10-QPeriod: Q2 FY2019

Extra Space Storage Inc. Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 6, 2019For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported solid financial performance for the second quarter and first half of 2019, demonstrating continued growth in revenues and net income. Total revenues increased by 9.0% in the second quarter and 9.1% for the first half, driven by higher property rental income from acquired stores and increased rental rates at stabilized properties. Net income attributable to common stockholders rose by 10.2% in the second quarter and 9.0% year-to-date, reflecting effective operational management and strategic growth. The company also saw an increase in its property portfolio, with a growing number of owned and managed stores, enhancing its market presence. The balance sheet indicates a robust asset base, with real estate assets continuing to be the primary driver of value. While the company's total liabilities also increased, largely due to financing activities for growth and acquisitions, the overall financial position remains stable. Management highlighted strong same-store revenue growth, indicating healthy organic performance within its existing portfolio. The company's liquidity position appears sufficient, with ample cash and available credit facilities to meet its ongoing operational and strategic needs. EXR also continues to leverage its access to capital markets for funding growth initiatives and shareholder returns through dividends.

Financial Highlights

37 data points
Beta

Revenue

$323.60M

75.0% Gross Margin

Net Income

$104.83M

32.4% Net Margin

EPS (Diluted)

$0.81

Total Assets

$8.39B

Cash & Equivalents

$47.67M

Free Cash Flow

$194.07M

Financial Statements
Beta
Revenue$323.60M
Cost of Revenue$80.87M
Gross Profit$242.73M
Operating Expenses$165.61M
Operating Income$159.20M
Interest Expense$5.68M
Net Income$104.83M
EPS (Basic)$0.82
EPS (Diluted)$0.81
Shares Outstanding (Basic)127.59M
Shares Outstanding (Diluted)135.65M

Key Highlights

  • 1Total revenues increased by 9.0% to $323.6 million for the three months ended June 30, 2019, compared to $296.8 million in the prior year period.
  • 2Net income attributable to common stockholders increased by 10.2% to $104.8 million for the three months ended June 30, 2019, compared to $95.2 million in the prior year period.
  • 3The company's property rental revenue saw an increase of 8.3% in Q2 2019, driven by both acquired stores and higher rental rates.
  • 4Same-store rental revenues increased by 3.9% in the second quarter, demonstrating positive organic growth within the existing portfolio.
  • 5Total assets grew to $8.39 billion as of June 30, 2019, up from $7.85 billion at the end of 2018, primarily due to increases in real estate assets.
  • 6The company declared and paid dividends of $0.90 per common share for the quarter, continuing its commitment to shareholder returns.
  • 7EXR's property portfolio expanded to 1,752 owned and/or managed stores by June 30, 2019.

Frequently Asked Questions

Revenue growth is primarily driven by increases in property rental revenue. This is achieved through the acquisition of new stores and higher rental rates at existing, stabilized properties. Tenant reinsurance and management fees also contribute to the overall revenue increase.

As of June 30, 2019, Extra Space Storage had approximately $5.1 billion in total debt. The company is managing its leverage through a mix of debt and equity financing, with a debt-to-total enterprise value ratio of 25.7%. Approximately 75.5% of its debt was fixed-rate at quarter-end, and the company has interest rate swaps to manage interest rate risk. They also have revolving lines of credit available for short-term liquidity needs.

The company's growth strategy involves acquiring new self-storage properties, developing and redeveloping existing assets, and managing properties for third parties. They also invest in unconsolidated real estate ventures. The increase in the number of owned and managed stores, as well as rental rate increases at stabilized properties, are key components of their expansion strategy.

The adoption of ASC 842, effective January 1, 2019, has led to the recognition of significant operating lease liabilities and corresponding right-of-use assets on the balance sheet. As of June 30, 2019, the company reported $230.8 million in operating lease liabilities and $221.5 million in operating lease right-of-use assets. This standard increases transparency by bringing operating leases onto the balance sheet.