QTS - Earnings call transcript Q4 2018

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Operator

Good afternoon and welcome to the QTS Fourth Quarter 2018 Earnings 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 would now like to turn the conference over to Shirley Goza, General Counsel. ahead. go Please

Shirley Goza

and Hello, and operator. here welcome QTS' Executive to Chad Officer. Chief Thank XXXX everyone earnings quarter Officer, Chief and year-end our joined Berson, conference fourth our Williams, Financial you, Chairman and Jeff call. today I'm

in joined participate also who are our team additional by We of members executive will Q&A.

release Investor tab. our of our Investors Relations and website financial are information supplemental earnings section Our posted the in on

our with also have and slides webcast website. We on made them the and available provided

let are start, that are information certain may we our of you Before me include filings, in some described number and SEC provided results remind vary may risks and call materially. forward-looking assumptions as future and subject a during based this to statements uncertainties, that on actual

now, the regarding non-GAAP Relations with of the we furnished Chad. use filed our will further Investor our our issued GAAP the that the as yesterday, undertake core press Today's events I to with adjusted and of And Forward-looking you them financial turn are adjusted along remarks made core operating ROIC them the these our we remarks EBITDA. information to on SEC page documents operating today include periodic core press today, or non-GAAP and FFO, FFO, statements of update actual available measures and for in we MRR reconciliation to call issued refer measures, reports are We over including as certain revenue, unfold. in FFO, that also release duty a website. These release to results. no of our

Chad Williams

to fourth successful the execution most QTS years one a strong Thanks, Shirley and of everyone. welcome performance closeout history. during in of the delivered quarter QTS

and plan predictability and at three, hyperscale business This our in business. around colocation performance. acceleration accelerated leasing enhanced refocusing for to we profitability verticals improved Turning growth strong and our drive the the beginning core organization hybrid to out included XXXX, a laid of slide our

a plan across the results, report pleased later, as operating meaningful of we every strategic our performing our growth strong nearly year financial our with and see and And is metric. I'm level business ahead completed a Now, at in can schedule. higher to key success you implementation of our

the XXXX, generated overall leasing in strongest hybrid For comprised year continued nearly the healthy full history of hyperscale colocation balance $XX our year we at between of of volume QTS verticals. million, and

of fourth XX% a XXXX for Our but a approximately not year-over-year represented of of $XX end of the approximately the in revenue as backlog increase leasing volume resulted business. yet new signed an of million core our record annualized and XXXX, commenced quarter

company, strategic public to of and fully and growth approximately direct the margin. quarter QX consolidated leveraging XXX a inherent capitalizing a a also complete in gross efforts facilities the data we've mega operating improvement platform approximately a our margin core XXXX ever digitize our approximately which core the in leverage model points from expansion XXX our business basis level overall ongoing of reported basis plan represents is result removing profitability our end-to-end. on achieve QTS points of as during XX%, enabled fourth over highest EBITDA the margin adjusted Our year-over-year scale benefits our in to complexity The

our range. brings industry. churn In core QTS our end rates of sustainable is X.X%, churn we've average. in the among by low our of churn rate just core reported below overall generate year-to-date XXXX business the addition, in This able predictability historical to been which the lowest in rental our guidance improvement X.X% our of to QX well customer at realizing

in of enhanced has growth represents churn we our strongest top in strategic plan directly our hyperscale believe point XXXX, business of Successful business which positioned relative reported the results colocation. consolidated are year reported XXX on our correlates implementation improvement XXXX demand enterprise basis core full to execute capability sector, Our two a drivers almost line to growth. what with our and initiatives the model to and differentiated hybrid

with four, XX% slide out business we and team's performance core achieved to XXXX. laid I'm respectively our and Turning very against goals XX% over $XXX million revenue approximately pleased of in our million the growth EBITDA adjusted XXXX. We for up $XXX and

also of core $X.XX up over XXXX. generated share FFO per in diluted operating We XXXX, X%

operating tax per year-over-year. non-cash increase represented XXXX share Excluding almost benefits our the year-over-year XX% an FFO impact from core

the made for of leading business capital we Over of the and accelerant quarter a megawatt the investments square the strategy. sustainable broke XXX,XXX mega completed newest numerous speed the months, a undeveloped the Manassas, represented opening enjoyed during position the to announced our software-as-a-service course in provider world-class In that greenfield we in year, hyperscale and efficient XX Also growth the structure foot in Virginia growth. center XXXX, XX a QTS we Northern XXXX on our construction of represents announced hyperscale significant execution. in long-term third strong Ashburn, land to key We with official in achievements of Virginia. lease within number a and ground which early data

services outcome partner with transitioned GDT higher expected. This months, are to we achieved. on than our retention for their initially We this period narrow and the multi-year part important Next of QTS of performance I'd that partner strong and to seven customer a this accumulated team significantly successful effort cloud and and cloud identified migration was that services context, scope employees and of transition. is a laid pleased a to tremendous all level we platform in our of directly. in high was put successfully like that customers over a thank we a to with for of QTS and To execution and than successfully less a delivers strategic that in as managed customer qualified base a growth completed the our the plan business on ahead of the schedule. their managed out we our path budget

During gained platform defined with we momentum also XXXX, our center SDP. data significant software or

have XX% known Amazon double support, and of year has we For or service center customer data over XXXX center achieved time, excellence service consecutive NPS the of year, their score Apple, extended we higher and XXXX was XX,XXX in its in ninth we enhanced our XXXX, customer The also our was NPS also confident satisfaction has business. an marked maintain business up to opportunities our QTS the year continuing customer XXXX a am our new for achievements NPS. growth year-over-year. achieved five industry in look pace as of current I which strong represented In plan. including average promoter QTS meaningful industry. and facility we to started by averaged QTS' active record nearly reflect consecutive measured score and the platform team year of can the and track forward Xs led identify the QTS performance which score execute efficiencies. revenue for enable in companies net operating or to well exceeded SDP, the momentum third in for in data that users and

in quarter leasing our healthy results continue to a slide fourth to five, Moving balance colocation hyperscale platforms. our and hybrid reflect

our up ago. The for incremental strong, million leases of higher representing a the the QTS was $XX.X accounted revenue, in For the the performance approximately particularly colocation signed core annualized return, considering year business of leasing quarter. over XX% fourth quarter hybrid XX% average quarter

public as For leases leasing a we revenue, nearly volume the million signed core achieved annual $XX XXXX, incremental highest full we've which year company. the representing annualized of is

Our approximately significantly XXXX. record leasing volume the of resulted backlog revenue our signed into end million of $XX as of has highest in in yet our fourth of growth nearly not the but de-risk which core history, a quarter, annualized company's commenced the

which our Even of and past had tremendous base makes QTS' among as industry conversations leasing in in the of centered hybrid hyperscale around growth up two-thirds of XXXX. a investors engine most revenue year year core the this colocation

we're which diversified seeing risk adjusted have and colocation strategic a vertical has diversify market customers we steady enterprise and business XXXX, providing with in We of technology hybrid that just customers that opportunities performance While growth to optimize an overall We the are to that having return more pipeline. platform The top for we pursue other attractive solutions sources potential with we of to approach of a hyperscale higher balances thousands acceleration future experienced the equally opportunity hyperscale in that the hybrid QTS. an driven size impart business growth our our continue increase than and the to path the opportunities committed see growth. performance strongly enhanced deals enterprise XX believe in in our performance of is meaningful companies. a larger the colocation companies, in that by best

quarters colocation X discussed to five in signed XXX XXXX. size enterprise to we've during range, only megawatt signed of compares deals deals As the which nine we in XXXX of the that during prior hybrid two including kilowatt all fourth quarter during

Turning in is acceleration addition and size to our is enabled data offers center colocation performance. a QTS' integrated platform the a data built platform. technology growth data for supporting increase the of in execute differentiator across software with platform continues overall around enterprise center delivered opportunities a a to the on represent that customers to hybrid strategy center our customer to slide deal fully defined scalable QTS six, key the solution

resources and enterprise in who are seamless among digitized represent experience. to the customers technology a Our accustom consuming sophisticated customers most

platform. Our within environments metrics own in is and have the with visibility customers critical data single the manage of introduced and through software both platform XXXX themselves. SDP if providing empowers visibility the partners, from control their real-time to QTS replicates across control interact data center and services dynamic environments a defined by and effectively which IT customers hybrid and our access they would

that tool of incremental customer but respective means not customers automatically XXXX, may identify upgrades over the opportunities power SDP otherwise thresholds Over is power customer Customer been grew active and across sales average not representing of as and serves effective usage opportunities. that interface of approaching user for is when have plus also only customers manage usage the platform primary over for for XX% their new SDP a represents XXXX users customers the them XX,XXX with to new X,XXX a of power like contributed base an the environments, course notifies QTS on revenue. see applications SDP to of This analytics annualized to identified. detects as $XXX,XXX

hybrid during SDP XXXX. in expect through XX the and all grow XXXX through centers for connects, data directly cross fact approximately were connect this nearly person to we new identified SDP. meaningfully be ordered now can orders sales of across new sales which SDP includes cross every opportunities coming In XX% QTS quarters. This colocation fully automated In percentage

addition In opportunities to SDP efficiency to continues enhance QTS also of new sales the operations.

XX% improvement opportunity of continue type when an our also platform a to to billing of the not services. placed contributed new is to in implementation the by continued expect growth SDP remain expand. provisioning to revenue efficiency, our but improvement time only XXXX with streamlines enterprise During and we SDP and encouraged recognition. from We order This accelerates adoption operational the of

Now an the opportunity growth to contributed area moving slide world. core leasing on volume and quarter; to companies a our largest for Hyperscale in of strategically which remains accelerate of technology in the XX% as approximately on focus growing with Hyperscale fastest seven, the QTS

a Hyperscale megawatt During customers aggregating leasing the quarter in growth vertical supporting full facilities, megawatts lease our two of and XX leases first the the approximately X of Hyperscale year XXXX existing the QTS' new efficient during including quarter, approximately Atlanta XXXX. volume, contributed for signed core our capital overall we signed strong Chicago third with to

the magnitude power past continue The feet strategic the into targeted customers. early available inside a gained this Over lot square data to advantaged shell data capacity to XXX in for million opportunity. X these need top in as very development executing year, on U.S. of entitled well and a over with of our fully are growth Hyperscale of positioned serve we future infrastructure center QTS of believe cost markets And plus suggests to land partner acres the is of we still customers. requirements their stages center infrastructure we've of

tracking closing had - XXXX. the were anticipated we While originally into we late transaction pushed deals during XXXX, one ultimately one additional larger of the hyperscale stage that

detail. business. growth Importantly, each size larger three transactions development now Hyperscale represent sales over these to diversity to Jeff? year. and to to and each more our remain in deliver that, our one Chief megawatt and Jeff future Hyperscale I'll to pipeline it they X of the We for our attractive deals both remains encouraged our and plan turn Financial continue expect in pipeline by an plus opportunity Berson, of discuss With outlook Officer, our

Jeff Berson

hello Chad everyone. Thanks, and

the to our in position. we I'd venture agreement with Moving that current like to earnings announced joint first discussing release, sheet our conjunction slide before nine, balance review

million we the of As of X.X XX, $XXX leverage over ended times XXXX, liquidity approximately in to quarter EBITDA. December debt the adjusted we net in had with business annualized and consolidated

supported last to the maintaining quarter capital backlog of signed support yet we mid As in near-term we are to high a by commence record discussed range times our near but revenue, the leverage in X comfortable development plan. not current

improvement the fourth During and and meaningful This XX QTS' of the maturity we facility on credit reduction extended reduced our continued interest by in rate by facility year our in basis credit the the the quarter, interest represents unsecured overall profile. points. one reflects a cost

approximately agreements cost yield additional management, believe option the the interest rate to increased lock to as pro of December to We our on balance approach into as curve. quarter visibility rate swap effectively these rate addition, to a that debt agreements In fixed XXXX. long-term capitalize entered in conservative represent of forma debt our XX, forward XX% a part sheet of flattening and QTS effective our opportunistically during exposure swap

return our in to record we strong track and XXXX pipeline, our an It's business a as capital we've well to means. bring most on growth growth continued near business, beyond. on of into both funding capital horizons, our growth. of that friendly sales expectation business we consistently have that and balancing and in a slide long-term demonstrated that backlog turning the always Next, have growth demonstrated requires as clear and in we our evaluating been In based shareholder XX, fund focus current

funded near-term business equity equity our the we separate business As demonstrated an a in in source QTS friendly funding the manner, These of shareholder potential transactions fund opened dilution. perpetual year preferred two and last commitment minimizing the new through future example, a to for up raises. while

funding outlines evaluating continue additional To our to that efficiency. Moving enhance sources billion into strategy, QTS. of potential we traditional to we've future a firms JV to an the to part with equity options this incremental at contribute range $X leading an industry's at our a represent formation the to Capital both year expand support of lever value and data opportunities, growth. contribute After XXXX, while expand diligence strategic greater view cost five of JV, will with a over investing a effort and JV This partners would an specific venture to to share growth, as potential Including financing negotiation, We QTS assets attractive of capital with sheet core represents ventures, funds and projects. announce we first capital development joint Partners, cap JV capital with to the leverage which of $X markets the a growth partnership growth. over evaluate and partner up excess future venture that the our to important fund of funding structure of period XXXX under structures billion OFFO $XXX programmatic initial may Alinda of our joint to debt still were equity the strategic one per rate point, capital access JV. transaction of a Hyperscale given framework potential our continuing balance short-term spent a on existing months the for facilities specifically Including in pleased Alinda capital partnership many and to as equity to Alinda in part close broader range and center creation joint support shareholder of potentially long-term the of initial agreement in of finding future management. contemplates million the in balance a capital infrastructure investment with a and valuation be opportunity associated to Alinda, under comparable which

will data in a beginning XXX,XXX $XXX stabilized to venture, of stabilized As Manassas, the reflected QTS' statements, interest value of center cap venture will as million, attractive foot quarter a part venture rate. square contributed the on its at reported QTS fully which in Hyperscale the development XX% and unconsolidated XXXX. in an an financial joint agreement, representing own Alinda each under the QTS be X.XX% of approximately Virginia first

reminder, available lease customer to commitments we QTS proceeds initially of a a grow shell, As entire megawatt center power facility joint XX with comprised venture able this initial data a XXXX, the signed its This and stabilizes, software upfront in the early center outstanding XX lease global million including cloud Manassas. at data development. year based development as well to a year the the gross expects to to on term of on in commitments use full they've data a asset ongoing to $XX over equity of turnkey borrowings as the They approximately two in will scaling at signed from revolving for a company and joint $XX Alinda expected approximately gross down turnkey capacity megawatts space. the sign as and debt. to venture, period. of QTS proceeds Through contributions joint lease raise is to from power an additional net pay which center X XX million corporate megawatts committed turnkey subsequently closing, to capital are general credit gross venture data megawatts purposes, X net of capacity, additional approximately center new

and phases from the withdraw rate. the on at based takes X.XX% preset development stabilized delivered the proceeds are to incremental the cap venture place, As will future additional facility Manassas QTS customers,

and QTS Moving its believe XX, we agreement multiple to to shareholders. has venture benefits slide joint the

at support growth go nature partnership the venture we cost venture broader closed infrastructure of Alinda, forward Alinda, strategy. partnership as to hyperscale joint terms of as the programmatic represents in strategic Alinda QTS' By of public decreased the broader transaction the participate we're able with joint Alinda, on through with of capital have part comparable fund additional agreements a initial Manassas to strategic first the investor from First, opportunity joint reliance a structure low to I business. the only markets overall the may like in our venture that the leveraging and mentioned, our sophisticated

development course joint In over capital venture reduce approximately we're the requirement facility. funding the of addition, full able an by the stabilized aggregate $XXX the QTS' through Manassas of to million structure, of

XX% be retaining at expenditures capital the capital plus Manassas QTS' XX to in and will and a well proportionate by return capital This efficiency, on reducing generated While incremental X% by facility fees. XX%. we NOI management in driving development approximately approximately increasing over will result percent from stake plus the

In addition, joint from stabilization that expected not value by valuation is growth. sacrificing venture's locking future cap asset in in factors QTS rate the a at full

of our Finally, the agreement We highlights center encompassed X.XX% core joint QTS' source cap rate the venture the data JV capital to strong venture to value the the opportunity look represents an attractive business with valuation to underlying the in assets. we believe structure growth. future joint the traditional and support to potentially along our forward capital funding incremental fund in markets of leverage

includes square to and floor in support and approximately our of to we on slide square Irving XX,XXX feet we're XX; XXX,XXX development continued floor feet of strong feet which our over just raised momentum Fort XX,XXX facilities anticipate approximately on bringing between seeing. plan, in online Worth square Dallas raised XXXX in Ashburn XXXX, Next, currently,

in Chicago, be spent, $XXX million has million space additional bring total in of Manassas, Atlanta, cost been to XXXX. which $XX already approximately and Clara. $XXX Santa online will and bringing million, is Piscataway the estimated capacity spent anticipate also We online to be The

cash M&A, of to year we $XXX expenditures share XXXX, and spend million includes expenditures cash expect million $XXX excluding in capital capital For any which Manassas. the proportionate the in between full QTS' of currently

with financial on the GAAP quarter including be unconsolidated Next EBITDAre slide unconsolidated of be and an joint accounting standards, from its venture respectively. on guidance reported reported and first joint proportionate NAREIT the beginning onto Consistent closed our from Also from standards, of funds with in accounting venture GAAP XXXX. will its the the financial venture which QTS's February operations defined consistent as operations QTS ownership statements XXXX funds results GAAP anticipates QTS's in EBITDAre XXnd, joint will statements. financial reported joint removed XX; from and venture revenue on reflected from

result XXX% We reported of joint XXXX in closing full revenue reduction of the year million, expect QTS's the of in representing the approximately a facility. Manassas will $XX revenue from the venture expected

venture million ownership joint contributed proportionate In in addition, EBITDA an in we joint XX% the our adjusted to from to in the expect facility reduction approximately XXXX reflect QTS's Manassas the reported will impact reduced closing of result the unconsolidated venture. $X

including $XXX year revenue just $XXX closing For be million the of the XXXX, the and reported joint that venture impacts I we the from total expect million. full between outlined, to

midpoint. the Excluding XX% this a and the million of XXXX range impact to $XXX $XXX over from million approximately JV, the represents at

We to impact EBITDA again range million, from $XXX approximately ownership reported million and the out a be XX% XXXX growth to JV and JV, the reflecting impact the QTS's expect adjusted the million, the the $XXX including $XXX over Manassas of represents at Stripping XXXX, facility. between midpoint. this in of $XXX reduced million proportionate

guidance for which XXXX. with assumes year initial range rental target X% financial between and XXXX X%, our is for the of consistent churn full Our

our net expect does anticipate expect proportionate guidance XXXX FFO operating of the of FFO XXXX adjusted to reported course OFFO full in able QTS material be a debt. the as joint share share of comparable be effectively range, per the including a ultimately a leverage reported for between higher to Manassas lower we EBITDA approximately $X.XX result intensity. to operating venture Manassas share of over by impact and $X.XX stabilization, JV per a reported per million. of per result per Moving in expects structure, $X.XX $X.XX contribution assumes in accretion. share, per share to debt share maintain QTS achieving Through we the in we OFFO capital OFFO to XXXX invested venture. to FFO XXXX the a generate capital JV with At its in closing to the QTS's joint on to X-times not of level mid-to-high return share

the Importantly, cost full our of XXXX. financing share for reflects per development capital our guidance plan OFFO

XXXX, outlook XXXX near-term to financial our strong Overall, value. on consistent results I'll booked-not-billed the to a our XXXX Chad. reflects investments long-term fourth have the backlog a and future very into growth, pipeline, growth we're continuing with operating for forward great turn commitment growth with balancing success and deliver we consistent Our and pleased shareholders' with achieved and and for focus delivering continued of momentum during to to look significant sales in in we visibility performance over business. back now in call our quarter

Chad Williams

Thanks, Jeff.

past slide in communities. objectives, three growth history, excited been core performance plan strategic and the so team dedicated stated our have related and relative profitability to resulted average our and churn XXX which highest with of a XX, increase QTS on period. customers in Also execution we continued on leasing reduction in the point significant more a QTS's employees core consolidated on to XXXX. are our for company's acceleration them. hard the the XX% to We annual the momentum the successfully delivered customer consolidated pleased back generated XX% to to a over about to accelerating I'd execute in in achieved represented surrounding leasing increase the XXXX, a QTS' Strong in average basis we never to the and volumes over nearly have seen our thank Turning take work I opportunities ability prior platform and performance. opportunity we far in service front over QTS their us, our our for core is which our performance looking three this growth year the years. like

I'd glad and always, QTS. questions. we'd to in customers their confidence thank continued for take to our With like Operator? As shareholders your be that, and trust

Operator

the session, for the to call to remarks. we Goza Shirley Before turn final begin back question-and-answer some like I'd

Shirley Goza

offering. common launch Before the of may seen stock session, we regarding begin our Q&A our you announcement have the

because As just each you keep session. ask comment offering would we'll process, one understand, I'm of launching the you are no go we call. to we Q&A we this the a sure we to follow-up. offering With since can question questions that today, on in during And that, the are your piece and cannot

Operator

begin KeyBanc. first now will question [Operator And the Please We ahead. will Jordan come of from session. question-and-answer Instructions] go our Sadler

Jordan Sadler

afternoon. Good you. Thank

and plan So positioned growth your your a businesses. on hyperscale focusing strategic the strategy for year yourselves refocus ago, colo you and guys

on leasing success the the had in You front year.

As into maybe you whether provided, you guidance XXXX separately you maybe $XX.X quarterly is up we in of or leasing you've look opine embedded XXXX expectation XXXX? and achievable not terms some what's this achieved in of again in offer Overall terms here? either can on or can the Thanks. in million

Jeff Berson

Jordan. is this Sure, Thanks, Jeff.

in remember so if XXXX, just So we of leasing our you averaged north $XX million or per quarter.

closed and with we transactions number of $XX strength hybrid annualized that were demonstrating we $XX Our enterprise the the that customers expectation we significant colo see between without the do do happy million looking million to million leasing X.X in QX, and per quarter with we've anticipation the XXXX million business, $XX booked-not-billed $XX And on X.X balance of that's the of north of accelerated that of over hyperscale, megawatt that that We business. or in in with above ranging over feel between up to very significantly north average million, million of had XXXX good into we the of $XX so colo net did and to in $XX looking megawatt in We're modeled of growth momentum acceleration given the XXXX felt were hybrid average. in and X. $XX and we've wound the the the result million. good going as of about business of of very leasing got that a

look growth higher of that, number expectations our were and we've north be we quarter the a per on obvious leasing with to million that always that basis, of XXXX, somewhat to Given million quarter, do said would XXXX $XX caveat, million expect lumpy. do maintain as we lease will $XX to average of in $XX average in

north achieve year, we at just feel to of that, that could next have So million we maintain XXXX. were goals But able been - the XXXX, below assuming an the of that got we in quarters some we've given business leasing some in fact that momentum we in $XX we $XX that. above million north about could have the good achieving our very quarters

Operator

Our of Capital BMO next ahead. from go Markets. Klein Please question comes Ari

Ari Klein

how does to this equity? on about why Thanks. process and coincide then decided decision to Can issue that structure? how the you maybe with talk Alinda as far the the extent And decision with maybe to was as the go can, competitive you you

Jeff Berson

Ari. Sure

So appreciate the question.

rates frankly what love a you we for to as going We have Hyperscale to that. have structure infrastructure traditional than capital a to Alinda much actively returns wealth of a accelerate pension than point, be engaged capital transaction we've methodology of And forward deep thinking does partners. as we of Hyperscale market sovereign same could looking wasn't more partner. were we what so just number with utilize single what We're looking the in of QTS and attractive going thrilled work they the is our have a we've with availability at done through recognized year for and They higher this unbelievably in We drive them funds like actively the and and partnership see the dozens there as private forward. the business a were engaged really capital of different plus their the someone the markets collaborative back and been with efficient process. depth found with they QTS and going about believe been approach dozens funds at and and probably where importantly business in a is more that we continue funds, replicate what

about that were us particular in leasing what aspect other Manassas our of customer that our phases this disaster we overtime. know, you the particularly remember structure megawatt agreed entire about and is leasing in The you powered from very excited XX us particular in from if if terms incremental is customer in to we've shell

only that additional in phases works they locked the two over the this of X structure to way on been delivered customer just phases continue the committed in megawatts XX. couple is they the the just the cap next two in expectation at to is of X.XX% up rate transaction deliver we've comes is course years time to that that X.XX% that because existing to year. in the more ramps far years. of frankly NOI incremental The within years. any the of first And business of cap full customer different our is the will and business the that over we this assuming three next next the business But the the beginning the on we lease So not megawatts course as ramping, phase rate the continue has XX to fixed phases

going rate. on results think And in So a the of math CapEx really in from we this all asset, like really is the locked overall that day $XXX cap this in comes as lease in At about promote the which summary end that where backend bringing represents we saving the cap to the we this, this over that asset. rate. right the of are the importantly of X.XX% capacity XX% we've of at view fact value this well and the million this in that we instead in upfront CapEx way

in XX% a And in. than XX% development out goes top get contributed less than that of JV of XX:XX on So more the we're pulling of it also an now because management fees we and effectively fees asset NOI CapEx put generated where we've it's we're the on and accelerate to than by CapEx XX% And as to us capital the yet less put asset of a driving in that asset. you from in NOI lower enabled XX%. more the the of of it's X% than returns what XX% if the where result

So going forward enables a this a efficient returns. with again much the fund using future partnership and Alinda as in and deals us at to more Hyperscale leveraging way capital higher template that

Operator

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

Robert Gutman

portions the had one just guidance about cost in it's rent same, just changing, overtime growth I taking [ph] for your base rent a the is because it revenue? more power question. until in is versus and quarter the simple the on that Thanks base

Jeff Berson

is Sure, Jeff. Rob, this

scale assets seeing the We the terms power fact stability think the at of the we've us business. generally we're in got in in cost access some and those we've we like like you gives reasonable what of power So got if look active in Dallas site the it some that sub-station and markets on we've and to cheapest Atlanta of advantage. got with some natural got very we've a

the up have visibility reality seen into our of and have in and terms some modeled power cost. power down in We and we expectations, moving we've markets different

our rate footage we rent. increases when of are cost, digit of and QTS of renewals to put the seen volatility renewal upon pretty core in core last you've out in what you of you've renewing that the have power metrics in rent that we five, the mid-single the frankly is reflected renewal with is think I not the we low And and been terms we've or where Rob where over square good seen remove seen in some years gets that modeling and In customers rent movement that persistent a consistently stability public. six changing business

that Now particular markets reality with you increased and with was and those QX renewed three X.X% price. this saw When of got in their renewal past. were a also the particular break we've was bit. quarter revenue that rates a footprint with a deals us customers remove down and the almost their consistent a our in year and they XX% affectively result three this us up But discounted that in little facilities as what multiple actually in seen there price and with that - that multiple you us expanded behind number

comfortable. feel we've like we that So very where and with gotten

Chad Williams

stable receiver initiatives we've data talked And is us it, sustainability ability a differently sub-stations support that might and the mega do Rob, that interest that renewables were and have add side a to little to I been customers our And do some power the customers that ability we same it's power. reliable we've we we've renewable, been the sustainability on in manage announce provide to talk some to strong power able power cost to exciting add might centers time, this message time and XXX% an able well give maintain effective which if about going on that around data the committing scale has sustainability does to actually the those of of facilities at have at been to than the cost also deliver. the the bit that. got the I a same received that Chad, our we've And and just an of own - about from when the publicly we initiative been center it with

Operator

next Our Deo Nick ahead. from question of Del Please go Moffett Nathanson. comes

Nick Del Deo

want to a call for a to exposure? of it more different mechanism taking target to Or manager of what of you it Call otherwise JV of part way we maybe that? set a your more - incremental was that and target Hyperscale your my gone to thanks customer wouldn't is you think it if attack your already Hi, to question. opportunities as this Should after? base way plan, have

Chad Williams

we've as been about most it a we've so, the I opportunities. to Hyperscale think as that but deals tool intentional know, Chad, as does of about actually on more the us or belt large the on focused done business on another little that. is and year both. I great a people give last that We've will we This you tell always bit talked it's question take

we more of the opportunities feet good have better job course, proposition the that with markets returns at parties. time square transaction. business much time to it have know done and our that largely like accelerate which a Hyperscale we are I give a But number shell really hopefully put if about think or what relevant us are think the range, both long over for an and us to returns to have to or Alinda take us And a that to to us do might strategic X% that of of end tools At as have for team in transactions able period that in in to X best for - us those feel hyperscalers and of be you the talk can marvelous gives de-risk has these intensity team QTS are I more enhanced cost we as advantage would growth side to lower over that absolutely - that position good hard to of a that an we get be to capital have do on Of our worked Alinda higher same powered put at be opportunity this our of Jeff transactions would the XX%. million range, that are initiatives. our equipping the out like can a opportunity to that

it So both we're excited that. really a about think little bit and for of gives I

Nick Del Deo

Thanks, Chad.

Operator

Our next Please question James. go comes from Frank Raymond ahead. Louthan of

Megan Yang

Hi, it's Megan covering for Frank. Yang,

second expect question management did get how year have you then is, and the what's in how And from an to XXXX? at the end for - management number sales the expectation get basis? many expect on fees much many of how - how you to do do or JV your the people you So much annual

Chad Williams

the is this take one, Chad. first I'll

or April. Clint last Tag materially came actually Our since sales force hasn't and on changed Clint

Tag organization to an to kind probably a heads in actually the just XX approximately A people, fewer on fact, who probably is sellers say Clint In people it's philosophy of few have ability more are Clint's and on around and both the of focused team. let's the players down drive that

So a I think aspect. positive that's very been

partners network has ranked us. CRN a big pretty press of point and Clint The just thing program, within supporter the way the other our is as the channel far we in kind had to resurgent release been put a day ranking that, a view channel big of other I'd out as that on we

biggest and of acceleration. program broker the So program part the has the been our probably channel

and a of that's KW in Jeff script been nine all has channel of have just differentiation had that our team also that in our KW level, success. help network two just has big And not platform ability plus in in and performance testament we been the of with high this huge true the the a or in at better, performing a about that a result XXX were with transactions think and brokers significant direct that's another with did of to last that year year how progress that. I but were fourth strong quarter, driving really XXXX XXX partners a - we the deals in kind part mentioned SDP that I

Operator

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

Erik Rasmussen

others joint other were JV, on And this? how be interesting the maybe the data there the just It's going this what of this centers might that property, in consideration, threshold some Manassas of a venture be the or you for regions forward near-term. bit Thank potential would then, selected was under Yes. little for you. background what

Chad Williams

and in first we Sure, Erik. I really will great particular, multiple with tell a accelerating is very solid the hyperscale customers market. market a you tremendous attractive to this hyperscale proud using and have work in, great talked that's It's was as we a traditional that it long-term this quality phenomenal going structure, we're and a a source very for to to forward assets Alinda case that in for the and very test we deal. asset about and as credit right us with put open the it's are reason high is lease, it's a

said, the right the more in leverage So do along an up structure about. absolutely do with excited to leverage, enable size, about they've of top the more deal which to forward. gives was the to think, talked going That have which enthusiasm this outside million of availability, right which the and it just us on of appetite than to I fact hit bank, equity being of significantly ability we're all to do right enable for up why $X billion of the levers Alinda capital $XXX and for their Alinda is us capacity allocating to

last sit for done get next. closed to going with we're a week, take we it this what's seconds then out we as soon and So and as figure down about XX breath Alinda

Operator

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

Eric Luebchow

you I question. would there is some a delay one hope around the and was recently the timing deals that to QX just of uncertainty mentioned we there some taking was closing. from hyperscale peers for you your of that thanks of deals heard curious, Hi, the of book in

I Thanks. So book deals. and maybe wondering could shed light these to you some if it's that on more if getting complicated was

Chad Williams

didn't Eric, anticipate Chad. you in is is hard there In your the work say to happy of script world did as I'm perfect get done set expectations really the that we transaction mentioned getting and transaction and hyperscale. another the to in this businesses high Thanks, just you of we in are needs closed of and quarter hyperscale the that and tell in fourth get each I a you moving will into clients their markets lot quarter XXXX there's of What of and first did have slide XXXX the different fast. and their demands complexity

done demand. because opportunity. a not growing I as time of lot there's get businesses more the encouraged just at be right to being able it's simple the and are But about sometimes as everything their couldn't So,

to feel we're more one a I few year. a hyperscale opportunities this, going in a with on the I expectations think to of kind to three dramatically earlier help I've our tool change capital now the belt got deals not like with Alinda partner on of question kind

powered hyperscalers it for million and shell X with tremendous speed, for their us for that's sitting I efficiency earlier I our gives business the that for cost think mentioned in hybrid key to and capital there continues square business think and markets allocation we efficiency capital proposition on. on focus robustness us, capital the the of efficiency as the a about set will how and tone returns businesses. available we for But that feet

it's fair in and forward earn So look continue to QTS no XXXX. to the it's that unfolds be fast, share to its and work year productive new complications, will growing of as

Operator

Co. Our Synesael & from Cowen comes ahead. next Colby of question Please go

Colby Synesael

question, and think much my not earlier or at but of It's asked framework the you. fee was that thank you is, to least around that. Great, management how was about that one

my facility the customer don't hoping get before it was that. answer to they hopefully it. megawatts, Manassas that question, it relates And hold take but is question have then that So my the space in not how asked to to I to XX does was long as earlier. that's for the

it customers something which You anything the in be it have Or over the offer so Thanks. that the it secondly, then others. it could would in same terms. let ability being that customer, in? go explicit to you to ultimately that that theory to there quality is or And right and Or customer? was if time about or specific that that wasn't has impact structure and requires with credit there JV other customer that forth

Jeff Berson

Yes, sure Colby.

we the around that in got JV flexible So that relationship customer. the is

zero and They XX very seen with customer. They very have to to us based on continue continue expectation have the and to believe, interaction are be the happy delivery they will We there. the actually excited, will asset for with scale very, ramp customer besides many to us in and staying that many, ahead that of plan. year we anything continuing And with that the contract. of years, as happen part

Chad Williams

additional keep entire note Colby, lease in actually building And just the they one today. mind

took So and they dedicated - structure, and on to their of that the that's leased is entire they them kind in shell. a capital the of efficient obligation building that

Jeff Berson

the point unwind the does JV that at that than that facility, or extent exit at some did any decided the some in customer to unwind if way. point not To

I be QTS excited continue ramp asset. high-quality We with the partnering in to think have a they're And to flexibility that. Alinda with just

a returns be of bit. level some traditional given the we standard for a active And On that management fee, haven't management just and pretty will performing just ongoing the compensate But helps management think, there. us detail. our development little fee, of frankly, fee it's just we

Operator

I conference This the and turn for would remarks. CEO concludes any Chairman Williams, over to back our question-and-answer like session. closing to Chad

Chad Williams

And with accelerated know, thank your and you next appreciate And we talk Thank you, we time. forward schedule the to with look to speak. working you to for everything. just we you. opportunity And we Well, quarter. the

Operator

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

disconnect. now may You

Qts Realty Trust (QTS) 26 Feb 192018 Q4 Earnings call transcript