National Storage Affiliates(NSA) - 2022 Q2 - Quarterly Report

Part I Financial Statements This section provides unaudited condensed consolidated financial statements for the quarter and six months ended June 30, 2022, detailing accounting policies and financial activities Condensed Consolidated Balance Sheets Total assets increased to $5.76 billion and total liabilities to $3.26 billion as of June 30, 2022, driven by property growth and increased debt financing Balance Sheet Summary | Metric | June 30, 2022 ($ thousands) | December 31, 2021 ($ thousands) | | :--- | :--- | :--- | | Total Assets | 5,759,041 | 5,562,594 | | Total Liabilities | 3,257,728 | 3,080,139 | | Total Equity | 2,501,313 | 2,482,455 | Condensed Consolidated Statements of Operations Total revenue grew 43.9% to $198.9 million and net income reached $48.4 million in Q2 2022, with six-month figures at $386.1 million and $93.2 million respectively Summary of Operations ($ thousands) | Metric | Q2 2022 ($ thousands) | Q2 2021 ($ thousands) | H1 2022 ($ thousands) | H1 2021 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | 198,890 | 138,246 | 386,074 | 261,238 | | Net Income | 48,425 | 35,675 | 93,211 | 63,310 | | Diluted Earnings Per Share | $0.24 | $0.25 | $0.48 | $0.44 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $227 million in the first six months of 2022, while $244.9 million was used in investing activities, and $25.6 million provided by financing activities Cash Flow Summary (Six Months Ended June 30, $ thousands) | Activity | 2022 ($ thousands) | 2021 ($ thousands) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 227,043 | 144,259 | | Net Cash Used in Investing Activities | (244,926) | (398,136) | | Net Cash Provided by Financing Activities | 25,624 | 258,151 | | Increase in Cash, Cash Equivalents, and Restricted Cash | 7,741 | 4,274 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies and financial statement items, including property acquisitions, debt structure, equity composition, related party transactions, and fair value measurements, highlighting key events like Northwest PRO internalization and significant financing activities - As of June 30, 2022, the company owned 892 consolidated self-storage properties and held interests in a total of 1,076 properties across 42 states and Puerto Rico[31][34] - The company acquired 20 self-storage properties for $207.5 million in the first six months of 2022[77] - Total outstanding debt was $3.14 billion as of June 30, 2022, an increase from $2.94 billion at the end of 2021[83] - Subsequent to the quarter-end, the company acquired an additional six properties for $71.6 million and approved a $400 million stock repurchase program[112][113] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes the company's Q2 and H1 2022 financial performance, covering revenue growth driven by acquisitions and strong same-store performance, increased expenses, liquidity, capital resources, and key non-GAAP metrics like FFO, Core FFO, and NOI Results of Operations Net income increased to $48.4 million in Q2 2022, driven by a $42.3 million rise in total NOI from acquisitions and 17.3% same-store NOI growth, with H1 2022 net income reaching $93.2 million Q2 Performance (vs. Q2 2021, $ thousands) | Metric | 2022 ($ thousands) | 2021 ($ thousands) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | 198,890 | 138,246 | +43.9% | | Total Net Operating Income (NOI) | 137,789 | 95,485 | +44.3% | | Same-Store NOI | 101,737 | 86,747 | +17.3% | | Net Income | 48,425 | 35,675 | +35.7% | H1 Performance (vs. H1 2021, $ thousands) | Metric | 2022 ($ thousands) | 2021 ($ thousands) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | 386,074 | 261,238 | +47.8% | | Total Net Operating Income (NOI) | 269,066 | 178,145 | +51.0% | | Same-Store NOI | 199,621 | 166,857 | +19.6% | | Net Income | 93,211 | 63,310 | +47.2% | Non-GAAP Financial Measures The company uses FFO, Core FFO, NOI, and Adjusted EBITDA to measure performance, with Core FFO per share at $0.71 in Q2 2022 and $1.38 in H1 2022, reflecting adjustments for non-cash items to clarify core business operations FFO and Core FFO per Share/Unit | FFO & Core FFO per Share/Unit | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | FFO per Share/Unit | $0.70 | $0.55 | $1.37 | $1.03 | | Core FFO per Share/Unit | $0.71 | $0.55 | $1.38 | $1.04 | Liquidity and Capital Resources Primary liquidity sources include operating cash flow, debt, and equity issuances, with $32.3 million cash and $359.3 million available on the revolving credit facility as of June 30, 2022, alongside significant property acquisitions and dividend payments - Primary liquidity sources include cash flow from operations, debt financing, and equity issuances[177] - As of June 30, 2022, the company held $32.3 million in cash and had $359.3 million available under its revolving credit facility[181][187] - In the first half of 2022, the company used $175 million in cash for property acquisitions and paid $96.2 million in common stock dividends[183][186] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk on its floating-rate debt, with $695 million unhedged as of June 30, 2022, where a 100-basis point increase would raise annual interest expense by approximately $7 million - The primary market risk is interest rate risk[217] - As of June 30, 2022, $695 million of the company's debt was subject to floating interest rates, excluding debt subject to interest rate swaps[218] - A 100-basis point increase in reference rates would increase annual interest expense by approximately $7 million[218] Controls and Procedures Management, including the CEO and CFO, assessed the company's disclosure controls and procedures as effective as of June 30, 2022, with no significant changes in internal control over financial reporting during the quarter - The company's disclosure controls and procedures were deemed effective at the end of the period[220] - No significant changes occurred in internal control over financial reporting during the second quarter of 2022[221] Part II Legal Proceedings The company reports no involvement in any legal proceedings deemed material at this time - The company is not currently involved in any material legal proceedings[224] Risk Factors This section directs readers to the company's annual report on Form 10-K for the year ended December 31, 2021, for a comprehensive discussion of potential risks and uncertainties - For a discussion of potential risks and uncertainties, refer to the 'Risk Factors' section in the company's 2021 Form 10-K[225] Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2022, the company issued 294,573 common shares to satisfy OP unit redemptions and issued OP units for property acquisitions, with these transactions exempt from registration under Section 4(a)(2) of the Securities Act - In the second quarter of 2022, 294,573 common shares were issued to satisfy redemption requests from limited partners[226] - OP units were issued as partial consideration for the acquisition of several self-storage properties[227] - As of August 3, 2022, 38,022,594 OP units and 12,369,794 subordinated performance units were outstanding (excluding units held by the company)[234] Other Information On July 29, 2022, the company amended its credit agreement and other debt instruments to permit common stock repurchases under board-authorized plans, provided no default or event of default has occurred - On July 29, 2022, the company amended its credit agreement and other debt instruments[240] - This amendment permits the company to repurchase its common stock under board-authorized plans, provided no default has occurred[240]