National Retail Properties, Inc. (NYSE:NNN) Q2 2020 Earnings Conference Call August 3, 2020 10:30 AM ET Company Participants Jay Whitehurst - President & Chief Executive Officer Kevin Habicht - Chief Financial Officer Conference Call Participants Brian Hawthorne - RBC Capital Markets Spenser Allaway - Green Street Advisors Rob Stevenson - Janney Vikram Malhotra - Morgan Stanley John Massocca - Ladenburg Thalmann Christy McElroy - Citi Chris Lucas - Capital One Joshua Dennerlein - Bank of America Operator Go ...

Part I - Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited financial statements reflect the initial impact of the COVID-19 pandemic on the company's performance [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$7,632,928** | **$7,434,867** | | Real estate portfolio, net | $7,221,418 | $7,289,048 | | Cash and cash equivalents | $224,560 | $1,112 | | **Total Liabilities** | **$3,322,128** | **$3,103,185** | | Line of credit payable | $0 | $133,600 | | Notes payable, net | $3,207,545 | $2,842,698 | | **Total Equity** | **$4,310,800** | **$4,331,682** | - Total assets increased to **$7.63 billion**, driven by a significant rise in cash and cash equivalents to **$224.6 million** from $1.1 million, and an increase in notes payable[9](index=9&type=chunk) [Condensed Consolidated Statements of Income and Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Income Statement Highlights (in thousands, except per share data) | Metric | Q2 2020 | Q2 2019 | Six Months 2020 | Six Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $163,701 | $164,792 | $338,764 | $328,504 | | Impairment losses – real estate | $21,854 | $7,187 | $27,367 | $10,432 | | Net earnings attributable to NNN | $46,265 | $78,678 | $111,443 | $158,701 | | Diluted EPS | $0.24 | $0.43 | $0.60 | $0.87 | - Net earnings for Q2 2020 decreased significantly to **$46.3 million** from $78.7 million in Q2 2019, primarily due to a large increase in real estate impairment losses, which rose to **$21.9 million** from $7.2 million year-over-year[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $187,717 | $235,341 | | Net cash used in investing activities | ($41,472) | ($317,836) | | Net cash provided by (used in) financing activities | $77,203 | ($29,563) | | **Net increase (decrease) in cash** | **$223,448** | **($112,058)** | - Cash from operations decreased in the first six months of 2020 compared to 2019, while cash used in investing activities decreased significantly due to lower additions to real estate[26](index=26&type=chunk)[29](index=29&type=chunk) - Financing activities provided cash in 2020, driven by new debt issuance, a reversal from 2019[26](index=26&type=chunk)[29](index=29&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The COVID-19 pandemic negatively affected tenants' ability to pay rent, leading NNN to negotiate short-term rent deferrals of 30 to 90 days[37](index=37&type=chunk)[38](index=38&type=chunk) - In Q2 2020, NNN entered into rent deferral agreements with tenants representing approximately **21% of rent due** for the quarter[68](index=68&type=chunk)[69](index=69&type=chunk) - The company recognized significant real estate impairment losses of **$21.9 million** for Q2 2020 and **$27.4 million** for the six months ended June 30, 2020, a substantial increase from the prior year periods[77](index=77&type=chunk) - In March 2020, NNN issued **$400 million** of 2.500% notes and **$300 million** of 3.100% notes, using proceeds to redeem **$325 million** of 3.800% notes, resulting in a **$16.7 million loss** on early extinguishment of debt[80](index=80&type=chunk)[85](index=85&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes the COVID-19 pandemic's impact on operations, liquidity, and financing activities [Impact of COVID-19 on NNN's Business](index=27&type=section&id=Impact%20of%20COVID-19%20on%20NNN's%20Business) - As of July 30, 2020, NNN had collected approximately **69% of rent due for Q2 2020** and **84% of rent originally due in July 2020**, indicating a severe impact on collections from the pandemic[116](index=116&type=chunk) Q2 2020 Rent Collection by Line of Trade (as of July 30, 2020) | Line of Trade | % of Total Annual Base Rent | % of Rent Collected | | :--- | :--- | :--- | | Convenience stores | 18.1% | 99.0% | | Restaurants – full service | 10.6% | 40.5% | | Automotive service | 10.2% | 53.8% | | Family entertainment centers | 6.7% | 8.6% | | Theaters | 4.7% | 2.2% | | **Total** | **100.0%** | **68.9%** | - Due to economic uncertainty, NNN is deferring material new property investments until there is more visibility on economic and capital market recovery[122](index=122&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) - Property acquisitions slowed significantly, with only 21 properties acquired in the first six months of 2020 for **$74.1 million**, compared to 104 properties for **$392.8 million** in the same period of 2019[128](index=128&type=chunk) - Total revenues for Q2 2020 were $163.7 million, a slight **decrease of 0.7%** from Q2 2019; for the six-month period, revenues **increased 3.1%** to $338.8 million[130](index=130&type=chunk) - Operating expenses for Q2 2020 **increased 24.7%** year-over-year, primarily due to a **204.1% increase** in impairment losses on real estate[132](index=132&type=chunk) - In March 2020, the company redeemed its **$325 million** 3.800% notes due 2022, incurring a make-whole payment of **$16.7 million**, recorded as a loss on early extinguishment of debt[138](index=138&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2020, NNN maintained a strong liquidity position with **$224.6 million in cash** and full availability of its **$900 million** unsecured revolving credit facility[139](index=139&type=chunk) - Significant financing activities included issuing **$700 million** in new notes, redeeming **$325 million** in existing notes, and raising **$52.0 million** through its ATM equity program[141](index=141&type=chunk)[145](index=145&type=chunk) - As of June 30, 2020, approximately **2% of total properties** were leased to six tenants currently in Chapter 11 bankruptcy[149](index=149&type=chunk) - In July 2020, NNN declared a quarterly dividend of **$0.52 per common share**, an increase from the previous quarter, continuing its history of dividend payments[155](index=155&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposure is interest rate fluctuations on its debt - NNN's primary market risk exposure is to interest rate changes, which the company aims to limit by using a mix of fixed and variable rate debt[171](index=171&type=chunk) - As of June 30, 2020, the **$900 million** variable-rate Credit Facility had no outstanding balance, minimizing near-term exposure to rising interest rates[172](index=172&type=chunk) [Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of the quarter's end - Management concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2020[176](index=176&type=chunk) - There were **no changes** in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[177](index=177&type=chunk) Part II - Other Information [Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material legal proceedings - Not applicable; the company reports **no material pending legal proceedings**[180](index=180&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) This section details new risks posed by the COVID-19 pandemic on tenants, capital, and financials - A new risk factor was added to address the **material and adverse effects of the COVID-19 pandemic** on the company's business, financial condition, and results of operations[181](index=181&type=chunk) - Key risks from the pandemic include **tenant defaults and bankruptcies**, inability to access capital markets on favorable terms, and a significant reduction in cash flows that could impact dividend payments[183](index=183&type=chunk)[185](index=185&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities - Not applicable; the company did not have any **unregistered sales of equity securities** during the period[187](index=187&type=chunk) [Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including CEO/CFO certifications and material contracts - The report includes exhibits such as **CEO/CFO certifications**, an amendment to the credit agreement, and interactive data files for financial statements[190](index=190&type=chunk)[192](index=192&type=chunk)

Financial Data and Key Metrics Changes - The company reported core FFO results of $0.70 per share for Q1 2020, which is 4.5% higher than the prior year and consistent with projections [18] - The occupancy rate at the end of Q1 2020 was 98.8%, consistent with the long-term average [9] - The AFFO dividend payout ratio for the quarter was 72.4%, consistent with full year 2019 levels [18] - The company ended the quarter with $677.5 million of annual base rent in place [18] - The company withdrew its 2020 earnings guidance due to uncertainty from the COVID-19 pandemic [22] Business Line Data and Key Metrics Changes - The company acquired 21 new properties in Q1 2020, investing slightly over $67 million at an initial cash cap rate of 6.9% [10] - The company sold 14 properties during the quarter, generating proceeds of just over $36 million at a cash cap rate of 4.7% [10] Market Data and Key Metrics Changes - The company received approximately 52% of rents due for April 2020, with 37% of annualized base rent under rent deferral agreements or negotiations [11] - The company expects occupancy rates to fall in Q2 2020 due to the impact of the pandemic [9] Company Strategy and Development Direction - The company emphasized its strong liquidity position, ending Q1 with $217 million cash on hand and no amounts drawn on its $900 million line of credit [5][20] - The company paused acquisitions to conserve cash during the uncertain economic environment [5] - The management team highlighted their experience in navigating economic downturns, having been with the company during the 2008 recession [8] Management's Comments on Operating Environment and Future Outlook - Management expressed uncertainty about the depth and duration of the economic turmoil caused by COVID-19, leading to the withdrawal of 2020 guidance [4][22] - The company is working with tenants to structure rent deferral programs to help them through the business interruption [9][12] - Management remains hopeful about reaching agreements with tenants who have not paid rent or agreed to deferrals [13] Other Important Information - The company declared its regular quarterly common stock dividend in April 2020, with the board reviewing the dividend policy amid economic turmoil [14] - The company has a strong balance sheet with low leverage metrics, including a debt to gross book assets ratio of 35.3% [21] Q&A Session Summary Question: How does the company plan to balance its dividend track record with potential increased leverage? - The company stated that its dividend policy is based on long-term sustainability rather than short-term results, maintaining a payout ratio that provides a cushion during challenging periods [26][27] Question: What is the anticipated rent collection for May compared to April? - Management indicated that if tenants agreed to rent deferrals in April, it is expected that May rent will also be deferred, and they are taking a long-term view toward tenant relationships [30][31] Question: How is the company handling non-payment of rent and operating expenses? - The majority of tenants are still paying operating expenses, and the company is requiring that expenses be paid even if base rent is deferred [36][37] Question: What is the company's approach to tenants requesting deferrals? - The company is taking a collaborative approach, focusing on short-term rent deferrals without pushing additional burdens onto tenants [31][67] Question: What is the company's outlook on acquisitions moving forward? - The company is in a strong financial position but has paused acquisitions until there is more clarity on the recovery from the pandemic [78] Question: How is the company managing its liquidity and credit lines? - The company has not drawn on its credit line due to sufficient cash reserves and does not see a need to do so at this time [68][69]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2020 OR (State or other jurisdiction of incorporation or organization) Maryland 56-1431377 (I.R.S. Employer Identification No.) ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. 450 South Orange Avenue, Suite 900 Orlando, Florida 32801 (Address of principa ...

National Retail Properties, Inc. (NYSE:NNN) Q4 2019 Earnings Conference Call February 11, 2020 10:30 AM ET Company Participants Jay Whitehurst ??? President and Chief Executive Officer Kevin Habicht ??? Executive Vice President and Chief Financial Officer Conference Call Participants Christy McElroy ??? Citi Brian Hawthorne ??? RBC Capital Rob Stevenson ??? Janney Spenser Allaway ??? Green Street Advisors Todd Stender ??? Wells Fargo John Massocca ??? Ladenburg Collin Mings ??? Raymond James Vikram Malhotra ...

National Retail Properties (NYSE:NNN) Q3 2019 Earnings Conference Call October 31, 2019 10:30 AM ET CompanyParticipants Jay Whitehurst - CEO Kevin Habicht - CFO Conference Call Participants Katy McConnell - Citibank Vikram Malhotra - Morgan Stanley Brian Hawthorne - RBC Capital Markets Spenser Allaway - Green Street Advisors John Massocca - Ladenburg Thalmann Operator Good day, ladies and gentlemen and welcome to the National Retail Properties' Third Quarter 2019 Earnings Call. After today's presentation, t ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2019 OR ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission file number 001-11290 NATIONAL RETAIL PROPERTIES, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorpo ...

National Retail Properties (NYSE:NNN) Q2 2019 Earnings Conference Call August 1, 2019 10:30 AM ET Company Participants Jay Whitehurst - Chief Executive Officer Kevin Habicht - Chief Financial Officer Conference Call Participants Katy McConnell - Citi Brian Hawthorne - RBC Capital Markets Spenser Allaway ??? Green Street Advisors Collin Mings - Raymond James Todd Stender - Wells Fargo John Massocca - Ladenburg Thalmann Chris Lucas - Capital One Securities Operator Good day, ladies and gentlemen, and welcome ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 2019 OR ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission file number 001-11290 NATIONAL RETAIL PROPERTIES, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporatio ...

Financial Data and Key Metrics Changes - The first quarter of 2019 reported core FFO results of $0.67 per share, flat compared to the prior year, with 2019 core FFO guidance unchanged at $2.71 to $2.76 per share, implying 3.2% growth to the midpoint [13][15] - The AFFO dividend payout ratio for the quarter was 72.8%, slightly up from 72.4% for the full year 2018 [15] - Occupancy rate remained stable at 98.2%, consistent with the long-term average [4][15] Business Line Data and Key Metrics Changes - The company invested $117 million in 33 new single-tenant retail properties with an initial cash yield of slightly over 7% and an average lease term of over 16 years [6] - Disposed of 17 properties generating over $19 million in proceeds at an average cap rate of 5.9% [6][39] Market Data and Key Metrics Changes - The balance sheet remained strong with no outstanding amounts on the $900 million bank line and $80 million in cash [19] - Net debt to gross book assets was 34.7%, with net debt to EBITDA at 4.8 times, unchanged from year-end 2018 [20] Company Strategy and Development Direction - The company maintains a long-term focus characterized by consistent per share growth on a multi-year basis [9] - The acquisition strategy emphasizes building relationships with retailers and focusing on high-quality, long-term leased properties [47][54] - The company is cautious about international opportunities, preferring to focus on the U.S. market where ample opportunities exist [55] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding tenant disruptions, indicating that the portfolio is expected to remain healthy [34] - The company is actively working on resolving vacancies and has in-house leasing expertise to manage properties effectively [36] - The management believes 2019 will be another solid year of growth in operating results despite challenges in the retail environment [21] Other Important Information - The new lease accounting rules have a modest impact on the company, primarily affecting the presentation of revenues [23][29] - The company has not issued any common equity during the first quarter under its ATM program, relying instead on equity from the dividend reinvestment program [82][84] Q&A Session Summary Question: Update on tenant closures and occupancy disruption expectations - Management feels the portfolio will remain healthy, with ongoing rent payments from tenants in bankruptcy situations [32][34] Question: Cap rate on dispositions - The cap rate on dispositions was approximately 5.9% [39] Question: Composition of acquisitions - The acquisitions were broadly diversified across various relationship tenants, with no significant movement in top tenants [40] Question: Trends in straight-line rents - Management indicated some lumpiness in straight-line rents, expecting it to trend close to zero [42][44] Question: New concepts for investment - The focus remains on building relationships with existing retailers rather than pursuing new concepts aggressively [47] Question: Yield on acquisitions and pricing environment - The cash yield on leases was 7%, with cap rates remaining low for high-quality assets [53] Question: Occupancy changes year-over-year - The decrease in occupancy is attributed to general retail environment challenges, with ongoing efforts to manage vacancies [70][72] Question: Rental rates and market comparisons - The company maintains that its portfolio generally sits close to market rent, with high renewal rates [78]