CONE - Earnings call transcript Q2 2019

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Operator

Good morning, and welcome to the CyrusOne Second Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Mr. Michael Schafer. ahead. go Please

Michael Schafer

Good Quarter Ben. by and to Morefield, welcome Wojtaszek, Thank Earnings morning, Call. Second CFO. Diane and XXXX and joined Today, CyrusOne's President you, CEO; everyone, I Gary am

like would release, cyrusone.com. available website earnings the on I begin, Investor with we to you section second along tables that financial quarter at Relations remind second the quarter our are our Before of

questions like and the subject on also would your with today's responses to of and some to that related made I statements remind comments call are to to uncertainties. deal forward-looking and you CyrusOne risks

Factors We that filings as expectations with actual no these revise undertake website access the to Company's are which SEC, differ SEC's you may obligation of except to may from call cause following this our conference the on required statements the cyrusone.com. detailed date law. on in by the results or

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

GAAP the a You Investors reconciliation find comparable on the posted which Section can the measures of the Company's to to earnings is website. release, most measures those in

to now turn call our President over like and CEO, would I to Gary Wojtaszek. the

Gary Wojtaszek

Welcome and call. results strong quarter well next the on the Europe, us second Thanks, howdy in setting The have continued business year to up growth for company quarter earnings show and our capitalize to Schafer, for in and we everyone. the CyrusOne's positioned expanding beyond. opportunity

after growth XX We development quarter in million another and annualized the the megawatts EBITDA, shortly timing and per We industry of combined XX% end of in adjusted the As grew of the several the capacity FFO the leases rates FFO signed the moved portfolio. including as leases GAAP Slide large in June megawatts revenue shows $XX which over in X, year-over-year. into leading XX quarter-end represent have share revenue July. pipeline, signed totaling at deals delivered from

position signed long-term us in us that to feet low over acres meet recently land quickly XX We capacity at a for of to deliver XXX,XXX cost XX a developing powered floor lease square giving for we are megawatts. raised will Dublin shell of also and demand

We range. midpoint midpoint year-over-year normalized broader significantly new our above share represents at the growth of increasing are REIT guidance FFO group the The which $X.XX XX% by again is per the average.

FFO low months that as XX double at growth all expect made We investments have continue grow our we per to realized. digit will rates share the the over rate past are

XXXX has X% announcing of than tripled quarterly REITs. increase since maintaining We amongst one of lowest all per the more our are while dividend the the $X.XX and in ratios still dividend a share payout

focus mentioning expense Turning to QX of I aggressively X, accordingly started I adjusted in a in particularly our velocity, quickly control. business the significant that plan in the noticing XXXX pullback and hyperscalers Slide was on leasing more

to QX given should I $XX July. As close guidance beginning the being any the overall quarter that we share result of which the expected we our year. of got million this light $XX to bookings in proportionate deals have quarter, partnerships, saw QX million as of of our to bookings, do above our the GDS several were This in not in the ODATA or include quarter per pushed bookings bookings at

and account our our business in XX quarter of very XX% both with sequential enterprise different is and for across businesses, we are how demand This across QX overall the interconnection over of third roughly strong which strong seen saw we highlights enterprise for with very as accounting have the remain well we in hyperscale which customers. quarters, from diversified new enterprises the Fortunately, past signed bookings logos and enterprise XX% three businesses our almost verticals.

grown. rates fastest this interconnection is at has grew at our quarter, which the ever among business which XX% Additionally, it

nearly now run to is rate business X% revenue. business a is IX and of $XX million our equivalent Our

up over four the is Company's for kilowatt, per during of history. which in deals second prior signed in pricing was quarter the quarter the average the strongest $XXX XX% quarters Pricing and one

Slide of our from importance the updated contribution growth. to customers our stats, highlighting provides X, the existing

nearly the Over with of XX% our customers. last bookings three years, existing our been have

consistently generally XX time. per added us have about have logos initial which new is deployments, over as typically small our We customer significant quarter, customers with but grow

end To of opportunity compound rent those customers, of averaged customers, this our XX period at customers highlight also magnitude top of were annual growth XXXX. the growth from the XX Over XX%. the

for same and Additionally, terms prefer increased longer once the XX% period. the the expand customers average of generally our customers remaining over begin with nearly us, group lease lease extended they to terms same was

multiple existing grow entire with our locations. locations. their in in expand from are is deployments the us, other customers average are in also customers XX% rent us with of this portfolio they The group of and facilities for that customers deploy an in and of three As

was An expected. the expectation that would expansion that drive demand, underwriting of out playing for customers as the important just existing our we in European been much and assumption the our has

XX% European additional second the year. of the it and Our half roughly expect in at year-over-year we XX% grew business an will grow

increase points have the our scales. of the further the expect to We increasing that and in XX% staffed fully see expect XXX we our XXXX platform operations EBITDA second margins expand European basis year there in as to by margin to and half

also how and tend X, in really new last and acceleration was earlier, quarters, cross up mentioned deploy shows to interconnection compared expand Slide an need even I more recent point This cross year in rate As well to XX% have to customers to them locations, to just to which continues the compared causes seen growth revenue I as relates business and connects. the regarding made matching our over the do year growth quarter we year connects. to

space. growth network storage in change nodes that cross be the to customer higher XX in will we will average, continues data this going first compute times forward, the our data this, connects, per more and than as customer center we will On XXXX each tracking and seven to three now important has explode, which when started believe play topology strengths

years, Slide and the CyrusOne respectively will over five EBITDA best center [XX%] trend. the performing data past X, with and continue been XX% that adjusted and Turning our to XX% CAGRs performance revenue of REIT has

are peer can key growing much see, across and than you the meaningfully As higher rates metrics we financial our of at other faster REITs than all group.

going of strong the of our create have set value We ultimately and continue cloud few over a business to growth position trends opportunities industry. with enterprise to worked creation of attractive The demand increasing, adoption hard underlying AI to stages represent very are the years expected next the very maintain billions of data dollars for hundreds growth continuing early outsourcing, in what accelerating, could forward.

growth all we markets extended rates we expand have We able methodically of capacity approach our invest well. ensuring and have we shell and been these to have to the continued our as have and superior across adequate business, Europe into because achieve same land

Currently million key the we have land almost across in that $XX million of and $X data share have billion U.S. Europe. all of including roughly of $XXX per center process $XXX we made, the of markets and in investment, construction

at are triple Those investments a us to and earnings. to all the accretive will thus low of relatively costs footprint our size build our allow highly

very well of support results, our of particularly should all an acceleration new growth. as see our four Clara, flow per a the to into incremental we in high result expansion Europe in Santa bottom driving of revenue markets the investments, FFO through a as As in line share

We EBITDA expect that our growth to will FFO growth revenue our begin rates. rate and per share converge with

see the we've couple that Slide that last that X these investments in progression we yield development made making expect the to point can are reiterates in. quarters, markets regarding new of you

campus. first there almost years the data quarter, four ago are for progression significant from our companies. We our This delivered and we a center showing yield with demand Northern first hyperscale you Virginia half

we for yields Last quarter single-digits the shown negative and and the our path property showed Phoenix getting over have initial follow and that trend then mid-teen stabilization. years always at same to full we others by showed Dallas yields with the quarter the followed same yield many the trends yield low before

in each the area. are similar knowledge, is on CyrusOne that center in the my believe costs the progression data details yields. largest four only and a of sites expect development that site data be new for To campus Clara, will company and Europe yield new I type Santa center We developing for in our has of these we which shared

early In enough are expectations. leasing such quarter business with closing, trend subdued we per $XX we model velocity this year’s of million million $XX that line is change in the accordingly. identified fortunately, our to able And to right our

with in and Latin expand our structuring exceed partnerships us positioned successfully to Our enabled We data guidance internationally own again. have third to our Europe the increase year presence that full we to and allowed right and to us decision in expectations the the America. capital was have company strategic believe expense call have industry global and center Asia and company be our largest the in initiatives

double-digit in mentioned, mid-teens plan invested per the investment-grade equity maintain have and EBITDA at sheet $X FFO revenue to rock needing We sit Also on and a additional REITs. land rates. consistent capital and roughly enable I've with any and in not that will should as growth billion grow our balance share we us solid low other do

really adjusted to offers compelling the a basis, opportunity. fastest and data growth be in continues the REIT believe industry company center growing CyrusOne on investment a I

Diane, to will provide for I color Thanks. an will our the the now over our guidance. more performance who and financial on update call turn on quarter

Diane Morefield

Gary. morning everyone. Thanks Good

all said, to are results compared and across growth our metrics, we the As broader our REIT financial quarter relative key financial industry. with Gary particularly second the really pleased

we towards revenue, between As shows XX%, lower FFO continue at while XX% Slide XXXX. in to the of range and each second the compared that X.X% end Churn low to of churn normalized X% be range. to relatively XX was expect the of and we trending are up adjusted year X%, to were full EBITDA,

which low was on Slide in XX, NOI decline quarter to totaled sales sales, The margin deployments. adjusted higher meter pass-through the consisting XX% approximately for grew a year-over-year power primarily and in The of of $XX percentage primarily a as revenue sales which of reimbursement with basis. an by margin larger driven contribution. result a associated zero the have million, higher equipment margin couple Turning equipment

XXX basis the FFO equipment EBITDA Adjusted in equipment For grew XXXX quarter accounted $X.X increase line the points were decline margin in in for in primarily year-over-year NOI in second normalized approximately of growth increase quarters. million. with between This was the driven EBITDA. in in only the and NOI by sales sales comparison, adjusted

our As our expansion becomes build total we revenue. as support a out we in of we begin have those our percentage region that expenses Gary to revenue platform SG&A European the see to markets. decline more should team as those But invested European noted, in significant of a portion and

rate second Our normalized growth quarter compared XXXX XX% ASC XXX. on of an FFO share to per for the meaningfully, increased basis up as-adjusted

normalized As rent customer the straight the at the cash at to zero adjustments. chart to received largely shows line netted the of slide arrive AFFO to FFO in for the bottom quarter, as offset adjustments installations,

to very down Turning contribution our in a continue nearly but balanced expansion year, even Europe XX% was capacity. markets to percentage will have the remains XX% high increase a the our further The and to with the leased Slide at geographic CSF in properties XX, slightly portfolio. compared prior we across for stabilized diversify

our South we elected our in not a revenue that small portfolio second data on quarter and the Bend lease quarter, in was renew property, impact legacy center churn. the reflected our During Crescent to

which pipeline, development our Europe. across U.S. shows XX projects and includes the Slide

the than lower While percentage prior in quarters. pre-leasing is

with be a of are these they will once upon these conversion XX% our projects deals significant a have sales stage completion overall late all of of year on funnel, projects. CSF level the in expect portfolio delivered. a basis to We compared The bigger leasing that will ago

that mentioned, powered Gary shell we portfolio. XXX additional square have square shell build-out, feet nearly upon capacity inventory, construction powered the feet full as of also shell combined we with megawatts nearly And across of of will XXX,XXX provide under existing have our million can X

support to XX, a maintain to a we growth. and Slide conservative to strong structure balance Moving very our sheet continue capital

at net for below leverage REITs. Xx average investment-grade Our debt-to-EBITDA low remains the meaningfully

maturities, near-term of billion no than more have a fully unsecured We borrower. liquidity and we $X.X remain

additional and issue We As we million the capacity while annual to capital need our and current through fund company's last scale. discussed leverage of quarter's flow $XXX we that cash debt range. free $XXX million investment to on call, targeted additional maintaining have no can approximately equity

annualized we to X.X% XX, $X.XX are in quarterly yield the Slide $X.XX XXXX an dividend third increase the range. in over Turning share. share to increasing of per a with per the represents the X% dividend quarter This previous of

since dividends yields was the the taxable tripled after-tax capital for than and our more of with we've investors XXXX of payout note mentioned, dividend Gary income. As enhancing that XXX% return

among order the the to one cash payout business. We also generated retain REITs ratios continue maintain in internally to lowest of to reinvest flow in

at recent XX, in Turning $XX commencement line expected June our of when derisked quarter, relatively signed phasing commence backlog Slide to to million revenue full the with leases that with impact approximately going shortly quarter that with nearly after the with in growth third our The the combined quarter backlog in leases year anticipated the commenced XXXX. is were within quarters. the end, XX% impact end the of into of

previous of primarily to timing as pushed of of expenditures tightening total for the midpoint, into million, are $XX Slide we EBITDA. spend will the by the decreasing some XX, expect midpoint $XXX XXXX. revenue the spend lower new the range ranges we the Turning We're driven of adjusted guidance is than and million capital and be

mentioned, Gary primarily at guidance of interest factors. a range share result by by is than driven anticipated. the increasing midpoint for expense had lower we several the previously This FFO per As normalized are as $X.XX we

previously more delayed. is as of lower the than we that First, is capital mentioned, just timing anticipated the of I spend and level spend

Additionally, originally is balances as higher higher result than capitalized a of interest construction-in-progress budgeted.

Finally, while year, the particularly for interest still rate to higher our current was compared decreased in decrease our given in forward rate we previously recent assumptions LIBOR forecast, current the outlook had curve. our the

a year company both positive expenses the and has that back EBITDA addition, FFO. during In on impact pulled had the

midpoint EBITDA our our in current below were our same within range of midpoint trending during current the of now the at half are very outlook. the our remains the but midpoint first range we and guidance guidance, While year the given the comfortable

In metrics. performance across financial growth closing, we're with pleased and our our the strong

our company outlook for strong on have to and execute number the growth opportunities of business. continued remain ongoing regarding able to position taken maintain very to optimistic the we a We steps be and the

participating for Operator, on questions. we're Thank now line. please your you the to take and open the happy call

Operator

first from begin will James. the The Instructions] Frank question now please. We will ahead, [Operator Go Raymond question-and-answer session. Louthan with come

Frank Louthan

seeing? nature U.S. existing very got are then is of that net Can – Great, seeing customers of business in – sort a what you're in that thank more existing sort base the you're Is bringing in just you new from Europe you follow-up. expanding much. growth of you I've your or the this And the of some the there?

Gary Wojtaszek

that market. U.S. But a as to European takes build going relationships business, also to into to to European assumed our sales-focused growth, we be that all majority building know, was that. the an trying our a Recognizing to The some proceeding We've original closed our in basically pull time you going Yes. well, were according enterprise be Frank. expand plan. knew we that's out there from the and business that U.S. of Europe, hey customers of the Yes, that in underwriting we were deals. leverage going of to enterprise as vast them and hyperscale of also the that we couple attack the right and long have

it's from customer closing, Typically, a process. first touch about to three-year

we that, didn't make getting in we for underwriting So deals. but assumptions our any are

was We expect to-date, U.S. that and hyperscale was in the in booking Everything that that the had we and Europe. else, entirely throughout enterprise, results actually all was in this just additive else – only had only everywhere Europe. quarter was going that to – to – was there. we be And it's enterprise other that's deal in been was hyperscale our enterprise. But and

Frank Louthan

multi-megawatt just… a that deal or Was

Gary Wojtaszek

about rest all meg. was quarter this XX% Yes, was – our XX%, The of a of enterprise. hyperscale. bookings was It couple

Frank Louthan

then And follow so up. – Okay.

more little enterprise for how versus we yields how you've off with a expanded that in development mix can we As the about characterize the – year, this bit these should more standard your think customers hyperscale? getting you're

Gary Wojtaszek

that's yield top That XX%, those on consistent of yields – this each our you included deals hyperscale our that customers. we're before. IX. so in in this just they're all reason about look the underwriting because range, get those was I just we XX%. we're yields, business substantially assets, And substantially what quarter. the higher enterprise see quarter, hyperscalers. that actual quarter you mean, than which park. And IX of because top Virginia on higher when we're enterprise And of in out kind knocked is deals we're able hear across And to Look putting Sure. higher returns I in than yield our the command blending of – development putting is those it that of of also actually talk we're into assets, Dallas XX%, of Phoenix XX% last why you me at the mean the at when asset

Diane Morefield

Frank, per that and rate $XXX of more also is And the less quarter of this XX% than indicative kilowatt our kilowatts were deals enterprise-focused. XXX

So it's business. obviously profitable very

Frank Louthan

Okay, great. Thank you.

Operator

come will question Flannery from ahead. Please go Stanley. with next Our Morgan Simon

Simon Flannery

Great, morning. thanks. Good

funnel should the terms talked Why How's you are – you And dividend? what's of of dividend the did you every for are when where And then there? cycle we what the looking? What to know of back? You maybe now, But in contracts maybe the kind sort the XX% presale the raise come we a you'll additional – on on Thanks. expecting review expecting are you Diane. about seeing development. hyperscale new FFO. now I are getting be QX? on expecting? What

Gary Wojtaszek

Yes. Sure.

on the is associated – mix European so our shift And in of now it's actually the business. with the there funnel, quarter-to-quarter. funnel is So flat XX%

recall, if of XX% funnel. our was last quarter, So at it you

So European It's business flat has year-over-year. it's grown XX%. up quarter-to-quarter,

– noticeable any really not we're hyperscaler environment. we're said, really That lot. in the a up change not still it's So seeing

not at going of the when and kind FFO was mean why the on point order to an down, not in to the was structure we We're to per And the where turn kind of beginning that's around. We focused in I year, capital our now the calling probably on to better kind company margins, I the of performance than feel comfortable drive buckled but slightly reposition management it this end this. more expense of conversations. this knowing year up. really share really

we've be per requirements around. because the of given this a the the it made, things I low by really to the going all growth doesn't, sales Then we're lot turn we growing made even company positioned want top the should way nice we've if hopefully, share XX mean with now, the you end So drive year – line investments investments of months. But it? not we've able to Di, double-digit to take be into last all over

Diane Morefield

Yes.

we So regarding to per flat year At share to came basically beginning it's in we given thought out with increase good question. outlook growth January, the flat we because time the the it. didn't frame, it dividend a when Simon, was February dividend, FFO certainly of the our keep the prudent back need

capital. dividend to now the guidance to it the in it's Our Obviously, and, sense progressed to increased year range, ultimately growth. was decision, time an Board But increase our the return a as XX% it and typically it, your that share per in growth Board made increase nature agreed point, per-share the we've given as our evaluate of is felt we dividend.

couple the increase quarters continue. Again, But we the we every this delayed that a company's been As a it dividend would to far and once it time. we year, would just always history of year. as increased has timing, anticipate generally,

Simon Flannery

you. thank Great,

Operator

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

Robert Gutman

the the for Thanks question. taking

Europe growth if in was hyperscale could U.S. I end, I Europe in the about the quarter wondering for that second in And in subsequent of said provide wondering landed deal was organic the was in you or the an You number that also terms if the revenue. the deal quarter to quarter.

Gary Wojtaszek

Yes. Sure. Sure.

growth. with we've actually, almost time. doubling subsequent a done we potential for that long quarter, So the actually our closed to That X enterprise largest deal was megs in

San the online and be in So facility our Antonio. that'll – be that we'll new bringing

break closed couple good enterprise that'll So that That in couple was allows of the land. predominantly. Then of bringing the end. after and there been quarter deals a it on we'll that deals, There the also were in be market big at. of the deal. other – we've piece sold. basically ground U.S. online was a sold That deal. Europe, was a be new those that the That really cloud XXX% capacity only to us right out was were There is

Diane Morefield

your on question the is Zenium in organic And growth, XX% range.

Robert Gutman

Thank you.

Operator

Richard from ahead. Go Our J.P. next comes Choe Morgan. question with

Richard Choe

Hi, the kind wondering I have revenue what expecting we be what was year. for And a and should of then do follow-on. visibility have you the I for just equipment

Gary Wojtaszek

Can you say that again, Rich?

Richard Choe

the the kind you of rest do What of visibility equipment revenue the year? of in terms for have

Gary Wojtaszek

of that. lot We of margin low of really assume that a high not don't much really not there's a because business – lot in

every We pop We couple commensurate I has quarter. every about like million had also bucks don't here, see revenue. $X our really we why EBITDA average million have with quarter big in in the we a typically, or mean strong of million got flow-through that's that quarter. been $X but a really

was. rest points couple we're where the the range call regard that the willing to bottom really year, for the of that second in improvement million see to quarterly point, being of comes of stronger the first terms a through, range. half the see we been to was but don't that this and with the comfortable we within We're Di than still With $XX half There's mean this I expense big bookings at of $XX the in to management. not really result has million alluding margin significantly

Diane Morefield

Yes. sales, really – large. Richard, unusually equipment second was on quarter the the

our XX% in of unfortunately, organic answer my until organic not to The And Rob XX% end XX% didn't because – range between see growth early to was close going September, So be is for we need year full organic. big to quarter-to-quarter, had the last trend Quarter-over-quarter, – years. the we couple August Zenium year. continuing. that on for ex had We deployments. that really Zenium sorry, on I a correct would the

Richard Choe

that positioning development at terms of And company of positioned planned and a as ahead enterprise, – rather you'd with affecting going kind come be Or the are terms well that? you then development is point, on hyperscale for in back all? of should some refocusing just at in the and

Gary Wojtaszek

exactly think rates. big been putting demand about mean, really have trying we strong growth if company is we against it. growing backdrop. That's we're performance so have you that up in been fastest Yes. and I do, we to since and what Rich, IPO'd, revenue EBITDA a was look, the

three Over was invested we years, $X done really the have all a roughly would cumulatively big platform. last billion strategically of that capital and out build to

So we're up, we while think the of the way of grow were in we early year. at Europe. U.S. in part we've growing And really business to the this this a small Clara, – year-over-year franchise fantastic what a on, expansion player built the franchise business I our just be in And months in the XX%, you've going XX% win. that Santa great by the to the all what years. of of XX% end XX that is internationally, expand going in to planning play a is slow pace. seen wanted to for got our made we of That to the period When we we overall another to in couple about in. XX% go quarter, And We in weren't be markets were to going key that decision on we're

such increasing we enough that that aspirations early this was down, we going we of the to identified saw business we back market, trend when our thought kind was our was kind scaled particularly everything this our we SG&A That that But slowing year, of line on how our were and in where hyperscale with go. capital. in in earlier really deploying

at our growth. growing double-digits. – is going range. growth the We with that up XX% in expect other FFO be to that cut was and got revenue we're that result that And on tightening some and Eventually, that revenue at wouldn't structure. our we things on really and the we capital EBITDA per will doing share back converge the focused of So growth EBITDA we've nice

down, We expect performance line will that'll increase. come bottom and the

So those time. over should converge

the So we really as last we right here as positioned and well. that is on we're sit now said call

ourselves can additional We market over capital. roughly two turn that that think And capital do if that fund XXX,XXX our take of the share a square given feet, We we not around, any miss position a to of next big the capacity and we're all we needs equity bringing not beat. market. the shell need all does years online,

we're doesn't, position, because terms us to our in good capability the product speed allows at know, as it in If a you still market of capital our to risk. minimize

right feel our So we now. we around. then around, that do on that with we're turn well it we it But doesn't pretty we the growth to if if does But underwriting bottom where it think going the turn think increase. are flow, positioned rates is good own all sit balance we we're own to could sheet line our internal cash

Richard Choe

thank Great, you.

Operator

comes Stifel. go Erik with Please Rasmussen question from next Our ahead.

Erik Rasmussen

I construction did NOVA. dovetails taking and and you noticed for but lot far two so of projects in push the into you thanks obviously leasing, Yes, made about a comments hyperscale this the questions. out

digestion of commentary mean you about obviously, there's us can can I you I that's kind – other on two any little a the each some sort going that? to give just that But through. Is by bit of quarters. give that? think more by commentary market's

Gary Wojtaszek

– related our same line mean, that I the do we build not are in with demand don't we – tracking. thing, product Sure. all we line the in They're we – right. to with

will pushing pushing capital we'll commensurately. out then see and So if be – we down demand out we slowing be

people making spite money. of in we some are kind mentality have that driving So profitability here, we cowboy thinking and really of focused on

really closely. really, two those manage we And

on another rest XX% sales then at spent probably you look managing you my personal rest, is XX% see the If and the of customers on business. calendar, that capital would and and the

doing work as lot those versa, So tandem it on so seen and there. in two could a vice be in more

seeing that anticipate You funnel. a we're bigger would

quarter-to-quarter, there our if So we're our capital in now that increasing. shifted seeing funnel, the the so where there, continues I that to flat mix doing while look funnel mentioned is growth the sequentially, of XX% because that you has at Europe question, on is is and Europe. increase funnel in that Simon's that we're investment

with then also allocation well. – so should as shift And to a that the shift, see you funnel capital

we've much being and a this the quarter decisions put is is some capital see always a believed that you And peers benefit of really that's why my And international being playing for portfolio that's of global. growth better of great you're And the benefit that in global numbers the this global are business. because basically up your because best global.

Erik Rasmussen

seems Maybe with kind it us sort just – and next And what's that give you investment Great. the of spend sort hurdle? can with I'll stand lowering lower grade, update just revisiting leverage my of the mention you CapEx mean, like of where an just the follow-up. I ratios,

Diane Morefield

should with and No. know, already you with Moody's us us call there this we're year. agencies. you got once S&P. some at Fitch. the reviewing a point reviews we anticipate rating year But as Well, conversations And we've would them

equity do through beginning of we're a through function of we that sale the leverage. there being process The GDS we already and we cash we formally. a covered year transparent lower It's raised pretty the of ATM get slow that So in was But all investment the the the more at the needed. the leverage manage just benchmarking feel grade. at to we're

sort on our the willing to are sense the to of so periods. we in feel intensity investment But large We've given capital low. go do range, And generally the business. it for short grade. grade we And investment said above leverage REITs stay all pact, that mid-Xx is managed the well-capitalized makes the of

So pretty future. the get not-too-distant there in confident we're we'll

Gary Wojtaszek

them, actually mean, anomaly would finally investment decade thought basically there since Yes. with a now me, grade this I should are which kind we to to were get been It to bizarre agencies, before provides little more I there, got grade investment comfort their a Equinix But that all comfort like industry. S&P Equinix with a good was to because of see have we – just ago. right. to they rating three

benefit some a that. a leverage get at actually ended we last quarter quarter. of lower hopefully, we So But we as than this positive did result

sheet really balance a wise. in So position we're strong

Erik Rasmussen

Great, thank you.

Operator

Breen James William ahead. Blair. with from comes next Our Go question

James Breen

Thanks questions. for taking the

How sort numbers? the you being Just quarterly around XX% to a on cash as talked the this mix. you sort one customers then think some couple, and average about flow? year, of about quarters to this the pricing that secondly, of over on of flows I'm some quarter. the based given gave. the smaller other that's through you And the guidance one timing get as of highest FFO XX% the of affect you it assuming the do How to

Gary Wojtaszek

Yes.

an the year. So XX% yes, for the average XX%, is

clearly, like that to end. we with So thought we're had fortunately, But after bookings what those the right higher in going tracking this right deals all had we would And to we quarter. quarter thought. line we're close

in Jim, yield those I as in put like we mentioned, that slides, So there.

You can in XX% about talking Northern for see yields Virginia. this chart

$XXX yielding about million we enterprise we mix that XX%. in of yield So we of invested there, XX% of capital there. customers the achieved that have is The way because in

customers, which cloud duration. compared higher priced higher customers typically, shorter priced the So enterprise but duration are lower to the but are

right. But it's really the to important mix,

to megs. per-share our that really We us inception, So can That's think customer never I yields. handle higher But a customer share come basis, walk is what agnostic. to performance we of were rack get our customer to that performance. – In spite up we going a blended we've to the wanted is sure close because revenue going gets We the actually increase wants through can per model, – a the the customer what's FFO door. you yields. here double-digit business growth down, opportunity is so should to allowing that of on XX that knew just just we since wants to completely is make what

James Breen

enterprise really some are duration, a is given knowledge, shorter even – shorter historical renewal up those end customers have your – can longer do they there do being they just – And they end up of duration, though ever they periods?

Gary Wojtaszek

Yes.

or was we this was point of time XX had right. matured mature to that – our look you of in one in XX% concerns the IPO'd. months, when about If portfolio either first at entire

And about it. so think

two ability leave. customers So to customers, customer, have out all of every of one our every the

see over And over period pretty over range time. if X% our period, that of that mean, churn it's in to it's I you much that unchanged. X% look what historical been you metric

price don't. of Everyone's if of they really two out every Because a caught treat one lot this. reality numbers, right. a they tend get though even fair customers And to good you customers well, could is the and walk So I away, into a at stay. the provide think into product people like

have But to investment and that you up is the of pay out that of of relative customer the a all if the it's rent just trees. the right. center that data through end they kind the center you money of kind all data of people see step terms moving the not caught difficulty of is data back the and couple a time numbers the bucks paying in think center, you think And a and forest world about more, in in I how for can't actually of the the get much lot just if like

James Breen

you. thank Great,

Gary Wojtaszek

Sure.

Operator

Cowen ahead, Our question please. Go and next from comes with Colby Synesael Company.

Gary Wojtaszek

Synesael, how are you?

Colby Synesael

It’s been pronounced worst.

I sure detail I'm So which prepared information your as in a really well. lot others of do and appreciate, remarks,

You talked make get just understood I little color. few I a sure want to bit things to very quickly, so just a more

So first expect you million in million. that mentioned $XX to to third quarter, $XX above off, your the you be

what assume million you million You've each months lower do announced. the $X you would you And done on to that in $XX next $X get you the end. or based that maybe enterprise, million two of in if

some I it visibility pipeline able your really some still being that your to relates visibility you to expecting give and bigger color of those deals. as if seems on come. So and deals you're like and more broadly, your more that close was some it wondering just can maybe to on happening

margins. secondly, then And

opportunity margins really terms quantify frame this if things? to mentioned next around next Diane, these Europe, line particularly that's the some I item guys of to how in that help going squeeze more the aggregate more or wondering, You you. color from over in should of some impact Thank color ultimately us was benefit just the total give we so. Can the or or margin you over few quarters. up, expect us year EBITDA out to the some you give of magnitude can

Gary Wojtaszek

Sure.

there. to feel I bag that mean, there. going million of against we that quarters. so over you the million us this in pretty well And that quarter $XX to of we're to we to two, million close Coby, for comfortable basically gets $XX yes, and $XX million back got get $XX quarter I pretty we a two tracking million lot So the have to $XX deals a are think bookings

These we've are So hand. stage. in a deals in later got

feel we being better about deliver So able that. to

Colby Synesael

in you're color Any of seeing terms where opportunities? markets the biggest

Gary Wojtaszek

– I has And We've Europe, Again, what returned demand I mean at yes. U.S. least cloud inventory – real some mind, the not my in everywhere. mean, But we've adequate is not those got really got Yes, got really doing – conversations – U.S. has that markets and more are to we've the we're yet the in well. seeing,

from a So a it's issue. of U.S. not supply It's more really customers like the demand issue market. in

hyperscalers. that in with So business U.S. really opportunity in But growth Europe strong seeing still the is is bigger we're our enterprise the

Colby Synesael

you're later sounds conversation. this on like quarter, deals some it So that would of where at, based those close just

Gary Wojtaszek

That's right. Yes.

Diane Morefield

Yes.

an XX%. of overhead, going year X% revenue. growing And SG&A trending expansion down mechanics to we we've I that this progresses, SG&A, we'll our made beyond the and That's a shy range see already keep last even year. because to margins, investment, our total further SG&A, as do particularly for margin. as that the year next EBITDA come in year, just then percent on the think we Regarding And see, down Europe into relatively of as flat

Gary Wojtaszek

our in to half, Yes. another next XXX use by EBITDA XXX end probably see points flow-through points the second in margin the of year. We by

Colby Synesael

Thank Great. you.

Diane Morefield

welcome. are You

Operator

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

Nick Del Deo

do like comes back? Virginia basic construction questions. there business Northern but obviously to stale who in deals when fair think are have moderate for hungry pricing what Thanks will inventory, and limit excess you demand mean for number my players Gary, space. a for are taking I look tends of

Gary Wojtaszek

tremendous our in there. in expecting the But about, about pricing a still But stories hear Look, always to amount in out Yes. at hyperscalers a the here. digits you for land. We're the most that on of market we're the talk looking yield yields changed. haven't there's inventory with mostly that I a really of is low-double part, for basis. lot due most about mean of supply

gold rush years last probably Northern of of There's overbuilt. not people was land built-out think But to a Virginia that lot that worth mentality delivered on XX of in demand. is going market capacity. of have there a I inventory a lot acquired the all There absolutely general, with like

for supply is market side. be on the overheated think the I to time So, going some

with I think But like I reluctance, Fortune where XXX marches you the will I of critical entrusted for corporations to manage right? financially shake dealing the stable, think prices is – and to a are don't as in long company gear not know some the was hard some you mean some most think, out. of partner mentioned if the that's of I a in that have that sense largest for you responsibility have the world and

asset do business grade, XXX% dealing calculus And to or think into when that soon-to-be partner that choice investment you on grade a going has if to partner that a debt of choose an folks. versus with to you're those so have you financing a investment is your with have

sheets. why Northern of everyone out think XX% all that companies. companies which strong capacity, tend public awarded more tend if to So to of ran highly that of you opt exception I with World-class players, else look with the I always would Virginia, when with couple have what in have the to financially unstable all with not deal deals public think that's advanced a They deal to were gone historically, of the is balance happened do do. deals over-levered, chains would supply organizations

Nick Del Deo

pick do But last see distressed opportunities up maybe in you sort to last you of theme, assets? comment tying made, to the horizon in the

Gary Wojtaszek

hope will the Well, cause not for industry. I that because problem bigger a

of XXX% leasing overall. if terms a create ring people bigger and will of industry brass into a in think did happens, are debt go So leased contract allow these that I that lease the some hoping get I'm those for and hyperscale financing who velocity problem things to at not to going distress. the got Because

hope absolutely can service. continuous sure Clearly, of for help happen. that that out would it and did in not I jump make there us, and were any we provide customers, does there So if our opportunities we

Nick Del Deo

Okay, thanks Gary.

Operator

from comes BMO Capital Ari Markets. question next Klein ahead. with Our Go

Ari Klein

Thanks. the spend. a quick Maybe just development one on

previously like strong. But next the think out commentary, ago. it case? from a vertical I when on like look As guided looks Is around based been at from actually annualized for slightly you million to year, the customers it sounds that year still declined you enterprise then the rent separately, CapEx. $XXX splits, has in I look non-cloud And

maybe going vertical standpoint So about what's a maybe talk little a and drag. the been what's well from bit

Gary Wojtaszek

Yes.

to manage fine. above kind with sounds that to that, million if went regard mean never number out built is issue the good. the it. Even we're We additional I of platform, business any growing our we we $XXX that equity. can just and takeaway that So the capital, would and have into be point now

though any be on good there a even no to rate. and position longer really growing So we're funding, at a rely in need we'll equity slower

With really regard has strong. mean to vertical been service I verticals, our the financial

one that and just signed space. some one the with tech mentioned, well that services, even I seeing communications a largest as some companies in that in enterprise deals pretty continue going we're we're expect deals accelerate that next to really of we've much long-time. actually smaller that's the But seeing and of We financial quarter

Ari Klein

Thanks

Operator

Jon next Our go Please with question Jefferies. ahead. from Petersen comes

Jon Petersen

can had can want. on through them kind some you I whatever a answer in few questions markets in them, you Europe. run I Great. just of order and

you So weeks a announced in Frankfurt, a new few guys development ago, there.

building if of your kind third. not, starting if pre-leasing you the it's there And think curious there? that was any I are on project. third was why I

able moratorium lights on. I finished, underway. there. had the in discussion development any we've the thoughts you you curious be that's to had if about a think then don't have But I when any turn And if Amsterdam, you'll on know

been power, Dublin. finally, issue, past in though across market. think, then And an to able there know whole procuring build. with it's in I I been has even the And the issues you've

if on all behind kind that's us. curious whether update Just there's of any

Gary Wojtaszek

Sure. Yes.

of all take I'll those. So

sold in We're building that Europe. So look, market announced that strongest is the Frankfurt in has basically XX the quarter now, building. out been megawatt we there. Right

that, delivered on that's opportunity that all of good to pre-leased. number if once deals right was for the a That that June, portion in that of expect working we're some of a it, now. of is going be not thing, We

With out for regard plan Amsterdam those over of We've a on Amsterdam, center going on to in that yes, moratorium with ground. got not nice Amsterdam, seen it, campus who've We're really right Schiphol in a data builds. there's there. on proper bringing near the

We expect end year. by the to have that the completed of

capacity that is track, on for We'll X that. in of and That have facility. approval megawatts that received about is we’ve

moratorium. impacted that by be this won't So

We that that, design and delivering moratorium, our expect compliant through that. what with we once the of kind work going be expect they that we're is to

a the that going more going to cleared I of And next us there in be to sell able we're moratorium have is really think, because certain for it's moot to be, to up. deliver be year, we that, plenty capacity market. point We'll going at expect capacity. to And by

have about a megs we have fairly large capacity of XX in going building market. We're So that there. to

right. incredibly market. is constrained you're Dublin, That

years. about just have for been property two on We working that

have the and as also secured signed Dublin, well. putting another lease. going that's big In we a We also we X,XXX quarter, announced after the be power that up to really we're there, year that development for

But couple And end of beginning would then megs extra additional last site available going we're a towards year, to year, capacity and brought megs so. have megs XX in We've there. is give the our XX I this going roughly think, So that us next we're of to of the power, or of have of got third London. capacity online London there.

Jon Petersen

you. thank helpful Very

Operator

Thank you.

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

Sami Badri

going and commentary interconnection. get what's first flow prepared just in Nice. with of we Sami connections on idea traffic. could Bardi And of and question has an your of here. of flow some do terms to My IX regarding maybe on

maybe this connecting the just in clouds on could Or what is you give us clouds? so… exactly is enterprises Like idea this networks? densifying Is connecting an to to network, just

Gary Wojtaszek

This going. adrenaline really my gets

year-over-year. fastest-growing XX% us. for pretty results ever quarters the IX up in some quarter. That's was have we It of this So searing one

that a of So, are couple going there's things on.

to is CyrusOne kind concept I right, one no as really think understand, about a thinks because this go-to important a company. IX of

kind look for to company little We're people this us purposes. kind of IX nocturnal sleepy of like really don't that

nodes. is the what and in at faster what's rate And is storage However, at the compute are pace. that data seen than growing landscape that are you've center is what's happening the happening much really IX, growth the a big in a nodes really nodes sets network because really, fast data exploding the

And that the been largest our going and large in, we We're targets XX% applications scaled after compute part the and of the the in that the right? that building application is play the organizations buildings, has business storage. that are massively in the of world,

explosive, business we're lot in the of do that the We've becomes we've as X% happening, never a and you've the in has say, that, really And on gone seen of network years, network we after of networking of that's of the What's the last side. versus Equinix the landscape seen like the a the is seeing after, change couple applications more an which over topology. networking gone parts in over part it. why growth last couple years, data

the getting of a in the growth is logos. connects new that. of And is done Two here so cross one great just we've result things: job

or logos start three month to Each new like connects a roughly add off one and on and on grow. we space logo a customer new with couple in, a So, time of get four they overall. enterprise the you a continue cross new month

number ago. commentary That we has average in seven I've XX. first about years the increased to connects cross started up is shared when that this What of customer is from my per sevenfold tracking

to that with go that customer access success cloud that's customers they has and because is thing expect going going the And different more us with been driving all making that's we to on talked connectivity a to having time. historically want And about we vendors. of trend other always over the provide to in the continue to be locate Megaport our

to go up pick to directing seeing access vendors is cloud And not the only to to customers are cloud. we're the Megaport that, their that what

us of just relationship So They've hybrid they because have of with connect to attract model that and it's after. Megaport. that enabled them into well really going really we the customers the done symbiotic we're kind cloud, we've

cross require more As deployments, to they more they and connects. do continue more

Sami Bardi

then you. of you want took, maybe is And Got regarding how that I U.S. on it. to right? compare demand another your take this the in Thank and have market for overall kind get I path question to the versus Europe,

timing big, around you been in that. window, see ends the think be this year window? maybe Do very U.S. couple to bit lumpy. spikes. a has perspective this Or is U.S. of play terms the So it's different little Is years? from going going be you It one Do a two It in like to Europe? plateaus. a very cycle year think you're comparable unfolding the how a way a of grew? up to next over going Europe similar And to out cycle just

Gary Wojtaszek

kind growth enterprise to going that the up it's That think that's doing in a nothing there. that we're we're platform, of though, why build focused We build you're really be know, similar that to minimize seen you've to U.S., an those I going out Look, return. that's able some once really strong trying is that enterprise have platform you valleys. immediate to of on Yes. and

from demand by associated slow. the are how platform So when sales real well strength big do a But hyperscalers. those peaks little we're of in times your with always the going is to determined see you

replicating demands the associated we're And builds, in U.S. on that hyperscale in lumpiness so peaky with the while the in success we've seeing absolutely now big enterprise focused and Tesh the Europe. is had

years' spite the really to enterprise enterprise results somewhat like which that's why And three time, you a quarters, high record being had comes there. last sales So going over look if that in we've at returns. in at really hyperscale our three of in muted, in have platform we're great like business

And do so we're what trying in to that's Europe.

Sami Bardi

you. Got it. Thank

Operator

you. Thank

question go comes Sadler ahead. Please Our Jordan from KeyBanc. with next

Jordan Sadler

Thanks morning. Good guys.

So a volume. connect on cross clarification just the

CyrusOne just curious of I'm Megaport. versus of terms in about split of terms growth the in Megaport You cross sort growth. physical internal connects the mentioned

Gary Wojtaszek

of mean I growth Yes. the cross look, majority is connects. just internal our vast

that in the and connect up your in is nicely. actual got quarter. cross had cross products, our physical basic this growth connect to go cross different connect, I – included cross connects of was and continues so that XX%. That mean And a really right? right, terms three we You've up big

IX, basically, is another really we've the metros and metros, data also that's that the country, ago, started between there's we business. That's years well. But business across of do our interconnected so centers we right, something where that now in we're and line and doing

The that there we selling is provide other one bandwidth. in

All of the a had the when And of kind those were in business, now. are first that, are that of we like business lot doing charts really the a perspective, actually, cost EBITDA well. that rates IX profitability because growth from just upfront we off doing

The lot. year-over-year. is We're going up sequentially up business like XX% a Megaport

is material So, other still with us to But still connect results. it customers to to an Megaport. enabling material not other would that but attract what that is our or from customers on perspective, But to growing otherwise it's for nicely. it not us be overall it's

Jordan Sadler

of help the on equipment Diane, quarter? what the sales. per-share contribution FFO on sales the was on number side. out back terms was just And Okay. revenue expense the million a in to maybe the equipment in what you $XX Can then or the side clarification the us out

Diane Morefield

margin. XX% around averaged sales Equipment

Jordan Sadler

margin. XX%

there's And on up out, REIT capital opportunity public been amount the then market just private private you. not the some difference there's have prices. versus about the of spread, and the you Okay. real Gary, sidelines tremendous for queued I'm in lastly, curious, pointed volatility any there's in yet, as between and thinking private, And guys or share capital the how markets. you're whether

Gary Wojtaszek

where mean or You private private...

Jordan Sadler

pay, your to private what equity players willing Where pay. to are versus trading are No. people stock is willing

Gary Wojtaszek

to I Wow. the to private big mean pay I really We've are any M&A, it XX, do multiples, all really mean, saying because been is players difficult along, XX. willing

invest afford at these high XX in in-place really, seen really deals EBITDA. to Sometimes times like assets. those cannot just We Like multiples. we've like are

same And grow that's going why in acquisition. you But to not definitely as an we the much would organically, strategically to made business scale kind decision immediately make recognizing we're and of the the to we're I not next going that returns. destiny think a to be revenue our higher our to able that like why We'll XX%. that of seeing kind better growth now. I'm That's control way, we're be year, little even hit expecting

going be I'm nicely. that up expecting to for we the performance We'll the bottom think time to come able go until really but I sustain line that that platform we've grow share built. into down, to is this

Jordan Sadler

pay Okay. your The it a price availing at just, angle important being you important public going you to Or public as company? was a Is for I would was for a really world-class you of because there's of capital, be than better private stock is quite being mentioned bit willing consider company shareholders of for customers. some to than take that higher numbers where higher opportunity yourself maybe the the to at. out you're a

Gary Wojtaszek

companies. I other like business Yes. doing with companies Look, big big think

of investment kind particularly, has capital public posted there's once a company, mean dramatically. itself and the debt, you XX-year public. benefit clear a I attractive just grade financing really think just like to to opened you avails grade, tower So only to hit access being really, a And really if right? are typically that today that one on is deal guys you I and of up your investment

Jordan Sadler

helpful. you Thank That's Guys.

Operator

go from with question Crossett Please ahead. Berenberg. comes next Our Nate

Nate Crossett

market What South been. lot that how's a GDS? call, question us of are maybe region? America Europe into with on Thanks. can your on give thoughts and just the aspirations there's this ODATA some on talk you but that there Asia. of Yes. maybe outside And one color expanding been then What are And about

Gary Wojtaszek

Yes. Yes.

Europe. Asia. right? So would they is something as GDS we like in mentioned, time the been not what term just doing has out anything I more phenomenally to doing we're our that started being, on But mean more partner partner longer be interesting for on in focusing the Asia. than I Ideally, well, in do building focused

got and on number that's of that making need to we focus underway for, successful. We've a projects sure

proved really results the have well. far, really, So

on our Europe. of in underwriting right expectations top are We

in interested more anything relationship So what than doing not have with Asia currently we're in we the that GDS.

the position think to operators, data has world, before, and GDS has a opportunity all best data probably of that I the is second publicly global given that market. And GDS I've the market fastest-growing mentioned that in center center as I believe the in that in they are none

So we think we market, that ODATA have right? at the partnered anything up for with is the ultimate doing player story, no similar but moment. in aspirations more

a rate also faster ODATA Brazil. lot of opportunities, doing than and going that's a really, is Colombia, And show They're in kind pretty we were well. as is of regionally to Latin actually market. into them are Ricardo they hot team they There's had sandbox underwritten. and a last a franchise doing Chris lot growing America. a really throughout that Ascenty to think ODATA really be and expanding quarter, we have Brazil help great much and succeed whole I really equally well, big. been and is doing the think the at team The

out our there's need plan. And have going that spend of we terms on in said, terms and that no equity more we outside have of building to really we're versus that in Europe what think And now. that not additional just to done much currently plan additional any in investments capital in It's GDS any focus the But need capital on don't for we focused what more direct ODATA, program. in that any we're Europe. we've of for

Nate Crossett

That's helpful. Thanks guys.

Operator

our concludes I over This session. to question-and-answer remarks. would back like closing the for to Wojtaszek now conference turn Gary

Gary Wojtaszek

guidance you're and time performance, Sure. you're us EBITDA quarter saw think growth what today. what I the revenue think was you per-share strong think We it know, of going to Thanks, really And just appreciate first to and I you is this strong in join leave see, everyone. I seeing of taking I'll quarters like with, growth. like you what really many

hyperscales, to of bottom we leasing And and line investment the and really saw capital next heard or We just this half on we kind took of so. it program, heart it in a for given going out see that our the to first back all appropriate feedback the and scale profitability. the call. pullback the to you're quarter, that focus year And you driving really thought

everyone. summer. seeing you Take speaker forward look circuit, I thanks, and the have great a So on to care.

Operator

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

You good may a day. disconnect. now Have

CyrusOne (CONE) 1 Aug 192019 Q2 Earnings call transcript