Earnings call transcript Q4 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Devin and I'll be your conference operator today. At this time, I'd like to welcome everyone to CareTrust REIT announces Fourth Quarter and Full Year 2022 Operating Results Conference Call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. instructions] [Operator

your President, turn Lauren for to call I'll Vice Senior Beale. patience. you the now over Thank

You may begin the conference.

Lauren Beale

regarding and call be Thank REIT’s projections you any financings its beliefs include business governmental based and it that forward-looking should may call pandemics financial on advised assumptions and and performance, on or fourth CareTrust beyond which recorded returns, statements business These this businesses reference aware tenants, actions. company’s operates. investments, acquisitions, future that are quarter XXXX disasters, are such statements affecting about listeners and their earnings the call. that and may as welcome are of in dividends, factors is or the being the to matters control, management’s environment today’s COVID-XX other including expectations, natural other such and made may Participants not CareTrust’s matters current as

risks are factors SEC today statements could from or company’s The should CareTrust’s reason. or information, or impact to and affiliates forward-looking for future its any implied results and materially result reliance forward-looking a SEC are herein. review as actual to financial do required new a complete not arise those more other statements to and REIT revise CareTrust well changes circumstances that to not encouraged as required other update differ events, expressed by information or publicly on as Listeners for business statistical of law, of any statements generally any Regulation G. as could by undertake cause undue results place changing where Except filings subject discussion and its uncertainties that

accompanying that as FFO of these more to FAD. the will relied be reference cautions believes call, EBITDA, they section press each company can results, upon at business, EBITDA, of or CareTrust the viewed measures be GAAP period. Relations F-A-D the call such its the FAD Yesterday, a complete this also can of When the supplement, its and exclusion understanding be of and limited together reports. should the which website on During GAAP and release Form replay not normalized and for accessed Investor will on FFO CareTrust’s with website available quarterly metrics but XX-Q non-GAAP A www.caretrustreit.com. and company financial filed a its of provide

Wagner, On and call Bill Officer. are Dave President Executive the James Chief Sedgwick, morning Chief and Officer this Chief Callister, Investment Financial Officer;

CareTrust President now I will Sedgwick, REIT's over Dave? and Dave CEO. turn to the call

Dave Sedgwick

last Fed's on impact has Many Lauren good and everyone. to applicable dynamics at the quarter's macro you, morning, themes response still play, of today, had earnings a Thank inflation been market over the with from undeniably five call starting the are risen the into also our leverage, sector-leading credit sector rapidly eat the slow even FFO has past rates years. share per a what as leading intended, with and growth rate significant

the quarter, and to The direction do for last accretive good elevated side tipping to who we positively, intend with credit cost to make of capital, sellers for the be certainty even market are brokers can our still of tighter in and as flip we the is investments looking a the of continues so news scales that close. and mentioned

to Our secure jobs and drive if some in operators where healthcare. a are back staffing find when are also challenges work, poised the to here to relief to people begins recession

handful with assets of made to report significant at Rent Today, that of I'm market. about quarter the in deposits remaining as XX.X% of smaller assets restructure, in came $XXX,XXX the we the identified a only or XX original sell, we've pleased inclusive progress reposition candidates of applied. on to fourth

exhaustive $XX.X an sold sold key those few supplemental, detailed XX on for will in after facilities The a retain points rent market. five update but I a running XXXX. and emphasize decided XX the million, we provide here. process, paid leaving XX, properties properties to our in no We Ultimately, essentially

we of retained, million For contractual about of in the $X.X million collected XXXX, rent. $X.X XX properties

For these just $X.X XX hope of of original estimate on will clarity of give about from we seniors next eight produce XXXX, rent smaller housing six quarter. the that the the for to We That cash timing commencement rent facilities more million. leaves remaining are those sell, two being we is to for last as a under rent of that, one LOI, the still marketed. market. on market, Two here only actively These $XXX,XXX. sit today, the XX under paid assets one are year, total on of leaving contract five five

strength, portfolio represent of with funds. the coverage see rent, portfolio XX% lease property of of ten X.XX terms a who contractual HHS EBITDAR excluding level times, XX with In you'll tenants,

We been facilities. the XX turn putting matter just to it's a few vulnerable in they've hard have top the until in surface, certain confidence on results their the in the reflect operators believe and work that appear time of

has rent as X.X% due for annualized. January their payment us elevated February talking recall In this has XXXX, may rent risk call yet. for exhausted coverage and you our who outside year, associated nursing of about lease to negative top quite million repeatedly deposit, $X.X for skilled we applied security XX/XX They and Midwest had or time. been one XX with Last of on account partial operator of payments, no some made

need from informed I We've with excluding HHS about coverage for the next lease our we to highlighted discussions a us EBITDAR top have A they works work XX that of outside active a path a X.XX on week times, just best expect change before, X.XX funds. this both of plan forward, in them CEO to without share you times ago, goes concrete Like to together started to us. and and plan with our operator, quarter. the

proud and the the and COVID on both is affiliate through many the way operators feel of taken majority of years the has toll we managed large sector, to our that our on small. some past country, have operators with Considering the few these in best gratifying vast levels,

enables our of strength more this attention The to to growth turn external company year. us

our So continue our and as balance experienced XXXX, our portfolio, our sheet, be we team. begin strengths to

turn I'll it James to on our update that, investment you outlook. With to over

James Callister

and good Dave, morning, Thanks, everyone.

the facilities see of nursing seniors to are that high uptick variable Looking sold across seniors Many skilled coming and interest being loans the we an to our with housing, desk. behavioral have and in owners consist market, continue to assets deals, exit. of housing distressed facing rate

transactions increase continues of some are primarily operational skilled flow with nonstrategic stage to to of to or Deal nursing few consisting assets at on a side, distress. single a the seller incoming the that

as a a few and rates looking portfolios the sell low. also We business, are in seeing they operators exit few portfolios smaller where larger Medicaid states from very to remain

negative are REITs Some cash equity to private owners are strategic. flowing and disposing assets that longer help assets or geographically operators of shed no assets also

These trends with of may accelerate the public health end emergency. the

flow placing of upsurge an certainty emphasis to execution the and deal continue, on expect in with risk. low close sellers We

Price seeing adjust discovery signs to cases. expectations are some continues, we though are sellers in that motivated starting

as We for rate environment, given look seller will disciplined markets further the other expectations, to adjustment tightness factors. the and debt we remain in high interest

and operators have capital, are we relationships favorable bench where to we with to a states sheet balance actively pursuing our long strong pursue Medicaid access on with With to a labor, actionable focus existing we those strong with of have where opportunities we new poised and operators, acquisition admired. are rates and access or

with side-by-side to environment. the underwriting our occupancy than commitment challenges difficult other a be will as of current assumptions ever labor, Our operators in we important approach more underwriting face and the

million to sits pipe, Turning the currently it $XXX million in to range. $XXX the

limited seniors As housing we enter medium-sized acquisition opportunities sit that primarily some would we here up us nursing, today, not of presence. The the have states, includes assets. include small deals portfolios allow skilled of in to to one our two standard also where states pipe is expand some but addition in to also only new made but or facility a

to And Bill. with it over I'll that, turn

Bill Wagner

Thanks, James.

normalized X.X% share. $X For Normalized from FFO share normalized to the On year decreased per a prior decreased $XX quarter a $X.XX. Fad per to X.X% $X.XX $XX basis, Normalized to million. FFO decreased Fad also by the million. $X to decreased quarter,

Rental million, $XX increase quarter in The is to due was million largely compared $XX.X income of $XXX,XXX the items. four for the to QX. following

prior receivable $X.X of more of a four, XXXX, during $XXX,XXX; rents the but of an quarter. cash increase $XXX,XXX on it cash accounting in rent little expect a a to bumps of QX material. are approximately tenants of basis not cash decrease three, will collections $XXX,XXX accounting in who was of in from relating received a that this recognized of million a moved basis I of in line we of related QX. straight Two, write-off to to we One, tenant CPI tenant a be from cash and

Interest our QX. up was due offset $X.X we interest the to million, $X.X income expense from up of to revolver. in $XXX,XXX QX million higher lower by due was closed borrowings under rates originations slightly Interest

impairment we collections quarter, items contractual $XXX,XXX expense the operators. contractual for took rents quarter $X.X XX% corporate the was of In $XXX,XXX collections down includes $XXX,XXX. cash our of G&A and deposits. the of security by related of from January, collected of Cash due the in of $XXX,XXX, rent. rent was expense XX.X% lower due to contractual of we cash deposits, XX.X% of During offset compensation QX came additional at an million, other of security Without application application the from

ATM in regarding gross We QX. $X.X notes of for and shares extended $XX.X sheet A our proceeds we another couple our of issued the million, under balance years. four revolver million

available $XX remains with and approximately extremely our liquidity cash strong in million Our revolver. under $XXX million

to achieved is a stated charge value four our times. normalized The net we which continued Leverage X.X range of a end to quarter as be below ratio and XX% debt enterprise also to to debt fixed with ratio times. of X.X coverage five is net times, of strong EBITDA of

that, turn to back I'll with it Dave. And

Dave Sedgwick

Great.

our answer questions So and and continued helpful time. support has happy and you your to this report we at interest hope for thank been your

Operator

Jonathan Our first question instructions] with from comes James. Raymond Hughes [Operator

Jonathan Hughes

since afternoon us the guess, to out. guidance. figure just Obviously, are I and to not rent seems retain those give good we some building of morning I hasn't I there. or was hoping or And have know It things what it like good given out operator we blocks year. a there's you've about need. this could XX% the of official of that why sell us that Hey, maybe we for November. obviously still so talk outlook out expected and properties paid or play few kind X% left there's how

our do tradition and make we trying the that preventing what's models your you just complex, can get giving guidance? resuming of I And us annual certainly own assumptions, from but not understand to

Dave Sedgwick

Yes.

Midwest this like the when retained rents question. of that the think are talked pointed answer not there's and guidance I timing to the outcome still facilities of enough of with issue We feel your yet. the to going you've operator these So in uncertainty around commence we to about kind

we're have the quarter, But that things by we to quarter, agreed do we clarity I hopeful in lot a next next will to. be and that because of think able should

And to able then think soon we'll will issue be guidance. so quarter, next as to, which we're I as be able

Jonathan Hughes

on good. the… then that Okay, And sounds

Dave Sedgwick

us quarter. of remind next You'll that

Jonathan Hughes

I write-off in if the that backing. think certainly the don't some as are will. they what's mean commit accrual not you new That you I pretty November, that recover also a the the Midwest still said I quarter. the to operator maybe since and And since financial And I chance, point under there are a have does as paid line hasn't to hopeful will operator, rent discussions saw this strong so, accounting they at been X.X% on progress, current CEO, think is still they straight paid?

Dave Sedgwick

expressing cash commitment of from very there although year news is to We them group I'll conversations on so the literally handicap turnaround. fresh. the this week They're how it's us the goes, they not and you with to portfolio the are that the and they're accounting. change the to CEO, in Yeah, over tell last accrual got hard to

nursing home refused of week, Iowa on in federal just has couple And FMAP the funds. the been any in This operator country far really Unlike one bit them. other of to I for homes of the pass supportive last providers. a give report Iowa in XX And least closed nursing operating color states, to have days or in of proven facilities the is recent years. you saw state more on primarily where states to the last be so little Iowa, they've a about

the that pretty makes So difficult. environment

increase late. because some, reason going but this However, there is going hope it's rate to for Medicaid July, just effect a too be there's little into for too

early for out an path makes So we those of both in give yet. how of sense it's just working figure going we're -- can't it's with operator indication that us. going But to you to play really this so to out we discussions be a forward that

Jonathan Hughes

raising been a quarter. raise equity, to those more. you've one of the of did in think used premium seven so It down capacity the to about future identified fourth opportunities to optionality capital? teens since expect rate, but Just hanging to how more and do that has cap more your ATM while proceeds equity low Could no you create to low for NAV, with at deploy we kind keep you continue to levels facility And trend external growth? that implied publicly

Dave Sedgwick

that it the the trigger look, down a pipeline in that we -- sense like execute and coming the we quarter. made feel and able to ATM line that into to is be feel on to bit, the think, saw with just going a I in little pay to to Yeah, ability that we months pull able visibility we'll so like be

Jonathan Hughes

All right, quarter. hearing lot I for a the forward Thanks look to next more time.

Operator

comes Wurschmidt question KeyBanc Capital next from Markets. Austin with Our

Austin Wurschmidt

morning, good everybody. Hey,

$X performance. Just $X.X million maybe based wanted past to of Midwest that go back talked be delta discussions, seemingly that level being million roughly to million, relative of about rent there where facility at of sort Dave, dollar contractual maybe couple operator, you've market believe rent, on I a would risk to in that

just I'm about how sort that's right range And a are you if to these still sell or potential cut communities? looking the today, rent of then even and curious thinking

Dave Sedgwick

over changed few EBITDAR. last negative Their the quarters. these our think don't has with performance buildings really stayed I on essentially value has the the of Yes. same view

that of so looking the basis in do, it's willing on bed we'd value probably would you're about what a given are to taken to yet. And talking be at we terms be something just should discussions, that it's But portfolio a per not if in market. publicly we where

Austin Wurschmidt

these then eight sort hand, you optimization original one grouping. switching then of portfolio that clearly to within over fair. That's you retained, the flagged And on guess, tenants I your

So presumably contractual all of optimal, that did wasn't rent there assets pay was something these about they but in XXXX. their

just sure sort So rent of little landed room on magnitude on there's shed forward? cut bit how the sufficient for the can you of be of going you cut need a the that light and that to

Dave Sedgwick

great buildings there Yeah, with though we the they saw I was because you out you're early right, way And something in laid these even current question. rent. appreciate the that question, on, were

that announced remember, If that we next who the try a this at time list. and or and hit to sort of the said was to the these look last when responding plan for our to we facilities XX, and we you'll year us to rest then portfolio were be operators operators couple caused anticipate going made of wall these that of

contractual guys we look year, with but if largely subsidized the They this received buildings to paid the going And it at. rent is the what engaged that have well? okay, and them that to in as these take the current, full for government think not say, to that, was stimulus we to And and keep number incentivized arrived forward that's we rent not we run then would year. in to year, I keep these

at may either very market retain any it come these when set agreement improve to for revisit sell and We the bringing us to well gives buyers a conditions right that rent or and to assets an we've time.

Austin Wurschmidt

may just it of event? on today now specifically, a of be when forward, curious commencement going that. Thanks the Just that these the retained you likely some know sort range, will a also FFO a respect one rest 'XX -- the wondering cash don't though And if you And kind on I'm us for event? is GAAP give impact is more 'XX of with can then so then even does we the commence. if reflected maybe last sort just it know of could even occur. specifically rent once four Is I facilities, or the basis understand to rent

Dave Sedgwick

expect this four again, of be that that of year I the would rent, we supplemental are the would and we retenanted some year one more are so of sorry at on that clear $XXX,XXX I'm that contractual can't see timing Yeah, for showing that.

a X.X%. checked, a requirements one would yeah, get Then rent year. of get it that need that sometimes to those some once that There's But, I expect this are redevelopment some things full time. chunk prevent and properties $XXX,XXX all the licensing transitions we'll take retenanting of shows as complete, the year and use will

Unfortunately, today but a I I the of timing followed And think, you step have X.X%. to we'll quarter of better a all be of up X.X% that really give year that the get you'll next when in by commenced. timing can't two will rent of when idea, that starts;

Austin Wurschmidt

Thanks time. Helpful. for the

Operator

Our next Steven Barclays. question with comes Valiquette from

Steven Valiquette

question. Great. today, of first Thanks end up some the positive flag earnings discussed the equation. guess to obviously is May, the went how additional your lead I some which the guys for you and coming it way opportunities, cause displacement release in side property taking of of sort of you acquisition out in PHE could the the official and to

I guess.

losing provider? policies some guys think because the of material going If some lost PHE. what's you the some the implementing be also to to target, material risk the in or you on guys can't time taken I the SNF color you but the percent the shared think knowing this EBITDAR for impact to remember what determine On a any states benefits you for we're talked around might average side, PHE, do you be internally average make previously, up about it's support not have guys related negative just it's or moving to if

that 'XX half potential ratios into or coverage as impact I just either thoughts just in 'XX. the average far as just around of EBITDAR Thanks. the back on want to get your

Dave Sedgwick

a question. of question that's depends are ball one. that levers there that on to play answer the so it and answers hard a It's for It's Thanks a really bit many because good crystal the at to you're historical skilled in. for non-event, it's be already In those at particularly mix state operating kind the are who operators some I states, going numbers. of sort think a of

have in might be states. Those so others rate already a increases that in deal really of Medicaid it In it states be. big some and put shouldn't

think to answer others average, negatively deal operators that be it's some states on won't them. an the and hard industry for So be or it some in will of big I a for affected

Steven Valiquette

your move the coverage think or Okay, though, progression ratios needle you coverage take. think six other it portfolio the be next of give reported the for we it your or could on guess you offset do When I and will but just by factors? ratios eight forward think about do for to just absorbed quarters,

Dave Sedgwick

will Yeah, I effect, whole who little lease their away skilled coverage net a probably because mix it effect eaten bit. to the negative going occupancy flat, their stays think be come little should if have a margin be on to down there going those by is just then on are bit. And a theoretically definition,

to that it's then slow, However, we're offset could steady that recovering, continues signs if while which occupancy recover, seeing it.

So it's a to little bit frankly. handicap, tough

Steven Valiquette

Yeah, about no it. doubt

the helpful. appreciate Thanks. definitely I Okay. in color, it's the meantime, though,

Operator

Our next Carroll from Markets. RBC Capital Michael with question comes

Michael Carroll

to in that that going there operators retaining were operators were bit can operating in talk to different be more the properties previously? How those Yes. the that facilities Thanks. on portfolio are versus and XX plan? a Dave, we those ones the going those are new optimization little you're planning about many

Dave Sedgwick

in XX, prior the new, operator. transitioning operators from the in of a are we So meaning coming couple have that

to Health. conversions two the have We Behavioral

with as new going there. classify then operator are properties eight to the So that for retained those a landmark type, us. among two the are retained those operators staying are we that And

Michael Carroll

like are It these are housing seniors then them nursing? skilled of many And but breakout? versus behavioral, two how of what's the sounds

Dave Sedgwick

the they're housing housing seniors are are Of two behavioral. behavioral XX, all converting that and the seniors into

Michael Carroll

ramping different going or [indiscernible], the there $X.X in they timing through that January, the rent up that you that throughout that be the a that of been or commencing rent expect Okay. to to paying from then paid of have And commence, year? And or million is of did fourth is continue quarter? the

Dave Sedgwick

of January as XX. commenced That's

Michael Carroll

they Did the pay quarter? in fourth that

Dave Sedgwick

what step quarter. fourth It's the a down from paid they in

Michael Carroll

What did they pay in the quarter? fourth

Dave Sedgwick

rent That show a slide on where there goes we It's X.X%. contractual seven down XXXX of to X.XX%. difference

Michael Carroll

fourth the those that then or ones exhausted rent -- that security that paid full And fourth if tenant, quarter, pay quarter in great. the deposit? their their you fourth did contractual Did of X.X% quarter? I deposit on reflect contractual security Okay, much did guess they the even when the how short was in in

Dave Sedgwick

Yeah.

the So made this quarter. they in a payment operator, fourth partial

So was payment us to November. last in their

Michael Carroll

fourth you in deposit. payments you security exhausted full then $X.X the that applied said, and Did And rent quarter? reflect million entire the the contractual

Dave Sedgwick

No.

to up for a about quarter. quarter, Sorry In confusion was on make in year, quarter, short in up fourth the bit still the due. the memory ended applied, for fourth third was of operator $XXX,XXX serves, the that. the little security but the $XXX,XXX first we They for this what quarter, security applied and in -- their deposits deposit if

we would deposit up would they would And and what the they quarter, is type then thing. in and then happen of the it, would same in quarter, first that, replenish apply a make third so for security

They would of their part replenish it. make payments,

really year, situation, is it why talking we ongoing about was so August which of last started about in late an And elevated risk. them sort payment being

Michael Carroll

of I plan? if that. waiting you as in they can recover about I we're from is can the soon seeing you little not a potential opportunity I that details, start think to this ultimate recover, rent as this on the marketplace? so start they but Or results then, see if just and see if know a sale repaying to more sure can And guess what's you the talked bit the call, I'm Okay. we're kind any answer

Dave Sedgwick

Yes, on weekend. is about early just conversation too a to it's comment sorry, The Mike, it.

Michael Carroll

Thanks. I appreciate great. Okay, it.

Operator

last with Capital Markets. question Juan Sanabria comes from instructions] Our [Operator BMO

Juan Sanabria

Hi.

Mike's line follow a questioning. up to Just of

was X.X% the the deposits? So that what booked of from XXXK in was quarter, the total tenant realizing security from rents the fourth amount

Bill Wagner

security it's about the X.XX% inclusive was guessing of deposit. Well, I'm

Juan Sanabria

Sorry. What?

Dave Sedgwick

X.X%.

Juan Sanabria

where if you kind a little Okay. could where remarks. for talked about to heading pipeline pipeline in about more do they're or that your rates million have just prepared moved And bit and $XXX acquisition plus talk you cap curious find of the to think then you your

James Callister

Yeah. Hey, Juan, James. it's

talk up bit. if that -- crept lease that's think little definitely it of think a in I about we for, we're yield looking terms I

I to think housing nursing testing, work find money for trying nines seniors skilled high that to low the maybe where ten put we're to or working works. at mid and hard opportunities to and nines on

dependent really to been by and state at our is which ten going at rate skilled drive nine or for the just have state get It's yield be right access now. we a high of or to Medicaid nursing. When you and the respect which states can whether that kind have which with and to states what look basis labor not favorable don't

Juan Sanabria

XXXX? just think question a out debt balance on rate Bill, we the some any And sheet modeling for then about out thoughts the on floating as terming of

Bill Wagner

course the debt, a but use I rate expect total ATM as mind, to as over fund the in as, to we of of revolver also keeping Yeah, the deals fund those match investments. the well as percent debt would year variable increase will we'll likely utilize

Juan Sanabria

tenants that me. just or ten coverage if times then of top of tenant. you'd in meaningfully of the Any lack maybe three one one, update a terms last for and thereof your covenant asset have kind below indulge kind and And conviction

Dave Sedgwick

coverage so way good my year to we buildings us got work in performance north credit time and beyond I the with that. have with is the We're we one Bayshire, pay one thing corporate lease last matter times, confident share numbers so much of of yet. them they that and real behind about you're their of a them will report, in that seeing those of and would remarks. hard guess beyond was in off their not I I all the their not because Yeah, talked highlight reflected

that So to up get the times we'll and of category see sub out soon. one continue creep

Juan Sanabria

thank Okay, you.

Operator

KeyBanc comes Capital with Austin Wurschmidt question final from Markets. Our

Austin Wurschmidt

follow-up. the Thanks for taking

deals some implicitly this about I fundamentals have on You the any guys how might recover? various on operations these future those setting participation sort Juan's at in yields as segments, upside you you and about initial in transactions, rent question answered are guess initial in of think future look and recovery as but thinking about of

Dave Sedgwick

I think upside offering we've really participation. and

I close with what will, the side and can we're looking some of come these up really the underwriting think do. that closely labor in run to on try to you by if we work rate side tenants transactions of the value occupancy and work best in can to really with put terms add, we for

think the respect assumptions with get we been other incoming occupancy make now point on with historic, the I closer the Those we to at, their ramp in with deals just right open we the look more we who have think structure. are difficult area, looking like to them a looking and facilities ways work tenant, the we get to to the try help creative if assets to at if and we they've up operator labor we're at then come turnaround at that localized definitely I are to is where, that can will where the to local trying with to assumptions the And doing what best and and and a to stabilized knowledge look to the rent has be expertise with feel mimic stabilized. needed,

Austin Wurschmidt

taking Thanks the for question.

End of QA

Operator

further that With attending today's There presentation. for this are Thank questions no concludes said, you time. conference. today's at

may disconnect. You now

CareTrust REIT (CTRE) 10 Feb 232022 Q4 Earnings call transcript