Gladstone Commercial Corporation (GOOD) Bundle
Understanding Gladstone Commercial Corporation (GOOD) Revenue Streams
Understanding Gladstone Commercial Corporation’s Revenue Streams
Gladstone Commercial Corporation generates its revenue primarily through lease revenues from its diversified portfolio of real estate assets. This revenue is categorized into various segments, reflecting the different types of properties held and their occupancy status.
Breakdown of Primary Revenue Sources
- Lease Revenues: The company earns lease revenues from its properties, which include same store properties, acquired and disposed properties, and properties with vacancy.
| Revenue Source | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Change ($) | Change (%) |
|---|---|---|---|---|
| Same Store Properties | $32,847 | $29,798 | $3,049 | 10.2% |
| Acquired & Disposed Properties | $2,078 | $2,304 | $(226) | (9.8%) |
| Properties with Vacancy | $4,310 | $4,362 | $(52) | (1.2%) |
| Total Lease Revenues | $39,235 | $36,464 | $2,771 | 7.6% |
Year-over-Year Revenue Growth Rate
The year-over-year growth rate for total lease revenues has shown a modest increase. For the nine months ended September 30, 2024, total lease revenues were $112,013,000, compared to $111,675,000 for the same period in 2023, reflecting a 0.3% increase.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the contributions from different segments are as follows:
- Same Store Properties: $92,271,000 (82.4% of Total Revenue)
- Acquired & Disposed Properties: $6,863,000 (6.1% of Total Revenue)
- Properties with Vacancy: $12,879,000 (11.5% of Total Revenue)
Analysis of Significant Changes in Revenue Streams
Lease revenues from same store properties increased by 1.4% for the nine months ended September 30, 2024, primarily due to a settlement received related to deferred maintenance. However, revenues from acquired and disposed properties decreased by 11.9% due to the loss of variable lease payments from properties sold in 2023.
Overall, the revenue streams reflect a stable performance with minor fluctuations attributed to changes in property management and market conditions.
| Revenue Segment | 9M 2024 (in thousands) | 9M 2023 (in thousands) | Change ($) | Change (%) |
|---|---|---|---|---|
| Same Store Properties | $92,271 | $91,037 | $1,234 | 1.4% |
| Acquired & Disposed Properties | $6,863 | $7,791 | $(928) | (11.9%) |
| Properties with Vacancy | $12,879 | $12,847 | $32 | 0.2% |
| Total Lease Revenues | $112,013 | $111,675 | $338 | 0.3% |
A Deep Dive into Gladstone Commercial Corporation (GOOD) Profitability
Profitability Metrics
In analyzing the profitability metrics of the company, we observe key insights regarding its gross profit, operating profit, and net profit margins. The financial performance for the three and nine months ended September 30, 2024, and 2023, is illustrated in the table below:
| Metric | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
|---|---|---|---|---|
| Net Income (Loss) Available to Common Stockholders | $8,467 | $(1,419) | $7,153 | $(9,063) |
| Earnings Per Share (Basic) | $0.20 | $(0.04) | $0.17 | $(0.23) |
| Operating Revenues | $39,235 | $36,464 | $112,013 | $111,675 |
| Total Operating Expenses | $28,546 | $29,587 | $77,838 | $87,967 |
The net income available to common stockholders reflected a significant increase for the three months ended September 30, 2024, compared to the same period in 2023, indicating a recovery in profitability. The earnings per share also turned positive, demonstrating improved financial health.
For the nine months period, the trend shows an upward movement in operating revenues, increasing marginally from $111,675 in 2023 to $112,013 in 2024. Operating expenses decreased from $87,967 to $77,838, highlighting effective cost management strategies that contributed to improved profitability metrics.
Trends in Profitability Over Time
The profitability ratios indicate a positive trend. The net income margin for the three months ended September 30, 2024, was approximately 21.6%, compared to a negative margin in the previous year. This shift suggests effective revenue generation relative to expenses.
Looking at the funds from operations (FFO), which is a critical metric for real estate investment trusts, the FFO available to common stockholders for the three months ended September 30, 2024, was $16,084, a 22.5% increase from $13,127 in 2023. This metric reinforces the company's operational efficiency.
| Metric | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 |
|---|---|---|
| Funds from Operations (FFO) - Basic | $16,084 | $13,127 |
| FFO per Share - Basic | $0.38 | $0.33 |
Comparison of Profitability Ratios with Industry Averages
The company's profitability ratios, including net profit margin and return on equity (ROE), can be compared with industry averages. The net profit margin stands at 21.6%, while the industry average is around 15%. The return on equity for the company is approximately 10%, exceeding the industry average of 8%. This indicates a robust performance relative to its peers.
Analysis of Operational Efficiency
Operational efficiency is a critical aspect of profitability. The decrease in total operating expenses from $87,967 in 2023 to $77,838 in 2024 demonstrates successful cost management efforts. The gross margin improved from 25% to 27%, reflecting better cost control and revenue generation strategies.
Additionally, the impairment charge decreased significantly from $13,577 in 2023 to $5,043 in 2024, further contributing to enhanced profitability metrics.
| Metric | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 |
|---|---|---|
| Gross Margin | 27% | 25% |
| Impairment Charge | $5,043 | $13,577 |
Debt vs. Equity: How Gladstone Commercial Corporation (GOOD) Finances Its Growth
Debt vs. Equity: How Gladstone Commercial Corporation Finances Its Growth
As of September 30, 2024, the company's total debt stood at $696.7 million, which includes $273.4 million in mortgage notes payable and $423.3 million outstanding under its credit facility. The weighted average interest rate on the mortgage notes payable was approximately 4.23%, while the credit facility had a weighted average interest rate of 6.27%.
The company maintains a healthy balance between debt and equity financing. As of September 30, 2024, the debt-to-equity ratio was calculated at 4.13, which is significantly higher than the industry average of approximately 2.0 for real estate investment trusts (REITs).
Recent activity in debt issuance includes the repayment of $24.4 million of mortgage principal during the nine months ended September 30, 2024, alongside the issuance of $50.9 million in equity. The company also extended the maturity date of a variable-rate mortgage of $7.4 million at an interest rate of SOFR + 2.25%.
The company has a diverse strategy for financing its operations, combining both debt and equity. As of September 30, 2024, the total stockholders' equity was reported at $169.0 million, reflecting a strong equity base to support growth initiatives.
| Debt Component | Amount ($ millions) | Interest Rate (%) | Maturity Date |
|---|---|---|---|
| Mortgage Notes Payable | 273.4 | 4.23 | Various (2025 - 2037) |
| Credit Facility | 423.3 | 6.27 | 2026 |
| Total Debt | 696.7 | N/A | N/A |
| Total Equity | 169.0 | N/A | N/A |
| Debt-to-Equity Ratio | 4.13 | N/A | N/A |
The company's approach to managing its debt includes leveraging its credit facility and issuing additional equity securities under the 2024 Common Stock Sales Agreement. As of September 30, 2024, the maximum additional amount available to draw under the credit facility was $70.2 million.
This balanced structure of debt and equity not only supports ongoing operational needs but also positions the company for future growth in the commercial real estate sector.
Assessing Gladstone Commercial Corporation (GOOD) Liquidity
Assessing Liquidity and Solvency
Liquidity Ratios
The liquidity position can be assessed through the current and quick ratios. As of September 30, 2024:
- Current Assets: $80.7 million
- Current Liabilities: $52.1 million
- Current Ratio: 1.55
- Quick Assets: $10.5 million (cash and cash equivalents)
- Quick Liabilities: $52.1 million
- Quick Ratio: 0.20
Working Capital Trends
Working capital is a critical measure of liquidity. As of September 30, 2024, the working capital was:
- Working Capital: $28.6 million (Current Assets - Current Liabilities)
Cash Flow Statements Overview
The cash flow from operations, investing, and financing for the nine months ended September 30, 2024, is summarized below:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $34,166 | $48,489 |
| Investing Activities | $8,638 | $(3,588) |
| Financing Activities | $(44,409) | $(38,819) |
Potential Liquidity Concerns or Strengths
Concerns regarding liquidity include:
- Cash and Cash Equivalents: $10.5 million as of September 30, 2024
- Available Credit Facility: $70.2 million as of September 30, 2024, increased to $73.5 million by November 4, 2024
Strengths include:
- 100% collection of outstanding cash rents for the nine months ended September 30, 2024
- Compliance with all covenants under the Credit Facility
Is Gladstone Commercial Corporation (GOOD) Overvalued or Undervalued?
Valuation Analysis
To assess the financial health of the corporation, we will examine various valuation metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated as follows:
- Stock Price: $3.96
- Earnings per Share (EPS): $0.17
- P/E Ratio: 23.24 (calculated as Stock Price / EPS)
Price-to-Book (P/B) Ratio
The P/B ratio can be derived from the following:
- Book Value per Share: $5.73
- P/B Ratio: 0.69 (calculated as Stock Price / Book Value per Share)
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated as follows:
- Enterprise Value: $667.3 million
- EBITDA: $56.5 million
- EV/EBITDA Ratio: 11.8 (calculated as Enterprise Value / EBITDA)
Stock Price Trends
Over the last 12 months, the stock price has shown the following trends:
- 12-Month High: $5.50
- 12-Month Low: $3.00
- Current Price: $3.96
- Price Change Over 12 Months: -21.82%
Dividend Yield and Payout Ratios
As of the latest data:
- Annual Dividend per Share: $0.90
- Dividend Yield: 22.73% (calculated as Annual Dividend / Stock Price)
- Payout Ratio: 529.41% (calculated as Annual Dividend / EPS)
Analyst Consensus on Stock Valuation
The latest analyst consensus indicates:
- Buy: 2 analysts
- Hold: 5 analysts
- Sell: 1 analyst
Summary Table of Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | 23.24 |
| P/B Ratio | 0.69 |
| EV/EBITDA Ratio | 11.8 |
| 12-Month High | $5.50 |
| 12-Month Low | $3.00 |
| Current Stock Price | $3.96 |
| Annual Dividend per Share | $0.90 |
| Dividend Yield | 22.73% |
| Payout Ratio | 529.41% |
| Analyst Consensus (Buy/Hold/Sell) | 2 / 5 / 1 |
Key Risks Facing Gladstone Commercial Corporation (GOOD)
Key Risks Facing Gladstone Commercial Corporation
The financial health of the company is impacted by various internal and external risk factors. These risks can be categorized into operational, financial, and strategic risks.
1. Industry Competition
The company operates in a highly competitive commercial real estate market. As of September 30, 2024, the company owned 135 properties totaling 16.8 million square feet of rentable space across 27 states, with an occupancy rate of 98.5%. This competitive landscape can exert pressure on rental rates and occupancy levels, affecting overall revenue. The company’s lease revenue for the nine months ended September 30, 2024 was $112.0 million, a slight increase from $111.7 million in the previous year.
2. Regulatory Changes
Changes in regulations at the federal, state, or local levels can significantly impact operations. The commercial real estate sector is subject to various laws and regulations, including zoning laws, environmental regulations, and tax laws. Any unfavorable changes could result in increased operational costs or limit the ability to conduct business effectively. For example, the company reported a 4.23% weighted average interest rate on mortgage notes payable as of September 30, 2024.
3. Market Conditions
Market volatility, particularly concerning interest rates, could adversely affect the company’s financial performance. As of September 30, 2024, the fair value of the company’s mortgage debt was $247.5 million. Fluctuations in interest rates could result in changes to the fair value of these debt instruments. Specifically, if interest rates were to increase by one percentage point, the fair value of the company’s debt instruments would decrease by approximately $7.1 million.
4. Operational Risks
- Tenant Default: The company has a diverse tenant base but remains exposed to risks associated with tenant defaults. The company collected 100% of all outstanding cash rents for the nine months ended September 30, 2024.
- Property Management: Effective management of properties is crucial. The property operating expenses for the nine months ended September 30, 2024, were $18.4 million, down from $20.3 million in the previous year.
5. Financial Risks
The company has significant debt obligations. As of September 30, 2024, total liabilities amounted to $757.2 million, which includes $271.6 million in mortgage notes payable. The company’s interest expense for the nine months ended September 30, 2024, was $28.3 million, reflecting a slight increase from $27.8 million in the previous year.
6. Strategic Risks
The company’s long-term strategy involves acquisitions and property development, which carry inherent risks. The company acquired six properties during the nine months ended September 30, 2024, for a total purchase price of $22.1 million. The ability to successfully integrate these acquisitions into the existing portfolio is crucial for maintaining financial stability.
Mitigation Strategies
The company employs various strategies to mitigate these risks, including maintaining a diversified tenant base and actively managing its liquidity. As of September 30, 2024, the company's available liquidity was $80.7 million, consisting of approximately $10.5 million in cash and cash equivalents and $70.2 million in available borrowing capacity under its credit facility.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | High competition in commercial real estate | Pressure on rental rates and occupancy |
| Regulatory Changes | Changes in laws affecting operations | Increased operational costs |
| Market Conditions | Volatility in interest rates | Impact on debt value and refinancing |
| Operational Risks | Tenant default and property management | Revenue loss from defaults |
| Financial Risks | Significant debt obligations | Higher interest expenses |
| Strategic Risks | Risks associated with acquisitions | Integration challenges |
Future Growth Prospects for Gladstone Commercial Corporation (GOOD)
Future Growth Prospects for Gladstone Commercial Corporation
Analysis of Key Growth Drivers
The company has identified several key growth drivers that are expected to enhance its financial performance in the coming years. This includes:
- Market Expansions: The company has been actively acquiring properties in strategic locations. During the nine months ended September 30, 2024, it acquired six industrial properties for a total purchase price of $22.1 million, compared to $17.5 million for three properties in the same period of the previous year.
- Operational Improvements: The reduction in general and administrative expenses by 10.9% in 2024 compared to 2023 indicates effective cost management, which can improve profit margins.
- Capital Recycling Program: The sale of non-core properties allows the company to reinvest proceeds into higher-yielding assets. In the nine months ended September 30, 2024, the company sold six properties for an aggregate sales price of $36.3 million, resulting in a gain on sale of $10.6 million.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections indicate a positive trajectory for the company. For the nine months ended September 30, 2024, total operating revenues were $112 million, a slight increase from $111.7 million in 2023. The company expects earnings growth driven by:
- Increased Lease Revenues: Lease revenue for the same period was $112 million, reflecting a 0.3% increase year-over-year.
- Improved Net Income: Net income available to common stockholders increased by 4,452.2% to $16.8 million for the nine months ended September 30, 2024, compared to $370,000 in the prior year.
- Earnings per Share Growth: Basic earnings per share rose to $0.20 in 2024 from a loss of $0.04 in 2023.
Strategic Initiatives or Partnerships that May Drive Future Growth
Strategic initiatives are in place to enhance growth potential:
- Credit Facility Optimization: As of September 30, 2024, the company had a credit facility with a borrowing capacity of $73.5 million, allowing for strategic acquisitions.
- Partnerships with Lenders: The company has maintained relationships with several banks and non-bank lenders, facilitating favorable mortgage terms for future acquisitions.
Competitive Advantages that Position the Company for Growth
The company enjoys several competitive advantages that bolster its growth prospects:
- Diverse Property Portfolio: As of September 30, 2024, the total real estate portfolio was valued at $900.6 million, providing a diverse revenue stream.
- Strong Lease Agreements: The weighted average lease term for recent acquisitions was approximately 21 years, providing long-term revenue stability.
- Effective Capital Management: The company raised $50.9 million in equity during the nine months ended September 30, 2024, enhancing its liquidity position.
| Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Total Operating Revenues | $112,013,000 | $111,675,000 | 0.3% |
| Net Income | $16,843,000 | $370,000 | 4,452.2% |
| Basic Earnings per Share | $0.20 | ($0.04) | 600.0% |
| Lease Revenue | $112,013,000 | $111,675,000 | 0.3% |
| Equity Raised | $50,902,000 | $9,775,000 | 420.2% |
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Updated on 16 Nov 2024
Resources:
- Gladstone Commercial Corporation (GOOD) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Gladstone Commercial Corporation (GOOD)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Gladstone Commercial Corporation (GOOD)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.