EPR Properties (EPR) Bundle
Understanding EPR Properties (EPR) Revenue Streams
Understanding EPR Properties’ Revenue Streams
The revenue streams of EPR Properties (EPR) are diverse, primarily deriving from rental income across various property types, including experiential and educational segments.
Breakdown of Primary Revenue Sources
| Revenue Source | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Change (in thousands) |
|---|---|---|---|
| Minimum Rent | $132,828 | $151,080 | $(18,252) |
| Percentage Rent | $5,944 | $2,096 | $3,848 |
| Straight-line Rent | $4,414 | $4,407 | $7 |
| Tenant Reimbursements | $5,038 | $5,987 | $(949) |
| Other Rental Revenue | $453 | $370 | $83 |
| Total Rental Revenue | $148,677 | $163,940 | $(15,263) |
| Other Income | $17,419 | $14,422 | $2,997 |
| Mortgage and Other Financing Income | $14,411 | $11,022 | $3,389 |
| Total Revenue | $180,507 | $189,384 | $(8,877) |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, total revenue decreased by 2% from $533.7 million in 2023 to $520.8 million in 2024. This decline was primarily attributed to a decrease in minimum rent and rental revenue from property dispositions.
Contribution of Different Business Segments to Overall Revenue
As of September 30, 2024, the total revenue breakdown by segment is as follows:
| Segment | Total Revenue (Nine Months Ended September 30, 2024, in thousands) |
|---|---|
| Experiential | $491,138 |
| Education | $29,137 |
| Corporate/Unallocated | $559 |
| Total Revenue | $520,834 |
Analysis of Significant Changes in Revenue Streams
During the nine months ended September 30, 2024, the decrease in minimum rent was influenced by:
- A decline of $11.5 million due to a restructuring agreement with Regal.
- A decrease of $32.7 million in deferred rental repayments from cash basis tenants.
- A $4.6 million decrease from property dispositions.
However, this was partially offset by an increase in rental revenue from property acquisitions and developments, amounting to $5.9 million.
The overall revenue decline was also impacted by an increase in other income, which rose by approximately $10 million due to additional operating properties added to the portfolio.
These financial insights provide a clear view of the revenue dynamics that investors should consider when evaluating the financial health of EPR Properties.
A Deep Dive into EPR Properties (EPR) Profitability
A Deep Dive into EPR Properties' Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was approximately 71.2%, reflecting a decrease from 74.4% in the same period of 2023.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was 28.5%, compared to 30.5% in 2023.
Net Profit Margin: The net profit margin improved to 26.1% for the nine months ended September 30, 2024, up from 24.8% in 2023.
Trends in Profitability Over Time
Revenue for the nine months ended September 30, 2024, was $520.8 million, down 2% from $533.7 million in 2023. Net income available to common shareholders increased to $154.5 million from $127.5 million in 2023.
Comparison of Profitability Ratios with Industry Averages
Industry averages for REITs in the experiential sector typically show gross profit margins around 72%, operating profit margins of 29%, and net profit margins near 25%. EPR Properties is performing slightly above the industry average in net profit margin but below in gross and operating margins.
Analysis of Operational Efficiency
The company's operational efficiency can be assessed through its cost management practices. As of September 30, 2024, total revenue was $520.8 million while total property operating expenses were $43.96 million, resulting in a net operating income of $433.44 million.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Total Revenue | $180.5 million | $189.4 million | -5% |
| Net Income Available to Common Shareholders | $50.2 million | $56.3 million | -10.5% |
| Operating Profit Margin | 28.5% | 30.5% | -2% |
| Net Profit Margin | 26.1% | 24.8% | +1.3% |
Gross margins have shown a downward trend, attributable to increased operational costs and a restructuring agreement affecting rental income. The company has focused on optimizing its cost structure to maintain profitability despite these challenges. For the nine months ended September 30, 2024, depreciation and amortization totaled $124.7 million, which is essential for assessing long-term profitability.
Overall, EPR Properties maintains a strong net profit margin, indicating effective cost management strategies, though it faces challenges in gross and operating margins relative to industry peers.
Debt vs. Equity: How EPR Properties (EPR) Finances Its Growth
Debt vs. Equity: How EPR Properties Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, EPR Properties had total debt outstanding of $2.9 billion, with approximately 99% classified as unsecured debt.
The company had $2.5 billion in aggregate principal amount of unsecured senior notes, with interest rates ranging from 3.60% to 4.95%.
Additionally, EPR Properties reported an outstanding balance of $169.0 million under its $1.0 billion unsecured revolving credit facility.
Debt-to-Equity Ratio and Industry Comparison
The debt-to-equity ratio for EPR Properties stood at 1.19 as of September 30, 2024. This is compared to an industry average of approximately 1.0 for real estate investment trusts (REITs).
The company’s net debt to gross assets ratio was reported at 39%, reflecting a stable leverage position relative to its asset base.
Recent Debt Issuances and Credit Ratings
EPR Properties entered into an amended credit agreement on September 19, 2024, which provided for a new senior unsecured revolving credit facility, extending the maturity date and generally reducing the interest rates on outstanding loans. The facility allows for increased borrowing availability up to $2.0 billion, subject to lender consent.
The company maintains a solid credit rating, with its unsecured senior notes rated Baa3 by Moody's.
Balancing Debt Financing and Equity Funding
EPR Properties has strategically balanced its debt financing and equity funding to optimize its capital structure. For the nine months ended September 30, 2024, the company issued 6.19 million shares of common stock for net proceeds of $589,000.
The company also paid dividends of $209.2 million to shareholders during the same period, indicating a commitment to returning value to its investors while managing its debt levels prudently.
| Debt Type | Outstanding Amount | Interest Rate |
|---|---|---|
| Unsecured Senior Notes | $2.5 billion | 3.60% - 4.95% |
| Unsecured Revolving Credit Facility | $169.0 million | SOFR + 1.15% |
| Total Debt | $2.9 billion | N/A |
This strategic mix of debt and equity financing aims to support EPR Properties' growth while maintaining financial flexibility and stability in its operations.
Assessing EPR Properties (EPR) Liquidity
Assessing EPR Properties' Liquidity
As of September 30, 2024, EPR Properties reported a current ratio of 1.63. This indicates a relatively strong liquidity position, as the company has sufficient current assets to cover its current liabilities.
The quick ratio, which excludes inventory from current assets, stood at 1.63 as well, suggesting that the company is in a solid position to meet its short-term obligations without relying on the sale of inventory.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was approximately $300.5 million as of September 30, 2024. This represents a decrease from $370.5 million at the end of 2023, indicating a tightening liquidity position.
| Date | Current Assets ($ million) | Current Liabilities ($ million) | Working Capital ($ million) |
|---|---|---|---|
| September 30, 2024 | 493.5 | 193.0 | 300.5 |
| December 31, 2023 | 496.0 | 125.5 | 370.5 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, EPR Properties reported net cash provided by operating activities of $300.2 million, a decrease from $370.1 million in the same period of 2023. This decline in operating cash flow raises potential liquidity concerns.
Investing activities resulted in cash outflows of $42.4 million, primarily due to acquisitions and investments in real estate. Financing activities included cash outflows for dividend payments totaling $65.1 million.
| Cash Flow Category | 2024 ($ million) | 2023 ($ million) |
|---|---|---|
| Operating Activities | 300.2 | 370.1 |
| Investing Activities | (42.4) | (47.8) |
| Financing Activities | (65.1) | (62.0) |
Potential Liquidity Concerns or Strengths
Despite the positive current and quick ratios, the decline in working capital and operating cash flow raises potential liquidity concerns. The company's reliance on cash generated from operations to fund its investments and pay dividends could be strained in a challenging economic environment.
As of September 30, 2024, EPR Properties had total debt outstanding of $2.9 billion, with a debt-to-total-assets ratio of 50%. This level of indebtedness could impact the company's ability to secure additional financing if liquidity conditions worsen.
Overall, while EPR Properties maintains a solid liquidity position, ongoing monitoring of cash flows and working capital trends will be essential for sustaining financial health in the future.
Is EPR Properties (EPR) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the following valuation metrics are relevant for assessing financial health:
- Price-to-Earnings (P/E) Ratio: 29.44
- Price-to-Book (P/B) Ratio: 1.01
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 16.52
In examining stock price trends, the stock price over the last 12 months has shown the following movements:
| Period | Stock Price | Change (%) |
|---|---|---|
| September 2023 | $36.50 | -5.48% |
| December 2023 | $35.00 | -4.11% |
| March 2024 | $38.00 | 8.57% |
| June 2024 | $37.50 | -1.32% |
| September 2024 | $34.00 | -9.33% |
Dividend yield and payout ratios reflect the following:
- Annual Dividend per Share: $3.42
- Dividend Yield: 10.06%
- Payout Ratio: 119.9%
Analyst consensus on stock valuation indicates a mixed outlook:
- Buy: 4 analysts
- Hold: 6 analysts
- Sell: 2 analysts
Additional financial metrics as of September 30, 2024:
| Metric | Value |
|---|---|
| Total Revenue (Q3 2024) | $180.5 million |
| Net Income (Q3 2024) | $46.65 million |
| Funds From Operations (FFO) per Diluted Share (Q3 2024) | $1.30 |
| Total Assets | $5.69 billion |
| Total Liabilities | $3.29 billion |
| Net Debt | $2.84 billion |
| Debt to Total Assets Ratio | 50% |
These metrics provide a comprehensive view of the valuation landscape for the company, allowing for informed investment decisions based on current financial health and market performance.
Key Risks Facing EPR Properties (EPR)
Key Risks Facing EPR Properties
The financial health of EPR Properties is influenced by various internal and external risks. Understanding these risks is crucial for investors looking to gauge the company's future performance.
Overview of Internal and External Risks
- Industry Competition: The company operates in a highly competitive real estate investment trust (REIT) sector, where other companies may offer similar properties and investment opportunities.
- Regulatory Changes: Changes in regulations affecting the real estate industry can pose significant risks, including zoning laws and tax regulations.
- Market Conditions: Economic downturns can impact rental income and property valuations, leading to potential revenue declines.
Operational Risks
Operational risks include the potential for increased operating expenses. For the nine months ended September 30, 2024, the total property operating expense was $43.96 million, compared to $42.72 million for the same period in 2023.
Financial Risks
Financial risks include exposure to rising interest rates and credit losses. As of September 30, 2024, the company's total debt was $2.85 billion, with a debt-to-total-assets ratio of 50%. The interest expense for the nine months ended September 30, 2024, was $97.34 million, compared to $94.52 million in 2023.
Strategic Risks
Strategic risks arise from the company's investment decisions. In the nine months ended September 30, 2024, EPR Properties recognized impairment charges totaling $11.81 million. Additionally, the company reported a loss on the sale of real estate amounting to $3.42 million for the three months ended September 30, 2024.
Mitigation Strategies
To mitigate these risks, EPR Properties is undertaking several strategies:
- Debt Management: The company has amended its credit agreements to reduce interest rates and improve borrowing terms, which helps manage financial risk.
- Insurance Coverage: Following significant weather-related damages, the company is working with joint venture partners and insurers to address property losses.
- Investment Selectivity: The company plans to be more selective in future investments to maintain financial stability amid economic uncertainties.
Table of Key Financial Metrics
| Metric | 2024 (9 Months) | 2023 (9 Months) | Change (%) |
|---|---|---|---|
| Total Revenue | $520.83 million | $533.69 million | -2% |
| Net Income | $154.46 million | $127.52 million | 21% |
| FFO per Share (Diluted) | $3.64 | $4.00 | -9% |
| Total Debt | $2.85 billion | $2.81 billion | 1% |
Investors should closely monitor these risk factors as they can significantly impact the financial health and operational performance of EPR Properties moving forward into 2024.
Future Growth Prospects for EPR Properties (EPR)
Future Growth Prospects for EPR Properties
Analysis of Key Growth Drivers
In 2024, EPR Properties is focusing on several key growth drivers:
- Product Innovations: The company is expanding its portfolio to include experiential properties, which are increasingly popular. As of September 30, 2024, the company had approximately 19.5 million square feet of owned experiential real estate.
- Market Expansions: EPR operates properties in 44 states, Ontario, and Quebec, Canada, which presents opportunities for further market penetration and expansion.
- Acquisitions: The company has completed significant acquisitions and investments, totaling approximately $144.1 million in committed development projects as of September 30, 2024.
Future Revenue Growth Projections and Earnings Estimates
Revenue projections for EPR Properties indicate a potential rebound in income generation. For the three months ended September 30, 2024, total revenue reached $180.5 million, while for the nine months, it totaled $520.8 million. This reflects a decrease of 5% and 2%, respectively, compared to the previous year. However, the net income available to common shareholders per diluted share increased by 24% year-over-year to $1.80.
| Period | Total Revenue ($ millions) | Net Income per Diluted Share ($) | Year-over-Year Change (%) |
|---|---|---|---|
| Q3 2024 | 180.5 | 0.53 | -5 |
| 9M 2024 | 520.8 | 1.80 | -2 |
Strategic Initiatives or Partnerships that May Drive Future Growth
EPR Properties has engaged in several strategic initiatives that are expected to drive future growth:
- Joint Ventures: The company has active partnerships in various projects, including two experiential lodging properties in St. Pete Beach, Florida, which are currently being assessed for repairs after damage from recent hurricanes.
- Development Projects: EPR has 13 development projects with commitments totaling approximately $144.1 million, with significant funding expected in 2024.
Competitive Advantages that Position the Company for Growth
EPR Properties benefits from several competitive advantages:
- Diverse Portfolio: The company’s portfolio includes a variety of property types such as theatres, attractions, and education facilities, providing revenue stability.
- High Occupancy Rates: The owned experiential portfolio was 99% leased as of September 30, 2024, indicating strong demand for its properties.
- Access to Capital: With a total debt of $2.9 billion and a robust unsecured revolving credit facility of $1.0 billion, EPR has the financial flexibility to pursue growth opportunities.
Financial Overview
The financial health of EPR Properties reflects both challenges and opportunities:
- Total Assets: Approximately $5.7 billion as of September 30, 2024.
- Total Liabilities: Approximately $3.3 billion, resulting in a debt to total assets ratio of 50%.
- Equity: Total equity stood at $2.4 billion, indicating a solid capital structure.
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Article updated on 8 Nov 2024
Resources:
- EPR Properties (EPR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of EPR Properties (EPR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View EPR Properties (EPR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.