Q1 2021 Digital Realty Trust Inc Earnings Call
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Yes.
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Good afternoon, and welcome to digital Realty first quarter 2021 earnings call. Please note. This event is being recorded during today's presentation. All parties will be in a listen only mode. Following the presentation. We will conduct a question and answer session callers will be limited to one question plus a fee.
Due to time constraints, we will conclude promptly at the bottom of the hour.
I would now and I'd like to turn the call over to John Stewart Digital Realty as senior Vice President of Investor Relations. John. Please go ahead.
Thank you operator and speakers on today's call are CEO, Bill Stein and CFO, Andy Power, Chief Investment Officer, Greg Wright, Chief Technology Officer, Chris Sharp and Chief revenue Officer, Corey Dyer are also on the call and will be available for Q&A.
And it may make forward looking statements, including guidance and the underlying assumptions forward looking statements are based on expectations and involve risks and uncertainties that could cause actual results to differ materially.
For further discussion of risks related to our business and see our 10-K and subsequent filings with the SEC.
This call will contain non-GAAP financial information and reconciliations to net income are included in the supplemental package furnished to the SEC and available on our website.
Before I turn the call over to Bill I'd like to hit the tops of the waves on our first quarter results first we demonstrated our commitment to delivering sustainable growth for all stakeholders with efficient and socially responsible capital raises and corporate governance enhancements.
We continue to enhance the value of our global platform extending connectivity offerings globally recycling capital and investing to fuel high quality organic growth.
We delivered solid financial results with core <unk> per share up 9% year over year and nine cents ahead of consensus for.
Finally, we continued to strengthen our balance sheet lowering our weighted average cost of debt with the redemption of high coupon debt and preferred equity while extending our weighted average duration with the issuance of attractively priced long term capital with that I'd like to turn the call over to Bill.
Thanks, John Good afternoon, and thank you all for joining us.
Our formula for long term value creation is a global connected sustainable framework and our first quarter results demonstrate the strength of this framework.
Our business is increasingly global with first quarter bookings very evenly balanced across regions.
We continue to align platform digital with our customers' digital transformation initiatives by expanding our unique interconnection capabilities focusing on connecting centres of data across our robust reliable global platform.
Last but not least we continue to advance our initiatives to deliver sustainable growth for all stakeholders.
Let's turn to our sustainable growth initiatives here on page three.
And we were recently honored to be named EPA Energy Star partner for the year for energy management for the second year and a row.
We were also recently honored to receive the 2020 largest financial corporate Green Bond award from climate bonds initiative.
We expect to publish our third annual ESG report during the second quarter, providing transparency on our ESG performance for 2020 as well as a comprehensive overview of our clean energy commitment resource conservation diversity equity and inclusion and other sustainable business.
Practices.
We are committed to minimizing our impact on the environment, while simultaneously meeting the needs of our customers our investors our employees.
And the broader society.
Okay.
In terms of our social efforts.
We recently joined leaders across 85 industries, and signing the CEO pledge and CEO action for diversity, and inclusion and initiatives to advance diversity and inclusion and the workplace.
Our board of Directors also amended our corporate governance guidelines to clarify the director candidate pools.
And just include candidates with diversity of race ethnicity and gender.
Finally in February our board of directors amended our nominating and corporate governance Committee charter to formalize oversight of our ESG programs, including sustainability as well as diversity equity and inclusion.
We are doing our best to play a constructive proactive role and advancing our broader goal of delivering sustainable growth for all our stakeholders and.
<unk> customers employees and the communities we serve around the world.
Let's turn to our investment activity on page four.
We continue to invest and our global platform.
With 44 projects underway around the world totaling more than 300 megawatts of incremental capacity scheduled for delivery over the next 18 months.
Half of this expansion is underway and EMEA.
While the balance is split roughly evenly between the Americas and APAC.
In EMEA, we continued our extension of the highly connected legacy interaction campus in Frankfurt and began construction on the neck and expansion campus.
During the first quarter, we broke ground on the first 26 megawatts on the expansion campus, which are scheduled for delivery next year.
Demand and Frankfurt remains strong and our campus with access to over 700 carriers and Isps.
And he is to attract customers from around the world.
And in France, we were adding capacity and Marseille as well as Paris.
Demand and Marseille is largely driven by the 14 subsea cables that terminated in our facilities, where we are transforming a former abandon world War two you both bunker into a modern and vital communications hub for over half of the world's population.
In Paris, we continue to develop interactions Paris digital apart, while they're doing that subsea cable that links Paris to Virginia Beach was connected and our Paris campus during the quarter.
Okay.
We are also expanding our highly connected Brussels campus and breaking ground on another facility and Madrid to serve the broadening needs of service providers as well as enterprises.
In APAC, we recently announced the Grand opening of our third datacenter and Singapore.
We were particularly pleased to be recognized by Singapore's Desmond Lee Minister of National development and highlighting the sustainable is the design of our most energy efficient datacenter and the region.
Despite some COVID-19 related construction challenges last year, we were gratified to be able to deliver this highly connected and sustainably designed facility to meet customer needs and our tightest market.
Finally in mid March we closed and the sale of a portfolio of 11 assets in Europe for approximately $680 million executing on our strategy of recycling capital for stabilized assets reinvesting proceeds into higher growth opportunities, while prioritizing long term value creation over near.
Term earnings growth.
Lets turn to demand drivers on page five.
We are fortunate for your operating and a business levered to secular demand drivers.
And our leadership position provides us with a unique vantage point that enables us to detect secular trends as they emerge globally on platform digital.
And the second half of last year, we introduced for our customers. The data gravity index, our market intelligence tool the projects the growing intensity of the enterprise data creation lifecycle and its gravitational impact on global I T infrastructure.
And the first quarter of this year, we took the next step and published and industry manifesto, enabling connected data communities to guide cross industry collaboration for our customers as they tackle data gravity head on and unlock a new era of growth opportunity.
Recent third party research continues to support the growing relevant and some data gravity.
Market intelligence from Gartner recently hosted and executive retreat and.
And surveyed over 400, chief data and analytic officers with 83% of Ceos expecting to increase investments in digital business with a large percentage of these firms and prioritizing digital data products to drive growth.
With this transition to data driven businesses Gartner predicts that by 2020 for more than 75% of company's Wolf deployed multiple data hubs to drive mission critical data analytics sharing and governance.
We are seeing growing momentum across our enterprise and service provider customers deploying their own data hubs and analytics for environments and multiple metros on platform digital.
As I mentioned earlier digital Realty was recently named Energy Star partner for the year by the United States Environmental Protection agency for the second consecutive year.
This award reflects our sharpened focus on driving sustainable design and operations on platform digital underpinned by ambitious science based targets to significantly reduce our carbon footprint by 2030.
We're honored by the strong validation of our platform and our market leading innovation to capture the growing global data center demand opportunity from data driven businesses.
Given the resiliency of the demand drivers underpinning our business and the relevance of our platform for the meeting. These needs. We believe that we are well positioned to continue to deliver sustainable growth for customers shareholders and employees whatever the macro environment may hold in store.
With that I'd like to turn the call over to Andy to take you through our financial results.
Thank you Bill, let's turn to our leasing activity on page seven.
We signed total bookings of $117 million and the first quarter, including a $13 million contribution from interconnection.
Network and enterprise oriented deals of one megawatt or less totaled $33 million building upon our consistent momentum and demonstrating the growing success of platform and digital as we continue to capture a greater share of enterprise demand.
The weighted average lease term was over seven years, we landed a 100 new logos during the first quarter with strong showings across all regions again, demonstrating the power of our global platform.
The mix of our new signings was quite healthy with APAC and EMEA, each contributing approximately 30% and the Americas accounting for the remaining 40% and.
In addition, nearly 40% of bookings for generated within the megawatt are less plus interconnection category with strength and the E Commerce gaming and financial services segments.
In terms of specific wins during the quarter and around the world.
A particular highlight of the quarter with lending a leading APAC based diversified digital economy platform in Singapore, where we were able to support this customer's needs across our full product spectrum from Colocation and connectivity to a hyperscale dedicated data hall.
Elsewhere in APAC, a leading cloud service provider expanded with us simultaneously and both Melbourne and Osaka.
Subsequent to quarter, and we landed a leading cloud provider to anchor our Tokyo campus and enzyme.
And we've assembled a runway of over 100 megawatts of growth capacity as well as key magnetic connectivity solutions.
And EMEA and automotive digital technology maker deployed and artificial intelligence machine learning footprint on platform digital to gain access to a community of leading cloud service providers on our Frankfurt campus.
And the Americas, a leading cloud provider expanded on our campuses and Sao Paulo, and Rio de Janeiro.
A global 2000, and industrial manufacturer leveraged a partner to deploy on plot from digital to support growing demand enabled by our global platform and one way for growth on our suburban Chicago campus.
A global digital advertising and exchange platform expanding its presence on platform digital to gain access to connected data communities and the northern Virginia and Metro area.
Also in Ashburn and leading video game developer selected platform digital to build centers of data exchange.
And finally, a global it service provider expanded and multiple metros across North America to enable new services and platform digital.
Turning to our backlog on page nine.
The current backlog of leases signed but not yet commenced reached another all time high at $307 million.
The step up from $269 million last quarter reflects $66 million of Commencements during the first quarter.
Offset by roughly a $104 million of combined space and power leases signed.
The lag between signings and Commencements was a bit longer than our long term historical average and just under eight months.
Moving on to renewal leasing activity on page 10.
We signed $193 million of renewals during the fourth quarter, and addition to new leases signed.
The weighted average lease term on renewals signed during the first quarter was a little less than three years, reflecting a greater mix of enterprise deals smaller than one megawatt.
We retained 75% of expiring leases.
Just a bit below our long term average.
Cash re leasing spreads on renewals were negative two 1%, which was in line with guidance, but weighed down by two customers, who renewed existing capacity as part of the expansion of their footprint on our platform.
These transactions for prime examples of what we mean, when we talk about our holistic long term approach to customer relationship management.
And we believe we have a distinct advantage when we are competing for new business with a customer.
We are already supporting elsewhere within our global portfolio.
And whenever we can we try to provide a comprehensive financial package across multiple locations and offerings, including both new business as well as renewals.
In terms of first quarter operating performance overall portfolio occupancy ticked down 100 basis points, driven by anticipated churn and ashburn.
As well as the sale of 11, almost fully leased facilities in Europe.
Same capital cash NOI growth was negative two 8% and the first quarter in line with guidance and largely driven by the same ashburn churn.
As a reminder.
Our recently acquired West and building in Seattle interaction across EMEA, and Linda Helix, and Greece, and Altice and Croatia are not yet included and the same store pool, but we expect each of these acquisitions will be accretive to our organic growth going forward.
Turning to our economic risk mitigation strategies on page 11.
The U S dollar strengthened and the first quarter, but still remains somewhat depressed relative to the prior year average, providing a bit of and FX tailwind in the first quarter.
As a reminder, we manage currency risk by issuing locally denominated debt to act as a natural hedge so only our net assets within a given region are exposed to currency risk from an economic perspective.
In addition to managing credit risk and foreign currency exposure. We also mitigate interest rate risk by proactively terming out short term variable rate debt with longer term fixed rate financing.
Given our strategy of matching the duration of our long lived assets with long term fixed rate debt and 100 basis point move and LIBOR would have less and a 50 basis point impact on full year <unk> per share.
Our near term funding and refinancing risk is very well managed and our capital plan is fully funded.
In terms of earnings growth for.
First quarter core <unk> per share was up 9% year over year and <unk> <unk> ahead of consensus.
Upside relative to our internal forecast was driven by.
A beat on the top line with an assist from an FX tailwind.
As well as operating expense savings, primarily due to lower property level spending and the COVID-19 environment.
And a later than budgeted closing on the non core European portfolio sale.
A portion of the Opex savings is likely timing related and represents more of a deferral rather than permanent savings, but substantially all of the beat flowed through to the raise and we are taking core <unk> per share guidance up by seven five cents at the midpoint.
In.
The quarterly run rate we.
We still expect the split between first half for the year and the second half for the year to be approximately 49 to <unk> 51.
In other words as you can see from the bridge chart on page 12, we expect to dip down by about 10 cents and the second quarter before ramping up fairly steadily over the rest of the year due to the mid March closing of the non core European portfolio sale and.
And as well as and expected catch up and Opex spend previously budgeted for the first quarter.
I would like to point out that although we are raising our G&A forecast by $15 million at the midpoint, our implied EBITDA margin guidance is unchanged as the lion's share of the increase is due to geography on the income statement as we finalized mapping and the interaction cost structure and a re characterized a portion of interactions.
Opex spend as overhead.
In terms of our financing plans, we have already made great strides this year with a highly successful 1 billion Green Euro bond offering in early January and five Eighths and addition to the proceeds from the asset sales in March.
As always we expect to remain nimble for the rest of the year and we may look to capitalize on favorable market conditions to lock in long term fixed rate financing at attractive coupons across the currencies that support our assets to proactively manage future liabilities.
Last but certainly not least let's turn to the balance sheet on page 13.
As previously mentioned, we closed on the sale of a portfolio of 11 assets in Europe for approximately $680 million and used the proceeds to pay down debt.
Bringing net debt to adjusted EBITDA back down to five six times in line with our long term target range for.
Fixed charge coverage reached an all time high of five eight times.
Collecting the results of our proactive liability management, we continued to execute on our financing strategy of maximizing the menu of available capital options, while minimizing the related cost and extending the duration of our liabilities to match our long lived assets.
And early January we raised 1 billion of tenant and a half year Green Euro bonds and at all time low coupon for digital Realty, a 0.6, 25%.
We also retired $350 million of 275% bonds due in 2023, and we repaid all $530 million outstanding on the term loan due in 2023.
In mid April we announced the redemption of 200 million of preferred stock at six and five eighths also bring total preferred equity redemptions over the past 12 months to 700 million and a weighted average coupon of just over six and a quarter.
Effectively lower and leveraged by another 0.3 turns.
This successful execution against our financing strategy reflects the strength of our global platform.
Which provides access to the full menu of public as well as private capital.
Sets us apart from our peers and enables us to prudently fund our growth.
As you can see from the chart on page 13, we extended our weighted average debt maturity out to nearly seven years, while ratcheting, our weighted average coupon down to two 3%.
A little over 70% of our debt is non U S dollar denominated, reflecting the growth of our global platform and acting as a natural FX hedge for our investments outside the U S.
94% of our debt is fixed rate to guard against a rising rate environment.
And 98% of our debt is unsecured and providing the greatest flexibility for capital recycling.
Finally, and you can see from the left side of the page 13, we have a clear runway with nominal near term debt maturities and no bar too tall in the out years.
Our balance sheet is poised to weather a storm, but also positioned to fuel growth opportunities for our customers around the globe consistent with our long term financing strategy.
This concludes our prepared remarks and now we'd be pleased to take your questions. Operator would you. Please begin the Q&A session.
We will now open up the call for questions. As a reminder, participants will be limited to one question and one follow up to ask a question you May Press Star then one on your Touchtone phone and.
If youre using a speakerphone please pick up your handset before pressing the keys. If at anytime you question. That's been a trust and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Our first question will come from Jon Atkin with RBC capital markets. Please go ahead.
Thanks, I wanted to ask a question about I guess customer retention and as well was about <unk>.
<unk> generation.
We look at your pending lease exploration.
Yes.
Outgrew year and 22.
Any kind of update you can give us and which markets might have greatest exposure and is there a way to characterize how much of that you would consider.
Highly likely.
And to renew and extend their commitments.
And then on the kind of on the new business that you're bringing on and if you think about your sub megawatt from multiple benches.
And then Colocation win.
Any way to characterize how much of that is.
Hi.
<unk> attach rate to it and more broadly and I'm wondering if you could maybe just review and <unk>.
You said that you have underway to enhance productivity and your direct and indirect channels and manage them for long.
Going relationships. Thanks.
Hey, Thanks, John and maybe I'll try to tackle some of them the number of questions on the beginning and I'll turn it over to Corey to talk about our channels and productivity.
So.
Just to cut them up and a little bit and order here. So I would characterize going to your second question about how much of our less and megawatt co location is kind of connectivity rich and I would characterize that as a I.
Highly connectivity rich piece of our business.
In terms of for the numbers of our customers and the 4000 customers that we.
Have a digital.
The lion's share and customer count falls into debt.
And typically some of our more highly connected destinations either.
Dating back many years for our legacy <unk> business or interaction or western and building.
Or where we've organically grown our colocation and connectivity suites across North America.
And with five markets across Asia Pacific.
And and elsewhere around the globe so.
And you typically see.
Fairly sticky high retention low churn.
And as well as us fairly.
Standard pricing power, our core up and core and you can see if you could see that in.
The table and the back for ourselves.
And the definition didn't change all that much when we migrated from the word colocation too.
And our size and definition.
I think the first.
Part of your question was called.
Look at the expiration schedule I thought I heard eight post year end 2022, I'm not sure my Crystal ball can go without much precision out that far.
I would say.
Thematic Lee.
We've been working through.
A few years now more tougher sledding when it came as for exploration and that was in 2000 22019, 2018 that was and size of the volume and the expirations that was in the mix of explorations.
In terms of kind of going back to more higher less pricing power locations chunkier deals concentrations of some multi market major customer renewals I think we've done a nice job chop and a fair bit of wood and the front for your mirror on the expiration schedule.
Well, it certainly looks better than what we've come through and I think <unk> seen that now.
In terms of how were mark to market has called has been progressing and back and do a better fashion.
And I haven't and kind of work through some of those lumpier contracts and then you can see it on the percentages were the expirations kind of fall between the plus or minus megawatt category.
So it feels like we're headed in the right direction on the expiration schedule.
And I didn't touch on but definitely geographically just fine and the maturity of our business much more non U S or out call. It in EMEA.
APAC type explorations and into the future, which also.
A higher barrier to entry tough for a high pricing power markets and alternatives. According to hit the last part of your question.
Yeah, Hey, Thanks, Andy and John and Thanks for the question.
Thanks, Catherine and you correct me if I missed it but you have to question around channels and how we're doing there and then a little bit about with the new laws and well be getting and an increase in interest and that I think other questions and Jonathan if I missed it then.
You know you kind of clarify it later, but I would tell you that really happy with the progress we're making on channel of our I'll call. It enterprise business non scale business. The channels now about a quarter of the business and we're pretty happy with the progress there.
And your question around new logos and how much of the new logos are adding interconnection to it we've seen an increase and that it really kind of just.
Come through when you think through platform did roll and how we're getting many many more multi use case deployment multi site deployment. Most of those look like network connectivity as wallets and control all hubs and so we're seeing good progress across both and were standard I guess the net of it is the channel to bring up a lot more.
And new logos and other new logos are a little bit more interconnection and network.
Hopefully that answers the question.
Yes, it was.
Just given given the talent you brought on from <unk>.
From a interaction and then a lot and legacy Equinix people, such as yourself and her onboard just interested in any kind of.
Machine learning AI and predictive analytics tool and are continuing.
Hello, and thanks. Thanks, Thanks, that's a good question yet.
And familiar with that.
Tell you that.
You referenced a few places at some other than sort of comment on what they're doing but I would tell you that yes, we do use call. It AI and ml day target base dataset for both our prospects our customers and and all.
I'll tell you debt. So we use data and that's really what the net.
And the data gravity index was it was a day to grab the index published based on data and what we see and the industry and it really helped us identify the shift and the infrastructure placement and connectivity that's required across the full spectrum co location and so I feel like we're doing pretty good across both of those Jonathan and use them.
AI using data to make our decisions, how we target our customers. So.
Are you on top of that for you.
Our next question will come from Jordan Saddler with Keybanc capital markets. Please go ahead.
Yes.
Thanks, I wanted to do.
Sure.
Any piece of the business and.
Looked like and there was some particular strengths and interconnection.
This quarter sequentially in particular, and just kind of curious.
Yes.
And the pacing and the growth is something that's sustainable.
Potentially you got some momentum there or if there was anything in particular that drove it.
Okay.
And thanks, Jordan, I would say, Oh, and total volume and connectivity new signs was up.
I think in terms of call it lumpier concentrations.
And Latin America, a portion of the portfolio was certainly a major contributor.
In terms of the top markets for just overall interconnection signings.
And North America, and with some of the Unusuals, and New York Metro Chicago Atlanta Ah.
But also I did notice we had some pretty strong connectivity growth and both our northern Virginia campus as well as our Franklin Park, Chicago campus, so not necessarily a licensee highly connectivity and dense location, but it's great to see some enterprise is landing there and growing and connectivity footprint.
And and answer partly answered the call Jon Atkins question, and we track, our new logos and a year over year growth basis.
We don't have this for all of our new logos, because we're kind of combining businesses over the last year, but I'll call. It for legacy digital subset that we're here a year ago.
For connectivity footprint north of 10% on a year over year basis. So the new logos are growing post landing with us.
So definitely pleased and.
I mean, I think it goes back for a lot of what Corey was saying about a reorientation all across the board in terms of bringing some of them critical puzzle pieces together in terms of our asset profile. Our go to market strategy led by Corey.
That form digital and brand into the market.
And many other elements that I think are tied together and that's been driving that success.
Okay, and then maybe just honing in on the.
And Northern Virginia, you touched on it there on interconnect and area.
And connectivity, but.
What's your availability looking like and that market and how.
What are you seeing in terms of customer or customer day bombora.
And Sir.
Northern Virginia, Jordan, obviously, where we have pretty incredible 2020.
For close to 85 megawatts sold overall.
And we kind of ran pretty darn tight on inventory based on that success.
Which is not necessarily a bad thing given that the northern Virginia market has been kind of working its way out of the woods for some time now.
We ended the year with our development pathway to 100% pre leased.
And we are now under construction and delivering building are in terms of our newbuild.
And I'll come along this summer.
And we did close to five megawatts of leasing and total in that market.
Including the full product suite.
And I would say the lion's share of our focus is on the <unk>.
Capacity, we got back to the very beginning of the year.
All of which I mentioned, we already re leased.
Pre leased.
On the last call, so really focusing on some of that knowledge and capacity on our existing campus.
But also we just landed anchor deal a little Chunkier and enterprise deal and to building our.
Coming on back on the back half for the year and and building our is a large shell that will.
Deliver six megawatts suites and called every other month type of a fashion.
And so.
A little tight right now and focused on where we place pushing customers, but a long longer larger one way with building aren't coming into the back and theater.
Our next question will come from Michael Funk with Bank of America. Please go ahead.
Yes.
Hi, good afternoon, and thank you for the questions. So first off I'm wondering if your posture or your approach to <unk>.
For rental rates and renewals has changed at all and last 12 months, given the tightening and some of the markets.
Yeah.
I think we have a pretty responsive pricing dynamic holistically and Mike.
It's not just on renewals and.
We have a call it inventory price book for every type of capacity.
For the duration of contract for every market and for every product that is update on a recurring basis in response to what we see in terms of the supply demand dynamics in the market. We obviously didn't have certain overlays in terms of customer relationships or larger growing customers are newer customers.
And that we kind of make sure we're responsive to and the same time.
We're certainly not sitting by idly when a market.
Is weaker and we need to respond to that with pricing to be more competitive.
And on the other flip side of that coin and we had experienced like and Singapore or other markets like Santa Clara Frankfurt.
We've raised rates overtime and those.
And those rates are impacted our renewals at our new pricing and.
In response to call for the overall supply demand dynamic.
And then and then one more if I could Andy so on the guidance or sell the non core expense add back and increased for 2021 and I didn't hear you called it out and the prepared remarks, what was the increase in the non core.
Yeah.
The increase and the non core I believe.
Got a whole list of items and are asking for a reconciliation and kind of hits the non core.
And that includes our our investment and Mega Port.
The stock price mark to market and when that flow through and that obviously is and the core up or down to our business.
And I believe there is a revaluation on our debt at SMT and given it's a.
Brazilian entity and we have a U S dollar denominated debt to match the currency of the launch of our contracts.
And we also have I think.
And this particular quarter, a little bit of a benefit from our PPA.
Settlement.
That we added back because we didn't view that as a recurring benefit for fall.
And.
Our next question will come from Simon Flannery with Morgan Stanley. Please go ahead.
Great. Thank you and maybe you could go back to Corey.
Can you talk about where we are on sort of returned to normal in terms of the sales process and some other regions.
Are you still able to get the the virtual tours and get the connections or do you think there's still more room to come and come back to normal here and then any commentary on the supply chain. I think you you did talk a little bit and your disclosures about.
Generally.
Not seeing huge issues, but in terms of building costs. So building.
And building up inventory there. Thanks.
And do you want me to take the enterprise demand question and just that are unusual and and you can follow on the second half.
Please go ahead, okay alright.
Alright.
Thanks for the question.
I would tell you that we're getting closer to that.
For the state of normal and that's what you want to call it.
Some of the things are opening up but we've got a lot of ability around doing.
Tours virtually we found a bunch of different ways.
And then the need and take care of customers during the pandemic so I.
And I feel like we're getting closer and we're not quite there that said enterprise demand has been really really good and strong broad based success selling our platform.
Andy mentioned it earlier, but early innings with long tail left we're.
And we're looking through some of the more macro trend Gartner Scott.
And I'm getting a 6% growth.
And with about four one.
Brilliant and annually and only about 400 billion of that go into a public cloud. So we think that enterprise demand and the point the president and.
Our multiyear.
Multi use cases as well as multiple markets that we're going out for are going to be there and we're seeing it continue.
Well I wouldn't say that it's up.
For you back to normal we haven't.
And the enterprise demand and and.
Quite frankly, we think we've done a pretty good job of just think through it with all the ops and now and.
Yes.
I hope that answered the question on that debt.
That's great. Thank you.
And Simon can you just repeat the second part of the question.
It was really around the supply chain issues and what youre seeing in terms of the COVID-19 impacts on your ability to bring on data.
Data centers on time on budget, and any cost issues and might be seeing or inventory issues.
Okay, Great. So let me take the.
Our digital supply chain and I'll, let Chris touched on and customer supply chain, because I know that's been a question out there as well so I mean I think.
Hats off and kudos to our operational design construction team and supply chain team.
Keeping ahead of this consistently obviously, we do all have the benefit of our scale, our global nature of our deep operational expertise, but we have not in recent quarters had any called disruption too.
Critical equipment delays cost.
Impact.
And so the team and really has done a really incredible job navigating through that I'm not sure. That's the case for all providers and the data center World, especially <unk>.
Smaller stature.
There has not been disruption today.
And I'd say we.
And what we've looked at our I'll call. It 300 megawatts of capacity under development.
Pretty darn insulated to.
And any potential inflation shops, and and we're also keeping a keen eye on that but.
But Chris once you hit that.
No absolutely not I would echo your sentiment and the vendor management program that we have in place today I think is something that has allowed us to overcome some of the shortcomings of some of the infrastructure within the facilities like breakers optical infrastructure things like that but that's something that operating on a global basis has been a big benefit to digital going.
Forward, but we also stay very close to our customers and really watching if theyre, having trouble procuring and infrastructure to deploy their architectures and tour our facility, we haven't seen them and material impact on that as well I know there's been a lot of concern around chip shortages and things like that but again just to reiterate and not all chips are the same and theres a lot of very.
The ability out there and so we have not seen any kind of material impact from customers being able to deploy into the facility and quite frankly, some of our larger hyperscale customers. They build the entire stack themselves. So they have strict control over their supply chain and so they have also not experienced any slowdown and being able to deploy the massive amount of infrastructure required for <unk>.
Our deployments as well.
Thank you for a helpful.
Our next question will come from <unk> Okusanya with Mizuho. Please go ahead.
Hi, yes, good evening, so when I look at the updated guidance. It seems like the only major change there really is the FX assumption.
Assumption around the pound so is it fair to me.
And as Jim.
Guidance.
You know is going up simply because of the changes and FX assumption or is there something else kind of operationally either visit and improvement.
And that should also be signals through the guidance increase.
Hey, Thanks Teo.
<unk>.
Sterling is especially today are much more smaller piece of our business.
Pro forma for our some of our acquisitions over the last year.
So while FX did contribute to our outperformance and the first quarter and obviously that flows through the guidance I would not say that was the only thing that drove our increase in guidance.
We did have a beat.
In terms of our internal forecast and now it was called and the same ballpark for us where consensus was.
We essentially raised a few elements of the revenue and EBITDA. The G&A piece is really just the P&L geography, you're mapping from interaction integrations.
And then we also kind of Oh made sure that showed that that flow through to the bottom line was caught.
Increase at the midpoint of the range up I think 755% year over year growth.
And not all due to FX. It was due to some of the operational outperformance not all of our beat flowed through because some of it was opex delayed from <unk>.
Two to <unk> 40 range for the year, and but definitely pleased with results and which I would say and gave us the confidence to raise here and the first quarter, which is.
I don't think I can recall last time, we did that now six years and digital but.
Definitely pleased with the progress.
And there were just separate the effect of both things away from them yet.
Okay.
I'm, sorry is there a way to separate those things away from the debt.
Impact of this new thing actual opposition and improvements of equities FX and the guidance for wings and the guidance, we lose some of your peers do.
So why would like and what.
We used to have a constant currency.
Closure at the bottom here I'm not sure I don't think we have that anymore.
Ballpark, the seven and a half century <unk> from FX.
Our next question will come from Matt <unk> with Deutsche Bank. Please go ahead.
Hey, guys. Thank you for taking the question.
First maybe on bookings can you talk about some of the strength seen in Asia Pac and what drove the uptick in bookings during the quarter.
And then.
And just maybe a little bit more of a housekeeping item on margins and the quarter were pretty solid I think there were the highest since you closed the interaction deal, but we also for tenant reimbursements and pick up and so I'm just wondering what was behind the.
Pickup and utilities reimbursements was that tied to the winter storm in Texas.
And then maybe what drove some of the offsetting cost benefits that helped.
Drive EBITDA margins as high as they were.
Hey, Thanks, Matt.
So maybe I'll try to take in reverse order and I'm going to I think probably bring and Corey here when we circle back to APAC, but just with the housekeeping piece.
A little bit of a funky quarter.
On the margin front, so guidance called to our full year guide.
Guidance table on the EBITDA margin.
You have a footprint across Texas, Dallas being the largest piece of that.
Were impacted by the winter storm, our again, our operational team did a really marvelous job.
Keeping up and running and customers happy.
Italy got it personally got a cold call from our CTO of our global customer, who also had their own asset or data center and the market and needed diesel fuel rerouted to them in order to stay running and our operations team sprung into action with it like an hour's notice and kind of really see that Cto's day.
But so on the power front.
It did increase unusually.
Given the given what the storm Luckily one our team did a nice job hedging in terms of our power cost too.
Well it didn't fleets.
And the expense it also inflates the reimbursement and because we have a sizable portion of our Dallas for Texas footprint is metered power. So reimbursed so net net especially on the size of company.
Not really a major negative, but certainly funky when you've got that spike and power. When you look at your EBITDA margins.
Coming through in.
In terms of APAC.
I mean alter.
And I will turn it to Korea over here, but I mean, just really standout quarter across the full customer product spectrum.
We're now live with I believe five or almost six colo projects across our platform.
From Seoul, Tokyo Osaka.
Singapore and I'm missing one.
So we had great success selling into those markets and then.
And also on the Hyperscale or larger footprint front I mentioned in the prepared remarks, one top CSP signed with US both in Osaka and Melbourne.
We also had subsequent quarter and anchor customer and insight and Tokyo.
And then Singapore.
Maybe I'll, let Corey kind of talk to some of the success, we saw and Singapore.
Yeah, Hey, Andy I would just add and you hit most of the data point that would thinking through and the response really broad based success across the portfolio is what I would say AAP was really it was really successful as well you mentioned it in your prepared remarks diversified e-commerce customer that's been doing a lot of business with us and we really are happy with.
And I would also tell you that are new logos coming out of that region, and that's tripled and last year. We're.
And we're really happy with the team, that's where most of our organic growth as far as the sales team that were putting out there in place.
And so we're really happy with it but I wouldn't get focused just on API.
I think about the <unk>.
Rod based platform success, we're having across all the regions, but I think our largest export region. This last quarter was EMEA. So we're really excited about just kind of broad based success, where we are and we think there's a ton of opportunity and.
And Asia Pacific and yet and Singapore, we were.
Pretty successful sell them through that large building there.
And he was there any other data point I missed I think we hit seven and for them.
No I think you got it thanks, okay. Thanks.
Thank you.
Our next question will come from Erik Rasmussen with Stifel. Please go ahead.
Yes, thanks for taking the questions.
Looking at your table.
And it looks like Europe seem to have sort of taken a breather this quarter with leasing down and especially in the greater than one megawatt category.
Has anything changed there I mean, I know you talked about a pretty robust pipeline, but maybe some commentary around that just to understand where the opportunities are and what drove this decline and if there's anything else you can comment on.
Thanks, Eric So I mean.
Really Europe for EMEA, and just really came off of.
Blowout.
The quarter prior.
I still think I was pretty impressed with the results and not really healthy quarter.
On the largest footprint side, we had for different csp's sign across three different markets.
<unk> for two and Zurich, one and Amsterdam, So definitely pleased with the diversity of demand and.
And from a customer and a geography standpoint on the enterprise customer standpoint.
Within the flap Frankfurt, London, and Amsterdam, certainly stood out this quarter and from new signings.
And within the non flap, Marseille, Stockholm, and Madrid, where some of our top EMEA market. So.
And as you can see on our development table, we've been continuing to increase our footprint of development and building out larger parcels and EMEA or highly connected campuses. There. So I don't.
I'm still pretty a.
Drove positive about the growth in Europe.
Great and then.
And then maybe just on <unk>.
Re leasing spreads greater than one megawatt.
And does that 11, 3% decline on a cash basis, how does that compare on a historical basis I know.
This is all dependent.
And our customers and mix and few other things, but how can.
Can you talk about debt to live and three in the context of what you've seen in the past.
Yeah.
And that's just that's just a statistic when you splice it down to a quarterly basis and depending.
Depending on what mix actually gets renewed and that quarter, because it's not just what actually expires customers will renew quarters or even years earlier sometimes in.
In particular, there was two specific customers one.
Top five CSP, another and <unk>.
Enterprise customer that did called and fairly chunky renewals in combination with new signings.
CSP was a multimarket renewals multimarket.
Growth the enterprise was in one particular, north American market. So we thought it was a.
A very fair commercial compromise and.
Love to see them continue to grow with us.
I mean that bounces around and.
We've had worst for that in a given quarter and we've got much better and that a given quarter and.
And I still as you saw we can confirm our guidance on the mark to market. So we don't think.
That's a truly bad omen or anything like that and as I've mentioned and I think and responsive Jon Atkins question on the front part of the call.
Definitely feel like we're moving towards better and better territory and explorations and based on the product mix and the geography.
Our next question will come from Sami Badri with credit Suisse. Please go ahead.
Yes.
Hi, Thank you I wanted to go back to slide number 10.
And also back to that 11 three <unk>.
Looking at for the greater than one megawatt.
Now I guess, if we go back to about a year ago, you guys are working through and carrying a large vintage and polices.
And we were kind of we were Inc.
And formed that it would be high single digit for double digit negative roll downs, there, but are we pretty much done with the majority of those leases or could we expect a bit more negative.
And if rates this magnitude and other quarters in 2020 one.
Okay.
Yes, Jamie.
Consistent with my response to Eric's question for.
Being able to predict with accuracy the quarterly blend to that precision is pretty challenging because it's really out of our control when the customer.
And so renewal.
But I think I would agree with your outset statement, we started out.
'twenty 'twenty with an outlook of net heart called mid to high single digit negative.
Cash mark to markets overall, and as we worked away through that year.
And outperform that expectation.
And then a negative but it was very slightly modestly negative and.
And we want to guidance our guidance again was really from that same territory and where it ended up so a better outlook and the prior year.
And if you look at the overall results here negative, 2% cash mark to market across all the products, it's kind of right in line.
And even overall, it's kind of it's.
Right and lie with the language we've described here so.
Again, I can't promise you every single quarter is going to be positive, but I do believe based on our understanding of the exploration of the contracts and.
And the supply demand market dynamics that we're heading into better territory on those mark to markets.
Got it thank you.
The other thing is on the zone, one megawatt range for the one 6%.
And in that unit, one megawatt and and those releasing spreads could you give us an idea and customer mix in there in terms of how much of that and enterprise versus cloud versus other.
Sure and that zero to one megawatt the some of the Chunkier deals were.
And then there is there and kind of no particular order.
And the New York Metro area, there was a fiber oriented customer and also a content oriented customer.
In London, and there was a top five cloud service provider and.
Singapore, There was a multinational financial services company and Northern Virginia, There was a.
And.
And.
Marketplace type.
Business.
Our next question will come from Tim long with Barclays. Please go ahead.
Hi, Good afternoon. This is Brendan Lynch on for Tim.
Your slide deck indicates you've been announced commitment to reduce direct emissions by 68% and indirect emissions by 24% by 2030.
It's the first day.
<unk> seen those numbers or any specific targets announced can you provide some color on your execution strategy around that and.
What it means in practical terms for your operations.
Sure. This is bill.
And we as you noted we've established carbon reduction targets and conjunction with the science based targets initiative and.
And in connection with that we've committed to reducing direct emissions by 68%.
By 2030.
And committed to reducing indirect emissions by 24% by 2030.
As you also are probably aware.
We are the we leave the data center category.
And the REIT industry and Green bond issuance, we've issued five $6 billion of green bonds since 2015.
We also lead the data center industry and Green building certifications.
796 megawatts of Green building certifications.
And we also.
556 megawatts of.
Renewable energy, that's contracted which of course.
Tributes to the direct emissions reduction and.
And that includes 154 megawatts and two renewable projects and Texas.
For the second year in a row we've been.
Voted the energy star partner for the year.
And for the fourth consecutive year, we've been voted NAREIT leader in the Light award for the data Center category and they recently had that leader and the White award for data centers for for years. So we're batting a thousand right now.
Yes, that's great color and clearly youre, making progress there and how does that affect your negotiations to the extent that it does with customers and and <unk>.
How are they responding to these initiatives.
You know the customers and.
And many of these customers or share the same corporate values that we do.
With respect to ESG.
And.
And we're all about reducing our carbon footprint, so I'd say.
We're totally in sync with what our customers long term goals are and this area.
Our next question will come from Michael Rollins with Citi. Please go ahead.
And.
Thanks, and good afternoon, and looking at the rent schedule it looks like about 35% of the rent comes from.
One megawatt and below Disney and I'm, just curious given all the comments.
On the call today and in terms of debt.
Financial performance of these rents.
Is it a strategic priority within digital to continue to lift this percentage of mix that comes from the one megawatt or below.
<unk>.
Okay.
Thanks, Mike.
Maybe Corey and I can tag team this for a second I mean.
Our strategy is being the leading global provider designated and full customer spectrum from the service providers all of the hyperscale or to the enterprise customer.
I think we've.
Certainly.
Demonstrated a pretty solid and consistent track record and the first leg of that stool.
With your call it top five CSP have and.
2025, 30 different locations with us.
And on average depending on the specific name.
And that value prop of our land and expand and future proof their runway for growth and operational expertise to the highest demands.
Certainly proud of that you've seen the success and our results, but I think going after and supporting the enterprises a place we've been investing and Joe.
Just as much.
And over the last several years on a multifaceted and front.
Certainly in terms of the critical pieces of the business, we've acquired putting the puzzle pieces together are the right.
Most connectivity rich destinations, but also on many other things both Chris and Corey had been call. It driving here for digital for some time, so I'll, let them speak to that a little bit as well.
Yeah. Thanks, Andy.
And on.
And on to that and you think through the tools, we were talking earlier and about how we use data to target for work moving.
And that forward as well down that path.
If you were asking about how we're going after them the market and we're going after that part of the business as far as the the demand that we have going forward and I'm sorry, if I missed some other question, but I think there was a sales funnel question as opposed to just.
And just how we were targeting it and get it all here and background noise alright, guys.
And Michael can you repeat the second part of the question I just want to make sure I'm getting it right.
Yes, so for the question.
How much of a strategic priority for digital to increase the revenue contribution from the one megawatt and below I'm, sorry, I've got it yet.
Given the financial <unk>.
Mitra and performance of this type of business versus the larger scale business that you have.
I guess I would tell you that we're going to try to increase both of them and we're not going to win every customer without and <unk>.
Discerning between them, but our plan and continue to grow the enterprise and drive that I think that will will move that mix a little bit naturally, but it's not going to be at the expense of the TSP is we're going to continue to partner with PSP and continue to partner with online customers and you'd like any commerce.
Some of the high performance computing, so we're going to continue to grow and everywhere as long as it adds to the value of a platform digital and is helpful for us.
So I just don't want you to think that we're only trying to raise the one without the other we're going to try to raise that enterprise business, maybe faster than others to help us with that mix, but we're going to win everything.
Thanks.
Thanks.
That concludes the Q&A portion of today's call I'd like now turn the call back over to CEO Bill Stein for his closing remarks. Please go ahead.
Thank you, Matt I'd like to wrap up our call today by recapping our highlights for the first quarter.
As outlined here and the last page of our presentation.
And we understand our commitment to delivering sustainable growth for all stakeholders.
And we were honored to be named the EPA Energy Star and the star partner for the year for the second year and a room.
Two we continued to enhance the value of our global platform.
Calling non core assets and.
And extending connectivity solutions.
And three we delivered very solid current period financial results, beating expectations and raising our full year outlook.
Last but not least we further strengthened our balance sheet.
Raising attractively price long term debt.
Recycling capital and using proceeds to hire to retire high coupon debt and preferred equity.
Our Hearts go out to all those impacted by the COVID-19 global pandemic.
And as we approach a post pandemic environment here and the United States.
I'd like to once again, thank the digital Realty frontline team members and critical data Center facility rules, who have kept the digital world running.
I hope all of you stay safe and healthy and we hope to see many of you and personally again later this year. Thank you.
The conference has now concluded. Thank you for joining today's presentation you may now disconnect.