10-QPeriod: Q3 FY2017

DIGITAL REALTY TRUST, INC. Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 9, 2017For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) reported its third-quarter results for the period ending September 29, 2017. The company completed a significant merger with DuPont Fabros Technology, Inc. (DFT) in September 2017, which is expected to expand its data center portfolio. Total operating revenues for the nine months ended September 30, 2017, increased by approximately 10.3% year-over-year to $1.73 billion, driven by growth in rental income and tenant reimbursements, particularly from recently acquired properties. The company's portfolio as of September 30, 2017, comprised 159 properties, a notable increase from the previous year, reflecting the DFT acquisition. Occupancy remained strong at 90.8% for operating properties (excluding space under development). While the company experienced increased operating expenses, largely due to the DFT merger and ongoing development activities, it also saw an increase in net cash provided by operating activities, demonstrating its operational resilience. DLR's financial condition remains robust, with a debt-to-enterprise value ratio of approximately 24% as of September 30, 2017, indicating a prudent approach to leverage.

Financial Highlights

32 data points
Beta

Revenue

$609.92M

Net Income

$12.44M

2.0% Net Margin

EPS (Diluted)

$-0.02

Total Assets

$21.23B

Cash & Equivalents

$192.58M

Free Cash Flow

$162.24M

Financial Statements
Beta
Revenue$609.92M
Operating Expenses$543.77M
Operating Income$66.16M
Interest Expense$71.62M
Net Income$12.44M
EPS (Basic)$-0.02
EPS (Diluted)$-0.02
Shares Outstanding (Basic)170.19M
Shares Outstanding (Diluted)170.19M

Key Highlights

  • 1Completed the significant merger with DuPont Fabros Technology, Inc. (DFT) in September 2017, expanding the company's data center footprint.
  • 2Total operating revenues for the nine months ended September 30, 2017, increased by 10.3% to $1.73 billion compared to the prior year period.
  • 3The company's portfolio grew to 159 properties as of September 30, 2017, up from 144 properties in the prior year, largely due to the DFT acquisition.
  • 4Portfolio occupancy remained strong at 90.8% as of September 30, 2017, excluding space under development, indicating healthy demand for its facilities.
  • 5Net cash provided by operating activities increased by approximately 8.7% for the nine months ended September 30, 2017, compared to the same period in 2016.
  • 6The debt-to-total enterprise value ratio was approximately 24% as of September 30, 2017, suggesting a conservative leverage position.
  • 7Transaction and integration expenses increased significantly due to merger-related costs, impacting short-term profitability but are expected to be offset by long-term synergies.

Frequently Asked Questions

The DFT merger, completed in September 2017, significantly expanded Digital Realty's portfolio and revenue base. While it led to increased transaction and integration expenses in the short term, it is expected to drive long-term growth and provide strategic benefits. The increase in total operating revenues and the expanded property count are direct results of this significant transaction.

As of September 30, 2017, Digital Realty maintained a debt-to-total enterprise value ratio of approximately 24%, indicating a moderate leverage level. The company utilized proceeds from debt and equity offerings to fund the DFT merger and for general corporate purposes. They also have a $2.0 billion global revolving credit facility with significant availability, providing liquidity for ongoing operations and potential acquisitions.

Revenue growth is primarily driven by rental income and tenant reimbursements. The company benefits from new leasing activity, renewals at favorable rates, and the acquisition of new properties, such as the DFT portfolio. Interconnection and other services also contribute to the revenue stream. The strong occupancy rate of 90.8% underscores the consistent demand for their data center space.

Key risks include general economic and market conditions impacting IT spending and capital availability, foreign currency exchange rate fluctuations due to international operations, potential increases in interest rates, and competition within the data center space. The company also faces risks related to the successful integration and operation of acquired properties, such as those from the DFT merger.