NetSTREIT(US:NTST)2025-04-28 20:46PART I — FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the first quarter of 2025 Item 1. Financial Statements (Unaudited) For the first quarter ended March 31, 2025, NETSTREIT Corp. reported total revenues of $45.9 million, a 21.9% increase year-over-year, and a net income of $1.7 million, up from $1.1 million in the prior year's quarter. Total assets grew to $2.29 billion from $2.26 billion at year-end 2024, primarily driven by property acquisitions and development. The company's financial activities included issuing new term loans, increasing borrowings on its revolving credit facility, and managing its portfolio through acquisitions and dispositions Condensed Consolidated Balance Sheets The balance sheet shows total assets increased to $2.29 billion by March 31, 2025, primarily due to real estate investments, while total liabilities also rose to $971.8 million Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Real estate held for investment, net | $1,827,171 | $1,834,361 | | Assets held for sale | $79,838 | $48,637 | | Cash, cash equivalents, and restricted cash | $14,205 | $14,320 | | Total assets | $2,285,278 | $2,259,346 | | Liabilities and Equity | | | | Term loans, net | $795,534 | $622,608 | | Revolving credit facility | $114,500 | $239,000 | | Total liabilities | $971,753 | $921,214 | | Total equity | $1,313,525 | $1,338,132 | | Total liabilities and equity | $2,285,278 | $2,259,346 | Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income Total revenues increased to $45.9 million in Q1 2025, leading to a net income of $1.7 million, despite higher operating and interest expenses Condensed Consolidated Statements of Operations (in thousands, except per share data) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total revenues | $45,910 | $37,673 | | Rental revenue | $42,590 | $35,189 | | Total operating expenses | $34,558 | $31,141 | | Depreciation and amortization | $20,923 | $17,541 | | Interest expense, net | ($11,460) | ($6,180) | | Net income | $1,700 | $1,052 | | Net income attributable to common stockholders | $1,691 | $1,045 | | Basic EPS | $0.02 | $0.01 | | Diluted EPS | $0.02 | $0.01 | Condensed Consolidated Statements of Changes in Equity Total equity decreased to $1.314 billion by March 31, 2025, mainly due to dividend payments and other comprehensive losses, partially offset by net income - Total equity decreased from $1.338 billion at the end of 2024 to $1.314 billion as of March 31, 2025. The decrease was primarily due to dividends and distributions of $17.2 million and an other comprehensive loss of $9.9 million, partially offset by net income of $1.7 million14 - The company declared and paid dividends of $17.2 million on common stock and OP Units during the three months ended March 31, 202514 Condensed Consolidated Statements of Cash Flows Operating cash flow significantly increased to $22.1 million, while investing activities saw reduced cash usage and financing activities provided less cash compared to the prior year Condensed Consolidated Statements of Cash Flows (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $22,091 | $11,651 | | Net cash used in investing activities | ($48,308) | ($97,202) | | Acquisitions of real estate | ($77,468) | ($95,153) | | Proceeds from sale of real estate | $38,563 | $20,466 | | Net cash provided by financing activities | $26,102 | $77,956 | | Proceeds from term loans | $218,675 | $100,000 | | Repayments under revolving credit facilities | ($214,000) | ($87,000) | | Net change in cash | ($115) | ($7,595) | Notes to the Condensed Consolidated Financial Statements The notes provide detailed information on the company's real estate portfolio, property transactions, debt structure, hedging activities, equity programs, and subsequent events - The company is an internally managed REIT focused on single-tenant retail commercial properties under long-term net leases. As of March 31, 2025, it owned or had investments in 695 properties in 45 states23 - During Q1 2025, the company acquired 18 properties for $77.5 million and sold 16 properties for $38.6 million, recognizing a net gain of $2.1 million5056 - As of March 31, 2025, total debt outstanding was $922.7 million, consisting of various term loans, a revolving credit facility, and a mortgage note. The company amended several credit agreements in January 2025 to extend maturities and upsize its revolver636978 - The company uses interest rate swaps to hedge its variable-rate debt. As of March 31, 2025, it had 18 outstanding interest rate swaps with a notional value of $800 million, designated as cash flow hedges8996 - The company has active at-the-market (ATM) equity programs. As of March 31, 2025, $300.0 million remained available under the 2024 ATM Program. There were also significant unsettled shares under forward sale agreements from ATM programs and a January 2024 follow-on offering105106107 - Subsequent to the quarter end, on April 25, 2025, the Board of Directors declared a Q2 2025 cash dividend of $0.21 per share130 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 21.9% year-over-year revenue growth to the expansion of its property portfolio through acquisitions. Operating expenses increased primarily due to higher depreciation and property-related costs associated with the larger portfolio. Interest expense rose significantly due to new debt issuances and higher average borrowings. The company maintains a strong liquidity position with access to a $500 million revolving credit facility, unsettled forward equity proceeds, and an active ATM program to fund future growth and obligations - As of March 31, 2025, the company's portfolio consisted of 695 properties with 99.9% occupancy and a weighted average remaining lease term of 9.7 years. Annualized base rent (ABR) was $168.7 million, with approximately 71% from tenants rated investment grade or having an investment grade profile134 - In January 2025, the company executed significant debt transactions, including amending credit agreements to extend maturities, upsizing its revolver to $500 million, and adding a new $175.0 million 2030 Term Loan B135 - The company's primary capital resources include cash from operations, sales of equity securities (including ATM programs), and its credit facilities. Management believes current liquidity is sufficient for at least the next 12 months149153 Results of Operations Comparison Total revenues increased by 21.9% due to portfolio growth, while operating expenses and interest expense also rose significantly Comparison of Operating Results (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $45,910 | $37,673 | $8,237 | 21.9% | | Total operating expenses | $34,558 | $31,141 | $3,417 | 11.0% | | Depreciation and amortization | $20,923 | $17,541 | $3,382 | 19.3% | | Interest expense, net | ($11,460) | ($6,180) | ($5,280) | 85.4% | | Net income | $1,700 | $1,052 | $648 | 61.6% | - The increase in revenue was driven by a larger portfolio of operating leases and mortgage loans. The rise in operating expenses was mainly due to higher depreciation and property expenses from portfolio growth. Interest expense increased by $5.3 million due to new term loans and higher average borrowings on the revolver143144146 Liquidity and Capital Resources The company maintains strong liquidity through term loans, a revolving credit facility, and unsettled forward equity contracts, supporting its operational and investment needs - As of March 31, 2025, the company had $800 million in term loans and $114.5 million outstanding on its $500 million revolver. It also had significant liquidity from unsettled forward equity contracts totaling $184.5 million149183 - Cash from operating activities increased to $22.1 million in Q1 2025 from $11.7 million in Q1 2024, driven by higher rental receipts from a larger portfolio159 - Cash used in investing activities decreased to $48.3 million from $97.2 million year-over-year, due to lower acquisition spending and higher proceeds from property sales160 - Cash provided by financing activities decreased to $26.1 million from $78.0 million, mainly due to higher net repayments on the revolver, partially offset by proceeds from new term loans161 Non-GAAP Financial Measures This section reconciles net income to key non-GAAP metrics such as FFO, Core FFO, AFFO, EBITDAre, and Adjusted EBITDAre, providing additional insights into operational performance Reconciliation of Net Income to FFO and AFFO (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income | $1,700 | $1,052 | | Depreciation and amortization of real estate | 20,850 | 17,462 | | Provisions for impairment | 3,616 | 3,662 | | Gain on sales of real estate, net | (2,075) | (997) | | FFO | $24,091 | $21,179 | | Core FFO | $24,570 | $22,450 | | AFFO | $26,248 | $22,863 | Reconciliation of Net Income to EBITDAre and Adjusted EBITDAre (in thousands) | | Three Months Ended March 31, 2025 | | :--- | :--- | | Net income | $1,700 | | Interest expense, net | 11,460 | | Depreciation and amortization | 20,853 | | EBITDA | $33,952 | | EBITDAre | $35,493 | | Adjusted EBITDAre | $38,125 | | Annualized Adjusted EBITDAre | $152,500 | - The company's Adjusted Net Debt to Annualized Adjusted EBITDAre ratio was 4.7x as of March 31, 2025180 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuation on its variable-rate debt, which includes four term loans and a revolving credit facility totaling $914.5 million as of March 31, 2025. To mitigate this risk, the company has entered into interest rate derivative contracts to effectively fix the rates on its term loans. The remaining exposure is on the revolving credit facility, where a 1% adverse change in interest rates would result in an estimated market risk exposure of approximately $1.0 million - The company is exposed to interest rate risk from its floating-rate debt, which includes the 2028, 2029, 2030A, and 2030B Term Loans, and the Revolver187 - Interest rate derivative contracts are used to hedge the market risk on all term loans, converting the variable rates to fixed rates for the duration of the hedges188 - The primary unhedged interest rate exposure is on the Revolver. A sensitivity analysis indicates that a 1% adverse change in interest rates would have an approximate $1.0 million impact based on borrowings during 2025189 Controls and Procedures Based on an evaluation conducted by management, including the CEO and CFO, the company's disclosure controls and procedures were deemed effective as of March 31, 2025. There were no material changes to the company's internal control over financial reporting during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025191 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls192 PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered equity sales, defaults, mine safety disclosures, other information, and exhibits Legal Proceedings The company is not currently subject to any material lawsuits, claims, or other legal proceedings - The company is not currently a party to any material legal proceedings193 Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes have been made to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024194 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities and no company stock repurchases during the period - There were no unregistered sales of equity securities or company stock repurchases195 Defaults Upon Senior Securities This item is not applicable - Not applicable195 Mine Safety Disclosures This item is not applicable - Not applicable196 Other Information This item is not applicable - Not applicable197 Exhibits The report includes standard exhibits, such as CEO and CFO certifications pursuant to the Sarbanes-Oxley Act (Sections 302 and 906) and XBRL data files - Exhibits filed with the report include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and XBRL interactive data files199