10-QPeriod: Q1 FY2019

Extra Space Storage Inc. Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 7, 2019For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported its first-quarter 2019 results, showcasing continued revenue growth and operational expansion. Total revenues increased by 9.1% year-over-year to $311.5 million, driven primarily by a 9.3% rise in property rental revenue, attributed to both new store acquisitions and increased rental rates at stabilized properties. The company also saw a healthy 10.2% increase in tenant reinsurance revenue. Financially, the company managed its debt effectively, with total debt at approximately $5.0 billion and a debt-to-enterprise value ratio of 26.7%. While interest expense saw an increase of 15.6% due to higher overall debt levels and interest rates, the company maintained compliance with all financial covenants. The adoption of new lease accounting standards (ASC 842) resulted in the recognition of significant operating lease liabilities and right-of-use assets, a key change impacting the balance sheet. Overall, EXR demonstrated solid operational performance and revenue growth in the first quarter of 2019.

Financial Highlights

37 data points
Beta

Revenue

$311.55M

74.7% Gross Margin

Net Income

$94.77M

30.4% Net Margin

EPS (Diluted)

$0.74

Total Assets

$8.13B

Cash & Equivalents

$38.99M

Free Cash Flow

$169.34M

Financial Statements
Beta
Revenue$311.55M
Cost of Revenue$78.77M
Gross Profit$232.78M
Operating Expenses$163.07M
Operating Income$148.48M
Interest Expense$5.65M
Net Income$94.77M
EPS (Basic)$0.74
EPS (Diluted)$0.74
Shares Outstanding (Basic)127.04M
Shares Outstanding (Diluted)134.29M

Key Highlights

  • 1Total revenues grew 9.1% year-over-year to $311.5 million in Q1 2019.
  • 2Property rental revenue increased by 9.3% to $271.0 million, driven by acquisitions and rental rate increases.
  • 3Tenant reinsurance revenue saw a significant increase of 10.2%.
  • 4Net income attributable to common stockholders increased to $94.8 million, or $0.74 per diluted share, up from $88.3 million, or $0.70 per diluted share, in Q1 2018.
  • 5The company acquired 14 new stores during the first quarter of 2019.
  • 6Adopted new lease accounting standard ASC 842, recognizing $104.9 million in lease liabilities and $95.5 million in right-of-use assets for operating leases as of January 1, 2019.
  • 7Same-store net operating income (NOI) increased by 4.8%, reflecting strong operational performance.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in property rental revenue, which rose 9.3% year-over-year. This growth was fueled by the acquisition of new stores and higher rental rates at stabilized properties. Additionally, tenant reinsurance revenue increased by 10.2%.

Effective January 1, 2019, Extra Space Storage adopted ASC 842, the new lease accounting standard. This resulted in the recognition of $104.9 million in operating lease liabilities and $95.5 million in right-of-use assets on the balance sheet, reflecting the company's obligations and rights under its operating leases.

As of March 31, 2019, Extra Space Storage had approximately $5.0 billion in total debt, with a debt-to-enterprise value ratio of 26.7%. The company reported compliance with all financial covenants and a weighted average interest rate of 3.5% on its total debt.

The company's same-store net operating income (NOI) increased by a healthy 4.8% compared to the same period last year. This was driven by a 4.2% increase in same-store rental revenues, primarily due to higher rental rates for both new and existing customers, and a 2.5% increase in same-store operating expenses.