10-QPeriod: Q1 FY2016

Extra Space Storage Inc. Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 6, 2016For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported strong financial performance for the first quarter of 2016, demonstrating significant revenue and net income growth compared to the prior year. Total revenues increased by 32.5% to $229.4 million, driven by a substantial 34.0% rise in property rental revenue, attributed to both strategic acquisitions and improved occupancy and rental rates at stabilized properties. Net income attributable to common stockholders surged by over 50% to $82.6 million. The company continued its aggressive growth strategy, evidenced by the acquisition of 23 new operating stores during the quarter, adding to its already extensive portfolio of 1,371 owned and/or managed properties. This expansion, coupled with effective operational management, led to a notable increase in property operations expenses, general and administrative costs, and depreciation, all of which grew in line with the expanded asset base and business activities. The company also reported a significant one-time gain related to a step acquisition of six stores from a joint venture. Financially, EXR maintained a solid balance sheet with total assets growing to $6.3 billion. While total liabilities also increased, primarily due to higher notes payable and lines of credit used to fund acquisitions, the company's equity base strengthened. The company's Funds From Operations (FFO) also showed robust growth, increasing by approximately 24.2% year-over-year, underscoring its operational efficiency and ability to generate cash flow from its real estate assets.

Financial Highlights

35 data points
Beta

Net Income

$82.59M

EPS (Diluted)

$0.66

Total Assets

$6.29B

Cash & Equivalents

$49.75M

Free Cash Flow

$95.47M

Financial Statements
Beta
Cost of Revenue$61.11M
Operating Expenses$135.78M
Operating Income$93.63M
Interest Expense$31.36M
Net Income$82.59M
EPS (Basic)$0.66
EPS (Diluted)$0.66
Shares Outstanding (Basic)124.75M
Shares Outstanding (Diluted)131.96M

Key Highlights

  • 1Total revenues grew by 32.5% to $229.4 million in Q1 2016 compared to Q1 2015.
  • 2Net income attributable to common stockholders increased significantly to $82.6 million in Q1 2016, up from $53.7 million in Q1 2015.
  • 3The company acquired 23 operating stores during Q1 2016, continuing its expansion strategy.
  • 4Same-store rental and tenant reinsurance revenues increased by 9.1%, with same-store net operating income growing by 12.3%, indicating strong performance of existing properties.
  • 5Funds From Operations (FFO) attributable to common stockholders increased by 24.2% to $104.9 million.
  • 6Total assets grew to $6.3 billion as of March 31, 2016, reflecting the expanded property portfolio.
  • 7The company's total debt increased, with lines of credit usage significantly higher, primarily to fund acquisitions.

Frequently Asked Questions

The primary driver of revenue growth was the significant increase in property rental revenue, up 34.0% year-over-year. This was fueled by contributions from recent acquisitions and improved occupancy and rental rates at the company's stabilized properties.

The company's active acquisition strategy led to increased expenses, including higher property operations costs (up 29.4%), general and administrative expenses (up 44.0%), and depreciation and amortization (up 41.0%). These increases are generally in line with the growth in the company's property portfolio and operational scale.

This significant gain of $26.9 million in Q1 2016 resulted from a step acquisition where Extra Space Storage acquired the remaining interest in six stores from its VRS joint venture. The gain arose from revaluing the company's existing equity interest in the venture to fair value upon gaining full control.

Extra Space Storage uses interest rate swaps as part of its risk management strategy to hedge against interest rate fluctuations. The company also maintains a significant portion of its debt as fixed-rate and utilizes lines of credit, with variable rates subject to market conditions. As of March 31, 2016, approximately 77.8% of its total debt was fixed-rate.