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Digital Realty Reports Second Quarter 2024 Results

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AUSTIN, Texas, July 25, 2024 /PRNewswire/ — Digital Realty (NYSE: DLR), the largest global provider of cloud- and carrier-neutral data center, colocation, and interconnection solutions, announced today financial results for the second quarter of 2024. All per share results are presented on a fully diluted basis.

Highlights

Reported net income available to common stockholders of $0.20 per share in 2Q24, compared to $0.34 in 2Q23Reported FFO per share of $1.57 in 2Q24, compared to $1.52 in 2Q23Reported Core FFO per share of $1.65 in 2Q24, compared to $1.68 in 2Q23Reported rental rate increases on renewal leases of 4.0% on a cash basis in 2Q24Signed total bookings during 2Q24 that are expected to generate $164 million of annualized GAAP rental revenue, including a $40 million contribution from the 0–1 megawatt category and $14 million contribution from interconnectionMaintained 2024 Core FFO per share outlook of $6.60 – $6.75

Financial Results

Digital Realty reported revenues of $1.4 billion in the second quarter of 2024, a 2% increase from the previous quarter and a 1% decrease from the same quarter last year.

The company delivered net income of $75 million in the second quarter of 2024, and net income available to common stockholders of $70 million, or $0.20 per diluted share, compared to $0.82 per diluted share in the previous quarter and $0.34 per diluted share in the same quarter last year. 

Digital Realty generated Adjusted EBITDA of $727 million in the second quarter of 2024, a 2% increase from the previous quarter and a 4% increase over the same quarter last year.

The company reported Funds From Operations (FFO) of $511 million in the second quarter of 2024, or $1.57 per share, compared to $1.41 per share in the previous quarter and $1.52 per share in the same quarter last year. 

Excluding certain items that do not represent core expenses or revenue streams, Digital Realty delivered Core FFO per share of $1.65 in the second quarter of 2024, compared to $1.67 per share in the previous quarter and $1.68 per share in the same quarter last year. Digital Realty delivered Constant-Currency Core FFO per share of $1.66 for the second quarter of 2024 and $3.33 per share for the six-month period ended June 30, 2024.

“Digital Realty’s second quarter results reflect the continued strength of demand for data center capacity, along with a keen focus on our value proposition,” said Digital Realty President & Chief Executive Officer Andy Power. “We have returned our balance sheet to below-target leverage levels and broadened our capital sources to capitalize on the global opportunity we see for data center infrastructure.”

Leasing Activity

In the second quarter, Digital Realty signed total bookings that are expected to generate $164 million of annualized GAAP rental revenue, including a $40 million contribution from the 0–1 megawatt category and a $14 million contribution from interconnection.

The weighted-average lag between new leases signed during the second quarter of 2024 and the contractual commencement date was 20 months.

In addition to new leases signed, Digital Realty also signed renewal leases representing $215 million of annualized cash rental revenue during the quarter. Rental rates on renewal leases signed during the second quarter of 2024 increased 4.0% on a cash basis and 7.5% on a GAAP basis. 

New leases signed during the second quarter of 2024 are summarized by region and product as follows:

Annualized GAAP

Base Rent

Square Feet

GAAP Base Rent

GAAP Base Rent

 Americas

(in thousands)

(in thousands)

per Square Foot

Megawatts

per Kilowatt

 0-1 MW

$13,980

58

$239

4.4

$263

 > 1 MW

87,212

359

243

49.8

146

 Other (1)

183

6

32

—

—

Total

$101,375

423

$239

54.2

$155

 EMEA (2)

 0-1 MW

$19,397

48

$406

4.9

$331

 > 1 MW

14,309

80

178

7.6

158

 Other (1)

37

4

10

—

—

Total

$33,743

132

$256

12.4

$226

 Asia Pacific (2)

 0-1 MW

$6,264

20

$316

1.7

$304

 > 1 MW

8,728

27

327

2.8

264

 Other (1)

129

1

118

—

—

Total

$15,121

48

$318

4.5

$279

 All Regions (2)

 0-1 MW

$39,642

126

$315

11.0

$299

 > 1 MW

110,249

466

236

60.1

153

 Other (1)

349

10

34

—

—

Total

$150,239

603

$249

71.1

$176

  Interconnection

$14,011

N/A

N/A

N/A

N/A

Grand Total

$164,250

603

$249

71.1

$176

Note:  Totals may not foot due to rounding differences.

(1)

Other includes Powered Base Building® shell capacity as well as storage and office space within fully improved data center facilities.

(2)

Based on quarterly average exchange rates during the three months ended June 30, 2024.

Investment Activity

As previously disclosed, Digital Realty closed on the sale to Digital Core REIT (SGX: DCRU) of an additional 24.9% interest in a data center facility located in Frankfurt, Germany for €117 million, or approximately $125 million. The transaction valued the Frankfurt facility at €470 million, or approximately $504 million (at 100% share).

Also previously disclosed, Digital Realty expanded its existing joint venture with GI Partners in Chicago, with the sale of a 75% interest in a third stabilized hyperscale data center that is situated on the same campus as two stabilized hyperscale data centers that were contributed to the joint venture with GI Partners in July 2023. Digital Realty received approximately $388 million of gross proceeds and maintained a 25% interest in the joint venture.

During the quarter, Digital Realty acquired a 4.1-acre parcel of land in Amsterdam, near one of its existing campuses for approximately €7.4 million or $7.9 million. The site comprises approximately 70,000 square feet leased to local tenants and approximately 39,000 square feet of land which will be used to develop a new high voltage substation to drive growth at the campus and optimize the use of a previously acquired land plot in the vicinity. 

Also during the quarter, Digital Realty liquidated its 17% interest in Colovore, generating gross proceeds of approximately $35 million. Digital Realty realized a gain of approximately $27 million on its original investments, made in 2015 and 2017.

Subsequent to quarter end, and as previously disclosed, Digital Realty closed on its purchase option to acquire two data centers located in the Slough Trading Estate for $200 million. The two stabilized data centers offer a combined 15 MW of IT load, with an established community of 150+ customers, including a broad array of connectivity providers, technology companies, and financial services firms, utilizing over 2,000 cross connects. The acquisition marked Digital Realty’s entry into the west London, UK submarket, complementing Digital Realty’s existing colocation capabilities in the City and the Docklands.

Balance Sheet

Digital Realty had approximately $16.3 billion of total debt outstanding as of June 30, 2024, comprised of $15.6 billion of unsecured debt and approximately $0.7 billion of secured debt and other. At the end of the second quarter of 2024, net debt-to-Adjusted EBITDA was 5.3x, debt-plus-preferred-to-total enterprise value was 25.3% and fixed charge coverage was 4.1x.

Digital Realty completed the following financing transactions during the second quarter:

In April, the company repaid €600 million ($647 million) in aggregate principal amount of its 2.625% senior notes;In May, Digital Realty sold 12.1 million shares of common stock at $144.63 per share pursuant to a follow-on equity offering, raising $1.65 billion of net proceeds; andThe company also sold 1.2 million shares of common stock under its At-The-Market (ATM) equity issuance program at a weighted average price of $148.99 per share, for net proceeds of approximately $177 million.

Subsequent to quarter end, the company sold an additional 1.4 million shares of common stock under its ATM program at a weighted average price of $152.77 per share, for net proceeds of approximately $219 million. In July, the company also repaid £250 million ($316 million) in aggregate principal amount of its 2.75% senior notes.

2024 Outlook

Digital Realty maintained its 2024 Core FFO per share and Constant-Currency Core FFO per share outlook of $6.60 – $6.75. The assumptions underlying the outlook are summarized in the following table. 

As of

As of

As of

 Top-Line and Cost Structure

February 15, 2024

May 2, 2024

July 25, 2024

Total revenue

$5.550 – $5.650 billion

$5.550 – $5.650 billion

$5.550 – $5.650 billion

Net non-cash rent adjustments (1)

($35 – $40 million)

($35 – $40 million)

($35 – $40 million)

Adjusted EBITDA

$2.800 – $2.900 billion

$2.800 – $2.900 billion

$2.800 – $2.900 billion

G&A

$450 – $460 million

$450 – $460 million

$450 – $460 million

 Internal Growth

Rental rates on renewal leases

Cash basis

4.0% – 6.0%

5.0% – 7.0%

5.0% – 7.0%

GAAP basis

6.0% – 8.0%

7.0% – 9.0%

7.0% – 9.0%

Year-end portfolio occupancy

+100 – 200 bps

+100 – 200 bps

+100 – 200 bps

“Same-Capital” cash NOI growth (2)

2.0% – 3.0%

2.5% – 3.5%

2.5% – 3.5%

Foreign Exchange Rates

U.S. Dollar / Pound Sterling

$1.25 – $1.30

$1.25 – $1.30

$1.25 – $1.30

U.S. Dollar / Euro

$1.05 – $1.10

$1.05 – $1.10

$1.05 – $1.10

 External Growth

Dispositions / Joint Venture Capital

Dollar volume

$1,000 – $1,500 million

$1,000 – $1,500 million

$1,000 – $1,500 million

Cap rate

6.0% – 8.0%

6.0% – 8.0%

6.0% – 8.0%

Development

CapEx (Net of Partner Contributions) (3)

$2,000 – $2,500 million

$2,000 – $2,500 million

$2,000 – $2,500 million

Average stabilized yields

10.0%+

10.0%+

10.0%+

Enhancements and other non-recurring CapEx (4)

$15 – $20 million

$15 – $20 million

$15 – $20 million

Recurring CapEx + capitalized leasing costs (5)

$260 – $275 million

$260 – $275 million

$260 – $275 million

 Balance Sheet

Long-term debt issuance

Dollar amount

$0 – $1,000 million

$0 – $1,000 million

$0 – $1,000 million

Pricing

5.0% – 5.5%

5.0% – 5.5%

5.0% – 5.5%

Timing

Mid-Year

Mid-Year

Mid-Year

 Net income per diluted share

$1.80 – $1.95

$1.80 – $1.95

$1.40 – $1.55

Real estate depreciation and (gain) / loss on sale

$4.40 – $4.40

$4.40 – $4.40

$4.75 – $4.75

 Funds From Operations / share (NAREIT-Defined)

$6.20 – $6.35

$6.20 – $6.35

$6.15 – $6.30

Non-core expenses and revenue streams

$0.40 – $0.40

$0.40 – $0.40

$0.45 – $0.45

 Core Funds From Operations / share

$6.60 – $6.75

$6.60 – $6.75

$6.60 – $6.75

Foreign currency translation adjustments

$0.00 – $0.00

$0.00 – $0.00

$0.00 – $0.00

 Constant-Currency Core Funds From Operations / share

$6.60 – $6.75

$6.60 – $6.75

$6.60 – $6.75

(1)

Net non-cash rent adjustments represent the sum of straight-line rental revenue and straight-line rental expense, as well as the amortization of above- and below-market leases (i.e., ASC 805 adjustments). 

(2)

The “Same-Capital” pool includes properties owned as of December 31, 2022 with less than 5% of total rentable square feet under development.  It excludes properties that were undergoing, or were expected to undergo, development activities in 2023-2024, properties classified as held for sale, and properties sold or contributed to joint ventures for all periods presented.

(3)

Excludes land acquisitions and includes Digital Realty’s share of JV contributions. Figure is net of JV partner contributions.

(4)

Other non-recurring CapEx represents costs incurred to enhance the capacity or marketability of operating properties, such as network fiber initiatives and software development costs.

(5)

Recurring CapEx represents non-incremental improvements required to maintain current revenues, including second-generation tenant improvements and leasing commissions.

Note: The Company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis, where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. Please see Non-GAAP Financial Measures in this document for further discussion.

Non-GAAP Financial Measures

This document contains non-GAAP financial measures, including FFO, Core FFO, Adjusted FFO, Net Operating Income (NOI), “Same-Capital” Cash NOI and Adjusted EBITDA. A reconciliation from U.S. GAAP net income available to common stockholders to FFO, a reconciliation from FFO to Core FFO, a reconciliation from Core FFO to Adjusted FFO, reconciliation from NOI to Cash NOI, and definitions of FFO, Core FFO, Adjusted FFO, NOI and “Same-Capital” Cash NOI are included as an attachment to this document. A reconciliation from U.S. GAAP net income available to common stockholders to Adjusted EBITDA, a definition of Adjusted EBITDA and definitions of net debt-to-Adjusted EBITDA, debt-plus-preferred-to-total enterprise value, cash NOI, and fixed charge coverage ratio are included as an attachment to this document.

The Company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis, where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and/or amount of various items that would impact net income attributable to common stockholders per diluted share, which is the most directly comparable forward-looking GAAP financial measure. This includes, for example, external growth factors, such as dispositions, and balance sheet items such as debt issuances, that have not yet occurred, are out of the Company’s control and/or cannot be reasonably predicted. For the same reasons, the Company is unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.

Investor Conference Call

Prior to Digital Realty’s investor conference call at 5:00 p.m. ET / 4:00 p.m. CT on July 25, 2024, a presentation will be posted to the Investors section of the company’s website at https://investor.digitalrealty.com. The presentation is designed to accompany the discussion of the company’s second quarter 2024 financial results and operating performance. The conference call will feature President & Chief Executive Officer Andy Power and Chief Financial Officer Matt Mercier.

To participate in the live call, investors are invited to dial +1 (888) 317-6003 (for domestic callers) or +1 (412) 317-6061 (for international callers) and reference the conference ID# 2977783 at least five minutes prior to start time. A live webcast of the call will be available via the Investors section of Digital Realty’s website at https://investor.digitalrealty.com.

Telephone and webcast replays will be available after the call until August 25, 2024. The telephone replay can be accessed by dialing +1 (877) 344-7529 (for domestic callers) or +1 (412) 317-0088 (for international callers) and providing the conference ID# 2171709. The webcast replay can be accessed on Digital Realty’s website.

About Digital Realty

Digital Realty brings companies and data together by delivering the full spectrum of data center, colocation, and interconnection solutions. PlatformDIGITAL®, the company’s global data center platform, provides customers with a secure data meeting place and a proven Pervasive Datacenter Architecture (PDx®) solution methodology for powering innovation and efficiently managing Data Gravity challenges. Digital Realty gives its customers access to the connected data communities that matter to them with a global data center footprint of 300+ facilities in 50+ metros across 25+ countries on six continents. To learn more about Digital Realty, please visit digitalrealty.com or follow us on LinkedIn and X.

Contact Information

Matt Mercier
Chief Financial Officer
Digital Realty
(737) 281-0101

Jordan Sadler / Jim Huseby 
Investor Relations 
Digital Realty 
(737) 281-0101

 

Consolidated Quarterly Statements of Operations

Second Quarter 2024

Unaudited and in Thousands, Except Per Share Data

Three Months Ended

Six Months Ended

30-Jun-24

31-Mar-24

31-Dec-23

30-Sep-23

30-Jun-23

30-Jun-24

30-Jun-23

Rental revenues

$912,994

$894,409

$885,694

$886,960

$869,298

$1,807,402

$1,740,273

Tenant reimbursements – Utilities

274,505

276,357

316,634

335,477

330,416

550,862

647,565

Tenant reimbursements – Other

41,964

38,434

46,418

64,876

46,192

80,398

86,342

Interconnection & other

109,505

108,071

106,413

107,305

104,521

217,576

206,216

Fee income

15,656

13,010

14,330

7,819

14,908

28,666

22,777

Other

2,125

862

144

—

932

2,987

1,819

Total Operating Revenues

$1,356,749

$1,331,143

$1,369,633

$1,402,437

$1,366,267

$2,687,892

$2,704,991

Utilities

$315,248

$324,571

$366,083

$384,455

$374,934

$639,818

$721,298

Rental property operating

237,653

224,369

237,118

223,089

224,762

462,021

449,623

Property taxes

49,620

41,156

40,161

72,279

46,718

90,776

87,141

Insurance

4,755

2,694

3,794

4,289

4,385

7,449

8,739

Depreciation & amortization

425,343

431,102

420,475

420,613

432,573

856,445

853,771

General & administration

119,511

114,419

109,235

108,039

105,964

233,931

213,730

Severance, equity acceleration and legal expenses

884

791

7,565

2,682

3,652

1,675

7,807

Transaction and integration expenses

26,072

31,839

40,226

14,465

17,764

57,911

30,031

Provision for impairment

168,303

—

5,363

113,000

—

168,303

—

Other expenses

(529)

10,836

5,580

1,295

655

10,306

655

Total Operating Expenses

$1,346,860

$1,181,776

$1,235,598

$1,344,206

$1,211,407

$2,528,636

$2,372,795

Operating Income

$9,889

$149,367

$134,035

$58,231

$154,860

$159,256

$332,196

Equity in earnings / (loss) of unconsolidated joint ventures

(41,443)

(16,008)

(29,955)

(19,793)

5,059

(57,451)

19,957

Gain / (loss) on sale of investments

173,709

277,787

(103)

810,688

89,946

451,496

89,946

Interest and other income / (expense), net

62,261

9,709

50,269

24,812

(6,930)

71,970

(6,650)

Interest (expense)

(114,756)

(109,535)

(113,638)

(110,767)

(111,116)

(224,291)

(213,336)

Income tax benefit / (expense)

(14,992)

(22,413)

(20,724)

(17,228)

(16,173)

(37,405)

(37,627)

Loss from early extinguishment of debt

—

(1,070)

—

—

—

(1,070)

—

Net Income

$74,668

$287,837

$19,884

$745,941

$115,647

$362,505

$184,486

Net (income) / loss attributable to noncontrolling interests

5,552

(6,329)

8,419

(12,320)

2,538

(777)

2,427

Net Income Attributable to Digital Realty Trust, Inc.

$80,220

$281,508

$28,304

$733,621

$118,185

$361,728

$186,913

Preferred stock dividends

(10,181)

(10,181)

(10,181)

(10,181)

(10,181)

(20,363)

(20,363)

Net Income / (Loss) Available to Common Stockholders

$70,039

$271,327

$18,122

$723,440

$108,003

$341,366

$166,550

Weighted-average shares outstanding – basic

319,537

312,292

305,781

301,827

295,390

315,915

293,316

Weighted-average shares outstanding – diluted

327,946

320,798

314,995

311,341

306,819

324,451

304,452

Weighted-average fully diluted shares and units

334,186

326,975

321,173

317,539

313,022

330,687

310,588

Net income / (loss) per share – basic

$0.22

$0.87

$0.06

$2.40

$0.37

$1.08

$0.57

Net income / (loss) per share – diluted (1)

$0.20

$0.82

$0.03

$2.31

$0.34

$1.01

$0.52

(1)

The Company has made an adjustment to previously reported amounts to correct an immaterial error in the computation of fully diluted earnings per share in each of the interim periods ended June 30, 2023, September 30, 2023, and December 31, 2023. This adjustment does not impact any of the other diluted measures per share for FFO, Core FFO or Adjusted FFO.

 

Funds From Operations and Core Funds From Operations

Second Quarter 2024

Unaudited and in Thousands, Except Per Share Data

Three Months Ended

Six Months Ended

Reconciliation of Net Income to Funds From Operations (FFO)

30-Jun-24

31-Mar-24

31-Dec-23

30-Sep-23

30-Jun-23

30-Jun-24

30-Jun-23

Net Income / (Loss)  Available to Common Stockholders

$70,039

$271,327

$18,122

$723,440

$108,003

$341,366

$166,550

Adjustments:

Non-controlling interest in operating partnership

1,500

6,200

410

16,300

2,500

7,700

4,000

Real estate related depreciation & amortization (1)

414,920

420,591

410,167

410,836

424,044

835,511

836,236

Reconciling items related to non-controlling interests

(17,317)

(8,017)

(15,377)

(14,569)

(14,144)

(25,335)

(27,532)

Unconsolidated JV real estate related depreciation & amortization

47,117

47,877

64,833

43,215

35,386

94,993

69,105

(Gain) / loss on real estate transactions

(173,709)

(286,704)

103

(810,688)

(89,946)

(460,413)

(97,771)

Provision for impairment

168,303

—

5,363

113,000

—

168,303

—

Funds From Operations

$510,852

$451,273

$483,621

$481,535

$465,844

$962,125

$950,589

Weighted-average shares and units outstanding – basic

325,777

318,469

311,960

308,024

301,593

322,151

299,452

Weighted-average shares and units outstanding – diluted (2) (3)

334,186

326,975

321,173

317,539

313,022

330,687

310,588

Funds From Operations per share – basic

$1.57

$1.42

$1.55

$1.56

$1.54

$2.99

$3.17

Funds From Operations per share – diluted (2) (3)

$1.57

$1.41

$1.53

$1.55

$1.52

$2.98

$3.13

Three Months Ended

Six Months Ended

Reconciliation of FFO to Core FFO

30-Jun-24

31-Mar-24

31-Dec-23

30-Sep-23

30-Jun-23

30-Jun-24

30-Jun-23

Funds From Operations

$510,852

$451,273

$483,621

$481,535

$465,844

$962,125

$950,589

Other non-core revenue adjustments (4)

(33,818)

3,525

(146)

(27)

27,454

(30,293)

26,566

Transaction and integration expenses

26,072

31,839

40,226

14,465

17,764

57,911

30,031

Loss from early extinguishment of debt

—

1,070

—

—

—

1,070

—

Severance, equity acceleration and legal expenses (5)

884

791

7,565

2,682

3,652

1,675

7,807

(Gain) / Loss on FX revaluation

32,222

33,602

(24,804)

451

(7,868)

65,824

(14,647)

Other non-core expense adjustments (6)

2,271

10,052

1,956

1,295

655

12,323

655

Core Funds From Operations

$538,482

$532,153

$508,417

$500,402

$507,501

$1,070,634

$1,001,001

Weighted-average shares and units outstanding – diluted (2) (3)

326,181

319,138

312,356

308,539

301,806

322,619

299,730

Core Funds From Operations per share – diluted (2)

$1.65

$1.67

$1.63

$1.62

$1.68

$3.32

$3.34

(1)          Real Estate Related Depreciation & Amortization

Three Months Ended

Six Months Ended

30-Jun-24

31-Mar-24

31-Dec-23

30-Sep-23

30-Jun-23

30-Jun-24

30-Jun-23

Depreciation & amortization per income statement

$425,343

$431,102

$420,475

$420,613

$432,573

$856,445

$853,771

Non-real estate depreciation

(10,424)

(10,511)

(10,308)

(9,777)

(8,529)

(20,935)

(17,535)

Real Estate Related Depreciation & Amortization

$414,920

$420,591

$410,167

$410,836

$424,044

$835,511

$836,236

(2)

Certain of Teraco’s minority indirect shareholders have the right to put their shares in an upstream parent company of Teraco to Digital Realty in exchange for cash or the equivalent value of shares of Digital Realty common stock, or a combination thereof. US GAAP requires Digital Realty to assume the put right is settled in shares for purposes of calculating diluted EPS. This same approach was utilized to calculate FFO/share. The potential future dilutive impact associated with this put right will be excluded from Core FFO and AFFO until settlement occurs – causing diluted share count to be higher for FFO than for Core FFO and AFFO. When calculating diluted FFO, Teraco related minority interest is added back to the FFO numerator as the denominator assumes all shares have been put back to Digital Realty.

Three Months Ended

Six Months Ended

30-Jun-24

31-Mar-24

31-Dec-23

30-Sep-23

30-Jun-23

30-Jun-24

30-Jun-23

Teraco noncontrolling share of FFO

$12,453

$9,768

$7,135

$11,537

$9,645

$22,221

$20,714

Teraco related minority interest

$12,453

$9,768

$7,135

$11,537

$9,645

$22,221

$20,714

(3)

For all periods presented, we have excluded the effect of dilutive series J, series K and series L preferred stock, as applicable, that may be converted into common stock upon the occurrence of specified change in control transactions as described in the articles supplementary governing the series J, series K and series L preferred stock, as applicable, which we consider highly improbable. See above for calculations of FFO and the share count detail section that follows the reconciliation of Core FFO to AFFO for calculations of weighted average common stock and units outstanding. For definitions and discussion of FFO and Core FFO, see the Definitions section.

(4)

Includes deferred rent adjustments related to a customer bankruptcy, joint venture development fees included in gains, lease termination fees and gain on sale of equity investment included in other income.

(5)

Relates to severance and other charges related to the departure of company executives and integration-related severance.

(6)

Includes write-offs associated with bankrupt or terminated customers, non-recurring legal expenses and adjustments to reflect our proportionate share of transaction costs associated with noncontrolling interests.

 

Adjusted Funds From Operations (AFFO)

Second Quarter 2024

Unaudited and in Thousands, Except Per Share Data

Three Months Ended

Six Months Ended

 Reconciliation of Core FFO to AFFO

30-Jun-24

31-Mar-24

31-Dec-23

30-Sep-23

30-Jun-23

30-Jun-24

30-Jun-23

 Core FFO available to common stockholders and unitholders

$538,482

$532,153

$508,417

$500,402

$507,501

$1,070,634

$1,001,001

Adjustments:

Non-real estate depreciation

10,424

10,511

10,308

9,777

8,529

20,935

17,535

Amortization of deferred financing costs

5,072

5,576

5,744

5,776

5,984

10,648

10,056

Amortization of debt discount/premium

1,321

1,832

973

1,360

1,339

3,153

2,640

Non-cash stock-based compensation expense

14,464

12,592

9,226

14,062

13,893

27,056

26,949

Straight-line rental revenue

334

9,976

(21,992)

(14,080)

(16,151)

10,310

(32,344)

Straight-line rental expense

782

1,111

(4,999)

1,427

520

1,893

5

Above- and below-market rent amortization

(1,691)

(854)

(856)

(1,127)

(1,195)

(2,545)

(2,421)

Deferred tax (benefit) / expense

(9,982)

(3,437)

33,448

(8,539)

1,339

(13,420)

(8,456)

Leasing compensation & internal lease commissions

10,519

13,291

9,848

12,515

11,611

23,809

22,678

Recurring capital expenditures (1)

(60,483)

(47,676)

(142,808)

(90,251)

(53,498)

(108,159)

(93,963)

AFFO available to common stockholders and unitholders (2)

$509,241

$535,073

$407,306

$431,322

$479,873

$1,044,314

$943,679

Weighted-average shares and units outstanding – basic

325,777

318,469

311,960

308,024

301,593

322,151

299,452

Weighted-average shares and units outstanding – diluted (3)

326,181

319,138

312,356

308,539

301,806

322,619

299,730

AFFO per share – diluted (3)

$1.56

$1.68

$1.30

$1.40

$1.59

$3.24

$3.15

 Dividends per share and common unit

$1.22

$1.22

$1.22

$1.22

$1.22

$2.44

$2.44

Diluted AFFO Payout Ratio

78.1 %

72.8 %

93.6 %

87.3 %

76.7 %

75.4 %

77.5 %

Three Months Ended

Six Months Ended

Share Count Detail

30-Jun-24

31-Mar-24

31-Dec-23

30-Sep-23

30-Jun-23

30-Jun-24

30-Jun-23

Weighted Average Common Stock and Units Outstanding

325,777

318,469

311,960

308,024

301,593

322,151

299,452

Add: Effect of dilutive securities

404

669

396

515

213

467

278

Weighted Avg. Common Stock and Units Outstanding – diluted

326,181

319,138

312,356

308,539

301,806

322,618

299,730

(1)

Recurring capital expenditures represent non-incremental building improvements required to maintain current revenues, including second-generation tenant improvements and external leasing commissions. Recurring capital expenditures do not include acquisition costs contemplated when underwriting the purchase of a building, costs which are incurred to bring a building up to Digital Realty’s operating standards, or internal leasing commissions.

(2)

For a definition and discussion of AFFO, see the Definitions section. For a reconciliation of net income available to common stockholders to FFO and Core FFO, see above.

(3)

For all periods presented, we have excluded the effect of dilutive series J, series K and series L preferred stock, as applicable, that may be converted into common stock upon the occurrence of specified change in control transactions as described in the articles supplementary governing the series J, series K and series L preferred stock, as applicable, which we consider highly improbable. See above for calculations of FFO and for calculations of weighted average common stock and units outstanding.

 

Consolidated Balance Sheets

Second Quarter 2024

Unaudited and in Thousands, Except Per Share Data

30-Jun-24

31-Mar-24

31-Dec-23

30-Sep-23

30-Jun-23

Assets

Investments in real estate:

Real estate

$27,470,635

$27,122,796

$27,306,369

$25,887,031

$27,087,769

Construction in progress

4,676,012

4,496,840

4,635,215

5,020,464

4,635,939

Land held for future development

93,938

114,240

118,190

179,959

193,936

Investments in Real Estate

$32,240,584

$31,733,877

$32,059,773

$31,087,453

$31,917,644

Accumulated depreciation and amortization

(8,303,070)

(7,976,093)

(7,823,685)

(7,489,193)

(7,739,462)

Net Investments in Properties

$23,937,514

$23,757,784

$24,236,089

$23,598,260

$24,178,182

Investment in unconsolidated joint ventures

2,332,698

2,365,821

2,295,889

2,180,313

2,040,452

Net Investments in Real Estate

$26,270,212

$26,123,605

$26,531,977

$25,778,573

$26,218,634

Operating lease right-of-use assets, net

$1,211,003

$1,233,410

$1,414,256

$1,274,410

$1,291,233

Cash and cash equivalents

2,282,062

1,193,784

1,625,495

1,062,050

124,519

Accounts and other receivables, net (1)

1,222,403

1,217,276

1,278,110

1,325,725

1,158,383

Deferred rent, net

613,749

611,670

624,427

586,418

613,796

Goodwill

9,128,811

9,105,026

9,239,871

8,998,074

9,148,603

Customer relationship value, deferred leasing costs & other intangibles, net

2,315,143

2,359,380

2,500,237

2,506,198

2,825,596

Assets held for sale

—

287,064

478,503

—

593,892

Other assets

563,500

501,875

420,382

401,068

414,078

Total Assets

$43,606,883

$42,633,089

$44,113,257

$41,932,515

$42,388,735

Liabilities and Equity

Global unsecured revolving credit facilities, net

$1,848,167

$1,901,126

$1,812,287

$1,698,780

$2,242,258

Unsecured term loans, net

1,297,893

1,303,263

1,560,305

1,524,663

1,548,780

Unsecured senior notes, net of discount

12,507,551

13,190,202

13,422,342

13,072,102

13,383,819

Secured and other debt, net of discount

686,135

625,750

630,973

574,231

554,594

Operating lease liabilities

1,336,839

1,357,751

1,542,094

1,404,510

1,420,239

Accounts payable and other accrued liabilities

1,973,798

1,870,344

2,168,983

2,147,103

2,214,820

Deferred tax liabilities, net

1,132,090

1,121,224

1,151,096

1,088,724

1,128,961

Accrued dividends and distributions

—

—

387,988

—

—

Security deposits and prepaid rents

416,705

413,225

401,867

385,521

417,693

Obligations associated with assets held for sale

—

9,981

39,001

—

4,990

Total Liabilities

$21,199,178

$21,792,866

$23,116,936

$21,895,634

$22,916,155

Redeemable non-controlling interests

1,399,889

1,350,736

1,394,814

1,360,308

1,367,422

Equity

Preferred Stock:  $0.01 par value per share, 110,000 shares authorized:

Series J Cumulative Redeemable Preferred Stock (2)

$193,540

$193,540

$193,540

$193,540

$193,540

Series K Cumulative Redeemable Preferred Stock (3)

203,264

203,264

203,264

203,264

203,264

Series L Cumulative Redeemable Preferred Stock (4)

334,886

334,886

334,886

334,886

334,886

Common Stock: $0.01 par value per share, 392,000 shares authorized (5)

3,231

3,097

3,088

3,002

2,967

Additional paid-in capital

26,388,393

24,508,683

24,396,797

23,239,088

22,882,200

Dividends in excess of earnings

(5,701,096)

(5,373,529)

(5,262,648)

(4,900,757)

(5,253,915)

Accumulated other comprehensive (loss), net

(884,715)

(850,091)

(751,393)

(882,996)

(741,484)

Total Stockholders’ Equity

$20,537,503

$19,019,850

$19,117,535

$18,190,026

$17,621,456

Noncontrolling Interests

Noncontrolling interest in operating partnership

$434,253

$438,422

$438,081

$441,366

$436,099

Noncontrolling interest in consolidated joint ventures

36,060

31,215

45,892

45,182

47,603

Total Noncontrolling Interests

$470,313

$469,637

$483,972

$486,547

$483,702

Total Equity

$21,007,816

$19,489,487

$19,601,507

$18,676,573

$18,105,158

Total Liabilities and Equity

$43,606,883

$42,633,089

$44,113,257

$41,932,515

$42,388,735

(1)

Net of allowance for doubtful accounts of $50,609 and $42,624 as of June 30, 2024 and June 30, 2023, respectively.

(2)

Series J Cumulative Redeemable Preferred Stock, 5.250%, $200,000 liquidation preference ($25.00 per share), 8,000 shares issued and outstanding as of June 30, 2024 and June 30, 2023.

(3)

Series K Cumulative Redeemable Preferred Stock, 5.850%, $210,000 liquidation preference ($25.00 per share), 8,400 shares issued and outstanding as of June 30, 2024 and June 30, 2023.

(4)

Series L Cumulative Redeemable Preferred Stock, 5.200%, $345,000 liquidation preference ($25.00 per share), 13,800 shares issued and outstanding as of June 30, 2024 and June 30, 2023.

(5)

Common Stock: 325,885 and 299,240 shares issued and outstanding as of June 30, 2024 and June 30, 2023, respectively.

 

Reconciliation of Earnings Before Interest, Taxes, Depreciation & Amortization and Financial Ratios

 

 

Second Quarter 2024

Unaudited and Dollars in Thousands

Three Months Ended

Reconciliation of Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) (1)

30-Jun-24

31-Mar-24

31-Dec-23

30-Sep-23

30-Jun-23

Net Income / (Loss) Available to Common Stockholders

$70,039

$271,327

$18,122

$723,440

$108,003

Interest

114,756

109,535

113,638

110,767

111,116

Loss from early extinguishment of debt

—

1,070

—

—

—

Income tax expense (benefit)

14,992

22,413

20,724

17,228

16,173

Depreciation & amortization

425,343

431,102

420,475

420,613

432,573

EBITDA

$625,130

$835,446

$572,958

$1,272,048

$667,866

Unconsolidated JV real estate related depreciation & amortization

47,117

47,877

64,833

43,214

35,386

Unconsolidated JV interest expense and tax expense

27,704

34,271

42,140

27,000

32,105

Severance, equity acceleration and legal expenses

884

791

7,565

2,682

3,652

Transaction and integration expenses

26,072

31,839

40,226

14,465

17,764

(Gain) / loss on sale of investments

(173,709)

(277,787)

103

(810,688)

(89,946)

Provision for impairment

168,303

—

5,363

113,000

—

Other non-core adjustments, net (2)

743

21,608

(35,439)

1,719

22,132

Non-controlling interests

(5,552)

6,329

(8,419)

12,320

(2,538)

Preferred stock dividends

10,181

10,181

10,181

10,181

10,181

Adjusted EBITDA

$726,874

$710,556

$699,509

$685,943

$696,604

(1)

For definitions and discussion of EBITDA and Adjusted EBITDA, see the Definitions section.

(2)

Includes foreign exchange net unrealized gains/losses attributable to remeasurement, deferred rent adjustments related to a customer bankruptcy, write offs associated with bankrupt or terminated customers, non-recurring legal expenses, gain on sale of land option and lease termination fees.

 

Three Months Ended

Financial Ratios

30-Jun-24

31-Mar-24

31-Dec-23

30-Sep-23

30-Jun-23

Total GAAP interest expense

$114,756

$109,535

$113,638

$110,767

$111,116

Capitalized interest

27,592

28,522

33,032

29,130

27,883

Change in accrued interest and other non-cash amounts                                                         

(55,605)

55,421

(66,013)

44,183

(60,612)

Cash Interest Expense (3)

$86,743

$193,479

$80,657

$184,081

$78,387

Preferred stock dividends

10,181

10,181

10,181

10,181

10,181

Total Fixed Charges (4)

$152,529

$148,239

$156,851

$150,079

$149,181

Coverage

Interest coverage ratio (5)

 4.3x

 4.3x

 4.0x

 4.3x

 4.5x

Cash interest coverage ratio (6)

 6.4x

 3.2x

 6.4x

 3.4x

 7.4x

Fixed charge coverage ratio (7)

 4.1x

 4.0x

 3.8x

 4.1x

 4.2x

Cash fixed charge coverage ratio (8)

 5.9x

 3.1x

 5.8x

 3.2x

 6.6x

Leverage

Debt to total enterprise value (9)(10)

24.2 %

26.7 %

28.6 %

30.6 %

33.3 %

Debt-plus-preferred-stock-to-total-enterprise-value (10)(11)

25.3 %

27.9 %

29.8 %

32.0 %

34.7 %

Pre-tax income to interest expense (12)

 1.7x

 3.6x

 1.2x

 7.7x

 2.0x

Net Debt-to-Adjusted EBITDA (13)

 5.3x

 6.1x

 6.2x

 6.3x

 6.8x

(3)

Cash interest expense is interest expense less amortization of debt discount and deferred financing fees and includes interest that we capitalized. We consider cash interest expense to be a useful measure of interest as it excludes non-cash-based interest expense.

(4)

Fixed charges consist of GAAP interest expense, capitalized interest, and preferred stock dividends.

(5)

Adjusted EBITDA divided by GAAP interest expense plus capitalized interest (including our pro rata share of unconsolidated joint venture interest expense).

(6)

Adjusted EBITDA divided by cash interest expense (including our pro rata share of unconsolidated joint venture interest expense).

(7)

Adjusted EBITDA divided by fixed charges (including our pro rata share of unconsolidated joint venture fixed charges).

(8)

Adjusted EBITDA divided by the sum of cash interest expense and preferred stock dividends (including our pro rata share of unconsolidated joint venture cash fixed charges).

(9)

Total debt divided by market value of common equity plus debt plus preferred stock.

(10)

Total enterprise value defined as market value of common equity plus debt plus preferred stock.

(11)

Same as (9), except numerator includes preferred stock.

(12)

Calculated as net income plus interest expense divided by GAAP interest expense.

(13)

Calculated as total debt at balance sheet carrying value, plus capital lease obligations, plus Digital Realty’s pro rata share of unconsolidated joint venture debt, less cash and cash equivalents (including Digital Realty’s pro rata share of unconsolidated joint venture cash) divided by the product of Adjusted EBITDA (including Digital Realty’s pro rata share of unconsolidated joint venture EBITDA), multiplied by four.

Definitions

Funds From Operations (FFO):

We calculate funds from operations, or FFO, in accordance with the standards established by the National Association of Real Estate Investment Trusts (Nareit) in the Nareit Funds From Operations White Paper – 2018 Restatement. FFO is a non-GAAP financial measure and represents net income (loss) (computed in accordance with GAAP), excluding gain (loss) from the disposition of real estate assets, provision for impairment, real estate related depreciation and amortization (excluding amortization of deferred financing costs), our share of unconsolidated JV real estate related depreciation & amortization, net income attributable to non-controlling interests in operating partnership and, depreciation related to non-controlling interests. Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions and after adjustments for unconsolidated partnerships and joint ventures, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our data centers that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our data centers, all of which have real economic effect and could materially impact our financial condition and results from operations, the utility of FFO as a measure of our performance is limited. Other REITs may not calculate FFO in accordance with the Nareit definition and, accordingly, our FFO may not be comparable to other REITs’ FFO. FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.

Core Funds from Operations (Core FFO):

We present core funds from operations, or Core FFO, as a supplemental operating measure because, in excluding certain items that do not reflect core revenue or expense streams, it provides a performance measure that, when compared year over year, captures trends in our core business operating performance. We calculate Core FFO by adding to or subtracting from FFO (i) other non-core revenue adjustments, (ii) transaction and integration expenses, (iii) loss from early extinguishment of debt, (iv) gain on / issuance costs associated with redeemed preferred stock, (v) severance, equity acceleration and legal expenses, (vi) gain/loss on FX revaluation, and (vii) other non-core expense adjustments. Because certain of these adjustments have a real economic impact on our financial condition and results from operations, the utility of Core FFO as a measure of our performance is limited. Other REITs may calculate Core FFO differently than we do and accordingly, our Core FFO may not be comparable to other REITs’ Core FFO. Core FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.

Adjusted Funds from Operations (AFFO):

We present adjusted funds from operations, or AFFO, as a supplemental operating measure because, when compared year over year, it assesses our ability to fund dividend and distribution requirements from our operating activities. We also believe that, as a widely recognized measure of the operations of REITs, AFFO will be used by investors as a basis to assess our ability to fund dividend payments in comparison to other REITs, including on a per share and unit basis. We calculate AFFO by adding to or subtracting from Core FFO (i) non-real estate depreciation, (ii) amortization of deferred financing costs, (iii) amortization of debt discount/premium, (iv) non-cash stock-based compensation expense, (v) straight-line rental revenue, (vi) straight-line rental expense, (vii) above- and below-market rent amortization, (viii) deferred tax expense / (benefit), (ix) leasing compensation and internal lease commissions, and (x) recurring capital expenditures. Other REITs may calculate AFFO differently than we do and, accordingly, our AFFO may not be comparable to other REITs’ AFFO. AFFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.

EBITDA and Adjusted EBITDA:

We believe that earnings before interest, loss from early extinguishment of debt, income taxes, and depreciation and amortization, or EBITDA, and Adjusted EBITDA (as defined below), are useful supplemental performance measures because they allow investors to view our performance without the impact of non-cash depreciation and amortization or the cost of debt and, with respect to Adjusted EBITDA, (i) unconsolidated joint venture real estate related depreciation & amortization, (ii) unconsolidated joint venture interest expense and tax, (iii) severance, equity acceleration and legal expenses, (iv) transaction and integration expenses, (v) gain (loss) on sale / deconsolidation, (vi) provision for impairment, (vii) other non-core adjustments, net, (viii) non-controlling interests, (ix) preferred stock dividends, and (x) issuance costs associated with redeemed preferred stock. Adjusted EBITDA is EBITDA excluding (i) unconsolidated joint venture real estate related depreciation & amortization, (ii) unconsolidated joint venture interest expense and tax, (iii) severance, equity acceleration and legal expenses, (iv) transaction and integration expenses, (v) gain (loss) on sale / deconsolidation, (vi) provision for impairment, (vii) other non-core adjustments, net, (vii) non-controlling interests, (ix) preferred stock dividends, and (x) gain on / issuance costs associated with redeemed preferred stock. In addition, we believe EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors, and other interested parties in the evaluation of REITs. Because EBITDA and Adjusted EBITDA are calculated before recurring cash charges including interest expense and income taxes, exclude capitalized costs, such as leasing commissions, and are not adjusted for capital expenditures or other recurring cash requirements of our business, their utility as a measure of our performance is limited. Other REITs may calculate EBITDA and Adjusted EBITDA differently than we do and, accordingly, our EBITDA and Adjusted EBITDA may not be comparable to other REITs’ EBITDA and Adjusted EBITDA. Accordingly, EBITDA and Adjusted EBITDA should be considered only as supplements to net income computed in accordance with GAAP as a measure of our financial performance.

Net Operating Income (NOI) and Cash NOI:

Net operating income, or NOI, represents rental revenue, tenant reimbursement revenue and interconnection revenue less utilities expense, rental property operating expenses, property taxes and insurance expenses (as reflected in the statement of operations). NOI is commonly used by stockholders, company management and industry analysts as a measurement of operating performance of the company’s rental portfolio. Cash NOI is NOI less straight-line rents and above- and below-market rent amortization. Cash NOI is commonly used by stockholders, company management and industry analysts as a measure of property operating performance on a cash basis. Same-Capital Cash NOI represents buildings owned as of December 31, 2022 of the prior year with less than 5% of total rentable square feet under development and excludes buildings that were undergoing, or were expected to undergo, development activities in 2023-2024, buildings classified as held for sale, and buildings sold or contributed to joint ventures for all periods presented (prior period numbers adjusted to reflect current same-capital pool). However, because NOI and cash NOI exclude depreciation and amortization and capture neither the changes in the value of our data centers that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our data centers, all of which have real economic effect and could materially impact our results from operations, the utility of NOI and cash NOI as measures of our performance is limited. Other REITs may calculate NOI and cash NOI differently than we do and, accordingly, our NOI and cash NOI may not be comparable to other REITs’ NOI and cash NOI. NOI and cash NOI should be considered only as supplements to net income computed in accordance with GAAP as measures of our performance.

Additional Definitions

Net debt-to-Adjusted EBITDA ratio is calculated as total debt at balance sheet carrying value, plus capital lease obligations, plus Digital Realty’s pro rata share of unconsolidated joint venture debt, less cash and cash equivalents (including Digital Realty’s pro rata share of unconsolidated joint venture cash) divided by the product of Adjusted EBITDA (including Digital Realty’s pro rata share of unconsolidated joint venture EBITDA), multiplied by four.

Debt-plus-preferred-to-total enterprise value is total debt plus preferred stock divided by total debt plus the liquidation value of preferred stock and the market value of outstanding Digital Realty Trust, Inc. common stock and Digital Realty Trust, L.P. units, assuming the redemption of Digital Realty Trust, L.P. units for shares of Digital Realty Trust, Inc. common stock.

Fixed charge coverage ratio is Adjusted EBITDA divided by the sum of GAAP interest expense, capitalized interest and preferred stock dividends. For the quarter ended June 30, 2024, GAAP interest expense was $115 million, capitalized interest was $28 million and preferred stock dividends was $10 million.

Reconciliation of Net Operating Income (NOI)

Three Months Ended

Six Months Ended

(in thousands)

30-Jun-24

31-Mar-24

30-Jun-23

30-Jun-24

30-Jun-23

Operating income

$9,889

$149,367

$154,860

$159,256

$332,196

 Fee income

(15,656)

(13,010)

(14,908)

(28,666)

(22,777)

 Other income

(2,125)

(862)

(932)

(2,987)

(1,819)

 Depreciation and amortization

425,343

431,102

432,573

856,445

853,771

 General and administrative

119,511

114,419

105,964

233,931

213,730

 Severance, equity acceleration and legal expenses

884

791

3,652

1,675

7,807

 Transaction expenses

26,072

31,839

17,764

57,911

30,031

 Provision for impairment

168,303

—

—

168,303

—

 Other expenses

(529)

10,836

655

10,306

655

Net Operating Income

$731,692

$724,482

$699,629

$1,456,175

$1,413,594

 Cash Net Operating Income (Cash NOI)

Net Operating Income

$731,692

$724,482

$699,629

$1,456,175

$1,413,594

 Straight-line rental revenue

(2,873)

(2,522)

12,116

(5,395)

(3,815)

 Straight-line rental expense

959

1,369

722

2,328

212

 Above- and below-market rent amortization

(1,691)

(854)

(1,195)

(2,545)

(2,421)

Cash Net Operating Income

$728,088

$722,474

$711,272

$1,450,563

$1,407,570

Constant Currency CFFO Reconciliation

Three Months Ended

Six Months Ended

(in thousands, except per share data)

30-Jun-24

30-Jun-23

30-Jun-24

30-Jun-23

Core FFO (1)

$538,482

$507,501

$1,070,634

$1,001,001

 Core FFO impact of holding ’23 Exchange Rates Constant (2)

3,841

—

5,180

—

Constant Currency Core FFO

$542,323

$507,501

$1,075,814

$1,001,001

 Weighted-average shares and units outstanding – diluted

326,181

301,806

322,619

299,730

Constant Currency CFFO Per Share

$1.66

$1.68

$3.33

$3.34

1)

As reconciled to net income above.

2)

Adjustment calculated by holding currency translation rates for 2024 constant with average currency translation rates that were applicable to the same periods in 2023.

This document contains forward-looking statements within the meaning of the federal securities laws, which are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Such forward-looking statements include statements relating to: our economic outlook, our expected investment and expansion activity, anticipated continued demand for our products and service, our liquidity, our joint ventures, supply and demand for data center and colocation space, our acquisition and disposition activity, pricing and net effective leasing economics, market dynamics and data center fundamentals, our strategic priorities, our product offerings, available inventory, rent from leases that have been signed but have not yet commenced and other contracted rent to be received in future periods, rental rates on future leases, lag between signing and commencement, cap rates and yields, investment activity, the company’s FFO, Core FFO, constant currency Core FFO, adjusted FFO, and net income, 2024 outlook and underlying assumptions, information related to trends, our strategy and plans, leasing expectations, weighted average lease terms, the exercise of lease extensions, lease expirations, debt maturities, annualized rent at expiration of leases, the effect new leases and increases in rental rates will have on our rental revenue, our credit ratings, construction and development activity and plans, projected construction costs, estimated yields on investment, expected occupancy, expected square footage and IT load capacity upon completion of development projects, backlog NOI, NAV components, and other forward-looking financial data. Such statements are based on management’s beliefs and assumptions made based on information currently available to management. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance and may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. Some of the risks and uncertainties that may cause our actual results, performance, or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

reduced demand for data centers or decreases in information technology spending;decreased rental rates, increased operating costs, or increased vacancy rates;increased competition or available supply of data center space;the suitability of our data centers and data center infrastructure, delays or disruptions in connectivity or availability of power, or failures or breaches of our physical and information security infrastructure or services;our dependence upon significant customers, bankruptcy or insolvency of a major customer or a significant number of smaller customers, or defaults on or non-renewal of leases by customers;our ability to attract and retain customers;breaches of our obligations or restrictions under our contracts with our customers;our inability to successfully develop and lease new properties and development space, and delays or unexpected costs in development of properties;the impact of current global and local economic, credit and market conditions;our inability to retain data center space that we lease or sublease from third parties;global supply chain or procurement disruptions, or increased supply chain costs;information security and data privacy breaches;difficulty managing an international business and acquiring or operating properties in foreign jurisdictions and unfamiliar metropolitan areas;our failure to realize the intended benefits from, or disruptions to our plans and operations or unknown or contingent liabilities related to, our recent acquisitions;our failure to successfully integrate and operate acquired or developed properties or businesses;difficulties in identifying properties to acquire and completing acquisitions;risks related to joint venture investments, including as a result of our lack of control of such investments;risks associated with using debt to fund our business activities, including re-financing and interest rate risks, our failure to repay debt when due, adverse changes in our credit ratings or our breach of covenants or other terms contained in our loan facilities and agreements;our failure to obtain necessary debt and equity financing, and our dependence on external sources of capital;financial market fluctuations and changes in foreign currency exchange rates;adverse economic or real estate developments in our industry or the industry sectors that we sell to, including risks relating to decreasing real estate valuations and impairment charges and goodwill and other intangible asset impairment charges;our inability to manage our growth effectively;losses in excess of our insurance coverage;our inability to attract and retain talent;impact on our operations and on the operations of our customers, suppliers, and business partners during a pandemic, such as COVID-19;the expected operating performance of anticipated near-term acquisitions and descriptions relating to these expectations;environmental liabilities, risks related to natural disasters and our inability to achieve our sustainability goals;our inability to comply with rules and regulations applicable to our company;Digital Realty Trust, Inc.’s failure to maintain its status as a REIT for federal income tax purposes;Digital Realty Trust, L.P.’s failure to qualify as a partnership for federal income tax purposes;restrictions on our ability to engage in certain business activities;changes in local, state, federal and international laws, and regulations, including related to taxation, real estate, and zoning laws, and increases in real property tax rates; andthe impact of any financial, accounting, legal or regulatory issues or litigation that may affect us.

The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance. Several additional material risks are discussed in our annual report on Form 10‑K for the year ended December 31, 2023, and other filings with the U.S. Securities and Exchange Commission. Those risks continue to be relevant to our performance and financial condition. Moreover, we operate in a competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.  We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Digital Realty, Digital Realty Trust, the Digital Realty logo, Interxion, Turn-Key Flex, Powered Base Building, ServiceFabric, AnyScale Colo, Pervasive Data Center Architecture, PlatformDIGITAL, PDx, Data Gravity Index and Data Gravity Index DGx are registered trademarks and service marks of Digital Realty Trust, Inc. in the United States and/or other countries. All other names, trademarks and service marks are the property of their respective owners.

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AudioEye Reports Record Third Quarter 2026 Results

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Third quarter GAAP net income profitability of $1 million with expectation of increased profitability in the fourth quarter

Third quarter adjusted EBITDA up 58% year over year, and the fourth quarter expected to be up 56% year over year

Sequential annualized fourth quarter revenue growth expected of approximately 20%

TUCSON, Ariz., Oct 26, 2026 /PRNewswire/ — AudioEye, Inc. (Nasdaq: AEYE) (“AudioEye” or the “Company”), an industry-leading digital accessibility company, reported financial results for the third quarter ended September 30, 2026.

“Starting in 2025 we set an aspirational goal of producing 30-40% annual growth over three years in adjusted EBITDA and adjusted EPS. In the second year, we are on track to exceed this goal with approximately 50% year-over-year growth while also generating GAAP profitability in the third quarter. In Q3 gross margins also improved by over 550 basis points to 83%, with an adjusted gross margin of 88%. We are increasing adjusted EBITDA guidance, and we now expect to generate over $17 million of annualized adjusted EBITDA in the fourth quarter with continued GAAP profitability. We also expect to generate significant cash going forward and recently announced a stock repurchase program of $15 million, which represents 15% of the outstanding shares at current prices,” said Kelly Georgevich, Chief Executive Officer of AudioEye. “The business is strong, and we expect annualized sequential revenue growth of approximately 20% in the fourth quarter, contributing to increased operating leverage.”

Georgevich continued, “In October, we launched two new AI products, Agentic Audits and the AudioEye SDK MCP, both powered by AudioEye Intelligence, our proprietary dataset built from more than one million human reviews over a decade. We expect that these new tools will improve our industry leading legal protection rate even further.”

Third Quarter 2026 Financial Results

Total revenue increased 7% to a record $11.0M from $10.2M in the same prior year period. During 2026, the Company has reduced its emphasis on non-recurring revenue to focus on growing Annual Recurring Revenue (“ARR”), which grew 12% in the third quarter over the same prior year period.Gross profit increased to $9.1M (83% of total revenue) from $7.9M (77% of total revenue) in the same prior year period. The increase in gross profit was driven by higher sales and efficiencies including AI use.Adjusted gross margin was 88% in the third quarter of 2026 compared to 83% in the same prior year period. Adjusted gross margin is defined as gross margin adjusted for non-cash items such as stock-based compensation and depreciation and amortization expenses in cost of revenue.Operating expenses were $7.8M, a decrease of 5% from the comparable prior year period. The decrease was primarily due to lower sales and marketing expenses as well as reduced research and development expenses driven by AI efficiencies.Net income was $1.0M, or $0.08 per diluted share, compared to a net loss of $(0.6M), or $(0.04) per diluted share, in the same prior year period. The change was primarily due to higher gross profit and lower operating expenses.Adjusted EBITDA was $3.9M, and adjusted EPS was $0.30 per diluted share, compared to adjusted EBITDA of $2.5M and adjusted EPS of $0.19 per diluted share in the same prior year period. For Q3 2026, the adjusted EBITDA and adjusted EPS results reflect adjustments primarily for stock-based compensation expense, depreciation and amortization, litigation expense, and interest expense.ARR as of September 30, 2026 increased sequentially to $43.3M from $42.3M as of June 30, 2026.At September 30, 2026 the Company had $9.3M in cash and cash equivalents.

Other Updates

On October 20, 2026, AudioEye announced that its Board of Directors authorized the repurchase of up to $15 million of the Company’s outstanding common stock through October 18, 2027. The new program replaces the Company’s prior share repurchase authorization and is expected to be funded with working capital and cash from operations.On October 8, 2026, AudioEye launched two new AI products, Agentic Audits and the AudioEye SDK MCP, both powered by AudioEye Intelligence, the Company’s proprietary accessibility dataset built from over one million human reviews across more than 100,000 sites. Agentic Audits deploy an AI agent that navigates a site the way a person would and can find up to 50% more high-severity issues than automation alone, while the SDK MCP brings AudioEye Intelligence directly into the AI coding tools developers already use.On September 30, 2026, AudioEye published research showing that leading AI coding tools failed to build accessible websites, with 91% of the issues found rated medium or high severity.On September 24, 2026, AudioEye published research showing that AI agents completed up to 68% fewer tasks and used 43% more tokens on average on inaccessible websites, demonstrating that digital accessibility is the foundation for AI readiness.On August 27, 2026, AudioEye released UK findings from its 2026 Digital Accessibility Index, which scanned over 14,400 pages across 475 UK websites and found an average of 66 accessibility issues per page, with AI search increasingly routing users to less accessible interior pages.As of September 30, 2026, AudioEye had approximately 130,000 customers, up 7,000 year-over-year from September 30, 2025, driven by increases in both the Partner and Marketplace channel and Enterprise channel.

Financial Outlook
AudioEye expects revenue of between $11.4M and $11.6M for the fourth quarter of 2026, which is expected to result in revenue of between $43.6M and $43.8M for the full year 2026. The Company expects adjusted EBITDA of between $4.2M and $4.4M for the fourth quarter of 2026, which raises expected full year 2026 adjusted EBITDA to between $13.4M and $13.6M, representing approximately 50% year-over-year growth. The Company expects adjusted EPS of between $0.32 and $0.33 per share for the fourth quarter of 2026 and at least $1.04 per share for the full year 2026.

Conference Call Information
AudioEye management will hold a conference call today, October 26, 2026, at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results, followed by a question-and-answer period.

Date: Monday, October 26, 2026
Time: 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time)
U.S. dial-in number: 877-407-8289
International number: 201-689-8341
Webcast: Q326 Webcast Link

Please call the conference telephone number 5-10 minutes prior to the start time. If you have any difficulty connecting with the conference call, please contact Gateway Group at 949-574-3860.

The conference call will also be webcast live and available for replay via the investor relations section of the Company’s website. The audio recording will remain available via the investor relations section of the Company’s website for 90 days.

A telephonic replay of the conference call will also be available after 7:30 p.m. Eastern Time on the same day through November 9, 2026 via the following numbers:

Toll-free replay number: 877-660-6853
International replay number: 201-612-7415
Replay passcode: 13763375

Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

About AudioEye
AudioEye exists to ensure the digital future we build is accessible for people with disabilities and AI agents. AudioEye’s comprehensive solution for over 130,000 customers combines industry-leading AI automation technology with expert fixes informed by the disability community. This powerful combination delivers industry-leading protection against lawsuits and readiness for AI agents. With 25 US patents, AudioEye’s solution includes 24/7 accessibility monitoring, automated WCAG issue testing and fixes, expert testing, developer tools, and legal protection, empowering organizations to confidently create accessible digital experiences for all.

Forward-Looking Statements
All statements in this press release about AudioEye’s expectations, beliefs, plans, objectives, prospects, financial condition, assumptions or future events or performance are not historical facts and are “forward-looking statements” as that term is defined under the federal securities laws. Forward-looking statements are often, but not always, made through the use of words or phrases such as “believe”, “anticipate”, “should”, “confident”, “intend”, “plan”, “will”, “expects”, “estimates”, “projects”, “positioned”, “strategy”, “outlook” and similar words. You should read the statements that contain these types of words carefully. Such forward-looking statements contained herein include, but are not limited to, statements regarding future cash flows of the Company, anticipated contributions from new sales channels, long-term growth prospects, opportunities in the digital accessibility industry, our revenue, adjusted EBITDA, adjusted EPS and ARR guidance, and our expectation of investments in marketing and sales. These statements are subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from what is expressed or implied in such forward-looking statements, including the variability of AudioEye’s revenue and financial performance; sales channels and offerings; product development and technological changes; the acceptance of AudioEye’s products in the marketplace; the effectiveness of our integration efforts; competition; inherent uncertainties and costs associated with litigation; and general economic conditions. These and other risks are described more fully in AudioEye’s filings with the Securities and Exchange Commission. There may be events in the future that AudioEye is not able to predict accurately or over which AudioEye has no control. Forward-looking statements reflect management’s view as of the date of this press release, and AudioEye urges you not to place undue reliance on these forward-looking statements. AudioEye does not undertake any obligation to update such forward-looking statements to reflect events or uncertainties after the date hereof.

About Key Operating Metrics
We consider annual recurring revenue (“ARR”) as a key operating metric and a key indicator of our overall business. We also use ARR as one of the primary methods for planning and forecasting overall expectations and for evaluating, on at least a quarterly and annual basis, actual results against such expectations.

We manage customers through two primary channels, Enterprise and Partner and Marketplace. Enterprise channel consists of our larger customers and organizations, including those with non-platform custom websites, who generally engage directly with AudioEye sales personnel for custom pricing and solutions. This channel also includes federal, state and local government agencies. The Partner and Marketplace channel consists of our CMS partners, platform & agency partners, authorized resellers and our marketplace. This channel serves small and medium sized businesses who are on a partner or reseller’s web-hosting platform or who purchase an AudioEye solution from our marketplace.

We define ARR as the sum of (i) for our Enterprise channel, the total of the annualized recurring fee at the date of determination under each active contract, plus (ii) for our Partner and Marketplace channel, the annual or monthly recurring fee for all active customers at the date of determination, in each case, assuming no changes to the subscription, multiplied by 12 if applicable. Recurring fees are defined as revenues expected to be generated from services typically offered as a subscription service or annual service offering such as our automation and platform, periodic auditing, human-assisted technological fixes, legal support and professional service offerings and other services that reoccur on a multi-year contract. This determination includes both annual and monthly contracts for recurring products. Some of our contracts are terminable prior to the expected term, which may impact future ARR. ARR excludes non-recurring fees, which are defined as revenue expected to be generated from services typically not offered as a subscription service or annual service offering such as our PDF remediation services business, one-time website and mobile application reports, and other miscellaneous services that are offered as non-subscription services or are expected to be one-time in nature.

Use of Non-GAAP Financial Measures
From time to time, we review adjusted financial measures that assist us in comparing our operating performance consistently over time, as such measures remove the impact of certain items, as applicable, such as our capital structure (primarily interest charges), certain non-cash items, including stock compensation and depreciation and amortization expense, and other expenses that do not relate to our core operations, including significant transaction and litigation-related expenses and other costs that are expected to be non-recurring. In order to provide investors with greater insight and allow for a more comprehensive understanding of the information used in our financial and operational decision-making, the Company has supplemented the consolidated financial statements presented on a GAAP basis in this press release with the following non-GAAP financial measures: Adjusted EBITDA, Adjusted EBITDA margin, Adjusted earnings (loss) per diluted share (adjusted EPS) and Adjusted gross margin.

These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of Company results as reported under GAAP. The Company compensates for such limitations by relying primarily on our GAAP results and using non-GAAP financial measures only as supplemental data. We also provide a reconciliation of non-GAAP to GAAP measures used. Investors are encouraged to carefully review this reconciliation. In addition, because these non-GAAP measures are not measures of financial performance under GAAP and are susceptible to varying calculations, these measures, as defined by us, may differ from and may not be comparable to similarly titled measures used by other companies.

Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted Earnings (Loss) per Diluted Share
We define: (i) Adjusted EBITDA as net income (loss), plus interest expense, plus depreciation and amortization expense, plus stock-based compensation expense, less change in fair value of contingent consideration, plus certain litigation expense, plus certain acquisition expense, plus certain severance expense, plus loss on disposal or impairment of long-lived assets, plus loss on extinguishment of debt, and plus lost deposit on alternative financing; (ii) Adjusted EBITDA margin as Adjusted EBITDA as a percentage of GAAP revenue; and (iii) Adjusted earnings (loss) per diluted share (EPS) as net income (loss) per diluted common share, plus interest expense, plus depreciation and amortization expense, plus stock-based compensation expense, less change in fair value of contingent consideration, plus certain litigation expense, plus certain acquisition expense, plus certain severance expense, plus loss on disposal or impairment of long-lived assets, plus loss on extinguishment of debt, and plus lost deposit on alternative financing, each on a per share basis. Adjusted earnings per diluted share includes incremental shares in the share count that are considered anti-dilutive in a GAAP net loss position.

Adjusted Gross Margin
We define Adjusted gross margin as gross profit, plus stock-based compensation expense and depreciation and amortization expense allocated to cost of revenue, expressed as a percentage of total revenue.

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted earnings (loss) per diluted share, and Adjusted gross margin are used to facilitate a comparison of our operating performance on a consistent basis from period to period and provide for a more complete understanding of factors and trends affecting our business than GAAP measures alone. All of the items adjusted in these calculations are either recurring non-cash items or items that management does not consider in assessing our ongoing operating performance. In the case of the non-cash items, such as stock-based compensation expense and valuation adjustments to assets and liabilities, management believes that investors may find it useful to assess our comparative operating performance because the measures without such items are expected to be less susceptible to variances in actual performance resulting from expenses that do not relate to our core operations and are more reflective of other factors that affect operating performance. In the case of items that do not relate to our core operations, management believes that investors may find it useful to assess our operating performance if the measures are presented without these items because their financial impact does not reflect ongoing operating performance.

Adjusted EBITDA is not a measure of liquidity under GAAP, or otherwise, and is not an alternative to cash flow from continuing operating activities, despite the advantages regarding the use and analysis of these measures as mentioned above. Adjusted EBITDA, Adjusted EBITDA margin, Adjusted earnings (loss) per diluted share, and Adjusted gross margin, as disclosed in this press release, have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP; nor are these measures intended to be measures of liquidity or free cash flow.

To properly and prudently evaluate our business, we encourage readers to review the consolidated GAAP financial statements included in this press release and not rely on any single financial measure to evaluate our business. Reconciliations of Adjusted EBITDA to net income (loss), the most directly comparable GAAP-based measure, Adjusted earnings (loss) per diluted share to net income (loss) per diluted share, the most directly comparable GAAP-based measure, and Adjusted gross margin to gross margin, the most directly comparable GAAP-based measure are provided in tables later in this press release. We strongly urge readers to review these reconciliations, along with the financial statements included in this press release.

Forward-Looking Non-GAAP Financial Measures
This press release and statements made in our conference call today also include the forward-looking non-GAAP financial measures of adjusted EBITDA, adjusted EBITDA margin, adjusted EPS and free cash flow guidance for the fourth quarter and full year 2026. We calculate forward-looking non-GAAP financial measures based on internal forecasts that omit certain amounts that would be included in GAAP financial measures. We have not provided quantitative reconciliations of these forward-looking non-GAAP financial measures to the most directly comparable forward-looking GAAP financial measures because the excluded items are not available on a prospective basis without unreasonable efforts. In addition, the Company believes such reconciliations would imply a degree of precision and certainty that could be confusing to investors. It is probable that these forward-looking non-GAAP financial measures may be materially different from the corresponding GAAP financial measures.

Investor Contact:
Tom Colton
Gateway Group, Inc.
AEYE@gateway-grp.com
949-574-3860

AUDIOEYE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

Three months ended September 30, 

Nine months ended September 30, 

(in thousands, except per share data)

2026

2025

2026

2025

Revenue

$

10,963

$

10,227

$

32,232

$

29,817

Cost of revenue

1,871

2,312

6,439

6,545

Gross profit

9,092

7,915

25,793

23,272

Operating expenses:

Selling and marketing

3,304

3,649

10,806

11,169

Research and development

889

1,118

2,848

3,471

General and administrative

3,644

3,506

13,365

10,998

Change in fair value of contingent consideration

—

(40)

—

(1,350)

Total operating expenses

7,837

8,233

27,019

24,288

Operating income (loss)

1,255

(318)

(1,226)

(1,016)

Other expense:

Interest expense, net

(265)

(236)

(763)

(709)

Loss on extinguishment of debt

—

—

—

(300)

Total other expense

(265)

(236)

(763)

(1,009)

Net income (loss)

$

990

$

(554)

$

(1,989)

$

(2,025)

Net income (loss) per common share – basic

$

0.08

$

(0.04)

$

(0.16)

$

(0.16)

Net income (loss) per common share – diluted

$

0.08

$

(0.04)

$

(0.16)

$

(0.16)

Weighted average common shares outstanding – basic

12,583

12,414

12,512

12,417

Weighted average common shares outstanding – diluted     

12,971

12,414

12,512

12,417

 

AUDIOEYE, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

September 30, 

December 31, 

(in thousands, except per share data)

2026

2025

ASSETS

Current assets:

Cash and cash equivalents

$

9,327

$

5,288

Accounts receivable, net

5,772

6,557

Prepaid expenses and other current assets

878

777

Total current assets

15,977

12,622

Property and equipment, net

105

146

Right of use assets

297

168

Intangible assets, net

10,826

12,515

Goodwill

6,682

6,682

Other

41

97

Total assets

$

33,928

$

32,230

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued expenses

$

3,442

$

4,851

Operating lease liabilities

57

218

Deferred revenue

8,350

8,619

Contingent consideration

300

225

Term loan, current

850

503

Total current liabilities

12,999

14,416

Long term liabilities:

Term loan, net

15,380

12,479

Operating lease liabilities

254

—

Deferred revenue

81

5

Contingent consideration, long term

—

300

Other

138

226

Total liabilities

28,852

27,426

Stockholders’ equity:

Preferred stock, $0.00001 par value, 10,000 shares authorized

Common stock, $0.00001 par value, 50,000 shares authorized, 12,676 and 12,383 shares     
issued and outstanding as of September 30, 2026 and December 31, 2025, respectively

1

1

Additional paid-in capital

110,937

108,201

Accumulated deficit

(105,862)

(103,398)

Total stockholders’ equity

5,076

4,804

Total liabilities and stockholders’ equity

$

33,928

$

32,230

 

AUDIOEYE, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES

(unaudited)

Three months ended September 30, 

Nine months ended September 30, 

(in thousands, except per share data)

2026

2025

2026

2025

Adjusted EBITDA Reconciliation

Net income (loss) (GAAP)

$

990

$

(554)

$

(1,989)

$

(2,025)

Change in fair value of contingent consideration

—

(40)

—

(1,350)

Interest expense, net

265

236

763

709

Stock-based compensation expense

1,191

1,281

3,678

3,693

Acquisition expense (1)

21

—

123

33

Litigation expense (2)

492

607

3,398

1,936

Severance expense (3)

—

—

344

304

Lost deposit on alternative financing

—

—

—

50

Depreciation and amortization

927

918

2,901

2,581

Loss on disposal or impairment of long-lived assets

—

5

5

61

Loss on extinguishment of debt

—

—

—

300

Adjusted EBITDA

$

3,886

$

2,453

$

9,223

$

6,292

GAAP Net income (loss) as a percent of revenue

9

%

(5)

%

(6)

%

(7)

%

Adjusted EBITDA margin (4)

35

%

24

%

29

%

21

%

Adjusted Earnings per Diluted Share Reconciliation

Net income (loss) per common share (GAAP) — diluted     

$

0.08

$

(0.04)

$

(0.16)

$

(0.16)

Change in fair value of contingent consideration

—

—

—

(0.10)

Interest expense, net

0.02

0.02

0.06

0.06

Stock-based compensation expense

0.09

0.10

0.29

0.29

Acquisition expense (1)

—

—

0.01

—

Litigation expense (2)

0.04

0.05

0.26

0.16

Severance expense (3)

—

—

0.03

0.02

Lost deposit on alternative financing

—

—

—

—

Depreciation and amortization

0.07

0.07

0.23

0.20

Loss on disposal or impairment of long-lived assets

—

—

—

—

Loss on extinguishment of debt

—

—

—

0.02

Adjusted earnings per diluted share (5)

$

0.30

$

0.19

$

0.72

$

0.50

Diluted weighted average shares (GAAP)

12,971

12,414

12,512

12,417

Includable incremental shares (Non-GAAP) (5)

—

229

348

174

Adjusted diluted shares (Non-GAAP)

12,971

12,643

12,860

12,591

(1)

Represents professional fees incurred in connection with acquisitions and dissolutions.

(2)

Represents legal expenses related primarily to non-recurring litigation.

(3)

Represents severance expense for an employee from a previously acquired business and for employees impacted by a reduction in force in 2026.

(4)

Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of GAAP revenue.

(5)

Adjusted earnings per adjusted diluted share for our common stock is computed using the treasury stock method.

 

AUDIOEYE, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES

(unaudited)

Three months ended September 30, 

Nine months ended September 30, 

(in thousands)

2026

2025

2026

2025

Adjusted Gross Margin Reconciliation

Revenue

$

10,963

$

10,227

$

32,232

$

29,817

Less: Cost of revenue

1,871

2,312

6,439

6,545

Gross profit (GAAP)

$

9,092

$

7,915

$

25,793

$

23,272

Gross margin (GAAP)

83

%

77

%

80

%

78

%

Add expenses included in cost of revenue:     

Depreciation and amortization

$

466

$

494

$

1,458

$

1,432

Stock-based compensation

56

61

202

198

Adjusted gross profit (non-GAAP)

$

9,614

$

8,470

$

27,453

$

24,902

Adjusted gross margin (non-GAAP)

88

%

83

%

85

%

84

%

 

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SOURCE AudioEye, Inc.

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Lingbo to Showcase Intelligent Electric Drive Systems and Powertrain Solutions at EICMA 2026

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MILAN, Oct. 26, 2026 /PRNewswire/ — Wuxi Lingbo Electronic Technology Co., Ltd. (Lingbo), a China-based developer and manufacturer of intelligent electric drive systems, will participate in EICMA 2026, held November 3–8, 2026, at Fiera Milano Rho, Italy. At Hall 18, Booth E53, Lingbo will showcase its motor control technologies and integrated powertrain solutions to European manufacturers, distributors and industry partners.

Lingbo develops motor controllers, electric motors, battery management systems (BMS) and integrated powertrain solutions for electric two-wheelers and light electric vehicles. Combining in-house hardware and software development, the company provides electric drive solutions for manufacturers with different vehicle configurations and performance requirements. Built around proprietary field-oriented control (FOC) algorithms, Lingbo’s motor controllers are designed for smooth torque delivery, responsive acceleration and low operating noise. The solutions support regenerative braking, closed-loop torque control and CAN bus communication, enabling integration across electric motorcycles, off-road electric motorcycles, light electric vehicles and electric three-wheelers.

Beyond individual components, Lingbo offers integrated hardware and software solutions, supporting customized powertrain development and vehicle integration. Its in-house R&D capabilities and experience serving international two-wheeler brands support collaboration with manufacturers seeking electric drive technologies.

Through EICMA 2026, Lingbo aims to strengthen its presence in Europe and connect with OEMs, distributors and technology partners to explore product development, technical collaboration and regional distribution opportunities. “Europe is an important market for Lingbo. EICMA provides an opportunity to introduce our technologies and connect with manufacturers seeking reliable electric drive solutions,” said Julian Xu, Senior Overseas Marketing Manager at Lingbo.

About Lingbo

Wuxi Lingbo Electronic Technology Co., Ltd. focuses on the research, development and manufacturing of core components for new energy transportation vehicles. Its main products include intelligent controllers (PDU/VCU), brushless DC motors (BLDCM), permanent magnet synchronous motors (PMSM), BMS, and instruments, which are widely used across applications including electric two-wheelers, shared mobility, water transportation, and special vehicles. The company integrated intelligent safety functions such as TCS and steep slope descent control.

Industry professionals are invited to visit Hall 18, Booth E53, from November 3–8, 2026, to explore Lingbo’s technologies and discuss potential partnerships.

Website :  https://www.lbelectronic.com/

Business Inquiries: julianxu@lingbomc.com

Media Contact: maozenan@lingbomc.com 

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Robo.ai Inc. Announces Results of Extraordinary General Meeting

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DUBAI, UAE, Oct. 26, 2026 /PRNewswire/ — Robo.ai Inc. (Nasdaq: AIIO) (the “Company”), a UAE-based, U.S.-listed company, today announced that each of the proposed resolutions submitted for shareholder approval as set forth in the notice of extraordinary general meeting of shareholders dated October 16, 2026 has been adopted at its extraordinary general meeting of shareholders held in Dubai, United Arab Emirates today.

After the adoption of the proposed resolutions, the seventh amended and restated memorandum and articles of association are adopted. Following the effectiveness of the share consolidation and increase in authorized share capital on November 6, 2026, (i) the Company’s authorized share capital will be US$19,250,000 divided into 385,000,000 shares, comprising 35,000,000 Class A ordinary shares with a par value of US$0.05 per share, and 350,000,000 Class B ordinary shares with a par value of US$0.05 per share, and (ii) the Company’s issued and outstanding shares will comprise 552,700 Class A ordinary shares with a par value of US$0.05 and 8,894,680 Class B ordinary shares with a par value of US$0.05. All fractional shares resulting from the reverse stock split will be disregarded and not be issued to the shareholders of the Company but all such fractional shares will be aggregated and, if possible, sold and distributed to the underlying shareholders as per latest decision of the board of directors of the Company.

About Robo.ai Inc.

Robo.ai Inc. (Nasdaq: AIIO), headquartered in Dubai, United Arab Emirates, is a Nasdaq-listed technology group building intelligent infrastructure across four platforms: artificial intelligence; robotics and smart mobility; advanced manufacturing; and digital assets and capital. Its industrial group, Alif Holding, is dedicated to building intelligent industries through the development, integration and manufacturing of AI systems, serving government, public sector and mission-critical domains. Through its subsidiary Neurovia AI, the Company develops AI software and visual data infrastructure. Quantum Core Capital (“QC Capital”), its AI-powered deep-tech holding and venture-building platform, incubates, invests in and operates businesses across artificial intelligence, robotics, digital infrastructure and the next-generation digital economy.

Forward-Looking Statements

This press release contains statements that may constitute “forward-looking” statements pursuant to the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “aims,” “future,” “intends,” “plans,” “believes,” “estimates,” “targets,” “likely to,” “challenges,” and similar statements. Robo.ai may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases and other written materials, and in oral statements made by its officers, directors, or employees to third parties. Statements that are not historical facts, including statements about Robo.ai’s beliefs, plans, and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Robo.ai’s strategies, future business development, and financial condition and results of operations; Robo.ai’s limited operating history in its current business; Robo.ai’s ability to generate positive cash flow and profits; Robo.ai’s ability to compete successfully; Robo.ai’s ability to build its brand and withstand negative publicity; and changes in customer demand and government incentives, subsidies, or other favorable government policies. Further information regarding these and other risks is included in Robo.ai’s filings with the SEC. All information provided in this press release is as of the date of this press release, and Robo.ai does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact:

For investors:
Robo.ai Inc. Investor Relations
E-mail: ir@roboai.group 

For media:
Robo.ai Inc. Corporate Communications
E-mail: pr@roboai.group 

Website: www.roboai.group 

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SOURCE Robo.ai Inc.

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