DHC — Diversified Healthcare Trust

Summary of DHC Q2 2026 Earnings Call

1. Key Financial Results and Metrics:

• Normalized FFO: $39 million, or $0.16 per share.
• Adjusted EBITDAre: $82 million.
• Consolidated NOI: Increased 20.4% year-over-year to $84 million.
• Same-property NOI (SHOP segment): Increased 37.2% year-over-year to $52 million.
• Same-property occupancy: Increased to 83.1%, up 160 basis points year-over-year.
• Average monthly rate: Increased by 6.2%.
• Total liquidity: Approximately $267 million with a net debt to EBITDA ratio improved to 7.1x from 8.7x year-over-year.

2. Strategic Updates and Business Highlights:

• DHC has seen strong operational momentum, particularly in the SHOP segment, attributed to strategic operator transitions completed in late 2025.
• Continued focus on improving profitability through new operator agreements, which will introduce a more aligned fee structure and tighter cost controls starting January 2027.
• Plans to convert closed skilled nursing wings into high-demand living units, with an initial investment of $20 million expected to generate mid-teens returns.
• The Medical Office and Life Science portfolio saw same-property occupancy increase to 95.8% with healthy leasing activity.

3. Forward Guidance and Outlook:

• Full-year guidance reaffirmed with total NOI expected between $307 million and $323 million, and normalized FFO projected at $0.56 to $0.62 per share.
• Adjusted EBITDAre guidance remains at $300 million to $315 million.
• Anticipated continued improvements in SHOP NOI, although occupancy growth is slightly below initial projections.

4. Challenges and Points of Concern:

• The pace of occupancy growth in the SHOP segment is slower than expected, attributed to transitional challenges with new operators and existing operational infrastructure.
• Notable one-time expense benefits in Q2 are not expected to recur, which could impact future margins.
• The Medical Office and Life Science segment faced a quarter-over-quarter decline in rental revenue due to a $1 million bad debt charge, unrelated to upcoming vacancies.

5. Notable Q&A Insights:

• Management clarified that the slower occupancy growth is primarily due to transitional noise rather than a lack of focus on top-line growth.
• There is confidence in the trajectory of RevPOR growth, driven by ancillary revenues and improved operational efficiencies.
• Future cost savings from new operator contracts are expected, with significant savings already recognized in dietary and maintenance expenses.
• The company plans to address upcoming vacancies in the Medical Office and Life Science segment proactively, with no direct link to the recent bad debt charge.

Overall, DHC reported strong financial performance in Q2 2026, with strategic initiatives in place to enhance profitability and operational efficiency, despite some challenges in occupancy growth and revenue stability in certain segments.