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May 2, 2018

CyrusOne Reports First Quarter 2018 Earnings

Pro Forma including Zenium, Signed $45 Million in Annualized GAAP Revenue
Year-over-Year Revenue Growth of 32% and Adjusted EBITDA Growth of 36%

 

DALLAS--(BUSINESS WIRE)--May 2, 2018-- CyrusOne Inc. (NASDAQ: CONE), a premier global data center REIT, today announced first quarter 2018 earnings.

 

Highlights

Category

   

1Q’18

   

% Change

vs. 1Q’17

Revenue     $196.6 million     32%
Net income     $43.5 million     n/m
Adjusted EBITDA     $109.5 million     36%
Normalized FFO     $82.2 million     34%
Net income per share     $0.45     n/m
Normalized FFO per share     $0.85     18%
 

 

Pro forma including Zenium, leased 32 megawatts (“MW”) and 240,000 colocation square feet (“CSF”) in the first quarter, totaling $45 million in annualized GAAP revenue

    -- Includes 29 MW and 226,000 CSF totaling $40.4 million in annualized revenue signed by CyrusOne and 3 MW and 14,000 CSF totaling $4.2 million in annualized GAAP revenue signed by Zenium
     

 

Backlog of $39 million in annualized GAAP revenue as of the end of the first quarter, representing more than $230 million in total contract value

     

 

Added three Fortune 1000 companies as new customers, increasing the total number of Fortune 1000 customers to 200 as of the end of the quarter

     

 

Entered into a new senior unsecured credit agreement, increasing the size of the credit facility by $1.0 billion, or 50%, to a total of $3.0 billion, consisting of $1.7 billion revolving credit facility and $1.3 billion in term loan commitments

    -- Agreement also provides for an extension of maturity dates, reductions in interest rate margins, and enhanced flexibility in support of the Company’s international expansion plans, including the ability to borrow in non-USD currencies
     

 

Raised approximately $152 million in net proceeds through the sale of 3.0 million shares of common stock under the at-the-market (“ATM”) equity program

     

 

Acquisition of Zenium, a leading hyperscale data center provider in Europe with four properties in London and Frankfurt, the continent’s two largest data center markets, expected to close in May, pending final regulatory approval

     

“We had one of the highest quarterly leasing totals in the Company’s history and continued strong financial performance, with Revenue and Adjusted EBITDA each growing over 30%” said Gary Wojtaszek, president and chief executive officer of CyrusOne. “We are excited to begin our global expansion by establishing a presence in the two largest markets in Europe, London and Frankfurt, at a time when demand across the continent has accelerated and our customers are increasingly asking us to support their international growth objectives.”

First Quarter 2018 Financial Results

Revenue was $196.6 million for the first quarter, compared to $149.3 million for the same period in 2017, an increase of 32%. The increase in revenue was driven primarily by a 29% increase in occupied CSF, lease termination fees totaling $5.0 million, and additional interconnection services. The lease termination fees related primarily to a reimbursement for capital expenditures made in connection with the delivery of an initial deployment for a customer that subsequently migrated from that location to another CyrusOne facility.

Net income was $43.5 million for the first quarter, compared to net loss of $30.4 million in the same period in 2017. Net income for the first quarter included a $40.5 million unrealized gain on the Company’s equity investment in GDS due to an increase in GDS’s share price during the quarter. Net income per basic and diluted common share1 was $0.45 in the first quarter of 2018, compared to net loss of $(0.36) per basic and diluted common share in the same period in 2017.

Net operating income (NOI)2 was $128.8 million for the first quarter, compared to $97.0 million in the same period in 2017, an increase of 33%. Adjusted EBITDA3 was $109.5 million for the first quarter, compared to $80.7 million in the same period in 2017, an increase of 36%.

Normalized Funds From Operations (Normalized FFO)4 was $82.2 million for the first quarter, compared to $61.2 million in the same period in 2017, an increase of 34%. Normalized FFO per basic and diluted common share was $0.85 in the first quarter of 2018, an increase of 18% over first quarter 2017.

Leasing Activity

CyrusOne leased approximately 29 MW of power and 226,000 CSF in the first quarter, representing $3.4 million in monthly recurring rent, inclusive of the monthly impact of installation charges, or approximately $40.4 million in annualized GAAP revenue5, excluding estimates for pass-through power. This excludes the impact of leases signed by Zenium in the first quarter. The weighted average lease term of the new leases, based on square footage, is 77 months (6.4 years), and the weighted average remaining lease term of CyrusOne’s portfolio is 53 months (taking into account the impact of the backlog). Recurring rent churn6 for the first quarter was 0.5%, compared to 1.4% for the same period in 2017.

Portfolio Development and CSF Leased

In the first quarter, the Company completed construction on 82,000 CSF and 27 MW of power capacity across four projects in Dallas, Northern Virginia, Phoenix and Austin, increasing total CSF across 45 data centers to approximately 3.35 million CSF. CSF leased7 as of the end of the first quarter was 92% for stabilized properties8 and 86% overall. In addition, the Company has development projects underway in Dallas, Northern Virginia, San Antonio, Phoenix, the New York Metro area, and Chicago that are expected to add approximately 132,000 CSF and 36 MW of power capacity.

Balance Sheet and Liquidity

As of March 31, 2018, the Company had gross assets9 totaling approximately $5.3 billion, an increase of approximately 28% over gross assets as of March 31, 2017. CyrusOne had $2.20 billion of long-term debt10, cash and cash equivalents of $228.7 million, and $1.7 billion available under its unsecured revolving credit facility as of March 31, 2018. Net debt10 was $1.99 billion as of March 31, 2018, representing approximately 28% of the Company's total enterprise value as of March 31, 2018 of $7.1 billion, or 4.5x Adjusted EBITDA for the last quarter annualized. Available liquidity11 was $2.22 billion as of March 31, 2018.

As previously announced, CyrusOne entered into a new senior unsecured credit agreement in the first quarter, increasing the size of the credit facility by $1.0 billion, or 50%, to a total of $3.0 billion. The new agreement also provides for an extension of maturity dates, reductions in interest rate margins, and enhanced flexibility in support of the Company’s international expansion plans, including the ability to borrow in non-USD currencies.

The agreement consists of a $1.7 billion revolving credit facility, which includes a $750 million multicurrency borrowing sublimit, and term loan commitments totaling $1.3 billion. The term loan commitments consist of a $1.0 billion five-year term loan, which includes a delayed draw feature allowing the Company to draw $300 million in up to three tranches over a six-month period in multiple currencies, and a new $300 million seven-year term loan. The interest rate margins applicable to the revolving credit facility and the five-year term loan based on the Company’s current leverage level have been decreased by 10 basis points to LIBOR plus 1.45% and LIBOR plus 1.40%, respectively, while the interest rate margin applicable to the seven-year term loan based on the Company’s current leverage level is LIBOR plus 1.70%. The maturity of the revolving credit facility is March 2022, and the facility includes a one-year extension option which, if exercised by the Company, would extend the final maturity to March 2023. The maturity of the five-year term loan is March 2023, and the seven-year term loan matures in March 2025. The credit agreement also contains an accordion that allows the Company to obtain up to $1 billion in additional revolving or term loan commitments.

Also in the first quarter, CyrusOne sold approximately 3.0 million shares of its common stock through its ATM equity program at an average price of $51.24, raising approximately $152 million in net equity proceeds. As of March 31, 2018, there was approximately $346 million in remaining availability under the current ATM program.

Dividend

On February 21, 2018, the Company announced a dividend of $0.46 per share of common stock for the first quarter of 2018. The dividend was paid on April 13, 2018, to stockholders of record at the close of business on March 29, 2018.

Additionally, today the Company is announcing a dividend of $0.46 per share of common stock for the second quarter of 2018. The dividend will be paid on July 13, 2018, to stockholders of record at the close of business on June 29, 2018.

Guidance

CyrusOne is reaffirming guidance for full year 2018. The annual guidance provided below represents forward-looking statements, which are based on current economic conditions, internal assumptions about the Company's existing customer base, and the supply and demand dynamics of the markets in which CyrusOne operates.

CyrusOne does not provide reconciliations for the non-GAAP financial measures included in the annual guidance provided below due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including net income (loss) and adjustments that could be made for transaction and acquisition integration costs, legal claim costs, lease exit costs, asset impairments and loss on disposals and other charges in its reconciliation of historic numbers, the amount of which, based on historical experience, could be significant.

 

Category

     

2018

Guidance(1)

Total Revenue       $810 - 825 million
Lease and Other Revenues from Customers       $735 - 745 million
Metered Power Reimbursements       $75 - 80 million
Adjusted EBITDA       $460 - 470 million
Normalized FFO per diluted common share       $3.18 - 3.28
Capital Expenditures       $850 - 900 million
Development       $845 - 890 million
Recurring       $5 - 10 million
 

(1) Full year 2018 guidance includes the impact of the Zenium acquisition,

which is expected to close in May 2018. Development capital

expenditures include the acquisition of land for future development.

 

Upcoming Conferences and Events

  • Jefferies 2018 Global Technology Conference on May 9-10 in Beverly Hills, California
  • J.P. Morgan Global Technology, Media and Communications Conference on May 15-17 in Boston, Massachusetts
  • 2018 RBC Global Datacenter and Connectivity Conference on May 22 in Falls Church, Virginia
  • Cowen Technology, Media & Telecom Conference on May 30-31 in New York City
  • NAREIT’s REITweek Conference on June 5-7 in New York City

Conference Call Details

CyrusOne will host a conference call on May 3, 2018, at 11:00 AM Eastern Time (10:00 AM Central Time) to discuss its results for the first quarter of 2018. A live webcast of the conference call and the presentation to be made during the call will be available under the “Company” tab in the “Investors / Events and Presentations” section of the Company's website at http://investor.cyrusone.com/events.cfm. The U.S. conference call dial-in number is 1-844-492-3731, and the international dial-in number is 1-412-542-4121. A replay will be available one hour after the conclusion of the earnings call on May 3, 2018, through May 17, 2018. The U.S. toll-free replay dial-in number is 1-877-344-7529 and the international replay dial-in number is 1-412-317-0088. The replay access code is 10118898.

Safe Harbor

This release and the documents incorporated by reference herein contain 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.

Adoption of New Accounting Standard and Use of Non-GAAP Financial Measurements

On January 1, 2018, we adopted the new accounting standard with respect to revenue recognition, see “Note 2. Summary of Significant Accounting Policies” in our financial statements included on Form 10-Q for additional information. We have adopted the new standard using the modified retroactive transition method, where financial statement presentations prior to the date of adoption are not adjusted. Accordingly, all information related to periods prior to 2018 have not been adjusted, including non-GAAP measurements.

This press release contains certain non-GAAP financial measures that management believes are helpful in understanding the Company's business, as further discussed within this press release. These financial measures, which include Funds From Operations, Normalized Funds From Operations, Adjusted EBITDA, Net Operating Income, Adjusted Net Operating Income, and Net Debt should not be construed as being more important than comparable GAAP measures. Detailed reconciliations of these non-GAAP financial measures to comparable GAAP financial measures have been included in the tables that accompany this release and are available in the Investor Relations section of www.cyrusone.com.

Management uses FFO, Normalized FFO, Adjusted EBITDA, NOI, and Adjusted NOI as supplemental performance measures because they provide performance measures that, when compared year over year, capture trends in occupancy rates, rental rates and operating costs. The Company also believes that, as widely recognized measures of the performance of real estate investment trusts (REITs) and other companies, these measures will be used by investors as a basis to compare its operating performance with that of other companies. Other companies may not calculate these measures in the same manner, and, as presented, they may not be comparable to others. Therefore, FFO, Normalized FFO, NOI, Adjusted NOI, and Adjusted EBITDA should be considered only as supplements to net income as measures of our performance. FFO, Normalized FFO, NOI, Adjusted NOI, and Adjusted EBITDA should not be used as measures of liquidity or as indicative of funds available to fund the Company's cash needs, including the ability to pay dividends. These measures also should not be used as substitutes for cash flow from operating activities computed in accordance with U.S. GAAP.

1Net income / (loss) per common share is defined as net income / (loss) divided by the weighted average common shares outstanding for the period, which were 96.6 million for the first quarter of 2018 (basic and diluted). The difference between basic and diluted net income per share was less than one cent.

2We use Net Operating Income ("NOI"), which is a non-GAAP financial measure commonly used in the REIT industry, as a supplemental performance measure. We use NOI as a supplemental performance measure because, when compared period over period, it captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, NOI is used by investors as a basis to evaluate REITs.

We calculate NOI as revenue less property operating expenses, each of which are presented in the accompanying consolidated statements of operations. Amortization of deferred leasing costs is presented in depreciation and amortization, which is excluded from NOI. Marketing and advertising costs are not property-specific, rather these costs support our entire portfolio. As a result, we have excluded these marketing and advertising costs from our NOI calculation, consistent with the treatment of general and administrative costs, which also support our entire portfolio. However, the utility of NOI as a measure of our performance is limited. Other REITs may not calculate NOI in the same manner. Accordingly, our NOI may not be comparable to others. Therefore, NOI should be considered only as a supplement to revenue and to net income (loss) presented in accordance with GAAP as a measure of our performance. NOI should not be used as a measure of our liquidity or as indicative of funds available to fund our cash needs, including our ability to make distributions. NOI also should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP.

3Adjusted EBITDA is defined as net income (loss) as defined by U.S. GAAP plus interest expense, income tax (benefit) expense, depreciation and amortization, asset impairments and (gain) loss on disposals, stock-based compensation, transaction and integration costs, severance and management transition costs, new accounting standards and systems implementation costs, lease exit costs, legal claim costs, loss on early extinguishment of debt, unrealized (gain) on marketable equity investments and other special items. Other companies may not calculate Adjusted EBITDA in the same manner. Accordingly, the Company's Adjusted EBITDA as presented may not be comparable to others.

4We use funds from operations ("FFO") and normalized funds from operations ("Normalized FFO"), which are non-GAAP financial measures commonly used in the REIT industry, as supplemental performance measures. We use FFO and Normalized FFO as supplemental performance measures because, when compared period over period, they capture trends in occupancy rates, rental rates and operating costs. We also believe that, as widely recognized measures of the performance of REITs, FFO and Normalized FFO are used by investors as a basis to evaluate REITs. We calculate FFO as net income (loss) computed in accordance with GAAP before real estate depreciation and amortization and asset impairments and gain or loss on disposal. While it is consistent with the definition of FFO promulgated by the National Association of Real Estate Investment Trusts ("NAREIT"), our computation of FFO may differ from the methodology for calculating FFO used by other REITs. Accordingly, our FFO may not be comparable to others.

We calculate Normalized FFO as FFO plus amortization of customer relationship intangibles, transaction acquisition and other integration costs, legal claim costs and lease exit costs, and other special items including loss on early extinguishment of debt, new accounting standards and system implementation costs, and severance and management transition costs, as appropriate. Because the value of the customer relationship intangibles is inextricably connected to the real estate acquired, the Company believes the amortization of such intangibles and impairments of such intangibles is analogous to real estate depreciation and impairments; therefore, the Company adds the customer relationship intangible amortization and impairments back for similar treatment with real estate depreciation and impairments. The Company believes its Normalized FFO calculation provides a comparable measure to that used by others in the industry. Other REITs may not calculate Normalized FFO in the same manner. Accordingly, our Normalized FFO may not be comparable to others.

In addition, because FFO and Normalized FFO exclude real estate depreciation and amortization and real estate impairments, and capture neither the changes in the value of our properties that result from use or from market conditions, nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO and Normalized FFO as measures of our performance is limited. Therefore, FFO and Normalized FFO should be considered only as supplements to net income (loss) presented in accordance with GAAP as measures of our performance. FFO and Normalized FFO should not be used as measures of our liquidity or as indicative of funds available to fund our cash needs, including our ability to make distributions. FFO and Normalized FFO also should not be used as supplements to or substitutes for cash flow from operating activities computed in accordance with GAAP.

5Annualized 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. It can be shown both inclusive and exclusive of the Company’s estimate of customer reimbursements for metered power.

6Recurring rent churn is calculated 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 period, excluding any impact from metered power reimbursements or other usage-based billing.

7CSF leased is calculated by dividing CSF under signed leases for available space (whether or not the contract has commenced billing) by total CSF. CSF Leased differs from CSF Occupied presented in the Data Center Portfolio table because the leased rate includes CSF for signed leases that have not commenced billing.

8Stabilized properties include data halls that have been in service for at least 24 months or are at least 85% leased.

9Gross asset value is defined as total assets plus accumulated depreciation.

10Long-term debt and net debt exclude adjustments for deferred financing costs and bond premiums. Net debt provides a useful measure of liquidity and financial health. The Company defines net debt as long-term debt and capital lease obligations, offset by cash and cash equivalents.

11Liquidity is calculated as cash, cash equivalents, and temporary cash investments on hand, plus the undrawn capacity on CyrusOne's revolving credit facility and the delayed draw term loan.

About CyrusOne

CyrusOne (NASDAQ: CONE) is a high-growth real estate investment trust (REIT) specializing in highly reliable enterprise-class, carrier-neutral data center properties. The Company provides mission-critical data center facilities that protect and ensure the continued operation of IT infrastructure for approximately 1,000 customers, including 200 Fortune 1000 companies.

With a track record of meeting and surpassing the aggressive speed-to-market demands of hyperscale cloud providers, as well as the expanding IT infrastructure requirements of the enterprise, CyrusOne provides the flexibility, reliability, security, and connectivity that foster business growth. CyrusOne offers a tailored, customer service-focused platform and is committed to full transparency in communication, management, and service delivery throughout its 45 data centers worldwide. Additional information about CyrusOne can be found at www.CyrusOne.com.

Company Profile

CyrusOne (NASDAQ: CONE) specializes in highly reliable enterprise-class, carrier-neutral data center properties. The Company provides mission-critical data center facilities that protect and ensure the continued operation of IT infrastructure for approximately 1,000 customers, including 200 Fortune 1000 companies. CyrusOne's data center offerings provide the flexibility, reliability, and security that enterprise customers require and are delivered through a tailored, customer service-focused platform designed to foster long-term relationships. CyrusOne is committed to full transparency in communication, management, and service delivery throughout its 45 data centers worldwide.

  • Best-in-Class Sales Force
  • Flexible Solutions that Scale as Customers Grow
  • Massively Modular® Engineering with Data Hall Builds in 10-14 Weeks
  • Focus on Operational Excellence and Superior Customer Service
  • Proven Leading-Edge Technology Delivering Power Densities up to 900 Watts per Square Foot
  • National IX Replicates Enterprise Data Center Architecture
 

Corporate Headquarters

   

Senior Management

2101 Cedar Springs Road, Ste. 900     Gary Wojtaszek, President and CEO     Robert Jackson, EVP General Counsel & Secretary
Dallas, Texas 75201     Diane Morefield, EVP & Chief Financial Officer     John Hatem, EVP Design, Construction & Operations
Phone: (972) 350-0060     Kevin Timmons, EVP & Chief Technology Officer     Blake Hankins, Chief Information Officer

Website: www.cyrusone.com

    Tesh Durvasula, EVP & Chief Commercial Officer     John Gould, EVP Global Sales
      Jonathan Schildkraut, EVP & Chief Strategy Officer     Brent Behrman, EVP Strategic Sales
      Kellie Teal-Guess, EVP & Chief People Officer     Howard Garfield, SVP & Chief Accounting Officer
 
 

Analyst Coverage

 

Firm

       

Analyst

       

Phone Number

Bank of America Merrill Lynch         Michael J. Funk         (646) 855-5664
Barclays         Amir Rozwadowski         (212) 526-4043
Citi         Mike Rollins         (212) 816-1116
Cowen and Company         Colby Synesael         (646) 562-1355
Credit Suisse         Sami Badri         (212) 538-1727
Deutsche Bank         Vin Chao         (212) 250-6799
Gabelli & Company         Sergey Dluzhevskiy         (914) 921-8355
Guggenheim Securities, LLC         Robert Gutman         (212) 518-9148
Jefferies         Jonathan Petersen         (212) 284-1705
J.P. Morgan         Richard Choe         (212) 622-6708
KeyBanc Capital Markets         Jordan Sadler         (917) 368-2280
MoffettNathanson         Nick Del Deo, CFA         (212) 519-0025
Morgan Stanley         Simon Flannery         (212) 761-6432
MUFG Securities         Stephen Bersey         (212) 405-7032
RBC Capital Markets         Jonathan Atkin         (415) 633-8589
Raymond James         Frank G. Louthan IV         (404) 442-5867
SunTrust Robinson Humphrey         Greg Miller         (212) 303-4169
UBS         John C. Hodulik, CFA         (212) 713-4226
Wells Fargo         Eric Luebchow         (312) 630-2386
William Blair         Jim Breen, CFA         (617) 235-7513
 
 

CyrusOne Inc.

Summary of Financial Data

(Dollars in millions, except per share amounts)

 
          Three Months      
          March 31,     December 31,     March 31,     Growth %
          2018     2017     2017     Yr/Yr

Revenue

        $ 196.6       $ 180.5       $ 149.3       32 %
Net operating income         $ 128.8       $ 120.3       $ 97.0       33 %
Net income (loss)         43.5       2.8       (30.4 )     n/m  
Funds from operations ("FFO") - NAREIT defined         110.2       65.4       18.3       n/m  
Normalized Funds from Operations ("Normalized FFO")         82.2       78.4       61.2       34 %
Weighted average number of common shares outstanding - diluted         96.6       93.5       84.5       14 %
Income (loss) per share - basic and diluted         $ 0.45       $ 0.03       $ (0.36 )     n/m  
Normalized FFO per diluted common share         $ 0.85       $ 0.84       $ 0.72       18 %
Adjusted EBITDA         109.5       104.2       80.7       36 %
Adjusted EBITDA as a % of Revenue         55.7 %     57.7 %     54.1 %     1.6 pts  
 
          As of      
          March 31,     December 31,     March 31,     Growth %
          2018     2017     2017     Yr/Yr
Balance Sheet Data                                  
Gross investment in real estate         $ 3,954.6       $ 3,840.8       $ 3,237.5       22 %
Accumulated depreciation         (836.4 )     (782.4 )     (625.9 )     34 %
Total investment in real estate, net         3,118.2       3,058.4       2,611.6       19 %
Cash and cash equivalents         228.7       151.9       20.4       n/m  
Market value of common equity         5,066.4       5,723.1       4,515.2       12 %
Net debt         1,987.2       1,958.2       1,747.0       14 %
Total enterprise value         7,053.6       7,681.3       6,262.2       13 %
Net debt to LQA Adjusted EBITDA         4.5x       4.7x       5.0x     (0.5)x  
                                   
Dividend Activity                                  
Dividends per share         $ 0.46       $ 0.42       $ 0.42       10 %
                                   
Portfolio Statistics                                  
Data centers         45       45       39       15 %
Stabilized CSF (000)         3,024       2,653       2,293       32 %
Stabilized CSF % leased         92 %     93 %     92 %     0 pts  
Total CSF (000)         3,348       3,267       2,477       35 %
Total CSF % leased         86 %     83 %     88 %     (2) pts  
Total NRSF (000)         5,824       5,717       4,645       25 %
 
 

CyrusOne Inc.

Condensed Consolidated Statements of Operations

(Dollars in millions, except per share amounts)

(Unaudited)

 
          Three Months      
          Ended March 31,     Change
          2018     2017     $     %
Revenue:                              
Lease and other revenues from customers         $ 175.2     $ 134.2     $ 41.0     31 %
Metered power reimbursements         21.4     15.1     6.3     42 %
Revenue         196.6     149.3     47.3     32 %
Operating expenses:                              
Property operating expenses         67.8     52.3     15.5     30 %
Sales and marketing         5.3     4.9     0.4     8 %
General and administrative         19.3     15.8     3.5     22 %
Depreciation and amortization         74.6     55.7     18.9     34 %
Transaction, acquisition and other integration expenses         1.9     0.8     1.1     138 %
Total operating expenses         168.9     129.5     39.4     30 %
Operating income         27.7     19.8     7.9     40 %
Interest expense         (20.8 )   (13.6 )   (7.2 )   53 %
Unrealized gain on marketable equity investment         40.5         40.5     n/m  
Loss on early extinguishment of debt         (3.1 )   (36.2 )   33.1     n/m  
Net income (loss) before income taxes         44.3     (30.0 )   74.3     n/m  
Income tax expense         (0.8 )   (0.4 )   (0.4 )   100 %
Net income (loss)         $ 43.5     $ (30.4 )   $ 73.9     n/m  
Income (loss) per share - basic and diluted         $ 0.45     $ (0.36 )   $ 0.81     n/m  
 
 

CyrusOne Inc.

Condensed Consolidated Balance Sheets

(Dollars in millions)

(Unaudited)

 
          March 31,     December 31,     Change
          2018     2017     $     %
Assets                            
Investment in real estate:                            
Land         $ 104.6       $ 104.6       $       n/m
Buildings and improvements         1,400.8       1,371.4       29.4       2 %
Equipment         1,959.5       1,813.9       145.6       8 %
Gross operating real estate         3,464.9       3,289.9       175.0       5 %
Less accumulated depreciation         (836.4 )     (782.4 )     (54.0 )     7 %
Net operating real estate         2,628.5       2,507.5       121.0       5 %
Construction in progress, including land under development         435.3       487.1       (51.8 )     (11 )%
Land held for future development         54.4       63.8       (9.4 )     (15 )%
Total investment in real estate, net         3,118.2       3,058.4       59.8       2 %
Cash and cash equivalents         228.7       151.9       76.8       51 %
Rent and other receivables, net         93.1       87.2       5.9       7 %
Goodwill         455.1       455.1             %
Intangible assets, net         196.8       203.0       (6.2 )     (3 )%
Other assets         406.4       356.5       49.9       14 %
Total assets         $ 4,498.3       $ 4,312.1       $ 186.2       4 %
Liabilities and equity                            
Long-term debt, net         $ 2,178.3       $ 2,089.4       $ 88.9       4 %
Capital lease obligations         15.9       10.1       5.8       57 %
Lease financing arrangements         131.3       131.9       (0.6 )     %
Construction costs payable         89.0       115.5       (26.5 )     (23 )%
Accounts payable and accrued expenses         66.7       97.9       (31.2 )     (32 )%
Dividends payable         46.4       41.8       4.6       11 %
Deferred revenue and prepaid rents         116.1       111.6       4.5       4 %
Total liabilities         2,643.7       2,598.2       45.5       2 %
Equity:                            
Preferred stock, $.01 par value, 100,000,000 authorized; no shares issued or outstanding                           %

Common stock, $.01 par value, 500,000,000 shares authorized and 98,933,109 and 96,137,874

shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively

        1.0       1.0             n/m
Additional paid in capital         2,268.0       2,125.6       142.4       7 %
Accumulated deficit         (413.1 )     (486.9 )     73.8       (15 )%
Accumulated other comprehensive income (loss)         (1.3 )     74.2       (75.5 )     %
Total stockholders’ equity         1,854.6       1,713.9       140.7       8 %
Total liabilities and equity         $ 4,498.3       $ 4,312.1       $ 186.2       4 %
 
 

CyrusOne Inc.

Condensed Consolidated Statements of Operations

(Dollars in millions, except per share amounts)

(Unaudited)

 
For the three months ended:         March 31,     December 31,     September 30,     June 30,     March 31,
          2018     2017     2017     2017     2017
Revenue:                                  
Lease and other revenues from customers         $ 175.2       $ 161.6       $ 155.5       $ 151.1       $ 134.2  
Metered power reimbursements         21.4       18.9       19.8       15.8       15.1  
Revenue         196.6       180.5       175.3       166.9       149.3  
Operating expenses:                                  
Property operating expenses         67.8       60.2       63.0       59.6       52.3  
Sales and marketing         5.3       3.9       3.9       4.3       4.9  
General and administrative         19.3       16.4       17.5       17.3       15.8  
Depreciation and amortization         74.6       70.8       68.7       63.7       55.7  
Transaction, acquisition and other integration expenses         1.9       5.3       4.1       1.7       0.8  
Asset impairments                     54.4       3.6        
Total operating expenses         168.9       156.6       211.6       150.2       129.5  
Operating income         27.7       23.9       (36.3 )     16.7       19.8  
Interest expense         (20.8 )     (20.1 )     (17.9 )     (16.5 )     (13.6 )
Unrealized gain on marketable equity investment         40.5                          
Loss on early extinguishment of debt         (3.1 )                 (0.3 )     (36.2 )
Net income (loss) before income taxes         44.3       3.8       (54.2 )     (0.1 )     (30.0 )
Income tax expense         (0.8 )     (1.0 )     (0.9 )     (0.7 )     (0.4 )
Net income (loss)         $ 43.5       $ 2.8       $ (55.1 )     $ (0.8 )     $ (30.4 )
Income (loss) per share - basic and diluted         $ 0.45       $ 0.03       $ (0.61 )     $ (0.01 )     $ (0.36 )
 
 

CyrusOne Inc.

Condensed Consolidated Balance Sheets

(Dollars in millions)

(Unaudited)

 
          March 31,     December 31,     September 30,     June 30,     March 31,
          2018     2017     2017     2017     2017
Assets                                  
Investment in real estate:                                  
Land         $ 104.6       $ 104.6       $ 102.8       $ 94.0       $ 79.8  
Buildings and improvements         1,400.8       1,371.4       1,344.0       1,291.7       1,270.9  
Equipment         1,959.5       1,813.9       1,721.2       1,525.3       1,438.0  
Gross operating real estate         3,464.9       3,289.9       3,168.0       2,911.0       2,788.7  
Less accumulated depreciation         (836.4 )     (782.4 )     (722.1 )     (679.6 )     (625.9 )
Net operating real estate         2,628.5       2,507.5       2,445.9       2,231.4       2,162.8  
Construction in progress, including land under development         435.3       487.1       429.4       569.1       399.2  
Land held for future development         54.4       63.8       58.7       52.7       49.6  
Total investment in real estate, net         3,118.2       3,058.4       2,934.0       2,853.2       2,611.6  
Cash and cash equivalents         228.7       151.9       24.6       40.0       20.4  
Rent and other receivables, net         93.1       87.2       89.2       88.7       83.7  
Restricted cash                     0.1       0.8       0.6  
Goodwill         455.1       455.1       455.1       455.1       455.1  
Intangible assets, net         196.8       203.0       209.7       216.3       223.1  
Other assets         406.4       356.5       171.1       162.5       149.3  
Total assets         $ 4,498.3       $ 4,312.1       $ 3,883.8       $ 3,816.6       $ 3,543.8  
Liabilities and equity                                  
Long-term debt, net         $ 2,178.3       $ 2,089.4       $ 2,013.7       $ 1,832.5       $ 1,731.8  
Capital lease obligations         15.9       10.1       10.9       11.7       12.4  
Lease financing arrangements         131.3       131.9       133.3       134.0       134.5  
Construction costs payable         89.0       115.5       133.6       163.4       174.3  
Accounts payable and accrued expenses         66.7       97.9       71.5       73.2       56.2  
Dividends payable         46.4       41.8       39.6       39.4       37.7  
Deferred revenue and prepaid rents         116.1       111.6       104.8       96.5       93.3  
Total liabilities         2,643.7       2,598.2       2,507.4       2,350.7       2,240.2  
Equity:                                  
Preferred stock, $.01 par value, 100,000,000 authorized; no shares issued or outstanding                                  

Common stock, $.01 par value, 500,000,000 shares authorized and

98,933,109 and 96,137,874 shares issued and outstanding at March 31, 2018

and December 31, 2017, respectively

        1.0       1.0       0.9       0.9       0.9  
Additional paid in capital         2,268.0       2,125.6       1,826.0       1,821.9       1,620.5  
Accumulated deficit         (413.1 )     (486.9 )     (449.2 )     (355.7 )     (316.5 )
Accumulated other comprehensive loss         (1.3 )     74.2       (1.3 )     (1.2 )     (1.3 )
Total stockholders' equity         1,854.6       1,713.9       1,376.4       1,465.9       1,303.6  
Total liabilities and equity         $ 4,498.3       $ 4,312.1       $ 3,883.8       $ 3,816.6       $ 3,543.8  
 
 

CyrusOne Inc.

Condensed Consolidated Statements of Cash Flow

(Dollars in millions)

(Unaudited)

 
         

Three Months

Ended March 31,

2018

   

Three Months

Ended March 31,

2017

Cash flows from operating activities:                
Net income (loss)         $ 43.5       $ (30.4 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
Depreciation and amortization         74.6       55.7  
Non-cash interest expense, net         0.7       0.9  
Stock-based compensation expense         3.9       3.7  
Provision for bad debt         0.5        
Unrealized gain on marketable equity investment         (40.5 )      
Loss on early extinguishment of debt         3.1       36.2  
Other               0.2  
Change in operating assets and liabilities:                
Rent and other receivables, net and other assets         (18.0 )     (20.0 )
Accounts payable and accrued expenses         (28.9 )     (6.8 )
Deferred revenue and prepaid rents         5.3       15.7  
Net cash provided by operating activities         44.2       55.2  
Cash flows from investing activities:                
Capital expenditures – asset acquisitions, net of cash acquired               (492.3 )
Capital expenditures – other development         (145.2 )     (182.5 )
Net cash used in investing activities         (145.2 )     (674.8 )
Cash flows from financing activities:                
Issuance of common stock, net         142.9       211.0  
Dividends paid         (41.0 )     (32.4 )
Proceeds from debt, net         985.6       1,200.9  
Payments on debt         (902.7 )     (744.8 )
Payments on capital leases and lease financing arrangements         (2.6 )     (2.3 )
Tax payment upon exercise of equity awards         (4.4 )     (6.4 )
Net cash provided by financing activities         177.8       626.0  
Net increase (decrease) in cash, cash equivalents and restricted cash         76.8       6.4  
Cash, cash equivalents and restricted cash at beginning of period         151.9       14.6  
Cash, cash equivalents and restricted cash at end of period         $ 228.7       $ 21.0  
                 
Supplemental disclosure of cash flow information:                
Cash paid for interest, net of amounts capitalized of $5.1 million and $3.6 million in 2018 and 2017, respectively         $ 42.2       $ 18.3  
Non-cash investing and financing activities:                
Construction costs and other payables         89.0       174.3  
Dividends payable         46.4       37.7  
Real estate additions from entering into and modifying capital leases         6.6        
Transfer of land held for future development to construction in progress         9.4       4.0  
Transfer of real estate to construction in progress from operating real estate         178.7       305.3  
 
 

CyrusOne Inc.

Net Operating Income and Reconciliation of Net Income (Loss) to Adjusted EBITDA

(Dollars in millions)

(Unaudited)

 
          Three Months Ended           Three Months Ended
          March 31,     Change     March 31,     December 31,     September 30,     June 30,     March 31,
          2018     2017     $     %     2018     2017     2017     2017     2017
Net Operating Income                                                          
Revenue         $ 196.6       $ 149.3       $ 47.3       32%     $ 196.6       $ 180.5       $ 175.3       $ 166.9       $ 149.3  
Property operating expenses         67.8       52.3       15.5       30%     67.8       60.2       63.0       59.6       52.3  
Net Operating Income (NOI)         $ 128.8       $ 97.0       $ 31.8       33%     $ 128.8       $ 120.3       $ 112.3       $ 107.3       $ 97.0  
NOI as a % of Revenue         65.5 %     65.0 %                 65.5 %     66.6 %     64.1 %     64.3 %     65.0 %
Reconciliation of Net Income (Loss) to Adjusted EBITDA:                                                          
Net income (loss)         $ 43.5       $ (30.4 )     $ 73.9       n/m     $ 43.5       $ 2.8       $ (55.1 )     $ (0.8 )     $ (30.4 )
Interest expense         20.8       13.6       7.2       53%     20.8       20.1       17.9       16.5       13.6  
Income tax expense         0.8       0.4       0.4       100%     0.8       1.0       0.9       0.7       0.4  
Depreciation and amortization         74.6       55.7       18.9       34%     74.6       70.8       68.7       63.7       55.7  
Asset impairments and loss on disposals               0.2       (0.2 )     n/m           0.2       55.5       3.6       0.2  
EBITDA (NAREIT definition)(a)         $ 139.7       $ 39.5       100.2       n/m     $ 139.7       $ 94.9       $ 87.9       $ 83.7       $ 39.5  
                                                           
Transaction, acquisition and other integration expenses         1.9       0.6       1.3       n/m     1.9       5.1       3.0       1.7       0.6  
Legal claim costs         0.2       0.2             n/m     0.2             0.3       0.6       0.2  
Stock-based compensation expense         3.9       3.7       0.2       5%     3.9       3.1       3.9       4.0       3.7  
Severance and management transition costs         0.7       0.5       0.2       40%     0.7                         0.5  
Loss on early extinguishment of debt         3.1       36.2       (33.1 )     n/m     3.1                   0.3       36.2  
New accounting standards and system implementation costs         0.5             0.5       n/m     0.5       1.1       0.8       0.5        
Unrealized gain on marketable equity investments         (40.5 )           (40.5 )     n/m     (40.5 )                        
Adjusted EBITDA         $ 109.5       $ 80.7       28.8       36%     $ 109.5       $ 104.2       $ 95.9       $ 90.8       $ 80.7  
Adjusted EBITDA as a % of Revenue         55.7 %     54.1 %                 55.7 %     57.7 %     54.7 %     54.4 %     54.1 %
 
(a)   We calculate Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) as GAAP net income (loss) plus interest expense, income tax expense, depreciation and amortization plus or minus losses and gains on the disposition of depreciable property, plus asset impairments. While it is consistent with the definition of EBITDAre promulgated by the National Association of Real Estate Investment Trusts ("NAREIT"), our computation of EBITDAre may differ from the methodology for calculating EBITDAre used by other REITs. Accordingly, our EBITDAre may not be comparable to others.
 
 

CyrusOne Inc.

Reconciliation of Net Income (Loss) to Net Operating Income

(Dollars in millions)

(Unaudited)

 
          Three Months Ended      
          March 31,     Change
        2018     2017     $     %
Net Income (Loss)         $ 43.5       $ (30.4 )     $ 73.9       (243 )%
Sales and marketing         5.3       4.9       0.4       8 %
General and administrative         19.3       15.8       3.5       22 %
Depreciation and amortization         74.6       55.7       18.9       34 %
Transaction, acquisition and other integration expenses         1.9       0.8       1.1       138 %
Interest expense         20.8       13.6       7.2       53 %
Unrealized gain on marketable equity securities         (40.5 )           (40.5 )     n/m  
Loss on early extinguishment of debt         3.1       36.2       (33.1 )     (91 )%
Income tax expense         0.8       0.4       0.4       100 %
Net Operating Income         $ 128.8       $ 97.0       $ 31.8       33 %
 
 

CyrusOne Inc.

Reconciliation of Net Income (Loss) to FFO and Normalized FFO

(Dollars in millions)

(Unaudited)

 
          Three Months Ended           Three Months Ended
          March 31,     Change     March 31,     December 31,     September 30,     June 30,     March 31,
        2018     2017     $     %     2018     2017     2017     2017     2017
Reconciliation of Net Income (Loss) to FFO and Normalized FFO:                                                            
Net income (loss)         $ 43.5       $ (30.4 )     $ 73.9       n/m       $ 43.5       $ 2.8       $ (55.1 )     $ (0.8 )     $ (30.4 )
Real estate depreciation and amortization         66.7       48.7       18.0       37 %     66.7       62.6       60.3       55.3       48.7  
Asset impairments                           n/m                   54.4       3.6        
Funds from Operations ("FFO") - NAREIT defined         $ 110.2       $ 18.3       $ 91.9       n/m       $ 110.2       $ 65.4       $ 59.6       $ 58.1       $ 18.3  
                                                             
Loss on early extinguishment of debt         3.1       36.2       (33.1 )     n/m       3.1                   0.3       36.2  
Unrealized gain on marketable equity investments         (40.5 )           (40.5 )     n/m       (40.5 )                        
New accounting standards and system implementation costs         0.5             0.5       n/m       0.5       1.1       0.8       0.5        
Amortization of customer relationship intangibles         6.1       5.2       0.9       17 %     6.1       6.6       6.6       6.7       5.2  
Transaction, acquisition and other integration expenses         1.9       0.8       1.1       138 %     1.9       5.3       4.1       1.7       0.8  
Severance and management transition costs         0.7       0.5       0.2       40 %     0.7                         0.5  
Legal claim costs         0.2       0.2             n/m       0.2             0.3       0.6       0.2  
Normalized Funds from Operations (Normalized FFO)         $ 82.2       $ 61.2       $ 21.0       34 %     $ 82.2       $ 78.4       $ 71.4       $ 67.9       $ 61.2  
Normalized FFO per diluted common share         $ 0.85       $ 0.72       $ 0.13       18 %     $ 0.85       $ 0.84       $ 0.79       $ 0.77       $ 0.72  
Weighted average diluted common shares outstanding         96.6       84.5       12.1       14 %     96.6       93.5       90.9       88.5       84.5  
                                                             
Additional Information:                                                            
Amortization of deferred financing costs and bond premium         0.7       1.0       (0.3 )     (30 )%     0.7       0.9       1.2       1.2       1.0  
Stock-based compensation expense         3.9       3.7       0.2       5 %     3.9       3.1       3.9       4.0       3.7  
Non-real estate depreciation and amortization         1.8       1.8             n/m       1.8       1.6       1.8       1.7       1.8  
Straight line rent adjustments(a)         (7.2 )     (9.7 )     2.5       (26 )%     (7.2 )     (7.4 )     (6.4 )     (8.8 )     (9.7 )
Deferred revenue, primarily installation revenue(b)         3.2       0.3       2.9       n/m       3.2       3.8       12.9       6.1       0.3  
Leasing commissions         (3.2 )     (3.9 )     0.7       (18 )%     (3.2 )     (3.5 )     (6.1 )     (3.8 )     (3.9 )
Recurring capital expenditures         (2.4 )     (1.5 )     (0.9 )     60 %     (2.4 )     (1.6 )     (0.6 )     (0.7 )     (1.5 )
 
(a)  

Straight line rent adjustments:

    Represents the difference between revenue recognized on a straight line basis under U.S. GAAP over the term of the lease compared to the contractual rental payments. Lease agreements typically include payments that escalate over the term of the contract or, to a lesser extent, a ramp period.
     
(b)  

Deferred revenue, primarily installation revenue:

    Represents payments received from customers in excess of revenue recognized under U.S. GAAP. This primarily relates to specific customer-requested buildouts that CyrusOne does not include in its basic data center design. The company charges customers up front for these buildouts rather than incorporating into rent and billing them over time. The cash payments for these buildouts are non-recurring, and may vary significantly from quarter to quarter, but revenue is amortized over the life of the lease.
 
 

CyrusOne Inc.

Market Capitalization Summary, Reconciliation of Net Debt, and Debt Schedule

(Unaudited)

 

Market Capitalization

(dollars in millions)         Shares or

Equivalents

Outstanding

    Market Price

as of

March 31, 2018

    Market Value

Equivalents

(in millions)

Common shares         98,933,109       $ 51.21       $ 5,066.4
Net Debt                     1,987.2
Total Enterprise Value (TEV)                     $ 7,053.6
 

Reconciliation of Net Debt

 
          March 31,     December 31,
(dollars in millions)         2018     2017
Long-term debt(a)         $ 2,200.0       $ 2,100.0  
Capital lease obligations         15.9       10.1  
Less:                
Cash and cash equivalents         (228.7 )     (151.9 )
Net Debt         $ 1,987.2       $ 1,958.2  
 

(a)  Excludes adjustment for deferred financing costs.

 

Debt Schedule (as of March 31, 2018)

 
(dollars in millions)                      
Long-term debt:         Amount     Interest Rate     Maturity Date
Revolving credit facility         $       L + 145bps     March 2023(a)
Term loan         700.0       3.28%     March 2023
Term loan         300.0       3.58%     March 2025
5.000% senior notes due 2024, excluding bond premium         700.0       5.000%     March 2024
5.375% senior notes due 2027, excluding bond premium         500.0       5.375%     March 2027
Total long-term debt(b)         $ 2,200.0       4.34%      
                       
Weighted average term of debt:        

6.5 years

     
 

(a)  Assuming exercise of one-year extension option.

(b)  Excludes adjustment for deferred financing costs.

 

Interest Summary

        Three Months Ended      
          March 31,     December 31,     March 31,     Growth %
(dollars in millions)         2018     2017     2017     Yr/Yr
Interest expense and fees         $ 25.2       $ 23.8       $ 16.2       56 %
Amortization of deferred financing costs and bond premium         0.7       0.9       1.0       (30 )%
Capitalized interest         (5.1 )     (4.6 )     (3.6 )     42 %
Total interest expense         $ 20.8       $ 20.1       $ 13.6       53 %
 
 

CyrusOne Inc.

Colocation Square Footage (CSF) and CSF Leased

(Unaudited)

 
          As of March 31, 2018     As of December 31, 2017     As of March 31, 2017

Market

       

Colocation

Space (CSF)(a) (000)

   

CSF

Leased(b)

   

Colocation

Space (CSF)(a) (000)

   

CSF

Leased(b)

   

Colocation

Space (CSF)(a) (000)

   

CSF

Leased(b)

Northern Virginia         673       94 %     640       79 %     357       100 %
Dallas         555       81 %     506       85 %     431       87 %
Phoenix         509       91 %     509       91 %     216       100 %
Cincinnati         404       92 %     404       91 %     387       91 %
Houston         308       74 %     308       74 %     308       74 %
San Antonio         273       100 %     273       88 %     240       100 %
New York Metro         218       83 %     218       82 %     218       83 %
Chicago         213       67 %     213       64 %     136       86 %
Austin         106       73 %     106       67 %     106       59 %
Raleigh-Durham         76       88 %     76       88 %     65       80 %
International         13       76 %     13       76 %     13       74 %
Total         3,348       86 %     3,267       83 %     2,477       88 %
Stabilized Properties(c)         3,024       92 %     2,653       93 %     2,293       92 %
 
(a)   CSF represents the NRSF at an operating facility that is currently leased or readily available for lease as colocation space, where customers locate their servers and other IT equipment.
(b)   CSF Leased is calculated by dividing CSF under signed leases for colocation space (whether or not the lease has commenced billing) by total CSF.
(c)   Stabilized properties include data halls that have been in service for at least 24 months or are at least 85% leased.
 
 

CyrusOne Inc.

2018 Guidance

         

Category

     

2018
Guidance(1)

Total Revenue       $810 - 825 million
Lease and Other Revenues from Customers       $735 - 745 million
Metered Power Reimbursements       $75 - 80 million
Adjusted EBITDA       $460 - 470 million
Normalized FFO per diluted common share       $3.18 - 3.28
Capital Expenditures       $850 - 900 million
Development       $845 - 890 million
Recurring       $5 - 10 million
     
(1)   Full year 2018 guidance includes the impact of the Zenium acquisition, which is expected to close in May 2018. Development capital expenditures include the acquisition of land for future development.

The annual guidance provided above represents forward-looking statements, which are based on current economic conditions, internal assumptions about the Company's existing customer base and the supply and demand dynamics of the markets in which CyrusOne operates.

CyrusOne does not provide reconciliations for the non-GAAP financial measures included in the annual guidance provided above due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including net income (loss) and adjustments that could be made for transaction and acquisition integration costs, legal claim costs, lease exit costs, asset impairments and loss on disposals and other charges in its reconciliation of historic numbers, the amount of which, based on historical experience, could be significant.

                                                                   

CyrusOne Inc.

Data Center Portfolio

As of March 31, 2018

(Unaudited)

                                                                   
                  Operating Net Rentable Square Feet (NRSF)(a)    

Powered
Shell
Available
for Future
Development
(NRSF)(k)
(000)

   

Available
Critical
Load
Capacity
(MW)(l)

Stabilized Properties(b)     Metro
Area
   

Annualized
Rent(c)
($000)

   

Colocation
Space
(CSF)(d)
(000)

   

CSF
Occupied(e)

   

CSF
Leased(f)

   

Office &
Other(g)
(000)

   

Office &
Other
Occupied(h)

   

Supporting
Infrastructure(i)
(000)

   

Total(j)
(000)

       
Dallas - Carrollton     Dallas     $ 70,766     305     89 %     90 %     66     63 %     111     482     16       38
Houston - Houston West I     Houston       43,053     112     96 %     96 %     11     99 %     37     161     3       28
Dallas - Lewisville*     Dallas       34,705     114     93 %     93 %     11     95 %     54     180           21
Cincinnati - 7th Street***     Cincinnati       34,475     197     93 %     94 %     6     100 %     175     378     46       16
Northern Virginia - Sterling II     Northern Virginia       33,337     159     100 %     100 %     9     100 %     55     223           30
Somerset I     New York Metro       29,300     97     88 %     88 %     27     85 %     89     213     2       11
Chicago - Aurora I     Chicago       28,034     113     96 %     96 %     34     100 %     223     371     27       71
San Antonio III     San Antonio       27,148     132     100 %     100 %     9     100 %     43     184           24
Totowa - Madison**     New York Metro       25,798     51     89 %     89 %     22     100 %     59     133           6
Cincinnati - North Cincinnati     Cincinnati       24,319     65     98 %     98 %     45     75 %     53     163     65       14
Houston - Houston West II     Houston       22,874     80     87 %     87 %     4     88 %     55     139     11       12
San Antonio I     San Antonio       22,684     44     100 %     100 %     6     83 %     46     96     11       12
Wappingers Falls I**     New York Metro       22,448     37     86 %     91 %     20     99 %     15     72           3
Phoenix - Chandler II     Phoenix       19,956     74     100 %     100 %     6     38 %     26     105           12
Phoenix - Chandler I     Phoenix       18,331     74     100 %     100 %     35     12 %     39     147     31       16
Northern Virginia - Sterling I     Northern Virginia       18,311     78     100 %     100 %     6     77 %     49     132           12
Raleigh-Durham I     Raleigh-Durham       17,877     76     88 %     88 %     13     100 %     82     171     246       12
Phoenix - Chandler III     Phoenix       17,344     68     100 %     100 %     2     %     30     101           14
Houston - Galleria     Houston       16,696     63     61 %     61 %     23     51 %     25     112           14
Austin II     Austin       15,234     44     95 %     95 %     2     100 %     22     68           5
Northern Virginia - Sterling III     Northern Virginia       15,184     79     100 %     100 %     7     100 %     34     120           15
San Antonio II     San Antonio       14,310     64     100 %     100 %     11     100 %     41     117           12
Northern Virginia - Sterling V     Northern Virginia       13,394     276     59 %     85 %     9     100 %     121     405     244       33
Florence     Cincinnati       13,276     53     99 %     99 %     47     87 %     40     140           9
Phoenix - Chandler VI     Phoenix       12,277     148     94 %     94 %     5     100 %     32     185     10       24
Phoenix - Chandler IV     Phoenix       11,222     73     100 %     100 %     3     100 %     27     103           12
Cincinnati - Hamilton*     Cincinnati       11,176     47     76 %     76 %     1     100 %     35     83           10
Austin III     Austin       10,769     62     52 %     58 %     15     83 %     21     98     67       6
London - Great Bridgewater**     International       6,015     10     94 %     94 %         %     1     11           1
Northern Virginia - Sterling IV     Northern Virginia       5,774     81     100 %     100 %     7     100 %     34     122           15
Dallas - Midway**     Dallas       5,357     8     100 %     100 %         %         8           1
Stamford - Riverbend**     New York Metro       5,149     20     23 %     23 %         %     8     28           2
Cincinnati - Mason     Cincinnati       5,087     34     100 %     100 %     26     98 %     17     78           4
Norwalk I**     New York Metro       3,797     13     93 %     100 %     4     72 %     41     58     87       2
Dallas - Marsh**     Dallas       2,570     4     100 %     100 %         %         4           1
Chicago - Lombard     Chicago       2,325     14     73 %     73 %     4     100 %     12     30     29       3
Stamford - Omega**     New York Metro       1,238         %     %     19     84 %     4     22          
Cincinnati - Blue Ash*     Cincinnati       630     6     36 %     36 %     7     100 %     2     15           1
Totowa - Commerce**     New York Metro       569         %     %     20     38 %     6     26          
South Bend - Crescent*     Chicago       541     3     40 %     40 %         %     5     9     11       1
Houston - Houston West III     Houston       507         %     %     10     100 %     11     21     209      
Singapore - Inter Business Park**     International       376     3     22 %     22 %         %         3           1
South Bend - Monroe     Chicago       142     6     23 %     23 %         %     6     13     4       1
Cincinnati - Goldcoast     Cincinnati       13     3     %     %     5     %     16     24     14       1
San Antonio IV     San Antonio           33     %     100 %     4     %     27     64           6
Stabilized Properties - Total           $ 684,384     3,024     88 %     92 %     562     78 %     1,830     5,416     1,133       518
 
CyrusOne Inc.
Data Center Portfolio
As of March 31, 2018
(Unaudited)
                                                                   
                  Operating Net Rentable Square Feet (NRSF)(a)    

Powered
Shell
Available
for Future
Development
(NRSF)(k)
(000)

   

Available
Critical
Load
Capacity
(MW)(l)

     

Metro
Area

   

Annualized
Rent(c)
($000)

   

Colocation
Space
(CSF)(d)
(000)

   

CSF
Occupied(e)

   

CSF
Leased(f)

   

Office &
Other(g)
(000)

   

Office &
Other
Occupied(h)

   

Supporting
Infrastructure(i)
(000)

   

Total(j)
(000)

       
Stabilized Properties - Total           $ 684,384     3,024     88 %     92 %     562     78 %     1,830     5,416     1,133     518
                                                                   

Pre-Stabilized Properties(b)

                                                                 
Dallas - Carrollton (DH #6)     Dallas       4,442     75     62 %     62 %         %     21     96         6
Houston - Houston West III (DH #1)     Houston       3,633     53     22 %     23 %         %     21     74         6
Phoenix - Chandler V     Phoenix       3,116     72     50 %     50 %     1     50 %     16     89     94     6
Chicago - Aurora II (DH #1)     Chicago       311     77     23 %     26 %     10     %     14     101     272     16
Dallas - Carrollton (DH #7)     Dallas           48     %     21 %         %         48         6
All Properties - Total           $ 695,885     3,348     83 %     86 %     573     78 %     1,903     5,824     1,499     567
     
*   Indicates properties in which we hold a leasehold interest in the building shell and land. All data center infrastructure has been constructed by us and is owned by us.
**   Indicates properties in which we hold a leasehold interest in the building shell, land, and all data center infrastructure.
***   The information provided for the Cincinnati - 7th Street property includes data for two facilities, one of which we lease and one of which we own.
(a)   Represents the total square feet of a building under lease or available for lease based on engineers' drawings and estimates but does not include space held for development or space used by CyrusOne.
(b)   Stabilized properties include data halls that have been in service for at least 24 months or are at least 85% leased. Pre-stabilized properties include data halls that have been in service for less than 24 months and are less than 85% leased.
(c)   Represents monthly contractual rent (defined as cash rent including customer reimbursements for metered power) under existing customer leases as of March 31, 2018, multiplied by 12. For the month of March 2018, customer reimbursements were $80.6 million annualized and consisted of reimbursements by customers across all facilities with separately metered power. Customer reimbursements under leases with separately metered power vary from month-to-month based on factors such as our customers' utilization of power and the suppliers' pricing of power. From April 1, 2016 through March 31, 2018, customer reimbursements under leases with separately metered power constituted between 10.2% and 12.6% of annualized rent. After giving effect to abatements, free rent and other straight-line adjustments, our annualized effective rent as of March 31, 2018 was $707.7 million. Our annualized effective rent was greater than our annualized rent as of March 31, 2018 because our positive straight-line and other adjustments and amortization of deferred revenue exceeded our negative straight-line adjustments due to factors such as the timing of contractual rent escalations and customer prepayments for services.
(d)   CSF represents the NRSF at an operating facility that is currently leased or readily available for lease as colocation space, where customers locate their servers and other IT equipment.
(e)   Percent occupied is determined based on CSF billed to customers under signed leases as of March 31, 2018 divided by total CSF. Leases signed but that have not commenced billing as of March 31, 2018 are not included.
(f)   Percent leased is calculated by dividing CSF under signed leases for colocation space (whether or not the lease has commenced billing) by total CSF.
(g)   Represents the NRSF at an operating facility that is currently leased or readily available for lease as space other than CSF, which is typically office and other space.
(h)   Percent occupied is determined based on Office & Other space being billed to customers under signed leases as of March 31, 2018 divided by total Office & Other space. Leases signed but not commenced as of March 31, 2018 are not included.
(i)   Represents infrastructure support space, including mechanical, telecommunications and utility rooms, as well as building common areas.
(j)   Represents the NRSF at an operating facility that is currently leased or readily available for lease. This excludes existing vacant space held for development.
(k)   Represents space that is under roof that could be developed in the future for operating NRSF, rounded to the nearest 1,000.
(l)   Critical load capacity represents the aggregate power available for lease and exclusive use by customers expressed in terms of megawatts. The capacity reported is for non-redundant megawatts, as we can develop flexible solutions to our customers at multiple resiliency levels. Does not sum to total due to rounding.
                                                                   

CyrusOne Inc.

NRSF Under Development

As of March 31, 2018

(Dollars in millions)

(Unaudited)

                                                                   
            NRSF Under Development(a)           Under Development Costs
Facilities     Metropolitan

Area

   

Estimated
Completion
Date

   

Colocation
Space
(CSF)
(000)

   

Office &
Other
(000)

   

Supporting
Infrastructure
(000)

   

Powered
Shell(b)
(000)

    Total (000)    

Critical
Load MW
Capacity(c)

   

Actual
to
Date(d)

   

Estimated

Costs to

Completion(e)

    Total
Somerset II     New York Metro     2Q'18                   210     210         $ 23     $ 1-2     $ 24-25
Northern Virginia - Sterling V     Northern Virginia     2Q'18     26           17         43     12.0             47-52       47-52
Dallas - Allen     Dallas     2Q'18     79       27     60     175     341     6.0       27       31-37       58-64
Phoenix - Chandler V     Phoenix     2Q'18                           6.0             18-20       18-20
Dallas - Carrollton     Dallas     3Q'18                           6.0             17-19       17-19
San Antonio IV     San Antonio     3Q'18     27       8             35     6.0             15-17       15-17
Northern Virginia - Sterling VI     Northern Virginia     3Q'18                   359     359                 73-77       73-77
Aurora II     Chicago     3Q'18           35             35                 8-9       8-9
Total                 132       70     77     744     1,023     36.0     $ 50     $ 210-233     $ 260-283
     
(a)   Represents NRSF 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.
(b)   Represents NRSF under construction that, upon completion, will be powered shell available for future development into operating NRSF.
(c)  

Critical load capacity represents the aggregate power available for lease and exclusive use by customers expressed in terms of megawatts. The capacity reported is for non-

redundant megawatts, as we can develop flexible solutions to our customers at multiple resiliency levels.

(d)   Actual to date is the cash investment as of March 31, 2018. There may be accruals above this amount for work completed, for which cash has not yet been paid.
(e)   Represents management’s estimate of the total costs required to complete the current NRSF under development. There may be an increase in costs if customers require greater power density.
         

CyrusOne Inc.

Land Available for Future Development (Acres)

As of March 31, 2018

(Unaudited)

         
        As of
Market       March 31, 2018
Atlanta       44
Austin       22
Chicago       23
Cincinnati       98
Dallas       33
Houston       20
International      
New York Metro      
Northern Virginia      
Phoenix       39
Quincy, Washington       48
Raleigh-Durham      
San Antonio      
Total Available       327
Book Value of Total Available       $54 million
                                         

CyrusOne Inc.

Leasing Statistics - Lease Signings

As of March 31, 2018

(Unaudited)

                                         
Period      

Number
of Leases(a)

     

Total CSF
Signed(b)

     

Total kW
Signed(c)

     

Total MRR
Signed (000)(d)

     

Weighted
Average
Lease Term(e)

1Q'18(f)       439       226,000       29,364       $3,370       77
Prior 4Q Avg.       434       130,250       14,591       $2,198       80
4Q'17       395       86,000       8,600       $1,463       61
3Q'17       411       151,000       14,830       $2,228       68
2Q'17       451       136,000       16,673       $2,467       86
1Q'17       480       148,000       18,259       $2,632       103
       
(a)     Number of leases represents each agreement with a customer. A lease agreement could include multiple spaces, and a customer could have multiple leases.
(b)     CSF represents the NRSF at an operating facility that is leased as colocation space, where customers locate their servers and other IT equipment.
(c)     Represents maximum contracted kW that customers may draw during lease period. Additionally, we can develop flexible solutions for our customers at multiple resiliency levels, and the kW signed is unadjusted for this factor.
(d)     Monthly recurring rent is defined as the average monthly contractual rent during the term of the lease. It includes the monthly impact of installation charges of approximately $0.2 million in 2Q'17-1Q'18 and $0.1 million in each of the other quarters.
(e)     Calculated on a CSF-weighted basis.
(f)     Excludes leasing from Zenium.
                                                 

CyrusOne Inc.

New MRR Signed - Existing vs. New Customers

As of March 31, 2018

(Dollars in thousands)

(Unaudited)

                                                 
New MRR(a) Signed ($000)
                                                 
      2Q'16     3Q'16     4Q'16     1Q'17     2Q'17     3Q'17     4Q'17     1Q'18(b)
Existing Customers     $ 4,406       $ 1,796       $ 1,332       $ 2,247       $ 2,322       $ 1,418       $ 1,063       $ 3,149  
New Customers     $ 460       $ 454       $ 258       $ 385       $ 145       $ 810       $ 400       $ 221  
Total     $ 4,866       $ 2,250       $ 1,590       $ 2,632       $ 2,467       $ 2,228       $ 1,463       $ 3,370  
                                                 
% from Existing Customers       91 %       80 %       84 %       85 %       94 %       64 %       73 %       93 %
     
(a)   Monthly recurring rent is defined as the average monthly contractual rent during the term of the lease. It includes the monthly impact of installation charges of approximately $0.2 million in 2Q'17-1Q'18 and $0.1 million in each of the other quarters.
(b)   Excludes leasing from Zenium.
 

CyrusOne Inc.

Customer Sector Diversification(a)

As of March 31, 2018

(Unaudited)

                             
    Principal Customer Industry     Number of
Locations
    Annualized
Rent(b) (000)
    Percentage of
Portfolio
Annualized
Rent(c)
    Weighted
Average
Remaining
Lease Term in
Months(d)
1   Information Technology     9     $ 125,202       18.0 %     90.4
2   Information Technology     4     32,858       4.7 %     82.7
3   Information Technology     10     31,078       4.5 %     45.9
4   Financial Services     1     19,794       2.8 %     156.0
5   Telecommunication Services     2     15,875       2.3 %     6.5
6   Research and Consulting Services     3     15,783       2.3 %     33.1
7   Healthcare     2     14,832       2.1 %     117.0
8   Energy     5     13,592       2.0 %     5.3
9   Energy     1     12,772       1.8 %     25.0
10   Industrials     4     11,203       1.6 %     17.5
11   Telecommunication Services     7     9,683       1.4 %     29.9
12   Financial Services     2     9,039       1.3 %     65.5
13   Information Technology     4     8,982       1.3 %     52.3
14   Consumer Staples     4     8,396       1.2 %     34.4
15   Information Technology     2     7,579       1.1 %     72.1
16   Information Technology     3     6,955       1.0 %     118.0
17   Financial Services     1     6,600       1.0 %     26.0
18   Energy     2     6,300       0.9 %     22.5
19   Telecommunication Services     5     5,861       0.8 %     13.2
20   Consumer Staples     2     5,214       0.7 %     48.7
                $ 367,597       52.8 %     68.4
 
(a)   Customers and their affiliates are consolidated.
(b)   Represents monthly contractual rent (defined as cash rent including customer reimbursements for metered power) under existing customer leases as of March 31, 2018, multiplied by 12. For the month of March 2018, customer reimbursements were $80.6 million annualized and consisted of reimbursements by customers across all facilities with separately metered power. Customer reimbursements under leases with separately metered power vary from month-to-month based on factors such as our customers' utilization of power and the suppliers' pricing of power. From April 1, 2016 through March 31, 2018, customer reimbursements under leases with separately metered power constituted between 10.2% and 12.6% of annualized rent. After giving effect to abatements, free rent and other straight-line adjustments, our annualized effective rent as of March 31, 2018 was $707.7 million. Our annualized effective rent was greater than our annualized rent as of March 31, 2018 because our positive straight-line and other adjustments and amortization of deferred revenue exceeded our negative straight-line adjustments due to factors such as the timing of contractual rent escalations and customer prepayments for services.
(c)   Represents the customer’s total annualized rent divided by the total annualized rent in the portfolio as of March 31, 2018, which was approximately $695.9 million.
(d)   Weighted average based on customer’s percentage of total annualized rent expiring and is as of March 31, 2018, assuming that customers exercise no renewal options and exercise all early termination rights that require payment of less than 50% of the remaining rents. Early termination rights that require payment of 50% or more of the remaining lease payments are not assumed to be exercised because such payments approximate the profitability margin of leasing that space to the customer, such that we do not consider early termination to be economically detrimental to us.
                                     

CyrusOne Inc.

Lease Distribution

As of March 31, 2018

(Unaudited)

                                     
NRSF Under Lease(a)     Number of

Customers(b)

    Percentage of

All Customers

    Total

Leased

NRSF(c) (000)

    Percentage of

Portfolio

Leased NRSF

    Annualized

Rent(d) (000)

    Percentage of

Annualized Rent

0-999     679     69 %     144     3 %     $ 67,998     10 %
1,000-2,499     120     12 %     190     4 %     41,654     6 %
2,500-4,999     69     7 %     245     5 %     44,681     6 %
5,000-9,999     45     4 %     316     7 %     62,071     9 %
10,000+     76     8 %     3,915     81 %     479,482     69 %
Total     989     100 %     4,809     100 %     $ 695,885     100 %
     
(a)   Represents all leases in our portfolio, including colocation, office and other leases.
(b)   Represents the number of customers occupying data center, office and other space as of March 31, 2018. This may vary from total customer count as some customers may be under contract, but have yet to occupy space.
(c)   Represents the total square feet at a facility under lease and that has commenced billing, excluding space held for development or space used by CyrusOne. A customer’s leased NRSF is estimated based on such customer’s direct CSF or office and light-industrial space plus management’s estimate of infrastructure support space, including mechanical, telecommunications and utility rooms, as well as building common areas.
(d)   Represents monthly contractual rent (defined as cash rent including customer reimbursements for metered power) under existing customer leases as of March 31, 2018, multiplied by 12. For the month of March 2018, customer reimbursements were $80.6 million annualized and consisted of reimbursements by customers across all facilities with separately metered power. Customer reimbursements under leases with separately metered power vary from month-to-month based on factors such as our customers' utilization of power and the suppliers' pricing of power. From April 1, 2016 through March 31, 2018, customer reimbursements under leases with separately metered power constituted between 10.2% and 12.6% of annualized rent. After giving effect to abatements, free rent and other straight-line adjustments, our annualized effective rent as of March 31, 2018 was $707.7 million. Our annualized effective rent was greater than our annualized rent as of March 31, 2018 because our positive straight-line and other adjustments and amortization of deferred revenue exceeded our negative straight-line adjustments due to factors such as the timing of contractual rent escalations and customer prepayments for services.
                                           

CyrusOne Inc.

Lease Expirations

As of March 31, 2018

(Unaudited)

                                           
Year(a)     Number of
Leases
Expiring(b)
    Total Operating
NRSF Expiring (000)
    Percentage of
Total NRSF
    Annualized
Rent(c) (000)
    Percentage of
Annualized Rent
    Annualized Rent
at Expiration(d) (000)
    Percentage of
Annualized Rent
at Expiration
Available           1,041     18 %                        
Month-to-Month     613     57     1 %     $ 17,323     2 %     $ 17,384     2 %
2018     1,515     401     7 %       102,917     15 %       105,649     14 %
2019     1,681     529     9 %       96,538     14 %       98,400     13 %
2020     1,349     513     9 %       73,347     10 %       75,880     10 %
2021     935     563     10 %       92,170     13 %       100,443     13 %
2022     242     554     9 %       54,301     8 %       67,303     9 %
2023     111     290     5 %       26,332     4 %       36,398     5 %
2024     42     239     4 %       33,539     5 %       42,732     5 %
2025     42     181     3 %       27,408     4 %       32,067     4 %
2026     26     577     10 %       79,016     11 %       85,678     11 %
2027     16     416     7 %       52,510     8 %       63,039     8 %
2028 - Thereafter     16     463     8 %       40,484     6 %       49,589     6 %
Total     6,588     5,824     100 %     $ 695,885     100 %     $ 774,561     100 %
     
(a)   Leases that were auto-renewed prior to March 31, 2018 are shown in the calendar year in which their current auto-renewed term expires. Unless otherwise stated in the footnotes, the information set forth in the table assumes that customers exercise no renewal options and exercise all early termination rights that require payment of less than 50% of the remaining rents. Early termination rights that require payment of 50% or more of the remaining lease payments are not assumed to be exercised.
(b)   Number of leases represents each agreement with a customer. A lease agreement could include multiple spaces and a customer could have multiple leases.
(c)  

Represents monthly contractual rent (defined as cash rent including customer reimbursements for metered power) under existing customer leases as of March 31, 2018, multiplied by 12. For the month of March 2018, customer reimbursements were $80.6 million annualized and consisted of reimbursements by customers across all facilities with separately metered power. Customer reimbursements under leases with separately metered power vary from month-to-month based on factors such as our customers' utilization of power and the suppliers' pricing of power. From April 1, 2016 through March 31, 2018, customer reimbursements under leases with separately metered power constituted between 10.2% and 12.6% of annualized rent. After giving effect to abatements, free rent and other straight-line adjustments, our annualized effective rent as of March 31, 2018 was $707.7 million. Our annualized effective rent was greater than our annualized rent as of March 31, 2018 because our positive straight-line and other adjustments and amortization of deferred revenue exceeded our negative straight-line adjustments due to factors such as the timing of contractual rent escalations and customer prepayments for services.

(d)   Represents the final monthly contractual rent under existing customer leases that had commenced as of March 31, 2018, multiplied by 12.

 

Source: CyrusOne Inc.

CyrusOne Inc.
Investor Relations:
Michael Schafer, 972-350-0060
Vice President, Capital Markets & Investor Relations
investorrelations@cyrusone.com