NETSTREIT Corp. (NTST)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 delivered steady non-GAAP performance: AFFO per diluted share was $0.32 (+3.2% YoY), FFO/share $0.29, Core FFO/share $0.30; GAAP diluted EPS was $0.02, on total revenues of $45.9M (+21.8% YoY) .
• Versus Street: Revenue beat ($45.91M vs $44.78M estimate*), EBITDA beat ($35.89M vs $35.06M*), while EPS missed ($0.0455 vs $0.0616*)—a mixed headline driven by non‑cash/GAAP items and timing of dispositions/acquisitions*.
• Guidance raised: AFFO/share increased to $1.28–$1.30 (from $1.27–$1.30); net investment activity maintained ($75M–$125M) and cash G&A $14.5M–$15.5M; Q2 dividend declared at $0.21/share .
• Strategic progress and catalysts: $90.7M investments at 7.7% blended cash yield, $40.3M dispositions at 7.3% yield, further reduced top tenant concentrations; strong liquidity ($584M) and adjusted net leverage 4.7x support capital recycling and a potential investment‑grade rating pursuit .

What Went Well and What Went Wrong

What Went Well

• Accretive capital recycling: $90.7M gross investments at 7.7% blended cash yield and $40.3M dispositions at 7.3%—supporting portfolio quality and diversification .
• Portfolio resilience and quality: Occupancy at 99.9%, WALT 9.7 years, 71% of ABR IG/IG‑profile tenants; reduced top tenant concentrations (Dollar General down to 8.1% ABR) .
• Management’s tone on execution: “This disciplined approach resulted in $90.7 million of new investments at a 7.7% cash yield… we are increasing the midpoint of our AFFO per share guidance.” — CEO Mark Manheimer .

What Went Wrong

• EPS miss vs Street: GAAP diluted EPS $0.0455 vs $0.0616 estimate*; reflects non‑cash items (impairments, depreciation) and timing effects inherent to GAAP earnings for net‑lease REITs*.
• Higher interest expense headwind YoY: Interest expense was $11.46M vs $6.18M in Q1 2024, partly offset by balance sheet actions and hedging .
• Continued need to pare headline‑sensitive exposures (pharmacy/dollar stores): Ongoing dispositions and buyer hand‑holding indicate market selectivity; management continues pushing all tenants below 5% exposure by year‑end .

Financial Results

Versus Wall Street consensus (Q1 2025):

Values marked with * retrieved from S&P Global.

Investment activity and portfolio KPIs:

Balance sheet and liquidity:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Given the excellent condition of our balance sheet and the exceptional performance of our defensively positioned net lease portfolio, we are increasing the midpoint of our AFFO per share guidance.” — CEO Mark Manheimer .
• “Our adjusted net debt to annualized adjusted EBITDA was 4.7x… total liquidity was $584 million… we are increasing the low end of our AFFO per share guidance to $1.28–$1.30.” — CFO Dan Donlan .
• On dispositions and exposures: “We continue to expect no tenant above 5% by 12/31… and we have a few pharmacies we expect to sell before our next earnings call.” — CEO Mark Manheimer .
• On IG rating pursuit: “We’re targeting going up to certain rating agencies in the latter half of this year… looking at least a 30 bps reduction across our term loans and credit facility” — CFO Dan Donlan .

Q&A Highlights

• Dispositions appetite and pricing: Robust 1031/institutional demand for dollar stores and select pharmacies; targeting cap rates mid/high‑6% for sales, >7.5% for acquisitions .
• Forward equity strategy: Majority likely settled by year‑end; can extend 6–12 months; deployment paced to cost of capital .
• Tenant strategy: Reducing Family Dollar/combo store exposure; continuing sales of Walgreens/CVS; adding diversified tenants like Gerber Collision; leaning into grocery where unit economics are strong .
• Big Lots re‑leasing: Multiple attractive LOIs; not in 2025 guide; expect better outcome with patience .
• Macro/tariffs: Heightened uncertainty slows decisions; NTST portfolio expected to outperform in slower environments due to necessity/service exposure .

Estimates Context

• Revenue beat: Actual $45.91M vs $44.78M consensus*—reflecting accretive net investments and strong rent collection.
• EBITDA beat: Actual $35.89M vs $35.06M consensus*—supported by portfolio growth and high cash yields.
• EPS miss: Actual $0.0455 vs $0.0616 consensus*—driven by higher interest expense and non‑cash GAAP items common in net‑lease REITs; non‑GAAP AFFO/share was in line with trend .
• Implications: Street may modestly revise FY EBITDA/Revenue upward and reassess EPS modeling cadence around dispositions and interest expense.
  Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Capital recycling at widening spreads is intact: buying at ~7.7% yields and selling mid/high‑6% supports AFFO stability while de‑risking exposures .
• Guidance momentum: AFFO/share raised (low end), with liquidity of $584M and adjusted net leverage 4.7x—providing runway for selective growth and rating initiatives .
• Diversification catalyst: Management remains on track to bring all tenants <5% ABR by year‑end—reducing headline risk in pharmacy/dollar store cohorts .
• Portfolio quality: 99.9% occupancy, 9.7‑year WALT, 71% IG/IG‑profile ABR underpin resilience across cycles .
• Near‑term trading: Mixed print (Revenue/EBITDA beat vs EPS miss) likely shifts focus to guidance raise and ongoing dispositions; watch for H2 IG‑rating developments and forward equity settlement pacing .
• Medium‑term thesis: Accretive recycling, internal growth from annual bumps, disciplined cost of capital, and improving tenant diversification should support AFFO growth and multiple normalization .
• Monitor catalysts: Further sales of Walgreens/CVS/Family Dollar, acquisition cap yields, progress with rating agencies, and macro tariff impacts on tenant expansion plans .