Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Q4 2020 Earnings Presentation

683 views

Published on

Q4 2020 Earnings Presentation

Published in: Investor Relations
  • Be the first to comment

  • Be the first to like this

Q4 2020 Earnings Presentation

  1. 1. © QTS. All Rights Reserved. QTS Realty Trust, Inc. Fourth Quarter and Year-End 2020 Earnings Presentation
  2. 2. © QTS. All Rights Reserved. 1 Forward Looking Statements Some of the statements contained in this document constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In particular, statements pertaining to the COVID-19 pandemic, its impact on the Company and the Company’s response thereto and to the Company’s strategy, plans, intentions, capital resources, liquidity, portfolio performance, results of operations, anticipated growth in our funds from operations and anticipated market conditions contain forward-looking statements. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. The forward-looking statements contained in this document reflect the Company’s current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed in any forward-looking statement. The Company does not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: • adverse economic or real estate developments in the Company’s markets or the technology industry; • obsolescence or reduction in marketability of our infrastructure due to changing industry demands; • global, national and local economic conditions; • risks related to the COVID-19 pandemic, including, but not limited to, the risk of business and/or operational disruptions, disruption of the Company’s customers’ businesses that could affect their ability to make rental payments to the Company, supply chain disruptions and delays in the construction or development of the Company’s data centers; • risks related to our international operations; • difficulties in identifying properties to acquire and completing acquisitions; • the Company’s failure to successfully develop, redevelop and operate acquired properties or lines of business; • significant increases in construction and development costs; • the increasingly competitive environment in which the Company operates; defaults on, or termination or non-renewal of, leases by customers; decreased rental rates or increased vacancy rates; • increased interest rates and operating costs, including increased energy costs; financing risks, including the Company’s failure to obtain necessary outside financing; • dependence on third parties to provide Internet, telecommunications and network connectivity to the Company’s data centers; • the Company’s failure to qualify and maintain its qualification as a real estate investment trust; • environmental uncertainties and risks related to natural disasters; • financial market fluctuations; • changes in real estate and zoning laws, revaluations for tax purposes and increases in real property tax rates; • and limitations inherent in our current and any future joint venture investments, such as lack of sole decision-making authority and reliance on our partners’ financial condition. While forward-looking statements reflect the Company’s good faith beliefs, they are not guarantees of future performance. Any forward-looking statement speaks only as of the date on which it was made. The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the Company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and the Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, as well as other periodic reports the Company files with the Securities and Exchange Commission, many of which should be interpreted as being heightened as a result of the ongoing COVID-19 pandemic and the actions taken to contain the pandemic or mitigate its impact. This presentation includes measures not derived in accordance with generally accepted accounting principles (“GAAP”), such as FFO, operating FFO, adjusted Operating FFO, EBITDAre, adjusted EBITDA, NOI, ROIC and MRR. These measures should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP, and may also be inconsistent with similar measures presented by other companies. Reconciliation of these measures to the most closely comparable GAAP measures are presented in the attached pages. We refer you to the appendix of this presentation for reconciliations of these measures and to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations--Non-GAAP Financial Measures" in our 10-K for further information regarding these measures.
  3. 3. © QTS. All Rights Reserved. 2 Fourth Quarter and Year-End 2020 Review
  4. 4. © QTS. All Rights Reserved. 3 $2.63 $2.84 2019 2020 $250.4 $299.3 2019 2020 $480.8 $539.4 2019 2020 2020 Year in Review Adjusted EBITDA ($M) OFFO per Share Revenue ($M) 2020 Highlights Completed construction of over 60MW of gross power capacity Opened three new facilities in Atlanta, Hillsboro & Eemshaven Atlanta (DC-2) Hillsboro (DC-1) Eemshaven +40% increase Y/Y in signed leasing activity 5th consecutive year that QTS has led data center industry in customer satisfaction 12th consecutive year of “5 Nines” or greater facility uptime performance Ranked #1 data center co. globally in sustainability by GRESB Net Promoter Score: 40 Industry Average
  5. 5. © QTS. All Rights Reserved. 4 30 MINUTES Differentiation Through Technology Innovation Customers accelerated their overall usage and engagement with QTS’ platform and SDP during 2020 80%+ INCREASE Nearly of new cross connect orders currently placed & fully automated through the platform New unique logins to SDP INCREASED YEAR OVER YEAR Average session time on SDP among active users accelerated to more than Total Contract Value of orders placed through SDP 70% 20%+ INCREASE Connectivity Revenue Y/Y approximately DOUBLE engagement levels in 2019 20% Connectivity revenue now represents ~9% of recurring revenue, up from ~8% in 2019
  6. 6. © QTS. All Rights Reserved. 5 Highest quarterly signed leasing performance in QTS history; 67% increase vs. prior 4 quarter avg. • Full-year 2020 net leasing of approximately $109M represents 40%+ increase Y/Y • Pricing on new & modified renewal leases up 4% vs. prior 4 quarter avg. despite increase in overall volume • Ended 2020 with a booked-not-billed backlog of $154M2, reflecting 18%+ growth Q/Q and 65%+ growth Y/Y Healthy underlying customer trends • Same space renewal rates were -1.5% during Q4 ’20, which was impacted by renewal of a larger enterprise customer as part of a broader multi-site expansion plan • Excluding this customer, same space renewal rates would have been +2.3% for the quarter • Churn during Q4 ’20 of 0.8% consistent with expectations and resulted in full-year churn of 3.7%, at the lower end of guidance of 3 – 5% and initial guidance range for the year of 3 – 6% Anticipating acceleration in hybrid colocation in 2021 • Q4 ’20 new enterprise logo activity increased relative to Q2/Q3 but remained below historical levels • Anticipating new logo activity returning to more normalized levels in 2021 based on recent acceleration in enterprise deal funnel Signed new and modified leases totaling $40M of incremental annualized rent1 Q4 2020 Leasing Review 1. Incremental annualized revenue from new and modified renewal leases, net of downgrades. 2. Backlog of signed but not yet commenced annualized monthly recurring revenue as of 12/31/20. Adjusting backlog for the effects of revenue which had begun recognition via straight-line rent, the Company’s annualized booked-not-billed backlog was $87.1 million. 3. 2017 and 2018 data reflects results for the Core business only $3.7 $11.7 $17.1 $8.6 $21.0 $13.1 $18.1 $12.2 $11.3 $19.6 $17.4 $27.7 $21.8 $21.0 $26.0 $40.3 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 $10.3M Avg. $19.0M Avg. $16.1M Avg. $27.3M Avg. Incremental Annualized Rent Signed by Quarter ($M)1,3
  7. 7. © QTS. All Rights Reserved. 6 5MW expansion in Manassas with hyperscale SaaS provider Accelerated Hyperscale & Federal Leasing Momentum • Including this new commitment, QTS has leased more than 40MW in the new Atlanta DC-2 site which supports 72MW upon full build out • Extends QTS’ market leadership position in Atlanta 12MW lease in Atlanta with large hyperscale customer • Incremental 5MW expansion in QTS’ unconsolidated JV facility brings customer’s committed turn-key capacity to 17MW+ • Customer expected to ramp to full 24MW capacity over the coming quarters • Ahead of initial target of 1 – 3 large, 5MW+ hyperscale leases • As a result of continued momentum and sales funnel visibility, QTS is increasing its hyperscale leasing volume target for 2021 to 2 – 4 large, 5MW+ leases Signed five 5+ MW hyperscale leases during full-year 2020 Q4 ’20 leasing results included several multi-megawatt signed deals • Signed a 5MW+ lease with a hyperscale cloud provider supporting the Federal Gov. • Full-year 2020 federal leasing of 15MW+ is more than double federal leasing in 2018 and 2019 combined, demonstrating ramping momentum Federal momentum continues with 5MW+ lease
  8. 8. © QTS. All Rights Reserved. 7 Financial Update
  9. 9. © QTS. All Rights Reserved. 8 2021 Capital Plan and Development Summary Q4 2020 Raised Floor Additional Raised Floor (expected to come online through 12/31/21) Existing Property Development Atlanta, GA (DC – 2) 55,896 61,500 Irving, TX 208,114 34,000 Chicago, IL 98,500 28,000 Richmond, VA 140,398 27,000 Piscataway, NJ 118,263 20,000 Ashburn, VA (DC – 1) 148,824 14,000 Santa Clara, CA 59,905 4,000 Total 188,500 New Property Development Ashburn, VA (DC – 2) 73,000 Manassas, VA (DC – 2) 30,000 Total 103,000 Unconsolidated JV Property1 Manassas, VA 33,600 11,000 Total 302,500 Full-year 2021 cash capital expenditure guidance of $800M - $900M • Supports record booked-not-billed backlog and strong momentum exiting the fourth quarter of 2020 • More than 70% of current development capital spend plan for 2021 is directly tied to signed leases Ashburn (DC - 2) Manassas (DC - 5) 1. Represents the Company’s unconsolidated joint venture at the JV’s 100% share. QTS’ pro rata share of the JV is 50%.
  10. 10. © QTS. All Rights Reserved. 9 • Leverage of 3.9x3 net debt to LQA adj. EBITDA, including forward equity proceeds; net debt to LQA adj. EBITDA of 5.7x at the end of Q4 2020 • Approximately $1.2B of available liquidity, including $588M4 of undrawn forward equity proceeds • Undrawn forward equity proceeds represent funding sufficient to support current capital development plan in 2020 • No significant debt maturities until 2023 and beyond • ~2/3 of debt is subject to a fixed rate, including interest rate swap agreements Highlights Balance Sheet and Liquidity Summary Capital Structure ($M) Debt Maturities ($M)5 1. Includes three term loans ($700 million in aggregate) and approximately $392 million of borrowings on revolving credit facility as of December 31, 2020 2.Market Cap calculated as: Class A and Class B common stock and OP units of 72.9 million incl. common stock sold in forward structure using treasury stock method, multiplied by 12/31/2020 stock price of $61.88 per share. 3. Adjusted for the effects of cash expected to be received upon the full physical settlement of, and issuance of 10.0 million shares of common stock pursuant to forward equity sales through the date of this report, assuming such proceeds were used to repay a portion of the Company’s outstanding debt. The company expects to use the proceeds from these forward equity agreements to fund future capital expenditures. 4. Reflects net proceeds available at the Company’s election to physically settle the forward equity sales 5. Includes QTS’ pro rata share of debt at the joint venture 6. Net of cash and cash equivalents $6.8B Enterprise Value6 $3 $3 $441 $228 $229 $1,026 2021 2022 2023 2024 2025 2026+
  11. 11. © QTS. All Rights Reserved. 10 Full Year 2021 Guidance Summary 1. Consistent with GAAP accounting standards, revenue from the unconsolidated joint venture is not included in QTS’ reported GAAP financial statements. 2. Consistent with NAREIT-defined standards, QTS has included its proportionate ownership of EBITDAre from the unconsolidated JV in its reported EBITDAre and adjusted EBITDA results. 3. Consistent with NAREIT-defined standards, QTS has included its proportionate ownership of Funds from Operations from the unconsolidated JV in its reported Funds from Operations, Operating Funds from Operations and Operating Funds from Operations per diluted share results. Reflects fully diluted share count. 4. Reflects cash capital expenditures and excludes acquisitions. Includes QTS’ proportionate share of cash capital expenditures in the unconsolidated Manassas joint venture. Note: The Company’s 2021 guidance assumes, among other things, that its facilities continue to operate and it does not experience significant work stoppages or closures, it is able to mitigate any supply chain disruptions for its development activities, and it is able to collect revenues in line with current expectations. • 2021 financial guidance reflects year-over-year impact of approximately $3M of COVID-related net cost benefits realized in 2020 that are not currently expected to recur in 2021. • Excluding the year-over-year impact of these net cost benefits, QTS’ current 2021 adjusted EBITDA guidance reflects approximately 50 basis points of year-over-year adjusted EBITDA margin expansion. 2020 2021 Guidance Midpoint $M except per share values Reported Low Midpoint High Growth Y/Y Revenue1 $539 $599 $606 $613 12% Adjusted EBITDA2 $299 $330 $335 $340 12% Operating FFO per Share3 $2.84 $2.92 $2.98 $3.04 5% Annual Rental Churn 3.7% 3.0% 4.5% 6.0% Capital Expenditures4 $794 $800 $850 $900
  12. 12. © QTS. All Rights Reserved. 11 Closing Remarks
  13. 13. © QTS. All Rights Reserved. 12 Thank You! ir@qtsdatacenters.com
  14. 14. © QTS. All Rights Reserved. 13 Appendix
  15. 15. © QTS. All Rights Reserved. 14 NOI Reconciliation December 31, September 30, December 31, $ in millions 2020 2020 2019 2020 2019 Net Operating Income (NOI) Net income (loss) $ (10,660) $ 6,907 $ (3,606) $ 14,576 $ 31,665 Equity in net loss of unconsolidated entity 411 366 481 2,044 1,473 Interest income - - (8) (2) (111) Interest expense 9,122 7,516 6,264 30,724 26,593 Depreciation and amortization 55,887 51,378 45,161 199,889 168,305 Debt restructuring costs 18,036 - 1,523 18,036 1,523 Other (income) expense - - 380 (159) 50 Tax expense (benefit) 242 227 (816) 438 (37) Transaction, integration and impairment costs 2,665 1,078 12,110 4,340 15,190 General and administrative expenses 20,809 22,082 20,866 84,965 80,385 Gain on sale of real estate, net - - (1,361) - (14,769) Restructuring - - - - - NOI from consolidated operations $ 96,512 $ 89,554 $ 80,994 $ 354,851 $ 310,267 Pro rata share of NOI from unconsolidated entity 1,172 1,180 841 4,122 2,789 Total NOI $ 97,684 $ 90,734 $ 81,835 $ 358,973 $ 313,056 Three Months Ended December 31, Year Ended
  16. 16. © QTS. All Rights Reserved. 15 EBITDAre & Adjusted EBITDA Reconciliation December 31, September 30, December 31, $ in millions 2020 2020 2019 2020 2019 EBITDAre and Adjusted EBITDA Net income (loss) $ (10,660) $ 6,907 $ (3,606) $ 14,576 $ 31,665 Equity in net loss of unconsolidated entity 411 366 481 2,044 1,473 Interest income - - (8) (2) (111) Interest expense 9,122 7,516 6,264 30,724 26,593 Tax expense (benefit) 242 227 (816) 438 (37) Depreciation and amortization 55,887 51,378 45,161 199,889 168,305 (Gain) Loss on disposition of depreciated property - - - - (13,408) Impairments of depreciated property - - 11,461 - 11,461 Pro rata share of EBITDAre from unconsolidated entity 1,167 1,178 830 4,088 2,775 EBITDAre $ 56,169 $ 67,572 $ 59,767 $ 251,757 $ 228,716 Debt restructuring costs 18,036 - 1,523 18,036 1,523 Equity-based compensation expense 6,862 7,315 4,360 25,133 16,412 Restructuring costs - - - - - Transaction, integration and implementation costs 2,665 1,099 649 4,361 3,729 Adjusted EBITDA $ 83,732 $ 75,986 $ 66,299 $ 299,287 $ 250,380 Three Months Ended December 31, Year Ended
  17. 17. © QTS. All Rights Reserved. 16 FFO, Operating FFO and Adjusted Operating FFO Reconciliation (1) The Company’s calculations of Operating FFO and Adjusted Operating FFO may not be comparable to Operating FFO and Adjusted Operating FFO as calculated by other REITs that do not use the same definition. December 31, September 30, December 31, $ in millions 2020 2020 2019 2020 2019 FFO Net income (loss) $ (10,660) $ 6,907 $ (3,606) $ 14,576 $ 31,665 Equity in net loss of unconsolidated entity 411 366 481 2,044 1,473 Real estate depreciation and amortization 52,763 47,880 41,947 186,539 156,387 Gain on sale of real estate, net - - - - (13,408) Impairments of depreciated property - (0) 11,461 - 11,461 Pro rata share of FFO from unconsolidated entity 495 512 324 1,684 1,078 FFO $ 43,009 $ 55,665 $ 50,607 $ 204,843 $ 188,656 Preferred stock dividends (7,045) (7,045) (7,045) (28,180) (28,180) FFO available to common stockholders & OP unit holders $ 35,964 $ 48,620 $ 43,562 $ 176,663 $ 160,476 Debt restructuring costs 18,036 - 1,523 18,036 1,523 Restructuring costs - - - - - Transaction and integration costs 2,665 1,078 649 4,340 3,729 Tax benefit associated with restructuring, transaction and integration costs - - - - - Operating FFO available to common stockholders & OP unit holders (1) $ 56,665 $ 49,698 $ 45,734 $ 199,039 $ 165,728 Maintenance capital expenditures (2,000) (2,268) (910) (10,150) (4,233) Leasing commissions paid (11,271) (9,670) (10,757) (36,744) (31,102) Amortization of deferred financing costs 1,180 990 982 4,148 3,917 Non real estate depreciation and amortization 3,124 3,498 3,214 13,350 11,918 Straight line rent revenue and expense and other (8,748) (7,196) (3,243) (25,401) (7,922) Tax expense (benefit) from operating results 242 227 (816) 438 (37) Equity-based compensation expense 6,862 7,315 4,360 25,133 16,412 Adjustments for unconsolidated entity (72) (211) 75 (304) 118 Adjusted Operating FFO available to common stockholders & OP unit holders (1) $ 45,982 $ 42,383 $ 38,639 $ 169,509 $ 154,799 Three Months Ended Year Ended December 31,
  18. 18. © QTS. All Rights Reserved. 17 MRR Reconciliation December 31, September 30, December 31, $ in millions 2020 2020 2019 2020 2019 Recognized MRR in the period Total period revenues (GAAP basis) $ 143,897 $ 137,538 $ 123,707 $ 539,368 $ 480,818 Less: Total period variable lease revenue from recoveries (14,648) (14,887) (14,018) (54,337) (55,046) Total period deferred setup fees (6,585) (5,300) (4,062) (20,330) (15,156) Total period straight line rent and other (10,201) (9,184) (5,156) (36,744) (20,349) Recognized MRR in the period $ 112,463 $ 108,167 $ 100,471 $ 427,957 $ 390,267 MRR at period end Total period revenues (GAAP basis) 143,897 137,538 123,707 539,368 480,818 Less: Total revenues excluding last month (96,260) (91,485) (81,699) (491,731) (438,810) Total revenues for last month of period $ 47,637 $ 46,053 $ 42,008 $ 47,637 $ 42,008 Less: Last month variable lease revenue from recoveries (4,953) (4,643) (4,578) (4,953) (4,578) Last month deferred setup fees (2,207) (1,864) (1,333) (2,207) (1,333) Last month straight line rent and other (2,349) (3,044) (2,413) (2,349) (2,413) Add: Pro rata share of MRR at period end of unconsolidated entity 411 411 350 411 350 MRR at period end $ 38,539 $ 36,913 $ 34,034 $ 38,539 $ 34,034 Three Months Ended Year Ended December 31,

×