QTS - Earnings call transcript Q4 2020

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Operator

Good morning and welcome to the QTS Realty Trust Fourth Quarter and Year-End 2020 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 also note, today's event is being recorded. I would now like to turn the conference over to Stephen Douglas, Head of Investor Relations at QTS. ahead. go Please

Stephen Douglas

today Hello, Chief and Operator. Douglas, welcome QTS' and I'm to of and our Thank Executive Officer. Chief XXXX everyone, Earnings Quarter Officer; joined and QTS, Year-End Relations Berson, Stephen Chad Conference Fourth Williams, Investor Chairman our you, Jeff at and by Financial Call. Head I'm

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

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

provided made follow make and with day. webcast have available also to We website and slides it the them on our our to easier presentation

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

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

Chad Williams

quarter Year-End Call. welcome QTS to Fourth in Quarter look XXXX bookings history. of details Thanks, Stephen. forward to the QTS' strongest Hello Earnings and reviewing the We and

moments exceptional a achievements However, fourth our I'd performance. year during a of before of few like to to key attention some highlighting quarter, turning spend the our

leveraging invested of customer support X X, our on target core to differentiators QTS' growth verticals Turning capital. strategy continues return to Slide consistent strong across and

to XXXX, year margin grew year-over-year full a XX%, that we expansion pandemic. margin XX%, aggregated utility cost benefits, as approximately the year-over-year, approximately points portion A excluding and continued the expansion basis operating $X growth even in result Consistent of XXX we the delivered was initiatives growth year-over-year. margin reflecting leverage reflecting for cost year achieved our the EBITDA the of of full while COVID-related corporate cost points incremental acceleration digitization previously achieved QTS stated of than These XXX revenue million approximately in total our with travel basis result of XXXX. company. approximately business expectations, For lower benefits these of more of across adjusted expense ongoing

of end share X% annual X% OFFO growth year, our of term For target stated per of growth. At delivered high the the longer we year-over-year. X% to

annual was of current customer strong Underpinning in growth, industry-leading highest leasing and in our than delivering XXXX, invested volume bottom-line back to results, growth XX% XXXX, the up our While support future an value we QTS delivered reported the during platform our most creation. financial more history year-over-year churn. the into strong in level and history which the also

platform. a the QTS In operating of number financial and addition we that execution team strong and results, reflected to our enjoyed differentiated significant strong the of achievements our

prior combined. X of over power of gross years During support in we in which the capacity represents completed direct leasing accelerating signed the XX construction more delivered megawatts capacity, XXXX, of our activity,

in new the were Our development activity year during which center projects opened XXXX. Eemshaven, in construction data Atlanta, and all included Hillsboro officially

marked our year. our significant bringing largely this of forward also In additional look capacity excellence this in Ashburn to measured which industry. or and above Net customer support in support. for In as extended XX-megawatt the customer the addition, the data to satisfaction, now service the average NPS led with we center market QTS' center score approximately industry Score in double record We score year of site, consecutive NPS. sold track XXXX, growth Promoter XX, that QTS NPS by to data Xth XXXX we achieved continue out. an

QTS to extended In addition, X XX its consecutive uptime of years facility performance. record Nines

commitment deliver external enabler ranked commitment customers highest our key the was the a year, systems. in second for industry of strong Global corporate Slide reflect of standards by Benchmark, during in and sustainability. These internal GRESB, pandemic performance for the and Real in of culture the consecutive leader our the among face global is Estate powered-by-people consistent Finally, QTSers to of was achievements to sustainability to our to QTS industry-leading focus to the innovation value shareholders. as centers a our X, data Sustainability and XXXX and of XXXX our year continued on our technology digitization through our QTS. a world-class demonstrating service Move

of with platform infrastructure towards remote Over management to of our and of consolidated capabilities our the infrastructure. customers' past Brent SDP, successfully includes interact handful core data utility which platforms. their and systems through a their center Jon remote software we've this accelerated amidst under customers Greaves, QTS' several leadership Bensten of This pandemic Delivery Service as empowers years into visibility or priorities the the our The environment. of many Platform, shifted

reliance SDP usage Over engagement. the grew with overall and on course of increased significantly XXXX, customers'

grew year-over-year. new the year, the logins unique to XX% platform During

has as engagement grew than average Importantly, to XX SDP contract primary with percent increase to emerge in approximately the session our XXXX. across during for year-over-year we XX%-plus and ancillary of XX% hour, the to than year connectivity time for minutes demand experienced levels services. of the cross value in reoccurring X% than is revenue, customer active new we platform. QTS' our more nearly Total placed SDP connectivity X% by represents XXXX. fully levels experienced continues orders Throughout And grew XX% one revenue approximately average user-base total now tool the increasing session more through additional interaction ago. SDP connectivity SDP acceleration year, double automated more time platform. increased of top and with this which the users, this placed of orders today through up from and approximately connect facilitated a

robust a feature capital The differentiator enhancements originate rates and business. on positioned we and technology innovation to capabilities driving meet SDP our remote customers, well for for to to QTS. management customers, of win we premium focus from have our believe differentiation through supporting core to remains new invested customers only technology continue and need backlog our are this efficiencies our is Our grow innovation with and that operating feature multi-year demand monitoring a return our SDP We requests of differentiation. on our through our expand and majority platform. delivering will accelerating

Next on Slide X. to

leasing annualized prior leasing During more of brings to a the nearly quarterly full increase incremental total million the fourth quarter, of $XXX signed achieved XX%. year-over-year increase X-quarter year which public average. single we This $XX.X representing relative a of approximately XX% as our QTS largest incremental annualized revenue, than and company our a million to represents revenue representing have new modified result leases and

relative backlog robust fourth the which annualized the backlog reoccurring of to million steady momentum, was which year in derisks a $XXX was and yet signed of leasing to return invested noteworthy a revenue, are the The of for close of is core performance. customer leasing QTS. a of but capital colocation quarter-over-quarter. colocation which of of diversification commenced the financial approximately XX% quarter end acceleration particularly verticals, our at customer for of engine year the as to QTS. in quarter, the up a signed, begun Strong for our rent, approximately our in trends not the level end premium vertical. financial XXXX. is modified growth strong increase across of new associated out reflect growth hybrid the remains volume pleased support on mix Adjusted within a revenue in the signed are as XXXX development and Pricing via straight approximately efficiency, and activity of our up prior capital X-quarter average, pricing balanced which sequentially. target in and of considering line with Enterprise sets hybrid leasing and up on performance history, such quarter including quarter. performance effects typically highest million, is enhanced have during approximately XX% with large our the We another performance backlog $XX up resulted fourth recognize and our leases This X% Enterprise

of generate base. the during growth from steady the As of hybrid by the a of the activity trend, quarters supporting we over course colocation embedded have we performance enterprise customer continue Despite this pandemic. discussed within XXXX, prior our slower to resulting logo pace we new experienced continued year in

We logo performance experienced that the the enterprise quarter, fourth a relative uptick of during new third to are year. second quarters encouraged the and we in slight

new see While historical new are currently our performance level as year. funnel across normalized by supporting encouraged the a levels, move we our we acceleration are have remains we this of to accelerating markets. logo enterprise activity pace and hybrid an begun expect seeing more activity of below logo enterprise to deal XXXX in We to through activity colocation return

rates healthy. quarter fourth down heavily customers space in weighted same towards which is We our installed more the remained base, pricing During renewal enterprise QX. X.X% on reported

the renewal by one our part customers of of multi-site larger this as expansion primarily of However, driven a plan. is enterprise broader

to and customer, range both our pipeline X%. Excluding and the of forward at return of in in to X% XXXX. also of approximately X.X% remained and pleased an during rates of the our year X%, the for enterprise space velocity leasing the to look consistent guidance relative activity same full to pre-renewal XXXX guidance expanding Overall, executing X% increased with we the on remain of renewal profile X.X% expectations leasing quarter initial Churn with our lower X.X%. end Churn this specific rates. came at

and activity we hyperscale, of X. contributed quarter, several multi-megawatt the primarily Starting half customers. experienced hyperscale Turning leasing leasing existing we driven quarter to was in Slide the acceleration the an by during more our hyperscale with in signed expansions verticals. activity overall during than The which the federal with quarter

based XX DC-X for new facility fourth stabilization power center have Atlanta hyperscale customer. - our upon remains advantage, a is on our leverage, data a total will our Our included of leveraging performance Including large in megawatts of to the out. XXX expand Metro than support forward XX differentiators incremental QTS' better ecosystem data the existing land. with At ago. strong new capacity acres capacity our a campus quarter owned team XX momentum QTS in adjacent Atlanta base center, strength able Atlanta-Metro market an power connectivity facility support continues we market of than critical be more just which build including expected an months cost to lease, customer to considering these customers XX-megawatt a a operating leasing We power to of megawatts extending tremendous which for significant is leadership support and few more of Atlanta look and us. in our to expansion now sold growth. full and this results full megawatts we the continued opened with our

to Manassas, X-megawatt we with company. a incremental now leading signed Moving lease Software-as-a-Service an

we a of reminder, total shell than to brings within this expanded This capacity agreement build-to-suit the full expansion facility. them our balance the and the and into signed gradually more capacity customer has the committed coming capacity to into a Manassas, XX-megawattt since ramp XX-megawatt, turn-key a to in for continue over As remaining previously latest a expect powered quarters. turn-key

vertical. in As leases hyperscale XX% target was smaller a X. only XX-XX contributed acceleration or hyperscale and size, quarter than that this Capital, ahead to X-megawatt with pleased megawatt experienced our Alinda fourth This a commitment. venture our megawatts contribution of we to in the of facility X pace X more X results X well signed our of initial in In leasing of we are our were leasing we to the experienced activity we from very federal with incremental the expansions the reflect hyperscale for joint X to number Manassas total, greater Overall, addition XXXX.

We XXXX to represent year expect of hyperscale another strong growth.

funnel visibility target As our a leases. X X leasing plus hyperscale to XXXX larger megawatt X to volume our momentum and increased result have we in of

our with view by growth We attractive largest fastest and to momentum federal as technology to world's the in hyperscale now Shifting companies and continue growing federal. accelerate to an supplemental strategically colocation opportunity continue hybrid verticals.

third our the the of we consecutive signed provider quarter, demonstrating quarter represents leasing supporting As announced multi-megawatt signed and quarter, supporting This lease aggregate more during press combined. the federal continued federal recently X via cloud XXXX double hyperscale than differentiation plus to volume we've a QTS leases, momentum in during during with lease signed a fourth This release megawatts within of of fourth in government. the deployments. a megawatt signed XXXX federal, lease support federal the represents deployments. and activity in the Including excess QTS XX capability representing level federal XXXX which

shareholders. unique we've close last within support our performance. positioned necessary provider. building we established a business, capability the a to federal we center infrastructure, requirements record XXXX QTS Federal federal creation the agency Overall, such These support center opportunity area opportunity continue for for a a with with for combined growth federal to with investments data strategic and out leading operational several services track excited years, Over this success the as and focus processes, a expect and remains data of value platform talent. investments are growing an strategic to operating in have strong

balanced core over Our leveraging in that, support approach it Berson, XXXX. turn Chief differentiators Jeff results Jeff? into strong to business backlog our and provides visibility of Financial record Officer. With tremendous our year growth consistent another booked-but-not-billed to I'll continues

Jeff Berson

Thanks, Chad, and good morning.

I'd like Slide to X, QTS' Turning plan development XXXX. reviewing begin to by for

leasing in XXX,XXX the facility opening Irving, site floor course deliver Chicago, square in look to out Since data our is currently sold existing ago, and to over new of growing our capital Atlanta, of growth our what our of still customer XXXX fastest and Manassas. customer Clara demand. XXXX extending the Richmond, of the at Manassas Including during our a the and the commissioning the Santa breadth The commissioning momentum of and success able facility is in in new largely XX-megawatt in included development facility the raised support Ashburn market our country. site XX-megawatt largest in of X year, new Over opening is construction first Manassas, our to plan our new and years incremental of in supported to visibility new capacity supporting Ashburn. phase development Piscataway, expect center plan formal we've additional be Also we entire the by in will the forward Ashburn, target feet funnel verticals.

To backlog and of derisked overall towards is approach skew approximately out. exiting support allocation. it's new build customer our capacity record quarter, we've currently pre-leased strong However, total upon particularly hyperscale capital XXXX our with to excluding this will power fourth XX% critical base. of cash more and to acquisitions. $XXX currently $XXX in already consistent Today, projecting full The expected our site booked-not-billed expenditures of and capital XX megawatts than which between million we're development momentum support the million site,

tied current is development leases expectation directly signed. more XX% to XXXX Importantly, have than our of capital that already been in spend

capital allocation growth timing evaluate our achieving on continue shareholder our long-term both of focus always, near-term to in customer and demand, balancing As align value. and to amount we'll the with

I'd position. X, like balance sheet our liquidity Slide to on current Next, review and

transactions extended debt $XXX weighted outstanding fourth the we of completed our the X.XXX% the a quarter, X-year average use fund offering completed a During reduced debt markets senior we of notes. redemption of our unsecured coupon and weighted interest X.XX% number to million previously outstanding that average senior million our and the rate. of proceeds maturity October, In with successful notes $XXX of capital

during credit pay maturity amounts proceeds of facility. a we million a outstanding a X-year down on new our loan with the quarter, the In revolving used addition, term $XXX to completed fourth with portion

approximately debt release. through current fund quarter QX issuances. current in of net net currently our plan over of a to through at basis. coming million ATM $XXX equity $XXX quarters proceeds level to flows, earnings to X the to representing forward for million leveraging operated retained EBITDA, dilution. approximately leverage QTS' a cash forward released mid equity to expect equity additional plan, QTS represent the plan a available quarter as down while had minimizing maintaining to equity maintain on forward adjusted our $XXX call we the proactive EBITDA largely ATM of Subsequent to in sufficient in CapEx on funding future our We October guidance, X.X earnings approximately our proceeds leverage sold program business development QTS' growth of We XX, funding QTS forward yesterday's equity access stock third XXXX. draw while times capital development where proceeds. adjusted equity stock net This largely available results ended net to times forward de-risk range. XXXX proceeds forward approach As consistent was funding high with proceeds fund to of on earnings our program, to historically We have approximately plan with and forecasted future our to through million these available including of issuances needs proceeds Based our annualized

the of approximately equity leverage forward X.X Excluding proceeds end fourth quarter our at was times. the

to opportunities overall the market's sheet We to enhance our of conditions our cost capital. capital will further for monitor and improve continue of health balance

Now, on our on outlook financial XX. Slide to

XXXX, we the million $XXX For expect year $XXX and revenue be million. between total to full

EBITDA XXXX $XXX EBITDA million XX.X% year be the margin million, to of $XXX between full expect an midpoint. Adjusted We and at Adjusted implying

net approximately current of Adjusting As in cost impact margin recognized mentioned, reflects million the year-over-year expansion. basis guidance of are cost of which XX Chad approximately benefits, year-over-year points recur currently will EBITDA we not our XXXX. COVID-related net XXXX adjusted we these $X during XXXX, forecasting for benefits,

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

$XX per net assumes current quarter. quarterly timing, target product mix million to financial In to and our range our addition, ability Depending the this will drive in leasing guidance $XX to outperform on average million could upside our XXXX outlook.

we to to XXXX in FFO per expect be share between per Moving $X.XX share, operating OFFO $X.XX. and

balancing share expectation Our our and outlook OFFO per to focus continuing investments with reflects year financial risked. we're deliver historical quarter continued momentum a long-term is with for capital during Overall, backlog, financial on the is target of of sales record funded, fourth an our to future our in and pleased consistent a pipeline performance with our operating XXXX. full growth that X% believe plan achieved X%. materially largely growth, we de booked-not-billed strong and success XXXX the we range With

remain will allocation decisions and Chad. while capital shareholder over course of call accelerate delivering on I'll turn We share the gains, value focused that in now differentiation our back consistent to market the growth over XXXX.

Chad Williams

the our Jeff. Thanks, were history. in unforeseen that Despite delivered presented XXXX, year strongest QTS many performance we challenges the in

testament to We continue capitalizing for you. our with who our service value. their win performance is in our their market against supporting to customers our and an to to to and a customers execute to in operation pandemic. our strategy, growth employees, remained the delivering And working like one continued throughout communities. also I'd critical resiliency on our our our core serve culture. differentiators to I of long-term QTSers like and deliver shareholder surrounding would thank them It's share world-class to honor effectively consistent service leadership have commitment and This focus, our thank sites each

experience customers. Board take data demonstrates in joined particular XX-plus-year Allen providing Directors of leadership who expertise and shareholders December. continued across continued brings confidence federal Board with and of that, I'd in various Booz served extensive close and federal be I'd and at a customers and to Members, government Before officially further QTS. by Dempsey, newest having for Joan's our Ms. highlight QTS' to cybersecurity the Joan roles the federal, Hamilton center focus thanking solutions Operator? like one in the in like to for we'd Board our to in also QTS' operating momentum their career. government With trust closing, Joan questions. addition glad

Operator

Thank you.

from Luebchow the Eric begin now Today's will ahead. Wells go Instructions] question We session. Please Fargo. comes question-and-answer with [Operator first

Eric Luebchow

an a talk year. strong The it question. sales you mean, perhaps kind business. for Thanks maybe executed see bit $XX Great. I like, could federal past do guidance, you're hyperscale, could given how enterprise million this you curious and to if about the enterprise? taking this what $XX you little your the in of between be year, at your I'm funnel, increasing percentage point expecting million some sounds of And mix

And kind you a could bit expansions talk little customer new you in that? logo of then, side, do about the existing more or new see opportunities? from So Thanks. hyperscale coming deals

Chad Williams

encouraged Thanks, lot starting like our pretty see Fortune focus to the deal the engine to is Chad. were Eric. our hybrid. and just pandemic in Companies of they with of do been list of that customers accomplish. they is are be. to a and it's enterprise On continue of the Part We feel during to we This about differentiation, a to our on things And XXXX. have and But hybrid, business, hundreds area. sharp that resilient we're want up. XXXX there pick

going strong enhancement across incumbency, and whether the customers was of of platform. feel about it's XXXX their they us like to with want of see focused to So, to across a digitization XXXX long the back a largely both their us have those growth in list definitely or But that continued hybrid just business things we to and time. been hyperscale be are that that for in get services board, people

our So logos base. customer year and across of a we find board. that's Tag they within we're put new success in the after. the to continue continue grow year current And we're encouraged also hyperscale great the excited team dynamic to that about. But the and couple each

now within customers it's are of mature We QTS. opportunities. getting pretty list But a hyperscale

that, the and just kind great we you being you is to path day-to-day work customers embedded with with. have in upon cleanest the base, the that growth which able see to is good think absolutely as in the have relationships So that we about portfolio of expansion, rely

encouraged we're about So both.

Eric Luebchow

Virginia now in building the capacity in success on in your maybe given follow-up, one comment just you've seen. Manassas, out that Northern pricing you've And returns just more had Great.

supply/demand versus ago. that I heard slightly in year think better in balance we've Northern a maybe Virginia

seen of the favorable So you wondering any outlook the out like supply new as if pricing months? XX kind or look lease what you've movements competitively looks in next

Chad Williams

first in market I the on opened in Ashburn competitive facility, Yeah, had some are stable. we were We I we our Ashburn in anchor It's mega just know colocation and mean, center think next bidder in facility, pretty federal, that most not data our the there it's do there approximately that Ashburn ago, truly that. long hyperscale in and time been probably pretty time. between differentiated a Ashburn, I people was focused our hyperscale. believe been but price that hybrid put difference XX%. but when first QTS a of we in for

we differentiated service much their we're technology. value. about in believe value deliver We we and and because way through And sell don't apologize that, a customers platform So do different that.

seen And is robust Ashburn market. a but is pretty so, we've - a it stable environment,

a to going feel opportunity, a the in other country. And Manassas. about our Manassas market. and less and that it's little because continues market. there. it's offshoot but capital go the as is market, competitive just And a You've mature to good certainly of growing of differentiated be we're a we Ashburn encouraged and Manassas to part both is so, And, But us is gives like lot product confident got quite invest. may it feel a enough of where some not that areas Ashburn go

Eric Luebchow

Okay. Thanks, Chad.

Chad Williams

Yeah.

Operator

Jonathan ahead. question go from Please next comes Capital our Markets. Atkin RBC today with And

Jonathan Atkin

Thanks.

the to about just logos. the to demand And been kind you of have have of I want the a So with you comment on new expansion new on us what was colo follow-up portion opposed to margin new But about logos, that the prospects longer-term. a can displacing I share as competitor? these with ask

Chad Williams

this know, you is, very resilient. as Jon, business

don't You that catch of to a out one are of to go another. lot deployment customers coming

up. and customers acquisition new pop have new in modes they as You expansion catch really modes loads some

it's So, our I The most resilient growth sector. fairly majority like in mean, is just the of deployments business.

we've And not never hyperscale customer a doing differentiated. unless generally a do hybrid like customer, we're they good taken they're that is I'm that to from wrong or thing you're we the feel competitor. So resilient. something impact But away stay. is, saying

so, growth acquisition platforms of where growing. in see mostly new And we they're

Jonathan Atkin

And right got feel think above the I level? guidance you calls the then, level think for that level. Or peers what your that like well EBITDA mid-XX% that margins, about are below that for that's would you've as longer-term And kind you margins. on And goals the as of metric? do

Chad Williams

Jon. Sure,

of jump happy improved margins, about the we've If utilities you what consistent of looked over from which drive XX travel, look with. much million entertainment for trying we're XXXX, effective that's years, with technically, the margin, on XXXX. lower quite at points, in improvement coming our improvement year-over-year $X leverage, adjust midpoint that's to last from at flat although of you bigger basis XXXX, few of out margin focused the and the when benefit XXXX, obviously But in in for a its guidance we operating saw margin and

So improvement I realistic. think is points of XX target that continuing basis of going forward, about

Jonathan Atkin

much can take are of? more for of And to you plan markets the specific then lastly, be in the guidance that How advantage you gave, included? equity on activities instance which forward capital a you little

Chad Williams

fund with business equity. through effectively Yeah, mid specifically business And us our we're it we of $XXX turns, I X the mean, the flows on is forward that the generally, to year. ability and growth, leverage the high funding EBITDA just million that, retaining leverage to then in maintaining after obviously, funding cash capacity, dividends. the utilizing our way as that largely What beyond under - we equity gives proceeds, believe then the

Operator

KeyBanc go ahead. Markets. And Capital Jordan Sadler question Please comes our from next with today

Jordan Sadler

and you good morning. Thank

of year sustainability, volume. the year framework. So I X likely sort this the exceeded hyperscale I of circle significantly to wanted the and in number to And obviously, overall think target terms X back volume on deals of fantastic so

at but back in guidance and we've to kind ability your times, we couple think a should in what's baked quarters, set I look circled a being sort But how over think. thinking the of last several XXXX. of as on pace about I question sustain the XXXX be this we to just of curious

Chad Williams

good Jordan, this feel about Chad. is the pace. We

X went from to X have We to to - X. X

increase. built an everything. that's So But is this not - we're to platform go chase not

of said fact, said more lot we as quality to we've which capital continues be with invested driver getting plus means the on a means that I've have as than a we're ever we at-bats, embedded new That base choices, no on the deals and before, of to company. and and even a In focus returns in in opportunity. have partnerships primary those XXXX, XXXX,

X to new X. So, is the guidance

platform Yeah. chase the set as per share that everything. OFFO But managing to X%. it we've we're up? built growth X% to go haven't also bottom-line Could dial We our we

So we same in found And the think be we're do the to that it balance at And too. we able bottom we XXXX XXXX. to in line going want to future, maintaining performance. invest in time

Jeff Berson

the looking we've I'll model that we're leasing just thing, one Jordan, the add, to quarter do average to laid XX supports that per in XX XXXX, of out.

So target the that's towards. really that gearing we're

Jordan Sadler

sort make high. prior that, the a exposure is know in was in sense bit about up just non-sequitur will? of terms talk Okay. to the No, in to did know on But there, But be I higher on a cold outages, level even I it doesn't it have And to looking going speak impacts? rent. you that. utility before this necessarily that at quarter, Texas. a and of can and notched you of the it, I My X terms terms incrementally. guys follow-up bar guess too meaningful actual you I - little prices may I'm exposure potential and of Can you what's catch set if snap understating and above of

Chad Williams

Kansas, this morning, a perspective. degrees. it cold was Yeah, is In X Jordan,

So protect our We're focused that our streak area, in there cold and certainly to participating service customers. is in to first a We're that. anyway, Texas. people provide in

I think contract to - we we've also the been we've But a power. a purchase come sustainability about long-term strategy the seen had pretty in renewable in. which leader with pricing. Obviously, energy, we you've commitment way that

power power stable, arrangement the and of So commitment. our that pricing contracts really because our is drives renewable is long-term purchasing our -

customers our people and engaged forward through and get our So safe we're keeping keeping this everything's been together. and moving

Jordan Sadler

power So have tenants exposure no prices? to spiking

Chad Williams

contract. is Yeah, long-term structure our Yeah. contract a

that some That's our is market something for a that group energy of worked benefit. would seeing sustainability our and which have from they're years. sheltered customers this really down So there, be on great volatility

Jeff Berson

fixed it's a this price. Jordan, so Yeah, contract,

for not And impact any material anticipating for customers QTS. so, or we're

Jordan Sadler

I And if guys hear any? outages, any have sustained you didn't

Chad Williams

No.

Jordan Sadler

you. great. Okay, Thank

Operator

next our And Synesael with Please question from Colby go today comes Cowen. ahead.

Colby Synesael

Thank X, may. if Great. you. I

the as it on So would step-down it relates if then, And XXXX? just type X that and Thank pretty any quarter could meaningfully and in you then for anticipating? because fourth guidance I'm if just guidance some to I'm the guidance if XXXX. ultimately X, you happened curious in kind since You talk when was FFO that what just curious deal activity, And weren't could that effectively going your seem give to EBITDA it on nature, quarter. hyperscale update is guess, of curious you us you I'm you you XXXX? take you're a what that. secondly, gave you. midpoint in EBITDA quarter we're see likelihood beat Netherlands, an of about just then at I sign the of that onetime of for that multi-megawatt call first the in that by type think in you fourth the your your conversations. third And the months multiply you quarter, can

Chad Williams

we've rate a meaningful customers the continuing grow operating then retention center. and of the colo, of Colby. uptick just in was pretty with X facility, and seen customers, because Yeah, add business that One to And new logos. largely data We an that couldn't were a take Netherlands into our higher entry about be more excited based hybrid Europe I'll first. assets. our on

think that at [in transatlantic power to hyperscale the and renewable that gives Netherlands is our struggled And fiber in landing with again, ground] of which of on attractive the with opportunities power, expansion very We facility an issue just us footprint wonderful the that, unique repurposing scale. has just megawatts a large aspect, capability, addition [ph] have meaningful to hyperscalers. the lot So, fiber lots then facility, unique station. been coming some phase not will year that's That availability. last of hyperscale with A where first facility about in of some we some largely through XX which be power of went brought in Eemshaven.

in XX with And be us expansion. a really We're now couldn't more meaningfully you're execute. Europe to close continue lot to we and excited. megawatts see to So of going

We center that have a data financially, in we're JD profitable couldn't to executive. up And that that team, asset a building way senior for us. more have going experienced a Mr. get have executive in been very us and over year and Luycks, impact and the on very be the Netherlands, and we're excited meaningful a on excited with to

forward to…? moving So we're Jeff, you on that. want

Jeff Berson

Sure. there. a Hey, couple Colby, of areas

where versus materially the QX us that then the an commencements in going early we And bigger that took that numbers business end unusual had on commencing anticipating way, is nothing that were than the of was year in we'd some XXXX. drove we really I onetime the in end towards towards honestly So some a of the anticipated. early power we beat customers that think, were for helping have aspect driving of as really part latter those costs at that in forward, the QX lower - that we just September, beat the

our us So in that QX. helped expectations of for at high the come end

to QX, fully accrued, to gets quarters that the then have winter a off low. costs paid the generally X some down where margins, things. bit In of and margins sort - in you we terms and just in other accruals the pull are high and we back always months are just is then XXXX, One first particular, of QX to in margin in And and that relative always the step tend a have year. QX. QX also that's payroll a power of couple then in X seen little get circumstances have QX situation of by numbers you because benefit we once where driven our and very And of down benefit the the

see in down to typically unusual margins And big down so basis that not we for QX. that then XXX to QX, points. And XXX and margin step steps always it's

normal all So of performance. that's sort just

Operator

Thank from ahead. go America. of question Michael you. comes next today Please Bank with our And Funk

Michael Funk

[over-indexing] a leasing morning. is to [ph] the million that on more back the enterprise side sustainable to it in $XX the Or it good XXXX level leasing you million it the lower forward? versus Does for come from Hi, if XXXX? snapback in the historic? in questions. Thank a going per is imply does, And wanted to commentary XXXX. $XX Yeah, in an quarter the I leasing

Jeff Berson

across the think $XX we the in are board, also million, $XX I confident really balance million to but it. of

federal the nature to across continued then think, enterprise picking the on a and timing You're I just we'll very the is its in see lumpy on focusing those see But it, going of seeing our work. procurements vertical, focus way hybrid the good which XXXX. right hyperscale in of balance because

So we're the focused all in areas.

Michael Funk

lease opportunity does comment XXXX leases the on at make then I the if lease of rates rates? for Can XXXX, And some look of expiring imply seem rates. on expiring the in upside in in renewal XXXX, renewal could expirations just the it renewal you to

Jeff Berson

- it's upon percentage best is, good that's it's existing MRR, but it's Yeah, of a base it percentage, our smaller all total I what's mean, customer relied us. a as about

have to X% but that the always we of and forward. competitive on kind be customers we're it's these And, And X% us we process. years. those expect market, working through in see increase counted are on that long-lasting So traditionally going for consistent the to

Chad Williams

at on don't nothing downgrades we I'll have We thing mean of to one around, significant you doesn't market business. mark we material that can that pricing Again, creates as is, risk we add customers an any the think any, in see have terms know. while won't that renewal renewals. Mike, and burden embedded that move but undue

Operator

Thank you.

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

Erik Rasmussen

for thanks the questions. taking Yeah,

federal business to Could on you strong. year? tracking? And you continues do quite just the in you're and maybe then expect maybe strong the upcoming driving comment First, leasing what's be deals what the then the

Chad Williams

an we've years. remind been working Yeah, federal been business it on I'd for exciting the opportunity. XX to like has that people

So like outsource, kind insource the put confidence a innings. skill long is at hard But a in. very a to set to people's to point process, is experience hard the acquire feel that a we it's where of it early

large going focus having we lumpy, It's and like And grow we're which to and some track people by going and in class. have great that right a seats putting are on down as but business, track to so to and also both hard is area that But future, just built think continue to business the them. those have business. working with success we're right record and the there to of lot we're to way real we deals be going the largely feel opportunities, to the the integrators, are that meaningful to But be predict continue mature a opportunities. sit direct there's we opportunities, in in

most we're of many part know, system, historically, that seeing we're going kind as programs, multiple program way of the through is them or X everybody's been there's to of I So we ourselves think I their to what and are can. the to programs pivoted working encouraging to attach X try

Erik Rasmussen

follow-up, highlights new any in enter Eemshaven, just Europe make to that Europe, to gave any and and general. against today? to any But might you then, be some expand Maybe on my desire Great. desire thinking just you're with that acquisition like into markets further

Chad Williams

to company we're kind the someplace, created to what always a us encourages those is have platform someplace and and off value of our that's the opportunity. at we're Europe with that get are, want look We'll going be us. something we take to or very goes opportunity very And value us and do. build have. that, always kind derisk to and we've with satisfied focus Customers to what an going continue very XX a But, probably lot comfortable we're that plus always to see come on of with forward. build and the our for off happens. to European assets. things, we'll build for and those us value the we that, we build against not opportunities. going to having based spends go assets going We're money we're us where the happy just of continue and of going what been shareholders But creation there we to X return in theater, we're of tenancy that and We megawatts that's the

Erik Rasmussen

you. Great. Thank

Operator

with comes Richard today our ahead. Choe And from Please JPMorgan. go question next

Richard Choe

start in just churn X%. came X% else reason should at is be lease between Are year? guidance you X.X%, kind I is it Or there range seeing at Great. anything to the that terms anything just wanted of any or ask COVID in end? to that Is for giving to the the to about that start higher expirations? of

Chad Williams

at not mean, year at anything. point seeing same I last X%. we No, to started we're X% the Richard,

standard during the X% get range X%. It's usual. more year, the visibility we to tightened business we as to As

and we'll be So the with consistent past in we done see don't think. anything we what we've

Richard Choe

mean, but And kind bit Chad, guidance this you've kind growth. I to XX% clearly. a of bit, of little touched you've more ask you of little a on

be little a time You're a the QTS growing and seems trying for to be harder of that of grow manage interest more it to a Is at peak might make platform? like organization leap and and in? little now, Or providing bit this right bigger But efficiency a business bigger you harder, faster kind to aggressive. is it the good be kind also push really have to value. that maybe something bit would

Chad Williams

we're do where if and with at the part feeling of satisfied something we're I don't we're always better be goodness get is stronger. QTS we ever that know going to of that's can

particularly year X% the growth, capital year and not $XXX at capital round last kind entered OFFO time million delivering the and X% we the million in year, just X%. I but almost numbers $XXX with investing a per think say of plan let's just share plan ended with guiding same to the of

to the business. Jeff give to what count need knows the the I constantly everyone capital are time, we is X%, I trying and to on for that it. to X% intensity I is our on. way stay future value and At think, committed parameters performance. this talked of going this business, they got we manage, monitoring build We've bottom-line to think in can same the people about we're So And

people threshold. We're going where meet a didn't our down we've size turned and deals we return that. every is in so the don't don't we're for we're and of scale. growing. that and what line size I growing the do at more manage But game confident also of We're pays more all the feel shareholders, the talking So to sake not will But scale invest believe that in just we're about going about that, it's and hopefully, at to going about. people That's become to and to we're on the all in-year we're future. to time, the same what And try timing. of our best as deliver horizons sorts we we we this proud of all thoughtful can because that every is grow shareholders and And like have necessarily performance day. Bottom day need performance, business. to be

future line, other. about the focused and bottom more we're each So in the investment the balancing

Richard Choe

Thank Great. you.

Operator

Please go question Berenberg. from next with Crossett our Nate today ahead. And comes

Nate Crossett

Hey, give additional maybe JV latest thinking you on with And we the morning. to added projects Alinda? us funding I see potentially the good some could was this wondering, your year? question. guys just that Can

Chad Williams

active and be great forth. been with has Alinda a continue mean, market, back continue I to tossing ideas and active the Jeff I them, be partner in to they and

to matter great And I opportunity partners. before fit a we take we're of of kind they're to going right just advantage think into of it's time that. find the that vehicle,

to strategic all have And the it of would. one access and those we're to back can which accelerate way grow to objectives, we is is And to Manassas ability also the part comment, that last situations not at the us as the very gives of we platform. a the work, in much. in line impact bottom some the opportunities. thought in of out going kind first We meet for asset everyone's Our look continues more important to nice it like think work funding that to

So it's forward to continue be a great active. to look partnership, we

Nate Crossett

in demand give Okay, us lately, curious going on on in subsea quick last the up what's that's just And update helpful. few just if Richmond picked months. the I'm you then cables? a has can

Chad Williams

not continues confident place. next the and story It excess neighborhood, hybrid decade. to to hyperscale very there's over a the both highlight who couldn't But continue opportunity, and large our about Tag Yeah, It's story. be is connectivity landholdings. this develop our build bring that one and momentum of there, special, continues for concentration, Clint helped team all that something hybrid interconnection active Richmond it's a with some fiber have portfolio in sets the we enterprise, most opportunity of to around and been sites. the of just the largest shell in the Obviously, be also special our are in. I powered technology the there. the will encouraged one the to hyperscalers kind more

Operator

you. Thank

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

Timothy Long

Thank you.

then XX% also bit Can about about obviously, you second, year a business, think really in XXXX, I it's centers. if noticed Amazon strong also been And connectivity little period back bit of to the on how growth? X, for talk Obviously, pretty you a up leaned you could. we do But last that data strong hyperscalers. guys. a little sustainability Just more internal the

using of maybe just a or about their at kind colocation? on centers update you. high-level you hyperscalers could Thank So us thinking own you're data how

Chad Williams

speed these see to to internally. balance. of of a have in and strategic and like to the probably doing at to some companies with else be location cash something do they're hyperscaler where balance themselves. AWS the well, example step any to it's big probably sheets or we're internal the that. of the they shift All think seeing be of for of and is, going feel it's thing. They're they continued be a external. some But with on in I stuff everyone conversation, thoughtful the going outsource to continued continue it, balance don't a going they're percentage aggressive balance going sake or lots that we is But to good need do big going in - most

the execution the have software, to leader. they've done through connectivity putting in and And our service the an position seamless as going to this connectivity that purchase. far Jon, for job amazing platform, platform, making we're to delivery company the connectivity, continue As yes, done is a Brent our see of of that one connectivity, the ways a of become

it the the connectivity the and that fiber of is the that's They all So an to that all it the transformed of way connectivity need have it. all engage job and access don't And and transatlantic necessarily with takes get Brent doing. customers to about care make providers. work with what to details us. amazing in just done the Jon They ease

than that. they continue years, have I and are about yes, to the And So, about to in I think the think past. next over lot number differently going think people a QTS of connectivity

Operator

you. Thank

Our go question from ahead. Simon Flannery with comes Please today Stanley. Morgan next

Simon Flannery

Thanks very morning. Good much.

made and still you've comments enterprises the levels? little on QX, into you just on historical So what's color conversations about bit more going a be but have make versus XXXX guidance? enterprise to ability the improving environment gradual below into around that with long-term given around is that Can you going process their some and how to a baked provide beyond? current your uncertainty decisions still the And recovery COVID? XXXX much Or

Chad Williams

to their it's move I is we're of the and pandemic just in ways. sea probably metrics we're hyperscale, this people both Simon, the seeing businesses so the transformational mean, forward. horrible Chad. This engagement. But customer they've engagement I and just we in just Tag, looking that way and been Yeah, from mean, their at, have kind Clint got hybrid got many has in understand people legs. it clearest

in strength. engagement we guess actually contacts colocation, that that still we've thing just we're indication play in business because in will Yes, good is the biggest Fortune other is, year. the hybrid is, we that the seeing believe involved. But So our XXXX in baked just level that more making the the we're balance be I of much that the out believe the success

the perform during we will we and So expect out way. that colocation that in federal and a in segments play all to year, expect hyperscale hybrid

Simon Flannery

it'll Or XX-XX? to this think towards bit went by And year? hyperscale, do the that more see pushing you you think up you Do hybrid colo? think you dominated be always do a we'll the XX% quite

Chad Williams

our wake returns up to let trying the percentage, a we don't out and hit honestly business. specific fields in right the right play We

we no going to and right You're deals continue and drive chip our balance from magic need just across achieve platform. just nature find of There's to individual number But and of let deals. trying their returns what hyperscale of them just of those on We to mix standpoint business. our have our away strategic and the the to size see really success. to platform the the those we're in scale the that because deals,

Operator

Thank you.

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

Frank Louthan

Great, any sort that you comment thank the using have much? a bit versus you. And little of you are customers and on systems that lines Can expansion is that much along SDP, the are renewal those users driving bookings? do how heavier as of not or incremental statistics

Chad Williams

what of about customers are and you perspective the overview a give lot these a this Bensten's of it's they him kind driving he did him pulled quick a customers, Frank, conversations is big today, a that. to give might here find Just asking Brent just interesting have and with gets of of SDP on deeper with little difference. into differentiator, I what SDP? kind

Brent Bensten

front see the SDP to us foremost. now or asking prospects coming first to coming Frank. a Sure, to backside talk customers of and The a and again. you platform the are reality to to is, us side Good from of has the are conversation to conversation, gone

is a getting I So tool and such Clint's changing, done job front in say, out of our the of has phenomenal then would it team prospects.

really have proven time difficult doing a legs - plus in that X,XXX has time, underneath world, in its this demos does it. the platform of the is very obviously, So year a really

continuing the So using we're excited for prospects customers platform. about the

Frank Louthan

percentage any us renewal Okay. give more Is customers to that with or or churn quantify with can engage us, kind that metric that? you to of there of share you customers that differential on expansion when start use can

Jeff Berson

right is in and our expect in in for too it's to But keep it's on forward it really is our way for do But customers. that keep Frank, an now just from given be use, the years, value I important going platform. efficiencies utilization happy customers around out price, customer customer win it's in SDP. separately, retaining couple we're operating frankly, on it's that flexibility. early another haven't rates, to tool differentiating seeing SDP been just renewals track SDP of great own will logically them a those

Chad Williams

the to do it's it We I think, is, and making one us the just attention Jeff with year-over-year. pay would up so an leasing probably say, win Frank, for most differentiating statistic mentioned ability to impact. that I is dramatically that yes,

Operator

Thank you.

Our next question today go Goldman from ahead. comes Feldman Please Sachs. with Brett

Brett Feldman

thanks question. taking Yeah, for the

just funnel qualitative is color about typically a see have Thank enterprise customer that sort Or see broadening the Is IT of to of are the talked to normal a more the a prepared And Or around were would around then And give you'll this hybrid outlook back average there a you types Could back Just confidence colo as to you're average? enterprise the engagement bit to talked doing kind that to up? that you you've that bookings. beginning that the of general you activity a how as kind point? enterprise, funnel? acceleration? talking tended levels you the about expected us between below be outlook with as the consistent seeing this you in get of year? customers, you. different business? the levels. within structured to return coming In sort that, quarter maybe suspect, of lot you is past, they're just to to for exited of back picking funnel? little your for maybe have But of you narrative $X Is you year, with maybe meaning about it usual and million $X what million it the you a base

Jeff Berson

Brett, given we on side, to we with group down customers which growing, logo was of X% X% just nice had existing base, new within to the XXXX is, for X%. robust X% the still the our that a our the activity enterprise is were thing in while customer activity

So different quarter, a mix. enterprise had wasn't the live it just in

around are logos little more in both said, customers and to in enterprise, a Now Clint we expect the new XXXX. we're anticipating we existing maybe, actually XXXX. will in pipeline. growth with detail see that that in what accelerate And being would jump enterprise in And seeing

Clint Heiden

in the Jeff deals the seeing as Well, we're what from a we're new larger of getting XXXX seeing and We're a terms mentioned, in seeing funnel. push. more strong deals Fortune come in logo focus,

rounded So the it's well around. all way

Operator

you. Thank

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

Ari Klein

you. Thank

of around looks see early QX, demand backlogs, is On more your commencing something could like given the XXXX? of it comments you commencements beyond XX% in in and of with the there what pace

Chad Williams

and more and customers circumstances they increase to see definitely can are get more we in than anticipation. quickly Ari, faster where Potentially, early load as their to anxious as

say, changes So that nothing upside modeling there's some than we material suggest of I'd opportunities now. right the down. definitely definitely there and see But upside business I the more there.

Ari Klein

pipeline? there the been XX Got you and it. they Historically, some past Are willing meet with little deals then, you've those market. grown And in this to some in a thresholds, of year. of are just on you've really maybe away larger from the bit go your megawatt of has size shied deals assuming deals more deals return winning the the now, large hyperscale, types the

Chad Williams

type find that never we when It's to are right are do larger continuing an we large can opportunity grow The important scale that. the of to to have deals. But and just very and been the returns It's finding you those deals, mix incumbents the issue. deals. have right

have just in could tendency So as sheer we grows that, to size. more a the platform of see

Operator

you. Thank

today Our comes question Street. Green next go with Guarino from Please ahead. David

David Guarino

new specifically, the guess, played what was Chad, year? down deal, there over Hey, where where pricing the on deals talk how last the gap you I price supply the all A for between to mentioned about competitive price, you and you willing ultimately to turned it due then, settled? thanks, And QTS Atlanta is guys. given out market, the question you, can that in the

Chad Williams

what was there, beginning, purchasing of of continue I unprecedented. a done a high of that Atlanta, see of just also well to on the I to deals through the from time size And that market. the you're at sheer facility size pricing the advantage in Atlanta, were open will digital to see continue successful market range. of to markets. really source space even the lead do platform, economy. build customers, That returns with is ecosystem that leased very the taken and think had because that us there because in sheer megawatts And since And market on new have of competitors the the a in both scale that X% that's XX don't XX% the more And that southeastern story today the just going having our and Yeah, mean, those we we In of think going to means the in market think own of to and building power/cost end appeal in return their that I have space does a interconnection to hyperscalers and hundreds position. there is come I grow. company

deals, and we've as overall what think it's what on and range. it's talked a that depends XX% great I market fairly said that point back you're stable just that and all about But pretty thankful But and for numbers think against. you're services, in from I to the range before value market has pricing But and and on regard. of Pricing metrics that I a been that. don't the have value a point. It market I'm price know and So X and the our separation the been the can competitor pay great, we of continue. as led tight kind genuinely able great difference really what it's in a really all people competitors. because to, you tier thing probably I our premium transformation range so we people earlier, I'd get opportunity.

Operator

you. Thank

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

Nick Del Deo

guys. morning, good Hey,

growth? a revenue might out utility that it federal about you what couple all is I'm thinking years. and hyperscale back high-single-digit in can like was tease your I'm from the straight currently make of First, just years to we second, land tricky Where your where might fluctuations as now? price line. few the It and MRR. And And to share of MRR between XXXX a or growth look opposed bit mistaken, not a most onion might relationship maybe outlook, revenue a think total if peel XX% as probably that driving years back?

Chad Williams

acquire start the going And do We're think an if zero, revenue Well, continue so we go hard both - total it's great from the uptick going see couple focus continue that had going you're on. I federal on when to nothing to very last to something. I an has continue grown we're - success to you and area to have MRR difficult at federal very back to And years. we to and to to is focus it. predict. space But as

that we think I you see talk up XXXX? through. you'll to want work continue as about to Jeff, inch

Jeff Berson

MRR XXXX, straight-line have more the scale just beyond and the and done. size because of of in did growth got some We of that Nick. benefits we Sure, deals

them. And pretty is, could do to continue so, large see and some we scale But truth of you to to expect forward. deals continue some the going that moderation

of you of I'd total with MRR say, line sort could growth So back is revenue assume in envelope, growth. the

Operator

Williams turn remarks. session. our over gentlemen, question-and-answer for and this Ladies final to you. concludes Thank Chad the I'd conference to back any like

Chad Williams

Yeah, XXXX, of to best just and health an a Thank our all happiness. very the during talk quarter. And time. year we'll you thank QTSers next for want difficult amazing Wish in you.

Operator

sir. you you, call. concludes This today's all thank presentation. And for conference We attending thank today's

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

Qts Realty Trust (QTS) 17 Feb 212020 Q4 Earnings call transcript