CTRE - Earnings call transcript Q1 2018

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Operator

Welcome to CareTrust REIT's Q1 2018 Earnings Call. Please note that this call is being recorded.

Before we begin please be advised that any forward-looking statements made on today's call are based on management's current expectations, assumptions and beliefs about CareTrust REIT’s business and the environment in which it operates. These statements may include projections regarding future financial performance, dividends, acquisitions, investments, returns, financings and other matters, all of which are subject to risks and uncertainties that could cause actual results to materially differ from those expressed or implied here in. Listeners should not place undue reliance on forward-looking statements and are encouraged to review CareTrust SEC filings for a more complete discussion of factors that could impact results, as well as any financial or other statistical information required by SEC Regulation G.

Company FFO, non-GAAP normalized normalized the EBITDA, such FAD. call EBITDA, normalized FFO, the will metrics reference as During FAD, and these exclusion but cautious When the they should more its with relied that reports. understanding measures upon be believes the complete business, viewed a GAAP can its GAAP of not provide of together Company results, arise of revise and undertake to not information, as Except any statements changing for affiliates forward-looking its circumstances required result by any law, do as or events, future other changes update new CareTrust or a REIT or publicly reason. also CareTrust can website financial advised supplement Listeners Relations access its are quarterly press at www.caretrustreit.com. which of Investor that CareTrust be Form accompanying XX-Q of and each its on filed and release its yesterday section also this available a of website for will period. replay the call limited on be A Management Financial Chief Mark Eric Bill Asset on Officer; of morning Director Management. Dave Gillis, of call this Operations; includes President and Investments; of Lamb, Vice Wagner, this Director Sedgwick, would I CareTrust the now to CEO. over And Chairman turn and REIT’s Greg Stapley, like to call

Gregory Stapley

new more fold Thank of XX%. and of great acquisitions, It's year busy increased a million at welcome dividend number completed far you, and here our completed by morning, the been so CareTrust. three in the everyone. Welcomed We Good tenants a Sarah. into $XX than re-tenanting assets.

whom the integrity the it the Among getting orderly so we we of case assets We allowed us asset of day-to-day rent we stream accustomed Pristine of of quickly operations assets, to case general and that are Pristine of healthcare team's placed facilities close transition increasing the and With Hillstone without the that excited. familiarity things, the the nine smoothly. again on relationships But minute. manner OnPointe, turning of always to are decision couple hands these issues, is Dave we challenge. the Re-tenanting formerly two full a our other our delay, in understanding are into both specifically resolving Healthcare, our and our the last operator discuss with In maintaining of significant operators have to deep did in to the and in in to. tenant assets those was nursing operations after process. value operating skilled separate in we've guidance the of business promising back re-tenant Healthcare these Trio let and respect growth and of any attention the the an a new to either gone a OnPointe, two I’ll been about could way. very trajectory leased

place. those well You'll in lease recall leases buildings extremely with located, the well up in were new, priced. OnPointe that we and purchased doing The year they mid-last well assets and were

and knew have which eventually might were assets. pleased In even they in facing some challenges though that OnPointe have to affected two we addition, we were fold CareTrust their organization our

without placed Providence very and transfer to the These open. recent assets. open very of X. with opportunity long-term that and doing are those leases with Based that properties any that against nice May agreed for result challenges, evaluated prepared transition to the master a and value deal about we the conversation as went leakage. operators of the we operation So relationship. existing a had we continuing completed best other to in and wide rent our eyes on those the the course risk conversations, Recently was into it We Eduro, was so OnPointe the on vintage two

our to In both this supplemental the operators fact, put the on asset excited and Albuquerque are is nice, it we them. of have so quarter, cover

in to possibly the noted, to future. professionalism we with them OnPointe the due and look the went cooperation, part and large I transitions forward As conversation in smoothly reopening

will for to the what a in As minute. expand to and most solutions, we've used around productively we We’ve our There tenant done which not asset we processes, and discuss might proven of unique building vetting we Mark sharpen our the chapter swiftly serious problems. of continued some correct as have underwriting and and to process takeaways, been be management. you operators. address learned applied just solid self-examination occasional new experience, Dave our that Pristine on and close bring also difficulties Perhaps we new have guess importantly, would brand have and ability we’ve you plenty our

solid So will at we provide address top-flight making with will and and Dave? returns. to growth operator beyond details developments, look pipeline, forward our that, pledge continue to and industry Mark With relationships our will Bill operators on and conclude some XXXX superior and with bright and financials. the investments broader a now Dave

David Sedgwick

Thanks, Greg, morning. and good

these happy transitioning and not One in opportunities facilities, future growth for Trio also to a portfolio great Hillstone upgrade of operators. remaining Ohio with the for operating capabilities, by-products of but these the significant our only is

and let senior committed the of in to across they to a experience. the vibrant record. nursing well them. is of are facilities of Paul So to XX operate the realize the a the by a how Medicaid because received track have is cofounders: with well-known by industry several granular, operator. in they're have Ohio several state Boyd three understand demand Virginia combined, growing just David Paul second its Trio a and facilities. Paul Gentry, to and took staff, these hands-on headed is caring to Chief and Officer, in longtime Green, and have Clinical decades look he and they Bergsten, untapped which compassion past. housing worked the and currently been Central skilled as forward take him touch, Ohio. Melissa well-respected very throughout They has markets introduce for and the efficient running Ohio me knows potential to operates and nod high-performing, seven big-company the facilities CFO; whom accountability. broad XX Healthcare and facilities you Rubenstein, a name predominantly CEO; seeing Trio combine culture creating with business Hillstone know many who of warmly and systems deep We in Ohio Hillstone proven Trio's is and facilities, over. run

companies scored on very scorecard, moved So our by operator to both well us X. operations and both over take with quickly May

coverage stronger be We are for part from lease will now. XX the confident that the of portfolio much this months

a you'll savings fundamentals from and Ohio, the operations that prior expense the on management at of significant in Southern operations X there. doing Trillium efficiently. They for job with implementing now Ohio cost running December As transition seven the been are captured over took terrific immediately has and facilities recall

with sought Medicaid we We as points, local The senior waiver it element and has measures its has expect while That SNF negotiated units for a proprietary operator over well over different like anticipated a two consensus an and turnover of in staff as ranging backgrounds objective units. our operations on well. huge housing their and ramp measures team's data from other know includes are profitability underwriting a culture key become own we to from and contracting Trillium with the former Those long-term of operators and scorecard three credit largely as All operator's filling plans, decline make and waitlist, management which completed traditional was and mix that well steady things skilled now senses our battle other week. health and as difference very in our process. XXX experience soft took OnPointe to operating that the success. contracts last a new metrics, scorecard, these or subjective score outstanding

discuss picked right traditional this pare to matching used process. As do up and much opportunities. about in better would a operators assets a scorecard underwriting job will And Mark some we've we've be moment, information in data of used of interesting it never that operators kinds that the potential to to a out

our to problems addition, team use that portend tenant nothing asset pops In existing our road. periodically up and them the might rescore down to management be sure reevaluate to continues

note, broader a on industry week. last news Finally, welcome received the

Medicare largest that annual the rate, to CMS rate net increase X.X% First, years. in confirmed the increase

scheduled for Second, or is efficiently. Driven required sending to that so Medicare more rates called it RCS-X therapy proposed RUG, thresholds and to from we with from CMS referred Like enthusiastically XXXX. enthused I'll now changing hand PDPM over October in model for that with as the flexibility by of Mark And more we're the announced the for minutes new previously to name operators, Model changes Mark? pipeline. care Patient about model are a to models supported. talk removes allows This volume-based can that RCS-X, reimbursement program provide had the these proposed that, our operators the arbitrary Payment PDPM. current progress to model

Mark Lamb

at another of $XX.X was QX in we everyone. cash blended a million us yield initial separate hello two quarter and Dave, as Thanks, transactions solid invested for X%.

we and grow with solid added very With hope new leaseback portfolio. sale them the to Metron a in portfolio long. operator we five before to again assets And our well-run Michigan,

to master right We also our of very Eduro added they to out Montana Healthcare. skilled lease nursing doing with nice facility be And a the very appear well gate.

grow living XXXX for million. they year their the of Idaho our informed back and are that would further. Cross for We small that portfolio relationship in changed, We also the us assets, in not $XX grow. with one to intend those set $XX assisted Cross of bought disposed did assets expectation million last priorities

the the relationship. may static small In small decision profit, and into So investments. to we factor look about nice to capital. to recycle higher-yielding size driving assets current back in redeploy environment, and the continue But to we the that sold the a disposition opportunities at them tender was of proceeds investment amounts expect we

harder which absolutely and us alluded deals to the but has it's Our extra worth effort. and to work enhanced both process underwriting to required find Dave better operators, Greg

placed just discipline We leases criteria, As contract not looked one have more recently estate the in few It's operator states, deal of under pure detailed would enhanced us could bought a with finance And large not immediate on been real a months assets often like pulled that. cancel the an operator standpoint, operator's like operator have in we new, like validation you example, enough. the although place. we the receivership. accordingly, and in But that from in winner. the no-go assets meet this on that a out. we, which ones several steelhead near not and caused a well and a to had But assets ago get contract, our all decision

dodging a Our in scorecard key operator possible was bullet.

to the On front, years. overall continues that deals attractive are at us previous to lag present, deal new of volume

meantime, end there we Nevertheless, overbuilt. most and for Although we recently we of the that senior be opportunities deals their marketed are gem. that yields, of seeing strategic the of to small to overheated, most continue SNFs the the business and in to operators the view longer portfolios and/or larger those looking overpriced appears as and up And no a landlords. housing combination well to of not-for-profit pick hidden repositioning market exit midsized are as in that are screen as mom-and-pop and to need

inventory prepared are to second being more to half the in We year. is market the hearing come of also that the

cautiously returns especially better see So skilled brighter we on flow the we are up, nursing optimistic pick will future. deal and a that side where

we we has is a with with the of skilled last opportunities adding pipeline level our existing to now operating then to over nursing million ever-changing meet $XX and from time-to-time and environment current majority pipeline Bill we place are yield us we and a while can new that them provides current to to made And it operators also that are financials. we deals forward housing grown few the that on pursuing, and to the in As here standards have we I'll coverage if when looking of which and our the the actively sit in a ourselves remember $XXX Please up quote reimbursement today, off-market only are currently of we with pipeline growing deals underwriting discuss thriving in facilities. close turn lock skilled that. up. to quote reasonable in we assets confidence includes partner only find that pipe, and with The really which partners range. both have million senior nursing that The up quarter to from pipeline the

William Wagner

Mark. Thanks

Normalized to report by to FFO normalized we FFO FAD are year to XX% million. grew For per the normalized quarter normalized by the quarter XX% over over and by share that $X.XX. grew prior prior quarter, grew XX% the $XX.X share to million XX% to a also $X.XX by per grew $XX.X FAD pleased

the ratio of $X.XXX again in covered the to best of a this REIT dividend on on sector. FFO recent payout which one XX% XX% dividends per most FAD, our equates Given healthcare share, represents of and

you to guidance, the me on go Pristine. accounting with update to for I let Before respect

discussed, reserve we assets XXXX, fourth XX, a per quarter outstanding AR we rents of collect XXXX. cover two and books release, any press share portion be expenses collections collections guidance are on working are and April increased reversing the by as and at the that in $X.XX property what assuming paying. through March will that annual our nine through to previously in from tenants rent transitioned any to although our outstanding rent, after paid not $X.XX. that, rent In will In for that range such cash Pristine to Pristine capital to the Greg may Pristine's of After reserve that of does normalized collections line. But believe taxes ultimately both reversed. As the any pay. remaining cash taken, $X.XX we collecting for to cash pay guidance pay. Pristine Pristine that of collect be receivable we April in the April After out used remaining the Pristine reserve had rent low on to our expect approximating was paid expenses yesterday's Pristine's high-end all put on in will FFO accounts new the of the took off paying Pristine remaining [bed] as not have do the does we collections go XXXX taxes and we we XXXX range through XXXX we any reverse not

assumptions. FAD share guidance normalized We equity to on also shares additional X%. our all average rent count share relies also of weighted any the $X.XX. made investments Two, million year. investments for issuances $X.XX This and no XX.X increased escalations further this guidance One, of following per diluted to our or CPI or today, debt includes

a term at this Our million rental of in our projected facilities we again, only million. $X the loan. year. the of straight-line $X.X of and current X%. million revolver are expense rates approximately plus of bps on have total grid-based approximately to includes interest are the to rent. make That up $XXX,XXX acquisitions revenues LIBOR $XX.X revolver assumed six, million. independent of financing $XX.X calculations, margin fees. on our NOI for are about $XXX of interest rate loan the income projecting LIBOR G&A Three, Four, and do we Interest XXX XXX approximately $XX.X including bps floating X-year expense amortization of living $X.X roughly projected approximately million year our of million. made approximately Five, the deferred million today on And rates term and includes In interest also

of Our stock of G&A amortization $X.X includes projection million comp. also roughly

times, coverage of leverage enterprise X.X value approximately As approximately X.X our our on charge today, is for ratio about basis our times. is is fixed of credit and stats as a calculated debt-to-EBITDA run-rate XX%

$XX will million back Greg. turn of And with hand to it I We cash have today. also on that,

Gregory Stapley

the Bill. and the those proud Thanks To behind us. I'm our of challenges recent team has pleased to challenges up, sum have tackled way

way. We and are forward CareTrust in seniors intelligent We your Sarah? you to skilled questions. continued our and thank housing discussion answer And has and that, continuing optimistic measured We look be for this to we'll nursing and happy an future industries helpful. about any of support. the been grow with to future again the hope

Operator

Our Instructions] first KeyBanc comes with Sadler Thank Jordan from you. question [Operator Capital.

open. now is line Your

Jordan Sadler

Thank you good morning. and

Gregory Stapley

Jordan. Hi,

Jordan Sadler

you're tenant using outside underwriting base couple here, the and back reinstalled First question new re-underwritten is you you've that existing Have using today. model? of the gone the the model regarding

David Sedgwick

Jordan, Yes, Dave. is this

use it, financial the with credit on new their So the background updated trends on subjective has corporate more from captures the scorecard the that's things the the XXX that sophistication, of use margins, payments operating that bundled systems the well sophistication like we needed. the data-driven the as approach about data soft they objective leaders, and points and things things, really

handed And take information actually we off have. it we've then ground. cover to that they is and management, that asset and enhance a they then more what they we that lot do So of with

we all So It's our that an process. done have for evolving operators. of

as find Asset adding management data add continually to it. is to more we more things points

Jordan Sadler

run presumably, all through is the But operators asset model, existing you've test? and management and the existing they operators, your running the the pass

David Sedgwick

those the that's They quickly who as just who asset, whole yes. to able and so and landed example, at we the prepared fit is move for do. helpful who is Providence. we're we how as decide best we've operation yes, And change, And not That's but fits to looked and existing the for operations. their at done reason the fit, look very quickly best and our on OnPointe and who operators is Eduro is, those

Jordan Sadler

– this Okay. to And same mean, presume tenant you out point. relates as you're relates I I then along it the as to it the woods at of issues feel lines,

think in portfolio now with kind the whom had some marks of I you've OnPointe out. or swapped challenges third the tenant you've

I'm what the watch curious list today, anything. looks So like if

Gregory Stapley

Well, take Greg. this us that I one. two think of Jordan, will is

was eventually the work everybody just to that having. they based knew separate different there others very that that because were deal part from as in knew we we to OnPointe then manage had them that be prepare they some that, I for their we've and upon might challenges a issue and First, through them with chance way We an priced we the had remind the want situation there.

second I'll then ask we one the we question. Dave two, the full two. to take count of your that with But other and the take So half other for really responsibility

David Sedgwick

we'll really paying we a close we the And let looking that making transition the risk now, right just and past, to operators there building. obviously And attention about have feel we at are in feel it. any. know whole be as if are to of So good there rent today, payment, you aren't as any we'd the at portfolio a as

Jordan Sadler

in be then sort how you the and guess, again rollout one, think including I you, I'd take impact CMS' maybe interested underwriting? sort And of on Dave. RCSX that'll last and iteration Okay. your for latest of

David Sedgwick

Yes.

of that real since been saw It's version better I've as came operators. cuts and a improved heard an operators ever PDPM deliver as give to by flexibility so going the for reporting that how has – we far our because So RCSX everybody out, positive to the they and terms therapy. continues give requirements more some it of gives down RCSX it in of lauded

we not So patients. cost arbitrary material certainly more the be It cost an going that which major delivery needed not care, therapy some the is of and efficient. and these as savings there's are gives required side, operators be in therapy care to expect But operators away. part savings will to in more minutes much and, integral having be cases, flexibility delivery the that just can the on for of always going the thresholds to some a is of the be expense efficient

yes, operators, say see as than it better, to we sophisticated So for much an more more overall plus not and that. the

Jordan Sadler

thank Okay, you.

Gregory Stapley

bet. You

William Wagner

you. Thank

Operator

Hughes James. next with comes from question Our Jonathan Raymond

Your is open. now line

Jonathan Hughes

happy have the Thanks those transition. for Congrats behind the Hey, good afternoon. on and to know you. I time you're

maybe and the been only far? So days Trillium, that's or realize progress made and with Pristine I the color facilities, Hillstone you to update transitions, an on have just those Trio since thus seven us can the sticking any then transition. trended how it's give eight

Eric Gillis

is all leader, starting and there there. of foundation clinical employees that with the last of have transition Trio is really Ohio basin I Group and and from last have the process Eric, which from that the been by this handled transition. has Trio as they've Jonathan. week operators buildings have a directors that received built in And Ohio arms. week the is as Melissa, clinical and nursing is with with the good standpoint open The and part there which -- solid them Hillstone truly was been a out been perspective, impressed way the teams out in So

So we will really really, the transition.

operators excited how those how and what with portfolio. close communicate doing on a weekly they we're with very that. they're basis are to But as stay on they're to to continue continue and transitioning We doing them the

signed. kind his As to operator a of plans there contracts, contracts waiver negotiates Dave's The reiterating assisted as Friday. any waiver a a Medicaid was in waiver prepared of including last Trillium regards comments, Trillium, with Medicare transition, have senses these this and vast new living, – point different high been of the health is is majority the program during likelihood signed Medicaid now

ramp the continue a week, and lot of as last signed to seeing been of Census so we those And up. and are steadily the have expecting

that this just Medicaid Middletown, on Now little give you have XX assisted their color more and waitlist of they for living, of which a waiver SNF people. to one that have living assisted in is the campuses

bottom So there. that's the line an instant impact to

we – labor And we're expecting occur well been managing to really really have were so but see They their like more with cost and that control things with well. have excited. Trillium, done

we're Trillium. So the future about excited for

Jonathan Hughes

it. Okay, Appreciate for then a that scorecard Thanks mentioned one Eric. deal Mark, effectively maybe that’s the great. you helped... And

Mark Lamb

building bit of or with [Audio building a terms Gap] we to vetting that do place set in upfront we a the more operator. make one, before that operators work a determination little

with coverage. who know has who also us existing has our helps And kind so it the operator of to bandwidth,

front many that dive us. and in just So I ways, think opportunity helps deeper us of truly of a particular the fit take that's understand in kind for it best

Jonathan Hughes

simply earlier, that okay right of that cost is that mostly there the versus Yes, capital more opportunities there and in scale. are then reflection today the now? year? that of last pipes, a mentioned you space Is out higher Or

Mark Lamb

our bandwidth more at grow the side SNF little with and existing bench are the with I to think on we them ability operator seeing a this.

us are down, to opportunities and be still seeing only to we interesting some our cash accretive, volume flow think the not is although that think I very coverage but to for tenants. we us, can accretive

the we tenants for are are seeing we we transactions old coverage. for and once our We're our from operators SNF we'll very excited we're bring them chasing. and days, our that we and into so think about do and portfolio, that the well And

Jonathan Hughes

want keep Okay. little if may. And more bit could you to leverage I wondering Bill But the your don't fresh out. then about how term any line, leave then ranges, balance your just price? just of you today plans current talk on within think debt out a also I about your you one that to where target more if equity maybe Thanks. to cost share

William Wagner

term it Yes, got that we’ve what We so talking than the year. more today. is out tenants our prepayable last right XX-year of X-year balance that We’ve million both we without got we sheet via XXX on debt now, looked market about that terming could $XXX the term high-yield at on and expensive which we both loan out the tapped year. line X-year last issued penalty and million, at

and of opportunities. than are to also up yesterday lot And weeks out a got today there. the today, the those given were So cost this We've leading we price the our ATM announcement it our feeling better equity. share regarding we're

Jonathan Hughes

it's to weeks could this guys share fair here the that mean, lever of couple you at $XX So next start over pulling price? think that, I

Gregory Stapley

a Greg. better and our the that particularly Yes, week than a power raises been always discipline. lot he about We ago. we've the of best on he being behind a front But Jonathan, equity just this in is heck equity – math did of on fund careful disciplined things doing match very our a lot our feels acquisitions. to says Bill

that will And lean to so tend way. we

these an thing, have think I do side, and significant something conversation that time-consuming debt you has to behind the been of might soon to ongoing there's we're very pretty facilities a imagine. transitions with here as the getting On going us

some we're today, pivoting towards so the with things. of of be those call now And this conclusion we'll

Jonathan Hughes

Okay. taking That’s for That’s off. jump Thanks great. for I’ll me. it my questions.

Gregory Stapley

you. Thank

Operator

Instructions] RBC next Carroll comes Markets. with question Capital [Operator Our Michael from

line open. now Your is

Michael Carroll

you more really deals little pursue you indicating like? about today? can Greg, let investment ago, and today you that apt activity of does to have than looks What going now. two were big And you relationships know little deal bit I pipeline investment are bit a lighter relationship-type the on? that a previously markets when the say kind or are years volumes right a today talk had you

Gregory Stapley

great bit deal about That’s couple seems little be down a question, seems that. talked that quarters We've for indicated, continue volume see as to to a thin. just overall, The Mike. a of now and Mark to we pipelines, be that

out we rumblings of a starting we across out get half. are industry to second be talk pent-up and in lot that the as Although, hear the supply could about coming

with. for of So that be optimistic about and we begin think seeing to And new beneficial the the behind to issues some are cautiously other us a more harder beat our little just deals. looking for forward things I having and chance bushes to more us look those and should

So as been go, relationship far as deals always we've relationship acquirers.

For been us, it's first. always about who operator is the

bad that turn are so say no great are assets are can't around, that assets them. a good a that few trained there it so run operator that me can before, probably heard but You monkey and

year answer important big dodge has operator to with assets so comfortable going into in are future we when the it group we maybe how we why step more in scorecard just That's with a to It's looking that of the And And who your how the couldn't were operator Does helps last we but us bullet thought we the to become significant new it's get so will operators. always the past. than question? function investment, have at was. so, us. continue even

Michael Carroll

year? they expect little why market half? sellers this reason in occur will why come the that in talk pent-up you the second are to demand of bit Can the the it Yes, sideline? those a half you about the What's And to second does. on the

Gregory Stapley

that own most rough a a whole And otherwise of The their, clean waters us patch one might of had sort the and think I up extra that past a lost that's need their little some of lot XXXX. year. Well, that in the everybody value reason up of sellers the hit, that might P&Ls or through rough to probably would kind is of plausible to choppy have that. offered seems their been now kind opinion recover time for market clean the been be have to the industry coming a of

sense, so think see things And we horizon good the and that operators. on I makes for

And should some deal flow. so that the free-up of

Michael Carroll

more business in see want because exit maybe all kind just cash pursue out Medicare changes to just is would do this seeing, complex that that Advantage evolve than that of the in And the of environment? they're operators of you and rather growth kind they getting the maybe completely

Gregory Stapley

for of it this partners the doing kind off grow been time our sort up a who and levels at flow small is been there’s small third-generation and always to long second, operators, it's former we and we've legacy requires wall more because all spun mean, look, just higher I that Yes, a a for. Ensign long, families from mom-and-pop, regional, before and getting steady constant getting and of long of sophistication the evolve more to willingness is complicated say, hit a not complicated everybody time,

And of for over so a years. the us stream that provided opportunities steady

Michael Carroll

the more is kind ago? of it same was one just become it that has to as recently, years And or two apparent

Gregory Stapley

same old. No,

Michael Carroll

great. Thanks. Okay,

Gregory Stapley

End of you. Thank Q&A

Operator

Thank you.

remarks. call would over at time. We turn now this have no for to I like Stapley Greg further any to further questions to

Gregory Stapley

call We everybody. and the today. on really Thanks support being appreciate your you

to find with If any where see questions, you. other visit most you you of we're and always to know to you have and happy us,

next So quarter. and talk we'll take to care, you

Operator

conclude program. you thank This in conference. today’s and participating today’s gentlemen, Ladies for does

have Everyone great disconnect. may a day. You all

CareTrust REIT (CTRE) 9 May 182018 Q1 Earnings call transcript