10-QPeriod: Q1 FY2020

Extra Space Storage Inc. Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 8, 2020For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported solid financial performance for the first quarter of 2020, despite the emerging challenges posed by the COVID-19 pandemic. Total revenues increased by 6.7% year-over-year, driven by growth in property rental income and tenant reinsurance. While property operations expenses saw a notable increase, largely due to store acquisitions, the company demonstrated effective cost management in other areas. Net income attributable to common stockholders rose to $108.2 million, a significant increase from $94.8 million in the prior year's quarter, leading to improved diluted earnings per share of $0.83 compared to $0.74. The company maintained a strong balance sheet with total assets of $8.55 billion, though total liabilities increased, primarily driven by a rise in revolving lines of credit. Management highlighted the resilience of the self-storage business and implemented measures to ensure business continuity and customer safety amidst the pandemic.

Financial Highlights

37 data points
Beta

Revenue

$332.45M

72.8% Gross Margin

Net Income

$108.18M

32.5% Net Margin

EPS (Diluted)

$0.83

Total Assets

$8.55B

Cash & Equivalents

$93.30M

Free Cash Flow

$189.26M

Financial Statements
Beta
Revenue$332.45M
Cost of Revenue$90.30M
Gross Profit$242.16M
Operating Expenses$175.26M
Operating Income$157.19M
Interest Expense$5.70M
Net Income$108.18M
EPS (Basic)$0.84
EPS (Diluted)$0.83
Shares Outstanding (Basic)129.29M
Shares Outstanding (Diluted)137.14M

Key Highlights

  • 1Total revenues increased by 6.7% to $332.5 million in Q1 2020, compared to $311.5 million in Q1 2019, primarily due to higher property rental revenues and tenant reinsurance income.
  • 2Net income attributable to common stockholders grew by 14.2% to $108.2 million ($0.83 diluted EPS) in Q1 2020, up from $94.8 million ($0.74 diluted EPS) in Q1 2019.
  • 3Property rental revenue increased by 5.8% to $286.7 million, driven by new store acquisitions and higher rental rates at stabilized properties.
  • 4Same-store rental revenues saw a modest increase of 1.9% to $270.1 million, indicating stable underlying property performance.
  • 5Operating expenses rose by 7.5% to $175.3 million, largely influenced by an 14.6% increase in property operations costs due to recent acquisitions.
  • 6The company ended the quarter with $93.3 million in cash and cash equivalents, and maintained a debt-to-enterprise value ratio of 27.9%, indicating a healthy liquidity position.
  • 7Management proactively implemented COVID-19 safety measures, including contactless rentals and remote work for corporate staff, while noting the business's historical resilience to economic downturns.

Frequently Asked Questions

While the company notes the emerging and significant impact of the COVID-19 pandemic on economies, for the first quarter of 2020, it had not seen significant vacates from existing tenants. New rentals saw a decrease, but overall operational resilience was maintained through safety measures and contactless processes. The full impact on future results remains uncertain and depends on future developments.

Total revenues increased by 6.7% to $332.5 million, driven primarily by a 5.8% rise in property rental revenues to $286.7 million. This growth was attributable to revenues from newly acquired stores and increases in rental rates at stabilized properties. Tenant reinsurance revenue also increased by 12.8%.

As of March 31, 2020, Extra Space Storage had total assets of $8.55 billion and total liabilities of $5.77 billion. The company had $93.3 million in cash and cash equivalents. The debt to total enterprise value ratio was 27.9%, and the company was in compliance with all financial covenants, indicating a solid liquidity and leverage position.

Total operating expenses increased by 7.5% to $175.3 million. A significant portion of this increase was in property operations (up 14.6%), directly linked to the inclusion of recently acquired stores. However, tenant reinsurance expenses decreased, and general and administrative expenses saw only a minor increase, showing some cost containment efforts outside of direct property operations.