Digital Realty Trust(US:DLR)2023-02-17 02:12Financial Data and Key Metrics Changes - The core FFO per share for Q4 2022 was reported at $1.65, consistent with the low end of the implied guidance range, down 1% sequentially and year-over-year due to increased operating expenses and interest rates [42][44] - For the full year 2022, the constant currency core FFO per share was $6.91, representing a 6% growth over 2021 [43] - Data center revenue growth on a constant currency basis improved by 4% year-over-year in Q4 2022, compared to a 1.8% decline in Q1 2022 [44] Business Line Data and Key Metrics Changes - New leases signed in Q4 2022 totaled $117 million, with strong contributions from the 0 to 1 megawatt segment and record interconnection signings [35][36] - Pricing on new leases increased for the fourth consecutive quarter across all business segments, marking a positive trend in market rents and re-leasing spreads [26][27] - Approximately 25% of newly signed leases in Q4 contained inflation-linked increases, indicating a shift towards CPI-based escalators [27] Market Data and Key Metrics Changes - Demand was geographically broad-based, with strong contributions from APAC, the Americas, and EMEA, reflecting the company's global footprint and customer base [25][35] - The current backlog of signed but not yet commenced leases increased to a record $477 million at year-end, with about 60% expected to commence in 2023 [39] - The company experienced nearly 90% customer retention and a churn rate of just 0.8%, the lowest in nearly three years [38] Company Strategy and Development Direction - The company aims to strengthen its customer value proposition by delivering sustainable connectivity-rich solutions and enhancing its global meeting place strategy [18][20] - There is a focus on integrating and innovating capabilities across the global asset portfolio, with an emphasis on technology and sustainability [19][31] - The company plans to diversify and bolster its capital sources to support growing digital infrastructure needs while improving capital efficiency and returns [50][51] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about strong demand driven by digital transformation and cloud migration, with expectations for a new wave of demand from emerging technologies like AI [20][21][22] - The company anticipates further inflection in positive trends for 2023, with guidance reflecting improvements in cash and GAAP re-leasing spreads [50][51] - Management acknowledged challenges in the operating environment, particularly regarding power procurement and capacity delivery in key markets like Northern Virginia [28][66] Other Important Information - The company was recognized for its ESG efforts, receiving multiple awards for sustainability and responsible business practices [31][32] - The company has contracted for a total of 470 megawatts of renewable energy during 2022 and added another 160 megawatts of solar power in 2023 [32] Q&A Session Summary Question: Balance sheet and asset sales - Management discussed a target of $2 billion in asset sales and joint ventures for the year, with a split between stabilized and development assets [53][54] Question: General demand environment - Management noted robust demand despite some hyperscalers experiencing revenue growth slowdowns, with a positive outlook for enterprise colo bookings [63][66] Question: Operating practices and FFO guidance - Management outlined priorities for strengthening customer value, integrating capabilities, and diversifying capital sources, with a focus on achieving the upper end of FFO guidance through improved renewal spreads [70][73] Question: Global interconnection platform - Management highlighted the importance of adding critical locations and enhancing technology to accelerate traction on interconnection, with ongoing efforts to innovate and improve customer experience [78][82]