Omega Healthcare Investors(OHI) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted FFO for Q1 2019 was $0.76 per share, an increase of $0.03 from Q4 2018's $0.73 per share, reflecting a return to a more predictable environment post-2018's asset repositioning [11][12] - Reportable FFO on a dilutive basis was $144 million, or $0.67 per share, compared to $147 million, or $0.71 per share in Q1 2018 [17] - Operating revenue for the quarter was approximately $224 million, up from $220 million in Q1 2018, driven by new investments and capital renovations [18] Business Line Data and Key Metrics Changes - Revenue related to the Orianna facilities transitioned to existing operators contributed to the revenue increase, alongside $972,000 of non-cash one-time revenue from the Aviv merger [19] - G&A expenses were $11.8 million, including $1 million in restructuring charges related to the Chicago office closure [23] Market Data and Key Metrics Changes - The skilled nursing facility industry remains challenged, but there is optimism due to a proposed 2.5% increase in Medicare reimbursement and the implementation of PDPM starting in October [14][45] - The occupancy rate remained stable at 82.8% for Q4 2018 [15] Company Strategy and Development Direction - The company is preparing for the MedEquities acquisition, which involves integrating portfolio management systems and identifying capital needs of existing operators [40] - The addition of the MedEquities portfolio is expected to provide meaningful growth opportunities [42] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the long-term outlook for the skilled nursing facility industry despite current challenges, particularly in Texas [14][36] - Labor challenges and Medicaid reimbursement issues in Texas are ongoing concerns, but upcoming Medicare rate increases and PDPM are expected to provide relief [70][104] Other Important Information - The company plans to issue approximately 7.5 million common shares for the MedEquities acquisition and take on $350 million of additional debt [25] - The balance sheet remains strong, with 81% of $4.5 billion in debt fixed and a net funded debt to adjusted annualized EBITDA ratio of 5.2 times [31] Q&A Session Summary Question: Can you provide details on the pipeline size and asset mix? - The pipeline includes skilled nursing facility assets, with cap rates tightening slightly due to lower borrowing costs, with a good year being around $1 billion in deal activity [60][61] Question: Update on Daybreak's status and Texas nursing facility reinvestment allowance? - Daybreak is seeing positive developments, including the addition of facilities into the Texas QIPP program and a Medicare rate increase, but uncertainties remain regarding rate relief [70][71] Question: How is the Manhattan project performing in terms of rent? - The Manhattan project is on target for underwriting rents, with strong market reaction and pre-leasing efforts underway [76][78] Question: How is accounts receivable trending from operators? - Accounts receivable has improved slightly, with a breakdown of contractual AR leasing now available for better clarity [95] Question: What is the outlook for skilled nursing and senior housing? - The skilled nursing outlook remains challenging due to labor pressures, but there is optimism for 2020 as demographic trends improve [104][112]