QTS Reports Fourth Quarter And Full Year 2020 Operating Results
QTS Realty Trust reported fourth-quarter and full-year results for 2020, showing total revenues of $143.9 million and $539.4 million, up 16.3% and 12.2% year-over-year, respectively. However, the company faced a net loss of $10.7 million in Q4, compared to a loss of $3.6 million in the same quarter of 2019. Adjusted EBITDA rose by 26.3% to $83.7 million for the quarter. Despite strong leasing activity, net loss attributable to common stockholders was $16.0 million. QTS has a record booked-not-billed MRR of $154.4 million and expects continued growth in 2021.
- Total revenue increased by 16.3% year-over-year in Q4 2020.
- Adjusted EBITDA rose by 26.3% in Q4 2020, reaching $83.7 million.
- Operating FFO available to common stockholders increased by 23.9% to $56.7 million in Q4 2020.
- Record $40.3 million in new and modified renewal leases signed in Q4 2020.
- Booked-not-billed MRR reached a record high of $154.4 million as of Dec 31, 2020.
- Net loss in Q4 2020 was $10.7 million, compared to a $3.6 million loss in Q4 2019.
- Net loss attributable to common stockholders was $16.0 million in Q4 2020, up from $9.6 million in Q4 2019.
- Full-year net income declined to $14.6 million from $31.7 million in 2019.
- Debt restructuring expenses increased by $16.5 million in Q4 2020 compared to Q4 2019.
OVERLAND PARK, Kan., Feb. 16, 2021 /PRNewswire/ -- QTS Realty Trust, Inc. ("QTS" or the "Company") (NYSE: QTS) today announced operating results for the fourth quarter and full year ended December 31, 2020.
Fourth Quarter and Full Year GAAP & Other Highlights | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
($ in thousands except per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Total revenue | $ | 143,897 | $ | 123,707 | $ | 539,368 | $ | 480,818 | |||||||
Net income (loss) | $ | (10,660) | $ | (3,606) | $ | 14,576 | $ | 31,665 | |||||||
Net income (loss) attributable to common stockholders | $ | (15,967) | $ | (9,556) | $ | (12,274) | $ | 3,111 | |||||||
Net loss per share attributable to basic common shares (1) | $ | (0.33) | $ | (0.20) | $ | (0.47) | $ | (0.09) | |||||||
Net loss per share attributable to diluted common shares (1) | $ | (0.33) | $ | (0.20) | $ | (0.47) | $ | (0.09) | |||||||
FFO available to common stockholders & OP unit holders (2) | $ | 35,964 | $ | 43,562 | $ | 176,663 | $ | 160,476 | |||||||
_________________________________________________________________________ | |
(1) | Basic and diluted net loss per share were calculated using the two-class method. |
(2) | Includes QTS' pro rata share of results from its unconsolidated entity. |
Additional Fourth Quarter and Full Year Highlights
- Recognized total consolidated revenues of
$143.9 million and$539.4 million for the quarter and year ended December 31, 2020, respectively, an increase of16.3% and12.2% compared to the same periods in 2019. Total consolidated revenues do not include QTS' pro rata share of revenue attributable to its unconsolidated joint venture. - Reported Adjusted EBITDA of
$83.7 million and$299.3 million for the quarter and year ended December 31, 2020, respectively, an increase of26.3% and19.5% compared to Adjusted EBITDA of$66.3 million and$250.4 million for the same periods in 2019. - Reported Operating FFO available to common stockholders and OP unit holders of
$56.7 million and$199.0 million for the quarter and year ended December 31, 2020, respectively, an increase of23.9% and20.1% compared to Operating FFO available to common stockholders and OP unit holders of$45.7 million and$165.7 million for the same periods in 2019. - Reported Operating FFO per fully diluted share of
$0.78 for the quarter ended December 31, 2020, an increase of13.0% compared to Operating FFO per fully diluted share of$0.69 in the same period of 2019. Reported Operating FFO per fully diluted share of$2.84 for the full year ended December 31, 2020, an increase of8.0% compared to Operating FFO per fully diluted share of$2.63 in the same period of 2019. - Signed new and modified renewal leases during the fourth quarter of 2020 aggregating to
$40.3 million of incremental annualized rent, net of downgrades, representing the highest quarterly performance in Company history. - Reported a Company record high annualized booked-not-billed monthly recurring revenue ("MRR") balance of
$154.4 million as of December 31, 2020, compared to$130.6 million as of September 30, 2020 and$93.1 million as of December 31, 2019. Adjusting booked-not-billed revenue for the effects of revenue which had begun recognition via straight line rent, the Company's annualized booked-not-billed balance was$87.1 million as of December 31, 2020, compared to$76.6 million as of September 30, 2020 and$60.7 million as of December 31, 2019. - Through incremental sales of common stock sold on a forward basis as of the date of this report, the Company had access to approximately
$587.6 million of undrawn net proceeds from forward sales.
"QTS delivered our strongest year of performance in 2020, including closing out the year with the largest quarterly leasing performance in our history. We continue to experience strong execution against our long-term strategy, capitalizing on core differentiators to win market share at attractive returns and deliver consistent growth in shareholder value," said Chad Williams, Chairman and CEO of QTS.
Williams added, "Our performance during 2020 is a testament to the strength of the QTS culture. I'd like to thank our QTS employees for their continued resiliency and commitment to delivering world-class service to our customers and surrounding communities. As we head into 2021 with a record booked-not-billed backlog and capital plan that is largely funded, QTS is well-positioned to drive continued growth and consistent performance."
Financial Results
Quarterly Results
QTS recognized net loss of
QTS generated total revenues of
QTS generated
Additionally, QTS generated Operating FFO available to common stockholders and OP unit holders of
Operating FFO per fully diluted share was
Annual Results
QTS recognized net income of
QTS generated total revenues of
QTS generated
Additionally, QTS generated Operating FFO available to common stockholders and OP unit holders of
Operating FFO per fully diluted share was
Leasing Activity
During the quarter and year ended December 31, 2020, QTS entered into new and modified renewal leases aggregating to
During the quarter and year ended December 31, 2020, QTS renewed leases with total annualized rent of
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
As of December 31, 2020, the booked-not-billed MRR balance (which represents customer leases that have been executed, but for which lease payments have not commenced as of December 31, 2020) was the highest in Company history and represented
Development
During the fourth quarter of 2020, the Company brought online approximately 20 megawatts of gross power and approximately 74,000 net rentable square feet ("NRSF") of raised floor at its Richmond, Atlanta (DC-2), Chicago, Ashburn (DC-1), Piscataway and Hillsboro facilities at an aggregate cost of approximately
For the year ended December 31, 2020, excluding the Company's share of capital at the joint venture, the Company brought online approximately 72 megawatts of gross power and approximately 296,000 NRSF of raised floor at its Ashburn (DC-1), Atlanta (DC-1), Atlanta (DC-2), Irving, Fort Worth, Atlanta - Suwanee, Hillsboro, Chicago, Piscataway, Richmond and Netherlands facilities at an aggregate cost of approximately
Additionally, during the year ended December 31, 2020, the joint venture brought online the third phase at the Manassas (DC-1) facility, representing approximately four megawatts of gross power and approximately 11,000 NRSF of raised floor at an aggregate cost of approximately
Balance Sheet and Liquidity
In June 2019, the Company established an "at-the-market" equity offering program (the "Prior ATM Program") pursuant to which the Company could issue, from time to time, up to
In June 2020, QTS conducted an underwritten offering of 4,400,000 shares of common stock sold on a forward basis at a price of
The following table represents a summary of the Company's forward equity activity from October 26, 2020 through the date of this report, February 16, 2021 (in thousands):
Offering Program | Forward | Net Proceeds Available/(Received) (1) | ||||||
Shares and net proceeds available as of October 26, 2020 | 7,711 | $ | 452,186 | (2) | ||||
May 2020 New ATM Program - Sales | 2,250 | $ | 135,364 | |||||
Shares and net proceeds available as of February 16, 2021 | 9,961 | $ | 587,550 | |||||
____________________________________________________________ | |
(1) | Proceeds available remain subject to certain adjustments until settled. |
(2) | Proceeds available reported in the third quarter earnings release were |
As shown in the table above, as of February 16, 2021, the Company currently has access to approximately
In October 2020, QTS through its subsidiaries, QualityTech, LP (the "Operating Partnership") and QTS Finance Corporation (the "Issuers"), issued
In October 2020, the Company, through the Operating Partnership, entered into a
As of December 31, 2020, the Company's total net indebtedness, inclusive of its pro rata share of joint venture net debt, was approximately
As of December 31, 2020, adjusted for approximately
Novel Coronavirus (COVID-19)
QTS continues to actively monitor developments with respect to COVID-19 and has taken numerous actions based on corporate policies specifically focusing on the safety and wellness of its customers, partners, and employees, as well as providing continuous and resilient services. Although the COVID-19 pandemic has caused significant disruptions to the United States and global economy and has contributed to significant volatility in financial markets, as of the date of this report these developments have not had a known material adverse effect on the Company's business. As of the date of this report, each of the Company's data centers in North America and Europe is fully operational and operating in accordance with the Company's business continuity plans. Across each of the respective jurisdictions in which the Company operates, the Company's business has been deemed essential operations, which has allowed the Company to remain fully staffed with critical personnel in place to continue to provide service and support for its customers.
In its first quarter 2020 earnings release, the Company reported that since the beginning of the economic disruptions from COVID-19, the Company had experienced a modest increase in customer requests for extended payment terms, primarily concentrated in the retail, oil and gas, hospitality and transportation customer verticals, with these customers representing approximately
In addition, the Company reported in its first quarter 2020 earnings release that it had experienced modest delays in construction activity in a few of its markets primarily as a result of availability of contractors and slower permitting. Consistent with what the Company reported in its second and third quarter 2020 earnings releases, during the fourth quarter of 2020 and through the date of this report, the Company is pleased to report that its commitments to customers remain on track and it does not currently anticipate any meaningful delays in its development activity associated with the Company's booked-not-billed backlog assuming current trends continue.
The extent to which COVID-19 impacts our and our customers' operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, new information that may emerge concerning the severity, variants or mutations of COVID-19, vaccine efficacy and rollout and other actions taken to contain COVID-19 or treat its impact, among others.
2021 Guidance | |||||||||||
2021 Guidance | |||||||||||
($ in millions except per share amounts) | 2020 Actuals | Low | High | ||||||||
Revenue | $ | 539 | $ | 599 | $ | 613 | |||||
Adjusted EBITDA | $ | 299 | $ | 330 | $ | 340 | |||||
Operating FFO per fully diluted share | $ | 2.84 | $ | 2.92 | $ | 3.04 | |||||
The Company's 2021 guidance assumes rental churn for the full year of between
The Company's 2021 guidance includes the effects of the Company's joint venture, which is reflected as an unconsolidated joint venture on QTS' reported financial statements. Consistent with GAAP accounting standards, revenue from the unconsolidated joint venture is not included in QTS' reported consolidated GAAP financial statements. Also consistent with NAREIT-defined standards, QTS includes its proportionate ownership of non-GAAP measures such as EBITDAre and FFO from the joint venture in its reported EBITDAre and FFO results, respectively.
The Company's 2021 guidance assumes, among other things, that its facilities continue to operate and it does not experience significant work stoppages or closures, it is able to mitigate any supply chain disruptions for its development activities, and it is able to collect revenues in line with current expectations. While these are the Company's current assumptions, the COVID-19 pandemic is a continuously evolving situation and these assumptions could change, including if the duration of the pandemic is extended, which could affect outlook.
QTS does not provide reconciliations for the non-GAAP financial measures included in its guidance provided above due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including net income (loss) and adjustments that could be made for restructuring costs, transaction costs, lease exit costs, asset impairments and gain (loss) on disposals and other charges as those amounts are subject to significant variability based on future transactions that are not yet known, the amount of which, based on historical experience, could be significant.
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 February 17, 2021, 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 8408212# 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 data center solutions across a diverse footprint spanning more than 7 million square feet of owned data center space throughout primarily North America and Europe. Through its software-defined technology platform, QTS is able to deliver secure, compliant infrastructure solutions, robust connectivity and premium customer service to leading hyperscale technology companies, enterprises, and government entities. QTS owns, operates or manages 28 data centers and supports more than 1,200 customers primarily in North America and Europe.
QTS Investor Relations Contact
Stephen Douglas – EVP – Finance
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 COVID-19 pandemic, its impact on the Company and the Company's response thereto and to the Company's strategy, plans, intentions, capital resources, liquidity, portfolio performance, results of operations, anticipated growth in our funds from operations and anticipated market conditions contain 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.
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 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; obsolescence or reduction in marketability of our infrastructure due to changing industry demands; global, national and local economic conditions; risks related to the COVID-19 pandemic, including, but not limited to, the risk of business and/or operational disruptions, disruption of the Company's customers' businesses that could affect their ability to make rental payments to the Company, supply chain disruptions and delays in the construction or development of the Company's data centers; 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; decreased rental rates or increased vacancy rates; increased interest rates and operating costs, including increased energy costs; financing risks, including the Company's failure to obtain necessary outside financing; 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; changes in real estate and zoning laws, revaluations for tax purposes and increases in real property tax rates; and limitations inherent in our current and any future joint venture investments, such as lack of sole decision-making authority and reliance on our partners' financial condition.
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, 2020, and other periodic reports the Company files with the Securities and Exchange Commission, many of which should be interpreted as being heightened as a result of the ongoing COVID-19 pandemic and the actions taken to contain the pandemic or mitigate its impact.
Consolidated Balance Sheets | |||||||
(unaudited and in thousands except share data) | |||||||
December 31, 2020 (1) | December 31, 2019 (1) | ||||||
ASSETS | |||||||
Real Estate Assets | |||||||
Land | $ | 165,109 | $ | 130,605 | |||
Buildings, improvements and equipment | 2,839,261 | 2,178,901 | |||||
Less: Accumulated depreciation | (702,944) | (558,560) | |||||
2,301,426 | 1,750,946 | ||||||
Construction in progress (2) | 1,028,765 | 920,922 | |||||
Real Estate Assets, net | 3,330,191 | 2,671,868 | |||||
Investments in unconsolidated entity | 22,608 | 30,218 | |||||
Operating lease right-of-use assets, net | 51,342 | 57,141 | |||||
Cash and cash equivalents | 22,775 | 15,653 | |||||
Rents and other receivables, net | 107,563 | 81,181 | |||||
Acquired intangibles, net | 68,090 | 81,679 | |||||
Deferred costs, net (3) | 63,689 | 52,363 | |||||
Prepaid expenses | 10,253 | 10,586 | |||||
Goodwill | 173,843 | 173,843 | |||||
Other assets, net (4) | 48,218 | 49,001 | |||||
TOTAL ASSETS | $ | 3,898,572 | $ | 3,223,533 | |||
LIABILITIES | |||||||
Unsecured term loans and revolver, net (5) | $ | 1,335,241 | $ | 1,010,640 | |||
Senior notes, net of debt issuance costs (5) | 492,534 | 395,549 | |||||
Finance leases and mortgage notes payable | 41,718 | 46,876 | |||||
Operating lease liabilities | 58,005 | 64,416 | |||||
Accounts payable and accrued liabilities | 187,270 | 142,547 | |||||
Dividends and distributions payable | 39,373 | 34,500 | |||||
Advance rents, security deposits and other liabilities | 19,850 | 18,027 | |||||
Derivative liabilities | 53,722 | 26,609 | |||||
Deferred income taxes | 810 | 749 | |||||
Deferred income | 85,351 | 39,169 | |||||
TOTAL LIABILITIES | 2,313,874 | 1,779,082 | |||||
EQUITY | |||||||
| 103,212 | 103,212 | |||||
| 304,223 | 304,223 | |||||
Common stock: | 646 | 582 | |||||
Additional paid-in capital | 1,622,857 | 1,330,444 | |||||
Accumulated other comprehensive loss | (50,451) | (24,642) | |||||
Accumulated dividends in excess of earnings | (504,313) | (376,002) | |||||
Total stockholders' equity | 1,476,174 | 1,337,817 | |||||
Noncontrolling interests | 108,524 | 106,634 | |||||
TOTAL EQUITY | 1,584,698 | 1,444,451 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 3,898,572 | $ | 3,223,533 | |||
__________________________________________________ | |
(1) | The balance sheets at December 31, 2020 and December 31, 2019 have been derived from the consolidated financial statements at that date, but do not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements. |
(2) | As of December 31, 2020, construction in progress included |
(3) | As of December 31, 2020 and December 31, 2019, deferred costs, net included |
(4) | As of December 31, 2020 and December 31, 2019, other assets, net included |
(5) | Debt issuance costs, net related to the senior notes and term loans aggregating to |
(6) | As of December 31, 2020, the total liquidation preference of the Series A Preferred Stock was |
(7) | As of December 31, 2020, the total liquidation preference of the Series B Preferred Stock was |
Consolidated Statements of Operations | |||||||||||||||||||
(unaudited and in thousands except share and per share data) | |||||||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | ||||||||||||||||
2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Revenues: | |||||||||||||||||||
Rental (1) | $ | 139,998 | $ | 133,782 | $ | 119,282 | $ | 519,858 | $ | 465,123 | |||||||||
Other (2) | 3,899 | 3,756 | 4,425 | 19,510 | 15,695 | ||||||||||||||
Total revenues | 143,897 | 137,538 | 123,707 | 539,368 | 480,818 | ||||||||||||||
Operating expenses: | |||||||||||||||||||
Property operating costs | 43,388 | 43,979 | 38,645 | 168,497 | 156,048 | ||||||||||||||
Real estate taxes and insurance | 3,997 | 4,005 | 4,068 | 16,020 | 14,503 | ||||||||||||||
Depreciation and amortization | 55,887 | 51,378 | 45,161 | 199,889 | 168,305 | ||||||||||||||
General and administrative (3) | 20,809 | 22,082 | 20,866 | 84,965 | 80,385 | ||||||||||||||
Transaction, integration, and impairment costs | 2,665 | 1,078 | 12,110 | 4,340 | 15,190 | ||||||||||||||
Total operating expenses | 126,746 | 122,522 | 120,850 | 473,711 | 434,431 | ||||||||||||||
Gain on sale of real estate, net | — | — | 1,361 | — | 14,769 | ||||||||||||||
Operating income | 17,151 | 15,016 | 4,218 | 65,657 | 61,156 | ||||||||||||||
Other income and expense: | |||||||||||||||||||
Interest income | — | — | 8 | 2 | 111 | ||||||||||||||
Interest expense | (9,122) | (7,516) | (6,264) | (30,724) | (26,593) | ||||||||||||||
Debt restructuring costs | (18,036) | — | (1,523) | (18,036) | (1,523) | ||||||||||||||
Other income (expense) | — | — | (380) | 159 | (50) | ||||||||||||||
Equity in net loss of unconsolidated entity | (411) | (366) | (481) | (2,044) | (1,473) | ||||||||||||||
Income (loss) before taxes | (10,418) | 7,134 | (4,422) | 15,014 | 31,628 | ||||||||||||||
Tax benefit (expense) | (242) | (227) | 816 | (438) | 37 | ||||||||||||||
Net income (loss) | (10,660) | 6,907 | (3,606) | 14,576 | 31,665 | ||||||||||||||
Net (income) loss attributable to noncontrolling interests (4) | 1,738 | 18 | 1,095 | 1,330 | (374) | ||||||||||||||
Net income (loss) attributable to QTS Realty Trust, Inc. | $ | (8,922) | $ | 6,925 | $ | (2,511) | $ | 15,906 | $ | 31,291 | |||||||||
Preferred stock dividends | (7,045) | (7,045) | (7,045) | (28,180) | (28,180) | ||||||||||||||
Net income (loss) attributable to common stockholders | $ | (15,967) | $ | (120) | $ | (9,556) | $ | (12,274) | $ | 3,111 | |||||||||
Net loss per share attributable to common shares: | |||||||||||||||||||
Basic (5) | $ | (0.33) | $ | (0.07) | $ | (0.20) | $ | (0.47) | $ | (0.09) | |||||||||
Diluted (5) | $ | (0.33) | $ | (0.07) | $ | (0.20) | $ | (0.47) | $ | (0.09) | |||||||||
______________________________________________________________________ | |
(1) | Represents lease revenue, inclusive of recoveries from customers as well as straight line rent. Recoveries from customers was |
(2) | Includes revenue from managed services, sales of scrap metals and other unused materials, management fees, service fees, development fees and various other non-rental revenue items. |
(3) | 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 |
(4) | The weighted average noncontrolling ownership interest of QualityTech, LP was |
(5) | Basic and diluted net income (loss) per share were calculated using the two-class method. |
Consolidated Statements of Comprehensive Income (Loss) | |||||||||||||||||||
(unaudited and in thousands) | |||||||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | ||||||||||||||||
2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Net income (loss) | $ | (10,660) | $ | 6,907 | $ | (3,606) | $ | 14,576 | $ | 31,665 | |||||||||
Other comprehensive income (loss): | |||||||||||||||||||
Foreign currency translation adjustment gain (loss) | 180 | 166 | 394 | 187 | 34 | ||||||||||||||
Increase (decrease) in fair value of derivative contracts | 6,561 | 5,500 | 4,349 | (28,295) | (29,843) | ||||||||||||||
Reclassification of other comprehensive income to utilities expense | 243 | 197 | 262 | 1,204 | 749 | ||||||||||||||
Reclassification of other comprehensive income to interest expense | 3,335 | 3,352 | 169 | 10,148 | (1,031) | ||||||||||||||
Comprehensive income (loss) | (341) | 16,122 | 1,568 | (2,180) | 1,574 | ||||||||||||||
Comprehensive (income) loss attributable to noncontrolling interests | 30 | (1,626) | (161) | 213 | (169) | ||||||||||||||
Comprehensive income (loss) attributable to QTS Realty Trust, Inc. | $ | (311) | $ | 14,496 | $ | 1,407 | $ | (1,967) | $ | 1,405 | |||||||||
FFO, Operating FFO, and Adjusted Operating FFO
The Company considers funds from operations ("FFO"), to be a supplemental measure of its performance which should be considered along with, but not as an alternative to, net income (loss) 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), adjusted to exclude gains (or losses) from sales of depreciable real estate related to its primary business, impairment write-downs of depreciable real estate related to its primary business, real estate-related depreciation and amortization and similar adjustments for unconsolidated entities. To the extent the Company incurs gains or losses from the sale of assets that are incidental to its primary business, or incurs impairment write-downs associated with assets that are incidental to its primary business, it includes such charges in its calculation of FFO. The Company's management uses FFO as a supplemental operating performance measure because, in excluding real estate-related depreciation and amortization, impairment write-downs of depreciable real estate 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.
Due to the volatility and nature of certain significant charges and gains recorded in the Company's operating results that management believes are not reflective of its operating performance, management computes an adjusted measure of FFO, which the Company refers to as Operating funds from operations ("Operating FFO"). Operating FFO is a non-GAAP measure that is used as a supplemental operating measure and to provide additional information to users of the financial statements. 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 they calculate Operating FFO on a comparable basis, between REITs.
Adjusted Operating Funds From Operations ("Adjusted Operating FFO") is a non-GAAP measure that is used as a supplemental operating measure and to provide additional information to users of the financial statements. 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, non-real estate depreciation and amortization, straight line rent adjustments, income taxes, equity-based compensation and similar adjustments for unconsolidated entities.
The Company offers these measures because it recognizes that FFO, Operating FFO and Adjusted Operating FFO will be used by investors as a basis to compare its operating performance with that of other REITs. However, because FFO, Operating FFO and Adjusted Operating FFO exclude real estate depreciation and amortization and capture neither the changes in the value of the Company's 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 its financial condition, cash flows and results of operations, the utility of FFO, Operating FFO and Adjusted Operating FFO as measures of its operating performance is limited. The Company's calculation of FFO may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or do not calculate FFO in accordance with NAREIT guidance. In addition, the Company's calculations of FFO, Operating FFO and Adjusted Operating FFO are not necessarily comparable to FFO, Operating FFO and Adjusted Operating FFO as calculated by other REITs that do not use the same definition or implementation guidelines or interpret the standards differently from us. FFO, Operating FFO and Adjusted Operating FFO are non-GAAP measures and should not be considered a measure of the Company's results of operations or liquidity or as a substitute for, or an alternative to, net income (loss), cash provided by operating activities or any other performance measure determined in accordance with GAAP, nor is it indicative of funds available to fund its cash needs, including its ability to make distributions to its stockholders.
A reconciliation of net income to FFO, Operating FFO and Adjusted Operating FFO is presented below (unaudited and in thousands):
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | ||||||||||||||||
2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
FFO | |||||||||||||||||||
Net income (loss) | $ | (10,660) | $ | 6,907 | $ | (3,606) | $ | 14,576 | $ | 31,665 | |||||||||
Equity in net loss of unconsolidated entity | 411 | 366 | 481 | 2,044 | 1,473 | ||||||||||||||
Real estate depreciation and amortization | 52,763 | 47,880 | 41,947 | 186,539 | 156,387 | ||||||||||||||
Gain on sale of real estate, net | — | — | — | — | (13,408) | ||||||||||||||
Impairments of depreciated property | — | — | 11,461 | — | 11,461 | ||||||||||||||
Pro rata share of FFO from unconsolidated entity | 495 | 512 | 324 | 1,684 | 1,078 | ||||||||||||||
FFO (1) | 43,009 | 55,665 | 50,607 | 204,843 | 188,656 | ||||||||||||||
Preferred stock dividends | (7,045) | (7,045) | (7,045) | (28,180) | (28,180) | ||||||||||||||
FFO available to common stockholders & OP unit holders | 35,964 | 48,620 | 43,562 | 176,663 | 160,476 | ||||||||||||||
Debt restructuring costs | 18,036 | — | 1,523 | 18,036 | 1,523 | ||||||||||||||
Transaction and integration costs | 2,665 | 1,078 | 649 | 4,340 | 3,729 | ||||||||||||||
Operating FFO available to common stockholders & OP | 56,665 | 49,698 | 45,734 | 199,039 | 165,728 | ||||||||||||||
Maintenance capital expenditures | (2,000) | (2,268) | (910) | (10,150) | (4,233) | ||||||||||||||
Leasing commissions paid | (11,271) | (9,670) | (10,757) | (36,744) | (31,102) | ||||||||||||||
Amortization of deferred financing costs | 1,180 | 990 | 982 | 4,148 | 3,917 | ||||||||||||||
Non real estate depreciation and amortization | 3,124 | 3,498 | 3,214 | 13,350 | 11,918 | ||||||||||||||
Straight line rent revenue and expense and other | (8,748) | (7,196) | (3,243) | (25,401) | (7,922) | ||||||||||||||
Tax expense (benefit) from operating results | 242 | 227 | (816) | 438 | (37) | ||||||||||||||
Equity-based compensation expense | 6,862 | 7,315 | 4,360 | 25,133 | 16,412 | ||||||||||||||
Adjustments for unconsolidated entity | (72) | (211) | 75 | (304) | 118 | ||||||||||||||
Adjusted Operating FFO available to common stockholders | $ | 45,982 | $ | 42,383 | $ | 38,639 | $ | 169,509 | $ | 154,799 | |||||||||
__________________________________________________ | |
(1) | FFO for the three months and year ended December 31, 2019 includes a |
(2) | 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. |
Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDA
The Company calculates EBITDAre in accordance with the standards established by NAREIT. EBITDAre represents net income (loss) (computed in accordance with GAAP), adjusted to exclude gains (or losses) from sales of depreciated property related to its primary business, income tax expense (or benefit), interest expense, depreciation and amortization, impairments of depreciated property related to its primary business, and similar adjustments for unconsolidated entities. The Company's management uses EBITDAre as a supplemental performance measure because it provides performance measures that, when compared year over year, captures the performance of the Company's operations by removing the impact of capital structure (primarily interest expense) and asset based charges (primarily depreciation and amortization) from its operating results.
Due to the volatility and nature of certain significant charges and gains recorded in the Company's operating results that management believes are not reflective of its operating performance, management computes an adjusted measure of EBITDAre, which the Company refers to as Adjusted EBITDA. The Company generally calculates Adjusted EBITDA excluding certain non-routine charges, write off of unamortized deferred financing costs, gains (losses) on extinguishment of debt, restructuring costs, and transaction and integration costs, as well as the Company's pro-rata share of each of those respective expenses associated with the unconsolidated entity aggregated into one line item categorized as "Adjustments for the unconsolidated entity." In addition, the Company calculates Adjusted EBITDA excluding certain non-cash recurring costs such as equity-based compensation. The Company believes that Adjusted EBITDA provides investors with another financial measure that may facilitate comparisons of operating performance between periods and, to the extent other REITs calculate Adjusted EBITDA on a comparable basis, between REITs.
Management uses EBITDAre and Adjusted EBITDA as supplemental performance measures as they provide useful measures of assessing the Company's operating results. Other companies may not calculate EBITDAre or Adjusted EBITDA in the same manner. Accordingly, the Company's EBITDAre and Adjusted EBITDA may not be comparable to others. EBITDAre and Adjusted EBITDA should be considered only as supplements to net income (loss) as measures of the Company's performance and should not be used as substitutes for net income (loss), as measures of its results of operations or liquidity or as an indications of funds available to meet its cash needs, including its ability to make distributions to its stockholders.
A reconciliation of net income to EBITDAre and Adjusted EBITDA is presented below (unaudited and in thousands):
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | ||||||||||||||||
2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
EBITDAre and Adjusted EBITDA | |||||||||||||||||||
Net income (loss) | $ | (10,660) | $ | 6,907 | $ | (3,606) | $ | 14,576 | $ | 31,665 | |||||||||
Equity in net loss of unconsolidated entity | 411 | 366 | 481 | 2,044 | 1,473 | ||||||||||||||
Interest income | — | — | (8) | (2) | (111) | ||||||||||||||
Interest expense | 9,122 | 7,516 | 6,264 | 30,724 | 26,593 | ||||||||||||||
Tax expense (benefit) | 242 | 227 | (816) | 438 | (37) | ||||||||||||||
Depreciation and amortization | 55,887 | 51,378 | 45,161 | 199,889 | 168,305 | ||||||||||||||
Gain on disposition of depreciated property | — | — | — | — | (13,408) | ||||||||||||||
Impairments of depreciated property | — | — | 11,461 | — | 11,461 | ||||||||||||||
Pro rata share of EBITDAre from unconsolidated entity | 1,167 | 1,178 | 830 | 4,088 | 2,775 | ||||||||||||||
EBITDAre (1) | $ | 56,169 | $ | 67,572 | $ | 59,767 | $ | 251,757 | $ | 228,716 | |||||||||
Debt restructuring costs | 18,036 | — | 1,523 | 18,036 | 1,523 | ||||||||||||||
Equity-based compensation expense | 6,862 | 7,315 | 4,360 | 25,133 | 16,412 | ||||||||||||||
Transaction, integration and implementation costs | 2,665 | 1,099 | 649 | 4,361 | 3,729 | ||||||||||||||
Adjusted EBITDA | $ | 83,732 | $ | 75,986 | $ | 66,299 | $ | 299,287 | $ | 250,380 | |||||||||
__________________________________________________ | |
(1) | EBITDAre for the three months and year ended December 31, 2019, includes a |
Net Operating Income (NOI)
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, other (income) expense, debt restructuring costs, transaction, integration and impairment costs, gain (loss) on sale of real estate, restructuring costs, general and administrative expenses and similar adjustments for unconsolidated entities. The Company allocates a management fee charge of
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 (loss) as computed in accordance with GAAP.
A reconciliation of net income to NOI is presented below (unaudited and in thousands):
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | ||||||||||||||||
2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Net Operating Income (NOI) | |||||||||||||||||||
Net income (loss) | $ | (10,660) | $ | 6,907 | $ | (3,606) | $ | 14,576 | $ | 31,665 | |||||||||
Equity in net loss of unconsolidated entity | 411 | 366 | 481 | 2,044 | 1,473 | ||||||||||||||
Interest income | — | — | (8) | (2) | (111) | ||||||||||||||
Interest expense | 9,122 | 7,516 | 6,264 | 30,724 | 26,593 | ||||||||||||||
Depreciation and amortization | 55,887 | 51,378 | 45,161 | 199,889 | 168,305 | ||||||||||||||
Debt restructuring costs | 18,036 | — | 1,523 | 18,036 | 1,523 | ||||||||||||||
Other (income) expense | — | — | 380 | (159) | 50 | ||||||||||||||
Tax expense (benefit) | 242 | 227 | (816) | 438 | (37) | ||||||||||||||
Transaction, integration and impairment costs | 2,665 | 1,078 | 12,110 | 4,340 | 15,190 | ||||||||||||||
General and administrative expenses | 20,809 | 22,082 | 20,866 | 84,965 | 80,385 | ||||||||||||||
Gain on sale of real estate, net | — | — | (1,361) | — | (14,769) | ||||||||||||||
NOI from consolidated operations (1) | $ | 96,512 | $ | 89,554 | $ | 80,994 | $ | 354,851 | $ | 310,267 | |||||||||
Pro rata share of NOI from unconsolidated entity (2) | 1,172 | 1,180 | 841 | 4,122 | 2,789 | ||||||||||||||
Total NOI (1) | $ | 97,684 | $ | 90,734 | $ | 81,835 | $ | 358,973 | $ | 313,056 | |||||||||
__________________________________________________ | |
(1) | Includes facility level general and administrative allocation charges of |
(2) | QTS' pro rata share of the JV is |
Monthly Recurring Revenue (MRR) and Recognized MRR
The Company calculates MRR as monthly contractual revenue under signed leases as of a particular date, which includes revenue from its rental and managed services activities, but excludes customer recoveries, deferred set-up fees, variable related revenues, non-cash revenues and other one-time revenues. MRR is also calculated to include the Company's pro rata share of monthly contractual revenue under signed leases as of a particular date associated with unconsolidated entities, which includes revenue from the unconsolidated entity's rental and managed services activities, but excludes the unconsolidated entity's customer recoveries, deferred set-up fees, variable related revenues, non-cash revenues and other one-time revenues. MRR reflects the annualized cash rental payments. It does not include the impact from booked-not-billed leases as of a particular date, unless otherwise specifically noted.
Separately, the Company calculates recognized MRR as the recurring revenue recognized during a given period, which includes revenue from its rental 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 the Company's customer leases and customer leases attributable to the Company's business. MRR and recognized MRR should not be viewed by investors as alternatives to actual monthly revenue, as determined in accordance with GAAP. Other companies may not calculate MRR or recognized MRR in the same manner. Accordingly, the Company's MRR and recognized MRR may not be comparable to other companies' MRR and recognized MRR. MRR and recognized MRR should be considered only as supplements to total revenues as a measure of its performance. MRR and recognized MRR should not be used as measures of the Company's results of operations or liquidity, nor is it indicative of funds available to meet its cash needs, including its ability to make distributions to its stockholders.
A reconciliation of total revenues to recognized MRR in the period and MRR at period-end is presented below (unaudited and in thousands):
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | ||||||||||||||||
2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Recognized MRR in the period | |||||||||||||||||||
Total period revenues (GAAP basis) | $ | 143,897 | $ | 137,538 | $ | 123,707 | $ | 539,368 | $ | 480,818 | |||||||||
Less: Total period variable lease revenue from recoveries | (14,648) | (14,887) | (14,018) | (54,337) | (55,046) | ||||||||||||||
Total period deferred setup fees | (6,585) | (5,300) | (4,062) | (20,330) | (15,156) | ||||||||||||||
Total period straight line rent and other | (10,201) | (9,184) | (5,156) | (36,744) | (20,349) | ||||||||||||||
Recognized MRR in the period | 112,463 | 108,167 | 100,471 | 427,957 | 390,267 | ||||||||||||||
MRR at period end | |||||||||||||||||||
Total period revenues (GAAP basis) | $ | 143,897 | $ | 137,538 | $ | 123,707 | $ | 539,368 | $ | 480,818 | |||||||||
Less: Total revenues excluding last month | (96,260) | (91,485) | (81,699) | (491,731) | (438,810) | ||||||||||||||
Total revenues for last month of period | 47,637 | 46,053 | 42,008 | 47,637 | 42,008 | ||||||||||||||
Less: Last month variable lease revenue from recoveries | (4,953) | (4,643) | (4,578) | (4,953) | (4,578) | ||||||||||||||
Last month deferred setup fees | (2,207) | (1,864) | (1,333) | (2,207) | (1,333) | ||||||||||||||
Last month straight line rent and other | (2,349) | (3,044) | (2,413) | (2,349) | (2,413) | ||||||||||||||
Add: Pro rata share of MRR at period end of unconsolidated entity | 411 | 411 | 350 | 411 | 350 | ||||||||||||||
MRR at period end | $ | 38,539 | $ | 36,913 | $ | 34,034 | $ | 38,539 | $ | 34,034 | |||||||||
View original content:http://www.prnewswire.com/news-releases/qts-reports-fourth-quarter-and-full-year-2020-operating-results-301229310.html
SOURCE QTS Realty Trust, Inc.
FAQ
What were QTS's revenue figures for the fourth quarter of 2020?
Did QTS make a profit or a loss in 2020?
What is the significance of QTS's booked-not-billed MRR?
How did QTS's operating performance change from 2019 to 2020?
What is QTS's outlook for 2021?
