10-QPeriod: Q3 FY2018

Extra Space Storage Inc. Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 6, 2018For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported solid financial results for the nine months ended September 30, 2018, demonstrating continued growth and operational efficiency. Total revenues increased by 8.0% year-over-year to $889.3 million, driven by a 7.2% rise in property rental revenue and a significant 17.3% increase in tenant reinsurance revenue. The company's strategic expansion, evidenced by the acquisition of 28 stores during the period, contributed to this top-line growth. Operating expenses also rose, largely due to increased property operations and depreciation associated with these acquisitions, but were managed effectively, leading to a healthy increase in Net Operating Income (NOI). Net income attributable to common stockholders grew by 19.3% to $313.8 million for the nine-month period, with diluted Earnings Per Share (EPS) rising to $2.48 from $2.07 in the prior year. Funds From Operations (FFO) also saw a notable increase, reflecting the company's focus on generating shareholder value. Despite an increase in total debt to support growth initiatives, the company maintained compliance with its financial covenants, indicating a stable financial position. EXR continues to demonstrate strong performance in its core self-storage operations while prudently managing its capital structure.

Financial Highlights

37 data points
Beta

Revenue

$306.95M

76.0% Gross Margin

Net Income

$130.42M

42.5% Net Margin

EPS (Diluted)

$1.02

Total Assets

$7.80B

Cash & Equivalents

$45.38M

Free Cash Flow

$189.28M

Financial Statements
Beta
Revenue$306.95M
Cost of Revenue$73.65M
Gross Profit$233.30M
Operating Expenses$153.36M
Operating Income$153.59M
Interest Expense$5.63M
Net Income$130.42M
EPS (Basic)$1.03
EPS (Diluted)$1.02
Shares Outstanding (Basic)126.47M
Shares Outstanding (Diluted)134.24M

Key Highlights

  • 1Total revenues increased by 8.0% to $889.3 million for the nine months ended September 30, 2018, compared to $823.2 million in the prior year.
  • 2Property rental revenue grew by 7.2% to $772.7 million, driven by higher rental rates and contributions from newly acquired stores.
  • 3Net income attributable to common stockholders increased by 19.3% to $313.8 million for the nine-month period, with diluted EPS rising to $2.48.
  • 4The company acquired 28 stores during the nine months ended September 30, 2018, contributing to asset growth and future revenue potential.
  • 5Same-store net operating income (NOI) increased by 3.9% for the nine-month period, showcasing consistent operational performance in existing properties.
  • 6Total debt increased, but the company remained compliant with all financial covenants.
  • 7Funds From Operations (FFO) attributable to common stockholders and unit holders increased by 6.7% to $460.7 million for the nine-month period.

Frequently Asked Questions

The primary driver of revenue growth was the increase in property rental revenue, which rose by 7.2% to $772.7 million. This growth was attributed to higher rental rates at stabilized stores and the revenue generated from newly acquired stores, offset partially by revenues from sold properties.

Extra Space Storage's total debt increased to $4.8 billion by September 30, 2018, to fund its growth, including store acquisitions. The company reported that it was in compliance with all financial covenants related to its outstanding debt, indicating effective management of its capital structure.

The increase in 'Gain (loss) on real estate transactions and impairment of real estate' to $30.8 million for the nine months ended September 30, 2018, compared to a $6.0 million loss in the prior year, is primarily due to a gain recorded on the sale of a property in California. This indicates a successful disposition strategy for certain assets.

Operational efficiency is reflected in the increase in Net Operating Income (NOI). Same-store NOI grew by 3.9% for the nine months ended September 30, 2018, suggesting that the company is effectively managing operating expenses relative to rental income from its established portfolio. Overall property operations expenses increased due to acquisitions, but were largely in line with revenue growth from those acquisitions.