Essential Properties(US:EPRT)2025-07-23 20:34markdown [Financial & Operating Highlights](index=1&type=section&id=Financial%20%26%20Operating%20Highlights) [Second Quarter 2025 Financial and Operating Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20and%20Operating%20Highlights) In the second quarter of 2025, Essential Properties demonstrated strong growth, with Net Income per Share rising 10% to $0.32 and AFFO per Share increasing 7% to $0.46 compared to Q2 2024 Second Quarter 2025 Key Financial and Operating Metrics | Metric | Value | Change vs Q2 2024 | | :--- | :--- | :--- | | **Investments** | $334.0 million | - | | Weighted Avg Cash Cap Rate | 7.9% | - | | **Dispositions (Net Proceeds)** | $46.2 million | - | | Weighted Avg Cash Cap Rate | 7.3% | - | | **Net Income per Share** | $0.32 | +10% | | **AFFO per Share** | $0.46 | +7% | | **Equity Raised (ATM Program)** | $118.9 million | - | | **Pro Forma Net Debt / Ann. Adj. EBITDAre** | 3.5x | - | [Year to Date 2025 Financial and Operating Highlights](index=1&type=section&id=Year%20to%20Date%202025%20Financial%20and%20Operating%20Highlights) For the first six months of 2025, the company invested $641.7 million at a 7.9% weighted average cash cap rate, contributing to a 7% year-over-year increase in AFFO per share to $0.91 Year to Date 2025 Key Financial and Operating Metrics | Metric | Value | Change vs YTD 2024 | | :--- | :--- | :--- | | **Investments** | $641.7 million | - | | Weighted Avg Cash Cap Rate | 7.9% | - | | **Dispositions (Net Proceeds)** | $70.5 million | - | | Weighted Avg Cash Cap Rate | 7.2% | - | | **Net Income per Share** | $0.61 | +7% | | **AFFO per Share** | $0.91 | +7% | - Key capital activities in the first half of 2025 included upsizing the revolving credit facility to **$1.0 billion** and raising a total of **$431.8 million** in gross equity through a follow-on offering and the ATM program[3](index=3&type=chunk) - A significant portion of these shares (**16.5 million**) remain unsettled on a forward basis, representing estimated net proceeds of **$507.4 million**[3](index=3&type=chunk) [Activity Subsequent to Second Quarter 2025](index=1&type=section&id=Activity%20Subsequent%20to%20Second%20Quarter%202025) Subsequent to the end of the second quarter, the company continued its portfolio management activities, investing an additional $8.0 million and realizing $1.8 million in gross proceeds from dispositions Subsequent Activity Metrics | Activity | Amount | | :--- | :--- | | Investments | $8.0 million | | Dispositions (Gross Proceeds) | $1.8 million | [Management Commentary and Portfolio Overview](index=2&type=section&id=Management%20Commentary%20and%20Portfolio%20Overview) [CEO Comments](index=2&type=section&id=CEO%20Comments) The CEO expressed a positive outlook, highlighting the company's strong performance in the first half of the year, characterized by resilient portfolio trends, robust investment execution, and proactive capital management - CEO Pete Mavoides noted that the year has been positive relative to expectations due to:[5](index=5&type=chunk) - Resilient portfolio trends[5](index=5&type=chunk) - Strong execution on investments[5](index=5&type=chunk) - Proactive capital markets activity[5](index=5&type=chunk) - A substantial investment pipeline despite a fluid macroeconomic backdrop[5](index=5&type=chunk) [Portfolio Highlights](index=2&type=section&id=Portfolio%20Highlights) As of June 30, 2025, the company's portfolio comprised 2,190 properties with a high occupancy rate of 99.6%, a long weighted average lease term of 14.3 years, and a healthy rent coverage ratio of 3.4x Portfolio Key Metrics | Metric | Value (as of June 30, 2025) | | :--- | :--- | | Number of properties | 2,190 | | Weighted average lease term (WALT) | 14.3 years | | Weighted average rent coverage ratio | 3.4x | | Top 10 tenant concentration (% of cash ABR) | 17.6% | | Weighted average occupancy | 99.6% | | Service-oriented or experience-based (% of cash ABR) | 93.0% | [Portfolio Activity](index=2&type=section&id=Portfolio%20Activity) [Investments](index=2&type=section&id=Investments) The company invested $334.0 million in Q2 and $641.7 million year-to-date, maintaining a consistent weighted average cash cap rate of 7.9%, with a high percentage of sale-leaseback transactions and reliance on existing relationships Investment Metrics | Investment Metric | Q2 2025 | YTD 2025 | | :--- | :--- | :--- | | Investment volume | $334.0 million | $641.7 million | | Number of properties | 77 | 125 | | Wtd. avg. cash / GAAP cap rate | 7.9% / 9.7% | 7.9% / 9.6% | | Wtd. avg. lease escalation | 2.2% | 2.2% | | % Sale-leaseback transactions | 93% | 92% | | % Existing relationship | 88% | 87% | | WALT | 19.5 years | 18.5 years | [Dispositions](index=3&type=section&id=Dispositions) In Q2 2025, the company generated $46.2 million in net proceeds from the sale of 23 properties, achieving a net gain of $2.1 million, with year-to-date dispositions totaling $70.5 million from 34 properties Disposition Metrics | Disposition Metric | Q2 2025 | YTD 2025 | | :--- | :--- | :--- | | Net proceeds | $46.2 million | $70.5 million | | Number of properties sold | 23 | 34 | | Net gain / (loss) | $2.1 million | $7.1 million | | Wtd. avg. cash cap rate | 7.3% | 7.2% | [Loan Repayments](index=3&type=section&id=Loan%20Repayments) The company received $3.4 million in loan principal repayments during Q2 2025 and $5.8 million year-to-date, with the repaid loans having a weighted average interest rate of 9.1% for the quarter Loan Repayment Metrics | Loan Repayment Metric | Q2 2025 | YTD 2025 | | :--- | :--- | :--- | | Proceeds—Principal | $3.4 million | $5.8 million | | Number of properties | 2 | 5 | | Weighted average interest rate | 9.1% | 8.4% | [Capital Structure and Liquidity](index=3&type=section&id=Capital%20Structure%20and%20Liquidity) [Leverage and Liquidity](index=3&type=section&id=Leverage%20and%20Liquidity) As of June 30, 2025, the company maintained a strong liquidity position of $1.3 billion, with leverage at 4.5x Net Debt to Annualized Adjusted EBITDAre, improving to 3.5x on a pro forma basis Leverage and Liquidity Metrics | Metric (as of June 30, 2025) | As Reported | Pro Forma | | :--- | :--- | :--- | | Net debt to Annualized Adjusted EBITDAre | 4.5x | 3.5x | | Cash and cash equivalents | $21.1 million | $328.5 million | | Unused revolving credit facility | $800.0 million | $1.0 billion | | Forward equity sales - unsettled | $507.4 million | — | | **Total available liquidity** | **$1.3 billion** | **$1.3 billion** | [Equity Activity](index=4&type=section&id=Equity%20Activity) During Q2 2025, the company sold **3,664,521 shares** through its ATM program at a net price of $32.00 per share, raising **$117.3 million** - In Q2 2025, the company sold **3,664,521 shares** via its ATM program, raising net proceeds of **$117.3 million**[13](index=13&type=chunk) - As of quarter-end, **16,512,921 forward shares** remained unsettled, representing **$507.4 million** in estimated net proceeds[13](index=13&type=chunk) [Outlook and Shareholder Information](index=4&type=section&id=Outlook%20and%20Shareholder%20Information) [2025 Guidance](index=4&type=section&id=2025%20Guidance) Reflecting its strong performance and positive outlook, the company has increased its full-year 2025 guidance, with the new AFFO per share range at $1.86 to $1.89 and investment volume target raised to $1.0 billion to $1.2 billion 2025 Guidance Metrics | 2025 Guidance Metric | Updated Range | | :--- | :--- | | AFFO per share | $1.86 to $1.89 | | Investment volume | $1.0 billion to $1.2 billion | | Cash G&A expense | $28 million to $31 million | [Dividend Information](index=4&type=section&id=Dividend%20Information) The company's board of directors declared a second quarter 2025 cash dividend of $0.30 per share, corresponding to an annualized dividend of $1.20 per share - A cash dividend of **$0.30 per share** was declared for Q2 2025[16](index=16&type=chunk) - This represents an annualized dividend of **$1.20 per share**[16](index=16&type=chunk) [Consolidated Financial Statements](index=6&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2025, total revenues grew 25.4% year-over-year to $137.1 million, driving a 22.6% increase in net income attributable to stockholders to $63.2 million Consolidated Statements of Operations (in thousands) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total revenues | $137,062 | $109,268 | +25.4% | | Income from operations | $87,813 | $66,797 | +31.5% | | Net income attributable to stockholders | $63,212 | $51,517 | +22.7% | Consolidated Statements of Operations (in thousands) | Metric | YTD 2025 | YTD 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total revenues | $266,416 | $212,770 | +25.2% | | Income from operations | $167,431 | $129,179 | +29.6% | | Net income attributable to stockholders | $119,320 | $98,491 | +21.1% | [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, the company's total assets grew to $6.29 billion from $5.80 billion at year-end 2024, primarily due to an increase in net real estate investments Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Net investments | $6,051,213 | $5,552,606 | | Total assets | $6,289,589 | $5,798,682 | | **Liabilities & Equity** | | | | Total liabilities | $2,451,603 | $2,226,555 | | Total stockholders' equity | $3,829,888 | $3,563,678 | | Total liabilities and equity | $6,289,589 | $5,798,682 | [Reconciliation of Non-GAAP Financial Measures](index=8&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) [Reconciliation of Net Income to FFO, Core FFO, and AFFO](index=8&type=section&id=Reconciliation%20of%20Net%20Income%20to%20FFO%2C%20Core%20FFO%2C%20and%20AFFO) The company reported strong growth in its key non-GAAP metrics for Q2 2025, with FFO and Core FFO per diluted share increasing to $0.50 and AFFO per diluted share growing to $0.46 year-over-year FFO, Core FFO, and AFFO Per Diluted Share | Per Diluted Share | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Income | $0.32 | $0.29 | +10.3% | | FFO | $0.50 | $0.47 | +6.4% | | Core FFO | $0.50 | $0.47 | +6.4% | | AFFO | $0.46 | $0.43 | +7.0% | FFO, Core FFO, and AFFO Per Diluted Share | Per Diluted Share | YTD 2025 | YTD 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Income | $0.61 | $0.57 | +7.0% | | FFO | $0.98 | $0.93 | +5.4% | | Core FFO | $0.98 | $0.93 | +5.4% | | AFFO | $0.91 | $0.85 | +7.1% | [Reconciliation of Net Income to EBITDAre and NOI](index=9&type=section&id=Reconciliation%20of%20Net%20Income%20to%20EBITDAre%20and%20NOI) The reconciliation of net income to non-GAAP measures shows an Annualized Adjusted EBITDAre of $512.3 million and an Annualized Adjusted Cash NOI of $506.2 million for Q2 2025, providing a run-rate estimate of earnings power Annualized Run-Rate Metrics (in thousands) | Annualized Run-Rate Metrics (Q2 2025) | Value | | :--- | :--- | | Annualized Adjusted EBITDAre | $512,324 | | Annualized Adjusted NOI | $556,328 | | Annualized Adjusted Cash NOI | $506,184 | [Debt and Enterprise Value Calculation](index=10&type=section&id=Debt%20and%20Enterprise%20Value%20Calculation) As of June 30, 2025, the company had total gross debt of $2.33 billion, with pro forma net debt decreasing to $1.80 billion after accounting for unsettled forward equity sales, resulting in a pro forma Net Debt to Annualized Adjusted EBITDAre ratio of 3.5x Debt and Enterprise Value Metrics | Metric (as of June 30, 2025) | As Reported | Pro Forma | | :--- | :--- | :--- | | Net Debt | $2.31 billion | $1.80 billion | | Total Enterprise Value (TEV) | $8.65 billion | $8.67 billion | | Net Debt / TEV | 26.7% | 20.8% | | Net Debt / Annualized Adj. EBITDAre | 4.5x | 3.5x | [Definitions of Non-GAAP Financial Measures](index=12&type=section&id=Definitions%20of%20Non-GAAP%20Financial%20Measures) [Non-GAAP Definitions](index=12&type=section&id=Non-GAAP%20Definitions) This section provides definitions for key non-GAAP financial measures used throughout the report, including FFO, Core FFO, AFFO, EBITDAre, Net Debt, NOI, and Cash NOI, explaining their utility for comparing REIT operating performance - The company computes FFO in accordance with NAREIT's definition, which excludes real estate depreciation and gains/losses on property sales from net income[42](index=42&type=chunk) - AFFO is derived from Core FFO by further adjusting for non-cash items like straight-line rent and non-cash compensation to better reflect operating performance[44](index=44&type=chunk) - EBITDAre is calculated per NAREIT standards, excluding gains/losses on property sales and impairment losses from EBITDA[46](index=46&type=chunk)