QTS Realty Trust (QTS) Misses Q2 EPS by 4c, Revenues Beat; Raises FY20 EPS Mid-Point Outlook, Provides FY20 Revenue Guidance

QTS Realty Trust (NYSE: QTS) reported Q2 EPS of ($0.05), $0.04 worse than the analyst estimate of ($0.01). Revenue for the quarter came in at $131.64 million versus the consensus estimate of $129.93 million.

Additional Second Quarter Highlights

• Recognized total consolidated revenues of $131.6 million for the quarter ended June 30, 2020, an increase of 10.5% compared to the same period in 2019. Total consolidated revenues do not include QTS' pro rata share of revenue attributable to its unconsolidated joint venture of $1.8 million and $1.3 million for the quarters ended June 30, 2020 and 2019, respectively.
• Reported Adjusted EBITDA of $72.8 million for the quarter ended June 30, 2020, an increase of 17.0% compared to Adjusted EBITDA of $62.2 million for the same period in 2019.
• Reported Operating FFO available to common stockholders and OP unit holders of $48.7 million for the quarter ended June 30, 2020, an increase of 19.4% compared to Operating FFO available to common stockholders and OP unit holders of $40.8 million for the same period in 2019.
• Reported Operating FFO per fully diluted share of $0.70 for the quarter ended June 30, 2020, an increase of 8.5% compared to Operating FFO per fully diluted share of $0.65 in the same period of 2019.
• Signed new and modified renewal leases during the second quarter of 2020 aggregating to $21.0 million of incremental annualized rent, net of downgrades.
• Reported a Company record high annualized booked-not-billed monthly recurring revenue ("MRR") balance of $111.2 million as of June 30, 2020 compared to $100.9 million as of March 31, 2020.
• Through incremental sales of common stock sold on a forward basis, as of June 30, 2020, the Company had access to approximately $591 million of undrawn net proceeds from forward sales. These available forward sale proceeds represent funding that is expected to be sufficient to support the Company's capital development plan for the remainder of 2020 and through the middle of 2021.

"QTS delivered another strong performance during the second quarter, including continued leasing momentum across our three customer verticals, hyperscale, federal and hybrid colocation. As I reflect back on the first half of this year, I am proud of the way that the QTS team has stepped up to the many challenges that were presented, and delivered for each other, our customers and communities, demonstrating their commitment to a culture of service to others," said Chad Williams, Chairman and CEO of QTS.

Williams added, "The consistency of our results during one of the most challenging economic periods on record, is a testament to the resiliency of our diversified business model and continued strong execution by the QTS team. We look forward to continuing to leverage our strategic differentiators to maintain our momentum, while remaining vigilant regarding the status of the pandemic and its potential impact on our business and customers."

GUIDANCE:

QTS Realty Trust sees FY2020 EPS of $2.73-$2.83, versus the consensus of $0.02. QTS Realty Trust sees FY2020 revenue of $523-537 million, versus the consensus of $531.4 million.

As a result of strong year to date leasing activity, the Company has outperformed its initial expectations for recurring revenue. However, as a result of lower than expected utility rates, particularly in Atlanta, the Company's largest market, the Company's power recovery revenue has trended lower than initial expectations for the year. Factoring in the net effect of these two items, the Company is reaffirming its revenue guidance for 2020 of $523 million - $537 million. In addition, as a result of the Company's strong year to date customer retention and visibility into customer activity for the remainder of 2020, the Company is lowering its annual churn guidance to 3 - 5%, down from the previous range of 3 - 6%.

The Company is increasing its 2020 Adjusted EBITDA guidance from a previous range of $275 million - $285 million to a new range of $280 million - $290 million. The Company's improved Adjusted EBITDA outlook primarily reflects outperformance in recurring revenue year to date associated with strong leasing activity, continued operating leverage in its platform, reduced utility expenses net of recoveries, and lower than initially expected corporate travel expenses associated with the effects of COVID-19. The Company has incorporated an aggregate benefit of approximately $2 million - $3 million into its updated 2020 Adjusted EBITDA and OFFO per fully diluted share guidance reflecting the combined impact of lower than initially expected corporate travel expense and reduced utility expenses, net of recoveries.

The Company is increasing its 2020 OFFO per fully diluted share guidance from a previous range of $2.69 - $2.83 per share to a new range of $2.73 - $2.83 per share to reflect its higher Adjusted EBITDA outlook and updated capital development plan. The updated 2020 OFFO per fully diluted share guidance range represents an increase of $0.02 at the midpoint relative to the Company's previous guidance range.

The Company is increasing its 2020 cash paid for capital expenditures guidance (excluding acquisitions and including its proportionate share of cash capital expenditures associated with the unconsolidated entity) as a result of strong year to date signed leasing activity that has resulted in a $111.2 million booked-not-billed annualized MRR backlog as of June 30, 2020 and improved sales pipeline visibility for the remainder of 2020. The Company is increasing its 2020 cash paid for capital expenditures guidance from a previous range of $550 million - $600 million to a new range of $650 million - $750 million.

The Company's 2020 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. The Company is also monitoring the impacts of COVID-19 on the fair value of its assets. While the Company does not currently anticipate any material impairments on its assets as a result of COVID-19, future changes in expectations for sales, earnings and cash flows related to fixed assets, intangible assets and goodwill could cause these assets to be impaired. While these are the Company's current assumptions, this is an evolving situation and these assumptions could change, including if the duration of the pandemic is extended, which could affect outlook.

For earnings history and earnings-related data on QTS Realty Trust (QTS) click here.

You May Also Be Interested In

• Freightos Limited (CRGO) Tops Q2 EPS by 3c ; Offers Guidance
• Motorsport Games Inc. (MSGM) Tops Q2 EPS by 33c
• INVO Fertility (IVF) Tops Q2 EPS by 105c