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Aug 1, 2018

CyrusOne Reports Second Quarter 2018 Earnings

Signed Quarterly Company Record $65 Million in Annualized GAAP Revenue and 52 Megawatts
Year-over-Year Revenue Growth of 18% and Adjusted EBITDA Growth of 22%

DALLAS--(BUSINESS WIRE)--Aug. 1, 2018-- CyrusOne Inc. (NASDAQ: CONE), a premier global data center REIT, today announced second quarter 2018 earnings.

Highlights

             

Category

   

2Q’18

   

% Change
vs. 2Q’17

Revenue     $196.9 million     18%
Net income     $105.9 million     n/m
Adjusted EBITDA     $110.6 million     22%
Normalized FFO     $80.7 million     19%
Net income per diluted share     $1.06     n/m
Normalized FFO per diluted share     $0.81     5%
             
     

  Leased 52 megawatts (“MW”) and 305,000 colocation square feet (“CSF”) in the second quarter, totaling $65 million in annualized GAAP revenue, all company records
     

 

 

-- Leasing results also included company records for number of leases signed (506), weighted average lease term (11.9 years on a CSF-weighted basis), and total interconnection revenue signed ($2.8 million annualized)

 

 

-- Includes leases totaling more than 10 MW signed with two hyperscale customers based in China

     

  Backlog of $85 million in annualized GAAP revenue as of the end of the second quarter, representing nearly $850 million in total contract value
     

  Completed construction of a 350-foot telecommunications tower at the Aurora I facility, creating the first on-campus wireless access and supporting both microwave and millimeter wireless antenna colocation services for financial ecosystem customers
     

  Acquired 68 acres of land in Mesa, Arizona, and subsequent to the end of the quarter, acquired a 154,000 square foot shell in Northern Virginia with up to 33 MW of power capacity
     

 

 

-- Transactions support the company’s continued growth in two of the strongest data center markets in the U.S.

     

“We are thrilled with our record bookings this quarter, which followed very strong leasing in the first quarter,” said Gary Wojtaszek, president and chief executive officer of CyrusOne. “The 52 megawatts signed this quarter included leases totaling more than 10 megawatts signed with Chinese hyperscale customers, reflecting the growing needs of these companies as they continue to expand into and within the U.S. Further, the $106 million in annualized revenue signed year-to-date through June positions us very well for continued strong, profitable growth in 2019.”

Second Quarter 2018 Financial Results

Revenue was $196.9 million for the second quarter, compared to $166.9 million for the same period in 2017, an increase of 18%. The increase in revenue was driven primarily by a 28% increase in occupied CSF and additional interconnection services.

Net income was $105.9 million for the second quarter, compared to net loss of $0.8 million in the same period in 2017. Net income for the second quarter included a $102.7 million unrealized gain on the Company’s equity investment in GDS Holdings Limited (“GDS”), a leading data center provider in China, due to an increase in GDS’s share price during the quarter. Net income per diluted common share1 was $1.06 in the second quarter of 2018, compared to net loss of $(0.01) per diluted common share in the same period in 2017.

Net operating income (NOI)2 was $128.0 million for the second quarter, compared to $107.3 million in the same period in 2017, an increase of 19%. Adjusted EBITDA3 was $110.6 million for the second quarter, compared to $90.8 million in the same period in 2017, an increase of 22%.

Normalized Funds From Operations (Normalized FFO)4 was $80.7 million for the second quarter, compared to $67.9 million in the same period in 2017, an increase of 19%. Normalized FFO per diluted common share was $0.81 in the second quarter of 2018, an increase of 5% over second quarter 2017.

Leasing Activity

CyrusOne leased approximately 52 MW of power and 305,000 CSF in the second quarter, representing $5.5 million in monthly recurring rent, inclusive of the monthly impact of installation charges, or approximately $65.4 million in annualized GAAP revenue5, excluding estimates for pass-through power. The weighted average lease term of the new leases, based on square footage, is 143 months (11.9 years), and the weighted average remaining lease term of CyrusOne’s portfolio is 59 months (taking into account the impact of the backlog), the longest in the Company’s history. Recurring rent churn6 for the second quarter was 1.1%, compared to 0.8% for the same period in 2017.

Portfolio Development and CSF Leased

In the second quarter, the Company completed construction on 27,000 CSF and 18 MW of power capacity across three projects in San Antonio, Northern Virginia, and Phoenix. CSF leased7 as of the end of the second quarter was 92% for stabilized properties8 and 88% overall. In addition, the Company has development projects underway in Northern Virginia, Dallas, the New York Metro area, Phoenix, Chicago and San Antonio that are expected to add approximately 401,000 CSF and 86 MW of power capacity.

Balance Sheet and Liquidity

As of June 30, 2018, the Company had gross assets9 totaling approximately $5.5 billion, an increase of approximately 23% over gross assets as of June 30, 2017. CyrusOne had $2.20 billion of long-term debt10, cash and cash equivalents of $116.2 million, and $1.7 billion available under its unsecured revolving credit facility as of June 30, 2018. Net debt10 was $2.10 billion as of June 30, 2018, representing approximately 27% of the Company's total enterprise value as of June 30, 2018 of $7.9 billion, or 4.7x Adjusted EBITDA for the last quarter annualized. Available liquidity11 was $2.11 billion as of June 30, 2018.

Dividend

On May 2, 2018, the Company announced a dividend of $0.46 per share of common stock for the second quarter of 2018. The dividend was paid on July 13, 2018, to stockholders of record at the close of business on June 29, 2018.

Additionally, today the Company is announcing a dividend of $0.46 per share of common stock for the third quarter of 2018. The dividend will be paid on October 12, 2018, to stockholders of record at the close of business on September 28, 2018.

Guidance

CyrusOne is updating guidance for full year 2018, increasing and tightening the range for Total Revenue, decreasing and tightening the range for Adjusted EBITDA, increasing and tightening the range for Normalized FFO per diluted common share, and reaffirming the range for Capital Expenditures. 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 forward-looking guidance for GAAP financial measures (other than Revenue and Capital Expenditures) or 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, acquisition, integration and other related expenses, legal claim 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

   

Previous 2018
Guidance(1)

   

Revised 2018
Guidance(1)

Total Revenue     $810 - 825 million     $820 - 830 million
Lease and Other Revenues from Customers     $735 - 745 million     $725 - 730 million
Metered Power Reimbursements     $75 - 80 million     $95 - 100 million
Adjusted EBITDA     $460 - 470 million     $454 - 459 million
Normalized FFO per diluted common share     $3.18 - 3.28     $3.25 - 3.30
Capital Expenditures     $850 - 900 million     $850 - 900 million
Development     $845 - 890 million     $845 - 890 million
Recurring     $5 - 10 million     $5 - 10 million
             

(1) Full year 2018 guidance includes the impact of the Zenium acquisition, which is assumed to close October 1,

2018. Previous guidance assumed a May 2018 closing. Development capital expenditures include the acquisition of

land for future development.
 

Upcoming Conferences and Events

  • Cowen Communications Infrastructure Summit on August 6-7 in Boulder, CO
  • Morgan Stanley Telecom & Media Corporate Access Day on August 9 in New York City
  • Raymond James Park City Summit on August 14-15 in Park City, UT
  • BMO Capital Markets Real Estate Conference on September 20-21 in Chicago, IL
  • Bank of America Merrill Lynch Global Real Estate Conference on September 25-26 in New York City

Conference Call Details

CyrusOne will host a conference call on August 2, 2018, at 11:00 AM Eastern Time (10:00 AM Central Time) to discuss its results for the second quarter of 2018. A live webcast of the conference call and the presentation to be made during the call will be available in the “Investors / Events & 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 August 2, 2018, through August 16, 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 10121348.

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 in our Form 10-Q for the quarter ended March 31, 2018 and in our subsequent filings for additional information. We have adopted the new standard using the modified retrospective 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, 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, and 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, and Adjusted EBITDA should be considered only as supplements to net income as measures of our performance. FFO, Normalized FFO, 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. The Company believes that Net Debt provides a useful measure of liquidity and financial health.

1Net income / (loss) per diluted common share is defined as net income / (loss) divided by the weighted average diluted common shares outstanding for the period, which were 99.4 million for the second quarter of 2018. Basic net income per share was one cent higher than diluted net income per share.

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 expenses. 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 expenses support our entire portfolio. As a result, we have excluded these marketing and advertising expenses from our NOI calculation, consistent with the treatment of general and administrative expenses, which also support our entire portfolio. Because the calculation of NOI excludes various expenses, 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, which is a non-GAAP financial measure, is defined as net income (loss) as defined by GAAP plus interest expense, income tax expense, depreciation and amortization, asset impairments and loss on disposals, transaction, acquisition, integration and other related expenses, legal claim costs, stock-based compensation expense, severance and management transition costs, loss on early extinguishment of debt, new accounting standards and regulatory compliance and the related system implementation costs, unrealized (gain) on marketable equity investments and other special items as appropriate. 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 loss on early extinguishment of debt, unrealized gain on marketable equity investment, new accounting standards and regulatory compliance and the related system implementation costs, amortization of customer relationship intangibles, transaction, acquisition, integration and other related expenses, severance and management transition costs, legal claim costs and other special items 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 between different periods. 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, which is a non-GAAP financial measure, 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 201 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 43 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 201 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 43 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       Jonathan Schildkraut, EVP & Chief Strategy Officer
Dallas, Texas 75201       Diane Morefield, EVP & Chief Financial Officer       Kellie Teal-Guess, EVP & Chief People Officer
Phone: (972) 350-0060       Kevin Timmons, EVP & Chief Technology Officer       Robert Jackson, EVP General Counsel & Secretary

Website: www.cyrusone.com

      Tesh Durvasula, EVP & Chief Commercial Officer       John Hatem, EVP Design, Construction & Operations
 

Analyst Coverage

                 

Firm

     

Analyst

     

Phone Number

Bank of America Merrill Lynch       Michael J. Funk       (646) 855-5664
Barclays       Amir Rozwadowski       (212) 526-4043
BMO Capital Markets       Ari Klein       (212) 885-4103
Citi       Mike Rollins       (212) 816-1116
Cowen and Company       Colby Synesael       (646) 562-1355
Credit Suisse       Sami Badri       (212) 538-1727
Deutsche Bank       Matthew Niknam       (212) 250-4711
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
Stifel       Erik Rasmussen       (212) 271-3461
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

           
      June 30,   March 31,   June 30,   Growth %
      2018   2018   2017   Yr/Yr
Revenue     $ 196.9     $ 196.6     $ 166.9     18 %
Net operating income     128.0     128.8     107.3     19 %
Net income (loss)     105.9     43.5     (0.8 )   n/m  
Funds from Operations ("FFO") - NAREIT defined     175.7     110.2     58.1     n/m  
Normalized Funds from Operations ("Normalized FFO")     80.7     82.2     67.9     19 %
Weighted average number of common shares outstanding - diluted     99.4     96.6     88.5     12 %
Income (loss) per share - basic     $ 1.07     $ 0.45     $ (0.01 )   n/m  
Income (loss) per share - diluted     $ 1.06     $ 0.45     $ (0.01 )   n/m  
Normalized FFO per diluted common share     $ 0.81     $ 0.85     $ 0.77     5 %
Adjusted EBITDA     110.6     109.5     90.8     22 %
Adjusted EBITDA as a % of Revenue     56.2 %   55.7 %   54.4 %   1.8 pts  
                           
                           
     

 

   

As of

           
      June 30,   March 31,   June 30,   Growth %
      2018   2018   2017   Yr/Yr
Balance Sheet Data                          
Gross investment in real estate     $ 4,145.6     $ 3,954.6     $ 3,532.8     17 %
Accumulated depreciation     (900.3 )   (836.4 )   (679.6 )   32 %
Total investment in real estate, net     3,245.3     3,118.2     2,853.2     14 %
Cash and cash equivalents     116.2     228.7     40.8     n/m  
Market value of common equity     5,784.3     5,066.4     5,089.5     14 %
Long-term debt     2,200.0     2,200.0     1,857.7     18 %
Net debt     2,098.7     1,987.2     1,829.4     15 %
Total enterprise value    

7,883.0

   

7,053.6

   

6,918.9

   

14

%
Net debt to LQA Adjusted EBITDA     4.7x     4.5x     5.0x     (0.3)x  
                           
Dividend Activity                          
Dividends per share     $ 0.46     $ 0.46     $ 0.42     10 %
                           
Portfolio Statistics                          
Data centers     43     45     40     8 %
Stabilized CSF (000)     3,097     3,024     2,380     30 %
Stabilized CSF % leased     92 %   92 %   93 %  

(1) pt

 

Total CSF (000)     3,369     3,348     2,575     31 %
Total CSF % leased     88 %   86 %   89 %  

(1) pt

 

Total NRSF (000)     5,842     5,824     4,783     22 %
                                     

CyrusOne Inc.

Condensed Consolidated Statements of Operations

(Dollars in millions, except per share amounts)

(Unaudited)

                                     
      Three Months                 Six Months            
      Ended June 30,     Change     Ended June 30,     Change
      2018     2017     $     %     2018     2017     $     %
Revenue:                                                
Lease and other revenues from customers     $ 172.4       $ 151.1       $ 21.3       14 %     $ 347.6       $ 285.3       $ 62.3       22 %
Metered power reimbursements     24.5       15.8       8.7       55 %     45.9       30.9       15.0       49 %
Revenue     $ 196.9       $ 166.9       $ 30.0       18 %     393.5       316.2       77.3       24 %
Operating expenses:                                                
Property operating expenses     68.9       59.6       9.3       16 %     136.7       111.9       24.8       22 %
Sales and marketing     4.4       4.3       0.1       2 %     9.7       9.2       0.5       5 %
General and administrative     18.6       17.3       1.3       8 %     37.9       33.1       4.8       15 %
Depreciation and amortization     77.6       63.7       13.9       22 %     152.2       119.4       32.8       27 %
Transaction, acquisition, integration and other related expenses     0.4       1.7       (1.3 )     (76 )%     2.3       2.5       (0.2 )     (8 )%
Asset impairments           3.6       (3.6 )     n/m             3.6       (3.6 )     n/m  
Total operating expenses     169.9       150.2       19.7       13 %     338.8       279.7       59.1       21 %
Operating income     27.0       16.7       10.3       62 %     54.7       36.5       18.2       50 %
Interest expense     (22.8 )     (16.5 )     (6.3 )     38 %     (43.6 )     (30.1 )     (13.5 )     45 %
Unrealized gain on marketable equity investment     102.7             102.7       n/m       143.2             143.2       n/m  
Loss on early extinguishment of debt           (0.3 )     0.3       n/m       (3.1 )     (36.5 )     33.4       n/m  
Net income (loss) before income taxes     106.9       (0.1 )     107.0       n/m       151.2       (30.1 )     181.3       n/m  
Income tax expense     (1.0 )     (0.7 )     (0.3 )     43 %     (1.8 )     (1.1 )     (0.7 )     64 %
Net income (loss)     $ 105.9       $ (0.8 )     $ 106.7       n/m       $ 149.4       $ (31.2 )     $ 180.6       n/m  
Income (loss) per share - basic     $ 1.07       $ (0.01 )     $ 1.08       n/m       $ 1.53       $ (0.37 )     $ 1.90       n/m  
Income (loss) per share - diluted     $ 1.06       $ (0.01 )     $ 1.07       n/m       $ 1.52       $ (0.37 )     $ 1.89       n/m  
                   

CyrusOne Inc.

Condensed Consolidated Balance Sheets

(Dollars in millions)

(Unaudited)

                   
      June 30,     December 31,     Change
      2018     2017     $     %
Assets                        
Investment in real estate:                        
Land     $ 107.4       $ 104.6       $ 2.8       3 %
Buildings and improvements     1,461.1       1,371.4       89.7       7 %
Equipment     2,050.3       1,813.9       236.4       13 %
Gross operating real estate     3,618.8       3,289.9       328.9       10 %
Less accumulated depreciation     (900.3 )     (782.4 )     (117.9 )     15 %
Net operating real estate     2,718.5       2,507.5       211.0       8 %
Construction in progress, including land under development     452.6       487.1       (34.5 )     (7 )%
Land held for future development     74.2       63.8       10.4       16 %
Total investment in real estate, net     3,245.3       3,058.4       186.9       6 %
Cash and cash equivalents     116.2       151.9       (35.7 )     (24 )%
Rent and other receivables, net     87.7       87.2       0.5       1 %
Equity investment     318.8       175.6       143.2       82 %
Goodwill     455.1       455.1             %
Intangible assets, net     190.5       203.0       (12.5 )     (6 )%
Other assets     215.1       180.9       34.2       19 %
Total assets     $ 4,628.7       $ 4,312.1       $ 316.6       7 %
Liabilities and equity                        
Debt, net     $ 2,179.5       $ 2,089.4       $ 90.1       4 %
Capital lease obligations     14.9       10.1       4.8       48 %
Lease financing arrangements     127.8       131.9       (4.1 )     (3 )%
Construction costs payable     113.3       115.5       (2.2 )     (2 )%
Accounts payable and accrued expenses     91.4       97.9       (6.5 )     (7 )%
Dividends payable     46.5       41.8       4.7       11 %
Deferred revenue and prepaid rents     127.1       111.6       15.5       14 %
Total liabilities     2,700.5       2,598.2       102.3       4 %
Stockholders' 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 99,114,112 and 96,137,874                                
shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively     1.0       1.0             %
Additional paid in capital     2,281.5       2,125.6       155.9       7 %
Accumulated deficit     (353.0 )     (486.9 )     133.9       (28 )%
Accumulated other comprehensive income (loss)     (1.3 )     74.2       (75.5 )     n/m  
Total stockholders’ equity     1,928.2       1,713.9       214.3       13 %
Total liabilities and equity     $ 4,628.7       $ 4,312.1       $ 316.6       7 %
                               

CyrusOne Inc.

Condensed Consolidated Statements of Operations

(Dollars in millions, except per share amounts)

(Unaudited)

                               
For the three months ended:     June 30,     March 31,     December 31,     September 30,     June 30,
      2018     2018     2017     2017     2017
Revenue:                              
Lease and other revenues from customers     $ 172.4       $ 175.2       $ 161.6       $ 155.5       $ 151.1  
Metered power reimbursements     24.5       21.4       18.9       19.8       15.8  
Revenue     196.9       196.6       180.5       175.3       166.9  
Operating expenses:                              
Property operating expenses     68.9       67.8       60.2       63.0       59.6  
Sales and marketing     4.4       5.3       3.9       3.9       4.3  
General and administrative     18.6       19.3       16.4       17.5       17.3  
Depreciation and amortization     77.6       74.6       70.8       68.7       63.7  
Transaction, acquisition, integration and other related expenses     0.4       1.9       5.3       4.1       1.7  
Asset impairments                       54.4       3.6  
Total operating expenses     169.9       168.9       156.6       211.6       150.2  
Operating income     27.0       27.7       23.9       (36.3 )     16.7  
Interest expense     (22.8 )     (20.8 )     (20.1 )     (17.9 )     (16.5 )
Unrealized gain on marketable equity investment     102.7       40.5                    
Loss on early extinguishment of debt           (3.1 )                 (0.3 )
Net income (loss) before income taxes     106.9       44.3       3.8       (54.2 )     (0.1 )
Income tax expense     (1.0 )     (0.8 )     (1.0 )     (0.9 )     (0.7 )
Net income (loss)     $ 105.9       $ 43.5       $ 2.8       $ (55.1 )     $ (0.8 )
Income (loss) per share - basic     $ 1.07       $ 0.45       $ 0.03       $ (0.61 )     $ (0.01 )
Income (loss) per share - diluted     $ 1.06       $ 0.45       $ 0.03       $ (0.61 )     $ (0.01 )
                       

CyrusOne Inc.

Condensed Consolidated Balance Sheets

(Dollars in millions)

(Unaudited)

                       
      June 30,   March 31,   December 31,   September 30,   June 30,
      2018   2018   2017   2017   2017
Assets                      
Investment in real estate:                      
Land     $ 107.4     $ 104.6     $ 104.6     $ 102.8     $ 94.0  
Buildings and improvements     1,461.1     1,400.8     1,371.4     1,344.0     1,291.7  
Equipment     2,050.3     1,959.5     1,813.9     1,721.2     1,525.3  
Gross operating real estate     3,618.8     3,464.9     3,289.9     3,168.0     2,911.0  
Less accumulated depreciation     (900.3 )   (836.4 )   (782.4 )   (722.1 )   (679.6 )
Net operating real estate     2,718.5     2,628.5     2,507.5     2,445.9     2,231.4  
Construction in progress, including land under development     452.6     435.3     487.1     429.4     569.1  
Land held for future development     74.2     54.4     63.8     58.7     52.7  
Total investment in real estate, net     3,245.3     3,118.2     3,058.4     2,934.0     2,853.2  
Cash and cash equivalents     116.2     228.7     151.9     24.7     40.8  
Rent and other receivables, net     87.7     93.1     87.2     89.2     88.7  
Equity investment     318.8     216.1     175.6          
Goodwill     455.1     455.1     455.1     455.1     455.1  
Intangible assets, net     190.5     196.8     203.0     209.7     216.3  
Other assets     215.1     190.3     180.9     171.1     162.5  
Total assets     $ 4,628.7     $ 4,498.3     $ 4,312.1     $ 3,883.8     $ 3,816.6  
Liabilities and equity                      
Debt, net     $ 2,179.5     $ 2,178.3     $ 2,089.4     $ 2,013.7     $ 1,832.5  
Capital lease obligations     14.9     15.9     10.1     10.9     11.7  
Lease financing arrangements     127.8     131.3     131.9     133.3     134.0  
Construction costs payable     113.3     89.0     115.5     133.6     163.4  
Accounts payable and accrued expenses     91.4     66.7     97.9     71.5     73.2  
Dividends payable     46.5     46.4     41.8     39.6     39.4  
Deferred revenue and prepaid rents     127.1     116.1     111.6     104.8     96.5  
Total liabilities     2,700.5     2,643.7     2,598.2     2,507.4     2,350.7  
Stockholders' 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                                
99,114,112 and 96,137,874 shares issued and outstanding at June 30, 2018                                
and December 31, 2017, respectively     1.0     1.0     1.0     0.9     0.9  
Additional paid in capital     2,281.5     2,268.0     2,125.6     1,826.0     1,821.9  
Accumulated deficit     (353.0 )   (413.1 )   (486.9 )   (449.2 )   (355.7 )
Accumulated other comprehensive income (loss)     (1.3 )   (1.3 )   74.2     (1.3 )   (1.2 )
Total stockholders' equity     1,928.2     1,854.6     1,713.9     1,376.4     1,465.9  
Total liabilities and equity     $ 4,628.7     $ 4,498.3     $ 4,312.1     $ 3,883.8     $ 3,816.6  
                         

CyrusOne Inc.

Condensed Consolidated Statements of Cash Flow

(Dollars in millions)

(Unaudited)

                         
     

Six Months
Ended June 30,
2018

   

Six Months
Ended June 30,
2017

   

Three Months
Ended June 30,
2018

   

Three Months
Ended June 30,
2017

Cash flows from operating activities:                        
Net income (loss)     $ 149.4       $ (31.2 )     $ 105.9       $ (0.8 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                        
Depreciation and amortization     152.2       119.4       77.6       63.7  
Interest expense amortization, net     1.8       2.2       1.1       1.3  
Stock-based compensation expense     8.4       7.7       4.5       4.0  
Provision for bad debt expense     0.4       0.3       (0.1 )     0.3  
Unrealized gain on marketable equity investment     (143.2 )           (102.7 )      
Loss on early extinguishment of debt     3.1       36.5             0.3  
Asset impairments           3.6             3.6  
Other           0.2              
Change in operating assets and liabilities:                        
Rent and other receivables, net and other assets     (36.8 )     (41.3 )     (18.8 )     (21.3 )
Accounts payable and accrued expenses     (3.1 )     5.2       25.8       12.0  
Deferred revenue and prepaid rents     16.3       18.9       11.0       3.2  
Net cash provided by operating activities     148.5       121.5       104.3       66.3  
Cash flows from investing activities:                        
Asset acquisitions, primarily real estate, net of cash acquired           (492.3 )            
Investment in real estate     (322.7 )     (485.0 )     (177.5 )     (302.5 )
Net cash used in investing activities     (322.7 )     (977.3 )     (177.5 )     (302.5 )
Cash flows from financing activities:                        
Issuance of common stock, net     152.2       408.6       9.3       197.6  
Dividends paid     (86.6 )     (69.1 )     (45.6 )     (36.7 )
Proceeds from debt, net     985.4       1,766.0       (0.2 )     565.1  
Payments on debt     (902.7 )     (1,212.1 )           (467.3 )
Payments on capital lease obligations and lease financing arrangements     (5.1 )     (4.8 )     (2.5 )     (2.5 )
Tax payment upon exercise of equity awards     (4.7 )     (6.6 )     (0.3 )     (0.2 )
Net cash provided by financing activities     138.5       882.0       (39.3 )     256.0  
Net increase (decrease) in cash, cash equivalents and restricted cash     (35.7 )     26.2       (112.5 )     19.8  
Cash, cash equivalents and restricted cash at beginning of period     151.9       14.6       228.7       21.0  
Cash, cash equivalents and restricted cash at end of period     $ 116.2       $ 40.8       $ 116.2       $ 40.8  
                         
Supplemental disclosure of cash flow information:                        
Cash paid for interest, net of amounts capitalized of $10.4 million and $8.1 million in 2018 and 2017, respectively     $ 53.3       $ 27.5       $ 11.1       $ 9.2  
Non-cash investing and financing activities:                        
Construction costs and other payables     113.3       163.4       113.3       163.4  
Dividends payable     46.5       39.4       46.5       39.4  
Real estate additions from entering into and modifying capital leases     6.6                    
Transfer of land held for future development to construction in progress     9.3       6.6       (0.1 )     2.6  
Transfer of construction in progress to gross operating real estate     337.7       415.6       159.0       110.3  
                                                       

CyrusOne Inc.

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

(Dollars in millions)

(Unaudited)

                                                       
      Six Months Ended                 Three Months Ended
      June 30,     Change     June 30,     March 31,     December 31,     September 30,     June 30,
      2018     2017     $     %     2018     2018     2017     2017     2017
Net Operating Income                                                      
Revenue     $ 393.5       $ 316.2       $ 77.3       24 %     $ 196.9       $ 196.6       $ 180.5       $ 175.3       $ 166.9  
Property operating expenses     136.7       111.9       24.8       22 %     68.9       67.8       60.2       63.0       59.6  
Net Operating Income (NOI)     $ 256.8       $ 204.3       $ 52.5       26 %     $ 128.0       $ 128.8       $ 120.3       $ 112.3       $ 107.3  
NOI as a % of Revenue     65.3 %     64.6 %                 65.0 %     65.5 %     66.6 %     64.1 %     64.3 %
Reconciliation of Net Income (Loss) to Adjusted EBITDA:                                                      
Net income (loss)     $ 149.4       $ (31.2 )     $ 180.6       n/m       $ 105.9       $ 43.5       $ 2.8       $ (55.1 )     $ (0.8 )
Interest expense     43.6       30.1       13.5       45 %     22.8       20.8       20.1       17.9       16.5  
Income tax expense     1.8       1.1       0.7       64 %     1.0       0.8       1.0       0.9       0.7  
Depreciation and amortization     152.2       119.4       32.8       27 %     77.6       74.6       70.8       68.7       63.7  
Asset impairments and loss on disposals           3.8       (3.8 )     n/m                   0.2       55.5       3.6  
EBITDA (NAREIT definition)(a)     $ 347.0       $ 123.2       223.8       n/m       $ 207.3       $ 139.7       $ 94.9       $ 87.9       $ 83.7  
                                                       
Transaction, acquisition, integration and other related expenses     2.3       2.3             n/m       0.4       1.9       5.1       3.0       1.7  
Legal claim costs     0.3       0.8       (0.5 )     (63 )%     0.1       0.2             0.3       0.6  
Stock-based compensation expense     8.4       7.7       0.7       9 %     4.5       3.9       3.1       3.9       4.0  
Severance and management transition costs     0.7       0.5       0.2       40 %           0.7                    
Loss on early extinguishment of debt     3.1       36.5       (33.4 )     n/m             3.1                   0.3  
New accounting standards and regulatory compliance and the related system implementation costs     1.5       0.5       1.0       n/m       1.0       0.5       1.1       0.8       0.5  
Unrealized gain on marketable equity investment     (143.2 )           (143.2 )     n/m       (102.7 )     (40.5 )                  
Adjusted EBITDA     $ 220.1       $ 171.5       48.6       28 %     $ 110.6       $ 109.5       $ 104.2       $ 95.9       $ 90.8  
Adjusted EBITDA as a % of Revenue     55.9 %     54.2 %                 56.2 %     55.7 %     57.7 %     54.7 %     54.4 %
(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                 Six Months Ended            
      June 30,     Change     June 30,     Change
    2018     2017     $     %     2018     2017     $     %
Net Income (Loss)     $ 105.9       $ (0.8 )     $ 106.7       n/m     $ 149.4       $ (31.2 )     $ 180.6       n/m
Sales and marketing expenses     4.4       4.3       0.1       2 %     9.7       9.2       0.5       5 %
General and administrative expenses     18.6       17.3       1.3       8 %     37.9       33.1       4.8       15 %
Depreciation and amortization expenses     77.6       63.7       13.9       22 %     152.2       119.4       32.8       27 %
Transaction, acquisition, integration and other related expenses     0.4       1.7       (1.3 )     (76 )%     2.3       2.5       (0.2 )     (8 )%
Asset impairments           3.6       (3.6 )     (100 )%           3.6       (3.6 )     (100 )%
Interest expense     22.8       16.5       6.3       38 %     43.6       30.1       13.5       45 %
Unrealized gain on marketable equity investment     (102.7 )           (102.7 )     n/m     (143.2 )           (143.2 )     n/m
Loss on early extinguishment of debt           0.3       (0.3 )     (100 )%     3.1       36.5       (33.4 )     (92 )%
Income tax expense     1.0       0.7       0.3       43 %     1.8       1.1       0.7       64 %
Net Operating Income     $ 128.0       $ 107.3       $ 20.7       19 %     $ 256.8       $ 204.3       $ 52.5       26 %
                                                       

CyrusOne Inc.

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

(Dollars in millions)

(Unaudited)

                                                       
      Six Months Ended                 Three Months Ended
      June 30,     Change     June 30,     March 31,     December 31,     September 30,     June 30,
    2018     2017     $     %     2018     2018     2017     2017     2017
Reconciliation of Net Income (Loss) to FFO and Normalized FFO:                                                      
Net income (loss)     $ 149.4       $ (31.2 )     $ 180.6       n/m     $ 105.9       $ 43.5       $ 2.8       $ (55.1 )     $ (0.8 )
Real estate depreciation and amortization     136.5       104.0       32.5       31 %     69.8       66.7       62.6       60.3       55.3  
Asset impairments           3.6       (3.6 )     n/m                       54.4       3.6  
Funds from Operations ("FFO") - NAREIT defined     $ 285.9       $ 76.4       $ 209.5       n/m     $ 175.7       $ 110.2       $ 65.4       $ 59.6       $ 58.1  
                                                       
Loss on early extinguishment of debt     3.1       36.5       (33.4 )     n/m           3.1                   0.3  
Unrealized gain on marketable equity investment     (143.2 )           (143.2 )    

n/m

    (102.7 )     (40.5 )                  
New accounting standards and regulatory compliance and the related system implementation costs     1.5       0.5       1.0       n/m     1.0       0.5       1.1       0.8       0.5  
Amortization of customer relationship intangibles     12.3       11.9       0.4       3 %     6.2       6.1       6.6       6.6       6.7  
Transaction, acquisition, integration and other related expenses     2.3       2.5       (0.2 )     (8 )%     0.4       1.9       5.3       4.1       1.7  
Severance and management transition costs     0.7       0.5       0.2       40 %           0.7                    
Legal claim costs     0.3       0.8       (0.5 )     (63 )%     0.1       0.2             0.3       0.6  
Normalized Funds from Operations (Normalized FFO)     $ 162.9       $ 129.1       $ 33.8       26 %     $ 80.7       $ 82.2       $ 78.4       $ 71.4       $ 67.9  
Normalized FFO per diluted common share     $ 1.66       $ 1.49       $ 0.17       11 %     $ 0.81       $ 0.85       $ 0.84       $ 0.79       $ 0.77  
Weighted average diluted common shares outstanding     98.1       86.5       11.6       13 %     99.4       96.6       93.5       90.9       88.5  
                                                       
Additional Information:                                                      
Amortization of deferred financing costs and bond premium     1.8       2.2       (0.4 )     (18 )%     1.1       0.7       0.9       1.2       1.2  
Stock-based compensation expense     8.4       7.7       0.7       9 %     4.5       3.9       3.1       3.9       4.0  
Non-real estate depreciation and amortization     3.4       3.5       (0.1 )     (3 )%     1.6       1.8       1.6       1.8       1.7  
Straight line rent adjustments(a)     (13.0 )     (18.5 )     5.5       (30 )%     (5.8 )     (7.2 )     (7.4 )     (6.4 )     (8.8 )
Deferred revenue, primarily installation revenue(b)     5.6       6.4       (0.8 )     (13 )%     2.4       3.2       3.8       12.9       6.1  
Leasing commissions     (6.9 )     (7.7 )     0.8       (10 )%     (3.7 )     (3.2 )     (3.5 )     (6.1 )     (3.8 )
Recurring capital expenditures     (4.7 )     (2.2 )     (2.5 )     n/m     (2.3 )     (2.4 )     (1.6 )     (0.6 )     (0.7 )
         
    (a)  

Straight line rent adjustments:

        Represents the difference between revenue recognized on a straight line basis under 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 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
June 30, 2018

   

Market Value
Equivalents
(in millions)

Common shares     99,114,112       $ 58.36       $ 5,784.3
Net Debt                 2,098.7
Total Enterprise Value (TEV)                 $ 7,883.0
 

Reconciliation of Net Debt

             
      June 30,     March 31,
(dollars in millions)     2018     2018
Long-term debt(a)     $ 2,200.0       $ 2,200.0  
Capital lease obligations     14.9       15.9  
Less:            
Cash and cash equivalents     (116.2 )     (228.7 )
Net Debt     $ 2,098.7       $ 1,987.2  
                     

(a)  Excludes adjustment for deferred financing costs.

                   

Debt Schedule (as of June 30, 2018)

                   
(dollars in millions)                  
Long-term debt:     Amount     Interest Rate     Maturity Date
Revolving credit facility     $       L + 145bps    

March 2023(a)

Term loan     700.0       L + 140bps(b)     March 2023
Term loan     300.0       L + 170bps(c)     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(d)     $ 2,200.0       4.44 %      
                   
Weighted average term of debt:     6.2 years      
                     

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

(b)  Interest rate as of June 30, 2018: 3.50%.

(c)  Interest rate as of June 30, 2018: 3.80%.

(d)  Excludes adjustment for deferred financing costs.

             

Interest Summary

    Three Months Ended      
      June 30,     March 31,     June 30,     Growth %
(dollars in millions)     2018     2018     2017     Yr/Yr
Interest expense and fees     $ 27.0       $ 25.2       $ 19.8       36 %
Amortization of deferred financing costs and bond premium     1.1       0.7       1.2       (8 )%
Capitalized interest     (5.3 )     (5.1 )     (4.5 )     18 %
Total interest expense     $ 22.8       $ 20.8       $ 16.5       38 %
                   

CyrusOne Inc.

Colocation Square Footage (CSF) and CSF Leased

(Unaudited)

                   
      As of June 30, 2018     As of March 31, 2018     As of June 30, 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       98 %     673       94 %     438       90 %
Dallas     550       81 %     555       81 %     431       93 %
Phoenix     509       92 %     509       91 %     216       100 %
Cincinnati     402       93 %     404       92 %     404       92 %
Houston     308       76 %     308       74 %     308       75 %
San Antonio     300       100 %     273       100 %     240       100 %
New York Metro     218       82 %     218       83 %     218       83 %
Chicago     213       67 %     213       67 %     136       88 %
Austin     106       72 %     106       73 %     106       64 %
Raleigh-Durham     76       88 %     76       88 %     65       80 %
International     13       76 %     13       76 %     13       77 %
Total     3,369       88 %     3,348       86 %     2,575       89 %
Stabilized Properties(c)     3,097       92 %     3,024       92 %     2,380       93 %
     
(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

       

Previous 2018

Guidance(1)

   

Revised 2018

Guidance(1)

Total Revenue         $810 - 825 million     $820 - 830 million
Lease and Other Revenues from Customers         $735 - 745 million     $725 - 730 million
Metered Power Reimbursements         $75 - 80 million     $95 - 100 million
Adjusted EBITDA         $460 - 470 million     $454 - 459 million
Normalized FFO per diluted common share         $3.18 - 3.28     $3.25 - 3.30
Capital Expenditures         $850 - 900 million     $850 - 900 million
Development         $845 - 890 million     $845 - 890 million
Recurring         $5 - 10 million     $5 - 10 million
 
(1)  

Full year 2018 guidance includes the impact of the Zenium acquisition, which is assumed to close October 1, 2018. Previous guidance assumed a May 2018 closing. 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 forward-looking guidance for GAAP financial measures (other than Revenue and Capital Expenditures) or 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, acquisition, integration and other related expenses, legal claim 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 June 30, 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     $ 74,229     305     89%     89%     82     51%     111     498         38
Houston - Houston West I         Houston     42,902     112     97%     97%     11     99%     37     161     3     28
Dallas - Lewisville*         Dallas     35,409     114     88%     89%     11     95%     54     180         21
Cincinnati - 7th Street***         Cincinnati     35,231     197     94%     94%     6     100%     175     378     46     16
Northern Virginia - Sterling II         Northern Virginia     35,162     159     100%     100%     9     100%     55     223         30
San Antonio III         San Antonio     31,477     132     100%     100%     9     100%     43     184         24
Somerset I         New York Metro     28,616     97     85%     85%     27     89%     89     213     203     11
Chicago - Aurora I         Chicago     27,628     113     97%     97%     34     100%     223     371     27     71
Totowa - Madison**         New York Metro     26,800     51     89%     90%     22     100%     59     133         6
Cincinnati - North Cincinnati         Cincinnati     24,450     65     98%     99%     45     79%     53     163     65     14
Houston - Houston West II         Houston     24,317     80     87%     87%     4     88%     55     139     11     12
Wappingers Falls I**         New York Metro     23,073     37     90%     90%     20     99%     15     72         3
Northern Virginia - Sterling V         Northern Virginia     22,914     276     73%     95%     11     100%     121     408     64     39
San Antonio I         San Antonio     22,871     44     100%     100%     6     83%     46     96     11     12
Phoenix - Chandler II         Phoenix     22,608     74     100%     100%     6     38%     26     105         12
Phoenix - Chandler I         Phoenix     19,999     74     100%     100%     35     12%     39     147     31     16
Northern Virginia - Sterling I         Northern Virginia     19,053     78     100%     100%     6     77%     49     132         12
Phoenix - Chandler III         Phoenix     18,806     68     100%     100%     2     —%     30     101         14
Raleigh-Durham I         Raleigh-Durham     17,651     76     88%     88%     13     100%     82     171     246     12
Houston - Galleria         Houston     16,665     63     59%     60%     23     51%     25     112         14
Northern Virginia - Sterling III         Northern Virginia     16,147     79     100%     100%     7     100%     34     120         15
Austin II         Austin     15,715     44     95%     95%     2     100%     22     68         5
San Antonio II         San Antonio     14,754     64     100%     100%     11     100%     41     117         12
Phoenix - Chandler VI         Phoenix     14,452     148     96%     98%     6     100%     32     186     10     24
Florence         Cincinnati     13,509     53     99%     99%     47     87%     40     140         9
Austin III         Austin     12,331     62     54%     56%     15     83%     21     98     67     6
Phoenix - Chandler IV         Phoenix     11,387     73     100%     100%     3     100%     27     103         12
Cincinnati - Hamilton*         Cincinnati     10,652     47     76%     76%     1     100%     35     83         10
Northern Virginia - Sterling IV         Northern Virginia     8,711     81     100%     100%    

7

    100%     34     122         15
London - Great Bridgewater**         International     6,300     10     94%     94%         —%     1     11         1
Dallas - Midway**         Dallas     5,357     8     100%     100%         —%         8         1
San Antonio IV         San Antonio     5,285     60     45%     100%     4     —%     27     91         12
Cincinnati - Mason         Cincinnati     5,269     34     100%     100%     26     98%     17     78         4
Stamford - Riverbend**         New York Metro     5,250     20     23%     23%         —%     8     28         2
Houston - Houston West III         Houston     4,641     53     25%     34%     10     100%     32     95     209     6
Norwalk I**         New York Metro     3,942     13     96%     96%     4     68%     41     58     87     2
Chicago - Lombard         Chicago     2,383     14     73%     74%     4     100%     12     30     29     3
Stamford - Omega**         New York Metro     1,238         —%     —%     19     84%     4     22        
Cincinnati - Blue Ash*         Cincinnati     660     6     36%     36%     7     100%     2     15         1
Totowa - Commerce**         New York Metro     567         —%     —%     20     38%     6     26        
South Bend - Crescent*         Chicago     542     3     41%     41%         —%     5     9     11     1
Singapore - Inter Business Park**         International     383     3     22%     22%         —%         3         1
South Bend - Monroe         Chicago     123     6     23%     23%         —%     6     13     4     1
Stabilized Properties - Total               $ 729,461     3,097     88%     92%     576     77%     1,835     5,508     1,124     543
 
 
CyrusOne Inc.
Data Center Portfolio
As of June 30, 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               $ 729,461     3,097     88%     92%     576     77%     1,835     5,508     1,124     543
                                                                       

Pre-Stabilized Properties(b)

                                                                     
Dallas - Carrollton (DH #6)         Dallas     4,906     75     76%     76%         —%     21     96         6
Phoenix - Chandler V         Phoenix     3,816     72     50%     50%     1     50%     16     89     94     12
Chicago - Aurora II (DH #1)         Chicago     1,077     77     23%     28%     10     —%     14     101     272     16
Dallas - Carrollton (DH #7)         Dallas     550     48     18%     21%         —%         48         6
All Properties - Total               $ 739,809     3,369     85%     88%     587     75%     1,886     5,842     1,490     583
 
*   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 June 30, 2018, multiplied by 12. For the month of June 2018, customer reimbursements were $100.8 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 July 1, 2016 through June 30, 2018, customer reimbursements under leases with separately metered power constituted between 10.2% and 13.6% of annualized rent. After giving effect to abatements, free rent and other straight-line adjustments, our annualized effective rent as of June 30, 2018 was $746.4 million. Our annualized effective rent was greater than our annualized rent as of June 30, 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 June 30, 2018 divided by total CSF. Leases signed but that have not commenced billing as of June 30, 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 June 30, 2018 divided by total Office & Other space. Leases signed but not commenced as of June 30, 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 June 30, 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
Northern Virginia - Sterling V     Northern Virginia     3Q'18     107         24         131     24.0     $ 18     $84-96     $102-114
Dallas - Carrollton     Dallas     3Q'18                         6.0     3     14-16     17-19
Dallas - Allen     Dallas     3Q'18     79     27     60     175     341     6.0     45     17-23     62-68
Aurora II     Chicago     3Q'18         35             35             8-9     8-9
Somerset II     New York Metro     4Q'18     9                 9     2.0         12-14     12-14
San Antonio IV     San Antonio     4Q'18         8             8             1-2     1-2
Northern Virginia - Sterling VI     Northern Virginia     1Q'19     206     30     52     71     359     48.0     9     238-264     247-273
Phoenix - Chandler VII     Phoenix     1Q'19                 269     269             59-65     59-65
Northern Virginia - Sterling VII     Northern Virginia     3Q'19                 93     93             33-37     33-37
Total                 401     100     136     609     1,246     86.0     $ 75     $466-526     $541-601
(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 June 30, 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 June 30, 2018

(Unaudited)

 
  As of
Market June 30, 2018
Atlanta 44
Austin 22
Chicago 23
Cincinnati 98
Dallas 33
Houston 20
International
New York Metro
Northern Virginia
Phoenix(a) 95
Quincy, Washington 48
Raleigh-Durham
San Antonio
Total Available(a) 383
Book Value of Total Available(a) $70 million

(a) Adjusted to reflect impact of Phoenix - Chandler VII shell construction, which commenced in July 2018.

 
 

CyrusOne Inc.

Leasing Statistics - Lease Signings

As of June 30, 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)

2Q'18     506     305,000     51,919     $5,453     143
Prior 4Q Avg.     424     149,750     17,367     $2,382     73
1Q'18     439     226,000     29,364     $3,370     77
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
 
(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 $0.3 million in 2Q'18 and $0.2 million in each of the other quarters.
(e)   Calculated on a CSF-weighted basis.
 
 

CyrusOne Inc.

New MRR Signed - Existing vs. New Customers

As of June 30, 2018

(Dollars in thousands)

(Unaudited)

 
                                                 
      3Q'16     4Q'16     1Q'17     2Q'17     3Q'17     4Q'17     1Q'18     2Q'18
Existing Customers     $1,796     $1,332     $2,247     $2,322     $1,418     $1,063     $3,149     $4,429
New Customers     $454     $258     $385     $145     $810     $400     $221     $1,024
Total     $2,250     $1,590     $2,632     $2,467     $2,228     $1,463     $3,370     $5,453
                                                 
% from Existing Customers     80%     84%     85%     94%     64%     73%     93%     81%
                                                 

 

(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 $0.3 million in 2Q'18, $0.2 million in 2Q'17-1Q'18 and $0.1 million in each of the other quarters.

 
 

CyrusOne Inc.

Customer Sector Diversification(a)

As of June 30, 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     10     $ 139,078     18.8%     89.4
2     Information Technology     4     39,827     5.4%     78.4
3     Information Technology     10     36,756     5.0%     42.9
4     Financial Services     1     19,349     2.6%     153.0
5     Research and Consulting Services     3     15,977     2.2%     30.4
6     Telecommunication Services     2     15,674     2.1%     3.9
7     Healthcare     2     14,999     2.0%     114.0
8     Energy     5     13,629     1.8%     3.3
9     Energy     1     13,060     1.8%     23.6
10     Industrials     4     11,366     1.5%     14.0
11     Information Technology     3     9,995     1.4%     46.9
12     Telecommunication Services     7     9,796     1.3%     27.2
13     Information Technology     4     9,336     1.3%     49.1
14     Financial Services     2     9,194     1.2%     62.6
15     Consumer Staples     3     8,639     1.2%     31.5
16     Information Technology     2     7,926     1.1%     70.9
17     Information Technology     3     7,884     1.0%     115.8
18     Energy     2     6,789     0.9%     28.3
19     Financial Services     1     6,600     0.9%     23.0
20     Telecommunication Services     10     6,467     0.9%     12.9
                  $ 402,343     54.4%     66.6
 
 
(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 June 30, 2018, multiplied by 12. For the month of June 2018, customer reimbursements were $100.8 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 July 1, 2016 through June 30, 2018, customer reimbursements under leases with separately metered power constituted between 10.2% and 13.6% of annualized rent. After giving effect to abatements, free rent and other straight-line adjustments, our annualized effective rent as of June 30, 2018 was $746.4 million. Our annualized effective rent was greater than our annualized rent as of June 30, 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 June 30, 2018, which was approximately $739.8 million.
(d)   Weighted average based on customer’s percentage of total annualized rent expiring and is as of June 30, 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 June 30, 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%     147     3%     $ 71,038     10%
1,000-2,499         118     12%     186     4%     41,495     6%
2,500-4,999         71     7%     253     5%     44,939     6%
5,000-9,999         46     5%     325     7%     63,788     9%
10,000+         75     7%     4,005     81%     518,549     69%
Total         989     100%     4,917     100%     $ 739,809     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 June 30, 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 June 30, 2018, multiplied by 12. For the month of June 2018, customer reimbursements were $100.8 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 July 1, 2016 through June 30, 2018, customer reimbursements under leases with separately metered power constituted between 10.2% and 13.6% of annualized rent. After giving effect to abatements, free rent and other straight-line adjustments, our annualized effective rent as of June 30, 2018 was $746.4 million. Our annualized effective rent was greater than our annualized rent as of June 30, 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 June 30, 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               925     16%                        
Month-to-Month         673     134     2%     $ 38,282     5%     $ 40,982     5%
2018         981     249     4%     60,099     8%     60,294     7%
2019         1,982     551     10%     104,868     14%     106,308     13%
2020         1,385     523     9%     77,030     11%     79,537     10%
2021         1,295     603     10%     105,776     14%     111,138     14%
2022         263     522     9%     59,869     8%     69,291     9%
2023         169     415     7%     40,742     6%     61,701     8%
2024         43     241     4%     35,563     5%     44,438     5%
2025         42     181     3%     29,549     4%     34,132     4%
2026         27     577     10%     82,958     11%     89,484     11%
2027         16     417     7%     58,517     8%     68,117     8%
2028 - Thereafter         24     503     9%     46,555     6%     52,788     6%
Total         6,900     5,842     100%     $ 739,809     100%     $ 818,209     100%
 
 
(a)   Leases that were auto-renewed prior to June 30, 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 June 30, 2018, multiplied by 12. For the month of June 2018, customer reimbursements were $100.8 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 July 1, 2016 through June 30, 2018, customer reimbursements under leases with separately metered power constituted between 10.2% and 13.6% of annualized rent. After giving effect to abatements, free rent and other straight-line adjustments, our annualized effective rent as of June 30, 2018 was $746.4 million. Our annualized effective rent was greater than our annualized rent as of June 30, 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 June 30, 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