Agree Realty(US:ADC)2025-07-31 20:06PART I: Financial Information Item 1: Financial Statements (Unaudited) The unaudited financial statements show asset growth to $9.08 billion and increased revenues, though net income declined due to higher expenses Condensed Consolidated Balance Sheets Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $9,084,744 | $8,486,446 | | Net real estate investments | $7,958,625 | $7,418,108 | | Total Liabilities | $3,430,340 | $2,975,785 | | Senior unsecured notes, net | $2,582,892 | $2,237,759 | | Unsecured revolving credit facility and commercial paper notes | $247,000 | $158,000 | | Total Equity | $5,654,404 | $5,510,661 | Condensed Consolidated Statements of Operations and Comprehensive Income Statement of Operations Summary (in thousands, except per-share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $175,527 | $152,575 | $344,687 | $302,029 | | Income from Operations | $82,006 | $81,967 | $160,701 | $152,465 | | Net Income | $49,353 | $54,913 | $96,501 | $99,927 | | Net Income Attributable to Common Stockholders | $47,339 | $52,865 | $92,476 | $95,865 | | Diluted EPS | $0.43 | $0.52 | $0.85 | $0.95 | Condensed Consolidated Statements of Equity - Total equity increased from $5.51 billion at the end of 2024 to $5.65 billion as of June 30, 2025, primarily driven by net income and the issuance of common stock, net of dividends13 - Cash dividends declared per common share increased to $0.768 for Q2 2025, up from $0.750 in Q2 20241315 Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $246,302 | $211,962 | | Net Cash Used in Investing Activities | ($725,812) | ($302,085) | | Net Cash Provided by Financing Activities | $482,022 | $99,853 | | Increase in Cash | $2,512 | $9,730 | Notes to Condensed Consolidated Financial Statements - As of June 30, 2025, the Company owned 2,513 properties with a total gross leasable area (GLA) of approximately 52.0 million square feet21 Real Estate Activity - Six Months Ended June 30, 2025 (dollars in thousands) | Activity | Count | Amount | | :--- | :--- | :--- | | Properties Acquired | 137 | $687,371 | | Properties Sold | 5 | $8,158 (Net Proceeds) | | Properties Impaired | 7 | $7,292 (Provision) | - In May 2025, the company issued $400.0 million of 5.600% Senior Unsecured Public Notes due 2035 and repaid $50.0 million of notes at maturity105106 - In March 2025, the company established a commercial paper program, allowing it to issue up to $625.0 million in short-term unsecured notes; as of June 30, 2025, $247.0 million was outstanding114107 - In April 2025, the company completed a follow-on public offering of 5,175,000 shares of common stock via forward sale agreements, with anticipated net proceeds of approximately $387.2 million119 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses portfolio growth, revenue increases from acquisitions, and declining net income due to higher interest, G&A, and impairment costs Results of Operations Comparison of Three Months Ended June 30, 2025 vs 2024 (in thousands) | Item | Q2 2025 | Q2 2024 | Variance ($) | Variance (%) | | :--- | :--- | :--- | :--- | :--- | | Rental Income | $175,397 | $152,424 | $22,973 | 15% | | Interest Expense, net | $32,274 | $26,416 | $5,858 | 22% | | Net Income | $49,353 | $54,913 | ($5,560) | -10% | - The increase in rental income was driven by the acquisition of new properties; the rise in interest expense was primarily due to higher borrowing levels to finance these acquisitions, including the issuance of $400.0 million in new notes in May 2025187189 - For the six months ended June 30, 2025, net income decreased by 3% to $96.5 million compared to the same period in 2024, reflecting portfolio growth offset by higher expenses and a $7.3 million impairment provision198203 Liquidity and Capital Resources - As of June 30, 2025, the company had over $2.30 billion of liquidity, consisting of cash, unsettled forward equity, and availability under its Revolving Credit Facility208 - Recent capital activities include a $400.0 million public offering of 5.600% Notes due 2035 in May 2025 and a follow-on public offering of 5,175,000 common shares in April 2025205206 - The company's total debt to total enterprise value was 28.2% as of June 30, 2025212 Material Cash Requirements as of June 30, 2025 (in thousands) | Obligation | Remainder of 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Debt Principal | $247,520 | $629 | $50,000 | $410,000 | $492,250 | $2,050,000 | $3,250,399 | | Land Lease Obligations | $999 | $2,022 | $1,884 | $1,855 | $1,846 | $34,702 | $43,308 | Non-GAAP Financial Measures Non-GAAP Performance (per diluted share/unit) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | FFO | $0.97 | $0.95 | $1.93 | $1.88 | | Core FFO | $1.05 | $1.03 | $2.09 | $2.05 | | AFFO | $1.06 | $1.04 | $2.12 | $2.07 | Item 3: Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate fluctuation, which is managed through fixed-rate debt and interest rate swaps - The company's main market risk is interest rate risk, managed by monitoring its variable rate debt and using derivative instruments like interest rate swaps263268 - The company has effectively fixed the interest rate on its $350.0 million 2029 Unsecured Term Loan at 3.57% through interest rate swaps269 - A hypothetical 100-basis point increase in market interest rates would change the annual interest expense on the $247.0 million of outstanding Commercial Paper Notes by approximately $2.5 million274 Item 4: Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective, with no material changes during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were effective as of the end of the reporting period275 - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls276 PART II: Other Information Item 1: Legal Proceedings The company is not involved in any material litigation outside of routine matters covered by insurance - The Company is not presently involved in any material litigation277 Item 1A: Risk Factors There are no material changes from the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - The report refers to the risk factors detailed in the Annual Report on Form 10-K for the year ended December 31, 2024278 Item 2: Unregistered Sales of Equity Securities and Use of Proceeds The company withheld a small number of shares for employee tax obligations and made minor share repurchases Common Stock Repurchases Q2 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2025 | 42 | $78.72 | | May 2025 | 86 | $75.17 | | June 2025 | 0 | — | | Total | 128 | $76.33 | Item 3: Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - None281 Item 4: Mine Safety Disclosures This item is not applicable to the company - Not applicable282 Item 5: Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated any Rule 10b5-1 trading arrangement during the quarter283 Item 6: Exhibits This section lists all exhibits filed with the Form 10-Q, including required CEO and CFO certifications - Lists filed exhibits, including CEO and CFO certifications (Sections 302 and 906) and Inline iXBRL data285286 Signatures