Omega Healthcare Invts (NYSE:OHI) released first-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.
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The full earnings call is available at https://events.q4inc.com/attendee/811963547
Summary
Omega Healthcare Invts reported a strong first quarter with adjusted funds from operations (AFFO) of $0.82 per share and funds available for distribution (FAD) of $0.78 per share, driven by acquisitions and active portfolio management.
The company increased the low end of its AFFO guidance, with a midpoint now at $3.22, reflecting confidence in sustained FAD growth and a robust pipeline of investment opportunities.
Strategic initiatives include a $480 million asset sale of Communicare facilities, expected to generate $0.03 of annual AFFO and FAD accretion, and $326 million in new investments in 2026, focusing on skilled nursing, senior housing, and long-term care real estate.
Management highlighted a strong balance sheet with a fixed charge coverage ratio of 6.3 times and leverage at 3.5 times, with significant liquidity to support future investments.
Future outlook remains positive, with a focus on capital allocation to drive sustainable FAD per share growth and exploring opportunities in both U.S. and UK markets, despite a competitive landscape.
Full Transcript
OPERATOR
Ladies and Gentlemen, thank you for standing by. Welcome to Omega Healthcare Investors Inc. First quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question, press STAR one again. Thank you. I will now turn the conference over to Michelle Weber. You may begin.
Michelle Weber (Operator)
Thank you and good morning. With me today is Omega CEO Taylor Pickett, President Matthew Gorman, CFO Bob Stevenson, CIO Vikas Gupta and Megan Kroll, Senior Vice President, Data, Intelligence and Government Relations. Comments made during this conference call that are not historical facts may be forward looking statements such as statements regarding our financial projections, potential transactions, operator prospects and outlook. Generally, factors that could cause actual results to differ materially from those in the forward looking statements are detailed in the company’s filings with the SEC. During the call today we will refer to some non GAAP financial measures such as NAREIT FFO, adjusted FFO, FAD and EBITDA. Reconciliations of these non GAAP measures to the most comparable measure under Generally Accepted Accounting principles are available in the quarterly supplement. In addition, certain operator coverage and financial information that we discuss is based on data provided by our operators and that has not been independently verified by Omega. I will now turn the call over to Taylor.
Taylor Pickett (Chief Executive Officer)
Thanks Michelle. Good morning and thank you for joining our first quarter 2026 earnings conference call. Today I will discuss our first quarter financial results and certain key operating trends. First quarter adjusted funds from operations AFFO of $0.82 per share and FAD (Funds Available for Distribution) of $0.78 per share. Reflects strong revenue and EBITDA growth principally fueled by acquisitions and active portfolio management. Our dividend payout ratio has dropped to 82% for AFFO and 86% for FAT. Our exceptional first quarter results reflect our high quality capital allocation throughout 2025 and the first quarter of 2026. We continue to find and close RIDEA transactions while still allocating meaningful capital to SNF facilities and UK care homes. We expect our capital allocation and active portfolio management will drive significant future AFFO and FAD growth. Our active portfolio management is highlighted by our planned and partially completed second quarter sales generating 480 million in proceeds. We expect the redeployment of this capital will result in approximately $0.03 of annual AFFO and FAD accretion.. I will now turn the call over to Matthew.
Matthew Gorman (President)
Thanks Taylor and good morning everyone. We have spoken in previous calls about the team’s focus on creating shareholder value by growing fad per share on a sustainable basis and we saw this focus continue to bear fruit in the first quarter as our FAD PER share increased 9.5% over the same quarter last year. This, along with a robust pipeline of investment opportunities gave us comfort to be able to increase the low end of our AFFO guidance, moving the Midpoint up by $0.02 to $3.22. At the same time, our first quarter investments reflect the breadth of our capital allocation focus. We invested in both Triple Net and RIDEA structures in skilled nursing, seniors housing and long term care real estate across the United States, the UK and Canada, and we closed on our equity investment in Savers Operating company. In addition, we are in the process of selling a portfolio of 18 CommuniCare assets for $480 million. Vikas will provide additional details around the sale. However, from an overarching perspective, it was about putting assets into the hands of strong stewards at a price that made sense for each party while also enhancing our credit with CommuniCare. While we would not expect to see this be a core element of our capital allocation strategy, we will continue to evaluate our portfolio and work with our operating partners to find innovative ways to both protect and enhance shareholder value over time. Finally, I would like to thank the team who continue to work tirelessly to execute on our vision, as well as our operating partners and their staff who work every day to look after some of the sickest and most frail members of our community. Without them, none of this would be possible. I will now turn the call over to Vikas.
Vikas Gupta (Chief Investment Officer)
Thank you Matthew and good morning everyone. Today I will discuss the most recent performance trends for Omega’s operating portfolio including an update on Genesys, additional detail on our strategic sales, Omega’s investment activity year to date and an update on our pipeline. Turning to portfolio performance, Core portfolio coverage continues to trend in a favorable direction above industry average coverage levels with our trailing twelve month operator EBITDAR coverage for our Triple Net and Mortgage core Portfolio as of December 31, 2025 at 1.58x compared to our third quarter 2025 reported coverage of 1.57 times. This represents the highest coverage in our portfolio in over a decade and reflects the combination of a relatively favorable operating backdrop. Combined with our active portfolio management where we have focused on strengthening the lease credit across our portfolio, the Genesis bankruptcy process continues to move forward with a few notable events having taken place in recent weeks. In March we committed to fund up to 26.7 million or 1/3 of a new aggregate $80 million DIP loan. As of the end of the first quarter, we have funded our 25 million portion of the initial 75 million advance. Proceeds from this new Super Priority DIP financing are used to fully repay the original DIP loan and to fund working capital needs. Additionally, the debtors have advised that 101 West State street has submitted a qualified financing commitment as required by the Asset Purchase Agreement. The closing date, which can contractually be extended to the end of the third quarter, is conditioned on several factors including receipt of regulatory change of ownership approvals. We anticipate that 101 West State Street will assume our Genesis MAS release and our DIP loan and term loan will be paid off from the consideration received by the debtors at closing. We remain confident that our term loan is fully collateralized based on the underlying collateral and the ascribed value of the Genesis Estate. These assumptions, along with all elements of the bankruptcy process are subject to further developments and events in the bankruptcy proceeding. As Taylor and Matthew mentioned, we’re in the process of a strategic sale of 18 communicare assets located in Maryland and West Virginia for contractual purchase price of 480 million and a rent discount at a blended 7.7%. Subsequent to quarter end, 12 Maryland facilities were sold and we expect the remaining six West Virginia facilities to be sold in the second quarter. While asset sales are not typically a core component of our capital allocation strategy, the strong pricing offered for these facilities combined with the improvement of our credit with Communicare presented an opportunity to realize significant value for our shareholders. Turning to New investments, Our transaction activity for 2026 started strong with 326 million in new investments year to date. Similar to previous quarters, these transactions varied in size and asset type, but demonstrate our ability to continue to develop, underwrite and close accretive transactions in our core asset classes. We continue to support the growth of existing and new operators in the US Skilled nursing space and UK care home space as well as expand our new senior housing Radia portfolio. As Matthew said earlier, our primary goal is to allocate capital with a focus on growing fad per share on a sustainable basis. During the first quarter of 2026, Omega completed a total of 251 million in new investments, not including 13 million in CapEx. These new investments included the previously announced purchase of 9.9% of the equity interest in Savers Operating Company, the $109 million acquisition of 13 Georgia skilled nursing facilities, and a $10 million investment in an Alabama senior housing RIDEA transaction. Our other first quarter investments included the purchase of a UK care home for 7 million and 27 million in real estate loans. The weighted average yield on these leases and loans was was 10.9%. Subsequent to quarter end we closed 75 million of additional investments. We purchased two Indiana skilled nursing facilities for 33 million and three senior housing facilities in Rhode island for 42 million. The skilled nursing facilities will be leased to a current Omega operator at a lease yield of 10%. The senior housing facilities will be operated by Omega and managed by a third party manager via a RIDEA structure. Turning to the Pipeline Our pipeline includes both marketed and off market opportunities in the US and the uk. A large component of these opportunities are US Senior housing assets that will be structured and operated using our new RIDEA platform. As mentioned previously, we’ve built out our infrastructure at Omega with an experienced team of investment professionals that are finding deals that meet our investment criteria and then coupling them with proven third party managers who we believe will deliver on those underwritten expectations. We continue to pursue deals that will achieve IRRs in the mid teens range. In addition to senior housing right year deals, we are aggressively pursuing both US Skilled Nursing and UK care home deals in uk. We’ve built out our team to help find off market transactions and quickly evaluate opportunities with existing and new operators in order to continue deploying meaningful capital through both Triple Net and RIDEA structures. I will now turn the call over to Bob.
Bob Stevenson (Chief Financial Officer)
Thanks Vikas and good morning. Turning to our financials for the first quarter of 2026, revenue for the first quarter was $323 million compared to $277 million for the first quarter of 2025. The year over year increase is primarily the result of the timing and impact of revenue from new Investments completed throughout 2025 and 26, annual escalators and active portfolio management. Our net income for the first quarter 2026 was $159 million or $0.47 per common share compared to $112 million or $0.33 per common share for the first quarter of 2025. Our adjusted FFO was $260 million or $0.82 per share for the quarter and our FAD was $247 million or $0.78 per share and both are adjusted for several items outlined in our NAREIT FFO adjusted FFO and FAD reconciliations to net income found in our earnings release as well as our first quarter financial supplemental posted to our website. Our first quarter 2026 adjusted FFO and FAD were both 2 pennies greater than our fourth quarter AFFO and FAD, with the increase primarily resulting from incremental net income from $585 million in new investments completed during the fourth and first quarters and revenue from annual escalators of $2 million. These were partially offset by income related to $53 million in asset sales and $88 million in loan repayments over the past two quarters, resulting in a $1.4 million reduction to our first quarter adjusted FFO and FAD, as well as the impact from the issuance of a combined 7.7 million common shares of stock and OP units over the past two quarters to fund the new investments. Our balance sheet remains incredibly strong, our debt is well laddered and we have significant liquidity. At March 31st we have $425 million in borrowings on our credit facility. However, we also have $26 million in available cash and assets held for sale which we expect to sell for approximately $480 million. Additionally, we have over $1.5 billion in available capacity on our $2 billion revolver with our next scheduled debt maturity not until April 2027. At quarter end, our fixed charge coverage ratio was 6.3 times and our leverage remained flat at 3.5 times. We are excited as our balance sheet and cost of capital continue to position us to accretively fund our active pipeline. Turning to Guidance as we press release yesterday we narrowed our full year adjusted income AFFO guidance to A range between $3.19 to $3.25 per share. This is a two penny increase over the midpoint of our February guidance. I’d like to take a moment to highlight a few of the guidance assumptions we outlined in our earnings release. Our guidance includes the impact of new investments completed as of April 27 and does not include any additional investments not outlined in our press release. It includes the impact of scheduled loan repayments and expected asset sales of the $159 million in mortgages and other real estate loans that are scheduled to mature in 2026. It assumes 65 million will convert to fee simple real estate and that the balance will be repaid. Additionally, 224 million in non real estate backed loans at March 31, 2026 are expected to be repaid throughout 2026, which includes approximately $159.5 million in Genesis loans. The …
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