ELS Inc. Reports ‘Continued Strong Performance’ During Q2

RV Business

($ in millions, except per share data)
FINANCIAL RESULTS	Q2 2023		Q2 2022		$ Change
Total Revenues	$	370.0	$	365.3	$	4.7
Net Income available for Common Stockholders	$	62.9	$	61.5	$	1.4
Net Income per Common Share – Fully Diluted	$	0.34	$	0.33	$	0.01

NON-GAAP FINANCIAL MEASURES	Q2 2023		Q2 2022		$ Change
Funds from Operations (“FFO”) per Common Share and OP Unit – Fully Diluted	$	0.63	$	0.62	$	0.01
Normalized Funds from Operations (“Normalized FFO”) per Common Share and OP Unit – Fully Diluted	$	0.66	$	0.64	$	0.02
Property operating revenues, excluding deferrals	$	333.3	$	315.8	$	17.5
Income from property operations, excluding deferrals and property management	$	184.5	$	174.8	$	9.7

Core Portfolio Performance	Q2 2023		Q2 2022		% Change
Core property operating revenues, excluding deferrals	$	320.6	$	305.3		5.0	%
Core income from property operations, excluding deferrals and property management	$	175.6	$	169.9		3.5	%

Operations Update

Normalized FFO for the quarter ended June 30, 2023 was $0.66 per share, representing a 3.4% increase compared to the same period in 2022, outperforming the midpoint of our guidance expectation by $3.2 million.

Core MH base rental income for the quarter ended June 30, 2023 increased 6.7% compared to the same period in 2022, which reflects 7.0% growth from rate increases. We sold 226 new homes during the quarter ended June 30, 2023, with an average sales price of $102,000.

RV and Marina

Core RV and marina base rental income for the quarter ended June 30, 2023 increased 2.3% compared to the same period in 2022. Core RV and marina annual base rental income for the quarter ended June 30, 2023 increased 7.8% compared to the same period in 2022, which reflects 7.3% growth from rate increases and 0.5% from occupancy gains. Demand from customers to visit our RV and Thousand Trails properties remains strong as total site utilization throughout the portfolio is in line compared to the quarter ended June 30, 2022 and increased 8% compared to the quarter ended June 30, 2019. Core RV and marina transient base rental income for the quarter ended June 30, 2023 decreased 13.9% compared to the same period in 2022. We continue to see demand for annual sites and have increased our Core RV and marina annual site count by approximately 240 since December 31, 2022, which has reduced the number of transient sites available for use. We experienced significant weather events during the quarter ended June 30, 2023 in California, the Pacific Northwest and along the East coast that impacted our results. During the quarter ended June 30, 2023, we made a change to our Core portfolio. Refer to page 19 for properties designated as Non-Core.

Property Operating Expenses

Core property operating expenses for the quarter ended June 30, 2023 increased 7.0% compared to the same period in 2022. Property operating and maintenance expenses for the quarter ended June 30, 2023 were favorable to our guidance expectations and the variance, primarily related to utility and payroll expenses, demonstrated a strong correlation to RV locations with lower than expected Transient rent in the same period. See page 8 for details of the Core property operating expenses.

Guidance ⁽¹⁾⁽²⁾

($ in millions, except per share data)					2023
					Third Quarter	Full Year
Net Income per Common Share – Fully Diluted					$0.38 to $0.44	$1.59 to $1.69
FFO per Common Share and OP Unit – Fully Diluted					$0.68 to $0.74	$2.76 to $2.86
Normalized FFO per Common Share and OP Unit – Fully Diluted					$0.68 to $0.74	$2.80 to $2.90

	2022 Actual				2023 Growth Rates
Core Portfolio:	Third Quarter		Full Year		Third Quarter	Full Year
MH base rental income	$	157.0	$	626.0	6.5% to 7.1%	6.3% to 7.3%
RV and marina base rental income ⁽³⁾	$	104.3	$	392.3	2.7% to 3.3%	4.1% to 5.1%
Property operating revenues	$	320.7	$	1,238.1	4.9% to 5.5%	5.5% to 6.5%
Property operating expenses	$	142.3	$	524.1	4.7% to 5.3%	6.3% to 7.3%
Income from property operations, excluding deferrals and property management	$	178.4	$	714.0	5.2% to 5.8%	4.9% to 5.9%

Non-Core Portfolio:					2023 Full Year
Income from property operations, excluding deferrals and property management					$22.8 to $26.8

Other Guidance Assumptions:					2023 Full Year
Property management and general administrative ⁽⁴⁾					$120.6 to $126.6
Debt Assumptions: ⁽⁵⁾
Weighted average debt outstanding					$3,375 to $3,575
Interest and related amortization					$129.0 to $135.0

(1)		Third quarter and full year 2023 guidance ranges represent a range of possible outcomes and the midpoint reflects management’s estimate of the most likely outcome. Actual growth rates and per share amounts could vary materially from growth rates and per share amounts presented above if any of our assumptions, including occupancy and rate changes, our ability to manage expenses in an inflationary environment, our ability to integrate and operate recent acquisitions and costs to restore property operations and potential revenue losses following storms or other unplanned events, is incorrect. See Forward-Looking Statements in this release for additional factors impacting our 2023 guidance assumptions. See Non-GAAP Financial Measures Definitions and Reconciliations at the end of the supplemental financial information.
(2)		Guidance assumptions do not include future capital events (financing transactions, acquisitions or dispositions) subsequent to those discussed in this press release or the use of free cash flow.
(3)		Core RV and marina annual revenue represents approximately 65.8% and 67.9% of third quarter 2023 and full year 2023 RV and marina base rental income, respectively. Core RV and marina annual revenue third quarter 2023 growth rate range is 8.2% to 8.8% and the full year 2023 growth rate range is 7.8% to 8.8%.
(4)		Includes accelerated vesting of stock-based compensation expense of $6.3 million recognized during the quarter ended June 30, 2023 as a result of the passing of a member of our Board of Directors.
(5)		Includes financing transactions discussed in this press release.

Balance Sheet Activity

In June 2023, we closed on a secured refinancing transaction generating gross proceeds of $89 million (the “June 2023 financing”). The loan represents an incremental borrowing from an existing secured facility, has a fixed interest rate of 5.04% per annum and matures in 10 years.

We also locked rate on a $375 million secured financing at a weighted average interest rate of 5.05% secured by a pool of MH and RV assets. The secured financing has a weighted average term to maturity of 7.5 years. We expect to close in the third quarter of 2023.

In July 2023 we repaid all debt scheduled to mature in 2023 and 2024 with proceeds from the June 2023 financing and our unsecured line of credit. Upon consummation of the $375 million secured financing, which is subject to customary closing conditions, the proceeds will be used to pay off the remaining balance on our unsecured line of credit.

For additional information, contact the Investor Relations Department at (800) 247-5279 or at [email protected].

Source: https://rvbusiness.com/els-inc-reports-continued-strong-performance-during-q2/