Sabra Reports Second Quarter 2023 Results

Sabra Health Care REIT, Inc. (“Sabra,” the “Company” or “we”) (Nasdaq: SBRA) today announced its results of operations for the second quarter of 2023.

SECOND QUARTER 2023 RESULTS AND RECENT EVENTS

• Results per diluted common share for the second quarter of 2023 were as follows:
  • Net Income: $0.09
  • FFO: $0.32
  • Normalized FFO: $0.33
  • AFFO: $0.33
  • Normalized AFFO: $0.34
• EBITDARM Coverage Summary:
  • Skilled Nursing/Transitional Care: 1.65x (1.57x excluding Provider Relief Funds)
  • Senior Housing - Leased: 1.15x
  • Behavioral Health: 1.87x
  • Specialty Hospitals & Other: 6.68x
• During the second quarter of 2023, Sabra generated $18 million of gross proceeds from the disposition of four skilled nursing facilities.
• On July 6, 2023, Sabra successfully transitioned 11 wholly-owned managed senior housing properties formerly managed by Enlivant to Inspirit Senior Living, an existing Sabra operator.
• As illustrated in the Supplemental Information presentation we issued today, we believe the Annualized Cash NOI upside opportunity for Sabra’s portfolio is attractive. The upside is a result of the Company's internal growth initiatives over the past several years, as well as the benefits of the broader healthcare industry's continued recovery from the pandemic.
• On August 7, 2023, Sabra’s Board of Directors declared a quarterly cash dividend of $0.30 per share of common stock. The dividend will be paid on August 31, 2023 to common stockholders of record as of the close of business on August 17, 2023.

BUSINESS UPDATE

Update on Reimbursement Trends

Reimbursement trends continue to move in a positive direction. In terms of Medicare Part A, which accounts for nearly 25% of revenue for Sabra’s skilled nursing tenants, CMS recently finalized a 4.0% rate increase that goes into effect on October 1, 2023.

In addition, and in recognition of skilled nursing’s vital role of providing high-quality, high-acuity care at a relatively low cost, many states have also increased support for the industry through various means, including Medicaid base rate increases, Federal Medical Assistance Percentage (“FMAP”) add-on extensions, and rebasing cost measures to better capture inflationary pressures. Notable examples include Texas, which increased its Medicaid rate to more than offset the expiration of FMAP, while Kentucky recently passed an 8% rate increase, which will have a significant positive impact on Sabra’s largest tenant, Signature Healthcare. In addition, Avamere (Sabra’s third largest tenant) will benefit from a blended 6% base rate increase in Oregon and Washington. Medicaid accounts for nearly half of the revenue received by Sabra’s skilled nursing tenants, and while not all states have finalized rates for the upcoming year, we estimate the increase in Medicaid rates across Sabra’s portfolio will average over 5%.

Commenting on the second quarter’s results, Rick Matros, CEO and Chair, said, “Sabra's portfolio continues to strengthen as occupancy gains and easing labor pressures drive improved rent coverages. Reimbursement trends also remain encouraging, highlighted by Medicaid rate increases that are trending higher than they have been in many years. We recently held an operators’ conference and while our operators are not yet where they want to be, these encouraging operating trends underpinned a sense of optimism among attendees that was evident and appreciated. Additionally, we are pleased we were able to expeditiously transition the 11 wholly-owned properties that were formerly managed by Enlivant to an existing operator. Our progress this year gives us increased confidence that we are moving past the pandemic, and have greater clarity on future earnings growth as illustrated in the Supplemental Information presentation we issued today.”

LIQUIDITY

As of June 30, 2023, we had approximately $926.7 million of liquidity, consisting of unrestricted cash and cash equivalents of $27.2 million and available borrowings of $899.5 million under our revolving credit facility. As of June 30, 2023, we also had $500.0 million available under the ATM program.

CONFERENCE CALL AND COMPANY INFORMATION

A conference call with a simultaneous webcast to discuss the 2023 second quarter results will be held on Tuesday, August 8, 2023 at 10:00 am Pacific Time. The webcast URL is https://events.q4inc.com/attendee/659208545. The dial-in number for U.S. participants is (888) 880-4448. For participants outside the U.S., the dial-in number is (646) 960-0572. The conference ID number is 1382596. A digital replay of the call will be available on the Company’s website at www.sabrahealth.com. The Company’s supplemental information package for the second quarter will also be available on the Company’s website in the “Investors” section.

ABOUT SABRA

As of June 30, 2023, Sabra’s investment portfolio included 392 real estate properties held for investment (consisting of (i) 253 Skilled Nursing/Transitional Care facilities, (ii) 45 senior housing communities (“Senior Housing - Leased”), (iii) 61 senior housing communities operated by third-party property managers pursuant to property management agreements (“Senior Housing - Managed”), (iv) 18 Behavioral Health facilities and (v) 15 Specialty Hospitals and Other facilities), 13 investments in loans receivable (consisting of two mortgage loans and 11 other loans), five preferred equity investments and two investments in unconsolidated joint ventures. As of June 30, 2023, Sabra’s real estate properties held for investment included 38,899 beds/units, spread across the United States and Canada.

FORWARD-LOOKING STATEMENTS SAFE HARBOR

This release contains “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. Any statements that do not relate to historical or current facts or matters are forward-looking statements. These statements may be identified, without limitation, by the use of “expects,” “believes,” “intends,” “should” or comparable terms or the negative thereof. Examples of forward-looking statements include all statements regarding our expectations regarding reimbursement rates and trends; our expectations regarding the upside opportunity for Sabra’s portfolio; our expectations regarding labor and occupancy trends; our expectations regarding the transition of the Enlivant facilities; our expectations regarding continued recovery from the pandemic; and our other expectations regarding our future financial position, results of operations, cash flows, liquidity, business strategy, growth opportunities, potential investments and dispositions, and plans and objectives for future operations and capital raising activity.

Our actual results may differ materially from those projected or contemplated by our forward-looking statements as a result of various factors, including, among others, the following: pandemics or epidemics, including COVID-19, and the related impact on our tenants, borrowers and Senior Housing - Managed communities; increased labor costs and historically low unemployment; increases in market interest rates and inflation; operational risks with respect to our Senior Housing - Managed communities; competitive conditions in our industry; the loss of key management personnel; uninsured or underinsured losses affecting our properties; potential impairment charges and adjustments related to the accounting of our assets; the potential variability of our reported rental and related revenues as a result of Accounting Standards Update (“ASU”) 2016-02, Leases, as amended by subsequent ASUs; risks associated with our investment in our unconsolidated joint ventures; catastrophic weather and other natural or man-made disasters, the effects of climate change on our properties and a failure to implement sustainable and energy-efficient measures; increased operating costs and competition for our tenants, borrowers and Senior Housing - Managed communities; increased healthcare regulation and enforcement; our tenants’ dependency on reimbursement from governmental and other third-party payor programs; the effect of our tenants, operators or borrowers declaring bankruptcy or becoming insolvent; our ability to find replacement tenants and the impact of unforeseen costs in acquiring new properties; the impact of litigation and rising insurance costs on the business of our tenants; the impact of required regulatory approvals of transfers of healthcare properties; environmental compliance costs and liabilities associated with real estate properties we own; our tenants’, borrowers’ or operators’ failure to adhere to applicable privacy and data security laws, or a material breach of our or our tenants’, borrowers’ or operators’ information technology; our concentration in the healthcare property sector, particularly in skilled nursing/transitional care facilities and senior housing communities, which makes our profitability more vulnerable to a downturn in a specific sector than if we were investing in multiple industries; the significant amount of and our ability to service our indebtedness; covenants in our debt agreements that may restrict our ability to pay dividends, make investments, incur additional indebtedness and refinance indebtedness on favorable terms; adverse changes in our credit ratings; our ability to make dividend distributions at expected levels; our ability to raise capital through equity and debt financings; changes and uncertainty in macroeconomic conditions and disruptions in the financial markets; risks associated with our ownership of property outside the U.S., including currency fluctuations; the relatively illiquid nature of real estate investments; our ability to maintain our status as a real estate investment trust (“REIT”) under the federal tax laws; compliance with REIT requirements and certain tax and tax regulatory matters related to our status as a REIT; changes in tax laws and regulations affecting REITs; the ownership limits and takeover defenses in our governing documents and under Maryland law, which may restrict change of control or business combination opportunities; and the exclusive forum provisions in our bylaws.

Additional information concerning risks and uncertainties that could affect our business can be found in our filings with the Securities and Exchange Commission (the “SEC”), including in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022. We do not intend, and we undertake no obligation, to update any forward-looking information to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, unless required by law to do so.

TENANT AND BORROWER INFORMATION

This release includes information regarding certain of our tenants that lease properties from us and our borrowers, most of which are not subject to SEC reporting requirements. The information related to our tenants and borrowers that is provided in this release has been provided by, or derived from information provided by, such tenants and borrowers. We have not independently verified this information. We have no reason to believe that such information is inaccurate in any material respect. We are providing this data for informational purposes only.

NOTE REGARDING NON-GAAP FINANCIAL MEASURES

This release includes the following financial measures defined as non-GAAP financial measures by the SEC: Annualized Cash NOI, funds from operations (“FFO”), Normalized FFO, Adjusted FFO (“AFFO”), Normalized AFFO, FFO per diluted common share, Normalized FFO per diluted common share, AFFO per diluted common share and Normalized AFFO per diluted common share. These measures may be different than non-GAAP financial measures used by other companies, and the presentation of these measures is not intended to be considered in isolation or as a substitute for financial information prepared and presented in accordance with U.S. generally accepted accounting principles. An explanation of these non-GAAP financial measures is included under “Reporting Definitions” in this release, and reconciliations of these non-GAAP financial measures to the GAAP financial measures we consider most comparable are included on the Investors section of our website at https://ir.sabrahealth.com/investors/financials/quarterly-results.