10-QPeriod: Q2 FY2014

Extra Space Storage Inc. Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 7, 2014For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported its quarterly results for the period ending June 30, 2014. The company demonstrated strong revenue growth, driven primarily by its property rental segment, which saw a significant increase of 29.3% year-over-year for the quarter. This growth was fueled by strategic property acquisitions completed in 2013 and the first half of 2014, alongside improved occupancy and rental rates in its existing stabilized properties. Overall, net income attributable to common stockholders rose to $41.7 million for the quarter, a notable increase from $34.5 million in the prior year. The company also reported a healthy increase in Funds From Operations (FFO), a key metric for REITs, reaching $76.8 million. Management highlighted disciplined acquisition strategies and operational efficiencies as key drivers of performance. The company's balance sheet showed an increase in total assets and liabilities, reflecting its growth initiatives, with significant investments in real estate assets and a corresponding increase in notes payable.

Financial Highlights

34 data points
Beta

Net Income

$41.66M

EPS (Diluted)

$0.36

Total Assets

$4.21B

Cash & Equivalents

$53.95M

Free Cash Flow

$103.19M

Financial Statements
Beta
Cost of Revenue$42.29M
Operating Expenses$90.06M
Operating Income$70.66M
Interest Expense$20.66M
Net Income$41.66M
EPS (Basic)$0.36
EPS (Diluted)$0.36
Shares Outstanding (Basic)115.65M
Shares Outstanding (Diluted)121.25M

Key Highlights

  • 1Total revenues increased by 26.9% to $160.2 million for the three months ended June 30, 2014, compared to $126.2 million in the prior year's quarter.
  • 2Property rental revenues, the largest segment, grew by 29.3% to $138.8 million, primarily due to acquisitions and increased occupancy/rental rates in stabilized properties.
  • 3Net income attributable to common stockholders increased by 20.3% to $41.7 million for the quarter, or $0.36 per diluted share, up from $34.5 million or $0.31 per diluted share in the prior year.
  • 4Funds From Operations (FFO) grew by 32.3% to $76.8 million for the quarter, indicating strong operational performance and cash generation from its real estate portfolio.
  • 5The company completed 29 property acquisitions during the first six months of 2014, significantly contributing to asset growth and revenue expansion.
  • 6Same-store rental revenues increased by 7.9% for both the quarter and the first six months, demonstrating organic growth within the existing portfolio.
  • 7Total debt increased to $2.17 billion, reflecting financing for acquisitions and growth, with a debt-to-enterprise value ratio of 24.8% at quarter-end.

Frequently Asked Questions

The primary drivers of revenue growth were property rental revenue, which increased by 29.3%, largely due to the completion of 29 property acquisitions during the first half of 2014 and the first half of 2013. Additionally, the company saw an increase in occupancy and rental rates at its existing stabilized properties, contributing to organic growth.

Net income attributable to common stockholders increased by 20.3% to $41.7 million, or $0.36 per diluted share, compared to $34.5 million, or $0.31 per diluted share, in the same period last year. Funds From Operations (FFO), a key metric for REITs, also showed significant growth, rising by 32.3% to $76.8 million for the quarter.

Extra Space Storage continues to pursue a strategy of acquiring self-storage properties, focusing on both multi-property portfolios and single properties that are expected to provide shareholder value. The company emphasizes being a disciplined buyer and utilizing its UPREIT structure for flexibility in deal structuring. Acquisitions in 2013 and the first half of 2014 have been significant contributors to asset and revenue growth.

As of June 30, 2014, the company had total debt of $2.17 billion, with a debt-to-enterprise value ratio of 24.8%. The company utilizes a mix of fixed and variable-rate debt, with approximately 73.7% of its debt being fixed-rate. Interest rate swaps are used to manage exposure to interest rate fluctuations. The company was in compliance with all its debt covenants.