– Delivered Strong Q2 Financial Results,
Including 7.7% Revenue Growth Year Over Year – – Executed
$7.8 Million of New and Expansion Sales, Driven by Retail
Colocation and Small Scale – – Increased Total Data Center
Portfolio Occupancy by 220 Basis Points Year-to-Date –
CoreSite Realty Corporation (NYSE:COR) (“the Company”), a
premier provider of secure, reliable high-uptime data center
campuses with high-performance cloud access and interconnection
solutions across the U.S., today announced financial results for
quarter ended June 30, 2021.
Q2 2021 Quarterly
Highlights
- Key Financial Results –
- Grew operating revenues to $162.1 million, an increase of 7.7%
year over year and 2.8% sequentially
- Delivered net income of $0.59 per common diluted share, an
increase of $0.07 year over year and $0.08 sequentially
- Grew adjusted EBITDA to $87.4 million, an increase of 7.1% year
over year and 1.6% sequentially
- Generated FFO, as adjusted, of $1.42 per diluted share and
unit, an increase of $0.07, or 5.2% year over year and $0.02, or
1.4% sequentially
- Paid a dividend of $1.27 per share for the second quarter on
July 15th, an increase of 3.25% over the prior quarter
- Lease Commencements –
- Commenced 133 new and expansion leases for 59,174 net rentable
square feet (“NRSF”), representing $8.4 million of annualized GAAP
rent, for an average rate of $142 per NRSF
- Leasing Activity –
- Signed 112 new and expansion leases for 33,135 NRSF and $7.8
million of annualized GAAP rent, for an average rate of $235 per
NRSF
- Renewed 330 leases for 136,564 NRSF and $20.4 million of
annualized GAAP rent, for an average rate of $149 per NRSF
- Renewed leases reflected an increase of 4.2% in cash rent and
7.1% in GAAP rent, and we reported churn of 1.3%
Q2 Notable Events
- Achieved Stabilization at Our SV8 Data Center During the
Quarter
- During the second quarter, our SV8 data center reached 98%
occupancy less than two years after the delivery of SV8 Phase
1
- Completed the New Boston Chiller Plant Project
- The multipurpose chiller plant project will provide
significantly expanded cooling capacity and generate a positive
return on investment through improved power efficiency
- This project is another leap forward in our ongoing energy
efficiency improvement initiative described in our sustainability
report
“We are optimistic about the fundamental market drivers
supporting our go-to-market strategy,” said Paul Szurek, CoreSite’s
President and Chief Executive Officer. “Technology requiring
low-latency, high-performance, hybrid-cloud IT architectures
continues to play an increasingly important role in the success of
businesses. We believe we are well-positioned to capture a good
share of the edge needs in our major metropolitan U.S.
markets.”
Sales Activity
CoreSite achieved new and expansion sales of $7.8 million of
annualized GAAP rent for the quarter, which included annualized
GAAP rent of $3.4 million, $3.6 million, and $0.8 million from
retail colocation, small scale, and large scale leases,
respectively.
“We remain focused on targeting retail and scale customers with
performance-sensitive applications requiring high-performance
interoperability and hybrid-cloud architectures,” said Steve Smith,
CoreSite’s Chief Revenue Officer. “We expect these leases to drive
higher yields with incremental power margin and interconnection
revenues that we typically see through these types of deployments,
while we continue to work on a strong funnel of scale opportunities
with longer sales cycles.”
CoreSite had annualized GAAP backlog of $8.1 million, or $15.6
million on a cash basis, for leases signed by not yet commenced.
The difference between GAAP and cash backlog is primarily driven by
a handful of scale leases with power ramps in the early portion of
their lease terms.
Other Financial Results
CoreSite’s $162.1 million of operating revenues for the second
quarter, including $136.8 million of rental, power and related
revenue, reflecting 7.6% year over year growth, $22.6 million of
interconnection revenue, reflecting 8.2% year over year growth, and
$2.7 million of office, light-industrial and other revenue. Net
income was $28.5 million for the quarter, or $0.59 attributable to
each common diluted share.
Development Activity
CoreSite continues to invest and develop new capacity as needed
to meet market demand.
- LA3 Phase 2 comprised of 54,000 NRSF and 6 megawatts (“MW”) is
under construction and continues to be on track for its estimated
completion in the fourth quarter of 2021.
- NY2 Phase 4A comprised of 35,000 NRSF and 4 MWs commenced
development during the quarter and is scheduled for completion in
the first quarter of 2022.
CoreSite’s ongoing data center development and operational
position includes –
- the ability to increase its occupied footprint of purpose-built
data centers, both owned and leased, by approximately 1.9 million
NRSF, or about 82.4%, including space unoccupied, under
construction, pre-construction or held for development, and
- owning (versus leasing) 93.1% of its current and developable
4.3 million data center NRSF, supporting operational control,
expansion and long-term expense management.
Balance Sheet and
Liquidity
The Company’s balance sheet remains strong, with a ratio of net
principal debt to second quarter annualized adjusted EBITDA of 5.0
times, or 4.9 times including GAAP backlog. As of the end of the
second quarter, CoreSite had approximately $264.3 million of
current liquidity, including $2.9 million of cash and $261.4
million of available capacity on its revolving credit facility.
2021 Updated Guidance
Updated Guidance
Previous Guidance
Total operating revenues
$645 - $653 million
$642 - $652 million
General and administrative expenses
$46.5 - $50.5 million
$47 - $51 million
Adjusted EBITDA
$340 - $348 million
$336 - $346 million
Net income attributable to common diluted
shares
$1.99 - $2.07
$1.81 - $1.91
FFO per common diluted share and OP unit,
diluted – as adjusted
$5.52 -$5.60
$5.42 - $5.52
Cash rent growth on data center
renewals
2% - 4%
0% - 2%
The increase of $0.09 per share, or 1.6%, at the midpoint of FFO
per share, as adjusted, is largely driven by an increase in
operating revenues, improved adjusted EBITDA margins, and to a
lesser extent, by lower than anticipated interest expense.
CoreSite’s full 2021 guidance can be found in the Company’s second
quarter 2021 Supplemental Earnings Information on page 21.
Conference Call Details
CoreSite will host its second quarter 2021 earnings call on
Thursday, July 29, 2021, at 12:00 p.m. (Eastern Time). The call
will be accessible by dialing 1-877-407-3982 (domestic) or
1-201-493-6780 (international).
A replay will be available after the call until August 5, 2021,
and can be accessed dialing 1-844-512-2921 (domestic) or
1-412-317-6671 (international). The passcode for the replay is
13720612.
The quarterly conference call also will be offered as a
simultaneous webcast, accessible by visiting CoreSite.com and
clicking on the “Investors” link. An on-line replay will be
available for a limited time immediately following the call.
Concurrently with issuing its financial results, the Company
will post its second quarter 2021 Supplemental Information on its
website at CoreSite.com, under the “Investors” link.
Upcoming Conferences and
Events
CoreSite’s management will participate in the Cowen 7th Annual
Communications Infrastructure Summit on August 10th.
About CoreSite
CoreSite Realty Corporation (NYSE:COR) delivers secure,
reliable, high-uptime data center campuses with high-performance
cloud access and interconnection solutions to a growing customer
ecosystem across eight key North American markets. More than 1,375
of the world’s leading enterprises, network operators, cloud
providers, and supporting service providers choose CoreSite to
connect, protect and optimize their performance-sensitive data,
applications and computing workloads. Our scalable, flexible
solutions and 475+ dedicated employees consistently deliver
unmatched data center options — all of which leads to a
best-in-class customer experience and lasting relationships. For
more information, visit www.CoreSite.com.
Forward Looking
Statements
This earnings release and accompanying supplemental information
may contain 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 some cases, you can
identify forward-looking statements by the use of forward-looking
terminology such as “believes,” “expects,” “may,” “will,” “should,”
“seeks,” “approximately,” “intends,” “plans,” “pro forma,”
“estimates” or “anticipates” or the negative of these words and
phrases or similar words or phrases that are predictions of or
indicate future events or trends and that do not relate solely to
historical matters. Forward-looking statements involve known and
unknown risks, uncertainties, assumptions and contingencies, many
of which are beyond CoreSite’s control that may cause actual
results to differ significantly from those expressed in any
forward-looking statement. These risks include, without limitation:
the geographic concentration of the Company’s data centers in
certain markets and any adverse developments in local economic
conditions or the level of supply of or demand for data center
space in these markets; fluctuations in interest rates and
increased operating costs; difficulties in identifying properties
to acquire and completing acquisitions; significant industry
competition, including indirect competition from cloud service
providers; failure to obtain necessary outside financing; the
ability to service existing debt; the failure to qualify or
maintain its status as a REIT; financial market fluctuations;
changes in real estate and zoning laws and increases in real
property tax rates; the effects on our business operations, demand
for our services and general economic conditions resulting from the
spread of the novel coronavirus (“COVID-19”) in our markets, as
well as orders, directives and legislative action by local, state
and federal governments in response to such spread of COVID-19; and
other factors affecting the real estate industry generally. All
forward-looking statements reflect the Company’s good faith
beliefs, assumptions and expectations, but they are not guarantees
of future performance. Furthermore, 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 its most recent annual report on Form 10-K, and other
risks described in documents subsequently filed by the Company from
time to time with the Securities and Exchange Commission.
Use of Funds From Operations
(“FFO”)
FFO is a supplemental measure of CoreSite’s performance which
should be considered along with, but not as an alternative to, net
income and cash provided by operating activities as a measure of
operating performance. The Company calculates FFO in accordance
with the standards established by the National Association of Real
Estate Investment Trusts (“Nareit”). FFO represents net income
(loss) (computed in accordance with GAAP), excluding gains (or
losses) from sales of property and undepreciated land and
impairment write-downs of depreciable real estate, plus real estate
related depreciation and amortization (excluding amortization of
deferred financing costs) and after adjustments for unconsolidated
partnerships and joint ventures.
CoreSite’s management uses FFO as a supplemental performance
measure because, by excluding real estate related depreciation and
amortization and gains and losses from property dispositions, it
provides a performance measure that, when compared year over year,
captures trends in occupancy rates, rental rates and operating
costs.
CoreSite offers this measure because it recognizes that
investors use FFO as a basis to compare its operating performance
with that of other REITs. However, the utility of FFO as a measure
of the Company’s performance is limited because FFO excludes
depreciation and amortization and captures neither the changes in
the value of its properties that result from use or market
conditions, nor the level of capital expenditures and capitalized
leasing commissions necessary to maintain the operating performance
of its properties, all of which have real economic effect and could
materially impact the Company’s financial condition and results
from operations. FFO is a non-GAAP measure and should not be
considered a measure of liquidity, an alternative to net income,
cash provided by operating activities or any other performance
measure determined in accordance with GAAP, nor is it indicative of
funds available to fund the Company’s cash needs, including its
ability to pay dividends or make distributions. In addition,
CoreSite’s calculations of FFO are not necessarily comparable to
FFO as calculated by other REITs that do not use the same
definition or implementation guidelines or interpret the standards
differently from the Company. Investors in CoreSite’s securities
should not rely on these measures as a substitute for any GAAP
measure, including net income.
Use of Earnings Before Interest, Taxes,
Depreciation and Amortization for Real Estate
(“EBITDAre”)
EBITDAre is calculated in accordance with the standards
established by the National Association of Real Estate Investment
Trusts (“Nareit”). EBITDAre is defined as earnings before interest,
taxes, depreciation and amortization, gains or losses from the sale
of depreciated property, and impairment of depreciated property.
CoreSite calculates adjusted EBITDA by adding its non-cash
compensation expense, transaction costs from unsuccessful deals and
business combinations and litigation expense to EBITDAre as well as
adjusting for the impact of other impairment charges, gains or
losses from sales of undepreciated land and gains or losses on
early extinguishment of debt. In Q2 2021, we excluded from adjusted
EBITDA a one-time, non-cash benefit of $3.1 million as a result of
the release of a tax liability during the quarter that is no longer
expected to be incurred.
Management uses EBITDAre and adjusted EBITDA as indicators of
the Company’s ability to incur and service debt. In addition,
CoreSite considers EBITDAre and adjusted EBITDA to be appropriate
supplemental measures of its performance because they eliminate
depreciation and interest, which permits investors to view income
from operations without the impact of non-cash depreciation or the
cost of debt. However, because EBITDAre and adjusted EBITDA are
calculated before recurring cash charges including interest expense
and taxes, and are not adjusted for capital expenditures or other
recurring cash requirements of the Company’s business, their
utilization as a cash flow measurement is limited.
Consolidated Balance Sheets
(in thousands, except per share data)
June 30,
December 31,
2021
2020
Assets:
Investments in real estate:
Land
$
109,400
$
104,734
Buildings and improvements
2,289,445
2,273,536
2,398,845
2,378,270
Less: Accumulated depreciation and
amortization
(946,668)
(867,975)
Net investment in operating properties
1,452,177
1,510,295
Construction in progress
365,430
319,411
Net investments in real estate
1,817,607
1,829,706
Operating lease right-of-use assets,
net
164,282
173,928
Cash and cash equivalents
2,866
5,543
Accounts and other receivables, net
24,804
20,849
Lease intangibles, net
1,612
2,507
Goodwill
40,646
40,646
Other assets, net
105,406
103,094
Total assets
$
2,157,223
$
2,176,273
Liabilities and equity:
Liabilities
Debt, net
$
1,751,005
$
1,715,911
Operating lease liabilities
180,709
189,404
Accounts payable and accrued expenses
84,599
79,140
Accrued dividends and distributions
65,154
63,878
Acquired below-market lease contracts,
net
2,214
2,313
Unearned revenue, prepaid rent and other
liabilities
51,907
53,149
Total liabilities
2,135,588
2,103,795
Stockholders' equity
Common stock, par value $0.01
436
422
Additional paid-in capital
566,370
555,595
Accumulated other comprehensive loss
(13,828)
(20,526)
Distributions in excess of net income
(533,451)
(471,910)
Total stockholders' equity
19,527
63,581
Noncontrolling interests
2,108
8,897
Total equity
21,635
72,478
Total liabilities and equity
$
2,157,223
$
2,176,273
Consolidated Statements of
Operations
(in thousands, except per share data)
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2021
2021
2020
2021
2020
Operating revenues:
Data center revenue:(1)
Rental, power, and related revenue
$
136,793
$
132,976
$
127,108
$
269,769
$
251,613
Interconnection revenue
22,606
22,160
20,897
44,766
40,982
Total data center revenue
159,399
155,136
148,005
314,535
292,595
Office, light-industrial and other
revenue
2,725
2,506
2,538
5,231
5,310
Total operating revenues
162,124
157,642
150,543
319,766
297,905
Operating expenses:
Property operating and maintenance
45,964
42,632
41,037
88,596
81,220
Real estate taxes and insurance
7,006
6,735
5,599
13,741
11,789
Depreciation and amortization
45,367
44,628
41,779
89,995
82,770
Sales and marketing
5,804
5,862
5,837
11,666
11,981
General and administrative
11,781
11,517
11,603
23,298
22,870
Rent
8,839
9,221
8,995
18,060
17,394
Total operating expenses
124,761
120,595
114,850
245,356
228,024
Operating income
37,363
37,047
35,693
74,410
69,881
Other income
3,098
—
—
3,098
—
Interest expense
(11,982
)
(12,123
)
(10,586
)
(24,105
)
(21,769
)
Income before income taxes
28,479
24,924
25,107
53,403
48,112
Income tax expense
(4
)
(9
)
(19
)
(13
)
(36
)
Net income
28,475
24,915
25,088
53,390
48,076
Net income attributable to
noncontrolling interests
3,226
3,047
4,417
6,273
9,557
Net income attributable to
common shares
$
25,249
$
21,868
$
20,671
$
47,117
$
38,519
Net income per share
attributable to common shares:
Basic
$
0.59
$
0.52
$
0.52
$
1.11
$
1.00
Diluted
$
0.59
$
0.51
$
0.52
$
1.10
$
0.99
Weighted average common shares
outstanding:
Basic
42,786
42,378
39,873
42,583
38,605
Diluted
42,939
42,592
39,993
42,781
38,759
(1) Below is a breakout of our contractual data center rental,
power, and tenant reimbursements and other revenue:
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2021
2021
2020
2021
2020
Rental revenue
$
86,960
$
85,207
$
81,612
$
172,167
$
162,498
Power revenue
47,014
44,360
41,902
91,374
83,180
Tenant reimbursement and other
2,819
3,409
3,594
6,228
5,935
Rental, power, and related revenue
$
136,793
$
132,976
$
127,108
$
269,769
$
251,613
Reconciliations of Net Income to
FFO
(in thousands, except per share data)
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2021
2021
2020
2021
2020
Net income
$
28,475
$
24,915
$
25,088
$
53,390
$48,076
Real estate depreciation and
amortization
43,636
42,889
40,162
86,525
79,577
FFO available to common
shareholders and OP unit holders
$
72,111
$
67,804
$
65,250
$
139,915
$127,653
Other Income Adjustment(1)
(3,098)
—
—
(3,098)
—
FFO available to common
shareholders and OP unit holders, as adjusted(1)
$
69,013
$
67,804
$
65,250
$
136,817
$127,653
Weighted average common shares
outstanding - diluted
42,939
42,592
39,993
42,781
38,759
Weighted average OP units
outstanding - diluted
5,664
5,941
8,377
5,801
9,586
Total weighted average shares and
units outstanding - diluted
48,603
48,533
48,370
48,582
48,345
FFO per common share and OP
unit - diluted
$
1.48
$
1.40
$
1.35
$
2.88
$2.64
FFO per common share and OP
unit - diluted, as adjusted(1)
$
1.42
$
1.40
$
1.35
$
2.82
$2.64
(1) FFO available to shares and units, as adjusted, excludes a
one-time benefit of $3.1 million, or $0.06 per share and unit, as a
result of the release of a tax liability during the quarter that is
no longer expected to be incurred.
Reconciliations of Net Income to
EBITDAre and Adjusted EBITDA:
(in thousands)
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2021
2021
2020
2021
2020
Net income
$
28,475
$
24,915
$
25,088
$
53,390
$
48,076
Adjustments:
Interest expense
11,982
12,123
10,586
24,105
21,769
Income taxes
4
9
19
13
36
Depreciation and amortization
45,367
44,628
41,779
89,995
82,770
EBITDAre
$
85,828
$
81,675
$
77,472
$
167,503
$
152,651
Non-cash compensation
4,680
4,393
4,172
9,073
7,654
Transaction costs / litigation
—
3
—
3
—
Other income adjustment
(3,098
)
—
—
(3,098
)
—
Adjusted EBITDA
$
87,410
$
86,071
$
81,644
$
173,481
$
160,305
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210729005092/en/
Kate Ruppe Investor Relations Manager 303-222-7369
InvestorRelations@CoreSite.com
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