– 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
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