Earnings Reports (Feb 19th-23rd)
Taking a Look at Earnings Reports/Updates for Realty Income, Avita Medical, Relay Therapeutics, Weekly Activity, & Portfolio Update.
1. Realty Income (O)
This past week, Realty Income (O) released their Q4 2023 earnings results and guidance for 2024:
Business Highlights
For the Three Months Ended December 31, 2023:
Net income available to common stockholders: $218.4M, or $0.30 per share.
Adjusted Funds from Operations (AFFO) available to common stockholders: $731M, or $1.01 per share.
Invested $2.7B at an initial weighted average cash yield of 7.6%.
Entered France, Germany, and Portugal markets through sale-leaseback transactions with affiliates of Decathlon SE for €527M.
Raised $1.6B from the sale of common stock at a weighted average price of $56.25.
Net Debt to Annualized Pro Forma Adjusted EBITDAre was 5.5x.
For the Year Ended December 31, 2023:
Net income available to common stockholders: $872.3M, or $1.26 per share.
AFFO available to common stockholders: $2.8B, or $4.00 per share.
Invested $9.5B at an initial weighted average cash yield of 7.1%.
Raised $5.5B from the sale of common stock at a weighted average price of $59.79.
Subsequent Events
Closed on the merger with Spirit Realty Capital, Inc. in an all-stock transaction on January 23, 2024.
Issued $450M of 4.750% senior unsecured notes due February 2029 and $800M of 5.125% senior unsecured notes due February 2034.
ATM forward agreements for a total of 10.8 million shares remain unsettled with total expected net proceeds of approximately $605M.
Select Financial Results
YOY increase in total revenue from $3.3B in 2022 to $4.07B in 2023.
A slight decrease in net income per share from $1.42 in 2022 to $1.26 in 2023.
Funds from Operations (FFO) per share slightly increased from $4.04 in 2022 to $4.07 in 2023.
AFFO per share increased from $3.92 in 2022 to $4.00 in 2023.
Dividend Increases
Announced the 105th consecutive quarterly dividend increase in December 2023.
Annualized dividend amount as of December 31, 2023, was $3.078 per share.
Monthly dividends paid per share increased 2.8% to $3.051 in 2023 from $2.967 in 2022.
Real Estate Portfolio Update
As of December 31, 2023, owned or had interests in 13,458 properties leased to 1,326 clients in 86 industries.
Portfolio occupancy was 98.6%.
Weighted average remaining lease term of approximately 9.8 years.
Investment Summary
For the three months ended December 31, 2023, total real estate acquisitions of 134 properties with an investment of $1.28B.
For the year ended December 31, 2023, total real estate acquisitions of 1,016 properties with an investment of $7.2B.
Same Store Rental Revenue
For the year ended December 31, 2023, same store rental revenue increased by 1.9% YoY.
Liquidity and Capital Markets
Raised $1.6B from the sale of common stock in the last quarter of 2023.
Issued £750M in senior unsecured notes in December 2023.
Issued $1.25B in senior unsecured notes in January 2024.
Earnings Guidance for 2024
Net income per share guidance: $1.22 - $1.34.
Normalized FFO per share guidance: $4.17 - $4.29.
AFFO per share guidance: $4.13 - $4.21.
Same store rent growth approximated at 1.0%.
Occupancy expected to remain over 98%.
Acquisition volume approximated at $2B.
My Take
Contrary to the buzz on social media, Realty Income delivered a solid performance this quarter. It's important for investors to remember that this company is a REIT, and not just any REIT, but one of the largest retail REITs globally. To anticipate growth rates akin to those of tech startups from such a massive entity is unrealistic. The metrics that hold my interest are FFO and occupancy rate, among a few others. A significant and ongoing decline in these areas would be a red flag. However, based on this quarter and the year's outcomes, the company's performance has been commendable. Moving forward, I plan to continue seeking opportunities to expand my stake in this position.
2. Avita Medical (RCEL)
RCEL announced their financial report for Q4 2023 and full-year 2023, along with their 2024 financial guidance:
Business Highlights
Commercial Revenue: Increased by approximately 50% to $14.1M compared to the same period in 2022.
Gross Profit Margin: 87.3%.
Full-Year 2023 Business Highlights
Commercial Revenue: Increased by approximately 46% to $49.8M compared to 2022.
Gross Profit Margin: 84.5%.
Cash Position: As of December 31, 2023, the company had approximately $89.1M in cash, cash equivalents, and marketable securities.
Future Milestones
Expansion: Increasing the field sales organization from 70 to 108 professionals in Q1 2024.
Product Launch: Introduction of PermeaDerm® Biosynthetic Wound Matrix planned for March 2024.
FDA Approvals: Awaiting FDA approval for RECELL GO, with a commercial launch planned for May 31, 2024.
Facility Expansion: Ventura warehouse facility renovation and expansion to increase capacity 10-fold by Q3 2024.
International Sales: Launch of RECELL in Germany, Austria, and Switzerland in January 2024.
Regulatory Submissions: Submission of a PMA supplement for RECELL GO mini expected by year-end, along with the publication of the TONE study and a health economics study.
2024 Guidance
Q1 Revenue: Expected to be between $14.8M to $15.6M, reflecting a growth of 42% to 50% over the prior year.
Full-Year Revenue: Projected to be between $78.5M to $84.5M, indicating a growth of 57% to 69% over 2023.
Profitability: Anticipates achieving cash flow break-even and GAAP profitability no later than Q3 2025.
Q4 2023 Financial Results
Revenue: Commercial revenue up 50% to $14.1M; total revenue (including BARDA revenue) also increased by 50% to $14.2M.
Gross Profit Margin: Improved to 87.3%.
Operating Expenses: Totaled $24.7M, due to increases in G&A, R&D, and sales and marketing costs.
Net Loss: $7.1M, or a loss of $0.28 per share.
Full-Year 2023 Detailed Financial Results
Revenue: Commercial revenue up 46% to $49.8M; total revenue reached $50.1M.
Gross Profit Margin: 84.5%.
Operating Expenses: Increased to $86.4M, primarily from expansions in sales, marketing, and R&D efforts.
Net Loss: $35.4M, or a loss of $1.40 per share.
Other Financial Details
Other Income: Net other income for the quarter was $6.3M, and $8.5M for the full year, including income from investing activities and non-cash foreign exchange gains.
My Take
This was an excellent quarter by RCEL. If the company meets its 2024 targets, RCEL stands poised for impressive growth, presenting a highly attractive opportunity for investors. The company has not only reaffirmed its full-year 2023 results and provided optimistic revenue guidance for 2024 but also unveiled several strategic initiatives that could significantly propel its growth. Among these initiatives are the anticipated FDA approval of the ReCell Go Mini, designed for smaller wounds with better economics than its predecessor, and a tenfold expansion of its Ventura manufacturing facility, expected to complete in Q3 2024, which highlights their ambitious growth plans. Additionally, the expansion of its field sales team from 70 to 108 professionals in Q1 2024 and the March 2024 launch of PermeaDerm are strategic moves to bolster growth and support the launch in soft tissue repair. With these plans in place, RCEL anticipates achieving cash flow breakeven and GAAP profitability by the third quarter of 2025. The company's aggressive growth strategy, highlighted by these developments, suggests a trajectory of significant value creation for its investors over the coming years. I may look to consolidate my position this year, other than that, it’s staying in my portfolio where it already remains at multi-bagger status.
3. Relay Therapeutics (RLAY)
Relay Therapeutics, operating as a pre-revenue biotechnology firm, will not be the focus of an in-depth financial analysis at this time. However, I will provide an overview of their business updates for Q4 2023 and the guidance set forth for 2024.
RLAY made significant strides in its portfolio, notably with the development of RLY-2608, a promising treatment for PI3Kα-mutated HR+/HER2- metastatic breast cancer. The company completed enrollment for the initial dose expansion cohort of RLY-2608 combined with fulvestrant and initiated additional cohorts, including a doublet combination at both 400mg and 600mg doses, and a triplet combination with fulvestrant and ribociclib, demonstrating a commitment to addressing this challenging cancer subtype.
Further enhancing its research capabilities, RLAY deprioritized RLY-5836 to focus resources on more promising areas, such as the development of lirafugratinib (RLY-4008) for FGFR2-altered solid tumors, with initial clinical data presented at a major conference. Financially, the company is in a strong position, ending Q4 2023 with $750.1M, which is expected to support operations into the second half of 2026. This financial stability is underpinned by a substantial increase in full-year revenue for 2023, primarily from milestone payments under a collaboration with Genentech, Inc. Despite increased R&D and G&A expenses due to clinical trial expansion and employee-related costs, RLAY is poised for important updates in 2024, including data on RLY-2608 combinations and a new program reveal from its Dynamo platform, aiming for first-in-class potential.
My Take
This outcome aligns with expectations; the true catalysts for the company are slated for 2024, with data readouts poised to significantly impact its trajectory. These findings have the potential to validate the company's promise and rejuvenate its liquidity. Currently, the situation is one of "wait and see”, with no immediate liquidity concerns. Therefore, I plan to maintain my position, ready to increase my investment should the stock price significantly drop below my cost basis.
Weekly Activity (Feb 19th-23rd)
50 shares of Coherus BioSciences (CHRS)
Portfolio Update
