10-QPeriod: Q1 FY2019

DIGITAL REALTY TRUST, INC. Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 10, 2019For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) reported its first-quarter 2019 results, showing an increase in total operating revenues to $814.5 million, up from $744.4 million in the same period of the prior year. This growth was driven by strong performance in pre-stabilized properties, particularly following the Ascenty acquisition, and ongoing leasing activity. While stabilized revenue saw a slight decrease, the overall portfolio expansion and strategic acquisitions signal continued growth momentum. The company's robust development pipeline, with significant square footage under active development and held for development, positions it well for future rental income. DLR also continues to manage its capital structure prudently, with a focus on maintaining targeted leverage ratios and a well-laddered debt maturity schedule. The company's financial health remains supported by its operating cash flow and access to credit facilities, enabling it to meet its distribution requirements and pursue growth opportunities.

Financial Highlights

31 data points
Beta

Revenue

$814.51M

Net Income

$116.81M

14.3% Net Margin

EPS (Diluted)

$0.46

Total Assets

$23.34B

Cash & Equivalents

$123.88M

Free Cash Flow

$350.70M

Financial Statements
Beta
Revenue$814.51M
Operating Expenses$672.97M
Operating Income$141.54M
Interest Expense$101.55M
Net Income$116.81M
EPS (Basic)$0.46
EPS (Diluted)$0.46
Shares Outstanding (Basic)207.81M
Shares Outstanding (Diluted)208.53M

Key Highlights

  • 1Total operating revenues increased by $70.1 million to $814.5 million for the three months ended March 31, 2019, compared to the same period in 2018.
  • 2Pre-stabilized and other revenues saw a significant increase of $73.8 million, driven by new leasing activity and the Ascenty Acquisition.
  • 3Depreciation and amortization expense increased by $16.7 million, primarily due to the Ascenty Acquisition.
  • 4Interest expense increased by $24.6 million, largely due to recent debt issuances in 2018 and 2019 and the Ascenty loan.
  • 5The company recognized a gain of $67.5 million on the deconsolidation of Ascenty through the formation of a joint venture with Brookfield Infrastructure.
  • 6Total capital expenditures increased by $102.5 million to $367.2 million for the three months ended March 31, 2019, compared to the same period in 2018, reflecting increased spending on development projects.
  • 7As of March 31, 2019, DLR's portfolio comprised 215 data centers with approximately 34.9 million rentable square feet, including space under active development and held for development.

Frequently Asked Questions

The primary driver of the revenue increase was strong performance in pre-stabilized properties, which benefited from new leasing activity and the Ascenty Acquisition. Additionally, ongoing leasing in developed areas contributed to overall revenue growth.

Digital Realty maintains a focus on a conservative capital structure, targeting a debt-to-Adjusted EBITDA ratio at or less than 5.5x and fixed charge coverage of greater than three times. They also aim to maintain a well-laddered debt maturity schedule and are exploring various sources of capital, including debt and equity issuances.

The Ascenty Acquisition significantly impacted the financials, contributing to a substantial increase in pre-stabilized and other revenues. It also led to an increase in depreciation and amortization expense and interest expense. The formation of a joint venture with Brookfield Infrastructure related to Ascenty also resulted in a significant gain on deconsolidation.

The company has a significant pipeline of space under active development and held for development. They expect to incur substantial capital expenditures for development programs, with an estimated $0.9 billion to $1.1 billion for the nine months ending December 31, 2019, funded by operations, equity, and debt capital.