CyrusOne (CONE) 28 Oct 212021 Q3 Earnings call transcript

Company Profile

Participants

Michael Schafer	VP, Capital Markets & IR
David Ferdman	Co-Founder, Interim President & CEO and Director
Katherine Motlagh	EVP & CFO
John Hatem	EVP & COO
Jonathan Atkin	RBC Capital Markets
Richard Choe	JPMorgan Chase & Co.
Aryeh Klein	BMO Capital Markets
Simon Flannery	Morgan Stanley
David Barden	Bank of America Merrill Lynch
Matthew Niknam	Deutsche Bank
Frank Louthan	Raymond James & Associates
Ahmed Badri	Crédit Suisse
Irvin Liu	Evercore ISI
Colby Synesael	Cowen and Company
Jordan Sadler	KeyBanc Capital Markets
Erik Rasmussen	Stifel, Nicolaus & Company
Brendan Lynch	Barclays Bank
Michael Rollins	Citigroup
Nick Del Deo	MoffettNathanson
Eric Luebchow	Wells Fargo Securities
David Guarino	Green Street Advisors

Call transcript

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Operator

Good morning, and welcome to the CyrusOne LLC Third Quarter 2021 Earnings Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Michael Schafer, SVP of Finance. Please go ahead.

Michael Schafer

Anthony. you, Thank and Call. everyone, CyrusOne's Quarter Third Good welcome Earnings XXXX morning, to Today, President Ferdman, Motlagh, Dave I'm by joined Interim John COO. CFO; Hatem, and and Katherine CEO;

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

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

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

David Ferdman

CyrusOne's Thank quarter you, earnings and welcome third Michael, to call.

want even strong the including been to our I was had months to contribution this and with I for an for will can We I'm deals. But results and from more of We Europe have update the X excited pricing about and call. outlook - significant seat than a leasing this First, financial number start and I the guidance say our we many to business I the on and meet performance, now key quarterly opportunity first having points: quarter shortly. stakeholders, healthy move in results great discuss across of we positive bookings things with an delivered on today, with a X provide to

our markets, of last and Over the and part X with impressed really make commitment months, simply team. DNA. hoops their passion to willingness through I'm this and is happy second their customers none, are many of visited to jump to I Their

to shareholder address regarding company. that is are I and the comment want to What alternatives say directly to I will value. not open-minded any Secondly, going acknowledge speculation market and maximizing the all recent our am on to avenues I rumor. we

Our to are management Board committed this. team and

interest This of to any the this have Our posted way shareholders' is doing We value top our we metrics million maximize we our discuss. in guiding best quarter, assessment annual principle. our key priority. results are The to focused strong GAAP to the as that. revenue. Beginning see to with show In execute. succeeding keep megawatts continue is just approximately quarter we for on that can financial you XX signed our and X, will Katherine which totaling Slide in $XX case,

our As $XXX us for year backlog well next approximately the the beyond. positioning million, of growth quarter, and end of revenue totaled

megawatts the XX quarter, which capacity most leased is brought U.S. online We X. during in Slide to Turning the of

Our Frankfurt and London, the of development of September of Virginia. pipeline consisted XX megawatts Northern as end across

power acquired and Antonio, in of San each XX estimated parcels We land also megawatts. Frankfurt with of capacity

fund the $X sheet had to liquidity billion our remains growth. in than more of and quarter end of we the balance Our available strong, as

lease with of over X extending the years X average for $XXX, weighted signed in is Annualized maturity in was the the MRR average profile the revenue nearly quarters, prior per the demand lease XX% signed to enterprise signed long reflecting X-quarter kW term Slide of line U.S. deals pricing quarter than GAAP and X. on hyperscale was good relative in strong prior the deals Moving higher The Europe our term average. during portfolio.

As the in we significant to from And and Europe. that XX% shows, hyperscale pie both in continue rent percentage is slide their chart footprints U.S. bottom customers. the the time expect growth given of the of to the at increase over

Slide to X. Moving

in as very total Our third perform million have demand European from projects gives in the in a well, development $XX us growth markets continue accounting account market through over for footprint. XXX near-term first and Taking London, in continue of The strongest nearly for to in revenue runway footprint $XX megawatts, leasing. European European site customers representing we represents near-term half GAAP annualized they scale. additional which the Frankfurt nearly to of quarters our the of X million our and accommodate quarter of the acquisition company's signed the underway our year, to hyperscale into Frankfurt year-to-date XX%

Turning X. have Slide concerns chain in supply to the dominating headlines recent Global been months.

chain manage continue have supply not significant We our actively and to near-term any headwinds. experienced

of supply lot we a risk. chain that is to As discussed mitigate flexible have designed and a have we this before, robust

Our need help rates key with we it, have near-term purchase to pressure. we pricing time on inventory forward contracts hold against items lead and vendors until protect fixed long

We design. at That from better have combined a to us we long-term the pricing. having and relationships with standardization, allows across standardized with portfolio, scale key that suppliers purchase and we the have significant benefit development achieve

built components through have dual resiliency chain the key supply sourced. with We also

meet we industry opportunities in the Overall, closely Our minimally together inflation focused on outlook year. In are working disruption to to the impacted are capacity work business the to into accurate broader hard for to and and our value. capitalize been on shareholder where needed we by and chain are customers. our and is front of and team issues, heading and planning ensure internal well deliver positioned to ensure supply is us ability demand positioned the maximizing the when from and integrated remains strong, has next it tightly teams product closing,

will as Katherine? across color more as financial to our on see the to discussions Katherine growth. with an we're the well year. markets now quarter and fund demand, have liquidity performance And provide our our continue our robust on update we our guidance We and productive for having With that, for customers. capacity

Katherine Motlagh

delay Slide Good XX%, everyone. XX. slightly EBITDA adjusted morning, with similar impact power in driven excluding approximately The expense the of metered flat X.X% customers. Continuing was Dave. reimbursements, grew XXX metered better years as XXXX. work at was contribution excluding level proactively and the XX%. with as rent NOI churn and you, churn in at as commencements margin, growth EBITDA we points, SG&A in Thank in period quarter of the up to basis lowest year-over-year adjusted approximately have with been to same lease the well power the increase reimbursements at of seen Europe for Revenue, impact by third Rent in our the relatively have we compared some able

towards decreasing we to that are range trending our are of year currently and small now by population X%, rent average relatively GAAP just renewals X% these the on X%. range. per lower like-for-like The We impacted to is end mentioned. guidance be X% from end range on The the of that and X% cash full were pushout a was weighted rate The I revised X% positively basis quarter, spreads upper the basis. the up the of to churn down on continues churn a and renewal

XX%. The of of to the the up That's to Slide XX% our European beginning XX. Turning from from markets year. contribution revenue as has approximately increased

to focused given to the increase profile We strong markets, to are have customers' and expect over contribution this trends needs. time capacity demand of that our ensuring and future across meet continue we the these commencements we on the

portfolio brought online we quarter, diversifying across the of fully the in X the During center leased now our first European with markets. geographically revenue data Paris, further phase

Moving XX. to Slide

to We our XX X development in have across U.S. pipeline focused strongest leases. development on closely and to mostly customers. And remain aligning square contractually we Frankfurt, footage with feet square under XXX,XXX megawatts XX% European and markets. with colocation Europe, London development continues be and including of signed pre-leased megawatts spend XX The committed

in and across up to markets. the year XX% these of Virginia, San in also X,XXX have in shell giving projects megawatts capacity, have ago. completion XXX,XXX key from will quickly response a construction square of to Upon powered pipeline, London, feet We Northern nearly we Antonio demand us increasing the under capacity deliver ability power the of

XX. Turning to Slide

end the of we $XXX available quarter, to more including had $X our equity. of billion fund than As growth, forward liquidity of million the in available

of was at quarter of end the targeted the range. X.Xx, leverage Our our the end of lower as

Moving to Slide XX.

year. of the towards The the significant third third approximately quarter million Our result of XXXX, beyond, from XXXX backlog remains the million end commence will quarter. during $XX at in in the the the decrease nearly second $XXX in second high $XX expected we the anticipate annualized begin to the million. Of lease weighted is half and quarter commencements revenue of of

to Turning Slide XX.

raising We are XXXX guidance. our

This base compared million, to the $X increase as our favorable the churn a primarily We guidance outlook, in resulting full of I the of more are range $XX impact increasing prior accelerated timing as lower for midpoint. commencements mentioned driven well year by is a our by the end including outlook. million revenue earlier, in

markets. the lower higher Additionally, across end upper result $XX of are metered guidance for range of and a our power by we increasing both usage as million our reimbursements

property are revenue This in lower the the $X $XX a by of is range midpoint. increase by increasing resulting EBITDA in expenses. driven base operating guidance slightly We million, end the lower in anticipated adjusted million our increase and

excited upper of And and closing, end with take growth the normalized beyond. also guidance primarily the of continued and in on the are open midpoint XXXX questions. increase of year, the plans appreciate we $XXX midpoint we We're to the range the both interest guidance call. is In midpoint line. couple as Thank we this adjusted narrowing CapEx midpoint participating We company in for Finally, are guidance by and our we're And of our you remain FFO months now in for business, focused head and our execution by maintaining the the last expense. outlook million. our in the lower operator, share increasing you. please ready we the and into range $X.XXX. positioning about increase The and lower-than-anticipated increasing EBITDA slightly per at driven

Operator

[Operator Instructions].

first Markets. Our from comes Capital with question RBC Atkin Jon

Jonathan Atkin

you on was CEO is if wondering us can I maybe going? how search update the

David Ferdman

Jon. bet, You

business am Board and available execution, and all making is sure ongoing all at to ongoing. looking an the And process. it's the is performs, process I on exploring So the the Board. focused opportunities

Jonathan Atkin

Got it. presumably, driving And then that on implications wondered hyperscale something is development megawatt, could that pricing inflation about then industry the per will think talk going which And think forward? I commitments CapEx have you bit a seeing. new I little is on you that's up, if any

Katherine Motlagh

Jon, Katherine. it's

that take Let me one.

our between Europe optimized closely globally procurement we with U.S. and So very vendors and is and our work suppliers,

have the that with fixed relationships and base forward. the so pipeline forward. And we development the ensure usually we capacity procurement our are a for as on we that vendors contracts We our go have

So far, construction pressures inflationary up with chain working we as manage forward-looking inflationary our our for I think contracts have well material costs. through contracts. But and on our - we're not come it we'll customers. seen as the renewal, And as efficiencies on supply

Jonathan Atkin

was then a And finally, Europe strong quarter.

million. leases us to - maybe distributed you talked that think how signings? or of I is, signed lease the be X or that you question largest the X large in X $XX a Was was the largest way evenly the that give Or across ask can what - you would magnitude about quarter? maybe

Katherine Motlagh

Yes.

as region speak is say fairly it's deployment. leases on focused or individual our customers. our But I So European and region customers would about hyperscaler heavily we existing customers, hyperscale it's large individual as with don't

David Ferdman

I'll that. we where ago, bookings to we are In that hyperscale. of XX% have X our with add year-to-date, mean, had Compared I XX%. years Jon, from

definitely contracts. So long trending towards hyperscale

Operator

Choe Richard JPMorgan. with from comes question next Our

Richard Choe

the search. A around or to Can on CEO give quick update any follow-up timing? timing us you expectations

David Ferdman

process, Richard. And set expectations an on can just I have timing. don't It's ongoing I any unfortunately,

Richard Choe

in on volatility market your quarter, terms are of shift the or And then in region energy, or whether you? customers follow up expectations, you to strong seeing any it's demand for another

David Ferdman

at look our bookings, And XX% our at first U.S. Europe. bookings, third We're if it the seeing all demand of you markets. it look if strong was our And quarter in quarter was XX% in you across

and all the see out can't, platform We have And taking we're the we demand over the some control the the grow, of as business. so platform timing. But certainly we of to because we as all lumpiness market. continues of know, distributed that

Katherine Motlagh

need the most Richard, And energy, are when power. on power that hyperscale a of an customers. pressure increase metered the it's you see on through impacting in reimbursements. Europe, they customers our so metered We do see decisions where path about capacity. do it's their think not on In majority, We

Operator

Capital BMO The Klein Aryeh Markets. question comes from with next

Aryeh Klein

up on It the leased following Just for hyperscale. looks nothing U.S., was hyperscale. in like

last too. it's pretty the light, And I quarter, enterprise. think rest was

you're but color lumpy, maybe those on provide seeing more a little So markets. what in you markets, can U.S. the obviously

David Ferdman

always it's lumpy. Look, Yes. been

- the all hyperscalers have We across strong in the the demand U.S.

of So we don't see that any relenting.

lumpy, it's confident still that our still U.S. hyperscalers. footprint in is So attractive to very we're but the the

Katherine Motlagh

have U.S. basis. the healthy And very quarterly with They monthly on business run their just customers conversations don't say we would I a in or our basis a

we long-term So relationships. work them with the on

Aryeh Klein

And faster the then you is commencements driving trend that anything that specific it. it? continue? on And a noted, there may is Got that's

Katherine Motlagh

what's to I say driving complement our that's would the faster it's team, commencements. a operations so

John Hatem

Thanks, Katherine.

company It's right? and that, always today. it on is environment we team the Aryeh, get as I mean, delivering focus and in with installed of quickly early the been the we our always them as Now even on can. as as customers possible, listen, are focused the we continues So work

Aryeh Klein

one Got run Obviously, about those open saying balance your with mind, the given here keeping on not just Can an shareholders' CEO the search. that CEO one - a and it. today. And do that earlier you maybe interest search? lot last in how But mind then concurrently? comments

David Ferdman

understand don't question. the I

Aryeh Klein

for add to make potential If while more difficult - difficult does CEO it sale, new to hire you were process? that running a a

David Ferdman

don't the or anything business. to rumors any how correlate market We just they in comment on

Operator

Our comes next from Morgan with Stanley. Flannery question Simon

Simon Flannery

Great.

of I going elaborate Is you looking down people your could on more should timing JLL. new that then that? there in second So I there a you're a the How comment on half next about was deals? facilities about of a little if wonder, wonder your year. And on comment longer on you time some something taking the Katherine, think management in lease bit these backlog there outsource report U.S. we that. to just if to the on

Katherine Motlagh

Yes.

- our let time on is start line. backlog of me So We backlog. with focused kind X months' normally, XX the to

works. skews or developments don't What see do deployment we of you Paris any without our backlog the It's So focused towards year. time heavier the have just than rather multiyear the beginning backlog, is times. in usually the that But the towards end new extended of of it. it longer kind of lead are remember that how year that, the deployments timing the

So I see don't times. any lead extension the of

in of some is backlog because my decreased, remarks, It did I we healthy. I as think prepared mentioned accelerate the the commencement.

timing. the that's again, - that's So

into So we and the our well feel backlog, we're good future. positioned going about

with terms of a contracts how really business, not add any our there the we with comments of In so for is operational, run of we we normal up come work all vendors. It's the to negotiate our to that. process vendors. renewal, the business, When

Operator

with comes from question America. Barden of Dave Bank Next

David Barden

around you've terms think us And or as I So will that whether whether is, take the the be space which could with massively getting hedged, sensitivity of Facebooks heard business? the for they're we've of would X their a and it second, facilities, lot, hyperscalers I potential guess then investments make guys' work kind mathematics you their things of multiyear perspective of I'm the maybe how to you preparing I preparing The increasing world have the if, to capital in what give from the is say, would those to remainder, sure question love And vendors. exposure question in been just question unhedged. - are lessee Katherine, expenditure. hear on to own business you is of incrementally the significant is. terms precise the the, percentage in pass-throughs the energy first cost of

Katherine Motlagh

All right.

the take power me math. let So

our power reimbursement. a metered customers of path through XX% are over on So

the are of U.S. I that, in U.S. would in say all-in So all - - or and from of customers all-in the customers majority are our then the

us So they've and from cost fixed power seen to on been raising rate, any haven't that. on we a the material exposure

it as to hedging, hedge we purchases. In XX% our And savings obtain pass power is of policy terms of customers. our approximately metered through our our we

answers So hopefully, that that.

David Ferdman

the of but lot I a from we've seeing - And these question. take do always do everything. hyperscale hyperscalers strong We're demand seen David, - they I'll that think

them very so And seeing assets. into we're big our investments make very,

they In what to with megawatt in, the hyperscaler including $XX us, fact, million that core, about they bring per all in fiber, they goes on a - their network invest invest network in, capacity when the deploys the all spend, addition all they dark gear.

So investments. these And as work big a very are we, course, partner. very, of with them

up. our facilities. they down. how They it probably haven't in that so And We of slow all it we all do split strong we're demand seen differently, know seeing but demand don't

Operator

Our Bank. next comes Deutsche Niknam Matthew with question from

Matthew Niknam

one then margins. and on churn on One

you if year, lower by next margins expectation this improved of what's could bps deferral pass-throughs, into it is, about then if that bit 'XX? about for the does year-on-year. into a the First deferral Is on XXXX? shape sort I talk churn. fact, And secondly, churn, And little driving how XXX in ex think,

Just of a the if you of maybe going on similar extrapolate whether drove improvements wondering improvement we little what sort a and more can color can give magnitude forward.

Katherine Motlagh

Yes.

So our churn, we proactive. very in as all, and On been negotiations negotiations not the with you ongoing able renewal is to that we Matt, earlier that an me year. let exact so have rate that. of first with they're of anticipated this and date customer conversations And delay the are know, some agreed have and and There future. renewal the those customers we've take reduction

churn a little 'XX. that we'll early report takes when about It's talk that. place, too So to on

we you a next year, that. get take address of we'll expectations then So and the to that. question for note I'll until hold if that guidance our

then... - and So

David Ferdman

We actually couple had of picture. that surprises a I year. renewal some healthy churn had and long-term deals want We churn to at for reduction on renewed enterprise projected a really add the X% a color actually price. in some a this renewal for and good little

We understand renewals it's one our was legacy XX% which a population. to Houston, earlier like-for-like had actually of X% talked our our think bunch in was renewal gap that renewals. And one are cash down, have I bump. We about roll we of - The the facilities. important X%. And of a X.X%

so what architecture. seeing trying to customers manage are is we're still And their

re-architecting cloud, cloud. large private going We're the to are a still Some role. are very some playing to the

positive the of at very, are is strategy having a very the Our renewal certainly And enterprise rates scale better. impact.

market or spot XX% averaging we're rate our above the fact, renewals. enterprise the In better on

And some stuff so had flagged I earlier. we know

timing, is just it in Some a - of very is but were we projections. lot actually will conservative our be

Katherine Motlagh

Yes.

question. now margin take So let your me

So increasing we are very contributed pleased expansion One the quarter, of to points X That, avenues of by our is is as XXXX. with that us Analyst one business our Europe, third our our which the performance Day XXX factors: in the looking is commencements in the margin we points basically at in scale are growing help Europe. about talked primarily expand is XXX and the to and on basis basis margin we

necessarily So the for more there. experienced and expect it quarter. in in well a progression, and a run SG&A expansion businesses margin is And opportunities but our second it's on it's efficiently, some linear expenses SG&A as as one we that Europe flat as grow not better this we savings we operating slightly

Operator

with Louthan Our from James. next question Frank comes Raymond

Frank Louthan

to of on going source of And do some pick us gets to Great. that's customers? mean permitted scarcity some like from be as up what power you exactly have you seems a and power business be available more incremental to over an think it able in idea the you'll there. there Europe? harder availability you Can I give

Katherine Motlagh

Okay.

can maybe and So John let me complement start me.

we new have we be - existing capacity have have and in and we're both still our The XXX% secured the will Frankfurt London, it's Frankfurt we're land and and permitting in permitted, working land Paris our footprint, London. as need but existing in process, and as leased. that through that to online, that on available well we've our got we we available starting So in

John Hatem

the - a markets. the because permitting and it's look at we Frank, it look time the at Europe, right? John. bank, outlook, look On we at that in we it's these X-, takes Yes, in land When X-year power

short-, I don't really bank, years. and site, want the we about land those that I it's for X really markets. power really bank to So And not beyond by - think I bank have into mean, outlook site that medium- and takes mean that's in but outlook get long-term us we the well

Frank Louthan

And All question. right. Great. follow-up a

you roll the think this downs about extent some at looking what as rent Looking to back got Day, had can decent help how the pretty pricing that rent You you to do you're improve you inflation help quarter. do think roll coming? will But forward Analyst a of some to you that mitigate Do downs that of think look rate the going forward? that? that you've

David Ferdman

Yes. I our modest the I mean, in business. Frank, side, going it's and we scale player, near are I mean, help for mean to it's inflation a us on term. the believe I inflation, healthy

Katherine Motlagh

renewals we when in the then, spot talked compare spreads, current remember And rates rates. to we future our about that -

see So current inflation But out. how extent drives or we'll to works spot help the that increases that renewals. that, stability rates will

Operator

question next Badri from Suisse. with Crédit comes Sami Our

Ahmed Badri

One talked time, capacity about the the you customers as into and relatively of earlier alluded this go higher peers be to come of have would new fixed capacity. week same think rates to with I the of negotiate your potentially at renewals and existing up. development builds there peer, same that your guys, But costs leasing how some your

and rising that an are give current the just are? equipment may fixed factors. other rates of to when they lot look they it. developments, pricing give due size years, and that be last you Now potentially the coming actually your color you inflationary idea seeing - when of us what over have given at input come And a of similar are of suppliers us down to Could component couple scale a vendors costs down we potentially happened rental tailwind dynamics unable alongside rates? be to on have prices and Just could come and just that types specifically, of with development on if be absorbing rents costs you then, in can at

Katherine Motlagh

Yes.

based you space, have the savings structure. development mean fixed second-generation cost. a I do some But So is cost the on you re-lease when from

have substantial I not that really yet. renewals to had talk think we on level about However,

John Hatem

Sami, side. on Yes, the development

headwinds, the design think talked about really holistically, chain, on pushed supply it's that's the in let's topology by right? about our with what when we on and line, our our So X pushed when density to it in gen seeing. we and we're say, we offset keep customers, inflation collaboration things we costs And and

- doesn't other So flow I because help development there's cost. on a build. it's not these a it you through the is mentioned, dollar for all are the scale dollar, like mean, that And happening scale, huge right, on right, dynamics the

have, managing are always the good our we as I on development up, we spot focused we chain prices all inflation if the Katherine to that's drives while maintain supply mean And for keep levers us, cost. right, So like mentioned.

Ahmed Badri

- look And to the think paying to your component? follow-up for maybe to when that of when and then lists about I or given again would that price what need vendors relatively Maybe some But I higher everything, maybe question your just to in is, their things. to your when increase apply what said to suppliers products you would talk the for to fixed they X X we currently are input you're doesn't costs, but vendors say, absorbing applies would regarding this one come years. asked prior the just slide,

John Hatem

same generator vendor those unit of a seeing that to get, with about to vendors some looking can scale right? that think metrics the impacts what's little we we're we the on increase base we're next say, So to bit the scale, a get. when could next on Sami, we size the at say, size if for it's a let's unit So What's level? generator, thing offset UPS cost

Operator

Rasmussen next comes question Our Stifel. with from Erik

Erik Rasmussen

changes to trend how back I appreciate, seeing saw, of trying just the for the you part. next magnitude churn improvements sustainable of the some of year. sort to Obviously, get know, Katherine, it's expect doesn't Dave, that going surprises. year, not just sort maybe a you But to a Maybe obviously, and I X% I were churn. throughout to we to where the you're sense offer guidance improvements of the a lower. And you could But coming seem to mean, X% settle. range said some good the continued

you all just talked I'm churn the with call. when in normalized take on - the potentially sort all trying to of balance So things factor we what's about that could - that range where

Katherine Motlagh

Yes.

So are a things business. renewal and, in Erik, there sense, of the for our into couple broader play a term in that longer conversations expectations churn customer

If as the to that revenue of kind business that we of we range. still grows, churn at Analyst multiyear, you Day on as that at our obviously, remember, said X% the the look base that. lower a to X% percent And the base end of kind and tends decrease in

today are signed a of versus years The that leases that we X, the ago population as terms longer which term, extending. obviously the also lot renewal leases the are the see we happens. signed it We leases decreases X

couple we've still see end. up at really. for I now the record, the if customer how churn think that those point, our X% renewals. of so some a It's base this were seen the relationships, you track these X% gravity, because lower X% at renew those come contracts we're an because at we've seeing because data of year. to And years success renewals improvement of And contracts X% been on ago, to to of do able to of

Erik Rasmussen

that coming lumpy. could just for now. opportunities it's - specifically sort see that what if maybe you're of market how know maybe hyperscale, That's Great. and last market, talked could market. in in competitive pretty a you obviously of, I And just quiet been, sort then helpful. Because quarters but quarters? - in you be seeing about your few it's maybe you the do comment on you the Okay. But And Northern Virginia

David Ferdman

this Dave. - is really Pricing has The Virginia. firmed strong. opportunity we're Look, up, opportunity Yes. is Northern about and confident

Katherine Motlagh

we And there. capacity Yes. have

right? not it's It's working with when, the when. That's just we're if right? if, So and customers,

we that - good we'll about region So feel still.

John Hatem

in the We've it's release with secured Yes, market Dominion. with right at we're power shell up both that big. now. - standing and I bank capacity, think across Erik. We is our sites NOVEC Land the

stay and tuned. excited So

Operator

with Our comes next from Cowen. question Colby Synesael

Colby Synesael

your done. And the Europe. just of in having is sound about then perhaps, share what leasing pretty comments as secondly, maybe Dave, see bullish more as I to degree, be that in environment I worth any already, is time. the guess considerations. conflicting but Board I'm activists, happen or One it'd I the if all victim within may And year's that a you it sooner start appreciate much you potentially is to demand across to helpful assets, some rather shareholders, that time. capacity of markets then motivated conflicting are in have you demand to all is in X argument made some actually JLL color more guys a think risk as to both sell something relates U.S. the question the off than other to deal perhaps call that the obviously off think perhaps open why those could into? you your How surprised, those off can that guys then us you're some you hearing terms Simon's to color X done you, some the see just lastly, - later. assets, might potentially been speak have views. selling the that I already. the as markets, does Is terms bit which about potentially significantly guys yourself make some looking just you find that what and side, the may earlier demand you're about be the Board available of at where it Day you that success of extent Analyst a seeing you relates can mentioned little the that legacy successful one of having a in To I be you're But that well missed And could demand, back take so on to to mentioned going with views? June the there today as own giving would flat-footed sell terms company on and

David Ferdman

You bet, Colby.

the do. all, shareholders, is optimization, digital We customers, So first and on and which we talked continue we we and focusing our - we'll tackle we focusing power, right? get we And forward value we enterprise strategy is of strategic data We bank, and when our to focus is for portfolio we at to block block about take us talked we tackle. about execute. capital and It's build them, just of scale gateway all install we on maximizing way to And objective. of going that's care on what land only to centers, we recycling, talk hyperscale. markets, a

investing markets gravity, we're where investing. And a not And to scale, we the good feel see strong and that the go-forward so data in significant before And we considered respect hyperscaler going with would we're kind market, demand lease we what great of fundamentally, Analyst all seeing in we've sight of had gateway we're to capital where certainly have it. our there's capacity, market strategic in the enterprise and Day. and with we're good and well plan. really bunch we a at like planned line With capital which That's growth the the when exactly We're both and positioned, strategic more be investments. based is digital demand recycling objective for to on making demand where announced of deploy markets we on success. we're this more

smart, safe, play going question is thing John it the turf up we're to I'm play suppliers. the now, to best land to let equipment it lined but handle and going the this then going getting around at do our protecting right probably moment. we're And to think and So we

John Hatem

that we it's Listen, no vendors them. utilize operating of of hundreds have time. key think the I There our sites. and in Colby. there's no model across we outsourced is we - our - all This change the vendor, - here a have lots is

to operationally. changing No change run to we We nothing day have of all how kinds the is But relationships. day. business

Colby Synesael

Or those Then of of the I facilities, in did you're which guess, that new you way JLL had the previously? facilities? outsourcing operating someone is deal Okay. replaced else some a this, your

Katherine Motlagh

talk Colby, specific talk venders. customers. We specific on don't on we don't

out. John our there's change as So operations, to no pointed

Operator

comes next from with Green Guarino question Our Street. David

David Guarino

kind where development. already space, I backfill of of And land. a through who risks some long-term asked think I about selling tenant Dave, because single at I about that just you you curious tenant How needed. a data think And for how through market, that you're large capacity approaching you bought think of do wanted that was shareholder another ask centers more maximizing market. could close talked you in San if value Antonio market? about to same you megawatts ever the underwriting just building scale XXX tenant when And that in that to just is

Katherine Motlagh

take I'll When underwriting under is development at yields. We umbrella. falls underwrite single-tenant we do we stabilized - my Maybe kind multi-tenant. not Katherine. that differentiate look it's David, deals, So of since versus

a at to prices. and the capacity when campus-based we scale, interested intent right Our offer tenants on they're

So the difference a versus I other. underwriting is there don't think between one

experience a great Antonio market. We have and in had success lot San of

that because we there. in there market for well and there we've So is demand us, continue really done expanding

David Ferdman

we And market, in enterprise and Antonio. fantastic and continue San excited hyperscale to to a It's demand expand there. we're have

David Guarino

about And they from those maybe their of then on environmental with intentions have maybe hyperscalers. have to foot going then to those you about A passed centers. is announced to what that the to the sticking you've to tenant? is tenants Can achieve impact reduce data talk conversations cost? number CyrusOne had Yes. Or bears they want Is might that green who's who goals? on ultimately, replace the their costs? And the them

John Hatem

imagine, environmental David, data the as customers, conversations center, we're I any data of in center all could impact around you these components constant or of with the footprint. mean,

generators. purchases. to energy looking green That's that's mean, at I replace solutions So diesel

things fruition yields going they're to they to them rates, So more, willing of get help is cost to all the our of to working cases, they're those come some with market - green to there. cost in because does. power we're which get we're initiative, and maintain reflected going will to their will more the And corporate power, If our in pay - for customers. and our hyperscale pay that for will it here that's it, demand

Operator

with Jordan comes question Capital next Our KeyBanc from Markets. Sadler

Jordan Sadler

clarification search. hire you Did firm? CEO I the more one just on an executive wanted search

Katherine Motlagh

the management it's decision. a Jordan, Board decision. It's Board a It's decision. not

Jordan Sadler

Right.

search has executive the Board So hired firm? an

David Ferdman

many And about we with Board the best ongoing all many, will we that's the relationships on particulars. I have think advisers, comment decision. we CEO the the do process. search. you So can very it's I'm not and say And I make an can tell confident

Jordan Sadler

process a what's Well, an describe bit? said can You you ongoing process. Can of number you it's the little speak going involved? on, maybe parties

David Ferdman

Board some working on a it's of focus traditional search. a think committee my committee And it. there's on on and execution, significant is working a on of on a the I that. or day-to-day We've got focus is There's the that's execution. Board objectives. the My group Board

- simply ongoing and traditional I tell we you process. So an process, pretty can think it's I a it's

Jordan Sadler

And the back asset recycling, circle Okay. on I to want then there.

if little just San this gateway a for kind us to times acres in You be gateway X And of markets did priority. markets asset opportunities? what of maybe versus or bit guys view strategic this in I'm touch you course, recycling curious, bought on Antonio. markets of characterize then, the a you you quarter, can number

Katherine Motlagh

Jordan. Yes,

take So that. let me

announced the that we First our optimizing of at in initiative recycling earlier all, is portfolio. our summer aimed

look diversified footprint our well an where demand. correct, as profitably. at on for of our more on extension of We areas look it and terms in existing a gateway of or So key San we're footprint, on our that's markets, us expanding which Antonio, we not at to expand is absolutely you're And necessarily current entering focusing opportunities looking for see expand market. different what we as high-growth

that demand meeting just the market in we're So right now.

John Hatem

the gateway it's demands the that's markets. for, I I It's right? we're And that, digital demand mean, we market. diversified not Yes, and - what gateway that's in digital point enterprise a customer. looking And at to classify diversified Jordan, just limited scale, right, hyperscale to these add one about to think how

Jordan Sadler

And sense. quantify you That David, your interesting. of pool you. like of renewals? of guys you Can think, your renewal thought heard like-for-like in an mentioned like-for-like, terms Okay. or of makes and for XX% so - like-for-like the then - the was in renewals I volume I dollar I that the were quarter clarification renewals were value, one

David Ferdman

continue we don't so can get this I report as is you on quarter. and I What you to tell in well, talking have. Jordan, have can quarter. this Yes, And we'll front I'm there's like-for-like legacy I'll of I some we are really X% our GAAP you, tell me. in do past That that can you most are it just what uptick. at I that data. good - we're enterprise, traditionally, of that almost of over some this XX% happens, And an markets even markets, And across couple scale. renewals. And cash roll only all X% tell large these they're enterprise they're down got a

my have I so get that fingertips. but And we quantified data, can that don't you at

Operator

comes question from next with Wells Luebchow Eric Our Fargo.

Eric Luebchow

to hammering keep the sorry So question. renewal

XXXX through curious, you towards may your at how weighted more renewals enterprise. Day, talked Analyst Just heavily about your be little a

those would versus mark-to-markets more have slightly favorable presume So I hyperscale.

kind get spot mentioned today? hyperscale think relative prices, on expirations when doing renewal, ballpark was that years. related next those cash could the for market. to would the you you the that that, market difficulty decline premium about few And of I to you rates where to presume have But given XX% XX% moving. maybe that, talk are a to So you any in And more a to in you're leverage mark-to-markets

is especially across you ahead, potential for increases some I meaningfully come XX%. on, and in price should of that with the maybe inflation that you presumption being So And were ultra think mentioned you the the conservative, market. earlier cost XX% to as

David Ferdman

significantly Katherine our let to renewals are to that going will significantly hyperscale renewal, coming less the customers. cost we I'm there's risk, tell a handle you definitely question. there's do disruption I the and bet. When You in. less

us, to, cash was paying so And XX% in above down renewal, that this average, rate XX% on they're X% on okay? that's So quarter, at a to spot what translating least over XX%. the churn instead of the market

So yes, we conservative. pretty were

but we'll for And that, that report this as is quarter. the each so continues the over quarter, data on

conservatism you our about prevails. the answer shot a we when that hyperscale And do think question they're coming I'd yes, love renewals Katherine, to and there's so for due. the

Katherine Motlagh

Yes.

the experienced look cash-on-cash to at rates, rate them - when - X And years, is revenue rates. higher be same about field. it's in been cost we all plan seeing approach not up are with of of the for the that necessarily enterprise to renew moving, we've of those customers the as to apply our what revenue work do same the same rightly between to at of rates, they're we And hyperscalers. But it's them, where today, mean our of XX-XX pointed enterprise, are majority the the come Eventually, this the It's data renew renewal and I Analyst customers. we as of enterprise. indicate to Eric, that year All is So And hyperscale talked just with going in market basically the at out. establishing are with we Day our next tend we you profile that spreads, goalpost as spot will gravity. the compare at playing today's renewals facing rates is this and the we the we'll day. than that renewals half

Operator

next comes with Brendan from question Barclays. Lynch Our

Brendan Lynch

active some the on commentary expanded years? follow And Wanted you're capital that on pool bidders the seen if up some seeing point, process. to and low pretty the And we've beyond cap you're this seen potential recently you past plan at could been bidders recycling. on has And the what that that give maybe transactions to has at extent of in rates.

Katherine Motlagh

program in any this time. that as we results talk that and can And at the about then in this we'll we're we're not billion continue we years. Brendan, on And is to on June. the program or recycle X announced There really report just progress said execute billion $X what it, $X to X to we the So in planning next recycling we market. any seeing

Brendan Lynch

on in a kind a sense. of us and give makes the your employees. you That to basis? stay around you After update with and, mentioned on the Okay. you're business, taking had then, And on reengaging customers permanent presumably, can an in your you've David, willingness tour role conversations markets CEO

David Ferdman

got I a I've of meet our first with customers. to our all, some - tour time had in Europe a So enterprise of team. had a lot fantastic several team of and I'm just in in customers our of Chicago now. markets. and several I Dallas they great of to Board looking lots let right with focused best can. other and the the I'm decision at executing really and met on And they're opportunities, make here course, all

interim the incredibly decisions is company made any haven't except see and powerful I'm just everything that CEO, regarding I this in So And for we're on anything and I working positive. execution.

Operator

Our next question comes from Michael Rollins with Citi.

Michael Rollins

Just of questions. a couple

and for an back GAAP a you items then the - just is use What's $XX to $XX development? the as important I'm the fund the in are of to if going importance sheet. curious about curious affecting credit your And on expectations And at ATM about in forward look driving ratings year-over-year that presentation some how think balance non-rental sheet secondly, provide And curious, additional in of the are how you management revenues? updates company for historically, historic maintaining increase capital that deferred that team quarter, the I continue of if question. equipment your there equity debt the any investment-grade talked revenues in balance that First, or opportunities? you is - just was, terms It IG year-to-date. has On line. I to discuss million of revenue? think, used that deferred that or AFFO, could the reported revenue significant million

Katherine Motlagh

it On revenue, lumpy. sales, it's so to is and equipment it related the deferred is Katherine. Michael,

past, on in doing have equipment. of they title sell would So the customers equipment where is and to year so we used take recently historically, really we a title sales. it would that retain be to the we the equipment the What onetime this equipment been the

of the so they're for pay it part upfront, stream. equipment while leasing the sales, And they

GAAP reporting you in the So that see in straight-line basis. a would

very I'm with in in question, billion we It's sheet, over sheet. liquidity. second our your with $X balance balance balance our of very and terms pleased In proud sheet are very strong

We and have development them opportunities quarter, third that do So raises forward our the does our with investment-grade way available look close to we against commencements. that. fund leasing we we of build pipeline. million to equity Typically, equity development our and to as is for match our and help about equity rating $XXX think

long mid- within equity. we as our leverage stay Xs, to that high is so supplement the we And as with parameters, which

this with recycling One Day, the of a second we purpose is program we as twofold: we've portfolio. in raises. is But Now program Investor optimize our also, the supplement of the part the equity mentioned launched

we balance capital. need X, if and we So the the when

Michael Rollins

Just get period deferred that you equipment on And your comments up margin what's for the the follow would then the straight sales? amortization regarding those revenue, what's that to that of on a the cost - equipment's is And causing not as of presumably in depreciation margins? in line? that cash that that Because - inflation and expense. operating some that the typically

Katherine Motlagh

core it's the for margin. reason this our customers margin, lease the of duration in terms not margin so in I material margin. it of The It's do So terms. that for is is wouldn't focused on be operations, also not do the value-add, same we we our and

term over of deployment. lined it's the that So straight specific lease

Operator

next question MoffettNathanson. Nick comes Deo Del from Our with

Nick Del Deo

supply First, about you your pretty feel chain. obviously good

than from you what feel those, you as disaggregate customers how soon And impacts was in the others? pretty components, with terms wondering of conversations eye then different it's if I closer like earlier this to or any links say. or second, a on-ramps risks your a if say I were too keeping enterprise Google. any the you're the protected? positive it's that and result positive landed across had are you are on number Or If there leasing you're board think you've you'd year, of consistent of a to do

John Hatem

it equipment the kind cases, side, that with risk. them. we've I X little But But of diversify talked so and on we've X think single providers we expanded - that any to to chain or Nick, saw focused quarters, we some this in about X of for conversations past without that our we bit. in of literally, deliver piece. think really, the base supply mean, this parts list of center our chain on kind in in kind because the a kind all some been pieces deck about supply Yes. I of of that some coming of OFCI the equipment can't we data And

of on the really that focused the a be we're customers. focused make been seems about across-the-board or So all like, like worry the it. out really, this not of to this. sticks to of lines Nothing kind demand to It's the sure demand, of enough kind concerned time we're we and says, that and have meet

David Ferdman

On a cloud the gravity. it's we've seen on-ramp, more look, data them, you And It enterprise, on-ramp, where attracts especially. deployed native the good. whenever we've have

so a for thing secure cloud asset. And the time you every that's on-ramp, native can a good

Operator

from Our Evercore with ISI. next comes question Irvin Liu

Irvin Liu

impact to your supply constraints that from for able in unable But whether Hopefully, this the mitigate deployments it they're you already wasn't end. potential could supply perspective, for But need? your on to a comment you impacts they like addressed. chain customers were looks event supply the to on there's procure that

John Hatem

kind customers we mean, our conversations run and customers things I scale same all our that time. they doing to mean they're our hyperscale prepurchasing the the chips on customers, at really I to with and yes, Irvin, we're talk in the business. our big enterprise their need doing - thing they of

anybody chips. same the obviously we of say, layers board, The we not taking the across the industry the like, businesses. data their on super center. we're had on demands all capacity haven't of they're that focused that it because kind we listen, on any demand And don't the So have is seeing see is

kind delivery on Everybody that. commencements of focused So And it, mind, top this focused to quarter nothing of and executing on in of lines. speak that has we kind everybody reported it's the on our time business. our changed still but is any early is

Irvin Liu

Or Europe looks reflective is in your - function data a strength good to function in of Got trying here the better Europe it. or of for But being trends to of understand like you. it Europe. Got perspective? a center it. more source it of is And more or gravity growth from be having continues if under-indexed underlying I'm a then hyperscalers traditionally a of more data

David Ferdman

to right? have we we've and and campuses focused able markets the Europe, scale on Look, So in get really markets been nice we have. just the in - key

part the continuously And got same so you're or just can for of same in town not than us, on you've a when better campus, if grow campus. a position another customer the on

what's the do know data that were like there seeing into happen gravity. hyperscalers XX years months. So just next we of to driving markets couple able can't exactly many, conversations is to but we about conversations coming John up with in these not they're that a tell I in. many the having focus demand think we're about scale because hyperscalers, I what's growth, and driving their the conversations on we you having - next which the Europe, be years. the And ago, we're We're demand, said significant XX the earlier, really did I to

- having key are our And so markets. around and we're conversations the

we expect to that continue. so And

Operator

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

David Ferdman

and Thank the for everyone, on you, call. participating Anthony,

about we look the positioned and well forward to U.S. Europe. needs reiterate We remain industry in the Before I'd solutions meet the how our talking excited next earnings the of you and about team focused on delivering are We we our the and the consistent to call. execution with is go, on like of to both customers, company.

Operator

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

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