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PE

Phillips Edison & Company, Inc. (PECO)·Q1 2025 Earnings Summary

Executive Summary

  • PECO delivered a clean beat on both revenue and EPS versus S&P Global consensus and affirmed FY25 guidance, with GAAP diluted EPS of $0.21 and revenue of $178.3M vs consensus EPS $0.147 and revenue $170.5M; Nareit FFO/share was $0.64 and Core FFO/share $0.65, each boosted by a ~$0.01 one-time lease termination fee . Revenue/EPS estimates from S&P Global, see Estimates Context below.*
  • Operating momentum remained strong: same‑center NOI +3.9% YoY; portfolio leased occupancy 97.1% (inline 94.6%); new and renewal rent spreads 28.1% and 20.8% respectively; leasing retention 91.4% .
  • Guidance: FY25 Nareit FFO/share and Core FFO/share maintained ($2.47–$2.54 and $2.52–$2.59), while FY25 net income/share range was raised to $0.58–$0.63 (from $0.54–$0.59) as internal/external growth drivers remain intact; same‑center NOI growth maintained at 3.0–3.5% .
  • Balance sheet/liquidity healthy with ~$760M liquidity, net debt/Adj. EBITDAre 5.3x TTM, 86% fixed-rate, and revolver extended/upsized to $1.0B, positioning PECO to pursue $350–$450M of FY25 gross acquisitions; Q1 gross acquisitions were $146.4M, with another $27.8M post-quarter .

What Went Well and What Went Wrong

  • What Went Well

    • Robust top-line and EPS vs consensus: revenue $178.3M beat consensus $170.5M; Primary EPS (S&P) 0.1652 vs 0.1475 estimate; GAAP diluted EPS $0.21; management also delivered Nareit FFO/share $0.64 and Core FFO/share $0.65, aided by ~$0.01 termination fee . Revenue/EPS estimates from S&P Global.*
    • Leasing power intact: portfolio leased occupancy 97.1%, rent spreads of 28.1% (new) and 20.8% (renewals), record in-line renewal spread cited, and retention ~91%; same‑center NOI +3.9% YoY . “Less beta, more alpha,” highlighting earnings resilience via necessity retail .
    • External growth pipeline active: $146.4M of Q1 gross acquisitions (5 wholly-owned, 1 JV), plus $27.8M subsequent; FY25 gross acquisitions guide reiterated at $350–$450M; target unlevered IRR ~9% .

  • What Went Wrong

    • Seasonally lower in-line occupancy: in-line leased dipped to 94.6% (typical Q1 pattern), with management expecting ~95% through the year; some vacancy from selected remerchandising/bankruptcy exposures (e.g., Party City, Big Lots) being backfilled at higher rents .
    • Slight leverage tick-up: net debt/Adj. EBITDAre moved to 5.3x TTM from 5.0x at YE24 due to acquisition activity; management remains comfortable within low-to-mid-5x target, expects ~5.0x on a current-quarter annualized basis .
    • One-time fee boosted FFO by ~$0.01 and won’t recur: management flagged the unusually large lease termination fee (with a replacement tenant signed) as non-recurring, tempering run-rate extrapolation .

Financial Results

MetricQ3 2024Q4 2024Q1 2025Vs. YoY (Q1)Vs. QoQVs. S&P Consensus (Q1)
Revenue ($M)$165.527 $173.048 $178.311 +10.6% (from $161.302M) +3.0%+$7.83M vs $170.481M estimate*
GAAP Diluted EPS ($)$0.09 $0.15 $0.21 +50.0% (from $0.14) +$0.06+$0.045 vs 0.1652 actual per S&P Primary EPS (methodology differs)*
Nareit FFO/share ($)$0.60 $0.61 $0.64 +8.5% (from $0.59) +$0.03n/a
Core FFO/share ($)$0.62 $0.62 $0.65 +8.3% (from $0.60) +$0.03n/a
Same-Center NOI ($M)$107.724 $110.413 $115.094 +3.9% +$4.681Mn/a
Same-Center NOI Growth (%)3.2% 6.5% 3.9% +200 bps vs Q1’24 (from 1.9%) -260 bpsn/a

Notes: Q1’25 EPS/Revenue consensus from S&P Global; Primary EPS measure differs from GAAP diluted EPS reporting.*

KPIs and Operating Metrics

KPIQ3 2024Q4 2024Q1 2025
Portfolio Leased Occupancy (%)97.8 97.7 97.1
Anchor Leased Occupancy (%)99.4 99.1 98.4
In-line Leased Occupancy (%)95.0 95.0 94.6
Rent Spread – New Leases (%)55.0 30.2 28.1
Rent Spread – Renewals (%)19.8 20.8 20.8
Retention Rate (%)92 88 91.4
Leases Executed (Count / MSF)268 / 1.6 231 / 1.4 234 / 1.5
Same‑Center NOI Margin (%)——71.9

Balance Sheet and Capital

  • Liquidity ~$760M (cash/restricted cash ~$7.9M + $751.8M revolver capacity); net debt/Adj. EBITDAre 5.3x TTM; W.A. interest rate 4.4%; W.A. maturity 5.6 years; ~86% fixed rate .
  • Acquisitions: $146.4M gross in Q1 (five wholly-owned; one JV) plus $27.8M after quarter; dispositions: one center sold for $24.9M with $17.4M seller note; JV acquisition (Oak Grove Shoppes) $8.0M PECO share .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Income per ShareFY 2025$0.54 – $0.59 $0.58 – $0.63 Raised
Nareit FFO per ShareFY 2025$2.47 – $2.54 $2.47 – $2.54 Maintained
Core FFO per ShareFY 2025$2.52 – $2.59 $2.52 – $2.59 Maintained
Same‑Center NOI GrowthFY 20253.0% – 3.5% 3.0% – 3.5% Maintained
Gross AcquisitionsFY 2025$350M – $450M $350M – $450M Maintained
Net Interest ExpenseFY 2025$111M – $121M $111M – $121M Maintained
G&A ExpenseFY 2025$45M – $49M $45M – $49M Maintained
Non‑cash Revenue ItemsFY 2025$18M – $20M $18M – $20M Maintained
Adjustments for CollectibilityFY 2025$4M – $8M $4M – $8M Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Macro/tariffsDemand solid; consumer resilient; no slowdowns flagged Pricing power; planning for ’25; macro tailwinds (suburban, limited supply) Watching tariffs; consumer remains resilient; PECO relatively insulated (71% ABR necessity-based) Watchlist but stable
Leasing & spreadsRecord 55% new spreads; renewals ~19.8%; occupancy +30 bps seq New 26.5%, renewal 20.8%; retention 88% New 28.1%, renewal 20.8%; in-line record renewal spread; retention 91% Stable/strong
Acquisitions/IRRNet acquisitions guide raised to $275–$325M in ’24 FY25 gross acquisitions plan $350–$450M; target ~9% unlevered IRR $146M Q1; guide reaffirmed; pipeline strong; target ~9% unlevered IRR Improving pipeline
Balance sheet & swaps93% fixed; laddering; 2035 notes 93% fixed; BBB/Baa2; no equity assumed in ’25 plan ~86% fixed (Q1 math); swap expirations managed through bond issuance; target ~90% fixed Stable
Re‑merchandisingAggressive stance to capture mark-to-market Intentional re‑merchandising creates slight near-term headwind Backfilling boxes; higher rents; visibility strong Positive mix shift
Development/outparcel10 projects; 9–12% yields 15 projects stabilized in ’24; plan $40–$50M/yr Active ground-up/redevelopment pipeline continues Ongoing

Management Commentary

  • Strategy and resilience: “71% of our ABR comes from necessity-based goods and services… We believe PECO is relatively more insulated from potential tariff disruption… Less beta, more alpha.” — Jeff Edison, CEO .
  • Leasing momentum: “In-line renewal rent spreads reached a record high of 21.7%… Comparable new leasing rent spreads were 28.1%.” — Bob Myers, President .
  • Balance sheet stance: “Approximately $760 million of liquidity… net debt to adjusted EBITDAre was 5.3x… 86% of total debt fixed rate.” — John Caulfield, CFO .
  • External growth discipline: “We continue to target an unlevered IRR of 9% for our acquisitions… we are affirming our guidance range of $350–$450 million in gross acquisitions this year.” — Jeff Edison .

Q&A Highlights

  • Guidance cadence/headwinds: FY25 ranges affirmed; lease termination fee (~$0.01/share FFO) non-recurring; higher-end outcomes depend on capital market improvement; acquisitions pipeline healthy .
  • Variable-rate exposure/swaps: ~14% variable today; plan to manage swap expirations by issuing fixed bonds, maintaining ~90% fixed target over time .
  • Transaction market: Healthy Q1; competition may ebb if some buyers step back; underwriting to ~9% IRR remains focus, cap rates vary by asset/story .
  • Occupancy and bankruptcies: Seasonal in-line dip; limited exposure to at-risk retailers; LOIs on ~80% of larger vacancies; re-leasing at higher rents .
  • Lease termination fee: Large, location-specific, non-bankruptcy, with replacement lease executed simultaneously; proceeds fund TI .

Estimates Context

  • Q1 2025 S&P Global consensus vs actuals:
    • Revenue: Estimate $170.48M; Actual $178.31M — beat by ~$7.83M.*
    • Primary EPS: Estimate $0.147; Actual $0.165 — beat by ~$0.018. Note: S&P “Primary EPS” differs from GAAP diluted EPS; company-reported GAAP diluted EPS was $0.21 .*
  • Implication: Modest upward bias to near-term models for revenue/FFO given strong spreads and affirmed same-center NOI growth; exclude the ~$0.01/share termination fee from run-rate FFO.*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Beat-and-affirm quarter: Top-line strength, EPS/FFO beats, and an upward revision to net income guidance reinforce earnings durability; one-time fee should be normalized out for run-rate .
  • Leasing engine robust: High occupancy and powerful rent spreads (28% new/21% renewal) plus 91% retention support continued same‑store NOI growth within the 3.0–3.5% guide .
  • External growth on track: $146M acquired in Q1 and reiterated $350–$450M FY25 target, with balance sheet/liquidity supporting continued pipeline conversion and a 9% unlevered IRR focus .
  • Balance sheet conservative: 5.3x TTM net debt/Adj. EBITDAre, long maturities, and high fixed-rate mix mitigate rate risk and provide optionality on timing of capital markets .
  • Watch items: Tariff headlines and macro uncertainty; seasonal in-line occupancy fluctuations; swap expirations to be managed with bond issuance — management stance remains “cautiously optimistic” .
  • Trading lens: Narrative supportive of defensive growth REITs — necessity-based rent growth, limited new supply, and acquisition runway are likely stock catalysts, especially if estimate revisions move higher on the beat and raised net income guide .

Additional Documents Read

  • 8‑K and press release: Q1 2025 results, guidance details, and supplemental metrics .
  • Earnings call transcript: Prepared remarks and Q&A on leasing, guidance, capital markets, and acquisitions .
  • Prior quarters for trend analysis: Q4 2024 press release and call; Q3 2024 press release and call .
  • Other relevant press releases around Q1: ICSC recap webcast announcement (context on leasing environment updates) .