CONE - Earnings call transcript Q3 2020

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Operator

Good day, and welcome to the CyrusOne LLC Third Quarter 2020 Earnings Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I'd now like to turn the conference over to Michael Schafer, Vice President of Capital Markets and Investor Relations. ahead. go Please

Michael Schafer

Good quarter Grant. Bruce and to CFO. welcome President Thank earnings morning, call. third Morefield, Diane XXXX CEO; by Today, CyrusOne and you, and everyone, I'm Duncan, joined

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

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

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

Bruce Duncan

that can very I'd call. to say CyrusOne I were results earnings results to and To the the quarter. you, Thank the disappointing. quarter, the welcome third leasing and our only be me like third-quarter leasing is for call, begin Michael, they for about the straightforward, thing let address

quarter. these how hyperscale to the talked have timing impact can from bookings of deals lumpiness about We quarter business larger the and of the

have that of will. us, line to strong this to two fourth we first quarter the up is This year. But bottom followed It in quarter. reminiscent quarter quarters the And results the better XXXX, we of which in is very are was team, that is fourth of deliver. confident produce CyrusOne the much the by half we to

to with hearing the Beginning X, the very customers. by signals with demand are discussions discuss you the remarks. in what will encouraged positive financial be We we our can quarter, continue Slide broader for and in results which Diane on her see are

results, million in first $XXX leased at remains three than revenues higher high backlog continued growth revenue us have the XXXX for million, is $XX We and bookings beyond. quarters well through as annualized our in total which our XXXX position

slide Moving to X.

XX,XXX the metro leased in Somerset New quarter, square location York data our area. hall During delivered we the fully feet, [ph] XMW at

continued commit have we of and Additionally, XXX XX in recently our lease that colocation commitments give acquired with footage. XX% growth development To -- square support megawatts feet XXMW with we which under of London, in of runway market. acres XXX,XXX approximately land square for customer us plenty the on capacity would

this development requires will a as land be the rezoning. However, longer-term

We $XXX sheet. coupon notes X.XX%. XX-year a Issuing continue of to with balance of strengthen million our

than through have in equity during ATM forward in we our the million $XXX nearly raised quarter, $XXX also equity. and more We program available million

the The low of the provides leasing toward fund to revenue for substantial quarter X to detail enterprise the Our leverage average Slide weighting year-to-date for we segment. deals significant remains signed and business. and XX% attributable liquidity third-quarter the results. have reflects pricing with

XX% accounting the the across the the quarter, As equivalent, with end of portfolio and enterprise from revenue for the of was revenue. customers roughly enterprise of contribution hyperscale

bookings year-to-date XX% as a accounting XXXX. However, increase XX% we have with seen to in in hyperscale for over XX segment significant volume, this compared of

kilowatt, has in success and been the the signed. half over of $XXX average for revenue with pleased Europe, very are which pricing the term per is new accounted nearly years. we eight addition, weighted we've The In had healthy lease has at

third-quarter margin XX% revenue. Turning a run high X, to interconnection This rate X% grow with total rate represents mid-teens Slide at $XX a approximately of our business compared continues up that is to company million now revenue business nearly to last year.

including this Importantly, we by carbon-free have announced report under also sustainability our carbon available conservation, carbon, priorities XXXX. responsibility water operate comprehensive recently on which XXXX our and by pledge The is included is of to efforts a other CyrusOne.com in in was ESG and provides published report social governance. website. committed month XXXX and areas on our zero we which energy Details our initiatives this earlier and overview and

We us, but it right is customers important are the because and is thing it to important our to because it, behind but in a it to is do. doing bit not only shareholders,

X, Moving Slide to quarter very was on busy. the

As a the as what earnings our be. in facilities should the I COVID this. to to call, it assess priorities my help of I intention Europe unable situation, and our States mentioned Unfortunately, was United people on result hope last of all to all during was the visit quarter me and our of the do and

away year. like and our for our tour and We taking even time. customers you would shout care to in platform. of on taking our quality as their this I doing big able these empire give the of a our as care their United during see greater of very important I strong entire you our group number back a visits Operating to strange our forward. the the that the business power CyrusOne a the made to people, but welcome have people States, to an the the meet team the to and of in do facilities from of John focus and recent ranks were relentless assembled by the excited of Chief the few was with and appreciation European a team senior is experienced talented end of for to very there and of with I I'm out management and came to smart, rest and customers team Officer. all changes our company lead thank plan Hatem well sites I However, more as

growth CyrusOne delivery John than in instrumental data scale and centers largest the decreased and was In and XXXX. the that and years his for decade. of joining in previous CyrusOne nearly a President to know, builds. had for design financial of design data John construction, of the center institutions XX particularly building developed you to with role as before costs processes for some world Vice As experience build accelerated times, of Executive and implemented the more improvements company, industry He success

John hyperscale returns. He and relationships is industry generating its attractive a has here us the well of As longstanding our well to with very companies and respected in tremendous result, known growing many room today CyrusOne in with the had success answer he is customers. your with business and questions.

and served which enterprise last Europe, of billion. new five rig, leading CFO with global of $XXX Africa is nearly American Katherine the Tower, has as Our CFO, America as value many an infrastructure for years of Latin at Motlagh you know, a

role center held grow While us $X.X incredibly of Vice there, CFO over company has valuable for President with serving the to international joining Tower, of the she also oversaw industry, data will continue has engineering Digital four divisions experience Brent estate the many of experience American we have strong in Senior customers. industry broad been and Executive Prior total her is data revenue to excited at and technology President with CyrusOne, well experience international he Katherine's we and Sales the within role roles the footprint. CFO as our Vice extensive team. XX centers has to both President relationships her Vice joining both billion as Executive Behrman Ericsson with of to has in years a for very sales. assumed Brent real of last years be Global Solutions her divisions our the and as COMPASS and CyrusOne. Realty respected Nokia. and join make of in known for of well great Brent background who key and and are the fit before

as reach responsibility, HR summary, the on has an our Robert I talent under Counsel. look years well of CyrusOne Robert broad a function data him and forward real center, of extensive and Jackson, EFG with our have initiatives. and partnering real team success. track background, for Lastly, have oversight areas as we an In General in our including to estate great we background mix strategy technology other a X of outstanding of and record with had realigned been with estate

Turning X. to Slide

The and bankers, with earlier, it was stakeholders, and bottom on-site investors, The going for of quarter slide observations on I including vendors, the customers, CyrusOne, where thoughts industry growth demand high The have providing and trends few to for these expected the secular to that environment; a strong continue in United over supply-constrained States. opportunities priced along landscape are with about many to talking other lots opportunity markets. as more of backdrop mentioned industry the demand In attractively performance acceleration competitive on a people years. well returns a as visiting the hear the driven while our is next some resulted in highlights our key a CyrusOne. in the across capital space created the particular. As and in from our compelling analysts, participants has companies, Europe, hyperscale industry the their busy access of

to and and investment-grade trade us number we well, a status different close meaningful our record, This and discount factors we track our presence shows XX priorities. Our of peers. at attributed gap. need key proven to has that but continue Slide near-term broad to position to a been geographical want

strong States. results First, releasing produce we in United have to the

improve area. We couple the have need this last we years to lost share and of over in

And have XX% compressed. that [ph] the In business. issue are will key X% which market still footprints known to these taking it's quantities targeting competitive, down These believe companies targeting yields be with have allow we across -- we while and developments us We're shareholders. we which last have Europe, year. our in to ourselves focused good an their larger markets, hyperscale key are continue We position to the generating ensuring time capacity well for to was to yields increasingly on remain hyperscale development capacity. our of we capture the on very returns across range, European expand capacity

of under XX% to projects growth. the total completion will footprint development continued well these our European markets be powered footprint. land as nearly near-term XX across we have XXXMW shell representing Upon development, megawatt We have our as of our and support ongoing

place Lastly, week will teams in put the senior basically this of management joins the end the Kathrine be team. at when

With be our strategy funding all will and strategy, evaluating the including in areas of our capital we among of cost our the our other now together assets, business, allocation the things, place, portfolio team key existing structure.

clear and progress is good meet leaders very all an that do evaluate measure competitors. analysts on to into closing, meeting, opportunity have know across plan focused are need company. and expect, and be investors guidance We and team, and significant to give gap performance it XXXX last that and our platform am our our we on strong we team end, will the our trends capacity our more and are which color us, that update is our will. and strong will articulate message as we we Diane between the closing the have and increasing to strong in get to an consistent to goals in remain her and our the before But for outstanding quarter it CyrusOne over year. call done; I liquidity. to on on up a confident thank career on demand the built results. with us our and At strategy from of capitalizing turn COVID the we for bookings, contribution distinguished last to our We I'd the markets and provide our hear The Investor on I consistent financial and in-person years, for to used focused the also quarter to like out. to is an tremendous her over give not a the consistent of and goalposts be her, willing, we we years. quarter Day the can community, known months CyrusOne a her she does we very head to respect congratulate execution being. with in going she valuation for have wonderful couple In we're a very year, real estate the Diane have our position of human to only four XX mid-year targeting and and I've this, truly that over need To within

wish leadership, commitment. to that think although for our I through enthusiasm. be know miss transition. the busy assist with CyrusOne I her the her and all with will of retirement she her end I she'll full time all her at here the keep forward, in year all I will the speak her plenty in everyone saying going wisdom we best Board

So, thank you. Diane?

Diane Morefield

Good intersection and at but support over your as real I've working of not thank with the platform opportunity you years kind and an of years. an over you words. all the for thank people and CyrusOne Bruce and well the that and great or those having plays part truly the at with company of only previous morning, of roles enjoyed investment also I many CyrusOne such and with in estate everyone a industry being four all years exciting group important my you, to dynamic very have role in the of technology. enjoyed here you my here community, work I at

Slide to in per Churn normalized to quarter third XXXX. X.X% FFO the in compared quarter. each remained XX. share at of Revenue X% Turning low grew the

end We X% churn range the to decreasing are X%. upper guidance our of from

full to churn the year, although expect For quarter slightly and we fourth compared X% be the quarters. that will X% are we elevated actually and toward of to recent do trending anticipate end range, be lower between we the churn

EBITDA Moving percentage the by as metered decrease EBITDA to and is this last increased last quarter margin pass year. and zero to in [indiscernible] Slide NOI primarily higher margins adjusted the adjusted driven quarter through XX, third power and respectively The compared year. X% compared slight investments of to NOI X%

contribution markets remains US from balanced. revenue XX our well shows, the Slide As

our markets. Our continued of these our will consists significant further deals portfolio in European and portion expansion backlog diversify of a

Turning support to reflects Slide projects largely the XX, our development pipeline to revenue backlog.

and CSF megawatts in terms Bruce XX% the of As end the mentioned, basis of lease [ph] XX% quarter. with roughly of as

feet the and portfolio of midpoint will capacity our also toward which approximately completion fund the is powered $XXX development. of substantial XX we at shell projects X colocation is have have estimated of European to liquidity addition cost markets, of million million square we power square projects, On weighted feet. megawatts under In range, of to this construction. complete The construction consist the total under to these our XXX,XXX nearly

extends during to with the of IG peers are and [ph]. sheet our see, other with rated floating positioned of weighted financial maintain our of opportunities equity of proceeds transaction XX%. interest on fund ATM forward fixed average The of now revolving the investment-grade X.XX% to The and $XXX has debt our sales you our we debt a the were proceeds available the as as mentioned, repay and weighted did XX-year growth The forward we under program continue low debt nearly total advantage and with XX, remaining equity. million equity during to status, we Slide for percentage our quarter, as summarizes long-term the metrics, quarter, Again, we purposes. line to remains the And given general borrowings rate in and available of we our quarter of have Slide strengthen to billion leverage targeted rates our ratio. loans end smooths ATM in X.XX%. unsecured to million very years replaced mix, Bruce maturity liquidity made balance in The schedule, and forward XX during of raised average Moving senior million our the at mentioned, repay to outstanding continue that million the manage second that term took notes indebtedness XXX sheet. Bruce further $XXX during well historically of low in and in September, $XXX with coupon interest million mix drawdown to increased March $XXX is our term in our is and key balance quarter. and of in outstanding from and net through increasing issuing as nearly combined we significant used line sales fixed-rate quarter more in a maturing all of available XXXX with X.X flexibility $X.X corporate our can

shares we $XX We continue million. raised to of a monetize net proceeds totaling XXX,XXX shares investments quarter, the have and proceeds. Year-to-date, approximately during approximately our sold $XX approximately approximately total GDS generating million opportunistically XXX,XXX of in

the forward we to our the As $XXX through continue price end our the owned quarter, GDS with the on of XXXX available leverage. we to going into of to September raised $XXX of X.X shares value and equity of equity value still substitutes total the ATM disposition million of value and million have total the fund Adding approximately program, based XX. equity share at to million a business in of manage their a nearly

Slide well million Turning year next XX, positions beyond. growth and for us backlog to our $XX revenue

is the for as in X/X prior deploy with is backlog expected And over of XX.XMW Just associated to quarters, the in of The in commence expected annually to capital revenue in fourth quarter. commencement the with XX I've the align the X.XMW million mentioned spend of to capital this has lease the to period also over for blocks mid-XXXX. ramp commitment the revenue. mid-XXXX corresponding phased four-year

for on updated Slide guidance have full year Moving based results to first through three XX, ranges we quarters. our the the

the revenue the for adjusted We maintaining while total and EBITDA ranges midpoint. have tightened

normalized tax FFO this primarily is are the shares driven we metric third [ph] will you is actual of associated impact midpoint, note We end have an result the per the our drawdown well range $X.XX, on full quarter quarter by which there as the the guidance with a performance. of the range quarter. of as FFO increased slightly quarter share a of fourth our as year-to-date the in just true-up Based $X.X as sequential mentioned. normalized lower by equity in share per of guidance This I income trading in for the European decline increases accrual midpoint issued higher on the third to implied compared by

are midpoint a billion, compared closing, we purchase. ensuring they support we to we expenditures range is continue of Lastly, for the increasing to land driven our capital at $XX focused to our to increase and London In are an to and are well-positioned our $X as which prior primarily by of the customers $XXX guidance million guidance grow is million expand. on

that participating continuation trends any we're of positive appreciate mentioned, the to the and sector. the call on have demand you now with Bruce happy As We underlying this in outlook driven the growth questions. remains take

large in are line questions the that Given request to the you number a one that of limit please participate your give and question kindly With that, questions. question main everyone queue, in our Q&A. the do Grant, you, open chance thank to we to for

Operator

will question-and-answer Our Jonathan begin ahead. come will go Atkin the [Operator Please first We session. now Capital Instructions] RBC question Markets. from with

Jonathan Atkin

and leasing Thanks I operations. to about very wanted much. about ask

if on in leasing? for So very number of different, changed, he's the to left and it on forward what's US markets kind bit of that provide you're looking XQ flavor for what in in across that side, what Is a your in your leasing a is observations, priorities if to larger that a then number on John now in give many maybe what's opportunity little bit give a are much. how Thanks company seat? the COO Europe in COO of, you're it terms XQ. that And of and that comment kind now he the at-bats you distributed maybe I company are wants of going little a of smaller broadly of a operations, the of or have wonder us forward can if you you us deals flavor

Bruce Duncan

things to the say, looking where we continue quarter to again, for has your what want let we've we pick on team stand very Great. to it's positive Well, very and reflections would done, so continue and It's where The a I we've it in incumbent business talk steady both upon and start, we're -- get fourth terms to will what be we're and to going the me again, -- home. at in we our it third lot in up. again, Europe much the quarter we're optimistic that and US. think about bullish it's -- welcome us, I enterprise today. steady, -- will are. steady has you and execute And John, hyperscale but in but we business got to been us. got again, And of

John Hatem

I I Thank customers, creating a is this half left products been it's could to I really hyperscale you, has are and the used evolve, constant customers me Hi, enterprise, How time. this was continued Bruce. think Do the business, do, kind and right or business focused long ago And continued for shareholders. and thing we're and our while and I Jonathan. say you? year make what a gone you And is, doing whether doing know, in right? for So I've on about we this priority all for right? and by to they're of a thing the get team sure right our our a

Jonathan Atkin

very much. Thanks

Bruce Duncan

Operator?

Operator

question will next with James. go from Frank Please come Our ahead. Raymond Louthan

Frank Louthan

thank you. Great,

with the So, what the good changed? first and to in with you're pretty bit a bookings. half. [indiscernible] Bruce, momentum make talk what's where had to little about organization you'd you changes changed in -- -- specifically what of What's bit you're get like to be? or -- little -- what good to What You if the or them us are the place and -- pick going put bookings really back you sales have you kind to that for to up this

Bruce Duncan

business is Hi, that the -- and we that, been the well, lumpy we've change number said a since business. Frank but was one, and saying what last call, before quarter hyperscale in well,

sort fourth these if we -- it's I'm terms it's in had XXXX the it's quarter. it's in not, the Diane, lumpy. like Steady sure of the enterprises, very of of one Eddie, again, not quarter of, slow So not

good changed. fourth that's But, So is I'm and business expect again, we quarter. a sure good not

Very of terms couple sale, that we've I was say, of business. a we one, new a at head terms drive new looking He Number made Brent changes, is of of sales in have this head Behrman In changes, ran sales. of would Compass sales role, and the has he good he the very, very I'm for taken well on by centers. he's leader, respected -- at taken data team on Digital. and bandit ran [ph]. He glad

the terms thing think doing terms -- the the of you so, is, focus. that's And as remarks, high using in -- of second lever. looking Again, I if So returns, for, a the returns, you X% leverage view in in our we're XX%. we that saw -- we're my the to that will, of unlevered that us that use, in gives doing

Our leverage the at X.X can mid-teen for times you or get whatever, returns equity.

business as was disappointed didn't quarter. be hyperscale again to the to quarter. So to leasing I that I bit us our I I think -- leasing mentioned, fourth in And more there's in out in had there, good the words too, it's aggressive deliver. but mince being disappointed help up little by plan don't demand third the we will but encouraged we're a

Frank Louthan

very you thank right, All much.

Bruce Duncan

Thanks.

Operator

come Colby Cowen. Synesael will question go ahead, next with Our from Cowen. Please

Colby Synesael

be you of it about while starting their thank longer FFO Bruce, a short think as or so the Thank giving in some changes you I of Great, and balancing I top your much for how about you've out recognizing to that expecting bigger think quickly? cognizant you know go growth to you do there want are much see to share term, that thinking the of made is near-term to terms OFFO on make imagine peers they been investors see What We're some demand months you're How near and that amount many just you. just there, secondly in I've what trajectory when you how of those guys in I you XQ so leasing. And line wasn't fielded then term pretty they pushed well. you. some diluting just time the pursue targets a you have that? too per in few as did growing be of management changes not that versus want that. of opportunities. lot dilution? questions they know

Bruce Duncan

I with when see were terms in the better. do terms did some what's start going of that's listening first The and Let's there I one on. well here, team as tour came areas the team. functioning team in of was a we When can my

key is -- to within John about I'm back. of oriented. is proven he's commodity He is action relationships very a me, the got only terms outside great but So excited and focused. of company, company in person a He they close be salespeople a with meeting if come our some it a John customer, say, with our would could've deal to would not coming customers one only to they into asking John the Hatem.

back had of and So come -- hearing, John meet I tour kept back, I until teammate. partner a glad it'd terms as listening is didn't We into John, he months and and that's in my fact running I this a talk talk great John. so be to X thing but you in great number probably I'm of said to And if John, I to he's conversations. talked a

up, I need we especially we it very that all good I This and so of convince very, very has impressed done it to that's she and of is stay, she and sales she's the has we've the talked it's leader companies good. good I strong for good, and leaving running additional but And a say, help is will think again. he her think think with, person. with pick a and So I think [indiscernible]. HR, is before we very group for couple working and need terms very us years is in this we a about, Robert, couldn't the U.S., underperformed responsibility and and I I good with that's he found last a number got over be HR would in very great and We great. I taken that think you replacement

so So yes, make there week. believer execute, to forward the you changes the very and great get you have of I'm happen; moves been a if we'll move end something in this start at changes. and see We've should had quick, but things

As the work. hard teams doing I are said,

relates top we would both. need it I sort of to and bottom view As you line line, how say

back you I at per think does line come on that You -- need looking what growth, share to growth, need a basis. top but you how deliver you

more top you're much well will So line see on as the It going metric. focused I more on a think be focus that as growth. per-share to

Colby Synesael

you. Thank

Operator

next Our KeyBanc from go Please Sadler with Jordan Capital question come Markets. will ahead.

Jordan Sadler

new And that hundred-day of seems one or share thing the and was this the of stay course. I Bruce, was of leasing struck ways sort sort of Europe, guess I like towards me will you and you takeaways. the keen as to hear other to it Thank and take sort increase morning. your the in because initiative good and interested I'm course the and stay U.S. assessment improve

change what in see you strategy, that first do read this following you the this that cadence of change? right So do is that away the XXX then right the days, to that shift implement or is and primary sort plan

Bruce Duncan

we figure out we we're to to and to focused but those right mean it'd attention what position the U.S., we we've that say shares have next capacity. at the Europe to terms I got be about the of getting capacity do big of dominant share part XX%, I'd and of losing U.S., to throughout now. got that it's company in year Well, sure a positions again, why need our end good again is on in you're just make

So sales again driven. it's

we that going incentives think leader I I we we're the doing a of these we've on the as a but try there, on to there figuring have in share. out to new assets great win think sales mentioned, our focus be to area. there's to what opportunity. because better -- demand and these good is we're out new about, got going It's focused get assets, And -- terms but in -- changes

Jordan Sadler

actively from actively Sorry, more Europe, of in the clarify shift the sort a and my quarter. The I prior was think wanted you because shift is to there toward, missed towards capital I'm sort will the you I of allocator, to and you're had shifted London making team one back as do this wondering management away question, U.S. toward capital what the decision more guess capital, again thing U.S.? guys capital you I

Bruce Duncan

I got value that of we land would that we've US we've the got not in the for. No, in that should we you position haven't to money lot no, need take any no, -- invested a maximize,

So out value that. need to of we get

terms markets In -- you we at in would that there say if we bought, the terms European is I working are look opportunity believe parcels, and strongly on again, great land of there. are on, new of focusing whatever, the we

would I to bit the in get regime don't allocating making the been focus we we're we all think little say available of in the capital we Europe. a forgetting We've or we weak that and Europe of for. So a there, can place sure that. the that new land that's have traction handle is to U.S. but have capital to need U.S., in lot customers terms some in on growth finding

Jordan Sadler

it. Thank you. Got you. Thank

Operator

Fargo. Wells come next Luebchow go ahead. from Please question Our Eric will with

Eric Luebchow

Bruce. question, the taking for thanks Great,

return XX% to X% the requirements on in the Just U.S.

that you year the of in you've public I that going the have longer pricing plan given it's of last sustainable? forward, that price seen in aggressive because maybe Ashburn So think number like in you the enough U.S. private? markets past you didn't on Thanks. and to because more missed deals it do you inventory think change any you do certain guess look kind competitors, you in the think stabilization weren't U.S., on and was term, you you related out Have range of supply do as both signs is and

Bruce Duncan

with I put missed aggressive and too because were the and we [indiscernible]; didn't standpoint because whatever in today as to returns have that's this -- some year, and they year we say the long-term rates. we product we on some want missed the XX%. X% at and thought aggressive didn't equity and would leases. to last we look that's pricing play missed market. And bad our I In last not think. [ph] at leverage that from we out I say we guess, mid-teens too would those cases get I We've year was your

we're relates think bit more as that. to I little So aggressive a it

John Hatem

on our priorities hyperscale -- it's their with our enterprise maintain definitely Eric, kind space, opportunity the right to need Hey, what what customers mean, are, yields side I see what the we John. really our of and in development customers.

for I like said earlier, key us to. So it's

matching to is sure to are we're what the that. in the make platform have operation rates competition the what need, the customers in side our -- for phenomenal products what our the we market, do On and market, have we a

Eric Luebchow

you. Thank

Operator

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

Nick Del Deo

how is the well you your as accept. shifting targets? willing using the Do think dimension? to need Hi, drive return a compete do that operators for to basis them you biggest up? sort your you hyperscale volume of new have competition more leg pricing with of are old of target similar that under amount even gives do positioned or you are any you And the that to deals returns you towards How on value, create much to Bruce scale the feel structural more think of would competitor

Bruce Duncan

Well, -- a think have to I be scale say, competing there can't don't big us deals We what's I take are. our international would and I people footprints care everywhere say Northern a Virginia, you they who at getting lot like when have couple enough customers. I there they're against would But at when at, where of are on who we are things. of of going of look a look we that when look done. lot are

are do have not because customers don't saying, international you, not footprint. to the we're like it's an business So with you going

great fronts, their got many on again, price deliver thing. we expectations with relationships, not to So and last just we've have able many really the we've relationships companies, is price, been meet for us, and because those

are very think factors but you're sometimes got business pricing want and lots they better important I to other factors, very getting and and would You relationships of you competitive. feel

to and it's in So, hyperscalers with not space, focus of the the decades the that mean We deliver, platform have a commodity. the larger dynamic so commodity the but that seeing for that enterprise I Yes, being can the And they really we need can like a fit these and in on just it's platform we've about developed initially on here requirements have facilities really into things that. we're really, right a the right. business, space -- about over Nick we the players talked mean that own guys not have their deliver. requirements -- I there

Nick Del Deo

All right, thank you.

Operator

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

Sami Badri

to the you Thank idea to being Bruce, of back of think that's you. is for just question. to on one I or that XX% X period for life to about thank yield how an the want you the and maybe, certain time to you like very and the that is the as the X% the range do see one, or this above U.S. against be would get same facilities up, rate below European it get dynamics, us. the for question question? of or Part Hi, X you hence type this is X XX% a number like utilization of the a part of years helpful line to number, in when and leasing into right that, go dynamics in of deal the year then and certain a that framework

Bruce Duncan

usually over lease know is really That and as it you whatever. getting yield, a X% stabilized to it these XX% up time, yield build

what right can to better economics Northern a In invest environment Europe in U.S., that Virginia. we over I now the change to it's say compare terms how bit the a But to we're favorable of U.S. but has now time. would Europe, to more like that in seeing little right

Sami Badri

Got it.

Diane Morefield

the is there some but long-term, ramp typically tend to for fairly hyperscale quickly. they ramp, even The

underwrite So ending is average yield, saying that in, yes, sort but the going range. what and of we we're stabilized

Sami Badri

follow-up. spend some to that we in into what just be modeling an it. sounds productivity your peers pipeline. about CapEx But Got of to some some XXXX translating alluding there the XXXX are in in a about background like share a share it. metrics. similar from is CapEx CapEx should And just idea Got I the there in XXXX. economics ends a then thinking your in thinking already per pickup guess your looks early your And or going on we get because on we of think up maybe It that very is I How should of perspective? be per

Bruce Duncan

you We that look fourth give forward our call quarter to February in of 'XX. in

Sami Badri

you. Thank it. Got

Operator

question Ari BMO will come Markets. with next Capital from Your go Please Klein ahead.

Ari Klein

Thanks.

the be the from well? there on heavy standpoint, all front? changes from kind does seeing attrition there you done are to standpoint at And what employee particularly lifting of what maybe the sales top, Given hiring as need

Bruce Duncan

We've seen people leaving front. in the sales

Brent having that position. energized pretty are in people think I

it's now, I good. So right think

John Hatem

They and I a I team I the coming that drive Yes. back, to back helped and to of our work to the And, with excited success on mean, lot year team Ari, left excited here Brent everybody of are winning. and half historically. kind mean I and ago about mean get a team new here was leadership. is excited myself for the they're back and that

Diane Morefield

I be. being would place echo the are people There the minimal real we is finance look, a in have organization, in on the industries. recognized attrition And other and I industry is particularly to data great lot industry, across center think, the of very a

Bruce Duncan

Amen.

Diane Morefield

those worked much both more in have I stressed. and that of some Bruce are

excited of. about some part for platforms, think industry is changes CyrusOne, a of to been be the people creative are reenergizing working I So a have our this and

I'm don't guess. in ships. the I not -- I one think don't are the I people room, jumping So smart

Ari Klein

Good forward little markets on Can exit -- moving would asset elaborate markets but entering? highlighted you the Are your luck that markets areas. focus in just one just and consider additional then there focus or a of markets in U.S. -- the you Bruce -- what potentially you'd mix you'd of bit mean? the

Bruce Duncan

Friday. we'll but as a into. in to where team we is together going where slim a I start think, everything the we But at, of of might to going that terms over back when yes, so we're might in we you, is as at be looking go to that, there down, again might all again we team exit, lot terms look that be we're

Ari Klein

Thanks.

Operator

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

Simon Flannery

the commentary the in the are seen Good in What from and a on term they're right, little COVID the you how of thank much. you the the Thanks. demand transformation? of the the leasing hearing strong has digital hyperscalers medium-term a take industry terms of terms hear about could out in very what happened in and environment has thinking quarter. enterprises and fourth really to just bit All XXXX? medium the post sustainability Leasing, us you more outlook, on

Bruce Duncan

would of -- they their is terms next there is encouraged few -- -- years the planning look business -- accordingly. think are say at they I next the over in very this growth they're hyperscalers [indiscernible] and great

encouraged. broad It's very we're So based.

John Hatem

was away, underlying just I second time we're of demand coming back the pushed that. an Simon. obviously kind mean from I the up in foundational -- technology logically the for I COVID Yes. mean the component of real. which just is is demand

amazing kind for So customers of that know being thought it's we are them thank they're and the that couple capacity the talk still a business is what had keeps or real I sites, people years enterprise they home and that mean, looking on to, it's like conducting consumed kind last and was we even the the good. whether hyperscalers keep everything to running stored you was was of of going growth. and demand

Simon Flannery

in-source desire change outsource? any in or And that to their

Bruce Duncan

been a and the the that hyperscalers, would hyperscalers, theme a constant based of years some I some about think XX% haven't assumption. timing, they those talk build out heard like lease insource the with variance mean see and anything versus on of but change I outsource. on that of -- come they for versus Yes, target some mean, I between and has you right this that

Diane Morefield

long-term fact maintain data very a third-party their the On to facilities. are footprint obviously that in is they center that leases they portion find good of going

Simon Flannery

Thank you.

Operator

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

Erik Rasmussen

thanks. Yes,

the of getting of nice retirement last just maybe Diane, have miss Bruce, again much this certainly that your your momentum back But if are in you and too is of fact worried you're Maybe you, some some in to may for you and luck call. priorities. this lost And with especially that? at First, XX%, like best around, X% receptive been does how Thank to with sort that range discussions cycle how to and time the new the in to invigorate hyperscale Northern customers Virginia? in of the what the that key yield of you. then markets do U.S. does they working

Bruce Duncan

I in would of had I to in say we a But staffing, the the lumpy into the it's we quarter we it's as pushed quarter. -- next -- begins. the that if say conversations we Again, think terms just it's missing -- again, hyperscale anything, quarter

I from us bit think [indiscernible] the -- So have available, be We that think and flexible in John, our and little again, say up a I product business a and terms don't some able more growth. think to But but coming good better show got back customers pricing that it's continue with may having pricing we We should deliver. relationships product that I standpoint, would missed pretty we forward last going I product. that issue with not of I that in don't think having being on over with the XX our to some to to we missed. great months an on as think see we've

Erik Rasmussen

Thank you.

Operator

David Please next Advisors. Street go from question will with Our Green Guarino ahead. come

David Guarino

from sure started. Hey, companies this seen is just since kind been supply given for of that capital your you. interest given estate kind monitoring of we've and the you one real Thanks. Bruce, picture product in you've just background I'm new wondering all I'm the

CyrusOne shift year So distribution away the I next and of within price landscape to you and evolve of competitors? think supply guess a some think how new do could about the we how you that the those will leasing possibly see from

Bruce Duncan

because seems is is to price say few think Again, supply again. we as as see the function people a demand continue can returns, long demand going of -- there supply. that that demand it's to and get you're there, and in coming there and people it. money there a but weeks coming I was with in there of I are Virginia, into Northern new interesting. in seeing ago I would demand, IOP, terms That's new

think of new the a lot -- I more than So lot to players. one CyrusOne offer a these has thing that

We platform. have a

people security important and all is sure who to and a track front people, is safety, want issues, deal have that make a sure with to can through proven -- their they want make know go they they we which this of platform record. center, with different they and these We to them have

plus. a that's think anything to you John, want I So big add?

John Hatem

the mean business all the they players Bruce for sometimes they making platform. look these to come get else. through it's right, years, from bit but Like where mean have right, of and another or I said, hyperscaler seen keep we've small David, and price some deal it's about important, money, I it's all Yes, not a space, somewhere Obviously folks. have doesn't it hyperscaler that the get they'll into

larger people the think I space. important for in that's us super

David Guarino

can before a Makes we yields what today, follow-up, pricing towel go projects the yield were -- justify development and on talk kind think on and helpful. the you how then if give trying before but starting just and one just disclosure just as we're go sense. can to on on of you is get it questions appreciate are color new how see maybe we of about low It's I you us doesn't constantly could where projects? asked out hyperscale guys about some of figure yields And kind throw just the

Bruce Duncan

probably you that the range if put it, Well, to are which like on that. terms a trying you think you yields yield with XX% and yield in whatever if look equity, that X% you or mean, of at I isn't I exciting return percent -- X% in XX% do look leverage at on

and leverage, banks some point these much at will private if could who that, they stop. that will do on So how it leverage guys more on depends and again, if put -- the it,

we the we want can in it's plenty XX% when do So that there's leverage transact And of still these the we for make XX%. sure can because rates, a around range. equity come big on customers X% that to and again -- return to think that to business of we put us, on think find you XX% us

Diane Morefield

steady data again all we're And because still Yes. centers co-location. -- almost enterprise, are very business from our

-- So, smaller the because yield long-term going blended the blended deals side, that are into hyperscale. as a the aggressively helps as not the higher large priced

David Guarino

working Thanks. That's great. Diane, you. it's with been great

Diane Morefield

Thanks.

Operator

with Deutsche go ahead. question Our will Please next from Niknam come Bank. Matt

Matt Niknam

talked bit a taking that peers. close sort gap of to wanting the valuation for question. you Bruce, about you with Thank

the milestones before management of next better I'm Thanks. improve put you that the or see gap what and helping in place, share timeline together that do investors enhance wondering CONE help gel of pieces so, kind steps peers? to with pieces should about think the new the returns. these And close got team And how in now you've leasing

Bruce Duncan

Again, by capital time we're fairly will a so terms at next to different terms the portfolio together, real as going trying we're of mix, looking of lot where be I we'll be in going, we of in a do allocation, order we I this would that what accomplish to said can in and short in plan -- my and the we're -- different we're that components is it remarks, although have team hope a is so together, [indiscernible]. with

Matt Niknam

year? and still a are in Just the demand customers you of digestion entering it pretty lighter strong was first in terms seen around a terms very but after half though one is of wondering, still the active, The seems particularly company-specific of signs like little follow-up in bit as also, the have there. more of hyperscale, volumes leasing sounds it of any issues, customers XQ, a hyperscale I'm it more side phase

Bruce Duncan

No. But we is very think -- appetite that the strong. still there think we

Matt Niknam

Great, thank you.

Operator

go come Our next Rollins question Michael from Please with ahead. will Citi.

Michael Rollins

And a morning. question we also on the Michael morning. Bilerman good line and for Thanks got this I've each and have you

Bruce Duncan

ahead, in, ahead. Try and go get go it

Michael Rollins

is of look bit schedules, the and I hyperscale on looks you presumably it's can and over headwinds turn X% if a happening Michael? rent whether domestic or vertical, the to year-over-year growing, may rents about unpack be like up curious, those just region I'm customer in I'll rents So terms of domestic it were it at some by where within what's that

Michael Bilerman

at I'll let back then I'll you answer that on one and the come end.

Diane Morefield

get some time of forget point Yes. we our time leases revenue U.S. our customers. assets, again I'm we as sorry, particularly rates. in backwards has and your might customers, enterprise market our in questions. were Because as ago legacy run really The long the different churned the that hyperscale, market is the far that to in a so written U.S. from it obviously those by from enterprise The and

there So we're U.S., zero we're the more extent in increase in European that's but the pricing still building Europe, and and not just to Europe. headwind. Obviously, assets, growth, is have in given -- churn we Europe in definitely of revenue there the the new power

and just So customers pressure so. Houston in there in that's that under markets as a that's really about oil generally sorry, then their what's that's Dallas, concentration in much been driving pressure, the is have portfolio that's and the -- in what -- and the Cincinnati but certainly gas bit and that's of the some most demand. our I'm

Michael Bilerman

And Bruce, to on multi-year Thank be absence. a good it's calls Bilerman. CyrusOne you. It's back after

thank So for you that.

Bruce Duncan

Welcome home, Michael. Welcome home.

Michael Bilerman

Thank you, Bruce.

What turnover, go valuation pretty factors consistency The And and as know slide try gap, of last overall? of communication. are talked So the turnover across a already listed is leasing, you of management to I terms a XXX-day and you to the -- to of variety -- getting when about constituencies to? -- their that those on where those of bullet sort would what appears views. want be of constituencies listening spoke in to people, other what about say to wide factors, how consistent addressed move those you spoke tour, some And these you to lot want talked the X address feedback in it though some wide-ranging you and the was with execution I other you forward. you've all

Bruce Duncan

and that not feeling clear the said where it so and a lot was did really priority consistent things I that the -- we're so was. that things, market didn't what lot of with the a just is understand wasn't we what and were said different about what program different company would say that the we going the of what

Diane Morefield

things said that also it that I think were think was there were done a I lot that, right. having but of

when footprint hyperscale you pretty the proven being and seeing very we puck ready always be know acquisition hit and and a in think certainly success. customers I where good in were has the going Zenium was at Company the to was based to the enterprise Europe having

size So, think CapEx, always that's when as pressure other multiple I we level just our our the to and but prior the of were discount been is smaller. particularly on compared thing

spending We our of bit more revenue a thing risk factor, are that level. multiple and a just capital consistently I that at even depressed than was again our some

Bruce Duncan

of of In issue. and development the equity we also terms the of amount amount

Diane Morefield

much when a a certainly is even financial There's doing before there is it pre-leased. that you're And shows development Right. lag up lag your one in metric.

it we lot That sight. think just platform combination a is in I still great So a right. things, think of of not I lose should was the of but company's a lot things, a

Bruce Duncan

and a One incumbent it's to forward. move platform. And a great upon good it it's again, as of and in very point, got take that us again good we've very a a company, team

Diane Morefield

they and hired me four And years that ago was brilliant.

Operator

will Please question come with JP Richard next from Our Morgan. Choe go ahead.

Richard Choe

table if development things change And little are Hi, weaken I just the if I things there the continuing, the your, capacity wanted assume but to table bit. guess little follow development where given is that get and a give up to is back. pre-stabilized for because how look I just development on pull a a to table kind ability just sense And current of substantial it there. and XQ, you maybe XQ us at color the

Diane Morefield

our developments are and obviously leasing our our Yes, backlog. geared towards successful

as and but leased disclosures the almost we square mentioned the on the under supplemental basis roughly table So megawatt. of currently of a development footage XX% XX% development and

to statistic So can really on. are we that a pre-leasing quarter. what quarter strong is capital spending This vary for

we deals were shell timeline for our we that because Virginia particularly were Northern is to larger times, pleased then CIP part getting done. shell of shell have didn't So we're be mentioned But the want build and with to some that. that there do meet that able we capacity, the in of

have all well. So pre-lease. as we in we the then build key halls our do And shown markets as obviously, out data we

in land in we're purchase third was for with shape good development again, we think really year, but and total capital, I that current in London So quarter. made the with increased the we the our the

Bruce Duncan

add Richard, which build in the we which when the data kind fit the think land of shell. is that I XX% to a is I center is we mean us about move quickly of mean, kind cost could right in shuffled that, to an And XX% that the the that of we those side. in platform US of it, risk alleviate wherever the to need leasing our like and on actual happens things wherever the advantage is capital out

Richard Choe

Great, thank you.

Diane Morefield

Okay.

Operator

question Tim comes Please Barclays. from Our Long go next ahead. with

Tim Long

a of And part business. color Maybe the term nature? churn the new the us is and about that short and macro-COVID just Thank follow-up, a then customers you. impacts quarter, that compared just of in little give more talk QX logos quick specific going just anything existing just Thank then in to in bit kind real little that the to you a you. enterprise on kind and of could higher, one

Bruce Duncan

Michael, why one second. don't the take and you I'll take the first

Michael Schafer

with quarter I in -- we did the majority logos. We you Yes, million existing vast vast in The enterprises, leasing historical majority our new added as with We the that third and quarter of was again $X $X customers. see trends. in of deck. think enterprises with eight leasing is the in line was the million with the leasing

most the about we unusual And do of. quarter, churn there's was of the seen we've couple fourth over enterprises better in a quarter last with with respect Obviously, years. with got what third to consistent part, So job that. leasing the in the to the hyperscale the for nothing

you the that to churn what out. of is year call historically. at the expectation fourth the but look happens If we've year, end the consistent range range, upper for unusual to quarter, X% our of nothing brought towards seen for we level so be down It but weighted the with of to just X%, that

Tim Long

you thank much. very Okay,

Operator

will come Bank Funk question Michael Please Our of with from next America. go ahead.

Michael Funk

bit appreciate A historic call for could, a you the it. me. you, of extending for first, thank Yes, a I I couple for Diane, if question.

a around you messaging put half being the a hyperscale year XQ. that you in comment heard obviously Looking you back the expectation recorded the activity. constituents, about more back turned talking January from earlier of of pullback your near-record the about in things and X-K thought in this then one year first and kind tempered I out of and dip a an

So is on cycle there a or change hyperscale sales the in side? visibility

Diane Morefield

in XXXX in hyperscale would Northern thought XXXX, in in Virginia. recall we that Virginia, last quarter us by XX%, over down don't pullback be Northern year. I hyperscale in about XXXX I it we [ph] first particularly say did down that fact and the was talking recall, into but going was the activity

Michael Funk

out in January, that, expectation. maybe expected announced headcount you reductions you you but January, in I the that Yes, can the lower -- you X-K put some when said said thought that I thought I you double-check of

Diane Morefield

more let rightsizing US. had the was headcount it us XX think of grow in and down slow referring I so Europe, to and was to primarily headcount do in our reduction from we the the

I for think was of what than XXXX a slowdown So XX to confusing it reflection if passage. in was a we the of more sorry was I'm that, that going so be, thought

Michael Funk

Okay.

Diane Morefield

will like the yes, cost always there. do at continue look good things that, Bruce again cost you structure, -- But, but and the team the you're margin your on looking business, there's think I to and can and if at lock -- any structure

Michael Rollins

seen? you've in But hyperscale from no enough sales the that change cycle

Bruce Duncan

the which Michael, thing that's the to -- business. goes would more That lumpiness only size in changing really be… is

Michael Rollins

one If squeeze for more I one I know more we're one longer, squeeze just Bruce. in, in going quick can

you So customers, hyperscale the the to you listening and of assuming I'm you get that larger to or expecting also wondering didn't the heard on deserve talked you're -- on share from side? you the some what reasons them

Bruce Duncan

it's they have, facilities I their else where where what would And our terms of someone take is it. the are, than beneficial want product better is. product cases, that's other than want something that you or maybe facility the and for other have is different is it fits in or you, your attractive more in where don't they maybe times or they some prices have question the we whether

-- it, but leasing, I of on our they're part big of it initial talking -- operations, over them, we with customers, done them out, John's It's important with COVID, it leadership to now a but just think day think customers be I and safety. of in and issues, importantly this. the the is what performance location dealing in think very I be it happy to all So we've day to our not be team it's under terms more security,

Michael Rollins

much, Okay, thank Diane. you Thank Bruce. very you,

Operator

question-and-answer our remarks. the for closing would Duncan turn I conference to over Bruce session. to like concludes back any This

Bruce Duncan

thank operator. look you you, and talk and myself, We we questions, you have our you. very any forward call, Thank to it. for Thank joining this for much. if continuing appreciate Again, appreciate to look it and us to Michael, we your conversations interest we Di, forward

Operator

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

now may disconnect. You

CyrusOne (CONE) 29 Oct 202020 Q3 Earnings call transcript