Extra Space Storage (EXR) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

August 4, 2023 1:00 p.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Thank you for standing by, and welcome to Extra Space Storage, Inc.'s Second Quarter 2023 Earnings Call. [Operator Instructions]

I would now like to hand the call over to Jeff Norman, Investor Relations. Please go ahead.

Jeff Norman

Thank you, Latif. Welcome to Extra Space Storage's second quarter 2023 earnings call. In addition to our press release, we have furnished unaudited supplemental financial information on our website. Please remember that management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business.

These forward-looking statements are qualified by the cautionary statements contained in the company's latest filings with the SEC, which we encourage our listeners to review. Forward-looking statements represent management's estimates as of today, August 4, 2023. The company assumes no obligation to revise or update any forward-looking statements because of changing market conditions or other circumstances after the date of this conference call.

And I would now like to turn the call over to Joe Margolis, Chief Executive Officer.

Joe Margolis

Thanks, Jeff, and thank you, everyone, for joining today's call.

We have had a busy three months and a lot has happened since our first quarter earnings call. Operationally, same-store occupancy remained high through the second quarter. Although rental volume was down year-over-year, vacates also remain muted, allowing us to improve occupancy sequentially each month through the quarter, ending June at a very healthy 94.5%. The existing customer health remains strong with ARs and bad debt levels remaining low and customer acceptance of rate increases remain steady.

Our strategy coming into the year was to maintain high occupancy in order to enhance pricing power to new customers as we moved into the leasing season. This strategy was effective through May, and we improved rental rates sequentially and started to tighten the year-over-year negative delta and achieved great growth to new customers.

However, new customer rates have not improved meaningfully in June and July, both of which are typically high-volume rental months in a busy leasing season. The miss in same-store revenue in June was offset by lower-than-expected same-store expenses, allowing us to remain on budget for property NOI for the first half of the year. From an FFO perspective, we also met our internal budgets for the first and second quarter.