Document



 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K
_______________

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): October 30, 2018
_______________
CYRUSONE INC.
(Exact Name of Registrant as Specified in its Charter)
_______________
Maryland
 
001-35789
 
46-0691837
(State of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
2101 Cedar Springs Road, Suite 900
Dallas, TX 75201
(Address of Principal Executive Office)
Registrant’s telephone number, including area code: (972) 350-0060
_______________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨








Item 2.02 Results of Operations and Financial Condition
On October 30, 2018, CyrusOne Inc. issued a press release announcing financial results and supplemental information for the third quarter ended September 30, 2018. A copy of the press release and supplemental information is furnished herewith as Exhibit 99.1.
Item 7.01 Regulation FD Disclosure
During a webcast scheduled to be held at 11:00 AM Eastern Time on October 31, 2018, Gary J. Wojtaszek, the Company’s president and chief executive officer, and Diane M. Morefield, the Company’s chief financial officer, will discuss the Company’s third quarter 2018 results and outlook for 2018. The slide presentation for the webcast will be available on the investors page of the Company’s website. To access the webcast and corresponding slide presentation, go to the investors page 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 October 31, 2018, through November 14, 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 10124746.
The information in Items 2.02 and 7.01 of this Current Report on Form 8-K and the exhibit furnished therewith shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, and shall not be or be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of any general incorporation language in such filing.
Item 9.01 — Financial Statements and Exhibits
(d) Exhibits.
 
 
 
Exhibit No.
 
Description
 












SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
Date: October 30, 2018
 
CYRUSONE INC.
 
 
 
 
 
By:
 
/s/ Robert M. Jackson
 
 
 
 
Robert M. Jackson


 
 
 
 
Executive Vice President, General Counsel
 
 
 
 
and Secretary




Exhibit
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Exhibit 99.1
CyrusOne Reports Third Quarter 2018 Earnings
Signed $27 Million in Annualized GAAP Revenue and 15 Megawatts
Year-over-Year Revenue Growth of 18% and Adjusted EBITDA Growth of 16%

DALLAS (October 30, 2018) - CyrusOne Inc. (NASDAQ: CONE), a premier global data center REIT, today announced third quarter 2018 earnings.

Highlights
Category
3Q’18
% Change
vs. 3Q’17
Revenue
$206.6 million
18%
Net income / (loss)
$(42.4) million
n/m
Adjusted EBITDA
$110.8 million
16%
Normalized FFO
$78.5 million
10%
Net income / (loss) per diluted share
$(0.43)
n/m
Normalized FFO per diluted share
$0.79
-%

Leased 15 megawatts (“MW”) and 114,000 colocation square feet (“CSF”) in the third quarter, totaling $27 million in annualized GAAP revenue

Backlog of $89 million in annualized GAAP revenue as of the end of the third quarter, representing nearly $850 million in total contract value

Closed acquisition of Zenium, establishing a presence in London and Frankfurt, the two largest data center markets in Europe

Acquired 15 acres of land in Santa Clara, California, establishing a presence in a key West Coast market with an onsite power cogeneration facility

Also acquired 40 acres of land in Northern Virginia (in addition to previously announced acquisition of 154,000 square foot powered shell) and 24 acres of land in Dallas to support continued strong growth in these markets

Added seven Fortune 1000 companies as new customers (three through third quarter leasing, four through the acquisition), increasing the total number of Fortune 1000 customers to 208 as of the end of the quarter

Raised nearly $400 million in net proceeds through a common stock offering of 6.7 million shares in late September and entered into a forward sale agreement with respect to an additional 2.5 million shares resulting in estimated net proceeds of nearly $150 million upon settlement by September 15, 2019

S&P Global Ratings upgraded issue-level credit ratings to investment grade (ꞌBBB-ꞌ), reflecting the growth and diversification of the business, strong underlying industry fundamentals, conservative leverage, and a strong balance sheet

Subsequent to the end of the quarter, announced a $12 million investment in exchange for a 10% equity interest in ODATA Brasil S.A. and ODATA Colombia S.A.S. (collectively “ODATA”), a leading data center provider in Brazil, the largest and fastest-growing data center market in Latin America

“We had another very strong quarter with many significant accomplishments, including closing Zenium, establishing a West Coast presence with the addition of Santa Clara, and achieving an investment grade credit rating, which is a goal that I have been focused on for a very long time,” said Gary Wojtaszek, president and chief executive officer of CyrusOne. “We are also thrilled to partner with ODATA to provide our customers a compelling alternative in Brazil and other markets in Latin America as we continue to develop solutions to meet their increasingly global needs.”

Third Quarter 2018 Financial Results
Revenue was $206.6 million for the third quarter, compared to $175.3 million for the same period in 2017, an increase of 18%. The increase in revenue was driven primarily by a 26% increase in occupied CSF and additional interconnection services.

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Net loss was $(42.4) million for the third quarter, compared to net loss of $(55.1) million in the same period in 2017. Net loss for the third quarter included a $(36.6) million unrealized loss on the Company’s equity investment in GDS Holdings Limited (“GDS”), a leading data center provider in China, due to a decrease in GDS’s share price during the quarter. Net loss per diluted common share1 was $(0.43) in the third quarter of 2018, compared to net loss of $(0.61) per diluted common share in the same period in 2017.

Net operating income (NOI)2 was $128.9 million for the third quarter, compared to $112.3 million in the same period in 2017, an increase of 15%. Adjusted EBITDA3 was $110.8 million for the third quarter, compared to $95.9 million in the same period in 2017, an increase of 16%.

Normalized Funds From Operations (Normalized FFO)4 was $78.5 million for the third quarter, compared to $71.4 million in the same period in 2017, an increase of 10%. Normalized FFO per diluted common share was $0.79 in the third quarter of 2018, equivalent to third quarter 2017.

Leasing Activity

CyrusOne leased approximately 15 MW of power and 114,000 CSF in the third quarter, representing $2.2 million in monthly recurring rent, inclusive of the monthly impact of installation charges, or approximately $26.6 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 60 months (5.0 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 third quarter was 2.6%, compared to 0.6% for the same period in 2017.

Portfolio Development and CSF Leased

In the third quarter, the Company completed construction on 185,000 CSF and 18 MW of power capacity across two projects in Northern Virginia and Dallas. CSF leased7 as of the end of the third quarter was 91% for stabilized properties8 and 86% overall. In addition, the Company has development projects underway in Northern Virginia, Dallas, the New York Metro area, Raleigh-Durham, Phoenix, San Antonio, Frankfurt and London that are expected to add approximately 393,000 CSF and 103 MW of power capacity.

Balance Sheet and Liquidity

As of September 30, 2018, the Company had gross asset value9 totaling approximately $6.5 billion, an increase of approximately 40% over gross asset value as of September 30, 2017. CyrusOne had $2.60 billion of long-term debt10, cash and cash equivalents of $61.0 million, and $1.7 billion available under its unsecured revolving credit facility as of September 30, 2018. Net debt10 was $2.57 billion as of September 30, 2018, representing approximately 28% of the Company's total enterprise value as of September 30, 2018 of $9.3 billion, or 5.4x Adjusted EBITDA for the last quarter annualized (after further adjusting to reflect a full quarter Adjusted EBITDA contribution from the Zenium data centers based on September results and the pro forma impact of equity proceeds assuming cash settlement under the forward sale agreement). Available liquidity11 was $1.92 billion as of September 30, 2018.

Dividend

On August 1, 2018, the Company announced a dividend of $0.46 per share of common stock for the third quarter of 2018. The dividend was paid on October 12, 2018, to stockholders of record at the close of business on September 28, 2018.

Additionally, today the Company is announcing a dividend of $0.46 per share of common stock for the fourth quarter of 2018. The dividend will be paid on January 11, 2019, to stockholders of record at the close of business on January 2, 2019.

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 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.

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Category
2018 Guidance(1)
Total Revenue
$820 - 830 million
   Lease and Other Revenues from Customers
$725 - 730 million
   Metered Power Reimbursements
$95 - 100 million
Adjusted EBITDA
$454 - 459 million
Normalized FFO per diluted common share
$3.25 - 3.30
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 closed in late August. Development capital expenditures include the acquisition of land for future development.

Upcoming Conferences and Events

NAREIT’s REITworld on November 7-9 in San Francisco, CA
Credit Suisse Technology, Media & Telecom Conference on November 26-29 in Scottsdale, AZ
UBS Global Media and Communications Conference on December 3-4 in New York City
Raymond James Technology Investors Conference on December 3-5 in New York City

Conference Call Details

CyrusOne will host a conference call on October 31, 2018, at 11:00 AM Eastern Time (10:00 AM Central Time) to discuss its results for the third 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 October 31, 2018, through November 14, 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 10124746.

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” and “Note 3, Revenue Recognition” 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.


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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 98.8 million for the third quarter of 2018.
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 expenses, which is excluded from NOI. Sales and marketing expenses are not property-specific, rather these expenses support our entire portfolio. As a result, we have excluded these sales and marketing 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, impairment losses 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) loss on marketable equity investment 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) loss 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

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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 EUR construction facility, plus the impact of equity proceeds assuming cash settlement under the forward sale agreement.

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 208 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 47 data centers worldwide. Additional information about CyrusOne can be found at www.CyrusOne.com.


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

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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 208 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 47 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
Berenberg Capital Markets
Nate Crossett
(646) 949-9030
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




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CyrusOne Inc.
Summary of Financial Data
(Dollars in millions, except per share amounts)

 
Three Months
 
 
September 30,
June 30,
September 30,
Growth %
 
2018
2018
2017
Yr/Yr
Revenue
$
206.6

$
196.9

$
175.3

18
 %
Net operating income
128.9

128.0

112.3

15
 %
Net income (loss)
(42.4
)
105.9

(55.1
)
n/m

Funds from Operations ("FFO") - NAREIT defined
33.6

175.7

59.6

(44
)%
Normalized Funds from Operations ("Normalized FFO")
78.5

80.7

71.4

10
 %
Weighted average number of common shares outstanding - diluted for Normalized FFO
99.5

99.4

90.9

9
 %
Income (loss) per share - basic
$
(0.43
)
$
1.07

$
(0.61
)
n/m

Income (loss) per share - diluted
$
(0.43
)
$
1.06

$
(0.61
)
n/m

Normalized FFO per diluted common share
$
0.79

$
0.81

$
0.79

 %
Adjusted EBITDA
110.8

110.6

95.9

16
 %
Adjusted EBITDA as a % of Revenue
53.6
%
56.2
%
54.7
%
(1.1
) pts


 
As of
 
 
September 30,
June 30,
September 30,
Growth %
 
2018
2018
2017
Yr/Yr
Balance Sheet Data
 
 
 
 
Gross investment in real estate
$
5,093.2

$
4,145.6

$
3,656.1

39
%
Accumulated depreciation
(973.4
)
(900.3
)
(722.1
)
35
%
Total investment in real estate, net
4,119.8

3,245.3

2,934.0

40
%
Cash and cash equivalents
61.0

116.2

24.7

n/m

Market value of common equity
6,709.9

5,784.3

5,379.7

25
%
Long-term debt
2,595.6

2,200.0

2,037.7

27
%
Net debt
2,571.5

2,098.7

2,024.0

27
%
Total enterprise value
9,281.4

7,883.0

7,403.7

25
%
Net debt to LQA Adjusted EBITDA(a)
5.4x

4.7x

5.3x

0.1x

 
 
 
 
 
Dividend Activity
 
 
 
 
Dividends per share
$
0.46

$
0.46

$
0.42

10
%
 
 
 
 
 
Portfolio Statistics
 
 
 
 
Data centers
47

43

44

7
%
Stabilized CSF (000)
3,396

3,097

2,494

36
%
Stabilized CSF % leased
91
%
92
%
93
%
(2) pts

Total CSF (000)
3,674

3,369

3,130

17
%
Total CSF % leased
86
%
88
%
82
%
4 pts

Total NRSF (000)
6,527

5,842

5,565

17
%
 
 
 
 
 
(a) September 30, 2018 period adjusted to reflect a full quarter Adjusted EBITDA contribution from the Zenium data centers based on September results and the pro forma impact of equity proceeds assuming cash settlement under the forward sale agreement.



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CyrusOne Inc.
Condensed Consolidated Statements of Operations
(Dollars in millions, except per share amounts)
(Unaudited)
 

 
Three Months
 
 
Nine Months
 
 
 
Ended September 30,
Change
Ended September 30,
Change
 
2018
2017
$
%
2018
2017
$
%
Revenue:
 
 
 
 
 
 
 
 
       Lease and other revenues from customers
$
177.6

$
155.5

$
22.1

14
 %
$
525.2

$
440.8

$
84.4

19
 %
       Metered power reimbursements
29.0

19.8

9.2

46
 %
74.9

50.7

24.2

48
 %
Revenue
$
206.6

$
175.3

$
31.3

18
 %
600.1

491.5

108.6

22
 %
Operating expenses:
 
 
 
 
 
 
 
 
Property operating expenses
77.7

63.0

14.7

23
 %
214.4

174.9

39.5

23
 %
Sales and marketing
4.3

3.9

0.4

10
 %
14.0

13.1

0.9

7
 %
General and administrative
19.3

17.5

1.8

10
 %
57.2

50.6

6.6

13
 %
Depreciation and amortization
84.0

68.7

15.3

22
 %
236.2

188.1

48.1

26
 %
Transaction, acquisition, integration and other related expenses
1.1

4.1

(3.0
)
(73
)%
3.4

6.6

(3.2
)
(48
)%
Impairment losses

54.4

(54.4
)
n/m


58.0

(58.0
)
n/m

Total operating expenses
186.4

211.6

(25.2
)
(12
)%
525.2

491.3

33.9

7
 %
Operating income
20.2

(36.3
)
56.5

n/m

74.9

0.2

74.7

n/m

Interest expense
(25.8
)
(17.9
)
(7.9
)
44
 %
(69.4
)
(48.0
)
(21.4
)
45
 %
Unrealized gain (loss) on marketable equity investment
(36.6
)

(36.6
)
n/m

106.6


106.6

n/m

Loss on early extinguishment of debt



n/m

(3.1
)
(36.5
)
33.4

(92
)%
Net income (loss) before income taxes
(42.2
)
(54.2
)
12.0

n/m

109.0

(84.3
)
193.3

n/m

Income tax expense
(0.2
)
(0.9
)
0.7

(78
)%
(2.0
)
(2.0
)

n/m

Net income (loss)
$
(42.4
)
$
(55.1
)
$
12.7

n/m

$
107.0

$
(86.3
)
$
193.3

n/m

Income (loss) per share - basic
$
(0.43
)
$
(0.61
)
$
0.18

n/m

$
1.09

$
(0.99
)
$
2.08

n/m

Income (loss) per share - diluted
$
(0.43
)
$
(0.61
)
$
0.18

n/m

$
1.08

$
(0.99
)
$
2.07

n/m


















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CyrusOne Inc.
Condensed Consolidated Balance Sheets
(Dollars in millions)
(Unaudited)
 

 
September 30,
December 31,
Change
 
2018
2017
$
%
Assets
 
 
 
 
Investment in real estate:
 
 
 
 
Land
$
125.2

$
104.6

$
20.6

20
 %
Buildings and improvements
1,587.3

1,371.4

215.9

16
 %
Equipment
2,452.5

1,813.9

638.6

35
 %
Gross operating real estate
4,165.0

3,289.9

875.1

27
 %
Less accumulated depreciation
(973.4
)
(782.4
)
(191.0
)
24
 %
Net operating real estate
3,191.6

2,507.5

684.1

27
 %
Construction in progress, including land under development
738.6

487.1

251.5

52
 %
Land held for future development
189.6

63.8

125.8

n/m

Total investment in real estate, net
4,119.8

3,058.4

1,061.4

35
 %
Cash and cash equivalents
61.0

151.9

(90.9
)
(60
)%
Rent and other receivables, net
104.5

87.2

17.3

20
 %
Equity investment
282.2

175.6

106.6

61
 %
Restricted cash



n/m

Goodwill
455.1

455.1


 %
Intangible assets, net
248.4

203.0

45.4

22
 %
Other assets
222.1

180.9

41.2

23
 %
Total assets
$
5,493.1

$
4,312.1

$
1,181.0

27
 %
Liabilities and equity
 
 


Debt, net
$
2,576.2

$
2,089.4

$
486.8

23
 %
Capital lease obligations
36.9

10.1

26.8

n/m

Lease financing arrangements
125.8

131.9

(6.1
)
(5
)%
Construction costs payable
160.5

115.5

45.0

39
 %
Accounts payable and accrued expenses
96.8

97.9

(1.1
)
(1
)%
Dividends payable
49.7

41.8

7.9

19
 %
Deferred revenue and prepaid rents
139.5

111.6

27.9

25
 %
Deferred tax liability
68.7


68.7

n/m

Total liabilities
3,254.1

2,598.2

655.9

25
 %
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 105,834,067 and 96,137,874 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively
1.1

1.0

0.1

 %
Additional paid in capital
2,685.3

2,125.6

559.7

26
 %
Accumulated deficit
(444.3
)
(486.9
)
42.6

(9
)%
Accumulated other comprehensive income (loss)
(3.1
)
74.2

(77.3
)
n/m

Total stockholders’ equity
2,239.0

1,713.9

525.1

31
 %
Total liabilities and equity
$
5,493.1

$
4,312.1

$
1,181.0

27
 %






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CyrusOne Inc.
Condensed Consolidated Statements of Operations
(Dollars in millions, except per share amounts)
(Unaudited)

 
For the three months ended:
September 30,
June 30,
March 31,
December 31,
September 30,
 
2018
2018
2018
2017
2017
Revenue:
 
 
 
 
 
Lease and other revenues from customers
$
177.6

$
172.4

$
175.2

$
161.6

$
155.5

Metered power reimbursements
29.0

24.5

21.4

18.9

19.8

Revenue
206.6

196.9

196.6

180.5

175.3

Operating expenses:
 
 
 
 
 
Property operating expenses
77.7

68.9

67.8

60.2

63.0

Sales and marketing
4.3

4.4

5.3

3.9

3.9

General and administrative
19.3

18.6

19.3

16.4

17.5

Depreciation and amortization
84.0

77.6

74.6

70.8

68.7

Transaction, acquisition, integration and other related expenses
1.1

0.4

1.9

5.3

4.1

        Impairment losses




54.4

Total operating expenses
186.4

169.9

168.9

156.6

211.6

Operating income
20.2

27.0

27.7

23.9

(36.3
)
Interest expense
(25.8
)
(22.8
)
(20.8
)
(20.1
)
(17.9
)
Unrealized gain (loss) on marketable equity investment
(36.6
)
102.7

40.5



Loss on early extinguishment of debt


(3.1
)


Net income (loss) before income taxes
(42.2
)
106.9

44.3

3.8

(54.2
)
Income tax expense
(0.2
)
(1.0
)
(0.8
)
(1.0
)
(0.9
)
Net income (loss)
$
(42.4
)
$
105.9

$
43.5

$
2.8

$
(55.1
)
Income (loss) per share - basic
$
(0.43
)
$
1.07

$
0.45

$
0.03

$
(0.61
)
Income (loss) per share - diluted
$
(0.43
)
$
1.06

$
0.45

$
0.03

$
(0.61
)


















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CyrusOne Inc.
Condensed Consolidated Balance Sheets
(Dollars in millions)
(Unaudited) 
 
September 30,
June 30,
March 31,
December 31,
September 30,
 
2018
2018
2018
2017
2017
Assets
 
 
 
 
 
Investment in real estate:
 
 
 
 
 
Land
$
125.2

$
107.4

$
104.6

$
104.6

$
102.8

Buildings and improvements
1,587.3

1,461.1

1,400.8

1,371.4

1,344.0

Equipment
2,452.5

2,050.3

1,959.5

1,813.9

1,721.2

Gross operating real estate
4,165.0

3,618.8

3,464.9

3,289.9

3,168.0

Less accumulated depreciation
(973.4
)
(900.3
)
(836.4
)
(782.4
)
(722.1
)
Net operating real estate
3,191.6

2,718.5

2,628.5

2,507.5

2,445.9

Construction in progress, including land under development
738.6

452.6

435.3

487.1

429.4

Land held for future development
189.6

74.2

54.4

63.8

58.7

Total investment in real estate, net
4,119.8

3,245.3

3,118.2

3,058.4

2,934.0

Cash and cash equivalents
61.0

116.2

228.7

151.9

24.7

Rent and other receivables, net
104.5

87.7

93.1

87.2

89.2

Equity investment
282.2

318.8

216.1

175.6


Goodwill
455.1

455.1

455.1

455.1

455.1

Intangible assets, net
248.4

190.5

196.8

203.0

209.7

Other assets
222.1

215.1

190.3

180.9

171.1

Total assets
$
5,493.1

$
4,628.7

$
4,498.3

$
4,312.1

$
3,883.8

Liabilities and equity
 
 
 
 
 
Debt, net
$
2,576.2

$
2,179.5

$
2,178.3

$
2,089.4

$
2,013.7

Capital lease obligations
36.9

14.9

15.9

10.1

10.9

Lease financing arrangements
125.8

127.8

131.3

131.9

133.3

Construction costs payable
160.5

113.3

89.0

115.5

133.6

Accounts payable and accrued expenses
96.8

91.4

66.7

97.9

71.5

Dividends payable
49.7

46.5

46.4

41.8

39.6

Deferred revenue and prepaid rents
139.5

127.1

116.1

111.6

104.8

Deferred tax liability
68.7





Total liabilities
3,254.1

2,700.5

2,643.7

2,598.2

2,507.4

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 105,834,067 and 96,137,874 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively
1.1

1.0

1.0

1.0

0.9

Additional paid in capital
2,685.3

2,281.5

2,268.0

2,125.6

1,826.0

Accumulated deficit
(444.3
)
(353.0
)
(413.1
)
(486.9
)
(449.2
)
Accumulated other comprehensive income (loss)
(3.1
)
(1.3
)
(1.3
)
74.2

(1.3
)
Total stockholders' equity
2,239.0

1,928.2

1,854.6

1,713.9

1,376.4

Total liabilities and equity
$
5,493.1

$
4,628.7

$
4,498.3

$
4,312.1

$
3,883.8


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CyrusOne Inc.
Condensed Consolidated Statements of Cash Flow
(Dollars in millions)
(Unaudited) 
 
Nine Months Ended September 30, 2018
Nine Months Ended September 30, 2017
Three Months Ended September 30, 2018
Three Months Ended September 30, 2017
Cash flows from operating activities:
 
 
 
 
Net income (loss)
$
107.0

$
(86.3
)
$
(42.4
)
$
(55.1
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
236.2

188.1

84.0

68.7

Interest expense amortization, net
3.0

3.4

1.2

1.2

Stock-based compensation expense
13.0

11.6

4.6

3.9

Provision for bad debt expense
0.6

0.5

0.2

0.2

Unrealized (gain) loss on marketable equity investment
(106.6
)

36.6


Loss on early extinguishment of debt
3.1

36.5



Impairment losses

58.0


54.4

Other

1.3


1.1

Change in operating assets and liabilities:
 
 
 
 
Rent and other receivables, net and other assets
(55.4
)
(53.7
)
(18.6
)
(12.4
)
Accounts payable and accrued expenses
(23.4
)
3.5

(20.3
)
(1.7
)
Deferred revenue and prepaid rents
25.4

27.2

9.1

8.3

Net cash provided by operating activities
202.9

190.1

54.4

68.6

Cash flows from investing activities:
 
 
 
 
Asset acquisitions, primarily real estate, net of cash acquired
(461.8
)
(492.3
)
(461.8
)

Investment in real estate
(631.2
)
(709.1
)
(308.5
)
(224.1
)
Net cash used in investing activities
(1,093.0
)
(1,201.4
)
(770.3
)
(224.1
)
Cash flows from financing activities:
 
 

 
Issuance of common stock, net
551.9

408.8

399.7

0.2

Dividends paid
(132.3
)
(107.4
)
(45.7
)
(38.3
)
Proceeds from debt, net
1,665.1

1,946.0

679.7

180.0

Payments on debt
(1,272.7
)
(1,212.1
)
(370.0
)

Payments on capital lease obligations and lease financing arrangements
(7.8
)
(7.3
)
(2.7
)
(2.5
)
Tax payment upon exercise of equity awards
(5.1
)
(6.6
)
(0.4
)

Net cash provided by financing activities
799.1

1,021.4

660.6

139.4

Effect of exchange rate changes on cash, cash equivalents and restricted cash
0.1


0.1


Net increase (decrease) in cash, cash equivalents and restricted cash
(90.9
)
10.1

(55.2
)
(16.1
)
Cash, cash equivalents and restricted cash at beginning of period
151.9

14.6

116.2

40.8

Cash, cash equivalents and restricted cash at end of period
$
61.0

$
24.7

$
61.0

$
24.7

 
 
 

 
Supplemental disclosure of cash flow information:
 
 

 
Cash paid for interest, net of amounts capitalized of $15.9 million and $12.4 million in 2018 and 2017, respectively
$
98.5

$
58.2

$
45.2

$
30.7

Cash paid for income taxes
3.3

1.9

0.4

0.3

Non-cash investing and financing activities:
 
 
 
 
Construction costs and other payables
160.5

133.6

160.5

133.6

Dividends payable
49.7

39.6

49.7

39.6

Debt assumed
86.3


86.3


Capital lease obligation assumed
25.0


25.0


Real estate additions from entering into and modifying capital leases
4.6


(2.0
)

Transfer of land held for future development to construction in progress
13.5

12.6

4.2

6.0

Transfer of construction in progress to gross operating real estate
554.7

733.9

217.0

318.3


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CyrusOne Inc.
Net Operating Income and Reconciliation of Net Income (Loss) to Adjusted EBITDA
(Dollars in millions)
(Unaudited)
 
Nine Months Ended
 
 
Three Months Ended
 
September 30,
Change
September 30,
June 30,
March 31,
December 31,
September 30,
 
2018
2017
$
%
2018
2018
2018
2017
2017
Net Operating Income
 
 
 
 
 
 
 
 
 
Revenue
$
600.1

$
491.5

$
108.6

22%
$
206.6

$
196.9

$
196.6

$
180.5

$
175.3

Property operating expenses
214.4

174.9

39.5

23%
77.7

68.9

67.8

60.2

63.0

Net Operating Income (NOI)
$
385.7

$
316.6

$
69.1

22%
$
128.9

$
128.0

$
128.8

$
120.3

$
112.3

NOI as a % of Revenue
64.3
%
64.4
%
 
 
62.4
%
65.0
%
65.5
%
66.6
%
64.1
%
Reconciliation of Net Income (Loss) to Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
Net income (loss)
$
107.0

$
(86.3
)
$
193.3

n/m
$
(42.4
)
$
105.9

$
43.5

$
2.8

$
(55.1
)
Interest expense
69.4

48.0

21.4

45%
25.8

22.8

20.8

20.1

17.9

Income tax expense
2.0

2.0


n/m
0.2

1.0

0.8

1.0

0.9

Depreciation and amortization
236.2

188.1

48.1

26%
84.0

77.6

74.6

70.8

68.7

Impairment losses and loss on disposals

59.3

(59.3
)
n/m



0.2

55.5

EBITDA (NAREIT definition)(a)
$
414.6

$
211.1

203.5

96%
$
67.6

$
207.3

$
139.7

$
94.9

$
87.9

 
 
 
 
 
 
 
 
 
 
Transaction, acquisition, integration and other related expenses
3.4

5.3

(1.9
)
(36)%
1.1

0.4

1.9

5.1

3.0

Legal claim costs
0.4

1.1

(0.7
)
(64)%
0.1

0.1

0.2


0.3

Stock-based compensation expense
13.0

11.6

1.4

12%
4.6

4.5

3.9

3.1

3.9

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



New accounting standards and regulatory compliance and the related system implementation costs
2.3

1.3

1.0

n/m
0.8

1.0

0.5

1.1

0.8

Unrealized (gain) loss on marketable equity investment
(106.6
)

(106.6
)
n/m
36.6

(102.7
)
(40.5
)


Adjusted EBITDA
$
330.9

$
267.4

63.5

24%
$
110.8

$
110.6

$
109.5

$
104.2

$
95.9

Adjusted EBITDA as a % of Revenue
55.1
%
54.4
%
 
 
53.6
%
56.2
%
55.7
%
57.7
%
54.7
%
(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 impairment losses. 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
 
 
Nine Months Ended
 
 
 
September 30,
Change
September 30,
Change
2018
2017
$
%
2018
2017
$
%
Net Income (Loss)
$
(42.4
)
$
(55.1
)
$
12.7

n/m

$
107.0

$
(86.3
)
$
193.3

n/m

Sales and marketing expenses
4.3

3.9

0.4

10
 %
14.0

13.1

0.9

7
 %
General and administrative expenses
19.3

17.5

1.8

10
 %
57.2

50.6

6.6

13
 %
Depreciation and amortization expenses
84.0

68.7

15.3

22
 %
236.2

188.1

48.1

26
 %
Transaction, acquisition, integration and other related expenses
1.1

4.1

(3.0
)
(73
)%
3.4

6.6

(3.2
)
(48
)%
Impairment losses

54.4

(54.4
)
n/m


58.0

(58.0
)
n/m

Interest expense
25.8

17.9

7.9

44
 %
69.4

48.0

21.4

45
 %
Unrealized (gain) loss on marketable equity investment
36.6


36.6

n/m

(106.6
)

(106.6
)
n/m

Loss on early extinguishment of debt



 %
3.1

36.5

(33.4
)
(92
)%
Income tax expense
0.2

0.9

(0.7
)
(78
)%
2.0

2.0


 %
Net Operating Income
$
128.9

$
112.3

$
16.6

15
 %
$
385.7

$
316.6

$
69.1

22
 %

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CyrusOne Inc.
Reconciliation of Net Income (Loss) to FFO and Normalized FFO
(Dollars in millions)
(Unaudited)
 
 
Nine Months Ended
 
 
Three Months Ended
 
September 30,
Change
September 30,
June 30,
March 31,
December 31,
September 30,
2018
2017
$
%
2018
2018
2018
2017
2017
Reconciliation of Net Income (Loss) to FFO and Normalized FFO:
 
 
 
 
 
 
 
 
 
Net income (loss)
$
107.0

$
(86.3
)
$
193.3

n/m

$
(42.4
)
$
105.9

$
43.5

$
2.8

$
(55.1
)
Real estate depreciation and amortization
212.5

164.3

48.2

29
 %
76.0

69.8

66.7

62.6

60.3

Impairment losses

58.0

(58.0
)
n/m





54.4

Funds from Operations ("FFO") - NAREIT defined
$
319.5

$
136.0

$
183.5

135
 %
$
33.6

$
175.7

$
110.2

$
65.4

$
59.6

 
 
 
 
 
 
 
 
 
 
Loss on early extinguishment of debt
3.1

36.5

(33.4
)
n/m



3.1



Unrealized (gain) loss on marketable equity investment
(106.6
)

(106.6
)
n/m

36.6

(102.7
)
(40.5
)


New accounting standards and regulatory compliance and the related system implementation costs
2.3

1.3

1.0

n/m

0.8

1.0

0.5

1.1

0.8

Amortization of customer relationship intangibles
18.6

18.5

0.1

1
 %
6.3

6.2

6.1

6.6

6.6

Transaction, acquisition, integration and other related expenses
3.4

6.6

(3.2
)
(48
)%
1.1

0.4

1.9

5.3

4.1

Severance and management transition costs
0.7

0.5

0.2

40
 %


0.7



Legal claim costs
0.4

1.1

(0.7
)
(64
)%
0.1

0.1

0.2


0.3

Normalized Funds from Operations (Normalized FFO)
$
241.4

$
200.5

$
40.9

20
 %
$
78.5

$
80.7

$
82.2

$
78.4

$
71.4

Normalized FFO per diluted common share
$
2.45

$
2.28

$
0.17

7
 %
$
0.79

$
0.81

$
0.85

$
0.84

$
0.79

Weighted average diluted common shares outstanding
98.4

88.0

10.4

12
 %
99.5

99.4

96.6

93.5

90.9

 
 
 
 
 
 
 
 
 
 
Additional Information:
 
 
 
 
 
 
 
 
 
Amortization of deferred financing costs and bond premium
2.9

3.4

(0.5
)
(15
)%
1.1

1.1

0.7

0.9

1.2

Stock-based compensation expense
13.0

11.6

1.4

12
 %
4.6

4.5

3.9

3.1

3.9

Non-real estate depreciation and amortization
5.1

5.3

(0.2
)
(4
)%
1.7

1.6

1.8

1.6

1.8

Straight line rent adjustments(a) 
(18.8
)
(24.9
)
6.1

(24
)%
(5.8
)
(5.8
)
(7.2
)
(7.4
)
(6.4
)
Deferred revenue, primarily installation revenue(b)
13.2

19.3

(6.1
)
(32
)%
7.6

2.4

3.2

3.8

12.9

Leasing commissions
(10.2
)
(13.8
)
3.6

(26
)%
(3.3
)
(3.7
)
(3.2
)
(3.5
)
(6.1
)
Recurring capital expenditures
(8.4
)
(2.8
)
(5.6
)
n/m

(3.7
)
(2.3
)
(2.4
)
(1.6
)
(0.6
)

(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.





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CyrusOne Inc.
Market Capitalization Summary, Reconciliation of Net Debt, and Debt Schedule
(Unaudited)
Market Capitalization (as of September 30, 2018)
(dollars in millions)
Shares or
Equivalents
Outstanding
Market Price
as of
September 30, 2018
Market Value
Equivalents
(in millions)
Common shares
105,834,067

$
63.40

$
6,709.9

Net Debt
 
 
2,571.5

Total Enterprise Value (TEV)
 
 
$
9,281.4

Reconciliation of Net Debt
 
September 30,
June 30,
(dollars in millions)
2018
2018
Long-term debt(a)
$
2,595.6

$
2,200.0

Capital lease obligations
36.9

14.9

Less:
 
 
Cash and cash equivalents
(61.0
)
(116.2
)
Net Debt
$
2,571.5

$
2,098.7


(a)Excludes adjustment for deferred financing costs and bond premiums.

Debt Schedule (as of September 30, 2018)
(dollars in millions)
 
 
 
Long-term debt:
Amount
Interest Rate
Maturity Date
Revolving credit facility
$

L + 145bps
March 2023(a)
Term loan
1,000.0

L + 140bps(b)
March 2023
Term loan
300.0

L + 170bps(c)
March 2025
EUR construction facility
95.6

E + 325bps(d)
June 2023
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(e)
$
2,595.6

4.36%
 
 
 
 
 
Weighted average term of debt:
5.7

years
 
(a)
Assuming exercise of one-year extension option.
(b)
Interest rate as of September 30, 2018: 3.64%.
(c)
Interest rate as of September 30, 2018: 3.95%.
(d)
Interest rate as of September 30, 2018: 3.25%.
(e)
Excludes adjustment for deferred financing costs.
Interest Summary
Three Months Ended
 
 
September 30,
June 30,
September 30,
Growth %
(dollars in millions)
2018
2018
2017
Yr/Yr
Interest expense and fees
$
30.2

$
27.0

$
21.0

44
 %
Amortization of deferred financing costs and bond premium
1.1

1.1

1.2

(8
)%
Capitalized interest
(5.5
)
(5.3
)
(4.3
)
28
 %
Total interest expense
$
25.8

$
22.8

$
17.9

44
 %



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CyrusOne Inc.
Colocation Square Footage (CSF) and CSF Leased
(Unaudited)
 

 
As of September 30, 2018
As of June 30, 2018
As of September 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
780

94
%
673

98
%
559

86
%
Dallas
621

69
%
550

81
%
506

82
%
Phoenix
509

100
%
509

92
%
438

83
%
Cincinnati
402

93
%
402

93
%
404

91
%
Houston
308

74
%
308

76
%
308

76
%
San Antonio
300

100
%
300

100
%
300

80
%
New York Metro
218

83
%
218

82
%
218

83
%
Chicago
213

67
%
213

67
%
213

61
%
Austin
106

78
%
106

72
%
106

68
%
Raleigh-Durham
76

88
%
76

88
%
65

84
%
Total - Domestic
3,533

86
%
3,356

88
%
3,117

82
%
London
77

99
%
10

94
%
10

97
%
Frankfurt
62

98
%

%

%
Singapore
3

22
%
3

22
%
3

22
%
Total - International
142

97
%
13

76
%
13

79
%
Total - Portfolio
3,674

86
%
3,369

88
%
3,130

82
%
Stabilized Properties(c)
3,396

91
%
3,097

92
%
2,494

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.
























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CyrusOne Inc.
2018 Guidance

Category
2018 Guidance(1)
Total Revenue
$820 - 830 million
   Lease and Other Revenues from Customers
$725 - 730 million
   Metered Power Reimbursements
$95 - 100 million
Adjusted EBITDA
$454 - 459 million
Normalized FFO per diluted common share
$3.25 - 3.30
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 closed in late August. Development capital expenditures include the
acquisition of land for future development.
 
CyrusOne is reaffirming guidance for full year 2018. 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.




























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CyrusOne Inc.
Data Center Portfolio
As of September 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
$
75,863

305

89
%
89
%
82

44
%
111

498


38

Houston - Houston West I
Houston
42,688

112

97
%
97
%
11

100
%
37

161

3

28

Northern Virginia - Sterling II
Northern Virginia
35,775

159

100
%
100
%
9

100
%
55

223


30

San Antonio III
San Antonio
34,328

132

100
%
100
%
9

100
%
43

184


24

Cincinnati - 7th Street***
Cincinnati
33,451

197

94
%
94
%
6

100
%
175

378

46

16

Northern Virginia - Sterling V
Northern Virginia
31,775

383

78
%
88
%
11

100
%
138

532

64

51

Somerset I
New York Metro
29,883

97

85
%
85
%
27

89
%
89

213

203

11

Dallas - Lewisville*
Dallas
28,750

114

77
%
77
%
11

84
%
54

180


21

Totowa - Madison**
New York Metro
26,670

51

89
%
91
%
22

100
%
59

133


6

Chicago - Aurora I
Chicago
26,171

113

98
%
98
%
34

100
%
223

371

27

71

Cincinnati - North Cincinnati
Cincinnati
24,478

65

99
%
99
%
45

79
%
53

163

65

14

Phoenix - Chandler II
Phoenix
24,037

74

100
%
100
%
6

38
%
26

105


12

Wappingers Falls I**
New York Metro
22,148

37

90
%
91
%
20

99
%
15

72


3

San Antonio I
San Antonio
22,038

44

100
%
100
%
6

83
%
46

96

11

12

Houston - Houston West II
Houston
21,414

80

77
%
78
%
4

88
%
55

139

11

12

Phoenix - Chandler I
Phoenix
20,784

74

100
%
100
%
35

12
%
39

147

31

16

Phoenix - Chandler III
Phoenix
20,299

68

100
%
100
%
2

%
30

101


14

Northern Virginia - Sterling I
Northern Virginia
19,528

78

100
%
100
%
6

77
%
49

132


12

Raleigh-Durham I
Raleigh-Durham
18,137

76

88
%
88
%
13

100
%
82

171