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): February 20, 2019
_______________
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 February 20, 2019, CyrusOne Inc. issued a press release announcing financial results and supplemental information for the fourth quarter ended December 31, 2018. A copy of the press release and supplemental information is furnished herewith as Exhibit 99.1.
Item 7.01 Regulation FD Disclosure

CyrusOne will host a conference call on February 21, 2019, at 11:00 AM Eastern Time (10:00 AM Central Time) to discuss its results for the fourth quarter of 2018 and guidance for 2019. 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 February 21, 2019, through March 7, 2019. 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 10127497.
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: February 20, 2019
 
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 Fourth Quarter and Full Year 2018 Earnings
4Q’18 Year-over-Year Revenue Growth of 23%
Record Leasing Year with $153 Million in Annualized GAAP Revenue Signed, up 45% vs. 2017

DALLAS (February 20, 2019) - CyrusOne Inc. (NASDAQ: CONE), a premier global data center REIT, today announced fourth quarter and full year 2018 earnings.

Highlights
Category
4Q’18
% Change
vs. 4Q’17
FY’18
% Change
vs. FY’17
Revenue
$221.3 million
23%
$821.4 million
22%
Net income / (loss)
$(105.8) million
n/m
$1.2 million
n/m
Adjusted EBITDA
$121.2 million
16%
$452.1 million
22%
Normalized FFO
$90.9 million
16%
$332.3 million
19%
Net income / (loss) per diluted share
$(1.00)
n/m
$—
n/m
Normalized FFO per diluted share
$0.86
2%
$3.31
6%

Leased 7 megawatts (“MW”) and 41,000 colocation square feet (“CSF”) in the fourth quarter, totaling $20 million in annualized GAAP revenue
For full year 2018, signed more than 1,900 leases totaling 103 MW and 686,000 CSF, representing $153 million in annualized GAAP revenue, all of which were full year company records

Backlog of $54 million in annualized GAAP revenue as of the end of the fourth quarter, representing nearly $550 million in total contract value

Added three Fortune 1000 companies as new customers, increasing the total number of Fortune 1000 customers to 211 as of the end of the quarter

Acquired approximately 16 acres of land for development of a campus at PolanenPark location near the Amsterdam metropolitan area with up to 72 MW of power capacity
Subsequent to the end of the quarter, acquired 22 acres of land in San Antonio with up to 120 MW of power capacity and 8 acres of land in Santa Clara with up to 48 MW of power capacity to support growth in those markets

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

Completed settlement of forward sale agreement, issuing 2.5 million shares of common stock in exchange for net proceeds of approximately $148 million

“2018 was a tremendous year with continued strong growth, record leasing that was up nearly 50% over 2017, expansion of our portfolio to the West Coast and into Europe, and the development of a solution for our customers in Brazil,” said Gary Wojtaszek, president and chief executive officer of CyrusOne. “We are working hard to position the company to better serve our customers around the world, capitalizing on the significant value creation opportunity ahead of us and delivering strong growth in the coming years in what is still a very early stage for the industry.”
Fourth Quarter 2018 Financial Results
    
Revenue was $221.3 million for the fourth quarter, compared to $180.5 million for the same period in 2017, an increase of 23%. The increase in revenue was driven primarily by a 24% increase in occupied CSF from organic growth and the Zenium acquisition, as well as additional interconnection services.


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Net loss was $(105.8) million for the fourth quarter, compared to net income of $2.8 million in the same period in 2017. Net loss for the fourth quarter included a $(96.7) 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 $(1.00) in the fourth quarter of 2018, compared to net income of $0.03 per diluted common share in the same period in 2017.

Net operating income (NOI)2 was $143.3 million for the fourth quarter, compared to $120.3 million in the same period in 2017, an increase of 19%. Adjusted EBITDA3 was $121.2 million for the fourth quarter, compared to $104.2 million in the same period in 2017, an increase of 16%.

Normalized Funds From Operations (Normalized FFO)4 was $90.9 million for the fourth quarter, compared to $78.4 million in the same period in 2017, an increase of 16%. Normalized FFO per diluted common share was $0.86 in the fourth quarter of 2018, an increase of 2% over fourth quarter 2017.

Leasing Activity

CyrusOne leased approximately 7 MW of power and 41,000 CSF in the fourth quarter, representing $1.7 million in monthly recurring rent, inclusive of the monthly impact of installation charges, or approximately $20.1 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 73 months (6.1 years), and the weighted average remaining lease term of CyrusOne’s portfolio is 57 months (taking into account the impact of the backlog). Recurring rent churn6 for the fourth quarter was 0.8%, compared to 1.1% for the same period in 2017.

Portfolio Development and CSF Leased

In the fourth quarter, the Company completed construction on 144,000 CSF and 52 MW of power capacity across six projects in Northern Virginia, Dallas, the New York Metro area, Frankfurt, and London. CSF leased7 as of the end of the fourth 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, Raleigh-Durham, Phoenix, Austin, Frankfurt, London, and Amsterdam that are expected to add approximately 439,000 CSF and 126 MW of power capacity.

Balance Sheet and Liquidity

As of December 31, 2018, the Company had gross asset value9 totaling approximately $6.6 billion, an increase of approximately 30% over gross asset value as of December 31, 2017. CyrusOne had $2.64 billion of long-term debt10, $64.4 million of cash and cash equivalents, and $1.55 billion available under its unsecured revolving credit facility as of December 31, 2018. Net debt10 was $2.61 billion as of December 31, 2018, representing approximately 31% of the Company's total enterprise value as of December 31, 2018 of $8.3 billion, or 5.4x Adjusted EBITDA for the last quarter annualized. Available liquidity11 was $1.61 billion as of December 31, 2018.

Dividend

On October 30, 2018, the Company announced a dividend of $0.46 per share of common stock for the fourth quarter of 2018. The dividend was paid on January 11, 2019, to stockholders of record at the close of business on January 2, 2019.

Additionally, today the Company is announcing a dividend of $0.46 per share of common stock for the first quarter of 2019. The dividend will be paid on April 12, 2019, to stockholders of record at the close of business on March 29, 2019.

Guidance

CyrusOne is issuing guidance for full year 2019. 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 Results
2018 Results Adjusted for ASC 842(1)
2019 Guidance
Total Revenue
$821 million
$821 million
$960 - 1,000 million
   Lease and Other Revenues from Customers
$717 million
$717 million
$835 - 865 million
   Metered Power Reimbursements
$104 million
$104 million
$125 - 135 million
Adjusted EBITDA
$452 million
$435 million
$500 - 525 million
Normalized FFO per diluted common share
$3.31
$3.22
$3.10 - 3.20
Capital Expenditures
$866 million
$866 million
$950 - 1,100 million
   Development(2)
$855 million
$855 million
$940 - 1,085 million
   Recurring
$11 million
$11 million
$10 - 15 million
 
 
 
 
(1)ASC 842 refers to Accounting Standards Codification Topic 842 - Leases, issued by the Financial Accounting Standards Board to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. The Company is adopting ASC 842 effective January 1, 2019. The adjusted 2018 results have not been prepared in accordance with GAAP and represent the Company’s estimates as if the standard had been adopted as of January 1, 2018. Adjusted EBITDA for 2018 decreased by $17 million due to higher operating lease expense. Normalized FFO per diluted common share decreased by $0.09 due to higher operating lease expense, partially offset by lower interest expense. The adjusted 2018 results are being shown solely for comparative and investor usefulness purposes with respect to the Company’s 2019 guidance.
(2)Development capital expenditures include the acquisition of land for future development.

Upcoming Conferences and Events

Morgan Stanley Technology, Media & Telecom Conference on February 25-28 in San Francisco, CA
Raymond James Institutional Investors Conference on March 4-6 in Orlando, FL
Deutsche Bank Media, Internet and Telecom Conference on March 11-13 in Palm Beach, FL

Conference Call Details

CyrusOne will host a conference call on February 21, 2019, at 11:00 AM Eastern Time (10:00 AM Central Time) to discuss its results for the fourth 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 February 21, 2019, through March 7, 2019. 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 10127497.

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 other than as required by law.

Adoption of New Accounting Standard and Use of Non-GAAP Financial Measures and Other Metrics


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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.

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 105.5 million for the fourth 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 and/or net income (loss), which is presented in the accompanying consolidated statements of operations, adjusted for sales and marketing expenses, general and administrative expenses, depreciation and amortization expenses, transaction, acquisition, integration and other related expenses, impairment losses, interest expense, unrealized (gain) loss on marketable equity securities, loss on early extinguishment of debt, income tax expense and other special items as appropriate. 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 adjusted for 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 loss on disposal. While it is consistent with the definition of FFO promulgated by the National Association of Real Estate Investment Trusts

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("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 trade names, transaction, acquisition and other integration expenses; severance and management transition costs; legal claim costs and other special items as appropriate. 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 colocation 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.

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 211 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 48 data centers worldwide. Additional information about CyrusOne can be found at www.CyrusOne.com.
# # #

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 211 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 48 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
John Gould, EVP & Chief Commercial Officer
Dallas, Texas 75201
Tesh Durvasula, EVP & President, Europe
Kellie Teal-Guess, EVP & Chief People Officer
Phone: (972) 350-0060
Diane Morefield, EVP & Chief Financial Officer
Robert Jackson, EVP General Counsel & Secretary
Website: www.cyrusone.com
Kevin Timmons, EVP & Chief Technology Officer
John Hatem, EVP Design, Construction & Operations
 
Jonathan Schildkraut, EVP & Chief Strategy Officer
 

Analyst Coverage

Firm
Analyst
Phone Number
Bank of America Merrill Lynch
Michael J. Funk
(646) 855-5664
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
 
 
December 31,
September 30,
December 31,
Growth %
 
2018
2018
2017
Yr/Yr
Revenue
$
221.3

$
206.6

$
180.5

23
%
Net operating income
143.3

128.9

120.3

19
%
Net income (loss)
(105.8
)
(42.4
)
2.8

n/m

Funds from Operations ("FFO") - Nareit defined
(10.3
)
39.5

71.7

n/m

Normalized Funds from Operations ("Normalized FFO")
90.9

78.5

78.4

16
%
Weighted average number of common shares outstanding - diluted for Normalized FFO
106.1

99.5

93.5

13
%
Income (loss) per share - basic
$
(1.00
)
$
(0.43
)
$
0.03

n/m

Income (loss) per share - diluted
$
(1.00
)
$
(0.43
)
$
0.03

n/m

Normalized FFO per diluted common share
$
0.86

$
0.79

$
0.84

2
%
Adjusted EBITDA
$
121.2

$
110.8

$
104.2

16
%
Adjusted EBITDA as a % of Revenue
54.8
%
53.6
%
57.7
%
(2.9
) pts


 
As of
 
 
December 31,
September 30,
December 31,
Growth %
 
2018
2018
2017
Yr/Yr
Balance Sheet Data
 
 
 
 
Gross investment in real estate
$
5,347.5

$
5,093.2

$
3,840.8

39
 %
Accumulated depreciation
(1,054.5
)
(973.4
)
(782.4
)
35
 %
Total investment in real estate, net
4,293.0

4,119.8

3,058.4

40
 %
Cash and cash equivalents
64.4

61.0

151.9

(58
)%
Market value of common equity
5,728.5

6,709.9

5,723.1

 %
Long-term debt
2,643.0

2,595.6

2,100.0

26
 %
Net debt
2,612.0

2,571.5

1,958.2

33
 %
Total enterprise value
8,340.5

9,281.4

7,681.3

9
 %
Net debt to LQA Adjusted EBITDA(a)
5.4x

5.4x

4.7x

0.7x

 
 
 
 
 
Dividend Activity
 
 
 
 
Dividends per share
$
0.46

$
0.46

$
0.42

10
 %
 
 
 
 
 
Portfolio Statistics
 
 
 
 
Data centers
48

47

45

7
 %
Stabilized CSF (000)
3,540

3,396

2,653

33
 %
Stabilized CSF % leased
92
%
91
%
93
%
(1) pts

Total CSF (000)
3,819

3,674

3,267

17
 %
Total CSF % leased
88
%
86
%
83
%
5 pts

Total NRSF (000)
6,726

6,527

5,717

18
 %
 
 
 
 
 

(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 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
 
 
Twelve Months
 
 
 
Ended December 31,
Change
Ended December 31,
Change
 
2018
2017
$
%
2018
2017
$
%
Revenue:
 
 
 
 
 
 
 
 
       Lease and other revenues from customers
$
192.2

$
161.6

$
30.6

19
 %
$
717.4

$
602.4

$
115.0

19
 %
       Metered power reimbursements
29.1

18.9

10.2

54
 %
104.0

69.6

34.4

49
 %
Revenue
$
221.3

$
180.5

$
40.8

23
 %
$
821.4

$
672.0

149.4

22
 %
Operating expenses:
 
 
 
 
 
 
 
 
Property operating expenses
78.0

60.2

17.8

30
 %
292.4

235.1

57.3

24
 %
Sales and marketing
5.6

3.9

1.7

44
 %
19.6

17.0

2.6

15
 %
General and administrative
23.4

16.4

7.0

43
 %
80.6

67.0

13.6

20
 %
Depreciation and amortization
97.9

70.8

27.1

38
 %
334.1

258.9

75.2

29
 %
Transaction, acquisition, integration and other related expenses
1.6

5.3

(3.7
)
(70
)%
5.0

11.9

(6.9
)
(58
)%
Impairment losses



n/m


58.0

(58.0
)
n/m

Total operating expenses
206.5

156.6

49.9

32
 %
731.7

647.9

83.8

13
 %
Operating income
14.8

23.9

(9.1
)
n/m

89.7

24.1

65.6

n/m

Interest expense
(25.3
)
(20.1
)
(5.2
)
26
 %
(94.7
)
(68.1
)
(26.6
)
39
 %
Unrealized gain (loss) on marketable equity investment
(96.7
)

(96.7
)
n/m

9.9


9.9

n/m

Loss on early extinguishment of debt



n/m

(3.1
)
(36.5
)
33.4

(92
)%
Net income (loss) before income taxes
(107.2
)
3.8

(111.0
)
n/m

1.8

(80.5
)
82.3

n/m

Income tax expense
1.4

(1.0
)
2.4

n/m

(0.6
)
(3.0
)
2.4

(80
)%
Net income (loss)
$
(105.8
)
$
2.8

$
(108.6
)
n/m

$
1.2

$
(83.5
)
$
84.7

n/m

Income (loss) per share - basic
$
(1.00
)
$
0.03

$
(1.03
)
n/m

$

$
(0.95
)
$
0.95

n/m

Income (loss) per share - diluted
$
(1.00
)
$
0.03

$
(1.03
)
n/m


$
(0.95
)
$
0.95

n/m


















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

 
December 31,
December 31,
Change
 
2018
2017
$
%
Assets
 
 
 
 
Investment in real estate:
 
 
 
 
Land
$
118.5

$
104.6

$
13.9

13
 %
Buildings and improvements
1,677.5

1,371.4

306.1

22
 %
Equipment
2,630.2

1,813.9

816.3

45
 %
Gross operating real estate
4,426.2

3,289.9

1,136.3

35
 %
Less accumulated depreciation
(1,054.5
)
(782.4
)
(272.1
)
35
 %
Net operating real estate
3,371.7

2,507.5

864.2

34
 %
Construction in progress, including land under development
744.9

487.1

257.8

53
 %
Land held for future development
176.4

63.8

112.6

n/m

Total investment in real estate, net
4,293.0

3,058.4

1,234.6

40
 %
Cash and cash equivalents
64.4

151.9

(87.5
)
(58
)%
Rent and other receivables, net
106.2

87.2

19.0

22
 %
Equity investment
198.1

175.6

22.5

13
 %
Goodwill
455.1

455.1


 %
Intangible assets, net
235.7

203.0

32.7

16
 %
Other assets
240.0

180.9

59.1

33
 %
Total assets
$
5,592.5

$
4,312.1

$
1,280.4

30
 %
Liabilities and equity
 
 


Debt, net
$
2,624.7

$
2,089.4

$
535.3

26
 %
Capital lease obligations
33.4

10.1

23.3

n/m

Lease financing arrangements
123.3

131.9

(8.6
)
(7
)%
Construction costs payable
195.3

115.5

79.8

69
 %
Accounts payable and accrued expenses
121.3

97.9

23.4

24
 %
Dividends payable
51.0

41.8

9.2

22
 %
Deferred revenue and prepaid rents
148.6

111.6

37.0

33
 %
Deferred tax liability
68.9


68.9

n/m

Total liabilities
3,366.5

2,598.2

768.3

30
 %
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 108,329,314 and 96,137,874 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively
1.1

1.0

0.1

 %
Additional paid in capital
2,837.4

2,125.6

711.8

33
 %
Accumulated deficit
(600.2
)
(486.9
)
(113.3
)
23
 %
Accumulated other comprehensive income (loss)
(12.3
)
74.2

(86.5
)
n/m

Total stockholders’ equity
2,226.0

1,713.9

512.1

30
 %
Total liabilities and equity
$
5,592.5

$
4,312.1

$
1,280.4

30
 %







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

 
For the three months ended:
December 31,
September 30,
June 30,
March 31,
December 31,
 
2018
2018
2018
2018
2017
Revenue:
 
 
 
 
 
Lease and other revenues from customers
$
192.2

$
177.6

$
172.4

$
175.2

$
161.6

Metered power reimbursements
29.1

29.0

24.5

21.4

18.9

Revenue
221.3

206.6

196.9

196.6

180.5

Operating expenses:
 
 
 
 
 
Property operating expenses
78.0

77.7

68.9

67.8

60.2

Sales and marketing
5.6

4.3

4.4

5.3

3.9

General and administrative
23.4

19.3

18.6

19.3

16.4

Depreciation and amortization
97.9

84.0

77.6

74.6

70.8

Transaction, acquisition, integration and other related expenses
1.6

1.1

0.4

1.9

5.3

        Impairment losses





Total operating expenses
206.5

186.4

169.9

168.9

156.6

Operating income
14.8

20.2

27.0

27.7

23.9

Interest expense
(25.3
)
(25.8
)
(22.8
)
(20.8
)
(20.1
)
Unrealized gain (loss) on marketable equity investment
(96.7
)
(36.6
)
102.7

40.5


Loss on early extinguishment of debt



(3.1
)

Net income (loss) before income taxes
(107.2
)
(42.2
)
106.9

44.3

3.8

Income tax expense
1.4

(0.2
)
(1.0
)
(0.8
)
(1.0
)
Net income (loss)
$
(105.8
)
$
(42.4
)
$
105.9

$
43.5

$
2.8

Income (loss) per share - basic
$
(1.00
)
$
(0.43
)
$
1.07

$
0.45

$
0.03

Income (loss) per share - diluted
$
(1.00
)
$
(0.43
)
$
1.06

$
0.45

$
0.03



















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CyrusOne Inc.
Condensed Consolidated Balance Sheets
(Dollars in millions)
(Unaudited) 
 
December 31,
September 30,
June 30,
March 31,
December 31,
 
2018
2018
2018
2018
2017
Assets
 
 
 
 
 
Investment in real estate:
 
 
 
 
 
Land
$
118.5

$
125.2

$
107.4

$
104.6

$
104.6

Buildings and improvements
1,677.5

1,587.3

1,461.1

1,400.8

1,371.4

Equipment
2,630.2

2,452.5

2,050.3

1,959.5

1,813.9

Gross operating real estate
4,426.2

4,165.0

3,618.8

3,464.9

3,289.9

Less accumulated depreciation
(1,054.5
)
(973.4
)
(900.3
)
(836.4
)
(782.4
)
Net operating real estate
3,371.7

3,191.6

2,718.5

2,628.5

2,507.5

Construction in progress, including land under development
744.9

738.6

452.6

435.3

487.1

Land held for future development
176.4

189.6

74.2

54.4

63.8

Total investment in real estate, net
4,293.0

4,119.8

3,245.3

3,118.2

3,058.4

Cash and cash equivalents
64.4

61.0

116.2

228.7

151.9

Rent and other receivables, net
106.2

104.5

87.7

93.1

87.2

Equity investment
198.1

282.2

318.8

216.1

175.6

Goodwill
455.1

455.1

455.1

455.1

455.1

Intangible assets, net
235.7

248.4

190.5

196.8

203.0

Other assets
240.0

222.1

215.1

190.3

180.9

Total assets
$
5,592.5

$
5,493.1

$
4,628.7

$
4,498.3

$
4,312.1

Liabilities and equity
 
 
 
 
 
Debt, net
$
2,624.7

$
2,576.2

$
2,179.5

$
2,178.3

$
2,089.4

Capital lease obligations
33.4

36.9

14.9

15.9

10.1

Lease financing arrangements
123.3

125.8

127.8

131.3

131.9

Construction costs payable
195.3

160.5

113.3

89.0

115.5

Accounts payable and accrued expenses
121.3

96.8

91.4

66.7

97.9

Dividends payable
51.0

49.7

46.5

46.4

41.8

Deferred revenue and prepaid rents
148.6

139.5

127.1

116.1

111.6

Deferred tax liability
68.9

68.7




Total liabilities
3,366.5

3,254.1

2,700.5

2,643.7

2,598.2

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 108,329,314 and 96,137,874 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively
1.1

1.1

1.0

1.0

1.0

Additional paid in capital
2,837.4

2,685.3

2,281.5

2,268.0

2,125.6

Accumulated deficit
(600.2
)
(444.3
)
(353.0
)
(413.1
)
(486.9
)
Accumulated other comprehensive income (loss)
(12.3
)
(3.1
)
(1.3
)
(1.3
)
74.2

Total stockholders' equity
2,226.0

2,239.0

1,928.2

1,854.6

1,713.9

Total liabilities and equity
$
5,592.5

$
5,493.1

$
4,628.7

$
4,498.3

$
4,312.1


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CyrusOne Inc.
Condensed Consolidated Statements of Cash Flow
(Dollars in millions)
(Unaudited) 
 
Twelve Months Ended December 31, 2018
Twelve Months Ended December 31, 2017
Three Months Ended December 31, 2018
Three Months Ended December 31, 2017
Cash flows from operating activities:
 
 
 
 
Net income (loss)
$
1.2

$
(83.5
)
$
(105.8
)
$
2.8

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
334.1

258.9

97.9

70.8

Interest expense amortization, net
4.0

4.2

1.0

0.8

Stock-based compensation expense
17.5

14.7

4.5

3.1

Provision for bad debt expense
2.6

0.2

2.0

(0.3
)
Unrealized (gain) loss on marketable equity investment
(9.9
)

96.7


Loss on early extinguishment of debt
3.1

36.5



Impairment losses

58.0



Other
(0.6
)
1.5

(0.6
)
0.2

Change in operating assets and liabilities:
 
 
 
 
Rent and other receivables, net and other assets
(80.2
)
(64.3
)
(24.8
)
(10.6
)
Accounts payable and accrued expenses
3.0

29.3

26.4

25.8

Deferred revenue and prepaid rents
34.5

34.0

9.1

6.8

Net cash provided by operating activities
309.3

289.5

106.4

99.4

Cash flows from investing activities:
 
 
 
 
Asset acquisitions, primarily real estate, net of cash acquired
(462.8
)
(492.3
)
(1.0
)

Investment in real estate
(865.7
)
(914.5
)
(234.5
)
(205.4
)
Equity investment
(12.6
)
(100.0
)
(12.6
)
(100.0
)
Net cash used in investing activities
(1,341.1
)
(1,506.8
)
(248.1
)
(305.4
)
Cash flows from financing activities:
 
 
 
 
Issuance of common stock, net
699.6

705.7

147.7

296.9

Dividends paid
(181.1
)
(145.7
)
(48.8
)
(38.3
)
Proceeds from debt, net
1,988.3

2,558.4

323.2

612.4

Payments on debt
(1,547.4
)
(1,749.8
)
(274.7
)
(537.7
)
Payments on capital lease obligations and lease financing arrangements
(9.5
)
(9.8
)
(1.7
)
(2.5
)
Interest paid by lenders on the issuance of the senior notes

2.7


2.7

Tax payment upon exercise of equity awards
(5.2
)
(6.9
)
(0.1
)
(0.3
)
Net cash provided by financing activities
944.7

1,354.6

145.6

333.2

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(0.4
)

(0.5
)

Net increase (decrease) in cash, cash equivalents and restricted cash
(87.5
)
137.3

3.4

127.2

Cash, cash equivalents and restricted cash at beginning of period
151.9

14.6

61.0

24.7

Cash, cash equivalents and restricted cash at end of period
$
64.4

$
151.9

$
64.4

$
151.9

 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for interest, net of amounts capitalized of $24.4 million and $17.0 million in 2018 and 2017, respectively
$
115.4

$
68.8

$
16.9

$
10.6

Cash paid for income taxes
3.4

2.2

0.1

0.3

Capitalized interest
24.4

17.0

8.5

4.6

Non-cash investing and financing activities:
 
 
 
 
Construction costs and other payables
195.3

115.5

195.3

115.5

Dividends payable
51.0

41.8

51.0

41.8

Debt assumed in asset acquisition
86.3




Capital lease obligation assumed
25.0

2.2




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CyrusOne Inc.
Net Operating Income and Reconciliation of Net Income (Loss) to Adjusted EBITDA
(Dollars in millions)
(Unaudited)
 
Twelve Months Ended
 
 
Three Months Ended
 
December 31,
Change
December 31,
September 30,
June 30,
March 31,
December 31,
 
2018
2017
$
%
2018
2018
2018
2018
2017
Net Operating Income
 
 
 
 
 
 
 
 
 
Revenue
$
821.4

$
672.0

$
149.4

22%
$
221.3

$
206.6

$
196.9

$
196.6

$
180.5

Property operating expenses
292.4

235.1

57.3

24%
78.0

77.7

68.9

67.8

60.2

Net Operating Income (NOI)
$
529.0

$
436.9

$
92.1

21%
$
143.3

$
128.9

$
128.0

$
128.8

$
120.3

NOI as a % of Revenue
64.4
%
65.0
%
 
 
64.8
%
62.4
%
65.0
%
65.5
%
66.6
%
Reconciliation of Net Income (Loss) to Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
Net income (loss)
$
1.2

$
(83.5
)
$
84.7

n/m
$
(105.8
)
$
(42.4
)
$
105.9

$
43.5

$
2.8

Interest expense
94.7

68.1

26.6

39%
25.3

25.8

22.8

20.8

20.1

Income tax expense
0.6

3.0

(2.4
)
(80)%
(1.4
)
0.2

1.0

0.8

1.0

Depreciation and amortization
334.1

258.9

75.2

29%
97.9

84.0

77.6

74.6

70.8

Impairment losses and loss on disposals

58.0

(58.0
)
n/m




0.2

EBITDA (Nareit definition)(a)
$
430.6

$
304.5

126.1

41%
$
16.0

$
67.6

$
207.3

$
139.7

$
94.9

 
 
 
 
 
 
 
 
 
 
Transaction, acquisition, integration and other related expenses
4.8

11.9

(7.1
)
(60)%
1.4

1.1

0.4

1.9

5.1

Legal claim costs
0.6

1.1

(0.5
)
(45)%
0.2

0.1

0.1

0.2


Stock-based compensation expense
17.5

14.7

2.8

19%
4.5

4.6

4.5

3.9

3.1

Severance and management transition costs
2.3

0.5

1.8

n/m
1.6



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
3.0

2.4

0.6

25%
0.7

0.8

1.0

0.5

1.1

Unrealized (gain) loss on marketable equity investment
(9.9
)

(9.9
)
n/m
96.7

36.6

(102.7
)
(40.5
)

Other expenses
0.1


0.1

n/m
0.1





Adjusted EBITDA
$
452.1

$
371.6

80.5

22%
$
121.2

$
110.8

$
110.6

$
109.5

$
104.2

Adjusted EBITDA as a % of Revenue
55.0
%
55.3
%
 
 
54.8
%
53.6
%
56.2
%
55.7
%
57.7
%
(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 impairment losses and loss on disposals. 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
 
 
Twelve Months Ended
 
 
 
December 31,
Change
December 31,
Change
2018
2017
$
%
2018
2017
$
%
Net Income (Loss)
$
(105.8
)
$
2.8

$
(108.6
)
n/m

$
1.2

$
(83.5
)
$
84.7

n/m

Sales and marketing expenses
5.6

3.9

1.7

44
 %
19.6

17.0

2.6

15
 %
General and administrative expenses
23.4

16.4

7.0

43
 %
80.6

67.0

13.6

20
 %
Depreciation and amortization expenses
97.9

70.8

27.1

38
 %
334.1

258.9

75.2

29
 %
Transaction, acquisition, integration and other related expenses
1.6

5.1

(3.5
)
(69
)%
5.0

11.9

(6.9
)
(58
)%
Impairment losses and loss on disposal

0.2

(0.2
)
n/m


58.0

(58.0
)
n/m

Interest expense
25.3

20.1

5.2

26
 %
94.7

68.1

26.6

39
 %
Unrealized (gain) loss on marketable equity investment
96.7


96.7

n/m

(9.9
)

(9.9
)
n/m

Loss on early extinguishment of debt



 %
3.1

36.5

(33.4
)
(92
)%
Income tax expense
(1.4
)
1.0

(2.4
)
n/m

0.6

3.0

(2.4
)
(80
)%
Net Operating Income
$
143.3

$
120.3

$
23.0

19
 %
$
529.0

$
436.9

$
92.1

21
 %

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CyrusOne Inc.
Reconciliation of Net Income (Loss) to FFO and Normalized FFO
(Dollars in millions)
(Unaudited)
 
 
Twelve Months Ended
 
 
Three Months Ended
 
December 31,
Change
December 31,
September 30,
June 30,
March 31,
December 31,
2018
2017
$
%
2018
2018
2018
2018
2017
Reconciliation of Net Income (Loss) to FFO and Normalized FFO:
 
 
 
 
 
 
 
 
 
Net income (loss)
$
1.2

$
(83.5
)
$
84.7

n/m

$
(105.8
)
$
(42.4
)
$
105.9

$
43.5

$
2.8

Real estate depreciation and amortization
325.5

250.6

74.9

30
 %
95.5

81.9

75.6

72.5

68.9

Impairment losses

58.0

(58.0
)
n/m






Funds from Operations ("FFO") - Nareit defined
$
326.7

$
225.1

$
101.6

45
 %
$
(10.3
)
$
39.5

$
181.5

$
116.0

$
71.7

 
 
 
 
 
 
 
 
 
 
Loss on early extinguishment of debt
3.1

36.5

(33.4
)
n/m




3.1


Unrealized (gain) loss on marketable equity investment
(9.9
)

(9.9
)
n/m

96.7

36.6

(102.7
)
(40.5
)

New accounting standards and regulatory compliance and the related system implementation costs
3.0

2.4

0.6

n/m

0.7

0.8

1.0

0.5

1.1

Amortization of tradenames
1.7

1.4

0.3

21
 %
0.6

0.4

0.4

0.3

0.3

Transaction, acquisition, integration and other related expenses
4.8

11.9

(7.1
)
(60
)%
1.4

1.1

0.4

1.9

5.3

Severance and management transition costs
2.3

0.5

1.8

n/m

1.6



0.7


Legal claim costs
0.6

1.1

(0.5
)
(45
)%
0.2

0.1

0.1

0.2


Normalized Funds from Operations (Normalized FFO)
$
332.3

$
278.9

$
53.4

19
 %
$
90.9

$
78.5

$
80.7

$
82.2

$
78.4

Normalized FFO per diluted common share
$
3.31

$
3.12

$
0.19

6
 %
$
0.86

$
0.79

$
0.81

$
0.85

$
0.84

Weighted average diluted common shares outstanding
100.4

89.4

11.0

12
 %
106.1

99.5

99.4

96.6

93.5

 
 
 
 
 
 
 
 
 
 
Additional Information:
 
 
 
 
 
 
 
 
 
Amortization of deferred financing costs and bond premium
4.0

4.3

(0.3
)
(7
)%
1.1

1.1

1.1

0.7

0.9

Stock-based compensation expense
17.5

14.7

2.8

19
 %
4.5

4.6

4.5

3.9

3.1

Non-real estate depreciation and amortization
6.9

6.9


n/m

1.8

1.7

1.6

1.8

1.6

Straight line rent adjustments(a) 
(27.7
)
(32.5
)
4.8

(15
)%
(8.9
)
(5.8
)
(5.8
)
(7.2
)
(7.4
)
Deferred revenue, primarily installation revenue(b)
29.3

23.3

6.0

26
 %
16.1

7.6

2.4

3.2

3.8

Leasing commissions
(16.7
)
(17.3
)
0.6

(3
)%
(6.5
)
(3.3
)
(3.7
)
(3.2
)
(3.5
)
Recurring capital expenditures
(10.5
)
(4.4
)
(6.1
)
n/m

(2.1
)
(3.7
)
(2.3
)
(2.4
)
(1.6
)

(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, Debt Schedule and Interest Summary
(Unaudited)
Market Capitalization (as of December 31, 2018)
(dollars in millions)
Shares or
Equivalents
Outstanding
Market Price
as of
December 31, 2018
Market Value
Equivalents
(in millions)
Common shares
108,329,314

$
52.88

$
5,728.5

Net Debt
 
 
2,612.0

Total Enterprise Value (TEV)
 
 
$
8,340.5

Reconciliation of Net Debt
 
December 31,
September 30,
(dollars in millions)
2018
2018
Long-term debt(a)
$
2,643.0

$
2,595.6

Capital lease obligations
33.4

36.9

Less:
 
 
Cash and cash equivalents
(64.4
)
(61.0
)
Net Debt
$
2,612.0

$
2,571.5


(a)Excludes adjustment for deferred financing costs and bond premiums.
Debt Schedule (as of December 31, 2018)
(dollars in millions)
 
 
 
Long-term debt:
Amount
Interest Rate
Maturity Date
Revolving credit facility - EUR(a)
$
143.0

E + 145bps(b)
March 2023(c)
Revolving credit facility - USD

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

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

L + 170bps(e)
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(f)
$
2,643.0

4.38%
 
 
 
 
 
Weighted average term of debt:
5.5

years
 
(a)
Amount outstanding is USD equivalent of €125 million.
(b)
Interest rate as of December 31, 2018: 1.45%.
(c)
Assuming exercise of one-year extension option.
(d)
Interest rate as of December 31, 2018: 3.92%.
(e)
Interest rate as of December 31, 2018: 4.23%.
(f)
Excludes adjustment for deferred financing costs.
Interest Summary
Three Months Ended
 
 
December 31,
September 30,
December 31,
Growth %
(dollars in millions)
2018
2018
2017
Yr/Yr
Interest expense and fees
$
32.7

$
30.2

$
23.8

37
%
Amortization of deferred financing costs and bond premium
1.1

1.1

0.9

22
%
Capitalized interest
(8.5
)
(5.5
)
(4.6
)
85
%
Total interest expense
$
25.3

$
25.8

$
20.1

26
%



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

 
As of December 31, 2018
As of September 30, 2018
As of December 31, 2017
Market
Colocation
Space (CSF)
(a) (000)
CSF
Leased
(b)
Colocation
Space (CSF)
(a) (000)
CSF
Leased
(b)
Colocation
Space (CSF)
(a) (000)
CSF
Leased
(b)
Northern Virginia
881

96
%
780

94
%
640

79
%
Dallas
621

70
%
621

69
%
506

85
%
Phoenix
509

100
%
509

100
%
509

91
%
Cincinnati
402

92
%
402

93
%
404

91
%
Houston
308

73
%
308

74
%
308

74
%
San Antonio
300

100
%
300

100
%
273

88
%
New York Metro
218

86
%
218

83
%
218

82
%
Chicago
213

69
%
213

67
%
213

64
%
Austin
106

80
%
106

78
%
106

67
%
Raleigh-Durham
76

97
%
76

88
%
76

88
%
Total - Domestic
3,633

87
%
3,533

86
%
3,253

83
%
Frankfurt
98

99
%
62

98
%

%
London
84

99
%
77

99
%
10

94
%
Singapore
3

22
%
3

22
%
3

22
%
Total - International
185

98
%
142

97
%
13

76
%
Total - Portfolio
3,819

88
%
3,674

86
%
3,267

83
%
Stabilized Properties(c)
3,540

92
%
3,396

91
%
2,653

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.
2019 Guidance

 
 
2018 Results Adjusted
 
Category
2018 Results
for ASC 842(1)
2019 Guidance
Total Revenue
$821 million
$821 million
$960 - 1,000 million
   Lease and Other Revenues from Customers
$717 million
$717 million
$835 - 865 million
   Metered Power Reimbursements
$104 million
$104 million
$125 - 135 million
Adjusted EBITDA
$452 million
$435 million
$500 - 525 million
Normalized FFO per diluted common share
$3.31
$3.22
$3.10 - 3.20
Capital Expenditures
$866 million
$866 million
$950 - 1,100 million
   Development(2)
$855 million
$855 million
$940 - 1,085 million
   Recurring
$11 million
$11 million
$10 - 15 million
 
 
 
 
(1)ASC 842 refers to Accounting Standards Codification Topic 842 - Leases, issued by the Financial Accounting Standards Board to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. The Company is adopting ASC 842 effective January 1, 2019. The adjusted 2018 results have not been prepared in accordance with GAAP and represent the Company’s estimates as if the standard had been adopted as of January 1, 2018. Adjusted EBITDA for 2018 decreased by $17 million due to higher operating lease expense. Normalized FFO per diluted common share decreased by $0.09 due to higher operating lease expense, partially offset by lower interest expense. The adjusted 2018 results are being shown solely for comparative and investor usefulness purposes with respect to the Company’s 2019 guidance.
(2)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.

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CyrusOne Inc.
Data Center Portfolio
As of December 31, 2018
(Unaudited)
 
 
 
Operating Net Rentable Square Feet (NRSF)(a)
Powered
Shell 
Available
for Future 
Development
(NRSF)
(k)  (000)
Available Critical Load Capacity
 (MW)
(l)
Stabilized Properties(b)
Metro
Area
Annualized Rent(c) ($000)
Colocation Space (CSF)(d) (000)
CSF Occupied(e)
CSF
Leased
(f)
Office & Other(g) (000)
Office & Other Occupied(h)
Supporting
Infrastructure
(i) (000)
Total(j)  (000)
Dallas - Carrollton
Dallas
$
75,701

305

88
%
89
%
82

44
%
111

498


44

Northern Virginia - Sterling V
Northern Virginia
42,039

383

83
%
92
%
11

100
%
138

532

64

57

Houston - Houston West I
Houston
41,911

112

97
%
97
%
11

100
%
37

161

3

28

Northern Virginia - Sterling II
Northern Virginia
35,853

159

100
%
100
%
9

100
%
55

223


30

Cincinnati - 7th Street***
Cincinnati
33,493

197

91
%
92
%
6

61
%
175

378

46

16

San Antonio III
San Antonio
30,781

132

100
%
100
%
9

100
%
43

184


24

Somerset I
New York Metro
29,786

97

85
%
92
%
27

89
%
89

213

203

13

Chicago - Aurora I
Chicago
27,797

113

98
%
98
%
34

100
%
223

371

27

71

Dallas - Lewisville*
Dallas
27,050

114

76
%
83
%
11

84
%
54

180


21

Totowa - Madison**
New York Metro
26,469

51

89
%
92
%
22

100
%
59

133


6

Cincinnati - North Cincinnati
Cincinnati
24,322

65

99
%
100
%
45

79
%
53

163

65

14

Wappingers Falls I**
New York Metro
23,705

37

92
%
92
%
20

99
%
15

72


3

Frankfurt I
Frankfurt
21,973

53

97
%
97
%
8

91
%
57

118


18

San Antonio I
San Antonio
21,586

44

100
%
100
%
6

83
%
46

96

11

12

Phoenix - Chandler VI
Phoenix
21,190

148

99
%
99
%
6

100
%
32

186

10

24

Houston - Houston West II
Houston
20,822

80

77
%
77
%
4

79
%
55

139

11

12

Phoenix - Chandler II
Phoenix
20,501

74

100
%
100
%