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| 8-K - 8-K - CyrusOne Inc. | a4thqtr2015-8xk.htm |
| EX-99.1 - EXHIBIT 99.1 - CyrusOne Inc. | exhibit991-earningsrelease.htm |
Phoenix, AZ - Chandler Dallas, TX - Carrollton Norwalk, CT Fourth Quarter 2015 Earnings February 24, 2016 2/24/2016
Safe Harbor This presentation contains forward-looking statements regarding future events and our future results that are subject to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “predicts,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “may,” variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned these forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially and adversely from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this release and those discussed in other documents we file with the Securities and Exchange Commission (SEC). More information on potential risks and uncertainties is available in our recent filings with the SEC, including CyrusOne’s Form 10-K report, Form 10-Q reports, and Form 8- K reports. Actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason. For additional information, including reconciliation of any non-GAAP financial measures, please reference the supplemental report furnished by the Company on a Current Report on Form 8-K filed February 24, 2016. Unless otherwise noted, all data herein is as of December 31, 2015. CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 2
Fourth Quarter 2015 Overview
CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 4 Highlights Fourth quarter Normalized FFO per share of $0.61 increased 27% over the fourth quarter of 2014 Fourth quarter Adjusted EBITDA of $60.5 million increased 36% over the fourth quarter of 2014 Fourth quarter revenue of $113.3 million increased 30% over the fourth quarter of 2014 Leased a record 205,000 colocation square feet(1) and 30 megawatts in the fourth quarter totaling $44 million in annualized GAAP revenue(2), pre-leasing the next four phases of our Northern Virginia campus Given anticipated commencement phasing, an estimated $19 - $24 million is expected to be recognized in 2016, with the full $44 million recognized in 2017 Leased a record 342,000 colocation square feet(1) and 49 megawatts in 2015, with a total contract value(3) of nearly $600 million Announcing a 21% increase in the quarterly dividend for the first quarter of 2016 to $0.38 per share, up from $0.315 per share in 2015 Added four Fortune 1000(4) companies as new customers in the fourth quarter, increasing the total number of Fortune 1000(4) customers to 173 as of the end of the quarter Subsequent to the end of the quarter, pre-leased the next two phases of our San Antonio campus Notes: 1. Colocation square feet (CSF) represents NRSF currently leased or available for lease as colocation space, where customers locate their servers and other IT equipment. Net rentable square feet (NRSF) represents the total square feet of a building currently leased or available for lease, based on engineers’ drawings and estimates but does not include space held for development or space used by CyrusOne. 2. Annualized GAAP revenue is equal to monthly recurring rent, defined as average monthly contractual rent during the term of the lease plus the monthly impact of installation charges, multiplied by 12. 3. Monthly recurring rent multiplied by lease term, expressed in months, for each lease signed. 4. Customer’s ultimate parent is a Fortune 1000 company or a foreign or private company of equivalent size.
Growth Since IPO - Customer Base Notes: 1. Customers as of quarter-end for each period, including customers that are under contract but have yet to occupy space. 2. Customer’s ultimate parent is a Fortune 1000 company or a foreign or private company of equivalent size. 3. Based on December 2015 annualized rent. Annualized rent represents cash rent, including metered power reimbursements, for the month of December, multiplied by 12. CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 5 526 612 669 941 4Q'12 4Q'13 4Q'14 4Q'15 200 400 600 800 1,000 Total Customers(1) 115 129 144 173 4Q'12 4Q'13 4Q'14 4Q'15 75 125 175 Fortune 1000 Customers(1)(2) Added more than 400 customers over last 3 years, nearly doubling size of customer base Top 10 customers account for less than 30% of revenue(3), down from 45% as of the end of 2012 Powerful impact of new logo acquisition as more than 50% of revenue growth is generated from existing customers
22% 21% 20% 17% 7% 5% 4% 2% 2% Houston Cincinnati Dallas NY Metro Phoenix San Antonio Austin No. Virginia Other Growth Since IPO - Data Center Footprint CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 6 Notes: 1. Based on December 2015 annualized rent. Annualized rent represents cash rent, including metered power reimbursements, for the month of December 2015, multiplied by 12. 2. Colocation square feet (CSF) represents NRSF currently leased or available for lease as colocation space, where customers locate their servers and other IT equipment. Net rentable square feet (NRSF) represents the total square feet of a building currently leased or available for lease, based on engineers’ drawings and estimates but does not include space held for development or space used by CyrusOne. Successful West Coast and East Coast expansions into Phoenix, Northern Virginia and NY Metro markets Geographical diversification resulting in no single market representing more than 22% of revenue(1) Phoenix Leased ~150K CSF Northern Virginia Leased ~215K CSF Dec’12 Dec’15 # of Markets 9 12 # of Data Centers 23 32 CSF(2) ~0.9 MM ~1.6 MM NRSF(2) ~1.7 MM ~3.0 MM NY Metro Acquisition of premier financial services platform Dec’15 % of Revenue(1) 37% 37% 20% 3% 3% Houston Cincinnati Dallas Austin Other Dec’12 % of Revenue(1) Nearly doubled CSF(2) capacity in 3 years
17% 37% 9% 10% 9% 3% 15% Growth Since IPO - Industry Verticals CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 7 Notes: 1. Based on December annualized rent. Annualized rent represents cash rent, including metered power reimbursements, for the month of December, multiplied by 12. 2. December 2015 annualized rent adjusted to include impact of December 31, 2015 backlog. 3.Monthly recurring rent (“MRR”) is defined as average monthly contractual rent during the term of the lease plus the monthly impact of installation charges. Cloud / IT Telecom Healthcare Other Energy Financial Services Dec’12 % of Revenue(1) Growth in Cloud / IT vertical driven by demand from cloud providers, with more than 30 added to portfolio in last two years Portfolio includes 8 of largest cloud providers More than doubled revenue contribution from Financial Services vertical Increasing cloud adoption and growth in other verticals has resulted in reduced dependence on Energy vertical, decreasing from 37% of revenue(1) to 18% Energy bookings remain steady with $0.5M in new MRR(3) signed in FY’15, in line with $0.5M in new MRR(3) signed in FY’14 More than 85% of revenue(1) in Energy vertical is from customers generating annual revenue in excess of $5 billion 33% 20% 18% 9% 8% 3% 9% Financial Services Cloud / IT Other Industrials Telecom Healthcare Energy Dec’15 Pro Forma(2) % of Revenue(1) Industrials
Growth Since IPO - Strong Leasing Notes: 1. Colocation square feet (CSF) represents NRSF currently leased or available for lease as colocation space, where customers locate their servers and other IT equipment. Net rentable square feet (NRSF) represents the total square feet of a building currently leased or available for lease, based on engineers’ drawings and estimates but does not include space held for development or space used by CyrusOne. 2. Monthly recurring rent multiplied by lease term for each lease signed. Monthly recurring rent is defined as average monthly contractual rent during the term of the lease plus the monthly impact of installation charges. CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 8 CSF and MW signed growing at compound annual rates of 39% and 35%, respectively Number of leases signed averaged more than 350 per quarter in 2015 70% of new Metered Power leases signed in 4Q’15 included power administration fee 177 236 342 27 42 49 - 20 40 60 FY'13 FY'14 FY'15 - 100 200 300 400 M W Sign ed CSF Sign ed (0 0 0 ) CSF(1) / MW Signed 928 1,167 1,416 FY'13 FY'14 FY'15 500 1,000 1,500 Number of Leases Signed Nearly $600 million in total contract value(2) signed in 2015 with weighted average lease term of ~7 years
CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 9 Interconnection Interconnection revenue increased 68% in 4Q’15 vs. 4Q’14 Currently ~6% of total revenue, up from ~4% as of 4Q’13 82% of leases signed in FY’15 included interconnection product Recently signed alliance agreement with Megaport to deliver SDN-enabled, elastic cloud interconnection services in CyrusOne data centers $3.0 $4.2 $7.0 $1.0 $3.0 $5.0 $7.0 4Q'13 4Q'14 4Q'15 Quarterly Interconnection Revenue ($MM) More than 11,000 cross connects installed across the portfolio
Fourth Quarter 2015 Financial Review
Normalized FFO, AFFO, Revenue and Churn CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 11 Notes: 1. Recurring rent quarterly churn is defined as any reduction in recurring rent due to customer terminations, service reductions or net pricing decreases as a percentage of rent at the beginning of the quarter, excluding any impact from metered power reimbursements or other usage-based or variable billing. 2. Colocation square feet (CSF) represents NRSF leased or available for lease as colocation space, where customers locate their servers and other IT equipment. Net rentable square feet (NRSF) represent the total square feet of a building leased or available for lease based on engineers’ drawings and estimates but does not include space held for development or space used by CyrusOne. 3. Annualized rent represents cash rent, including metered power reimbursements, for the month of December 2015 multiplied by 12. $86.9 $113.3 4Q'14 4Q'15 1.7% 3.1% 0.6% 0.7% 0.4% 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 Revenue ($ Millions) Churn Recurring Rent Quarterly Churn (1) Revenue growth driven by: Expansion of customer base to 941 Increases in leased CSF(2) and annualized rent (3) of 24% and 32%, respectively, compared to 4Q’14 Strong Normalized FFO and AFFO growth Driven by Adjusted EBITDA as a result of strong growth in revenue, margin improvement, and impact of Cervalis acquisition Churn 4Q’15 churn lowest quarterly level since becoming public company Normalized FFO ($ Millions) AFFO ($ Millions) $31.2 $44.2 4Q'14 4Q'15 $29.8 $46.3 4Q'14 4Q'15 $0.48 $0.61 Norm. FFO per Share
Year over Year P&L Analysis Notes: 1. 4Q’15 property operating expenses and NOI adjusted (Adjusted Annualized NOI) to exclude impact of $0.3 million in costs associated with the forthcoming termination of the Austin 1 facility lease. 2. Severance and management transition costs of $4.1 million and legal claim costs of $0.1 million in 4Q’15 are omitted from this presentation as they are excluded from Adjusted EBITDA. 3.Weighted average diluted common share or common share equivalents for 4Q’15 and 4Q‘14 were 72.6 million and 65.3 million, respectively. Revenue growth of 30% NOI up 32% over 4Q’14 driven by revenue growth; NOI margin up 1 percentage point Adjusted EBITDA up 36% over 4Q’14 driven primarily by higher NOI; Adjusted EBITDA margin up 2 percentage points Increase in Normalized FFO of 42% due to growth in Adjusted EBITDA, partially offset by increase in interest expense Increase in AFFO of 55% driven primarily by increase in Normalized FFO and positive impact of deferred revenue and straight line rent adjustments CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 12 ($ Millions) 4Q 2015 4Q 2014 $ % Revenue 113.3$ 86.9$ 26.4$ 30% Property operating expenses (1) 41.1 32.0 (9.1) -28% Net Operating Income (NOI) (1) 72.2 54.9 17.3 32% NOI Margin 64% 63% Selling, general & administrative (2) 14.1 13.0 (1.1) -8% Less: Stock-based compensation (2.4) (2.7) (0.3) -11% Adjusted EBITDA 60.5$ 44.6$ 15.9$ 36% Adjusted EBITDA Margin 53% 51% Normalized FFO 44.2$ 31.2$ 13.0$ 42% Normalized FFO r share (3) 0.61$ 0.48$ 0.13$ 27% AFFO 46.3$ 29.8$ 16.5$ 55% Three Months Ended Fav/(Unfav)
Balance Sheet / Portfolio Overview CyrusOne Fourth Quarter 2015 Earnings Presentation 28% increase in CSF(1) capacity compared to December 31, 2015, with Utilization (2) at 86% Commissioned first data hall in Austin 3 facility, adding ~62,000 CSF(1) Notes: 1. Colocation square feet (CSF) represents NRSF currently leased or available for lease as colocation space, where customers locate their servers and other IT equipment. Net rentable square feet (NRSF) represent the total square feet of a building currently leased or available for lease based on engineers’ drawings and estimates but does not include space held for development or space used by CyrusOne. 2. Utilization is calculated by dividing CSF under signed leases (whether or not the lease has commenced billing) by total CSF. Built for Tomorrow. Ready Today. | 13 ($ Millions) 12/31/15 Gross Inv. in Real Estate $1,827.6 Accumulated Depreciation (435.6) Net Inv. in Real Estate $1,392.0 Other Assets 803.6 Total Assets $2,195.6 S-T Liabilities $215.3 L-T Debt and Capital Leases 1,008.7 Lease Financing Arrangements 150.0 Total Liabilities $1,374.0 Total Shareholders’ Equity 821.6 Total Liabilities and Shareholders’ Equity $2,195.6 $1.8 billion gross investment in real estate Cincinnati Bell has converted remaining operating partnership units into shares of common stock Portfolio Overview Balance Sheet
Lease Term / Escalators Note: 1.Monthly recurring rent (“MRR”) is defined as average monthly contractual rent during the term of the lease plus the monthly impact of installation charges. CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 14 Inclusive of backlog, have extended remaining lease term for portfolio by 12 months since the end of 2012 77% of new MRR(1) signed over last three years includes escalators (weighted average escalator: 2.3%) 28 29 33 34 40 4Q'12 4Q'13 4Q'14 4Q'15 4Q'15 w/ Backlog 15 25 35 45 Wtd. Avg. Remaining Lease Term (Mos.) + 12 mos. 72% 72% 84% FY'13 FY'14 FY'15 % of New MRR(1) Signed w/ Escalators
2015 / 2016 Development CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 15 Market 2015 CSF(1) Delivered CSF Under Dev.(1,2) 2015 Critical Load Capacity(3) Delivered Critical Load Capacity(3) Under Dev. Austin 62K - 3 MW - Dallas 56K 77K 6 MW 11 MW San Antonio - 30K - 3 MW Houston - 53K - 6 MW Phoenix 36K 36K 6 MW 2 MW No. Virginia 74K 159K 12 MW 30 MW Total 228K 355K 27 MW 52 MW Notes: 1. Colocation square feet (CSF) represents NRSF currently leased or available for lease as colocation space, where customers locate their servers and other IT equipment. Net rentable square feet (NRSF) represent the total square feet of a building currently leased or available for lease based on engineers’ drawings and estimates but does not include space held for development or space used by CyrusOne. 2. Represents square footage at a facility for which activities have commenced or are expected to commence in the next 2 quarters to prepare the space for its intended use. Estimates and timing are subject to change. 3. Represents aggregate power available for lease to and exclusive use by customers expressed in terms of megawatts. The capacity presented is for non-redundant megawatts, as we can develop flexible solutions to our customers at multiple resiliency levels. Development Projects Delivered 228K CSF(1) and 27 MW of power capacity in Dallas, Phoenix, Austin, and Northern Virginia in 2015 Development projects in Texas markets as well as Phoenix and Northern Virginia expected to deliver 355K CSF(1) and 52 MW of power capacity by 3Q’16 For projects currently under development, nearly 60% of CSF(1) is contractually committed to customers Estimating ~2M CSF(1) online by the end of 2016, nearly doubling raised floor capacity from the end of 2014
Net Debt and Market Capitalization CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 16 ($ Millions) December 31, 2015 6.375% Senior Unsecured Notes due 2022 $477.6 Revolver and Term Loan 535.0 Note Payable 1.5 Capital Lease Obligations 12.2 Less: Deferred Financing Costs (17.6) Less: Cash and Cash Equivalents (14.3) Net Debt $994.4 Liquidity $422.2 ($ Millions except per share amounts) Shares or Equivalents Outstanding Market Price as of December 31, 2015 Market Value Equivalents Common Shares 72,556,334 $37.45 $2,717.2 Operating Partnership Units - $37.45 - Total Equity Value $2,717.2 Net Debt 994.4 Total enterprise value (TEV) $3,711.6 Net leverage of 4.2x(1) Note: 1. Calculated as net debt excluding impact of deferred financing costs as of December 31, 2015, divided by Adjusted EBITDA for 4Q’15 annualized.
Dividend Growth CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 17 $0.16 $0.21 $0.315 $0.38 2013 2014 2015 2016 - $0.10 $0.20 $0.30 $0.40 Q u a rte rl y D iv id e n d Dividend(1) per Share Growth Note: 1. 2016 reflects 1Q’16 dividend. 21% increase in quarterly dividend announced for 1Q’16 - Annualized dividend yield of 4.0% based on February 22 closing stock price of $37.92 AFFO payout ratio of 54% in 2015 Historical tax allocation of between 40% and 100% return of capital - 2013: 53%; 2014: 42%; 2015: 100%
Lease Commencements CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 18 Total Backlog - Estimated Annualized GAAP Revenue(1) Commenced by End of Period ($ Millions) (excl. estimates of pass-through power) Note: 1. Annualized GAAP revenue is equal to monthly recurring rent, defined as average monthly contractual rent during the term of the lease plus the monthly impact of installation charges, multiplied by 12.. 2. Colocation square feet (CSF) represents NRSF leased or available for lease as colocation space, where customers locate their servers and other IT equipment. Net rentable square feet (NRSF) represent the total square feet of a building leased or available for lease based on engineers’ drawings and estimates but does not include space held for development or space used by CyrusOne. $3.4 $43.6 $6.1 $3.7 $30.4 4Q'15 1Q'16 2Q'16 3Q'16 Total $- $10 $20 $30 $40 $50 4Q’15 Leases - Estimated Annualized GAAP Revenue(1) Commenced by End of Period ($ Millions) (excl. estimates of pass-through power) In 4Q’15, leased 30.0 MW and 205,000 CSF(2); weighted average lease term of 107 months Estimates on lease commencements for future quarters are based on current estimated installation timelines Excluding estimates for pass- through power charges, leases signed during 4Q’15 represent approximately $43.6M of annualized GAAP revenue(1) Total annualized GAAP revenue(1) backlog of approximately $41.5M as of the end of 4Q’15, largest in company’s history $6.7 $41.5 $4.4 $30.4 1Q'16 2Q'16 3Q'16 Total $- $10 $20 $30 $40 $50
2016 Guidance CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 19 Category ($ Millions except for Normalized FFO) 2015 Results 2016 Guidance Total Revenue $399 $485 - 500 Base Revenue $355 $438 - 448 Metered Power Reimbursements $44 $47 - 52 Adjusted EBITDA $212 $258 - 268 Normalized FFO per diluted common share or common share equivalent(1) $2.17 $2.45 - 2.55 Capital Expenditures $235 $320 - 345 Development $232 $316 - 337 Recurring $3 $4 - 8 Note: 1. Assumes weighted average diluted common shares for 2016 of approximately 73 million.
Appendix (Non-GAAP Reconciliations)
Non-GAAP Reconciliations CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 21 LQA Q4 2015 Reconciliation of Net Loss to EBITDA and Adjusted EBITDA: Net (loss) income (4.8)$ (1.2)$ (5.3)$ (11.8)$ Interest expense 48.0 12.0 12.1 9.1 Income tax expense 1.2 0.3 0.7 0.3 Depreciation and amortization 159.6 39.9 39.1 30.6 EBITDA 204.0 51.0 46.6 28.2 Transaction and acquisition integration costs 10.4 2.6 1.8 0.1 Legal claim costs 0.4 0.1 - - Stock-based compensation 9.6 2.4 3.4 2.7 Severance and management transition costs 16.4 4.1 1.9 - Loss on extinguishment of debt - - - 13.6 Lease exit costs 1.2 0.3 0.4 - Asset impairments and loss on disposals - - 4.9 - Adjusted EBITDA 242.0$ 60.5$ 59.0$ 44.6$ Three Months Ended December 31, 2015 September 30, 2015 December 31, 2014
Non-GAAP Reconciliations CyrusOne Fourth Quarter 2015 Earnings Presentation Built for Tomorrow. Ready Today. | 22 December 31, 2015 September 30, 2015 December 31, 2014 Reconciliation of Net (Loss) Income to FFO and Normalized FFO: Net (loss) income (1.2)$ (5.3)$ (11.8)$ Real estate depreciation and amortization 32.8 31.9 25.1 Asset impairments and loss on disposal - 4.9 - Funds from Operations (FFO) 31.6$ 31.5$ 13.3$ Loss on extinguishment of debt - - 13.6 Amortization of customer relationship intangibles 5.6 5.6 4.2 Transaction and acquisition integration costs 2.5 1.9 0.1 Severance and management transition costs 4.1 1.9 - Legal claim costs 0.1 - - Lease exit costs 0.3 0.3 - Normalized Funds from Operations (Normalized FFO) 44.2$ 41.2$ 31.2$ Normalized FFO per common share or common share equivalent 0.61$ 0.57$ 0.48$ Weighted average common shares and common share equivalents o/s 72.6 72.6 65.3 Reconciliation of Normalized FFO to AFFO: Normalized FFO 44.2$ 41.2$ 31.2$ Amortization of deferred financing costs Stock-based compensation 1.1 0.9 0.7 Non-real estate depreciation and amortization 2.4 3.5 2.7 Deferred revenue and straight line rent adjustments 1.5 1.6 1.4 Leasing commissions 1.1 (1.6) (2.3) Recurring capital expenditures (3.3) (1.6) (2.9) Adjusted Funds from Operations (AFFO) (0.7) (1.2) (1.0) 46.3$ 42.8$ 29.8$ CyrusOne Inc. Reconciliation of Net (Loss) Income to FFO, Normalized FFO, and AFFO (Dollars in millions) (Unaudited) Three Months Ended