Document
false0001553023 0001553023 2019-10-30 2019-10-30




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
8-K
 
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): October 30, 2019
 
CYRUSONE INC.
(Exact name of registrant as specified in its charter)
Maryland
 
001-35789
 
46-0691837
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
2101 Cedar Springs Road, Suite 900
Dallas, TX 75201
(Address of principal executive offices, including zip code)
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.):
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))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.01 par value
 
CONE
 
The NASDAQ Global Select Market
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨






Item 2.02 Results of Operations and Financial Condition
On October 30, 2019, CyrusOne Inc. issued a press release announcing financial results and supplemental information for the third quarter ended September 30, 2019. 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 October 31, 2019, at 11:00 AM Eastern Time (10:00 AM Central Time) to discuss its results for the third quarter of 2019. A live webcast of the conference call will be available in the “Investors / Events & Presentations” section of the Company's website at http://investor.cyrusone.com/events.cfm. The presentation to be made during the call is now available in this location. The U.S. conference call dial-in number is 1-844-492-3731, and the international dial-in number is 1-412-542-4121. A replay will be available one hour after the conclusion of the earnings call on October 31, 2019, through November 14, 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 10134994.

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
 
104
 
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.












SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
Date: October 30, 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 Third Quarter 2019 Earnings
3Q’19 Year-over-Year Revenue Growth of 21%
Achieves Investment-Grade Index Eligibility

DALLAS (October 30, 2019) - CyrusOne Inc. (NASDAQ: CONE), a premier global data center REIT, today announced third quarter 2019 earnings.

Highlights
 
 
% Change vs. 3Q’18
Category
3Q’19
3Q’18
3Q’18 Adjusted
for ASC 8421
Revenue
$250.9 million
21%
21%
Net income / (loss)
$12.6 million
n/m
n/m
Adjusted EBITDA
$127.8 million
15%
20%
Normalized FFO
$103.9 million
32%
36%
Net income / (loss) per diluted share
$0.11
n/m
n/m
Normalized FFO per diluted share
$0.91
15%
18%

Leased 35 megawatts (“MW”) and 266,000 colocation square feet (“CSF”) in the third quarter, totaling $52 million in annualized GAAP revenue
Includes 4.5 MW and approximately $5.5 million in annualized GAAP revenue associated with a paid reservation expected to be exercised in the next 12 months
Leased 22 MW totaling $27 million in annualized GAAP revenue across European locations (inclusive of lease associated with paid reservation referenced above), reflecting growing demand in the market from U.S. hyperscale companies, particularly for the larger deployments for which CyrusOne has unique expertise and capabilities
Company record $23 million in annualized GAAP revenue signed with enterprise customers
Backlog of $53 million in annualized GAAP revenue as of the end of the third quarter representing more than $340 million in total contract value (inclusive of lease associated with paid reservation referenced above)
Subsequent to the end of the quarter, acquired 20 acres of land with 24 MW of power capacity in Council Bluffs, IA to deliver a unique hybrid cloud solution for enterprise customers
Subsequent to the end of the quarter, Fitch Ratings assigned first-time long-term issuer default and senior unsecured ratings of ‘BBB-’, the Company’s second investment-grade credit rating (S&P Global Ratings: ‘BBB-’), resulting in investment-grade index eligibility and improving access to capital at attractive interest rates
Follows an upgrade by Moody’s Investors Service from Ba2 to Ba1, one notch below an investment-grade credit rating
Positioned the business for future growth in Europe, synthetically converting $500 million of the Company’s term loan maturing in March 2023 into more attractively priced EUR-denominated debt (equivalent to €451 million), resulting in a nearly 200 basis point decrease in the average interest rate over the remaining term based on the current forward curves
Reduced variable interest rate exposure by synthetically converting the remaining $300 million of the Company’s term loan maturing in March 2023 into fixed rate debt, decreasing the interest rate on this tranche to approximately 2.5% and increasing the percentage of total fixed rate debt to nearly 55%
“This was one of the strongest and most diversified leasing quarters in the company’s history, with contributions across numerous markets, verticals and product types in the U.S. and Europe,” said Gary Wojtaszek, president and chief executive officer of CyrusOne. “The bookings generate significant momentum for the business, with the $53 million backlog positioning us well for continued strong, profitable growth in 2020. Achieving investment-grade status is extremely important as certainty of access to capital allows us to grow with our hyperscale customers, our strong credit profile reduces their risk, and lower interest rates result in improved profitability for the business.” 


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Third Quarter 2019 Financial Results
    
Revenue was $250.9 million for the third quarter, compared to $206.6 million for the same period in 2018, an increase of 21%. The increase in revenue was driven primarily by an 11% increase in occupied CSF, the full quarter impact of the Zenium acquisition (which closed in late August 2018), and additional interconnection services.

Net income was $12.6 million for the third quarter, compared to net loss of $(42.4) million in the same period in 2018. Net income for the third quarter included a $12.4 million gain on the Company’s equity investment in GDS, a leading data center provider in China, and a $5.5 million gain associated with a change in fair value on the undesignated portion of the Company’s cross-currency swaps. Net income per diluted common share2 was $0.11 in the third quarter of 2019, compared to net loss per diluted common share of $(0.43) in the same period in 2018.

Net operating income (“NOI”)3 was $147.9 million for the third quarter, compared to $128.9 million in the same period in 2018, an increase of 15%. Adjusted EBITDA4 was $127.8 million for the third quarter, compared to $110.8 million in the same period in 2018, an increase of 15%.

Normalized Funds From Operations (“Normalized FFO”)5 was $103.9 million for the third quarter, compared to $78.5 million in the same period in 2018, an increase of 32%. Normalized FFO per diluted common share was $0.91 in the third quarter of 2019, compared to $0.79 in the same period in 2018, an increase of 15%.

Leasing Activity

CyrusOne leased approximately 35 MW of power and 266,000 CSF in the third quarter, representing approximately $4.3 million in monthly recurring rent, inclusive of the monthly impact of installation charges. This also includes 4.5 MW and approximately $0.5 million in monthly recurring rent associated with a paid reservation expected to be exercised in the next 12 months. The leasing for the quarter represents approximately $51.9 million in annualized GAAP revenue6, excluding estimates for pass-through power. The weighted average lease term of the new leases, based on square footage, is 99 months (8.2 years), and the weighted average remaining lease term of CyrusOne’s portfolio is 52 months (taking into account the impact of the backlog). Recurring rent churn7 for the third quarter was 1.0%, compared to 2.6% for the same period in 2018.

Portfolio Development and Percentage CSF Leased

In the third quarter, the Company completed construction on 31,000 CSF and 17 MW of power capacity across four projects in Frankfurt, London, Austin and Northern Virginia. Percentage CSF leased8 as of the end of the third quarter was 88% for stabilized properties9 and 85% overall. In addition, the Company has development projects underway in San Antonio, Northern Virginia, Iowa, the New York Metro area, Raleigh-Durham, Dallas, Frankfurt, Amsterdam, Dublin, and London that are expected to add approximately 397,000 CSF and 102 MW of power capacity.

Balance Sheet and Liquidity

As of September 30, 2019, the Company had gross asset value10 totaling approximately $7.2 billion, an increase of approximately 11% over gross asset value as of September 30, 2018. CyrusOne had $2.79 billion of long-term debt11, $51.7 million of cash and cash equivalents, and $1.20 billion available under its unsecured revolving credit facility as of September 30, 2019. Net debt11 was $2.77 billion as of September 30, 2019, representing approximately 24% of the Company's total enterprise value as of September 30, 2019 of $11.7 billion, or 5.4x Adjusted EBITDA for the last quarter annualized. After further adjusting Adjusted EBITDA to exclude the impact of the adoption of ASC 842 as of January 1, 2019, in order to present the leverage metric on a basis comparable to that of periods prior to 2019, net debt to Adjusted EBITDA for the last quarter annualized was 5.3x12. Available liquidity13 was $1.25 billion as of September 30, 2019.

In order to position the business for future growth in Europe, the Company synthetically converted $500 million of its term loan maturing in March 2023 into more attractively priced EUR-denominated debt (equivalent to €451 million), resulting in a nearly 200 basis point decrease in the average interest rate over the remaining term based on the current EURIBOR and LIBOR forward curves.

The Company also reduced its interest rate exposure by synthetically converting the remaining $300 million of its term loan maturing in March 2023 into fixed rate debt, decreasing the interest rate on this tranche to approximately 2.5% and increasing the percentage of total fixed rate debt to nearly 55%.
Dividend

On July 31, 2019, the Company announced a dividend of $0.50 per share of common stock for the third quarter of 2019. The dividend was paid on October 11, 2019, to stockholders of record at the close of business on September 27, 2019.

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Additionally, today the Company is announcing a dividend of $0.50 per share of common stock for the fourth quarter of 2019. The dividend will be paid on January 10, 2020, to stockholders of record at the close of business on January 2, 2020.

Guidance

CyrusOne is updating guidance for full year 2019, tightening the guidance range and decreasing the midpoint for Total Revenue, tightening and decreasing the guidance range for Adjusted EBITDA, and tightening the guidance ranges and increasing the midpoints for Normalized FFO per diluted common share, Capital Expenditures and Capital Expenditures - Development. 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 Total Revenue and Capital Expenditures) or reconciliations for the non-GAAP financial measures included in the annual guidance provided below due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including net income (loss) and adjustments that could be made for transaction, acquisition, integration and other related expenses, legal claim costs, asset impairments and loss on disposals and other charges in its reconciliation of historic numbers, the amount of which, based on historical experience, could be significant.
Category
Previous
2019 Guidance
Revised
2019 Guidance
Total Revenue
$970 - 990 million
$970 - 980 million
   Lease and Other Revenues from Customers
$842 - 857 million
$838 - 843 million
   Metered Power Reimbursements
$128 - 133 million
$132 - 137 million
Adjusted EBITDA
$507 - 517 million
$505 - 510 million
Normalized FFO per diluted common share
$3.50 - 3.60
$3.55 - 3.60
Capital Expenditures
$850 - 950 million
$900 - 950 million
   Development(1)
$840 - 935 million
$890 - 935 million
   Recurring
$10 - 15 million
$10 - 15 million
 
 
 
(1)Development capital expenditures include the acquisition of land for future development.

Upcoming Conferences and Events

NAREIT’s REITworld on November 12-14 in Los Angeles, CA
UBS Global TMT Conference on December 9-11 in New York City

Conference Call Details

CyrusOne will host a conference call on October 31, 2019, at 11:00 AM Eastern Time (10:00 AM Central Time) to discuss its results for the third quarter of 2019. A live webcast of the conference call will be available in the “Investors / Events & Presentations” section of the Company's website at http://investor.cyrusone.com/events.cfm. The presentation to be made during the call is now available in this location. The U.S. conference call dial-in number is 1-844-492-3731, and the international dial-in number is 1-412-542-4121. A replay will be available one hour after the conclusion of the earnings call on October 31, 2019, through November 14, 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 10134994.

Safe Harbor

This release and the documents incorporated by reference herein contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward- looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. 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

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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. We disclaim any obligation other than as required by law to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors or for new information, data or methods, future events or other changes.

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

In February 2016, the Financial Accounting Standards Board issued ASU 2016-02 (codified in ASC 842, Leases (“ASC 842”)) 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 ASU requires that a liability be recorded on the balance sheet for all leases where the reporting entity is a lessee, based on the present value of future lease obligations. A corresponding right-of-use asset will also be recorded. Amortization of the lease obligation and the right-of-use asset for leases classified as operating leases are on a straight-line basis. Leases classified as financing leases are required to be accounted for as financing arrangements similar to the accounting treatment for capital leases under ASC 840, Leases (the former accounting standard for all leases).

We adopted ASU 2016-02 on January 1, 2019, applied the package of practical expedients included therein and utilized the modified retrospective transition method with the cumulative effect of transition recognized on the effective date. By applying the modified retrospective transition method, the presentation of financial information for periods prior to January 1, 2019 was not restated.

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, Normalized Funds From Operations per Diluted Common Share, 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, Normalized FFO per Diluted Common Share, Adjusted EBITDA, and NOI, which are non-GAAP financial measures commonly used in the REIT industry, as supplemental performance measures. Management uses these measures as supplemental performance measures because, when compared period over period, they 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), these measures are used by investors as a basis to evaluate REITs. 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 make distributions. These measures also should not be used as supplements to or substitutes for cash flow from operating activities computed in accordance with GAAP. The Company believes that Net Debt provides a useful measure of liquidity and financial health.

1 The Company adopted ASC 842 effective January 1, 2019. The adjusted 3Q’18 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. The percentage changes versus adjusted 3Q’18 results are being shown solely for comparative and investor usefulness purposes with respect to the Company’s 3Q’19 results. There is no impact on 3Q’18 Revenue. The estimated impacts on 3Q’18 Net income (loss), Adjusted EBITDA, Normalized FFO, Net income / (loss) per diluted share, and Normalized FFO per diluted share are $1.3 million, $4.3 million, $2.3 million, $0.01, and $0.02, respectively.
2Net 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 113.5 million for the third quarter of 2019.
3We 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 net income (loss), adjusted for sales and marketing expenses, general and administrative expenses, depreciation and amortization expenses, transaction, acquisition, integration and other related expenses, interest expense, net, (gain) loss on marketable equity investment, loss on early extinguishment of debt, impairment loss on real estate, foreign currency and derivative gains, net, other expense, income tax (benefit) expense and other 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

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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 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.
4Adjusted EBITDA, which is a non-GAAP financial measure, is defined as net income (loss) as defined by GAAP adjusted for interest expense, net, income tax (benefit) expense, depreciation and amortization, 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, (gain) loss on marketable equity investment, impairment loss on real estate, foreign currency and derivative gains, net, other expense and other 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.
5We 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 disposals. While it is consistent with the definition of FFO promulgated by the National Association of Real Estate Investment Trusts ("NAREIT"), our computation of FFO may differ from the methodology for calculating FFO used by other REITs. Accordingly, our FFO may not be comparable to others.
We calculate Normalized FFO as FFO plus loss on early extinguishment of debt; (gain) loss on marketable equity investment; foreign currency and derivative gains, net; new accounting standards and regulatory compliance and the related system implementation costs; amortization of tradenames; transaction, acquisition, integration and other related expenses; severance and management transition costs; legal claim costs and other items as appropriate. We believe our 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 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.
6Annualized 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.
7Recurring 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. 3Q’19 recurring rent churn excludes additional 0.4% impact of a customer exit associated with legal settlement and termination fee received during the quarter; recurring revenue from that lease has not been recognized since mid-2016.
8Percentage CSF leased is calculated by dividing CSF under signed leases for colocation space (whether or not the lease has commenced billing) by total CSF. Percentage 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.
9Stabilized properties include data halls that have been in service for at least 24 months or are at least 85% leased.
10Gross asset value is defined as total assets plus accumulated depreciation.

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11Long-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 finance lease liabilities, offset by cash and cash equivalents.
12The estimated impact of the adoption of ASC 842 on Adjusted EBITDA for the last quarter annualized is $16.2 million.

13Liquidity 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 more than 200 Fortune 1000 companies.
With a track record of meeting and surpassing the aggressive speed-to-market demands of hyperscale cloud providers, as well as the expanding IT infrastructure requirements of the enterprise, CyrusOne provides the flexibility, reliability, security, and connectivity that foster business growth. CyrusOne offers a tailored, customer service-focused platform and is committed to full transparency in communication, management, and service delivery throughout its nearly 50 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 more than 200 Fortune 1000 companies. CyrusOne's data center offerings provide the flexibility, reliability, and security that enterprise customers require and are delivered through a tailored, customer service-focused platform designed to foster long-term relationships. CyrusOne is committed to full transparency in communication, management, and service delivery throughout its nearly 50 data centers worldwide.

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

Corporate Headquarters
Senior Management
2101 Cedar Springs Road, Ste. 900
Gary Wojtaszek, President and CEO
Jonathan Schildkraut, EVP & Chief Strategy Officer
Dallas, Texas 75201
Tesh Durvasula, EVP & President, Europe
John Gould, EVP & Chief Commercial Officer
Phone: (972) 350-0060
Diane Morefield, EVP & Chief Financial Officer
Kellie Teal-Guess, EVP & Chief People Officer
Website: www.cyrusone.com
Kevin Timmons, EVP & Chief Technology Officer
Robert Jackson, EVP General Counsel & Secretary

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
Green Street Advisors
Lukas Hartwich
(949) 640-8780
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
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



9

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

 
Three Months
 
 
September 30,
June 30,
September 30,
Growth %
 
2019
2019
2018
Yr/Yr
Revenue
$
250.9

$
251.5

$
206.6

21
%
Net operating income
147.9

148.2

128.9

15
%
Net income (loss)
12.6

(8.5
)
(42.4
)
n/m

Funds from Operations ("FFO") - Nareit defined
116.2

91.7

39.5

n/m

Normalized Funds from Operations ("Normalized FFO")
103.9

102.1

78.5

32
%
Weighted average number of common shares outstanding - diluted for Normalized FFO
113.5

113.1

99.5

14
%
Income (loss) per share - basic
$
0.11

$
(0.08
)
$
(0.43
)
n/m

Income (loss) per share - diluted
$
0.11

$
(0.08
)
$
(0.43
)
n/m

Normalized FFO per diluted common share
$
0.91

$
0.90

$
0.79

15
%
Adjusted EBITDA
$
127.8

$
127.3

$
110.8

15
%
Adjusted EBITDA as a % of Revenue
50.9
%
50.6
%
53.6
%
(2.7) pts



 
As of
 
 
September 30,
June 30,
September 30,
Growth %
 
2019
2019
2018
Yr/Yr
Balance Sheet Data
 
 
 
 
Gross investment in real estate
$
5,870.8

$
5,707.0

$
5,093.2

15
 %
Accumulated depreciation
(1,292.7
)
(1,207.4
)
(973.4
)
33
 %
Total investment in real estate, net
4,578.1

4,499.6

4,119.8

11
 %
Cash and cash equivalents
51.7

144.1

61.0

(15
)%
Market value of common equity
8,953.8

6,532.5

6,709.9

33
 %
Long-term debt
2,791.0

2,729.9

2,595.6

8
 %
Net debt
2,770.0

2,617.4

2,571.5

8
 %
Total enterprise value
11,723.8

9,149.9

9,281.4

26
 %
Net debt to LQA Adjusted EBITDA
5.4x

5.1x

5.4x

-

 
 
 
 
 
Dividend Activity
 
 
 
 
Dividends per share
$
0.50

$
0.46

$
0.46

9
 %
 
 
 
 
 
Portfolio Statistics
 
 
 
 
Data centers
47

47

47

-

Stabilized CSF (000)
3,935

3,744

3,396

16
 %
Stabilized CSF % leased
88
%
89
%
91
%
(3) pts

Total CSF (000)
4,148

4,116

3,674

13
 %
Total CSF % leased
85
%
84
%
86
%
(1) pts

Total NRSF (000)
7,117

7,085

6,527

9
 %




10

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

 
Three Months
 
 
Nine Months
 
 
 
Ended September 30,
Change
Ended September 30,
Change
 
2019
2018
$
%
2019
2018
$
%
Revenue(a)
$
250.9

$
206.6

$
44.3

21
 %
$
727.4

$
600.1

127.3

21
 %
Operating expenses:
 
 
 
 
 
 
 
 
Property operating expenses
103.0

77.7

25.3

33
 %
289.6

214.4

75.2

35
 %
Sales and marketing
5.1

4.3

0.8

19
 %
15.7

14.0

1.7

12
 %
General and administrative
19.8

19.3

0.5

3
 %
61.6

57.2

4.4

8
 %
Depreciation and amortization
105.4

84.0

21.4

25
 %
309.6

236.2

73.4

31
 %
Transaction, acquisition, integration and other related expenses
4.4

1.1

3.3

n/m

6.2

3.4

2.8

82
 %
Total operating expenses
237.7

186.4

51.3

28
 %
682.7

525.2

157.5

30
 %
Operating income
13.2

20.2

(7.0
)
(35
)%
44.7

74.9

(30.2
)
(40
)%
Interest expense, net
(19.6
)
(25.8
)
6.2

(24
)%
(64.4
)
(69.4
)
5.0

(7
)%
Gain (loss) on marketable equity investment
12.4

(36.6
)
49.0

n/m

105.1

106.6

(1.5
)
(1
)%
Loss on early extinguishment of debt



n/m


(3.1
)
3.1

n/m

Impairment loss on real estate
(0.7
)

(0.7
)
n/m

(0.7
)

(0.7
)
n/m

Foreign currency and derivative gains, net
5.5


5.5

n/m

5.5


5.5

n/m

Other expense
(0.2
)

(0.2
)
n/m

(0.3
)

(0.3
)
n/m

Net income (loss) before income taxes
10.6

(42.2
)
52.8

n/m

89.9

109.0

(19.1
)
(18
)%
Income tax benefit (expense)
2.0

(0.2
)
2.2

n/m

3.6

(2.0
)
5.6

n/m

Net income (loss)
$
12.6

$
(42.4
)
$
55.0

n/m

$
93.5

$
107.0

$
(13.5
)
(13
)%
Income (loss) per share - basic
$
0.11

$
(0.43
)
$
0.54

n/m

$
0.83

$
1.09

$
(0.26
)
(24
)%
Income (loss) per share - diluted
$
0.11

$
(0.43
)
$
0.54

n/m

$
0.83

$
1.08

$
(0.25
)
(23
)%
            
(a) The Company adopted the new accounting standard, ASC 842, “Leases”, in the first quarter of 2019. Revenue includes metered power reimbursements of $41.1 million and $29.3 million for the three months ended September 30, 2019 and 2018, respectively, and includes metered power reimbursements of $101.3 million and $75.7 million for the nine months ended September 30, 2019 and 2018, respectively.















11

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

 
September 30,
December 31,
Change
 
2019
2018
$
%
Assets
 
 
 
 
Investment in real estate:
 
 
 
 
Land
$
147.3

$
118.5

$
28.8

24
 %
Buildings and improvements
1,732.0

1,677.5

54.5

3
 %
Equipment
2,950.3

2,630.2

320.1

12
 %
Gross operating real estate
4,829.6

4,426.2

403.4

9
 %
Less accumulated depreciation
(1,292.7
)
(1,054.5
)
(238.2
)
23
 %
Net operating real estate
3,536.9

3,371.7

165.2

5
 %
Construction in progress, including land under development
836.9

744.9

92.0

12
 %
Land held for future development
204.3

176.4

27.9

16
 %
Total investment in real estate, net
4,578.1

4,293.0

285.1

7
 %
Cash and cash equivalents
51.7

64.4

(12.7
)
(20
)%
Rent and other receivables, net
279.3

234.9

44.4

19
 %
Restricted cash
1.3


1.3

n/m

Operating lease right-of-use assets, net
90.7


90.7

n/m

Equity investments
104.3

198.1

(93.8
)
(47
)%
Goodwill
455.1

455.1


n/m

Intangible assets, net
203.7

235.7

(32.0
)
(14
)%
Other assets
128.7

111.3

17.4

16
 %
Total assets
$
5,892.9

$
5,592.5

$
300.4

5
 %
Liabilities and equity
 
 


Debt
$
2,776.1

$
2,624.7

$
151.4

6
 %
Finance lease liabilities
30.7

33.4

(2.7
)
(8
)%
Operating lease liabilities
124.3


124.3

n/m

Lease financing arrangements

123.3

(123.3
)
n/m

Construction costs payable
131.2

195.3

(64.1
)
(33
)%
Accounts payable and accrued expenses
132.4

121.3

11.1

9
 %
Dividends payable
57.7

51.0

6.7

13
 %
Deferred revenue and prepaid rents
164.0

148.6

15.4

10
 %
Deferred tax liability
59.6

68.9

(9.3
)
(13
)%
Total liabilities
3,476.0

3,366.5

109.5

3
 %
Stockholders' equity
 
 


Preferred stock, $.01 par value, 100,000,000 authorized; no shares issued or outstanding



n/m

Common stock, $.01 par value, 500,000,000 shares authorized and 113,196,585 and 108,329,314 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively
1.1

1.1


n/m

Additional paid in capital
3,094.2

2,837.4

256.8

9
 %
Accumulated deficit
(657.4
)
(600.2
)
(57.2
)
10
 %
Accumulated other comprehensive loss
(21.0
)
(12.3
)
(8.7
)
71
 %
Total stockholders’ equity
2,416.9

2,226.0

190.9

9
 %
Total liabilities and equity
$
5,892.9

$
5,592.5

$
300.4

5
 %



12

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

 
For the three months ended:
September 30,
June 30,
March 31,
December 31,
September 30,
 
2019
2019
2019
2018
2018
Revenue(a)
$
250.9

$
251.5

$
225.0

$
221.3

$
206.6

Operating expenses:
 
 
 
 
 
Property operating expenses
103.0

103.3

83.3

78.0

77.7

Sales and marketing
5.1

5.3

5.3

5.6

4.3

General and administrative
19.8

19.7

22.2

23.4

19.3

Depreciation and amortization
105.4

102.1

102.1

97.9

84.0

Transaction, acquisition, integration and other related expenses
4.4

1.4

0.3

1.6

1.1

Total operating expenses
237.7

231.8

213.2

206.5

186.4

Operating income
13.2

19.7

11.8

14.8

20.2

Interest expense, net
(19.6
)
(21.1
)
(23.7
)
(25.3
)
(25.8
)
Gain (loss) on marketable equity investment
12.4

(8.5
)
101.2

(96.7
)
(36.6
)
Impairment loss on real estate
(0.7
)




Foreign currency and derivative gains, net
5.5





Other expense
(0.2
)

(0.1
)


Net income (loss) before income taxes
10.6

(9.9
)
89.2

(107.2
)
(42.2
)
Income tax benefit (expense)
2.0

1.4

0.2

1.4

(0.2
)
Net income (loss)
$
12.6

$
(8.5
)
$
89.4

$
(105.8
)
$
(42.4
)
Income (loss) per share - basic
$
0.11

$
(0.08
)
$
0.82

$
(1.00
)
$
(0.43
)
Income (loss) per share - diluted
$
0.11

$
(0.08
)
$
0.82

$
(1.00
)
$
(0.43
)

(a) The Company adopted the new accounting standard, ASC 842, “Leases”, in the first quarter of 2019. Revenue includes metered power reimbursements of $41.1 million, $31.7 million, $28.5 million, $28.4 million and $29.3 million for the three months ended September 30, 2019, June 30, 2019, March 31, 2019, December 31, 2018, and September 30, 2018, respectively.
















13

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CyrusOne Inc.
Condensed Consolidated Balance Sheets
(Dollars in millions)
(Unaudited) 
 
September 30,
June 30,
March 31,
December 31,
September 30,
 
2019
2019
2019
2018
2018
Assets
 
 
 
 
 
Investment in real estate:
 
 
 
 
 
Land
$
147.3

$
148.0

$
124.9

$
118.5

$
125.2

Buildings and improvements
1,732.0

1,689.7

1,649.2

1,677.5

1,587.3

Equipment
2,950.3

2,869.7

2,799.6

2,630.2

2,452.5

Gross operating real estate
4,829.6

4,707.4

4,573.7

4,426.2

4,165.0

Less accumulated depreciation
(1,292.7
)
(1,207.4
)
(1,122.5
)
(1,054.5
)
(973.4
)
Net operating real estate
3,536.9

3,500.0

3,451.2

3,371.7

3,191.6

Construction in progress, including land under development
836.9

799.2

734.7

744.9

738.6

Land held for future development
204.3

200.4

200.4

176.4

189.6

Total investment in real estate, net
4,578.1

4,499.6

4,386.3

4,293.0

4,119.8

Cash and cash equivalents
51.7

144.1

126.0

64.4

61.0

Rent and other receivables, net
279.3

268.4

248.7

234.9

224.6

Restricted cash
1.3

1.3

1.3



Operating lease right-of-use assets, net
90.7

78.5

83.8



Equity investments
104.3

91.9

299.3

198.1

282.2

Goodwill
455.1

455.1

455.1

455.1

455.1

Intangible assets, net
203.7

215.3

226.1

235.7

248.4

Other assets
128.7

115.5

114.8

111.3

102.0

Total assets
$
5,892.9

$
5,869.7

$
5,941.4

$
5,592.5

$
5,493.1

Liabilities and equity
 
 
 
 
 
Debt
$
2,776.1

$
2,713.8

$
2,898.6

$
2,624.7

$
2,576.2

Finance lease liabilities
30.7

31.6

33.4

33.4

36.9

Operating lease liabilities
124.3

114.1

119.6



Lease financing arrangements



123.3

125.8

Construction costs payable
131.2

149.5

155.5

195.3

160.5

Accounts payable and accrued expenses
132.4

112.8

81.6

121.3

96.8

Dividends payable
57.7

53.0

51.5

51.0

49.7

Deferred revenue and prepaid rents
164.0

166.8

155.9

148.6

139.5

Deferred tax liability
59.6

65.5

67.2

68.9

68.7

Total liabilities
3,476.0

3,407.1

3,563.3

3,366.5

3,254.1

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 113,196,585 and 108,329,314 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively
1.1

1.1

1.1

1.1

1.1

Additional paid in capital
3,094.2

3,089.5

2,938.2

2,837.4

2,685.3

Accumulated deficit
(657.4
)
(613.0
)
(552.2
)
(600.2
)
(444.3
)
Accumulated other comprehensive loss
(21.0
)
(15.0
)
(9.0
)
(12.3
)
(3.1
)
Total stockholders' equity
2,416.9

2,462.6

2,378.1

2,226.0

2,239.0

Total liabilities and equity
$
5,892.9

$
5,869.7

$
5,941.4

$
5,592.5

$
5,493.1





14

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CyrusOne Inc.
Condensed Consolidated Statements of Cash Flow
(Dollars in millions)
(Unaudited) 
 
Nine Months Ended September 30, 2019
Nine Months Ended September 30, 2018
Three Months Ended September 30, 2019
Three Months Ended September 30, 2018
Cash flows from operating activities:
 
 
 
 
Net income
$
93.5

$
107.0

$
12.6

$
(42.4
)
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
309.6

236.2

105.4

84.0

Provision for bad debt expense
(0.2
)
0.6

0.1

0.2

Unrealized gain on marketable equity investment
(38.2
)
(106.6
)
(12.4
)
36.6

Realized gain on marketable equity investment
(66.9
)



Foreign currency and derivative gains, net
(5.5
)

(5.5
)

Loss on asset disposals
0.2


0.2


Impairment loss on real estate
0.7


0.7


Loss on early extinguishment of debt

3.1



Interest expense amortization, net
3.5

3.0

1.2

1.2

Stock-based compensation expense
12.4

13.0

4.2

4.6

Deferred income tax expense
(6.4
)

(3.0
)

Operating lease cost
14.6


5.0


Other


0.2


 
 
 
 
 
Change in operating assets and liabilities:
 
 
 
 
Rent and other receivables, net and other assets
(51.5
)
(55.4
)
(10.4
)
(18.6
)
Accounts payable and accrued expenses
11.8

(23.4
)
20.0

(20.3
)
Deferred revenue and prepaid rents
16.1

25.4

(1.9
)
9.1

Operating lease liabilities
(16.7
)

(6.9
)

Net cash provided by operating activities
277.0

202.9

109.5

54.4

Cash flows from investing activities:
 
 
 
 
Investment in real estate
(727.3
)
(631.2
)
(212.5
)
(308.5
)
Asset acquisitions, primarily real estate, net of cash acquired

(461.8
)

(461.8
)
Proceeds from sale of equity investments
199.8




Equity investments
(0.3
)



Proceeds from the sale of real estate assets
0.9


0.9


Net cash used in investing activities
(526.9
)
(1,093.0
)
(211.6
)
(770.3
)
Cash flows from financing activities:
 
 
 
 
Issuance of common stock, net
253.3

551.9

0.7

399.7

Dividends paid
(153.5
)
(132.3
)
(52.2
)
(45.7
)
Proceeds from revolving credit facility
534.3

370.0

246.5

370.0

Repayments of revolving credit facility
(183.2
)
(370.0
)
(183.2
)
(370.0
)
Proceeds from unsecured term loan

1,665.1


679.7

Repayments of unsecured term loan
(200.0
)
(1,272.7
)

(370.0
)
Payments on finance lease liabilities
(2.1
)
(7.8
)
(0.9
)
(2.7
)
Tax payment upon exercise of equity awards
(9.0
)
(5.1
)
(0.2
)
(0.4
)
Net cash provided by financing activities
239.8

799.1

10.7

660.6

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(1.3
)
0.1

(1.0
)
0.1

Net decrease in cash, cash equivalents and restricted cash
(11.4
)
(90.9
)
(92.4
)
(55.2
)
Cash, cash equivalents and restricted cash at beginning of period
64.4

151.9

145.4

116.2

Cash, cash equivalents and restricted cash at end of period
$
53.0

$
61.0

$
53.0

$
61.0

 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for interest, including amounts capitalized of $26.2 million and $15.9 million in 2019 and 2018, respectively
$
109.0

$
98.5

$
46.3

$
45.2

Cash paid for income taxes
3.0

3.3

0.2

0.4

Non-cash investing and financing activities:
 
 
 
 
Construction costs payable
131.2

160.5

131.2

160.5

Dividends payable
57.7

49.7

57.7

49.7


15

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CyrusOne Inc.
Reconciliation of Net Income (Loss) to Net Operating Income
(Dollars in millions)
(Unaudited)
 
Three Months Ended
 
 
Nine Months Ended
 
 
 
September 30,
Change
September 30,
Change
2019
2018
$
%
2019
2018
$
%
Net income (loss)
$
12.6

$
(42.4
)
$
55.0

n/m

$
93.5

$
107.0

$
(13.5
)
(13
)%
Sales and marketing expenses
5.1

4.3

0.8

19
 %
15.7

14.0

1.7

12
 %
General and administrative expenses
19.8

19.3

0.5

3
 %
61.6

57.2

4.4

8
 %
Depreciation and amortization expenses
105.4

84.0

21.4

25
 %
309.6

236.2

73.4

31
 %
Transaction, acquisition, integration and other related expenses
4.4

1.1

3.3

n/m

6.2

3.4

2.8

82
 %
Interest expense, net
19.6

25.8

(6.2
)
(24
)%
64.4

69.4

(5.0
)
(7
)%
(Gain) loss on marketable equity investment
(12.4
)
36.6

(49.0
)
n/m

(105.1
)
(106.6
)
1.5

(1
)%
Loss on early extinguishment of debt



n/m


3.1

(3.1
)
n/m

Impairment loss on real estate
0.7


0.7

n/m

0.7


0.7

n/m

Foreign currency and derivative gains, net
(5.5
)

(5.5
)
n/m

(5.5
)

(5.5
)
n/m

Other expense
0.2


0.2

n/m

0.3


0.3

n/m

Income tax (benefit) expense
(2.0
)
0.2

(2.2
)
n/m

(3.6
)
2.0

(5.6
)
n/m

Net Operating Income
$
147.9

$
128.9

$
19.0

15
 %
$
437.8

$
385.7

$
52.1

14
 %

CyrusOne Inc.
Net Operating Income and Reconciliation of Net Income (Loss) to Adjusted EBITDA
(Dollars in millions)
(Unaudited)
 
Nine Months Ended
 
 
Three Months Ended
 
September 30,
Change
September 30,
June 30,
March 31,
December 31,
September 30,
 
2019
2018
$
%
2019
2019
2019
2018
2018
Net Operating Income
 
 
 
 
 
 
 
 
 
Revenue
$
727.4

$
600.1

$
127.3

21%
$
250.9

$
251.5

$
225.0

$
221.3

$
206.6

Property operating expenses
289.6

214.4

75.2

35%
103.0

103.3

83.3

78.0

77.7

Net Operating Income (NOI)
$
437.8

$
385.7

$
52.1

14%
$
147.9

$
148.2

$
141.7

$
143.3

$
128.9

NOI as a % of Revenue
60.2
%
64.3
%
 
 
58.9
%
58.9
%
63.0
%
64.8
%
62.4
%
Reconciliation of Net Income (Loss) to Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
Net income (loss)
$
93.5

$
107.0

$
(13.5
)
(13)%
$
12.6

$
(8.5
)
$
89.4

$
(105.8
)
$
(42.4
)
Interest expense, net
64.4

69.4

(5.0
)
(7)%
19.6

21.1

23.7

25.3

25.8

Income tax (benefit) expense
(3.6
)
2.0

(5.6
)
n/m
(2.0
)
(1.4
)
(0.2
)
(1.4
)
0.2

Depreciation and amortization
309.6

236.2

73.4

31%
105.4

102.1

102.1

97.9

84.0

EBITDA (Nareit definition)(a)
$
463.9

$
414.6

$
49.3

12%
$
135.6

$
113.3

$
215.0

$
16.0

$
67.6

 
 
 
 
 
 
 
 
 
 
Transaction, acquisition, integration and other related expenses
6.2

3.4

2.8

82%
4.4

1.4

0.3

1.4

1.1

Legal claim costs
0.6

0.4

0.2

50%
0.4

0.1

0.1

0.2

0.1

Stock-based compensation expense
12.4

13.0

(0.6
)
(5)%
4.2

3.7

4.5

4.5

4.6

Severance and management transition costs

0.7

(0.7
)
n/m


0.1

1.6


Loss on early extinguishment of debt

3.1

(3.1
)
n/m





New accounting standards and regulatory compliance and the related system implementation costs
0.8

2.3

(1.5
)
(65)%
0.2

0.3

0.3

0.7

0.8

(Gain) loss on marketable equity investment
(105.1
)
(106.6
)
1.5

(1)%
(12.4
)
8.5

(101.2
)
96.7

36.6

Impairment loss on real estate
0.7


0.7

n/m
0.7





Foreign currency and derivative gains, net
(5.5
)

(5.5
)
n/m
(5.5
)




Other expense
0.3


0.3

n/m
0.2


0.1

0.1


Adjusted EBITDA
$
374.3

$
330.9

$
43.4

13%
$
127.8

$
127.3

$
119.2

$
121.2

$
110.8

Adjusted EBITDA as a % of Revenue
51.5
%
55.1
%
 
 
50.9
%
50.6
%
53.0
%
54.8
%
53.6
%
(a)
We calculate Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) as GAAP net income (loss) plus interest expense, income tax benefit (expense) and depreciation and amortization. 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.

16

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CyrusOne Inc.
Reconciliation of Net Income (Loss) to FFO and Normalized FFO
(Dollars in millions)
(Unaudited)
 
 
Nine Months Ended
 
 
Three Months Ended
 
September 30,
Change
September 30,
June 30,
March 31,
December 31,
September 30,
2019
2018
$
%
2019
2019
2019
2018
2018
Reconciliation of Net Income (Loss) to FFO and Normalized FFO:
 
 
 
 
 
 
 
 
 
Net income (loss)
$
93.5

$
107.0

$
(13.5
)
(13
)%
$
12.6

$
(8.5
)
$
89.4

$
(105.8
)
$
(42.4
)
Real estate depreciation and amortization
302.9

230.0

72.9

32
 %
102.6

100.2

100.1

95.5

81.9

Asset impairments and loss on disposals
1.0


 
 
1.0





Funds from Operations ("FFO") - Nareit defined
$
397.4

$
337.0

$
59.4

18
 %
$
116.2

$
91.7

$
189.5

$
(10.3
)
$
39.5

 
 
 
 


 
 
 
 
 
Loss on early extinguishment of debt

3.1

(3.1
)
n/m






(Gain) loss on marketable equity investment
(105.1
)
(106.6
)
1.5

(1
)%
(12.4
)
8.5

(101.2
)
96.7

36.6

Foreign currency and derivative gains, net
(5.5
)

(5.5
)
n/m

(5.5
)




New accounting standards and regulatory compliance and the related system implementation costs
0.8

2.3

(1.5
)
(65
)%
0.2

0.3

0.3

0.7

0.8

Amortization of tradenames
0.9

1.1

(0.2
)
(18
)%
0.6

0.1

0.2

0.6

0.4

Transaction, acquisition, integration and other related expenses
6.2

3.4

2.8

82
 %
4.4

1.4

0.3

1.4

1.1

Severance and management transition costs

0.7

(0.7
)
n/m



0.1

1.6


Legal claim costs
0.6

0.4

0.2

50
 %
0.4

0.1

0.1

0.2

0.1

Normalized Funds from Operations (Normalized FFO)
$
295.3

$
241.4

$
52.9

22
 %
$
103.9

$
102.1

$
89.3

$
90.9

$
78.5

Normalized FFO per diluted common share
$
2.63

$
2.45

$
0.18

7
 %
$
0.91

$
0.90

$
0.82

$
0.86

$
0.79

Weighted average diluted common shares outstanding
111.9

98.4

13.5

14
 %
113.5

113.1

108.8

106.1

99.5

 
 
 
 
 
 
 
 
 
 
Additional Information:
 
 
 
 
 
 
 
 
 
Amortization of deferred financing costs and bond premium
3.6

2.9

0.7

24
 %
1.2

1.2

1.2

1.1

1.1

Stock-based compensation expense
12.4

13.0

(0.6
)
(5
)%
4.2

3.7

4.5

4.5

4.6

Non-real estate depreciation and amortization
5.8

5.1

0.7

14
 %
2.0

1.9

1.9

1.8

1.7

Straight line rent adjustments(a) 
(22.8
)
(18.8
)
(4.0
)
21
 %
(5.9
)
(6.8
)
(10.1
)
(8.9
)
(5.8
)
Deferred revenue, primarily installation revenue(b)
8.9

13.2

(4.3
)
(33
)%
(1.7
)
4.7

5.9

16.1

7.6

Leasing commissions
(9.6
)
(10.2
)
0.6

(6
)%
(2.8
)
(3.1
)
(3.7
)
(6.5
)
(3.3
)
Recurring capital expenditures
(8.8
)
(8.4
)
(0.4
)
5
 %
(4.5
)
(1.6
)
(2.7
)
(2.1
)
(3.7
)

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

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





17

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CyrusOne Inc.
Market Capitalization Summary, Reconciliation of Net Debt, Debt Schedule and Interest Summary
(Unaudited)
Market Capitalization (as of September 30, 2019)
(dollars in millions)
Shares or
Equivalents
Outstanding
Market Price
as of
September 30, 2019
Market Value
Equivalents
(in millions)
Common shares
113,196,585

$
79.10

$
8,953.8

Net Debt
 
 
2,770.0

Total Enterprise Value (TEV)
 
 
$
11,723.8

Reconciliation of Net Debt
 
September 30,
June 30,
September 30,
(dollars in millions)
2019
2019
2018
Long-term debt(a)
$
2,791.0

$
2,729.9

$
2,595.6

Finance lease liabilities
30.7

31.6

36.9

Less:
 
 
 
Cash and cash equivalents
(51.7
)
(144.1
)
(61.0
)
Net Debt
$
2,770.0

$
2,617.4

$
2,571.5

(a)Excludes adjustment for deferred financing costs and bond premiums.
Debt Schedule (as of September 30, 2019)
(dollars in millions)
 
 
 
Long-term debt:
Amount
Interest Rate
Maturity Date
Revolving credit facility - GBP(a)(b)
16.0

GBP LIBOR + 120 bps(c)
March 2023(d)
Revolving credit facility - USD(b)(e)
475.0

USD LIBOR + 120 bps(f)
March 2023(d)
Term loan(b)(g)
800.0

USD LIBOR + 135 bps(g)
March 2023
Term loan(b)
300.0

USD LIBOR + 165 bps(h)
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(i)
$
2,791.0

3.22%(j)
 
 
 
 
 
Weighted average term of debt:
4.7

years
 
(a)
Amount outstanding is USD equivalent of £13 million.
(b)
Credit rating-based pricing grid replaced leverage-based grid, resulting in a 0.25% margin reduction for revolving credit facility borrowings and a 0.05% margin reduction for term loans, elimination of 0.25% commitment fee on undrawn portion of revolving credit facility commitment, and introduction of 0.25% facility fee on entire revolving credit facility commitment.
(c)
Interest rate as of September 30, 2019: 1.92%.
(d)
Assuming exercise of one-year extension option.
(e)
$450 million of $475 million synthetically converted into €401 million pursuant to USD-EUR cross currency swaps.
(f)
Interest rate as of September 30, 2019: 3.25%; adjusted rate on $450 million synthetically converted pursuant to USD-EUR cross currency swaps: 0.84%.
(g)
$500 million of $800 million synthetically converted into €451 million pursuant to a USD-EUR cross currency swap; remaining $300 million swapped pursuant to USD floating to fixed interest rate swap. Interest rate as of September 30, 2019: 3.40%; weighted average interest rate pursuant to swaps: 1.50%.
(h)
Interest rate as of September 30, 2019: 3.70%.
(i)
Excludes adjustment for deferred financing costs.
(j)
Weighted average interest rate calculated using lower interest rate on swapped amount.
Interest Summary
Three Months Ended
 
 
September 30,
June 30,
September 30,
Growth %
(dollars in millions)
2019
2019
2018
Yr/Yr
Interest expense and fees
$
26.4

$
28.8

$
30.2

(13
)%
Amortization of deferred financing costs and bond premium
1.2

1.2

1.1

9
 %
Capitalized interest
(8.0
)
(8.9
)
(5.5
)
45
 %
Total interest expense
$
19.6

$
21.1

$
25.8

(24
)%

18

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

 
As of September 30, 2019
As of June 30, 2019
As of September 30, 2018
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
1,113

91
%
1,113

91
%
780

94
%
Dallas
621

71
%
621

70
%
621

69
%
Phoenix
509

100
%
509

100
%
509

100
%
Cincinnati
402

78
%
402

79
%
402

93
%
Houston
308

64
%
308

68
%
308

74
%
San Antonio
300

100
%
300

100
%
300

100
%
New York Metro
228

76
%
228

77
%
218

83
%
Chicago
203

73
%
203

72
%
213

67
%
Austin
106

81
%
106

81
%
106

78
%
Raleigh-Durham
83

100
%
83

100
%
76

88
%
Total - Domestic
3,872

84
%
3,872

84
%
3,533

86
%
Frankfurt
144

99
%
125

99
%
62

98
%
London
128

81
%
116

72
%
77

99
%
Singapore
3

22
%
3

22
%
3

22
%
Total - International
275

90
%
244

85
%
142

97
%
Total - Portfolio
4,148

85
%
4,116

84
%
3,674

86
%
Stabilized Properties(c)
3,935

88
%
3,744

89
%
3,396

91
%

(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. May not sum to total due to rounding.
(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.
























19

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CyrusOne Inc.
2019 Guidance

Category
Previous
 2019 Guidance
Revised
2019 Guidance
Total Revenue
$970 - 990 million
$970 - 980 million
   Lease and Other Revenues from Customers
$842 - 857 million
$838 - 843 million
   Metered Power Reimbursements
$128 - 133 million
$132 - 137 million
Adjusted EBITDA
$507 - 517 million
$505 - 510 million
Normalized FFO per diluted common share
$3.50 - 3.60
$3.55 - 3.60
Capital Expenditures
$850 - 950 million
$900 - 950 million
   Development(1)
$840 - 935 million
$890 - 935 million
   Recurring
$10 - 15 million
$10 - 15 million
 
 
 
(1)Development capital expenditures include the acquisition of land for future development.
 
CyrusOne is updating guidance for full year 2019, tightening the guidance range and decreasing the midpoint for Total Revenue, tightening and decreasing the guidance range for Adjusted EBITDA, and tightening the guidance ranges and increasing the midpoints for Normalized FFO per diluted common share, Capital Expenditures and Capital Expenditures - 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 Total 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.

20

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CyrusOne Inc.
Data Center Portfolio
As of September 30, 2019
(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
$
103,364

379

82
%
82
%
82

46
%
133

595


50

Northern Virginia - Sterling V
Northern Virginia
55,796

383

85
%
93
%
11

100
%
145

539

64

65