![]() These in turn produce income for the company, via the service provided on-site. In terms of operating capital, it operates multiple facilities and care units. NHC's presence in the senior healthcare market is also critical to its business economics. This suggests significant operational inefficiencies and a lack of value for shareholders - no matter what the top line does, there are no earnings left over at the 'end of the year' for the company's owners.ĭata: Author, NHC SEC Filings Investment implications As revenues have been climbing persistently to c$125mm, the level of recorded operating income on this has clipped to record lows <$20mm, from ~$600mm in 2013. Note, the gapping in operating income to revenues since 2013. This operational divergence is seen in Figure 2. Still, you'd expect these pressures to normalize going forward. Inflationary pressures on labor costs also contributed to the decreased adjusted net income, which is not unique to the company.Less government stimulus income was compared to the previous year $0 this quarter, versus $10.6mm the year prior.Earnings are down $37mm since 2013, with minimal growth in between as well, perhaps one primary reason the equity value has been so flat.Īlas, despite the growth trends observed within the quarter, this didn't pull vertically down to the P&L. A firm doing $49mm less in operations over a 10-year horizon is the antagonist to value creation in my view. Note: The year 2023 is shown as the trailing 12 months up until Q1 2023. You can see this clearly in the progression of annual operating income, FY'18-23 TTM (the year 2023 is shown as the tailing 12 months up until Q1 2023): ![]() The critical fact I'd point out is that NHC has been scaling back its business size for several years. This is a decrease compared to the net income of $21.3mm reported last year. It pulled this down to core EBITDA of $20mm and earnings of $15.3mm or $0.76 per share ($3.04 annualized). Acquisition of Caris Healthcare: In June FY'21, the company acquired Caris Healthcare, a hospice provider, and this has begun to pull through to the top line.A higher census suggests increased patient care in these facilities, leading to higher revenues, a sign of revenue growth downstream, in my opinion. Census Increase in Skilled Nursing Facilities: NOO was driven by a higher census within the company's skilled nursing facilities.On inspection, the quarter's growth can be traced back to two underlying factors: Looking at the quarterly numbers, the company booked an 11.2% increase in net operating revenues ("NOO") to $269mm and pulled this to $101.7mm gross. However, a more thoughtful analysis of the future is now required, given that the markets have adapted, as they always do. This is attributed to the defensive nature of its stock in my view (coincidentally, also the factor I urged investors to position against last year, during the broad market selloff). Note, the company trades in line with 2007 rangeĭata: Updata Q1 Earnings Continue Earnings TrendsĪ look-back over the last few years of business shows NHC's performance to be less than appealing.NCH equity stock performance, 2001-date (22 years) This report will attempt to convey the critical facts in the NHC investment debate and what justifies a neutral viewpoint. The reasons for this are simple yet require a degree of explanation. As such, I am revisiting the NHC investment thesis, reverting it to hold in doing so. More clarity on rates, a slowdown in the pace of inflation, and potential near-term liquidity catalysts mean the funding window for selective investment is wide open. In my December National HealthCare Corporation ( NYSE: NHC) publication, I noted the company's potential as "a tactical inclusion as a defensive overlay to reduce equity risk…and its ability to smooth equity returns". Chinnapong/iStock via Getty Images Investment Summary
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