Global Medical REIT(US:GMRE)2019-05-09 20:04PART I FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements for Global Medical REIT Inc. as of March 31, 2019, and for the three-month period then ended, with comparative data for December 31, 2018, and the three months ended March 31, 2018 Consolidated Balance Sheets The Consolidated Balance Sheets show an increase in total assets to $656.7 million as of March 31, 2019, from $636.1 million at December 31, 2018, primarily driven by growth in net real estate investments Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2019 (unaudited) | December 31, 2018 | | :--- | :--- | :--- | | Investment in real estate, net | $633,160 | $616,925 | | Cash and cash equivalents | $1,844 | $3,631 | | Total assets | $656,690 | $636,099 | | Credit facility, net | $219,993 | $276,353 | | Total liabilities | $286,128 | $336,349 | | Total stockholders' equity | $370,562 | $299,750 | | Total liabilities and stockholders' equity | $656,690 | $636,099 | Consolidated Statements of Operations For the three months ended March 31, 2019, total revenue increased to $15.2 million from $11.6 million in the prior-year period, driven by higher rental revenue from an expanded property portfolio Statement of Operations Summary (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Total revenue | $15,200 | $11,564 | | Total expenses | $13,157 | $9,663 | | Net income | $2,043 | $1,901 | | Net income attributable to common stockholders | $528 | $411 | | Net income per share – basic and diluted | $0.02 | $0.02 | Consolidated Statements of Cash Flows For the first quarter of 2019, net cash from operating activities was $6.1 million, net cash used in investing activities was $22.7 million, and net cash provided by financing activities was $15.0 million, resulting in a net decrease in cash of $1.5 million Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,148 | $9,295 | | Net cash used in investing activities | ($22,655) | ($66,250) | | Net cash provided by financing activities | $14,972 | $57,242 | | Net (decrease) increase in cash | ($1,535) | $287 | Notes to the Unaudited Consolidated Financial Statements The notes provide detailed disclosures on significant accounting policies, property portfolio acquisitions, debt structure, stockholders' equity transactions, related-party agreements, stock-based compensation, and the adoption of the new lease accounting standard (ASC Topic 842) - The company acquired two properties during the quarter for a total of $21.4 million, increasing the gross investment in real estate to $668.9 million4243 - On January 1, 2019, the Company adopted the new lease accounting standard, ASC Topic 842, resulting in the recognition of a right-of-use asset of $2.2 million and a lease liability of $2.2 million for its operating ground leases115116127 - In March 2019, the company closed a public offering of 8.2 million shares of common stock, raising net proceeds of $75.9 million78 - Subsequent to the quarter end, on April 15, 2019, the company acquired four inpatient rehabilitation facilities for $94 million and increased its credit facility capacity to $425 million by exercising a $75 million accordion feature135 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and results of operations, highlighting a 31% increase in total revenue year-over-year, driven by portfolio growth, and a reconciliation of non-GAAP measures like FFO and AFFO Executive Summary & Recent Developments The company's portfolio grew to a gross investment of $668.9 million across 52 facilities, raised $83.9 million in equity during Q1 2019, and subsequently acquired four inpatient rehabilitation facilities for $94 million in April 2019 - As of March 31, 2019, the portfolio consisted of a gross investment in real estate of $668.9 million, comprising 52 facilities with approximately 2.1 million rentable square feet146 - Raised $83.9 million of equity in Q1 2019 through a public offering ($80.3 million gross), an ATM program ($3.1 million gross), and OP Unit issuance ($0.5 million)147149 - On April 15, 2019, acquired four inpatient rehabilitation facilities for $94 million and increased the credit facility's term loan component by $75 million, bringing total capacity to $425 million147148 Consolidated Results of Operations Comparing Q1 2019 to Q1 2018, total revenue increased by $3.6 million (31%) to $15.2 million, while total expenses rose by $3.5 million to $13.2 million, resulting in a slight increase in net income to $2.0 million Comparison of Results of Operations (in thousands) | Item | Q1 2019 | Q1 2018 | $ Change | | :--- | :--- | :--- | :--- | | Total revenue | $15,200 | $11,564 | $3,636 | | General and administrative | $1,606 | $1,005 | $601 | | Depreciation expense | $3,867 | $2,906 | $961 | | Interest expense | $4,025 | $2,684 | $1,341 | | Total expenses | $13,157 | $9,663 | $3,494 | | Net income | $2,043 | $1,901 | $142 | - The increase in General and Administrative expenses was primarily due to a rise in non-cash LTIP compensation expense, which was $0.8 million in Q1 2019 compared to $0.2 million in Q1 2018158 Liquidity and Capital Resources The company's short-term liquidity is sourced from cash on hand, operating cash flow, and its credit facility, with $78.9 million in net proceeds from equity offerings used for acquisitions and credit facility repayment in Q1 2019 - Short-term liquidity requirements include interest expense, G&A, operating expenses, management fees, property acquisitions, and tenant improvements171 - In Q1 2019, the company raised net proceeds of $75.9 million from a public offering and $3.0 million from its ATM program173174 - The credit facility capacity was $350 million as of quarter-end, with $220.0 million outstanding, and was increased to $425 million in April 2019175 Non-GAAP Financial Measures The company uses FFO and AFFO as supplemental performance measures, with Q1 2019 FFO at $5.5 million ($0.17 per share) and AFFO at $5.4 million ($0.17 per share), reflecting portfolio growth and increased share count FFO and AFFO Reconciliation (in thousands, except per share) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Net income | $2,043 | $1,901 | | Depreciation and amortization | $4,869 | $3,671 | | Preferred stock dividends | ($1,455) | ($1,455) | | FFO | $5,457 | $4,117 | | Adjustments (straight-line rent, stock comp, etc.) | ($63) | ($331) | | AFFO | $5,394 | $3,786 | | FFO per share | $0.17 | $0.18 | | AFFO per share | $0.17 | $0.16 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk from variable-rate debt, with a 100 basis point increase in LIBOR impacting annual cash flow by approximately $0.5 million on unhedged debt, mitigated by interest rate swaps - The primary market risk is interest rate risk from debt used to acquire healthcare facilities, particularly borrowings under the Credit Facility194195 - As of March 31, 2019, a 100 basis point change in LIBOR would impact annual cash flow by approximately $0.5 million on the $53.7 million of unhedged variable-rate debt196 - The company has hedged its interest rate risk on $170 million of its debt through three interest rate swaps, effectively fixing the LIBOR component at 2.88% for $100 million and 2.93% for $70 million197 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2019, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2019199200 - No material changes were made to the internal control over financial reporting during the first quarter of 2019202 PART II OTHER INFORMATION Legal Proceedings The company reports that it is not currently subject to any material litigation, nor is it aware of any threatened litigation that would have a material adverse effect on its financial position or results of operations - The company is not involved in any pending legal proceedings that would be reasonably likely to have a material adverse effect on its financial condition or results of operations204 Risk Factors There were no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2018 - No material changes to the risk factors disclosed in the 2018 Form 10-K occurred during the three months ended March 31, 2019205 Unregistered Sales of Equity Securities and Use of Proceeds On March 1, 2019, the company issued a total of 51,110 shares of its common stock to two trusts in exchange for the redemption of an equivalent number of OP Units, exempt from registration under Section 4(a)(2) of the Securities Act of 1933 - On March 1, 2019, the Company issued 33,333 shares of common stock to the Rao Movva Trust upon redemption of 33,333 OP Units206 - On March 1, 2019, the Company issued 17,777 shares of common stock to the Vedavathi Movva Trust upon redemption of 17,777 OP Units207 Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - None208 Mine Safety Disclosures This item is not applicable to the company - Not applicable209 Other Information The company reported no other information for the period - None210 Exhibits This section lists the exhibits filed with the Form 10-Q, including a Purchase and Sale Agreement, officer certifications (pursuant to Sarbanes-Oxley Sections 302 and 906), and XBRL data files - Exhibits filed include a Purchase and Sale Agreement dated March 12, 2019, and certifications by the Principal Executive Officer and Principal Financial Officer212