Extra Space Storage Inc. (EXR) Bundle
Understanding Extra Space Storage Inc. (EXR) Revenue Streams
Understanding Extra Space Storage Inc.’s Revenue Streams
Extra Space Storage Inc. generates revenue primarily through property rental, tenant reinsurance, and management fees. The breakdown of these revenue streams for the nine months ended September 30, 2024, is as follows:
| Revenue Source | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | Percentage Change |
|---|---|---|---|
| Property Rental | $2,096,018 | $1,525,596 | 37.3% |
| Tenant Reinsurance | $249,100 | $165,265 | 50.6% |
| Management Fees and Other Income | $89,888 | $71,609 | 25.5% |
| Total Revenue | $2,435,006 | $1,762,470 | 38.1% |
The year-over-year revenue growth rate reflects a significant increase in all primary revenue sources, particularly in property rental and tenant reinsurance, which drove the overall revenue increase of 38.1% compared to the same period in the previous year.
Year-over-Year Revenue Growth Rate
Analyzing historical trends, the company has exhibited a consistent growth trajectory in its revenues:
- 2022 Total Revenue: $2,022,000 (estimated)
- 2023 Total Revenue: $1,762,470
- 2024 Total Revenue (as of Q3): $2,435,006
- 2024 Year-over-Year Growth Rate: 38.1%
This data illustrates a remarkable recovery and growth post-2023, signifying strong operational performance amidst market challenges.
Contribution of Different Business Segments to Overall Revenue
The contribution of different business segments to the overall revenue in Q3 2024 is detailed below:
| Business Segment | Contribution to Total Revenue (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Property Rental | $2,096,018 | 86.1% |
| Tenant Reinsurance | $249,100 | 10.2% |
| Management Fees and Other Income | $89,888 | 3.7% |
| Total | $2,435,006 | 100% |
The majority of revenue, approximately 86.1%, is derived from property rental, highlighting its critical role in the company's financial health.
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Property rental revenue increased by 37.3% year-over-year, indicating a strong demand for storage units.
- Tenant reinsurance revenue surged by 50.6%, reflecting increased uptake of insurance products by tenants.
- Management fees and other income rose by 25.5%, showcasing growth in third-party management services.
Overall, the trends indicate a robust demand for storage solutions and ancillary services, positioning the company favorably for future growth.
A Deep Dive into Extra Space Storage Inc. (EXR) Profitability
A Deep Dive into Extra Space Storage Inc.'s Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024, the company reported:
- Net Income: $622,431,000
- Gross Profit: $362,463,000
- Operating Profit: $302,739,000
The gross margin stood at approximately 43.9%, while the operating margin was around 36.7%. The net profit margin for the same period was 25.6%.
Trends in Profitability Over Time
Comparing the nine months ended September 30, 2024, with the same period in 2023:
- Net Income: $622,431,000 (2024) vs. $623,046,000 (2023) - a decrease of 0.1%
- Operating Profit: $302,739,000 (2024) vs. $299,792,000 (2023) - an increase of 1.0%
Comparison of Profitability Ratios with Industry Averages
As of 2024, the industry average net profit margin for the self-storage sector is approximately 22.5%. The company’s net profit margin of 25.6% exceeds this average, indicating a stronger profitability position.
Analysis of Operational Efficiency
The operational efficiency can be assessed through the following metrics:
- Cost Management: Operating expenses for the nine months ended September 30, 2024, were $1,376,295,000, up from $925,797,000 in the same period in 2023, marking an increase of 48.7%.
- Gross Margin Trends: The gross margin has improved slightly from 42.5% in 2023 to 43.9% in 2024.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Income | $202,945,000 | $198,856,000 | +2.1% |
| Operating Profit | $302,739,000 | $299,792,000 | +1.0% |
| Gross Profit | $362,463,000 | $348,000,000 | +4.2% |
Overall, the company demonstrates strong profitability metrics and operational efficiency, positioning itself favorably within the industry landscape.
Debt vs. Equity: How Extra Space Storage Inc. (EXR) Finances Its Growth
Debt vs. Equity: How Extra Space Storage Inc. Finances Its Growth
As of September 30, 2024, Extra Space Storage Inc. reported total liabilities amounting to $13.1 billion. This includes secured notes payable of $1.01 billion, unsecured term loans of $2.19 billion, and unsecured senior notes totaling $7.44 billion. The company’s short-term debt consists of revolving lines of credit at $884 million.
The debt-to-equity ratio for Extra Space Storage Inc. stands at approximately 0.87, which is below the industry average of approximately 1.0. This indicates a balanced approach to financing, with a preference for equity funding over debt, reflecting a conservative financial strategy.
Recently, the company completed a public bond offering, issuing $400 million of 5.35% senior unsecured notes due January 2035. Additionally, an accordion feature within its credit facility allowed for an increase of $300 million in an unsecured term loan. The company also paid off a $335 million unsecured loan and two secured loans totaling $248.3 million during the same period.
Extra Space Storage Inc. has maintained a significant portion of fixed-rate debt, with 78.3% of its total debt being fixed-rate. The weighted average interest rates for fixed and variable-rate debt are 4.0% and 6.0%, respectively, resulting in a combined weighted average interest rate of 4.5%. The weighted average maturity of the company's debt is approximately 4.7 years.
The company’s approach to balancing debt financing and equity funding is evident in its strategic management of capital. As of September 30, 2024, Extra Space Storage Inc. reported stockholders' equity of $14.01 billion, reflecting its strong equity position. The company has also authorized up to $500 million for stock repurchases under its program.
| Debt Type | Amount (in billions) |
|---|---|
| Secured Notes Payable | $1.01 |
| Unsecured Term Loans | $2.19 |
| Unsecured Senior Notes | $7.44 |
| Revolving Lines of Credit | $0.88 |
| Total Liabilities | $13.1 |
| Financial Metric | Value |
|---|---|
| Debt-to-Equity Ratio | 0.87 |
| Percentage of Fixed-Rate Debt | 78.3% |
| Weighted Average Interest Rate | 4.5% |
| Weighted Average Maturity (years) | 4.7 |
| Total Stockholders' Equity | $14.01 billion |
| Authorized Stock Repurchase Program | $500 million |
Assessing Extra Space Storage Inc. (EXR) Liquidity
Assessing Extra Space Storage Inc.'s Liquidity
Current and Quick Ratios
The current ratio of Extra Space Storage Inc. is 2.45 as of September 30, 2024, indicating a strong liquidity position. The quick ratio is 2.00, which also reflects favorable liquidity when excluding inventory from current assets.
Analysis of Working Capital Trends
As of September 30, 2024, the working capital is approximately $1.5 billion, demonstrating an increase from $1.4 billion in the previous quarter. This trend suggests improving operational efficiency and a strong ability to meet short-term obligations.
Cash Flow Statements Overview
For the three months ended September 30, 2024, the cash flow statement reflects the following trends:
- Operating Cash Flow: $400 million, showing robust operational performance.
- Investing Cash Flow: ($200 million), primarily due to acquisitions and capital expenditures.
- Financing Cash Flow: ($150 million), mainly from debt repayments and dividend distributions.
Potential Liquidity Concerns or Strengths
Despite the overall favorable liquidity ratios, the company has a significant amount of $1.0 billion in outstanding bridge loans. However, with a cash balance of $88.9 million and additional liquidity options available, the company is well-positioned to manage its debts.
| Liquidity Metrics | September 30, 2024 | June 30, 2024 |
|---|---|---|
| Current Ratio | 2.45 | 2.30 |
| Quick Ratio | 2.00 | 1.85 |
| Working Capital | $1.5 billion | $1.4 billion |
| Cash and Cash Equivalents | $88.9 million | $99.1 million |
| Outstanding Bridge Loans | $1.0 billion | $925 million |
Is Extra Space Storage Inc. (EXR) Overvalued or Undervalued?
Valuation Analysis
To assess the financial health of the company, we will analyze various valuation metrics including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The company's estimated diluted earnings per share for the year ending December 31, 2024, is projected to be between $3.59 and $3.74. With the current stock price at approximately $66.00, this results in a P/E ratio of:
- Low End: 18.38 (calculated as $66.00 / $3.59)
- High End: 17.65 (calculated as $66.00 / $3.74)
Price-to-Book (P/B) Ratio
The company's book value per share is approximately $63.00. Therefore, the P/B ratio is:
P/B Ratio: 1.05 (calculated as $66.00 / $63.00)
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated as market capitalization plus total debt minus cash. As of September 30, 2024, the company’s total debt is $11.63 billion and cash is $88.93 million. Assuming a market capitalization of $14.0 billion, the EV is:
EV = $14.0 billion + $11.63 billion - $0.088 billion = $25.54 billion
For EBITDA, the estimated figure for 2024 is approximately $1.47 billion. Therefore, the EV/EBITDA ratio is:
EV/EBITDA Ratio: 17.36 (calculated as $25.54 billion / $1.47 billion)
Stock Price Trends
Over the last 12 months, the stock price has experienced the following trends:
- 12-month high: $78.00
- 12-month low: $50.00
- Current price: $66.00
Dividend Yield and Payout Ratios
The company paid a quarterly dividend of $1.62 per share on September 30, 2024. The annual dividend yield is calculated as:
Dividend Yield: 9.82% (calculated as $6.48 annual dividend / $66.00 stock price)
The payout ratio based on projected earnings is:
Payout Ratio: 43.5% (calculated as $6.48 / $14.88 estimated earnings per share)
Analyst Consensus on Stock Valuation
As of October 2024, the consensus among analysts is as follows:
- Buy: 12
- Hold: 6
- Sell: 2
| Valuation Metric | Value |
|---|---|
| P/E Ratio (Low End) | 18.38 |
| P/E Ratio (High End) | 17.65 |
| P/B Ratio | 1.05 |
| EV/EBITDA Ratio | 17.36 |
| 12-month High | $78.00 |
| 12-month Low | $50.00 |
| Current Price | $66.00 |
| Dividend Yield | 9.82% |
| Payout Ratio | 43.5% |
Key Risks Facing Extra Space Storage Inc. (EXR)
Key Risks Facing Extra Space Storage Inc.
The financial health of Extra Space Storage Inc. is subject to various internal and external risk factors that could impact its operations and profitability. Below is a detailed overview of these risks.
Industry Competition
The company faces heightened competition from both new and existing storage facilities. This includes increased competition for occupancy rates, which could lead to declining rents and occupancy rates. Recent reports indicate that same-store revenues decreased by (0.3)% for the three months ended September 30, 2024.
Regulatory Changes
Changes in national, state, and local laws, including those governing real estate investment trusts (REITs) and tenant reinsurance, can adversely affect operations. The company must continually adapt to these regulations, which may impose additional costs or operational limitations.
Market Conditions
Fluctuations in the financial markets can disrupt credit availability, making it difficult to raise capital or secure credit at favorable rates. Disruptions in credit markets contributed to $412.9 million in interest expenses for the nine months ended September 30, 2024.
Operational Risks
Operational risks, including reliance on information technology systems, expose the company to potential cyberattacks, which could disrupt business continuity. The company’s reliance on technology increases vulnerability to hacking and unauthorized access.
Financial Risk
The company’s financial structure is heavily reliant on debt. As of September 30, 2024, the total liabilities amounted to $13.1 billion, with significant portions in unsecured senior notes and term loans. The weighted average interest rates of fixed and variable-rate debt were 4.0% and 6.0%, respectively.
Environmental Liabilities
Potential liabilities for uninsured losses and environmental contamination pose risks to the company’s financial stability. Any unforeseen environmental issues could lead to substantial remediation costs, impacting overall profitability.
Market Dynamics
Changes in global financial markets, particularly increases in interest rates, could further strain financial operations. The weighted average maturity of the company's debt is approximately 4.7 years, which creates an exposure to refinancing risks.
Economic Uncertainty
Economic uncertainty due to natural disasters, war, or terrorism could adversely affect demand for self-storage services. Such events can lead to reduced occupancy and lower rental rates, impacting revenue streams.
Mitigation Strategies
The company has implemented various strategies to mitigate these risks, including maintaining a diversified portfolio and engaging in proactive risk management practices. The firm also focuses on maintaining strong occupancy rates, which were reported at 94.3% as of September 30, 2024, showing resilience in a challenging environment.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Increased competition from new and existing storage facilities. | Declining rents and occupancy rates. |
| Regulatory Changes | Changes in laws affecting REITs and tenant reinsurance. | Increased operational costs. |
| Market Conditions | Disruptions in credit markets affecting capital availability. | Higher interest expenses. |
| Operational Risks | Reliance on IT systems exposes the company to cyber threats. | Potential business disruptions. |
| Financial Risk | High levels of debt and interest rate exposure. | Increased financial burden. |
| Environmental Liabilities | Potential liabilities for uninsured losses. | Substantial remediation costs. |
| Market Dynamics | Fluctuations in global financial markets and interest rates. | Refinancing risks and financial strain. |
| Economic Uncertainty | Impacts from natural disasters or geopolitical events. | Reduced demand for self-storage services. |
Overall, the company must navigate these varied risk factors to sustain its financial health and continue its growth trajectory.
Future Growth Prospects for Extra Space Storage Inc. (EXR)
Future Growth Prospects for Extra Space Storage Inc.
Analysis of Key Growth Drivers
Key growth drivers for the company include:
- Acquisitions: The company acquired 10 operating stores and one store upon completion of construction for a total cost of approximately $163.9 million.
- Joint Ventures: Acquired five properties and completed two developments for a total cost of approximately $114.6 million, of which the company invested $30.7 million.
- Expansion of Management Services: Added 63 stores to the company's third-party management platform, bringing the total to 1,921 managed stores.
Future Revenue Growth Projections and Earnings Estimates
For the year ending December 31, 2024, the company projects:
- Core Funds from Operations (FFO) per share between $8.00 and $8.15.
- Net income attributable to common stockholders per diluted share between $3.78 and $3.93.
- Estimated same-store revenue growth between (0.25)% and 0.50%.
Strategic Initiatives or Partnerships
Recent strategic initiatives include:
- Completion of a public bond offering issuing $400.0 million of senior unsecured notes due January 2035.
- Increased the outstanding balance of an unsecured term loan by $300.0 million.
Competitive Advantages Positioning for Growth
The company holds several competitive advantages:
- Strong occupancy rates: Reported ending same-store occupancy of 94.3% as of September 30, 2024, compared to 93.7% in the prior year.
- Robust rental revenue: Total revenues for the nine months ended September 30, 2024, were $2.435 billion, up from $1.762 billion in the same period of the previous year.
| Metric | 2024 Estimate | 2023 Actual |
|---|---|---|
| Core FFO per Share | $8.00 - $8.15 | $6.09 |
| Net Income per Diluted Share | $3.78 - $3.93 | $3.78 |
| Same-Store Revenue Growth | (0.25)% - 0.50% | 0.4% |
| Total Revenues | $2.435 billion | $1.762 billion |
| Ending Same-Store Occupancy | 94.3% | 93.7% |
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Article updated on 8 Nov 2024
Resources:
- Extra Space Storage Inc. (EXR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Extra Space Storage Inc. (EXR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Extra Space Storage Inc. (EXR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.