CyrusOne
Aug 2, 2017

CyrusOne Reports Second Quarter 2017 Earnings

Signed $30 Million in Annualized GAAP Revenue
Year-over-Year Revenue Growth of 28%
Increasing Normalized FFO per share Guidance Range

DALLAS--(BUSINESS WIRE)-- CyrusOne Inc. (NASDAQ: CONE), a premier global data center REIT, today announced second quarter 2017 earnings.

Highlights

Category

     

2Q'17

     

% Change
vs.
2Q'16

Revenue $166.9 million 28%
Net income / (loss) $(0.8) million n/m
Adjusted EBITDA $90.8 million 30%
Normalized FFO $67.9 million 28%
Net income / (loss) per share $(0.01) n/m
Normalized FFO per share $0.77 15%
 

Leased 17 megawatts (MW) and 136,000 colocation square feet (CSF) in the second quarter totaling $30 million in annualized GAAP revenue
 

 

-- Signed 451 leases in the second quarter, the second highest quarterly total in the Company's history

 

Backlog of $49 million in annualized GAAP revenue as of the end of the second quarter, representing more than $390 million in total contract value
 

Amended our senior unsecured credit agreement, increasing the total size of the facility by $450 million to $2.0 billion and gaining additional flexibility to pursue various initiatives, including joint ventures and international expansion
 

Raised $197.5 million in net equity proceeds through our at-the-market equity program
 

Closed the previously announced acquisition of 48 acres of land in Quincy, Washington, extending the Company's presence to the Pacific Northwest and positioning it to offer what it believes to be one of the lowest cost data center solutions in the country
 

"We had another outstanding quarter with continued strong financial results and growth rates significantly higher than those of most other REITs. The leasing volume of $30 million annualized reflects the tremendous efforts of our Sales team and the strength of our customer relationships across all industry verticals," said Gary Wojtaszek, president and chief executive officer of CyrusOne. "We believe this digital wave will continue for years to come as the secular demand drivers remain intact, and I am excited about the position we are in to capitalize on these opportunities and generate attractive returns for our shareholders."

Second Quarter 2017 Financial Results

Net loss was $(0.8) million for the second quarter, compared to net income of $9.1 million in the same period in 2016. Normalized Funds From Operations (Normalized FFO)1 was $67.9 million for the second quarter, compared to $53.1 million in the same period in 2016, an increase of 28%. Net loss per basic and diluted common share2 was $(0.01) in the second quarter of 2017, compared to net income of $0.11 per basic and diluted common share in the same period in 2016. Normalized FFO per basic and diluted common share was $0.77 in the second quarter of 2017, an increase of 15% over second quarter 2016.

Revenue was $166.9 million for the second quarter, compared to $130.1 million for the same period in 2016, an increase of 28%. The increase in revenue was driven primarily by a 35% increase in leased CSF and additional interconnection services. Net operating income (NOI)3 was $107.3 million for the second quarter, compared to $85.3 million in the same period in 2016, an increase of 26%. Adjusted EBITDA4 was $90.8 million for the second quarter, compared to $69.7 million in the same period in 2016, an increase of 30%.

Leasing Activity

CyrusOne leased approximately 17 MW of power and 136,000 CSF in the second quarter, representing $2.5 million in monthly recurring rent inclusive of the monthly impact of installation charges, or approximately $30 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 86 months (7.2 years), and the weighted average remaining lease term of CyrusOne's portfolio is 57 months (taking into account the impact of the backlog), an increase of 23 months compared to December 31, 2015. Recurring rent churn6 for the second quarter was 0.8%, compared to 2.7% for the same period in 2016.

Portfolio Utilization and Development

In the second quarter, the Company completed construction on approximately 99,000 CSF and 21 MW of power capacity in Northern Virginia, Dallas and Cincinnati, increasing total CSF across 40 data centers to approximately 2,575,000 CSF. This represents an increase of 570,000 CSF, or 28%, from June 30, 2016. CSF utilization7 as of the end of the second quarter was 93% for stabilized properties8 and 89% overall. The Company has development projects underway in Phoenix, Northern Virginia, Chicago, Dallas, San Antonio, Austin and the New York Metro area that are expected to add approximately 477,000 CSF and 73 MW of power capacity.

Balance Sheet and Liquidity

As of June 30, 2017, the Company had gross assets9 totaling approximately $4.5 billion, an increase of approximately 49% over gross assets as of June 30, 2016. CyrusOne had $1,857.7 million of long-term debt10, cash and cash equivalents of $40.0 million, and $933.8 million available under its unsecured revolving credit facility as of June 30, 2017. Net debt10 was $1,829.4 million as of June 30, 2017, representing approximately 26% of the Company's total enterprise value of $6.9 billion, or 5.0x Adjusted EBITDA for the last quarter annualized. Available liquidity11 was $973.8 million as of June 30, 2017.

In June 2017, CyrusOne's operating partnership entered into an amendment to its senior unsecured credit agreement that increased the total size of the facility by $450 million to a total of $2.0 billion and provided additional flexibility to pursue various initiatives, including joint venture and international expansion. The amendment increased the size of the term loan maturing in January 2022 from $300 million to $650 million and expanded the revolving credit facility by $100 million to $1.1 billion. Proceeds from the $350 million term loan increase were used to pay down borrowings under the revolving credit facility.

Additionally, during the second quarter, the Company sold approximately 3.6 million shares of its common stock through its at-the-market equity program at an average price of $56.03, raising $197.5 million in net equity proceeds. The Company has approximately $93 million in remaining capacity under the original program authorization.

Dividend

On May 3, 2017, the Company announced a dividend of $0.42 per share of common stock for the second quarter of 2017. The dividend was paid on July 14, 2017, to stockholders of record at the close of business on June 30, 2017.

Additionally, today the Company is announcing a dividend of $0.42 per share of common stock for the third quarter of 2017. The dividend will be paid on October 13, 2017, to stockholders of record at the close of business on September 29, 2017.

Land Acquisition in Allen, TX

Subsequent to the end of the second quarter of 2017, CyrusOne purchased 66 acres of land in Allen, Texas, to support growth in the Dallas market. The Company also has an option to acquire an additional 24 acres of adjacent land.

Guidance

CyrusOne is updating guidance for full year 2017, increasing the ranges for Normalized FFO per diluted common share and Capital Expenditures. The annual guidance provided below represents forward-looking statements, which are based on current economic conditions, internal assumptions about the Company's existing customer base, and the supply and demand dynamics of the markets in which CyrusOne operates.

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

       

Category

Previous
2017
Guidance(1)

Revised
2017
Guidance(1)(2)

Total Revenue $666 - 681 million $666 - 681 million
Base Revenue $591 - 601 million $591 - 601 million
Metered Power Reimbursements $75 - 80 million $75 - 80 million
Adjusted EBITDA $364 - 374 million $364 - 374 million
Normalized FFO per diluted common share $2.95 - 3.05 $3.00 - 3.10
Capital Expenditures $600 - 650 million $700 - 750 million
Development $595 - 640 million $695 - 740 million
Recurring $5 - 10 million $5 - 10 million
 

(1) Full year 2017 guidance includes the impact of the Sentinel data center acquisition from 3/1-12/31

(2) Includes impact of approximately 3.6 million shares issued in 2Q'17, with approximately 91.3 million shares outstanding as of June 30, 2017.

 

Upcoming Conferences and Events

Conference Call Details

CyrusOne will host a conference call on August 3, 2017, at 11:00 AM Eastern Time (10:00 AM Central Time) to discuss its results for the second quarter of 2017. A live webcast of the conference call and the presentation to be made during the call will be available under the "Company" tab in the "Investors / Events and Presentations" section of the Company's website at http://investor.cyrusone.com/events.cfm. The U.S. conference call dial-in number is 1-844-492-3731, and the international dial-in number is 1-412-542-4121. A replay will be available one hour after the conclusion of the earnings call on August 3, 2017, through August 17, 2017. 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 10109684.

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.

Use of Non-GAAP Financial Measures

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

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

1Normalized Funds From Operations (Normalized FFO) is defined as Funds From Operations (FFO) plus amortization of customer relationship intangibles, transaction and acquisition integration costs, legal claim costs and lease exit costs, and other special items including loss on extinguishment of debt, severance and management transition costs, and new accounting standards and systems implementation costs, as appropriate. FFO is net (loss) income computed in accordance with U.S. GAAP before real estate depreciation and amortization and Asset impairments and loss on disposal. Because the value of the customer relationship intangibles is inextricably connected to the real estate acquired, CyrusOne believes the amortization of such intangibles and impairments of such intangibles is analogous to real estate depreciation and impairments; therefore, the Company adds the customer relationship intangible amortization and impairments back for similar treatment with real estate depreciation and impairments. The Company believes its Normalized FFO calculation provides a comparable measure to that used by others in the industry. However, other REITs may not calculate Normalized FFO in the same manner. Accordingly, the Company's Normalized FFO may not be comparable to others.

2Net loss per common share is defined as net loss divided by the weighted average common shares outstanding for the period, which were 88,097,529 for the second quarter of 2017.

3Net Operating Income (NOI) is defined as revenue less property operating expenses. Amortization of deferred leasing costs is presented in depreciation and amortization, which is excluded from NOI. CyrusOne has not historically incurred any tenant improvement costs. Our sales and marketing costs consist of salaries and benefits for our internal sales staff, travel and entertainment, office supplies, marketing and advertising costs. General and administrative costs include salaries and benefits of our senior management and support functions, legal and consulting costs, and other administrative costs. Marketing and advertising costs are not property-specific, rather these costs support our entire portfolio. As a result, we have excluded these marketing and advertising costs from our NOI calculation, consistent with the treatment of general and administrative costs, which also support our entire portfolio. From time to time, there may be non-recurring costs in property operating expenses, and as a result the Company may present Adjusted Net Operating Income (Adjusted NOI) to exclude the impacts of those costs.

4Adjusted EBITDA is defined as net income (loss) as defined by U.S. GAAP plus interest expense, income tax (benefit) expense, depreciation and amortization, stock-based compensation, transaction and integration costs, severance and management transition costs, asset impairments and (gain) loss on disposals, lease exit costs, legal claim costs and other special items. Other companies may not calculate Adjusted EBITDA in the same manner. Accordingly, the Company's Adjusted EBITDA as presented may not be comparable to others.

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.

7Utilization is calculated by dividing CSF under signed leases for available space (whether or not the contract has commenced billing) by total CSF. CSF Utilized differs from CSF Leased presented in the Data Center Portfolio table because the utilization 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% utilized.

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

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

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

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 nearly 1,000 customers, including 190 Fortune 1000 companies.

CyrusOne's data center offerings provide the flexibility, reliability, and security that enterprise and cloud 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 40 data centers worldwide.

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 nearly 1,000 customers, including 190 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 40 data centers worldwide.

     

Corporate Headquarters

Senior Management

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

Website: www.cyrusone.com

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

Analyst Coverage

 

Firm

Analyst

Phone Number

Bank of America Merrill Lynch Michael J. Funk (646) 855-5664
Barclays Amir Rozwadowski (212) 526-4043
Citi Mike Rollins (212) 816-1116
Cowen and Company Colby Synesael (646) 562-1355
Credit Suisse Sami Badri (212) 538-1727
Deutsche Bank Vin Chao (212) 250-6799
Gabelli & Company Sergey Dluzhevskiy (914) 921-8355
Guggenheim Securities, LLC Robert Gutman (212) 518-9148
Jefferies Jonathan Petersen (212) 284-1705
J.P. Morgan Richard Choe (212) 622-6708
KeyBanc Capital Markets Jordan Sadler (917) 368-2280
Morgan Stanley Simon Flannery (212) 761-6432
Macquarie Capital (USA) Inc. Andrew DeGasperi (212) 231-0649
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 Matthew S. Heinz, CFA (443) 224-1382
SunTrust Robinson Humphrey Greg Miller (212) 303-4169
UBS John C. Hodulik, CFA (212) 713-4226
Wells Fargo Eric Luebchow (312) 630-2386
             

CyrusOne Inc.

Condensed Consolidated Statements of Operations

(Dollars in millions, except per share amounts)

(Unaudited)

 
Three Months Six Months
Ended June 30, Change Ended June 30, Change
2017   2016   $   %   2017   2016   $   %
Revenue:    
Base revenue and other $ 151.1 $ 118.2 $ 32.9 28

%

$ 285.3 $ 224.7 $ 60.6 27 %
Metered power reimbursements 15.8     11.9     3.9     33 %   30.9     23.2     7.7     33 %
Revenue $ 166.9 $ 130.1 $ 36.8 28 % 316.2 247.9 68.3 28 %
Costs and expenses:
Property operating expenses 59.6 44.8 14.8 33 % 111.9 85.1 26.8 31 %
Sales and marketing 4.3 4.2 0.1 2 % 9.2 8.2 1.0 12 %
General and administrative 17.3 14.9 2.4 16 % 33.1 28.9 4.2 15 %
Depreciation and amortization 63.7 44.7 19.0 43 % 119.4 84.0 35.4 42 %
Transaction and acquisition integration costs 1.7 0.4 1.3 n/m 2.3 2.7 (0.4 ) (15 )%
Asset impairments and loss on disposal 3.6    

-

    3.6     n/m   3.8    

-

    3.8     n/m
Total costs and expenses 150.2     109.0     41.2     38 %   279.7     208.9     70.8     34 %
Operating income 16.7 21.1 (4.4 ) (21 )% 36.5 39.0 (2.5 ) (6 )%
Interest expense 16.5 11.5 5.0 43 % 30.1 23.6 6.5 28 %
Loss on extinguishment of debt 0.3    

-

    0.3     n/m   36.5    

-

    36.5     n/m
Net (loss) income before income taxes (0.1 ) 9.6 (9.7 ) n/m (30.1 ) 15.4 (45.5 ) n/m
Income tax expense (0.7 )   (0.5 )   (0.2 )   40 %   (1.1 )   (0.7 )   (0.4 )   57 %
Net (loss) income $ (0.8 )   $ 9.1     $ (9.9 )   n/m   $ (31.2 )   $ 14.7     $ (45.9 )   n/m
(Loss) income per share - basic and diluted $ (0.01 ) $ 0.11 $ (0.12 ) n/m $ (0.37 ) $ 0.19 $ (0.56 ) n/m
       

CyrusOne Inc.

Condensed Consolidated Balance Sheets

(Dollars in millions)

(Unaudited)

 
June 30, December 31, Change
2017   2016   $   %
Assets  
Investment in real estate:
Land $ 160.0 $ 142.7 $ 17.3 12 %
Buildings and improvements 1,291.7 1,008.9 282.8 28 %
Equipment 1,525.3 1,042.9 482.4 46 %
Construction in progress 555.8     407.1     148.7     37 %
Subtotal 3,532.8 2,601.6 931.2 36 %
Accumulated depreciation (679.6 )   (578.5 )   (101.1 )   17 %
Net investment in real estate 2,853.2     2,023.1     830.1     41 %
Cash and cash equivalents 40.0 14.6 25.4 n/m
Rent and other receivables, net 93.4 83.3 10.1 12 %
Restricted cash 0.8

-

0.8 n/m
Goodwill 455.1 455.1

-

-

%
Intangible assets, net 216.3 150.2 66.1 44 %
Other assets 157.8     126.1     31.7     25 %
Total assets $ 3,816.6     $ 2,852.4     $ 964.2     34 %
Liabilities and Equity
Accounts payable and accrued expenses $ 276.0 $ 227.1 $ 48.9 22 %
Deferred revenue 96.5 76.7 19.8 26 %
Capital lease obligations 11.7 10.8 0.9 8 %
Long-term debt, net 1,832.5 1,240.1 592.4 48 %
Lease financing arrangements 134.0     135.7     (1.7 )   (1 )%
Total liabilities 2,350.7     1,690.4     660.3     39 %
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 91,291,228 and 83,536,250 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively 0.9 0.8 0.1 13 %
Additional paid in capital 1,821.9 1,412.3 409.6 29 %
Accumulated deficit (355.7 ) (249.8 ) (105.9 ) 42 %
Accumulated other comprehensive loss (1.2 )   (1.3 )   0.1    

-

%
Total stockholders' equity 1,465.9     1,162.0     303.9     26 %
Total liabilities and equity $ 3,816.6     $ 2,852.4     $ 964.2     34 %
                   

CyrusOne Inc.

Condensed Consolidated Statements of Operations

(Dollars in millions, except per share amounts)

(Unaudited)

 
For the three months ended: June 30, March 31, December 31, September 30, June 30,
2017     2017     2016     2016     2016
Revenue:
Base revenue and other $ 151.1 $ 134.2 $ 123.2 $ 128.8 $ 118.2
Metered power reimbursements 15.8       15.1       14.2       15.0       11.9  
Revenue 166.9       149.3       137.4       143.8       130.1  
Costs and expenses:
Property operating expenses 59.6 52.3 47.8 54.6 44.8
Sales and marketing 4.3 4.9 4.0 4.7 4.2
General and administrative 17.3 15.8 17.9 13.9 14.9
Depreciation and amortization 63.7 55.7 49.3 50.6 44.7
Transaction and acquisition integration costs 1.7 0.6 0.4 1.2 0.4
Asset impairments and loss on disposal 3.6       0.2       5.3      

-

     

-

 
Total costs and expenses 150.2       129.5       124.7       125.0       109.0  
Operating income 16.7 19.8 12.7 18.8 21.1
Interest expense 16.5 13.6 11.4 13.8 11.5
Loss on extinguishment of debt 0.3       36.2      

-

     

-

     

-

 
Net (loss) income before income taxes (0.1 ) (30.0 ) 1.3 5.0 9.6
Income tax expense (0.7 )     (0.4 )     (0.5 )     (0.6 )     (0.5 )
Net (loss) income $ (0.8 )     $ (30.4 )     $ 0.8       $ 4.4       $ 9.1  
(Loss) income per share - basic and diluted $ (0.01 ) $ (0.36 ) $ 0.01 $ 0.05 $ 0.11
                   

CyrusOne Inc.

Condensed Consolidated Balance Sheets

(Dollars in millions)

(Unaudited)

 
June 30, March 31, December 31, September 30, June 30,
2017     2017     2016     2016     2016
Assets
Investment in real estate:
Land $ 160.0 $ 156.9 $ 142.7 $ 143.1 $ 122.9
Buildings and improvements 1,291.7 1,270.9 1,008.9 1,009.3 995.2
Equipment 1,525.3 1,438.0 1,042.9 976.9 917.8
Construction in progress 555.8       371.7       407.1       304.0       178.9  
Subtotal 3,532.8 3,237.5 2,601.6 2,433.3 2,214.8
Accumulated depreciation (679.6 )     (625.9 )     (578.5 )     (546.4 )     (503.2 )
Net investment in real estate 2,853.2       2,611.6       2,023.1       1,886.9       1,711.6  
Cash and cash equivalents 40.0 20.4 14.6 11.0 13.2
Rent and other receivables, net 93.4 89.4 83.3 73.0 66.4
Restricted cash 0.8 0.6

-

-

0.3
Goodwill 455.1 455.1 455.1 455.1 453.4
Intangible assets, net 216.3 223.1 150.2 155.8 160.6
Other assets 157.8       143.6       126.1       114.5       105.8  
Total assets $ 3,816.6       $ 3,543.8       $ 2,852.4       $ 2,696.3       $ 2,511.3  
Liabilities and Equity
Accounts payable and accrued expenses $ 276.0 $ 268.2 $ 227.1 $ 214.6 $ 163.7
Deferred revenue 96.5 93.3 76.7 72.5 71.7
Capital lease obligations 11.7 12.4 10.8 11.9 10.9
Long-term debt, net 1,832.5 1,731.8 1,240.1 1,065.7 1,096.2
Lease financing arrangements 134.0       134.5       135.7       141.9       144.3  
Total liabilities 2,350.7       2,240.2       1,690.4       1,506.6       1,486.8  
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 91,291,228 and 83,536,250 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively 0.9 0.9 0.8 0.8 0.8
Additional paid in capital 1,821.9 1,620.5 1,412.3 1,408.9 1,215.7
Accumulated deficit (355.7 ) (316.5 ) (249.8 ) (218.8 ) (191.5 )
Accumulated other comprehensive loss (1.2 )     (1.3 )     (1.3 )     (1.2 )     (0.5 )
Total stockholders' equity 1,465.9       1,303.6       1,162.0       1,189.7       1,024.5  
Total liabilities and equity $ 3,816.6       $ 3,543.8       $ 2,852.4       $ 2,696.3       $ 2,511.3  
               

CyrusOne Inc.

Condensed Consolidated Statements of Cash Flow

(Dollars in millions)

(Unaudited)

 

Six Months Ended
June 30, 2017

   

Six Months Ended
June 30, 2016

   

Three Months
Ended June 30, 2017

   

Three Months
Ended June 30, 2016

Cash flows from operating activities:
Net (loss) income $ (31.2 ) $ 14.7 $ (0.8 ) $ 9.1
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization 119.4 84.0 63.7 44.7
Non-cash interest expense and change in interest accrual 10.7 1.5 11.7 0.6
Stock-based compensation expense 7.7 6.2 4.0 3.2
Provision for bad debt 0.3 0.7 0.3 0.6
Loss on extinguishment of debt 36.5

-

0.3

-

Asset impairments and loss on disposal 3.8

-

3.6

-

Change in operating assets and liabilities:
Rent receivables and other assets (41.3 ) (8.9 ) (21.3 ) (15.1 )
Accounts payable and accrued expenses (3.3 ) 1.7 1.6 1.7
Deferred revenues 18.9       (7.0 )     3.2       (4.7 )
Net cash provided by operating activities 121.5       92.9       66.3       40.1  
Cash flows from investing activities:
Capital expenditures - asset acquisitions, net of cash acquired (492.3 ) (131.1 )

-

-

Capital expenditures - other development (485.0 ) (247.1 ) (302.5 ) (168.6 )
Changes in restricted cash (0.8 )     1.2       (0.2 )     0.4  
Net cash used in investing activities (978.1 )     (377.0 )     (302.7 )     (168.2 )
Cash flows from financing activities:
Issuance of common stock 408.6 256.5 197.6 0.5
Stock issuance costs

-

(0.5 )

-

(0.5 )
Dividends paid (69.1 ) (52.9 ) (36.7 ) (30.1 )
Borrowings from credit facility 1,010.0 415.0 570.0 95.0
Payments on credit facility (737.3 ) (315.0 ) (467.3 ) (10.0 )
Payments on senior notes (474.8 )

-

-

-

Proceeds from issuance of debt 800.0

-

-

-

Payments on capital leases and lease financing arrangements (4.8 ) (4.4 ) (2.5 ) (1.3 )
Debt issuance costs (13.6 ) (2.1 ) (4.8 )

-

Payment of debt extinguishment costs (30.4 )

-

(0.1 )

-

Tax payment upon exercise of equity awards (6.6 )     (13.6 )     (0.2 )    

-

 
Net cash provided by financing activities 882.0       283.0       256.0       53.6  
Net increase (decrease) in cash and cash equivalents 25.4 (1.1 ) 19.6 (74.5 )
Cash and cash equivalents at beginning of period 14.6       14.3       20.4       87.7  
Cash and cash equivalents at end of period $ 40.0       $ 13.2       $ 40.0       $ 13.2  
 
Supplemental disclosures
Cash paid for interest $ 27.5 $ 27.2 $ 9.2 $ 21.0
Cash paid for income taxes 1.6 1.2 1.6 1.1
Capitalized interest 8.1 5.0 4.5 2.9
Non-cash investing and financing activities
Acquisition and development of properties in accounts payable and other liabilities 163.4 77.4 163.4 77.4
Dividends payable 39.4 31.8 39.4 31.8
Debt issuance cost payable 0.1

-

0.1

-

         

CyrusOne Inc.

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

(Dollars in millions)

(Unaudited)

 
Six Months Ended Three Months Ended
June 30, Change June 30,   March 31,   December 31,   September 30,   June 30,
2017   2016   $   %   2017   2017   2016   2016   2016
Net Operating Income  
Revenue $ 316.2 $ 247.9 $ 68.3 28 % $ 166.9 $ 149.3 $ 137.4 $ 143.8 $ 130.1
Property operating expenses 111.9     85.1   26.8 31 % 59.6     52.3     47.8     54.6     44.8  
Net Operating Income (NOI) $ 204.3     $ 162.8   $ 41.5 25 % $ 107.3     $ 97.0     $ 89.6     $ 89.2     $ 85.3  
NOI as a % of Revenue 64.6 % 65.7 % 64.3 % 65.0 % 65.2 % 62.0 % 65.6 %
Reconciliation of Net (Loss) Income to Adjusted EBITDA:
Net (loss) income $ (31.2 ) $ 14.7 $ (45.9 ) n/m $ (0.8 ) $ (30.4 ) $ 0.8 $ 4.4 $ 9.1
Interest expense 30.1 23.6 6.5 28 % 16.5 13.6 11.4 13.8 11.5
Income tax expense 1.1 0.7 0.4 57 % 0.7 0.4 0.5 0.6 0.5
Depreciation and amortization 119.4 84.0 35.4 42 % 63.7 55.7 49.3 50.6 44.7
Transaction and acquisition integration costs 2.3 2.7 (0.4 ) (15 )% 1.7 0.6 0.4 1.2 0.4
Legal claim costs 0.8 0.5 0.3 60 % 0.6 0.2 0.4 0.2 0.3
Stock-based compensation 7.7 6.2 1.5 24 % 4.0 3.7 3.0 2.3 3.2
Severance and management transition costs 0.5

-

0.5 n/m

-

0.5 1.9

-

-

Loss on extinguishment of debt 36.5

-

36.5 n/m 0.3 36.2

-

-

-

New accounting standards and system implementation costs 0.5

-

0.5 n/m 0.5

-

-

-

-

Asset impairments and loss on disposals 3.8    

-

  3.8 n/m 3.6     0.2     5.3    

-

   

-

 
Adjusted EBITDA $ 171.5     $ 132.4   $ 39.1 30 % $ 90.8     $ 80.7     $ 73.0     $ 73.1     $ 69.7  
Adjusted EBITDA as a % of Revenue 54.2 % 53.4 % 54.4 % 54.1 % 53.1 % 50.8 % 53.6 %
                       

CyrusOne Inc.

Reconciliation of Revenue to Net Operating Income to Net (Loss) Income

(Dollars in millions)

(Unaudited)

 
Three Months Ended Six Months Ended
June 30, Change June 30, Change
2017     2016     $     %     2017     2016     $     %
Revenue $ 166.9     $ 130.1 $ 36.8 28 % $ 316.2     $ 247.9 $ 68.3 28 %
Property operating expenses 59.6       44.8       14.8       33 %     111.9       85.1       26.8       31 %
Net Operating Income $ 107.3       $ 85.3       $ 22.0       26 %     $ 204.3       $ 162.8       $ 41.5       25 %
Sales and marketing 4.3 4.2 0.1 2 % 9.2 8.2 1.0 12 %
General and administrative 17.3 14.9 2.4 16 % 33.1 28.9 4.2 15 %
Depreciation and amortization 63.7 44.7 19.0 43 % 119.4 84.0 35.4 42 %
Transaction and acquisition integration costs 1.7 0.4 1.3 n/m 2.3 2.7 (0.4 ) (15 )%
Asset impairments and loss on disposal 3.6

-

3.6 n/m 3.8

-

3.8 n/m
Interest expense 16.5 11.5 5.0 43 % 30.1 23.6 6.5 28 %
Loss on extinguishment of debt 0.3

-

0.3 n/m 36.5

-

36.5 n/m
Income tax expense 0.7       0.5       0.2       40 %     1.1       0.7       0.4       57 %
Net (loss) income $ (0.8 )     $ 9.1       $ (9.9 )     n/m     $ (31.2 )     $ 14.7       $ (45.9 )     n/m
               

CyrusOne Inc.

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

(Dollars in millions)

(Unaudited)

 
Six Months Ended Three Months Ended
June 30, Change June 30,     March 31,     December 31,     September 30,     June 30,
2017     2016     $     %     2017     2017     2016     2016     2016
Reconciliation of Net (Loss) Income to FFO and Normalized FFO:    
Net (loss) income $ (31.2 ) $ 14.7 $ (45.9 ) n/m $ (0.8 ) $ (30.4 ) $ 0.8 $ 4.4 $ 9.1
Real estate depreciation and amortization 104.0 71.4 32.6 46 % 55.3 48.7 42.0 44.2 38.4
Asset impairments and loss on disposal 3.8      

-

  3.8 n/m 3.6       0.2       5.3      

-

     

-

 
Funds from Operations (FFO) $ 76.6 $ 86.1 $ (9.5 ) (11 )% $ 58.1 $ 18.5 $ 48.1 $ 48.6 $ 47.5
 
Loss on extinguishment of debt 36.5

-

36.5 n/m 0.3 36.2

-

-

-

New accounting standards and system implementation costs 0.5

-

0.5 n/m 0.5

-

-

-

-

Amortization of customer relationship intangibles 11.9 9.7 2.2 23 % 6.7 5.2 5.6 4.8 4.9
Transaction and acquisition integration costs 2.3 2.7 (0.4 ) (15 )% 1.7 0.6 0.4 1.2 0.4
Severance and management transition costs 0.5

-

0.5 n/m

-

0.5 1.9

-

-

Legal claim costs 0.8       0.5   0.3 60 % 0.6       0.2       0.4       0.2       0.3  
Normalized Funds from Operations (Normalized FFO) $ 129.1       $ 99.0   $ 30.1 30 % $ 67.9       $ 61.2       $ 56.4       $ 54.8       $ 53.1  
Normalized FFO per diluted common share $ 1.49 $ 1.30 $ 0.19 15 % $ 0.77 $ 0.72 $ 0.68 $ 0.67 $ 0.67
Weighted Average diluted common shares outstanding 86.5 76.0 10.5 14 % 88.5 84.5 82.9 81.3 79.0
 
Additional Information:
Amortization of deferred financing costs 2.2 2.0 0.2 10 % 1.2 1.0 1.1 1.0 1.1
Stock-based compensation 7.7 6.2 1.5 24 % 4.0 3.7 3.0 2.3 3.2
Non-real estate depreciation and amortization 3.5 2.9 0.6 21 % 1.7 1.8 1.7 1.6 1.4
Deferred revenue and straight line rent adjustments (12.1 ) (7.0 ) (5.1 ) 73 % (2.7 ) (9.4 ) (2.5 ) (10.7 ) (5.0 )
Leasing commissions (7.7 ) (5.3 ) (2.4 ) 45 % (3.8 ) (3.9 ) (3.8 ) (3.0 ) (3.4 )
Recurring capital expenditures (2.2 ) (1.8 ) (0.4 ) 22 % (0.7 ) (1.5 ) (1.9 ) (1.7 ) (0.9 )
 

CyrusOne Inc.

Market Capitalization Summary, Reconciliation of Net Debt, and Debt Schedule
(Unaudited)

           

Market Capitalization

(dollars in millions)

Shares or

Equivalents

Outstanding

    Market Price

as of

June 30, 2017

    Market Value

Equivalents

(in millions)

Common shares 91,291,228 $ 55.75 $ 5,089.5
Net Debt 1,829.4
Total Enterprise Value (TEV) $ 6,918.9
           

Reconciliation of Net Debt

(dollars in millions) June 30, March 31
2017       2017
Long-term debt(a) $ 1,857.7 $ 1,755.0
Capital lease obligations 11.7 12.4
Less:
Cash and cash equivalents (40.0 )       (20.4 )
Net Debt $ 1,829.4         $ 1,747.0  
 

(a)  Excludes adjustment for deferred financing costs.

           

Debt Schedule (as of June 30, 2017)

(dollars in millions)
Long-term debt: Amount     Interest Rate     Maturity Date
Revolving credit facility $ 157.7 L + 155bps November 2021(a)
Term loan 250.0 2.72 % September 2021
Term loan 650.0 2.67 % January 2022
5.000% senior notes due 2024 500.0 5.000 % March 2024
5.375% senior notes due 2027 300.0       5.375 %     March 2027
Total long-term debt(b) $ 1,857.7   3.74 %
 
Weighted average term of debt: 5.9 years
 
(a) Assuming exercise of one-year extension option.
(b) Excludes adjustment for deferred financing costs.
                       

CyrusOne Inc.

Colocation Square Footage (CSF) and Utilization

(Unaudited)

 
As of June 30, 2017     As of December 31, 2016     As of June 30, 2016

Market

Colocation
Space (CSF)(a)
    CSF
Utilized(b)
    Colocation
Space (CSF)(a)
    CSF
Utilized(b)
    Colocation
Space (CSF)(a)
    CSF
Utilized(b)
Northern Virginia 437,847 90 % 277,629 100 % 236,863 99 %
Dallas 431,287 93 % 431,287 83 % 431,119 78 %
Cincinnati 404,207 92 % 386,508 92 % 386,484 91 %
Houston 308,074 75 % 308,074 73 % 308,074 70 %
San Antonio 239,879 100 % 108,112 99 % 108,064 99 %
New York Metro 218,448 83 % 121,530 79 % 121,530 89 %
Phoenix 215,964 100 % 215,892 94 % 183,511 94 %
Chicago 136,306 88 % 111,660 82 % 95,024 89 %
Austin 105,610 64 % 105,610 50 % 121,833 49 %
Raleigh-Durham 64,559 80 %

-

n/a

-

n/a
International 13,200     77 %     13,200     70 %     13,200     80 %
Total 2,575,381     89 %     2,079,502     85 %     2,005,702     84 %
Stabilized Properties(c) 2,379,515     93 %     1,895,867     92 %     1,822,067     92 %
 
(a) CSF represents the NRSF at an operating facility that is currently leased or readily available for lease as colocation space, where customers locate their servers and other IT equipment.
(b) Utilization 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% utilized.
           

CyrusOne Inc.

2017 Guidance

 

Category

Previous
2017
Guidance(1)

Revised
2017
Guidance(1)(2)

Total Revenue $666 - 681 million $666 - 681 million
Base Revenue $591 - 601 million $591 - 601 million
Metered Power Reimbursements $75 - 80 million $75 - 80 million
Adjusted EBITDA $364 - 374 million $364 - 374 million
Normalized FFO per diluted common share $2.95 - 3.05 $3.00 - 3.10
Capital Expenditures $600 - 650 million $700 - 750 million
Development $595 - 640 million $695 - 740 million
Recurring $5 - 10 million $5 - 10 million
 

(1) Full year 2017 guidance includes the impact of the Sentinel data center acquisition from 3/1-12/31.

(2) Includes impact of approximately 3.6 million shares issued in 2Q'17, with approximately 91.3 million shares outstanding as of June 30, 2017.

 

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

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

                       

CyrusOne Inc.

Data Center Portfolio

As of June 30, 2017

(Unaudited)

 

Operating Net Rentable Square Feet (NRSF)(a)

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

Available
Critical
Load
Capacity
(MW)(l)

Stabilized Properties(b)

Metro
Area
 

Annualized
Rent(c)

 

Colocation
Space
(CSF)(d)

 

CSF
Leased(e)

 

CSF
Utilized(f)

 

Office &
Other(g)

 

Office &
Other
Leased (h)

 

Supporting
Infrastructure(i)

 

Total(j)

   
Dallas - Carrollton Dallas $ 60,409,360 304,598 80 % 93 % 64,317 61 % 111,383 480,298 68,000 38
Houston - Houston West I Houston 45,067,350 112,133 96 % 97 % 11,163 99 % 37,243 160,539 3,000 28
Dallas - Lewisville* Dallas 36,677,714 114,054 94 % 94 % 11,374 89 % 54,122 179,550

-

21
Cincinnati - 7th Street*** Cincinnati 35,566,063 196,648 92 % 92 % 5,744 100 % 175,148 377,540 46,000 16
Northern Virginia - Sterling II Northern Virginia 30,650,020 158,998 100 % 100 % 8,651 100 % 55,306 222,955

-

30
Somerset I New York Metro 27,501,179 96,918 86 % 86 % 26,613 85 % 88,991 212,522 2,000 11
Totowa - Madison** New York Metro 25,766,445 51,290 84 % 84 % 22,477 100 % 58,964 132,731

-

6
Cincinnati - North Cincinnati Cincinnati 25,218,325 65,303 97 % 97 % 44,886 72 % 52,950 163,139 65,000 14
Wappingers Falls I** New York Metro 24,976,582 37,000 96 % 97 % 20,167 97 % 15,077 72,244

-

3
Chicago - Aurora I Chicago 24,748,318 113,008 96 % 96 % 34,008 100 % 223,478 370,494 27,000 71
Houston - Houston West II Houston 23,697,450 79,540 93 % 93 % 3,355 74 % 55,023 137,918 12,000 12
San Antonio I San Antonio 21,991,617 43,891 99 % 100 % 5,989 83 % 45,650 95,530 11,000 12
Phoenix - Chandler II Phoenix 21,297,731 74,082 100 % 100 % 5,639 38 % 25,519 105,240

-

12
Houston - Galleria Houston 17,828,949 63,469 62 % 62 % 23,259 51 % 24,927 111,655

-

14
Phoenix - Chandler I Phoenix 17,193,070 73,969 100 % 100 % 34,582 12 % 38,524 147,075 31,000 16
San Antonio III San Antonio 16,261,404 131,767 100 % 100 % 9,309 100 % 43,126 184,202

-

24
Raleigh-Durham I Raleigh-Durham 15,782,996 64,559 80 % 80 % 9,507 100 % 82,119 156,185 257,000 10
Phoenix - Chandler III Phoenix 15,583,970 67,913 100 % 100 % 2,440

-

%

30,415 100,768

-

14
Northern Virginia - Sterling I Northern Virginia 15,001,443 77,961 98 % 99 % 5,618 77 % 48,598 132,177

-

12
Austin II Austin 14,630,041 43,772 94 % 94 % 1,821 100 % 22,433 68,026

-

5
Northern Virginia - Sterling III Northern Virginia 14,502,400 79,122 100 % 100 % 7,264 100 % 33,603 119,989

-

15
San Antonio II San Antonio 13,807,583 64,221 100 % 100 % 11,255 100 % 41,127 116,603

-

12
Florence Cincinnati 13,315,702 52,698 100 % 100 % 46,848 87 % 40,374 139,920

-

9
Cincinnati - Hamilton* Cincinnati 8,880,542 46,565 77 % 77 % 1,077 100 % 35,336 82,978

-

10
Cincinnati - Mason Cincinnati 5,401,402 34,072 100 % 100 % 26,458 98 % 17,193 77,723

-

4
Dallas - Midway** Dallas 5,356,920 8,390 100 % 100 %

-

-

%

-

8,390

-

1
Stamford - Riverbend** New York Metro 5,051,087 20,000 30 % 31 %

-

-

%

8,484 28,484

-

2
London - Great Bridgewater** International 4,094,117 10,000 85 % 94 %

-

-

%

514 10,514

-

1
Norwalk I** New York Metro 3,476,288 13,240 88 % 90 % 4,085 72 % 40,610 57,935 87,000 2
Northern Virginia - Sterling IV Northern Virginia 2,589,764 40,670 100 % 100 % 5,523 100 % 32,433 78,626

-

6
Dallas - Marsh** Dallas 2,534,506 4,245 100 % 100 %

-

-

%

-

4,245

-

1
Chicago - Lombard Chicago 2,268,093 13,516 61 % 61 % 4,115 100 % 12,230 29,861 29,000 3
Stamford - Omega** New York Metro 1,315,757

-

-

%

-

%

18,552 87 % 3,796 22,348

-

-

Totowa - Commerce** New York Metro 691,429

-

-

%

-

%

20,460 43 % 5,540 26,000

-

-

Cincinnati - Blue Ash* Cincinnati 575,172 6,193 36 % 36 % 6,821 100 % 2,165 15,179

-

1
South Bend - Crescent* Chicago 555,137 3,432 43 % 43 %

-

-

%

5,125 8,557 11,000 1
Houston - Houston West III Houston 493,602

-

-

%

-

%

9,095 100 % 10,652 19,747 209,000

-

Singapore - Inter Business Park** International 344,565 3,200 22 % 22 %

-

-

%

-

3,200

-

1
South Bend - Monroe Chicago 167,576 6,350 22 % 22 %

-

-

%

6,478 12,828 4,000 1
Cincinnati - Goldcoast Cincinnati   96,089   2,728  

-

%

 

-

%

  5,280   100 %   16,481   24,489   14,000   1
Stabilized Properties - Total $ 601,367,758   2,379,515   91 %   93 %   517,752   78 %   1,601,137   4,498,404   876,000   435
 

Pre-Stabilized Properties(b)

Austin III Austin 7,061,018 61,838 33 % 42 % 15,055 83 % 20,629 97,522 67,000 3
Northern Virginia - Sterling V Northern Virginia 4,594,400 81,096 45 % 48 %

-

-

%

31,365 112,461 380,000 12
Houston - Houston West III (DH #1) Houston   1,844,688   52,932   11 %   20 %  

-

 

-

%

  21,992   74,924  

-

  6
All Properties - Total $ 614,867,864   2,575,381   87 %   89 %   532,807   78 %   1,675,123   4,783,311   1,323,000   456
 
* Indicates properties in which we hold a leasehold interest in the building shell and land. All data center infrastructure has been constructed by us and owned by us.
** Indicates properties in which we hold a leasehold interest in the building shell, land, and all data center infrastructure.
*** The information provided for the Cincinnati - 7th Street property includes data for two facilities, one of which we lease and one of which we own.
 
 
(a) Represents the total square feet of a building under lease or available for lease based on engineers' drawings and estimates but does not include space held for development or space used by CyrusOne.
(b) Stabilized properties include data halls that have been in service for at least 24 months or are at least 85% utilized. Pre-stabilized properties include data halls that have been in service for less than 24 months and are less than 85% utilized.
(c) Represents monthly contractual rent (defined as cash rent including customer reimbursements for metered power) under existing customer leases as of June 30, 2017, multiplied by 12. For the month of June 2017, customer reimbursements were $70.4 million annualized and consisted of reimbursements by customers across all facilities with separately metered power. Customer reimbursements under leases with separately metered power vary from month-to-month based on factors such as our customers' utilization of power and the suppliers' pricing of power. From July 1, 2015 through June 30, 2017, customer reimbursements under leases with separately metered power constituted between 10.6% and 12.6% of annualized rent. After giving effect to abatements, free rent and other straight-line adjustments, our annualized effective rent as of June 30, 2017 was $634.0 million. Our annualized effective rent was greater than our annualized rent as of June 30, 2017 because our positive straight-line and other adjustments and amortization of deferred revenue exceeded our negative straight-line adjustments due to factors such as the timing of contractual rent escalations and customer prepayments for services.
(d) CSF represents the NRSF at an operating facility that is currently leased or readily available for lease as colocation space, where customers locate their servers and other IT equipment.
(e) Percent leased is determined based on CSF being billed to customers under signed leases as of June 30, 2017 divided by total CSF. Leases signed but not commenced as of June 30, 2017 are not included.
(f) Utilization is calculated by dividing CSF under signed leases for colocation space (whether or not the lease has commenced billing) by total CSF.
(g) Represents the NRSF at an operating facility that is currently leased or readily available for lease as space other than CSF, which is typically office and other space.
(h) Percent leased is determined based on Office & Other space being billed to customers under signed leases as of June 30, 2017 divided by total Office & Other space. Leases signed but not commenced as of June 30, 2017 are not included.
(i) Represents infrastructure support space, including mechanical, telecommunications and utility rooms, as well as building common areas.
(j) Represents the NRSF at an operating facility that is currently leased or readily available for lease. This excludes existing vacant space held for development.
(k) Represents space that is under roof that could be developed in the future for operating NRSF, rounded to the nearest 1,000.
(l) Critical load capacity represents the aggregate power available for lease and exclusive use by customers expressed in terms of megawatts. The capacity reported is for non-redundant megawatts, as we can develop flexible solutions to our customers at multiple resiliency levels. Does not sum to total due to rounding.
                                           

CyrusOne Inc.

NRSF Under Development

As of June 30, 2017

(Dollars in millions)

(Unaudited)

 
NRSF Under Development(a) Under Development Costs(b)
Facilities

Metropolitan
Area

   

Estimated
Completion
Date

   

Colocation
Space
(CSF)

   

Office &
Other

   

Supporting
Infrastructure

   

Powered
Shell(b)

    Total    

Critical
Load MW
Capacity(c)

   

Actual
to
Date(d)

   

Estimated
Costs to
Completion(e)

    Total
San Antonio IV San Antonio 3Q'17 60,000 16,000 21,000

-

97,000 12.0 $ 36 $ 23-25 $ 59-61
Phoenix - Chandler IV Phoenix 3Q'17 73,000 3,000 27,000

-

103,000 12.0 56 1 56-57
Phoenix - Chandler V Phoenix 3Q'17

-

-

-

185,000 185,000

-

10 10-11 20-21
Northern Virginia - Sterling IV Northern Virginia 3Q'17 41,000

-

2,000

-

43,000 9.0 24 19-21 43-45
Northern Virginia - Sterling V Northern Virginia 3Q'17 77,000 1,000 69,000

-

147,000 6.0 11 24-27 35-38
Chicago - Aurora II Chicago 3Q'17 77,000 10,000 14,000 272,000 373,000 16.0 49 48-53 97-102
Dallas - Carrollton Dallas 3Q'17 75,000

-

21,000

-

96,000 3.0 3 22-25 25-28
Phoenix - Chandler VI Phoenix 4Q'17 74,000

-

23,000 96,000 193,000 12.0 26 27-30 53-56
Austin III Austin 4Q'17

-

-

-

-

-

3.0

-

11-13 11-13
Somerset II New York Metro 1Q'18

-

   

-

   

-

    210,000     210,000    

-

      10       14-15       24-25
Total 477,000     30,000     177,000     763,000     1,447,000     73.0     $ 225     $ 199-221     $ 424-446
 
(a)   Represents NRSF at a facility for which activities have commenced or are expected to commence in the next 2 quarters to prepare the space for its intended use. Estimates and timing are subject to change.
(b) Represents NRSF under construction that, upon completion, will be powered shell available for future development into operating NRSF.
(c) Critical load capacity represents the aggregate power available for lease and exclusive use by customers expressed in terms of megawatts. The capacity reported is for non-redundant megawatts, as we can develop flexible solutions to our customers at multiple resiliency levels.
(d) Actual to date is the cash investment as of June 30, 2017. There may be accruals above this amount for work completed, for which cash has not yet been paid.
(e) Represents management's estimate of the total costs required to complete the current NRSF under development. There may be an increase in costs if customers require greater power density.
 

CyrusOne Inc.

Land Available for Future Development (Acres)

As of June 30, 2017

(Unaudited)

 
As of
Market June 30, 2017
Austin 22
Chicago 23
Cincinnati 98
Dallas
Houston 20
International
New York Metro
Northern Virginia 16
Phoenix 39
Quincy, Washington 48
Raleigh-Durham
San Antonio
Total Available 266
                             

CyrusOne Inc.

Leasing Statistics - Lease Signings

As of June 30, 2017

(Dollars in thousands)

(Unaudited)

 
Period      

Number
of Leases(a)

     

Total CSF
Signed(b)

     

Total kW
Signed(c)

     

Total MRR
Signed ($000)(d)

     

Weighted
Average
Lease Term(e)

2Q'17 451 136,000 16,673 $2,467 86
Prior 4Q Avg. 398 152,250 21,125 $2,835 85
1Q'17 480 148,000 18,259 $2,632 103
4Q'16 358 74,000 9,038 $1,590 63
3Q'16 389 105,000 16,930 $2,250 63
2Q'16 363 282,000 40,272 $4,866 112
 
(a) Number of leases represents each agreement with a customer. A lease agreement could include multiple spaces, and a customer could have multiple leases.
(b) CSF represents the NRSF at an operating facility that is leased as colocation space, where customers locate their servers and other IT equipment.
(c) Represents maximum contracted kW that customers may draw during lease period. Additionally, we can develop flexible solutions for our customers at multiple resiliency levels, and the kW signed is unadjusted for this factor.
(d) Monthly recurring rent is defined as the average monthly contractual rent during the term of the lease. It includes the monthly impact of installation charges of approximately $0.2 million in 2Q'17 and $0.1 million in each of the other quarters.
(e) Calculated on a CSF-weighted basis.
 

CyrusOne Inc.

New MRR Signed - Existing vs. New Customers

As of June 30, 2017

(Dollars in thousands)

(Unaudited)

                 
New MRR(a) Signed ($000)
 
3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17
Existing Customers $ 578 $ 2,984 $ 1,767 $ 4,406 $ 1,796 $ 1,332 $ 2,247 $ 2,322
New Customers $ 534   $ 646   $ 1,843   $ 460   $ 454   $ 258   $ 385   $ 145  
Total $ 1,112 $ 3,630 $ 3,610 $ 4,866 $ 2,250 $ 1,590 $ 2,632 $ 2,467
 
% from Existing Customers 52 % 82 % 49 % 91 % 80 % 84 % 85 % 94 %
 
(a) Monthly recurring rent is defined as the average monthly contractual rent during the term of the lease. It includes the
monthly impact of installation charges of approximately $0.2 million in 2Q'17 and $0.1 million in each of the other quarters.
                     

CyrusOne Inc.

Customer Sector Diversification(a)

As of June 30, 2017

(Unaudited)

 
Principal Customer Industry    

Number of
Locations

      Annualized
Rent(b)
    Percentage of
Portfolio
Annualized
Rent(c)
    Weighted
Average
Remaining
Lease Term in
Months(d)
1 Information Technology 8 $ 99,972,920 16.3 % 93.0
2 Information Technology 2 21,299,785 3.5 % 92.7
3 Financial Services 1 19,954,132 3.2 % 165.0
4 Information Technology 7 17,878,391 2.9 % 49.5
5 Telecommunication Services 2 16,260,032 2.6 % 15.3
6 Healthcare 2 14,437,506 2.3 % 126.0
7 Research and Consulting Services 3 14,307,523 2.3 % 43.1
8 Energy 5 13,578,787 2.2 % 14.1
9 Energy 1 13,452,122 2.2 % 33.3
10 Telecommunication Services 7 12,271,232 2.0 % 17.0
11 Industrials 4 11,329,208 1.8 % 26.6
12 Financial Services 2 8,886,662 1.4 % 74.5
13 Energy 2 7,314,286 1.2 % 13.6
14 Information Technology 3 6,850,232 1.1 % 126.8
15 Information Technology 2 6,672,237 1.1 % 85.1
16 Financial Services 1 6,600,225 1.1 % 35.0
17 Telecommunication Services 5 5,838,748 1.0 % 22.1
18 Consumer Staples 4 5,225,591 0.9 % 43.9
19 Financial Services 7 5,036,533 0.9 % 46.8
20 Financial Services 1   4,991,418     0.8 %     53.0
$ 312,157,570     50.8 %     72.3
 
(a)   Customers and their affiliates are consolidated.
(b) Represents monthly contractual rent (defined as cash rent including customer reimbursements for metered power) under existing customer leases as of June 30, 2017, multiplied by 12. For the month of June 2017, customer reimbursements were $70.4 million annualized and consisted of reimbursements by customers across all facilities with separately metered power. Customer reimbursements under leases with separately metered power vary from month-to-month based on factors such as our customers' utilization of power and the suppliers' pricing of power. From July 1, 2015 through June 30, 2017, customer reimbursements under leases with separately metered power constituted between 10.6% and 12.6% of annualized rent. After giving effect to abatements, free rent and other straight-line adjustments, our annualized effective rent as of June 30, 2017 was $634.0 million. Our annualized effective rent was greater than our annualized rent as of June 30, 2017 because our positive straight-line and other adjustments and amortization of deferred revenue exceeded our negative straight-line adjustments due to factors such as the timing of contractual rent escalations and customer prepayments for services.
(c) Represents the customer's total annualized rent divided by the total annualized rent in the portfolio as of June 30, 2017, which was approximately $614.9 million.
(d) Weighted average based on customer's percentage of total annualized rent expiring and is as of June 30, 2017, assuming that customers exercise no renewal options and exercise all early termination rights that require payment of less than 50% of the remaining rents. Early termination rights that require payment of 50% or more of the remaining lease payments are not assumed to be exercised because such payments approximate the profitability margin of leasing that space to the customer, such that we do not consider early termination to be economically detrimental to us.
 

CyrusOne Inc.

Lease Distribution

As of June 30, 2017

(Unaudited)

                         
NRSF Under Lease(a)

Number of
Customers(b)

   

Percentage of
All Customers

    Total

Leased

NRSF(c)

    Percentage of

Portfolio

Leased NRSF

    Annualized

Rent(d)

    Percentage of

Annualized Rent

0-999 672 70 % 144,748 4 % $ 66,197,193 11 %
1,000-2,499 112 12 % 173,614 4 % 37,858,066 6 %
2,500-4,999 67 7 % 234,795 6 % 43,983,353 7 %
5,000-9,999 43 4 % 296,184 7 % 61,211,783 10 %
10,000+ 70     7 %     3,251,762     79 %       405,617,469       66 %
Total 964     100 %     4,101,103     100 %     $ 614,867,864       100 %
 
(a) Represents all leases in our portfolio, including colocation, office and other leases.
(b) Represents the number of customers occupying data center, office and other space as of June 30, 2017. This may vary from total customer count as some customers may be under contract, but have yet to occupy space.
(c) Represents the total square feet at a facility under lease and that has commenced billing, excluding space held for development or space used by CyrusOne. A customer's leased NRSF is estimated based on such customer's direct CSF or office and light-industrial space plus management's estimate of infrastructure support space, including mechanical, telecommunications and utility rooms, as well as building common areas.
(d) Represents monthly contractual rent (defined as cash rent including customer reimbursements for metered power) under existing customer leases as of June 30, 2017, multiplied by 12. For the month of June 2017, customer reimbursements were $70.4 million annualized and consisted of reimbursements by customers across all facilities with separately metered power. Customer reimbursements under leases with separately metered power vary from month-to-month based on factors such as our customers' utilization of power and the suppliers' pricing of power. From July 1, 2015 through June 30, 2017, customer reimbursements under leases with separately metered power constituted between 10.6% and 12.6% of annualized rent. After giving effect to abatements, free rent and other straight-line adjustments, our annualized effective rent as of June 30, 2017 was $634.0 million. Our annualized effective rent was greater than our annualized rent as of June 30, 2017 because our positive straight-line and other adjustments and amortization of deferred revenue exceeded our negative straight-line adjustments due to factors such as the timing of contractual rent escalations and customer prepayments for services.
                         

CyrusOne Inc.

Lease Expirations

As of June 30, 2017

(Unaudited)

 
Year(a)

Number of
Leases
Expiring(b)

   

Total Operating
NRSF Expiring

    Percentage of
Total NRSF
    Annualized
Rent(c)
    Percentage of
Annualized Rent
    Annualized Rent
at Expiration(d)
    Percentage of
Annualized Rent
at Expiration
Available 682,208 14 %
Month-to-Month 446 37,262 1 % $ 9,591,436 2 % $ 9,631,636 1 %
2017 956 282,202 6 % 40,388,824 7 % 40,420,017 6 %
2018 1,922 469,568 10 % 131,657,070 21 % 132,947,225 19 %
2019 1,114 453,337 10 % 73,086,437 12 % 75,037,921 11 %
2020 911 442,871 9 % 59,226,721 10 % 63,643,461 9 %
2021 525