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: 30 July 2015
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
The Way Forward Top Priorities OPPORTUNITY OPPORTUNITY STRATEGIC STRATEGIC DIRECTION DIRECTION Excess finished inventory Lease-up existing inventory and improve ROIC – Align our leasing efforts and sales incentive Legacy non-data center assets, non-core program to bring inventory back into equ
Slide 3: Highly Complementary Business
Highly Complementary Business Market Leading Presence in Highly Attractive Businesses 1Q15 2012- Colocation • Nationwide colocation footprint and premium connectivity offering Revenue 1Q15 (LQA) provide the necessary scalability for growing businesses Contribution CAGR (1) Space Power • Typically mu
Slide 4: Strategic Rationale
Strategic Rationale Strengthens Product Mix and Growth Trajectory Strategic and A Leading Colocation and Complementary Product Interconnection Provider Offering Attractive Pro Forma Enhanced Growth Potential Financial Profile in Attractive Locations Integration Risk Mitigated Premium Connectivity by
Slide 5: Telx's Attractive Financial Profile
Telx’s Attractive Financial Profile Gaining Exposure to a High Growth Business Revenue Core EBITDA (1) Colocation Interconnection Services Core EBITDA Core EBITDA Margin +$11 (3) +$15 (2) CAGR $334 $122 $309 8% $110 $10 $12 $93 $257 30% $82 $214 $11 $161 $145 $9 $114 38% 36% 36% 36% $89 $152 $162 16
Slide 6: Upside Opportunity of Currently Available Space
Upside Opportunity of Currently Available Space Opportunity to Increase Revenue and Cash Flow via Lease-Up Target Utilization of 80% Illustrative Example Potential Incremental Revenue (1) ($ in millions) Target Utilization 70% 80% 68% - 77% Utilized Facilities $0 $9 71% 57% - 64% Utilized 61% Facili
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 3433 S 120th Place - Seattle 60 Hudson Street - NYC Digital can drive •
Slide 8: Key Customer Ecosystem
Power of the Ecosystem Digital Realty’s Campus Network Ashburn Chicago Dallas Locations Campus Hong Kong Overlap London New York Silicon Valley Singapore IT & Cloud Services Network & Mobility Financial Services Media & Other Key Customer Ecosystem 8
Slide 9: Attractive Real Estate Transaction
Attractive Real Estate Transaction Overlapping Footprint Reduces Risks and Drives Value Telx-Owned Assets Telx Portfolio Profile 1Q15 Revenue (1) by Facility Type Owned by 56 Marietta, Atlanta, GA 100 Delawanna, Clifton, NJ Telx 3rd Party 23% • Telx owns 56 Marietta and 100 Delawanna and leases 11 o
Slide 10: Robust Interconnection Ecosystem
Robust Interconnection Ecosystem Long-Standing Relationships with Premium, Credit-Worthy Tenants Large and Strategic Blue-Chip Customer Base Customer Breakdown by Industry • Customer base consisting of 1,250+ customers as of Customers % MRR (2) March 31, 2015 • Over 80% of MRR generated from connect
Slide 11: Strategic Fit
Strategic Fit Immediate Transformation into Premium Colocation and Interconnection Provider • 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
Slide 12: Transaction Impact
Transaction Impact Enhanced Scale, Product Mix and Growth Trajectory 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 % Owned Real Estate (G
Slide 13: Recent Results
Recent Results 13
Slide 14: Driving Greater Current-Year Contribution
Driving Greater Current-Year Contribution Solid Leasing Momentum Annualized GAAP Annualized GAAP Type of Space Total s.f. Signed (1) (2) (2) Base Rent / s.f. Base Rent Turn-Key Flex® 245,649 $135 $33.3 million Powered Base Building® - - - Custom Solutions - - - Colocation 16,230 $228 $3.7 million No
Slide 15: Record-High Lease Commencements
Record-High Lease Commencements Shortest Lag in Company History $ in millions Backlog Commencement - Timing (1) Annualized GAAP Base Rent $80 $17 $13 $40 $14 $73 M $55.8 $42.4 $28.7 $29 $ 3Q15 4Q15 2016 2017+ Total Backlog $ in millions months Custom Solutions Turn-Key Other Sign-to-Commencement Gap
Slide 16: Cycling Through Peak Vintage Renewals
Cycling Through Peak Vintage Renewals Approaching Mark-to-Market Inflection Point ® ® TKF PBB Data Center Total 30% Signed renewal leases representing $17 million 26% of annualized GAAP rental revenue Rental rates on renewals increased by 2% on a cash basis and increased by 6% on a GAAP basis fo
Slide 17: Broad-Based Reduction in Finished Inventory
Broad-Based Reduction in Finished Inventory Down by Almost Half Since November 2013 Investor Day (1) Finished Inventory – Major Markets in megawatts Investor Day Nov. 12, 2013 As of June 30, 2015 12 9 6 3 - Phoenix Silicon Valley Dallas Boston Houston New York Northern Virginia Chicago Investments i
Slide 18: U.S. Major Market Data Center Supply
U.S. Major Market Data Center Supply (1) Supply and Demand Roughly in Equilibrium Current Supply New Construction Sublease Availablility DLR Inventory (2) in megawatts 2Q15 60 40 20 - Boston Chicago Dallas Houston N Virginia NY Metro Phoenix Silicon Valley in megawatts 1Q15 60 40 20 - Boston Chicago
Slide 19: 2Q15 Well Ahead of Consensus
2Q15 Well Ahead of Consensus Beat Partially Due to Timing & One-Time Items Core FFO per share $0.01 $1.30 $0.02 $0.02 $1.30 $1.25 $1.20 $1.10 $1.00 2Q15 Core FFO - One-Time Property Tax Early Commencements & FX Impact 2Q15 Core FFO - Actual Consensus (1) (2) Reversals Delayed Asset Sales 1) Based on
Slide 20: Constant-Currency Growth
Constant-Currency Growth FX Represents ~300 bps Drag on Reported Results As Reported Constant Currency (1) 14% 11.6% 7% 7.8% 7.5% 7.4% 5.6% 5.5% 4.7% 4.0% 2.6% 2.8% 0% Revenue Adj. EBITDA SS NOI 1Q15 / 1Q14 2015 Core 2Q15 / 2Q14 2Q15 / 2Q14 2Q15 / 2Q14 Core FFO / FFO / sh 2Q15 / 2Q14 Sh 2015 / 2014
Slide 21: Credit Metrics Compare Favorably to Blue Chip REITs
Credit Metrics Compare Favorably to Blue Chip REITs Committed to a Conservative Capital Structure Net Debt / LQA Adjusted EBITDA (1) Net Debt + Preferred / LQA Adjusted EBITDA (1) 8.0x 8.0x 6.2x 6.1x 6.4x 6.3x 6.2x 6.1x 6.0x 5.5x 5.5x 5.4x 5.5x 5.4x 5.1x 5.0x 6.0x 5.1x 4.0x 4.0x 2.0x 2.0x 0.0x 0.0x
Slide 22: Forward Sale of Equity
Forward Sale of Equity Transaction Overview Forward-sale structure allowed Digital to lock in equity financing for the Telx acquisition Description Transaction Mechanics (Inception) Allowed Digital to capitalize on market conditions and lock in future equity Forward Cash Agreement capital raise wh
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 Non-GAAP Items
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) Three Months Ended Six Months Ended Ju
Slide 28: Reconciliation of Non-GAAP Items
Reconciliation of Non-GAAP Items To Their Closest GAAP Equivalent Three Months Ended Six Months Ended June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 FFO available to common stockholders and unitholders $ 176,148 $ 164,179 $ 392,508 $ 328,276 Add: 5.50% exchangeable senior debentures interes
Slide 29: Reconciliation of Non-GAAP Items
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) Three
Slide 30: Reconciliation of Non-GAAP Items
Reconciliation of Non-GAAP Items To Their Closest GAAP Equivalent Three Months Ended Six Months Ended 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 -
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: