SWCH - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the Switch’s Second Quarter 2019 Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to our presenters. Please go ahead.

Matt Heinz

Thank you, operator. to quarter welcome conference and afternoon, Switch's XXXX second call. Good

including Morton, call are call risks, and statements, market projections conditions. today materially events the which may those of Switch's other may to and characterizations or uncertainties are forward-looking Actual Today's On statements, or CFO. expressed certain Thomas President in subject future forward-looking expectations, to Switch's Gabe include assumptions. differ results references from Nacht, our

no of in Factors. as in update today, specifically made obligation are assume some risks to entitled disclosures. we these on statements our describe We Risk Our the section XX-K, our and filings, our of Form SEC

addition, GAAP. supplemental package not of financial today's substitute In measures, for non-GAAP and discussion in Please financial press prepared release as non-GAAP which be accordance in a refer a call information should including reconciliation measures. to with today's isolation includes for of considered from information, further or

XXXX release Investor the second website Our our furnished Form part at on of to as investors.switch.com. SEC press and available our quarter X-K is has been

Morton, will Thomas call turn President. the over to now I Switch's

Thomas Morton

you, good afternoon, everyone. today. Thank Thank Matt, for joining you and us

continued the of again while healthy incremental additions recurring bookings second key to strong over million teams. momentum business with XXXX, $XX as profitability its revenue, quarterly of external make sales achieving annualized revenue company. quarter and EBITDA our highest We to signed solid delivering our and margin Switch public in internal a and in continued QX

position some world's our mission trusted provider ecosystem locations continued most capabilities entrench and This computing unmatched the continues significant Prime and enterprise, a enterprise's requirements. strategic continue of an increased believe critical service and the will critical unique solving environments Switch’s needs. on largest to attract corporations. effort to of for advisor We infrastructure to campus We share and have scale of the our focus as

toward hyperscale we zones the our largest, the in relationships and vendors, most to world. vision Moreover, resilient cloud sustainable, availability strategic execute building we deepen multi-cloud our most as with continue of connected highly

We believe multi-cloud industry-leading architectures is increasingly enterprises look latency, for our positioned as hyperscale uniquely Switch to campus hybrid low deploy environments. and in growth

and robust further, connectivity through range these of initiatives. a solutions purchasing one our and ecosystem, telecommunications of cloud wide kind Our advanced partner expanding cooperative,

Our occur cloud require close to top hybrid quest prior truly priority to build differentiated enterprise without public crossing achieve ecosystem of node, cloud To been a time we our the manner between physical dating Switch, performance, has in IPO. a back the to and such optimal gear a workloads for believe data the internet. the hybrid compute the frictionless transfers proximity that strategic

initial X the This completed usage options Campus. based During telecommunication second over expansion a transaction $XX in cloud up million of contract megawatts. to provider excludes X than and based additional years. five megawatt services, in for term an quarter, the This figure revenue The will with a built-in Switch more generate usage Core agreement power,

partner. existing We relationship to upon this our are expand with cloud excited

payment existing a million second incremental successfully a a order value. of with colocation an three-year also million and agreement quarter, Also aerospace during closed contractor, customer solutions expansion the from Switch $X approximately defense and totaling $X completed major

million XX solutions just cloud over of In includes the Coast new of contractor, years. a generating Switch store XXX in which executed term grocery with average added aerospace quarter, contracts a nearly logos total, leading the contract aforementioned in provider. customer $XX nationwide weighted also total institution, four emerging a financial value security defense chain, rapidly to addition the in quarter, and West a We

continue second across to sales bookings, strong our Campus breadth and diversity the our quarter and Overall, locations. activity Prime pipeline we are extremely a pleased see with of of

increase an outpaced the specific have year-to-date resulting to in of presentation. our in our guidance, speak detailed later earnings will and press this guidance on changes as financial results drivers investor and XXXX Importantly, Gabe release bookings call. initial our in and our our expectations, in our internal increase

further team Novak joins Vice to additions Solutions. during to announce with We Vice quarter. CBRE, was of are Shawn second sales senior our the Executive President Center Data Shawn previously new us pleased of President Strategic as as Solutions.

center data Shawn providing strategist, industry ecosystem knowledge colocation, and the look and design, enterprises many owned including infrastructure. complex further Shawn's While relationships of the of Switch. CBRE, largest at to sales with capabilities forward leveraging insights enhance enterprise center around worked world's value as data cloud, deep enterprise to We a

we sales add to the XX in line XXXX. new professionals added with Year-to-date, to six during between X and expectation team, Switch have senior our members

diverse new hires specialties telecommunications thus veterans highly from and hybrid of real represent estate. group commercial ranging a with to industry far accomplished Our cloud

next Core In Switch's June, the our will continue at several This growth of total, located in with Core VEGAS. parcels acres secured in approximately the Campus. we additional acreage rights at to years comprising XX LAS support Campus

We have on the on new construction in XXXX. and next center expect commence permitting to already the site early begun data process our

world. additional forward provide is which Core data with hyperscale and We is planning updates center expansion, construction we currently million X.X the move Campus largest will our ecosystem in square feet as phases of the and

more Switch favorable renewable to capacity in multiple In economic of agreements, steps for a provide solar storage on leadership July, for entered to XXX% XX took and power two agreement we green securing power the realm energy, years. energy providing purchase has decades. system term additional a term of capacity than megawatts into commitment battery further and our our megawatts of XX for XXX of sale

I financial to our results. over will discuss Gabe this to now Gabe? call turn

Gabe Nacht

Thanks, Thomas.

review for remainder and for XXXX of financial our to results quarter I'm discuss of the outlook the our going second Today, XXXX.

the XXXX quarterly new of year-over-year XX% service This second the attributable quarter who in during from In X.X% XXXX. second million XXXX, or the of $X.X compared to growth customers in a initiated More was past million, than primarily of revenue of XX% of include $X.X of QX colocation which growth services, than and million the have our colocation XX%. an while $XXX.X achieved been XX came we million, of XX% quarter compared was revenue colocation months, in is revenue to telecom reported primarily QX $XX.X year. of increase increase an revenue. cross second Switch in the the in of quarter XXXX, customers $XX.X revenue revenue of the XXXX consisting from increase recurring connect with quarter nature, who for one longer to million resulted

compared for to the million period QX in for $X.X million million revenue million, services accounted same $XX.X XXXX. of period revenue professional to in XXXX, the including $X.X same was $XX.X Telecom Other in of for XXXX. XXXX compared QX

strategic over become and QX of a has XXX Switch in new we logos partner to customers, added XX XXXX.

cabinet of equivalents, and over As connects Switch recurring of accounted equivalent connects June $X,XXX of revenue. over cross in for XX,XXX QX had XX, cross total in cabinet June had more We approximately revenue XXth, billing generating X.X% monthly as billing per than XXXX, X,XXX XXXX.

contract of contracts, of XX full revenue sales and $XX QX, with comprising $XX signed both total than incremental more of value we annualized million renewals, deployment, During XXX at megawatts inclusive and services. nearly of million

revenue. customers value with were in Bookings contract $XX $X annualized in total from in over million XXXX QX million of new

signed than revenue million over customers, the also yielding incremental $XX annualized total incremental of from more during $X second We revenue million signed existing of quarter.

QX. contracts in from in annualized booked QX, contractual June currently to and backlog and billed totaling recurring aggregate reflected also stands commence approximately annualized billing. is backlog during our million not over As $XX decline during $XX increase revenue, of including large of several quarterly revenue ramps in our had the commence at yet customer XXXX, partially This by XX, contracts quarter, both the million revenue. offset our bookings sequential incremental prior We

XXXX, remainder half in and contributing $X approximately the of the beyond. expect backlog million during with contribution We from revenue XXXX second of

churn X.X% Revenue QX. customer remained in reductions QX X.X% XXXX compared from at in low to

attributable As in as a expired customer or divided define reduction of the of period. at nonrenewal revenue revenue beginning churn contracts the by terminations to reminder, we the recurring

posted on metrics our our call presentation, Relations of in the section The Investor website. today's on discussed investor are

to equipment costs. offset to connectivity in $X quarter, increased in of declines placed a depreciation result Cost service, and in by compared of and being increase labor, a million by and expense, of million revenue property XXXX year-ago primarily $X.X as the facilities due into additional QX amortization

and provided in is XXXX $XX.X profit reconciliation gross adjusted XX% section A year-over-year depreciation, gross increased appendix adjusted compensation amortization million. to our QX profit equity-based to the expenses, investor our of Excluding of gross profit presentation.

was $XX an increase SG&A of compared expenses in to to growth. in X%. attributable of higher The million, primarily $XX.X XXXX QX and professional headcount QX were SG&A increase in million of fees XXXX,

a a $X.X increased The $X.X offset Income $XX.X in increase growth million SG&A of was XXXX in primarily profit, by gross operations to million in attributable operating income in in increase XX% of compared to XXXX. QX to from million $XX.X cost. million QX

primarily quarter last million LIBOR by to same XXXX, increased million $X.X rates, in expense driven increase by $X.X Interest QX the compared an to in year.

reminder, during we a a rate floating $XXX which swaps, fixed into of effectively As QX, million XXXX. X.XX% interest rate to June debt of rate fixed of through entered

an XXXX QX impact in recorded income on of to was of compared rate million million, XXXX. the $X.X of interest of QX XXXX Net income the income of $X.X second loss includes million in for net Net $X.X quarter swaps.

QX of QX totaled in XXXX, compared XX%. XXXX, growth of EBITDA for reflecting to $XX.X million year-over-year Adjusted million of $XX.X

to XX.X% of XXXX, of points. XXX XX.X% of margin Our compared QX basis increase EBITDA adjusted for XXXX was in an QX

were investment XXXX million, compared by Core Campus, quarter increased Capital $XX.X spending XX%, expenditures to Keep of The quarter partially in the and of in lower to same $XX.X Campus. down the due primarily The in Citadel second The million offset in XXXX, Campus

power million facilities. same equipment of and compared of LAS at of $X.X million quarter were the to This last year. quarter LAS to X for primarily $X revenue the core was upgrades second X.X% and network our due XXXX increase expenditures capital VEGAS X Maintenance VEGAS purchased additional X% or revenue and infrastructure in

for quarter the period to Growth CapEx year. $XX.X million compared the million $XX.X same of in was last XXXX second

X $XX.X which April. second placed open both in the Sectors Switch During in LAS spent to of The Core VEGAS into XX of quarter X, million service XXXX, were and Campus

X As of second customer committed VEGAS are installs Sector expected based of and X executed XX June over on LAS half XX, the Sector to XX% XXXX, contracts ramp was XXXX.

As is in XXXX late XXXX. or work such, open Sector expected which X XX, LAS early to begun VEGAS we’ve on of

remains out, end $XX.X construction on the towards The clients related be Switch to sector building where build Campus also Citadel QX XXXX. the track in QX open continuing million $X.X costs open spent the next million Atlanta construction in Keep XXXX. will Campus of of first invested to which Switch The of in for for for

invested Campus. additional expansion for $X.X million Switch The Finally, in Pyramid

available currently within contracts. under PRIMES, The The XX,XXX committed space XX% June QX approximately four had and our respectively. on at of and were utilization Pyramid committed Core cabinets open based the sectors, and of XX% Campus, cabinet equivalents for The PRIMES Switch Campus XXXX XX, The colocation these As capacity of which rates were XX% XX%, XXXX, Citadel Campus

out, aggregate nearly our of existing of to feet an million At power X.X equivalents. cabinet square full nearly of gross XXX comprise build and space, megawatts facilities up XX,XXX

at the now balance Looking sheet.

of XX, net X.X of times $XXX.X net ratio equivalents X.X last resulting As times, outstanding Company's the the in adjusted to annualized cash debt XXXX, prior and debt of quarter. to EBITDA cash the June total in was quarter million, compared

As liquidity and our million, believe Switch line availability plans to We foreseeable the of sufficient cash of June and XX, equivalents revolving XXXX, fund cash had this future. of is under for growth credit. including its $XXX.X

of A on an member rights. number class shares our the common Class Inc. X-K, with stock Limited in of July Switch, and Switch issued Xth, B concurrently disclosed redemption members cancelled in connection equivalent of million X.X stock of of common to As exercise shares

units $XX.XX that $XX.X of we million the In program. spent Subsequent XXX,XXX approximately $XX our exchanges repurchase unit. on Switch transaction, at to per occurred, common to this million Limited had addition to remaining common repurchase we

to Now guidance. turning

our the million a As $XXX We as from range initial range XXXX increasing to margins, to outperformance timing million. of and follows $XXX of commencements million of bookings, our result of the contract a to revenue XXXX $XXX $XXX guidance expect million relative we regarding are year-to-date prior the forecast in

the in expenditure million. remains prior EBITDA [Technical And of We million range of from $XXX $XXX million. capital a expect adjusted to $XXX $XXX million the in to Difficulty] range XXXX range unchanged guidance

Thomas for Now, I it back to remarks. will closing some turn

Thomas Morton

migration positioned we well with conclusion, a Switch favorably firmly believe into accelerate industry and that cloud In hybrid enterprise is environment. dynamics to aligned

partners, continued transactions like of of our again forward opportunities, colocation would to continue on robust. announcing to enterprise this execute these behalf team which We thank pipeline their We our course. remain support take retail for shareholders We our look employees, to customers, management and our due large of our opportunity to in our on once Switch.

line We like to questions. now for open would the

Operator

go first Rollins with ahead Please Thank with you. question. [Operator instructions] Michael from Citi. your come The will question

Michael Rollins

seeing of you the you bookings afternoon. your where good of you in the you're Can and terms look that as campuses? evolving? discuss Thanks how at Hi. see And, different mix pipeline,

Gabe Nacht

across driver base because currently of bookings campus very with open. way will and Michigan locations Reno and filling. Las We're happy and you customers major been that the seeing Obviously, grow happy the three expand an way Vegas we We're really all plus embedded XXX are has us. to is we're here, continue is filling, with have with they

as we we're will and So, to able, quite confident of transaction we're quite the continue. well. year. And up for all we're in seeing are right discussions this there a with that I as soon would at we're having Atlanta three, the bookings we market as expect bookings announce across Atlanta the and happy that but opens now end

Michael Rollins

also us update respect of your indirect with force And the an in are terms bookings channels? coming give you direct could and from sales to where

Thomas Morton

customers of this desire us. land direct Thomas. from sales from So, about channel, is our They of remaining three XX%, existing and they to XX% it direct that from with come, and is grow, force force sales direct mostly XX% come really Most The expand sales expand Great areas. -- the and sales -- force. and mixture come question. sales of

of offerings, volume. expanding smaller they our sales are a in sales direct portion are but than We our currently channel terms incremental

Gabe Nacht

with And additionally, smaller tend partners to work the companies. channel

to more bite the larger working bit is on. be sales transactions, rather tend a sized, so, forces bookings the those than And direct

Thomas Morton

is Gabe absolutely correct.

in really terms XX Most a in volume sales back be are bookings the tend I to occasionally But, transactions versus of increments. does our well. side direct we force. X, come to in cabinet robust So, mean, they volume larger channel the of the of and and impact, the and X have from sales channel of it

Operator

will for Choe ahead come go The Thank Morgan. with question with next question. the Please you from your question. JP Richard

Richard Choe

thank Great, you.

quarter, maybe deals, to wins bookings mean, million of how difference call longer do and an are the kind call of terms this of MRC? term think annualized it to get it expect your longer managing terms term, million think In we of and million smaller mid-teens to the and kind kind higher the should about $XX wins I Should to then lot we sounds two? overall Thank scale in that it bouncing of from larger versus kind you a terms you. of wins, $XX customer of in the the a the driving sense of a wanted $XX the the between deals smaller up How end? about level?

Thomas Morton

Yes.

what we way had and needle, customers that out our not contract are just logos. very average and our There -- but to And traditional X% that churn of average -- they're as And continued more more been a basis. smattering leads us will customers the internal on sales, is of to out expect it numerous period move dollar there's, volume to robust. long the for to themselves. continue to added term do. in that, then that our -- four are and infrastructure XXX an and they much. playing another part that another And cabinet, few is the with But contracts, Company. is that's smaller So, not as that a with tend buy you that get build We've addition that with in make a which years. And to that with to -- their that's what of we continue but power, about, has another large below customers XX talked move going your new continue stay in there's about as indication grow be needle to significantly, -- us that's

Gabe Nacht

this Richard, Yes. is Gabe.

when you always we don't did, number particularly what our As we quarter, happy as the In a first of very of incremental a We're bounce quarter. around is drop had if bit contracts the top this about contract have bounce large far bookings, because going with the with of larger to our know as a -- far they drop. about, XXX XX% you a seeing MRC they as bookings. that our as going talk revenue. XX those bookings, we are But around size we bit. And from we’re to customers, are do the

So, that rest. means customers XXX the we've to make up got

closing that deals that. shop, pipeline, with retail still but colocation of So, the we we we're Very smaller the contracts contracts, in have rate happy feed a normal are larger our Thanks. run growth. larger business seeing

Operator

question. the Raymond go Frank The ahead with from come with question Thank Please you your next James. question. for will Louthan

Frank Louthan

How XX Michigan? then, that what more Thank a that is get will capacity much how acres the contiguous? the -- the what dipped What should able take Reno in in Great. space it will And see we about to little you. Is a in you it of bit. bit Vegas? up for taken And rest think Las be to year? little

Thomas Morton

The of contiguous, street. all it's acres the part of is across majority There deck. answer the is is the that the is acres right XX that and XX

street So, pieces. a there's the acreage just two dividing

we that things And and the on decide parking be a on end so, how substations there up little lots to put we number to that. we’ll bit switching is of sectors get dependent able buildings, like the and and actual and designing stations where

that having about in of beginning months available facility beginning we building is year, commencing that. next that of this building to space build So, flex year, forward how the there, a to we out. first after some to it end on out want bit are start on we XX But look -- as our there and and opportunity we little the planning within

about call, have have, to we during the as X,XXX announced cabinets primary we our in the In inventory. that still available X,XXX Gabe interim,

And we are as there been even environment -- in that well. has quite so, GRR, into anticipated. we data to very And plenty the that -- have we we have welcomeness grow the the period. really than with still of we of during uptake centers inventory more to facility, then, and pleased That is

soon will. line have, We comes to able And that Atlanta. mentioned, on on to things good this the when very there, discussions in of very Atlanta good announcement make anticipate robust year. we're we an as we going and Gabe becoming at But an as facility as end

Gabe Nacht

to and I center, the patch you’ve you talking if big corporate Thomas we sit, data there's right about. the but If land our building offices, to that's where of where Thomas not sit, is been land that recall, a the next

of it'll while design So, over acreage, be space. footage, million doing for the of and data feet X lead additional center will final that the ultimately square we're square all permitting still to which well

Operator

for you with will The come the Stifel. Thank Please go question. Erik next from ahead. Rasmussen question

Erik Rasmussen

of the and are I the we taking we’d you raising great your look at execution. are here? the in factor the of are wanted Obviously, sort guidance. back first for end for where really Yes. overall to if guidance rate of But to QX the into Thanks backlog and conversion, guidance. for questions, raising just and account go midpoints kind towards we run a your half then then your year of tracking the and high take QX, and

Gabe Nacht

we've We're it raised get the further guidance as range. comfortable setting into only but with not the that happy we tightened the forth. the year. with range, We've we’re We're

we'll high towards comfortable guidance bitter that the whether tracking setting with But, we're let towards the play we're out. So, year end, for. the the we're

Thomas Morton

hope ambition, to we your it. and appreciate Erik, beat we

Erik Rasmussen

is there? Based maybe that do things shift happening vertical. this just with heard we so season, And a that's on about Well, are would then, Good. your accelerating [Technical earnings a that there maybe I. on discussions suggest fundamental customers, lot enterprise the Difficulty]

Thomas Morton

and we Yes, legacy with that migrate work environment. absolutely. as their fact learned to concierge colocation about and of -- we’ve enterprises provide we the into out services a of If data have these talked to how centers some they

in we customers that, how get also or and to and best gets start they concierge we address them better prospective these partner that it, were with And to around, do customers. work other and learn they service transitions. those are that tell better the their customers word for for that doing in us, learn As better a at issues we as with can we become how they them what successful and make customers Switch,

an deployments to multi-megawatt, goes initial in be in acceleration curve. come So, learning to an deployment, us, the that year yes, larger to that with very can those as Box we customers expansion earlier this which that and we're from we are had larger And do also seeing witnessed point. continue they that do tend and

Gabe Nacht

regard quarters. longer And fact complex more the with sales that enterprise about the We to talked and we're about signing. those quite the seeing they we're past are happy talk in we're that But We've deals, definitely with deals did have cycles. activity. that more

quarter, contractors growth. as new fact, of we that a defense institution, with financial enterprise future, new for a In contracts signed got bank, we lot for the growth an has that new runway Fortune another the deal, of the this a a it's customer again, as lot far for signed runway a in transaction They've company, and XXX us. about, that's talked

that chain. seeing an grocery So, we're with including very We're activity. the happy closing, definitely we're transactions enterprise

Operator

question come Credit will Please Suisse. go for with you next The your Sami Badri from question. Thank ahead.

Sami Badri

Hi. Thank you.

it could backbone But us about you tell Switch could just network, physical to a do little behind or interconnection to provider their signed the color an first predominantly to and was deployment. to with And get on-ramp core quarter. the or be bit that in out my their here, I broader trying motivation together the cross to maybe has cloud Are more connect is enterprises with both? or deployment do using So, deal trying a want connects, you major a to this they the the this. in just question like cloud build what node, almost

Thomas Morton

respect with Sami, tight thank you very customer. very much. to a NDA this We're under

the contract. much give you if total illumination. that So, can't of I give forgive But, value we you did too me

have But, announcements. something new that idea now, as substantial would it we not of to So, with an relationship ready or they really are no just more. whether more when say want will There forth of And be those or is and is facility respect that. give coming on-ramp us announcements you make required than asked them. have our make we that they some to disclosures right to

Sami Badri

Got it. Thank you.

could So, it are to like more similar sounds now. similar of something major it's one next providers taking guys see expecting the other at So, least months, or maybe providers you to be suit two announced these the build-outs Do that deals we or three aggressive XX cloud when follow big big be place? more of doing? these do these over cloud very are

Thomas Morton

me answer Well, let there's -- them. answer of there, implied let two both me questions

get The and in with When going providers have to determined, that whether we they we already and and active one, what are they're cloud are discussions other not close, on more yes, sign we of when scale the tends we close them. first I'll unknown. the and having they are with to But, discussions they part. is that do. is know and close, they secured major And several more, one yet what working

Gabe Nacht

and to to to environment, being right our right building Switch to land clouds, order the environment, you all just that go or customer every already But, more the of and that. purchased really next And hybrid are attract have campus talking the to in as to some about next right a clouds about case little pre that hybrid density really of the since having the us, access IPO everything does we cloud customers, clouds the power, have either to our a been the add this design, in resiliency, with clients. When the on-ramps know. on to bit get Rob's back cloud us about --

under unique an size that NDA I some a by this there. is think, this we're presence tight our this Thomas the is you than pretty can things that more within But, attracted on-ramp. does facilities. customer. said, This transaction, particular Switch as of a see There's

Sami Badri

it. have then, Got I And question. last one

two you're a comfortable then Is the at net-debt-to-EBITDA Company, years And times? one more you is this area projecting your of business, sources now, think here to a story, you comfortable to are you're going But, manage getting at maybe the So, run of of that X.X kind net-debt-to-EBITDA. the closer times and question. of currently to be we X your that long-term level or range? way for you X.X is if times about or finance the

Gabe Nacht

Yes.

I think, there's the comfort X.X EBITDA a comfortable even leverage revenue base. between where such have and difference at repeatable X certainly business. a we we see because or We're and times

others it's the haven't build We it. we in industry a modularly, the we do. as model we leverageable just build, just time. So, obviously build needed of Because way in

opens build. we're X campus CapEx Las Michigan, as deployment, on all by years new then the we The of into in a in and growth CapEx, now we be here higher just-in-time a into normal seen going in as only locations campus just-in-time is our functional each new And those and Vegas. across You've of out campus fully Atlanta, are were with build campus far in level our that last two that's because are building growth will our those XXXX, new locations locations. Reno as in once

pre-IPO the we the So, history are right then the XX-year because a -- we Company the it? leveraged leveraged comfortable? Yes. after with need it, exception did and than haven't up delivered the more distribution simply No. we and leverage in we Do IPO. special We've of needed in at where one pre-IPO times of X been history no

Sami Badri

force. And then, one your just question, has it. last sales I Go your have to of do scaling with

level remain sales of continue your the scale tick up definitely to or half of to as and marketing up. half force? guys the Should expect year, ticked this first you as the So, sales well, for this back we year at elevated

Thomas Morton

elevated but continue to the with an know would run current don't it level, expect rate. would we if I it's --

that fortunate marketing we have to sales having to now, in We ramp and to not fact been one accommodate need on have spend we proportionally much marketing. expenses campus very the sales have our And and campuses. X to

new we and the very working so, build continuing force, And support years come. will on they that so in we the will be to successful out as continuing our to can be sales be And norm. that

Operator

the question question. next go your for will ahead Ari question. BMO you Thank Markets. Capital The Please Klein come from with with

Ari Klein

up Thanks. that last Maybe following question. just on

bit senior out quarter, You've headcount? are just those which quarter. changes that in follows you more maybe last this about little the of hires the you Can some talk building announced sales hires, kind the hires or this some quota-bearing implementing from a the with is of about

Thomas Morton

to up we is the are hiring in staff their helps them make and the because they that and both. administrative don't at pace that order It along It people sales we infrastructure at, announce run need have that make the them. underneath succeed, need others KPIs. the that that come to run quota-bearing quotas grow headcount make is successful, are to that, you their thing to is an That with building there and and

the they top So, that expand and to infrastructure that make turn will that grow expand of make we to continue well-supported and them our will the will we line that sure force. growth continue investments our in are EBITDA to margin. that also in sales so below And community,

Ari Klein

Any you is that component hit like looks nonrecurring specifically, to deal. it the of maybe at the Will million once? then, And cloud there? $X you that there's provide color model could it what Can talk Okay. about the and timing an impact?

Gabe Nacht

transaction, they're that putting tied our component Yes. in customer to a addition related facility. our That's in to what facilities to a fiber connectivity

Ari Klein

over that or length at that's will come Okay. in of once, going And the hit contract? the to

Gabe Nacht

over Yes. the get the contract. of That will length amortized

Thomas Morton

indefeasible income fade the amortized the contract. right over Yes. over that -- of to will It's in time length IRU, an is use,

Operator

the ahead The Berenberg. Nate come question. question. [Operator go Please Crossett for will you with Thank from question next Instructions] your with

Nate Crossett

to wanted just I Yes. Atlanta. Thanks. touch on

you indication would But, you think, yet? I something after? And new just are I mentioned there they any pre to are going announce releasing you're you Has when mostly been customers clear. so can. on they then, far, just Switch or current be people wanted the

Thomas Morton

we you, good to your So Nate, -- voice. are thank in hear

decided that Switch. are some an deployment of which with a discussion in have customers, Coast with customers are new, to are and and of incremental We which Coast West variety and a of East some existing

with Atlanta at fact, would have the do facility. out deployments a prospective who in two we is In today new that customers team significant meeting

sales near be But, interest the mix Coast West that announcements existing the So, desire blood it customers new and with forward of volume presence doing and we been new the robust. will And the East has or in to us. term. sales and a look have an to logo

Nate Crossett

on where one Is to shakes Okay. go by end can into And continues of just next it year? any the out the and kind or That's you your up? then, year the guidance that helpful. of us give flow, thoughts there on maybe

Gabe Nacht

make is numbers we we a were basis announced that And we date exchange October. just last on exchanges and this quarterly next now. how limited do There in really we isn't a lot do really of the partners our what on guidance do far because We exchange. those in it in partnership period that announce the can getting dependent that is on as as exchanged many are and

quarters So, there's as next exchange. soon But nothing is will partners to announce, as we in what that dependent really entirely we it on the decide call. can

Operator

Breen next will James The from question ahead. Please Blair. Instructions] [Operator come William with go you. Thank

James Breen

Thanks taking for question.

EBITDA XXX. are added pretty now side. the of percentage we’re one, over at That's couple, be gross the on And just a you'll single a a both what's or margins, for a sort at expansion room margin year-over-year as logos uptick other? way saw color good that new margin quarter. the good one gain give XX us just just base some then, secondly, for happening or ones around there? you Just of Could the and you on the levels And

kind on sales as Just that are and customers new you're from force that, to what why hearing something wondering, your those of specific there coming line? if to led is

Gabe Nacht

So, a couple of things.

On the margins and gross seeing managing carefully margins, our we are expenses quite expanded EBITDA that margins. developing into and

most that's a tied as as in a As you that continuing, couple contracts, our we and is put and from even I we can expecting of for QX with guidance far energy our same X, in forth, not three-year we of see there energy margin of QX, that in EBITDA Qs costs think reasons. where typically the the increase, are quarter is X is though level experienced the quarter. usage as QX, summer locked And also, does we of energy of see do because does that And portion costs earlier, a in higher we float. announced because and in energy that we've a float, see to those to hit next of in we'll payments under portion of a our And begin the a facilities, land bunch land is we lease. lease July.

our year. So, long-term forecast it's those still for our But for forecast EBITDA of with margins. And with we're XX% the bit. line will nevertheless, impact overall relatively in margins a the comfortable margins

Thomas Morton

Yes. this Thomas. is James,

we our our buying revenue, this top margins, I accelerated terms increasing One about same our things is to not indicative our we of time, maintaining like scale shrinking expectations expense able line We're business. rate while ratio. the that even the at margins, are an are of at exceeding and and maintain we're which that in is EBITDA

James Breen

And just customer on side? the

Gabe Nacht

you new really far not question second were than a to releases, read logos, happened other a your of of those number XX A This with to there's past few about and so as our that quarterly sure significant that part expand time up into know the in were we -- typically majority they XX we’re that love typically don't number we of And this to the look the don't make larger of customers of us be they're over typically The run quarter. seeing logos logos. come low, I'm quarter. other part rate what into is I our churn because if about those new We as quarter between in XXX guys that a at the that transactions. anything they leave. think business. and read our talk with

Operator

queue. no We currently instructions] in [Operator questions the have further

Gabe Nacht

you all afternoon. Thank time with forward we speaking you. for look this soon. Wonderful, guys. Thank to And you your

Thomas Morton

of others, Thank meantime, We look Switch investor the In and seeing various we to support the to and your you, appreciate next forward the to forward talking quarterly at everybody. our next conference. analysts we you giving and look report.

Operator

event. concludes and gentlemen, this Ladies today's you. Thank

now your disconnect lines. You may

Switch (SWCH) 7 Aug 192019 Q2 Earnings call transcript