Yahoo Finance National Health Investors Inc (NHI) (Q1 2024) Earnings Call Transcript Highlights: A Strong ...
Net Income: Q1 2024 net income per diluted common share was $0.71.
Revenue: Q1 2024 revenue included a net increase in NHC rent of $1.1 million.
Earnings Per Share (EPS): Q1 2024 EPS for FFO and normalized FFO per diluted common share were $1.10 and $1.12, respectively.
Free Cash Flow (FAD): Q1 2024 FAD was approximately $51 million, a 6.8% increase year over year.
Gross Margin: SHOP portfolio margin improved by 600 basis points year over year to 22.2%.
Same-Store Sales Performance: SHOP NOI increased by 54.8% year over year to $2.9 million.
Debt to EBITDA Ratio: Net debt to adjusted EBITDA improved to 4.4 times.
Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
National Health Investors Inc reported a strong start to 2024 with first quarter results exceeding expectations, marking the third consecutive quarter of outperformance.
The company raised its full-year guidance, reflecting over 5% FAD growth at the midpoint, driven by stable cash collections, steady deferral repayments, and improving operator fundamentals.
Senior housing EBITDARM coverage increased for the eighth consecutive period to 1.45 times, showing particular strength at Bickford and other need-driven operators.
The company's senior housing operating portfolio (SHOP) saw a significant increase in NOI by 54.8% year-over-year, with revenue growth of over 13% and margin expansion of 600 basis points.
National Health Investors Inc has a robust pipeline with over $300 million, including submitted LOIs on deals valued at over $100 million with initial yields of more than 8%, enhancing the company's growth prospects.
Negative Points
Despite the positive performance, the company's net income and REIT FFO per diluted common share declined year-over-year by 10.1% and 5.2%, respectively.
There are ongoing sensitive negotiations related to the NHC lease, which matures at the end of 2026, posing potential risks depending on the outcome.
The company experienced a straight-line rent receivable write-off of approximately $800,000 due to transitioning one SNF in Wisconsin to another operator.
While the company has a strong pipeline, there is a risk of becoming overleveraged as a lender versus a fee-simple owner, which needs careful management.
The political and regulatory landscape, particularly concerning staffing requirements in skilled nursing facilities, presents an ongoing challenge and potential risk for operational costs and margins.
Q & A Highlights
Q: On Bickford, was the $3 million increase already included in the previous guidance? A: John Spaid, CFO of NHI, confirmed that there was an increase in guidance associated with it, partially.
Q: How has the ratio of base rent to deferred rent repayment changed with the April 1 reset for Bickford? A: Kevin Pascoe, CIO of NHI, explained that the base rent was increased based on past performance, and the revenue threshold for deferred rent repayment was slightly raised, resulting in about 90% of rent being base rent.
Q: Is there a risk of becoming overleveraged as a lender versus being a fee-simple owner in the context of the current pipeline? A: Kevin Pascoe noted the importance of maintaining a balance and emphasized that while there is some capacity for loans, the preference is towards property acquisition, viewing loans as a "dating period" before establishing a long-term relationship.
Q: Regarding SHOP guidance, with the increase in occupancy, should we expect rate growth throughout the year? A: Kevin Pascoe indicated that the focus remains on boosting occupancy to about 90% before significantly pushing rates. He also mentioned that move-in incentives are expected to decrease as the year progresses.
Q: Given the willingness to expand SHOP, would NHI consider deals with existing operators or new relationships? A: Eric Mendelsohn, CEO of NHI, expressed openness to both, emphasizing the importance of operators having deep experience, a solid balance sheet for joint ventures, and a strong reputation.
Q: Can you comment on the political pressures regarding minimum staffing requirements in skilled nursing facilities? A: Kevin Pascoe acknowledged the challenges in staffing and suggested that a more thoughtful approach might be needed rather than imposing blanket staffing requirements, noting the difficulty in attracting and retaining skilled nursing staff.
These Q&A highlights from the National Health Investors Inc earnings call provide insights into management's strategies and responses to current operational and market challenges.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
