EPR Properties(EPR) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted FFO for the quarter was $0.68 per share compared to $0.41 in the prior year, and AFFO was $0.71 per share compared to $0.44 in the prior year [44] - Total revenue for the quarter was $125.4 million versus $106.4 million in the prior year, primarily due to improved collections and revenue from certain tenants [44][45] - Cash collections were approximately 85% of contractual cash revenue for the second quarter, exceeding the high end of previous guidance [55] Business Line Data and Key Metrics Changes - Total investments were approximately $6.5 billion with 357 properties in service and 95% occupied [15] - The experiential portfolio accounted for 91% of total investments, approximately $5.9 billion [15][16] - 99% of EPR theaters were open as of July 26, 2021, with strong box office performance noted [17][21] Market Data and Key Metrics Changes - Box office gross increased significantly, with June reaching $399 million and July expected to exceed $500 million, a 25% increase over June [21] - Year-to-date box office growth exceeded $1.5 billion compared to $2.1 billion for all of 2020 [22] - The company noted strong performance across non-theater segments, with attendance at or above 2019 levels in several areas [33][35] Company Strategy and Development Direction - The company aims to return value to shareholders and pursue external growth following the early termination of the covenant relief period [9] - Focus on deploying capital, increasing earnings, and growing dividends, with a resumption of monthly dividends anticipated [10][53] - The company is not looking to grow its theater portfolio but is open to diversifying its tenant base and pursuing various investment opportunities [65] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of the experience economy and the importance of theatrical releases for studios [12][29] - The company anticipates continued positive trends in cash collections and revenue recognition, with expectations of approaching 100% by the fourth quarter [40][56] - Management acknowledged the fluid environment but remains optimistic about the performance of high-quality properties [12][30] Other Important Information - The company has a strong liquidity position with $509.8 million in cash on hand and no scheduled debt maturities until 2022 [54][50] - The company has executed leases for all five previously unleased theaters, which are expected to reopen this year [19] - The company is actively pursuing new opportunities in experiential categories other than theaters [39] Q&A Session Summary Question: Can you provide more color on the sale process for the theater asset sold this quarter? - The company sold four theaters over the past year, with various contracts in place for different uses, and will provide updates on cap rates later [64] Question: Can you update on the types of opportunities you're seeing for external investment? - The company is looking to grow tenant diversity and is open to both one-off and portfolio deals, with a focus on experiential categories [65] Question: How does the 5% vacancy tie with leasing on vacant theaters? - The overall 5% vacancy includes properties being marketed for sale, with all expected leases accounted for [68][70] Question: What is the expected contribution from theater leases? - Theater leases are expected to contribute more next year, with current contributions primarily on a percentage rent basis [71][74] Question: Can you discuss the company's long-term leverage targets? - The company aims to return to a mid-five range for debt-to-EBITDA by the end of the year, consistent with historical targets [82] Question: How did the board settle on the $3 annual dividend? - The decision was based on taxable income considerations, with potential for meaningful increases next year [90][92] Question: What are the current valuations for theater properties? - The company is not actively looking at theater transactions, focusing instead on adaptive reuse opportunities [86][88]