CareTrust REIT, Inc 2026 Q2 Earnings Call

Lauren, please go ahead. Thank you, and welcome to CareTrust REIT's second quarter 2026 earnings call.

Today, we will make forward-looking statements based on management's current expectations, including statements regarding future financial performance, dividends, acquisitions, investments, financing plans, business strategies, and growth prospects. These forward-looking statements are subject to risks and uncertainties that could cause actual results to materially differ from our expectations. These risks are discussed in CareTrust REIT's most recent Form 10-Q filing with the SEC. We do not undertake a duty to update or revise these statements except as required by law. During the call, the company will reference non-GAAP metrics such as EBITDA, FFO, and FAD. A reconciliation of these measures to the most comparable GAAP financial measures is available in our earnings press release and Q2 2026 financial supplement, which are available on the investor relations section of CareTrust website at www.caretrustreit.com.

A replay of this call will also be available on the website for a limited period. On the call this morning are Dave Sedgwick, President and Chief Executive Officer, Derek Bunker, Chief Financial Officer, and James Callister, Chief Investment Officer. I'll now turn the call over to Dave Sedgwick, CareTrust REIT's President and CEO.

Dave? Thank you, Lauren, and good morning, everybody.

Thank you for joining us. The CareTrust flywheel cranked up a few years ago when we hit around seven times our lifetime annual average of investments in 2024 and again in 2025. The team shows no signs of slowing. In fact, the opposite is true. After two back-to-back record-setting years, we are again on pace to deliver in a big way for our operators and shareholders. Last quarter was the single largest investment quarter in our company's history, excluding M&A activity, with approximately $900 million of investments at a blended yield of 8.9%. James, Kyle, Joe, Tree, Josh, JP, Nick, Martin, and Killian, that's the dream team right there responsible for a year's worth of investments in one quarter. I'm so proud of them and proud of the entire CareTrust team across the board, accounting, asset management, finance, tax, legal, data, operations.

Everyone is rowing hard together to make this year a three-peat of record performance. Q2 results achieved record investments in a quarter, record revenues, record FFO per share, and a healthy raise to guidance, built on a foundation of record operator lease coverage and operator quality care measures. Let me expand on that foundation just a little bit. We are stoked to see our operator quality care measures exceed the industry averages for overall star ratings, health inspections, quality measures, successful discharges, and readmission rates. Let me repeat that. Our operators outperform industry averages for overall star ratings, health inspections, quality measures, successful discharges, and readmission rates after they've had a chance to manage these buildings for at least four years.

In my 2025 annual report letter, I discussed how mission-critical it is for us to lease our properties to high-quality operators and how we view the relationship between them and the value of our real estate investments. A quality operator is one who is driven by a mission, focuses their resources first on becoming the employer of choice, and through that becomes the quality care provider of choice in their market. Only after achieving sustained quality care outcomes can a provider and the real estate they operate achieve sustainable financial stability. We have seen this formula for success prove out over the last 25 years. A CareTrust operator is one who harmonizes mission-driven culture with the clinical and financial sophistication to adapt to an ever-changing environment. We apply those first principles to skilled nursing and senior housing alike. We invest for the long term.

The price we pay and the operator we choose are intended to result in long-term quality care, and as a result, compounding value creation. That solid operator foundation and orientation allows us to grow in a sustainable and accelerated way across our three growth engines. Year to date, we have already closed on approximately $1.5 billion, and looking forward, the pipeline continues to reload and deal flow continues to be active and interesting across skilled nursing, care homes, and SHOP, both in the U.S. and the U.K. With the balance sheet as strong as it is, the team stronger than ever before, and the opportunity set expanded, and great relationships with partners and new and existing high-quality operators, there has simply never been a more exciting time for CareTrust. With that, I'll hand it off to James for a report on investment activity and the acquisition landscape.

Breaking that down, roughly $735 million in U.S. triple net skilled nursing and seniors housing, approximately $397 million in U.K. care homes, approximately $240 million in loans, and approximately $81 million in SHOP. Turning to what's ahead. The pipeline sits at approximately $540 million, roughly two-thirds skilled nursing and one-third loans to strategic partners, plus U.K. care homes. It's a healthy mix. Some singles and doubles alongside mid to large portfolio opportunities. You'll note the immediate pipe doesn't include SHOP. That's really just a function of timing and discipline. The team continues to deepen relationships, including with high-performing operators, and we are confident these relationships will drive attractive on and off-market opportunities that we expect to convert in future quarters and give us a long runway to scale that portfolio in both the U.S. and the U.K. Our usual reminder on methodology.

The quoted pipe includes only deals we have a reasonable level of confidence we can lock up and close within the next 12 months, and it typically excludes larger portfolios still under review. Stepping back for a moment, what gives us real confidence is that all three of our growth engines are producing. In skilled nursing, deal flow remains deep and steady, with proprietary opportunities generated through longstanding relationships. In SHOP, even amid stiff competition and compressing cap rates, we're pursuing the right assets with the right operators and see a long runway to scale that portfolio in the quarters and years ahead. In the U.K., our London-based team has widened our aperture considerably. New operators, new sources of deal flow, and a pipeline that keeps building.