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HP

Hudson Pacific Properties, Inc. (HPP)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered mixed results: total revenue fell 12.8% YoY to $190.0M while GAAP net loss widened to $(0.41) per share; FFO ex-specified items was $0.04 and AFFO was $(0.03) per diluted share .
  • Results missed S&P Global consensus: Revenue $190.0M vs $199.6M estimate (MISS), GAAP EPS $(0.41) vs $(0.25) estimate (MISS)*. Management guided Q3 FFO per share to $0.01–$0.05 .
  • Leasing momentum is improving: 558K sf signed (1.2M sf YTD), GAAP rent spreads +4.9% and office occupancy stable q/q at 75.1%; pipeline >2.0M sf with later-stage deals ~600K sf .
  • Balance sheet materially strengthened: $690M equity raise, repayment of $465M private placement notes, and $1.0B liquidity; 99.2% of debt fixed/capped; no maturities until Dec-2025 .
  • Catalysts: continued AI-driven Bay Area demand and improving studio production supported by California’s expanded tax credit; risks center on studio show counts and timing of office absorption .

What Went Well and What Went Wrong

What Went Well

  • Leasing engine re-accelerating: 558K sf executed in Q2 (1.2M YTD); GAAP rents +4.9% and a robust >2.0M sf pipeline with increasing average deal size; management expects occupancy growth ahead .
  • Deleveraging and liquidity: $690M common/pre-funded offering, repayment of $465M notes, $1.0B liquidity; 99.2% fixed/capped debt and extended facility capacity/maturities .
  • Studio momentum building into tax incentives: improving stage utilization at Sunset Las Palmas; California’s film/TV tax credit expanded to $750M is expected to lift activity in coming quarters. “We expect to see increased allocation activity…with the potential for show counts to begin to benefit as early as the fourth quarter” (Victor Coleman) .

What Went Wrong

  • Top-line and EPS shortfalls: Revenue down 12.8% YoY to $190.0M and GAAP EPS $(0.41), reflecting asset sales, lower office occupancy, and Quixote-related accelerated depreciation; FFO ex-items declined to $0.04 .
  • Studio softness persists: Trailing-12-month in-service studio leased 63.0% (stages 63.6%), down vs prior year; same-store studio cash NOI declined YoY .
  • Same-store cash NOI pressure: $87.1M vs $104.1M YoY (–16.4%) driven by lower office occupancy; AFFO turned negative $(0.03) per diluted share amid higher recurring capex .

Financial Results

Headline P&L and Cash Metrics (chronological columns: oldest → newest)

MetricQ2 2024Q1 2025Q2 2025
Total Revenue ($M)$218.0 $198.5 $190.0
GAAP EPS (Diluted)$(0.33) $(0.53) $(0.41)
FFO/sh (Diluted)$0.16 $0.02 $(0.05)
FFO ex Specified Items/sh$0.17 $0.09 $0.04
AFFO/sh (Diluted)$0.17 $0.01 $(0.03)
Same-Store Cash NOI ($M)$104.1 $93.2 $87.1

Vs. S&P Global Consensus (Q2 2025)

MetricConsensusActualSurprise
Revenue ($M)$199.6*$190.0 −$9.6 (MISS)
GAAP EPS (Diluted)$(0.25)*$(0.41) −$0.16 (MISS)

Values retrieved from S&P Global.

Segment and Portfolio KPIs

KPIQ2 2024Q1 2025Q2 2025
Office Revenues ($M)$176.0 $165.2 $155.8
Studio Revenues ($M)$42.0 $33.2 $34.2
In-Service Office Occupancy (%)78.7 75.1 75.1
In-Service Office Leased (%)80.0 76.5 76.2
In-Service Studio Leased TTM (%) (Total/Stages)76.1/78.1 73.8/78.7 63.0/63.6 (74.3/80.0 ex Glenoaks)
Same-Store Cash NOI ($M)$104.1 $93.2 $87.1
Office Leasing Activity (sf)539,531 630,295 558,055
GAAP/Cash Rent Change on Rollover (%)+2.6 / −13.3 +4.8 / −13.6 +4.9 / −1.8

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
FFO per diluted shareQ2 2025$0.03 – $0.07 N/A (reported)N/A
FFO per diluted shareQ3 2025N/A$0.01 – $0.05 New range (lower absolute level)
Same-Store Cash NOI GrowthFY 2025(13.5)% – (12.5)% (12.5)% – (11.5)% (range improved; includes Metro Center) Raised
G&A ExpenseFY 2025$(67.0)M – $(73.0)M $(57.5)M – $(63.5)M Lowered
Interest ExpenseFY 2025$(185.0)M – $(195.0)M $(168.0)M – $(178.0)M Lowered
Weighted Avg Diluted Shares/UnitsFY 2025146.5M – 147.5M 319.0M – 321.0M Higher (equity raise)
Other assumptions (non-cash revenue/expense, JV FFO, NCI, preferred)FY 2025As disclosed Updated ranges Updated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
AI/Tech demand in Bay AreaEmphasized AI-related leasing and VC flows; pipeline >2.0M sf (Q4/Q1) “AI…next wave of economic growth on the West Coast”; tech drove SF occupancy gains; core AI ~10% of ABR, runway to grow Improving
Leasing pipeline & toursPipeline >2.0M sf; later-stage ~700K sf (Q1) Pipeline ~2.1M sf with ~600K later-stage; tours +8–10% q/q to ~1.8M sf; avg deal size rising Improving
Office occupancy trajectoryExpected stabilization and growth as expirations fall (Q1) Stable q/q occupancy 75.1%; plan to reach high-70s/low-80s leased by YE’25 and mid-80s in 2026 Stabilizing → Gradual recovery
Studio production & incentivesAnticipated policy support; early signs of activity (Q4/Q1) California credit expanded; show counts could lift by Q4; studio NOI improved q/q; Quixote cost cuts continue Improving from low base
Balance sheet/liquidityCMBS financing; liquidity $838.5M (Q1) $690M equity raise, $465M notes repaid; $1.0B liquidity; fixed/capped 99.2%; 1918 Eighth refi expected Strengthened
Large development (Washington 1000)Stabilization expected 2027; leasing in progress (prior commentary)Multi-tenant and large users touring; no later-stage deals yet; will de-capitalize interest at YE’25 Leasing pipeline building

Management Commentary

  • “We are energized…produced 1.2 million square feet of office leases signed in the first half…Portfolio stabilization is close…benefit from…AI…[and] starting to experience positive traction in our studio business…With a capital structure that now provides $1.0 billion of liquidity…we are poised to capture additional value” — Victor Coleman, CEO .
  • “We signed 558,000 square feet…60% new leases…rent spreads…+4.9% GAAP/−1.8% cash…pipeline is healthy at 2.1M sf including >500K sf later stage” — Mark Lammas, President .
  • “For Q3, we expect FFO/sh of $0.01 to $0.05…gross FFO to increase due to deleveraging, partially offset by higher share count (~456.75M)” — Harout Djerimariam, CFO .
  • “AI…represents only 10% of our ABR…we see a considerable runway to expand both core AI and AI-enabled companies” — Victor Coleman .

Q&A Highlights

  • Occupancy trajectory: Management targets high-70s to low-80s leased by YE’25 and mid-80s in 2026, underpinned by lower expirations and pipeline; no new tenant credit issues flagged .
  • Studio sensitivity in guidance: Q3 guidance skewed by show counts; stronger studio activity would push toward high end of range .
  • Quixote cost reductions: Annualized expense cuts ~$24M; breakeven show counts lowered to low-90s; potential $30–$40M cash NOI at 110–120 show counts (pro forma vs 2024) .
  • Capital and leasing capex: Balance sheet positioned to fund leasing; $1.0B liquidity, minimal near-term maturities; 1918 Eighth refi expected this quarter .
  • Washington 1000 leasing: Active tours, engaging with multi-hundred-thousand-sf prospects; still earlier stage; de-capitalization of interest at YE’25, stabilization targeted 2027 .

Estimates Context

  • Q2 2025: Revenue $190.0M vs $199.6M consensus (MISS); GAAP EPS $(0.41) vs $(0.25) consensus (MISS)* .
  • Q3 2025: Street GAAP EPS consensus ~$(0.20); management guided FFO/sh $0.01–$0.05 (non-GAAP and not directly comparable) .
  • FY 2025: Street revenue consensus ~$751.5M*; management lowered G&A and interest expense assumptions, but higher diluted share count post-offering implies EPS dilution, while FFO ex-interest headwind should improve*.

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Leasing momentum is real and broadening, especially in Bay Area AI/tech; stable 75.1% occupancy with improving pipeline supports a gradual occupancy uptrend through 2026 .
  • Deleveraging is the near-term valuation driver: $1.0B liquidity, fixed/capped debt, and extended maturities reduce risk and support execution on leasing/capex .
  • Studio is a call option on tax-incentivized recovery: watch California allocation cadence and show counts; Quixote cost actions lower breakeven and potentially re-rate segment earnings as utilization improves .
  • Near-term numbers face dilution from higher share count; however, lower interest and G&A partially offset. Expect models to reflect lower FY G&A/interest and Q3 FFO $0.01–$0.05 guide .
  • Stock sensitivity near term hinges on: (1) closing larger late-stage office deals, (2) confirmation of 1918 Eighth refi, (3) signs of studio bookings into Q4 .
  • Risk checks: Same-store cash NOI pressure remains until cash rents catch up; San Jose lagging occupancy; Washington 1000 leasing timing is a swing factor .

Appendix: Other Relevant Press Releases (Q2 period)

  • Public equity offering priced ($600M+ gross; net ~$575.6M; upsized potential to ~$662M with greenshoe) to repay revolver/other debt .
  • Board rightsized from 10 to 8 to reduce costs; commentary highlights AI tailwinds and studio incentive benefits .