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PE

Phillips Edison & Company, Inc. (PECO)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered durable operating performance: same-center NOI +4.2% YoY to $114.5M and Core FFO/share +8.5% YoY to $0.64, while GAAP EPS fell to $0.10 on higher depreciation and interest expense .
  • Guidance raised across Net Income/share ($0.61–$0.64), Nareit FFO/share ($2.50–$2.54), Core FFO/share ($2.55–$2.60), and same-center NOI growth (3.10%–3.60%); acquisitions guide maintained at $350–$450M .
  • Estimates context: PECO delivered a revenue beat ($177.8M vs $173.8M consensus*) and an EPS miss ($0.10 vs $0.143 consensus*); EBITDA near consensus (definitions vary)* .
  • Strategic catalysts: strong rent spreads (new +34.6%, renewal +19.1%), high occupancy (97.4%), increased fixed-rate debt (95%), and an active pipeline (YTD acquisitions $279.7M at PECO share) underpin forward growth .

What Went Well and What Went Wrong

What Went Well

  • Same-center NOI grew 4.2% to $114.5M; Core FFO/share grew 8.5% YoY to $0.64. CEO: “Retailer demand remains strong… platform is driving meaningful earnings growth” .
  • Leasing momentum and pricing power: comparable new lease spreads +34.6%, renewal +19.1%; inline renewal spreads +20.7%. President: “We delivered strong comparable renewal rent spreads of 19.1%… and new rent spreads were 34.6%” .
  • Balance sheet strength and funding: $972M liquidity; 95% fixed-rate debt; $350M 5.250% senior notes due 2032 completed, effectively match-funding YTD acquisitions .

What Went Wrong

  • GAAP EPS declined to $0.10 (vs $0.12 YoY) driven by higher D&A ($71.2M vs $61.2M YoY) and interest expense ($27.7M vs $23.6M YoY) despite stronger operations .
  • Net debt/Adj. EBITDAre increased to 5.4x (from 5.0x YE 2024), reflecting elevated acquisition activity; management noted tracking “last quarter annualized” leverage at 5.3x given timing .
  • Bad debt ticked up vs prior year in the quarter (still within guidance); CFO tightened collectibility range and indicated consistency for 2H25 .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Total Revenues ($USD Millions)$161.5 $178.3 $177.8
Net Income per Diluted Share ($)$0.12 $0.21 $0.10
Nareit FFO per Diluted Share ($)$0.57 $0.64 $0.62
Core FFO per Diluted Share ($)$0.59 $0.65 $0.64
Same-Center NOI ($USD Millions)$109.8 $115.1 $114.5
Same-Center NOI Margin (%)71.9% —72.8%

Estimates vs Actuals (Q2 2025):

MetricActualConsensusResult
Revenue ($USD Millions)$177.8 $173.8*Beat
EPS (GAAP, $)$0.10 $0.143*Miss
EBITDA ($USD Millions)116.6 (Adj. EBITDAre) 112.6*Slight beat (note: definitions differ)

Values with asterisk retrieved from S&P Global.*

KPIs

KPIQ2 2024Q1 2025Q2 2025
Leased Portfolio Occupancy (%)97.5 97.1 97.4
Leased Anchor Occupancy (%)98.8 98.4 98.9
Leased Inline Occupancy (%)95.1 94.6 94.8
Comparable New Lease Spreads (%)34.4 28.1 34.6
Comparable Renewal Spreads (%)20.5 20.8 19.1
Retention Rate (%)——93.6
YTD Gross Acquisitions ($USD ‘000 at PECO share)—146,445 279,699
Liquidity ($USD Millions)—760 972
Net Debt / Adj. EBITDAre (TTM, x)5.0 (YE24) 5.3 5.4
Fixed-Rate Debt (%)93.0 (YE24) 85.6 95.0
Weighted Avg Interest Rate (%)4.3 (YE24) 4.4 4.4

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Income per ShareFY 2025$0.58–$0.63 $0.61–$0.64 Raised
Nareit FFO per ShareFY 2025$2.47–$2.54 $2.50–$2.54 Raised (low end)
Core FFO per ShareFY 2025$2.52–$2.59 $2.55–$2.60 Raised
Same-Center NOI GrowthFY 20253.00%–3.50% 3.10%–3.60% Raised
Gross AcquisitionsFY 2025$350M–$450M $350M–$450M Maintained
Net Interest ExpenseFY 2025$111M–$121M $110M–$120M Lowered
G&A ExpenseFY 2025$45M–$49M $46M–$51M Raised
Non-cash Revenue ItemsFY 2025$18M–$20M $19M–$21M Raised
Adjustments for CollectibilityFY 2025$4M–$8M $4.5M–$7.5M Tightened
Dividends (Monthly)Jun–Aug 2025—$0.1025 per share per month Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Tariffs / Macro2024 portfolio resilience; higher fixed-rate debt and extended revolver CEO estimates ~85% of neighbors (by ABR) see limited impact; necessity mix (70% ABR) supports resilience Stable-to-benign impact given necessity mix
Leasing Spreads & OccupancyQ4 new +30.2%, renewal +20.8%; occupancy ~97.7% New +34.6%, renewal +19.1%; occupancy 97.4%; anchor 98.9%; inline 94.8% Strong spreads sustained; occupancy up sequentially
Acquisitions StrategyYE24 set up for expanded 2025 acquisitions; extended revolver $287M YTD at PECO share; shadow/unanchored selectively targeted; target unlevered IRR ≥9% Active and disciplined; pricing competitive
Same-Center NOI cadenceYE24 weighted to Q4; Q1 +3.9% Mgmt expects smoother 2H; Q3/Q4 consistent and improving from Q2 (Q4’24 skew elevated) Sequential improvement; 2H steady
Balance Sheet & Debt MixYE24 fixed-rate 93%; net debt/Adj. EBITDAre 5.0x Fixed-rate 95%; net debt/Adj. EBITDAre 5.4x; $350M 2032 notes Increased fixed-rate, modestly higher leverage due to acquisitions

Management Commentary

  • CEO: “We are pleased to report another quarter of solid operating and financial results, with same-center NOI growth of 4.2% and Core FFO per share growth of 8.5%… PECO’s strong balance sheet and highly-experienced team are well-positioned to drive continued earnings growth” .
  • CEO framing of strategy: “Because of these advantages, we believe PECO is able to deliver mid to high single digit core FFO per share growth annually… Less beta, more alpha” .
  • President: “Comparable renewal rent spreads of 19.1%… new rent spreads were 34.6%… average annual rent bumps of 2.7%… we expect new and renewal spreads to continue to be strong” .
  • CFO: “We have approximately $972M of liquidity… 95% of total debt fixed-rate… completed a bond offering of 5.25% senior notes due 2032… pleased to raise 2025 guidance” .

Q&A Highlights

  • Acquisitions competitiveness and mix: Buying in multiple markets one center at a time; shadow-anchored and unanchored centers offer wider IRR; YTD acquisitions ~$290M; guidance maintained given competitive pricing discipline .
  • Same-center NOI cadence: Mgmt highlighted Q4’24 skew (+6.5%) and expects Q3/Q4 to be consistent and improving from Q2; avoids quarterly guidance for timing effects .
  • Variable-rate debt outlook: Target ~90% fixed; repeat issuer in unsecured bond market; may opportunistically term out variable exposures; monitoring swaps maturities .
  • Tariffs & consumer: Necessity-heavy mix limits exposure; tenants largely passing costs to suppliers; foot traffic remains strong; employment in PECO trade areas supportive .
  • Kroger closures: One impacted store in portfolio, already backfilling with another grocer; co-tenancy risks limited in grocery-anchored format .

Estimates Context

  • Q2 2025 results vs consensus (S&P Global): revenue beat ($177.8M vs $173.8M*), EPS miss ($0.10 vs $0.143*). EBITDA close to consensus (note: consensus EBITDA vs company-reported Adjusted EBITDAre differ by definition)* .
  • Implications: Street may raise FFO and NOI trajectory given updated 2025 guidance and robust leasing spreads; GAAP EPS likely remains pressured by D&A and higher interest expense even as operating metrics strengthen .
    Values with asterisk retrieved from S&P Global.*

Key Takeaways for Investors

  • Core operating strength intact: same-center NOI +4.2% YoY, Core FFO/share +8.5% YoY, with strong spreads and high occupancy driving dependable cash flows .
  • Revenue beat, EPS miss dynamic underscores REIT accounting (D&A/interest headwinds) vs cash flow measures; Nareit/Core FFO are the better performance lenses in this setup .
  • Guidance raised broadly (Net Income, Nareit FFO, Core FFO, same-center NOI), supporting estimate upward revisions and medium-term growth visibility .
  • Balance sheet optionality: $972M liquidity, 95% fixed-rate debt, recent $350M bond issue—capacity to fund acquisitions while managing rate risk .
  • Leasing tailwinds should persist: retailer demand concentrated in necessity categories; inline occupancy has room to rise; robust pipeline of development/redevelopment projects with 9–12% estimated yields .
  • Active external growth: YTD acquisitions $279.7M at PECO share, with disciplined underwriting (target ≥9% unlevered IRR); positioned to exceed guide if pricing allows .
  • Near-term trading lens: narrative favors guidance raises and cash-flow momentum; watch tariff headlines (largely benign for PECO’s mix), bad debt normalization, and acquisition pricing discipline as incremental stock drivers .