From RBC Analyst RBC Positive initial view prior to conference call. GLTA
May 11, 2023 DRI Healthcare Trust Q1/23 Results - Revenue, adj. EBITDA and cash royalties ahead of estimates TSX: DHT-U | CAD 9.12 | Outperform | Price Target CAD 17.00 Sentiment: Positive Our view: Overall, we view DRI's Q1/23 results as positive for the shares. Q1/23 revenue, cash receipts and adj. EBITDA were ahead of estimates. Total revenue of $28.2MM was above RBCe ($22.2MM) and consensus ($24.2MM). Cash royalty receipts (exinterest receipts) of $23.4MM were ~22% ahead of our estimate ($19.1MM). Adj. EBITDA of $21.4MM was also ahead of RBCe ($16.9MM) and consensus ($19.3MM). DRI declared a cash dividend of $0.0750/unit for Q2/23 to be paid on 20-Jul. DRI will also pay a one-time special cash dividend of $0.53/unit associated with the Tzield royalty sale. Post the quarter, the company acquired an additional royalty stream on Empaveli/Syfovre for $3.7MM and repaid $146.3MM of outstanding debt which was the entire amount outstanding under the Trust's revolving acquisition credit facility. On the earnings call, we would look for updates on the existing portfolio of royalties, the company's deal pipeline and management's return expectations for future royalty acquisitions.
Royalty revenues above RBC and consensus estimates; Cash royalties ahead of RBCe. DRI reported total revenue of $28.2MM ahead of RBCe ($22.2MM) and consensus ($24.2MM). DRI reported cash royalty receipts of $23.4MM also ahead of RBCe ($19.1MM). Total cash receipts including interest receipts were $25.0MM.
Q1/23 adj. EBITDA of $21.4MM was ahead of RBCe ($16.9MM) and consensus ($19.3MM). The adj. EBITDA margin of 86% was down q/q (88% in Q4/22).
Balance sheet, dividend and NCIB update. DRI ended Q1/23 with cash on hand of $10.5MM and had drawn $227.6MM under its credit facility. On 03-April-2023, the Trust drew an additional $3.7MM to fund the purchase of an additional royalty stream on Empaveli/Syfovre, and on 02-May-2023, DRI used the proceeds from the Tzield sale to make an additional principal repayment of $146.3MM, representing the entire amount outstanding under the revolving acquisition credit facility, bringing the outstanding balance to $85MM. During the quarter, DRI closed a private placement of ~$114.8MM resulting in gross proceeds to DRI of ~$95MM. The Preferred Securities are unsecured, subordinated debt securities of the Trust. DRI paid its previously declared dividend of $0.075/unit on 20-Apr. Today, it declared a cash dividend of $0.075/unit for Q1/23 payable on 20-Jul along with special cash dividend of $0.53/unit associated with the Tzield sale. During Q1/23, DRI acquired a total of 319,453 units for an aggregate purchase price of $1.7MM under its NCIB at a weighted price of C$7.44/unit.
CTI loan and announced acquisition of CTI by SOBI. DRI noted that CTI and SOBI have agreed that the secured loan of $50MM made by DRI will be repaid in full, subject to the terms of the credit agreement. DRI is monitoring this development for any additional impacts on its business.
Tomorrow's conference call. We would look for updates on the existing portfolio of royalties. Additionally, we expect the focus to be on the company's deal pipeline and management's return expectations for future royalty acquisitions. With the original Tzield royalty acquisition, the company had addressed the declining cash royalties between 2025E and 2030E. After the sale of Tzield royalty for $210MM vs. an upfront investment of $100MM, the cash royalties are expected to decline between 2025E and 2030E; however, we look forward to the company's ability to leverage the ~2x cash return into new royalty transactions at IRRs anticipated to be in excess of 14%