10-QPeriod: Q2 FY2015

Extra Space Storage Inc. Quarterly Report for Q2 Ended Jun 30, 2015

Filed August 10, 2015For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported strong financial performance for the second quarter and first half of 2015, driven by robust revenue growth and strategic acquisitions. Total revenues increased by 15.6% for the quarter and 14.6% year-to-date, primarily due to a significant rise in property rental income, reflecting higher occupancy rates and rental rates at stabilized properties. The company also saw growth in its tenant reinsurance and management fee segments. The company's strategic focus on expanding its portfolio through acquisitions continues to be a key driver of growth, with 39 operating stores acquired in the first six months of 2015. This expansion, coupled with effective operational management, led to a substantial increase in Funds From Operations (FFO) attributable to common stockholders, which rose by 17.3% for the quarter and 19.1% year-to-date. The company also highlighted its pending acquisition of SmartStop Self Storage, Inc., a move expected to further enhance its market position and scale.

Financial Highlights

35 data points
Beta

Net Income

$55.34M

EPS (Diluted)

$0.47

Total Assets

$4.83B

Cash & Equivalents

$175.89M

Free Cash Flow

$95.85M

Financial Statements
Beta
Cost of Revenue$48.21M
Operating Expenses$104.25M
Operating Income$81.61M
Interest Expense$22.81M
Net Income$55.34M
EPS (Basic)$0.47
EPS (Diluted)$0.47
Shares Outstanding (Basic)116.86M
Shares Outstanding (Diluted)124.48M

Key Highlights

  • 1Total revenues increased by 15.6% to $185.9 million for the quarter ended June 30, 2015, compared to $160.7 million in the prior year period.
  • 2Property rental revenue, the largest segment, saw a significant increase of 16.0% for the quarter, driven by higher occupancy (94.0% for wholly-owned stabilized stores) and increased rental rates.
  • 3Funds From Operations (FFO) attributable to common stockholders grew by 17.3% to $90.1 million for the quarter, indicating strong operational profitability.
  • 4The company completed the acquisition of 39 operating stores during the first six months of 2015, contributing to portfolio expansion.
  • 5Net income attributable to common stockholders increased by 32.8% to $55.3 million for the quarter.
  • 6The company announced a definitive agreement to acquire SmartStop Self Storage, Inc. for approximately $1.4 billion, a significant strategic move expected to increase its scale and market presence.
  • 7Same-store net operating income increased by a healthy 12.1% for the quarter, demonstrating strong performance from its existing, stabilized portfolio.

Frequently Asked Questions

The primary driver of revenue growth was a significant increase in property rental revenue, up 16.0% year-over-year. This was attributed to a combination of higher occupancy rates (reaching 94.0% in wholly-owned stabilized stores) and increased rental rates for both new and existing customers.

The company continued its aggressive acquisition strategy, acquiring 39 operating stores during the first six months of 2015. This contributed to the overall revenue growth and the expansion of its portfolio, although it also led to increased property operations and depreciation expenses.

The announced acquisition of SmartStop Self Storage, Inc. for approximately $1.4 billion is a major strategic initiative. If completed, it is expected to significantly increase Extra Space Storage's scale, market presence, and operational efficiencies, solidifying its position as a leading self-storage REIT.

FFO attributable to common stockholders increased by 17.3% to $90.1 million for the quarter. FFO is a key metric for REITs as it provides a better measure of operating performance by excluding depreciation and amortization (which are non-cash expenses related to real estate assets) and gains/losses on property sales. The growth in FFO indicates strong underlying operational profitability and the ability to generate cash from its real estate operations.