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MI

MODIV INDUSTRIAL, INC. (MDV)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered steady operations and modest beats: revenue of $11.793M and diluted EPS of $(0.01), with FFO/share $0.33 and AFFO/share $0.33; management highlighted AFFO growth and consensus beats, supported by lease renewal and disciplined capital allocation .
  • Street Q1 2025 estimates: revenue $11.720M vs actual $11.793M (beat), Primary EPS −$0.087 vs actual −$0.010 (beat), FFO/share $0.30 vs actual $0.33 (beat). Values retrieved from S&P Global*.
  • Guidance and capital actions: dividend maintained at $1.17 annualized ($0.0975/month); interest rate swaps fixed the term loan at ~4.25% for 2025, expected ~$0.7M cash interest savings; preferred repurchases reduced dividend burden and lifted base-case 2025 AFFO guidance from $1.37 to $1.39 .
  • Near-term stock narrative drivers: tariff commentary and tenant health (limited near-term impact), lease renewal at FUJIFILM Dimatix (6.75% initial rent increase in 2026, 3% annual escalators), and ongoing capital recycling/discipline in acquisitions amid volatile markets .

What Went Well and What Went Wrong

What Went Well

  • AFFO/share rose 18% YoY to $0.33, beating consensus; management pointed to positive rent growth, lower cash interest, and reduced property expenses as drivers: “Financial performance came in as we planned and ahead of consensus” .
  • Lease renewal: FUJIFILM Dimatix TIC leases extended 10 years (through 2036) with an initial 6.75% rent increase in 2026 and 3% annual escalations, supporting future cash flows .
  • Balance sheet optimization: $250M of term loan fully swapped to ~4.25% fixed in 2025, with ~$0.7M interest savings; preferred repurchases (275k shares YTD) reduce preferred dividends and lift AFFO coverage; dividend maintained at $1.17/year with 118% AFFO coverage at recent share price per management .

What Went Wrong

  • GAAP diluted EPS was negative (−$0.01), reflecting distribution mechanics (Class X OP Unit distributions reduce EPS despite de minimis net income attributable to common) .
  • Rental revenue declined 2% YoY to $11.793M, driven by 2024 dispositions partially offset by 2024–Q1 2025 acquisitions; operating income fell vs prior-year quarter as derivative and interest effects weighed on other expense .
  • Net debt/Adjusted EBITDA increased to 7.5x (from 7.0x in Q4 2024), and cash declined to $6.165M, reflecting continued leverage and lower cash on hand, albeit fully fixed rate and no maturities until January 2027 .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$11.655 $11.730 $11.793
Diluted EPS ($)$(0.18) $0.07 $(0.01)
FFO per share ($, fully diluted)$0.20 $0.46 $0.33
AFFO per share ($, fully diluted)$0.34 $0.37 $0.33
Q1 2025 Actual vs EstimatesConsensus*Actual# of Estimates*Result
Revenue ($USD)$11,719,750*$11,793,000 4*Beat*
Primary EPS ($)−$0.08667*−$0.010 3*Beat*
FFO/share ($)$0.30*$0.33 n/aBeat*

Values retrieved from S&P Global*.

Segment and Portfolio KPIs

  • Property Type ABR (Q1 2025): Industrial core ABR $31.474M (80%); Non-core ABR $7.935M (20%); total ABR $39.409M .
  • WALT (post FUJIFILM amendments): ~14.2 years portfolio; manufacturing WALT >20 years (management remarks) .
  • Net debt/Adjusted EBITDA: 7.5x (Adjusted EBITDA $9.378M; net debt $283.202M) .
  • Leverage ratio (credit facility basis): 47.6% .
  • Weighted average interest rate on total debt: 4.27% .
  • Cash and cash equivalents: $6.165M .
  • Dividend: $0.0975/month ($1.17 annualized); AFFO coverage noted at ~118% by management .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
AFFO/share (base-case, “do-nothing”)FY 2025$1.37 per diluted share (3/4/2025) $1.39 per diluted share (3/7/2025) Raised
Common dividend (annualized)2025$1.17 (increased in Q3 2024) $1.17 maintained (Q1 2025 declarations) Maintained
Term loan interest rateCY 2025Prior swaps canceled end-2024 New swaps fix SOFR to 2.45% → ~4.25% fixed; ~$0.7M cash interest savings Updated
Revolver unused fee savingsCY 2025n/a~$0.3M annual savings after reducing revolver to $30M New
Stock comp run-rateCY 2025Prior variable earn-out structure ~$0.8M per quarter run-rate (OP units + directors) Clarified
FUJIFILM Dimatix lease2026 onwardPrior expiry 2026 10-year extension to 2036; +6.75% initial rent in 2026; 3% annual escalations Extended

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Tariffs/macro volatilityFocus on facts; raise ATM at $16.54; dividend increased 2025 outlook; $1.4M savings; disciplined acquisitions Tenants largely unaffected to date; preparedness; surcharge pass-throughs; inventory cushion Stable-to-improving tenant resilience
Acquisition disciplineUPREIT pipeline; selective accretive buys Selective sale (Endicott NY) and UPREIT in FL; preference for episodic growth “If there is a deal that will make us money” amidst volatile cap rates (7.5–8.25%) Continued discipline
Capital allocation (preferred)n/aEfficiency focus; revolver rightsizing 275k preferred shares repurchased YTD; $276k annual savings from initial block; leverage reduction Active deleveraging
Dividend & coverageIncreased to $1.17 annualized Coverage emphasized (>115%) Maintained $1.17; AFFO coverage ~118% at recent price Stable
Interest rate managementn/aPrior swaps canceled late 2024 New swaps fix 2025 rate; ~4.25% fixed; cash interest savings ~$0.7M Improved visibility
Asset recycling/redevelopmentn/aCostco property PSA with KB Home; Solar Turbines parcel split Costco sale progressing; Solar exit timing and owner-user sale plan; Minnesota vacant: sell/lease marketing Executing
Tenant credit/IG mixn/a~30% ABR investment-grade ~30% ABR IG; rest private, unrated but financially sound; management avoids “implied” ratings Consistent

Management Commentary

  • “First quarter results – Financial performance came in as we planned and ahead of consensus… All these activities represent positive AFFO growth – grindstone stuff.” — Aaron Halfacre, CEO .
  • “Our 43 property portfolio has an attractive weighted average lease term of 14.2 years… Approximately 30% of our tenants or their parent companies have an investment-grade credit rating…” — CFO Ray Pacini .
  • “The histrionics… since Liberation Day appear to be noise… our tenants simply haven’t incurred any material impact since the tariff announcements.” — CEO .
  • “We negotiated and signed a 10-year lease renewal with FujiFilm… with a pleasant 6.75% increase in future rent… and 3% annual escalations.” — CEO .

Q&A Highlights

  • Cap rates and acquisition stance: Sweet spot ~7.5%–8.25%; focus on compelling real estate/tenancy; avoid marginal deals given cost of capital and volatility .
  • ATM and float strategy: Opportunistic issuance to increase float, maintain long-term price discipline; blackout windows limited issuance timing .
  • Non-core assets: OES option appraisal process underway; Costco PSA with KB Home progressing; Solar Turbines exit and parcel split near completion; Minnesota vacant asset marketed for sale/lease .
  • Stock comp cadence: ~$0.8M per quarter run-rate expected; smoother vs prior earn-out variability .
  • Tenant health and tariffs: Middle-market manufacturers managing via surcharges, inventory, and alternate sourcing; limited immediate impact .

Estimates Context

  • Q1 2025 performance vs Street: revenue $11.793M vs $11.720M estimate (beat); Primary EPS −$0.010 vs −$0.087 estimate (beat); FFO/share $0.33 vs $0.30 estimate (beat). Values retrieved from S&P Global*.
  • Implication: With AFFO/share $0.33 and fully fixed-rate debt in 2025, consensus for FFO/AFFO may drift higher, supported by lease renewals and interest savings. Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Core earnings quality: AFFO/share up 18% YoY to $0.33 with broad-based operational contributors (rent growth, lower cash interest, lower property expenses), plus lease renewal tailwinds .
  • Risk management: 100% fixed-rate debt for 2025 at ~4.25% on the term loan; leverage ratio at 47.6% and no maturities until 2027 reduce rate and refinancing risk .
  • Capital discipline: Preferred repurchases and reduced revolver limit support deleveraging and AFFO accretion; management continues to pass on marginal acquisitions .
  • Dividend durability: $1.17 annualized distribution with management-cited ~118% AFFO coverage at recent prices; portfolio WALT ~14.2 years supports cash flow visibility .
  • Tariff exposure: Tenants report limited near-term impacts; preparedness and surcharge pass-throughs mitigate risk, but macro remains fluid—monitor USMCA and metals pricing .
  • Asset recycling optionality: Costco/WSP/Solar pathways and Minnesota marketing offer potential capital recycling and redevelopment upside in 2025–2026 .
  • Trading lens: Modest estimate beats, fixed-rate visibility, and lease extensions are near-term positives; continued acquisition discipline and tenant health updates are key catalysts for estimate revisions and sentiment .

Notes: All document-based figures are cited. Estimates marked with an asterisk are Values retrieved from S&P Global*.