Q1 2020 Earnings Call
Mm.
The day and welcome to the switch and first quarter 2020 earnings Conference call.
Oh participants will be unless it on the Mac.
You need a system. Please signal uncompressed specialist by pressing the Starkey followed by zero.
After today's presentation there'll be an opportunity to ask questions.
Please note with events as being recorded.
I would now like to turn the conference over to Matthew High V.P. of Investorrelations. Please go ahead.
Thank you operator, good afternoon, and welcome the switches first quarter Twentytwenty conference call on the call today are Thomas sport switches, President and gave knocked switches CFL.
Today's call May include forward looking statements, including references to expectations projections or other characterizations of future events or market conditions. Actual results may differ materially from those expressed in our forward looking statements, which are subject to certain risks uncertainties and assumptions are state.
Since our made as of today and we assume no obligation to update our disclosures. We describe some of these rest and R.S. He see filings specifically our form 10, k., particularly in the section entitled Risk factors. In addition today is call includes discussion of non gap financial measures, we should not be considered in isolation from or as a substitute.
For financial information prepared in accordance with Gab. Please refer to today's Pressrelease and supplemental package for further information, including a reconciliation of non-GAAP measures.
Our first quarter 2020 earnings press release has been furnished to the C.C. as part of our form eight K. and is available on our ambassador website at Investor start switched Dot Com I will now turn the call over to switch as President Thomas Moore.
Thank you ma'am and good morning, everyone. Thank you for joining us today for our first quarter Twentytwenty earnings call.
First and foremost I want to express my sincere appreciation boy. They continued patients dedication and Brazilians that are switched team members have shown throughout the Kobe 19 health crisis.
Thank you for all you have done and continue to do during these unprecedented times.
On that note I'm pleased to report that switches maintained 100% continuity of our operations for our clients across all of our data centers in all four prime campus locations throughout the Kobe 19 pandemic <unk>.
Construction on our newest facilities has also continued unabated since the shelter in place order was implemented in early March are non data center operation staff has made a seamless transition to remote work environments.
We do not expect any reduction in employee head count as a result of cope with 19.
Furthermore, we believe the cost to support remote I.T. requirements are immaterial to our full year financial guidance.
Moreover, we saw a node disruptions to our mission critical operations teams, nor any other corporate functions.
This was achieved well closely monitoring the well being of our employees would strict adherence to state and federal protocols surrounding worker safety and social distancing.
Importantly, we also continue to forge ahead on innovative future growth initiatives, which I will discuss in greater detail later in this call.
Our first quarter Twentytwenty financial results reflect sustain business momentum and positive underlying demand trends across all of our prime campus locations.
Quarter revenue increase 19% year over year to 128.1 million and adjusted <unk> 61.5 million represents a 14% year over year grow.
As identified on our prior earnings call, we incurred elevated S.G.N.A. costing Q1 related to professional services as a result of our transition to a large accelerated file or in 2019.
These elevated professional service costs were fully considered in our Twentytwenty operating plan and we expect quarterly adjusted to put their margins to normalize around the historical 50 per cent level for the remainder of this year.
As such we are reaffirming are twentytwenty financial outlook and guidance, which gave we'll discuss in greater detail.
The first sector of the data center floor and it <unk> is now operational and we currently have 15 customers signed and committed to deploy this year with five additional logo signing on in Q1 Twentytwenty. Our team is extremely pleased with the market research.
To the opening of our Atlanta campus, we are seeing excellent opportunities from a balanced mix of new and existing customers.
We are maintaining strong growth momentum across the entire switch prime national footprint.
Campus locations outside of Las Vegas, now represent 15% of our consolidated revenue as if Q1 twentytwenty.
This represents an increase from 10% and the prior year quarter.
During Q1 Twentytwenty revenue at the Citadel Prime and the pyramid Prime grew at a combined grade of 75% a year over year end accounted for 48% of our incremental revenue growth compared to the year ago period.
We continue to experience favorable customer expansion trends toward our newer primes, which is well demonstrated by the growing proportion of multi campus customer revenue.
As if Q1 twentytwenty more than 140 customers have deployed in multiple switch crimes.
Representing 39% of total revenue.
This compares to 110 customers and 23% of revenue in the year ago quarter.
Waiting to a 92% year over year increase in multi campus revenue.
First quarter sales activity remained steady as we executed 560 contracts, representing total contract value of $73 million.
Weighted average term of approximately five years.
Signed approximately $10 million of incremental annual ice revenue in Q1, including $4 million, an incremental annualised revenue from new logos and an additional $6 million from existing customers.
We added 22, new customer logos in the first quarter, including a fortune 500 semiconductor components manufacturer.
The pyramid campus, a fortune 1000 financial institution in the pyramid campus, a nationwide health insurance provider in the keep campus and a leading construction goods retailer in the core campus.
Several existing switch customers, either expanded or sign long term annuals and Q1.
Including a multi year 7 million dollar renewal and expansion, where they leading cloud security vendor in the core campus.
Expansions from two major semiconductor customers across three campus locations totalling over $10 million and contract value and a six year extension would they multi national bank customer in the core campus as a leading innovator in technology infrastructure.
Sure we continually assess the anticipated future technology needs of our customers and keep a polls on developing technology trends.
One of the most rapidly evolving areas of the technology landscape involves the combination of AI five g. and the cloud.
We have identified three verticals or switch can uniquely address customer technology utilization in a highly differentiated way as data management needs proliferate.
These involve class for edge computing Tempest raided data storage and A.I. driven robotic security.
Under Rob Roy leadership switches identified these three areas as highly strategic and a natural compliment to our access scale prime infrastructure platform strategy.
Enterprise technology requirements are moving rapidly toward a more distributed primary and edge infrastructure configuration. This road map involves the deployment of large mission critical workloads and highly secure prime locations to maximize purchasing benefits at scale while minimum.
<unk> total cost of ownership at the same time enterprises across a variety of industries are seeking edge solutions that can increase the number of low latency delivery nodes across their networks, while offering the same robust level of resiliency and security that switches known.
For within our industry, leading class five primes.
As we look to extend our reach from the primes to the edge, we believe switches position to deliver the most resilient and connected enterprise class edge data center solution based on Rob Roy is unique and proprietary designs, including his newest switch.
Edge modular data center.
Recently deployed our showcase modular edge designed representing the world's only class for system plus system Bully Air Transportable edge data center.
Switch edge data centers are fully customized supposed to meet a wide range of specific use cases and in recent months, we have engaged and substantives dialog with numerous enterprise partners that have identified various business needs for this highly resilient secure class for.
Edge solution.
One of the identify concerns regarding edge deployment is physical security.
Deploying 24 by seven by 365 human guards at edge locations is not economically or physically practical.
To address this issue Rob Roy has developed a robotic A.I. human in the loop security solution, which will be deployed at switch edge facilities.
In addition to the youth at our own data center facilities. The excitement generated from these enterprise Alpha test client partners has led to switch offering the switch century robot as a standalone security platform to the general market.
Switch century robots utilized advanced A.I., driven sensors and can be equipped with a range of options to protect assets and to cure enterprise and industrial environments.
Additionally, as enterprises seek solutions for mission critical data storage. We believe there is an industry wide deficiency in the physical security environment supporting hybrid clouds storage offerings.
We have designed the switch vault data centres sectors to be the only Tempest rated private and public cloud accessible storage rooms available as an advanced yeah complimentary solution to cloud storage. We believe these highly secure environment will be flexible.
Cost effective locking free and we'll be mandatory for some portion of evolving corporate data needs.
Continued to prepare to capitalize on the market opportunities addressed by switch edge switch century, and switch fault together with the other related services that support and expand upon our technology ecosystem.
Will provide further details to investors as we move forward with our analysis and client interactions.
Now turning to our data center construction milestones in project pipeline.
During the first quarter of Twentytwenty, we delivered over 2000 cabinet equivalents and 30 megawatts of new power capacity across our prime footprint.
This includes the opening of Las Vegas, 11 sector three in mid February and a new five 130 cabinet sector in the pyramid campus.
10 megawatt power system at the Citadel campus and lastly, the initial sector and 12 megawatt power system at or Atlantic keep campus.
Each of these additions to our infrastructure are backed by customer demand and will provide substantial capacity for future growth.
As shown in our developing milestones table and the Q1 investor presentation, we expect to deliver an additional 2000, plus cabinet equivalent and over 30 megawatts of incremental power infrastructure during the remainder of Twentytwenty.
I will now turn the call over to gave to discuss our financial results.
Gave.
Thanks, Thomas today, I'm going to review our financial results for the first quarter of 2020 and discuss our outlook for the full year.
In the first quarter of 2020, we achieved quarterly revenue of 128.1 million and increase of 20.7 million or 19.2% compared to the first quarter of 2019.
This is primarily attributable to a 14.7 million dollar increase and call location revenue and a 6.2 million dollar increase in connectivity revenue R. Q1, 2020 revenue includes 4 million in non recurring fiber revenue related to a joint fiber build an I.R.U. transaction with the strategic cloud cut.
<unk>, 56% of the year over year revenue growth in Q1, 2020 resulted from new customers, who initiated service during the past 12 months, while 44% of the revenue growth came from customers, who have been with switch longer than one year more than 94% of our revenue in the quarter was recurring in nature consists.
Primarily of coal location and telecom services, which include Crossconnects broadband an external point to point connectivity.
Co location revenue for the first quarter of 2020 was 101.2 million compared to 86.5 million and Q1 of 2019, an increase of 17% connectivity revenue in Q1 of 2020 was 25.2 million, increasing 33% compared to 19.
In in the same period in 2019, excluding nonrecurring fiber revenue year over year growth in Q1 connectivity revenue was approximately 11% other revenue, including professional services accounted for 1.7 million Q1 of 2020 compared to 2 million in the same period of 2019.
As of March 31, 2020 switch at approximately 16900 billing cabinet equivalents generating approximately $2400 per cabinet equivalent in monthly recurring revenue, we had more than 7500 total crossconnects as of March 31st and Crossconnects accounted for 3.7%.
Total revenue in Q1 of 2020, consistent with a year ago period now turning to bookings during Q1 of 2020, we executed 560 contracts comprising approximately seven megawatts, representing total contract value 73 million and annualized revenue of 18 million at full deployment.
Inclusive of both renewals and sales of incremental services in the first quarter, we signed 10 million of incremental annualized recurring revenue inclusive of 6 million, an incremental bookings from existing customers and approximately 4 million from new logos as of March 31st 2020, our book not build back law.
Stood at 24 million in aggregate annualized revenue, including contractual ramps and contracts yet to commence billing.
We expect our backlogged to contribute approximately 7 million of incremental revenue during the remainder of 2020 with the balance contributing and 2021 and beyond revenue reductions from customer churn remain low in Q1 of 2020 at 0.4% compared to 0.1% in the year ago quarter as a rubber.
Mind, or we define churn as the reduction in recurring revenue attributable to customer terminations or non renewal of expired contracts divided by the revenue at the beginning of the period.
Most of revenue increase by 9.5 million in Q1 of 2020 compared to the year ago quarter, primarily due to increases in depreciation and costs related to the F. four mention joined fiber project, excluding depreciation amortization an equity based compensation expenses are Q1 2020, adjusted gross profit increase 19.
Percent year over year to 92.8 million.
Reconciliation of gross profit to adjusted gross profit is provided in the appendix section of our Investor presentation.
S. G.N.A. expenses in Q1 of 2020 were 40.1 million compared to 34.3 million in Q1 of 2019. The increase in S.G.N.A. was primarily attributable to professional fees and higher labor costs. We expect both of these to decline as a percentage of revenue in subsequent quarters of 2020 income.
I'm from operations and Q1 of 2020 increase 34% to 21 million compared to 15.7 million in Q1 of 2019.
Growth in operating income was primarily attributable to an 11.2 million dollar increasing gross profit offset by a 5.9 million dollar increase in S.G.N.A. costs interest expense increased by 0.3 million to 7.4 million Q1 of 2020, primarily driven by higher debt balances on our revolver.
As of March 31, 2020, we had 583.5 million outstanding on our term loan and 240 million drawn on our 500 million dollar revolver, we reported a cue one net loss of 3.5 million compared to net income of 3.8 million in Q1 of 2019.
Net loss in the first quarter of 2020 includes 17.6 million dollar loss on interest rate swaps, which had a five cent per diluted share impact on our reported net loss per diluted share of one cent.
Adjusting for the loss on interest rate swaps, our net income per diluted shares for sense. We provide a full reconciliation of gap net loss attributable to switching to adjusted net income attributable to switch Inc. In the financial tables of R. Q1, 2020 earnings release available on our Investor Relations website.
Adjusted <unk> totaled 61.5 million for Q1 of 2020 compared to 53.8 million in Q1 of 2019, reflecting year over year growth, 14.2% adjusted EBITDA margin for Q1 of 2020 was 48% decreasing from 50.1% in the.
Go period, primarily due to the previously mentioned increases in fiber build expenses and S.G.N.A.
We anticipate that adjusted he bit dumb margins will normalized toward the historical 50% range for the remainder of this year.
Capital expenditures in the first quarter of 2020 were 80.9 million compared to 45.9 million in the same quarter of 2019.
Harrison's to the first quarter 2019 capital expenditures are skewed by the heavy rainfall that delayed construction early last year to keep campus in Atlanta.
Esmin in the core in Citadel campus locations also increase compared to the year ago quarter, driven by accelerated demand in both of these primes. In addition to cite work for Las Vegas, 14, 15, and 16 as we continue expanding in the core campus investment in the pyramid campus declined year over year as we finally.
Tenant improvements for co location space in Michigan.
Maintenance capital expenditures were 1.3 million for the first quarter of 2020, or just 1% of revenue compared to 2 million and 1.9 per cent of revenue in the same quarter last year growth cap X. for data center construction and improvements was 79.6 million for the first quarter of 2020 compared to 43.
Point 9 million in the same period last year as of March 31, 2020, the switch primes had capacity for 23300 cabinet equivalence within our open sectors. This reflects a sequential increase of approximately 1900 cabinet equivalents due to the opening of new sectors in the core pyramid.
And keep campus locations in Q1 of 2020 at quarter end, 88% of our total cabinet inventory was committed under contracts compared to 91% and the prior quarter and 89% in the year ago quarter.
The Q1 2020 utilization rates at these primes based on committed cabinets and currently available Colocations space, where approximately 93%, 84% and 71% at the core campus, the Citadel campus and the pyramid campus, respectively compared to 94%.
75% and 97% and the prior quarter committed utilization at the keep campus was 21% March quarter end based on Sellable cabinet inventory of 780 insect or one.
The sequential decline in contracted utilization rates was driven by the previously mentioned 1900 cabinet increase in new Sellable inventory at full buildout, including Atlanta, one our existing constructed facilities comprise and aggregative, nearly 4.7 million gross square feet of space up to 400 and.
90 megawatts of power and over 26000 cabinet equivalence.
Looking now at the balance sheet as of March 31, 2020 accompanies total debt outstanding net of cash and cash equivalents was 813 million, resulting in a net debt to last quarter annualized adjusted he bit dial ratio of 3.3 times down slightly from 3.4 times in the prior quarter.
As of March 31, 2020, we had liquidity of 324.7 million, including cash and cash equivalence and availability under our revolving line of credit. We believe this is sufficient to fund our growth plans for the foreseeable future.
Disclosed in recent eight k. filings during the first quarter of 2020, our members redeemed 4.6 million common units, resulting in the issuance of an equivalent number of class a common shares.
As of March 31, 2020, there were 241.4 million total shares outstanding, including 95 million class, a public float or 39% of the total shares outstanding.
Role redemptions of common units totaled 7.9 million and an additional 3.5 million were exchanged on may 7th 2020.
In total during the second quarter class a shares increased by 11.4 million.
In July we expect an additional 2.5 million units to be redeemed, bringing our public float to approximately 109 million shares or 45% of total shares outstanding beyond July we expect to have three additional redemption opportunities. During 2020, we believe in his in shareholders best.
Interest to accelerate the conversion of private units to public float, creating greater liquidity in our stock and expanding our institutional investor base. We are reaffirming our guidance for 2020 as follows revenue in the range of 507 million to 521 million, reflecting 11% organic year over year growth.
The midpoint.
Adjusted EBITDA in the range of 251 million to 261 million, reflecting an increase of 11% compared to 2019 and and adjusted he bit dumb margin of 49.8% at the mid point.
And capital expenditures, excluding land acquisitions in the range of 290 million to 340 million and now I will turn it back to Thomas for some closing remarks.
In conclusion, we firmly believe that switches well aligned with industry dynamics favorably position 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 in due course.
We would once again like to take this opportunity on behalf of our management team to thank our employees our customers are partners and our shareholders for their continued supportive switch.
We would now like to open the line for questions.
Thank you we will not be in their question and Nancy session.
Ask a question you May impressed Star then one on your Touchtone phone.
If you're using a speaker phone please pick up your handset before pressing the key.
Withdraw your question. Please press start then too.
At this time, we will pod momentarily to assemble a roster.
The first question comes from Richard Show J.P. Morgan. Please go ahead.
It seems like you're having fun.
Engineer.
For total contract.
Talk about.
She said it was robot.
Have you seen any change from the coven 19 impact in recent weeks.
Richard Hi, this is Thomas and good morning.
The answer is no we had seen no change in our pipeline as a result of coded 19, we continue to see a large number of customers that are looking to do substantial deployments with us.
See we sold a number 22, new logos this quarter, including five morning land.
So we continue to see a lot of sales activity. Despite eco good 19.
Pandemic that has most largely effect is smaller companies versus the larger companies that we tend to do most of our business with so.
If you have any additional comments that love to hear them.
For the most part we are very competent in our pipeline after the balance of Twentytwenty.
Yeah, and Richard I'm.
Through April.
We.
We've seen are signing continue on pace through the month of April and so we are not seeing any slowdown in our sales activity at this point.
And.
Logo moment.
Can you talk a little bit about.
Growing growing.
Yeah.
Well a lot of it as the.
We passed in the prior year 2019 and before.
On our as three sales force our commission sales force they have begun to yield results.
In addition to that we continue to be prolific in.
Our website presence as well as we are now doing virtual tours as a way too because people are not able to visit our facilities as as easily as they were in the past. So we have moved to the dynamics the market and we have been able to leverage.
Allergies in order to sustain our growth and increase our sales.
<unk>.
Right.
Our next question.
Right.
Yeah.
Oh.
Yes. Thank you.
The question so.
We have a little bit.
It looks like.
The new customer sightings in Atlanta added five new logos.
You just talk about you know the dynamics in that market, we have seen some activity there.
But you know how do you see you're sort of competitive position of all the.
And then just how that facility is shaping up in terms of.
You see.
Yeah.
Yeah, we already have we've just open that facility has its grand opening coming up later this year, which has been postponed is the result of Kobe and we have already sold 21% of the available space in that facility.
15 logos in that.
Very very pleased with the momentum that's been going on there nobody else has eight year for certified data center. There nobody else has a class five data center there.
So we are distinct and unique deployment in that market and we're able to offer a more resilient product is similar price point that the peers are being offering are offering their products. So we have seen a lot of interest in that market and unlike other markets, where we have been market makers.
In Atlanta, there is already.
Level of market in so we are able to capitalize on that existing momentum to drive our product forward and gave his during along.
Well also add that of the 15 logos.
You are Atlanta centric logos, but the majority or not and that's exactly what we expected out of that market, we view Atlanta as a southeast regional.
Switch and we're we're seeing uptake folks that are in the Atlanta market. We're also seeing it utilize for exist from existing customers that are using Atlanta.
Disaster recovery site from Michigan and elsewhere. So it's it's developing exactly as we expected with both the mix of existing customers and new new logos.
Now.
It's not in Atlanta.
Market play it really is a regional hub for us.
Great. Thank you and then just made my follow up.
And you just talked about you know you've seen on the enterprise side.
Russians were customers how you see the are shaping out in terms of activity.
You know you seeing any potential for better leasing versus prior expectations and then.
That is covert nights he changed the discussion a little bit in terms of.
<unk>.
Some Poland.
As of that.
So.
Good question, Eric the we have not seen any slowdown as result.
There has been some changes and I stayed in the dynamics in the way we do tours.
Enterprise customers be no our product they know with two weeks.
They are comfortable moving forward with us even the ability to visitor centers directly has been impacted.
We have reaffirmed our guidance as you heard earlier on this call.
We believe that we will hit aren't guidance. So we're not making any changes to guidance and therefore I would take that away is some statement of how we feel we've been impacted by which is minimally.
I will also say that.
A couple of the larger our piece that we've been working on.
Actually picking up speed because mmm.
<unk>.
Has brought to light infrastructure weaknesses, among some of the enterprise clients.
To deal with an entire workforce working remotely and they're realizing that their infrastructure just isn't capable of supporting it. So these folks were in the process.
Adjusting their technology stat.
Well the future as as it as it was already in progress with our if that were in the market, but now they're suddenly exposed.
Picking up speed an urgent.
But there's also a lot of uncertainty no one knows how long this is going to last and as we start coming out.
Out of the market shut downs and start reopening.
His uncertainty as to how quickly things are going to open up and.
That's why we're keeping our guidance where it is despite our strong performance.
Because we.
I don't know what the.
Rest of the year is going to break.
Thanks for the color.
My next question comes from our equine, let's be about capital markets. Please go ahead.
Thanks.
On the Atlantic question, Yeah looks like if you look at the development schedule you have quite a few cabinets coming on later this year.
Next year, yeah, how much of that based on what you're seeing in the pipeline you on your expectations for that market.
We have we have a large number of customers in our pipeline and we continue to close those customers. So we are building as fast as is true.
For the pipeline, but we have in our Q.. So we always try to marry our construction against actual customer demand and it has to be customer demand that we don't get too far ahead.
Build.
Advances to the customer needs in we over the last 19 years who've gotten pretty good at.
Right sizing our infrastructure to the growth of our customers.
Builds that you're seeing a representative.
Is going to be the customer uptake in that facility and we feel very strongly about that uptake, we see a lot of activity going on in Atlanta, and we see a lot of closings and Q1 continuing to go on in Atlanta. So we feel very bullish about that area of that region of the United States update that it's going to have insurance.
Customer usage.
And then just on the new logo.
You mentioned don't go into virtual tours.
How much more challenging is that to attract new lows in the current environment is that one area.
You expect to see it maybe a slowdown.
Oh.
And actually gave said we've seen an increase in requests for proposals are F.G.'s and requests for information in our eyes.
So I haven't seen or we haven't seen a very significant impact it too.
Customer movement as a result of covert 90.
If this things as days or another six months or so who knows there is some uncertainty in the market, but as we sit right now we've been very fortunate and we continue to see robust customer demand and a lot of customer activity.
Thank you.
Oh My next question comes from named Charles said, Let's ban back. Please go ahead.
Mmm.
You guys.
Have you taken any debt reserves for non payment.
Maybe you can just give us a sense for any tenants dress in the portfolio.
A bit.
But still very low.
Or anything to note there.
I'll turn this one already gave it a couple of comments first.
We've had fewer than 5% of our customers inquire about any pain relief.
And the formal requests for pain, inflexibilities impacted less than 3% M.R.C.
So we.
Gave you have any further color you want to provide on that.
Yeah, we.
We take our normal debt reserves, we look at those each quarter, there was a new accounting pronouncement.
It went into play into one of 2020 that changed a bit of the way companies have to calculate their debt reserves in that fully baked into our into our financial.
Thomas said you know we've we've had.
Relatively few inquiries about any sort of financial relief, but our position is this you know we have a strong balance we have liquidity you want to work with our customers wherever possible to make sure that they come through this pandemic in a way that is healthy for the long term for them healthy in the long term for US we haven't asked any of our vendors for any sort of.
Payment.
We have liquidity and we want to make sure. The vendors are there for us. After this pandemic subsides, because we we want our entire ecosystem to remain straw wherever possible, we have been working with customers.
To give them.
I'm short term payment.
Change for.
Additional commitments to to switch and we've been successful in doing that as Thomas said, it very very small portion of our.
Recurring revenue.
These are clients that week.
You with us for the long term.
Come out of business.
In a healthy way.
Okay. That's helpful. And then I just wanted to ask about niece expiration.
Thank you guys get a schedule, but maybe it would be helpful to get a sense of how much it up for renewal August.
And what it spread yeah kind of look like.
Yeah I'll take that.
We really don't put out a schedule because we have a thousand clients remember we're retail co location company.
Not really doing large wholesale.
He says.
Retail co location company with an average contract lanes of three to five years typically for years on average so in any given year you can expect around 25% of our of our lease is to come up.
Renewal and they're actually licenses not least.
But to come up for renewal and because of our load sure you can see that essentially everyone does does renew I will make a comment on our turn this quarter because it is funny that.
It was remark that it is elevated 0.4%.
Exceptionally low.
Sure.
What are really consisted of two clients. One was an online dating service that was purchased by an international company and they took.
Their deployment in the house overseas.
The other was a.
Was a technology company decided to exit the private cloud business. So both were business decisions and really has nothing to do with.
With our our performance or.
Mm.
Okay. Thank you.
Yeah.
My next question will come from frankly.
Raymond James Please go ahead.
Great. Thank you on the non recurring revenue in the quarter just want to check was that contemplated in the guide.
From that the guidance.
Doesn't include any.
<unk> red roll down through other pricing adjustments things like that coming up this lady here from customers that you're aware of.
Yeah.
Oh.
Go ahead.
No I'm, just going to say that the $4 million.
Fiber revenue was baked into the F.Y. 20 financial guidance, but.
We weren't certain of the timing and previously assumed it would be more evenly distributed throughout the year. The reason for that assumption I'll I gave a talk to.
Yeah, we did make that in that really is simply a result of an accounting change.
Prior to last year and sort of.
Why are you was accounted for with the Bill Cosby and capitalized and then taking the revenue over the life of the I.R.U.
Leasing standards Andreas the 42, we were required to record that.
Type Elise, which means as we build it and turn it over to the client we record all of the revenue and all of the clause all at once.
So it was baked into our into our guidance, we don't provide quarterly.
But it was baked into our annual guidance.
And in this quarter, we we were able to construct faster than we.
Originally anticipated so we both the revenue and we also looked at cost which is part of the the reason that.
That our margins were a bit lower than than our typical.
Q1, because this really was a construction project.
Okay, Great and and then just as as far as a follow up talk to us a little bit more about the edge product what do you see the Tam for that product in is that something you might consider licensing similar day done licensing other technology.
So we're not putting our financial is on the edge product yet.
There is obviously, a very large tam for edge.
Is something that we've identified is a significant market and a request that we received from a number of customers to have something that is more proximate to their locations or to their customer base and it is partly our response to that demand in that request by customers.
Providing that there are several use cases for the edge customer product you know we had been just from the transportation logistics industries Telecom media, obviously cloud in latency sensitive applications, such as E. commerce, and electronic gaming, which is particularly right now given everybody doing there.
Social distancing. So we're we're very excited about being able to bring a class for offering because one of the thing the two things at 10 to come up when we talk to people about edge. One is they're concerned about resiliency. They don't have a container just sitting in on that very hot area and middle of nowhere, but the person.
Resiliency and then the second is concerned about security and we feel the we have addressed bold to those items and concerns the customers have brought and of course, we will leverage core to add connectivity to those facilities as well, which make them very unique offering and something that we feel as the next step in advancing.
Customer.
What they can do on the edge.
And guys I'll jump in.
Really excited about.
Some of you I think on the call may have seen it already.
Toward recently, because it is part of our of our tour path at this point and those of you that no no as well no that switch bill data centers.
You know Rob designs data centres differently, they operate differently they have.
Best in class resiliency best in classic here.
In class ability for high density compute and he's taken all of that is putting into very very unique edge design. It is transportable air cargo containers fully modular fully scale level cost effective has system plus system.
Security and.
The ability for identity compute there'd been a lot of announcement about folks putting.
Cutting edge containers out there, but this is not like that this is this is all of switches technologies scaled down to one edge facility is unlike anything that.
Or or seen please go to our website.
Because on our website you'll see.
Information on our edge facility videos of the actual facility what it looks like how.
How it can be scaled up we're really excited about this opportunity also you'll see information on.
Century security robot that we've designed that we design that really to to solve the need that we had because it it's tough getting security officers the work graveyard shifts.
Elsewhere. So we designed this technology to solve a need that we had in the folks that have seen it said, hey, we could really use that as well. So we're really excited about that opportunity as well as as we are up switching wall.
Which is a really unique storage concept that as complementary to cloud stories. So please visit our website all of the information on those three new initiatives are on the website.
<unk> sentiment.
There are videos as well as text on the website for Ed century and vault. Please don't go visit those videos as you see now the switch videos are very well produce very well put together and informational. So please go and learn more about these products on our website.
Great. Thank you very much.
My next question comes from Michael Roland.
City. Please go ahead.
Good morning, and thanks for taking the questions [noise].
To follow ups, if I could the first one is on the connectivity business and.
Back to pick up in chronic hit the customers, you're trying to respond and build capacity in in the current climate and on the data Center concept is there are also a multitenant option versus a single 10, an option that you get your.
Are working on I think as people think about the edge, they're also thinking about how.
You can get multiple padding closer to yeah. The eyeballs. Thanks.
All right so.
Thank you I'll take to these questions into like game.
Provide further illumination.
Activity, yes, there are more people, who seek connectivity that is impacting to tell goes even more than it's impacting us.
The end user connectivity, which is what we're seeing is out.
Vigils in homes in various smaller deployment locations rather than offices. So that has some impact on us, but it hasn't been material.
The.
Second thing is to edge everything that we do is targeted towards multitenant occupancy.
We don't usually lease whole buildings to customers or even hold sectors to customers. So on the edge deployment, we have absolutely design knows so that they are set up for multitenant occupancy there are multiple pods or groups of cabinets that you can deploy in and his Gabe said they are <unk>. So.
We can build one that is.
24 cabinet and we could build one put another section on there and becomes 48 and so on and so forth. So these are skater labeled data centers that as we have an initial deployment put down we filled out with tendency and customers, which is usually more than one and then we will build that say that building out and continue to add more.
Prosody on that facility and add incremental number of tenants. So it is not in designed are intended to be for a single canon do it can be used for that purpose. We plan to put multiple tenants at each location, which is part of the region that the logistics of security in maintenance et cetera were so complicated to figure out.
Rob Roy really put himself to the task and came up with a solution that combines vault security and edge to build the best in most robust most resilient data center he possibly good on the edge that would deliver a good R.Y. for the ambassador base.
Do you have any more.
On the connectivity side, Mike I would add that.
But don't really get into her until mid March.
So there there really wasn't a significant impact on connectivity usage that we saw in Q1.
There is likely to be an uptick on usage in cute too and we do charge customers based on usage.
But we don't have a lot of data on that yet because it's the telecoms Bill us interiors, though we're just getting that information.
Just to follow up all your customers give new indication that they want to see it that crime location for you somewhere in the Americas.
Mm.
No.
It's really we haven't seen customers asking for a.
Prime location you remember as gave mentioned earlier this call to prime served regions inside the United States rather than.
<unk> and what we can do now is we can reach all the metropolitan Hobbs in less than 10 milliseconds, which is what customers are looking for in connection with their prime deployments their prime deployments can be anywhere what they want to do is put their prime deployment and the place where there is the cheapest amount of power.
The lowest cost of can activity, the lowest amount of taxes and the lowest cost of operations and we have chosen those locations to put in our for Prime Zen while also making sure that they are 100% green and located in areas that are some 10 millisecond solve the metropolitan areas. So with those criteria being met we haven't had.
Customers ask us for a an additional prime location would they have been asking is four is an eight.
Spoke type deployment and that is what we are addressing with our switch facilities.
Thank you.
Mmm.
My next question will come from that Jerry with Credit Suisse. Please go ahead.
Hi, Thank you very much for the question then.
I know you're in kind of discuss this a little bit earlier on the call given the average size that your customers are generally work with larger more established entities.
Small and midsize businesses, but.
Your customers actually ask for payment poor parents or deferrals or anything like that they did you have an idea maybe quantifying what percentage of grabbing me as well per cent your customers actually request something like that.
Yeah I'll take that.
Talked about or or the call.
The folks that.
For some sort of payment amount to less than 3% of our monthly revenue.
We are here in Las Vegas, you guys know our isn't that some of our businesses is casino in hospitality base, but that's less than 4% of our revenue.
You know wherever possible, we provided some form of payment.
Form of extended payment terms for for two or three runs.
Until we see a reopening in exchange for an extended.
Just switch, but it's been been minimal.
Got it. Thank you and then see my second question has to do at the robotics offering that you guys are discussing already mentioned earlier in the call is this something that data center, operator or edge company can just subscribe to like the robotic space or do they have to actually.
Deployments your actual edged micro or smaller data center sites that come with the robotics capability.
No.
Great question, and we tried to bring this company is a new product. The we've initially and I'm visioned this robotics as being a augment to the security systems or switch edge.
So many customers.
Asking us hey can we deploy this is our facilities or in our industrial locations that we should absolutely. So that allows us to scale up the robotics in that will generate additional revenue and also drive down costs and allow for additional research and development.
Enron to do even more with these robots and he already has so they are absolutely available to those who don't have co location with us and can be deployed in non colocations environments, just as effectively as they can be deployed in co location.
<unk>.
God. Thank you.
Again, if you'd like to ask a question. Please Crestar then one our next question comes from James screen with William Blair. Please go ahead.
Thanks for taking the question just on the connectivity side Sorta telecom side.
So let it into traffic growth in the quarter and Apptix from a lot of or band with related companies. You can you just talk give it a little color on what your saw there, especially as a sort of came out of March April in terms of needs to some your customers and connectivity.
Mmm.
Yeah.
Is but one thing that just quickly you do is gave mentioned there is there is a lag in the connectivity building so.
Customers will use and we'll get the invoices 30 45 days after that you use it just occurred so.
There is some some lag in asked knowing how much more they have to use we expect that there will be some uptake in the connectivity how much that will be we will know one scene voices start coming in from the carriers.
And all that.
Yeah, Yeah in April we actually.
April bookings have been had been on pace with our historical averages we did see an uptick telecommunications bookings in April.
You know, we're we're not sure how that will translate into may and beyond but we definitely saw deck in April.
And you know anything from across connect perspective inside the data centres that you saw change relative basis as being sorted change in March.
Yeah, you look at our guard bester deck and what I mentioned in in my marks is you know we were up over 70 500 billion Crossconnects now I think the last number that we provided to the market was 6500, but that's a nice increase and continue to see that moment.
Great. Thanks.
Mm.
It's a question and answer session in the conference is also now concluded.
Thank you for attending the dates presentation you made out of this can it.