Phillips Edison mpany : Q3 2022 Earnings Release

Phillips Edison & Company Reports

Third Quarter 2022 Results and

Raises Full Year Guidance

CINCINNATI - November 3, 2022 - Phillips Edison & Company, Inc. (Nasdaq: PECO) ("PECO" or the "Company"), one of the nation's largest owners and operators of grocery-anchoredomni-channel neighborhood shopping centers, reported net income attributable to stockholders of $11.0 million, or $0.09 per diluted share, for the three months ended September 30, 2022.

Highlights for the Third Quarter Ended September 30, 2022

• Nareit FFO totaled $72.0 million, or $0.55 per diluted share
• Core FFO totaled $76.6 million, or $0.58 per diluted share
• Same-centerNOI increased 4.3% versus the third quarter ended September 30, 2021
• Leased portfolio occupancy as of September 30, 2022 increased to a record-high 97.1%
• Comparable new and renewal rent spreads were 21.3% and 15.5%, respectively
• Acquired one grocery-anchored shopping center and two outparcels for $59.5 million
• Net debt to annualized adjusted EBITDAre was 5.4x compared to 5.6x at December 31, 2021
• Increased monthly distributions by 3.7% to $0.0933 per share

Management Commentary

"PECO's grocery-anchored and necessity-based Neighbor mix, our right-sized format and well-positioned locations in growing markets, resulted in continued strong leasing demand," stated Jeff Edison, chairman and chief executive officer of PECO. "Our team delivered another strong quarter with same-center NOI growth of

4.3% and record occupancy of 97.1%. Our performance allows us to raise the midpoint of our 2022 guidance for the third quarter in a row. As reflected in our results, 2022 has been a year of reaching record highs in occupancy and releasing spreads. Our grocery-anchored neighborhood centers continue to benefit from structural and macroeconomic trends that create tailwinds for us as we head into 2023 and beyond, providing us with confidence in our ability to continue to deliver strong results."

Financial Results for the Third Quarter and Nine Months Ended September 30, 2022

Net Income

Third quarter 2022 net income attributable to stockholders totaled $11.0 million, or $0.09 per diluted share, compared to net income of $14.6 million, or $0.13 per diluted share, during the third quarter of 2021.

For the nine months ended September 30, 2022, net income attributable to stockholders totaled $34.6 million, or $0.30 per diluted share, compared to net income of $20.3 million, or $0.21 per diluted share, for the same period in 2021.

Nareit FFO

Third quarter 2022 funds from operations attributable to stockholders and operating partnership ("OP") unit holders as defined by Nareit ("Nareit FFO") increased 26.4% to $72.0 million, or $0.55 per diluted share, from $56.9 million, or $0.46 per diluted share, during the third quarter of 2021.

For the nine months ended September 30, 2022, Nareit FFO increased 29.9% to $210.2 million, or $1.62 per diluted share, from $161.8 million, or $1.44 per diluted share, during the same period in 2021.

The $15.1 million increase for the third quarter of 2022 and the $48.4 million increase for the nine months ended September 30, 2022 were driven by an increase in rental income as a result of the Company's portfolio expansion, lower interest expense, and a reduction in non-cash expense as a result of the final settlement of the earn-out liability with the issuance of 1.6 million OP units in January 2022.

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Core FFO

Third quarter 2022 core funds from operations ("Core FFO") increased 15.4% to $76.6 million, or $0.58 per diluted share, compared to $66.4 million, or $0.54 per diluted share, during the third quarter of 2021.

For the nine months ended September 30, 2022, Core FFO increased 13.8% to $221.0 million, or $1.70 per diluted share, from $194.2 million, or $1.73 per diluted share, during the same period in 2021.

Results for both periods were driven by increased rental income as a result of the Company's portfolio expansion, increased occupancy, improved average base rent per square foot, as well as lower interest costs. The decrease in the per diluted share result for the nine months ended was primarily due to an increase in the share count of 18% as a result of PECO's July 2021 underwritten IPO.

Same-Center NOI

Third quarter 2022 same-center net operating income ("NOI") increased 4.3% to $92.5 million compared to $88.7 million during the third quarter of 2021.

For the nine months ended September 30, 2022, same-center NOI increased 5.1% to $271.8 million from $258.6 million during the nine months ended September 30, 2021.

Results for both periods were driven by a $0.37 increase in average base rent per square foot and an improvement in average occupancy, offset by reduced out-of-period collections in 2022 when compared to the same year-ago period.

Portfolio Overview for the Third Quarter and Nine Months Ended September 30, 2022

Portfolio Statistics

As of September 30, 2022, PECO's wholly-owned portfolio consisted of 270 properties, totaling approximately

31.1 million square feet, located in 31 states. This compared to 267 properties, totaling approximately 30.4 million square feet, located in 31 states as of September 30, 2021.

Leased portfolio occupancy increased to 97.1% at September 30, 2022 compared to 95.6% at September 30, 2021.

Anchor occupancy increased to 98.9% at September 30, 2022 compared to 97.6% at September 30, 2021, and inline occupancy increased to 93.6% at September 30, 2022 compared to 91.9% at September 30, 2021.

Leasing Activity

During the third quarter of 2022, 240 leases (new, renewal, and options) were executed totaling 1.2 million square feet. This compared to 268 leases executed totaling 1.4 million square feet during the third quarter of 2021.

During the nine months ended September 30, 2022, 749 leases (new, renewal, and options) were executed totaling 3.6 million square feet. This compared to 882 leases executed totaling 4.2 million square feet during the same year-ago period.

Comparable rent spreads during the third quarter of 2022, which compare the percentage increase (or decrease) of new or renewal leases to the expiring lease of a unit that was occupied within the past twelve months, were 21.3% for new leases, 15.5% for renewal leases (excluding options), and 16.9% combined (new and renewal leases only).

Comparable rent spreads during the nine months ended September 30, 2022 were 31.3% for new leases, 14.9% for renewal leases (excluding options), and 18.5% combined (new and renewal leases only).

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Acquisition & Disposition Activity

During the third quarter of 2022, one property and two outparcels were acquired for $59.5 million. During the same period, one outparcel was sold for $0.4 million. Third quarter 2022 grocery-anchored shopping center acquisitions included:

• Crossroads Towne Center, a 149,000 square foot shopping center shadow-anchored by Walmart in Las Vegas, Nevada. The center is located in a high-traffic area with strong median household income and a growing population. At the time of purchase, the center occupancy was 88.7%, providing room for growth through leasing vacant space.

During the nine months ended September 30, 2022, five properties and three outparcels were acquired for $228.8 million. During the same period, three properties and three outparcels were sold for $28.7 million.

Balance Sheet Highlights as of September 30, 2022

As of September 30, 2022, PECO had $757.8 million of total liquidity, comprised of $24.4 million of cash, cash equivalents, and restricted cash, plus $733.4 million of borrowing capacity available on its $800 million revolving credit facility.

PECO's net debt to annualized adjusted EBITDAre was 5.4x, compared to 5.6x at December 31, 2021.

PECO's outstanding debt had a weighted-average interest rate of 3.3%, a weighted-average maturity of 4.6 years, and 86.5% of its total debt was fixed-rate debt.

Monthly Stockholder Distributions

For the three months ended September 30, 2022, total distributions of $36.1 million were paid to common stockholders and OP unit holders. Distributions paid in July, August, and September were each $0.09 per share.

PECO's Board of Directors (the "Board") unanimously approved monthly distributions payable October 3, 2022 and November 1, 2022 to stockholders of record at the close of business on September 16, 2022 and October 17, 2022, respectively. The Board approved the distribution at a rate of $0.0933 per share of the Company's common stock and per OP unit. When annualized, this is equal to a rate of $1.12 per share, representing an increase of 3.7% over the previous annualized rate of $1.08 per share. PECO has paid, and plans to continue to pay, distributions monthly.

Subsequent to quarter end, the Board authorized monthly distributions of $0.0933 per share payable in December 2022, January 2023, and February 2023 to stockholders of record at the close of business on November 15, 2022, December 15, 2022, and January 17, 2023, respectively.

Updated 2022 Guidance

PECO has updated earnings guidance for the year ending December 31, 2022 to reflect the following:

• Strong property results from record occupancy and leasing spreads to date
• Lower than expected corporate and general and administrative expenses

	Updated Full Year	Prior Full Year
	2022 Guidance	2022 Guidance
Net income per share	$0.36	- $0.39	$0.34 - $0.40
Nareit FFO per share	$2.11	- $2.15	$2.09 - $2.15
Core FFO per share	$2.22	- $2.26	$2.19 - $2.25
Same-Center NOI growth	4.1%	- 4.5%	3.75% - 4.5%
Acquisitions (net of dispositions)	$200 - $250 million	$200 - $300 million

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The following table provides a reconciliation of the range of the Company's 2022 estimated net income to estimated Nareit FFO and Core FFO:

(Unaudited)		Low End			High End
Net income	$	0.36	$	0.39
Depreciation and amortization of real estate assets		1.77			1.78
Gain on sale of real estate assets		(0.03)			(0.03)
Adjustments related to unconsolidated joint ventures		0.01			0.01
Nareit FFO	$	2.11	$	2.15
Depreciation and amortization of corporate assets		0.03			0.03
Change in fair value of earn-out liability		0.01			0.01
Loss on extinguishment of debt, net		0.01			0.01
Transactions and other		0.06			0.06
Core FFO	$	2.22	$	2.26

Jeff Edison summarized the quarter: "Our third quarter results continue to highlight the strength of PECO's focused and differentiated strategy of owning and operating small-format, neighborhood centers anchored by the #1 or #2 grocer in a market which drives high-recurring foot traffic and Neighbor demand and results in superior financial and operating performance. Our experienced cycle-tested team, integrated operating platform, and grocery-anchored strategy place PECO in a strong position, despite an uncertain macroeconomic environment, with a fortress balance sheet and liquidity that will allow us to take advantage of opportunities as they arise."

Conference Call Details

PECO plans to host a conference call and webcast on Friday, November 4, 2022 at 12:00 p.m. Eastern Time to discuss these results. Chairman and Chief Executive Officer Jeff Edison, President Devin Murphy, and Chief Financial Officer John Caulfield will host the presentation.

Third Quarter 2022 Earnings Conference Call Details:

Date: Friday, November 4, 2022

Time: 12:00 p.m. ET

Toll-FreeDial-In Number: [phone]

International Dial-In Number: [phone]

Conference ID: 2035308

Webcast:Third Quarter 2022 Webcast Link

A webcast replay will be available approximately one hour after the conclusion of the presentation using the webcast link above.

For more information on the Company's financial results, please refer to the Company's Form 10-Q, filed with the SEC on November 3, 2022 and available on the SEC's website at www.sec.gov.

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PHILLIPS EDISON & COMPANY, INC. CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021 (Condensed and Unaudited)

(In thousands, except per share amounts)

	September 30, 2022		December 31, 2021
ASSETS
Investment in real estate:
Land and improvements	$	1,656,666	$	1,586,993
Building and improvements		3,539,035			3,355,433
In-place lease assets		470,184			452,504
Above-market lease assets		72,294			68,736
Total investment in real estate assets		5,738,179			5,463,666
Accumulated depreciation and amortization		(1,272,653)			(1,110,426)
Net investment in real estate assets		4,465,526			4,353,240
Investment in unconsolidated joint ventures		27,601			31,326
Total investment in real estate assets, net		4,493,127			4,384,566
Cash and cash equivalents		4,789			92,585
Restricted cash		19,657			22,944
Goodwill		29,066			29,066
Other assets, net		183,774			138,050
Real estate investments and other assets held for sale		-			1,557
Total assets	$	4,730,413	$	4,668,768
LIABILITIES AND EQUITY
Liabilities:
Debt obligations, net	$	1,872,939	$	1,891,722
Below-market lease liabilities, net		108,548			107,526
Earn-out liability		-			52,436
Derivative liabilities		-			24,096
Deferred income		21,586			19,145
Accounts payable and other liabilities		112,433			97,229
Liabilities of real estate investments held for sale		-			288
Total liabilities		2,115,506			2,192,442
Equity:
Preferred stock, $0.01 par value per share, 10,000 shares authorized, zero shares issued and		-			-
outstanding at September 30, 2022 and December 31, 2021
Common stock, $0.01 par value per share, 1,000,000 shares authorized, 117,084 shares issued
and outstanding at September 30, 2022; 650,000 shares authorized, 19,550 shares issued and		1,170			196
outstanding at December 31, 2021
Class B common stock, $0.01 par value per share, zero shares authorized, issued, and
outstanding at September 30, 2022; 350,000 shares authorized, 93,665 shares issued and		-			936
outstanding at December 31, 2021
Additional paid-in capital		3,381,638			3,264,038
Accumulated other comprehensive income (loss)		21,123			(24,819)
Accumulated deficit		(1,150,337)			(1,090,837)
Total stockholders' equity		2,253,594			2,149,514
Noncontrolling interests		361,313			326,812
Total equity		2,614,907			2,476,326
Total liabilities and equity	$	4,730,413	$	4,668,768

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