10-KPeriod: FY2022

DIGITAL REALTY TRUST, INC. Annual Report, Year Ended Dec 31, 2022

Filed February 27, 2023For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) reported its fiscal year 2022 results, showcasing continued growth in its global data center platform. The company has significantly expanded its international footprint, notably through the acquisition of a controlling interest in Teraco Data Environments in South Africa, which diversifies its geographic presence and strengthens its service offerings in emerging markets. DLR's strategy remains focused on leveraging its PlatformDIGITAL® to provide scalable colocation and interconnection solutions, catering to the increasing demand driven by digital transformation, cloud adoption, and data growth. Financially, the company reported an increase in total operating revenues, driven by growth in its non-stabilized portfolio and the recent acquisitions. However, it also navigated challenges such as higher utility costs and foreign currency translation effects impacting stabilized revenues. DLR maintained a strong focus on capital allocation, continuing significant investments in development projects while prudently managing its balance sheet with a target debt-to-Adjusted EBITDA ratio. The company's operational resilience and strategic expansion position it to capitalize on long-term secular trends in the digital economy.

Financial Highlights

33 data points
Beta

Revenue

$4.69B

Net Income

$380.32M

8.1% Net Margin

EPS (Diluted)

$1.11

Total Assets

$41.48B

Cash & Equivalents

$141.77M

Free Cash Flow

$1.66B

Financial Statements
Beta
Revenue$4.69B
Operating Expenses$4.10B
Operating Income$589.97M
Interest Expense$299.13M
Net Income$380.32M
EPS (Basic)$1.18
EPS (Diluted)$1.11
Shares Outstanding (Basic)286.33M
Shares Outstanding (Diluted)297.92M

Key Highlights

  • 1Acquisition of 61.1% indirect controlling interest in Teraco Data Environments for $1.7 billion, expanding presence in South Africa.
  • 2Total operating revenues increased by 6.0% to $4.69 billion.
  • 3Non-stabilized rental and other services revenue saw a significant increase of 34.7% driven by development pipeline lease-up and acquisitions.
  • 4Total capital expenditures were $2.49 billion, primarily allocated to development projects, reflecting continued investment in growth.
  • 5Secured approximately $1.8 billion in available borrowings under its global revolving credit facilities, ensuring liquidity.
  • 6Maintained a significant global data center portfolio of 316 facilities across 28 countries, with an overall portfolio occupancy of 84.7%.

Frequently Asked Questions

The acquisition of a 61.1% controlling interest in Teraco for $1.7 billion in August 2022 significantly expanded Digital Realty's geographic footprint into South Africa. This acquisition contributed $71.4 million in non-stabilized rental and other services revenue and added $1.6 billion in goodwill and $720 million in customer relationship value and other intangibles.

Digital Realty maintained a significant debt load totaling $16.7 billion at year-end 2022. The company actively managed its capital structure by issuing new debt, including €750 million in 1.375% Guaranteed Notes due 2032 and $900 million in 5.550% Notes due 2028, while also redeeming some existing debt. The company aims to maintain a debt-to-Adjusted EBITDA ratio of 5.5x and has a commitment to a conservative capital structure, with approximately 80.8% of its debt being fixed rate or subject to interest rate swaps.

Digital Realty's revenue growth is primarily driven by the increasing global demand for data center space, colocation, and interconnection solutions. Key factors include digital transformation, cloud adoption, the growth of the Internet of Things (IoT), 5G technology, and the resulting explosion in data generation and processing needs. The company's strategic investments in new development projects and acquisitions, like Teraco, are crucial for expanding capacity and capturing this growing market demand.

Digital Realty is experiencing increased utility expenses, with total stabilized utilities increasing by $79.4 million year-over-year. While many leases include provisions for tenants to reimburse operating expenses, including utilities, the company notes that any additional taxation or regulation on energy use could significantly increase costs. Management aims to pass on these costs to customers through existing lease structures and escalations, but the effectiveness of this mitigation is subject to market conditions and lease terms.