10-QPeriod: Q1 FY2023

DIGITAL REALTY TRUST, INC. Quarterly Report for Q1 Ended Mar 31, 2023

Filed May 4, 2023For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) reported solid revenue growth for the first quarter of 2023, with total operating revenues increasing by 18.8% year-over-year to $1.34 billion. This growth was driven by both the stabilized and non-stabilized portfolios, with significant contributions from utility reimbursements, new leasing activity, and the completion of development projects. The company also saw a substantial increase in operating expenses, largely due to higher utilities (driven by price and usage) and increased property operating and maintenance costs related to its expanding portfolio and development pipeline. Despite increased operating expenses and a rise in interest expense due to new debt issuances and higher rates, Digital Realty maintained positive net income and increased its Funds From Operations (FFO) per share to $1.60 on a diluted basis. The company's balance sheet remains robust, though total liabilities have increased, primarily due to higher borrowings. Digital Realty continues to invest heavily in development, with significant capital expenditures planned for the remainder of 2023, indicating a focus on future growth.

Financial Highlights

33 data points
Beta

Revenue

$1.34B

Net Income

$68.73M

5.1% Net Margin

EPS (Diluted)

$0.20

Total Assets

$41.95B

Cash & Equivalents

$141.63M

Free Cash Flow

$349.73M

Financial Statements
Beta
Revenue$1.34B
Operating Expenses$1.16B
Operating Income$177.33M
Interest Expense$102.22M
Net Income$68.73M
EPS (Basic)$0.20
EPS (Diluted)$0.20
Shares Outstanding (Basic)291.22M
Shares Outstanding (Diluted)303.06M

Key Highlights

  • 1Total operating revenues increased by 18.8% year-over-year to $1.34 billion for Q1 2023.
  • 2Stabilized rental and other services revenue grew by 11.4%, while non-stabilized revenue saw a significant 59.6% increase, bolstered by development lease-ups and the Teraco acquisition.
  • 3Property level operating expenses increased by 26.8%, largely driven by a 43.6% rise in utilities costs due to higher prices and usage.
  • 4Net income available to common stockholders was $58.5 million, resulting in basic and diluted EPS of $0.20.
  • 5Funds From Operations (FFO) per share increased to $1.60 on a diluted basis, up from $1.60 in the prior year period.
  • 6Total debt increased to $18.0 billion as of March 31, 2023, from $16.7 billion at year-end 2022, with a significant portion financed by credit facilities and new term loans.
  • 7Capital expenditures for development projects amounted to $644.9 million in Q1 2023, reflecting continued investment in future growth.

Frequently Asked Questions

Digital Realty's revenue growth was primarily driven by a substantial increase in rental and other services revenue, up 18.6% year-over-year. This growth was supported by higher utility reimbursements (due to price and usage increases), new leasing and renewals across its portfolio, the lease-up of recently completed development projects, and the contribution from the Teraco acquisition.

While operating expenses rose significantly (up 26.8%), primarily due to higher utilities and property operating costs, Digital Realty managed to maintain profitability. The company's ability to pass through some of these costs through contractual rent increases and expense escalations in its leases, coupled with strong revenue growth, helped mitigate the impact on net income and FFO.

The company continues to invest heavily in its development pipeline, with approximately $2.6 billion in outstanding commitments for construction contracts and nearly $8.5 billion in total investment for construction in progress and land held for future development as of March 31, 2023. Digital Realty expects to incur $1.7 to $1.9 billion in capital expenditures for development programs in the remaining nine months of 2023, indicating a strong commitment to expanding its capacity and capturing future market demand.

Digital Realty is utilizing a combination of sources. Net cash from operations is a primary source, supplemented by borrowings under its Global Revolving Credit Facilities and new debt issuances, such as the $740 million senior unsecured term loan. The company also has an at-the-market (ATM) equity offering program with up to $1.5 billion available to fund liquidity requirements, acquisitions, and development opportunities.