CareTrust REIT, Inc. Q2 FY2026 earnings call

Core Strategic Philosophy & Operator Quality

• Management prioritizes high-quality, mission-driven operators over market tier, preferring a strong operator in a secondary market over a mediocre operator in a top market. The company believes sustained quality care outcomes from strong operators create long-term sustainable financial value for its real estate portfolio.
• After four years of management by Care Trust-vetted operators, portfolio operator quality metrics (overall star ratings, health inspection results, clinical quality scores, successful discharge rates, readmission rates) all outperform industry averages. The company invests for long-term compounding value creation across skilled nursing, senior housing, and SHOP segments.

Investment Activity & Pipeline

• Q2 2026 was the largest investment quarter in company history excluding M&A, with $900 million in closed investments. Year-to-date 2026 investments reached $1.5 billion, keeping the company on track for a third consecutive year of record annual investment volume after record years in 2024 and 2025.
• Post-Q2, a 16-property UK care home net lease portfolio (with a new operator relationship) and a two-community $65 million SHOP addition have already closed. The UK team has expanded sourcing beyond marketed deals to source off-market opportunities via new operator relationships, growing the active pipeline steadily.

Capital & Liquidity Position

• The company maintains a very strong balance sheet: as of the call, total available liquidity is ~$1.4 billion, including $90 million cash on hand, $605 million in revolving credit facility availability, and $671.4 million in unsettled equity forward proceeds. An additional $785.8 million in capacity is available under the company's ATM program.
• Net debt to annualized normalized run-rate EBITDA was 1.0x at quarter end, well below the company's long-term target range. Fixed charge coverage ratio was 9.9x, and there are no scheduled debt maturities prior to 2028.

Care Trust's 2026 year-to-date total investments are approximately $1.5 billion, broken out across segments as follows: 1) U.S. triple net skilled nursing and seniors housing: ~$735 million, 49% of total year-to-date investments; 2) U.K. care homes: ~$397 million, 26.5% of total year-to-date investments; 3) Relationship-driven loans (primarily to skilled nursing operators): ~$240 million, 16% of total year-to-date investments; 4) SHOP (operator-managed properties): ~$81 million, 5.4% of total year-to-date investments. In Q2 2026 alone, the company closed $900 million in total investments at a blended 8.9% stabilized yield. Post-Q2 end through the call date, an additional $308 million in investments closed at a 7.8% blended stabilized yield. As of the call, the current active investment pipeline totals ~$540 million, with roughly two-thirds allocated to skilled nursing and the remaining one-third split between strategic partner loans and U.K. care homes. Q2 2026 normalized FFO was $119.7 million (up 44% YoY), with normalized FAD at $118.5 million (up 43% YoY). Normalized FFO per share was 51 cents (up 19% YoY), and normalized FAD per share was also 51 cents (up 19% YoY).

Management upwardly revised full-year 2026 guidance, reflecting stronger-than-expected year-to-date investment activity:

• The updated normalized FFO per share guidance range is $2.03 to $2.06, up from prior guidance. At the midpoint, this represents 16.2% YoY growth over 2025 full-year results.
• The updated normalized FAD per share guidance range is $2.01 to $2.04, also an upward revision. At the midpoint, this represents approximately 15.1% YoY growth over 2025 full-year results.
• Guidance is based on a weighted average diluted share count of 233 million shares, with core assumptions including: no additional investments, loans, or dispositions beyond what has closed year-to-date; no new debt or equity issuances beyond year-to-date activity; 2.5% inflation-based rent escalators on long-term triple-net leases; $147 million in loan repayments during the year ($104 million already received as of the call); and no material change in the GBP to USD exchange rate.

• All forward-looking statements, including guidance and investment growth projections, are subject to risks and uncertainties that could cause actual results to differ materially from expectations, as detailed in the company's most recent Form 10-Q filing with the SEC.
• Intensified competition and compressed cap rates in the SHOP segment require continued disciplined underwriting to avoid overpaying for assets, as increased private market entry has created more competitive bidding processes.
• Macro uncertainty around Federal Reserve interest rate policy creates some volatility in the company's cost of capital, though low leverage provides sufficient optionality to navigate different rate environments.
• Lease reset risk is not material for the near term, as most lease maturities do not begin until 2031, though future rent resets will depend on market conditions at that time.
• Purchase option exercises by current tenants are considered likely, and while this does not harm existing relationships, it would reduce the company's asset base if exercised, requiring new capital deployment to replace that capacity.

Q: The analyst asks why Care Trust has deployed less SHOP capital than peers despite having a competitive cost of capital, and what draws Care Trust to the skilled nursing segment if acquisition activity slowed. / A: Management explains that unlike peers who have fully pivoted to SHOP and face pressure to deploy capital to prove their new strategy, Care Trust views SHOP as a complementary long-term growth engine and is comfortable maintaining discipline, pursuing opportunities across all three segments. The company has deep historical expertise in skilled nursing, views it as a critical, too-important-to-fail part of the U.S. healthcare continuum with strong demographic tailwinds over the next 25 years, and generates high risk-adjusted returns by partnering with top-tier operators that deliver high quality care. (398 characters)

Q: The analyst asks how increased private market interest in healthcare real estate has impacted acquisition cap rates across property segments. / A: Management confirms that SHOP has seen the most impact: increased private market entry has compressed cap rates and created more competitive bidding processes. In U.S. skilled nursing, the buyer pool remains largely unchanged, with only minimal cap rate compression on large portfolio deals, and off-market sourcing via strong relationships is more common than publicly listed deals. In the UK, there has been a small uptick in new private buyers, but this has not meaningfully impacted cap rates or competitive dynamics. (431 characters)

Q: The analyst asks how management balances growth discipline with avoiding missing attractive opportunities, specifically for SHOP. / A: Management notes that the team works hard to source and pursue attractive SHOP opportunities with the right partners, but does not feel compelled to stretch on price or underwriting just to hit volume targets. The company already has strong, attractive opportunities to deploy capital in U.S. skilled nursing and UK care homes, so it can afford to be selective and only pursue SHOP deals that meet its fundamental return and quality requirements. (357 characters)

Q: The analyst asks what management means by "widening the aperture" for UK deal sourcing, and how the company balances operator quality focus with portfolio diversification. / A: James Callister explains that widening the aperture means the UK team has expanded sourcing beyond traditional marketed deals to source more off-market opportunities via new and existing operator relationships, increasing the volume of available opportunities. Dave Sedgwick adds that the company's core principle is prioritizing high-quality operators over geographic or tenant diversification; management is comfortable building moderate concentration with top-tier operators, and diversification develops naturally over time as the portfolio grows. (452 characters)