Q4 2019 Earnings Call

strategic objectives

That we believe will sustain our long-term growth.

These include completing construction at our campus in Atlanta and deepening our relationships with new and existing strategic Enterprise clients by offering industry-leading capabilities for hybrid Cloud adoption.

I am pleased to report these critical goals were obtained during 2019 and we believe switch has never been better positioned to capitalize upon the opportunities that lie ahead.

Other notable achievements during our 2019 year include the following switch received the United States Environmental Protection Agency. Excellent job in green power leadership award for increasing the prevalence of renewable energy. Nvidia recognized switches class, five Platinum data centers off as pre-qualified a I ready infrastructure for rapidly deploying artificial intelligence switch received the Smart Energy 20-25 Center Energy Efficiency award at the 2019 Smart Energy decisions Innovation. Summit switches CIO missing young hosts need the Google cloud and powering female leaders event at The Innovation Center on switches core campus this event highlights industry leaders and diversity wage.

champions

Who discuss their experiences around building and inclusive workplace switch announced the completion of a licensing agreement with vertiv four switches revolutionary off hot cold aisle containment technology and proprietary data center HV AC systems invented by Rob Roy switch collaborated with NASA and it's t c l for drone traffic management testing the data collected during these historic test flights was presented to the FAA money to help them inform future rules policies and traffic management procedures for operating drones safely over populated areas switch was awarded a fortress award by open text Elise for combining technology and process to mitigate risk and cost around litigation digital investigation dead.

data security and

Compliance as discussed on last quarter's call customer installations in the keep campus are scheduled to begin in q1 at our Atlanta one facility. We currently have 10 customers committed to deploy in Atlanta during the first half of 2020 and our sales teams continue to pursue an hour to funnel of attractive opportunities, including a balanced mix of new and existing customers with respect to the Atlanta colocation Market in general which now serves as switches fourth prime location and Regional hub for the Southeastern United States. We see tremendous long-term upside down.

This optimism stems from switches unique advantages surrounding Enterprise hybrid Cloud delivered through our patented and highly efficient data centers designs invented by Rob Roy our low-cost 100% green energy offering access to the switch Telecom purchasing Cooperative off. The Tractive sales tax incentives. We continue to make meaningful progress toward growing our customer ecosystems outside of the core Prime as our Citadel and pyramid locations now represent 13% of the Consolidated Revenue as of Q4 2019 up from 9% in the prior year quarter during 2019, these two primes accounted for over 40% of our incremental growth and a project.

only two thirds

Of our incremental epidemic growth compared to 2018 demonstrating the powerful operating leverage inherent in our model as the switch Prime's continue to scale moreover. We continue to experience favorable Trends in multi-campus customer Revenue as of Q4 2019 wage more than $135 customers have deployed in two or more of the switch Prime's representing 34% of total revenue this compares to just over 100 customers in 23% of Revenue in the year-ago quarter equating to a 70% year-over-year increase in multi-campus Revenue.

Sales velocity gain momentum in 2019. I switch signed over $500 in total contract value during the year representing a 16% increase in sales volume compared to 2018. We added over 110 new logos in 2019 which accounted for $22 million dollars of annualized Revenue bookings.

African increase from just over twelve million in new customer bookings during 2018. We believe this trend is largely attributable strategic focus on targeting larger initial deal sizes and increasing holistic service Partnerships with high-quality enterprise-class corporations.

Fourth-quarter sales activity was also robust notwithstanding traditional seasonal year-end headwinds as we executed 618 contracts representing total contract value of $138 million with a weighted average term of approximately four years to for was our most productive quarter of 2019 in terms of incremental annualized Revenue bookings with $20 million dollars in signings, including $17 off and from existing customers and three million from new logos. We added 29 new customer logos in the fourth quarter alone, including a nationwide cable television and Broadband provider in the keep campus a michigan-based health insurance provider in the pyramid campus and a leading radio off.

oncology provider in

And the core campus we also had several notable wins in Q4 from existing switch customers, including a 3 megawatt expansion totaling $24 million dollars in contract value from a leading e-commerce platform in the Citadel campus a four megawatt expansion, totaling $23 million dollars in contract value age where they top cloud storage provider with deployments in both the core campus and the Citadel campus and a multi-year renewal + 650 expansion with a leading domestic streaming video platform customer totaling $18 million dollars in contract value.

Now turning to our construction milestones and project pipeline during 2019. We delivered 20 megawatts of new power capacity in the core campus coinciding with the opening of two additional sectors at Las Vegas 11:00, totaling 1560 cabinet equivalent. We open sector three of Las Vegas 11 in mid-February with an additional 780 cabinet equivalents and the third ten volt power system is scheduled for delivery in mid 2020 in the Citadel campus. We open a new 460 cabinet sector wage to for 2019 with one additional sector and 20 megawatts of power slated for 20 20 in the pyramid campus wage.

We have completed.

On a new sector with 530 cabinet equivalents which will open in q1 2020 following the signing of an anchor customer in the space. The keep campus has an initial inventory of 12 megawatts in 780 cabinet equivalents. As a reminder. The Atlanta one facility is a to sector design with a total cabinet equivalent capacity of 1560 the timing of sex life to delivery in subsequent construction on the Atlanta to Shell will be dependent on customer absorption. We continue to move forward with the planning a permitting process Force which is next phase of expansion at the core campus in Las Vegas. We have begun site work and infrastructure development to support our law.

Vegas 14

Vegas 15 and Las Vegas 16 facilities and we expect to begin construction of the next Las Vegas data center later this year upon full build-out the core campus Expansion Project will comprise five new data centers adding more than 200 megawatts in two point six million square feet of incremental capacity. We look forward to providing additional updates over the course of twenty twenty.

Finally our initial guidance for 2020 represents Revenue growth of over 11% and adjusted ebitda margins of approximately 50% off at the midpoint of the range Gabe will speak to the specific details and drivers of our guidance later in today's call. I will now turn the call over to Gabe to discuss our financial results, Gabe.

Thanks Thomas today. I'm going to review our financial results for the fourth quarter and full-year of 2019 and discuss our outlook for 2020 unless otherwise noted metronome discussed during this portion of the call reflect the adoption of ASC 606 and ASC 842 Accounting Standards, which have been applied retroactively to our 2019 Financial results a full reconciliation to our pre ASC 606 and ASC 842 financials can be found in the appendix of our investor presentation on the switch investor relations website in the fourth quarter of 2019. We achieved quarterly revenue of 120.5 million an increase of 17.3 million or 16.8% compared to the fourth quarter of 2018. This is primarily attributable to a fourteen point nine million dollar increase in colocation revenue and includes a zero point five million dead.

Went from the adoption of a s c.

6 and 8:42 on a pre ASC 606 and 842 basis fourth-quarter revenue of $120 million reflects 16.3% off over year growth up from our Q3 2019 growth rate of 14.4% The acceleration in fourth quarter, Revenue growth was driven by continued strength in our colocation businesses, which grew 17.5% in addition to improving growth Trends in connectivity Revenue, which increased 14.1% compared to the year ago quarter 47% of the year-over-year revenue growth in Q4 2019 resulted from new customers who initiated service during the past 12 months while 53% of the revenue growth came from customers who have been with switch longer than one year for the full year 2019 62% of total revenue growth was attributable to existing customers with 38% from college.

There's initiating service after January one.

And 2019 more than 95% of our Revenue in the quarter and the year was recurring in nature consisting primarily of co-location and Telecom Services, which include Chrome connect broadband and external point-to-point connectivity colocation revenue for the fourth quarter of 2019 was 97.8 million compared to eighty two point nine million reported in Q4 2018 an increase of 18% Telecom Revenue in Q4 of 2019 was 21.1 Million increasing 14.4% compared to eighteen point four million in the same period in 2018.

Other Revenue including Professional Services accounted for one point six million in Q4 2019 compared to 1.9 million for the same. In 2018 month of December Thirty One 2019 switch had approximately $16,500 billion cabinet equivalents generating over $2,400 per cabinet equivalent in monthly recurring Revenue. We had more than $6,500 billion cross-connects, as of December Thirty One and cross-connects accounted for approximately 3.8% of total revenue in Q4 2013 consistent with the year ago. Now turning the bookings during Q4. We executed 618 contracts comprising more than 14 megawatts representing total contract value of $138 million and annualized revenue of $46 million at full deployment inclusive of both renewals and sales of incremental services in the for Thursday.

What are we signed twenty million?

Parts of incremental annualized recurring Revenue inclusive of Seventeen million in incremental bookings from existing customers and approximately 3 million from new customers. As of December 13th. 2019 are booked not billed backlog stood it over $37 million in aggregate annualized Revenue including contractual ramps and contracts yet to commence billing. We expect our backlog contribute approximately twenty million of incremental Revenue during 2020 with the remainder contributing in 2021 and Beyond Revenue reductions from customer churn remained low in June 2019 at 0.2% compared to 0.4% in the year-ago quarter as a reminder. We Define chart as the reduction in recurring Revenue attributable to customer termination or non-renewal of expired contracts / the revenue at the beginning of the.

Cost of Revenue increased by eight point three million in Q4 2019 compared to the year ago quarter primarily due to increases in depreciation power and labor costs excuse depreciation amortization and equity-based compensation expenses are 419 justed gross profit increased 17% year-over-year 287.85 million a Reconciliation of gross profit to adjusted gross profit is provided in the appendix section of our investor presentation sg&a expenses in Q4 2019 with 38.7 million compared to Thirty one point 1 million in Q4 of 2018. The increase in sg&a was primarily attributable to hire professional fees and labor expenses wage income from operations in 2019 increased 8.5% to 18.3 million compared to sixteen point nine million in Q4 2018 the growth in operation.

Income was primarily attributed.

able to a $9 increase in gross profit offset by a seven point six million dollar increase in sg&a costs

interest expense increased by zero point seven million to 7.2 million in Q4 of 2019 primarily driven by higher debt balances on our revolver offset by lower Libor rate's compact the same quarter last year as of December Thirty One 2019. We had $585 outstanding on our Term Loan and 170 million drawn on our $500 million dollar of net income for 2019 was 12.9 Million compared to net income of eleven point two million in Q4 of 2018. Net income in the fourth quarter of 2019, a 2.8 million dollar gain on interest rate swaps or less than zero point one cent per diluted share adjusted ebitda total 57.6 million for Q4 of 2019 compared to fifty three point six million in Q4 of 2018 reflecting year-over-year growth of 7.5% are adjusted ebitda. Margin for Q4 of 2019 was 47.8.

8% decrease in

From 52% in the year ago. Primarily due to the aforementioned increases in sg&a related to Professional Services and labor. We expect sg&a growth to moderate in 2028 resulting in a normalization of adjusted ebitda margins toward the historical 50% range. I will discuss our twenty-twenty margin expectations in Greater detail during the guidance portion of the cost of capital expenditures in the fourth quarter of 2019 or eighty six point four million compared to fifty four point four million in the same quarter of 2018 compared to the year ago quarter and excluding land Acquisitions, the 59% increase in Q4 Capital expenditures was driven by higher investment in the core Citadel and keep campus locations offset by am spending in the pyramid campus.

Excluding land purchases full year 2019 Capital expenditures were 278.8 million compared to 252.8 million in 2018 and increase of ten percent in the fourth quarter of 2019 switch invested $37 million in the core campus for data center Construction and Equipment primarily to support customer demand at our Las Vegas 11:00 facility. As of December Thirty One 2019, Las Vegas 11:00 sectors one and two were 95% contractually committed and in additional 788 cabinets of inventory. We're added with the opening of sector three in mid February of 2020 switch. Also invested twenty five point two million for tenant improvements at the keep campus finalizing construction on sector one or bar Atlanta one facility in preparation for Q 12020 customer deployments.

switch spend twenty two

Point two million in the Citadel campus for ongoing construction on two additional sectors one of which opened in Q4 of 2019 adding 460 cabinet equivalents and the second choice is expected to open in Q3 of twenty-twenty finally switch invested two million in the pyramid campus as we prepared to open a new sector in q1 of 2020.

Maintenance Capital expenditures were 1.5 million in the fourth quarter of 2019 or just 1.2% of Revenue compared to 2.8 million and 2.7% of Revenue in the same quarter last year.

Gross capex for data center construction and improvements was 84.9 Million for the fourth quarter of 2019 compared to fifty one point six million in the same period last year month of December Thirty One 2019. The switch Prime's had capacity for twenty one thousand four hundred cabinet equivalents within are open sectors of which ninety 1% were committed under my contracts compared to 90% in the prior quarter and 86% in the year-ago quarter the Q4 2019 utilization rates at these Prime's based on committed cabinets and correct available call location space were approximately 94% 75% and 97% at the core campus The Citadel campus and the pyramid campus respectively compared to 93% seventy 2% and 92% as of Q3 at full build-out excluding Atlanta won our existing Construction.

facilities comprised of aggregate

Out of nearly four point four million square feet of space up to 455 megawatts of power and nearly 25000 cabinets equivalents the Atlanta one facility, three hundred and ten thousand square feet of space and up to 35 megawatts of power. Now looking at the balance sheet as of December Thirty One 2019, the company's total debt outstanding amount of cash and cash equivalents was 784.3 Million resulting in a net debt to last quarter annualized adjusted ebitda ratio of 3.4 times compared to point seven times in the prior quarter as of December Thirty One 2019 switch had liquidity of 354.7 million including cash and cash equivalents availability under its revolving line of credit. We believe this is sufficient to fund our growth plans for the foreseeable future.

Has disclosed in recent 8K filings during the fourth quarter of 2019. We repurchased 4.3 million common units of switch limited for a total of 66.3 million reflecting a weighted average price of $15.54 per common unit. As of December Thirty One 2019. There were 240.8 million total shares outstanding including 89.8 million Class A shares and 151 million Class B shares.

has

Disclosed in our 8K on January 10th, 2020 switch Inc issued four point six million shares of class a common stock two members of switch limited and concurrently canceled an equivalent number of shares of Class B common stock in connection with the exercise of member Redemption rights this transaction brings our class a public float to over $94 million shares or approximately 39% of total shares outstanding as of February 12020 based on member Redemption notices received to date we expect an additional seven point nine million shares to be exchanged for class a common stock on April 2nd 2020. Now turning to guidance for 2020. We expect 2020 Revenue in the range of 557 million to 521 million reflecting 11% organic year-over-year growth of the midpoint. We expect 2020 adjusted ebitda in the range of $251 off.

261 million

Reflecting an increase of 11% compared to 2019 and an adjusted ebitda margin of 49.8% at the midpoint. We expect sg&a to remain elevated in q1 before leveling off throughout the remainder of twenty-twenty. Lastly. We expect Capital expenditures, excluding land Acquisitions in the range of 290 million to 340 million. Approximately two-thirds of our 2020 capital budget is slated for new construction at the core and Citadel campus locations. We have begun site work and infrastructure development to support our Las Vegas 14, Las Vegas 15 and Las Vegas 16 facilities, and we expect to begin construction of the next Las Vegas data center later this year.

We're also continuing the ongoing build out of our tahoe-reno one facility which continues to experience strong customer demand offsetting The increased investment in our Nevada Prime's expect Capital intensity in the keep and pyramid campus locations to moderate during twenty-twenty with incremental Investments being largely dictated by sales velocity as the year progresses dead now, I will turn it back to Thomas for some closing remarks.

Conclusion. We firmly believe that switch is well aligned with industry Dynamics and favorably positioned to accelerate Enterprise migration into a hybrid Cloud environment. We continue to execute on our pipeline of large Enterprise retail co-location opportunities, which remain robust. We look forward to announcing these transactions invite to course.

We would once again like to take this opportunity on behalf of our management team to thank our employees customers partners and our shareholders for their continued support us, which we would now like to open the line for questions wage in one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at anytime your question has been addressed and you would like to withdraw your question, please press * then two at this time momentarily to assemble our roster.

and the first question

And will come from Frank loosen of Raymond James, please go ahead great. Thank you very much. So on the guide, you know, the the growth appears to be struggling a bit, you know, you're growing you over 16% Q4 and better than you know in a little bit better than what you're guiding to for the full year. Now you're taking on some space and seeing the bookings. Why would the growth rate Decline and what would it take to get to say the higher end of your range of guidance, or are you just being a little conservative here?

Hey Frank, this is Thomas Martin. Thank you very much for your question. Actually don't like gave answer this one because that is something that we noticed as well. Yeah on a full year basis. If you look at the full year, obviously, we're growing off of a a slightly elevated base because of the 606 and 842 adjustments that added about six million six point 1 million dollars of Revenue. So if we look on a pre adjusted basis, we're really expecting to grow up roughly the same rate. It's it's obviously at the beginning of the year. We want to make sure that we are putting forth the range that is achievable and the comps as as we go into twenty-twenty become a little bit more difficult than they were in in the past year. So we believe that a consistent growth rate is achievable and is proof to put forth with them.

Right great, and then I think you mentioned there.

You got 10 new deployments or so set up for for the for the Atlanta campus you characterize those between new and existing customers.

Yeah, we've got ten in customers at this point. I think for our new and 6 our existing and and they will be deploying in the first half of the year of them that are new. There are a couple that are deploying in different divisions of their company. They are the same company, but it's a new division of that Enterprise. Great. Okay. Thank you very much.

Thank you.

And our next question will come from Michael Rolen of City, please go ahead.

Thanks a couple of questions first. Please talk about the yields and the Returns on Capital that you've been seeing over the last 12 months versus maybe a couple of years ago and just how competitive conditions are influencing the future return prospects as you're deploying new capital and and then just separately maybe just an update on the fishing ocean front and we're seeing the bookings come in from between direct and indirect sources.

Okay.

As far as return on Capital over a 2-year period our return on Capital invested has has gotten better because a couple of years ago all of the capital that are spent to launch the Grand Rapids campus off and the Reno campus were included and we had just begun, you know, they were included in the denominator and we just begun filling that space. So we've seen our return on Capital increase over the last couple of years. We will obviously be putting the Atlanta facility into service in q1. So you'll see a chunk of capex move into the denominator off for that return on Capital calculation. So it is a bit lumpy but over time as far as our yields we we've seen consistent pricing we've been able to maintain are $2,400 plus per cabinet off all in revenue and you know, we build a different mousetrap. So while there are folks out there that are looking for wholesale space. It's essentially powered Shell at the lowest price. They can possibly get dead.

Those aren't the people that we're chasing.

You know we want we want customers that understand what's which is about understand our differentiated platform understand our efficiencies our technology and understand that in terms of total cost of ownership month when you look just beyond just the co-location price. We're able to deliver a value value formula that that they find compelling. Yeah, my bank is this is Thomas and off Gabe's absolutely right that we are able to be in areas where there are tax advantages power advantages. And obviously we have core offerings significant telecommunications advantages. So when they look at a TCM basis, we are able to offer those three items without impacting what we are offering the space at and so we have been able to maintain our price point for our space because we look at it with a customer on a TCO basis and on that basis We compare favorably against any peers as well. As you know, our product is industry-leading. So we've been able to maintain and sustain we also wage

lot with either regulated entities or entities that want to deploy their core and

Critical infrastructure with us. And in that case. They are more sensitive to uptime and resiliency than they are to saving $5 or $2 or some lot of money per KW. I think you also asked about distributions, you know, we have had a history of changing or increasing or distributions. We will look toward possibly doing that or not doing that as revenues go forward in a future, but it's not something that we are speaking to at this time. I think Matt, I'm sorry. I think Mike you were talking about distribution of our sales and where the contracts are coming from. We continue to the contract growth from our channels. We continue to see contract growth from our from our uh, uh, commission-based sales force that we put in place last year, and of course, our traditional sales force continues to bring in the trash actions as well. So we're very happy with the the sales pipelines on All Brands. Thank you.

Our next question will come from Richard of JPMorgan, please go ahead great. Thank you. I wanted to ask about you said you're focusing on large deals and still a lot of your new signings are coming from existing customers. Can you talk a little bit about what's changed for maybe a year or two ago where your actual talking with your customers about bigger deals and or is it just the customers that you signed over the past few years are just larger customers and they want bigger deployed.

well we

You to have our our normal growth from our existing customer base and we are a retail colocation company. So while 10% of our top 10 customers represent about 36% of our Revenue off that means you know, we have nine hundred plus other customers that represent the other 64% So we are still a retail co-location company, but as we've talked about over the past year and particularly June in 2018. We had a bit of a Slowdown in our in our Revenue growth because we were having more strategic discussions with some large customers about their technology strategy going forward to for the next decade or so, and and we were able to turn what would have been a you know, a typical colocation cabinet deal into a much more strategic relationship with customers like FedEx customer is like eBay continue to expand with us customers like box that we've talked about. So these are much larger deployments and you know, they they do take time and our normal growth that we see of birth.

every month customers coming to us and saying I need to

Two new cabinets for new series 5 new new cabinets, etcetera that continues but you know, we're at a five hundred million dollar kind of base and you know, those things get you to a certain level of growth but to get to a to a number that moves the needle you need some larger deployments and that's what our what our sales team has been focusing on.

And then the MRC per cabinet went up from $23 to $24. It seems like is that pricing being better customers doing something else? Can you talk about a little bit is it's really not or any hey, we're not seeing any contraction in pricing, but it's also if people dents up they consume more power per cabinet and that is increasing the wage from that cabinet because there's more power being consumed.

Great. Thank you.

Our next question comes from Sammy of Credit Suisse, please go ahead. Hi. Thank you. I just had kind of two cuts of the same question regarding my guidance. And the first one is how should we expect the seasonality of the year to actually flow. Is it is it front end loaded? Is it back up? I don't understand kind of the acceleration here. If there is one or like Georgia General seasonality growth rates and then to cut that in a different way. Do you expect connectivity Revenue to start to over-index compared to colocation revenue in 2020. And if not like New Jersey, could you give us some rationale and why that's not the case.

Historically our I'll start with the second half for us, you know, historically telecommunications Revenue has grown along with colocation because obviously a data center is just a center unless it's connected to data. So every cabinet need some form of connectivity and switches uniquely positioned to provide that connectivity through our Cooperative at prices that are that are compelling to customers and they take advantage of the power of the exact opposite purchasing environment. So it has traditionally grown along with colocation. However, you know, there are customers that are understanding that switch can deliver connectivity that doesn't have to touch any of our data centers at the same compelling price and there and is there corporate contracts expire with carriers? They're taking advantage of the power of the Cooperative to lower their own telecommunications needs. So, you know, I we're not forecasting and over index in 2020, but it could very well be the case particularly with some of these large Enterprise organizations that literature

Spend hundreds of millions of dollars.

First a year on connectivity that's not however in our guidance port in our forecast as far as seasonality goes, you know, we've talked about the fact that we've signed a a certain number of Atlanta contracts wage will start deploying throughout the year. So as the year progresses, we'll see more revenue from those contracts. We previously announced on our last quarter call that we received an expand order from eBay going into 2020 and that will ramp throughout the year. The Box contract will ramp throughout the year. So as we move into the year, we'll see Revenue continue to grow however, the 842 adjustments that we that we took in this quarter will have an impact particularly in Q3 as we get into the back half of the years the growth in Q3 numbers this year are now elevated because of a contract that Fiber iru contract that we entered into with the major cloud provider. Yep.

Under the new leasing guidelines has to be classes.

Flight is a sale a sales type lease. So rather than taking that Revenue over a 20-year I are you we had to take it all in Q3. And so you'll see about a a four plus million dollar impact due to that in Q3 compared to the numbers that we previously reported. So as we get into uh-uh the back half of the year and are comping against that number you'll see you'll see probably a bit of a decline in the growth rate in Q3 because of that Sammy, this is Thomas. Your Telco question is great because we also as Telco is also evolving in terms of his technology. So you'll see in the industry. There's some change in mpls purchases and this transitions to new product types that creates A disruption in the marketplace and it creates a a change in the way that we are selling products and the products that we are selling. So with that change of that transition happening with our customers this year. We also want to be a little conservative on what we were throwing out there initially for the numbers for the table.

Medications team so they had time to absorb that adoption.

219 or at least the fourth quarter is typically not your seasonally, uh, you know productive year as far as signings but in for 19, it was and my question here is just that is Thursday tributable to the new sales force coming in and being commission-based and being productive and motivated in that way. Not that everyone else is in your organization is not motivated, but I'm just saying maybe there is a little bit of an element of that coming in and if it's not that is it possibly that there's a new campus coming online which is Atlanta and therefore signing started to ramp through like which one of these things is it and maybe you could be both bulbs. Give us more color on that.

I think it's sort of all of the above. If you recall on our last quarterly call we reported our third quarter bookings number, but then we mentioned that right after the end of the quarter we signed with three large deals. Now. Those are in the queue for bookings historically as you get in toward the holiday. Things from a booking standpoint. Just tend to slow down this year. We signed three large contracts right after the end of the September September. So those are in our queue for numbers are commissioned sales team is producing. They've assigned a number of deals including uh, a new transaction for Grand Rapids in 2020. So, you know, I think it's a bit of all of the above and it's just about timing of when customers actually sign and just so happened three of the large ones signed off. Yeah. There were a couple that would gave mentioned that we're going to be potentially Q3 signings at the customer just decided to roll over to Q4 to make sure it hit their books and Q4 and there is also wage

Got it. Thank you guys for that and then just one follow-up and your prepared remarks you mentioned that for

But we had a signing in.

And it in grr, or Grand Rapids the pyramid campus that was done by the S3 S or the new sales commission sales team. And then we've also had a signing in Atlanta that was brought in entirely by the new commission off steam. So they are definitely on the ground and producing.

Got it. Thank you guys.

And our next question will come from Eric Rasmussen of stifel, please go ahead and thank you first maybe on the your your announcements about campus sounds like you got 10 customers signed on would you consider any of those customers sort of an anchor customer or maybe sort of the make up of of that and is it sort of wage would have expected at this time given that you just now opening up?

Yes, thank you very much Eric. It was great. The the answer is no I don't consider any of these to be major anchor tenants, but it is a plurality of tenants that gives us resilience life. So the fact that they're not one massive one actually gives us diversity of Revenue. So that's a strength for us. There was a report that came out if that's what you're alluding to that. We had signed a 6 megawatt deal with that reporter has corrected that statement and issued a correction online. So that was a false bit of news that we have now spoken with them and they have changed their their report. So but we looked forward to we do have a robust pipeline for large tenants in Atlanta. And we look forward to doing announcements and do courses I said during my opening remarks as soon as the bank customers allow us to make those announcements.

Got it.

And then maybe just of my second question, you know, the the the guidance for the year 32 million at the midpoint above what you did this past year. I think you'd mentioned that there's about twenty million from from backlog. So that leaves about twelve million. How do you see sort of the you know, you fill in fill in that Gap and that seems to be you know, a pretty achievable level concern sort of the you know, the revenue opportunities and sort of the momentum you're heading into this year. So how should we think about the guidance or guidance I think is is about a $15 increase from where we ended up this year and twenty of that will come from backlog. So we've got to sell just as we do every year when we set guidance we look at what our book not billed is dead. We look at at what our pipeline is and what are our probability of closing is and we come up with a forecast, but we're expecting to grow about fifty million next year 20 of which will come off.

backlog so the team is selling

Hard as always in order to make up that 30 million dollar Gap and as our sales team likes to point out. It's not just sell it sell install and Bill this year.

Thank you.

Our next question will come from Nathan process of berenberg, please go ahead. Hey, good evening guys. I think you said that phase one of the Atlanta was $35 a month. So how much of that is now least with these ten tenets.

It's it's up to 35 megawatts. As you know, everything we do is modular. So we only install Cooling and power enough to to handle the customers that are moved in. And so as we signed contracts for more megawatts will install more power more Cooling and that's how we do all of our data centers. And that's how we're able to deploy Capital efficiently suck up to 35 megawatts. We have not installed megawatts that kind of megawatts. The first power system is 12 megawatts, and that's what's been installed. Yeah, and and let me tell you a couple kind of what happens here. And this is an interesting point is we have Maps 7 for example, and that's been sold out since 2010/2011. There is an ability in that 7 to produce hundred megawatts of power. We are currently producing 60 megawatts of power out of that data Centre, even though the floor space has been sold out for eight years. So depending on what the customer Lounge

customer desire is we may never

Put 35 megawatts in that facility. We will put as much as the customers need with the ability to add more incrementally as customer demand Rises.

Okay, that's helpful. This is unrelated question, but I wanted to ask about potential conversion. Now that the class C Shares are gone. Is it possible you could eventually convert to a read? You know, how should we think about that? What are the hindrances for you converting to a read Because almost everybody has now that's always a great question because what happens is if we had gone out as a we couldn't have converted to an up see we went out as an up see when we went public and that always leaves open the option of converting to a reef off and if we find it to be tax and otherwise advantageous to do that then we will do so we currently do not have it in our forecast to convert to a re we don't see a significant advantage to converting to a and we do look at ourselves as a technology ecosystem Solutions company. And so we are providing services that are not read.

couple income streams and we will

Can you to do that? So there is flexibility by us being up see that we would not enjoy if we were so as long as we are continuing to evolve and diverge our Revenue sources in order to increase the number of offerings we have and thereby gain stability and keep our growth going to move with the market. We will continue to take advantage of the nimbleness. That's afforded To Us by being an up. See that's correct. And then what financially while it's our views, uh to have a tax advantage because they're pass-through entities as an up see we do have our our partnership that is continuing as a pass-through entity and switch Inc, which is the taxable operation on top while we look a tax provision. We are not a taxpayer. There's a non-res we're able to take accelerated depreciation on much of our equipment that REITs don't enjoy because they've specifically gone to the IRS and and yep.

Received, uh, uh tax rulings that allow them to classify certain parts of their equipment as real estate assets and appreciate them as real estate life assets. Where

As we uh-huh depreciate most of our Power Systems are handlers Etc and five to seven-year light and so we're not a cash taxpayer. So I think it's a perceived advantage to be am not a real advantage and as Thomas alluded to first and foremost culturally, we're a technology company, you know, we do things quite differently than others who are in the business office or more real estate dangers. We respect them all relationships with our peers. They just think differently about the markets. We're always thinking about where it's

Good. Thanks.

This concludes our question-and-answer session as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.