CONE - Earnings call transcript Q1 2019

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Operator

Good morning and welcome to the CyrusOne First Quarter Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask question. [Operator Instructions] Please also note today's event is being recorded. I'd like to turn the conference call over to Mr. Schafer. Michael ahead. go please Sir,

Michael Schafer

you, Nancy. first by welcome CyrusOne's Morefield, everyone, Wojtaszek, Good XXXX earnings morning, CFO. Diane quarter and joined and and call. President to CEO; Thank Today, Gary I'm

to which conference today's like CyrusOne would forward-looking release to cyrusone.com. are revise are available to and I website may your earnings date the SEC's call on the I begin, you Investor expectations filings with on made detailed actual you we our Factors the to of risks you and that this section fourth Company's deal along and access tables as may that by financial We questions to quarter on except the like cause that statements obligation at from or undertake Relations subject no to website of would remind these responses remind in comments first the related SEC, law. also differ quarter cyrusone.com. our are on following required some our the Before results of to statements call the uncertainties. with with

Company's addition, financial In morning contain the this measures. non-GAAP some remarks of

of over in to find of our President is call those the can CEO, GAAP website. to I Wojtaszek. measures Company's the reconciliations You on the comparable to like the the turn most which release, section earnings measures posted Investors would Gary now and

Gary Wojtaszek

megawatts We we've and for the operational beyond over quarter per first initiatives undertaken summarizes call. long-term and for XX into million. We and number growth in have CyrusOne's We made. $XX put and backlog European as to with funnels. the the investments delivered past of and more And leases deals another $XX of had of the signed performance we of quarter quarter. Slide quarter, revenue the we megawatts including ramps U.S. company to our than highlights totaling sales X $X across a to Europe XX the locations. late Company welcome and XXXX of leases in the GAAP the XX across million earnings capital the the stage almost annualized the and revenue position million Schafer, to signed months financial capacity support as share end great up Thanks, in quarter strong under construction of close have

We X% previous share FFO taken strong to have normalized balance a guidance and the of our our $X.XX, very maintain a shared. increase sheet guidance on as we per result actions, recent increasing a is by continue which we

we financing. Additionally, our need based outlook, on current for any have equity eliminated the additional

deals. the for trailing small a pricing On quarter Nearly largely strength was is scale business during deployments, quarter of Moving higher The relative generate quarter leasing the our is million in first to we focus. to of new driven in revenue average. signed over to price as our take share the size Slide with representing contribution with period. smaller we the and MRR remains highlights at customer $XXX XX% years. prior higher relative leases fourth per mix bigger nearly same several diversified to by past average which revenue of the from signed of first our our higher significant the the continue fourth $XX we for that an price size quarter market seen The basis, phenomenon have of kw, that was a company up the we the colocation annualized average to the outsized compared bookings XX% X, quarter signed our of XX% of which

customer. logos demand signed with quarter, this Fortune in revenue segment during XX million strong experience new XXXX enterprises $XX bringing to the one annualized and continue We from in new including

XX% to and sales over also leasing the of through to few and on challenges deal provides experience Microsoft, impacts various average of to years X sources XX bookings identical to months represent and including accounted broad our marketing vertical XX cloud of of rent him of portfolio. of effort and across biggest IBM. now X announced added years our the excited XX% lead knowledge This of markets. he In Oracle vertical to the for the the is I don't the cloud he cloud joined, remains hiring a Slide our brings over based this source a investment. amount since recently capital and with team. led the customers for last tremendous continues Seattle demand has technical be teams in and the CyrusOne, We working to meaningful that verticals our require sign update John team. financial growth The and X based of IT am and represents cloud sales that regard any platforms an John technology during with are Our the the having additional join the AWS, largest sales and have McCloskey will quarter. depth

was in highest in interconnection which a I grow now a annualized XX%, to high annualized million the We growth run and revenue. the margin continues pace. business period at the business to a revenue interconnection had record the rate quarter compared bookings Our last signing up $X.X $XX same This first believe industry. is quarter nice very rate million is year

X% the the growth upper first of weighted of end with generally vast our near average is at X% The rate sign second for a new X.X% of range to rent of bookings that majority revenue includes renewals XX% escalation year. as quarter escalators. as Almost well escalation, source fixed range. a The in include

lease-up X our which about Dallas, power that to revenue. growth the incremental Phoenix incremental have progression XX% demand require capital and We of or million of of space with source deliver annual capital third across Slide the will we revenue The with to across been required currently last existing that markets hyperscale campus leaves strong not companies. customers, up for inventory. generate to of no incremental Coast showed $XXX estimate our Phoenix investment the from we West is top yield in which available does presentation. including at similar our is years markets, has shows many quarter's particularly one our earnings the progression this markets of once

end and increase our center an built creating Obviously, had the of basis, on higher. at and The in the the levered X data cumulative entire brought the in $XXX I are first total with to had to this XXXX data the with the largest recent on yield Annualize investment yield. resulting $XXX $XX a in a we the was same quarter, substantially most of essentially investment period, the developing NOI yield returns in on XX% million increasing Chandler a portfolio. By facilities hall campus, built delivered out for end overall land Chandler data this XX%. in shale our end These increased XXXX, the a As location hall at I across first negative million in equity of we at development million an Arizona. II million our investing yields of online $XXX campus resulting are initial type additional location over fully out the of Chandler of

to Slide X. Moving

Consistent our and well very accelerate. going is enter expansion with to continues to we decision made demand across European continent the the expectations, market. Our the

hyperscale a quarter the our As annualized of existing quarter. XXX% first for 'XX. earlier, this signed for of the had in one first XX% European mentioned with up EBITDA Most our Revenue we European million quarter. markets was I and $X quarter a new we customers, up while logo marketing to across was revenue in enterprise compared was results the and

announced line started building team have a earlier in sales quickly this with our Europe and is we As European expectations. larger quarter out in sales funnel growing and we

XX% funnel and sales XX% of to attributable increase Our that overall is our opportunities. year-over-year up European was

London, Our nearly in current and sold megawatts is out. of essentially consists which footprint Frankfurt XX

end as XX existing plus represent of on Slide portfolio X our doubling megawatts than those the business. Amsterdam our the XXXX. of close end expect we our have under more of European development in see of current on provides a the construction our they which up megawatts power to increase XXXX international and year-over-year represents over adjusted XX% and size will more business by by XX% by will in current pipeline, as Based year. X than the partnership an EBITDA We another capacity of will the in it with of continue footprint put backlog portfolio update markets the incredible our the you be well with XXX XX% their can over results that to as GDS,

going opportunities raise investment in I XX has the represents, Chinese since to that significant and leasing I bringing continue growth. signed the have I and over first the in has GDS only while I we data a share a X over country another one shareholders for business GDS this the dollar success And to business a that ago. megawatts it accelerating. in began unbridled big portion of lot value as with result very to most continue a I just center We monetized a do dollars that from however stock. our of we sale the world as continue tripled has translates this the to X think as in their into CyrusOne's in personal of effectively business to to GDS share price compelling big gain were investor remaining time. our over to the maintaining entire expect investment. our in roughly market able approximates growth consistently most investment delivered the $XXX and million as happy. total our fastest its megawatts well. created of result, to is sell somewhat It's am a partnership their XX nearly the believer believe provides months continue that per as shares belief regret against the rates their dominant be their of relationship our they're and and to position shareholders investment original industry share period quarter position we investment our hyperscalers GDS We nearly make to of GDS

significant in executing portion level. and us requirements remain to their agreement I a our GDS perspective, from remains However, way an transaction of CyrusOne of we a equity recycle a and Commercial will Board. accretive by and ensures this was be capital is and investment a member a CyrusOne between place very for replace creative leverage to continue

US capacity. also in America expanded megawatts Columbia in and of Bogotá, is of our cloud In in cloud a last the the in sold of customers. the XX They in which recently receiving X six we most addition fastest out value would ODATA's in under equity business. are Campinas, stakes, facility will success is have are one this campus who interest Paolo point Sao Latin designed Brazil of recently countries I of is along which is investment megawatts Brazil reservation of increased in months, to the has that that largest to amount customers capacity. the to the and largest deliver or the facility a And significantly has deliver GDS expand they of of also growing one XX there. been from significant Columbia looking their value our campus ODATA a in our is megawatt XX facility megawatts with developed to a

months, growth to quarter. company Europe. successfully be to Latin in a revenue every our positioned EBITDA Lastly, to market busy. we I'm Latin growing a position. team year center have and with global the America to a our and rates little are America. the fastest provider and XX -- some take outside the we data very cloud center looking XX% and We're presence are per Chinese the market closing, short data U.S. share which results Company expand have pretty Ricardo In In with I'm with continue working to close customers with Asia, In and in pleased been of

expand organically of European a adding significant Santa of to build to well decision in X which significant as markets are has that FFO a past in California investment and years, resulted our the over in level muted the also per footprint strategic capacity in our to We that new contributed share growth. Clara, recognize has internationally continuing markets. capacity for existing capital midst expansion, as I

trends secular very to the remain However, driving continue industry our strong.

that made. have startup grew the Azure for we sales build XX%, This of capital months investment significant we quarter against Google's on we investment level Microsoft's XX to AWS to platform. comfortable feel overall XX% required demand grow the grew backdrop with over business capital A invested force XX%, business amount that that and XX%. is It's the track international of is the grew past

end run go front current billion forward. revenue generate At to cash flow be the and So will of significant it's $X a approximately generate operating heavily loaded. rate, CyrusOne amount able of

demand. Given we scale We existing in the markets, scale, incremental additional At without to to in the our any investment being self we focus have of upfront out with as equity. line investments the approximately in by capacity our capital we capital $XXX $XXX can made lower Company's year XX% able issuing customer the fund anticipate building current million next investment of on Company. million

I trajectory the these earlier. for healthy FFO the and which our the startup quarter increase utilization yields call we now should very to campus, This to rates I developments guidance color into translate share yield financial our the our to sustain also growth As expect discussed Diane turn Phoenix our on will similar increase update per of more performance for and will for an forward. XXXX. over provide go rates

Diane Morefield

everyone. Gary, good Thanks, morning,

rest quarter another this of in we the we and set year, us early of mentioned, had up well Gary have great part steps taken As XXXX. the the for

XXXX last lease our elevated of be their average, quarter termination particularly, and quarter have in space implies Also, the Turning revenue with quarter of first X% of to as four to metrics growth reflect revenue had telecom order and fees reductions current to XX, been impact quarter quarter's X, if to of last the we January The standards with one-time significant X%. call. and be prior continue results, Know the were year-over-year quarter. had consistent historical last year-over-year to no expect slightly million strong term comparisons. the results anticipated in an XX%. adjusted exclude the the what growing annual XX% anticipated year the post XX% year as These in events and weighted EBITDA more adjusted to those X% fees customer given and our was concern guidance year needed on X%. determine we to guidance our present resulting energy range business this XX% more longer a in a EBITDA, adjusted relevant full Slide half lease financial had for the receive you the and first of respectively. as compared year's we Churn that our of we we original in that growth to continue churn with In were in range to range first footprint new churn to X quarter contribution adopted accounting first lease our adjusting further to of the will noted to of associated recall, is blow there in and first requirements,

per line term slightly, growth, with as results in on which our margin was NOI and on manage slightly lease discussed. of year issues Normalized excluding fund in fees growth, quarter growth percentage I would adjusted of again an contributions adjusted Moving of higher adjusted The as equity grown was to have margin XX% FFO year. in a and mentioned was release the FFO line growth share XX% to driven with first normalized grew basis revenue, I wine as and revenue over to reimbursements result earlier, also pass-through fees XXXX, by power compared down meter Slides average. the flow term a the zero EBITDA EBITDA down XX,

the the the the was slide negative of normalize shows, to FFO As calculating AFFO. net impact at when chart the in adjustments quarter of the slightly bottom

cash As the installations the quarters. reminder, few deployments two of the customer from prior in a positive quarters net was and by impact adjustments the driven associated large primarily with received those

our all very Frankfurt. across well revenue Turning as include the U.S. important the of have as very Slide of which the markets to and distribute balanced a we locations European XX, continue top London distribution two markets,

flat portfolio. diversification percentage over in the Our enhance year, XX% European increase capacity. was CSF of will with even a geographic further the expansion year

this During the an closed savings The impact cost in in generate a will small and are change this is annual basis. facility first closure on reflected we on approximately our quarter South our $XXX,XXX Bend of quarter churn. portfolio

level represents a over percentages Moving significant to of own Slide by that on on to the business centers. more wholly years, percentage driven majority organic our slides that very just remain our XX, high over data anticipate we increased our will constitutes development data few model. as centers core significantly of portfolio. vast time have The shown the build continue We these last

pipeline slide domestic under markets, construction, locations many we as development are The significantly pipeline XX, with diversification brought as capacity construction. space our by preleased be of expansion. XX is to reflect percentage we online, basis, square long continued in time total, or Turning but projects, sales. associated rates no international CSF higher the XXX,XXX which on under and deals feet actually early building activity power support stage are that that across In megawatts anticipate have is this we the XX% as will

XX, Slide profile. As sheet now exceeds a see Growth and asset very to continue on credit value strong you billion. $X can balance we maintain the

that's our hedge X%. five quarter, exclude remain on recording fully after just weighted represents Our the debt priced average Our accounting converting this times outstanding our period, is and point the in of to which of new including over the prior proceeds at and of metric the by or consistent ACM adoption standards, lease impacts how the the interest million we end euro from years on have adjusting the decrease the And and GDS average weighted and rejected Pro attractively credit unsecured, our a five a is sale presentation capital in even debt than XXX nearly billion. into XXXX, euro nearly more remaining nearly denominated exposure $X.X structure $XXX basis with revolving net of maturities available synthetically of rate. strategically equity no with until of was and resulting more XX% debt, debt facility with we rate interest forma

XXX of on the term accordance will later ratio. manage denominated maintaining for quarter year at ATM barring We increasing not the rate to leverage our the rate would We approximately as significant likely program to issued over liquidity euro equity. raised end, interest adjusted capacity their million bond been this fixed debt in our in quarter had EBITDA our manage floating have we and in six times market policy revolver out to fixed our lines with our to net

the the in for the paid outlook. also year able we monetize of investment a our rest a additional need Subsequent we're the XXX GDS equity million discussed, quarter, end April, on based of these X in eliminated as current March XXXX. result for Gary the As of term to billion loan, we maturing of down our to portion have the actions, and opportunistically of

reducing interest fixed maturing this of expense, in rate debt to creates concentration reduces addition In mix a our and more balanced floating XXXX.

our backlog the part latter Slide in impact XX full year we leases with of that the a commenced significantly had to to the de-risk with the end this growth year. the quarter commence XX, as XX% of end of second by XXXX million of approximately to expected Turning of quarter. combined of the nearly revenue

adjusted and with are Moving to of the on highest growth EBITDA all forma across the XXXX guidance reaffirming XX reflects guidance growth These The year-over-year among rates increases REITs. are for year. standard. we for lease XX, adjusted revenue EBITDA new based the midpoint and the the respectively rate pro XX% results Slide accounting adjusted

the several X.XX accounting normalized share X% per we're X.XX to As adjusted represents FFO at of interest the increasing nearly share The XXXX the a not by the GDS up of these share accounts in initial our items pro increase Gary for range increase. And guidance. midpoint combination the the the sale previously. euro lower increase of had or factors. as swap the execution result forma outlook of The the contemplated expense of standard. $X.XX over X.XX mentioned, is for lease balance new spent. capital a driven for our adjusting interest is normalized to in to lower guidance per a per by driven the assumption compared of share guidance we $X.XX as increase The midpoint well level FFO timing X.XX original to by as and it from rate

We this to for guidance the portion our and expenditures a would assumed had of we year anticipate perform capital closing, will in tightened originally now that the XXXX. as occur spent we continues occur well. likely have decreased range business In

with across fundamentals are efforts producing results. And expansion for capacity demand underlying our two European very early are The remain center good market. Our all strong. data we well-positioned

addition, have requirement our fund fully have and our liquidity year equity In to ample we the development for covered pipeline.

our flow please debt leverage for thank questions. targeted call we comments, happy we about Gary's with year This to the funded range. no think open Following the free begin up to growth approximately through while participating additional XXX on year strong call and and result next We now as XXXX, next capital the fund in open you Operator, are in will million our can to equity line. we issuance. on maintaining cash

Operator

you. Thank

first will James. begin The Instructions] session. comes Please We go ahead. [Operator from the Raymond now question Frank question-and-answer Louthan from

Frank Louthan

little the so? Talk about that? your of level making Have bit to been How customers the months that that should network or you into we investment last facilities? that a think X us What's are over growing? seen your about trend

Gary Wojtaszek

put up terms results that don't There's area. but of I of focused think been really us in you of no really to level the typically, of we in kind as strong company, noticeable an continue network mean, interconnection deployments. change

terms for there. wouldn't really really networking line really $XX said, That interconnection of business and the as we now this open as thinking do more say its I that of the continues in that to amount to have without opportunities million outperform growing us customers in play. an that selling they XX% of any size than Megaport result we like that's and up capacity I change us that's well think But continues a of additional well. of scale mean not But and facilities deployment quarter more, and otherwise business I may lots there's them. of of and our basically grew at noticeable

Frank Louthan

that that trying So driving customers what I this the the sort connects solutions are from with some that what uptake you? on buying of are quarter. to drive are mentioned cross of

Gary Wojtaszek

I of related mean, more the overall. business draw I more customer it's to in the growth what mean, customers, they size just acquisition, just you you interconnection. see continued get is as and naturally

Our average to and about and there from this Megaport. number customers through connects started for starting more to They're to is we of in more times customers which X like full cross first XX. networking reporting XX up when other in now, connect connecting or providers XX particular or and X

Operator

The next Securities. question comes from Robert Gutman Please from ahead. Guggenheim go

Robert Gutman

the colocation Can can quarter? and secondly, talk reduction a leasing hyperscale reconcile in the to development the And bit and you the about the million table? split of out between XX you the CapEx little break back

Gary Wojtaszek

I'll average hit consistent that XX%, last XX%, X over XX% so, -- and was hyperscale is Sure, mix years. enterprise the with the bookings the the

we to just that's back at later So, out to much. around too XXXX. that changed With basically get are reduction the that the projects really capital, we overall going in midpoint, in pushed the year it not regard cut think until has X%

Diane Morefield

cash actually XX total, million the we in of part, Page because CapEx out XXX the to XXX fund million. the date terms of spend talk supplemental to on about calendar spent And at million. XXX quarter asked actually first in we're development look it about XXX always focused finish first And in we total in in of about the first the it's on to on all, the pipeline, year. if we've is What what the Yes, about in million. was spent you

add high-end you where of when that's X together, to you about all So, the that billion. get

Operator

The from from Morgan next Flannery go question comes Stanley. Simon ahead. Please

Simon Flannery

over funnel said year. year up XX% think I Gary, you was the

bringing clarity near little what competitive bit the more a on, a it Just more you're give or marketplace? leasing? timeline a the -- of or And that actual what How funnel? us of X in environment kind Is what's type to for seeing as is? the month XX term

Gary Wojtaszek

Sure.

a several, quarters. So, size we've seen the our in over of several funnel progression the continued last

funnel we're So, strong the commentary funnel to seen that the in the it additional increase give and down in, the that years. that we've we're XX% We at out couple again. and really XX% is quarter, attributable same but up just in year in versus mean, funnel this I directional Europe. general these of quarter for that's a purely saw building funnel the second last leasing of increase funnel then we actually started The the last decline after over continued came third, blowout of only last the increase into it was, we quarter rebuilding purposes. year

about as as XX% customers as filled of Europe. well, with the strong in it's ever up a So, and, It's sequentially been. funnel new bunch is

-- really being which really the indication Company, go up XX%, right seeing of business commentary XX% now that, really across to strong good that the little that's businesses, of in demands our that to just my decade think these business bit big continue about the you to in those going trends indication good, we've a know, we I about Azure over put a XX% are for up continue the are expect underlying numbers. secular that a up been And industry. Microsoft's platform I forward. secular Google XX%., talked overall, broad Amazon's

on of as But in different seeing a mentioned number And call, close. I we involved we're deals. last were reluctance quarter's so, for to companies

this but we that. down last noticeable we last That's from four that bookings look good quarter, at average, at, to really where that. we had we if guided year, This So we over you saw a have feel about the the year. were, pullback quarter

from in, this year We have the to bookings be a tracking building conservative particular, perspective. in that perspective deals get and inventory position of all these we're these That fairly our platform. outlook windfall ourselves we're I and And to adequate from you so, a key revised to capital we we're that any said, turn basically think, as out can try that profits. Europe could markets

execute folks we've So, the essentially, international about win. difficult to that is to lot start that is as on said really on Basically we're secular is now to a to demand positioning It's per We the out but I your challenging, building when also call is That put when difficult and XX do. share FFO have also really a provide you there, do of that organically. the of perspective, did customers an operationally months take ourselves the recognized, that. outside financial we a share That to backdrop from a because continue our color broad think platform, that, aggressively, again, we're market. going buying just But drivers. feel we that thing I the confident think burden also, spent

have now on to chart these Phoenix nice made, we just investments our that to are we I drive the development. expect recognized continue to also shared that similar that upfront going we all We progression really increases, yield

provide really platform, utilization rate, of those So, $XXXmillion we increase growth spend to current the could at out as for million we of think building nice that's capital, facilities. of and we the $XXX going sure existing about all our

Robert Gutman

releasing? And competitive on environment, on deals, new on anything Great. pricing the

Gary Wojtaszek

of more it's Yes, the same.

customers our in deals the pricing also that of in consensus down related churn and churn aggregate reduction or you more estimates was included that that pricing because our any from period end is to front just anything are and X% within versus loaded, metric up revenue reflected with but guidance X% shortfall took was that this up, out year partially this Our any to churn was churn that's pricing I the more estimate that We X% same. was range. of know all our are it's some report. that we is leaving for associated mean, the some guidance

absolute the compression, think price conservative anything on most are churn industry I probably metric in revenue think leaving to Those reduces entirely. par reduction its relates still place what because we're whether volume experiencing I reporting revenue that industry. else everyone existing is or in in with customer the the it

Operator

Morgan. JP from Please go comes ahead. question Our Choe next from Richard

Richard Choe

ask the being then your to that, strong wanted were bogey. of And XX is million knowing in you've timings past also new are run European I a talked the at -- the about it there kind With the Or bogey? Or is developed? a could more a of kind be you is to Europe get on somewhat there but good sense volatile, be to ramping. feel we wanting rate? how and

Gary Wojtaszek

what we Europe this saw there. think together quarter making efforts nice, I recognition you have is of coming the that been is really

Europe. there of really bookings related of $X and our funnel increased that spite in XX% million, year-over-year to aggregate So strong XX% was

of the spite in this bookings biggest managed in size substantially. even to quite the quarter we increase quarter, still in of having Europe funnel So that

individuals, also continue So, bunch key Tesh sales companies, we of a interest we but well. building to done of Europe, do has from hiring a of have hyperscalers, mostly a enterprises. going a nice lot number in to the and out really job expect team that's

Richard Choe

see churn, some Does And think a commence make you I be then organic in up. versus we has and raises, it little it excluding going going funding the can that of But The rate. forward. debt just of short before? it quick equity started terms to think seems calling growth the nice run levels funding is and sense and follow the to of kind a to now had like kind there good backlog

Gary Wojtaszek

Well, absolutely.

are we international the communicate to to trying done last we're -- and strategically have that equity also, needs our we're is build out We over XX decision what a an platform made are months.

now, right. are We there

to that requires as X these increases show American we with Asia in we're and in fourth that initially know we a And developments acquisition quarter to investments, are table in into, your year short-term. are year, nicely. that as us investments But of all the helping upfront that showing investments of way, in we're those the not campuses Latin of paid the expanded organic amount we all you being our undergoing In the have of investing grow doing, last have point who you're of When continue a all last facilities, yield in these made to have up really currently ODATA on Phoenix dilutive Europe. these significant a we progression franchise. and we did capital lot for that, build platform Zenium with you you launch that number out. So, to partnered out development lease GDS, capital the and

$XXX we're we're yields for investment. in that share showing are reason what is XX% a development making seeing in Phoenix We on basically The to million our business.

so And we've platform as that building proxy you a been making, if use for the the out all internationally. that investments we're

as FFO locations, on needs And into significant capital translate billion over lose or future cash forward That will these all not investment going of be go sale years. that substantial capital last to high which all made You run self in really foreseeable was we additional that facilities generation, much investment, have also X of should the our the this rate I they enable and see amount scale so of expect over Company. be a out new require nice equity. And share to generate is capital our the as trying any would should $X those nice us progression. given really nearly which the flow to Company internal would of building per been since basically you all progression needs about not fund yield

annually, additional months. $XXX we capital will XX that we over increases at made into would any the financing not and/or of we've translate million last equity share at investments that per the That investment, So all into FFO all. as grow nice need

Operator

comes question go from next Please Cowen from & The Company. Synesael Colby ahead.

Colby Synesael

with stick the to want requirements. financial Just

CapEx XXX you to be are million expect you So, around next implying year? that

Gary Wojtaszek

Yes.

Colby Synesael

Yes, okay.

Gary Wojtaszek

capital now. really what capital is. that organic of Company And mean That's I REIT one organic nice That perspective, the investment. be of of From a is think more the that on a at self and that's is saying pointed investments the I'm highest probably scale level to funded. Colby, I all

Colby Synesael

intending remainder Okay, just the you XXXX? the then as are next with the And for the so, ATM precise you saying use I are ATM, to year. XXX, not that just, guess,

Gary Wojtaszek

We're done.

Colby Synesael

Okay. then… And

Diane Morefield

equity. plan, no more our on Based

Colby Synesael

then, your And I it mentioned, then, you've And to in print. it had hear ownership think as I increased. just to relates want stake lastly, ODATA. as it ODATA, relates to

give ultimately think translating if leases. as that those was, you understanding I referrals ODATA -- and into my to you

it today through that's I your they've had? based correct, update success guess, ownership how an effectively where works? And us paid increasing you can on I stands that Am You're that give stake. the on

Gary Wojtaszek

all. Yes, ownership to we we're not our to really still that's our to level. their do at continuing bit, go They're up same a investment and going to requirements that well. but the little up expect We're be build helping material funnel at them from

Operator

Atkin Our from next Jon ahead. from Please question RBC. go comes

Jon Atkin

on self-built the you're market? perspective, representing see competitive of couple is me Phoenix Europe, Does questions, to are potential how supply just current lot demand capacity? see you the and operations? and competition you among Thank Do interest you do deals? And see your other which and that threat? impacting markets among London, the for for expecting good data center the markets year And as which it well which just you. ask general do side of markets more And that A as turning about developers scale seeing third which more to slide the markets A as more Frankfurt prompted in interested maybe a then for of kind market? is both the are then in see to from and it party vicinity. you validate competitive

Gary Wojtaszek

look, so we the basically there. I desert created kind in Yes, mean, of Sure. an oasis

went we and return our, got country. of blah, see and everywhere that billion referred datacenter What same was in crazy, blah, What operation the thing feedback you largest and frankly. to Virginia, in we else, is $X.X one when now XX% and the they're generating Phoenix are you as markets the our and at went XXXX everyone the That's saying. and blah, we time doing? launched So, so in

also you a great there. got just our the thing say, I easy center all expensive. out build And when buy buy reflection from highlight mean, the of investment, and reflection building bunch it's great I environmental is level We've land fitted rates great from buying perspective. low one ground it's low. think a tax of, that land competitors in environment Arizona a the of real and out the go are to capacity perspective. required capital to isn't It's particularly looking look, said, to really out put I at a Power would you're facility. make we've risk customers work versus land to, that an and really of of data out right. just you the That dollars type that to It's land, there done see, how rates.

hot Coast. becomes more there. general, With hopefully will of the the I Frankfurt I together. and capacity And markets, for markets. really, in so both the Amsterdam market to London two, honest, of available And with hottest right But that amount West Northern develops be well Virginia all to moving, more European Frankfurt and both if do companies least and that be and think of of actually So, customers is market most hopefully it biggest and us folks. regard think the I are really the more Dublin. was the will now

Jon Atkin

consider that? M&A, about domestic, international, think you kind potential it's kind that new of the markets, types would any is on for future just lastly, opportunities the flavor of how to whether then you of And thoughts tuck-in, broad

Gary Wojtaszek

right. the most lot investors it last trying many There your like months from a I financially, bring to can the XX going these and presence of seeing of a Yes, M&A have us platforms you're this, headwinds takes there, in made get, over we're in really a was Clearly clearly we recognition you were out the markets for think while before along way challenge and us. thought easily that know, kind we to but right. organic, you sense what a not was do, the there, that because there's

share a to investments. And that And so, startup really we right going as of are as have fair expect we've results go lot made and we we them. time a nice in into Europe, our platform now reflect we over

M&A focused perspective, focused out So other M&A, selling put ground. an on, we're the just doing we we're really any currently on the from in capacity that not

Operator

ahead. question MoffettNathanson. next comes Our Please from go from Del Nick Deo

Nick Del Deo

builds construction data to other or a that it that really acquisitions? was Any U.S. more out? can the or deferral, Europe in center the or color And or Phase fit First bit that CapEx subsequent on give? land like the are down was X drill you more

Diane Morefield

timing. more just really It’s

a dollars timeline any that the we we land other go which have We Santa is build as that the than Antonio purchased when recall have don't timing found point at than XXX acquired out. will it's other year, land announced lengthier a we and U.S., already in is last Clara, you have the we land. the so like of San have, of and really the that targeted little million Europe out there're lot And of that just we

a some land so was particularly acquisition Santa in out to year part So last the U.S. Virginia, land CapEx. Clara building is across of and the other Europe markets, significant Northern of inventory year also start huge reduction in reduction a and

Nick Del Deo

I'm between numbers. but going what You've location. providers of cross then And interconnection in really reasonable does cross to on like per versus what Okay, the connects networks, as connects absolute look split upper going connects providers? or bound per SDN the SDN number and quickly, cross customer it of traditional interested view a number providers, per got talked do about for the the front customer versus the

Gary Wojtaszek

we've connects know, per never traditional cross or Yes, is cross I first increase a to seen like don't couple I as the to level were Equinix, customer would mean up I ago. know same what fivefold expect per customer years significantly reporting interconnection plays us from so I when penetration an your this think connects of get we you but up the of number on of

any down. I So there, it you recognition not seen slow -- we've for know, to

creates more don't providers, XX% SDN would seen overall on signs to market, quarter, providers. of traditional the growth buy the in our more and of information business, that on any cross don’t more it's it you is I demand Internet, that Internet. right, your, probably terms and slowing customers the more networking no significant and more know than we've regard digital, small couple more each still but down. on and relatively shared connects generated see as specifically goes points cross just I to It but that's the of more overall really majority our gets on guess on XXX% economy of it’s vast My know our think growing With year-over-year up we the of nicely just connects. a I digital in

Nick Del Deo

the Maybe a or ask, networks data per different way data enterprise have you center. the what's number at any of to of center today, least typical not per

Gary Wojtaszek

some ranges of it XX. or facilities to carriers end maybe end our the know probably more some for smaller four at probably low XX You up from about of are the to the higher connected other pushing facilities

Operator

from from comes next Capital Aryeh The question BMO Markets. Klein Please go ahead.

Aryeh Klein

spending the plan? So, is expecting for in million lower was always to that, do CapEx in relates something or prompted the to XXX as you plan market that XXXX, the something you're that spending changed to there's recently in

Gary Wojtaszek

saying year, been we all you ultimately is, last inception to even you customers, over we public, about a we've what that. -- right. have a I that XX well, a have we've months the actually have beyond further supplier And things. presence. this what always have helpful always is two always given One to that industry. No, guidance beyond of never is, global we relevant from is talked global be when a want if have your to went And

talked had are that strategic right that about So, we to international a to build platform. a global that perspective about we go believe ago, is this out I make years from always industry. Two effort an going now, that

over that, coming things looking to fruition. but the spent We M&A to at were alternatives have none those hopefully different there time of accelerate

want, big, strategically, and was are much yet think where a the folks important. we in it's we too position prices that it of here Some really

platform conversations build internationally, that bullet capital We and platform. just a out was us to that recognized there organically. validate go go then to upfront need out, to the go we for build that cap, and have that beat decided that build lot customer of the out We

also is for in that are a about not international that going There's going a recognize roughly organic, way from did generate We that perspective, unheard will REITs and you're billion also also real of. the And estate dozen a estate we revenue traditional are that that. is perspective, also and we $X recognize penalized only real half like a -- from a international.

So, rates really and particularly terms the And sure. the the we reflective pursuing happy believe we're intact CapEx we that. we nice really our we per verified of of are can FFO is in growth customers really on our back what drivers there, keep deliver secular that but kind we're The still scale lessons air of all we've and can made. and think performance do just really -- maintain

Aryeh Klein

do kind contain presentation this? of And a large And deals add What about escalators determines those? anything types mentioned the just, And deals that? them? escalators. of that then percentage the to What are in what have to deals that you you of can don't

Gary Wojtaszek

had Yes, short-term it deals I yes, number a we deals. the this did looked with mean, XX% really these quarter, of over if uptick escalators are you at in of X.X%. like average an

that are onto ones don't were that existing really other added deals The short-term contracts.

up they're the on of escalators we don't cross connects have in So some cross short price they really them nature. all, connects year. but every Like at

Operator

Wells next go comes Luebchow Eric Our Please ahead. Fargo. from from question

Eric Luebchow

at probably first the last sustainable. market you wasn't And industry-wide Northern Gary, quarter. you about Virginia year-over-year, you like in in high thought the that down seems saw are it year leasing volumes that least really talked in

are And And seeing of it Virginia it what I the in some then So your what of that table. didn't in that type was in to Northern interest on development other U.S. on Santa last could you're development markets? curious other demand year shift see Clara, markets? hyperscale

And progressing? some expect how see to When expect to that's you you market? that could Just when curious, it? in open pre-leasing

Gary Wojtaszek

our exclude you Sure. XX, I Europe. year-over-year up and funnel mentioned, Look, XX% if as is

a is Virginia, funnel well. key that So the in it based, but the lot also in as country is markets other it's around broad it's of

through of big patterns anything kind other these up of So, I just of the cloud wouldn't down. the Virginia read strength market go of Northern they more of that in than and terms buying the, typical companies

companies the be And think, probably these that cloud more sustained gyrations. for of just that don't we growth seeing rates see us. would natural we you and if challenging aggregate big concerning decreases kind were of more see I and slow if for you were, down them

We expect to that's going pop around.

We markets, pretty your now that as of well much East demand platform. as as other West are as from, Europe all Coast, customers in we big spend across our What question? was Central and seeing well

Diane Morefield

Santa Clara.

So, come late development table, a still Santa not year that permitting in on in XX, XXXX yet, the finalizing is but be later the capacity Clara the first on design in stage, will and with delivery.

Gary Wojtaszek

Yes, we're there scraping now. ground

So, kind we're building -- just we knocked ready for down the original the and construction. land of getting

Operator

of Bank Our Funk next Michael go America. question Please from comes ahead. from

Michael Funk

that? guys, the Back could. ones scale some overseas substantial how Hey to on, for Microsoft of to win commentary you Europe moving how know for couple you mean, please positioned of some and they, thoughts are you questions. to that you that the Maybe win I you commenting just lineup the trying Microsoft hyper business, please put think to over obviously, preposition there quick I your business. A capacity commentary, taking thank and your the the

Gary Wojtaszek

relationships And Microsoft, we up with in not we're lined all companies I I mean, various think, three really built customer I really all cloud can our just highlights across a our as up cloud well putting drive for customers. strong the think a growth. positioned continued sales. strong for I were of really really players. I nice XX% our sales all just not But strength with have of think, and well, bookings numbers, we're enterprise the as but of year cloud trends. with that the the expect consistent this the big But, company, all just well franchise we're that's that space really I mean, that are enterprise franchise quarter we

outsourced but investments today was reaccelerate about, Amy is the any think only to know, that different to is you probably is don't than that's of XX% everyone she cloud. as think Microsoft's The I I was at enterprise do reality well. what business of it looking the else the open in kind to cloud, growth more, planning

of is So, fat us. of in the big curve still front the adoption part

put growth So, that going up, years. for to everyone's couple I'd rates put really consistently the next expect nice up

Michael Funk

if I hear it the What implied had earlier, XXXX. could. was you the per mentioned that you development into that in spending million I $XXX one CapEx that? megawatt clarification, in cost didn't And baked the you but

Gary Wojtaszek

on or done, depends your But demand million cost materializes. It low. part your be out to after going is $X your build where incremental roughly of so. It's megawatt first the is

Michael Funk

the upward Or trend Are an pretty cost that you as still seeing well? consistent with build pressure during is on XXXX?

Gary Wojtaszek

hasn't labor was -- with now. at kind in of Yes, of the and tightest labor one changed U.S. markets that really a that's Virginia all, the while actually much in back

Operator

question The Matthew Deutsche next comes from Niknam go Bank. ahead. Please from

Matthew Niknam

One, I Just could. two, into on XX. the it's backlog if on Slide XQ, sort rolls that how think about and XX I of million

the you get self to the and we think or loaded like XXX frontend better ability of fund. zone in as rolled think backend the leverage Any it's you'd through? of think could about you in comfort provide on a CapEx leverage, help If and can just And then us to be next about terms where secondly loaded there? that how about updates we year, to whether sense cadence

Diane Morefield

assume just a the one it's say to in mid exactly to safe quarter's million it's mean we online the XX guide you second model way to it. mid so in always pretty comes when we just hard say coming I midyear, backlog first sorry that Okay, know the all quarter, quarter,

one EBITDA because Regarding, the first I one that if clearly be down really really lease EBITDA did would adjust like brought all to down our was with -- in question think standard activity your X times. you up sorry, that low new we it I we quarter for the basically the Xs. leverage straight And am on leverage,

year. So, as time know solving of And we've range. leverage quarter that in to going over and mid that when we you that's cushion the the X say leverage in still growth XXXX already balance EBITDA times the build is, the built quarter goes on over XXX because and say then to of

Gary Wojtaszek

it additional investment really level what we're within to of to that sustain be become to business, grade. a ratings any saying is basically and never growthy going also So fund equity the investment to we're credit guidelines capital at nice be able need

Operator

next ahead. comes Sami from The go from Suisse. Badri Please Credit question

Sami Badri

to specifically and give is insight of your question that invested on do yield LATAM My type so that specifically ODATA, markets? can or maybe, you're just as and with understand with in capital the North you America begin region more they're as it on to begins you the we does entering. that comparable LATAM? to everyone generating markets Just the is to And or more ODATA some relationship European is develop, now returns generating

would color very any on be great? So that

Gary Wojtaszek

stronger insight Sure, the market. we that. in than really do, nice we do generate yields have They probably U.S.

Sami Badri

Got it.

on going to developing or Or, in ODATA additional Okay. scaling be required that the partnership of it And up just hiring when it then, there comes on? is any OpEx business? by side, and is kind no CyrusOne solely to real coming relying

Gary Wojtaszek

partner that firm just out is equity Sure. Brazil. established is in financial a ODATA Yes. which private well are really It's and they're big Patria, of basically, they the

is capital-efficient do -- international the an and -- then you gave your focus goal how of original out whole capital, terms ultimately in limited so did well. So, William gone foray we in that of GDS and way. us of the how access China. if build have our do was to And that you amount with do most and to That's really platform

felt leverage on very to putting comfortable that investment, direct We areas, out for can over America team this capital do. help a in the in where us our like the is Europe, And with with franchise our them. the thing felt partners And in have tried and develop customer same those where kind there, a with then own, relationships of in we to Ricardo really develop Latin we platform replicating We building strong relationship there. right our real way thing relationships.

So, actually pretty I this, think we're least we're I when about, much much, started we when -- years at two pretty on be, -- call where talking to this we wanted ago. started

Sami Badri

portion financing $X.XX commented increased rating grade But GDS the also it And question guidance, you interest FFO to capital the recycling. regarding do the rate $X.XX? the $X.XX a You comment then, with and regarding Diane how regarding made on normalized investment European dynamics and for lower by expense. the a

potentially well a some we your interest may should us you rate because term as marginal reissuing just think guys business in costs, be go Now the the should either debt we this more rates also or financing be giving of through thinking be about transition? XXXX, like as bit XXXX, rolling and little just down and color longer considering about as step your this of we how a you in

Diane Morefield

Yes.

then not contemplated that $X.XX year, for was the about cross pertains as a worth direct to GDS So, substitute And it we this equity. share. currency per again swap probably was had the issuing

LIBOR and over we have pump -- Originally, GDS Fed. LIBOR we wasn't have that So, interest this rate projection. then much did shares probably flat. year. thought rates really pretty of in to that it going to in not -- that with we balance were million appears at companies. unlike it's now not two curve times probably And lot going million it because was the the thought risk And a into contemplated are would bumps the Everybody year, going into other the least It going is issuing the following savings own of into our was sales. $XXX public we we a the X of couple

bumps. So, out we've those taken

are will what rates the over planned, course was well lower what the think a had CapEx and we timing just of than which it more as So, as is when of be reforecast funded. differed we actual year, some

Gary Wojtaszek

So, your that think yes, shown we've question for grade we here what next regard just to are investment on year, that, path. I is with

showed of some our a recycle ensure we that ways strong to basically to balance willingness just we're creative sheet that capital. to We some keep have shown and really going

become interest of are as it's grade. to down, think going we rates I investment and go appropriate that assume the our -- our to increases the business scale

Diane Morefield

rate to grade of investment savings Yes, XX interest basis probably is XXX points. the

new goes as investment debt, to the have when grade grade, revolver to would get we out pricing our automatically, market, our once margin that as long-term to investment the go we can rate bond down of So, assume marginal will get savings and fixed we kind you well. on

Operator

Crossett next ahead. from Nate Please The Berenberg. from comes go question

Nate Crossett

deals, made On some maybe curious since was what that in much the on the know, in color hyperscale Chinese megawatts versus you you to just and GDS near and U.S. Europe the of how the be some have seem I term? Chinese XX an investment the getting. are signed, guys to been targeting markets you just

Gary Wojtaszek

talking Europe Latin That's about also America Yes. them well. now U.S., to all the in in we're and as

typically So, Santa Virginia followed popular Northern in major most in markets are in the hyperscale with by in markets, the being U.S. U.S. three Clara. they deployed a

Nate Crossett

a because deals advantage are, other GDS, versus being sourced just providers? of to I'm then Okay. say And the sense through trying get all those Chinese your with

Gary Wojtaszek

for the and -- to Well, everywhere. and for been try GDS. initially, I as And similarly, same all are and customers got us. them relationships the with and contract we We relationships same and our customers all do through introduced GDS have them. and of all to done those things introductions working touch mean, they've -- put contacts in them And great now with that do we've

that capacity So, I of them on all like about like partners. with bunch and we well Latin in what last China West the conversations do the can customers week was am the Ricardo with as locations when can was Coast, them, was talking we and that as our so I for William as meeting them I -- with having a and America offer

Operator

The Please next Jefferies. Jon question comes from ahead. Petersen from go

Jon Petersen

Thanks.

one question. Just

tax So, over zero of years. the income It's of years, know, like at not if in dividends, you your treatment some it few these you low. very taxable last the is your look looks

have the you dividend. does to any pressure it seem like increase So,

in growth, So, against you the next of can Will per think the will you reinvest about CapEx couple in back, you with all with AFFO organic of how just was grow line share, some it or so years? over business? backdrop, hold in the talk curious dividend needs I that growing the

Diane Morefield

Well, ever here been of all since you're right. has The dividend nature capital. of been I've our return

So, the we dividend. to any have increase don't pressure

increasing and don't I didn't our is in the clear on perspective. we the Ultimately, at flow certainly Board's think increasing as it year. a cash it say again grows, REIT the you dividend to to do we And want dividend on of year, Yes, future. tax the envision quarterly. it we'd were decision increase the from retain call our guidance again, given yes, But assume we will own a the increase CapEx, weren't beginning a Board rather given, earnings think capital it I pretty the funding. for we to early February, dividend in AFFO and the reviews over this just we time could need

Operator

ahead. next comes Please KeyBanc. from from Jordan The Sadler go question

Jordan Sadler

the morning. just you Can financing cash going in the dig dividend? after you year good on flow Diane? up and offer the for forward retained Can you Thank this expectation

Diane Morefield

I top have, off head. it's the don't my

probably model number. $XXX it's that You I exact have couple could a an million. don't

Jordan Sadler

of million, Couple well, I $XXX think…

Diane Morefield

Then again over time that that will will grow. --

Jordan Sadler

times to at $X.XX, share point. get looking $X.XX $X.XX have -- of per you starting dividend I'm And I the FFO a your guess I it, then XXX. and of that's, Well, is a call

Gary Wojtaszek

Right.

Jordan Sadler

a pretty that That's proxy? much is -- decent

Gary Wojtaszek

No, you that all flow, million stuff year. and million a $XXX our operating roughly net scaling $XXX cash at XX% out is when is, between and

Jordan Sadler

Okay. later. I that maybe through walk I we could, mean

to here cash the the going is support idea to forward? growth and -- basically flow lever the just retained So,

Gary Wojtaszek

cash generation, yes. by internal flow Supplement

Jordan Sadler

joint venture asset Okay. going sales And or contemplated forward? no

Gary Wojtaszek

don't But dry something need that those you. that and structure those capital you investment, as available you're at -- kind that's weighing are of to the in always complicating further. complexity of powder then capital always have mean I always relative there. your you are But of level it to

Jordan Sadler

what's a forma Okay. were debt, grade, investment pro once as rate hit And debt percent floating swap? of the calculus floating running the savings then the through you total pro rate forma, Diane debt you total the of on

Gary Wojtaszek

Jordan. It's in decks, the

Diane Morefield

Yes.

Gary Wojtaszek

It's XX, XX roughly.

Diane Morefield

fixed bunch X are investment we the fixed able And and more put in XX-year be XX/XX before rate, fix and we're particularly floating grade. and X a we once managing to because that to get generally grade, like of Yes. going in buckets. get If don't to we want to long-term maturity get we attractive comfortable it investment to a to

we're and generally, fixed rate. But see fix just at there comfortable in much we would can point. we been build at us the you to rate just it interest get bucket, that the very lower fixed because So, once range grade, a we've XX/XX this investment

Gary Wojtaszek

across over-equitized. consider Yes, the look part to I you is other like, REIT the are Jordan thing entire of universe, think is probably we that, if

composition XX% the you debt you if structure relative the look at capital of being leverage diluted our that fixed floating and to to. So, equity rate consider XX/XX or

of You really think than of probably real estate trends other folks in the the a the the and secular other how of there. classes. think stable we asset some versus have strong industry, space center and we're position We in given that in just data the a most fixed higher well proportion

Jordan Sadler

fair. be might They

opposed within differently Although viewed their that's because versus I probably guys focus investors development. developers would universe, substantial you REIT most little universe, to as development pipeline a bit on REIT the you have entire think guys and do zero a

Gary Wojtaszek

thanks. We and great reach in a Great, NAREIT. don't at to we'll week. call hesitate out you weeks Have couple in and a to everyone. Well, thanks, Jordan. appreciate see you Thanks today's dialing

Diane Morefield

Bye.

Operator

now you is for presentation. conference today's Thank The attending concluded.

You a may Have day. now good disconnect.

CyrusOne (CONE) 2 May 192019 Q1 Earnings call transcript