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Sabra Health Care REIT, Inc. (SBRA)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered continued operational recovery: total revenues rose to $182.3M (+11.6% YoY), diluted EPS was $0.19, and Normalized AFFO per share was $0.36; management introduced FY2025 guidance implying ~4% YoY growth in Normalized FFO/AFFO per share .
  • Strong portfolio metrics: SNF/Transitional EBITDARM coverage hit an all-time high 2.09x; Senior Housing – Leased coverage held at 1.36x; Managed Senior Housing same-store cash NOI grew 17.9% YoY .
  • Balance sheet/liquidity set for 2025 execution: net debt/adjusted EBITDA was 5.27x; liquidity ~$980M, and a $0.30 common dividend (83% of Q4 Normalized AFFO) was declared for payment on Feb 28, 2025 .
  • 2025 guidance/strategy are catalysts: a larger SHOP-focused acquisition pipeline supported by improved cost of capital and robust deal flow; portfolio strength and reimbursement tailwinds (Medicaid increases already in effect, Medicare market basket to follow) underpin margin/coverage resilience .

What Went Well and What Went Wrong

What Went Well

  • Managed Senior Housing momentum: same-store cash NOI grew 17.9% YoY; sequential margin expansion of 50 bps; revenue +3.5% sequential; cash NOI +5.4% sequential .
  • SNF portfolio strength: sequential occupancy +60 bps; skilled mix +30 bps; EBITDARM coverage hit 2.09x, “higher than we’ve seen in years” (CEO) .
  • SHOP traction and operating leverage: same-store occupancy +80 bps sequential; margins +20 bps; management expects ongoing occupancy/rate-driven growth with labor costs stable (CIO/CFO) .

What Went Wrong

  • Triple-net cash rental income declined by $1.8M QoQ, driven by timing of cash-basis tenant rents and asset sales .
  • Pricing competition for stabilized SNF assets remains “frothy” due to strategic buyers valuing ancillary revenue streams, challenging accretive participation for lenders/REITs (pipeline selectivity required) .
  • Political/regulatory overhang: House budget proposals include large, unspecified Medicaid cuts, creating uncertainty; management views bipartisan/state “guardrails” as mitigating but notes unpredictability in the environment .

Financial Results

Per-Share Earnings and Cash Flow

Metric (per diluted share)Q4 2023Q3 2024Q4 2024
Diluted EPS ($)$0.07 $0.13 $0.19
FFO ($)$0.30 $0.34 $0.36
Normalized FFO ($)$0.32 $0.35 $0.35
AFFO ($)$0.32 $0.36 $0.36
Normalized AFFO ($)$0.34 $0.37 $0.36

Revenues and Components ($USD Thousands)

MetricQ4 2023Q3 2024Q4 2024
Rental and Related Revenues$93,037 $94,555 $96,068
Resident Fees and Services$61,256 $73,746 $76,865
Interest and Other Income$9,104 $8,794 $9,413
Total Revenues$163,397 $178,001 $182,346

Coverage and Portfolio KPIs

KPIQ3 2024Q4 2024
SNF/Transitional EBITDARM Coverage (x)1.94x 2.09x
Senior Housing – Leased Coverage (x)1.37x 1.36x
Behavioral/Specialty Coverage (x)3.68x 3.66x
Managed SH Same-Store Cash NOI YoY Growth (%)17.8% 17.9%
SHOP Same-Store Occupancy Seq Change (bps)N/A+80 bps
SHOP Margins Seq Change (bps)N/A+20 bps
Managed SH (Total) Seq: Revenue/Cash NOI/MarginsN/A+3.5%/+5.4%/+50 bps

Selected Balance Sheet/Liquidity

MetricQ4 2024
Net Debt / Adjusted EBITDA (x)5.27x
Liquidity ($USD Millions)~$980.0
Dividend Declared ($/share)$0.30; payout ~83% of Q4 Normalized AFFO

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Income (per diluted share)FY 2025N/A$0.67 – $0.70 Introduced
FFO (per diluted share)FY 2025N/A$1.42 – $1.45 Introduced
Normalized FFO (per diluted share)FY 2025N/A$1.43 – $1.46 Introduced
AFFO (per diluted share)FY 2025N/A$1.47 – $1.50 Introduced
Normalized AFFO (per diluted share)FY 2025N/A$1.48 – $1.51 Introduced
Key AssumptionsFY 2025N/ATriple-net cash NOI low-single-digit; managed SH same-store cash NOI low-to-mid teens; G&A ~$50M (incl. $11M SBC); WASC ~240M/241M (Normalized FFO/AFFO); no 2025 investments/dispositions/capital markets Introduced
DividendQ1 2025Prior $0.30$0.30 declared (2/28/25) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Managed Senior Housing recoverySame-store cash NOI +17.7% YoY (Q2); +17.8% YoY (Q3) +17.9% YoY; sequential revenue +3.5%, cash NOI +5.4%, margin +50 bps Improving, moderating growth later in 2025 as recovery nears full
SNF coverage/marginsSNF coverage supported by Medicaid increases; pipeline improving (Q2/Q3) SNF occupancy +60 bps seq; skilled mix +30 bps; coverage 2.09x; margins “higher than in years” Stronger coverage/margins with reimbursement tailwinds
Reimbursement tailwinds (Medicare/Medicaid)CMS +4.2% Medicare rate from Oct 1, 2024; Medicaid rate increases ~7% from Jul 1, 2024 (portfolio est.) Medicaid increases drove coverage step-up; Medicare market basket impact to show next quarter Positive tailwinds continue
Acquisition pipeline & cost of capitalPipeline expanding; ~$100M Q3 investments; cost of capital improving Increased deal flow (10+ NDAs/week), focus on SHOP with care components; go-in yields ~7–7.5% with growth; 60/40 equity/debt funding to keep leverage ~5x Acceleration likely in 2025
Technology/AI enablementNot emphasizedBuilding AI capabilities into systems to enhance operator support/visibility/predictability Emerging internal initiative
Macro/policy risk (Medicaid cuts)Acknowledged policy uncertainty (Q3) House budget proposes unspecified Medicaid cuts; mitigation via bipartisan/state guardrails; sector lobbying; CHIP/home/community programs may be targeted first Overhang persists; management confident in resilience

Management Commentary

  • “Our SHOP same-store occupancy was up 80 basis points sequentially with margins up 20 basis points… Our EBITDARM coverage hit an all-time high at 2.09” (CEO) .
  • “Total managed portfolio… sequential revenue +3.5%, cash NOI +5.4%, margin +50 bps… same-store revenue +7.4% YoY; cash NOI +17.9% YoY” (CIO) .
  • “Normalized FFO per share and Normalized AFFO per share were $1.39 and $1.44 respectively, for the full year… 2025 guidance midpoints imply ~4% increases” (CFO) .
  • “Deal flow is robust… focus on SHOP with AL/IL/memory care; go-in yields ~7–7.5% that stabilize higher” (CIO) .
  • “Medicaid increases in July/August had the biggest impact… next quarter will also show Medicare market basket impact” (CEO) .

Q&A Highlights

  • SHOP growth pacing: Management expects continued acceleration (not deceleration), balancing occupancy gains with RevPOR increases; conservative assumptions as occupancy approaches upper-80s/low-90s .
  • Acquisition cadence/pricing: Pipeline materially larger; cost of capital supports accretive SHOP deals; SNF transactions competitive due to strategic buyers; underwriting go-in yields ~7–7.5%; blended funding ~60% equity/40% debt to maintain ~5x leverage .
  • G&A/platform: SHOP infrastructure already built; incremental cost to scale; ongoing systems upgrades and AI capabilities to improve visibility/predictability .
  • Dispositions/cash-basis tenants: Q4 dispositions were ordinary course; remaining SNF portfolio sale ~$50M; cash-basis tenants represent <5% of NOI; Q4 sales included some cash-basis tenants .
  • Rent increases: January rent bumps in SHOP generally ~4–5% across larger operators (timing varies by operator/lease terms) .

Estimates Context

  • Attempts to retrieve Wall Street consensus (S&P Global CapIQ) for Q4 2024 EPS/revenue and FY2025 were unsuccessful due to SPGI request-limit errors at time of query; as a result, estimate comparisons are unavailable for this recap. If you want, I can re-run when the SPGI service window resets to add beat/miss analysis against consensus [GetEstimates attempt failed].

Key Takeaways for Investors

  • Portfolio recovery is durable: managed senior housing continues to post double-digit cash NOI growth with sequential margin expansion; SNF coverage/margins at multi-year highs—supportive for 2025 earnings trajectory .
  • Guidance credibility: FY2025 per-share midpoints imply ~4% YoY growth without relying on new investments—upside could come from accretive SHOP acquisitions later in the year .
  • Reimbursement tailwinds: Recent Medicaid increases lifted coverage; Medicare market basket should benefit upcoming results, bolstering operator health and rent coverage .
  • Capital deployment: Improved cost of capital and robust pipeline set conditions for stepped-up SHOP investments, with targeted go-in yields around breakeven/accretive levels; funding plan maintains leverage discipline .
  • Risk watch: Policy uncertainty (Medicaid) is an overhang; management highlights bipartisan/state guardrails and sector lobbying as mitigants—monitor budget developments into 2025 .
  • Dividend sustainability: $0.30/qtr dividend is covered (~83% of Q4 Normalized AFFO), supported by stable triple-net escalators and expanding managed SH margins .
  • Tactical: Near-term narrative catalysts include FY2025 guidance validation, evidence of Medicare market basket benefits, and announced transactions; any sizable accretive deals or clearer policy outcomes could drive stock reactions .
Notes on non-GAAP: In Q4 2024, other normalizing items included ~$0.5M insurance proceeds in FFO/AFFO reconciliations; cash rental income declined by $1.8M QoQ due to cash-basis timing and asset sales, partially offset by managed SH NOI gains **[1492298_6ecf2b970fd14d64ab36e4ed7958dff9_13]** **[1492298_SBRA_3417048_4]**.