NexPoint Residential Trust, Inc. Q2 FY2025 earnings call

• Paul Richards discussed Q2 results, NAV estimate ($43.90 low to $57.73 high per share), revised guidance ranges for earnings loss, core FFO, etc. - Matt McGraner went over same-store operational results: same-store total revenue down 20 basis points, 4 markets with at least 1% growth; same-store operating expenses up 1.5% y/y; same-store NOI growth improved to negative 1.1% from negative 3.8% in Q1; 5 markets with >1% NOI growth; renewal conversions 54.2%; expense moderation with payroll and marketing down; focus on optimizing maintenance operations and AI-driven efficiencies. - Second half 2025 guidance: supply pressures eased but still challenges; demand outperformed; occupancy expected to average 94% vs 94.7% in 2024 second half; revenue more muted; expense improvements with centralized operations and AI; insurance renewal favorable.

For Q2 2025, net loss was $7 million or $0.28 per diluted share on total revenue of $63.1 million, compared to net income of $10.6 million or $0.40 earnings per diluted share in Q2 2024 on $64.2 million revenue. NOI was $38 million on 35 properties in Q2 2025 vs $38.9 million on 36 properties in Q2 2024. Same-store rent and occupancy decreased 1.3% and 0.8% respectively, leading to a 0.2% decrease in same-store revenues and 1.1% decrease in same-store NOI. Core FFO was $18 million or $0.71 per diluted share in Q2 2025 vs $0.69 per diluted share in Q2 2024. During Q2, 555 full and partial upgrades were completed, 381 upgraded units leased with $73 average monthly rent premium and 26% ROI. Dividend of $0.51 per share paid, repurchased 223,109 shares totaling ~$7.6 million, and entered into a new $100 million SOFR swap.

• Revised 2025 guidance ranges: earnings loss per diluted share $1.22 high to $1.40 low (midpoint $1.31), core FFO per diluted share $2.84 high to $2.66 low (midpoint $2.75). - Second half 2025: supply slowdown continues; demand outperformed first half; occupancy expected 94% vs 94.7% in 2024 second half; revenue more muted; expense improvements with centralized ops and AI; insurance impact fully recognized in second half with $600k savings year-over-year.

• Supply pressures in some submarkets continuing to present challenges. - Economic uncertainty and soft consumer sentiment causing new lease growth to slow modestly. - Potential short-term headwinds in certain markets due to new supply. - Bad debt pressure in some markets.

Q: How much of the $8 million in recurring capitalized maintenance expenditures year-to-date are non-revenue-producing?

A: Elevated spend this quarter, skewed more towards nonrevenue generating, with normalization expected in Q4.

Q: What drove the large increase in rehab units to 500-plus in Q2 vs prior expectations?

A: Focus of the year, identified opportunity and deployed faster with BH construction team and asset management.

Q: What's the useful life for tenure in post-rehab units ROI?

A: Historically 7 years, no difference between full and partial units.

Q: Color on Phoenix and Vegas occupancy drops?

A: Phoenix supply-driven with 3 properties, Vegas due to 1 asset (Bella Solara) with weaker traffic; expect subside in later quarters.

Q: What's driving lower turn costs?

A: Higher retention and focus on smaller value-add upgrades offsetting turn costs