QTS - Earnings call transcript Q1 2019

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Operator

Good morning and welcome to the QTS First Quarter 2019 Earnings Conference Call. [Operator Instructions]. Please note today's event is being recorded. I would now like to turn the conference over to Stephen Douglas, Head of Investor Relations. Please go ahead, sir.

Stephen Douglas

Operator. you, Thank welcome Call. and first XXXX quarter Hello to Conference Earnings everyone QTS' I'm at and Investor joined of Chief Stephen Head Douglas, Relations and Berson, by Williams, Financial Officer. Officer; here Chad QTS our Executive Chairman Chief Jeff our today I'm and Q&A. by in also will joined executive who members additional We're our of team participate

webcast to Our earnings section information made our it We've website. financial available of today. follow slides them in our and website posted release are and on with to easier the also make supplemental Relations the our provided presentation Investor

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

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

Chad Williams

relies strong strongest kick risk-adjusted with be with We value-creation robust our year what large healthy between Earnings this welcome Quarter and strategy vertical growth we expect hyperscale first plan higher-return, our XXXX. quarter consistent, within our select, enterprise balance while maximizes on believe hello to First in near and off XXXX industry. long-term Stephen, capitalizing of the both combined Call. of performance in growth another QTS and delivered consistent during companies. the QTS' the demand QTS' performance technology growth our will shareholders strategic another drivers Thanks, X opportunity diversified, for acceleration opportunities on to

with overall and business XXXX the strong QTS industry leasing positions in financed industry-leading operating demand continue well to combined strength results. our momentum fully Continued plan financial and deliver to

performance our Turning growth on on generated in strong to plan. in QTS' continued execution the first X. business demonstrate XXXX that Slide quarter strategic of on Building the XXXX results we successful

million our longer our approximately and XX% we For and the for near $XX This objectives. of XX% term of first organic and and XXXX. financial million growth EBITDA is level quarter up respectively and continues to strategic of industry-leading achieved adjusted $XXX reported over revenue core results quarter support

to XX.X%, than of EBITDA last effective controlled reflect financial our first approximately an impact results margin XXX joint Our year reflected leasing performance continued and adjusted balance results points is platform. first the leverage quarter Underpinning operating our business of more during unconsolidated over our quarter. a we basis addition grow results. the the venture announced we strong our quarter cost as continued Reflecting previous to up healthy across in which core

revenue rata JV, share including the QTS's unconsolidated of with the XXXX. leases annualized $XX is performance derisk signed to performance commenced revenue annualized quarter which which annualized pro representing yet ended quarter. million not within our our approximately in of fourth revenue, $XX.X We a of but QTS signed the with quarter the incremental consistent during of For leasing the million backlog continues

hybrid leasing colocation the vertical QX. Moving fourth majority to performance Slide the X. our for of Consistent with during leasing in our volume our accounted quarter

a number acceleration which has Over been an colocation hybrid factors. our experienced past by in the year driven vertical, we've of

The robust. center economy throughout is enterprise First, strengthening We and new requirements. the expanding which in XXXX unlocked experienced in enterprise the momentum XXXX. has and resulted spending, that data turn of level carried into for over this has demand backdrop has

new which More spread than evenly signed our represent on logos across fairly growth During our comes our basis. year-over-year. embedded footprint, base XX% the continuing first a XX% typically reoccurring we growth customer a to quarter expand XX from of

bringing for remains team. platform new So initiative sales customers key onto a our our

our increased Second, strategic as a our we've in our a result step channel with flow. partnership contribution significant up experienced relationships to of channel overall from deal the our

focus sales scalable and a growth technology-enabled quarter channel delivered three SDP. our customers we channels solution a During just years contribution through data platform. time, within center that the of critical was a XX% their are control around would center with single across QTS' our our strategy team sourced and the platform Over expect hybrid across the colocation consistently away. platform opportunity blown hybrid ago. enterprise to on and which a nearly XX% from as show to first partner, customers our offers of metrics colocation execute time finally, dynamic real data When environments is a maximizing a approximately leasing compares IT integrated differentiation walk generation to can driven visibility they hybrid customer fully our being into meeting software-defined built a them from center our we data performance also is acceleration sales continue to And in or continued lead platform top from grow by on leaders. from

is apart technology-enabled differentiation. with is lead this Our people of an direct to our platform of each in what reason element market the this trained sales for essential QTS and sets

our and the customer CTO, Greaves our of significant addition, Jon team platform. time in demonstrating currently his their spend capabilities a In portion meetings of

through today. in opportunity not of and by is expect We largely continue we hybrid and market will ability continued to remain solution expand. and partner compliance SDP with that and a customers connectivity platform our of security cloud our encouraged the colocation available and integrated our world-class combined customer adoption the with ecosystem enable platform growth enterprise solutions an represents service broad high-end attractive QTS fully Our infrastructure to for

on hyperscale moving X. Now to on Slide

to we pleased new data quarter first our were Worth logo hyperscale center. sign Fort a the During in

capacity past the of them consumers hyperscale had We the platform. of the several data this customer fastest pushed into industry onto has QTS was bring into transaction and phases. originally in growing split been close we're but XXXX multiple largest XXXX deal center in ultimately to Over and anticipated years the excited this would one the early and

our The X-megawatt focus supporting capital of Fort able a incremental on to facility deployment first QTS' capital limited support were efficiency. phase encompasses which further this existing commitment, with Worth we with

in that in to -- discount Importantly, these site assets Corp. we leases acquired at leverage what the a was. from XXXX material previous Care invested investment Services the Health opportunistically the

Fort on return the this market. for the that in basis facility expectations Worth lease typical low return a enables the Our hyperscale in capital above is

optimize located will volumes substantially and core site on next our portion focus X an of in X the Based We the platform to volume the remain over years companies QTS over scale capitalize confident a encouraged X to over we're hyperscale remains with to area strategically world. at this on leasing we positioned by with believe conversations new targeted third-party years overall the We growth for our is strategically we to expect coming We initial this the previous over Hyperscale establish exceed business that customers believe to well opportunity. time they X relationship the hyperscale fastest as the colocation hyperscale with opportunity of the acceleration strongly path remain balances a in the data level performance growth QTS. best our is growing that our are a having opportunity growth diversified, anticipating strategic steady of hybrid and pleased that risk-adjusted technology customer. for commitment a approach customers the centers a higher-return, a performance and business a align years. with and top investment to to the hyperscale of

Next, as the opportunistically growth The on the combined announce and including raised $XX approximately Slide of operating Netherlands excited fully The XX we we in outside data closed closing power from of XXX,XXX part global cost. X available. square on our facilities capacity expansion TCN. data floor out April mega-scale yesterday, million U.S. strategy gross and built centers centers of megawatts were first X, of acquired XX acquisition approximately X capacity the On feet for have to QTS' were

our to expanding leverage new QTS with that hyperscale business a target opportunity an $X it's site, Groningen approximately leasing. customer assuming to closing the annualized our the customers acquisition increasingly available also revenue strong has Along to $X data of recurring EBITDA, This no as adjusted presence customer evident in-place exists becoming in As in allows and expand support the facility flow. revenue At scale. our requirements significant the with and base, their we've capacity on generate and annualized deepened Europe relationships X well. facilities cash million expect a global we'll U.S. supporting embedded center currently of Eemshaven million tremendous in

in for Europe expansion a an of evaluated the have number We years.

the for Given deploy the than more internally U.S. high. floor growth acres than and adjacent raised X in square land, of the significant our addition has million feet to capability more shell, runway capital hurdle been XXX expansion with U.S. in owned-powered in of outside to the

identifying concentrations X leasing. the data build-out opportunity remaining one yet breakeven represents in data exchanges square and Eemshaven feet of weighted strong markets. other is more XX and providers represents of colocation finding base revenue cost, center tenants with network locations was users lease facility, outside fully gross built of Eemshaven northeast and Netherlands largely European in mega-scale These European cost facility competitive center of one power to center data our representing focused currently the upside with customer facility the on of campus been are capacity matched acquiring the The center multiple pre-leasing on-site that fiber by center X.X contribution and and existing data QTS top XXX-plus internet strategically The provides large which term existing utility operating raised markets a cable world. megawatts the a the Amsterdam. vacant Groningen The and a to XXX,XXX NL-ix one a cloud years. hyperscale data either and and investment center assets to true floor or data Eurofiber. approximately The constructed interconnected originally including of to permanent basis, a adjacent upfront of of with infrastructure us remains of providers hyperscale QTS renewable competency the located average For of of XX form kilometers are was proximity in market than for most single on sources out another to to in that XX,XXX to currently and to and the data gross low deployments including X megawatt space. we floor opportunistically an OFFO is facility XX And major power steer power is opportunity derisk square undersea approximately landings due data is have in a unique centers Groningen through customer-owned major share along our XXX approximately of U.S. available core of Groningen representing data agreement located The availability support XX significant capital feet stabilized options Netherlands approximately right of strategically capacity space. operated acquisition under hyperscale megawatts allocate raised has tenant construction cities The at deployments. largest approximately The connectivity hyperscale and center example on embedded acquired customer significant adjacent with diverse the positioned this advantage center future to infrastructure. and

to to and transatlantic facility In XXXX. anticipates addition, center positioning several quarters is multiple providing proximity the data QTS within markets Europe invest recommission access incremental over cable landings Eemshaven America. the the to capacity the to facility expects with in sellable capital fiber multiple late close located in next and North

tenants. our with expect facility the Eemshaven already engaged discussions potential multiple support We preliminary anchor hyperscale growth have ongrowing to in initiatives and

fully a European European existing state-of-the-art center significant the top strategy According to mega-scale megawatt estimated The Slide in accelerate new represents built X XXX an to of have CBRE representing markets available in a acquisition gross capability XX capacity XXXX of in with markets. absorption the driven a at growth nearly presents our and opportunity Eemshaven hyperscale Turning aggregate a materially two approximately enter The one part, international data facilities data market opportunity hyperscale facility, derisked out by totaled center This in XX% growing attractive to particular, which a year-over-year, entry point. increase top demand. in expansion megawatts with large X. approximately megawatt unique XX to is capacity.

in conceivable with of capital cost approximately positions cost only QTS customers Including market participate an megawatt these per in $X $XX to facilities spend X to during million enhanced any sites expects value with growth at QTS XXXX. this of approximately build our significantly modest opportunity data a to Our for This investment. price purchase represents permanent the recommissioning a advantage entry today. generate well which creation upfront that million, acquisition additional approach X the The of center a cost point an for fraction in provides derisk and shareholders. upfront is

QTS' no basis Given revenue committed combined incremental breakeven price low purchase share transaction initially OFFO at conservatively in-place leasing. the is this assuming to with closing XXXX per

growth we power OFFO a capacity by incremental European over the support will one We high local enable overall provider Eemshaven. of surrounding returns. Eurofiber, leading opportunities operations group, in opportunity. executing operating Zentrys will the between customer in the model and provides in local the to partnership that fiber a cable that international agreement Netherlands With market subsea with growth for support. potential past with We're cost Berson, platform X a in partnerships demonstrated further growth the data Jeff that establish a are significant under evaluate facility to the to to We past. our and through a to center with the expects operators European a connectivity on in strategic expansion a strategy center we look with local discuss that have and ownership Jeff? Netherlands-based hyperscale addition balance our through more to data center infrastructure opportunities of As modest with we landings local that, derisk initial allocation, as has to investment to to level sites Zentrys Financial occupancy. I'll discipline the the time execution lower-risk sites European maintenance both flexible the and top company forward market efficient to has to U.S. for international opportunity maintained now have turn sites provide the data a our markets maintain as per customer Officer, to future into higher support we and an excited QTS and leveraging well continued marketing sales years. generate upside into in entered continue with in also of the for the growth sheet investment attracting Netherlands it QTS markets lower-risk, share Chief believe future detail. new initial capital entered an opportunity capital more on X on-site day-to-day QTS in operations continue third-party structure execute approach has over at capital accretion significant available modest fully of outlook operations consistently will same to our and at two and and result substantially strategy able customers incremental agreement a a QTS efficient partnership a support and X-plus our approach. international facilities

Jeffrey Berson

and Thanks, morning. good Chad,

we and that understanding in role above create X business consistently of long-term Moving deploy. is capital ensure healthy of first, horizons. to able the both achieve to the cost to for time return and our we one are critical find Slide capital we of capital-intensive QTS in a different sought deployment of order investors balance as growth most investing that in near variety managers beyond a value has this, ways: to and to a that evaluate primary aspects X. In have thresholds

XX% consistently generate of have strong consolidated in invested capital. return cost of represents We with a more been capital on higher facilities. our matured returns able relative premium return to This to in meaningfully excess profile a

the with acceleration Through among we capital is significant strategic spread return create approach, balanced revenue, X/X business hybrid this can estate and growth value in believe a companies, return, real of to opportunities hyperscale focuses profile colocation, shareholders. on on the high confident premium maintain with we which for our we remain fact, recurring In our widest industry. continue currently

predictable and per have Second, deploy year-to-year evaluate and in to spend balancing stable focus both we our will the in we near our continue and consistently that on OFFO a achieve same future. constantly demonstrated business exercise capital growth horizons. long-term In evaluating order and capital the share in prioritize to we rigor in

and only funding Based also we or and consistent for we thoughtful Our on have view the deploy model that in to on the evaluating the into timing have possible. source It's managing of and remain current have we near-term a exclusively this the structure timing performance. performance capital fund deliver that business we while in business that amount approach requires to in a XXXX long-term our to is equity shareholder model not focused the dilution. focuses maintained our of record any bring beyond. into of near-term sustainable and minimizing strong business our growth that that challenged in is on sales a business third, our way both With either industry reason In most capital business And capital. but a our we friendly visibility pipeline growth. we track backlog our fund business capital to growth and demonstrated capital-intensive

year venture preferred year Alinda. business funded equity raises we joint with through announced the example, perpetual and separate an structure this last X As a

XX. Turning Slide to

of value. shareholder in forward joint growth As funding continue work on potential a with evaluate we evaluation will on sources plan, opportunity to to move This of ventures. we includes strategic maximize our additional Alinda executing the to range

in believe the that the our in-place efforts achieve in QTS cost of this hyperscale significant which to decrease agreement joint rate believe next markets embedded last We opportunity stabilization of NOI a a capacity. in to Through evaluation QTS' makes aspect the chosen facility have initially unique remaining venture effectively phases approximately requirement growth important by JV X% reminder, We're while to X.XX% creates and to are to we capturing and value closing we're share not in assets on is is modestly in agreement fact shareholders. initial implied its Manassas cap we've the what stabilization equity X.XX% also only more this capital QTS leverage joint upside venture NOI growth addition the QTS' years. in joint time fund return structure to funding Alinda XX% future assets facility but of from that capital business. the quarter our focus full public through Through only able for opportunities We the increase our of shareholders. to our but completed our development closing Alinda the proportionate there's with market incremental our future applicable a rate In fees. also largely at all for an reduce contributed development. thereby for management structure at of cap X over lower the investor and sophisticated the of An structure JV our full Manassas Manassas low evaluating retaining infrastructure we on generated structure able capital data the XX% center from As XX%. to first approximately overall of announced reliance to by on the the this Manassas venture able like in than

markets growth. to incremental to continue while traditional continuing our to fund to strategy core growth view an future JV leverage as We important hyperscale structure capital the lever fund

position. like to our Next, review balance sheet on now XX, I'd current Slide

the diluted no million XXXX, As of a to and had in the a beyond proceeds. X.Xx is of liquidity our overall XXXX structure sheet adjusted EBITDA not of of approximately venture. $XXX undrawn ended annualized QTS' XX% the fixed until stock additional the interest our leverage but as quarter leverage are approximately of March we rate our of approximately series significant recent currently through share conservative than and including agreements. X.Xx. in in including of business EBITDA forma debt adjusted have to maturities XX, indebtedness rate approach subject forward which of balance of first joint debt raised the offering, including our unconsolidated debt We to forward our count, equity net reflected approximately $XXX pro we million at swap share with end more Including equity quarter from the Demonstrating current proceeds stood management

but development term in last yet maintaining quarter, leverage high we commenced revenue, in capital backlog to the supported a As range of substantial by mid- our not we're to signed support near comfortable discussed Xx the plan.

our Next, guidance XX. financial onto XXXX Slide on

expects has from the from NAREIT updated the in the operations reminder, joint to as removed reported joint and unconsolidated Also its guidance financial our impact X a the QTS accounting approximately the of $X approximately EBITDA the million our the February Consistent $X of respectively. ownership of As EBITDAre million of venture operations revenue the JV. of of generate closing, and XXXX with funds closing QTS' an statements closing funds QTS' from annualized of on QTS financial been include venture year in EBITDAre basis. Alinda with date of the consistent XX. reflect as joint At the it's XXXX includes proportionate unconsolidated closing facilities XX% of We've to defined from Netherlands will revenue standards acquisition with guidance full and reported GAAP GAAP financial adjusted standards results Netherlands. recurring from venture

the in-year which now outlook and X% unchanged our For increase of Underlying XXXX expectation. is to guidance $X million full a Netherlands and X million from reported from be year of rental contribution year the this initial million revenue we total is expect an the sites. $XXX X%, $XXX of between reflecting between full churn

$XXX $XXX.X again, the acquisition. between of also million up million are range reflecting We to our the and $XXX.X previously, closing increasing adjusted million XXXX Netherlands million, of the $XXX and from EBITDA a guidance

the the initially QTS facility acquisition at of with to Groningen price that power accretion from expects acquisition per breakeven a Eemshaven the XXXX year share incremental in-place leasing. contracted to revenue upside future performance our low in-place result with OFFO significant be to site, capacity relative at combined Netherlands As full basis the

is result, at to a our year per $X.XX As between OFFO unchanged $X.XX. range full guidance XXXX share

million guidance capital of factoring between CapEx $XXX unchanged, of deploy and in million the acquired to in also $XXX $XX Netherlands Our X is even additional we anticipate recommissioning sites. million in, the

our Netherlands capital Importantly, is our we're business to in raise fully funded acquisition access and plan the the including capital. the XXXX QX. in including momentum with proceeds from our Overall, equity our pleased

We delivering will back a call on turn value allocation capital I'll approach business growth consistent continue focus shareholder to Chad. the over now strategy. and through and to balanced

Chad Williams

Jeff. platform the quarter forward of growth our consistent course first in year. pleased robust off And to confident the and environment look We're to is the deliver and and with QTS' over the The XXXX Thanks, performance capabilities value. expanding. strong third-party maintaining demand shareholder continue to of I'm data kick in momentum centers to for

Before served career the as moving newest for leadership in wealth following and Financial a call, XX operating capability March, Officer X our independent. the Holdings. Chief of XX independent Rehberger. Wayne a Directors, composition joined financial to a over of recently, of diversified the years he of new are on sales to take of which Engility brings to the a to management experience. like Board QTS the spanning Most whom I'd brings highlight Wayne addition the Board to Board Directors. as minute Director Wayne Q&A portion

to provide join QTS' approach multiple Board pleased have financial expect overall in financial leading his capital the technology support experience to are valuable QTS' and of insight We management. and allocation for and communications organizations companies Wayne infrastructures will leading

experience Wayne's supports unique capabilities company to best-in-class focused are increased federal and previous drive the vertical security our seeing customers compliance the to opportunities federal addition, in with management serving our leverage government on and In we future.

and for to to I'd I'd and employees thank our closing, to shareholders in confidence our hard to in service. thank QTS their your like also world-class continued be questions. for customers that, trust glad customer like QTS. dedication work Operator? continued With their Finally, we'd take and

Operator

Markets. Today's Jonathan of Instructions]. Atkin comes first [Operator question RBC from Capital

Bora Lee

Two It's for could. on John. Bora Lee If I

First Are anticipate Do other you that events follow-up churn international with entering could with any the a over churn. there Netherlands. elevate then to locations? wholesale And non-hub the similar cause focus a coming regard in on notable to on customer quarters? markets

Chad Williams

little hearing re-ask you trouble can had We on The Netherlands, Netherlands that. the you question? a Yes.

Bora Lee

just you anticipate other Sure. wholesale with locations. a focus I entering international was wondering if in similar markets on non-hub

Chad Williams

and strategy around to on good really we customers U.S. about hyperscale go. feel Yes, from Netherlands returns facilities standpoint, into we pipeline really a launching feel our that I that acquisition an of efficiency focused. the opportunistic the opportunistically just Europe investment. not search location in unique our broad and about I capital a and opportunity, or think, by in a informed the think That's wouldn't as the is for It a is capacity opportunity strategy. accelerate to

the a We asset model. are operational approaching efficiency little with going be Netherlands of a to bit

partners years outsourcing high for sales it last So company confidence the the channel and done X that's and also really in Zentrys a facility colocation the services to opportunities. X hybrid through we to then have

will and hyperscale Eemshaven look our of we the to focused forward U.S. having opportunity drive further to be So on interest investment. the to with most a in kind facility of that the and partner Groningen of kind deployment

opportunity, very be a and great there. more we're to excited unique be about couldn't So excited

Jeffrey Berson

very about churn the our visibility on our annual. We feel of that I changes don't pipeline. X% we've good the anything reiterated we've there. to And our see expectations in X% Bora, got guidance side,

Operator

question And today our KeyBanc comes next Markets. from Jordan Sadler Capital of

Jordan Sadler

the hyperscale see bit lease little potential surprised for importantly what the lease customer of it then the maybe logo, just agreement strategic players Obviously, is expansion a quarter. a you a and expand of what the is new hyperscale the maybe on one the it's what the Because function full to the A And is? largest you usually is first being then in vis-à-vis size win of seemingly vendor? Can the give or of So we us large a there. new the lease bigger chunks? repositioning. on subscale your is know a term think I taking initial function,

Chad Williams

QTS the couldn't me with, is be Hey, valuable logo we being What excited deal Great equal opportunity. partner opportunity for about we -- but -- it. we This that start and for consider one one Its be of like to Chad. created is George. extremely I with us let X-plus a this more and to megawatt. logo a kind excited question. hyperscale about everyone. are not talked This new about a that's garner Thanks hard we we've that's question. is We to the with be it's couldn't know about more and

let So kind point that deal. couldn't enterprise the that this But is just with, of year X did to we question, X be so hyperscale of sign. more grow to hyperscale potentially for beyond. we hyperscale we term about fully Typical thresholds megawatts start me will to the -- this our our XX and expect excited kind plus of take

Fort to center we're going. fairly get network with of X got just you clear, term opportunity is they've this and what's of lot kind kind available get space exciting So availability with a priority had tucked and And we this this got get to make started. matching current start on in and into matching was and power stuff data these sure so opportunity build very up and about up to what megawatts going well times But up to come a to they've into lot because our this. Worth typical of existing in so of hyperscalers to a start quickly is fairly inventory

in wrap infrastructure-rich, an of infrastructure-rich, put another of this, 'XX can super being the start So what was higher to turns the of last range is we bought and we lower the in assets, end it said incrementally even reason they asset end great amounts what you I into the the that. we returns when hyperscale is announced And at range. hyperscale think larger into is X% this up of low-basis is XX% deal talked typically to year, that though of excited about in and our consume about maybe it low-basis space we're we've

a new it's QTS high-return grow expect also an X-megawatt asset. for filling on a great it's efficient, it So up to and both We and quick, existing opportunity logo opportunity. a fully

win-win to So look it's and forward the opportunity to a we having with. something flourish

Jordan Sadler

How investment the Worth in of next some and to just that then the how specifics course presently you year? expand on asset? you expect is asset the much over out the maybe available Can play Fort that of in

Chad Williams

forward I hyperscale. have his also opportunities and Well, continue and team hybrid look in in with Clint to momentum, both to the

across there. into. will remember, about have opportunities good also. We So of that But and and if that seeing built it space on It'll pods a that ability be hybrid in we and XX,XXX availability efficient, be had shell do We're mixture a now of hyperscale couple we'll move both quickly feet opportunity facility. out a square you cost balance. in deployed

is us So to continue things our get to it's in our hyperscale And shell that powered-shell mean priority existing have and hyperscale an huge take higher quick facility. as can company we'll return a into customer opportunities and facility. to a see capacity built hyperscale capacity great for deploy of out and a put some existing I mature there.

great company. So a properties for it's just both a as us example those of

Jeffrey Berson

that more than half to facility we continue that have invest And we ramp. in can still

feel very significant we path that, good So has that upside.

Chad Williams

pretty of we earning the on note, acres small also land. about XXX chunk of have do We one XXX and good Yes, almost script talked we -- have that a availability.

acreage almost land campus great surrounds that XX that campus. is of That Some acres.

adjacency. in got runway existing lot the we've just also opportunity but a So that left the Fort it's not a of in great Worth, facility,

Jordan Sadler

Okay. even low that Can view level of a you to considering basis you here? market to in mean as So in you what And realistic or rent, the Eemshaven? lastly what maybe achievable rents market? the I be you're speak then did on underwrite Netherlands. achievable

Chad Williams

question. Great

I general the fairly it's Amsterdam in a and also model. the think about a to and and that revenue similar both U.S., the in a cost is thing build Eemshaven Netherlands market in

or expectations of in -- in general not the or different Eemshaven in don't I U.S. Groningen So dramatically the type there's any than Netherlands

So market. I pretty think a it's consistent

that in way. it to expect We behave

to I outsize that and we is have facility, an have another not opportunity us opportunity create that's think that's cost for returns with normal what basis the thing anticipate at our the to -- only to have we that doing. ability

Jordan Sadler

occupied hyperscaler? previously And be just by Eemshaven clear, to was

Chad Williams

Yes, suit is was to a vacated. for it originally currently built hyperscaler and

Jordan Sadler

chance? source, power renewable by And is the it

Chad Williams

access market of significant it's release, hyperscale it a that and by press are is you I we stories -- stories push business They opportunities. there's think the could was coming. one power has the not best have ecstatic which and renewable Yes, in and for And that port, fiber have. stories accident our that quoted

accident there to and thrilled port megawatts that it's authority runs be that with partnered and a, I'm distance the Eemshaven. almost X-iron to tune facility And in by your not a that of are away. is area the within sure the We XXX

opportunity is only gives the a offshore access, and the wind level will a a that with that to for that power renewable that's growth to an in also great on base see growth, story, opportunity it going be area. adjacent asset a and you're fibers in at transatlantic that story ground because us the the So come be us the the in, of future area

Operator

And question Markets. from today Capital Klein Aryeh our of BMO comes next

Aryeh Klein

more and are any deal. the And on concerned the employee that? the you opportunities there anticipating push not But in do you Just And you really was of the you deal there? one of to sounds any it think and then seeing Netherlands, you signed XXXX? But Europe. a new one-off opportunistic of doing kind is build how was hyperscale, part broader competitive infrastructure in Are as deals into out out environment far pipeline, more leasing need process? do just for as kind you expect like

Chad Williams

question. great Yes,

thing was in working dealt the the tracked we for bankruptcy involved patience and a and we talk with one just QTS of that have about the a the be and let process. is some long time, So this and It around and me parent a perseverance, type We of about followed to patient complexity process. try And was process. just lot through and tedious process. assets

to There's unique most story in the that Europe complexity availability process to transaction. dollars competitive to the we that aren't the the in-country some both, to and appropriate speak of and be So people's we I a the and time or us other overall us tremendously with governments the to the know and colocation we directly at process. of hybrid build don't it I QTS felt opportunity, aspect. to a level. desire or I of hyperscale ability positions interest can't at clients every significant to our work that that's capability the type a I lot have we through. pressure not want tie led maybe one highest -- will, the tell clients is great to they same a not was ability where U.S. resources, and manage sure competition, that a feel optimized -- say process but for like strategy put love our in the but Groningen our We in But But in this complex capability in you, colocation to entities platform in the juncture, the ran position. hyperscalers had process, big make will and asset, at very whether the customers unique an that

And certainly the sales, some these at that feel we'll the table, over on of partnering about hyperscale and team doing and the our be where partners period And to our part we're development Tag really marketing great all going. very of U.S. picked leader say in-country has do at little most we've the can who where in-country sites. time, coming both look for leadership revitalization good from customers and We'll development And be all teams are in not comfortable on the for recommissioning facilities partners of for and of appropriate look years. Zentrys So and restoration hyperscale the bit and that the the we're would off the that that operations based feel I and teams operated Greason and with course, is U.S. but that. also activity

Aryeh Klein

just then And on Okay. the...

Chad Williams

the acquisition As goes, and good energy around colocation. we the far forward to location, hyperscale. It as of a informed U.S. very synergy very feel partner and pipeline about we was our some the creating look

optimizing there is We on will because more some restriction some be a lower facilities, space Groningen, density is power there in there of is deployments. because doing space but some the -- left of or capacity some

some forward. power free So of team refresh our as in of for like opportunity have some profiles. up will good and capital bit space, we against deploy move client the some layout there's that managing kind feels And good additional more a And Clint the space his some the a and time. colocation so be of look little distribution and over we -- we partner can

Aryeh Klein

new can talk deal to you enter one And hyperscale the expect out in hyperscale pipeline? you within more about deal, the XXXX? pipeline then You but And signed the complete -- U.S.? do any seeing are opportunities you deals

Chad Williams

and Eemshaven on by the the feel about of hyperscale end ready planning We really year. pipeline. We're good open, having the recommissioned

it in is but the going that. goes. to think see kind out, our ready leasing The to that But immediately Eemshaven, we're the I So where expectation to continue to pipeline move happen and went pipeline I that and news that do through building. is teams continue build talk I to of are think the big going wouldn't some anticipate and just

the it seeing and to we we're we'll the when build, good anticipate have So get year. of end at success open

Operator

Today's next comes Instructions]. from Sachs. [Operator Feldman Brett question Goldman of

Brett Feldman

an you some believe million quarter. to that able per of quarter, of you'd I bookings conviction last talked be $XX about exceed average

have the an Over of year? funnel as that would $XX.X exceed is appreciate hyperscale confident the million on have be, that. you something component the It's that to give in that answer, little as year? I of And longer year? over the of an a additional the a opportunity the customer of phases course visibility expect this in Do terms new $XX then actually this feel you'll you you see Or you course with book that do still the term? the little I you average that this just update really into lumpy. us for quarter, million, bookings question of can at you a year, that remainder guess, came you under your and for

Chad Williams

but do Brett, strong feel the average is we inside we of for fine got We property. we we additional little And a hyperscale. generate phases some as quarter. thanks. said bit a million feel as had book $XX more Chad. of expect This hybrid earlier, about to I Yes, year We've still that continue opportunities a that, new the like this with quarter. booking great do, and

Brett Feldman

you sales Or it. Do do sense important. of order with size of to of you in to you mentioned And drive as bookings? higher ramp size your that is that, follow-up sales increasingly inside the feel just that your force force? channel it think Got -- becoming comfortable makes a your you the

Chad Williams

today. -- Clint here us is and think with sitting I

of I he's feel force. think what his balance about done very good sales we with the

expanded if repositioned you bit fact, also refocused he's a sales, it anything, In can it, it inside little created channel. but say and trimmed and an up

think I confidence that. in and trifecta So balance of is great well, working that we his to continue have

quality our the people So of really quality people. not it. numbers good our vertical, people, about partners and demonstrating think ability are those feel of colocation about it's to And it's very about we and hybrid I the drive

Operator

of America Lynch. question of Bank Merrill our And comes today Funk from next Michael

Michael Funk

last guess, follow-on, a to I the Just question.

highlighted your sales You channel. the from of XX% came about that

the you're sales? future depending also margin This partners very and some showed the for in to your us walk expand expansion through in leverage of Maybe business the just now the good more opportunity on channel margin that the business. quarter operating that the

Chad Williams

hybrid when percentage, think part focus know of optimal is verticals, channel stepped we a we exact don't commitment momentum, channels it. the definitely to a both a number much were so picked take goal and a of a hyperscale. connection finite that's that there's pleased and that more huge going that direct sales I our set Clint to on be in to the up I if but that have are to and see our really channel

that to that. leverage drive So to and continue going we're

does it us think I more make efficient.

getting gives they're own, buy pretty also earlier brokers on set hyperscalers that. because it up to their efficient really are at with think do to I that are the ability us smaller deals, the more involved junctures

to of start that business enterprises XXXkW an found So intersect megawatt, a X the and know kW, broker the partnerships. our have that ability very to our maybe brokers and want to at may they're that we good community extension a lower

Clint So a I their feedback a event, in [indiscernible] job is are setting which listening continued, for broker team that thanks that community, get and biannual a giving a I program They is great at the to the just thanks to channel event a finished doing to in tone. Arizona, able doing them and is continue think be about think out intentional company. for and foothold of emphasize successful, you're make to and we part us influencer and us want thanks your make business for an us be to I how successful. very it's just successful, they're what And going making we that as be be to

Jeffrey Berson

to and able to have spending. do demonstrate leverage side, had been liked operating we room think margin we've that We significant -- discipline the on grow around focus strong there's there. a we improvement, we Mike, and

a towards operating drive couple ability over to path another of points next from the basis expectation we've is leverage of years, year margin good the XX got it. each and Our

Michael Funk

And one could. follow-up if I

of now quickly. I longer can part to they're things maybe build precise advance. end talks hard be It's urgency with So to the thought from far hyperscale that of deal hyperscalers the little their in necessary to appreciate taking you contract quarter less We've XXXX. a hyperscalers, slip. bring close so less it capacity that commented finding hearing bit in market that I've number on been to at a are you that the might timing. been this hearing

deal deal about of the in hyperscalers theme announced that size a reflects wondering seeing about Texas commentary your the or slip and their a pattern even the if if that's and urgency in that Just shift more from you leasing you're that of one-off? less

Chad Williams

to I to It's assessments the have need people know of -- tell taking this not and for charts, read of lumpy little those obviously, right But make love because hyperscale a the down. fourth in through rest is to engine X.X of XX meetings I've forecast data first quarter things I to that have be -- year. I continue and of kind think business going are is you what period. hybrid And and really and at and kind middle of a digestion meetings to the do be last There's their now, in in been lumpy. business were our those in The we I periods if will look X the to purchases time. we bit And read not of you, the of too. going periods. would colocation hyperscale the the is month the a going quarter number reason big of of buying quarters, cycle be the lumpy. into digestion

to sat X any In is hyperscale fact, X the team increased periods of to the over deploy over long that we planning one cycle ago, dramatically they're with as next the in their not prior capacity years business.

low We that is ability to the we intensity places our lumpy to from feel hyperscale capital deploying momentum equal, created to that So all return to right the a the growing. because pipeline continue want and both nuggets earnings It's infrastructure-rich same in to intersect, a at is still higher like basis. grow ability time, a outpaces to going be find per of business. share, your capital of opportunity the a find at rate not

is trying competitors good balance growing about capable to from step plenty time private and opportunity. be hyperscale deliver. space a all we that to of are that. to to Even feel where in, think the companies So still the we of is at competition And going think there's good markets in are we that the

Operator

today Morgan Simon And comes from Flannery Stanley. of our next question

Simon Flannery

then right you up back buildings And would Just that into coming in the do of comment your if up environment? you And competitive came locations about pricing pricing terms just and just consider was renewal overall on the other that Can there? the what X.X%. recommissioning to just Europe. you facility? you mean details opportunistic the go Can approach, does to given need

Chad Williams

the some But of Simon, the of blocking I'd to and some and refresh tackling. go normal facilities of in, has maintained Yes, the just the upgrade the do some I'll some part. PDUs the Chad. of first process. The the vacant blocking security been maintenance redeploy just much even facility. tackling. managed say Very take batteries, consistently, been going the infrastructure, features, we're and the throughout have entire

of some the up free power raise the and deployed to we'll some that In all some or the facility, some million of optimize So get much the the nothing overwhelming. space Groningen $XX-plus those of blocking and excess pretty of it, enhance to and of things. capital look But cooling spectacular type and laid tackling of we've with just density kind out. to

for we're about And and know looking, of once well, as over commented, that -- excited years, of outsized -- always you that returns core kind don't people deploy efficient and infrastructure-rich or are looking people or I lucky opportunistically So to low nothing X capital X think -- capital just on basis, the of hey, kind I we later deals often have say, of we approach heroic think capital. it's to we're starting I there, are kind a allocation twice. now where opportunity. competency got QTS'

And that Netherlands, to going to to you Europe. that, docks so be but that it's Europe, always looking, have read any we in need into be great in X location, growing. We're we're in be shouldn't successful in the feel it's we because a successful

derisk good demand, of that's it is. a want really to have point. And entry interest and We and a Jeff, do the what you part? other we lot profile and have take

Jeffrey Berson

Simon. Yes,

rates pricing and over a of I QTS over That renewal were percentage. and to in over rate that renewal We see of in it renewal pricing. demonstrates We higher low time. in the history just stability seen customers with continue up digits to think And service our see driving X.X%. mid-single you've with support just consistency multiyear years

Operator

of our And comes Robert Guggenheim from question Partners. Gutman today next

Robert Gutman

of the entered to the there $X first, a business? facilities the other Regarding per the of circumstances, the sort some it's would unrelated anything million that were company per million any center bring to whether that because for went logic the other seller data Or price it to bankrupt the was was center specific economics this area data bigger that Well, regional price. $X or tag? into of megawatt secondly, megawatt that bankruptcy, or And costs reasons business?

Chad Williams

and were tell you involved any for I centers process Yes, had persevered price, a a it be value And all the that's they and I we they directly patient we with I acquisition more than that other the were the could couldn't bankruptcy that just the was not strategic that not through in think think had opportunity were we of thrilled people. will data that monetize. part asset that

bankruptcy and operated with centers. completely years why one So it upstream the of appointed was certainly the a to data trustee this the It had an for businesses is unrelated parent parent multiple data successfully reasons bankruptcy. during centers

was So jump-off the great us gives the that we that that it set through. something obviously, point. for worked we And feel us a opportunity tone

to for infrastructure. and support there's it's authorities' growth also not think I local continue power the and see being renewable excited the XXX-megawatt be and couldn't expansion infrastructure now expect location a very robust for going available As to more the area the center tight far the southern that's and fiber of sites the power a said review, and as part would point by was And built earlier, that access, is to data there on, the anything incentives that, street, in down lengthy Netherlands I also power scale and jump-off about accident, after which with I else like and of we the them. and

you'll I that see, part continue of couldn't more So a to trim it's be be it. we think to and excited

Robert Gutman

by specific what's just question. a going on of I a the tell us kind you year-over-year facility, Santa of of NOI decline reviewing up basis, breakdown one and In quarter-over-quarter. on And see just just year-over-year, nice although altogether there? continued it's Clara Can nicely other

Jeffrey Berson

mean, I Santa we're Clara. Rob. Sure, still growing

build the that ton It's have grow and a remaining, the quarter. Clara Santa space You we're see but don't the a actually brought and in it, some it in continuing we of revenues can during capacity facility up to we service there.

as some that we've strong down, is a it's a lease ever market underlying just that in got, ground of pack was terms But terms that just largely some In long-term in well lease. it's of in and profitability that which economics of been. reprice on shifting NOI facility, the as the little bit as as

Operator

comes of And our Eric Wells Fargo. next today question from Luebchow

Eric Luebchow

I'll it to one. just leave

will a markets capacity, land or wins should of balance we that Oregon how of if you contributed hyperscale would in of where assessing Phoenix them be balance going we U.S., JV? more have terms think in of should shell in of is year be -- financing greenfield any about forward. that In in the and you're those curious lot the be presuming on terms new you have and or to future in you financed your builds the Just how sheet this potentially how

Chad Williams

thanks Eric, the question. Well, for

to the But great hard excited shell and more opportunity, I what hyperscale opportunity work a the question, and be us that, our Alinda much partnership, it's when end the because also, great capital it's for right? -- think that and infrastructure relationship opportunistic -- especially about to a to get the more around flexibility and both, couldn't for when It's might of intensity we keep higher hybrid return team growth. the love the more be and to less or JV deploy the friendly we that. capital the Jeff accelerate did profile

focused saying, that's short on. what we of we're capital. lot deal and a which lot goes access of where, to a And coming So optionality have of

Jeffrey Berson

the focused at us effectively enables the what to see stabilization, to of and the where basis. in revenue Eric, opportunities is a going rate and to existing add you'll XXX% retaining apply on shareholders which deal and in forward of future close like fully protective very and or only cap We've we'll growth -- and for existing asset. accretion at would that that assets stabilized more value the rate of expect cap terms JV capacity continue been that I'll focus really thing full evaluation a of growth Manassas maintain on on us assets are that

Operator

Crossett Nate from comes today Berenberg. question next of our And

Nathan Crossett

the related question potential the include with the have It's on European that assets? kind for agreement JV. them of Does a you

Jeffrey Berson

them. Again, does. to work flexibility lot we're as There's and But ways of any domestic in we've it to there's fashion. find that is a requirement got their multiple with Yes, Alinda. and excited does no both appetite international,

Nathan Crossett

Okay. of see to in And in within the continue then That's comment enterprise funnel. helpful. just deal you a size an There was quick follow-up. increase that the guys a slides one overall the

deals so And size more I maybe how today on maybe little was those last the ago year. evolved color some say, the on, just curious just year detail bit a versus average and a over for have

Chad Williams

Yes, so is this Chad.

former bit Governor say on we hybrid what into that kW, within was longer of of Clint came XXX think point company. we no exists the the a I hyperscale That little really team. deals, colocation rolled would artificially that the kind -- that XXX At the is a was which of they removed when -- kW. in,

our getting Greaves team from to inherently, enterprise the is I you'd more the deals X, ago, broker So that removed scale, up, said, time, where of -- seeing greater that the seeing At Certainly, the we're activity, and visibility. that of initiative. seeing getting about Jon go and and in so XXX enterprises that data into differentiating start area maybe see more need. platform, are time, kind starting you're XXX the at a are that earlier for maybe SVP lead X But that, kW same megawatt same we some picking the the center that is comment things did enterprise, economy kW our the X software-defined we're that see is kind continue of XXX our and us at of team anywhere years more kW. out to to to at Clint community structuring is as a lot

and deals it's organization are way that. the and enterprise in density up we the the picking combination the and So structured just differentiation that seeing of is

Nathan Crossett

in throughout? Okay. momentum? strong scattered helpful. is any industries just the That's particularly Or that are of kind enterprise And it certain like there you're seeing

Chad Williams

sector healthcare. really security -- It to enterprise, and continues banking, ability drive differentiated our federal is financial, with be our very It's compliance. to

seeing the community. we're what's pretty it much great is across business So

Operator

Raymond next Frank our of Louthan from comes question James. And

Frank Louthan

So in And capital there discussions you're tell at? you are kind -- of of looking of be long having JV us your from that partner would Alinda investment with? be what percentage sort others the term? would can you'd target is partners Or that you main

Jeffrey Berson

Yes, the around don't thinking right growth. we -- about when continue right find to the we're what a attractive is attractive fund absolutely say The have structure opportunities a the we assets, intend continue it, target in preset Frank, hyperscale and it to the capital and with to we we Jeff. Alinda. this to I'd leverage of cost think way very

of down and not deals like in just on are in it hyperscale to also with what or in whether future that the ourselves depends asset built we some hyperscale we're So embedded the suites. deals, painting growth number significant to quarter existing facilities announced of

So expect absolutely you'll that on see we it But there. leverage we venture. us joint depends continue what to that

obviously ties we And nice ties As some we some has to think relates Alinda work Alinda. to with, it have I to who do provided us.

us have bring is working flexibility what So we have do, time, to that as our with in are well. doesn't up if do Alinda. match the continue flexibility the At looking to see Alinda that there just we to with expectation is you'll capital same additional certain circumstances

Frank Louthan

have center other make Do flexibility with companies? they investments also to data

Jeffrey Berson

pretty where do It's side sure fully other also we're good that of partner, with They situation good either any but a were other's limitations. each handcuffed. in with preferred We making balance. not each is terms

Operator

our Deutsche from of next And question comes Matthew Niknam Bank.

Matthew Niknam

And it one I'll keep well. as

different comment terms lieu Netherlands. you terms opportunities in opportunities, the you're in in can on of valuations deal of out the U.S. what if market private in Just in the of there seeing and

past, now the are the mentioned if Netherlands. unique there more if this in opportunistic in to see wondering a the or as overseas was, U.S. you opportunities Just you've relative deal

Chad Williams

expectation that think be I in like I can set repetitive this Europe. wouldn't we want an to

tighter think power, both constraint, of has lot in markets. Europe different on general, I a capacity a and in renewable

like this unique felt is we pretty why at So scale. that's opportunity

powered X-plus the U.S. gaping us market in almost we cost kind gives want capable. to think is square of -- advantage the that located years really don't same feel ground U.S. to wouldn't and there's almost time strategically quickly entitled impressive in hole having footprint utilize done expectation. has our are I of at a always major shell, and I data where hyperscale a big center in -- us over specifically, I the XXX every positioned foot the we've work the opportunity the competitive existing of and acres year But delivers in U.S. million that So us cost last for X of set which We're the the looking over at a like

success with So I strong capital-efficient about approach. think feel a the opportunity higher-return both instances, for we in

Operator

question Del MoffettNathanson. from next Deo comes of our Nick And

Nicholas Del Deo

that except the Was commission of and have in to a what sort such it internal of made leads have big are between What something to prompted or the conflict just a sales changes in changes bookings? else? put the your address place you've or specific guardrails channel change And channel force? risk willingness you

Chad Williams

I little it But great think let bit a starts Clint a just at I take too. with may this intentional. very being question. It's

I lot bit about do always against have of think a work we of of them. little a think that. going me. partners who's And Clint little only Money it's relationship. Maybe were of competitive but driver a channel to for a people had me I is we important, this telling or the unique good dynamic not I'll out for take of and let that right, who's bit

Clint Heiden

grow. point, and so Yes. we've view the To them drive customers what it's organization to technology, going platform that a adopt that this to with them we're business taken get the to important and something Jon very the the We've really something very and into looking and the at. Greaves to doing brought SDP Chad's us. them also prospects intentional that's been is as to started can a is that speed quicker that viewpoint up earlier on around, they're on actively We've train they program

that's So of piece big it. a

Nicholas Del Deo

to guardrails the conflict? And a avoid Okay.

Clint Heiden

we first to out thing that year the in company. difference here payment the commission pulled reps the Well at was did last we the

being bookings select and the at our conflict found work we actually our increase with So sales We doing trim that there and organization incentivized reps of that. all no within fully of force is could our paid the one by down to channel.

Operator

to remarks we'll And ladies going and be now. gentlemen, in time, closing the of interest

to the So remarks. I'd for back Williams any like over turn to Chad conference follow-on

Chad Williams

bright to where the continuing business. interest we are thank forward today to Well, support, the you excited your look and year drive We're for and about we and is ahead.

time, So thank questions soon. and for and your talk you we'll

Operator

has you to you, I thank for Thank today's now want attending Today's sir. all concluded. conference presentation.

a You disconnect have may day. lines, your now wonderful and

Qts Realty Trust (QTS) 1 May 192019 Q1 Earnings call transcript