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Medical Properties Trust(MPW) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements This section presents MPT's unaudited condensed consolidated financial statements for Q2 and H1 2025, detailing financial position, performance, and cash flows, alongside notes on tenant bankruptcies, debt, and asset sales MPT Inc. Financial Position Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $15,150,428 | $14,294,594 | +$855,834 | | Debt, net | $9,649,035 | $8,848,112 | +$800,923 | | Total Equity | $4,833,810 | $4,833,783 | +$27 | MPT Inc. Statement of Net Income Summary (in thousands) | Period | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $240,359 | $266,560 | $464,158 | $537,876 | | Net Loss Attributable to MPT | $(98,357) | $(320,635) | $(216,632) | $(1,196,260) | | Diluted EPS | $(0.16) | $(0.54) | $(0.36) | $(1.99) | MPT Inc. Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $52,131 | $109,601 | | Net Cash (used for)/provided by Investing Activities | $(161,734) | $1,082,853 | | Net Cash provided by/(used for) Financing Activities | $271,523 | $(831,442) | Note 3: Real Estate and Other Activities This note details significant operational events, including financial impacts from Steward and Prospect bankruptcies, asset sales like the $1.2 billion Utah hospital portfolio, and increased credit loss reserves - Steward Health Care System filed for Chapter 11 bankruptcy, leading to a global settlement where MPT terminated its master lease, gained control of 23 properties for re-tenanting, and released its claims. MPT had already recorded significant impairment charges in 2024 related to its Steward investments6466 - Prospect Medical Holdings filed for Chapter 11 bankruptcy in January 2025. MPT recorded over $400 million in impairment charges in Q4 2024 and additional charges in 2025. The ultimate recovery of the remaining ~$660 million investment is uncertain727577 - In April 2024, MPT sold its interest in five Utah hospitals in a joint venture transaction valued at $1.2 billion, recognizing a gain of approximately $380 million and generating $1.1 billion in cash51 Credit Loss Reserve Activity (in thousands) | Period | Beginning Balance | Provision for Credit Loss, net | Ending Balance | | :--- | :--- | :--- | :--- | | H1 2025 | $511,473 | $53,323 | $564,796 | | H1 2024 | $96,001 | $442,533 | $538,534 | Note 4: Debt This note details MPT's debt, which increased to $9.8 billion by June 2025, highlighting the February 2025 refinancing of $1.5 billion USD and €1.0 billion Euro secured notes, and the amendment of its credit facility - In February 2025, MPT issued $1.5 billion in USD Senior Secured Notes at 8.500% and €1.0 billion in Euro Senior Secured Notes at 7.000%, both maturing in 2032105 - Net proceeds from the new notes were used to redeem senior unsecured notes due in 2025 and 2026, and to pay down the revolving credit facility106 - The company's credit facility was amended to be secured, with the interest rate reset to SOFR + 225 bps and maturity extended to 2027103 Note 9: Contingencies This note details MPT's involvement in federal securities class action and shareholder derivative lawsuits concerning disclosures about tenant financial health, particularly Steward and Prospect, with the company believing claims are without merit - MPT and its executives are defendants in federal securities class action lawsuits in Alabama and New York concerning disclosures about tenant financial health (Steward and Prospect)134136 - Related shareholder derivative lawsuits have also been filed. Most cases have been stayed pending developments in the primary securities lawsuits135137 - The company believes the claims are without merit but cannot predict the outcome or potential financial impact138 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant decrease in H1 2025 net loss due to lower impairment charges, a 42% decline in Q2 NFFO from asset sales and higher interest, and outlines liquidity strategies including asset sales and dividend management Results of Operations Q2 2025 total revenues decreased 9.8% to $240.4 million due to lower financing lease income and asset sales, while interest expense rose; H1 2025 net loss significantly improved due to lower impairment charges Revenue Comparison - Q2 2025 vs Q2 2024 (in thousands) | Revenue Type | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Rent billed | $177,860 | $183,764 | (3.2)% | | Income from financing leases | $9,923 | $27,641 | (64.1)% | | Total revenues | $240,359 | $266,560 | (9.8)% | - The decrease in net loss for H1 2025 was primarily driven by significantly lower impairment charges ($77.5 million in H1 2025 vs. $830.5 million in H1 2024)172180 - Interest expense increased in Q2 and H1 2025 due to debt refinancing activities in February 2025 at higher interest rates. The weighted-average interest rate was 5.3% in Q2 2025, up from 4.1% in Q2 2024156175 Reconciliation of Non-GAAP Financial Measures This section reconciles GAAP Net Loss to FFO and NFFO, showing Q2 2025 NFFO at $81.4 million ($0.14 per share), a 42% decrease from Q2 2024, primarily due to lower revenues and higher interest costs FFO and Normalized FFO Reconciliation (in thousands, except per share) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net loss attributable to MPT | $(98,357) | $(320,635) | $(216,632) | $(1,196,260) | | Funds from operations (FFO) | $(40,176) | $(89,550) | $(24,053) | $(869,509) | | Normalized FFO (NFFO) | $81,362 | $139,367 | $162,464 | $281,152 | | NFFO per diluted share | $0.14 | $0.23 | $0.27 | $0.47 | - The 42% decrease in quarterly Normalized FFO is primarily attributed to lower revenues from property disposals and higher interest expense following recent refinancing activities153172 Liquidity and Capital Resources MPT's liquidity strategy leverages operating cash flow and asset sales, with total liquidity at $1.2 billion as of August 2025, supported by recent debt refinancing and a new S-3 shelf registration for future capital access - As of August 5, 2025, the company has liquidity of $1.2 billion, including cash on hand and availability under its $1.28 billion revolving credit facility199 - On June 2, 2025, MPT filed a new shelf registration statement on Form S-3, regaining the ability to raise capital in the public markets192207 - The quarterly dividend was reduced to $0.08 per share in August 2024 to preserve liquidity206 Quantitative and Qualitative Disclosures About Market Risk MPT's primary market risks are interest rate and foreign currency fluctuations, with most debt fixed-rate; a 10% variable rate increase would raise interest expense by $5.1 million, and a 10% currency change would impact net loss by $1.9 million - At June 30, 2025, the company had $9.8 billion in total debt, of which $0.8 billion was variable rate211 - A 10% increase in variable interest rates would result in a $5.1 million annual increase in interest expense212 - A 10% adverse change in foreign currency exchange rates would impact net loss by approximately $1.9 million213 Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective in providing reasonable assurance for timely and accurate reporting215 - No material changes were made to the internal control over financial reporting during the most recent fiscal quarter216 PART II — OTHER INFORMATION Legal Proceedings The company is involved in various lawsuits, including securities class action and shareholder derivative suits related to tenant financial health disclosures, which management believes are without merit - The company is party to various lawsuits as described in Note 9, 'Contingencies'219 - Management believes the resolution of pending legal matters will not have a material adverse effect, but acknowledges the inherent uncertainty of litigation220 Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - No material changes to the Risk Factors presented in the 2024 Form 10-K have occurred221 Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 87,000 common shares at $5.24 each to satisfy employee tax withholding obligations from restricted stock awards, not as part of a public buyback program Common Stock Repurchases - Q2 2025 | Period | Total Shares Purchased (thousands) | Average Price per Share | | :--- | :--- | :--- | | April 1-April 30, 2025 | 87 | $5.24 | - The shares were purchased from employees to satisfy tax withholding obligations from vesting of restricted stock awards222 Other Information No company directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading plan during the three months ended June 30, 2025225