National Storage Affiliates(US:NSA)2023-08-08 20:48Financial Data and Key Metrics Changes - Core FFO per share for Q2 2023 was $0.68, a decrease of 4.2% year-over-year despite a 3.4% growth in same-store NOI and a 7.4% growth in adjusted EBITDA, primarily due to elevated interest expenses [4][3] - Revenue growth on a same-store basis was 2.8%, driven by a 7% contract rate growth [4] - At quarter end, leverage was 6.1 times net debt to EBITDA, down from 6.3 times at the end of Q1 [5] Business Line Data and Key Metrics Changes - Street rate growth was 3.4% over Q1, with contract rate growth increasing 1% sequentially and 7% year-over-year [10] - Bad debt was 2.1% of revenue and concessions were 2% of revenue, both below pre-pandemic levels [10] - Insurance penetration improved, increasing over 10% year-to-date [10] Market Data and Key Metrics Changes - Occupancy ended Q2 at 90%, up 20 basis points from Q1 but down 450 basis points year-over-year [96] - July occupancy was 89.9%, also down 450 basis points year-over-year [96] - The company noted that markets like Oklahoma City and South Texas performed well, while markets like Vegas and Phoenix faced near-term pressure due to supply and housing market changes [115] Company Strategy and Development Direction - The company is focused on enhancing customer acquisition and revenue management processes, optimizing online customer experience, and front-end pricing [3] - The strategy includes evaluating non-core properties and markets for potential divestiture [7] - The company plans to remain opportunistic in acquisitions while managing its balance sheet effectively [12][95] Management's Comments on Operating Environment and Future Outlook - Management expects interest rates to remain a headwind for the remainder of the year, leading to revised guidance [3] - The company anticipates a return to more typical seasonal occupancy patterns, with a forecasted occupancy loss of 250 to 300 basis points by year-end [110] - Management expressed confidence in the portfolio's positioning for future success despite current challenges [3][76] Other Important Information - The company acquired two facilities totaling $14 million during Q2, with a focus on opportunistic growth [12] - Marketing expenses grew by 34% and insurance costs increased by 41% due to policy renewals [96] - The company is exploring joint venture opportunities to access capital for future growth [99] Q&A Session Summary Question: What is the company's strategy regarding share buybacks in the current environment? - Management indicated that share buybacks remain an option but are not a priority at this time due to the need to maintain balance sheet flexibility [43] Question: How is the company addressing the competitive environment for new customers? - Management noted that competition varies by market, with some experiencing more volatility due to new supply, while others like Oklahoma City remain stable [85] Question: What is the current status of the company's length of stay metrics? - The average length of stay is stabilizing above 17 months, indicating a healthy consumer base [82] Question: Can you elaborate on the company's approach to managing operating expenses? - Management highlighted efforts to control expenses, with payroll and property taxes down year-over-year, while marketing and insurance costs have increased [96] Question: How does the company view the potential for distressed asset acquisitions? - Management is seeing more product come to market and is underwriting more deals, indicating a cautious but opportunistic approach to potential acquisitions [84]