Digital Realty Trust, Inc.

And welcome to the Digital Realty Third Quarter 2024 Earnings Conference Call. Please note, this event is being recorded. During today's presentation, all parties will be in listen-only mode. Following the presentation, we will conduct a question and answer session. Callers will be limited to one question, and we will aim to conclude at the top of the hour. I would now like to turn the call over to Jordan Sadler, Digital Realty's Senior Vice President of Public and Private Investor Relations. Jordan, please go ahead.

Thank you, Operator, and welcome everyone to Digital Realty's third quarter 2024 earnings conference call. Joining me on today's call are President and CEO Andy Power and CFO Matt Mercier, Chief Investment Officer Greg Wright, and Chief Technology Officer Chris Sharp, and Chief Revenue Officer Colin McLean are also on the call and will be available for Q&A. Management will be making forward-looking statements, including guidance and underlying assumptions on today's call. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business, see our 10-K and subsequent filings with the SEC. This call will contain non-GAAP financial information. Reconciliations and net income are included in the supplemental package furnished to the SEC and available on our website. Before I turn the call over to Andy, let me offer a few key takeaways from our third quarter. First, new leasing volume of $521 million at our share shattered our prior record and even our own expectations for the realm of possibility in a quarter. In fact, 3Q leasing was more than a full year's worth by previous standards as activity in the quarter exceeded the leasing completed in all of 2023. pushing our backlog of signed but not commenced leases up to nearly $860 million. While greater than a megawatt leasing was the primary driver, our zero to one megawatt plus interconnection segment also posted record bookings in the quarter. Second, strong fundamentals translated into improved pricing for data center capacity, and this was evident across both new and renewed leases, with record rates on new greater than a megawatt leases 4% escalators on the majority of new leases, and a record 15% uplift in cash renewal spreads in the quarter. And third, our development pipeline increased by nearly 50% sequentially to 644 megawatts under construction and is now 74% pre-leased at a 12% average expected yield as a result of successful leasing of shell and land capacity in North America. These results continue to move digital realty closer to management's objective to improve longer-term sustainable growth. With that, I'd like to turn the call over to our President and CEO, Andy Power.

Andy Power Thanks, Jordan, and thanks to everyone for joining our call. I don't often start this way, but this quarter was certainly one for the record books. As Jordan noted, we posted record results across a broad array of metrics. These results are the product of Digital Realty's team capitalizing on a favorable demand backdrop, but are also a testament to our efforts to enhance our value proposition and to drive long-term sustainable growth. Demand for data center capacity remains strong, both for larger capacity blocks in our core markets and to support continued growth in both cloud and digital transformation. We are well positioned to take advantage of this favorable environment given our full-spectrum strategy, our global footprint across six continents, and a robust land bank that can support three-plus gigawatts of incremental development, together with an investment-grade balance sheet that is complemented by a diverse group of capital partners. And the expertise to put it all together and operate these facilities on behalf the world's leading technology companies and enterprise. Highlights for the third quarter were abundant and include 521 million new leases signed at Digital Realty Share, more than double our prior record in the first quarter of this year. Greater than a megawatt bookings in North America led the way, driven by large hyperscale deals in Manassas, Ashburn, and Chicago. New leasing volume in this segment was up more than 75% from the 1Q record, while pricing moved up nearly 30%. Included in our greater than a megawatt signings was a large lease in our hyperscale development venture in Manassas. Like all of our JVs, we report these leasing results at our share, or 20% in this case. The total leasing into our facilities at 100% share was in excess of 700 million in the third quarter, demonstrating the significant appetite for data center capacity. Given the size of those numbers, it might be easy to overlook a very strategic and important milestone with a sizable record quarter in our zero to one plus interconnection business, which saw more than 66 million of new bookings, topping our prior record in this product category by over 20%, with particular strength in small deals under half a megawatt, which accounted for 80% of our zero to one megawatt leasing. Not to be forgotten, new interconnection bookings also hit a record in the quarter. We view these bookings very favorably as it further validates our full spectrum product strategy and provides us with growing momentum in a segment with durable pricing power and steadily increasing customer demand. Our strength in this category was also characterized by a record 149 new logos for the quarter. Platform Digital offers our customers the convenience and simplicity to manage their global data center needs, and it is reflected by record export activity in the third quarter, which were 50 plus percent higher year over year, with Americas to EMEA exports leading the way, followed by APAC into the Americas. With a record $859 million backlog of favorably priced leases largely commencing over the next two years, we are positioned for accelerating top-line and bottom-line growth. In support of our customers' growing requirements and all of the new leasing accomplished in the quarter, we also substantially scaled our development pipeline in the third quarter, increasing the capacity underway by almost 50% to 644 megawatts under construction today. And we maintain another 3 gigawatts of buildable IT load capacity in land and shell condition. As we noted last quarter, we also strengthened our value proposition in Europe with the acquisition of a densely connected enterprise data center campus in Slough. During the quarter, we also continue to bolster our balance sheet and diversify our capital sources through a combination of favorable debt and ATM issuances. Matt will provide more details on these activities in a few minutes. Over the past few weeks, we've seen several examples of the lengths that some hyperscalers will go to reserve enough power for their fast-growing compute requirements. We've seen a deal to reactivate Three Mile Island another hyperscaler partnering with an existing utility to develop small modular reactors, and a third executing power purchase agreements to purchase nuclear energy from multiple SMRs that have yet to be built. These agreements are similar in that they are seeking long-term carbon-free energy solutions to help power growing data center portfolios and speak to the longer-term demand outlook for data center capacity. Yet each of these plans is still years away from beginning to generate power, underscoring the value of large capacity blocks today and perhaps for the next several years. And sourcing available power is just one piece of the data center infrastructure puzzle. Supply chain management, construction management, and operating expertise are all challenges that customers rely on digital realty to solve. and they are clearly a critical aspect of the overall value proposition that we bring to the table. While the large hyperscale deals get plenty of focus, customers and partners are recognizing the value that digital realty's meeting place can bring to their private cloud and hybrid IT applications around the world. We continue to see a meaningful share of our 0 to 1 megawatt wins influenced by our partners, expanding our reach into more enterprises around the world. Our wins this quarter include a Global 2000 telecom provider who partners with one of our largest customers choosing Platform Digital to deploy a distributed cloud solution to alleviate geographic data gravity challenges, a leading healthcare provider, and a new logo for Digital Realty, which also came to us from a partner. Modernizing its infrastructure to take advantage of the cloud connectivity available on Platform Digital while maintaining data compliance for personal health information privacy. Another new logo, an international financial institution critical to global financial and monetary policy, chose Platform Digital to secure their cloud requirements while maintaining global access. A Global 2000 technology company is expanding their presence on Platform Digital in support of its autonomous driving solution. A top 20 Japanese electronics and semiconductor manufacturer is joining Platform Digital through another partner as part of an integrated tech refresh initiative where robust connectivity was a critical differentiator. And a global cloud optimization provider is deploying additional capacity on Platform Digital across two continents to support their expanding enterprise customer base. who require access to rich and scalable connectivity solutions. Before turning it over to Matt, I'd like to touch on our global ESG progress during the third quarter. We continue to lead the industry in green building IT capacity, 178 megawatts certified in the last 12 months, while our SWIS team achieved the first ever SWIS Data Center Efficiency Association Gold Plus certification for our data centers in Zurich. Digital Realty also continued to be recognized for ESG leadership, including Broad Group's Data Cloud Global Awards 2024 for AI Data Center of the Year, the Tech Capital's Digital Infrastructure Action Global Award 2024, and Frost and Sullivan recognized our Japanese joint venture, MC Digital Realty, the 2024 Japan Data Center Services Company of the Year Award. Moving to green finance, where digital continues to be a leader in the data center industry, during the quarter we issued an €850 million green bond, adding to digital's long history of support for linking its debt to sustainable projects. Additionally, we maintained a sustainability-linked pricing component on our new credit facility further demonstrating the company's commitment to ESG. We remain committed to minimizing digital realty's impact on the environment while delivering sustainable growth for all of our stakeholders. With that, I'm pleased to turn the call over to our CFO, Matt Mercier.