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    OHI
    Earnings call· Jun 2026(Q2 FY26)

    OMEGA HEALTHCARE INVESTORS Q2 FY26 earnings call OHI

    Jul 30, 2026 Source

    Executive summary

    Omega Healthcare Investors Q2 FY26 — Strategic Portfolio Management and Strong Investment Pipeline

    Omega Healthcare Investors delivered a quarter marked by strategic portfolio management and a strong outlook for future growth, despite sequential earnings being flat due to significant asset dispositions. The company successfully strengthened its balance sheet and operator credit profiles through proactive sales and transitions, while building a robust investment pipeline, particularly in RIDEA structures and UK care homes. Management expressed high confidence in the team's ability to drive accretive growth, leveraging a strong cost of capital and secular tailwinds.

    Highlights

    5

    • Adjusted FFO of $0.83 per share and FAD of $0.78 per share, reflecting strong year-over-year growth.

    • Trailing 12-month operator EBITDAR coverage improved to 1.65x as of March 31, 2026, up from 1.58x in Q4 2025.

    • Leverage decreased to 3.3x, reaching historically low levels, with fixed charge coverage at 6.5x.

    • Increased and tightened full-year adjusted FFO guidance to $3.22-$3.26 per share, up $0.02 at the midpoint.

    • Closed $470 million in new investments year-to-date, with a robust pipeline expected to drive significant transaction volume through year-end and into 2027.

    Concerns

    3

    • Sequential AFFO and FAD were flat due to a $563 million headwind from asset sales in Q2.

    • The timing of asset sales and loan repayments is expected to create a temporary earnings headwind in Q3.

    • Regulatory focus on fraud and abuse in healthcare, while not directly impacting nursing homes yet, is being watched for indirect impacts from state budget constraints.

    Guidance & targets

    1
    CategoryTargetConfidence
    Adjusted FFO per share
    $3.22 to $3.26 per share
    high materiality
    High

    Operational metrics

    19
    Adjusted FFO per share
    $0.83effectively flat sequentially
    Q2 FY26

    Reflects strong year-over-year growth but flat sequentially due to $563 million of asset sales.

    FAD per share
    $0.78effectively flat sequentially
    Q2 FY26

    Reflects strong year-over-year growth but flat sequentially due to $563 million of asset sales.

    Revenue
    $328 millioncompared to $283 million for Q2 FY25
    Q2 FY26

    Year-over-year increase primarily due to timing and impact of revenue from net new investments, annual escalators, and active portfolio management.

    Net income available to common shareholders
    $363 millioncompared to $137 million for Q2 FY25
    Q2 FY26

    Year-over-year increase primarily a result of a $247 million gain on asset sales in Q2 2026.

    EPS
    $1.19compared to $0.46 for Q2 FY25
    Q2 FY26

    Year-over-year increase primarily a result of a $247 million gain on asset sales in Q2 2026.

    AFFO per share increase
    $0.25compared to Q1 FY26
    Q2 FY26

    Primarily driven by incremental net income from $377 million in new investments, $1.6 million of revenue from annual escalators, and lower net interest expense of $1.6 million, offset by $7.5 million from asset sales and loan repayments.

    New investments completed
    $377 million
    YTD Q2 FY26

    Completed during the first and second quarters, contributing to Q2 AFFO increase.

    Common dividend increase
    $0.01
    Q2 FY26

    Announced last week, included in full-year guidance.

    Asset sales volume
    $563 million
    Q2 FY26

    Headwind to sequential AFFO and FAD growth.

    Loan repayments volume
    $209 million
    Q2 FY26

    Over the past two quarters, reduced Q2 AFFO by $7.5 million.

    Proceeds from asset sales and loan repayments
    $700 million
    Q2 FY26

    Used to pay down the $2 billion revolver to $6 million in borrowings.

    Revolver borrowings
    $6 million
    Q2 FY26

    Balance after paying down with proceeds from asset sales and loan repayments.

    Cash on hand
    $39 million
    as of June 30

    Available cash.

    Restricted cash
    $145 million
    as of June 30

    Includes sales proceeds held by qualified intermediaries for 1031 exchange to fund future investments.

    Fixed charge coverage ratio
    6.5x
    Q2 FY26

    At quarter end.

    Unlevered returns (triple net deals)
    low double digits
    stabilized

    Expected for announced triple net transactions.

    Unlevered returns (RIDEA deals)
    low to mid-teens
    stabilized

    Expected for announced RIDEA transactions.

    Nursing home workforce recovery
    14%vs pre-pandemic levels
    June 2026

    Industry finally recovered to pre-pandemic workforce levels.

    Annualized FAD growth
    mid-single-digit (6-7%)
    annualized

    Eminently achievable, with potential for high single or low double-digit growth in some years.

    Industry KPIs

    4
    MetricValueDetails
    Coverage ratios1.65xx
    Senior housing occupancy94%%
    Operator tenant concentration9.9%%
    Investment volume and sourcing mix$470 millionUSD

    Orderbook & backlog

    3
    Investment pipelineRobustQ2 FY26

    Expected to drive a material pickup in transactions through year-end 2026 and into 2027, including market and off-market opportunities in U.S. and U.K., with a large component being RIDEA.

    Investment volume under contractMeaningful increaseQ2 FY26

    Based on transactions forecasted to close in the coming months.

    Disposition volume remaining$15 million to $25 millionper quarter

    Ongoing asset sales as part of portfolio pruning and strengthening.

    Deals & partnerships

    11
    CommuniCareStrategic exit of 18 facilities located in Maryland and West Virginia.$480 million

    Driven by strong pricing received for these facilities, combined with the ability to significantly improve Omega's credit with CommuniCare.

    Ciena, Saber, HHCTransition of 20 facilities from Ciena to two other current operators, Saber and HHC. 18 facilities to Saber master lease, 1 facility to HHC master lease, and 1 facility sold to Saber Propco JV. Ciena also agreed to exit 8 owned Laurel assets through a sale to Saber Propco JV.

    Proactive portfolio management by Omega; Ciena's Laurels portfolio had historically weighed down performance with trailing 12-month EBITDAR coverage of 0.87x on allocated rent of $33 million.

    Saber Propco JVAcquisition of nine skilled nursing facilities in the Laurels portfolio.$160 million

    Omega owns a 49% equity interest in the Saber Propco JV. Expected to achieve additional growth via improvements of same-store financial performance and future new deal transactions.

    Omega-owned care homes operatorAcquisition of the operations of four Omega-owned care homes in the U.K., converting the investment into a RIDEA structure.$20 million

    First RIDEA investment in the U.K. This transaction was not converted due to operator issues, but rather for an opportunity for enhanced accretive growth.

    VariousAcquisition of three Rhode Island senior housing communities.$43 million

    Part of new investments in Q2 2026.

    VariousAcquisition of two Indiana skilled nursing facilities.$33 million

    Part of new investments in Q2 2026.

    VariousPurchase of a Tennessee senior housing community.$15 million

    Part of new investments in Q2 2026.

    VariousPurchase of a U.K. care home.$11 million

    Part of new investments in Q2 2026.

    VariousPurchase of a Texas skilled nursing facility.$8 million

    Part of new investments in Q2 2026.

    VariousReal estate loans.$16 million

    Part of new investments in Q2 2026.

    VariousPurchase of six Texas skilled nursing facilities.$73 million

    Subsequent to quarter end, under a triple net structure.

    Risks & headwinds

    2
    Temporary earnings headwind due to timing of asset sales and loan repaymentsQ3 FY26

    Impacted Q2 AFFO growth; expected to create a temporary earnings headwind in Q3.

    Mitigation: Proceeds position Omega for meaningful deployment opportunities supporting stronger growth in Q4 and into 2027.

    Indirect impact from regulatory focus on fraud and abuse in healthcareOngoing

    Watching carefully for any indirect impact to nursing home space caused by state budget constraints; no material impact to coverages from negative state rate-setting outcomes to date.

    Mitigation: Management applauds efforts to reduce fraud and abuse, hoping efforts focus on bad actors and that upstanding providers aren't inadvertently impacted.

    What to watch in Q3 FY26

    5

    Earnings accretion from redeployed asset sale proceeds

    Q3 FY26 (impact), Q4 FY26 and into FY27 (growth)
    CurrentQ2 AFFO flat sequentially due to $563M asset sales
    TargetStronger growth in Q4 and into 2027

    Why it matters

    Verifies the success of the strategic asset sales and capital recycling strategy.

    However, we believe those proceeds position us for meaningful deployment opportunities that support stronger growth in Q4 and into 2027.

    Q&A highlights

    6

    Why did the operator agree to shift to RIDEA given high EBITDAR coverage, and what are the dynamics for future UK RIDEA transitions?

    Matthew Gourmand explained the operator sought to monetize value, and Omega saw an opportunity for outsized returns (low to mid-teen yields) while allowing the operator to de-risk. This aligns with Omega's goal of long-term alignment of interest with partners, and they will continue to seek such opportunities in the UK.

    “my sense was that he had created a decent amount of money and value in this portfolio and was looking to monetize some of that. We obviously spent a decent amount of time trying to understand whether there was opportunity for further growth, and we're very comfortable with that. And then we're able to strike a price that will create outsized returns, so meaningfully more than our low to mid-teen returns, we believe, over time, while also allowing him to take a little bit of risk off the table.”

    asked by Justin Haasbeek · answered by Matthew Gourmand

    2 min read6 chapters

    Detailed Narrative

    01

    Leadership Transition and Legacy

    CEO Taylor Pickett and CFO Bob Stephenson announced their 100th and final earnings call, reflecting on 25+ years of industry evolution and Omega's growth. They highlighted the company's culture of intellectual rigor, conservative balance sheet management, and evolving capital allocation products, expressing confidence in the new leadership team under Matthew Gourmand to maximize value over the next decade.

    02

    Strategic Portfolio Management

    Omega proactively managed its portfolio, including the strategic exit of 18 CommuniCare assets for $480 million at an effective 6.7% cash flow cap rate, significantly improving credit. Additionally, 20 Ciena facilities were transitioned to Saber and HHC, strengthening Ciena's credit profile and providing future growth opportunities through Omega's 9.9% ownership in Saber OpCo. This active management aims to enhance the portfolio and improve accretion.

    03

    Investment Activity and Pipeline

    The company closed $470 million in new investments year-to-date, with $126 million in Q2 and $93 million subsequent to quarter-end. These included senior housing, skilled nursing, and UK care homes, with a notable first RIDEA investment in the UK. A strong pipeline of market and off-market opportunities, particularly in RIDEA structures, is expected to drive significant transaction volume through year-end 2026 and into 2027, with stabilized unlevered returns in the low double digits for triple net and low to mid-teens for RIDEA deals.

    04

    Balance Sheet Strength and Liquidity

    Omega maintained a strong balance sheet with leverage at a historically low 3.3x and fixed charge coverage of 6.5x. Proceeds from asset sales and loan repayments ($700 million) were used to pay down the revolver to $6 million, providing significant liquidity and flexibility for future investments and debt maturities. As of June 30, the company had $39 million in available cash and $145 million in restricted cash, including $118 million for 1031 exchanges.

    05

    Industry Trends and Regulatory Environment

    The nursing home industry recovered 14% of its workforce, reaching pre-pandemic levels by June 2026, a significant milestone. CMS is rolling out a risk-based survey process, and while some negative state rate-setting outcomes occurred, they are not expected to materially impact coverages. Management is monitoring the regulatory focus on fraud and abuse for indirect impacts on state budgets, applauding efforts to reduce fraud while hoping to avoid inadvertent impacts on upstanding providers.

    06

    RIDEA Strategy and Operator Partnerships

    Omega is expanding its RIDEA strategy, including its first UK RIDEA investment, aiming for enhanced accretive growth. The company emphasizes aligning interests with operating partners, such as Saber, through creative deal structures and a focus on high-quality assets with growth opportunities. This approach prioritizes strong clinical care and rational capital allocation, with a willingness to grow with high-caliber operators even if it means increased concentration.

    AI-generated summary of the company’s earnings call. Not investment advice.