NetSTREIT Corp.

Greetings and welcome to the NetStreetCorp second quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Amy Ahn, Investor Relations. Thank you. You may begin.

We thank you for joining us for NetStreet's second quarter 2025 earnings conference call. In addition to the press release distributed yesterday after market closed, we posted a supplemental package and an updated investor presentation. Both can be found in the investor relations section of the company's website at www.netstreet.com. On today's call, management's remarks and answers to your questions may contain forward-looking statements as defined in the private securities litigation with Form Act of 1995. Forward-looking statements address matters that are subject to risk and uncertainties that may cause actual results that differ from those discussed today. For more information about these risk factors, we encourage you to review our Form 10-K for the year ended December 31st, 2024, and our other SEC filings. All forward-looking statements are made as of the date hereof, and NetStreet assumes no obligation to update any forward-looking statements in the future. In addition, certain financial information presented on this call includes non-GAAP financial measures. Please refer to our earnings relief and supplemental package for definitions of our non-GAAP measures, reconciliations to the most comparable GAAP measure, and an explanation of why we believe such non-GAAP financial measures are useful to investors. Today's conference call is hosted by NIP Street's Chief Executive Officer, Mark Mainheimer, and Chief Financial Officer, Dan Donlund. They will make some prepared remarks, and then we will open the call for your questions. Now I'll turn the call over to Mark. Mark?

Thank you, Amy, and thank you all for joining us this morning to discuss our second quarter 2025 results. Similar to past quarters, we continue to improve our tenant diversification by a thoughtful and a creative disposition, and we are now slightly ahead of pace as it relates to our year-end goals. On the external growth front, our team is actively sourcing attractive investments across a broad spectrum of tenants and industries, and we remain confident in our ability to find off-the-run opportunities that fit our underwriting standards. From a portfolio perspective, our tenants remain incredibly healthy, and our heavy concentration within the necessity, discount, and service industries adds further stability to our cash flows. In addition, we provided new disclosure during the second quarter to illustrate our de minimis credit losses since inception and better demonstrate the overall strength of our portfolio, which I will discuss later. We believe this enhanced disclosure, continued diversification efforts, and disciplined approach to capital deployment have all contributed to the improvement in our cost of capital. While there is still plenty of room for improvement on this front, we did take advantage of our favorable investment spreads to raise over $46 million via the HCM this quarter. With all these positives in mind, we are increasing our AFFO per share guidance midpoint by a penny to a new range of $1.29 to $1.31, and we are increasing our net investment guidance by $50 million at the midpoint to a new range of $125 to $175 million. Turning back to external growth, we completed $117.1 million of gross investments at a blended cash yield of 7.8% during the quarter. While we are thrilled to achieve our highest quarterly cash yield on record in the second quarter, we do not expect this to repeat in the back half of the year, as the opportunities at the best risk-adjusting returns are currently blending to a 7.4% to a 7.5% cash yield. The weighted average lease term for our second quarter investments was 15.7 years, with investment-grade and investment-grade profile tenants representing more than a quarter of these acquisitions. Additionally, more than half of our investment activity this quarter was accretively funded with disposition proceeds, which totaled $60.4 million across 20 properties at a 6.5% blended cash yield. As we look out to the third quarter and beyond, we are currently seeing great investment opportunities across a variety of tenants and industries, including farm supplies, grocery, quick service restaurants, auto service, and convenience stores, to name a few. Turning to the portfolio, we ended the quarter with investments in 705 properties that were leased to 106 tenants operating in 27 industries across 45 states. From the credit perspective, 68.7% of our total ABR is leased to investment grade or investment grade profile tenants. Our weighted average lease term remaining for the portfolio was 9.8 years, with just 1.2% of ABR expiring through 2026. As mentioned earlier, we have updated our disclosure to better demonstrate the individual property risk within our portfolio, as well as provide more details around our best-in-class track record as it relates to credit loss. Moreover, we believe this disclosure serves to better illustrate the underwriting discipline that we have maintained since inception, which, as we've said before, goes well beyond just understanding the corporate credit. We also emphasize unit-level performance in locations where we believe the rent is replaceable, which helps us to carefully manage lease expirations. We also focus on larger and more established operators that we believe are more capable of adapting to market changes. As you can see from our investor presentation, our portfolio-wide unit-level length coverage picked up to 3.9 times from 3.8 times when we initially provided the disclosure less than two months ago. To reiterate, we believe this disclosure provides excellent visibility into our best-in-class default and credit loss statistics while providing the necessary context around future risks within our portfolio. We believe this insight, which is not uniformly disclosed across the net lease industry, should provide investors with greater comfort in the future cash flow production of our portfolio, both on an absolute basis and relative to our net lease peers. Before handing the call over to Dan, I wanted to reiterate a message that we have consistently provided in the past. We will not sacrifice our balance sheet for growth, nor will we grow for the sake of asset growth without an appropriate level of per share earnings growth. However, with our cost of capital having meaningfully improved throughout the year, we can now afford to be more inclusive, which is a welcome development to the NetStreet team. We very much appreciate the support of our shareholders, and we remain confident that our growth from a small base narrative can gain additional traction as we execute our strategy. With that, I'll hand the call to Dan to go over second quarter financials and then open up the call for your questions. Thank you, Mark. Looking at our second quarter earnings, we reported net income of $3.3 million, or 4 cents per deleted share. Core FFO for the quarter was $25.6 million, or 31 cents per deleted share, and AFFO was $27.5 million, or 33 cents per deleted share, which is a 3.1% increase over last year. Turning to the expense front, our total recurring G&A in the quarter increased year-over-year to $5.4 million, which is mostly a result of our staffing levels normalizing after we restructured various roles last year. That said, with our total recurring G&A representing 11% of total revenues this quarter versus 12% in the prior quarter, our G&A continues to rationalize relative to our revenue base. Turning to capital markets activity in the second quarter, we sold 2.8 million shares via our ATM program, generating over 46.1 million of net proceeds. Additionally, we settled 1.1 million shares during the quarter. Turning to the balance sheet, our adjusted net debt, which includes the impact of all forward equity, was $713.89. Our weighted average debt maturity was 3.8 years, and our weighted average interest rate was 4.58%. Including the extension options, which can be exercised at our discretion, we have no material debt maturing until February 2028. In addition, our total liquidity was $594 million at quarter end, which consisted of $20 million of cash on hand, $373 million available on a revolving credit facility, and $202 million of unsettled forward equity.