Omega Healthcare Investors(OHI) - 2024 Q1 - Quarterly Results

First Quarter 2024 Results and Recent Developments First Quarter 2024 Financial and Operational Highlights Omega reported strong Q1 2024 financial results with significant year-over-year growth in net income and Adjusted FFO, alongside substantial new investments and strategic debt repayment Q1 2024 Key Financial Metrics vs. Q1 2023 | Metric | Q1 2024 ($) | Q1 2023 ($) | | :--- | :--- | :--- | | Net Income | $69 million | $37 million | | Net Income per Share | $0.27 | $0.15 | | Nareit FFO | $153 million | $146 million | | Nareit FFO per Share | $0.60 | $0.60 | | Adjusted FFO (AFFO) | $176 million | $160 million | | AFFO per Share | $0.68 | $0.66 | | FAD | $168 million | $147 million | | FAD per Share | $0.65 | $0.60 | - Completed $75 million in new investments in Q1 2024 and an additional $165 million in Q2 2024 to date[5] - Repaid $400 million of senior unsecured notes on April 1, 2024[5] - Issued 1 million common shares for gross proceeds of $33 million[5] CEO Commentary CEO Taylor Pickett highlighted Q1 financial performance exceeding expectations due to strong interest income and improving operating fundamentals, while expressing concerns about new staffing regulations - Q1 financial performance exceeded expectations due to higher interest income and earlier-than-anticipated cash payments from a turnaround asset[4] - Operating fundamentals are improving, with occupancy and agency labor usage trending favorably, resulting in a Q1 standalone EBITDAR coverage of 1.42x, excluding stimulus[4] - Restructuring of the Guardian portfolio is complete, while efforts for LaVie and Maplewood are ongoing with expectations for incremental cash payments as the year progresses[4] - The company expressed disappointment with the recently announced final ruling on minimum staffing, believing it will place an unnecessary burden on the industry[6] Financial Performance First Quarter 2024 Results (P&L Analysis) Q1 2024 saw total revenues increase to $243.3 million and expenses decrease, leading to a substantial rise in net income to $69.3 million Q1 2024 vs Q1 2023 Income Statement Summary | Item | Q1 2024 ($M) | Q1 2023 ($M) | Change ($M) | | :--- | :--- | :--- | :--- | | Total Revenues | 243.3 | 218.2 | +25.1 | | Total Expenses | 174.1 | 199.8 | -25.7 | | Other Income | 2.6 | 16.4 | -13.8 | | Net Income | 69.3 | 36.8 | +32.5 | - The increase in revenue was primarily driven by the timing and impact of operator restructurings and transitions, as well as revenue from new investments[6] - The decrease in expenses was mainly due to a lower impairment on real estate properties ($5.3 million in Q1 2024 vs $39.0 million in Q1 2023) and reduced depreciation and interest expenses[7][42] Balance Sheet and Liquidity Omega maintained strong liquidity as of March 31, 2024, with $361.8 million in cash and $1.4 billion in undrawn credit, while managing $5.1 billion in total debt Debt Profile as of March 31, 2024 | Debt Component | Amount ($M) | | :--- | :--- | | Senior Unsecured Notes | 4,600.0 | | Unsecured Term Loans | 478.5 | | Secured Debt | 19.8 | | Revolving Credit Facility | 20.2 | | Total Indebtedness | ~5,100.0 | - As of March 31, 2024, the company had $361.8 million in cash and cash equivalents and $1.4 billion of undrawn capacity under its unsecured revolving credit facility[25] - On April 1, 2024, the company repaid its $400.0 million 4.950% senior notes that matured, using invested cash and borrowings from its credit facility[26] Portfolio Activity and Operations Portfolio Updates Omega actively managed its portfolio in Q1 2024 through operator restructurings, new investments totaling $75 million, and asset sales, with accelerated investment activity into Q2 Operator Updates Omega completed the Guardian portfolio restructuring in April, while LaVie and Maplewood made partial rent payments as their restructurings continue - Guardian: The restructuring was completed in April 2024 with the transition of the remaining six facilities to a new operator for an initial annual rent of $5.5 million[12] - LaVie: Paid $4.4 million in rent in Q1 2024 and $1.5 million in April 2024[10] - Maplewood: Paid $11.3 million in rent in Q1 2024 and $3.8 million in April 2024[11] Investment Activities Omega invested $75.0 million in Q1 2024, primarily in real estate loans, and accelerated investments in Q2 with an additional $165.4 million deployed Q1 2024 New Investments ($75.0M Total) | Investment Type | Amount ($M) | % of Total | | :--- | :--- | :--- | | Real estate loans receivable | 41.2 | 55.0% | | Construction-in-progress | 14.8 | 19.7% | | Real property | 13.3 | 17.7% | | Capital expenditures | 5.7 | 7.6% | - In Q2 2024 to date, the company closed on $165.4 million in new investments, including $71.7 million in loans and $93.7 million in real estate acquisitions[14][15][16] Asset Dispositions Omega sold four facilities for $10.1 million, recorded a $5.3 million impairment, and classified 16 facilities with an $81.5 million book value as held for sale - Sold four facilities for $10.1 million in cash, resulting in a loss of $1.4 million[17] - Recorded a $5.3 million net impairment charge to reduce the book value of three facilities to their estimated fair value[17] - As of quarter-end, 16 facilities were classified as assets held for sale, with a total net book value of $81.5 million[18] Operator Coverage Data Operator portfolio fundamentals improved, with occupancy rising to 79.6% and EBITDAR coverage increasing to 1.33x, while Medicaid remained the primary payor source Operator Occupancy and Coverage Trends (Trailing 12-Months) | Period Ended | Occupancy | EBITDARM Coverage (Before Mgmt Fee) | EBITDAR Coverage (After Mgmt Fee) | | :--- | :--- | :--- | :--- | | Dec 31, 2023 | 79.6% | 1.69x | 1.33x | | Sep 30, 2023 | 79.1% | 1.63x | 1.28x | | Jun 30, 2023 | 78.6% | 1.50x | 1.15x | | Mar 31, 2023 | 78.0% | 1.44x | 1.10x | | Dec 31, 2022 | 77.0% | 1.38x | 1.04x | - For the three months ended December 31, 2023, the operator revenue mix was 55.3% Medicaid, 28.0% Medicare/Insurance, and 16.7% Private/Other[20] Outlook and Shareholder Information 2024 Guidance Omega affirmed its 2024 Adjusted FFO guidance of $2.70 to $2.80 per diluted share, noting it is subject to various operational and transactional factors - The company affirmed its 2024 Adjusted FFO guidance to be between $2.70 and $2.80 per diluted share[28] - Guidance is subject to change based on factors like the timing of rent collection, acquisitions, divestitures, and restructurings[29] Dividends The Board of Directors declared a quarterly cash dividend of $0.67 per common share on April 18, 2024, payable on May 15, 2024 - A quarterly cash dividend of $0.67 per share was declared on April 18, 2024[27] Financial Statements Consolidated Balance Sheets As of March 31, 2024, Omega reported total assets of $9.01 billion, total liabilities of $5.31 billion, and total equity of $3.70 billion, showing slight changes from year-end 2023 Consolidated Balance Sheet Summary (in thousands) | | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total real estate investments | $7,357,181 | $7,378,929 | | Cash and cash equivalents | $361,773 | $442,810 | | Total assets | $9,011,848 | $9,117,402 | | Total liabilities | $5,311,255 | $5,355,111 | | Total equity | $3,700,593 | $3,762,291 | | Total liabilities and equity | $9,011,848 | $9,117,402 | Consolidated Statements of Operations For Q1 2024, Omega's total revenues increased to $243.3 million, resulting in net income available to common stockholders of $67.4 million, or $0.27 per diluted share Consolidated Statements of Operations Summary (in thousands) | | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total revenues | $243,299 | $218,202 | | Total expenses | $174,072 | $199,831 | | Net income | $69,346 | $36,845 | | Net income available to common stockholders | $67,361 | $35,942 | | Diluted EPS | $0.27 | $0.15 | Reconciliation of Non-GAAP Measures For Q1 2024, Net Income of $69.3 million was reconciled to Nareit FFO of $153.1 million, Adjusted FFO (AFFO) of $176.1 million, and Funds Available for Distribution (FAD) of $167.9 million Q1 2024 Reconciliation from Net Income to FAD (in thousands) | Metric | Amount (in thousands) | | :--- | :--- | | Net income | $69,346 | | Adjustments (Depreciation, Impairment, etc.) | +$83,776 | | Nareit FFO | $153,122 | | Adjustments (Credit losses, stock comp, etc.) | +$22,996 | | Adjusted FFO (AFFO) | $176,118 | | Adjustments (Non-cash revenue/expense) | -$8,201 | | Funds Available for Distribution (FAD) | $167,917 |