SUBSCRIBE TO TMCnet
TMCnet - World's Largest Communications and Technology Community

TMC NEWS

TMCNET eNEWSLETTER SIGNUP

QTS Reports Second Quarter 2017 Operating Results
[July 25, 2017]

QTS Reports Second Quarter 2017 Operating Results


OVERLAND PARK, Kan., July 25, 2017 /PRNewswire/ -- QTS Realty Trust, Inc. ("QTS" or the "Company") (NYSE: QTS) today announced operating results for the second quarter ended June 30, 2017.

Second Quarter Highlights

  • Reported net income of $4.6 million in the second quarter of 2017, a decrease of 20.6% compared to the second quarter of 2016. Net income was $0.08 per basic and diluted share for the second quarter of 2017, compared to net income per basic and diluted share of $0.11 and $0.10, respectively, for the second quarter of 2016.
  • Reported Operating FFO of $35.0 million in the second quarter of 2017, an increase of 0.5% compared to Operating FFO of $34.9 million in the second quarter of 2016. Operating FFO in the second quarter of 2017 and 2016 included a non-cash deferred tax benefit of $1.4 million and $1.3 million, respectively. Operating FFO for the second quarter of 2017 on a fully diluted per share basis was $0.63 per share, consistent with Operating FFO per fully diluted share in the second quarter of 2016 of $0.63.
  • Reported FFO of $34.9 million in the second quarter of 2017, an increase of 8.3% compared to FFO of $32.2 million in the second quarter of 2016. On a fully diluted per share basis, FFO was $0.63 per share for the second quarter of 2017 compared to $0.58 per share for the second quarter of 2016, an increase of 8.5%.
  • Reported Adjusted EBITDA of $49.2 million in the second quarter of 2017, an increase of 8.0% compared to the second quarter of 2016.
  • Reported NOI of $68.1 million in the second quarter of 2017, an increase of 6.3% compared to the second quarter of 2016.
  • Reported total revenues of $107.9 million recognized in the second quarter of 2017, an increase of 9.3% compared to the second quarter of 2016.
  • Signed new and modified renewal leases aggregating to $13.3 million of incremental annualized rent, net of downgrades, during the second quarter of 2017, an increase of 21.7% compared to the prior four quarter average.

"The second quarter represents another strong performance from QTS and we are encouraged by the trends we are seeing in our business across leasing volume, financial performance and pricing on new leases and renewals," said Chad Williams, Chairman and CEO of QTS.

Williams added, "We remain focused on building strength and capacity within QTS to continue to deliver valuable solutions for larger C1-hyperscale customers while executing on the strong growth opportunity with our C2 and C3 customers enabling their diverse hybrid IT strategies."

Financial Results

Net income in the second quarter of 2017 was $4.6 million ($0.08 per basic and diluted share), which included approximately $0.2 million of transaction and integration costs and $1.4 million of income tax benefit, compared to net income of $5.8 million ($0.11 and $0.10 per basic and diluted share, respectively) recognized in the second quarter of 2016, which included approximately $3.8 million of transaction and integration costs and $2.5 million of income tax benefit.

QTS generated Operating FFO of $35.0 million, or $0.63 per fully diluted share, in the second quarter of 2017, which includes a non-cash tax benefit of approximately $1.4 million, compared to Operating FFO of $34.9 million, or $0.63 per fully diluted share, for the second quarter of 2016, which included a non-cash tax benefit of approximately $1.3 million. Operating FFO for the second quarter of 2017 represents an increase of approximately 0.5% compared to the prior year.

Additionally, QTS generated $49.2 million of Adjusted EBITDA in the second quarter of 2017, an increase of 8.0% compared to $45.6 million for the second quarter of 2016.

QTS generated total revenues of $107.9 million in the second quarter of 2017, an increase of 9.3% compared to $98.7 million in the second quarter of 2016. MRR as of June 30, 2017 was $31.7 million, an increase of 9.8% compared to MRR as of June 30, 2016 of $28.9 million.

Leasing Activity

During the second quarter of 2017, QTS entered into new and modified customer leases representing approximately $13.3 million of incremental annualized rent, net of downgrades, which was 22% higher than the prior four quarter average. Pricing on new and modified leases signed during the quarter of $1,018 per square foot was 45% higher than the prior four quarter average of $704 per square foot, primarily driven by strong C2/C3 leasing volume and higher pricing across both C1 and C2/C3 categories, which increased by 17% and 33%, respectively, compared to their respective prior four quarter averages.

During the second quarter of 2017, QTS renewed leases with a total annualized rent of $18.8 million at an average rent per square foot of $1,077, which was 1.0% higher than the annualized rent prior to their respective renewals. The Company defines renewals as leases for which the customer retains the same amount of space before and after renewal. There is variability in the Company's renewal rates based on the mix of product types renewed, and renewal rates are expected to increase in the low to mid-single digits. Rental churn (which the Company defines as MRR lost in the period to a customer intending to fully exit the QTS platform in the near term compared to total MRR at the beginning of the period) was 1.0% for the second quarter of 2017. Rental churn was 4.3% for the six months ended June 30, 2017, the majority of which was the result of a single customer termination in the first quarter of 2017 at one of the Company's leased facilities in Northern Virginia which was disclosed in prior quarters. Excluding this customer termination, rental churn for the six months ended June 30, 2017 would be 1.7%.

During the second quarter of 2017, QTS commenced customer leases (which includes new customers and also existing customers that renewed their lease term) representing approximately $34.8 million of annualized rent at $778 per square foot. Average pricing on QTS commenced leases during the second quarter of 2017 increased 51% compared to the prior four quarter average primarily due to a larger mix of C2/C3 commencements which tend to have a higher rate per square foot in comparison to C1 deals.

As of June 30, 2017, the booked-not-billed MRR balance (which represents customer leases that have been executed, but for which lease payments have not commenced as of June 30, 2017) was approximately $3.3 million, or $39.7 million of annualized rent, and compares to $41.9 million of annualized rent at March 31, 2017. The booked-not-billed balance is expected to contribute an incremental $8.3 million to revenue in 2017 (representing $23.7 million in annualized revenues), an incremental $3.9 million in 2018 (representing $6.1 million in annualized revenues), and an incremental $9.8 million in annualized revenues thereafter.

Development, Redevelopment, and Acquisitions

During the second quarter of 2017, the Company brought online approximately 6 megawatts of gross power and approximately 19,000 net rentable square feet ("NRSF") of raised floor and various portions of customer specific capital at an aggregate cost of approximately $55 million. In addition, during the second quarter of 2017, the Company continued redevelopment of the Atlanta-Metro, Irving, Chicago, Piscataway, Fort Worth, Santa Clara and certain Leased Facilities to have space ready for customers later in 2017 and forward.  The Company expects to bring an additional 103,000 raised floor NRSF into service in the remaining quarters of 2017 at an aggregate cost of approximately $153 million.

Balance Sheet and Liquidity

As of June 30, 2017, the Company's total debt balance net of cash and cash equivalents was $1,039.5 million, resulting in a net debt to last quarter annualized Adjusted EBITDA of 5.3x. This ratio is consistent with the 5.3x net debt to annualized Adjusted EBITDA reported in the first quarter of 2017 and remains in line with company expectations. The Company's booked-not-billed backlog of $39.7 million in annualized rent will continue to provide enhanced visibility in 2017 and beyond.

In March 2017, the Company established an "at-the-market" ("ATM") equity offering program pursuant to which the Company may issue, from time to time, up to $300 million of its Class A common stock. Pursuant to this ATM program, during the three months ended June 30, 2017, the Company issued approximately 746,000 shares of QTS' Class A common stock at a weighted average price of $53.60 per share which generated net proceeds of approximately $39.4 million.

On April 5, 2017, QTS entered into interest rate swaps relating to $400 million of the Company's term loan borrowings. These swaps will effectively convert floating rate debt to fixed rate debt with an interest rate of approximately 3.5% starting on January 2, 2018 through the maturity of their respective term loans. Due to the effect of these swaps, as of June 30, 2017 approximately 68% of the Company's outstanding debt will carry a fixed interest rate beginning in 2018.

As of June 30, 2017, the Company had total available liquidity of approximately $495 million which was comprised of $452 million of available capacity under the Company's unsecured revolving credit facility and approximately $43 million of cash and cash equivalents.

2017 Guidance

The Company is expecting 2017 year-over-year revenue growth to be at the low end of its previously provided range of 11 - 13%, due to lower than expected utility recovery revenue, which passes through directly to lower operating costs, as well as lighter leasing volume earlier in the year. However, given that utility recovery revenue correlates directly to cost savings, as well as continued cost efficiencies in the business, the Company is reaffirming its 2017 adjusted EBITDA guidance of $203.0 million to $211.0 million. In addition, the Company is raising its guidance for Operating FFO and Operating FFO per share. The Company now expects Operating FFO of $152.0 million to $158.0 million and Operating FFO per share of $2.66 to $2.78, which reflects an estimated non-cash tax benefit in excess of $4 million recognized in 2017. The Company is maintaining its guidance for expected churn at the high end of its historical average of 5-8%.  The Company is maintaining its guidance for Capital Expenditures, excluding acquisitions, of approximately $325.0 million to $375.0 million.

Non-GAAP Financial Measures

This release includes certain non-GAAP financial measures that management believes are helpful in understanding the Company's business, as further described below. The Company does not, nor does it suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information. The Company believes that the presentation of non-GAAP financial measures provide meaningful supplemental information to both management and investors that is indicative of the Company's operations. The Company has included a reconciliation of this additional information to the most comparable GAAP measure in the selected financial information below.

Conference Call Details

The Company will host a conference call and webcast on July 26, 2017, at 8:30 a.m. Eastern time (7:30 a.m. Central time) to discuss its financial results, current business trends and market conditions.

The dial-in number for the conference call is (877) 883-0383 (U.S.) or (412) 902-6506 (International). The participant entry number is 6442668# and callers are asked to dial in ten minutes prior to start time. A link to the live broadcast and the replay will be available on the Company's website (www.qtsdatacenters.com) under the Investors tab.

About QTS

QTS Realty Trust, Inc. (NYSE: QTS) is a leading provider of secure, compliant data center solutions, hybrid cloud and fully managed services. QTS' integrated technology service platform of custom data center (C1), colocation (C2) and cloud and managed services (C3) provides flexible, scalable, secure IT solutions for web and IT applications. QTS' Critical Facilities Management (CFM) provides increased efficiency and greater performance for third-party data center owners and operators. QTS owns, operates or manages 25 data centers and supports more than 1,100 customers in North America, Europe and Asia.

QTS Investor Relations Contact

Stephen Douglas – Vice President – Investor Relations and Strategic Planning
Jeff Berson – Chief Financial Officer
William Schafer – Executive Vice President – Finance and Accounting
ir@qtsdatacenters.com  

Forward Looking Statements

Some of the statements contained in this release constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In particular, statements pertaining to the Company's capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise, all of the statements regarding anticipated growth in funds from operations and anticipated market conditions are forward-looking statements. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You also can identify forward-looking statements by discussions of strategy, plans or intentions.

The forward-looking statements contained in this release reflect the Company's current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed in any forward-looking statement. The Company does not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: adverse economic or real estate developments in the Company's markets or the technology industry; global, national and local economic conditions; risks related to the Company's international operations; difficulties in identifying properties to acquire and completing acquisitions; the Company's failure to successfully develop, redevelop and operate acquired properties or lines of business; significant increases in construction and development costs; the increasingly competitive environment in which the Company operates; defaults on, or termination or non-renewal of leases by customers; increased interest rates and operating costs, including increased energy costs; financing risks, including the Company's failure to obtain necessary outside financing; decreased rental rates or increased vacancy rates; dependence on third parties to provide Internet, telecommunications and network connectivity to the Company's data centers; the Company's failure to qualify and maintain its qualification as a real estate investment trust; environmental uncertainties and risks related to natural disasters; financial market fluctuations; and changes in real estate and zoning laws, revaluations for tax purposes and increases in real property tax rates.

While forward-looking statements reflect the Company's good faith beliefs, they are not guarantees of future performance. Any forward-looking statement speaks only as of the date on which it was made. The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the Company's future results to differ materially from any forward-looking statements, see the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 and other periodic reports the Company files with the Securities and Exchange Commission.



Consolidated Balance Sheets


(in thousands except share data)











June 30,


December 31,



2017


2016 (1)



(unaudited)




ASSETS







Real Estate Assets







Land


$

86,192


$

74,130

Buildings, improvements and equipment



1,625,254



1,524,767

Less: Accumulated depreciation



(354,522)



(317,834)




1,356,924



1,281,063

Construction in progress



363,449



365,960

Real Estate Assets, net



1,720,373



1,647,023

Cash and cash equivalents



42,604



9,580

Rents and other receivables, net



44,033



41,540

Acquired intangibles, net



119,384



129,754

Deferred costs, net (2) (3)



38,152



38,507

Prepaid expenses



8,875



6,918

Goodwill



173,843



173,843

Other assets, net (4)



59,119



39,305

TOTAL ASSETS


$

2,206,383


$

2,086,470








LIABILITIES







Unsecured credit facility, net (3)


$

744,307


$

634,939

Senior notes, net of discount and debt issuance costs (3)



292,858



292,179

Capital lease, lease financing obligations and mortgage notes payable



34,059



38,708

Accounts payable and accrued liabilities



84,052



86,129

Dividends and distributions payable



21,606



19,634

Advance rents, security deposits and other liabilities



31,505



24,893

Deferred income taxes



12,207



15,185

Deferred income



23,433



21,993

TOTAL LIABILITIES



1,244,027



1,133,660








EQUITY







Common stock, $0.01 par value, 450,133,000 shares authorized, 48,812,009 and 47,831,250 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively



488



478

Additional paid-in capital



970,811



931,783

Accumulated dividends in excess of earnings



(126,331)



(97,793)

Total stockholders' equity



844,968



834,468

Noncontrolling interests



117,388



118,342

TOTAL EQUITY



962,356



952,810

TOTAL LIABILITIES AND EQUITY


$

2,206,383


$

2,086,470












(1)

The balance sheet at December 31, 2016, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements.

(2)

As of June 30, 2017 and December 31, 2016, deferred costs, net included $6.1 million and $7.0 million of net deferred financing costs related to the revolving portion of the Company's unsecured credit facility, respectively, and $32.0 million and $31.5 million of deferred leasing costs net of amortization, respectively.

(3)

Debt issuance costs, net related to the Senior Notes and term loan portion of the Company's unsecured credit facility aggregating $9.2 million and $10.1 million at June 30, 2017 and December 31, 2016, respectively, have been netted against the related debt liability line items for both periods presented.

(4)

As of June 30, 2017 and December 31, 2016, other assets, net included $50.9 million and $31.7 million of corporate fixed assets, respectively, primarily relating to construction of corporate offices, leasehold improvements and product related assets. During the quarter ended June 30, 2017, fixed assets and the associated accumulated depreciation related to the Duluth, GA facility aggregating to $10.6 million were moved from Real Estate Assets, net to Other assets, net as the facility was transitioned to corporate office space.

 

Consolidated Statements of Operations


(unaudited and in thousands except share and per share data)




































Three Months Ended


Six Months Ended



June 30,


March 31,


June 30,


June 30,



2017


2017


2016


2017


2016

Revenues:
















Rental


$

80,793


$

79,117


$

71,670


$

159,910


$

140,096

Recoveries from customers



8,774



8,361



6,168



17,135



11,603

Cloud and managed services



16,856



16,965



17,015



33,821



35,905

Other (1)



1,445



1,521



3,834



2,966



5,851

Total revenues



107,868



105,964



98,687



213,832



193,455

Operating expenses:
















Property operating costs



36,846



35,421



32,646



72,267



64,427

Real estate taxes and insurance



2,946



3,147



2,020



6,093



3,760

Depreciation and amortization



34,527



33,948



30,355



68,475



58,994

General and administrative (2)



22,562



22,197



21,608



44,759



41,894

Transaction and integration costs (3)



161



336



3,833



497



5,920

Total operating expenses



97,042



95,049



90,462



192,091



174,995

















Operating income



10,826



10,915



8,225



21,741



18,460

















Other income and expense:
















Interest income



-



1



2



1



2

Interest expense



(7,647)



(6,869)



(4,874)



(14,516)



(10,855)

Income before taxes



3,179



4,047



3,353



7,226



7,607

Tax benefit of taxable REIT subsidiaries (4)



1,429



1,521



2,454



2,950



5,059

Net income



4,608



5,568



5,807



10,176



12,666

Net income attributable to noncontrolling interests (5)



(568)



(691)



(707)



(1,259)



(1,677)

Net income attributable to QTS Realty Trust, Inc.


$

4,040


$

4,877


$

5,100


$

8,917


$

10,989

















Net income per share attributable to common shares:
















     Basic


$

0.08


$

0.10


$

0.11


$

0.18


$

0.25

     Diluted



0.08



0.10



0.10



0.17



0.24

















Weighted average common shares outstanding:
















     Basic



47,666,086



47,908,709



47,783,093



47,561,507



44,537,769

     Diluted



55,458,429



55,620,260



55,574,545



55,336,062



52,274,198





















(1)

Other revenue – Includes straight line rent, sales of scrap metals and other unused materials and various other revenue items. Straight line rent was $0.9 million, $1.5 million and $3.5 million for the three months ended June 30, 2017, March 31, 2017 and June 30, 2016, respectively. Straight line rent was $2.4 million and $5.4 million for the six months ended June 30, 2017 and 2016, respectively. 

(2)

General and administrative expenses – Includes personnel costs, sales and marketing costs, professional fees, travel costs, product investment costs and other corporate general and administrative expenses. General and administrative expenses were 20.9%, 20.9%, and 21.9% of total revenues for the three month periods ended June 30, 2017, March 31, 2017 and June 30, 2016, respectively. General and administrative expenses were 20.9% and 21.7% of total revenues for the six months ended June 30, 2017 and 2016, respectively.

(3)

Transaction and integration costs – For the three month periods ended June 30, 2017, March 31, 2017 and June 30, 2016, the Company recognized $0.1 million, $0.1 million and $0.8 million, respectively, in transaction costs related to the examination of actual and potential acquisitions. Transaction costs were $0.2 million and $0.8 million for the six months ended June 30, 2017 and 2016, respectively. The Company also recognized less than $0.1 million, $0.3 million and $3.0 million in integration costs for the three month periods ended June 30, 2017, March 31, 2017 and June 30, 2016, respectively. Integration costs include various costs to integrate QTS and acquired businesses (including consulting fees, costs to consolidate office space and costs which were previously duplicated) as well as accelerated depreciation of certain software following acquisition. Integration costs were $0.3 million and $5.1 million for the six months ended June 30, 2017 and 2016, respectively.

(4)

Tax benefit of taxable REIT subsidiaries – For the three months ended June 30, 2017, March 31, 2017 and June 30, 2016, the Company recorded an approximate $1.4 million, $1.5 million and $2.5 million non-cash deferred tax benefit, respectively, related to operating losses which include certain transaction and integration costs. The Company recorded $3.0 million and $5.1 million in non-cash deferred tax benefits for the six months ended June 30, 2017 and 2016, respectively.

(5)

Noncontrolling interest – The noncontrolling ownership interest of QualityTech, LP was 12.2% and 12.4% as of June 30, 2017 and 2016, respectively.

 

Reconciliations of Net Income to FFO, Operating FFO & Adjusted Operating FFO


(unaudited and in thousands except per share data)


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), adjusted to exclude gains (or losses) from sales of property, real estate-related depreciation and amortization and similar adjustments for unconsolidated partnerships and joint ventures. Management uses FFO as a supplemental performance measure because, in 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. The Company generally calculates Operating FFO as FFO excluding certain non-routine charges and gains and losses that management believes are not indicative of the results of the Company's operating real estate portfolio. The Company believes that Operating FFO provides investors with another financial measure that may facilitate comparisons of operating performance between periods and, to the extent other REITs calculate Operating FFO on a comparable basis, between the Company and these other REITs. The Company calculates Adjusted Operating FFO by adding or subtracting from Operating FFO items such as: maintenance capital investment, paid leasing commissions, amortization of deferred financing costs and bond discount, non-real estate depreciation, straight line rent adjustments, deferred taxes and non-cash compensation. Operating FFO and Adjusted Operating FFO are non-GAAP measures that are used as supplemental operating measures and to provide additional information to users of the financial statements.


A reconciliation of net income to FFO, Operating FFO and Adjusted Operating FFO is presented below:


















Three Months Ended


Six Months Ended


June 30,


March 31,


June 30,


June 30,


2017


2017


2016


2017


2016

FFO















Net income

$

4,608


$

5,568


$

5,807


$

10,176


$

12,666

Real estate depreciation and amortization


30,275



29,504



26,409



59,779



51,278

FFO


34,883



35,072



32,216



69,955



63,944
















Integration costs


18



272



3,026



291



5,079

Transaction costs


143



64



807



206



841

Tax benefit associated with transaction and integration costs


-



-



(1,183)



-



(1,931)

Operating FFO  *


35,044



35,408



34,866



70,452



67,933
















Maintenance Capex


(1,172)



(796)



(380)



(1,968)



(715)

Leasing commissions paid


(4,055)



(4,169)



(3,388)



(8,224)



(9,195)

Amortization of deferred financing costs and bond discount


971



980



877



1,951



1,754

Non real estate depreciation and amortization


4,254



4,443



3,946



8,697



7,716

Straight line rent revenue and expense and other


(637)



(1,127)



(3,243)



(1,764)



(4,853)

Tax benefit from operating results


(1,429)



(1,521)



(1,271)



(2,950)



(3,128)

Equity-based compensation expense


3,732



3,082



3,200



6,814



5,250

Adjusted Operating FFO *

$

36,708


$

36,300


$

34,607


$

73,008


$

64,762
















Fully diluted weighted average shares


55,458



55,620



55,575



55,336



52,274

Operating FFO per diluted share

$

0.63


$

0.64


$

0.63


$

1.27


$

1.30





*

The Company's calculations of Operating FFO and Adjusted Operating FFO may not be comparable to Operating FFO and Adjusted Operating FFO as calculated by other REITs that do not use the same definition.

 

Reconciliations of Net Income to EBITDA and Adjusted EBITDA


(unaudited and in thousands)


The Company calculates EBITDA as net income (loss) (computed in accordance with GAAP) adjusted to exclude interest expense and interest income, provision (benefit) for income taxes (including income taxes applicable to sale of assets) and depreciation and amortization. The Company believes that EBITDA is another metric that is often utilized to evaluate and compare the Company's ongoing operating performance between periods and between REITs. In addition to EBITDA, the Company calculates an adjusted measure of EBITDA, which the Company refers to as Adjusted EBITDA, as EBITDA excluding write off of unamortized deferred financing costs, gains (losses) on extinguishment of debt, transaction and integration costs, equity-based compensation expense, restructuring costs and gain (loss) on sale of real estate. The Company believes that Adjusted EBITDA provides investors with another financial measure that can facilitate comparisons of operating performance between periods and between REITs.


A reconciliation of net income to EBITDA and Adjusted EBITDA is presented below:


















Three Months Ended


Six Months Ended


June 30,


March 31,


June 30,


June 30,


2017


2017


2016


2017


2016

EBITDA and Adjusted EBITDA















Net income

$

4,608


$

5,568


$

5,807


$

10,176


$

12,666

Interest expense


7,647



6,869



4,874



14,516



10,855

Interest income


-



(1)



(2)



(1)



(2)

Tax benefit of taxable REIT subsidiaries


(1,429)



(1,521)



(2,454)



(2,950)



(5,059)

Depreciation and amortization


34,527



33,948



30,355



68,475



58,994

EBITDA


45,353



44,863



38,580



90,216



77,454
















Equity-based compensation expense


3,732



3,082



3,200



6,814



5,250

Integration costs


18



272



3,026



291



5,079

Transaction costs


143



64



807



206



841

Adjusted EBITDA

$

49,246


$

48,281


$

45,613


$

97,527


$

88,624

 

Reconciliations of Net Income to Net Operating Income (NOI)


(unaudited and in thousands)


The Company calculates net operating income ("NOI") as net income (loss) (computed in accordance with GAAP), excluding: interest expense, interest income, tax expense (benefit) of taxable REIT subsidiaries, depreciation and amortization, write off of unamortized deferred financing costs, gain (loss) on extinguishment of debt, transaction and integration costs, gain (loss) on sale of real estate, restructuring costs and general and administrative expenses. Management uses NOI as a supplemental performance measure because it provides a useful measure of the operating results from its customer leases. In addition, management believes it is useful to investors in evaluating and comparing the operating performance of its properties and to compute the fair value of its properties. The Company's NOI may not be comparable to other REITs' NOI as other REITs may not calculate NOI in the same manner. NOI should be considered only as a supplement to net income as a measure of the Company's performance and should not be used as a measure of results of operations or liquidity or as an indication of funds available to meet cash needs, including the ability to make distributions to stockholders. NOI is a measure of the operating performance of the Company's properties and not of the Company's performance as a whole. NOI is therefore not a substitute for net income as computed in accordance with GAAP. A reconciliation of net income to NOI is presented below:


















Three Months Ended


Six Months Ended


June 30,


March 31,


June 30,


June 30,


2017


2017


2016


2017


2016

Net Operating Income (NOI)















Net income

$

4,608


$

5,568


$

5,807


$

10,176


$

12,666

Interest expense


7,647



6,869



4,874



14,516



10,855

Interest income


-



(1)



(2)



(1)



(2)

Depreciation and amortization


34,527



33,948



30,355



68,475



58,994

Tax benefit of taxable REIT subsidiaries


(1,429)



(1,521)



(2,454)



(2,950)



(5,059)

Integration costs


18



272



3,026



291



5,079

Transaction costs


143



64



807



206



841

General and administrative expenses


22,562



22,197



21,608



44,759



41,894

NOI (1)

$

68,076


$

67,396


$

64,021


$

135,472


$

125,268

Breakdown of NOI by facility:















Atlanta-Metro data center

$

20,704


$

20,511


$

20,885


$

41,215


$

40,857

Atlanta-Suwanee data center


11,423



11,958



11,272



23,381



22,772

Leased data centers (2)


8,408



9,010



10,574



17,418



22,383

Richmond data center


8,389



8,230



7,976



16,619



14,578

Irving data center


8,057



6,440



3,914



14,497



6,538

Santa Clara data center


2,705



3,279



3,653



5,984



7,417

Piscataway data center


2,279



2,403



670



4,682



670

Princeton data center


2,393



2,399



2,356



4,792



4,712

Sacramento data center


1,778



1,837



2,140



3,615



4,062

Chicago data center


1,275



647



-



1,922



-

Fort Worth data center


75



106






181



-

Other facilities (3)


590



576



581



1,166



1,279

NOI (1)

$

68,076


$

67,396


$

64,021


$

135,472


$

125,268





(1)

Includes facility level G&A expense allocation charges of 4% of cash revenue for all entities, with the exception of the leased facilities acquired in 2015, which include G&A expense allocation charges of 10% of cash revenue.  These allocated charges aggregated to $5.3 million, $5.2 million and $5.1 million for the three month periods ended June 30, 2017,  March 31, 2017 and June 30, 2016, respectively, and $10.5 million and $10.1 million for the six month periods ended June 30, 2017 and 2016, respectively.

(2)

Includes 13 facilities. All facilities are leased, including those subject to capital leases. During the quarter ended March 31, 2017, the Company moved its Jersey City, NJ facility to the "Leased data centers" line item.

(3)

Consists of Miami, FL; Lenexa, KS; Overland Park, KS; and Duluth, GA facilities. During the quarter ended March 31, 2017, the Company moved its Miami, FL facility to the "Other facilities" line item.

 

Reconciliations of Total Revenues to Recognized MRR in the period and MRR at period end


(unaudited and in thousands)


The Company calculates MRR as monthly contractual revenue under signed leases as of a particular date, which includes revenue from its C1, C2 and C3 rental and cloud and managed services activities, but excludes customer recoveries, deferred set up fees, variable related revenues, non-cash revenues and other one-time revenues. MRR does not include the impact from booked-not-billed leases (which represent customer leases that have been executed but for which lease payments have not commenced) as of a particular date, unless otherwise specifically noted. The Company calculates recognized MRR as the recurring revenue recognized during a given period, which includes revenue from its C1, C2 and C3 rental and cloud and managed services activities, but excludes customer recoveries, deferred set up fees, variable related revenues, non-cash revenues and other one-time revenues. Management uses MRR and recognized MRR as supplemental performance measures because they provide useful measures of increases in contractual revenue from customer leases. A reconciliation of total GAAP revenues to recognized MRR in the period and MRR at period-end is presented below:



















Three Months Ended


Six Months Ended


June 30,


March 31,


June 30,


June 30,


2017


2017


2016


2017


2016

Recognized MRR in the period















Total period revenues (GAAP basis)

$

107,868


$

105,964


$

98,687


$

213,832


$

193,455

Less: Total period recoveries


(8,774)



(8,361)



(6,168)



(17,135)



(11,603)

Total period deferred setup fees


(2,436)



(2,616)



(2,256)



(5,052)



(4,159)

Total period straight line rent and other


(3,306)



(3,118)



(5,757)



(6,424)



(10,025)

Recognized MRR in the period


93,352



91,869



84,506



185,221



167,668
















MRR at period end















Total period revenues (GAAP basis)

$

107,868


$

105,964


$

98,687


$

213,832


$

193,455

Less: Total revenues excluding last month


(71,262)



(70,939)



(64,520)



(177,226)



(159,288)

Total revenues for last month of period


36,606



35,025



34,167



36,606



34,167

Less: Last month recoveries


(2,872)



(2,760)



(2,805)



(2,872)



(2,805)

Last month deferred setup fees


(822)



(898)



(756)



(822)



(756)

Last month straight line rent and other


(1,221)



(933)



(1,734)



(1,221)



(1,734)

MRR at period end

$

31,691


$

30,434


$

28,872


$

31,691


$

28,872


















 

 

View original content:http://www.prnewswire.com/news-releases/qts-reports-second-quarter-2017-operating-results-300494039.html

SOURCE QTS Realty Trust, Inc.


[ Back To TMCnet.com's Homepage ]






Technology Marketing Corporation

35 Nutmeg Drive Suite 340, Trumbull, Connecticut 06611 USA
Ph: 800-243-6002, 203-852-6800
Fx: 203-866-3326

General comments: tmc@tmcnet.com.
Comments about this site: webmaster@tmcnet.com.

STAY CURRENT YOUR WAY

© 2017 Technology Marketing Corporation. All rights reserved | Privacy Policy