Medical Properties Trust, Inc. common stock

Good morning, and welcome to the first quarter 2023 Medical Properties Trust Earnings Conference Call. All participants will be in a listen-only mode for a 60-minute duration. And should you need any assistance during that time, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. And to withdraw your question, please press star, then two. Please also note that this event is being recorded today. I would now like to turn the conference over to Charles Lambert, Vice President. Please go ahead, sir.

Thank you. Good morning, and welcome to the Medical Properties Trust conference call to discuss our first quarter 2023 financial results. With me today are Edward K. Aldag, Jr., Chairman, President, and Chief Executive Officer of the company, and Stephen Hamner, Executive Vice President and Chief Financial Officer. Our press release was distributed this morning and furnished on Form 8K with the Securities and Exchange Commission. If you did not receive a copy, it is available on our website at medicalpropertystrust.com in the investor relations section. Additionally, we're hosting a live webcast of today's call, which you can access in that same section. During the course of this call, we will make projections and certain other statements that may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our financial results and future events to differ materially from those expressed in or underlying such forward-looking statements. We refer you to the company's reports filed with the Securities and Exchange Commission for discussion of the factors that can cause the company's actual results or future events to differ materially from those expressed in this call. The information being provided today is as of this date only and except as required by the federal securities laws, the company does not undertake a duty to update any such information. In addition, during the course of the conference call, we will describe certain non-GAAP financial measures which should be considered in addition to, and not in lieu of, comparable GAAP financial measures. Please note that in our press release, Medical Properties Trust has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. You can also refer to our website at medicalpropertystrust.com for the most directly comparable financial measures and related reconciliations. I will now turn the call over to our Chief Executive Officer, Ed Aldack.

Thank you, Charles, and thanks to all of you for joining us this morning for our earnings call. The overall preliminary results from our operators for the first quarter of 2023 are following in the same positive trends we have recently seen from other publicly reporting hospital operators. Remember, we report a quarter in arrears, so today's results are from the quarter ending 12-31-22. On the volume side, our domestic operators, same-store admissions across our portfolio, are positive with admissions steadily increasing over the last few months, including January 2023. Surgical volumes look even better. On a same-store basis, surgeries are up year over year, trailing 12 months, Q4 2022 versus trailing 12 months Q3 2022. We're also seeing good momentum on a discrete quarter basis with quarter four up 3% over quarter three. The number of ER visits have been steadily rising since the beginning of 2022, topping off in December with the highest ER volumes our portfolio saw in all of 2022. Internationally, we are seeing particularly strong demand, both from an admissions and surgical perspective, in the Spanish market. Recall that we're currently developing three ground-up general acute care hospitals along the Mediterranean coast of Spain with IMED. It's great to see the demand in this market continuing to grow at such a high rate with our IMED Valencia Hospital seeing admissions up 8% year-over-year and surgical volumes up 11% during the same period. The German and UK markets are also experiencing continued improvement, with the German occupancy up 6% year over year through February 2023. In the UK, circles admissions and outpatient volumes continue to increase, with overall volumes exceeding pre-pandemic levels. In Colombia, 2022 admissions and surgeries were up over 20% year over year. You can refer to our supplement file this morning for more information on our EBITDARM coverages, but some points I'd like to highlight for you. We're getting close to the point where CARES Act grants will no longer impact the trailing 12-month coverages. General acute, inpatient rehab, and behavioral health were all flat for the trailing 12 months, quarter three over quarter four. Long-term acute care coverages declined from 2.3 to 1.9 times, Remember that LTACs represent only 1.4% of our total portfolio, and the 1.9 times coverage is more in line with historical coverages. I know that people are specifically interested in Steward Hospital's performance, so excluding grants, Steward Hospital's 2022 coverage increased to almost 2.5 times from approximately 2.2 times in 2021. Coverage has increased another 18 points for the trailing 12 months ending February of 2023. Also relating to Stuart, the transaction with Common Spirit is still scheduled to close next week. We look forward to expanding our relationship with Common Spirit and the liquidity this transaction brings to Stuart. On Prospect, we've seen some positive events, which Steve will go over in more detail in a few moments, but just briefly for me. On the Yale sale, this continues to move along positively, This week, one of the biggest unions came out to support this sale. The California operations continue to see improvements with volumes near historic levels. Additional capitation agreements have been signed by the hospitals, which will allow those volumes to continue to grow. Labor calls to continue to hold down the trailing 12-month coverages, but they've seen good improvement in that over the last few months. The managed care business continues to grow its membership and its profits. It continues to exceed budgets. We remain confident that our overall investment and prospect will be fully realizable from that investment. Our recent announcement to sell our Australian investments operated by HealthScope is a testament to the steady demand of hospitals. Anticipated cash proceeds from this divestiture will result in sufficient liquidity to repay the term loan used to fund the acquisition back in 2019. Our well-laddered debt maturity schedule, along with our inflation-protected long-term leases, allows for our cash flow to continue to increase without adding additional properties. Until the global markets stabilize, we do not anticipate making any significant acquisitions. However, our relationships with our operators create numerous organic growth opportunities. We will continue to analyze these opportunities as they come in, and make prudent decisions about the use of our capital. We announced this morning an acquisition with Priory for five behavioral hospitals for 44 million pounds. This closed in the second quarter. Additionally, we closed on the purchase of two median rehabilitation hospitals in Germany for 47 million euros, with a third expected to close later this quarter for 23 million euros. Speaking of growing relationships, it was announced earlier this month that Intermountain Health, based in Utah, has acquired a minority op co-interest in both of our Idaho Falls Community Hospital and Mountain View Hospital. This partnership will provide these two hospitals with additional access to highly trained specialists and vast resources as a result of collaborating with one of the region's largest and most successful health systems. While the financial terms of the investment have not been disclosed, we can say that they are an impressive valuation resulting from this equity investment, which once again proves the essential nature of our hospital real estate. Steve?