Diversified Healthcare (DHC) Q1 2025 Earnings Report

Revenue and profitability
- Revenue: $386.864 million for Q1 2025, up 4.34% YoY and 1.91% QoQ, reflecting broader leasing activity and operational momentum.
- Gross profit: $386.864 million (gross margin effectively 100% due to presentation; underlying NOI dynamics cited elsewhere).
- Operating income: $72.538 million, up noticeably YoY; operating margin 16.45% (0.164) on a reported basis.
- Net income: $(8.986) million; net margin: (2.32%). EPS: $(0.0374) per share, diluted.
- EBITDA/FFO: EBITDAre $75.1 million (YoY up 17%); normalized FFO $14.3 million or $0.06 per share.

Cash flow and liquidity
- Net cash provided by operating activities: $(3.243) million; operating cash flow (non-GAAP) adjusted for items noted in the call.
- Free cash flow: $(3.243) million; cash at end of period: $306.655 million; unrestricted cash approx. $300 million after May financing activities.
- Balance sheet liquidity: cash and short-term investments $302.6 million; total debt $2.820 billion; net debt $2.518 billion; net debt to adjusted EBITDAre 8.8x as of 3/31/2025.

Portfolio and segment trends
- SHOP (senior living and related communities): same-property NOI $38.4 million, up 42.1% YoY and 33.6% sequentially; occupancy 80.2% (up 130 bps YoY); average monthly rate up 4.8% YoY; RevPOR up 4.8%; SHOP NOI margin 11.2% consolidated (12.9% same-property), with 5-star communities delivering a 14.6% NOI margin.
- MOB/Life Science: leasing activity ~145,000 sq ft with rents up ~18.4% vs prior rent; same-property occupancy 90.1% (down 10 bps QoQ).
- Dispositions and capital allocation: $321 million of asset sales in Q1 (MUSE Life Science Campus sale for $159 million and 18 Brookdale senior living communities for $135 million), net proceeds $299 million used to reduce near-term maturities; pipeline includes 65 properties with planned proceeds of $350–$400 million, of which about $125 million is collateral for the 2026 maturity.

Guidance and outlook
- 2025 SHOP NOI guidance reaffirmed at $120–$135 million, with potential upside if Q2 trends strengthen and disposition timing remains favorable.
- CapEx guidance revised to $150–$170 million for 2025; expect spend to skew to the second half of the year consistent with prior years.
- Debt maturity management: early-stage progress with deleveraging (partial paydown of June 2025 debt; planned financing proceeds of ~$94 million secured by six senior living communities) and dispositions to fund repayment and reduce exposure to the 2026 zero-coupon bond. Management expects to have no maturities until 2028 post-restructuring.

Overall assessment
- The QQ1 2025 results show meaningful improvement in SHOP NOI and a strong progress trajectory on deleveraging via asset sales and refinancings, supported by improved occupancy and rate growth. The company asserts a clear path to align capital allocation with high-ROI opportunities and to de-risk near-term maturities, while reaffirming SHOP NOI targets and maintaining liquidity to weather the expected maturity profile. Investors should monitor the pace and timing of asset dispositions, the progression of MOB/life science leasing, and the eventual impact of refinancing activities on the 2026 zero-coupon bond.