Good afternoon, and welcome to Digital Realty First Quarter 2021 Earnings Call. Please note this event is being recorded. During today's presentation, all parties will be in a listen only mode. Following the presentation, we will conduct a question and answer session. Callers will be limited to one question plus a follow-up.
Due to time constraints, we will conclude promptly at the bottom of the hour. I would now like to turn the call over to John Stewart, Digital Realty's Senior Vice President of Investor Relations. John, please go ahead.
Thank you, operator. The speakers on today's call are CEO, Bill Stein and CFO, Andy Power Chief Investment Officer, Greg Wright Chief Technology Officer, Chris Sharp and Chief Revenue Officer, Corey Dyer are also on the call and will be available for Q and A. Management may make forward looking statements, including guidance and underlying assumptions. Forward looking statements are based on expectations and involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of risks related to our business, see our 10 ks and subsequent filings with the SEC.
This call will contain non GAAP financial information. Reconciliations to net income are included in the supplemental package furnished to the SEC and available on our website. Before I turn the call over to Bill, I'd like to hit the tops of the waves on our Q1 results. First, we demonstrated our commitment to delivering Sustainable growth for all stakeholders with efficient and socially responsible capital raises and corporate governance enhancements. We continue to enhance the value of our global platform, extending connectivity offerings globally, recycling capital and investing to fuel high quality organic growth.
We delivered solid financial results with core FFO per share up 9% year over year and $0.09 ahead of consensus. Finally, we continue to strengthen our balance sheet, lowering our weighted average cost of debt with the redemption of high coupon debt and preferred equity, while extending our weighted average duration with the issuance of attractively priced long term capital. With that, I'd like to turn
the call over to Bill. Thanks, John. Good afternoon, and thank you all for joining us. Our formula for long term value creation is a global, connected, sustainable framework, And our Q1 results demonstrate the strength of this framework. Our business is increasingly global with Q1 bookings very evenly balanced across regions.
We continue to align Platform Digital with our customers' digital transformation initiatives by expanding our unique Interconnection capabilities focusing on connecting centers of data across our robust reliable global platform. Last but not least, we continue to advance our initiatives to deliver sustainable growth for all stakeholders. Let's turn to our sustainable growth initiatives here on Page 3. We were recently honored to be named EPA Energy Star Partner of the Year for Energy Management for the 2nd year in a row. We were also recently honored to receive the 2020 Largest Financial Corporate Green Bond Award From Climate Bonds Initiative.
We expect to publish our 3rd annual ESG report during the 2nd quarter, Providing transparency on our ESG performance for 2020 as well as a comprehensive overview of our clean energy commitment, Resource conservation, diversity, equity and inclusion and other sustainable business practices. We are committed to minimizing our impact on the environment, while simultaneously meeting the needs of our customers, our investors, our employees and the broader society. In terms of our social efforts, we recently joined leaders across 85 industries in signing the CEO pledge on CEO Action for Diversity and Inclusion, an initiative to advance diversity and inclusion in the workplace. Our Board of Directors also amended our corporate governance guidelines to clarify that director candidate pools must include candidates with diversity of race, Ethnicity and gender. Finally, in February, our Board of Directors amended our Nominating and Corporate Governance Committee Charter To formalize oversight of our ESG programs, including sustainability as well as diversity, equity and inclusion.
We are doing our best to play a constructive proactive role in advancing our broader goal of delivering sustainable growth for all our stakeholders, Let's turn to our investment activity on Page 4. We continue to invest in our global platform With 44 projects underway around the world, totaling more than 300 megawatts of incremental capacity scheduled for delivery over the next 18 months. Half of this expansion is underway in EMEA, while the balance is split roughly evenly between the Americas and APAC. In EMEA, we continued our extension of the highly connected legacy Interaction Campus in Frankfurt and began construction on the Neckermann Expansion campus. During the Q1, we broke ground on the first 26 megawatts on the expansion campus, which are scheduled for delivery next year.
Demand in Frankfurt remains strong and our campus with access to over 700 carriers and ISPs Continues to attract customers from around the world. In France, we are adding capacity in Marseille as well as Paris. Demand in Marseille is largely driven by the 14 subsea cables that terminate in our facilities, Where we are transforming a former abandoned World War II U Boat bunker into a modern and vital communications hub for over half of the world's population. In Paris, we continue to develop InterXion's Paris Digital Park, While the Dunant Subsea cable that links Perris to Virginia Beach was connected in our Perris campus during the quarter. We are also expanding our highly connected Brussels campus and breaking ground on another facility in Madrid to serve the broadening needs of service providers as well as enterprises.
In APAC, we recently announced the In APAC, we recently announced the grand opening of our 3rd data center in Singapore. We were particularly pleased to be recognized by Singapore's Desmond Lee, Minister of National Development, highlighting the sustainable design of our most energy efficient data center in the region. Despite some COVID related construction challenges last year, We were gratified to be able to deliver this highly connected and sustainably designed facility to meet customer needs in our tightest market. Finally, in mid March, we closed on the sale of a portfolio of 11 assets in Europe for approximately $680,000,000 Executing on our strategy of recycling capital from stabilized assets, reinvesting proceeds into higher growth opportunities, while prioritizing long term value creation over near term earnings growth. Let's turn to demand drivers on Page 5.
We are fortunate to be operating in a business levered to secular demand drivers. Our leadership position provides us with a unique vantage point that enables us to detect secular trends as they emerge globally On Platform Digital. In the second half of last year, we introduced to our customers the Data Gravity Index, Our market intelligence tool that projects the growing intensity of the enterprise data creation life cycle and its gravitational impact on global IT infrastructure. In the Q1 of this year, we took the next step and published an industry manifesto, enabling connected data communities to guide cross industry collaboration for our customers as they tackle data gravity head on and unlock a new era of growth opportunity. Recent third party research continues to support the growing relevance of data gravity.
Market intelligence firm Gartner Recently hosted an executive retreat and surveyed over 400 Chief Data and Analytic Officers With 83% of CEOs expecting to increase investments in digital business with a large percentage of With this transition to data driven businesses, Gartner predicts that by 2024, More than 75% of companies will deploy multiple data hubs to drive mission critical data analytics, sharing and governance. We are seeing growing momentum across our enterprise and service provider customers deploying their own data hubs and analytics environments in multiple metros On Platform Digital. As I mentioned earlier, Digital Realty was recently named Energy Star Partner of the Year by the United States Environmental Protection Agency for the 2nd consecutive year. This award reflects our sharpened focus On driving sustainable design and operations on Platform Digital, underpinned by ambitious science based targets To significantly reduce our carbon footprint by 2,030, we are honored by the strong validation of our platform And our market leading innovation to capture the growing global data center demand opportunity from data driven businesses. Given the resiliency of the demand drivers underpinning our business and the relevance of our platform to meeting these needs, We believe that we are well positioned to continue to deliver sustainable growth for customers, shareholders and employees, whatever the macro environment may hold in store.
With that, I'd like to turn the call over to Andy to take you through our financial results.
Thank you, Bill. Let's turn to our leasing activity on Page 7. We signed total bookings of $117,000,000 in the Q1, including a $13,000,000 contribution from interconnection. Network and enterprise oriented deals of 1 megawatt or less totaled 33,000,000 Building upon our consistent momentum and demonstrating the growing success of platform digital as we continue to capture a greater share of enterprise demand. The weighted average lease term was over 7 years.
We landed 100 new logos during the Q1 with strong showings across all regions, Again demonstrating the power of our global platform. The mix of our new signings was quite healthy With APAC and EMEA each contributing approximately 30% and the Americas accounting for the remaining 40%. In addition, nearly 40% of bookings were generated within the Megawatt or Less Plus Interconnection category With strength in the e commerce, gaming and financial services segments. In terms of specific wins during the quarter and around the world, A particular highlight of the quarter was landing a leading APAC based diversified digital economy platform in Singapore, where we were able to support this customer's needs across our full product spectrum from colocation and connectivity to a hyperscale dedicated data hall. Elsewhere in APAC, a leading cloud service provider expanded with us simultaneously in both Melbourne and Osaka.
Subsequent to quarter end, we landed a leading cloud provider To anchor our Tokyo campus in Ensign, where we've assembled a runway of over 100 megawatts of growth capacity as well as key magnetic connectivity solutions. In EMEA, an automotive digital technology maker Deployed in artificial intelligence machine learning footprint on platform digital to gain access to a community of leading cloud service providers on our Frankfurt campus. In the Americas, a leading cloud provider expanded on our campuses in Sao Paulo and Rio de Janeiro. A Global 2000 industrial manufacturer leveraged a partner to deploy on platform digital to support growing demand Enabled by our global platform and runway for growth on our suburban Chicago campus. A global digital advertising exchange platform Expanded its presence on Platform Digital to gain access to connected data communities in the Northern Virginia Metro area.
Also in Ashburn, a leading video game developer selected Platform Digital to build centers of data exchange. And finally, A global IT service provider expanded in multiple metros across North America to enable new services on platform digital. Turning to our backlog on Page 9. The current backlog of leases signed but not yet commenced reached another all time high at $307,000,000 The step up from $269,000,000 last quarter reflects $66,000,000 of commencements during the Q1, offset by roughly $104,000,000 of combined space and power leases signed. The lag between signings and commencements Was a bit longer than our long term historical average at just under 8 months.
Moving on to renewal leasing activity on Page 10. We signed $193,000,000 of renewals during the Q1 in addition to new leases signed. The weighted average lease term on renewals signed during the Q1 was a little less than 3 years, reflecting a greater mix of enterprise deals smaller than 1 megawatt. We retained 75% of expiring leases, just a bit below our long term average. Cash releasing spreads on renewals were negative 2.1%, which was in line with guidance, but weighed down by 2 customers who renewed existing capacity as part of the expansion of their footprint on our platform.
These transactions were prime examples of what we mean when we talk about our holistic Long term approach to customer relationship management. We believe we have a distinct advantage when we are competing for new business with a customer That we are already supporting elsewhere within our global portfolio. And whenever we can, we try to provide a comprehensive financial package across multiple locations and offerings, including both new business as well as renewals. In terms of 1st quarter operating performance, Overall portfolio occupancy ticked down 100 basis points driven by anticipated churn in Ashburn as well as the sale of 11 almost fully leased facilities in Europe. Same capital cash NOI growth was negative 2.8% in the 1st quarter, in line with guidance and largely driven by the same Ashburn Churn.
As a reminder, our recently acquired Weston Building in Seattle, Interaction across EMEA, Lambda Helix in Greece and Altus IP in Croatia are not yet included in the same store pool, but we expect each of these acquisitions will be accretive to our organic growth going forward. Turning to our economic risk mitigation strategies on Page 11. The U. S. Dollar strengthened in the Q1, but still remains somewhat depressed relative to the prior year average, providing a bit of an FX tailwind in the Q1.
As a reminder, we manage currency risk By issuing locally denominated debt to act as a natural hedge, so only our net assets within a given region are exposed to currency risk from an economic perspective. In addition to managing credit risk and foreign currency exposure, we also mitigate interest rate risk By proactively terming out short term variable rate debt with longer term fixed rate financing. Given our strategy of matching the duration of our long lived assets with long term fixed rate debt, a 100 basis point move in LIBOR Would have less than a 50 basis point impact on full year FFO per share. Our near term funding and refinancing risk is very well managed and our capital plan is fully funded. In terms of earnings growth, 1st quarter core FFO per share Was up 9% year over year and $0.09 ahead of consensus.
The upside relative to our internal forecast was driven by A beat on the top line with an assist from an FX tailwind as well as operating expense savings, primarily due to lower property level spending in the COVID-nineteen environment and a later than budget of closing on the non core European portfolio sale. A portion of the OpEx savings is likely timing related and represents more of a deferral rather than permanent savings. But substantially, all of the beat flows through to the raise, and we are taking core FFO per share guidance up by $0.075 at the midpoint. In terms of the quarterly run rate, We still expect the split between first half of the year and the second half of the year to be approximately 4951. In other words, as you can see from the bridge chart on Page 12, we expect to dip down by about $0.10 in the second quarter Before ramping up fairly steadily over the rest of the year due to the mid March closing of the non core European portfolio sale as well as an expected catch up in OpEx spend previously budgeted for the Q1.
I would like to point out That although we are raising our G and A forecast by $15,000,000 at the midpoint, our implied EBITDA margin guidance is unchanged As the lion's share of the increase is due to geography on the income statement, as we finalize mapping the InterXion cost structure and have recharacterized a portion of InterXion's OpEx spend as overhead. In terms of our financing plans, We've already made great strides this year with a highly successful $1,000,000,000 Green Euro Bond offering in early January at 5.8 in addition to proceeds from the asset sales in March. As always, we expect to remain nimble for the rest of the year and we may look to capitalize on favorable market conditions to lock in long term fixed rate financing and attractive coupons across the currencies that support our assets to proactively manage future liabilities. Last but certainly not least, Let's turn to the balance sheet on Page 13. As previously mentioned, we closed on the sale of a portfolio of 11 assets in Europe for approximately $680,000,000 and use the proceeds to pay down debt, bringing net debt to adjusted EBITDA Back down to 5.6 times, in line with our long term target range.
Fixed charge coverage reached an all time high of 5.8 times, reflecting the results of our proactive liability management. We continue to execute on our financial strategy of maximizing the menu of available capital options while minimizing the related cost and extending the durations of our liabilities to match our long lived assets. In early January, we raised $1,000,000,000 of 10.5 year green euro bonds at an all time low coupon for Digital Realty of 0.625%. We also retired $350,000,000 of 2.75 percent bonds due in 2023, and we've repaid all $530,000,000 outstanding on the term loan due in 2023. In mid April, we announced the redemption of $200,000,000 of preferred stock at 0.6.5.8 Also bring total preferred equity redemptions over the past 12 months to $700,000,000 at a weighted average coupon of just over 6.25, effectively lowering leverage by another 0.3 turns.
This successful execution against our financing strategy reflects the strength of our global platform, which provides access to the full menu of public As well as private capital sets us apart from our peers and enables us to prudently fund our growth. As you can see from the chart on Page 13, we've extended our weighted average debt maturity out to nearly 7 years while ratcheting our weighted average coupon down to 2.3%. A little over 70% of our debt is non U. S. Dollar denominated, reflecting the growth of our global platform and acting as a natural FX hedge for our investments outside the U.
S. 94% of our debt is fixed rate to guard against a rising rate environment and 98% of our debt is unsecured, providing the greatest flexibility for capital recycling. Finally, as you can see from the left side of the Page 13, We have a clear runway with nominal near term debt maturities and no bar too tall in the out years. Our balance sheet is poised to weather a storm, but also positioned to fuel growth opportunities for our customers around the globe, consistent with our long term financing strategy. This concludes our prepared remarks.
And now we'll be pleased to take your questions. Operator, would you please begin the Q and A session?
We will now open up the call for questions. And one follow-up John Atkin with RBC Capital Markets. Please go ahead.
Thanks. I wanted to ask a Question about, I guess, customer retention as well as about new logo generation. As we look at your pending lease expirations After year end 2022, any kind of update you can give us on which markets might have greatest exposure? And is there a way to characterize how much of that you would consider to be highly likely to renew or extend their commitments? And then on the kind of on the new business that you're bringing on, if you think about your sub megawatt or low single digit megawatt Colocation wins, any way to characterize how much of that has a high kind of connectivity attach rate to it?
And more broadly, I wondered if you could maybe just review initiatives you have underway to enhance productivity in your direct and indirect channels and manage those ongoing relationships? Thanks.
Hey, thanks, John. Maybe I'll try to tack some of the numbered questions on the beginning, and I'll hand it over Corey, to talk about our channels and productivity. So just to cut them up in a little bit of order here. So I would characterize going to your second question about how much of our less than megawatt colocation is kind of connectivity rich. I would characterize that as a highly connectivity rich piece of our business.
In In terms of the numbers of our customers of the 4,000 customers that we have at Digital, the lion's share of the customer count falls into that. They sit in typically some of our more highly connected destinations either dating back many years to our legacy Telix business or InterXion or West Building or where we've organically grown our colocation connectivity suites across North America, I think we'll be 5 markets across Asia Pacific and elsewhere around the globe. So you typically see Fairly sticky high retention, low churn as well as fairly substantial pricing power quarter after quarter. You could see that in the retention table in the back of our cell. And the definition didn't change all that much when we Migrating from the word colocation to a sizing definition.
I think the first part of your question Was called, look at the expiration schedule. I thought I heard a post year end 2022. I'm not sure my crystal ball Can go without much precision out that far. I would say thematically, we've been working through A few years now of more tougher sledding when it came to our expirations and that was in 2020, 2019, 2018, that was in size of the volume of the expirations, that was in the mix of the expirations, in terms of kind of going back to more Less pricing power locations, chunkier deals, concentrations of some multi market major customer renewals. I think we've done a nice job chopping a fair bit of wood and the front view mirror on the expiration schedule certainly looks better than what we've Come through and I think you've seen that now in terms of how our mark to market has called is progressing and backed into a better fashion As we kind of work through some of those long period contracts and you can see on the percentages of where the expirations kind of fall between the So it feels like we're heading in the right direction on the expiration schedule.
And I I didn't touch on it. Definitely geographically, just by the maturity of our business, much more non U. S. Or out, call it, EMEA, APAC type expirations into the future, which also call it higher barrier entry, tougher higher pricing power markets. I'll turn it to Corey to hit the last part of your question.
Yes. Hey, thanks, Andy. And John, thanks for the question. I think I kind of captured it and you correct me if I missed it, but you asked a question around channels and how we're doing there. And then a little bit about With the new logos, are we getting an increase in interconnect, I think are the questions.
And Jonathan, if I missed it, then you can always clarify it later. But I would tell you that Really happy with the progress we're making on channels. Of our, I'll call it, enterprise business, non scale business, the channel is now about Order of the business, so we're pretty happy with the progress there. And then on your question around new logos and how much The new logos are adding interconnection to it. We've seen an increase in that.
It really kind of just Come through when you think through Platform Digital and how we're getting many, many more multi use case deployments, multi site deployments. Most of those look like network connectivity as well as some control off ups. And so we're seeing good progress across those and we're seeing, I guess the net of it is the channel is bringing us a lot more new logos and those new logos are a little bit more interconnection dense than they were in the past. Hopefully that answers the question.
Yes. I was just given the talent you brought on from InterXion and then a lot of legacy Equinix people Such as yourself that are on board, just interested in any kind of machine learning, AI, predictive analytics tools that you are considering. Yes.
Thanks. That's a good question. Yes, pretty familiar with that. I'll tell you that you referenced a few places that some of the bins, so we're not going to comment on what they're doing. But I would tell you that, yes, we do use, call it, AI and I'll say target based data set for both our prospects, our customers.
And I'll tell you that we use data and that's really what the essence of the Data Gravity Index was. It was a Data Gravity Index published based on data on what we see in the industry, and it really helped us identify the shift in the infrastructure And so I feel like we're doing pretty good about across both of those, Jonathan, using AI using data to make our decisions and how we target our customers. So pretty on top of that for you.
Our next question will come from Jordan Sadler with KeyBanc Capital Markets. Please go ahead.
Thanks. I wanted to touch base on sort of the connectivity piece of the business. It looked like there was some particular strength in interconnection this quarter sequentially in particular. And just kind of curious If the pacing in the growth is something that's sustainable that you potentially got some momentum there or if there was anything
Thanks, Jordan. I would say All total volume connectivity new signings was up. I think in terms of call Lumpier concentrations, our Latin America portion of the portfolio was certainly a major contributor In terms of the top markets for just overall interconnection signings, in North America, it was some of the usuals, New York Metro, Chicago, Atlanta, but also I did notice we had some pretty strong connectivity growth in both our Northern Virginia campus As well as our Franklin Park Chicago campus. So not necessarily a legacy, highly connectivity dense location, but it's great to see some enterprise This is landing there and growing the connectivity footprint. And answer to partly answer to kind of John Atkins' question, We track our new logos on a year over year growth basis.
We don't have this for all of our new logos because we're kind of combining businesses over the last year, but I'll call it the legacy digital subset that were here a year ago, they grew their connectivity footprint north of 10% On a year over year basis, so the new logos are growing post landing with us. So definitely pleased. And I mean, I think it goes back to a lot of what Corey was saying about our reorientation across the board in terms of bringing some of the Critical puzzle pieces together in terms of our asset profile, our go to market strategy led by Cory, our platform digital and branding to the market and many other elements I think are tied together that's been driving that success.
Okay. And then maybe just honing in
And Northern Virginia, you touched on
it there on connectivity. But what's your availability looking like in that market? And how What are
you seeing in terms of customer demand there
for this year?
Northern Virginia, Jordan, obviously, you're aware we had a pretty incredible 2020, close to 85 megawatts sold overall. We kind of ran pretty darn tight on inventory based on that success, which is not necessarily a bad thing given that the Northern Virginia market has been kind of Working its way out of the woods for some time now. So we ended the year with our development pipeline 100% pre leased. We are now under construction and delivering Building R in terms of our new build that will come along this summer. We did close to 5 megawatts of leasing in total in that market, including the full product suite.
I would say the lion's share of our focus is on the capacity we got back at the very beginning of the year, some of which I mentioned we already Pre leased on the last call. So really focusing on some of that non retained capacity On our existing campus, but also we did land an anchor deal, a little chunkier enterprise deal into Building R Coming on the back half of the year, Building R is a large shell that we'll call it deliver 6 megawatt suites And call it every other month type of a fashion. So a little tight right now, focused on where we're Please pushing customers, but a larger runway with Building R coming on in the back half of the year.
Our next question will come from Michael Funk with Bank of America. Please go ahead.
Hi, good afternoon. Thank you for the questions. So first, I'm wondering if your posture or your approach So rental rates and renewals have changed at all in the last 12 months given the tightening in some of the markets.
Yes. I mean, I think we have a pretty responsive pricing dynamic holistically, Mike. So it's not just on renewals. We have a, call it, inventory price book for every type of capacity, For every duration of contract, for every market, for every product that is updated on a recurring basis in response to What we see in terms of the supply demand dynamics in the market. We obviously did have certain overlays in terms of customer relationships For either larger growing customers or newer customers that we kind of make sure we're responsive to at the same time.
We're certainly not sitting by idly when a market is weaker and we need to respond to that with Pricing to be more competitive. And on the other flip side of that coin, we've had experience like in Singapore or other markets like Santa Clara or Frankfurt, Where we've raised rates over time, and those rates are impacting our renewals and our new pricing in response to call it the overall
And then one more if I could, Andy. So on the guidance, I saw the non core expense add back increased For 2021, I didn't hear you call that out in the prepared remarks. What was the increase in the non core?
The increase in the non core, I believe we got a whole List of items in our FFO reconciliation that kind of hits the non core that includes Our investment in Megaport is the stock price marks the market when that flows through and that obviously is in the core up or down to our business. I believe there's a revaluation on our debt at Ascenty given it's a Brazilian entity and we have a U. S. Dollar denominated debt To match the currency of the line share of our contracts. And we also have, I think, in this particular quarter, A little bit of a benefit from our PPA settlement that we added back because we didn't view that as a recurring benefit to our core portfolio.
Our next question will come from Simon Flannery with Morgan Stanley. Please go ahead.
Great. Thank you. Maybe I could go back to Cory. Can you talk about where we are on sort of return to normal in terms of the sales process in some of the regions? Are you still able to get the virtual tours and get the connections?
Or do you think there's still more room to come back to normal here? And then any commentary on the supply chain? I think you did talk a little bit in your disclosures about generally not seeing huge issues, but In terms of building costs or building up inventory there? Thanks.
Andy, do you want me to take the enterprise demand question and just State of usual and you can follow on the second half?
Please go ahead. Okay.
All right. So yes, thanks for the question. I would tell you that we're getting closer to the state of normal, if that's what you want to call it. Some of the things are opening up, but we've got a lot of Mobility around doing tours virtually, we've found a bunch of different ways to augment the needs and And take our customers during the pandemic. So, I feel like we're getting close to we're not quite there.
That said, enterprise demand has been really, really good. And strong broad based success selling our platform. Andy mentioned it earlier, but early innings with long tail left. We're looking through some of The more macro trends, Gartner's got IT spending getting a 6% growth with about 4 point $1,000,000,000,000 annually and only about $400,000,000,000 of that go into public cloud. So we think that enterprise demand and the point of presence and The multi use
cases as well
as multi markets that we're going after are going to be there and we're seeing it continue Sure. This is Jamie. So I wouldn't say that it's a complete back to normal. We haven't seen a different enterprise demand and We think we've done a pretty good job adjusting through with all the ops and the FDs and SAs we have a lot of people working through it. I hope that answered the question, if I did.
Yes, that's great.
Thank you. Okay.
Hey, Simon, can you just repeat the second part of the question to make sure we can answer that?
Yes. It was really around the supply chain issues and What you're seeing in terms of the COVID impacts on your ability to bring on data centers on time, on budget And any cost issues you might be seeing or inventory issues?
Okay, great. So let me take the kind of Our digital supply chain, and I'll let Chris touch on the customer supply chain because I know that's been a question out there as well. So I mean, I think really hats off and kudos to Our operational design and construction team and supply chain team for really keeping ahead of this consistently. Obviously, we do all have the benefit of our scale, our global nature, our deep operational expertise, but we've not In recent quarters, had a disruption to critical equipment delays, cost impact. And so the team really has done a really incredible job navigating through that.
I'm not sure that's the case for all providers in the data center world, especially Smaller stature, but there's not been disruption today. And I'd say, we've looked at our, call it, 300 megawatts Capacity under development is pretty darn insulated to these any potential inflation shocks, And we're also keeping a keen eye on that. But Chris, why don't you hit on the chips piece as well? No, absolutely. And I would
echo your Andy, the vendor management program that we have in place today, I think is something that has allowed us to overcome some of the shortcomings of some of the infrastructure within Facilities like breakers, optical infrastructure, things like that. But that's something that operating on a global basis has been a big benefit to digital going forward. But We also stay very close to our customers and really watching if they're having trouble, procuring infrastructure to deploy their architectures into our facility. We haven't seen a material impact on that as well. I know there's been a lot of concern around chip shortages and things like that.
But again, just to reiterate, not all chips are the same and There's a lot of variability out there. And so we have not seen any kind of material impact from customers being able to deploy into the facility. And quite frankly, some of our larger hyperscale customers, They build the entire stack themselves, so they have strict control over their supply chain. And so they've also not Experience any slowdown in being able to deploy the massive amount of infrastructure required for their deployments as well.
Thank you. Very helpful.
Our next question will come from Omo Teyu Okusanya with Mizuho. Please go ahead.
Hi, yes, good evening. So when I look at the updated guidance, it seems like the only major change there really is the FX assumption around the pound. So Is it fair to assume guidance is going up simply because of changes in FX assumptions? Or is there something also kind of operationally there's an improvement that should also be signaled through the guidance increase?
Hey, thanks, Tayo. The I mean, the Sterling is especially today a much more Smaller piece of our business, pro form a for some of our acquisitions over the last year. So while FX did contribute To our, I'll call outperformance in the Q1, and obviously, that flows through the guidance. I would not say that was the only thing that drove our increase in guidance. We did have a beat in terms of our internal forecast and that was called in the same ballpark is where consensus was.
We've essentially raised a few elements, the revenue, the EBITDA, the G and A piece is really just the P and L Geography or mapping from Interxion Integrations. And then we also kind of made sure that showed that, that flow through to the bottom line with, call it, A increase at the midpoint of the range up, I think $0.075 so 5% year over year growth And not all due to FX. It was due to some of the operational outperformance. Not all of our beat flowed through because some of it was OpEx delayed from 1Q 2Q, 3Q, 4Q rate of the year, but definitely pleased with the results and which I would say, it gave us the confidence to raise here in the Q1, which is a little I don't think I can recall last time we did that in my now 6 years of digital, but I'm definitely pleased with the progress.
Is there a way to separate the effect of both things away from what your peers do?
I'm sorry, is there a way to separate those things away from the
The impact of the two things, actual operational improvements versus FX in the guidance range. And the guidance range, the way some of your peers do, you can actually tell what's driving what?
We used to have a constant currency Disclosure at the bottom here. I'm not sure I don't think we have that anymore. I mean, I would ballpark the $0.075 maybe $0.03 from FX.
Our next question will come from Matt Niknam with Deutsche Bank. Please go ahead.
Hey, guys. Thank you for taking the question. First maybe on bookings, can you talk about some of the strength seen in Asia Pac And what drove the uptick in bookings during the quarter? And then just one maybe a little bit more of Margins in the quarter were pretty solid. I think they were the highest since you closed the InterXion deal.
But we also saw tenant reimbursements Pickup. And so I'm just wondering what was behind the pickup in utilities reimbursements? Was that tied to the winter storm in Texas? And then maybe what drove some of the offsetting cost benefits that helped drive EBITDA margins as high as they were? Thanks.
Thanks, Matt. So maybe I'll try to take in reverse order and I'm going to I think probably bring Corey here When we circle back to APAC, but just to the housekeeping piece, a little bit of a funky quarter on the margin front. So I've guided this call to our full year guidance table on the EBITDA margin. We do have a footprint across Texas, Dallas being the largest piece of that. We were impacted by the winter storm.
Again, our operational team did a really marvelous job, keeping up and running, and customers happy. Literally Got it personally got a cold call from a CTO of a global customer who also had their own asset or data center in The market needed diesel fuel rerouted to them in order to stay running and our operations team sprung into action within like an hour's notice And kind of really saved that CTO's day. But so on the power front, power did increase Unusually, given the storm, luckily, 1, our team did a nice job hedging in terms of our power cost. 2, while it inflates the expense, it also inflates the reimbursement because we have a A sizable portion of our Dallas or Texas footprint is metered power, so reimbursed. So net net, especially on the size of company, Not really a major negative, but certainly funky when you got that spike in power when you look at your EBITDA margins Coming through.
In terms of APAC, I mean, I'll turn it to Corey over here, but I mean just Really standout quarter across the full customer product spectrum. We're now live with, I believe, 5 Almost 6, colo projects across our platform, from Seoul to Tokyo, Osaka, Singapore, missing one. So we had great success selling into those markets. And then also on the hyperscale or larger footprint front, I mentioned in the prepared remarks, one top CSP signed with us both in Osaka and Melbourne. We also had subsequent quarter an anchor customer in Incy in Tokyo.
And then Singapore, maybe I'll let Corey kind of talk to some
Yes. Hey, Andy, I would just add, you hit most of the data points I was thinking through in the response. Really broad based success across the portfolio is what I would say. AP was really successful as well. You mentioned it in your prepared remarks, diversifiedecommerce customer that's been doing a lot of business with us and we really are happy with that.
But I would also tell you that our new logos coming out of that region has tripled in the last year. We're really happy with the It's where most of our organic growth as far as the sales team that we're putting out there in place. So we're really happy with it, but I wouldn't get focused just on AP. I'd Think about the broad based platform success we're having across all the regions. I think our largest export region this last quarter was EMEA.
So we're really excited about this kind of broad based success where we are and we think there's a ton of opportunity in Asia Pacific. And yes, in Singapore, we were pretty successful selling through that large building there that we have. Andy, was there any other data point I missed? I think we hit most of them before.
No, I think you got it. Thanks.
Okay, thanks.
Thank you.
Our next question will come from Erik Rasmussen with Stifel. Please go ahead.
Yes. Thanks for taking the questions. Looking at your table, it looks like Europe seemed to have sort of taken a breather this quarter with leasing down, And especially in the greater than 1 megawatt category, has anything changed there? I mean, I know you talked about a pretty robust pipeline, but maybe some carry around that just to understand where the opportunities are and what drove this decline and if there's anything else you can comment on.
Thanks, Eric. So I mean really Europe or EMEA just really came off of a Blowout the quarter prior. I still think I was pretty pressed with the results and a really healthy quarter. On the larger footprint side, we had 4 different CSPs signed across 3 different markets, Frankfurt, 2 in Zurich, 1 in Amsterdam. So definitely pleased with the diversity of demand and from a customer energy aqua standpoint.
On the enterprise customer standpoint, within the flap Frankfurt, London and Amsterdam certainly stood out this quarter in terms of new signings. And within the non flap, Marseille, Stockholm and Madrid were some of our top EMEA markets. So I and as you can see on our development Table, we've been continuing to increase our footprint of development and building out larger parcels in EMEA on our highly connected campuses there. So I don't I'm still pretty very positive about the growth in Europe.
Great. And then maybe just on the re leasing spreads, the greater than 1 megawatt, How does that 11.3% decline on a cash basis, how does that compare on a historical basis? I know this is all dependent Customers and mix and a few other things, but how can you talk about that 11.3 in the context of what you've seen in the past?
Yes. That's just a statistic when you splice it down to a quarterly basis and depending on what mix Actually gets renewed in that quarter because it's not just what actually expires. Customers will renew quarters or even years earlier sometimes. In particular, there was 2 specific customers. 1, top 5 CSP, another Enterprise customer that did call fairly chunky renewals in combination with new signings.
The CSP was a multi market renewal, multi market growth. The enterprise was in one particular North American market. So we thought it was a very fair commercial compromise and love to see them continue to grow with us. I don't I mean that bounces around and we've had worse than that in a given quarter and we have much better than that in a given quarter. And I still as you saw, we Confirm our guidance on the mark to market.
So we don't think, that's a truly bad omen or anything like that. And as I mentioned, I think in response to John Atkins' question on the front part of the call, definitely feel like we're moving towards better and better territory and expirations based on the product mix and the geography.
Our next question will come from Sami Badri with Credit Suisse. Please go ahead.
Hi, thank you. I want to go back to Slide number 10, and also back to the 11.3 Now we're looking at for the greater than 1 megawatt. Now I guess if we go back to about a year ago, you guys are working through a fairly large vintage of Leases and we were kind of we were informed that it would be high single digit or double digit negative roll downs there. But are we pretty much done with the majority of those leases? Or couldn't we expect a bit more negative rates, at least at this magnitude, Another quarter is in 2021.
Yes, Sami, kind of consistent with my response to Eric's question, Being able to predict with accuracy the quarterly blend to that precision is pretty challenging because it's really out of our control when the customer Inks of Renewal, but I think I would agree with your outset statement. We started out 2020 with an outlook of net hot, call mid to high single digit negative cash mark to markets overall. And as we worked our way through that year, we outperformed that expectation. It ended up negative, but it was very slightly modestly negative. And then we went to guidance.
Our guidance again was really in that same territory of where it ended up. So a better outlook than the prior year. If you look at the overall results here, negative 2% cash mark to market across all the products, it's kind of right in line. Even overall, it's kind of right in line with the language we described here. So Again, I can't promise you every single quarter is going to be positive, but I do believe based on our understanding of the expiration of the contract and the supply demand market dynamics that we're heading to better territory on those mark to markets.
Got it. Thank you. The other thing is on the 0 to 1 megawatt range for the 1.6%. In that 0 to 1 megawatt and in those releasing spreads, could you give us an idea on customer mix in there in terms of how much of that is enterprise Cloud versus other?
Sure. In that 0 to 1 megawatt, some of the chunkier deals were And there's kind of no particular order.
In the
New York Metro area, there was A fiber oriented customer and also a content oriented customer. In London, there was a top five Cloud service provider in Singapore, there was a multinational financial services company. In Northern Virginia, there was a Add marketplace type business.
Our next question will come from Tim Long with Barclays. Please go ahead.
Good afternoon. This is Brendan Lynch on for Tim. Your slide deck indicates you've announced commitments to reduce direct emissions by 68% indirect admission by 24% by 2,030. Can you it's the first I've seen those numbers or any specific targets announced. Can you provide some color on your execution strategy around that and what it means in practical terms for your operations?
Sure. This is Bill. We as you noted, we've established carbon reduction targets In conjunction with the Science Based Targets Initiative and in connection with that, we've committed to reducing direct admissions by 68% By 2,030 and committed to reducing indirect emissions by 24% by 2,030. As you also are probably aware, we are the we lead the data center category and the REIT Industry in green bond issuance, we've issued $5,600,000,000 of green bonds since 2015. We also lead the data center industry in green building certifications.
We have 7 96 megawatts Green Building Certifications. And we also have 5.56 megawatts of renewable energy that's contracted, Which of course, contributes to the direct emissions reduction, and that includes 154 Megawatts and 2 renewable projects in Texas. For the 2nd year in a row, we've been voted the ENERGY STAR Partner of the Year. And for the 4th consecutive year, We've been voted NAREIT Leader in the Light Award for the data center category and NAREIT has only had that Leader in the Light Award for data centers for 4 years. So We're batting 1,000 right now.
Yes, that's great color and clearly you're making some progress there. How does that affect your negotiations to the extent that it does with customers and how are they responding to these initiatives?
The customers, many of these customers are share the same corporate values that we do with respect to ESG. And we're all about reducing our carbon footprint. So I'd say we're totally in sync with what Our customers' long term goals are in this area.
Our next question will come from Michael Rollins with Citi. Please go ahead.
Thanks and good afternoon. Looking at the rent schedule, it looks like about 35% of the rent comes from 1 Megawatt and Below Business. And I'm just curious, given all the comments that you shared on the call today in terms of The financial performance of these rents, is it a strategic priority within digital to continue to lift This percentage of mix that comes from the 1 megawatt or below leases?
Thanks, Mike. I mean, maybe Corey and I can tag team this for a second. I mean, Our strategy is to be the leading global provider dedicated to the full customer spectrum from the service providers, All of the hyperscalers to the enterprise customer. I think we've certainly Demonstrated a pretty solid and consistent track record on the first light of that stool, with your, call it, top 5 CSP having 20, 25, 30 different locations with us on average depending on the specific name, and that value prop of our Land and expand and future proof their runway for growth and operational expertise to the highest demands. Certainly proud of that.
You've seen the success And our results, but I think going after and supporting the enterprise is a place we've been investing in just as much over the last several years On a multifaceted front, certainly in terms of the critical pieces of the business we've acquired putting the puzzle pieces together of the right Most connectivity rich destinations, but also on many of the things both Chris and Corey I've been, call it, driving gear for digital for some time, so I'll let them speak to that a little bit as well.
Yes. Thanks, Andy. Sign on to that. We think through just the tools we were talking earlier about how we use data to target. So we're Moving that forward as well, down that path, if you were asking about kind of how we're going after the market and if we're going after that part of the business.
As far as the demand that we have going forward, I'm sorry if I missed some of the questions, but I think there was a sales funnel question as opposed to just how we were targeting it. Did you hear a background noise? Sorry, guys. And Michael, can you repeat the second part of the question? I just want to make sure I'm getting it right.
Yes. So the question is just, how much of a strategic priority is it for digital to Increase the revenue contribution from the 1 megawatt
and below Disney. I'm sorry. I've got it. Yes.
So that's okay. Just given the financial Nature and performance of this type of business versus the larger scale business that you have?
I guess I would tell you that we're going to try to We're not going to win every customer without discerning between them. But our plan is Continue to grow the enterprise and drive that. I think that will move that mix a little bit naturally, but it's not going to be at the expense We're going to go continue to partner with CSPs, continue to partner with online customers, anybody that's in e commerce, AI, some of the high performance computing. So we're going to continue to grow it everywhere as long as it adds to the value of platform digital and it's helpful for us. So I just don't want you to think that we're only trying to raise one without the other.
We're going to try to raise that enterprise business maybe faster than others
That concludes the Q and A portion of today's call. I'd like now to turn the call back over to CEO, Bill Stein, for his closing remarks. Bill, please go ahead.
Thank you, Matt. I'd like to wrap up our call today by recapping our highlights for the Q1 as outlined here on the last page of our presentation. 1, we understand our commitment to delivering sustainable growth for all stakeholders. And we were honored to be named the EPA Energy Star Partner of the Year for the 2nd year in a row. 2, we continue to enhance the value of our global platform, culling non core assets and extending connectivity solutions.
3, we delivered very solid current period financial results, beating expectations And raising our full year outlook. Last but not least, we further strengthened our balance sheet, Raising attractively priced long term debt, recycling capital and using proceeds to hire to retire High coupon debt and preferred equity. Our hearts go out to all those impacted by the COVID-nineteen global pandemic. And as we approach a post pandemic environment here in the United States, I'd like to once again thank the Digital Realty frontline team members And critical data center facility roles who have kept the digital world running. I hope all of you stay safe and healthy, and we hope to see many of you in person again later this year.
Thank you.
The conference has now concluded. Thank you for joining today's presentation. You may now disconnect.