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01/11 11:06
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights several concerns: declining revenue, net loss, and occupancy rates, coupled with market-specific weaknesses and economic uncertainty. The Q&A section reveals management's vague responses to critical questions, especially regarding non-revenue-generating expenditures. Despite a strong dividend history and share repurchase program, the negative financial results and cautious outlook outweigh these positives, leading to a negative sentiment.
Net Loss $7 million or a loss of $0.28 per diluted share, compared to net income of $10.6 million or $0.40 earnings per diluted share in Q2 2024. The decline is attributed to reduced revenue and increased expenses.
Total Revenue $63.1 million, down from $64.2 million in Q2 2024, reflecting a decrease in same-store revenues of 0.2%.
Net Operating Income (NOI) $38 million on 35 properties, compared to $38.9 million on 36 properties in Q2 2024, reflecting a decrease in same-store NOI of 1.1%.
Same-Store Rent and Occupancy Decreased by 1.3% and 0.8%, respectively, year-over-year, contributing to the decline in same-store NOI.
Core Funds From Operations (Core FFO) $18 million or $0.71 per diluted share, up from $0.69 per diluted share in Q2 2024, driven by operational efficiencies and cost management.
Dividend $0.51 per share, representing a 147.6% increase since inception. The dividend was 1.39x covered by core FFO with a 72.2% payout ratio.
Share Repurchase 223,109 shares repurchased for $7.6 million at an average price of $34.29 per share, reflecting the company's capital allocation strategy.
Same-Store Operating Expenses Increased by 1.5% year-over-year, with declines in marketing (4.7%) and payroll (2.8%), but offset by other controllable expenses.
Insurance Costs Decreased by 20% year-over-year due to favorable market conditions in property casualty insurance.
Same-Store NOI Margin 60.9%, reflecting operational efficiency despite revenue challenges.
Unit Upgrades: Completed 555 full and partial upgrades in Q2, leased 381 upgraded units with an average monthly rent premium of $73 and a 26% ROI. Since inception, completed 9,113 full and partial upgrades, 4,870 kitchen and laundry appliances, and 11,199 tech packages, resulting in $165, $50, and $43 average monthly rental increases per unit, respectively.
Market Performance: Atlanta and South Florida led with 3.6% and 2.3% revenue growth, respectively. Raleigh and Atlanta achieved 6.8% and 4.4% NOI growth, respectively. Tampa, Dallas, Charlotte, and Las Vegas are expected to exceed revenue expectations in the second half of 2025.
Expense Management: Marketing and payroll expenses declined by 4.7% and 2.8%, respectively. Insurance costs decreased by 20%, saving $600,000 annually. Repairs and maintenance costs are expected to finish 3% below 2024 totals.
AI and Centralized Operations: Implemented AI-driven technologies and centralized platforms for renewals, screening, and call centers, reducing off-site staffing and improving efficiency.
Credit Facility: Entered a $200 million corporate revolving credit facility with an option to increase by $200 million upon lender consent. The facility matures in 2028 with improved spread by 15 basis points.
Capital Recycling: Plans to recycle capital in the second half of 2025 through targeted acquisitions and dispositions to replenish the rehab pipeline.
Net Loss and Revenue Decline: The company reported a net loss of $7 million for Q2 2025, compared to a net income of $10.6 million in Q2 2024. Total revenue also decreased from $64.2 million in Q2 2024 to $63.1 million in Q2 2025.
Same-Store Performance Decline: Same-store rent and occupancy decreased by 1.3% and 0.8%, respectively, leading to a 1.1% decline in same-store NOI compared to Q2 2024.
Supply Pressures: Supply pressures remain a challenge in certain submarkets, with over 400,000 units delivered in the trailing 12 months, sustaining elevated competition in lease-ups. This is expected to stabilize only in late 2025.
Economic Uncertainty and Consumer Sentiment: Economic uncertainty and soft consumer sentiment have led to modest slowing in new lease growth in late June and July 2025.
Market-Specific Weakness: South Florida, Orlando, and Atlanta are expected to underperform in the second half of 2025 due to supply pressures and tempered growth expectations.
Occupancy and Revenue Challenges: Occupancy is expected to average 94% in the second half of 2025, down from 94.7% in the second half of 2024, leading to muted revenue growth.
Expense Management Risks: While controllable operating expenses have improved, there is ongoing reliance on centralized operations and AI-driven technologies, which may pose risks if these efficiencies do not materialize as expected.
Full Year 2025 Guidance: NXRT has tightened its 2025 guidance ranges for core FFO per diluted share and same-store NOI while affirming the midpoint. The revised guidance ranges for earnings loss per diluted share are $1.22 at the high end, $1.40 at the low end, with a midpoint of $1.31. Core FFO per diluted share is projected at $2.84 at the high end, $2.66 at the low end, affirming the midpoint of $2.75. Acquisitions and disposition guidance is also reaffirmed.
Second Half 2025 Revenue and Occupancy: Revenue growth is expected to be more muted in the second half of 2025 compared to initial expectations. Occupancy is projected to average 94% in the second half of 2025, down from 94.7% in the second half of 2024.
Market-Specific Revenue Expectations: Tampa, Dallas, Charlotte, and Las Vegas are expected to exceed revenue expectations by 80 to 130 basis points. South Florida, Orlando, and Atlanta are projected to underperform, with South Florida finishing the year at 1.8% top-line growth, Orlando at negative 1%, and Atlanta at negative 70 basis points.
Expense Management and Cost Savings: Controllable operating expenses have improved due to centralized operations and AI-driven technologies. Payroll costs are expected to remain flat in the second half of 2025, and repairs and maintenance costs are projected to finish 3% below 2024 totals. Insurance renewals will result in $600,000 in annual savings, fully recognized in the second half of 2025.
Supply and Demand Outlook: Supply pressures are expected to ease after Q3 2025, with national delivery outlook contracting to GFC-level output of 77,000 units per quarter. This supports accelerating fundamentals in 2026, 2027, and 2028. Stabilized occupancy rates have improved to 94.6% as of July 2025.
Bad Debt and Rent Growth: Bad debt is expected to stabilize between 50 and 75 basis points for the remainder of 2025. Rent growth has decelerated but is still expected to show improvement compared to the second half of 2024. Renewal rent growth remains strong and will be a focus for the second half of the year.
Transaction Market and Capital Recycling: NXRT plans to recycle capital in the second half of 2025 through targeted acquisitions and dispositions to replenish its rehab pipeline. Recent portfolio processes in NXRT's markets were awarded in the 5% to 5.25% cap rate range, supporting the company's NAV guidance.
Dividend Payment: NXRT paid a second quarter dividend of $0.51 per share of common stock on June 30, 2025.
Dividend Growth: Since inception, NXRT has increased its dividend by 147.6%.
Dividend Coverage: For Q2, the dividend was 1.39x covered by core FFO with a 72.2% payout ratio of core FFO.
Future Dividend Plan: The company's Board approved a quarterly dividend of $0.51 per share payable on September 30, 2025 to stockholders of record on September 15, 2025.
Share Repurchase: During the second quarter, the company repurchased 223,109 shares of its common stock, totaling approximately $7.6 million at an average price of $34.29 per share.
The earnings call presents mixed signals: slight improvements in core FFO and NOI, a dividend increase, and effective cost management are positive. However, revenue decline, occupancy drop, and weak lease rates offset these gains. The Q&A reveals management's optimism, but also highlights concerns about sustainability of savings and unclear asset acquisition strategy. The overall sentiment is neutral, as the positives and negatives balance out, suggesting limited stock price movement in the near term.
The earnings call highlights several concerns: declining revenue, net loss, and occupancy rates, coupled with market-specific weaknesses and economic uncertainty. The Q&A section reveals management's vague responses to critical questions, especially regarding non-revenue-generating expenditures. Despite a strong dividend history and share repurchase program, the negative financial results and cautious outlook outweigh these positives, leading to a negative sentiment.
The earnings call presents mixed signals. The financial performance shows a net loss and declining revenue, which are negative indicators. However, the dividend increase and share buyback program are positive factors. The Q&A reveals management's cautious optimism and strategic buybacks but also highlights uncertainties in market conditions and future guidance. The negative financial results are somewhat offset by optimistic guidance and shareholder returns, leading to a neutral overall sentiment.
The earnings call reveals a concerning decline in total revenue and NOI, alongside a slight decrease in occupancy and same store rent. Despite an increased dividend and share repurchases, these are overshadowed by unclear management responses and weak market performance in key areas like Atlanta. The Q&A highlights uncertainties, such as the vague explanation regarding swap strategies and the potential challenges in hitting lease rate growth targets. These factors suggest a negative sentiment, likely leading to a stock price decrease in the short term.
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