CYXT - Earnings call transcript Q4 2021 | Cyxtera Technologies, Inc.

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Operator

Good morning and welcome to today’s Cyxtera fourth quarter 2021 earnings call. My name is Bailey and I will be your moderator for today’s call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.

If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the call over to Greer Aviv, Senior Vice President of Investor Relations. ahead. go please Greer,

Greer Aviv

our Good year welcome On XXXX walk available we Bailey. at quarter today’s our and will on materials the full earnings through Relations morning you website to ir.cyxtera.com. and fourth call, Investor Thank conference call.

joined lines Nelson Fonseca, here for Carlos Q&A. CEO, President we’ll remarks, by After CFO. our prepared today open are and and We Sagasta, up the

the future today’s expectations. begin, from today’s a of our discussion Before forward-looking Please those statements. in statements Safe like earnings that actual materials would you including that presentation, for uncertainties. contain major I Slide the subject our filings we factors regarding our risk earnings are remind forward-looking SEC Harbor our language of could All statements on and differ to and statements, to forward-looking to materials, risks X cause to our results refer

In addition, non-GAAP results. several when financial our measures presenting we use

included information. the to have in I’ll measures over Nelson. these call that, the With We to supplemental financial reconciliation our turn

Nelson Fonseca

Thank morning for call. you fourth thank our Good and for earnings us joining quarter Greer. you

report company. to fourth our and year plan as in publicly out execution delivering solid pleased We’re growth of quarter, finishing a as first XXXX continued traded business the

Our go-to-market partner the with robust our XXXX ecosystem across demonstrates customer we an full year strategy consistent platform. execution global and performance efficient that leverages have built

increase for core XXXX. bookings annualized totaling XX% $XXX a year strong the drove team Our over in revenue, million

to executing year-over-year. core midpoint innovation, themes: this focused on $XXX on transaction-adjusted year, and and made the and combination or of see bookings capital revenue can the average of and core and growth on on customers, were three the This structure. revenue in than organic on focused X% momentum, our key of ending employees, growth, churn more respectively. million on you year-over-year As our commitments shareholders. X.X%. throughout X, of resulted XXXX X% plan we X% growth We growth Throughout our delivering lower improved at Building partners monthly churn Slide XXXX, XXXX quarterly we and implies of strengthening guidance EBITDA strong

of transaction-adjusted expanding In In year-over-year. quarter, achieved revenue and logos strength the of we to I the quarter, in X%, EBITDA X% platform of growth strategy. new outlined XXXX EBITDA core in more growth more of fourth accounted success our margin than points for of XX XX attracted than while terms with our go-to-market basis growth, our bookings the demonstrating the differentiated which XX%

For the full XX%. increased year, new acquisition logo

which increase acquisitions, program, results, on continues than delivering logo XX% produce partner focused channel is new our to an Additionally, of more year-over-year.

interconnection XXXX. in our prior at year revenues Regarding XX% the year, growth over approximately of of ecosystem, representing XX% solid total another saw revenue

we and expect over to as to partners the percent generated providers from interconnection solutions time We to our network global increase our service add margin of high revenue continue ecosystem.

transformation to for emulate. consume, to our centers of our unveiled to offerings is digital to Throughout differentiators allow customers’ edge something customers we initiatives. data easier make business support one of difficult As constant previous I solutions a value in the house mentioned call, the team The driving innovative to part behind innovation our customers. push is to it’s our earnings culture increasing deliver core Cyxtera’s the force on and is develops the seamlessly leading and our another, that that key of peers connect and our XXXX, one

their As applications workloads to growth, business component becomes looking an digital and increasingly and deliver enterprises the mix of infrastructure of essential efforts agility resources require. continue solutions are to accelerate transformation hybrid to

with speed seeking reliability are both customers Our and scale typically the comes dedicated with associated and the the security and cloud infrastructure. that

earlier network with in market metal and service to cabinets on-demand deployment accelerating platform press power their a bare and recently digital their reducing complete off out in the Package resources the solution. model. business significantly requirements OEMs to on-demand delivers In access technology both a announced technology core immediate on-demand this provide the schedules infrastructure of address enterprise enterprises which SmartCabs how like leverages trend, these an exchange and dedicated Bell to offering providers, we colocation IT customers an solutions growing audience evolve, fabric. offering and looking configurable as gain adjust infrastructure built-in today our we are platform providing recent Fabric companies ready-to-buy Technologies flexibility release, purchase to and innovations, future. exchange digital Building Our and called time SmartCabs to to as-a-service integrated, who

makes a high capability this leverage center providers, sales channel. to Cyxtera’s them service global and data OEMs growth it easier for as For platform

ability recent Building most customers’ innovation network major that’s customers foundational existing our every the provider environments. capabilities, exchange. hybrid extending their customers reduce provided and ecosystem to the to to enabling area by establish connections IT comes value by Our to in on performance we’re strength costs, architect The Cyxtera’s an network improve of throughput, bandwidth our reliability. our increase cloud on-demand and to directly offering allows via digital interconnection,

latency natively and our providers capital offered detail. on structure, directly through demand strengthening cloud we more to partner will now the customer connect made meaningful which progress Carlos optimizing have on solutions, our out in connectivity balance enable To we discuss cloud reliably, low via we XXXX, portal. While long sheet close customers to

to to next to positioned access growth of strategic enter initiatives. phase our greater well support are with the We and growth capital our flexibility

remainder growth our to organic will focus ahead sustaining our As additional on we XXXX, differentiation look our we building maintain on through innovation. while of the

to meaningful this, people, opportunities initiatives of innovation has found across just customers, make prioritizes a progress partners, Cyxtera ESG Cyxtera, we it. our while the At of sustainability believe a demands of is without list Cyxtera’s and our We we by enable efficiency metrics a at currently across and and in the To this our top of to based guiding developed environment, key our platform. operations of XXXX. that as we organization. of of in prioritize that harnessing mind. shareholders, are level impact world our measures we holistic our better stakeholders, our is oversight we culture society we bit will whole. including expand To that have and our at carbon-emitting to compromising minimize a on achieve leave which sector To looking ESG global the XX% us On efforts. approach at than When ensure energy achieving also our goal energy XX, corporate initiatives share and the products our environmental, established the non ESG environment proactive the of ESG operate, needs the the areas, on XXX% Slide all strategic end, with and little some mitigating in levels employees, each social reliability. governance center data multiple the responsibilities we established board prioritized evaluating of

our at a in by average level gender XX% employees company’s generation to and is of In peers. of in line we’re with and impact PUE investing develop workforce, our cultivating culture and retail VP above next From our colocation Currently for inclusive employees to ethnic leaders represent our a leaders, our of to communities. back providing X.X focused diversity. the their and give perspective, performing opportunities social maintaining high diverse teams on addition, our of

ethnic employees on our shareholders, we a overall on maintaining are gender addition, board of diversity. partners, leadership governance our From industry XX% and customers, focused development down. the in program trust with our from of In participating perspective, and directors the also represent

CEO Our board and represent XX% of of diversity. XX% are separate consists ethnic roles, directors our and gender Chairman and independent,

continued culture improvement. and strong structure our corporate are have our of We proud governance the focus, to and place deliver ESG in

look markets growth, As to and inorganic we will we further evaluate expansion initiatives into accelerate other opportunistically. new

value to intend in opportunities focus markets our geographic to implemented to process have We expansion international evaluate internal available are we us. the which an strategic adds positioning to our We efforts provides many and customers. believe our to effectively increasing that

will opportunities pleased EBITDA our core for focus are that by plan deliver we financial allocation those strong revenue to are highlighted More capital growth margins. to importantly, we In disciplined accretive continued with on expanding XXXX, and a summary, approach decisions. results to organic

about profitability excited attractive on ahead We platform, capital. our global and to opportunities innovative us solutions leverage of to and and strong drive returns ecosystem, increase growth, are the look differentiated accelerated

I’ll the cover the detail. to to call financial Carlos results over in more Now turn

Carlos Sagasta

joining Good Thank thank our everyone Nelson. morning and for for fourth us quarter you you earnings call.

sources and and Cyxtera you our XXXX from we in investments. innovation, capital continue to good As continued We access and financial see more we technology new customer support purposeful accelerate further fuel have ability a which fund returns a meet us go-to-market enhance I quickly the detail to growth, have strategic reduce as XXXX leverage strong in support executed minutes. discuss needs for on organic balance to taken The in sheet company. for year now well to heard Nelson, and a continue to to pivotal product public was outlook efforts. growth few will steps to XXXX, strengthen enables a our and and

to for performance increased to Slide million revenue bookings fourth to by while X.X% total $X.X $XXX.X X.X% momentum Turning increased The continued quarter quarter. net the million. performance during XX, million revenue in million, recurring attributed by the $X.X strong $XXX.X revenue year-over-year to or can or year-over-year be

XX% the and enhance innovative expected are mind, revenue total of as Cyxtera interconnection and ecosystem we and for the quarter we attract and revenue products Our With in SmartCabinets, new robust bare which year-over-year. across metal grew represented customers built services, QX such launched, to recently platform. the that X% have

Slide revenue the as an For Core XXX revenue, to by due efficiency grew and in Lumen of increased $X Gross fourth in installation XX.X% basis which on year, offset excludes costs year-over-year increase was was initiatives, or XX, approximately year-over-year, X.X% utility increased to quarter. the higher margin shown revenue, costs million. million ongoing lower full XX%. $XX.X by attributable $XXX.X interconnection million points primarily to revenue which

of flexibility contracts. increases discussed through quarter, contractual more to than have power the As pass we covers XX% last which our costs, we in

and center to While our a higher into issue on XXXX data impacting expect have our an this to costs the broader small outlook for this industry, are impact energy we have results. continue factored

is power because customers. However, that activity pass-through to carefully understand this we impact consider real our very a we

a there throughout it discussion remain impact topic the between our key the Finally, ability of is course to sure XXXX. pass and change timing a I’m of costs energy cost will on.

higher to declined EBITDA, or revenue. primarily of decreased year-over-year of Moving EBITDA which to million, equates year-over-year onto by approximately $XX.X Transaction-adjusted EBITDAR margin by it year-over-year. X.X% XX.X%. points XX.X% million, Transaction-adjusted $XX.X $X.X X.X% XX margin $X.X by due transaction-adjusted to a basis or million to million increased

want churn core performance As EBITDA of been quarter absorb significant for for public structure. a for I than everybody quarterly EBITDAR expectations original and beyond our able company the ownership our year-over-year the our eight to because costs asset quarters. transaction-adjusted EBITDAR that remind have the skew fourth X.X% points evolving reminder, also monthly basis we represents and peers as our comparing to view that more comparisons. best transaction-adjusted to were it metric adjusts XX year-over-year in and improved lowest level our Average

year, Seattle coupled increases in Toronto XXXX across our with quarter from QX. level. expansion strength Within in occupancy For New with increase North level. markets with X.X% and gains customer our stabilized from monthly in by of markets. of improved directly This the points while point increase and benefited customers, in third sequential improved America, a basis occupancy was represents of churn utilization exit We XXX also existing resulted double-digit strong rate led full core of Jersey occupancy churn increase the growth. and an XX.X% basis from in related over The experiencing the ended to primarily international strong XX XXXX Denver Frankfurt a were basis has occupancy. booking QX by increase The points deployments XXX healthy average rates driven

core As MRR primarily $X.X detailed installations. million to increased Slide $XX.X FX of to on XX, due net million, including

primarily significantly MRR capital times contractual reduce net quarter We I mentioned earlier, X% now breakdown and basis we timing with we leverage previous to financial to investments have able guidance to If points. XXXX. ongoing been of in a ended maintenance fourth million update Silicon with an capex On Our we reminder the our and the on of corporate. down have and Slide revenue XX, London, currently XX ramp customer decreased a timing capital during due in times between balance our we XXXX, level. an modestly expansion, per Jersey to Though specific Slide improvement was capex certain sheet the declined below X.X have and Chicago, of market. the activity, from New cabinet a projects leverage a projects, QX of as to XXX of in due buckets due markets our the also was maintenance Valley year-ago $XX approximately projects. provided expansion QX QX for to major X.X turn above year-over-year

our lower business levels our on the this confident this the the remain we variables. progress great can are and debt financial to net can making of and different go-to as that better de-lever target term best to We’re continue way constant. grows we liquidity control metric to leverage and view We closer as measure long EBITDA

You the year-over-year. on leverage can an was of XXX basis see that also X.X in slide lease-adjusted times, points QX improvement

future relates we XXXX. our it have ahead opportunities, refinancing term As believe loan and ample maturing of in our us to capital we structure runway with

sense We to business all the continue and that support make to growth our evaluate possible in most plans future. the avenues

near it to under financing ahead and these of timely always address any items has needs in get the term, manner. to philosophy in not are a While we thoughtful any our been pressure

As of approximately million announced for recent private which exercised public press you and warrants million we of basis the completed a common on X than in of the $XX.X exchange shares releases, was warrants, January. December stock. were the More XX% our cashless saw in from likely outstanding redemption in

had we clarity goes stock million add capital XX, of common January long to this outstanding. way our believe of structure. shares XXX As to We a

quarter purchases in XXXX, In a shares to optional entered $XX Holdings this elected price stock purchase we pursuant the transaction. first of XXXX. In announced related gross the purchase X.X share to $XX received at forward per addition, proceeds million share SIS of and of of of into the agreement September million we to common

Finally EBITDA revenue growth. our pleased strong Slide guidance are year the XXXX which and turning on for to outlook introduce XX, we imply to transaction-adjusted ranges

or revenue We million million, of $XXX total midpoint of increase X%. at a in the year-over-year expect the $XX million range to $XXX

to midpoint of We EBITDA $XXX at million of million $XXX $XX increase million, expect X%. year-over-year transaction-adjusted a or the

ahead be expect capital X.X% maintenance to we our of Looking projects capital to previously to expenditures, due primarily XXXX as revenue, to outlook X.X% expenditures of for timing noted. approximately

we between the $XX expansion year-over-year relates million of capital, midpoint. a $XXX on million it anticipate to to at As expending $XXX million increase

of customer to context capacity resulting been center capex deployments chain supply ongoing pressure. and in We discussed delays and specific challenges build at primarily in expect this increased discussed industries, including expansion, level In other to of the for signed have across development widely out support industry, growth previously. or expansion inflationary times data projects XXXX future many the

XXXX. for myriad XXXX, manufacturing were challenges, While we the navigate not reasons, imbalance of seen of including of demand have cycle the pipeline we all are nature are immune to and and through of shortages to these and these raw we somewhat supply to successfully more insulated the development said, we a as enter issues due able our across of lengthen markets. That materials end

such way we We work suppliers prices necessary. have we we volume as over the increase ensure purchase, optimize supplier pool, a or higher buying seen in longer where closely horizons to reducing as partners time and our only modest with our

have and in partners All continue should been outlook we contemplated lessen impact confident that the factors with to can of successfully they we challenges XXXX to of our our are intensify. engage these

your successes all continued discuss our joining I would dedication not and many full and be the thank Cyxtera for results. commitment concluding, us you support the to that, achieve for teammates Before today With to thank world XXXX. quarter year their for of to and our remiss fourth across

over open Let line me questions. the turn Operator the it to for to

Operator

go from Raymond from comes [Operator question Frank, today instructions] please ahead. Frank James. The first Louthan

now Your line is open.

Rob

you then impacted you items can your this far? your so on margins impacts are highlight business largest for on Hey by of inflation How and much guys, that Rob Frank. year, the say inflationary would this is

Carlos Sagasta

part Frank had sorry, Can Hey it crack that it first we of asking lost please? line - your horrible again the seems it, and question. you a behind try the

Rob

items impacted you on this worries. your more you. no impacts business? by Yes, inflation margins generally can Thank highlight Rob inflationary of the your are How much on for This is largest year, and Frank.

Carlos Sagasta

impact we on relatively to general, believe is a have margins. going in think small I inflation that

that expense, basis human fundamentally really It’s few energy, believe our pressures we’re major. resources, Human resources. some some see a on there’s going about when of structure, absolute you perspective. points all a we we at seeing. cost margin but think basis, inflation we absolute so an seeing obviously pass energy, from and our and we’re would so I I cost dilution great capabilities structure look pressure pressure, rent although we’re to don’t have on say that see basis cost, an nothing is to on dollar

of us source for I think XXXX. remains the single of pressure focus energy inflationary in

Rob

thanks guys. Great,

Operator

next Markets. is ahead, your from comes Jonathan Jonathan, Thank line open. please now today Capital The RBC question Atkin you. from go

Rashim Jain

Hi, behalf morning. Atkin. good of Jon on Jain is This Rashim

questions, a have few you them. We could if take

on the related for center the exchange the of current the to target is those of segment, segment you run Then annual of the the lastly bookings? what digital cross-connect interconnection comment the that the what on business is data volume quarter? run you. could additions for First revenue new Thank business, the occupancy, in services on what FYXXXX was occupancy company? rate Secondly, attach and rate

Nelson Fonseca

perspective, occupancy occupancy we’ve a will for I metric be. don’t what From an XXXX think given

period, our we’ve to so I we with they’re on us and for ports. frankly term exchange, physical be and cross-connects interconnection over guidance and digital what expect our digital what interconnection perspective given one From both that’s focused including on. same, longer a think occupancy the exchange we’re five-year an

statistics multiple times, exchange what out I’ve the will you, out logo is our of digital anything and seeing, platform, and connections want is exchange there? and strategy lowering we’ve value proposition, churn, add tell and bookings what’s how our amount we the that or there’s of said it and our publicly we had broken point. our the been we’ve the to We I selling. What I ports of ecosystem customers--we also mentioned haven’t those center that’s yet data of digital broken been selling driving and bare this which you Carlos, haven’t so to the accelerated fourth is the sales attribute metal goes if know in that part performance strong core really we our entire that this new go-to-market that’s and the team so but yet market to don’t a at global platform, quarter

Carlos Sagasta

would satisfied with only is growth interconnect No, thing our I that I we’re think XXXX. say the in

Nelson Fonseca

we yes. Yes, had interconnection growth, strong

Rashim Jain

Thank you.

Operator

Thank next go you. please from line is today comes question Rollins Citi. ahead, Michael, open. The your Michael from now

Michael Rollins

Thanks, and good I please. questions, could, if morning. I have three

over that that opportunities on fill of out what robust demand had what taking the where at quarter, looks number The supplemental first and was of existing exit Thanks. through a drove like many broadly, the curious where but for in the are up, Then of it markets was few maybe option your looking you was per down, of are the pick that just of ’XX. and months? core and markets in leases, there’s kind schedule, to in driving is to the kind was just the second back MRR capital flows demand walk next step slightly the and XX quarter. curious Then items opportunities of in to but question just is what spread you finally, quarter, just just the up the the extend weren’t the backlog flat, opportunities fourth one as where is into a the could that other cabinet the just utilization, markets of kind MRR those the what on a seemed increase kind utilization sitting to an the more

Nelson Fonseca

so the I’ll first. address Mike, Thanks three. all last take let’s one

think of those Bookings bit bookings very when little of in year, the about go a these markets have we occupancy quarters the variable when take Carlos we with hey, mentioned you would Frankfurt global that occupancy as how and definition the about little choppy, maybe platform. reality and think plan bit that, in the you do some is but previous key answer, think about driving the we’ve markets, you on mentioned pleased way our that in excited increases very we’re the you in by selling some those a look to remarks, market Denver, his is it. full I had saw we at markets We’re previous about value we always in performance. QX, is over where growth of said, a up a proposition

in not the want to bit about. are something yes, on but quarter we know that but Carlos, to other-- to quarter market, a concerned little up occupancy focused perspective from we’re So fluctuate going you that’s address a driving I don’t if every

Carlos Sagasta

the Page very, to well. Yes, of look MRR MRR for around so reason bridge, business at Mike, your MRR exit first the that when feel actually cabinet growth question, on on the very XX, X% MRR for we versus bridge we X% It’s core doing the feels strong that per is obviously exit that why of us. on part

capitalize to the the got see and where fourth work itself in simply temporary MRR time per a think into developer revenue because for in because to you you reduction and out a quarter, between the and lag the still way in Then facility a of the that the all QX calculation, to numerator, the temporary calculation. between lease speak, the our a all metric we as metric, for on of the the in you we once seeing signs options what increase. new so customer a QX extend, ramp something contract, the added and the as that’s now, cabinets know, we the see That’s new should up are that the but have not that the from those assume and decrease coming part we cabinets methodology denominator you a XXXX. until revenue you coming cabinet showing options, is report into I on that so we is tend a

Michael Rollins

lease of facility existing to an that that something or is existing development, facility? expansion new is So related or

Carlos Sagasta

one It that with keeping to capture time of we in facility to it’s occupancy markets, added that continue response was but our can a part growth. our we enough new customer of make sure

Michael Rollins

for my this answering Thanks morning. all questions

Carlos Sagasta

Michael. Thanks

Operator

Thank go please line from next Elias open. Michael question is ahead, you. The Michael, today now from your comes Cowen.

Joseph

for Hey, I on to taking really on question. wanted thank Joseph just you touch guidance Michael. for my quickly. This is

First, anything Lumen much little is that in two, that? guidance that there for adjusted ranges upcoming bit you. than EBITDA well a your included noticed Is it’d revenue the touch just as particular wider be normal. really on I churn have and behind appreciated. If in and you quickly, just ranges; Thank there any reason could

Carlos Sagasta

there Lumen, be on gave to I back so Sure, last impacted by Lumen sense if think revenue from our go of presentation projected day going assume you of we how May a was the we to already year, analyst contract. and

year, in disclosed May this line in what you very of we’re in with much should of there. in projected we surprises there be is having is we What first year no step-down As the to have step-down. which back last know, XX-month so that contract, little a May

Nelson Fonseca

And it’s in guidance. into taken the account

Carlos Sagasta

felt to we bit think take to the went so a so step and speak, and ranges from of little of of and a date, a because came guidance a it’s that decided already year visibility, late We good things out a bit perspective, Then great a little This Yes. year, with last a maybe like range. we we at such over-deliver, tighter it that in broader was part the take yes, year the are many had we so under-promise we market XXXX. I chunk to in to range. a cautionary good because making volatile, wider

Joseph

you. thank Okay,

Operator

you. Thank

press like one James, now James telephone comes would open. star reminder, ask William ahead, The line if As on a your by question, from is please today to you keypad. please from go question your followed next a Breen Blair.

James Breen

taking question. for Thanks the

the talk low have, assets you’d where you occupancy of general to it XXs out? XXs, that on on environment you assets to high sort perspective, about is just down have as get you thoughts moving obviously of - more it stable a flattened the you Then you you where low rate, Just leverage know, think can see just based from around coming where sort today? that you XXs, to the before it’s think--you year-over-year, Thanks. a given get

Nelson Fonseca

so Yes, on been That we inventory our in to markets by in that comments We a that occupancy, point, couple but little about that up additional range. want we’ve that at consistent bit to the means XX% XXXX occupancy do I a have think market. driving of in treat differently, you from publicly that’s what that those our little if I that over in being don’t to to But we’ve centers. bit occupancy XX% drive the-- doesn’t XX%. a stop us data further it to next and said is able years, drive to know goal want to the address Carlos, few

Carlos Sagasta

a say times, as always financial I out. we’ve on long term three and flattening expect around basis would said that be three approach on times, target we was leverage James, leverage to would that our side, the Yes, that I so

James Breen

Great, thanks.

Operator

you. Thank

please fourth all you keypad. waiting XXXX if at for press additional like Thank telephone your concludes time, on that reminder, to participation. one As questions are so today’s call. quarter Cyxtera would you a a followed by question, no There ask the your earnings star

lines. may You now your disconnect

Cyxtera (CYXTQ) 22 Mar 222021 Q4 Earnings call transcript