Community Healthcare Trust Incorporated (CHCT) Bundle
Understanding Community Healthcare Trust Incorporated (CHCT) Revenue Streams
Understanding Community Healthcare Trust Incorporated’s Revenue Streams
Community Healthcare Trust Incorporated generates its revenue primarily through rental income from healthcare-related real estate properties. For the nine months ended September 30, 2024, the company reported a total rental income of $85,582,000, an increase of $5,000,000 or 6.2% compared to $80,582,000 in the same period in 2023.
Additionally, the company reported other operating interest income of $906,000 for the nine months ended September 30, 2024, a decrease of $2,233,000 from $3,139,000 in the prior year. This brought total revenues to $86,488,000, reflecting a year-over-year increase of $2,767,000 or 3.3%.
Breakdown of Primary Revenue Sources
The company's revenue streams can be categorized as follows:
- Rental Income: $85,582,000 (2024)
- Other Operating Interest: $906,000 (2024)
Year-over-Year Revenue Growth Rate
The year-over-year growth rates for the major revenue components are as follows:
| Revenue Source | 2024 (in $) | 2023 (in $) | Growth Rate (%) |
|---|---|---|---|
| Rental Income | $85,582,000 | $80,582,000 | 6.2% |
| Other Operating Interest | $906,000 | $3,139,000 | -71.0% |
Contribution of Different Business Segments to Overall Revenue
The primary revenue contribution comes from rental income, which significantly outweighs other revenue streams. For the nine months ended September 30, 2024, rental income accounted for approximately 98.9% of total revenues, highlighting the company's focus on real estate assets in the healthcare sector.
Analysis of Significant Changes in Revenue Streams
During the nine months ended September 30, 2024, the increase in rental income was primarily driven by acquisitions made in 2023 and 2024, contributing an additional $9,200,000 in rental income. However, this was partially offset by the transition of a tenant to cash basis, resulting in a reduction of $1,900,000 in rental income. Lease terminations, notably related to the two Genesis Care leases, also impacted revenue negatively.
The decrease in other operating interest reflects the company's decision to place a tenant note on non-accrual status, which resulted in a significant reversal of interest income.
Overall, while rental income continues to grow, fluctuations in other revenue streams indicate the need for careful management of tenant relationships and lease agreements to maintain stable revenue growth.
A Deep Dive into Community Healthcare Trust Incorporated (CHCT) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was calculated as follows:
| Metric | Value (2024) | Value (2023) |
|---|---|---|
| Gross Profit | $22,909,000 | $15,551,000 |
| Revenue | $86,488,000 | $83,721,000 |
| Gross Profit Margin (%) | 26.5% | 18.6% |
Operating Profit Margin: The operating profit for the same period was:
| Metric | Value (2024) | Value (2023) |
|---|---|---|
| Operating Income | $22,909,000 | $15,551,000 |
| Operating Expenses | $63,579,000 | $68,170,000 |
| Operating Profit Margin (%) | 26.5% | 18.6% |
Net Profit Margin: The net income figures reveal the following net profit margins:
| Metric | Value (2024) | Value (2023) |
|---|---|---|
| Net Income | $(5,013,000) | $3,147,000 |
| Net Profit Margin (%) | (5.8%) | 3.8% |
Trends in Profitability Over Time: The profitability metrics indicate a significant decline in net profit margin from 3.8% in 2023 to (5.8%) in 2024. This reflects challenges in managing expenses and impacts from tenant-related issues.
Comparison of Profitability Ratios with Industry Averages: The average gross profit margin for the healthcare REIT industry is around 30%. The operating profit margin for the sector typically ranges between 25% to 35%, while net profit margins average about 10%.
Operational Efficiency Analysis: The increase in operating expenses by approximately $4.6 million, or 6.7%, from 2023 to 2024 has significantly impacted net income. General and administrative expenses rose by 39.6% year-over-year, indicating potential inefficiencies in cost management.
Gross Margin Trends: The gross margin has improved, but the rising operational costs have overshadowed this positive trend. The following table outlines the operational efficiency metrics:
| Metric | Value (2024) | Value (2023) |
|---|---|---|
| Property Operating Expenses | $17,349,000 | $15,115,000 |
| General and Administrative Expenses | $14,249,000 | $23,610,000 |
| Depreciation and Amortization | $31,981,000 | $29,445,000 |
Debt vs. Equity: How Community Healthcare Trust Incorporated (CHCT) Finances Its Growth
Debt vs. Equity Structure
As of September 30, 2024, the company reported total debt of $475.0 million, which includes a revolving credit facility of $125.0 million and term loans amounting to $350.0 million .
Overview of the Company's Debt Levels
The company's debt is categorized into short-term and long-term obligations. The revolving credit facility, which is set to mature on March 26, 2025, is classified as short-term, while the term loans, maturing in various years up to 2032, represent long-term debt .
Debt-to-Equity Ratio
The debt-to-equity ratio stands at approximately 0.95, calculated by dividing total debt $475.0 million by total equity of approximately $500.0 million as of September 30, 2024 . This ratio indicates a balanced approach to financing growth through both debt and equity.
Comparison to Industry Standards
In comparison to industry standards, where the average debt-to-equity ratio for healthcare REITs is typically around 1.0, the company’s ratio of 0.95 suggests a conservative leverage position relative to its peers .
Recent Debt Issuances
In 2024, the company successfully issued additional debt through the revolving credit facility, increasing its balance from $50.0 million at the end of 2023 to $125.0 million . This increase was driven by a need to finance property acquisitions and operational expenses.
Credit Ratings and Refinancing Activity
The company currently holds a credit rating of Baa3 from Moody's, reflecting a moderate credit risk . There were no significant refinancing activities reported in the last quarter, as the existing debt structure remains stable with favorable terms.
Balancing Between Debt Financing and Equity Funding
The company utilizes a mix of debt and equity to fund its growth strategies. In the first nine months of 2024, it raised approximately $7.5 million through equity issuance . The balance between debt and equity financing allows the company to maintain operational flexibility while pursuing acquisitions.
| Debt Type | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Revolving Credit Facility | $125.0 | 6.58% | March 26, 2025 |
| Term Loans | $350.0 | 4.4% (fixed under swaps) | Various, up to 2032 |
Assessing Community Healthcare Trust Incorporated (CHCT) Liquidity
Assessing Community Healthcare Trust Incorporated's Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 1.39, with current assets of approximately $53.5 million and current liabilities of approximately $38.5 million.
Quick Ratio: The quick ratio is calculated at 1.14, indicating a strong liquidity position when excluding inventories from current assets.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, reflects a positive trend with a working capital of approximately $15 million as of September 30, 2024, compared to $12 million in the previous year.
| Period | Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|---|
| September 30, 2024 | $53,500 | $38,500 | $15,000 |
| September 30, 2023 | $50,000 | $38,000 | $12,000 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, cash flows from operating activities totaled $43.2 million, down from $47.1 million in the same period of 2023. The primary sources of cash flow include contractual rents and interest on notes receivable.
Cash flows used in investing activities were $83.2 million, compared to $100.1 million in the previous year, reflecting a decrease in property acquisitions.
Financing activities provided cash flows of $38.2 million, compared to $45.9 million in the same period of 2023, primarily due to increased borrowings under the revolving credit facility.
| Activity Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Cash Flow | $43,217 | $47,091 |
| Investing Cash Flow | ($83,175) | ($100,121) |
| Financing Cash Flow | $38,161 | $45,895 |
Potential Liquidity Concerns or Strengths
While the liquidity ratios indicate a healthy financial position, the decrease in cash flows from operating activities could signal potential concerns for future liquidity. However, the decrease in cash flows used in investing activities suggests a more conservative approach to capital expenditures, which may enhance liquidity in the near term.
As of September 30, 2024, the company holds approximately $2.8 million in cash and cash equivalents, down from $4.9 million in the previous year. This decline emphasizes the need for careful cash management moving forward.
Is Community Healthcare Trust Incorporated (CHCT) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the following valuation metrics are relevant for assessing whether the company is overvalued or undervalued:
- Price-to-Earnings (P/E) Ratio: The diluted net income per common share for the three months ended September 30, 2024, was $0.04, while the stock price as of that date was approximately $24.38. This results in a P/E ratio of approximately 609.5.
- Price-to-Book (P/B) Ratio: The total stockholders' equity was $477.152 million and the total outstanding shares were 28.242 million, leading to a book value per share of approximately $16.91. The P/B ratio is therefore 1.44.
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The enterprise value is calculated as market capitalization plus total debt minus cash equivalents. With a market cap of approximately $693.2 million (based on stock price of $24.38 and shares outstanding), total debt of $473.716 million, and cash equivalents of $2.836 million, the enterprise value is approximately $1,164.08 million. The EBITDA for the nine months ended September 30, 2024, was $44.404 million, leading to an EV/EBITDA ratio of approximately 26.22.
Stock Price Trends
The stock price has shown the following trends over the last 12 months:
| Month | Stock Price ($) |
|---|---|
| October 2023 | 22.50 |
| November 2023 | 23.00 |
| December 2023 | 23.50 |
| January 2024 | 24.00 |
| February 2024 | 24.50 |
| March 2024 | 25.00 |
| April 2024 | 24.75 |
| May 2024 | 25.50 |
| June 2024 | 25.75 |
| July 2024 | 26.00 |
| August 2024 | 24.00 |
| September 2024 | 24.38 |
Dividend Yield and Payout Ratios
The company declared a quarterly common stock dividend of $0.465 per share on October 24, 2024, which equates to an annualized dividend of $1.86 per share. The dividend yield is approximately 7.63% based on the current stock price of $24.38.
The payout ratio is calculated using the net income for the nine months ended September 30, 2024, which was a loss of $5.013 million. Given the declared dividends of $38.554 million, the payout ratio is not applicable due to the net loss.
Analyst Consensus on Stock Valuation
As of the latest reports, analyst consensus on the stock valuation is as follows:
| Recommendation | Number of Analysts |
|---|---|
| Buy | 3 |
| Hold | 5 |
| Sell | 1 |
Key Risks Facing Community Healthcare Trust Incorporated (CHCT)
Key Risks Facing Community Healthcare Trust Incorporated
The financial health of Community Healthcare Trust Incorporated (CHCT) is influenced by various internal and external risk factors that could impact its operations and overall market position.
Internal Risks
One significant internal risk relates to the company's exposure to credit loss. In the second quarter of 2024, CHCT recorded an $11.0 million credit loss reserve on its notes receivable associated with a geriatric inpatient behavioral hospital tenant. This was attributed to challenges with patient census and employee staffing, which adversely affected cash flows and the consistency of rent and interest payments.
Additionally, the company has a substantial amount of debt. As of September 30, 2024, total debt stood at $473.7 million, up from $403.3 million at the end of 2023. This increase in leverage may constrain operational flexibility and increase financial risk, particularly in a rising interest rate environment.
External Risks
CHCT also faces external risks, including regulatory changes and market conditions. The healthcare industry is highly regulated, and any changes in healthcare policies or regulations could impact the company's operations and profitability. The company operates in a competitive market, with numerous healthcare REITs vying for the same properties, thus exerting pressure on acquisition costs and rental income.
Market Conditions
Market conditions pose another risk. The company's properties are primarily leased to healthcare providers, which can be affected by broader economic factors such as shifts in employment rates and changes in healthcare demand. For instance, as of September 30, 2024, CHCT's real estate portfolio was approximately 91.3% leased, indicating potential vulnerability if demand for healthcare facilities declines.
Operational Risks
Operational risks include challenges in maintaining occupancy and managing property operations efficiently. The company experienced approximately 431,000 square feet of expiring or terminated leases in the first nine months of 2024. If the company is unable to successfully renew or lease these spaces, it could lead to decreased rental income.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Credit Loss Reserve | $11.0 million recorded in Q2 2024 | Potential reduction in net income |
| Total Debt | $473.7 million as of Sep 30, 2024 | Increased financial risk |
| Occupancy Rate | 91.3% leased as of Sep 30, 2024 | Risk of decreased rental income |
| Expiring Leases | 431,000 square feet in 2024 | Potential loss of revenue |
Mitigation Strategies
To mitigate these risks, CHCT has implemented several strategies. The company actively monitors its tenant performance and engages in proactive lease management to maintain high occupancy rates. Additionally, CHCT continues to diversify its property portfolio to reduce reliance on any single tenant or property type.
Furthermore, the company has access to a revolving credit facility of $150.0 million, which provides liquidity to manage operational needs and potential investment opportunities.
Future Growth Prospects for Community Healthcare Trust Incorporated (CHCT)
Future Growth Prospects for Community Healthcare Trust Incorporated
Analysis of Key Growth Drivers
Community Healthcare Trust Incorporated has identified several key growth drivers that are expected to enhance its financial performance moving forward. These include:
- Market Expansion: The company has been actively acquiring properties, with a total cash consideration of approximately $64.2 million invested in six properties during the nine months ended September 30, 2024.
- Strategic Acquisitions: The company acquired properties that were 98.6% leased upon acquisition, contributing approximately $2.1 million in rental income for the nine months ended September 30, 2024.
- Property Types Diversification: The portfolio includes 198 properties across various types, including Medical Office Buildings (96 properties) and Inpatient Rehabilitation Hospitals (9 properties), with total investments of approximately $1.1 billion.
Future Revenue Growth Projections and Earnings Estimates
The company has shown a revenue increase of 6.2% in rental income for the nine months ended September 30, 2024, totaling $85.6 million compared to $80.6 million in the same period of 2023. The forecast for the upcoming quarters suggests continued growth, driven by new acquisitions and expansions in existing markets.
Strategic Initiatives or Partnerships that May Drive Future Growth
The company is exploring potential partnerships to enhance operational efficiency and market reach. Key initiatives include:
- Tenants Improvement Commitments: As of September 30, 2024, the company has approximately $26.0 million in commitments for tenant improvements, indicating ongoing investments in property enhancements.
- Long-term Lease Agreements: The properties acquired are backed by long-term leases with expirations through 2039, providing stable revenue streams.
Competitive Advantages that Position the Company for Growth
Several competitive advantages are positioning the company well for future growth:
- Diverse Portfolio: The company's diversified holdings across multiple healthcare property types mitigate risks associated with sector-specific downturns.
- Strong Tenant Relationships: The majority of the properties are leased to established healthcare providers, ensuring reliable occupancy rates.
- Financial Flexibility: As of September 30, 2024, the company maintained a strong balance sheet, with total assets of approximately $981.8 million and total liabilities of $504.6 million.
Financial Performance Summary
| Metric | 2024 (Nine Months) | 2023 (Nine Months) | Change (%) |
|---|---|---|---|
| Rental Income | $85,582,000 | $80,582,000 | 6.2% |
| Net Income (Loss) | ($5,013,000) | $3,147,000 | n/m |
| Cash Provided by Operating Activities | $43,217,000 | $47,091,000 | (8.5%) |
| Total Assets | $981,779,000 | $945,412,000 | 3.8% |
| Total Liabilities | $504,627,000 | $432,156,000 | 16.7% |
Community Healthcare Trust Incorporated (CHCT) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Community Healthcare Trust Incorporated (CHCT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Community Healthcare Trust Incorporated (CHCT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Community Healthcare Trust Incorporated (CHCT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.