10-QPeriod: Q2 FY2017

Extra Space Storage Inc. Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 4, 2017For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported its second-quarter 2017 financial results, showcasing solid revenue growth and improved operational performance. Total revenues increased by 13.0% year-over-year to $276.0 million for the quarter ended June 30, 2017. This growth was primarily driven by a 13.7% increase in property rental revenue, fueled by both acquisitions and improved occupancy and rental rates at stabilized properties. The company's strategic focus on operational efficiency and expansion through acquisitions continues to yield positive results, with a reported increase in same-store net operating income of 7.7% for the quarter. Financially, the company maintained a strong balance sheet, though total assets saw a slight decrease from the prior year-end. Debt levels increased, consistent with expansion efforts, but the company emphasized its compliance with all financial covenants and a stable debt-to-enterprise value ratio. Management highlighted continued investment in property acquisition and development as key drivers for future growth. The company remains committed to enhancing shareholder value through strategic initiatives, operational excellence, and disciplined capital allocation.

Financial Highlights

37 data points
Beta

Revenue

$276.00M

75.6% Gross Margin

Net Income

$87.01M

31.5% Net Margin

EPS (Diluted)

$0.69

Total Assets

$7.04B

Cash & Equivalents

$31.65M

Free Cash Flow

$175.93M

Financial Statements
Beta
Revenue$276.00M
Cost of Revenue$67.30M
Gross Profit$208.71M
Operating Expenses$139.60M
Operating Income$136.41M
Interest Expense$6.16M
Net Income$87.01M
EPS (Basic)$0.69
EPS (Diluted)$0.69
Shares Outstanding (Basic)125.67M
Shares Outstanding (Diluted)132.78M

Key Highlights

  • 1Total revenues increased by 13.0% to $276.0 million for the three months ended June 30, 2017, compared to $244.3 million in the prior year period.
  • 2Property rental revenue, the primary revenue driver, grew by 13.7% to $240.8 million, driven by acquisitions and same-store rent increases.
  • 3Same-store net operating income (NOI) increased by 7.7% to $155.8 million for the quarter, indicating strong operational performance of existing properties.
  • 4The company completed the acquisition of five operating stores during the six months ended June 30, 2017, contributing to portfolio growth.
  • 5Total assets decreased slightly to $7.04 billion as of June 30, 2017, from $7.09 billion at December 31, 2016, while total liabilities remained relatively stable.
  • 6Interest expense increased by 14.2% due to higher overall debt levels, reflecting ongoing investment and financing activities.
  • 7Funds from Operations (FFO) attributable to common stockholders and unit holders increased by 20.9% to $146.1 million for the quarter.

Frequently Asked Questions

The primary driver of revenue growth was property rental revenue, which increased by 13.7% to $240.8 million. This growth was attributed to acquisitions completed in 2016 and 2017, as well as increases in occupancy and rental rates at stabilized stores.

Total debt, including lines of credit, increased to $4.34 billion as of June 30, 2017. The company reported compliance with all financial covenants and noted a debt-to-enterprise value ratio of 29.3%. They also announced an agreement for a private placement of $300 million of senior notes expected to close in August 2017 to refinance existing debt and for general corporate purposes.

Extra Space Storage continues to focus on maximizing store performance, acquiring self-storage stores, and expanding its management business. They are actively pursuing acquisitions and believe their UPREIT structure provides flexibility in deal structuring. The company is committed to disciplined acquisitions that strengthen the portfolio and increase shareholder value.

For the three months ended June 30, 2017, the company recorded a loss of $6.0 million related to impairments in land. There were no significant gains on real estate transactions or from the purchase of joint venture partner interests in this quarter, unlike in the prior year period.