10-QPeriod: Q3 FY2020

Extra Space Storage Inc. Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 6, 2020For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported its third-quarter results for the period ending September 30, 2020. The company demonstrated resilience, with total revenues growing by 1.6% year-over-year to $343.0 million. Net income attributable to common stockholders increased by 5.9% to $114.6 million, or $0.88 per diluted share. This performance was driven by a combination of strategic acquisitions and operational efficiencies, despite some headwinds from the COVID-19 pandemic impacting rental rates for existing customers. The balance sheet shows total assets of $8.76 billion. Debt levels remain significant, with notes payable, net, at $4.61 billion. The company's balance sheet reflects prudent management of its real estate portfolio, with real estate assets comprising the largest portion of its assets. While the company navigated the challenges of the pandemic, its diversified revenue streams and strong operational execution contributed to positive financial results.

Financial Highlights

36 data points
Beta

Revenue

$343.02M

73.1% Gross Margin

Net Income

$114.63M

33.4% Net Margin

EPS (Diluted)

$0.88

Total Assets

$8.76B

Cash & Equivalents

$74.80M

Free Cash Flow

$191.19M

Financial Statements
Beta
Revenue$343.02M
Cost of Revenue$92.32M
Gross Profit$250.70M
Operating Expenses$179.82M
Operating Income$163.21M
Interest Expense$5.72M
Net Income$114.63M
EPS (Basic)$0.89
EPS (Diluted)$0.88
Shares Outstanding (Basic)128.86M
Shares Outstanding (Diluted)129.87M

Key Highlights

  • 1Total revenues increased 1.6% to $343.0 million for the three months ended September 30, 2020, compared to the prior year period.
  • 2Net income attributable to common stockholders rose 5.9% to $114.6 million, or $0.88 per diluted share, for the three months ended September 30, 2020.
  • 3Property rental revenue saw a slight decrease of 0.2% for the quarter but increased 1.8% year-to-date, reflecting a balance between pandemic impacts on existing customer rates and growth from acquisitions.
  • 4Tenant reinsurance revenue significantly increased by 17.0% for the quarter and 13.6% year-to-date, indicating strong performance in this segment.
  • 5Cash flows from operating activities increased to $583.3 million for the nine months ended September 30, 2020, up from $544.5 million in the prior year period.
  • 6The company repurchased $67.9 million of common stock during the nine months ended September 30, 2020, and had $331.6 million remaining authorization under its share repurchase program as of September 30, 2020.
  • 7The company managed 1,906 stores (owned and/or managed) as of September 30, 2020, an increase from 1,797 stores in the prior year period.

Frequently Asked Questions

The COVID-19 pandemic impacted revenue through lower rental rates for existing customers and reduced late fee collections. However, the company observed record occupancy levels in Q3 2020 due to reduced vacates as restrictions lessened. Tenant reinsurance revenue saw significant growth, and the company implemented contactless rental processes and other measures to ensure operational continuity and safety.

As of September 30, 2020, Extra Space Storage had approximately $5.3 billion in total debt. The company has a significant portion of its debt at fixed rates (77.7%) and uses interest rate swaps to manage interest rate risk. The weighted average interest rate on its total debt was 3.0%. The company was in compliance with all financial covenants. They also continued share repurchases, demonstrating a commitment to capital allocation.

Growth drivers include strategic acquisitions of new stores, development of new properties, and effective management of existing properties through proprietary revenue management systems. The increase in managed stores and the strong performance of the tenant reinsurance segment also contribute to overall growth.

Same-store rental revenues decreased by 1.5% for the three months ended September 30, 2020, compared to the prior year, primarily due to lower net rental rates for existing customers and higher bad debt expense. However, same-store square foot occupancy increased to 95.9% from 93.8% in the prior year period.