SWCH - Earnings call transcript Q1 2020

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Operator

Good day, and welcome to the Switch Inc., First Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will an opportunity to ask questions. Please note this event is being recorded.

I would now like to turn the conference over to Matthew Heinz, VP of Investor Relations. ahead. go Please

Matthew Heinz

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

On are call Switch's the today CFO. Gabe President; Nacht, and Thomas Morton, Switch's

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

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

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

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

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

Thomas Morton

good Matt, earnings morning, call. Thank joining us you and today quarter for you, Thank XXXX for our first everyone.

continue I and do have COVID-XX for sincerest express to continued patience, to during Thank you team the crisis. health these times. have dedication First my and shown you foremost, resilience and done Switch want our the unprecedented that appreciation members throughout all for

the was March, made non-data continued our has unabated. that centers center to on operation throughout Construction has transition our of Since implemented pleased that XXX% remote prime report a the across operations Switch clients four campus in environments. note, data to am seamless I facilities of pandemic. has On for work COVID-XX our order maintained our all shelter-in-place locations staff all newest early continuity in also our

our full employee was requirements surrounding achieved, do cost our year the strict no social of worker nor to our a mission-critical protocols teams to we of Moreover, remote monitoring disruptions are adherence to closely operations and with Furthermore, IT while support reduction corporate This guidance. expect to federal any state safety and result the as saw We functions. distancing. we well-being any immaterial other not employees headcount in COVID-XX. believe financial

Importantly, ahead we also continue discuss innovative to call. will later growth which greater I in on future detail forge initiatives, in this

reflect Our sustained all positive results business demand and first underlying XXXX quarter trends our momentum financial prime campus of across locations.

XX% EBITDA increased revenue quarter year-over-year million and XX% $XX.X represents First million of a $XXX.X adjusted year-over-year growth. to

of earnings a in call, elevated professional XXXX. QX our services filer costs in a transition to quarterly costs remainder fully level XXXX historical around for large professional As operating EBITDA the identified were margins we incurred we normalize and our year. accelerated adjusted elevated SG&A in plan These prior related as XX% service on result of to our considered the expect to this

we in XXXX our such, will financial guidance, outlook reaffirming and Gabe are greater As detail. which discuss

logos currently signing in signed first of to center deploy additional QX with year and The the floor this Atlanta committed XX on now is sector customers we operational and X five have in XXXX. data

to the team extremely the market with pleased our response Our campus. of is Atlanta opening

excellent and new balanced of We are customers. from seeing opportunities existing mix a

in This outside represents revenue as strong XX% Switch national consolidated quarter. QX our the increase year maintaining represent an momentum PRIME footprint. Vegas the from locations are growth across now We of prior entire Campus Las XX% of of XXXX.

XX% and PRIME accounted grew the for of the During QX of XX% year-over-year a revenue PRIME XXXX, at ago revenue growth compared combined period. the incremental our at rate to and year Citadel Pyramid

multi-campus growing which is toward revenue. trends by well-demonstrated to experience of proportion continued our We expansion customer PRIMEs, the favorable customer newer

XX% revenue. This increase of XXX in Primes, revenue equating representing customers As the and revenue. ago year-over-year XX% in multiple in than to deployed have of total customers multi-campus year XX% Switch more of to QX XXX quarter, XXXX a compares

contracts, five value QX, of executed annualized activity approximately we steady, an $X We representing total including as $XX new term of contract logos of from annualized approximately years. remains in of incremental sales a signed and existing $X revenue $XX quarter million incremental revenue million First XXX million weighted million, average additional from with customers.

We financial in health customer leading components construction Fortune Keep quarter, Fortune goods in institution Campus the the Campus, in Core and Pyramid in new in the nationwide a added XX the Campus, XXXX Campus. first insurance logos manufacturer provider semiconductor a including Pyramid a retailer the XXX a

renewals cloud in QX, customers security from semiconductor the million and contract across multiyear Campus. extension bank customers with totaling locations, signed in vendor and Core $XX Switch campus a expanded multinational or in Several $X the expansion, including two major in renewal million value customer three a either over Core expansions six-year with a long-term leading existing a Campus;

customers As a trends. developing technology technology assess leading pulse innovator a of we needs our and future keep technology in infrastructure, the continually on anticipated

the areas of technology involves evolving One the cloud. most XG the AI, of of the combination rapidly landscape and

Switch Prime customer natural can involve a We edge strategy. computing, areas security. identified X robotic where proliferate. storage uniquely have and Class Under verticals three these infrastructure highly highly technology management differentiated three and exascale complement These in our identified AI-driven needs a platform way, utilization as Rob strategic Roy's address has Switch as to TEMPEST-rated data leadership, data

deployment moving configuration. Switch edge of variety maximize benefits while of offering time, delivery same of toward networks, number increase at to that mission-critical are their of secure workloads seeking infrastructure a for across the known highly locations road while level are the Enterprise industry-leading involves X in can scale, robust and is This requirements more At resiliency distributed cost same our security enterprises minimizing primary a Primes. purchasing nodes low-latency the Prime across technology of solutions edge map large total rapidly the within ownership. and industries that Class

center and Rob Roy's is Switch the to EDGE solution, edge, Center. resilient believe to we extend proprietary we designs, deliver data the on from and to Switch newest positioned look most Primes As based edge unique Data including his enterprise-class our reach Modular the connected

specific only the X data system data are substantive a modular engaged highly enterprise world's Class meet secure deployed use EDGE dialogue with wide air design, recently in cases. centers EDGE + edge to of solution. identified have edge Class We range resilient Switch this fully we that transportable center. in business customizable numerous months, for And our have partners recent various needs representing system showcase fully X

address regarding human-in-the-loop deployed has physical edge of developed Switch One be a is at will issue Rob human at identified XXxXxXXX economically To solution facilities. concerns edge which not EDGE is security. Deploying practical. guards deployment or this Roy physically AI security robotic locations the

In Switch excitement addition these Robot partners data enterprise the generated use alpha center led to at to a own as the client Century Switch has offering our facilities, test the from protect security range to equipped to stand-alone of be options can enterprise environments. with Switch and the and general Century platform utilize market. a industrial and secure sensors robots AI-driven assets advanced

data Additionally, as enterprises is hybrid in solutions deficiency environment for believe industry-wide storage, critical supporting security the we seek cloud mission physical an offerings. there storage

sectors these mandatory cloud data solution cost-effective, designed flexible, private an be We rooms, have center some to needs. Switch available be yet highly the and to and lock-in-free the We evolving cloud public only corporate complementary be storage believe as accessible will storage. environments advanced for tempest-rated secure portion VAULT will data of

addressed with Century Switch on continue capitalize prepare and the by together opportunities support VAULT, to that related our other Switch EDGE, Switch and expand technology market We the upon ecosystem. to services

further client interactions. provide as will with We our details to move we forward investors analysis and

construction our data and center turning pipeline. milestones Now project to

at Prime we Campus, XXXX, XX-megawatt a lastly, over of across delivered our system initial and and quarter a sector first cabinet and XX Citadel new sector power opening the X the Las of Vegas During the XXX system power our the cabinet X,XXX This Pyramid at of new XX Keep mid-February Sector footprint. includes megawatts and Campus, power Atlanta the capacity Campus. in in XX-megawatt equivalents

additions our these provide are infrastructure, backed to by and substantial of future will customer for demand growth. capacity Each

table XX during XXXX. to cabinet additional As power of the investor expect deliver QX of and we incremental infrastructure in presentation, development milestones in shown remainder megawatts over an the X,XXX-plus equivalents our

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

Gabe Nacht

our million, attributable to or for primarily discuss This XXXX of we XX.X% quarter increase $XX.X Thomas. million XXXX, quarter $XXX.X a financial quarterly In first the I'm of results in $XX.X of of of quarter to an achieved for outlook compared increase colocation year. is revenue increase and going XXXX. to revenue Thanks, full connectivity in the review Today, our the $X.X million first million the revenue. first a and

of came growth Switch one service revenue initiated XXXX months, fiber from build been and includes related the customer. QX XX non-recurring during transaction QX cloud from have revenue strategic of growth $X in in the the Our a fiber to XXXX year-over-year revenue who longer while past customers revenue IRU resulted XX% with new joint year. than who with customers a XX% million

More than include was XX% services, connectivity. and in of cross-connects, telecom external revenue which broadband the colocation recurring in and nature, of consisting our quarter point-to-point primarily

to compared QX first XX% million in of Colocation million in $XX.X of million same revenue $XXX.X in increase for compared the an XXXX revenue XX%. to increasing $XX.X of in $XX was QX the quarter was million, XXXX, of Connectivity period XXXX. XXXX

$X of QX non-recurring $X.X in revenue QX XXXX. million same the services of XX%. million revenue, was accounted professional revenue Other in including period for to Excluding growth compared connectivity year-over-year fiber approximately XXXX in

cabinet billing monthly generating March XX the X,XXX XXXX, $X,XXX cross-connects equivalents for in year equivalent of revenue. as per March and QX in approximately consistent revenue total approximately had XX,XXX of cross-connects accounted recurring X.X% had ago with of total period. cabinet XXXX of We more than As Switch XX

bookings. to turning Now

of value million revenue During XXX comprising both at inclusive QX total $XX deployment and contracts of representing full seven renewals incremental million $XX services. contract XXXX, and of annualized megawatts we approximately of executed sales of

from and incremental $X new revenue, from first $XX the million customers of signed $X million we annualized In bookings logos. incremental inclusive existing million recurring quarter, in of approximately

billing. aggregate not XXXX, As revenue, contracts annualized $XX yet stood in contractual our of XX and commence billed at ramps including million to backlog booked March

contribute of contributing approximately We with during $X remainder incremental in and of XXXX revenue million the expect our beyond. backlog XXXX the balance to

remained from XXXX reductions the compared in low quarter. QX in X.X% churn ago at of to X.X% year customer Revenue

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

year the by the to increases aforementioned to in XXXX fiber ago Cost in depreciation of costs quarter, $X.X of increased compared related project. and to revenue joint due primarily QX million

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

$XX.X to attributable professional SG&A primarily SG&A of fees expenses The XXXX. million was higher XXXX $XX.X in costs. in million QX to and QX were of compared in labor increase

of XXXX. quarters these We subsequent of to expect revenue both a percentage as of decline in

in expense Income on by by increase increase to in debt of XXXX, a our operations SG&A to in to QX profit, QX increased in of was million attributable primarily $XX.X $X.X offset million gross in increased XX% The costs. from $X.X primarily million compared $XX.X $X.X in income million QX XXXX. driven higher to by XXXX growth Interest $XX of revolver. million million operating balances an

million March $XXX on our term of We income loss As share in had XX, of million QX $XXX per share the a which on loan first $XXX.X our our million outstanding net drawn XXXX. net $X.X includes million XXXX loss compared on diluted reported per swaps we million quarter of and a of to interest QX impact $X.X revolver. net reported XXXX $X.XX of $X.XX. million rate $XX.X on Net a loss diluted of had in loss

Relations attributable Adjusting tables full $X.XX. XXXX our Inc. to a to adjusted provide income earnings Switch of the diluted attributable swaps, to Switch of is rate net GAAP reconciliation QX loss our available our on Investor Inc. share per income interest for on loss financial We release, the net in net website.

million towards totaled of from the margin million EBITDA QX compared QX adjusted XXXX for was $XX.X decreasing this primarily SG&A. in for previously reflecting to remainder mentioned for XXXX increases XX.X% to Adjusted of Adjusted will and XX.X%. growth due QX year-over-year of $XX.X normalize XXXX the EBITDA XX%, EBITDA in historical fiber of period, expenses XX% range the We ago anticipate year in margins year. that the build of

Campus of XXXX first to in XXXX the expenditures compared rainfall quarter heavy Capital million construction $XX.X in Keep quarter early that by Comparisons the first the delayed year same at quarter XXXX. last million to in $XX.X capital are the of were skewed expenditures Atlanta. the

we VEGAS Investment in for increased in Investment Campus LAS in colocation for ago of Citadel to and as XX, Campus compared space Core tenant the declined accelerated demand finalize improvements Core expanding Campus. we work site driven the quarter, year-over-year year and the locations addition to as XX, continue XX in by these also Michigan. the both PRIMEs in Pyramid in

Maintenance and of quarter same the the $XX.X expenditures first year. the construction revenue to and quarter X% were compared the X.X% compared was of center, just in last for capital revenue improvements for CapEx of in Growth XXXX last $X.X year. of million million or quarter same XXXX for first $X million to $XX.X million data period

March opening Switch equivalents the Campus locations in Pyramid of XX, of had for in PRIMEs our sequential reflects cabinet increase equivalents due of open approximately XXXX XXXX, sectors. a QX the the to and capacity XX,XXX XXXX. sectors new of This As Keep Core, cabinet within

on XXXX XX% QX in was utilization compared At at committed year under XX% cabinet these the contracts quarter. based and prior PRIMEs, rates ago in quarter end, total The quarter the XX% to of inventory at Campus, Core our Campus, the Campus and colocation in XX%, Citadel committed available space currently XX% and compared and to the quarter. and XX% Pyramid the were approximately cabinets the XX% prior XX%, XX% respectively

Sector the The utilization Campus the driven Committed utilization increase sequential on previously contracted at decline XXXX was XXX inventory sellable new rates in quarter X. cabinet by end, mentioned at inventory. sellable was based in March XX% cabinet of in Keep

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

Looking the sheet. at now balance

net and debt net XX, annualized $XXX cash last slightly total of March X.X X.X resulting to from EBITDA a adjusted XXXX, prior of company's the ratio million quarter of in debt As times, times down was in equivalents the cash outstanding, quarter.

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

Class members XXXX, an common shares. equivalent disclosed during our of the X-K in in A X.X filings, redeemed number recent resulting As first million units quarter of of issuance the common

XX% XX, March A shares million of Class XXX.X million XXXX, the shares total total of there or including float were As XX outstanding, outstanding. public

April total totaled shares float million In In million shares $X.X second redemptions an A quarter, common we to or X.X approximately by May during million units exchanged redeemed, expect and XX% million our units X, the to million. total, an additional of on were shares $X.X Class July, XXXX. additional XXX public be increased bringing XX.X of outstanding.

it to additional expect stock interest our opportunities float, Beyond in XXXX. in to July, redemption private is conversion base. we believe shareholders' our accelerate creating best during and greater have public institutional We of three investor the liquidity expanding units to

reaffirming XXXX million in the midpoint; million. XX% an of of $XXX XXXX and land $XXX increase excluding an of reflecting million, expenditures margin compared at the $XXX to acquisitions in at the growth follows, of range million, are adjusted XX.X% the to million EBITDA $XXX million as We the capital of and $XXX revenue range organic our EBITDA reflecting range adjusted year-over-year in $XXX guidance for XX% to to midpoint;

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

Thomas Morton

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

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

like the for We line to would now open questions.

Operator

you. Thank

begin JPMorgan. ahead. Choe session question Instructions] with The from Please go question-and-answer not will We comes first [Operator the Richard

Richard Choe

talk robust. for have a But Hi. and said impact contract a nice about change pace you in any weeks? having recent deals? COVID-XX of I Can pipeline the from was You like the And It continued it of seen seems you you're total value. follow-up. signings have

Thomas Morton

is Richard, morning. good hi, Thomas answer The this and is no.

change no of result in have as seen pipeline COVID-XX. a We our

We continue substantial number to deployments customers of that to a looking see large are us. with do

logos more this number five a XX we in of including Atlanta. As see, you sold new can quarter

lot do That to our has tend COVID-XX largely So activity companies versus a sales of larger we affected we most to the despite the with. smaller of business see pandemic. that continue companies most

So pipeline confident I'd Gabe, in any to part, we them. comments XXXX. hear the But for our additional have very if the balance love most you of are

Gabe Nacht

I And we've continue would our April, seeing through the point. our say at of through on that month Richard, April we signings in and yes are not seen slowdown pace sales activity so any this

Richard Choe

a the or new momentum it the Can gaining. about that's And customer you bit campuses logo to how sales added talk business? little that, it follow your like the -- something? you it actually up force? are Is Is seems growing on new is

Thomas Morton

Well, initiatives XXXX the our passed commission prior a SX lot on before to results. in They we force. yield sales have year our bringing is and force, the of begun it that sales

to that, continue as be In able pivot in a presence as as prolific visit as people easily website the now we well addition doing our not as were past. in to our because tours are facilities we to are they way to virtual

of market able order So, we the capacity. in our growth to have moved the sustain we have technologies and increase with dynamics our been leverage to and sales

Richard Choe

Thank you. Great.

Operator

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

Erik Rasmussen

question. thank Yes, taking for the you

Atlanta that up echo dynamics here, that, seen see of just new some your and talk line And a We there. of of throughout that flow But just terms market? you evolving? then sight deal some position the do see facility shaping how in you have activity you sort that. pacing We of new have competitive how It year? of had is about added five the little go bit accelerated Can looked but of through like I'll customer in a the logos. an signings the you in

Thomas Morton

as – coming up this later opened result of have has which COVID. postponed opening facility. just grand already It that has year, been We a we've Yeah. its

available XX% the in already facility. that space have of sold We

logos there. We pleased there. else have center that very We're XX Nobody has on momentum with there. X Tier data certified been Nobody going X else in very, center the facility. data Class a has that's a

So, the offering able similar price more we that we're are a a products. point the unique to distinct are offer peers their deployment and at market in -- offering resilient product being that and are

unlike seen makers where level interest been there lot we Atlanta, of in already some is have other And market. of that in we market have market. So, a markets

any And we so on momentum to And to products able add forward. our that? want there are to capitalize existing to thing that is you Gabe drive other

Gabe Nacht

for of Atlanta-centric logos, a And that the but logos are what Atlanta from few add folks majority as also We're out uptake Southeast Atlanta market. recovery Atlanta we Switch expected the a the existing seeing and we're exactly from from We that are XX a and it Michigan that are utilize also view as disaster not. customers that using regional hub that's elsewhere. seeing I'll market. in are site of

mix a developing new customers it's really play. we entire So, both for hub an serving expected Southeast It's region. regional as the existing us. the of a It exactly not and with market logos is Atlanta-centric

Erik Rasmussen

then did just of a And Are activity? maybe better seeing just COVID-XX terms because Can with that with discussions potential expectations? versus then has seeing terms the of you talk on the prior some see pull-ins year potentially the of discussion for leasing And you any We seeing bit that? in little about do enterprise you're shaping side? out my Great. in what you follow-up. customers how changed

Thomas Morton

been COVID. have to – So visit dynamics has and we impacted. to with they There I moving the tours. customers changes if been any centers our they large comfortable stated ability result has expect even a way question, our directly some as with do The our are forward product, Though good in they us enterprise what as not know the of seen and know the we Erik. slowdown

as will call reaffirmed our So heard we guidance. you hit earlier this we our we believe and have on guidance that

we So we've therefore as we statement not COVID that by feel making are any away which impacted And of guidance. take been to changes some would minimally. is how the I

Gabe Nacht

amongst larger pandemic that clients of to will speed light the working infrastructure they're that been the entire and their of isn't because where a have the realizing to they actually supporting COVID has just up now couple some remotely also I brought are it. that, deal enterprise on an picking say RFPs of weaknesses capable with infrastructure workforce we've working

of as market. suddenly But future with So their were the were exposed stack actually the adjusting these process progress they're those folks already on they're the it that speed and technology now, RFPs and for in urgency in picking was up RFPs. in

lot rest a where we're quickly to reopening uncertainty as the of open is don't as of why start in shutdowns it out things there knows of one to bring. to uncertainty coming is are But going keeping know long there's our the no because going and despite and really market we And last. year to strong our we is, performance this start And what how also that's guidance up. QX is simply going how the

Erik Rasmussen

the color. for Thanks Okay.

Operator

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

Ari Klein

Thanks.

cabinets on if question. next schedule coming on and you're and year this few development It the Just based year. quite that what pipeline that Atlanta later for looks the at of How following seeing expectations late market? is much a like, your on you in you have up look the

Thomas Morton

close we large customers. our and We those customers of have in a continue number pipeline to

is as have for our in queue. we we prudent as fast building pipeline that the So, are

last So, demand years don't that, demand growth too at get in customers. have actual anticipated to customer XXXX of our far of we always good need. the and And gotten construction try our we a to against over so customer ahead infrastructure over the advance pretty marry build customer we rightsizing, our the

strongly about QX And see of closings to on is in a activity so of Atlanta. are we we a and feel on in of see Atlanta uptake. go what that builds representative going that We lot in are facility, customer seeing continuing feel the the going to be in and that lot very uptake you we

have States United feel customer it's in we of So that bullish terms uptake usage. very that and about that the to of the going area region or

Ari Klein

just much going maybe challenging new more in on that see attract the expect to new to COVID? tours. you area environment? then related levels the virtual mentioned to is How slowdown to it you that front a current Is And one logo Okay. it

Thomas Morton

Actually said, for in an proposals RFPs RFIs. and we've as information Gabe seen for requests increase request

customer this another haven't thing very so impact for to So, months I we a of movement, seen a haven't six sustains as significant seen result who or If is customer the see But very some right there And uncertainty customer in activity. market. sit of been and fortunate we we've to now, a or as COVID-XX. our that continue knows, lot robust we demand.

Ari Klein

Got it. Thank you.

Operator

question Berenberg. comes Crossett from ahead. next Our Nate with Please go

Nate Crossett

morning elevated, taken for there reserves Hey. a sense bit low. you any a Have note just but there? portfolio. stress Is debt give can in still you Good to tenant anything very Churn for non-payment? was guys. Maybe us any that

Thomas Morton

turn of couple this over Gabe, comments. a one to but I'll

payment had impacted X% is, than X% fewer from request our payment customers, formal about relief. And MRC. for we've any less of First the inquire flexibility has than

provide to have we that? want you Gabe, color, further any you do So on –

Gabe Nacht

a accounting debt reserves. debt the was financials. We normal take And quarter. to that's our XXXX in new have of those look our that QX way We companies went at fully changed baked into reserves. a bit that of play pronouncement Yeah. each There calculate their into

few But had of relatively position Thomas inquiries As our about financial said, is sort any we've this. relief.

a strong have We sheet. balance

for healthy them, for possible with they in the work pandemic, that's long-term to in the customers We liquidity. long-term have wherever make this come healthy want that through We our a for sure us. to way

we our liquidity. vendors, sort because asked relief, any have for of payment any haven't We of

strong. us, want our to commitments Switch. in give customers exchange want after pandemic payment subsides to sure make have short-term possible we been remain them vendors we there And additional the are Wherever to for entire with some ecosystem relief, to working for because this we

doing successful And in that. we've been

As revenue. Thomas long-term. come it be this And we'll our will affects with a are small in feel healthy monthly a recurring we the way. us out portion clients for of said, of very these And that

Nate Crossett

helpful this would helpful. don't look guys of That's of then, maybe spreads just schedule. be for lease is get to wanted a up and you But Okay. a gave what sense about, it think just like. kind expirations. ask to how the renewal And I much year I

Gabe Nacht

out We clients. leases. that. retail not really We're don't have we're a put we Remember, really take wholesale doing a because I'll X,XXX Yeah. co-location schedule, large company.

to a average on of retail company contract are with three years, average. five four We lengths co-location years typically

they're up in because expect our low given churn, of come come you our licenses for to not can And for leases leases year actually you renewal. to And any of So up renewal. that essentially can XX% make comment exceptionally I was churn our at X.X%. that will because see is it remarked everyone quarter, it does it renew. this -- It's is low. that elevated is on still funny it a around

in-house The churn One purchased this deployment business. And the an took of cloud the quarter to really consisted company. was overseas. that exit was technology online, service was they dating decided their international And two other clients. an private by a company that

had or do performance really with any and competitive business to issues. both So our nothing were decisions

Nate Crossett

you. Thank Okay.

Operator

come Raymond next ahead. with Our Frank go James. from Louthan Please will question

Frank Louthan

Great thank you.

pricing this aware that of? guide? in from then On contemplated up want coming you're in things the adjustments include like other quarter, any the confirm, just rent downs non-recurring the just that year, later to just that And that check, the known revenue or was doesn't guidance roll customers to

Thomas Morton

Good morning, Frank.

Frank Louthan

morning. Good ahead, Gabe. Go

Thomas Morton

No. I'm throughout to. $X the that assumption talk just assumed we going fiber the certain it guidance. into distributed evenly year. of XXXX million to previously reason was But Gabe say that that, the for and let FY be would timing the I'll of The revenue more weren't financial baked

Gabe Nacht

build is And sort and of an with that last year change. over did capitalized result then really of for simply accounted being life a cost the taking Yeah. in. any of to Prior accounting that bake was We revenue the the an the IRU IRU.

client, required the standards record leasing it. new all and as the lease, under record the a that to all And it as the revenue sales-type once. turn with over which ASC means costs, we to we of build of we all were Now XXX, at

So it was baked into our guidance.

We we faster don't were we to but this baked guidance. quarter our guidance in it provide And into than originally able specific annual construct quarterly was anticipated.

also typical QX we was and part our this of our really booked lower construction booked a cost the the we reason margins bit the than because were revenue project. in that which is So, a

Frank Louthan

more just similar Okay, edge for then licensing technology? little other great. bit the a to consider a do licensing to is you the that you And that about And us follow-up. TAM product? as how you've something might done Talk see product. as What

Thomas Morton

locations a edge we're putting is of very something for a from proximate cases and off There that So, that to the And we There response we've that are customers market to that. not to received edge our a is for a demand as TAM that edge. customers partly on their and large that product. is are to request number request significant by something the obviously identified several or that have customer providing financials base. use customer yet. It is more product it we their

which We cloud, obviously, now have media, sensitive applications and telecom, interest and hot distancing. from the transportation, such social logistics their particularly gaming is latency as electronic industries, e-commerce everybody right doing given

the tend of about Class a offering because don't able excited very in to they up the nowhere things a in come -- resiliency. one edge -- one to when a very talk -- resiliency the but we're have that area middle concerned two container about on to of the they're that is sitting versus just about four people So, bring being things we hot

and and step do makes facilities as them that connectivity on we can items something course very edge. what customers to in is well both next core of that we the leverage have brought. then to that a those addressed concerns second feel we And we and security. about the offering of unique is add advancing will customer then have the concern And those the feel they which And

Gabriel Nacht

guys about edge product. We're in. the jump And really I'll excited

you seen builds of toured that it of at if have know you centers I recently because think call path Switch part may the Some already data is us know point. And on our those differently. it that you've well tour this of

cargo the and transportable have best-in-class They that + modular, resiliency Rob high-density They for the designs containers into all he's fully that for differently. very best-in-class security design air high-density is design differently. taken data And centers scalable, unique and security ability ability edge system fully operate of compute. system putting very, has a in compute. best-in-class cost-effective resiliency

been there out unlike containers to like edge announced that's an because built, please opportunity. edge Switch's not of actual facility technology the is This the is all like scaled up. you'll go can see it this there scaled on lot this our We're was seen. it to website folks It's excited facility. be on or but And how that. announcements what down it how about been So, really of facility have about anything our a looks our of edge website videos putting information

getting to Security you'll elsewhere. and we information robot the graveyard tough on Switch at that Also officers to designed Century see we've it's a because had solve security that need that Switch we shifts designed and really work

to we technology this folks use designed need could as had solve it we well. really so And that seen hey that we the that have have and the said,

So, we're as excited really about opportunity that well.

is that concept a is the about unique VAULT storage are really we Switch cloud complementary storage. to As which

our visit website. please So,

the three initiatives of on information new All those website. the are on

Thomas Morton

on website well Yes, are and Please there The as produced VAULT. echo for I and other Switch Gabe's very well EDGE those. videos text will seen videos well Century do go the informational. are videos as put together very as you've that visit sentiments

learn our these and more go please products about So on website.

Frank Louthan

much. very you Thank Great.

Operator

Our next go ahead. Please Michael Rollins question Citi. from comes with

Michael Rollins

and I if questions. follow-ups morning Two for the thanks taking could. good Hi,

current on the first climate? customers trying The respond and business. And is the connectivity are in a would you expect build in as one connectivity to pickup capacity

Because data the the there edge Thanks. people versus eyeballs. a as closer they're get also to center tenants working the on is think concept option about multiple about And can also thinking on? option single-tenant edge how think you you're multi-tenant I that a

Thomas Morton

No. All right.

I'll I'll So these illumination. two of let and Mike, questions Gabe then you. take thank provide further

connectivity, than the even On it's more which seeing offices. individuals locations see people various is yes, and us. impacting than user are out rather the telcos The end connectivity. is connectivity there what That is smaller impacting we're at homes and deployment more who

has impact it us but been on some material. that So hasn't

We is customers buildings multi-tenant that whole is even edge. don't thing usually customers. Everything second to to lease we The towards targeted occupancy. or whole to do sectors

Gabe There set edge or have that of as you multiple occupancy. scalable. that absolutely those they can And groups said, pods So, cabinets designed so they in. for up deploy are on the multi-tenant we deployments, are are

let's can section say we it So another so build we there, cabinets, XX forth. could build put and on and on one XX one, becomes and that is so

more as So we out of more centers deployment facility then capacity building tenants. initial And -- than usually that add continue and will these have are scalable and to an which we that with tenants that data we on that incremental number add filled put one. down, and is build customers,

the multiple it So location, tenant. that why or for cetera build part center Roy to security vault, figure a maintenance, and the the most it is that logistics, really which a et robust, edge and so complicated Though Rob designed be to for he is most intended possibly solution security test the not edge purpose, in of put a be and investor can plan could and himself would to we to reason that were ROI that the best been used for good single resilient tenants the out up put data with and to came base. the combines deliver on each

Gabe, have add anymore to you I color to if don't want know that? And you

Gabe Nacht

the I shutdown mid-March. add On really until connectivity didn't Mike, side, would that the occur

bill but usage don't customers uptick There is out. there we wasn't yet, so getting significant QX. in that that saw data usage, we and impact an So on the just arrears charge really telecoms on a in be information we connectivity on us because based of do connectivity usage to lot QX, a likely that have in we're on

Michael Rollins

customers fifth your want for somewhere indications And follow-up, a giving that Americas? see in just PRIME you are they to the you a location

Thomas Morton

really is a States to call, location. answer as this haven't customers mentioned we remember seen asking inside in The regions United And the earlier is that Gabe for -- of PRIME No. the sort PRIME locations. connection with hubs which PRIME than what deployments. their in can less rather looking is for reach now is all we in can are do particular metropolitan XX customers milliseconds, the And than we what

they connectivity, Their four areas operations. put the while PRIME PRIME we cheapest all the their to that in the want taxes amount lowest and do the place power, of deployments is can the deployments where is put cost the amount be lowest of there anywhere. to XXX% What milliseconds also have our are of and PRIMEs in, they cost And sure making are areas. locations in to those lowest located that chosen sub-XX metropolitan of green

had are an met haven't is and deployment hub us with spoke what with So is PRIME location. for being those additional that an criteria Switch facilities. customers us they our have type we What addressing we edge been asking ask for

Michael Rollins

you. Thank

Operator

next Credit come ahead. will Our Please of question from go Badri Sami Suisse.

Sami Badri

you question. know bit Thank on earlier a the the I Hi. very much kind call. already this you little for of discussed

and size average But ask of your any generally you entities with established actually customers forbearance the businesses. midsized Given for not larger and more did work customers, your payment of small or have actually what And you do of maybe percentage like they deferrals revenues, your customers if or that? did, that? anything an requesting idea like quantifying percentage something of on what

Gabe Nacht

take that. Yes. I'll

Thomas Morton

Yeah. ahead. Go

Gabe Nacht

I than revenue. to the some of had X% asked amount sort call for relief monthly have that less talked about earlier our payment folks the in of

We are Vegas. here in Las

guys know You business. our

the provided until exchange months casino an see form our extended is payment been revenue. relief X% we've but terms we three and hospitality Switch, reopening for form And wherever to two business some it's that's commitment our than of of of payment less in for based, but or in Some extended of a possible minimal.

Sami Badri

offering do you. earlier question has in mentioned Is micro an capability? that data discussing subscribe like to or smaller edge sites that the data just actually this something a the with Thank second then you Got my deploy or company center or edge actual come into robotics the with do can piece, to they or robotics that operator have your guys to are the call. you it. center And the robotics

Thomas Morton

but question. we customers envisioned our so bring security deploy the a hey, had to up, being tried systems Sami, us, at or absolutely. new That that's can at augment great initially this said, asking locations? product, this industrial is we a as EDGE. we this for Switch which facilities to we robotics No. this But And many our

more and for to up do even with So robots down additional drive additional also and us that and has. and that to will Rob scale robotics he the than costs research allows allow these already and generate development, revenue

who have be So non-colocation as deployed can can with don't collocation be absolutely type as effectively in colocation they facilities. environments available they just in are and to those us deployed

Sami Badri

Got you. it. Thank

Operator

James next with Breen Blair. [Operator William comes question Please Instructions] Our from go ahead.

James Breen

question. taking Thanks the for

you the internet talk -- into you just quarter side, on connectivity April customers side. lot there out us your you a the especially Just lot on and as came saw to from telecom of need we upticks March terms Obviously companies. Can the little some saw of in connectivity? of a growth of a in traffic what of give color in bandwidth-related

Thomas Morton

Yeah. this. I'll quickly. let But to Gabe one that talk thing just --

is in there the billing. connectivity As Gabe mentioned a lag

XX, will customers So and has use invoices days occurred. usage we'll the the get after XX

So is knowing much there used. some how they lag us in have more

to add How uptake once that carriers. there will invoices the from the will Anything We in the be? coming be We in will Gabe? there expect much some start know connectivity. that

Gabe Nacht

And bookings how bookings in on our I'll pace did April. April beyond, will see We're We but add and averages. to an our have saw an into telecommunications I that historical we May that, mentioned April. in translate definitely been in yes. In we sure uptick with actually -- April uptick not

James Breen

cross-connect as in from centers you perspective And that on inside change the started anything things a basis to change a March? data saw relative

Gabe Nacht

Yeah.

If X,XXX to look at mentioned is our up in I what now. you investor my remarks and deck we're cross-connects building over

I that we the X,XXX. think provided the last market number to was

we're So see that's a momentum. nice increase continuing to that and

James Breen

Great. Thanks.

Operator

concluded. session question-and-answer now presentation. for also attending today's our concludes This you conference Thank and has the

disconnect. now may You

Switch (SWCH) 8 May 202020 Q1 Earnings call transcript