10-QPeriod: Q3 FY2015

Extra Space Storage Inc. Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 6, 2015For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported strong financial performance for the nine months ended September 30, 2015, demonstrating significant growth in revenue and net income compared to the same period in the prior year. Property rental revenue, the company's primary revenue driver, saw a substantial increase of 15.7%, driven by both acquisitions and improved occupancy and rental rates at stabilized properties. This revenue growth translated into a healthy increase in net income, up 35.1% year-over-year, reflecting effective operational management and strategic expansion. The company's balance sheet shows a significant expansion in real estate assets and total assets, fueled by strategic acquisitions. This growth was financed through a combination of increased debt, including new exchangeable senior notes, and equity issuance. EXR also maintained a strong liquidity position with substantial cash and cash equivalents at quarter-end. A significant subsequent event disclosed is the acquisition of SmartStop Self Storage, Inc. on October 1, 2015, for approximately $1.4 billion, which is expected to further enhance the company's scale and market presence.

Financial Highlights

34 data points
Beta

Net Income

$71.72M

EPS (Diluted)

$0.58

Total Assets

$6.00B

Cash & Equivalents

$1.12B

Free Cash Flow

$102.99M

Financial Statements
Beta
Cost of Revenue$48.88M
Operating Expenses$100.19M
Operating Income$97.30M
Interest Expense$20.81M
Net Income$71.72M
EPS (Basic)$0.58
EPS (Diluted)$0.58
Shares Outstanding (Basic)122.64M
Shares Outstanding (Diluted)130.40M

Key Highlights

  • 1Total revenues increased by 15.5% for the nine months ended September 30, 2015, reaching $556.5 million.
  • 2Net income attributable to common stockholders grew by 35.1% to $180.8 million for the nine months ended September 30, 2015.
  • 3Real estate assets increased significantly from $4.14 billion at year-end 2014 to $4.45 billion at September 30, 2015.
  • 4Total assets grew from $4.40 billion to $6.00 billion over the same period, reflecting substantial acquisition activity.
  • 5The company successfully issued $575 million in 3.125% Exchangeable Senior Notes due 2035 in September 2015.
  • 6Funds From Operations (FFO) attributable to common stockholders increased by 20.2% to $280.7 million for the nine months ended September 30, 2015.
  • 7The acquisition of SmartStop Self Storage, Inc. was completed on October 1, 2015, for approximately $1.4 billion, adding 122 stores.

Frequently Asked Questions

Revenue growth is primarily driven by an increase in property rental revenues, which saw a 15.7% rise for the nine months ended September 30, 2015. This growth is attributed to acquisitions of new stores and improved performance at existing stabilized properties, including higher occupancy rates and increased rental rates. Tenant reinsurance and management fee revenues also contributed positively.

The company's balance sheet shows significant growth in assets, particularly real estate assets, due to strategic acquisitions. To finance this expansion, Extra Space Storage has increased its debt, including issuing new exchangeable senior notes, and also raised capital through equity offerings. The company's total assets grew substantially from $4.40 billion to $6.00 billion.

The acquisition of SmartStop, completed on October 1, 2015, for approximately $1.4 billion, is a major strategic move. It significantly expands Extra Space Storage's portfolio by adding 122 stores and the management of 43 additional third-party stores. This acquisition is expected to further enhance the company's scale, market presence, and potential for stockholder value creation.

Extra Space Storage actively manages its exposure to interest rate fluctuations. As of September 30, 2015, the company had $3.49 billion in total debt. Approximately $970 million of this debt was subject to variable interest rates. The company utilizes interest rate swaps to manage its interest rate risk and aims to maintain a stable interest expense. A hypothetical 100 basis point increase in LIBOR could impact interest expense by approximately $9.7 million annually on its variable-rate debt.