LSI - Earnings call transcript Q4 2019 | Life Storage Inc

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Operator

Good day, and welcome to the Life Storage Fourth Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]

I would now like to turn the conference over to David Dodman, Senior Vice President, Investor Relations & Strategic Planning. Please go ahead.

David Dodman

to quarter welcome call. earnings and morning our XXXX fourth conference Good today's Saffire, Andy Storage; Officer. Joe will Gregoire, Executive Financial Leading be Life Chief discussion Officer of Chief and

questions discussion answers following the reminder, statements. a to As your contain forward-looking and

projected actual and to uncertainties Our business. risks company's due from the may differ results those with

found be at regarding our quarterly and press can the on Investor SEC page found be Relations the information Additional factors filings. company's lifestorage.com. release supplement in these A of may copy

[Operator Instructions]

the turn I'll time, over to this At call Joe.

Joseph Saffire

Thanks, year. We and strategic Dave my had another the strong our good morning, and everybody. be with solid finish I pleased on quarter to more execution the team’s initiatives. couldn’t

a all as $XXX million I Toronto. footprint higher of prospects expanded an many stabilized of with both almost lease-up our the achieved of properties and six Seattle, We new completed which stores, divested. year. acquisitions, additional will touching we've stores accomplishments markets a strategic Baltimore have of year We start than to on and contract. started such California few included over We've by important off which under of this well we growth the and past $XXX mix currently revenue million

such portfolio, management more owners XXXX. are at of XX third-party Rent just as years, This in and as our platforms three Now reached the stores portfolio drawn grew net successfully our almost XXX stores in which Warehouse with We year-end, addition has innovative Anywhere. tripled to

three $XX just existing in to million And $XX of enhancements million within million capitalized XXXX. the each We of of on to compares expansions opportunities portfolio, previous in with completion our years. the growth this and $XX

allows with the rental self-serve Rent fully in digital over customers interact any skip now they to counter. allows phone rollout Now, the customers in or the choose person platform, of finalized achievement This to manner so We us and our that online.

our efficiency improve that efforts with we expenses taxes. on discussed expected initiatives, property have technologies our And fourth operating helped which call, with and than third operating our new Same-store margins. on focused earlier our X% excludes quarter we than quarter. has to Our out played more down property

we lastly, minority in U.S. both XXXX. $XX made partners our with and continue portfolio And to of of investments Canada venture the million joint in expand

to relates see As new we positive in and Los Buffalo, continue And supply, Vegas largest, markets, of San including Texas Tampa, trends we and experienced are in our improvement to seeing markets significant Austin Las some including Antonio. have Southeast that sequential and Angeles. several Chicago, Miami,

our peak performance we and we're deliveries optimism our past slightly some As of to our are guidance. a our the markets, in that increase result of going XXXX of larger new

to will results. now hand you through our these to walk it I as well quarterly over as details, Andy

Andrew Gregoire

funds share adjusted same expected year, period night, than we Thanks, of the performance. increase quarter, a X.X% $X.XX for quarterly last same-store reported driven better per Joe. Last fourth operations from over the by

revenue well growth same-store was and controlled NOI Our highlighted expenses. of growth by by achieved a of combination extremely X.X%, performance

rates realized over revenue same-store that third revenue of period of the quarter square our per last increased growth acceleration growth an fourth X.X%. revenue by same-store quarter This year, increased X.X% over same driven X.X% was Specifically, from the foot XXXX.

decreased of XXX quarter over expenses, quarter Fourth same-store outside taxes, of fourth property XXXX. basis the points

item. line operating marketing spend, and Excluding property expenses in internet decreased taxes every major

these was expense X.X% producing on results the great efficiencies Our in are of in Partially our in fourth property offsetting NOI year-over-year technology evident improvement basis point and efficiencies taxes our an same-store margin. are and investments quarter increase focus over XXX in the XXXX.

X% expense in property We as expense of an increase do continued tax from comp. But came tough in a tax forecast year-to-date had XXXX. X.X%. pressure expense anticipate to X% annual property tax property quarter with fourth expected Our our increase and

increased are program pleased quarter income Since XXXX, associated the XX% the insurance tenant this of April X to captive as program for our transitioned outside transition than on more expect very of with we quarter. net year’s one of year-over-year program operating that fourth continued We performance more with benefit a over last

Our reflected XX.X% stores. fees, the quarter that fourth management gained traction due in increase overall third-party revenue to portfolio also of increase significant growing have we the in

had solid, they to flexibility Our have investment meet our and At when our on quarter-end, balance significant hand sheet to $XX.X return million available of million opportunities line on credit. and attractive we remained we cash capitalize on requirements. $XXX continue of

service ratio debt coverage was and was X.X Our times, X.X EBITDA net healthy to a our times. debt recurring

August debt We until have no maturity of XXXX.

with Our our December fixed and percentage at rate, average XX. was debt, years seven is XX% the total of maturity debt that

XXXX Regarding of to $X.XX range midpoint year with $X.XX to the full guidance of we guidance, a raised $X.XX.

same-store grow basis for XX from up XXXX expect we revenues Specifically, X.X% points and to expectation X.X% year, between fiscal in late the October. our

between on the assumptions result and NOI, October. discipline as basis XX points Rent X.X% continued same-store Excluding to expectations a cumulative operating these The of other related of expect decrease to result effect up to in costs X.XX% in the property X.X% growth of savings taxes, Now. from we should and our in impacts expenses X.XX%

lease-up same-store group of of rates our occupied XX% early acquired stores were the not XXXX. with practices, as than in past of we any Consistent including beginning are that less market in the at stages our

not of first pool to same-store rates. per for material Based be the expected between per $X.XX adjusted change to same-store XXX stores, a on these to to do we Our have on XXX increase and per by assumptions, share anticipate $X.XX share. XX growth quarter XXXX impact share XXXX expect the from and this we is FFO stores

operator, call the for with And will open questions. that we now

Operator

you. Thank

[Operator will now Instructions] question-and-answer the session. begin We

ahead. question Our SunTrust. come with first Kim Bin today from will Ki Please go

Ki Bin Kim

Thanks.

Just first. a broader question

decent business same-store you're So, year. what confidence your gives the this we're still in in at point in season, so revenue you just to spring I'm the seeing not that curious raise guidance

Joseph Saffire

quarter to us felt comfortable We of a we finished. bit more Joe. surprise. nice obviously was with it's The -- quarter strong Bin, Ki Hi, pleasantly the a Yeah. fourth just

all and concerns I better our I markets Dallas, the and some three them them bit Miami it look think, you as felt feeling budgets we've head we at we three little think were had where the the of a Houston, our of do. just the of was like And went markets, through it for again about right as quarter. most into each thing to

bit You of little see a quarter. acceleration to fourth third an from

as much January, it seen January was good well. haven't changed a month We for really because

bit yeah, that just I we're think a basis So, points. comfortable up more XX bumping little

Ki Bin Kim

markets, of that you things. And had pretty Now a major your like York and Dallas. couple of Rent some declines in or can't some imagine New expense just outsized I

can So, on you longevity operating I wondering the more a if color of those was little maybe provide that, declines. expense and

Andrew Gregoire

property tax Sure, This Bin. That is Ki was related. Andy.

look taxes -- all and at the We in the driven you when want Dallas, right, the property that then and in in than better we a had we -- had where go increase wrong Chicago for by happened way, expected. quarter and the we had York had accruing and was in So, what in in an three expected resolution appeals just we better expenses for increase property we quite in opposite Dallas first to some quarters XX% Chicago. so had where came New been taxes, in

swings in were the taxes expenseswere related. property So, big property tax -- property

Ki Bin Kim

in more. could I squeeze Thanks. one And if

item repair line and was down. Your maintenance

that? which what the line which differentiate drove versus -- So versus capital property same XXXX? isn't grew million how expenses item, And do in R&M, you $X expenditure XXXX how

Joseph Saffire

you R&M. what's saw Yeah. But R&M reduction that XXXX, well related been many we've of on Thank in and a to probably really authorizes it's we've also been I’ll I’d let software focused that question. lot more really that the no It's Andy over and -- Ki third just company, more to the costs. more been who as Throughout the answer spend, say controls and to been different implementing you, Bin. providing discipline exception. on area similar quarter second different is spent part things in the that us other over -- focused

that. So, team been the we're on with the pleased focused way has

can that. chat about In terms we R&M CapEx, decide of how Andy

Andrew Gregoire

-- then of Yeah. big There a did $X couple buy to some Bin. things Ki point increase. million We trucks. of And a out, was worth

seeing, of GAAP extends It it's the accounting the -- in expense. real useful the just you're otherwise that improvement building some of life estate. get significant gets was gets follow trucks extends, capitalized. it the we bump Otherwise, that CapEx of that So capitalized, those the

Ki Bin Kim

All right. Thank you, guys.

Joseph Saffire

Okay.

Operator

Thomas Our KeyBanc next from Capital come with Markets. question will ahead. Todd go Please

Todd Thomas

thanks. Hi,

XXXX in guess terms occupancy Just and the of specifically. guidance I

just but year the half the -- think occupancy start you throughout year-over-year, of expect occupancy mentioned would implying that that the to negative second you you're growth in little year some you'd build help suggestion you'd see But previously XXXX. trends what's off I the off I occupancy occupancy. there embedded year might talk for Can year-over-year understand start now, current bit with the about almost higher guidance? a guess. us further, in trends And

Joseph Saffire

Thanks Hi, bumped It's Yeah. why well. the Joe. part up, reason guidance Todd. we the that of a good revenue one. It's It's for question. as actually

Depending of to have and occupancy, -- see we quarter basis some leasing the on We to have marketing. especially for improvement fourth but but the gave line. in be line successful how haven't we get top think in we in period, improve of focused of some top -- XX some know. are, going we new some back did we'll January, the is that it focus room you were points the We in the there, back Jan, on it's as affect us. also We with RevMan will we of how it obviously tactics results a because and occupancy, that on

focus a it's for So, us.

room think our and achieve I better. we think guidance. we occupancy on what Hopefully, do some can we we put the will have further I improve

Todd Thomas

basis the say pool points that or same-store January, back you is same-store new that But you when XXXX XX on is the gave pool? on in

Andrew Gregoire

That same-store was on pool. the XXXX

-- January So down down special end gap in went the see points, points. then revenue. to turn. basis the that really think expect and and of trying of maximize XX combination we of but year, from basis Todd will the the to continue XX that at you'll it's I year occupancy we that over It's rate we're decrease, -- that, and And some we're that ended

Todd Thomas

then And just Great. the Okay. on pipeline question there. third-party management, a second the

in a little want dig Just bit. to

the last expectation you of you that of I quarter mentioned think sort had for also adding XX year. an

good are some a and there You momentum there's your at outlook for like in added management and sounds quarter expectations Was your to third-party revision this business. all additions that to there? XX what

Joseph Saffire

I -- that pipeline. a Todd, there mean, No, is

in open up year. years that visibility construction, signed this some of should we under have the that We were stores some last couple

net I doing think, think that's stores. winning some I a stabilized XX. -- XX we're of good And a job

come in holy will So, all. pool, of of the will those California some third-party be out the we're management that stores buying and

least at net and in third-party get And be XX on how the so, a throughout we still get I to see accordingly. think should able we management. We'll growth year adjusted

Todd Thomas

Okay. Thank All you. right.

Operator

go question next come with Evercore. Samir will from ahead. Please Our Khanal

Samir Khanal

Hey, your major as it to talk Joe. markets. about the in maybe bit Good a you half sort us growth, kind I the through markets? Can What's in talked major know past, inside about some same reversal little second you've of walk of in more a and topics the some along your Houston too? of relates embedded revenue morning. just of

Joseph Saffire

like I’ll I Yeah. feeling see in the where deeper. -- biggest about go, but revenue of of projected my think three had nice the but better and concern, balance Houston. at most has have over Miami we second little We to as Andy said -- been for half it. gotten dig in the mean, of last We still I that occupancy trends, Dallas, But kind the Houston, the markets, think, slightly quarters. how it of still we're Q&A, the Houston, the year, negative be we've I towards we'll is few let decel the we the year, beginning the less a

street then but been move And negative throughout rates, we as negative XXXX, it's they've well on. less as getting obviously,

we've seen that that XX one the lowest feel with there coming we manage a And number supply MSAs of MSA internally. the and -- at then obviously, it we that is top out companies on from Houston look better of a little So new -- bit about also and that.

So, ton Houston. see we supply in don't of a new on coming

points. been new few XXth was of is quarter, stabilize. a huge supply market, it on from impact heard be we us, kind to has you've Dallas flat our basis think us. a saw revenue XXX to Dallas, on new a think I But will then little probably And XXXX. and better. starting it that, fourth seems for through getting obviously a up over us largest than one supply, so still so Miami Houston. It's there, of they're getting interesting not Miami, more you But been a stay

Dallas. about good pretty feeling we're So,

Occupancy has been strong.

in pretty about markets. our most good concerning those terms, feel So, we

And new to buffalo. on markets and as some a well. but strongest some are Not supply, Vegas those Chicago, of markets us. pretty there's coming pretty, have we feel our Those important been Vegas, good ton of about

some Atlanta, and it's And some new pleasantly well. other of I then but held the we’re think, up surprise, supply. Obviously, been given new supply, some good the a Austin there's ones watching, Austin's of

So, through went budget overall, things in consideration. obviously for we all to market-by-market our these take into

our the and years feeling said, us. last the markets been it's like think we -- peak But I in pretty of deliveries I and major in we're are in turning. it's built our think, into It few behind tough And good guidance. Houston terms has kicked

Samir Khanal

proactive question is, for you. look, the management utility I been side, that. thanks that's second you've no, Joe, Yeah, And mean, generated my guess, savings on I for

payroll reduced what you Can are there? sort initiatives you to there you the set margins guess, for further that of Now. here? Rent about talk I big out expense to can is opportunity about improve -- You broadly through other extent how

Joseph Saffire

up X%, differentiates I that I now that -- able is gotten where XX% many of see in be saw goes customers we would to see using things, It's terms been use little more our in But more mean, lot that how fourth XX% great. mean, quarter, ever savings. how definitely that something that's And focused into our us peers. we've big it's improvement. the Well, and and are quarter. built in it. on get the We'll we’ve a you payroll of guidance. see each new terms around goes. to our If on customers our of it. capitalize right from We'll -- Rent that's bit Now how it's of a obviously, of XX%, many not our something we

the unknown biggest So, but that's going been think across we're Samir. probably technology, I board. to We've embrace moment, continue to the at it the new doing

some management. huge is ways also we're ESG XXXX. some But something more around rid less to increasingly and put trucks. efficient our of save you'll money Obviously, ESG focus a see older, finding about and arms utility that's Got throughout for us. that's

guidance we'll And But control costs a be deliver So, things number have of pretty we're in ability that doing good to terms looking. of we Samir. able pretty our going feel We're to on strong to XXXX. we keep in that.

Samir Khanal

Okay. Thanks, guys.

Joseph Saffire

Samir. Thanks,

Operator

question from go next Our come will Please Smedes ahead. Rose with Citi.

Smedes Rose

Rent I thanks. you just Now on Hi, the program. wanted to ask

You mentioned about XX%. it was

to I it pick So, talk little -- in maybe a margin the that implications a the for just bit what that program -- bit to kind customers. little the about Can to you are continues incoming coming think someone through of what of chooses come up just counter? terms versus

Joseph Saffire

the company. a margin for efficient it's think obviously, Thanks, more Smedes. there. I Well, mean, Andy from I perspective, But mean, something definitely has I

less the taking You our at up time. people have minutes counter, spending store manager's XX, XX

efficient the be to who the organization. calling you're people an They're more going call self-serve, as not center. more So

a going to if we So, see tool. to can Rent customers forward. get Now way a great going And more it's look we're use to

built So, savings, that's of is into our majority Right already that payroll Now.

teams more obviously our do online and efficient. with things other we're there's to that as auctions, other store doing can other And technologies, things make that we such

hours So have that stores. less again we at can the

Rent technologies to improve to continue we're company. overall margins So, for new our going obviously embrace to Now the and

Andrew Gregoire

not to They're they're customers and difference. -- admin And paying fee. the using taking the like Now Rent any Smedes, that are stay. We're are seeing those pretty insurance,

customer. margin similar very a it's So,

Smedes Rose

Okay. ask picture. also you bigger wanted to just I

the stabilized you properties Can about through talk I mean, platform. management in you're by you -- mentioned changes any just cap rates bought or can? seeing pricing market, you some You if

Andrew Gregoire

Yeah.

when It's You're third-party get some hanging going still going at portfolio competition I you're fruit think and be market-by-market, there's of there be those a there's market. lot California, low -- opportunities off caps. out deals. they're still deals looking New seeing good York to low to to for management But

Obviously, not there's how no you're stores three, out, budgets whether going You're know feel to -- but two-year, the pretty not you good out definitely compression. penciling when are involved. competing, those are broker about you -- bid you operating one-year,

I low capital it's debt to think to cost Cost deals. Obviously, low. is good to find harder cost.

to still So, we there's don't very there. think that's but good change, going opportunities out

Smedes Rose

Okay. Thank you.

Operator

Our next come of will with go question from America. Bank Shirley Wu ahead. Please

Shirley Wu

guys. Thanks questions. Hey, for taking the

burnout those first had less people payroll kind assuming my bit let's more, [ph] So, a guys at efficiencies. just say, you of just I question, expand terms on year over savings the counter the having and -- in last of, little

are what into right incremental you now, if at a of operating terms going about how costs. from -- you're thinking XXXX personnel already So in efficiencies lower

in from how you So, much into can of where's really terms coming how -- which that pocket? and guidance, put your

Andrew Gregoire

part and whole those it year. have payroll savings the of Well, is we didn't for the

the It's change that the to overnight flip we of time shoot fourth it system a number replacing not customers that that. it switch, sometimes payroll where yet if of in those that quarter, no but as can of it's as an first But so. comp the this expected again, year. when comp up obviously, back in But October. in of said So, rate we issued we the through easier in the going knew in go It's and using be that not work from point in Tougher hours. quickly, can the that XX%, all view. into the take the does XX% would does we switch Joe significant guidance XX% guidance payroll and year half sudden or associates to an take flick the change that we the you

site care You the your need customer. still take to of manager on

Joseph Saffire

Yeah.

Shirley Wu

about as see system an question, my moving strategy you guys on your forward. and have improvement, how And second revenue this improvements your you talked management it. Got

bit you the been about could talk of So things a that that? on you've little some doing more

Andrew Gregoire

want and we're many there, deep a Yeah, about and industries many knowledge things much And new its free embrace really head AI. proprietary. got it on not conference in on science and out implementing he there, very you with still And are and has to management, will revenue I working call, smarter talk do of everything mean, out things. and But We don't new learning a use have too lot we're better. a and of cuts. of we some to a make help data data how how like many we've decisions been give on companies, tools necessarily away other technologies embracing rent focused that just those those rate different machine us

think we it's still like continue. in think there. over doing we're and I last we about But what excited surely, we've some we're but few early things the very the months, been of seeing game, So, the it'll

a I some think our of built benefits we're of going lot to terms XXXX throughout rate that's and and in occupancy into guidance already. see

Shirley Wu

you. Got it. Thank

Operator

Lumb from will ahead. Green Our Advisors. next question come Ryan Street go with Please

Ryan Lumb

good morning. Hi,

Just to circling the back margin improvement.

any curious to anticipating of what targets sort looking you can guys in magnitude that or are the share of of achieve, guys if what that. to you're you have achieve you specific Just timing terms of the

Joseph Saffire

… Ryan And

Andrew Gregoire

was targets Ryan, which -- for for what one? sorry --

Ryan Lumb

been you margin The that guys improvement referencing? have

Andrew Gregoire

tackling. do looks margin stone just blocking margin. we've done And And looking day over it And we'll beyond here. keep more mean, Yeah, And Okay. can differently that's you're just program in up item challenging seeing we the that, But XXXX. improvements. you And we seeing there's think potential. line show can under And like it things. basis that. see it's every talk probably up. expect every of to but really and about, want that every and I we it's happens and about, our And to -- points in we don't what doing improvement XXXX, XX how to showing

Joseph Saffire

more margin as that on margins smaller better recycling, much not not revenue side, asset been pretty and some Ryan. buying Yeah. store, as rates, well. are per And obviously, everything just the it's they're older and has I friendly, our been been lower or we've bigger rates, stores, focused on selling mean, helping expense stores off we've that's through

many So, we're angles. it different going at in

much I and like us good in is it's margins, a for been in but can't supply. of about terms new You revenue Chicago do markets, certain a growth property one very lot tax Chicago. mean, of tough for

that So, going mix But find the for said, XXXX. basis it. markets about to properties. some margins, has to keep it's improve we're some are expand it's it And will we Andy California And the the for always that a a of looking excited not target doesn't like we ones continue newer entered. been for us, we're things. we And it's of mean just to to XX target hard ways better the think six pack. points in of

All our to And be a for of looking for margins. us now, And big right But these it's us. has technology things other well. helped. obviously, to we're on to will been clearly, help as one continue work going technologies

Ryan Lumb

then in dipped in with international Great. Okay. your year. And curious, some Toronto toe growth just last you

Just what year the ahead. is for in international appetite your growth curious

Andrew Gregoire

I interesting. it's a big mean, international experience. I Yeah. have

I it's great. think

we I lot of and in do a think U.S. still to lot opportunities. there's a the need

Canada that I no-brainer we're for there. goes was us and where doing well year. We'll think this see a

and year that, now. on think when and you we Aside borders. focus looking enter the not saw internationally, far Canada there too And are we'll But last opportunities really the from I that U.S. across we're for Canada.

Ryan Lumb

Thanks, Sure. guys.

Joseph Saffire

Ryan. Thanks,

Operator

will today's This like would any to to remarks. over closing turn for the now question-and-answer conclude I conference Saffire session. Joe

Joseph Saffire

joining great have for and the just call our thank all I’ll of week. you say rest a

Operator

The may conference you Thank now attending you today's disconnect. for concluded. has now presentation and

Life Storage Inc - Registered Shares (LSI) 20 Feb 202019 Q4 Earnings call transcript