EPR Properties

Good day, ladies and gentlemen, and welcome to the second quarter 2020 EPR Properties Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to hand the conference over to your host, Mr. Brian Moriarty, Vice President of Corporate Communications.

Thank you. Hi, everybody, and welcome. Thanks for joining us today for our second quarter 2020 earnings call. I'll start the call by informing you that this call may include forward-looking statements as defined in the Private Securities Litigation Act of 1995, identified by such words as will be, intend, continue, believe, may, expect, hope, anticipate, or other comparable terms. The company's actual financial condition and the results of the operations may vary materially from those contemplated by such forward-looking statements. Discussion of these factors that could cause results to differ materially from these forward-looking statements are contained in the company's SEC filings, including the company's reports on Form 10-K and 10-Q. Additionally, this call will contain references to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished to the SEC under Form 8-K. If you wish to follow along, today's earnings release, supplemental, and earnings call presentation are all available on the Investor Center page of the company's website, www.eprkc.com. Now I'll turn the call over to the company's President and CEO, Greg Silvers.

Thank you, Brian. Good morning, everyone, and thank you for joining us on today's second quarter call. I'd like to start by extending our best wishes for the health and safety of everyone and by voicing my appreciation to the entire EPR team that has been diligently working to advance the goals of EPR while working remotely and facing the challenges of the ongoing pandemic. Joining me on the call today are company CIO Greg Zimmerman and company CFO Mark Peterson. I will start the call with an opening statement, then turn the call over to Greg and Mark, who will provide more detail. As we discussed on our last call, during this unprecedented time, we've taken the necessary steps in terms of our balance sheet and tenant agreements to help ensure EPR's long-term success. To this end, we have maintained an essential focus on fortifying our balance sheet with sufficient liquidity to sustain us. We have more than $1 billion of cash on hand which puts us in a very strong position to navigate the current challenges. Furthermore, with increasing progress in our rent collections as we move through the quarter and for July, we are cautiously optimistic that we will continue to see sustained improvement during the coming quarters. We are also pleased to see that our tenants have made significant progress in safely reopening our properties within the confines of jurisdictional mandates. and our theater tenants are currently targeting the late summer to reopen. Separately, we've reached resolution with the vast majority of our customers where deferrals were warranted. Our team has worked extremely hard over the past few months to execute agreements which are reasonable for both EPR and our tenants as we ramp back up throughout the year. Greg will have more detail on this. Additionally, we executed important new lease restructuring agreements with AMC Theaters. The leases contain several features which we believe will significantly enhance our long-term position with respect to AMC, which we received in return for providing a reduction in annual fixed minimum rents. Specifically, we believe the new master lease structure will reduce our risk should AMC seek the protections of a reorganization process. As Greg will elaborate, we also meaningfully extended our lease term and gained the optionality to reduce AMC concentration through the bundling of transitional properties. Lastly, with regard to the recent studio announcements regarding the release of titles, I think it's important to remember that all of us are trying to navigate a pandemic that has disrupted our normal activities. We understand that some will want to mark this time as a permanent change. However, we believe such leaps are not supported by the underlying economics. All of the studios understand that to maximize the economics for a film, they need a robust theater exhibition platform. Notwithstanding the excitement generated by Troll's world tour, the reality is that Universal did not make near the revenues or profit of the original title that was released theatrically, and in reality, after taking into account significant marketing expenditures, they may have lost money. The uncertainty of the times has led studios to pursue various avenues, including premium video on demand, streaming on demand, and delaying titles. It's important to note that the delaying of releases has been by far the most frequent choice for the studios, even those that are experimenting with PVOD and SVOD. Both Universal and Disney reaffirmed their commitment to theater exhibitions. Disney indicated that the release of Mulan was driven by the pandemic and not a change in their operating model. Universal moved Fast and the Furious 9 to a 2021 theatrical release. We understand that these experiments may result in changes to the model, but these changes will be driven by economics, and theatrical release continues to be an important part of that equation. As with any experiment, many questions remain, including what's the economic model? Does film rent reduction or exhibitor participation in PVOD revenues offset revenue losses from shortening the window? And how much revenue will be lost if, in fact, studios like Universal only intend to move films that were not going to generate significant box office anyway? What price point will consumers support for at-home viewing? And is this data skewed to reflect current pandemic conditions? To date, most non-theatrical releases have been family product with a younger target demographic. Separately, over the last five years, PBOD has shown significant decline, while monthly subscription streaming platforms have seen significant growth. How will this be implemented internationally? Remember, worldwide box office was approximately $42 billion, and this hybrid approach is a difficult proposition for most of the remaining markets, given the fear of privacy. Any long-term systematic change requires a viable economic model. and the underlying economics at this point simply do not support radical shifts to the strategy. Could we see revisions through the theatrical window? Definitely, especially for low-budget films or films with low to moderate box office expectations. Likewise, we could also see new content providers like Netflix move into theatrical release as a means to increase revenues. The long-term effects of the pandemic on our everyday lives have yet to be defined, but we are confident that theatrical exhibition will remain an important part of film distribution simply because of these economics. Now I'll turn the call over to Greg Zimmerman.