Welltower Inc. (WELL) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

August 1, 2023 9:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Welltower Second Quarter 2023 Earnings Call. [Operator Instructions]. It is now my pleasure to turn today's call over to Matt McQueen, General Counsel. Please go ahead.

Matthew McQueen

Thank you, and good morning. As a reminder, certain statements made during this call may be deemed forward-looking statements in the meaning of the Private Securities Litigation Reform Act. Although Welltower believes any forward-looking statements are based on reasonable assumptions, the company can give no assurances that its projected results will be attained. Factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company's filings with the SEC.

And with that, I'll hand the call over to Shankh for his remarks.

Shankh Mitra

Thank you, Matt, and good morning, everyone. I'll review our second quarter results and describe high-level business trends and our capital allocation activities. John will provide an update on the performance of our Senior Housing Operating and Outpatient Medical Portfolios. Tim will walk you through our triple-net businesses, balance sheet highlights and revised guidance. Nikhil is also on the call to answer questions. We are delighted to report results, which exceeded our expectations in both our Senior Housing Business as well as Outpatient Medical Segment.

Let me first dig into the Senior Housing segment. The key drivers of this business, occupancy, rate and expenses all came in better than expected this quarter, supported by accelerating demand of our product and plummeting new deliveries. From a top line perspective, our Senior Housing Operating portfolio achieved approximately 10% growth on a same-store basis and 17.8% growth on a total portfolio basis driven by another solid quarter of year-over-year occupancy growth and significant pricing power.

Last quarter, I discussed with you how the strong pricing trends, along with moderating expenses, resulting in significant margin expansions that we have been all waiting for. I'm pleased to report to you that this trend intensified in the second quarter as we saw revenue per occupied room or RevPOR growth of 7.3%, coupled with just 3.5% expense per occupied room or export growth, resulting in an approximate 25% operating margin, a level not seen since the onset of the pandemic. And while that still leaves significant upside before achieving our pre-COVID NOI margin of above 30%, we expect to meaningfully exceed our pre-COVID level of profitability over time through John's build-out of the operating platform.