SWCH - Earnings call transcript Q3 2021

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Operator

Hello, and welcome to the Switch, Inc.

Third Quarter 2021 Earnings Conference Call. My name is Katie, and I’ll be coordinating your call today. [Operator Instructions] I’ll now hand the call over to your host, Matthew Heinz, to begin. Matthew, please go ahead.

Matthew Heinz

operator. you, Thank welcome Conference and Inc.’s Quarter Third Good to Earnings Call. XXXX afternoon, Switch,

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

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

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

XXXX investors.switch.com. has X-K and quarter press the Morton. Form on investor our President, third release available Switch will our to at now to website been the as call turn of is earnings Thomas Our I SEC part over furnished

Thomas Morton

and good by for strong afternoon, quarter enterprise demand earnings driven Matt, data you you, our us continue infrastructure. Thank sustainable to resilient today center we as Thank and Switch accomplished joining strategic our our initiatives, growth for XXXX quarter solid third everyone. call. another execute highly on for

signings. the traction, year-to-date revenue increase quarter XX% strong Importantly, and in sales our mid-teens revenue to strategic third growth in continue producing initiatives gain incremental a

voted this to we’ll Board to sharing with additional earnings evolution am pursue of REIT Switch’s our corporate to we to a I forward as XXXX, Directors tax exciting be look in on REIT targeting pleased continue disclosed and structure. election announce January we that As details release, forward conversion, the move Switch unanimously X, in has press

deck detailed reflect momentum on our our locations. Slide all accelerating of campus financial X investor PRIME line across of XXXX QX results Our top

Third quarter revenue was $XXX.X million, increasing year-over-year. XX%

contribution representing growth Data quarter. Switch’s the revenue Excluding million, year a Foundry, XX.X% was organic million $XXX.X revenue $XX from rate compared ago to a

Third to from $XX.X $X.X year-over-year Foundry. contribution a million Data increased quarter adjusted million, EBITDA XX.X% including

margin today’s Our in seasonally in quarter provide of additional contribution by benefit do not driven the to EBITDA Data QX where financial SG&A on full Gabe synergies. later was performance increases call. a of adjusted addition power and third levels on XX.X% affected from XXXX costs, Foundries reflect operations, yet QX merger-related quarter full details will guidance

solid as deck. incremental XX value over teams than on quarter sales and once more $XX a million signing detailed delivered third $XX bookings, of of our Slide contract again Our recurring million, revenue of total investor

to States months million, annualized across X our strategy XX% its signings the our $XX renewals. revenue XX% PRIME and have total to footprint customers equally expand multiple increasingly demand across world-class Switch’s as dividends, has of for to exhibited infrastructure inclusive million, our bookings locations. continued increased Switch pay XXXX, to and first the strategically United increased incremental For $XX $XX year-over-year annualized of revenue in million

As growth year-over-year of customer represents This third quarter rate quarter. of comprised compared in of in XXXX, multi-campus legacy prior year XX% customers XX% revenue multicampus to a over QX XX% the switch revenue.

which X value of with of bookings XX% approximately the our data the to $X Texas customers continued as of revenue a customer Vegas of coming significant million XX% largest increasing utilize efforts newest accounted technology the in during a Notably, the strong revenue Switch campus Las quarter, we center. year-to-date sector build-out QX believe Switch’s growth will expansion Foundry and for a Primes momentum of companies a from deployment gain business third executed period. the signings We remaining of world’s expansion Texas. annualized our in to continues incremental incremental Austin technology in Our as one QX, Fortune for also its Texas in X-megawatt with Data than all the mix X X in substantially our whose of enterprises positive the and on Austin, other validation this diversity early demonstrates basis. from contract the acquisition, just closed months ago rock large a other in represents sends signal capacity total

existing inbound and other of the funnel clients and robust Our rock opportunities Switch remains by enterprise the at outbound sales both across X for expansions campus primes.

October, he quarter locations. the the and Google campus metrics our initiative activity development, previously PRIME I as across will Keep August, Revenue are Campus expand data in of a expansion Google Cloud national legacy the be cooperative Jonathan Texas and of within King synergies acquisition. Cloud, executive and We some creating great and of by in tremendous third the health Officer. this opportunities pleased an our including notable that a led Cloud’s Switch In to the outbound signed Edge footprint will organization and remain Atlanta. first care key ecosystem Switch’s was Telecom existing customers Jonathan customer now has to launch partner to center We report Switch’s Chief Foundry to revenue telecommunications where at of Data discuss cross-selling global from footprint, announced value that Vmware appointment Google Switch’s Engine. confident

As further Switch’s Chief from Revenue Switch, business growth. go-to-market Jonathan strategy accelerate development revenue to Officer efforts oversee and will

approval agreement Technologies Rock. with Dell land from our City Following zoning and the Round of of receipt purchase

rock centers X QX, During began next future work at sites Platinum underground on the data we preparation Tier the campus. our of

Data assets, XXX will completion of be center more of data million campus X Austin We than square megawatts X. ecosystem upon of targeted in after line to space X X Including the Austin the architected XXXX. And completion Foundry power provide construction Rock for XXXX in feet early of Austin for will expect the targeted shell QX X to and be a time months on completion. with X to begin

closing the client’s X expansion existing the previously more multi-megawatt Switch a signed Foundry footprint As its double just Data of renewal customer. Foundry, involves first will its and transaction Houston. with its of space after acquisition than and The X-year X-megawatt Austin order expansion in current Data legacy a mentioned, months

partnership signed We approximately incremental new and on of pipeline the manufacturer will top Subsequent same commitment who the reclamation with future. Center, top contract switches a agencies. executed XXX on government EPA’s expansion for over customer public decades Atlanta, further its order the by over Keep in of its customer semiconductor X-year to providing services XXX telecommunication renewable into the Tahoe effluent Campus acre green a Campus. kind list to facility a list in and in placed treated industry-leading represents for third U.S. indefinitely pipeline usage revenue adding the multicampus history. Keep XXrd represents another into November, for to order also in value. feet and perfect use with year third top multiyear water Industrial project and power term. Industrial of new in XXX% begin million technology in approximately expect Agency’s operate in XXXX. XX to Reno Core To list leading quarter, Switch customer this the Reno largest $X.X Center the cabinets ramping XXX million deliver Campus Switch’s Tahoe improvement On first to a Switch early power based a of The recycled partnership Campus additional Switch the total signed colocation The the we ranked Citadel sustainable The an existing order in Citadel revenue a the X-megawatt incremental a in Sparks, from million users expansion incremental October, on technology Power X,XXX on green and basis, the Nevada. water. on locations. for announced the various deployment is the the the of Switch from combined was contract recognized enabling $X.X ranking with XXX% water In of Protection with the telecom regional row logistics XX companies top for state power. global local national In Green the commencement project being the Environmental campus and This and in Partnership. private an in the Nevada $XX footprint annualized infrastructure is the in of this

Now turning to our project pipeline. construction robust milestones and

of be feet XX% of capacity service. future seen on X increase million a development square capacity X As greater that currently in center or Switch in represents to a is data can for through our progress total square deck, center XXXX. feet either more investor of This X.X than has data planned million Slide the than of

and foot final Tahoe massive of we Keep at Tahoe the an of the we continue our customer, the the facility prioritize and to delivered X.X Shell XXX gross power our service. cabinets XXX anchor we megawatts Campus, of The build-out. now Campus, into Campus pad up of Citadel million construction underway at construction data XX center During placing are is the quarter, Reno customers, square million on X and committed of effectively Campus fully megawatts Citadel Tahoe the to the centers totaling construction data to Reno feet X and X the new full Reno acceleration to sector X at square and Core X.X of

we delivery In campus, accelerate development pad in expect the order table Atlanta in additional and utilities campus and Core also XX XX complete of Slide XXXX. milestones our As and XXXX, of spanning presentation, to campus to and in illustrated QX the construction on Tahoe preparation efficiency on completing future QX we of cost QX locations. facilities maximize Vegas Keep campus investor of Rock XXXX, capacity, our X on Reno of X Las our in data underground Citadel are center X

are have their million megawatts provide Investor feet on thus we completion Switch forward square Vegas these for XX, of power of XXXX demand. hosting real-time Upon investors that to Please mind capacity. from available to than facilities customer evaluation through the centers approximately and X XXXX. X anticipated Day data We XXXX, investor incur our in-service in on the with Additional our capital ranging of our currently incremental November spend, majority keep accordance headquarters the details more of dates and the XXX analysts completion, will deck. in closer Slide Las expect dates look much at these planned will and X.X

Rob as will Those vision the to and opportunity our spend and have present and they key range strategy switch Our Las of campus Vegas will our in executives operations. the tour a Founder attendance present of and his strategy for elements company. with CEO, Roy, time

Gabe? to provide turn I Gabe years. over In several multiyear we discuss next the our over financial investors help will results. to will evolution financial targets call our guide addition, now through the to

Gabe Nacht

review third to XXXX. going compared I’m reported our financial Today, third Slide for remainder the the Thomas. XXXX outlook and an or of results $XXX.X of presentation, XXXX discuss Switch million our with third X Thanks, of XXXX. our quarter revenue million, of XX.X% for of quarter of the quarter total investor to increase $XX.X Starting

million, quarter EBITDA Excluding year-over-year $XXX.X $XX.X XX.X% third $XX.X in compared revenue million XXXX XXXX, XX.X% XX.X%. margin adjusted and increase Data XXXX. organic Switch for to QX $XX.X of a on an growth of third of million reflecting to of Foundry million growth totaled quarter or X, revenue totaled the $XX.X QX of million, Staying Slide compared

margins power quarter of and were the adjusted EBITDA Foundry results. quarter a inclusion full by seasonal Data of costs Third affected

income reflecting Switch $X.X QX million, adjusted by Data XXXX. Again, costs of relative to to primarily margin of Excluding XX.X% reduction ago an net million third increase in income million power to quarter, EBITDA $X.X in in expense. of a the In was income Switch million attributable quarter. XX.X% year net operations EBITDA loss adjusted to $X.X million the in in interest an net million and $XX.X XXXX. reported from of Foundry’s was driven QX primarily margin a increase a compared The compared of $XX.X reduction $X.X a in contribution

the was QX to year quarter. unchanged X.X% on in XXXX, X, Lastly, compared customer Slide ago churn

Looking our now Slide portfolio exascale growing X. on at

in cabinet PRIME to compared billing XX, the is campus September was cabinet per of additions recurring its approximately the XXXX. $X,XXX a on X,XXX Staying at contribution quarter Foundry cabinet billing locations, X,XXX in this had total XXXX, XX,XXX Slide of quarter. monthly reflecting Data to compared X. Foundry, net Switch Included the across average Including full equivalents XXX from X quarter. over prior in revenue cabinet Switch prior approximately As QX equivalents Data

in Switch As quarter. September PRIMEs of the of contracts X XX,XXX the within our ago XX% year XX, were to cabinet XX% had for capacity XXXX, compared open equivalents committed approximately under which sectors,

XX. Slide on turning Now bookings to

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

to Data continuing demand We Texas in assets. are customer the see and for Foundry strong

Austin of in Our $X from annualized example a we third over legacy revenue great million with Data traction $XX were contract bookings value customers. approximately seeing Foundry total and in quarter the are million sales in

we from XX signed $XX.X annualized million existing million customers $X.X of new QX, logos. including approximately incremental bookings in revenue renewals, Excluding from in incremental recurring million $XX and

Slide Now at looking for XX. year compared XXXX quarter. the quarter was the attribution revenue million, in to up colocation of ago on Total $XXX.X third revenue $XXX.X million XX%

from compared the third million Data Foundry, quarter. in $XXX.X quarter colocation $X.X Excluding ago million, revenue grew ago $XX.X to the Switch from revenue connectivity was XX% million year Total revenue quarter. XX% colocation to increasing year

million, X% connectivity Switch September basis, and a XX% quarter for of than of to cross-connects XXXX, $XX.X reflecting XX, basis. total Excluding more third growth and sequentially an cross-connect of On revenue. $X.X Data cross-connects Switch year-over-year organic consolidated year-over-year in XX% revenue QX XX,XXX connectivity billing accounted million increased in Foundry revenue as had revenue on X.X%

refer million professional $XXX,XXX of from revenue, of million includes CapEx, year of detailed for million was of by XXXX XXXX, $X.X Please XXXX in Foundry. Data to in the Slide excluding Maintenance breakdown $X compared third million for capital for $XX.X in XX million land quarter services, accounted to last X.X% same or including the expenditures other $X.X the of expenditures to QX X.X% year. quarter. a compared for quarter capital our third purchases, quarter approximately the Finally, and revenue ago revenue which were campus. Growth $XXX.X

higher $XX.X compared of by Third year primarily quarter cost costs to $X.X The million $XX.X was revenue Foundry. attributable ago was and Switch million increased the quarter, of power in cost revenue seasonal increase to million Data to of depreciation. attributable which

million, depreciation, revenue note increased costs summer following that would primarily connectivity peak pricing increases in and of by rates forward power Excluding the equity-based adjusted cost ago by months. curve year amortization and in $XX.X We the and to elevated compensation Switch’s in an QX September power driven compared normalized October have quarter.

the were services the attributable litigation $XX.X comparison expenses SG&A Switch’s from quarter million around in the to related up Cobalt, increased quarter. operator to a million, primarily Switch Third In $X.X to ago related in million, who against ceased year-over-year higher $X.X evaluation. filed litigation third REIT XXXX, ongoing million year Data company or costs for in our Foundry, quarter XXXX the Normalizing professional costs lawsuit of accrued SG&A $XX.X and by in XXXX. center by a operations data

trial expectation in was prior Our the to begin XXXX. for

for set However, XXXX. date mid-November the the court trial

operations. are our core business our It thus, to exclude that our continue portfolio against and merit, allegations or EBITDA been vigorously be costs deemed to We we intend believe patent claims. the the to to defend has historically practice lack to unrelated of from adjusted litigation presentation

third allegations. fees in such, the litigation adjusted quarter As incurred our with defense connection the of our EBITDA excludes

quarter costs SG&A fourth with expect these connection remain in elevated XXXX of to We items. in X the

QX $XX operations, the litigation Adjusted case $XX.X a the presentation to XXXX, of to operations was any unsecured QX million our million million to was $XX.X to compared year-over-year capital $XX.X interest per in costs income adjusted debt $X.XX share X% be to EBITDA. higher excluded expense to year reduction by in QX in of due maintenance primarily million and decrease related year-over-year Interest attributable XXXX. in income However, to XXXX, expense, in increased of increases The in XXXX by QX of and notes. costs billion will to $X.X in depreciation $X.X from AFFO, balances driven ago the in quarter. in $X.XX was compared outstanding was $XX.X compared to and compared expenditures shares funds from power primarily ago amortization, diluted issuance diluted or SG&A million XXXX, the expense. related operating senior QX increases million from AFFO quarter. year

sheet at now balance on Page Looking the XX.

was XXXX, ratio our net September by increase in ratio was outstanding, historically lower our resulting debt billion, in and revolver. annualized the The the adjusted cash increase our EBITDA margin of and EBITDA company’s driven net of QX of cash equivalents $XX X.Xx. last $X.X As XX, to of leverage million quarter debt a total on

XXXX, liquidity XX, and September had Switch available revolver. of As including $XXX.X of borrowings cash million, equivalents and on cash our

recurring $XX reduction quarter. backlog to of As the revenue $XX in prior September XX, The our our of backlog in commencements compared $XX at million XXXX. stood in during a was nearly million function annualized of QX XXXX, revenue million

of backlog our $XX Slide of of $X remainder estimated of during contribute further commencements for to an and million expect reference million revenue representing timing annualized commencements. expected QX. the our approximately revenue details backlog incremental XXXX, XX We on for Please

XXX.X XXXX, XXX.X and of were million there total As September XX, including shares B million $XXX A shares million outstanding, shares. Class Class

in the issuance resulting million member $X.X October November, million disclosed of X-K A outstanding. recent equivalent represents and of XX.X% X.X common third public redeemed our Class filings, members total the As shares. shares totaling an quarter float of in units Class XXXX, in our redemptions during now Including number of A common

Page XX Now turning to investor for of XXXX presentation. our guidance on

consolidated represents revenue million, Data million XX% $XXX $XXX and including Foundry organic XX% million consolidated range expect revenue million. to of revenue Foundry. in excluding Data We This of growth to $XX growth, over the in $XX

guidance campuses. demonstrating growth result significant QX a X the XX% from ongoing revenue of PRIME represents organic and midpoint, implied trends for acceleration Our growth recent at our across

of XX.X% to consolidated adjusted million, $XXX $XX million at a Foundry, $XX Data the to million margin of EBITDA from adjusted including We midpoint. million expect EBITDA $XXX consolidated reflecting

from CapEx million XX for response and an opening our XXXX $XX Rock been in in in in contribution $XX is million, difference EBITDA material for Lastly, pass-through to second guidance. primarily deployments of closing land offset in the in that the X particularly by back to the midpoint it to reduction The timing campus installations to to excluding in build acceleration sales lower-than-expected portion change capital due sector and million Vegas lower to by million X strategic no the increase guidance QX, of as preparation prior Austin QX X of of remarks. early The the reflects revenue costs QX XXXX, occurred development resulting Las including for guidance and XXXX, half largely site guidance of timing acquisitions, million modest we’ll our our to in XXXX impact to during the Relative related Austin revenue on XXXX. Austin X-year begins expectations. facilities. ramp funnel revenue activity customer from to in pass-through turn relative full for equipment X% power construction increased $XXX the range of the $XXX for power our Thomas contract final has range, of affected customer will I strong addition now customer signing expenditures, purchases demand, a its XXXX. in to Austin the our revenue of prior power The And to guidance largely was adjusted but begin some lower-than-planned in for second $XX the the year midpoint half to is

Thomas Morton

transformation rapid is Gabe. for among believe digital We multi-cloud hybrid the they migration as you, their favorably Switch that firmly architectures. to Thank continue enterprises positioned

like of the are in On execute. data accelerate center level team’s to meet additional of we team, partners this questions. ability support behalf management confident customers, the open to We employees, delivery to are for capacity to hard to shareholders would our for would to working like we continued of and demand take and we the experiencing, are strong currently We now of our line Switch. entire our opportunity our their thank

Operator

Eric Our Luebchow from first Wells question Fargo. comes from

Eric Luebchow

at a color know the But conversion. of if give little the I this of decision go this you just on will Day. us bit some – over a you’ll wondering could for REIT Analyst

the the in strategy? read think right takes you and considerations point is why terms pursuing this puts the in of at of Some to

Thomas Morton

any we Eric. that is time variety drive something believe that reason with shareholder always converting Board that We’ve met team, can is value, external well operate the has not this to value, the The it. wanted impact that maximize growth sort on they believe favorable change negative of going is at do ability and of Yes, value advisers and as to a reach shareholder and initiatives. shareholder our will as and and we the internal be will our to have

of to believe that worked maximize we’ve is way ways imperatives, shareholder all REIT a time to various out balance the converting value. So at we and this to those

Eric Luebchow

is new or supply And limited it your year. the be Las one cabinets largely just in of we Obviously, could as the online coming quarters next like Okay. you then Or next a quarters? that sounds today. your you couple ability enter follow-up Vegas Las up presold for little new Maybe be in Great. as year? think to position the about mentioned, of me. for building Vegas funnel XX lease next available you couple more to terms talk Do the XX. pre-leased Is of you’ll

Thomas Morton

correct. that’s Yes,

XXXX, have existing that have additional And we XX first bring And the or we the inventory. around of believe into That of X Tahoe coming XXXX, We online, And PRIMEs we Vegas will spread revenue our in sell we have us. now. beginning in then Reno to is then online. coming Las will half that which inventory. X inventory X

for the into load people to we will we’ll there believe available to lot that inventory of able a demand. and be be that future, meet So in

Gabe Nacht

Eric, talking XX. today currently Vegas about are to we Las customers

early and to is square it pre-leasing. between Thomas’s early reiterate have And So X.X coming available for point, we ’XX. feet online million ’XX yes,

positioned in Atlanta. XX do believe inventory comes do first we XXXX in inventory Vegas. And in inventory have of future. for months We in the online, continue until Vegas growing we’re few we the Las have So We to well Texas. have Las do

Operator

Richard Instructions] question Our next [Operator from Choe JPMorgan. from comes

Richard Choe

it seems going improvement? update is like Data margin some good had guidance that about Can a the you’ve you think Now forward? well. the How full Foundry, we quarter it given pretty about should of give going acquisition that

Gabe Nacht

I’ll that. take Richard. Sure,

to build happy very the market on Data essentially knows to really our takes team sale because a facilities We’re ground us Foundry, we start And the give we were X-year centers. acquiring of into high-quality existing We quarter that our about talked strategic a campus. acquisition, strategy with we the was Dell Data The Data it looking the to had of has And head fantastic. a knew how been that Texas staff, for Foundry on it fantastic the as the facility. by very in data run got we’ve the last sector Foundry acquisition.

that So synergies, in expected, the as annualized we’re going are exceeding are to way about number. The really $X there. we as synergies happy million And Street talked things the already far expecting we with that we

Thomas Morton

Yes.

than with has of the the largest and one good from has is integration, job synergies in a that done echo really that And data Gabe to thing team that Just our resulted faster said sale expected. came foundry. actually achieving

very So that, way the by pleased out. is rolling that acquisition

Richard Choe

you about sale a bit that the can in already talk works Or little Was you it? acquired more before that? done

Thomas Morton

and That a post-acquisition we it. successfully us Data opportunity sale helped It that team the the works Foundry was not land. in was acquired before done not

Operator

next from from We BMO Aryeh question take Markets. our Capital Klein

Aryeh Klein

executing little a that? how Can strategy where better talk maybe feel with you bit could Chief a Revenue be you about expect And to like in go-to-market evolve? Officer. brought do you your You you

Thomas Morton

QX organic XX% Well, growth growth yes, QX then have pretty in good projected. in about Aryeh. and we And

King that brought to group different So the sales. national growing on footprint. we are and doing been feel leader But sales and well we a force, our a there for is Jonathan both in need enhancing X that and We X sales sales we board, in our footprint. going now of that strategy like campuses, And he in effective think that we’re different cities in that approach. need deploying is incredibly a numbers and for for terms quite has in team why is be

need on caliber to and its pleased of him the board, organization have King a we’re Mr. the the that So and it’s is. its a in just company really of evolution size is sales breadth leader we natural that and in that

pleased on forward forward as move very him very, to XXXX. So the into to and we have board results look

Aryeh Klein

then can you it. Got And –

Gabe Nacht

that that sales of expect is addition very, Jonathan national direct large a for in to always which do on And industry this do force, years. Technology, at Worldwide board, but wherever at us we -- for his our footprint. and always things force get continue Not he's to previously Google, one many he to was around the partner. help experience they him to them go. him Jonathan Gabe. wanted known a years, tough very build expect But is He's our brings talent people taking to and really very to only many, -- XX-plus grow Rob sorry, us because him guy we to been of sales to build add been bring lot the channel he's I'm has keep a expertise

Aryeh Klein

some and think big you're Gabe, impact. in had you then, I talk could And just were it. it Got a doesn't you about there? what that the it guidance, commencement there mentioned like timing issues sound But seeing that

Gabe Nacht

small a a locked involved a we impact It were revenue our power When The adjusting pass-through curve forecast that to rates lower we in at QX, for our very for than sure. we in forward guidance. expecting. increase, we actually power guidance Yes, talked primary was power and reason was revenue. had

lower those lower passed revenue. get therefore, rates the and through So we

really quite was large Texas and minimal, issue to was timing it transaction. this the So really related

not with XXXX. of variety customers. and sector, ramping a took So This into instead typically selling customer X, of they’re that we last as Austin sector X the entire until of early do

So timing difference. really the the behind that’s primary driver

Operator

comes question Badri Suisse. next Our Credit Sami from from

Sami Badri

Foundry just references Great. also then through So on these I customers several existing you Switch A question that’s an customer a are the And apply legacy? treating guys? power cost of customers, And maybe walk renewal number might for any are manages base power Data the seeing? is, to just to do pricing questions. and I guys to number follow-up. made Could activity Foundry savings just costs, X you And couple is could revenue revisit actually Data how cetera. et synergy update and both and how one. give kind managed have us things? that treatments you’ve the how that’s the story of could the you But the switch you of or synergy know this we question and part

Gabe Nacht

Vegas or in down to Switch, historically, primarily With a decade decoupled open power an XXXX This time so, over our were from seen last went really for rates we’ve Energy and the Sami. Las been able quite power, in provider costs the power utility is first NV when significantly. going rates. from to actually regard drop our Sure, we market increase power an in strategy, have to that

our we’ve lock that working of for have power now, And for lock average do we – this are increase, the in wherever of we not in So typically we months, in have we adjusted are to specifically possible. XX half adjusted the because rates markets was longer up. periods next provide the in time. Right power to X%. power that customers rates The about with power increase adjust of upward. our But right us locked additional actively about currently and

have related also to our we fields those agreements solar building We’re and solar fields. Nevada, purchase in power XX-year

Sami Badri

on the maybe question it. Got And second renewals. that is then

Gabe Nacht

pricing? and renewals The

Sami Badri

question. Data but just have Is other clarification Foundry versus Switch, it, you you the checking. I’m on may sorry, addressed gave prior one

Gabe Nacht

as that has Yes. to in coming Data experienced that the rates utility Las Texas open here Foundry Vegas. are purchases in power we market opposed No, from

put of that addition renewals is large customers. Data in renewals regard strategic to any and pass-through well structure made going Foundry different, any with power sector are their the for Data So to power for the And Data the last Foundry, didn’t Foundry. quite we the and we signing in

reduction. We another large Data large no the also customer had rate incremental rate, and at another Foundry increase renewal from so same

So happy we’re at the Data things Foundry. with very are way going

Thomas Morton

their gave energy And let of accolades you we the – XX just XXX% to the you our as us and press continue XXX quick for our scale One in sorry. that out green green, top to energy. seen quick proliferate one being Sami, field of know addition, rated have on companies EPA order commitment XXX% the solar building and are may in companies. to us release, just green in

that So ESG our way well power the we through and our continue we’re we as commitment as operate initiatives, our facilities. to that doing

Sami Badri

it. And pricing the renewal just then question? Got

Gabe Nacht

think I’m we sorry, I already addressed that.

Thomas Morton

think that. we addressed I Yes,

Sami Badri

Okay.

and The a other follow-up do X-part supply question to I it’s chains was had more question. with

delayed issues? percentage a because paused been in customer The the seen have industrial of order were you the Switch the of shipments to manufacturing therefore, commencements, if base? centers. equipment lot magnitude with is, number has So us a your that’s that and of the incoming designs X supply say that of go you down or and of is, data guys number would IP of slowing you actual of your the delays chain vendor of give your that then arrive the first or pecking number commencements supply to one with are into have to customers X. How actually prioritized base what components for working since you’re and kind And percentage facilities question

Thomas Morton

All right.

So Gabe, in They’re chain custom relationships as have lead just very our with at products. We we do, different the manufacturers. very long items. so please do go the to I’ll weigh But supply than take long-standing and chain first commodity builds, prioritization, a time this they then pass supply in.

on long plan a go are different So to we’ve been order able route. they because those custom time and And ago. they a items builds,

had So deliver being a significant in and timely any us not able we have chains, to delivering manner. by supply impacts

experienced delays or in time to we As been deploy our obtain they in deploying need their to us customers, delays had significant have on with and customers facilities, they’ve any and pace. significant items sharing doing to haven’t on

So haven’t date we operations. the a way seen our in least to supply impact much chain at in of

Gabe Nacht

to I’ll Sami. Yes, add that,

that our by to we equipment build said, meet the we power our about did and from customer want production Thomas that And suppliers all make A CapEx Switch do of guidance to this million have our has we equipment to product equipment. different those notice suppliers with As power are that quarter. ordering demand. cooling for we – slots increase sure need We of our that do very lot for $XX a that based patents. our on really you’ll

to anticipating chain all our did equipment. we’re anticipating all So any want issues, and not those of we delivery, we’ve ordered but any in in slowdowns supply of lock the slots, we’re not and

Operator

James William question your from take we Breen from Next, Blair.

James Breen

Can mobile you talk or across facilities? data us taking a facilities interest you little bit on the customers are space in multiple give about customer centers? Any all can which color

Thomas Morton

to particular initial customers in we but revenue the reasons XX% our well, pleased and in organization originally reasons the are multiple grow particular we expanded we populating which Texas. in customers that good way is overall is great. elevating to are also stability proliferate, customer not of terms it engagement. in to campuses, as our multicampus But revenue, any our and of the across across which It’s customer good of one And of continued continuing to they during that of is which but locations. to grow, and number – expect The take into has spreading one see tied of back any east industry increase, our continue expanded space was – of of customers mentioned that the to it’s remarks, or that terms we we Yes. is also very XX%

by and will are pleased our we stabilize So those help going of numbers up both that fact it the platform.

James Breen

between customer the seeing spot a multi-tenant single churn customer in you difference are noticeable And versus

Thomas Morton

No, X.X%. has remained unchanged. It’s churn

in QX it So from unchanged XXXX. is

So no differences there. appreciable

Operator

Citi. Rollins We have a from question from Michael

Michael Rollins

little I’m the delve a curious more REIT just into conversion.

the second distribution So was and And earnings the you any retained first, to of a I to shareholders tax prior REIT agreement? this liability topic curious converted to make the conversion? to of about do remaining part have purge the receivable as happens liability How as what the shares converted? conversion existing yet does is already well be from impact from to shares

Gabe Nacht

take I’ll those. Mike. Sure,

are additional additional detail Day the As our Investor detail a purge still upon those conversion, and really required through more far E&P we working provide We’ll at REIT that’s numbers. as next year.

date, ones We’re are a process. ones subsidiary and which is all this complicated taxable accordingly. means and up REIT of income that qualifying, are up We assets targeting REIT be January go which the X, a business need XXXX, divide set not, determine through to during going our to XXXX election which

receivable done. So be of as Two there’s finalized you alternatives materially And And early on a TRA. large TRA, of the from don’t TRA E&P that be items number the need utilize. with but the us. a we lot of the are to range we believe of to still the purge, is the termination continuing a for item depending mentioned, that variety structures those the to another to be that work that’s have different to tax deal agreement going TRA, we

all we of we’ll analyzed as provide is being and it. So information have still that additional

Michael Rollins

number moments the se, an revenue of churn, not How then a just had But range had about the of and you’ve just as bookings And investors should the but at quarters. possible the lumpiness has each, last on other which outcomes the bookings, churn elevated then update think – per at in impacts. trend look customer certain also on of side you on environment really general. over

going about right way forward? these to So the lumpiness of each what’s the think of

Gabe Nacht

for our been last annualized quite signings million some elevated for as quarters. number, was incremental our annualized because X flat that at far QX over as have has Actually, revenue $XX relatively in been But the incremental bookings in. quarters. come at large we’ve typically XXXX the year-end, of X bookings last we Yes. running

so incremental back of go you running $XX were we around year a revenue. annualized million or ago, If typically

So year increase the exactly our things we’re we the in knew commence and into as bookings. signaled happy back commence. quite accelerated is I correct. But really earlier there we because And bookings in and the we ramps bookings lumpiness would you We’ve indeed revenue occur. and year had in mean as what’s going our revenue, that with are happened. have that’s that the would half of excited

same you and number growth at XX% obviously of is we’re looking looking that’s the half prior QX If year But quarter the we we’re the had really, that at organic look growth guidance. as they of and XX% this of our growth in for in because back to XX% QX, through midpoint the had we’ve – that the roll revenue. comparison commencements the in in QX, exciting in year

So is to lumpiness some business. there our

of I natural just think that’s part what do. we a

those We that’s ramp large capitals. the companies XX take have cabinets. a cabinets as number in, hundreds know, lumpiness. cabinet X retail that X take cabinets, some of XX But then of customers to a as what very have you bit that to clients, we of creates And

Thomas Morton

deals, at the in deploy. large overall, onwards can upwards – you’ve timing deal as then we grow. projection the some revenue we in and that time. have Every and looking But way be continuing to is and they in. And have is of it are ramps close to XX% there said, is deal different. I once that over their that starts is or true deal, would Gabe organic larger to how to and takes And even time flow in And QX. they closed lumpiness when growth some it and rollouts out deployment their do phase-ins what is that all we a schedule figure as even

both coming channel sales, indirect and the to growth. continue and our believe And of beyond. We sales we our into us have we direct a way to partners that firming So sustained going board King – we have and momentum on platform up with do Jonathan and that growth – XXXX built sales

Gabe Nacht

future. excited long a we’re history many digits Additionally, Mike, company well, continues and our growth that history double you double all proves run, to out. been we’ve digits, doesn’t many, over And our compound our the years. growth And know that but very annual time. for But be our it’s about the rate mean double-digit

We relatively have feet that. And future. in online coming space million coming then X.X square $X.X the another of short online after million

building now. no the inventory right standpoint, kind Switch is quality building we And building one building. that of is from certainly, nobody is believe is that an So Switch inventory the

to corporate hybrid So centers growth. we uniquely looking to a environment, continue and – positioned to cloud colocation and are as that centers corporations data close believe move are data we their

Michael Rollins

we’re incremental was ago, quarter, this customer revenue was in in these X what’s didn’t And them. just there that the migrations it X side, was the fourth if as you’ve come up types had with of some just thinking churn should customers? out of churn. I’m any coming on correctly, be some conversations remembering that kind next the and churn I for years migrations over that see of year of to There chunky up risks just Are the mindful of in we renewal had there as or you think you X a

Gabe Nacht

going to now, isn’t that we see Right significant. the be horizon in anything really is Yes. there that

have the over have out, data normal do We for When at the XX workloads cloud. near move looking been the expect customer years that that another, anything moving They’ve material. cloud, deployments years but are to you doing to but multiple there’s that years, material nothing workloads say back that to customers from – facility one good out, multiple we’re are term. don’t we what going on I customers from don’t

Operator

Frank from question The from comes Louthan James. next Raymond

Frank Louthan

you’re on question XX? that seek idea you conjunction some missed causing think of to I can power the conversion. with us IRS PLR but And will you morning. few need is us to you in that’s Do that REIT with has January – Can a this, the to you confusion the going able done the this And then be somewhere? that? maybe I’ve Or think an been pass-through got before another get give I running disclosed some quarters? give what last

Thomas Morton

year seek Gabe. that I’ll there think to REITs. But data as centers PLR do speak do next the second throughout continue and more implementation and It’s to And to on pass-through that speak power? to being in the to to January options Investment a towards as the do pretty going need Gabe, pods answer our of various a Day. have have need we’re to isn’t to about we we that work we’ll a vetted we of And we XXXX. conversion want don’t REIT, and the to you X, question, evaluate well this conversion probably out, course that. into

Gabe Nacht

regard of variety With contracts a sell flavors. to we in power, different Sure.

of circuit number circuit-based and buy as a much they of use a will a cabinet with have they as circuit where that We can customers like. they

buy We that buy cabinets separately. power have then and customers

includes that have power. We power to that and customers cabinets all-in commitment commit both an floor

our different regard of mentioned, sell we’ve we and So that. as about and affected of ever XX% about average, our customers increase of formulas. the variety passed increase power the it utilization we that is I was, our a done the through, X%, on time this to of With typical of first

Frank Louthan

Can But what a of down, can as really kind as Okay. idea does of going so guidance the an dollar get far basis, on mentioned that usually run margin idea – you quarterly we that forward was you it pass-through. basis, magnitude coming low margin how like on us what’s of mean, changed I give the – an here? a so

Thomas Morton

Yes. The increase $X about -- the were reduction million in the in QX. expecting we that was power revenue

of our the that's guidance. in decrease part so And largest

Frank Louthan

the else the and change? is delta margin to for it there low anything that Or -- much in it? there Is Okay. that pretty was

Thomas Morton

pie, earlier made the to really in that The as large of piece sale we related about of taxes. we timing was talked the the other

Operator

Colby have we Synesael from Cowen. Next,

Colby Synesael

Great.

it. else maybe and So I apologize, guess, I’m still confused, everybody I understands

of on you passed though a, So presumably it which to your you million the I also revenue that’s even on necessarily the that that I to quarter that then think, and But fourth in you referenced implemented would you you revenues a for benefit power into saying X% EBITDA pass-through saying base, pricing, as you’re customers, not a positive XX% guess, on reduced XXXX. and your increase you your lower just got for Frank. you’re guidance $X your pricing and then said just lower to have

amount of X but as even opposites. you’re enterprise? than extent particularly in decent a you – kind accustomed what the just said you of Michigan. historically have I’m they example, what may guys for in you’ve may of secondly, on types in be deals trying though you Would they’re perceive see more some interested when where polar signing, that to And So you’re to an bigger those seem unpack markets to focused those deals, things, for then hyperscale so capacity, opportunity

Gabe Nacht

we were of back by revenue And than to is along not power our million We That’s $X had expecting revenue about the actually we than the that the that we in anticipated But less anticipated, locked with million pass-through what pass-through lower power put regard is million. so QX, to certain lower $X why amount half we of increase. revenue in power, additional or our about in in impacted. prices cost. pass-through when year. EBITDA with $X we guidance forth of Colby, Yes. a built coming comes

that our I guidance guidance increase we and we numbers So that. mean expectation. hopefully, helps. have actual part in was for adjusted now of based on have in QX And that that

do types interested As the far you Thomas, as sales to? want of we’re that in.

Colby Synesael

That seems mean that for that does they’re, and higher the isn’t from X% described? you by mean doesn’t if that that your for so And revenue, X% just go business. it’s – I for intents I how that. I separate is separate X%, that, pricing that to purposes pricing I before and guess, XX% total by then? play of this you’re pass-through component guess, Is X% increasing raising into the

Thomas Morton

no. a that no, No, is That component we the is

Gabe Nacht

Yes.

mean, not sorry, I’m have timing, Some increases increases of in – going to a increases and those Those we too. full quarter revenue. pricing partial offset but the the in revenue. increase be in didn’t it’s seeing it’s it I increases -- of of that’s and only pricing full QX, in reason quarter the will quarter doesn’t that pricing a QX you’re new in was experience a part in

Colby Synesael

offline. it take can We Okay.

Thomas Morton

Yes.

Okay.

open Reno, in customer we took from had are larger customers, to megawatts doing As significant. which us, year to large is XX a that last customers. We absolutely fairly

building have their customers, scale, customers. in in come in mean I potentially most we large but have our And customers migrating talked a XXXX. mean, their potential because because – that from of environment. all corporate you’re a where those those a X have deployments number in reference Reno small coming large cloud about they’re just colocation enterprises they’re data enterprises out talking customers, and or centers Hyperscale, of the we when enterprises impacts doesn’t into And to but large-scale those online campuses, in We sales not queue. just that X we’re and notably it’s we up of the very seeing

Gabe Nacht

And on we’re Colby, to just saying, you’re there be want want come that confusion. back, sure and any make clear what to I don’t I to

look at About guiding adjust numbers, $XXX of for able QX we’re the at revenue, $XXX.X to the million, guidance, you half about our power. midpoint running we’re to million. if So that

million X% or what’s roughly or And getting so. take you if So today. about a on to guidance million you’re that, you at so $X.X and $XX quarterly in additional increase of revenue, that’s our

and double we that Now rates. lower be to to thought Does we that in were going QX, lock was clarify? in about able

Operator

a from Brendan Barclays. from Lynch we Next, question have

Brendan Lynch

you the It Maybe an how update in a Maybe center slide deck us like give just Tennessee? the can photo from give initiatives. data on is idea edge looks an the rollout us going? had you

Thomas Morton

that. about in Yes, online in excited put to of is Brendan. yes, a near future, Tennessee, we’re data that did come picture And and we edge looking the center the

revenue. don’t expand fourth queue or center the do platform the expect a and to that cloud Vault contributor will it view roll time partners data announcing launching take colocation in our of probably on but do other of that conjunction a in large large be in XXXX. some to locations the network. significant our Edge terms contributor will But we in have telecommunications and work we with is again, be out our just really effectively, a so The XXXX Edge remind edge everybody to We with and not from point opportunity remember into. in is –

Gabe, is to you that to will. if that? So just an add update edge, on anything

Gabe Nacht

No, I covered it. think you

Brendan Lynch

a And maybe just follow-up. Great.

release at Or targets? you you your You press objective Can giving giving more AFFO specific -- us is generalized? the EBITDA Investor and you're if planning revenue, going on multi-year growth alluded objectives growth the be Day. are tell to to

Gabe Nacht

give long we’re revenue to Well, over growth going the targets term.

margin an looking forward over range, we’ll to but give tuning some We’re long as we’re in EBITDA going get additional and data. to AFFO provide your on that target the certainly well, information to

Operator

Berenberg. from The Nate next comes Crossett from question

Nate Crossett

would When follow-up terms But I kind something sounds conversion REIT amount. going just ever about the highest be? time, that? think that like timing be not a large think like would E&P the It in it’s they’ve of to of levels are on your how Maybe the at the same funding one And distribution. leverage on been. the you

that? square on overall And comments we helpful. should So kind leverage would how then of be just

Gabe Nacht

Sure.

really determining the going E&P As any we but or exactly a be still far going us. material purge, of is funding it’s be, what again, that kind believe as we’re number don’t to for issue create to

election As do that timing, which have we X, the actually of make year, our election returns, XXXX be that XXXX, tax to before have until is tax as far to make we would as the effective January XX the while we we actually election. October file

at required. we provided Of dividends acquisition election we operating your But the ‘XX otherwise, a separate believe E&P in ‘XX as REIT want to because it’s REIT place but be course, you’re were our would take shareholders some with able balance required equity a the and assets tremendously haven’t purge that immediately from think don’t wouldn’t our at as busted We’d and we of that, we that wait want no long. to really. you’re you you to sheet the likely leverage of your make if as you’re inception point, the as data the – effectively. since raise, increased foundry And value, and used going company, very as we be low enterprise benefited we’ve we material. were additional of general, leverage because in far do which to operating And

power in you to in We’re lowest that QX summer and EBIT sitting down come back our quarter at we is margin Nevada, our but QX. rates we expect know typically around look of history, Xx at today, if leverage because

Nate Crossett

Okay.

there? of mean, terms space upon there color the a us there the in you converting give Just payouts. I a REIT. dividend disparity about to could is Is any across level

thinking what’s that? I’m on – So just your

Gabe Nacht

the more REIT information as have one this we still that it. part on just many conversion. on complexities that We That’s will we’re of of as provide working

Nate Crossett

last Okay. lot just shares, just of the liquidity latest Then get to? just a would one I’m the picking been to you up redemption on year. what quick curious

Gabe Nacht

through XX% under floated Yes. If shares. reductions just we look at November, publicly our at we’ll latest be

with float dissipated. it So as good got The we’re has low volume. sits. happy quite float currently essentially concerns the about trading We’ve

redemptions additional hearing next not And see We’re we’ll that anymore. year.

We partners have year. opportunities redeem shares for to X next another our

Thomas Morton

worth day. that’s trade $XX Yes, more million of north of a correct. currently We stock

consider do people not an in stock most us respect. So illiquid any

future. So the we really XX% gave we get crest don’t that, and right. will near We many over questions on in really

Operator

from Erik take next question Rasmussen [Operator from Instructions] our Stifel. We

Erik Rasmussen

But lot’s Foundry costs, addressed. the sort it obviously factor Maybe in some the the the impacted of rates structure? were limiting QX. margins return the that’s power just of just it been sounds margin creating more to Is like really business headwind this what’s normalized at EBITDA point? But a by to but higher Data given you the

Gabe Nacht

Yes.

the ahead, -- go think Thomas. I

Thomas Morton

QX All are The power the costs quarters. always right. higher than other

that item goes That’s HVAC electricity see it’s we It’s run electricity year. seasonal data brought in use a up. and every point that foundry nothing X about hot. more foundry, reduction resulted that’s XX we So of summer, board, We the the to units And and have months margins. then the which first that have on we’ve data basis we on new. in a price

Erik Rasmussen

just then access it is Or some equipment And Great. really market just to critical in a hand, purchases. that Is little components there’s clarifying, of accelerated is getting that’s more the at and chain about you talked more Okay. challenging? maybe demand? supply knowing issues that the whatnot

Thomas Morton

Yes.

growing the orders making potential own are the facilities and that continue the for their and our to ourselves and we that avoid our expectations a that issues, rate, know sure they of our our any that a money need that the just supply builds the supply that suppliers they adjust chain. rapid longer have other fact of putting orders is it there, we to in such chain is Some are just at early,

So adequate place both done us equipment had delay. our suppliers what time we the make we without our to curve orders that the is help that have earlier to also and sure demand need provide

Gabe Nacht

Yes. Eric, bit. a add to I’ll that

is year after look about lot we’re are but also our customer Las that. a facilities of to due plan, also build other But coming at be XX online adding not a demand. online, only Vegas coming our facilities equipment Reno the you to If going to

equipment to adding We’re due to customer Las demand. Vegas XX

demand. customer Atlanta equipment to adding due facility our We’re to

as production think from said, So it’s we Thomas in our primarily But I those demand-driven. lock also want suppliers. slots to

Operator

no an for this joining. further brings Thank Okay. questions, which call are to now There you end. all

You may now disconnect your lines.

Gabe Nacht

Thank you.

Switch (SWCH) 5 Nov 212021 Q3 Earnings call transcript