EPR Properties(US:EPR)2023-03-08 18:17Financial Data and Key Metrics Changes - The company reported a significant increase in coverage for its non-theater portfolio, rising from 2.0 pre-pandemic to 2.7 in the last quarter, indicating strong consumer support for experiential properties [4] - The company is generating over $100 million in free cash flow beyond its dividend, which is well-covered [6] Business Line Data and Key Metrics Changes - The theater business is recovering but slower than other sectors due to a content issue, with wide releases dropping from 135 in 2019 to 75 last year, but expected to rise to 95 next year and 110-120 in 2024 [10][11] - The average per capita food and beverage spend in theaters has increased from $4.20 to $7.40, indicating a shift towards higher-margin revenue streams [10] Market Data and Key Metrics Changes - The box office is projected to recover to the $9 billion to $10 billion range in 2024, which is still 10% to 20% below pre-pandemic highs [10] - The company is focused on experiential properties, which are seeing strong consumer interest and growth potential [4] Company Strategy and Development Direction - The company aims to reduce its exposure to theaters by selling assets once the market stabilizes, rather than growing out of the theater segment [18] - The company has a $1 billion pipeline and closed $600 million in transactions last year, focusing on experiential categories that are performing well [22] Management's Comments on Operating Environment and Future Outlook - Management believes that the theater industry will stabilize and return to pre-pandemic coverage levels, driven by improved content flow and consumer demand [11] - The company is cautious about issuing new equity due to a depressed equity multiple and is focused on using internal cash flow for investments [52] Other Important Information - The company is enhancing its tenant reporting for ESG initiatives and has made progress with its Corporate Responsibility Report [56] - The company has a strong balance sheet with low debt maturities and is well-positioned to navigate potential economic challenges [52] Q&A Session Summary Question: What are the top three reasons to buy your stock today? - The company is trading at a historically low equity multiple, has a well-covered dividend, and presents a strong growth profile in the experiential space [6] Question: What is the strategy behind adding John Case to the board? - The addition is not a shift in strategy but aims to leverage his expertise in the net lease space to enhance board composition [8] Question: Why is the theater recovery slower compared to other sectors? - The recovery is primarily a content issue, with fewer wide releases impacting box office performance [10] Question: Will valuations for theaters recover? - If the market stabilizes and content flow improves, there will be a market for theater assets [16] Question: What are the best acquisition opportunities today? - The company sees strong opportunities across various experiential categories, with a focus on organic growth [22] Question: What is the company's approach to balance sheet management in a high-rate environment? - The company has a strong cash flow and low debt maturities, allowing it to avoid accessing capital markets [52] Question: What is the top ESG priority this year? - The focus is on improving tenant reporting and enhancing the company's ESG narrative [56]