NETSTREIT Corp. (NTST) Bundle
Understanding NETSTREIT Corp. (NTST) Revenue Streams
Understanding NETSTREIT Corp.’s Revenue Streams
NETSTREIT Corp. generates revenue primarily through rental income, interest income on mortgage loans, and other revenue sources. The following breakdown provides insights into these revenue sources:
- Rental Revenue (including reimbursable): $110,226,000 for the nine months ended September 30, 2024, compared to $89,347,000 for the same period in 2023.
- Interest Income on Loans Receivable: $8,458,000 for the nine months ended September 30, 2024, compared to $5,145,000 for the same period in 2023.
- Other Revenue: No other revenue recorded for the nine months ended September 30, 2024, compared to $550,000 for the same period in 2023.
Year-over-Year Revenue Growth Rate
The total revenue for NETSTREIT Corp. increased significantly, showing a year-over-year growth:
- Total Revenues: $118,684,000 for the nine months ended September 30, 2024, up from $95,042,000 for the same period in 2023, reflecting an increase of 24.9%.
- Quarterly Revenue Comparison: For the three months ended September 30, 2024, total revenues were $41,444,000, up from $33,961,000 for the same period in 2023, indicating a growth rate of 22.0%.
Contribution of Different Business Segments to Overall Revenue
The contribution of different segments to the overall revenue for the nine months ended September 30, 2024, is summarized in the following table:
| Revenue Source | Amount ($) | Percentage of Total Revenue |
|---|---|---|
| Rental Revenue (including reimbursable) | 110,226,000 | 92.9% |
| Interest Income on Loans Receivable | 8,458,000 | 7.1% |
| Other Revenue | — | — |
| Total Revenue | 118,684,000 | 100% |
Analysis of Significant Changes in Revenue Streams
The increase in revenue streams can be attributed to several factors:
- Increase in Operating Leases: The number of operating leases and properties securing mortgage loans increased, contributing to higher rental income.
- Additional Cash Rental Receipts: Cash rental receipts rose by $20.2 million during the nine months ended September 30, 2024.
- Interest Income Growth: Interest income on mortgage loans receivable increased by $3.3 million during the same period.
- Straight-Line Rental Revenue: Straight-line rental revenue experienced an increase of $1.0 million.
Overall, NETSTREIT Corp.'s revenue growth reflects a robust performance in its primary business segments and effective management of its real estate investment portfolio.
A Deep Dive into NETSTREIT Corp. (NTST) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was approximately 14.19%, compared to 13.11% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was 6.80%, while for the nine months ended September 30, 2023, it was 4.83%.
Net Profit Margin: The net profit margin decreased to (5.55)% for the nine months ended September 30, 2024, from 5.18% for the same period in 2023, indicating a significant shift in profitability due to increased expenses.
Trends in Profitability Over Time
Net income for the nine months ended September 30, 2024, was a loss of $6.576 million, compared to a profit of $4.928 million for the same period in 2023.
Rental revenue increased to $110.226 million for the nine months ended September 30, 2024, from $89.347 million in 2023, showcasing growth in operational performance despite net losses.
Comparison of Profitability Ratios with Industry Averages
| Metric | Company | Industry Average |
|---|---|---|
| Gross Profit Margin | 14.19% | 20.0% |
| Operating Profit Margin | 6.80% | 10.5% |
| Net Profit Margin | (5.55)% | 5.0% |
Analysis of Operational Efficiency
Cost Management: Total operating expenses for the nine months ended September 30, 2024, were $101.903 million, a rise from $77.889 million for the same period in 2023.
Depreciation and amortization accounted for $56.522 million in 2024, compared to $46.599 million in 2023, indicating a significant increase in asset values and related costs.
Gross Margin Trends: The gross profit for the nine months ended September 30, 2024, was approximately $16.781 million, reflecting improvements in revenue generation despite increased operating costs.
Debt vs. Equity: How NETSTREIT Corp. (NTST) Finances Its Growth
Debt vs. Equity: How NETSTREIT Corp. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, NETSTREIT Corp. reported a total principal amount of debt of $783.2 million. This includes:
- $175.0 million under the 2027 Term Loan
- $200.0 million under the 2028 Term Loan
- $250.0 million under the 2029 Term Loan
- $150.0 million in borrowings under the Revolver
Debt-to-Equity Ratio
The company’s debt-to-equity ratio stands at approximately 0.58, calculated by dividing total debt of $783.2 million by total equity of $1.34 billion as of the same date. This ratio is below the industry average of 0.75, indicating a more conservative leverage position in comparison to its peers.
Recent Debt Issuances and Credit Ratings
During the nine months ended September 30, 2024, NETSTREIT Corp. raised $251.0 million through the Revolver at a weighted average interest rate of 6.49%. The company has maintained a stable credit rating, with its debt instruments rated at Baa3 by Moody’s.
Refinancing Activity
The company has engaged in refinancing efforts to manage its interest rate exposure. As of September 30, 2024, it entered into interest rate derivative contracts to convert floating rate debts into fixed rates, effectively hedging against interest rate fluctuations.
Debt and Equity Balance
NETSTREIT balances its financing needs through a mix of debt and equity. The company utilizes debt for property acquisitions and developments while relying on equity financing to support its long-term growth strategy. Recent equity issuances include:
- In June 2024, the company issued 4,000,000 shares at $16.43 per share, raising approximately $65.3 million.
- In September 2024, 1,983,711 shares were issued at $16.41 per share for net proceeds of around $32.3 million.
| Debt Type | Principal Amount | Interest Rate | Maturity Date |
|---|---|---|---|
| 2027 Term Loan | $175,000,000 | 3.88% | February 11, 2028 |
| 2028 Term Loan | $200,000,000 | 4.99% | January 3, 2029 |
| 2029 Term Loan | $250,000,000 | 5.94% | August 11, 2026 |
| Revolver | $150,000,000 | 5.94% | August 11, 2027 |
| Mortgage Note | $8,245,000 | 4.53% | November 1, 2027 |
This strategic balance of debt and equity enables the company to finance its growth while maintaining financial stability and flexibility in its operations.
Assessing NETSTREIT Corp. (NTST) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
As of September 30, 2024, the current ratio for NETSTREIT Corp. was approximately 1.36, indicating that the company has sufficient current assets to cover its current liabilities. The quick ratio, which excludes inventory from current assets, was recorded at 1.36 as well, suggesting a strong liquidity position without reliance on inventory sales.
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, stood at $81.6 million as of September 30, 2024. This reflects an increase from $61.6 million as of December 31, 2023, indicating improved liquidity and operational efficiency over the period.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, reveals the following trends:
- Operating Cash Flow: Net cash provided by operating activities was $62.1 million, up from $51.5 million in the same period of 2023.
- Investing Cash Flow: Net cash used in investing activities totaled ($319.4 million), compared to ($345.7 million) in 2023.
- Financing Cash Flow: Net cash provided by financing activities was $256.1 million, an increase from $231.6 million in 2023.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, NETSTREIT Corp. had total debt obligations of $1.1 billion, with $754.5 million classified as net debt after accounting for $28.8 million in cash and equivalents. The adjusted net debt to annualized EBITDA ratio was 4.0, indicating manageable leverage levels given the company's cash flow generation capabilities.
| Debt Type | Principal Amount | Interest Rate | Maturity Date |
|---|---|---|---|
| 2027 Term Loan | $175.0 million | 6.67% | January 15, 2026 |
| 2028 Term Loan | $200.0 million | 6.67% | February 11, 2028 |
| 2029 Term Loan | $250.0 million | 6.67% | July 3, 2026 |
| Revolving Credit Facility | $150.0 million | 6.49% | August 11, 2026 |
The company's ability to generate cash flow through its operations and manage its debt levels effectively positions it to meet its liquidity needs in the foreseeable future.
Is NETSTREIT Corp. (NTST) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of NETSTREIT Corp. (NTST) focuses on key financial metrics to determine whether the company is overvalued or undervalued based on its current market performance and financial health.
Price-to-Earnings (P/E) Ratio
The P/E ratio reflects the company's current share price relative to its earnings per share (EPS). As of September 30, 2024, the diluted net loss per common share was ($0.07). The P/E ratio cannot be calculated due to the negative earnings, indicating that traditional valuation metrics may not apply effectively.
Price-to-Book (P/B) Ratio
The P/B ratio compares the market value of a company's stock with its book value. As of September 30, 2024, the book value per share was approximately $10.00. The current stock price was around $17.20, resulting in a P/B ratio of 1.72, suggesting the stock may be overvalued compared to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio provides insight into the valuation of the company relative to its earnings before interest, taxes, depreciation, and amortization. For the nine months ended September 30, 2024, the adjusted EBITDA was $87.6 million. The enterprise value, calculated as market capitalization plus total debt minus cash equivalents, was approximately $1.35 billion. This results in an EV/EBITDA ratio of 15.4, indicating a premium valuation compared to industry averages.
Stock Price Trends
Over the last 12 months, the stock price of NTST has fluctuated significantly. The stock price was approximately $17.20 as of September 30, 2024, compared to a price of $21.50 a year prior, reflecting a decrease of about 20.7%.
Dividend Yield and Payout Ratios
NETSTREIT Corp. has maintained a consistent dividend payout. For the nine months ended September 30, 2024, the total dividends declared were $0.620 per share. With the current stock price of $17.20, the dividend yield is approximately 3.6%. The payout ratio, based on the adjusted EBITDA, indicates a sustainable dividend policy despite recent losses.
Analyst Consensus on Stock Valuation
Analyst consensus regarding the stock valuation of NTST remains mixed. As of October 2024, several analysts recommend a "Hold" rating, citing the company's growth potential but cautioning about the current overvaluation based on P/B and EV/EBITDA ratios.
| Metric | Value |
|---|---|
| P/E Ratio | N/A (Negative Earnings) |
| P/B Ratio | 1.72 |
| EV/EBITDA Ratio | 15.4 |
| Stock Price (as of 09/30/2024) | $17.20 |
| Dividend Yield | 3.6% |
| Total Dividends Declared (9M 2024) | $0.620 per share |
| Analyst Consensus | Hold |
Key Risks Facing NETSTREIT Corp. (NTST)
Key Risks Facing NETSTREIT Corp. (NTST)
Industry Competition: The competitive landscape in the commercial real estate sector poses significant risks. As of September 30, 2024, the company operates in a market characterized by fluctuating property prices and varying capitalization rates, which could impact investment returns.
Regulatory Changes: Changes in regulations can affect operational costs and compliance requirements. The company is subject to environmental regulations related to real estate ownership, though costs have not been material in recent periods. As of September 30, 2024, the company has not reported any significant regulatory issues.
Market Conditions: The economic environment, including inflation and interest rate fluctuations, poses risks to financial performance. The annual inflation rate for the nine months ended September 30, 2024, was reported at 2.4%, down from 3.7% in the same period of 2023. The Federal Reserve's monetary policy has led to a rise in interest rates, with the weighted average interest rate for term loans reaching 6.67% for the nine months ended September 30, 2024.
Operational Risks: The company reported a net loss of $6.6 million for the nine months ended September 30, 2024, primarily due to increased interest expenses and provisions for impairment. Provisions for impairment rose to $17.3 million during the same period. Additionally, depreciation and amortization expenses increased to $56.5 million.
Financial Risks: The company’s total debt as of September 30, 2024, was approximately $783.2 million, with a net debt of $754.5 million after accounting for cash and equivalents. The Adjusted Net Debt to Annualized Adjusted EBITDA ratio stood at 4.0, indicating a higher leverage position.
Strategic Risks: The company has committed to significant capital expenditures, with tenant improvement allowances totaling approximately $5.1 million and commitments for properties under development amounting to $11.2 million. As of September 30, 2024, the company had $30.6 million in unsettled forward equity under its ATM programs.
| Risk Factor | Description | Current Impact |
|---|---|---|
| Industry Competition | Fluctuating property prices and capitalization rates | Potentially reduced investment returns |
| Regulatory Changes | Environmental regulations on real estate ownership | Costs not material as of recent reports |
| Market Conditions | Inflation rate at 2.4%, interest rates increasing | Higher financing costs and potential pressure on margins |
| Operational Risks | Net loss of $6.6 million, increased provisions for impairment | Higher operating expenses impacting profitability |
| Financial Risks | Total debt of $783.2 million, net debt of $754.5 million | Leverage ratio at 4.0, indicating higher risk |
| Strategic Risks | Commitments for capital expenditures totaling $16.3 million | Potential cash flow constraints |
Mitigation Strategies: The company actively monitors the commercial real estate and credit markets to adjust its business strategy as necessary. It has also implemented interest rate derivative contracts to hedge against fluctuations in interest rates.
Future Growth Prospects for NETSTREIT Corp. (NTST)
Growth Opportunities
Future Revenue Growth Projections: For the nine months ended September 30, 2024, total revenues increased to $118.7 million from $95.0 million for the same period in 2023, reflecting a growth of 25%. This growth is attributed to a rise in rental revenues, which reached $110.2 million, up from $89.3 million in the previous year.
Market Expansions: The company acquired 68 properties for a total purchase price of $302.3 million in the nine months ended September 30, 2024. These properties span 24 states with an average weighted lease term of approximately 13.2 years.
Strategic Initiatives: The company invested $27.9 million in property developments during the nine months ended September 30, 2024, including the acquisition of land for four new developments at an initial purchase price of $2.0 million. Six ongoing developments are expected to be completed in the near term.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenues | $41.4 million | $34.0 million | 21.4% |
| Rental Revenue | $38.2 million | $31.2 million | 22.4% |
| Interest Income on Loans Receivable | $3.3 million | $2.2 million | 49.5% |
| Net Loss | $(5.3) million | $4.2 million | - |
Acquisitions and Dispositions: In the three months ended September 30, 2024, the company sold 8 properties for a total sales price of $23.0 million, resulting in a net loss of $0.1 million. During the same period, the company recognized a net gain of $0.9 million from the sale of 26 properties throughout the nine months ended September 30, 2024.
Competitive Advantages: The company maintains a diversified portfolio with properties leased to investment-grade tenants, enhancing its revenue stability. The weighted average capitalization rate for recent acquisitions stands at approximately 7.3%, indicating strong investment potential.
Future Earnings Estimates: The annualized Adjusted EBITDAre for the nine months ended September 30, 2024 is projected at $143.4 million, while Adjusted Net Debt to Annualized Adjusted EBITDAre stands at 4.0.
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Updated on 16 Nov 2024
Resources:
- NETSTREIT Corp. (NTST) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of NETSTREIT Corp. (NTST)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View NETSTREIT Corp. (NTST)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.