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NNN REIT, INC. (NNN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue rose 7.2% year over year to $230.854M while diluted EPS was $0.51; Core FFO/AFFO per share increased 3.6% to $0.86/$0.87 . Versus consensus, NNN delivered a revenue and EPS beat, aided by $8.2M lease termination fees; full‑year guidance was maintained . EPS and revenue estimates: $0.484 and $219.900M; actual: $0.516 and $230.854M (beat)*.
  • Occupancy dipped to 97.7% due to tenant defaults in 4Q24, but management reported strong re‑leasing progress and expects the total impact to stabilized Core FFO per share to be less than 1% .
  • Acquisition volume was $232.4M at a 7.4% initial cash cap rate (82 properties; WALT ~18.4 years); dispositions delivered $15.8M of proceeds at a 4.9% cap rate .
  • Balance sheet remained resilient: $1.1B of available liquidity, BBB+ profile, 11.6‑year weighted average debt maturity, Net Debt/EBITDAre 5.5x; dividend of $0.58/share (66% AFFO payout) was declared .

What Went Well and What Went Wrong

  • What Went Well

    • Acquisition execution and pricing discipline: $232.4M invested at 7.4% cap rate, all sale‑leasebacks, with strong tenant relationships and WALT >18 years . Management avoided sub‑7% cap rate large portfolios: “we are seeing significant compression… causing us to forgo those opportunities” .
    • Re‑leasing momentum on vacancies: 31 of 64 restaurant assets re‑leased; 12 of 35 furniture assets resolved (7 sold, 5 re‑leased) by quarter‑end, with expectation of vast majority resolved by year‑end .
    • Guidance maintained and cash generation: Core FFO $0.86 and AFFO $0.87 grew 3.6% YoY; free cash flow after dividend ~$55M; FY 2025 Core FFO $3.33–$3.38 and AFFO $3.39–$3.44 reaffirmed .

  • What Went Wrong

    • Occupancy decline to 97.7% (from 98.5% at 12/31/24) driven by 4Q24 tenant defaults; management expects occupancy to trend higher through 2025 .
    • Real estate expenses net of reimbursements remained elevated due to vacancies; FY 2025 outlook $15–$16M vs historical ~$13M .
    • Non‑recurring lease termination fees ($8.2M; ~$0.04/share) boosted Q1; management cautioned timing is unpredictable and Q1 was unusually high .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$215.407 $218.482 $230.854
Net Earnings ($USD Millions)$94.371 $97.894 $96.458
Diluted EPS ($)$0.52 $0.52 $0.51
FFO per share ($)$0.83 $0.82 $0.85
Core FFO per share ($)$0.83 $0.82 $0.86
AFFO per share ($)$0.84 $0.82 $0.87
Operating Expense Detail ($USD Millions)Q1 2024Q4 2024Q1 2025
General & Administrative$12.584 $8.705 $13.008
Real Estate Expenses$7.154 $11.142 $9.375
Real Estate Expenses, Net of Reimbursements$2.420 $5.663 $3.857
Consensus vs Actual (Q1 2025)ConsensusActualSurprise
Revenue ($USD Millions)219.900*$230.854 Beat
Diluted EPS ($)0.484*0.516 (rounded from $0.51 reported) Beat

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (2/11/2025)Current Guidance (5/1/2025)Change
Net earnings per share (excl. gains/impairment/retirement)FY 2025$1.97–$2.02 $1.97–$2.02 Maintained
Real estate depreciation & amortization per shareFY 2025$1.36 $1.36 Maintained
Core FFO per shareFY 2025$3.33–$3.38 $3.33–$3.38 Maintained
AFFO per shareFY 2025$3.39–$3.44 $3.39–$3.44 Maintained
G&A expenses ($M)FY 2025$47–$48 $47–$48 Maintained
Real estate expenses, net ($M)FY 2025$15–$16 $15–$16 Maintained
Acquisition volume ($M)FY 2025$500–$600 $500–$600 Maintained
Disposition volume ($M)FY 2025$80–$120 $80–$120 Maintained
Dividend per share (quarterly)Q2 2025—$0.58 declared (paid 5/15/25) Maintained run-rate

KPIs and Portfolio Metrics

KPIQ1 2024Q4 2024Q1 2025
Properties (#)3,546 3,568 3,641
Gross leasable area (M sqft)36.137 36.557 37.311
Occupancy (%)99.4 98.5 97.7
ABR ($USD Millions)831.010 860.562 874.301
Acquisitions ($USD Millions)—216.8 (31 properties; 7.6% cap) 232.4 (82 properties; 7.4% cap; WALT 18.4yrs)
Dispositions ($USD Millions)—42.8 (12 properties) 15.8 (10 properties; 4.9% cap)
Liquidity ($USD Billions)—$1.2 revolver availability $1.1 total available liquidity
Net Debt / EBITDAre (x; last qtr annualized)—5.6 5.5
Dividend per share ($)$0.565 $0.565 $0.58

Vacancy resolution progress: restaurant assets (64) – possession taken; 31 re‑leased by 3/31/25; furniture assets (35) – 7 sold, 5 re‑leased .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 / Q4 2024)Current Period (Q1 2025)Trend
Occupancy & creditOccupancy 99.3% (Q3); watchlist discussed; balance sheet strength Occupancy 97.7%; limited/no credit loss; embedded 60 bps reserve; <1% FFO impact from 4Q24 defaults Near‑term dip; improving through 2025
Acquisitions/cap ratesQ3 cap ~7.6%; disciplined underwriting $232.4M at 7.4%; cap rates steady; passing on sub‑7% large portfolios Slight compression; disciplined selection
Tariffs/macro impactMacro caution; liquidity emphasis 85% ABR service/nondiscretionary; tariff exposure manageable; tenants reevaluating growth pace Resilient portfolio mix
Balance sheetWAM maturity ~12.1 years; zero revolver balance (YE 2024) WAM maturity 11.6 years; $1.1B liquidity; 2.5% floating debt Strong; minor changes
Lease terminationsNot highlighted in Q3; episodic in later quarters $8.2M in Q1; unusually high; long‑term average ~$2–3M/year Elevated in recent periods
Tenant re‑leasingEvictions initiated Q4 with progress 31 of 64 re‑leased; strong interest; furniture re‑leases/sales underway Ongoing improvement

Management Commentary

  • “We’re making excellent progress resolving these vacancies… anticipate the vast majority resolved by year‑end… total impact of only $0.15 to $0.25 on our stabilized Core FFO per share for the year. That’s less than 1%.” — Stephen Horn, CEO .
  • “This morning, we reported Core FFO of $0.86 per share and AFFO of $0.87 per share… Results were slightly ahead of our internal plan, driven primarily by lower‑than‑planned bad debt and net real estate expenses.” — Vincent Chao, CFO .
  • “We finished the first quarter with nearly $1.1 billion availability on our $1.2 billion line of credit… reinforces the effectiveness of our self‑funding model.” — Stephen Horn .
  • “Given our strong start to the year… we are comfortable maintaining our 2025 outlook for Core FFO per share of $3.33 to $3.38 and AFFO per share of $3.39 to $3.44.” — Vincent Chao .
  • “Cap rates are mostly holding steady with the first quarter… large portfolio transactions… going sub‑7, and we just didn’t think that was the right price.” — Stephen Horn .

Q&A Highlights

  • Acquisition pace and pipeline: Management is ~40% toward FY acquisition guidance and comfortable with hitting $500–$600M; bottom‑up approach and cautious escalation given macro uncertainty .
  • Tariffs and rent coverages: 85% ABR in service/nondiscretionary tenants; rent coverages broadly stable; tariff impacts manageable at portfolio level .
  • Discretionary exposure: Camping World and Dave & Buster’s coverage described as healthy due to long‑standing partnerships and proactive lease management; selective on newer DB deals with low cap rates .
  • Car wash sector: Confident holdings (notably Mr. Car Wash) done pre‑overheating; expect to be net winners; passed on financial‑engineer‑driven deals .
  • Lease termination fees: $8.2M in Q1 driven largely by one long‑dark tenant; fees are recurring but unpredictable; long‑term average ~$2–$3M/year .
  • Real estate expense outlook: Net real estate expenses guided to $15–$16M due to vacancies, improving as re‑leasing progresses .

Estimates Context

  • Q1 2025 comparison to S&P Global consensus: Revenue $230.854M vs $219.900M consensus (beat); EPS $0.516 vs $0.484 consensus (beat); EBITDA $208.341M vs $201.715M consensus (beat). Analyst count: 10 for revenue, 7 for EPS.
  • Implications: Beats were supported by lower bad debt and net real estate expenses plus $8.2M termination fees; given the non‑recurring nature of fees, models should normalize lease termination income and maintain 60 bps credit loss reserve as guided .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • NNN executed a clean revenue/EPS beat while reaffirming FY 2025 Core FFO/AFFO guidance, signaling operational resilience despite 4Q24 tenant setbacks .
  • Vacancy resolution is progressing faster than expected, with re‑leasing/sales momentum and an estimated <1% impact to stabilized Core FFO per share for the year — a key de‑risking catalyst as occupancy trends higher .
  • Acquisition discipline remains intact: all sale‑leasebacks, steady cap rates (~7.4%), and avoidance of sub‑7% large portfolios underpin spread preservation and quality .
  • Balance sheet strength (11.6‑year WAM, $1.1B liquidity, 5.5x Net Debt/EBITDAre) supports internally funded growth and November 2025 refinancing flexibility .
  • Near‑term modeling should adjust for the unusually high $8.2M lease termination fees in Q1 and maintain guided real estate expense levels; bad debt was minimal in Q1 .
  • Portfolio mix (85% ABR service/nondiscretionary) and deep tenant relationships mitigate tariff/macro exposure; watchlist item At Home remains under monitoring but is manageable given low rent basis and property optionality .
  • Dividend yield remains attractive with a conservative 66% AFFO payout; income investors can anchor on durability while monitoring re‑leasing milestones and acquisition pacing .

Citations: Press release and 8‑K earnings materials ; Q1 2025 call transcript ; Q4 2024 and FY 2024 press release ; Q3 2024 press release . Values marked with * retrieved from S&P Global.