Medical Properties Trust, Inc. 2026 Q2 Earnings Call

Welcome to the MPT conference call to discuss our second quarter 2026 financial results. With me today are Edward K. Aldag Jr., Chairman, President, and Chief Executive Officer of the company; Steven Hamner, Executive Vice President and Chief Financial Officer; Kevin Hanna, Senior Vice President, Controller, and Chief Accounting Officer; Rosa Hooper, Senior Vice President of Operations and Secretary; and Jason Frey, Managing Director, Asset Management and Underwriting. Our press release was distributed this morning and furnished on Form 8-K with the Securities and Exchange Commission. If you did not receive a copy, it is available on our website at mpt.com in the investor relations section. Additionally, we are 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 and/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 could 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 mpt.com for the most directly comparable financial results and related reconciliations. I will now turn the call over to our Chief Executive Officer, Ed Aldag.

Thank you, Charles, and thanks to all of you for joining us this morning on our second quarter 2026 earnings call. Before I begin today, we would like to extend our thoughts and prayers to the people of Colombia after this morning's earthquake. Now let me begin with the most significant update. Today, we announced a comprehensive refinancing transaction that extends $2.4 billion of debt maturities to 2032, significantly reducing near-term maturities and positioning us well to pursue a balanced capital allocation strategy moving forward. Steve will discuss this transaction in more detail shortly. Turning to our performance highlights. Total portfolio EBITDARM coverage remains steady as we continue to see robust demand for rehabilitation services around the world.

Our post-acute operators again delivered the strongest growth in the portfolio, with EBITDARM increasing more than $70 million year-over-year, led by a 24% increase in MEDIAN and a 13% increase in Ernest Health. General acute performance was stable. Behavioral health remains a source of pressure on the overall portfolio, despite the increased importance and demand for these services we continue to see around the world. In the U.K. market especially, revenue continues to be impacted by funding pressures at the NHS as the new administration in the U.K. works to rebalance its entire budget. I spent last week in the U.K. spending time with many of our operators there. I walked away from those meetings impressed with the level of activity across those facilities, confident in the opportunities for high-quality general acute providers, and encouraged that behavioral market remains a compelling long-term investment.

As most of you know, our Swiss joint venture went public this summer. It is now listed on the SIX Exchange. Infracore continues to see attractive opportunities for growth, and the company was able to access capital for further growth. We retain a significant ownership position in Infracore and remain bullish on Switzerland and look forward to seeing our overall investments grow there. Finally, to further strengthen our portfolio, we consolidated all of our ScionHealth general acute hospitals and LifePoint leases into one LifePoint master lease. As a part of this conversion, Scion transitioned certain MPT-owned acute hospitals to LifePoint, and we are pleased with the resulting single lease relationship with a mature operator with an enhanced credit profile.

With the strong trends we continue to see across our diverse portfolio of operators, the proving enduring value of our assets, and a plan to clear the runway of debt maturities until late 2028, we are well positioned to achieve our goal of over $1 billion annualized cash rent by the end of the year and to create value for the shareholders moving forward.

Rosa? Thank you, Ed. As usual, I will walk through the trends we are seeing, the continued progress of our recently transitioned operators, and the steps tenants are taking to enhance performance.

Across our core portfolio, performance trends remain broadly stable. General acute operators still comprise the majority of the portfolio and reported aggregate EBITDARM coverage of 2.8 times during the quarter. As Ed mentioned, our post-acute portfolio delivered another really strong performance, with coverage of 2.4 times. Finally, our behavioral portfolio coverage was down slightly to 1.4 times, reflecting the discrete headwinds in the U.K. and U.S. markets that we have discussed all year. For individual operator coverage details, we would encourage you to review the supplemental published on the investor relations page of our website. Our international portfolio continues to provide meaningful stability.

Swiss Medical Network, MEDIAN, and Circle continue to produce strong, stable earnings, executing on their respective growth and innovation strategies. Swiss Medical Network is advancing its integrated care strategy with revenue growth supported by recent acquisitions and an ongoing shift toward higher-value outpatient and primary care. In Germany, MEDIAN continues to build on its momentum, with year-to-date EBITDA running ahead of budget. At Priory, proactive measures are being taken to address challenges related to the previously discussed shift in NHS referral patterns. With the ongoing budget constraints in the U.K., management is focused on implementing even more disciplined cost control measures and optimizing services to better align with demand. Turning to the U.S., Noor continues to produce strong results. Noor began paying 50% contractual rent in June. Operationally, Noor delivered encouraging momentum, with admissions, emergency department visits, and surgeries all higher year-over-year, reflecting volume recovery across the platform.

The emergency department project at Culver City is progressing and remains scheduled to open in the fourth quarter of 2027. HSA, which operates hospitals in Florida, Louisiana, and Texas, saw mixed results in the second quarter due to certain disruptions that caused lower cash collections and volume declines in some markets. First, the MEDITECH EMR conversion caused a temporary inability to bill and collect cash for a period during the month of May, resulting in lower collections in May and June. Additionally, prior to the conversion, HSA transitioned its revenue cycle management to an outsourced firm. Because HSA operates in markets where they serve an above-average number of indigent patients, reliance on supplemental payments from federal and state agencies is necessary. These payments are not always predictable and can therefore be a strain on cash flows.

That was evident when the Florida supplemental funding that was due in April was delayed until August, which caused further short-term pressure on HSA's liquidity. With the MEDITECH conversion largely behind them, HSA has brought revenue cycle management back in-house and expects to improve revenue cycle and operational efficiency in the coming months. While cash collections are still lagging, HSA has received significant payments from the Florida Supplemental Funding Program in August, enabling them to begin repayment of the working capital advances we made during the quarter. While trailing 12-month EBITDARM to cash rent coverage of 2 times, we remain cautiously optimistic about the trajectory of HSA and will continue carefully monitoring their operations. Our U.S. post-acute portfolio remains an area of strength.

Ernest Health is a standout, and we're excited to see Ernest continue to grow with its acquisition of Reunion Rehabilitation Hospitals, adding seven hospitals, with closing expected this summer. Finally, we remain confident in the long-term earnings power of these assets and in our path toward normalized rent across the portfolio. With that, I'll turn it over to Kevin.