Digital Realty Trust, Inc. · NYSE:DLR
Digital Realty Trust — Q2 2015 Earnings Presentation
31 slides from Digital Realty Trust's earnings presentation, Jul 30, 2015
Slide 1: Second Quarter 2015 Results and Telx Acquisition
30 July 2015 July 30, 2015 The acquisition of Telx Holdings, Inc. is expected to close later this year, subject to the satisfaction of closing conditions. There can be no assurance that the Telx acquisition will be consummated on the anticipated schedule or at all. Please see the risks described und
Slide 2: The Way Forward: Top Priorities
The Way Forward Top Priorities Lease-up existing inventory and improve ROIC – Align our leasing efforts and sales incentive program to bring inventory back into equilibrium Recycle capital to focus on the core – Sell non-strategic assets to refine our portfolio focus, improve ROIC and fund futur
Slide 3: Highly Complementary Business
Highly Complementary Business Market Leading Presence in Highly Attractive Businesses Highly complementary business anchored in key Digital Internet Gateway data center properties 49% 1Q15 Revenue Contribution 48% 3% 2012- 1Q15 (LQA) CAGR (1) 16% 30% 8% 1) Past financial performance is not a guarant
Slide 4: Strategic Rationale
Strategic Rationale Strengthens Product Mix and Growth Trajectory Enhanced Growth Potential in Attractive Locations Integration Risk Mitigated by Presence in 11 Digital Facilities (1) Attractive Pro Forma Financial Profile Premium Connectivity Infrastructure Embedded Growth Potential from Lease-Up S
Slide 5: Telx's Attractive Financial Profile
$82 $93 $110 $122 38% 36% 36% 36% 2012 2013 2014 LQA (1Q15) Core EBITDA Core EBITDA Margin $116 $132 $152 $162 $89 $114 $145 $161 $9 $11 $12 $10 $214 $257 $309 $334 2012 2013 2014 LQA (1Q15) Colocation Interconnection Services 8% 30% 16% CAGR 40,402 46,546 51,354 52,359 $191 $219 $247 $259 2012 2013
Slide 6: Upside Opportunity of Currently Available Space
Upside Opportunity of Currently Available Space Opportunity to Increase Revenue and Cash Flow via Lease-Up Illustrative Example Potential Incremental Revenue (1) 71% 61% 49% 46% 29% 22% Target Utilization of 80% W e ig h te d -A v e ra g e U ti liz a tio n b a s e d o n S e lla b le S q . F t. 68% -
Slide 7: Strengthen National Footprint
Strengthen National Footprint Acquisition Expected to Enhance Operational Potential through Geographic Expertise Drive value through regional expertise with limited integration risk given that 29% of Telx SF is owned by Digital •1Q15 Annualized Revenue: $1.3MM •1Q15 Utilization: 46% 60 Hudson Street
Slide 8: Power of the Ecosystem: Digital Realty's Campus Network
Power of the Ecosystem Digital Realty’s Campus Network LondonHong Kong Ashburn DallasChicago SingaporeSilicon ValleyNew York C a m p u s L o cat io n s Media & OtherNetwork & Mobility Financial ServicesIT & Cloud Services K e y C u st o me r Ec o s y ste m Overlap 8
Slide 9: Attractive Real Estate Transaction
Attractive Real Estate Transaction Overlapping Footprint Reduces Risks and Drives Value 100 Delawanna, Clifton, NJ56 Marietta, Atlanta, GA Telx-Owned Assets Note: Unless otherwise noted, figures as of, or for the quarter ended, March 31, 2015. 1) Chart based on 1Q15 revenue from respective facilitie
Slide 10: Robust Interconnection Ecosystem
Note: Telecom includes Telecoms, Networks & Mobility customers, System Integrators and Data Center Competitors. Enterprise includes Healthcare. Does not reflect Government and Education customers (~1% of MRR). 1) Reflects customer concentration mix based on March 2015 MRR. 2) Reflects customer verti
Slide 11: Maintain Core Strength
M a inta in Core S treng th • Realizing the significant growth opportunity in the colocation and interconnection space has long been a goal for Digital, as emphasized to its investors over the past several years • Combination with Telx is expected to enhance the overall attractiveness of our portfol
Slide 12: Enhanced Scale, Product Mix and Growth Trajectory
77% 14% 9% 50% 50% 93% 7% Product Mix (6)(7) Digital Telx COMBINED Enterprise Value (1) $15.0 Billion $1.886 Billion $16.9 Billion Owned / Operated Properties 127 / 128 2 / 20 (2) 129 / 137 (2) Gross Square Feet (3) 24.7 Million 1.3 Million 25.7 Million 2012–1Q15 (LQA) Revenue CAGR 11% 22% 13% (5) I
Slide 13: Recent Results
Recent Results 13
Slide 14: Solid Leasing Momentum
Turn-Key Flex® 245,649 $135 $33.3 million Powered Base Building® - - - Custom Solutions - - - Colocation 16,230 $228 $3.7 million Non-Technical 9,903 $31 $0.3 million Total 271,782 $137 $37.3 million Type of Space Total s.f. Signed (1) Annualized GAAP Annualized GAAP Base Rent / s.f. (2) Base Rent (
Slide 15: Record-High Lease Commencements
Record-High Lease Commencements Shortest Lag in Company History Note: Amounts shown represent GAAP annualized base rent from signed but not yet commenced leases and are based on current estimates of future lease commencement timing. Actual results may vary from current estimates. The timing between
Slide 16: Cycling Through Peak Vintage Renewals
4% 1% 26% 7% 6% 2% 0% 15% 30% GAAP Rent Change Cash Rent Change TKF PBB Data Center Total Cycling Through Peak Vintage Renewals Approaching Mark-to-Market Inflection Point Note: Represents Turn-Key Flex and Powered Base Building product types signed as of 6/30/15. ® ® Signed renewal leases represe
Slide 17: Broad-Based Reduction in Finished Inventory
Broad-Based Reduction in Finished Inventory Down by Almost Half Since November 2013 Investor Day (1) in megawatts 1) Reflects the reduction of finished inventory throughout the entire portfolio. Finished Inventory – Major Markets - 3 6 9 12 Phoenix Silicon Valley Dallas Boston Houston New York North
Slide 18: Supply and Demand Roughly in Equilibrium
- 20 40 60 Boston Chicago Dallas Houston N Virginia NY Metro Phoenix Silicon Valley Current Supply New Construction Sublease Availablility DLR Inventory - 20 40 60 Boston Chicago Dallas Houston N Virginia NY Metro Phoenix Silicon Valley U.S. Major Market Data Center Supply (1) Supply and Demand Roug
Slide 19: 2Q15 Well Ahead of Consensus
2Q15 Well Ahead of Consensus Beat Partially Due to Timing & One-Time Items $1.30 $0.02 $0.02 $0.01 $1.25 $1.00 $1.10 $1.20 $1.30 2Q15 Core FFO - Consensus One-Time Property Tax Reversals Early Commencements & Delayed Asset Sales FX Impact 2Q15 Core FFO - Actual Core FFO per share 1) Based on FactSet
Slide 20: Revenue, EBITDA and Core FFO Growth
4.7% 7.8% 4.0% 7.5% 2.8% 5.5% 7.4% 11.6% 2.6% 5.6% 0% 7% 14% Revenue Adj. EBITDA SS NOI 1Q15 / 1Q14 Core FFO / Sh 2015 Core FFO / sh Reported Constant Currency 2015 / 2014 Core FFO / sh Growth Constant-Currency Growth FX Represents ~300 bps Drag on Reported Results (2) 2Q15 / 2Q14 Adj. EBITDA Growth
Slide 21: Credit Metrics Compare Favorably to Blue Chip REITs
4.5x 4.4x 3.9x 3.5x 3.4x 3.4x 3.0x 0.0x 2.0x 4.0x 6.0x AVB SPG FRT DLR KIM EQR BXP 4.9x 4.5x 4.4x 4.3x 4.0x 3.4x 3.1x 0.0x 2.0x 4.0x 6.0x DLR AVB SPG KIM FRT EQR BXP 6.4x 6.3x 6.2x 6.1x 5.5x 5.4x 5.1x 0.0x 2.0x 4.0x 6.0x 8.0x KIM BXP DLR EQR AVB FRT SPG 6.2x 6.1x 5.5x 5.5x 5.4x 5.1x 5.0x 0.0x 2.0x 4
Slide 22: Forward Sale of Equity Transaction Overview
Forward Sale of Equity Transaction Overview Allowed Digital to capitalize on market conditions and lock in future equity capital raise when required to fund a portion of the Telx acquisition Sale of borrowed shares was executed via a marketed offering – No incremental shares will be issued to th
Slide 23: Consistent Execution on Strategic Vision
Consistent Execution on Strategic Vision Powerful Connection Shifts Focus to Future Growth Achieved 20 bps sequential improvement in ROIC Tightened commencement lag to 2.5 months Beat 2Q15 consensus estimates by $0.05 Raised 2015 core FFO/sh guidance from $5.03 - $5.13 to $5.05 - $5.15 Ent
Slide 24: Appendix
Appendix 24
Slide 25: Definitions of Non-GAAP Financial Measures
Definitions of Non-GAAP Financial Measures The information included in this presentation contains certain non-GAAP financial measures that management believes are helpful in understanding our business, as further described below. Our definition and calculation of non-GAAP financial measures may diff
Slide 26: Telx's Core EBITDA Reconciliation
Appendix –Non-GAAP Financial Measures Telx’s Core EBITDA Reconciliation 26
Slide 27: Reconciliation of Net Income to FFO
Reconciliation of Non-GAAP Items To Their Closest GAAP Equivalent Digital Realty Trust, Inc. and Subsidiaries Reconciliation of Net Income Available to Common Stockholders to Funds From Operations (FFO) (in thousands, except per share and unit data) (unaudited) (2) For all periods presented, we have
Slide 28: Reconciliation of FFO to Core FFO
Reconciliation of Non-GAAP Items To Their Closest GAAP Equivalent Digital Realty Trust, Inc. and Subsidiaries Reconciliation of Funds From Operations (FFO) to Core Funds From Operations (CFFO) (in thousands, except per share and unit data) (unaudited) (3) Includes one-time fees, proceeds and certain
Slide 29: Reconciliation to EBITDA and Adjusted EBITDA
Reconciliation of Non-GAAP Items To Their Closest GAAP Equivalent Digital Realty Trust, Inc. and Subsidiaries Reconciliation of Net Income Available to Common Stockholders to Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA (in thousands) (unaudited) June 3
Slide 30: Reconciliation of Cash Net Operating Income
Reconciliation of Non-GAAP Items To Their Closest GAAP Equivalent June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Rental revenues 196,637$ 197,836$ 390,617$ 394,476$ Tenant reimbursements - Utilities 36,893 38,337 72,108 75,975 Tenant reimbursements - Other 16,618 16,291 33,686 33,526 Total
Slide 31: Forward-Looking Statements
Forward-Looking Statements The information included in this presentation contains forward-looking statements. Such statements are based on management’s beliefs and assumptions made based on information currently available to management. Such forward-looking statements include statements relating to: