10-QPeriod: Q1 FY2017

Extra Space Storage Inc. Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 5, 2017For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported its first-quarter results for 2017, demonstrating solid top-line growth and operational efficiency. Total revenues increased by 14.6% to $263.0 million, primarily driven by a 16.0% rise in property rental revenues, fueled by both acquisitions and improved occupancy and rental rates at stabilized stores. The company's strategic focus on maximizing store performance and disciplined acquisition strategy continues to yield positive results. While overall expenses saw a modest increase of 2.2%, this was largely due to higher property operations and depreciation costs associated with recent acquisitions. The company effectively managed general and administrative expenses, which decreased by 19.6%. Funds From Operations (FFO) attributable to common stockholders and unit holders saw a significant increase of 31.4% to $137.9 million, highlighting the company's ability to generate strong cash flow from its operations. EXR's balance sheet remains robust, with adequate liquidity to fund its operations and strategic initiatives.

Financial Highlights

37 data points
Beta

Revenue

$263.01M

74.7% Gross Margin

Net Income

$82.28M

31.3% Net Margin

EPS (Diluted)

$0.64

Total Assets

$7.03B

Cash & Equivalents

$29.31M

Free Cash Flow

$113.12M

Financial Statements
Beta
Revenue$263.01M
Cost of Revenue$66.64M
Gross Profit$196.36M
Operating Expenses$138.81M
Operating Income$124.20M
Interest Expense$6.14M
Net Income$82.28M
EPS (Basic)$0.65
EPS (Diluted)$0.64
Shares Outstanding (Basic)125.61M
Shares Outstanding (Diluted)132.62M

Key Highlights

  • 1Total revenues increased by 14.6% year-over-year to $263.0 million, driven by a 16.0% increase in property rental revenue.
  • 2Property rental revenue growth was attributed to both acquisitions and increased occupancy and rental rates at stabilized stores, with wholly-owned stabilized store occupancy rising to 92.1%.
  • 3Funds From Operations (FFO) attributable to common stockholders and unit holders grew by 31.4% to $137.9 million.
  • 4General and administrative expenses decreased by 19.6%, primarily due to a reduction in legal accruals compared to the prior year.
  • 5The company completed the acquisition of two operating stores during the quarter, adding to its portfolio of owned and managed properties.
  • 6Debt to total enterprise value ratio remained healthy at 30.3% as of March 31, 2017.
  • 7Same-store rental revenues increased by 5.8%, while same-store operating expenses decreased by 2.0%, leading to a 9.2% increase in same-store net operating income.

Frequently Asked Questions

The primary driver of Extra Space Storage's revenue growth was a 16.0% increase in property rental revenues, which benefited from recent acquisitions and improved occupancy and rental rates at its stabilized stores.

While property operations and depreciation expenses increased due to acquisitions, the company successfully reduced general and administrative expenses by 19.6%, largely due to lower legal accruals compared to the prior year. Tenant reinsurance expenses also decreased.

As of March 31, 2017, Extra Space Storage maintained a healthy leverage position with a debt to total enterprise value ratio of 30.3%. The company also reported that it was in compliance with all financial covenants.

Same-store results showed positive momentum, with rental revenues increasing by 5.8% and operating expenses decreasing by 2.0%, resulting in a 9.2% growth in same-store net operating income. This indicates strong underlying performance from its established portfolio.