10-QPeriod: Q1 FY2020

DIGITAL REALTY TRUST, INC. Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 11, 2020For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) reported its first-quarter 2020 financial results, showing a significant increase in total operating revenues to $823.3 million, up from $814.5 million in the prior year's comparable quarter. This growth was primarily driven by the Interxion combination, which closed in March 2020, and ongoing leasing activity. Net income attributable to Digital Realty Trust, Inc. significantly increased to $224.0 million, or $0.90 per diluted share, compared to $116.8 million, or $0.46 per diluted share, in Q1 2019. The company also recorded a substantial gain on the disposition of properties totaling $304.8 million in the current quarter. Despite the strong revenue growth and increased net income, operating income saw a decrease to $100.0 million from $141.5 million year-over-year, largely due to higher transaction and integration expenses related to the Interxion acquisition and increased operating expenses. DLR maintained a strong balance sheet with $246.5 million in cash and cash equivalents and significant liquidity available under its global revolving credit facilities. The company reaffirmed its commitment to prudent capital management and its REIT status. Management noted that while operations remained stable during the initial impact of COVID-19, the full extent of its impact on future financial performance remains uncertain. DLR is actively monitoring the situation and has implemented business continuity plans.

Financial Highlights

34 data points
Beta

Revenue

$823.34M

Net Income

$224.01M

27.2% Net Margin

EPS (Diluted)

$0.90

Total Assets

$33.11B

Cash & Equivalents

$246.48M

Free Cash Flow

$226.66M

Financial Statements
Beta
Revenue$823.34M
Operating Expenses$723.29M
Operating Income$100.05M
Interest Expense$85.80M
Net Income$224.01M
EPS (Basic)$0.91
EPS (Diluted)$0.90
Shares Outstanding (Basic)222.16M
Shares Outstanding (Diluted)224.47M

Key Highlights

  • 1Total operating revenues increased by $8.8 million to $823.3 million for the three months ended March 31, 2020, compared to the same period in 2019.
  • 2Net income attributable to Digital Realty Trust, Inc. increased to $224.0 million from $116.8 million in the prior year's quarter.
  • 3Diluted earnings per share rose to $0.90 from $0.46 year-over-year.
  • 4The company recorded a significant gain on disposition of properties of $304.8 million.
  • 5Transaction and integration expenses increased significantly to $56.8 million from $2.5 million, primarily due to costs associated with the Interxion combination.
  • 6The Interxion combination, completed in March 2020, added substantial assets, including approximately $4.2 billion in goodwill.
  • 7Cash flow from operations decreased to $226.7 million from $350.7 million in the prior year's quarter.

Frequently Asked Questions

The Interxion combination, completed in March 2020, significantly contributed to revenue growth and the company's overall asset base. It resulted in the recognition of approximately $4.2 billion in goodwill. While the combination boosted total operating revenues, it also led to a substantial increase in transaction and integration expenses for the quarter.

As of March 31, 2020, Digital Realty Trust had $246.5 million in cash and cash equivalents. The company also has access to significant liquidity through its global revolving credit facilities, providing substantial capacity for operational needs and strategic initiatives.

The company's interest expense decreased by $15.8 million year-over-year, mainly due to lower average balances on credit facilities and term loans, partly offset by new debt issuances. Digital Realty Trust actively manages its debt through a mix of fixed and variable rate instruments and utilizes interest rate swaps to mitigate interest rate risk. As of March 31, 2020, approximately 91.8% of its debt was fixed rate, including swapped variable rate debt.

Digital Realty Trust is closely monitoring the impact of COVID-19. While operations have remained stable and essential services have been maintained, the company acknowledges the uncertainty surrounding its future financial performance due to the pandemic. They are evaluating customer rent relief requests on a case-by-case basis and cannot predict the full extent of the impact.