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Sabra Health Care REIT, Inc. (SBRA)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered steady operational progress and modest upside vs Street: total revenues rose to $183.54M (+10.1% YoY), with diluted EPS $0.17; FFO/share $0.36 and AFFO/share $0.37. Revenue beat consensus by ~$3.3M; FFO/share was essentially in line to slightly above; EPS matched expectations . S&P Global estimates reference: revenue $180.23M*, FFO/share $0.3569*, EPS $0.1701*.
  • Managed senior housing same-store Cash NOI grew 16.9% YoY; portfolio coverage reached post‑pandemic highs (SNF 2.19x; SH-leased 1.41x; Behavioral 3.77x), reflecting labor moderation and rate/occupancy tailwinds .
  • Guidance was reaffirmed: 2025 per-share ranges remain Net Income $0.67–$0.70; FFO $1.42–$1.45; Normalized FFO $1.43–$1.46; AFFO $1.47–$1.50; Normalized AFFO $1.48–$1.51. Management expects to include awarded deals in guidance after closing .
  • Catalysts: >$200M awarded SHOP acquisitions at high‑7% initial yields; Fitch affirmed BBB‑ with Stable Outlook; dividend declared $0.30/share. Leverage improved to Net Debt/Adj. EBITDA 5.19x with ~$1.1B liquidity .

What Went Well and What Went Wrong

  • What Went Well
    • Same-store managed SH Cash NOI +16.9% YoY; RevPOR +2.8% YoY; occupancy up to 85.4% (Canada 90.9%, U.S. 83%)—operators are “tactically deploying the levers of occupancy and rate” to drive NOI and margins .
    • Coverage at post‑COVID highs (SNF 2.19x; SH-leased 1.41x; Behavioral 3.77x); “leverage ticked down again and we have ample liquidity available,” per CEO .
    • Awarded >$200M newer‑vintage senior housing deals at high‑7% initial yields; legacy Jasper second phase acquired for $7.8M at 7.5% yield .
  • What Went Wrong
    • Behavioral/Specialty occupancy showed volatility typical of the segment; management characterized trends as “meander[ing]” given short lengths of stay, holiday seasonality, despite strong coverage (3.77x) .
    • Limited availability of attractive SNF acquisitions; nonprofit divestitures often “losing a lot of money,” making lease underwriting challenging amid Medicaid uncertainty .
    • Macro/policy overhang: potential Medicaid program pressure debated in Washington; while management is constructive on guardrails, they acknowledged provider tax risks and will watch summer rate decisions .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($M)$178.00 $182.35 $183.54
Diluted EPS ($)$0.13 $0.19 $0.17
FFO per diluted share ($)$0.34 $0.36 $0.36
Normalized FFO per diluted share ($)$0.35 $0.35 $0.35
AFFO per diluted share ($)$0.36 $0.36 $0.37
Normalized AFFO per diluted share ($)$0.37 $0.36 $0.37
  • Q1 2025 vs prior year: Revenues $183.54M vs $166.75M (+10.1% YoY); diluted EPS $0.17 vs $0.11; FFO/share $0.36 vs $0.32; AFFO/share $0.37 vs $0.35 .

Segment breakdown (Cash NOI, Q1 2025)

Segment Cash NOI ($000s)Q1 2025
Skilled Nursing/Transitional Care$63,732
Senior Housing – Leased$11,017
Senior Housing – Managed (Consolidated)$20,993
Behavioral Health$10,561
Specialty Hospitals & Other$4,825

Managed Senior Housing KPIs

KPIQ3 2024Q4 2024Q1 2025
Consolidated Cash NOI ($000s)$19,512 $21,107 $20,993
Consolidated Cash NOI Margin (%)26.5% 27.5% 27.1%
Same-store Occupancy (%)84.7% 85.5% 85.4%
Same-store RevPOR ($)$4,086 $4,119 $4,139
Same-store Cash NOI ($000s)$20,117 $20,638 $20,668

Coverage summary (as reported Q1 2025)

  • SNF/Transitional: 2.19x
  • Senior Housing – Leased: 1.41x
  • Behavioral/Specialty/Other: 3.77x

Guidance Changes

Metric (per diluted share)PeriodPrevious Guidance (2/19/25)Current Guidance (Q1 reaffirm)Change
Net Income ($)FY 2025$0.67 – $0.70 $0.67 – $0.70 Maintained
FFO ($)FY 2025$1.42 – $1.45 $1.42 – $1.45 Maintained
Normalized FFO ($)FY 2025$1.43 – $1.46 $1.43 – $1.46 Maintained
AFFO ($)FY 2025$1.47 – $1.50 $1.47 – $1.50 Maintained
Normalized AFFO ($)FY 2025$1.48 – $1.51 $1.48 – $1.51 Maintained
Dividend ($/share)Quarterly$0.30 declared (May 5) $0.30 (paid May 30) Maintained
Assumptions (SHOP same-store Cash NOI growth)FY 2025Low-to-mid teens Reaffirmed Maintained

Note: Awarded acquisitions are not embedded in guidance and will be incorporated post‑closing .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
SHOP recovery and operating leverageSame-store occupancy up; SHOP Cash NOI +17.8% YoY; margin expansion SHOP occupancy +80 bps seq; Cash NOI +17.9% YoY; margins +50 bps Same-store Cash NOI +16.9% YoY; RevPOR +2.8% YoY; Canada leading occupancy; margins stable Improving but normalizing
Labor and contract laborLabor stabilizing across operators Workforce availability challenging but mitigated; wages rebased Contract labor improving; labor moderating faster than anticipated Easing
Acquisitions pipeline (SHOP focus)Pipeline building; cost of capital improving Expect higher 2025 volume; focus on smaller, accretive deals >$200M awarded at high‑7% yields; prefer ones/twos; PE sellers exiting Accelerating
SNF market and reimbursementMedicaid increases aided SNF coverage Expect outsized Medicaid increases; occupancy/mix rising 2.8% proposed Medicare FY’26; watching Medicaid/provider tax; cautious on SNF acquisitions Policy watch; coverage up
Behavioral health dynamicsPortfolio stable with strong coverage Coverage strong; segment volatility acknowledged Coverage 3.77x; occupancy volatile/seasonal; not concerning Stable coverage, variable volumes
Technology/AI enablement—Building AI capabilities into systems to support operators Continued systems upgrades; AI capabilities referenced Building capabilities

Management Commentary

  • CEO: “We are seeing real traction on deal flow of newer vintage assets with attractive yields… senior housing managed portfolio again showed robust year over year growth… leverage ticked down again and we have ample liquidity available” .
  • CFO: “Normalized FFO/share $0.35 and normalized AFFO/share $0.37… net debt to adjusted EBITDA 5.19x… we issued $84.3M on a forward basis at $17.32 per share to fund awarded investments on a leverage-neutral basis… guidance reaffirmed” .
  • CIO: “Same-store SHOP cash NOI grew 16.9% YoY; Canadian RevPOR +4.9% YoY; operators tactically balancing occupancy and rate; little new supply supports continued internal and external growth” .

Q&A Highlights

  • Dispositions: A ~$50M SNF portfolio sale remains on track, timing subject to regulatory process; broader dispositions expected to be ordinary course ($50–$100M/year) .
  • SHOP cadence: Expect occupancy and rate tailwinds; expenses (labor) stable; anticipating stronger seasonal move-ins beginning in Q2, especially in northern geographies/Canada .
  • Acquisitions competition/underwriting: Focus on newer AL/memory care assets; initial yields 7–7.5% with embedded growth; accretive at blended low-to-mid 7% cost of capital; funding roughly 60/40 equity/debt to keep leverage ~5x .
  • Genesis exposure: Reduced to 8 assets with sublease/guarantee; operational improvement and rent made whole; NOI impact negligible .
  • Behavioral segment: Coverage strong; occupancy variability expected due to short lengths of stay/seasonality; breakeven occupancy low (<60%) .

Estimates Context

  • Q1 2025 vs S&P Global consensus:
    • Revenue: Actual $183.54M beat $180.23M* by ~$3.3M (~1.8%) .
    • Primary EPS: Actual $0.17 broadly in line with $0.1701* .
    • FFO/share (REIT): Actual $0.36 modestly above $0.3569* .
  • Outlook: With awarded high‑7% yield SHOP deals, Street may lift out‑quarter revenue/FFO expectations upon closings; reaffirmed low-to-mid teens SHOP same-store Cash NOI growth supports mid-single-digit per-share growth for 2025 .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue and FFO/share outcomes were solid, with a clear beat on revenue and slight upside on FFO/share; EPS in line—no negative surprises. Expect estimate revisions if awarded deals close in Q2 .
  • The SHOP engine is driving margin/NOI expansion via occupancy and rate; same-store Cash NOI +16.9% YoY underpins leverage reduction and dividend coverage (AFFO payout ~81%) .
  • Awarded >$200M of newer-vintage SHOP assets at high‑7% initial yields offers accretive external growth; management signals preference for smaller, digestible transactions .
  • Credit strength intact (BBB‑ Stable; Net Debt/Adj. EBITDA 5.19x; ~98% unsecured debt; ~$1.1B liquidity), enabling match‑funding growth through ATM forward equity when accretive .
  • Macro watch: 2.8% proposed Medicare FY’26; Medicaid/provider tax risk monitored. Management expects continued coverage improvement with summer rate resets and moderating labor costs .
  • Tactical positioning: Focus on AL/memory care within SHOP; limited interest in large portfolios; disciplined underwriting targeting breakeven/accretion at low‑mid‑7% yields .
  • Near term trading: Reaffirmed guidance plus visible external growth pipeline and Fitch affirmation are supportive; key catalysts include deal closings, SHOP KPI trajectory, and summer reimbursement decisions .

Appendix: Additional KPIs and Liquidity

  • Liquidity: ~$1.1B (Cash $22.7M; revolver availability $917.3M; forward equity $110.5M) .
  • Net Debt/Adjusted EBITDA: 5.19x (annualized adjusted EBITDA methodology) .
  • Dividend: $0.30 per share declared May 5, paid May 30 .
  • ATM program: $297.7M remaining capacity; forward sales outstanding 6.38M shares at $17.32 .