10-QPeriod: Q2 FY2020

WELLTOWER INC. Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 6, 2020For Securities:WELL

Summary

Welltower Inc.'s (WELL) third-quarter 2020 filing indicates resilience amidst the COVID-19 pandemic, though not without impact. Total revenues for the three months ended June 30, 2020, were $1.19 billion, a decrease from the prior year's $1.32 billion, primarily driven by a decline in resident fees and services. Net income attributable to common stockholders was $179.2 million ($0.43 per share), an increase from $137.8 million ($0.34 per share) in the same period last year, demonstrating operational strengths despite revenue headwinds. The company's balance sheet remains robust, with total assets of $33.16 billion and total equity of $16.94 billion. Significant cash and cash equivalents of $1.68 billion provide a cushion for operations and strategic initiatives. The company continues to manage the impact of COVID-19 on its seniors housing portfolio, observing declines in occupancy and increased operational costs. However, rental income from triple-net and outpatient medical tenants remained relatively stable, with strong collection rates and limited rent concessions. Management is actively monitoring credit risks and has adjusted its allowance for loan losses accordingly. Welltower's strategic focus on healthcare infrastructure and its diversified portfolio across the US, Canada, and UK position it to navigate the evolving healthcare landscape.

Financial Highlights

41 data points
Beta

Revenue

$1.19B

44.4% Gross Margin

Net Income

$179.25M

15.1% Net Margin

EPS (Diluted)

$0.42

Total Assets

$33.16B

Cash & Equivalents

$1.83B

Free Cash Flow

$399.76M

Financial Statements
Beta
Revenue$1.19B
Cost of Revenue$660.76M
Gross Profit$527.71M
SG&A Expenses$34.06M
Operating Expenses$1.18B
Interest Expense$126.36M
Net Income$179.25M
EPS (Basic)$0.43
EPS (Diluted)$0.42
Shares Outstanding (Basic)417.08M
Shares Outstanding (Diluted)419.12M

Key Highlights

  • 1Total revenues decreased by approximately 10% year-over-year to $1.19 billion for the three months ended June 30, 2020.
  • 2Net income attributable to common stockholders increased by 30% year-over-year to $179.2 million ($0.43 per share) for the three months ended June 30, 2020.
  • 3Cash and cash equivalents stood at $1.68 billion as of June 30, 2020, providing strong liquidity.
  • 4Seniors Housing Operating segment experienced occupancy declines due to COVID-19, with spot occupancy falling to 79.4% by July 2020, and saw increased operational costs.
  • 5Triple-net and Outpatient Medical segments demonstrated resilience, with consistent rent collections and minimal concessions, supported by CARES Act funding for some operators.
  • 6The company reported $382.6 million in real estate held for sale as of June 30, 2020, indicating ongoing portfolio management.
  • 7Welltower raised approximately $595.3 million in net proceeds from stock issuances during the six months ended June 30, 2020, and authorized a $1 billion share repurchase program.

Frequently Asked Questions

The COVID-19 pandemic has had a mixed impact. The Seniors Housing Operating segment experienced occupancy declines and increased operational costs, leading to a decrease in its net operating income (NOI). However, the Triple-net and Outpatient Medical segments remained relatively stable, with strong rent collection rates, partly supported by government stimulus measures like the CARES Act. Overall revenues saw a year-over-year decrease, but net income attributable to common stockholders increased due to strong performance in certain segments and effective cost management.

Welltower maintains a strong liquidity position with $1.68 billion in cash and cash equivalents as of June 30, 2020. The company also has significant borrowing capacity under its unsecured credit facilities. During the first half of 2020, Welltower raised substantial proceeds from stock issuances and completed debt transactions, including a $1.0 billion term loan and a $600 million senior unsecured note issuance, which were used to refinance existing debt and reduce borrowings. The company is in compliance with all debt covenants.

Welltower is focused on protecting stockholder capital and enhancing stockholder value. It continues to invest in health care infrastructure and diversifies its portfolio. The company is actively managing its portfolio, including classifying properties as held for sale. Despite challenges in the Seniors Housing Operating segment, the company's strategy aims to mitigate payment risks through strong asset management, guarantees, and structured leases. The company also has ongoing construction projects across its segments.

Welltower declared a cash dividend of $0.61 per share for the quarter ended June 30, 2020. This represents a decrease compared to the $0.87 per share declared in the same quarter of the previous year, reflecting a reduction in the quarterly cash dividend starting with the quarter ending March 31, 2020. The company aims to pay consistent cash dividends, but the current economic environment has led to this adjustment.