10-QPeriod: Q3 FY2020

WELLTOWER INC. Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 29, 2020For Securities:WELL

Summary

Welltower Inc. (WELL) reported its financial results for the quarter ending September 30, 2020. The company experienced a decrease in total revenues compared to the prior year, largely driven by a decline in resident fees and services and rental income. This decline is significantly influenced by the ongoing COVID-19 pandemic, which has impacted occupancy rates, particularly in the Seniors Housing Operating segment, and led to increased operational costs. Despite these challenges, the company maintained collections and approved short-term deferrals for most of its Outpatient Medical rent and continued to manage its debt effectively. Key financial movements include a reduction in total assets and liabilities compared to year-end 2019. While net income attributable to common stockholders decreased year-over-year, the company maintained a strong liquidity position with substantial cash and cash equivalents and available borrowing capacity. Welltower continues to strategically manage its portfolio through acquisitions and dispositions, albeit at a slower pace due to pandemic-related uncertainties. The company remains focused on protecting stockholder capital and enhancing value through its diversified real estate investments.

Financial Highlights

41 data points
Beta

Revenue

$1.04B

38.8% Gross Margin

Net Income

$325.58M

31.4% Net Margin

EPS (Diluted)

$0.77

Total Assets

$32.54B

Cash & Equivalents

$1.60B

Free Cash Flow

$297.97M

Financial Statements
Beta
Revenue$1.04B
Cost of Revenue$634.72M
Gross Profit$402.16M
SG&A Expenses$31.00M
Operating Expenses$1.12B
Interest Expense$124.85M
Net Income$325.58M
EPS (Basic)$0.78
EPS (Diluted)$0.77
Shares Outstanding (Basic)417.03M
Shares Outstanding (Diluted)418.99M

Key Highlights

  • 1Total revenues decreased by approximately 18% year-over-year for the nine months ended September 30, 2020, impacted by lower resident fees and services and rental income.
  • 2Seniors Housing Operating (SHO) segment experienced occupancy declines due to the COVID-19 pandemic, leading to increased operational costs and a decrease in SSNOI by 20.2% year-over-year for the nine months.
  • 3Triple-net segment's rental income decreased significantly (25% YoY for nine months) due to write-offs of straight-line rent receivables related to the financial distress of a major tenant (Genesis Healthcare).
  • 4Outpatient Medical segment showed revenue growth for the nine months (+11% YoY), driven by acquisitions and new construction, though collections were impacted by COVID-19, resulting in short-term deferrals.
  • 5The company reported a significant increase in cash, cash equivalents, and restricted cash to $2.16 billion as of September 30, 2020, up from $385.8 million at the beginning of the year.
  • 6Total debt decreased by approximately $1.15 billion year-over-year, reflecting debt extinguishments and paydowns, while maintaining compliance with all debt covenants.
  • 7Welltower recorded $126.3 million in asset impairment charges for the nine months ended September 30, 2020, primarily related to Seniors Housing Operating and Triple-net properties, reflecting COVID-19's impact on valuations.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted Welltower's financial performance. It led to lower occupancy rates in the Seniors Housing Operating segment, increased operational expenses due to health and safety measures, and tenant difficulties in the Triple-net and Outpatient Medical segments, resulting in write-offs and deferrals. This contributed to a year-over-year decrease in net income attributable to common stockholders.

Welltower maintained a strong liquidity position. Cash, cash equivalents, and restricted cash increased substantially to $2.16 billion. The company also had $3.0 billion in available borrowing capacity under its unsecured revolving credit facility, providing a total of approximately $4.6 billion in near-term liquidity.

The SHO segment continued to face challenges with occupancy declines in Q3 2020. The company anticipates further declines in occupancy in the fourth quarter and expects operational expenses to remain elevated due to ongoing health and safety protocols. While collections from Triple-net and Outpatient Medical tenants were generally consistent, future rent payments remain a point of focus.

Welltower actively managed its debt during the period, reducing total debt and maintaining compliance with all debt covenants. The company utilized its strong liquidity to extinguish secured debt and refinance other obligations. It also maintained access to capital markets through its equity shelf program and had ample capacity under its credit facilities, indicating a well-managed capital structure.