Sabra Health Care REIT, Inc.

Good day, everyone. My name is Christina, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Sabra second quarter 2024 earnings 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, you can press star one again. I would now like to turn the call over to Lucas Hartwich, SVP of Finance. Please go ahead, Mr. Hartwich.

Thank you and good morning. Before we begin, I want to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning our expectations regarding our future financial position and results of operations, including our earnings guidance for 2024 and our expectations regarding our tenants and operators, and our expectations regarding our acquisition, disposition, and investment plans. These forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including the risks listed in our Form 10-K for the year ended December 31, 2023, as well as in our earnings press release included as Exhibit 99.1 to the Form 8-K we furnished to the SEC yesterday. We undertake no obligation to update our forward-looking statements that reflect subsequent events or circumstances, and you should not assume later in the quarter that the comments we make today are still valid. In addition, references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures, as well as the explanation and reconciliation of these measures to the comparable GAAP results included on the financials page of the investor section of our website at cyberhealth.com our form 10q earnings release and supplement can also be accessed in the investor section of our website and with that let me turn the call over to rick matros ceo president and chair of cyber healthcare e thanks lucas good day everybody thanks for joining us we appreciate it as noted in our press release the court had demonstrated progress in all key areas guidance was increased

Our shop cash NOI growth was 17.7%. Our senior housing and skilled nursing occupancy increased. Our EBIT-DARM rent coverage increased for both senior housing leased assets and our skilled nursing portfolio. Our skilled nursing portfolio continues to surpass pre-pandemic levels. And in fact, coverage is higher than when we hit our occupancy high in 2019, which was approximately 200 basis points higher than it is today, all of which bodes really well for the future. Nine of our top ten operators had improved rent coverage, with McGuire being the only one that didn't, but came in at a strong 1.79 EBITDA on coverage with no concerning trends. Leverage ticked down. We announced approximately 136 million in new investments. Medicaid rate increases on a weighted basis are estimated to be roughly 7%, which is 200 basis points higher than last year's increases. 71% of sovereign states have new effective Medicaid rates on July 1st of every year. The other six states are spread throughout different months of the year. The Medicaid rate increase for our top five SNF tenants was actually 10.6%. And then, of course, Medicare has finalized its market basket increase at 4.2%. Additionally, our skilled nursing mix was up 110 basis points. Our labor costs, including contract labor for that asset class, are now at their lowest level since March of 2021. And agency is now down 50% from a year ago. Our skilled nursing EBITDA margins are now higher than pre-pandemic margins. And again, that's with occupancy still about 200 basis points lower than pre-pandemic occupancy. So we would fully expect to see margins and coverage continue to improve. One comment I want to make on our behavioral segment Our rent coverage was down, but if you look at the last five quarters, it's always up and down in the behavioral segment. You have to think about it a little bit differently than skilled nursing and senior housing, which are actually very predictable businesses, pandemics notwithstanding. The behavioral business is very dynamic, much shorter length of stay, but also has a break-even point at much lower occupancy. And the coverage is still quite strong at 3.69. So there's a lot of breathing room there. So we have no concerns about that. And you should expect going forward to see that move up and down a little bit more than you would expect to see in our skilled nursing asset class or our senior housing asset class. In terms of our investment pipeline, we're starting to finally see some skilled nursing opportunities in the pipeline and expect to increase over the course of the coming months. We're also seeing an uptick in the behavioral space. And with shop cap rates much more attractive relative to our cost of capital, we'll continue to invest in the shop and shop as well. At this point in the year, we continue, we expect to continue to execute in the course we set before the year began and create a much stronger base from which to grow in 2025. And with that, I'll turn the call over to Talia.