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NETSTREIT Corp. (NTST)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue modestly exceeded Wall Street consensus ($48.31M actual vs $48.13M consensus; +$0.18M), but EPS missed ($0.058 actual vs $0.068 consensus); AFFO/diluted share rose 3.1% YoY to $0.33. The miss was driven by late-quarter closings and treasury stock dilution from forward equity, per management commentary. *
  • Record quarterly gross investments of $203.9M at a 7.4% blended cash yield, alongside $37.8M of dispositions (7.2% cap) and $24.1M loan repayments; net investment activity was $142.0M.
  • Liquidity exceeded $1.1B at quarter-end (cash/revolver/forward equity/undrawn term loan), supported by a July forward offering and ATM sales; pro forma adjusted net debt/Annualized Adjusted EBITDAre was 3.6x.
  • Guidance: AFFO/diluted share maintained at $1.29–$1.31 in Q3 (with $0.015–$0.025 dilution from forward equity) and net investment guidance raised to $350–$400M; subsequently, on Nov 18, low-end AFFO/diluted share was increased to $1.30–$1.31.
  • Stock reaction catalysts: record deployment, improved cost of capital/spreads, and raised full-year AFFO low-end; management signaled an “attractive opportunity set” and disciplined pursuit of an investment-grade rating.

What Went Well and What Went Wrong

What Went Well

  • Record quarterly investment volume: $203.9M across 50 properties at a 7.4% blended cash yield; WALT 13.4 years; more than one-third IG/IG-profile tenants.
  • Strong balance sheet and liquidity: $1.134B total liquidity (cash $53.3M; revolver $499.9M; unsettled forward equity $431.2M; undrawn term loan $150M); pro forma adjusted net leverage 3.6x.
  • Portfolio resilience: occupancy 99.9%, minimal near-term expirations, and reiterated best-in-class credit loss statistics (“we again had no credit losses in the quarter”).
  • Quote (CEO): “We are currently seeing the most attractive opportunity set that we have seen since going public… and we are excited to have the dry powder to execute and drive growth.”
  • Quote (CFO): “Our pro forma adjusted net debt to annualized adjusted EBITDAre was 3.6x at quarter end, well below our targeted range of 4.5 to 5.5x.”

What Went Wrong

  • EPS miss vs consensus despite revenue beat; diluted GAAP EPS was $0.01, with management citing heavy back-end timing of acquisitions and forward equity dilution. *
  • Cap rate compression vs Q2’s unusually high yield (7.8% → 7.4% blend) amid lower rates and increased competition; management guided that 7.4–7.5% is a more sustainable run rate.
  • G&A increased YoY to $5.1M on normalized staffing; though G&A as % of revenues is trending down, it weighed on near-term earnings optics.
  • IG/IG-profile mix moderated: combined IG exposure (by ABR) was 62.1% at Q3 vs 68.7% at Q2, reflecting opportunistic higher-yield non-IG acquisitions.

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Total Revenues ($USD)$41.44M $45.91M $48.29M $48.31M
Diluted EPS (GAAP)$(0.07) $0.02 $0.04 $0.01
FFO/diluted share$0.32 $0.29 $0.31 $0.29
Core FFO/diluted share$0.32 $0.30 $0.31 $0.31
AFFO/diluted share$0.32 $0.32 $0.33 $0.33
EBITDA ($USD)N/A$33.95M $37.47M $34.48M
EBITDA Margin (%)N/A78.18%*78.15%*79.93%*
Net Income Margin (%)N/A3.68%*6.78%*1.28%*

Values with asterisks retrieved from S&P Global.

Estimates vs Actual (Wall Street consensus, S&P Global):

MetricQ3 2025 ConsensusQ3 2025 Actual
Revenue ($USD)$48.13M*$48.31M
Primary EPS$0.0678*$0.0581*
  • Result: Revenue beat; EPS miss. Management attributed EPS shortfall to the timing of ~$100M of acquisitions in the final two days of the quarter and treasury stock method dilution from forward equity. *

Revenue composition:

Revenue Line ($USD)Q1 2025Q2 2025Q3 2025
Rental revenue (incl. reimbursable)$42.59M $45.16M $45.03M
Interest income on loans receivable$3.08M $3.13M $3.28M
Other revenue$0.25M $0.00M $0.00M

KPIs and deployment:

KPI / ActivityQ1 2025Q2 2025Q3 2025
Occupancy99.9% 99.9% 99.9%
Portfolio WALT (years)9.7 9.8 9.9
ABR ($USD 000s)$168,702 $172,889 $183,163
IG + IG Profile (% of ABR)70.7% 68.7% 62.1%
Gross investments ($USD)$90.68M $117.06M $203.91M
Dispositions ($USD)$40.29M $60.39M $37.77M
Loan repayments ($USD)$4.70M $7.32M $24.13M
Net investment activity ($USD)$45.69M $49.35M $142.01M
Blended investment cash yield7.7% 7.8% 7.4%

Balance sheet & liquidity:

MetricQ2 2025Q3 2025
Total liquidity ($USD)$594.21M $1,134.42M
Adjusted net debt / Annualized Adjusted EBITDAre4.6x 3.7x (Adj), 3.6x (Pro forma)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
AFFO/diluted shareFY 2025$1.28–$1.30 (Apr 28) $1.29–$1.31 (Jul 23) Raised (low end +$0.01)
AFFO/diluted shareFY 2025$1.29–$1.31 (Oct 27) $1.30–$1.31 (Nov 18) Raised (low end +$0.01)
Net investment activityFY 2025$75–$125M (Apr 28) $125–$175M (Jul 23) Raised
Net investment activityFY 2025$125–$175M (Jul 23) $350–$400M (Oct 27) Raised substantially
Cash G&AFY 2025$14.5–$15.5M (Apr 28) $15.0–$15.5M (Oct 27) Narrowed upward
AFFO dilution (treasury stock method)FY 2025N/A$0.015–$0.025 per share (Oct 27) New disclosure
Dividend (quarterly)Q3/Q4 2025Increased to $0.215 (Jul 21) $0.215 declared for Q4 (Oct 24) Maintained at higher level

Earnings Call Themes & Trends

TopicQ1 2025 (Apr 29)Q2 2025 (Jul 24)Q3 2025 (Oct 28)Trend
Cost of capital & spreads“Light is lime-ish green”; targeting IG rating; ~120 bps spread at 7.7% cap Spreads ~150–160 bps; ATM issuance resumed; no material maturities before 2028 Spreads ~165–170 bps; 12.4M follow-on; liquidity >$1.1B Improving cost of capital; widening spreads; more external growth
Cap rates7.7% acquisitions; scaling to 7.5% if volume ramps Record 7.8% cap; guided 7.4–7.5% going forward 7.4% blend; possible ~10 bps compression into 2026 Peak in Q2; normalization in Q3; mild compression ahead
Portfolio diversification (dollar/pharmacy)Plan to get all key tenants below 5% by year-end; Walgreens <3% target Dispositions heavy; Walgreens/CVS reductions; strong 1031 demand Top-5 tenancy down 600 bps to 22.9%; final heavy quarter of dispositions expected Ahead of schedule; reduced concentrations
Credit losses & tenant healthNo credit losses during COVID; Big Lots impact minimal Unit-level coverage up; robust tenant health No credit losses; lone vacancy (Big Lots) re-lease expected at +20% rent Continued favorable credit outcomes
CompetitionLimited impact from new entrants; IG deals not attractive at offered cap rates New entrants not materially affecting pipeline Private equity activity mostly in larger/industrial; limited overlap Fragmented market; competition manageable
Lease structures & internal growthFocus on longer leases, escalations Attractive terms; internal growth emphasis No notable changes in lease structures; peers seek long leases/escalators Steady; terms favorable
Investment-grade rating pursuitTargeting discussions in latter half of 2025; ~30 bps debt savings potential Start discussions later Q3; ~30 bps savings Hopeful to have discussions this year Ongoing; timing TBD

Management Commentary

  • “We are increasing our 2025 net investment guidance range to $350 million to $400 million… and are excited to have the dry powder to execute and drive growth well into the future.”
  • “AFFO was $28 million or $0.33 per diluted share… recurring G&A increased to $5.1 million… we expect this rationalization to accelerate in 2026 and beyond.”
  • “We closed basically $100 million on the last two days of the quarter… our total revenues went up $22,000 quarter over quarter… timing has played a big part.”
  • “Spreads are closer to, call it, 165–170 bps… should allow us to continue to grow AFFO per share as we look out to 2026 at a fairly healthy pace.”
  • “Investment grade is just not really something that we focus on; we’re looking for the best risk-adjusted returns that we can.”

Q&A Highlights

  • Guidance dynamics: AFFO per share held at $1.29–$1.31 due to back-end weighted investment timing and treasury stock dilution; revenue impact limited in-quarter.
  • Cap rates and opportunity set: Post-Q2 normalization to ~7.4–7.5% expected; mild compression possible if rates fall further.
  • Forward equity settlement: Modeling suggests settling ~8–9M shares by year-end; majority of 2024–2025 forwards settled through 2026.
  • Competition: Private equity largely pursuing larger/non-retail or deeper down credit curve; limited overlap with NTST’s targeted assets.
  • Walgreens/CVS/dollar exposure: Walgreens ABR expected <3%; continued selective reductions; strong 1031 demand supports dispositions.

Estimates Context

  • Q3 2025 revenue slightly beat consensus; EPS missed consensus. Management cited late-quarter closing timing and forward equity dilution as primary drivers. *
  • Implications: Street may lift revenue estimates on higher ABR and deployment pace, but EPS estimates may need to reflect dilution from unsettled forward equity and G&A normalization. *
  • Note: Estimates shown are S&P Global consensus; EPS refers to “Primary EPS” as defined by S&P Global. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Deployment acceleration is real: record $203.9M gross investments and a sharp raise in net investment guidance ($350–$400M) indicate a meaningful external growth inflection. Watch for Q4 settlement of forwards and deployment pacing.
  • Liquidity/Leverage provide runway: >$1.1B liquidity with pro forma adjusted net leverage of 3.6x leaves ample capacity to fund acquisitions without stressing the balance sheet.
  • Earnings optics: Expect near-term EPS volatility tied to timing of closings and forward equity dilution; AFFO/diluted share is trending up YoY, with the low-end of full-year guidance raised to $1.30.
  • Mix shift supports returns: Willingness to lean into non-IG assets with strong unit-level coverage supports spread maintenance (~165–170 bps), despite modest cap rate compression risk into 2026.
  • Portfolio quality intact: 99.9% occupancy, minimal near-term expirations, and no credit losses; re-leasing of the lone vacancy anticipated at >20% rent uplift.
  • Potential IG rating: Discussions targeted; ~30 bps debt cost tailwind could lift spreads and EPS/ AFFO in 2026+.
  • Trading setup: Near-term catalysts include Q4 deployment/settlement updates, further diversification progress, and any rating developments; the Nov 18 guidance uplift (AFFO low-end) is supportive for sentiment.

Footnote: Values marked with asterisks retrieved from S&P Global.