Welltower(US:WELL)2024-04-30 11:18PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) For the first quarter ended March 31, 2024, Welltower reported total revenues of $1.86 billion, a significant increase from $1.56 billion in the prior-year period, with net income attributable to common stockholders rising to $127.1 million ($0.22 per diluted share) from $25.7 million ($0.05 per diluted share) year-over-year Consolidated Balance Sheets As of March 31, 2024, total assets were $44.55 billion, a slight increase from $44.01 billion at year-end 2023, while total liabilities decreased significantly to $16.01 billion from $17.64 billion, primarily due to a reduction in senior unsecured notes Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Net real estate investments | $38,757,448 | $38,775,913 | | Cash and cash equivalents | $2,388,488 | $1,993,646 | | Total assets | $44,553,585 | $44,012,166 | | Liabilities & Equity | | | | Senior unsecured notes | $12,171,913 | $13,552,222 | | Total liabilities | $16,005,677 | $17,640,439 | | Total equity | $28,246,993 | $26,081,122 | Consolidated Statements of Comprehensive Income For the three months ended March 31, 2024, total revenues increased by 19.2% year-over-year to $1.86 billion, driven by strong growth in resident fees and services, with net income attributable to common stockholders surging to $127.1 million from $25.7 million in the same period of 2023 Q1 2024 Statement of Comprehensive Income Highlights (in thousands, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total revenues | $1,859,741 | $1,560,729 | | Net income | $131,634 | $28,635 | | Net income attributable to common stockholders | $127,146 | $25,673 | | Diluted EPS | $0.22 | $0.05 | | Dividends declared per common share | $0.61 | $0.61 | Consolidated Statements of Cash Flows For the first quarter of 2024, net cash from operating activities was $406.8 million, up from $376.1 million in Q1 2023, while net cash used in investing activities decreased to $580.9 million from $932.8 million, reflecting lower acquisition spending Consolidated Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $406,806 | $376,058 | | Net cash used in investing activities | ($580,931) | ($932,837) | | Net cash from financing activities | $578,567 | $470,470 | | Increase (decrease) in cash | $402,252 | ($83,496) | Notes to Unaudited Consolidated Financial Statements The notes detail the company's business as a healthcare infrastructure REIT, its accounting policies, and significant activities during the quarter, including real property acquisitions totaling $82.2 million and dispositions generating $44.8 million in cash proceeds - Welltower is a REIT focused on healthcare infrastructure, with properties in the U.S., Canada, and the U.K., primarily consisting of seniors housing, post-acute communities, and outpatient medical properties15 - In Q1 2024, the company invested $427.0 million in real property, including $62.8 million for acquisitions and $231.8 million for construction in progress21 - During Q1 2024, the company recorded total impairment charges of $43.3 million, primarily related to Seniors Housing Operating properties classified as held for sale or held for use27 - The company's Seniors Housing Operating segment generated the highest consolidated NOI of $347.4 million for Q1 2024, followed by the Triple-net segment with $258.9 million98 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the strong Q1 2024 performance to robust growth in the Seniors Housing Operating segment, which saw a 37% increase in Net Operating Income (NOI) year-over-year, driven by rising occupancy and rental rates Executive Summary Welltower, a healthcare infrastructure REIT, reported strong Q1 2024 results driven by its Seniors Housing Operating portfolio, which constitutes 46.8% of its consolidated NOI, with key activities including raising $2.4 billion in equity and repaying $1.35 billion of senior unsecured notes - The company's primary objectives are to protect stockholder capital, enhance value, and pay consistent cash dividends through diversified investments in seniors housing and health care real estate123 Key Performance Indicators | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | NICS (in thousands) | $127,146 | $25,673 | | FFO (in thousands) | $556,703 | $386,062 | | NOI (in thousands) | $762,828 | $602,976 | | Net debt to book capitalization | 29% | 40% | | Interest coverage ratio | 4.29x | 3.44x | - During Q1 2024, the company sold 26.6 million shares under its ATM programs for gross proceeds of approximately $2.4 billion and repaid $1.35 billion of senior unsecured notes132 Liquidity and Capital Resources The company maintains a strong liquidity position with primary cash sources from operations, equity issuances, and borrowings, with cash and equivalents standing at $2.48 billion and $4.0 billion available under its unsecured revolving credit facility as of March 31, 2024 - Primary sources of cash include resident fees, rent, interest receipts, and proceeds from debt and equity issuances, while primary uses include dividend distributions, debt service, and real property investments143 Contractual Obligations Summary (as of March 31, 2024, in thousands) | Obligation Type | Total | 2024 | 2025-2026 | 2027-2028 | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | | Senior unsecured notes & term facilities | $12,328,089 | $0 | $1,960,000 | $4,385,299 | $5,981,850 | | Secured debt (Consolidated) | $2,070,776 | $307,236 | $532,136 | $312,147 | $919,257 | | Purchase obligations | $1,103,007 | $799,951 | $291,535 | $7,792 | $3,729 | | Total Contractual Obligations | $21,883,508 | $1,747,742 | $4,420,059 | $5,647,237 | $10,068,470 | - The company maintains an active ATM Program, with $936 million of remaining capacity as of April 26, 2024, to fund investments and repay borrowings153 Results of Operations Overall operating results for Q1 2024 showed significant year-over-year growth, with Net Income increasing 360% to $131.6 million and FFO increasing 44% to $556.7 million, primarily driven by the Seniors Housing Operating segment Q1 2024 vs Q1 2023 Performance Summary | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Net income (in thousands) | $131,634 | $28,635 | 360% | | FFO (in thousands) | $556,703 | $386,062 | 44% | | NOI (in thousands) | $762,828 | $602,976 | 27% | | SSNOI (in thousands) | $537,581 | $477,990 | 12% | | Diluted FFO per share | $0.96 | $0.78 | 23% | - The Seniors Housing Operating segment's NOI increased by 37% to $347.4 million, driven by a 20% rise in resident fees and services, with average occupancy for this segment increasing to 82.5% in Q1 2024 from 79.0% in Q1 2023158159 - The Triple-net segment's NOI grew 14% to $258.9 million, supported by a 10% increase in rental income from acquisitions and rent escalators, though partially offset by a $9.4 million write-off of straight-line rent receivables165167 - The Outpatient Medical segment's NOI increased by 8% to $136.7 million, due to acquisitions, construction conversions, and positive leasing activity171 Quantitative and Qualitative Disclosures About Market Risk Welltower is exposed to market risks from changes in interest rates and foreign currency exchange rates, which it manages through matching investment terms with long-term fixed-rate debt and using derivatives - The company is exposed to interest rate risk and foreign currency exchange rate risk from its operations and capital structure196 - A hypothetical 1% increase in interest rates would increase annual interest expense on variable-rate debt by $11.7 million as of March 31, 2024199 - A hypothetical 10% change in CAD or GBP exchange rates would impact annualized net income by less than $19 million, after accounting for existing hedges200 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of March 31, 2024, concluding that these controls are effective in ensuring timely and accurate reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report201 - No material changes were made to the internal control over financial reporting during the first quarter of 2024201 PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings that arise in the ordinary course of business, which management does not believe will have a material adverse effect on the company's financial condition or results of operations - Management asserts that pending legal proceedings are not expected to have a material adverse effect on the company's financial condition or results203 Risk Factors There have been 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, 2023 - No material changes from the risk factors identified in the Annual Report on Form 10-K for the year ended December 31, 2023, have been reported204 Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2024, the company acquired 36,437 shares of its common stock from employees to satisfy tax withholding obligations related to vested restricted stock awards, and did not repurchase any shares under its $3.0 billion stock repurchase program - The company acquired 36,437 shares from employees for tax withholding purposes at an average price of $89.63 per share205206 - No shares were repurchased under the company's $3.0 billion stock repurchase program during the three months ended March 31, 2024207 Exhibits This section lists the exhibits filed with the Form 10-Q, including compensatory plan agreements, CEO and CFO certifications as required by the Sarbanes-Oxley Act, and XBRL data files - The report includes certifications from the CEO and CFO pursuant to Rule 13a-14(a)/15d-14(a) and Section 1350 of the U.S. Code211 - Various long-term incentive program agreements and forms are filed as exhibits211