Sabra Health Care REIT, Inc. (SBRA)·Q2 2025 Earnings Summary

Executive Summary

• Sabra delivered a clean beat versus S&P Global consensus on both EPS and revenue, raised FY25 Net Income and FFO guidance, and reiterated a sizable acquisition pipeline focused on senior housing; same-store SHOP Cash NOI rose 17.1% YoY, leverage improved to 5.0x net debt/Adj. EBITDA, and liquidity reached ~$1.2B . Results: Diluted EPS $0.27; Normalized FFO/share $0.37; Normalized AFFO/share $0.38; total revenue $189.15M . Versus S&P consensus: Primary EPS est. $0.17 vs actual $0.25*; revenue est. $182.79M vs actual $189.98M*.
• FY25 guidance updated: Net Income to $0.77–$0.79 (from $0.67–$0.70), FFO to $1.52–$1.54 (from $1.42–$1.45); Normalized AFFO to $1.49–$1.51 (prior $1.48–$1.51), while AFFO narrowed to $1.47–$1.49 (prior $1.47–$1.50) .
• Capital structure/interest expense tailwind: closed a $500M unsecured term loan due 2030 at an effective 4.64% (swapped) and used proceeds to redeem 2026 notes at 5.125%; declared a $0.30 dividend .
• Strategic mix shift progressing: ~($122.3M) YTD closed senior housing investments plus ~$220M awarded (high-7% initial yields) and the transition of 21 Holiday assets to Discovery, Inspirit, and Sunshine; management targets growing managed senior housing exposure from ~20% toward 30% . On the call, management reiterated an annual investment range of $400–$500M for 2025 .

What Went Well and What Went Wrong

• What Went Well

  • Beat and guidance up: EPS and revenue exceeded S&P Global consensus, and FY25 Net Income and FFO ranges were raised; Normalized AFFO nudged higher; SHOP same-store Cash NOI +17.1% YoY . EPS est. $0.17 vs actual $0.25*; revenue est. $182.79M vs actual $189.98M*.
  • Balance sheet actions: New $500M term loan fixed at 4.64% over five years and redemption of 5.125% 2026 notes should modestly lower interest cost; leverage improved to 5.0x net debt/Adj. EBITDA and liquidity stood at ~$1.2B .
  • Strategic execution: 21 Holiday assets transitioned with “minimal” disruption; senior housing acquisitions closed ($53M in Q2) with additional $61.5M post-quarter and ~$220M awarded; CEO: “we are well on our way toward our initial goal of taking our managed senior housing exposure from 20% to 30%” .

• What Went Wrong

  • AFFO guide narrowed: AFFO range trimmed at the top end versus initial guide ($1.47–$1.49 now vs $1.47–$1.50 prior), suggesting some conservatism around timing/mix of deals and operating cadence .
  • Skilled nursing M&A remains selective: Management continues to see fewer high-quality SNF opportunities and is cautious given Medicaid uncertainties; they are not pursuing mezz/complex JV structures or building a loan book, which can limit certain deal avenues .
  • Transition “noise”: Management acknowledged the Holiday transition introduced some temporary noise in SHOP metrics, although 16 of 21 properties remained in same store; excluding them would have been more favorable, per call commentary .

Financial Results

Per-Share Earnings Metrics

Revenue Breakdown (GAAP)

Operating Margins and Profitability

Values marked with * retrieved from S&P Global via GetFinancials.

Segment/KPI Snapshot

Non-GAAP note: Q2 FFO normalization included a $17.2M gain reclassified from OCI (terminated swaps) and ~$3.2M SHOP transition expenses; similar items affected AFFO “other adjustments” .

Guidance Changes

Guidance assumptions also include: no post-6/30/25 cash-basis tenant changes, and only completed investments/dispositions/capital markets activity as of the release date .

Earnings Call Themes & Trends

Management Commentary

• CEO Rick Matros on portfolio and leverage: “We have roughly $350 million in closed, in process of closing and awarded investments…we are well on our way toward our initial goal of taking our managed senior housing exposure from 20% to 30%…Our leverage dropped to 5.0x net debt to adjusted EBITDA” .
• On reimbursement: CMS finalized a +3.2% Medicare increase from Oct 1, 2025, and Medicaid rates estimated to average mid‑3% across the portfolio; top five states ~5% .
• On 2025 investments scale and deal structures: “It will be somewhere in the $400 million to $500 million range…we’re not interested in building a loan book…or complex JV kind of structures or mezz debt…” .
• On Holiday transition: Minimal operational disruption; 16 of 21 properties remain in same-store pool .

Q&A Highlights

• 2025 investments: Management guided to $400–$500M in 2025 investments, weighted to SHOP; SNF still desired but more selective and fewer quality opportunities .
• Reimbursement and coverage: CEO clarified that the 5% increase reference pertained to top five states; overall CMS +3.2% Medicare and expected Medicaid increases underpin continued coverage improvement .
• Strategy/structures: Reaffirmed preference for straightforward acquisitions over mezz/complex JVs; not building a loan book, which keeps underwriting discipline and portfolio simplicity .
• Holiday transition context: Management noted some temporary noise from the transition; excluding transitioned assets, SHOP occupancy trends would appear more favorable .

Estimates Context

Values marked with * retrieved from S&P Global.

Note: Company-reported Q2 totals were $189.15M revenue and $0.27 diluted EPS .

Key Takeaways for Investors

• Clean beat and constructive FY25 update: Raised Net Income and FFO guidance with Normalized AFFO inching higher; SHOP same-store NOI growth remains in the mid‑teens, supporting upward estimate revisions on FFO/AFFO .
• Visible external growth: $122.3M YTD closed, ~$220M awarded at high‑7% initial yields, and a stated $400–$500M 2025 target—likely driving incremental AFFO, with equity forwards helping fund growth leverage‑neutral .
• Balance sheet trending better: 5.0x net debt/Adj. EBITDA, ~$1.2B liquidity, and refinancing that swaps a 5.125% note for a 4.64% effective term loan rate provide modest interest burden relief and capital flexibility .
• Policy backdrop supportive: CMS +3.2% Medicare and mid‑3% average Medicaid increases (top states ~5%) should sustain rent coverage trends across SNF tenants into late 2025 .
• Execution risk moderate: Holiday transition creates some near‑term noise, and skilled nursing M&A remains selective; management’s aversion to mezz/JVs maintains discipline but may limit deal avenues if competition intensifies .
• Dividend supported: $0.30/share declared; payout aligned with Normalized AFFO trajectory and leverage progress .
• Near-term trading lens: Positive beat/raise plus financing tailwinds and a robust SHOP pipeline are supportive; watch cadence of awarded deal closings, integration of Holiday assets, and reimbursement finalizations for stock catalysts .

Disclosures:

• S&P Global estimates and certain ratio values are marked with an asterisk (*) and were retrieved via SPGI/Capital IQ tools. Values retrieved from S&P Global.
• We attempted to retrieve the Q2 2025 transcript via document tools (document id 3) but encountered a retrieval error; transcript content and Q&A highlights were sourced from publicly available transcripts and summaries at Seeking Alpha and Yahoo Finance .