Tiptree Financial, Inc. :TIPT-US: Earnings Analysis: 2015 By the Numbers

Tiptree Financial, Inc. reports financial results for the year ended December 31, 2015.

We analyze the earnings along side the following peers of Tiptree Financial, Inc. – Ventas, Inc., Universal Health Realty Income Trust, HCP, Inc., Ashford Hospitality Trust, Inc., Welltower, Inc., Duke Realty Corporation, Sabra Health Care REIT, Inc. and Healthcare Trust of America, Inc. Class A (VTR-US, UHT-US, HCP-US, AHT-US, HCN-US, DRE-US, SBRA-US and HTA-US) that have also reported for this period.

Highlights

  • Gross margins narrowed from 78.48% to 37.14% compared to the same period last year, operating (EBITDA) margins now 7.05% from 12.28%.
  • Year-on-year change in operating cash flow of -105.82% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2011 2012 2013 2014 2015
Relevant Numbers (Annual)
Revenues 15.58 16.05 101.66 153.49 463.46
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 16.53 -0.56 4.26 -5.29 -8.5
Earnings Growth (YOY) 185.2 -103.36 866.55 -224.17 -60.53
Net Margin 106.11 -3.46 4.19 -3.45 -1.83
EPS N/A -0.05 -0.49 -0.1 -0.3
Return on Equity 18.95 -0.61 1.76 -1.33 -2.13
Return on Assets 9.16 -0.29 0.12 -0.07 -0.16

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Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 78.48% to 37.14%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 12.28% to 7.05% in this time frame. For comparison, gross margins were 78.48% and EBITDA margins were 12.28% in the previous period.

Gross Margin Versus EBITDA Margin

Cash Versus Earnings – Sustainable Performance?

Operating Cash Flow Growth Versus Earnings Growth

TIPT-US‘s change in operating cash flow of -105.82% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 4.50% to -2.68% and (2) one-time items that contributed to a decrease in pretax margins from 0.51% to -2.68%

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

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Company Profile

Tiptree Financial, Inc. is a real estate investment trust and finance company that invests in healthcare-related real estate. It invests in healthcare-related real estate and mortgage debt in the United States of America, which includes nursing homes, hospitals, outpatient centers, assisted living facilities, medical office buildings and labs. The company operates through the following segments: Insurance and Insurance Services, Specialty Finance, Asset Management, Real Estate and Corporate and Other. Tiptree Financial was founded by Flint D. Besecker on March 1, 2007 and is headquartered in New York, NY.

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