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Extra Space Storage CEO Discusses Q2 Results - Earnings Call Transcript

Stocks in this article: EXR

Karl Haas

Thanks, Spence. As Spencer noted, we saw excellent revenue growth of 6.7% in the second quarter. There are a few primary factors that drove this top line growth.

First, the latest version of our revenue management software is working well. We are gaining a better understanding of the price elasticity of demand for storage at a property level. We are often asked about our rental volume for a given period. Although the rental volume is significant, it is more important to maximize the long-term revenue growth of those rentals with the correct mix of incoming price, discount and rate increases over time.

Second, we continue to gain market share from our smaller competitors by leveraging our size, resources and sophisticated systems, we are driving traffic to our websites and properties. We are capturing more than our fair share of the rentals while lowering our overall cost per acquisition. Lastly, we are not seeing any new supply.

As we mentioned in the last quarter, our same-store pool of 282 properties includes 19 sites that over three years old and are in the final stages of lease up. As a result, during the second quarter, we received almost a 0.8% of top line benefit from these assets. By stripping these 19 properties out of the same-store pool, our top line revenue growth would have been 5.9% versus the 6.7%.

Same-store year-over-year expenses were down slightly, primarily due to lower utility cost as a result of our investment in sustainability initiatives. We are also seeing lower credit card processing fees, thanks to new regulations. While we continue to implement processes and invest in systems that create efficiencies, we don't expect our expense growth rate to continue at the levels it's been at Q1 and Q2.

Expense will return to more normal levels as we move through the year. With occupancy at historically high levels, discounts and promotions are down 11% for the quarter. When combined, all these factors bode well for the remainder of the year.

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