our deals in our pipeline are our normal bread and butter, which is acquisitions of fee simple properties.
Q: What are the main drivers of the abnormally large staffing issues in Texas? Are these staffing issues primarily responsible for the lagging occupancy gains relative to other markets? A: (Megan M. Krull - SVP of Operations) Texas has a lot of very rural areas, so you have very small towns where it's not easy to go pick up staff from the neighboring town, you're really relying on your local market. That plays into a very wide and vast area.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
