COR Cencora Inc

– Delivered Strong Q3 Financial Results, Including 6.4% Revenue Growth Year Over Year –

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 the quarter ended September 30, 2021.

Q3 2021 Quarterly Highlights

• Key Financial Results –
  • Grew operating revenues to $163.9 million, an increase of 6.4% year over year and 1.1% sequentially
  • Delivered net income of $0.50 per common diluted share, consistent year over year and a decrease of $0.09 sequentially
  • Grew adjusted EBITDA to $85.7 million, an increase of 5.2% year over year and a decrease of 2.0% sequentially
  • Generated FFO of $1.39 per diluted share and unit, an increase of $0.06, or 4.5% year over year, and a decrease of $0.03, or 2.1% sequentially
  • Paid a dividend of $1.27 per share for the third quarter on October 15th, consistent with the prior quarter

• Lease Commencements –
  • Commenced 122 new and expansion leases for 29,308 net rentable square feet (“NRSF”), representing $7.1 million of annualized GAAP rent, for an average rate of $242 per NRSF
  • LA3 Phase 1 was 93% leased and moved into the stabilized data center portfolio less than 12 months after being placed into service

• Leasing Activity –
  • Signed 122 new and expansion leases for $7.2 million of annualized GAAP rent during the third quarter, and signed a large scale lease for $1.7 million of annualized GAAP rent at SV7 on October 7th, representing total leasing activity of $8.9 million of annualized GAAP rent
  • This $8.9 million of annualized GAAP rent reflects 62,098 NRSF for an average rate of $143 per NRSF and includes leases signed at SV7 for $2.9 million of annualized GAAP rent
  • Renewed 296 leases for 118,887 NRSF and $18.7 million of annualized GAAP rent, for an average rate of $157 per NRSF
  • Renewed leases reflected an increase of 2.0% in cash rent and 5.7% in GAAP rent, and we reported churn of 2.5%

“Demand trends continue to be positive for low-latency, high-performance, hybrid-cloud IT solutions across our markets,” said Paul Szurek, CoreSite’s President and Chief Executive Officer. “Our excellent team continues to build on and strengthen the diverse customer ecosystems in each of our eight markets and our connectivity products to facilitate digital transformation. Our purpose-built, power efficient and scalable data center campuses enable the interoperability required for multi and hybrid-cloud solutions the current and future needs of enterprises, networks and cloud providers.”

Sales Activity

CoreSite signed new and expansion leases of $7.2 million in annualized GAAP rent during the third quarter, and signed a large scale lease for $1.7 million of annualized GAAP rent at SV7 on October 7th, representing total leasing activity of $8.9 million of annualized GAAP rent.

“We are encouraged by our continuing strong attraction of retail and small scale leases, which are fundamental to our go-to-market strategy,” said Steve Smith, CoreSite’s Chief Revenue Officer. “We are focused on continual generation of profitable organic growth, attracting high-quality new logos, and creating incremental value to our customers and shareholders through the lease-up of our available capacity within our portfolio.”

Including the $1.7 million of annualized GAAP rent for the scale lease signed on October 7th, CoreSite had annualized GAAP backlog of $9.9 million, or $17.2 million on a cash basis, for leases signed but not yet commenced. The difference between GAAP and cash backlog is primarily driven by a handful of scale leases with power ramps during the early portion of their lease terms.

Other Financial Results

CoreSite’s $163.9 million of operating revenues for the third quarter, included $138.1 million of rental, power and related revenue, reflecting 6.0% year over year growth, $23.0 million of interconnection revenue, reflecting 8.7% year over year growth, and $2.8 million of office, light-industrial and other revenue. Net income was $24.1 million for the quarter, or $0.50 attributable to each common diluted share.

Development Activity

CoreSite continues to develop new capacity as needed to meet market demand.

• The LA3 Phase 2 development project, comprised of 54,000 NRSF and 6 megawatts (“MW”), was completed in October. As of September 30, 2021, LA3 Phase 2 was approximately 8% leased.
• NY2 Phase 4A, comprised of 35,000 NRSF and 4 MWs, is under construction and is on track for its estimated 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 2.0 million NRSF, or about 84.0%, including space unoccupied, under construction, pre-construction design and permitting 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 reflects a ratio of net principal debt to second quarter annualized adjusted EBITDA of 5.2 times, or 5.1 times including GAAP backlog. As of the end of the third quarter, CoreSite had approximately $235.4 million of current liquidity, including $3.4 million of cash and $231.9 million of available capacity on its revolving credit facility.

Updated 2021 Guidance

CoreSite updated its 2021 guidance related to total capital expenditures to its new guidance range of $140 million to $150 million from its previous range of $185 million to $225 million. CoreSite’s full 2021 guidance can be found in the Company’s third quarter 2021 Supplemental Earnings Information on page 21.

Conference Call Details

CoreSite will host its third quarter 2021 earnings call on Thursday, October 28, 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 November 4, 2021, and can be accessed dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The passcode for the replay is 13723625.

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 third 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 Nareit REITworld Virtual Conference on November 9th.

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 1,370 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 480+ 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)

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

2021

 

2020

 

Assets:

 

 

 

 

 

 

 

Investments in real estate:

 

 

 

 

 

 

 

Land

 

$

109,400

 

 

$

104,734

 

 

Buildings and improvements

 

 

2,315,125

 

 

 

2,273,536

 

 

 

 

 

2,424,525

 

 

 

2,378,270

 

 

Less: Accumulated depreciation and amortization

 

 

(986,095

)

 

 

(867,975

)

 

Net investment in operating properties

 

 

1,438,430

 

 

 

1,510,295

 

 

Construction in progress

 

 

375,168

 

 

 

319,411

 

 

Net investments in real estate

 

 

1,813,598

 

 

 

1,829,706

 

 

Operating lease right-of-use assets, net

 

 

172,439

 

 

 

173,928

 

 

Cash and cash equivalents

 

 

3,406

 

 

 

5,543

 

 

Accounts and other receivables, net

 

 

26,825

 

 

 

20,849

 

 

Lease intangibles, net

 

 

1,159

 

 

 

2,507

 

 

Goodwill

 

 

40,646

 

 

 

40,646

 

 

Other assets, net

 

 

108,922

 

 

 

103,094

 

 

Total assets

 

$

2,166,995

 

 

$

2,176,273

 

 

 

 

 

 

 

 

 

 

Liabilities and equity:

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Debt, net

 

$

1,781,039

 

 

$

1,715,911

 

 

Operating lease liabilities

 

 

189,581

 

 

 

189,404

 

 

Accounts payable and accrued expenses

 

 

89,902

 

 

 

79,140

 

 

Accrued dividends and distributions

 

 

65,772

 

 

 

63,878

 

 

Acquired below-market lease contracts, net

 

 

2,164

 

 

 

2,313

 

 

Unearned revenue, prepaid rent and other liabilities

 

 

48,342

 

 

 

53,149

 

 

Total liabilities

 

 

2,176,800

 

 

 

2,103,795

 

 

 

 

 

 

 

 

 

 

Stockholders' equity (deficit)

 

 

 

 

 

 

 

Common stock, par value $0.01

 

 

436

 

 

 

422

 

 

Additional paid-in capital

 

 

570,746

 

 

 

555,595

 

 

Accumulated other comprehensive loss

 

 

(12,261

)

 

 

(20,526

)

 

Distributions in excess of net income

 

 

(567,771

)

 

 

(471,910

)

 

Total stockholders' equity (deficit)

 

 

(8,850

)

 

 

63,581

 

 

Noncontrolling interests

 

 

(955

)

 

 

8,897

 

 

Total equity (deficit)

 

 

(9,805

)

 

 

72,478

 

 

Total liabilities and equity

 

$

2,166,995

 

 

$

2,176,273

 

 

 

Consolidated Statements of Operations

(in thousands, except per share data)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

 

September 30,

 

September 30,

 

 

 

2021

 

2021

 

2020

 

 

2021

 

2020

 

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data center revenue:(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental, power, and related revenue

 

$

138,095

 

 

$

136,793

 

 

$

130,300

 

 

 

$

407,864

 

 

$

381,913

 

 

Interconnection revenue

 

 

22,994

 

 

 

22,606

 

 

 

21,144

 

 

 

 

67,760

 

 

 

62,126

 

 

Total data center revenue

 

 

161,089

 

 

 

159,399

 

 

 

151,444

 

 

 

 

475,624

 

 

 

444,039

 

 

Office, light-industrial and other revenue

 

 

2,769

 

 

 

2,725

 

 

 

2,537

 

 

 

 

8,000

 

 

 

7,847

 

 

Total operating revenues

 

 

163,858

 

 

 

162,124

 

 

 

153,981

 

 

 

 

483,624

 

 

 

451,886

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating and maintenance

 

 

49,940

 

 

 

45,964

 

 

 

44,986

 

 

 

 

138,536

 

 

 

126,206

 

 

Real estate taxes and insurance

 

 

5,184

 

 

 

7,006

 

 

 

5,989

 

 

 

 

18,925

 

 

 

17,778

 

 

Depreciation and amortization

 

 

45,072

 

 

 

45,367

 

 

 

41,759

 

 

 

 

135,067

 

 

 

124,529

 

 

Sales and marketing

 

 

6,186

 

 

 

5,804

 

 

 

5,901

 

 

 

 

17,852

 

 

 

17,882

 

 

General and administrative

 

 

12,167

 

 

 

11,781

 

 

 

10,854

 

 

 

 

35,465

 

 

 

33,724

 

 

Rent

 

 

9,292

 

 

 

8,839

 

 

 

8,966

 

 

 

 

27,352

 

 

 

26,360

 

 

Total operating expenses

 

 

127,841

 

 

 

124,761

 

 

 

118,455

 

 

 

 

373,197

 

 

 

346,479

 

 

Operating income

 

 

36,017

 

 

 

37,363

 

 

 

35,526

 

 

 

 

110,427

 

 

 

105,407

 

 

Other income

 

 

—

 

 

 

3,098

 

 

 

—

 

 

 

 

3,098

 

 

 

—

 

 

Interest expense

 

 

(11,894

)

 

 

(11,982

)

 

 

(11,384

)

 

 

 

(35,999

)

 

 

(33,153

)

 

Income before income taxes

 

 

24,123

 

 

 

28,479

 

 

 

24,142

 

 

 

 

77,526

 

 

 

72,254

 

 

Income tax expense

 

 

(5

)

 

 

(4

)

 

 

(10

)

 

 

 

(18

)

 

 

(46

)

 

Net income

 

 

24,118

 

 

 

28,475

 

 

 

24,132

 

 

 

 

77,508

 

 

 

72,208

 

 

Net income attributable to noncontrolling interests

 

 

2,339

 

 

 

3,226

 

 

 

3,000

 

 

 

 

8,612

 

 

 

12,557

 

 

Net income attributable to common shares

 

$

21,779

 

 

$

25,249

 

 

$

21,132

 

 

 

$

68,896

 

 

$

59,651

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.50

 

 

$

0.59

 

 

$

0.50

 

 

 

$

1.60

 

 

$

1.50

 

 

Diluted

 

$

0.50

 

 

$

0.59

 

 

$

0.50

 

 

 

$

1.60

 

 

$

1.49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

43,712

 

 

 

42,786

 

 

 

42,235

 

 

 

 

42,963

 

 

 

39,823

 

 

Diluted

 

 

43,907

 

 

 

42,939

 

 

 

42,404

 

 

 

 

43,166

 

 

 

39,996

 

 

(1)

Below is a breakout of our contractual data center rental, power, and tenant reimbursements and other revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2021

 

 

2020

 

 

 

2021

 

 

2020

 

Rental revenue

 

$

87,596

 

$

86,960

 

$

82,943

 

 

$

259,763

 

$

245,441

 

Power revenue

 

 

48,678

 

 

47,014

 

 

43,112

 

 

 

140,052

 

 

126,292

 

Tenant reimbursement and other

 

 

1,821

 

 

2,819

 

 

4,245

 

 

 

8,049

 

 

10,180

 

Rental, power, and related revenue

 

$

138,095

 

$

136,793

 

$

130,300

 

 

$

407,864

 

$

381,913

 

 

Reconciliations of Net Income to FFO

(in thousands, except per share data)

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

 

 

 

2021

 

2021

 

2020

 

2021

 

2020

 

Net income

 

$

24,118

 

$

28,475

 

 

$

24,132

 

$

77,508

 

 

$

72,208

 

Real estate depreciation and amortization

 

 

43,349

 

 

43,636

 

 

 

40,136

 

 

129,874

 

 

 

119,713

 

FFO available to common shareholders and OP unit holders

 

$

67,467

 

$

72,111

 

 

$

64,268

 

$

207,382

 

 

$

191,921

 

Other income adjustment(1)

 

 

—

 

 

(3,098

)

 

 

—

 

 

(3,098

)

 

 

—

 

FFO available to common shareholders and OP unit holders, as adjusted(1)

 

$

67,467

 

$

69,013

 

 

$

64,268

 

$

204,284

 

 

$

191,921

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

 

43,907

 

 

42,939

 

 

 

42,404

 

 

43,166

 

 

 

39,996

 

Weighted average OP units outstanding - diluted

 

 

4,740

 

 

5,664

 

 

 

6,030

 

 

5,444

 

 

 

8,392

 

Total weighted average shares and units outstanding - diluted

 

 

48,647

 

 

48,603

 

 

 

48,434

 

 

48,610

 

 

 

48,388

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per common share and OP unit - diluted

 

$

1.39

 

$

1.48

 

 

$

1.33

 

$

4.27

 

 

$

3.97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per common share and OP unit - diluted, as adjusted(1)

 

$

1.39

 

$

1.42

 

 

$

1.33

 

$

4.20

 

 

$

3.97

 

(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 second quarter that is no longer expected to be incurred.

Reconciliations of Net Income to EBITDAre and Adjusted EBITDA:

(in thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

 

 

 

2021

 

2021

 

2020

 

2021

 

2020

 

Net income

 

$

24,118

 

$

28,475

 

 

$

24,132

 

$

77,508

 

 

$

72,208

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

11,894

 

 

11,982

 

 

 

11,384

 

 

35,999

 

 

 

33,153

 

Income taxes

 

 

5

 

 

4

 

 

 

10

 

 

18

 

 

 

46

 

Depreciation and amortization

 

 

45,072

 

 

45,367

 

 

 

41,759

 

 

135,067

 

 

 

124,529

 

EBITDAre

 

$

81,089

 

$

85,828

 

 

$

77,285

 

$

248,592

 

 

$

229,936

 

Non-cash compensation

 

 

4,563

 

 

4,680

 

 

 

4,156

 

 

13,636

 

 

 

11,810

 

Transaction costs / litigation

 

 

—

 

 

—

 

 

 

—

 

 

3

 

 

 

—

 

Other income adjustment

 

 

—

 

 

(3,098

)

 

 

—

 

 

(3,098

)

 

 

—

 

Adjusted EBITDA

 

$

85,652

 

$

87,410

 

 

$

81,441

 

$

259,133

 

 

$

241,746

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028005086/en/

Kate Ruppe Investor Relations Manager 303-222-7369 InvestorRelations@CoreSite.com