Q4 2020 CyrusOne Inc Earnings Call
Good morning, and welcome to the Cyrusone and fourth quarter, 'twenty and 'twenty earnings Conference call. All participants will be on listen only mode share do you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be and opportunity to ask questions to ask a question you May press star.
And then one on your Touchtone phone to withdraw from the question queue. Please press Star then two.
Please note. This event is being recorded I would now like to turn the conference over to Michael Schafer VP of capital markets and Investor Relations. Please go ahead.
Thank you Kate good morning, everyone and welcome to Cyrusone fourth quarter 2020 earnings call.
Today, I'm joined by Bruce Duncan, President and CEO, Catherine <unk>, CFO and John hate them CLO.
Before we begin I would like to remind you that our fourth quarter earnings release, along with our fourth quarter financial tables are available on the Investor Relations section of our website at Cyrusone Dot com.
I would also like to remind you that comments made on today's call and some other responses to your questions deal with forward looking statements related to Cyrusone and are subject to risks and uncertainties and factors that may cause our actual results to differ from expectations are detailed on the company's filings with the SEC, which you may access on the SEC's website or on.
Cyrusone dotcom.
We undertake no obligation to revise these statements. Following the date of this conference call, except as required by law.
In addition, some other companies remarks. This morning contain non-GAAP financial measures you can find reconciliations of those measures to the most comparable GAAP measures and the earnings release, which is posted on the investors section of the company's website.
I would now like to turn the call over to our President and CEO Bruce Duncan.
Yeah.
Thanks, Michael and welcome.
This one fourth quarter earnings call.
Before I begin my prepared remarks.
I wanted to give a big shout out and thank you to all of my Cyrusone teammates worldwide.
These last 11 months dealing with Covid and now the current major Texas Winter storm had been very difficult and challenging more than any other time and the company history.
And you all have risen to the challenge your dedication and commitment taking care of our customers and our data center facility as well as each other has been extraordinary.
So on behalf of the senior leadership team I. Thank each and every one of you from the bottom of my heart.
You are very special and talented teammates and it has and honor and privilege to work with you.
With that.
Let me start with my prepared remarks.
I'd like to begin by.
Saying that we are very pleased with our leasing results for the fourth quarter.
With broad based demand across industry verticals.
And quoting significant contributions from both our Hyperscale and enterprise customers.
The leasing was also well diversified across geographies with importantly, a meaningful improvement from recent quarters and our U S market.
And continued strong performance in Europe.
For the full year.
We signed $156 $8 million and annualized revenue.
The highest total and the company's history.
Significantly 56% from our 2019 bookings.
As a result, we began 2021.
With a record backlog and good leasing momentum.
With that said.
I recognize that the guidance for this year is disappointing.
Yeah outlook is being impacted by an unexpected increase in churn.
And as well as an extension and the book to Bill cycle, particularly for Hyperscale Asia and Europe.
But also to some extent in the U S.
In large part driven by the pandemic and customers taking more time to deploy.
This is reflected in the anticipated commencement timing related and our year end backlog.
And as well as our assumption about the revenue and EBIT contribution this year from new leases that we expect this on.
Please note that this is a strictly a timing issue with an increase in the period between signing and commencement for some of the bigger deployment impacting this year's results.
Importantly, the average term of leases signed during 2020.
On a colocation square foot weighted average basis with 8.2 years.
Improving the quality and durability of our rental stream.
The team is focused on driving better normalized <unk> per share performance and we have placed a significant emphasis on improving this metric going forward.
Beginning with slide four you can see the financial results for the fourth quarter, which Katherine will discuss shortly.
We signed 31 megawatts.
And $49 $3 million and annualized GAAP revenues during the quarter.
One of the biggest leasing quarters in the company's history.
As a result of the strong leasing we began 2021 with a backlog of $101 million.
Which helps to Derisk, our growth this year and positions us well for growth and 2022 and beyond.
Turning to slide five we completed construction on a 194000 Colocation square feet.
And 48 megawatts in the fourth quarter.
Cross markets and both the U S and Europe.
Most of which.
He's tied to sign leases.
Our development pipeline at the end of the year is weighted towards Europe.
With 50 per cent and the square footage under construction pre leased.
Additionally, we are expanding into Paris, one on the Lady markets in Europe with a fully pre leased data center.
Yeah.
We continue to strengthen our balance sheet.
The only additional equity.
On a forward basis through our ATM program and the fourth quarter and.
And monetizing our remaining investment and GDS.
Slide six.
Additional detail on our leasing results for the quarter and full year.
The MRI per kilowatt sign for leases during the quarter was $131.
And the lease term was 9.8 years on a colocation square foot weighted average basis.
As I mentioned, we saw good demand from both our Hyperscale and enterprise customers.
With deals greater than 500 kilowatts, representing 74% of our bookings for the quarter.
Enterprise accounted for $19 $5 million and annualized revenue signed.
And Cody and several deals greater than 500 kilowatts.
And the leasing total was significantly higher than our average a $10.5 million through the first three quarters of the year.
We were also pleased with results across our U S market.
With $32 $6 million in annualized revenue signed which I will talk more about in a minute.
And at the end of the year Hyperscale companies and Enterprises, Inc.
Each represented approximately 50% of our total portfolio rent.
For the full year.
MRI per kilowatt sign with $130 and.
And approximately two thirds of the leaking, whereas with Hyperscale customers.
Significantly from the prior year when there was a more even hyperscale enterprise split.
Moving to slide seven.
Fourth quarter and.
Connection revenue was up 12% compared to the same period a year ago.
In December we launched our Google cloud direct connect offering, adding five new direct on ramps across our portfolio.
Well operating our enterprise customers additional flexibility and meet their hybrid cloud needs efficiently and cost effectively.
We also continue to make good progress on our commitment to a sustainable future.
We recently announced and we will purchase nearing 70 megawatts of renewable energy generated by the Azure Sky Solar project and North Texas.
This will provide the equivalent of 100 per cent of the power requirements and our al and data Center.
And approximately 70% on the power requirements and our Carrollton data center.
Yeah. The agreement reflects our commitment to transition to renewable energy resources and local communities.
Turning to slide eight.
Demand throughout Europe remained strong.
And as Hyperscale companies continue to expand across key markets.
And.
And the fourth quarter.
We signed $16 $8 million and annualized revenue.
And our European markets accounted for 47%.
Of our leading over the full year.
As I mentioned earlier.
We are excited to expand into Paris.
And are doing so with a fully pre leased development.
Minimizing the risk that comes with entry into a new market.
Construction is underway on the first phase of a data center.
The reported a 27 megawatt customer deployment.
And we'll ramp and blocks through mid 2026.
With the capital spend closely aligned to the timing of revenue recognition.
As the chart at the bio and on this slide shows.
Upon completion of the project and our development pipeline.
Our European footprint will be.
And to what.
Representing approximately 20% of our total portfolio.
Slide nine provides an update.
On the near term priorities that we discussed on last quarter's call.
The first priority was to improve our leading share in the United States.
The $32 $6 million and annualized revenue signed Costco U S markets with more than double the prior four quarter average.
With contributions from customers across many industry verticals throughout our markets.
With our revised targeted hyperscale stabilized yield range of 8% to 10%.
We are able to be more competitive for deals.
While still generating attractive equity return.
We also have capacity across our key markets.
To meet demand, including shell and land inventory.
And I guess just that.
Europe remains very strong.
And we now have a presence across all of the major European data Center market.
And in the U S. We have sufficient inventory to continue to support our growth and clothing available shell and land to more than double the size of our footprint.
The demand continues to be driven primarily by U S based hyperscale customers.
Although we expect that over time and it.
Price demand will contribute to our growth.
Our proven track record with the Hyperscale or <unk> as.
As well as our broad footprint and strong credit profile put us in a good competitive position across these markets.
Lastly, we are planning to have our virtual investor day on June 16th.
Giving you an opportunity to hear from all members of the senior management team.
We will provide a comprehensive review of key industry trends and our business and our strategy and co.
And a framework to help you think about growth in the coming years.
It has been a very busy year.
And while we have a lot of work ahead of us.
The demand trends remained strong and.
And we are well positioned and compete and help our customers with their it infrastructure requirements.
It is incumbent upon us to execute our plan and create value for our shareholders.
Before I turn the call over to Katherine.
And when I say, how excited I am to have her as a partner.
He has a tremendous background and.
He's very smart energetic and she will play an important role and our success in the coming years.
With that Catherine we now will now provide you more color on our financial performance for the quarter and discuss our guidance for the year Catherine.
Thank you Bruce and good morning, everyone I'm thrilled to join Cyrusone and it's such an exciting time for the data center industry and my first call as the CFO I can say with confidence that I'm, joining a company with incredible momentum supported by favorable secular trends and compare.
Additive platform with a presence in key markets and a solid financial position.
And as Bruce indicated we believe there is a significant opportunity ahead of us.
And we are focused on running the business is best positioned for sustainable and profitable growth.
Turning to slide 11 revenue growth and the fourth quarter of 'twenty and 'twenty was driven by a 10% increase and occupied Colocation square feet and at 12% interconnection revenue growth.
Italy, offset by the impact of $4 $7 million in lease termination fees received in the fourth quarter of 2019.
The decrease in NOI margin of approximately four percentage points was driven by several factors.
The fourth quarter of 'twenty and 'twenty margin was negatively impacted by an increase and zero margin pass through metered power reimbursements that reached nearly 17% of our total revenue and an increase in cooling costs in our Frankfurt facility related to chiller and efficient.
And which we are addressing.
Additionally, the fourth quarter 2019 margin was higher as a result of one time items.
Typically the reversal of a property tax accrual as well as the lease termination fees I just mentioned.
Normalized <unk> was up slightly compared to last year due primarily to a decrease in interest expense as a result of lower rates, which more than offset the decrease in adjusted EBITDA.
Rent churn was one 9% and the fourth quarter, it's lower than we expected, but relatively in line with the results from each of the prior three quarters.
And churn for the full year totaled three 6%.
Moving to slide 12, we have a well balanced portfolio with the revenue contribution and spread across our markets.
And with notable growth in Europe is the result of recent lease commencement.
We anticipate the percentage of revenue attributable to these markets will continue to increase as leases and our backlog come on.
And with further scale our business in Europe.
And slide 13 shows our development pipeline and set up 289000, Colocation square feet and 73 megawatts.
As well as 279000 square feet of powered shell under construction in Paris, and Dublin, which will add more than 40 megawatts of capacity to our footprint.
Please note that the powered shell in Paris will support the customer deployment included in our leasing in 'twenty and 'twenty.
As Bruce mentioned, 50% of Colocation square footage under development is pre leased.
And we have substantial liquidity to fund the remaining costs.
Upon completion of these projects our portfolio.
On both and square footage and power basis will be nearly 20% larger compared to the portfolio at the end of 'twenty and 'twenty.
Turning to slide 14, we continue to strengthen our balance sheet to ensure that and we have maximum financial flexibility to support profitable growth and to protect our investment grade credit ratings.
And as of the end of the year, our pro forma leverage adjusted for available forward equity remained low at five times, and we had more than one $7 billion and available liquidity.
As noted by Bruce earlier, we executed additional forward sales in the fourth quarter, and we have approximately $485 million and available forward equity to help fund our development pipeline and manage leverage within our targeted mid to upper and five times range.
We also monetize our remaining GDS investment raising approximately $177 million and net proceeds.
All of which $67 million was received in January.
Slide 15 shows the expected commencement timing for leases signed and the fourth quarter and put our backlog as of the end of the year.
Just over half the revenue and the backlog is expected to commence within the first two quarters of the year.
On the nearly 15 million and then leases expected to commence and the third quarter and beyond as we have discussed in prior quarters and as shown in the footnotes and approximately 26 million is associated with 22, five megawatts and expect it to be deployed in four and a half.
Megawatt blocks annually from mid 'twenty, and 'twenty to mid 'twenty and 'twenty six.
Of the remaining 24 million approximately 5 million is expected to commence in the second half of this year.
Approximately $14 million the following year and.
And the remaining $5 million in 'twenty and 'twenty three.
Before I discuss the guidance for 'twenty and 'twenty, one I'd like to note that we haven't included two additional line items and the additional information section on page 17 of our fourth quarter supplemental disclosure document.
These items relate to above and below market rent amortization and.
And the first taxes, primarily associated with the acquisition of video and.
And these adjustments are common among our data center REIT peers as well as tower, we the industry and which I spent the past five years and the inclusion of these items aligns our supplemental disclosures closer to the financial statements.
Now turning to slide 16, the guidance mid points for lease and other revenues from customer and adjusted EBITDA reflect increases of seven and 8% respectively.
Compared to 'twenty and 'twenty results.
We expect that full year 'twenty 'twenty, one churn will be and the range of 4% to 6%.
As Bruce mentioned, the anticipated increase in churn compared to last year, particularly in the first half of this year is having an impact on our outlook.
We estimate that approximately one third of churn will be rate driven with the remaining two thirds related to customer footprint consolidations migrations to other data centers within our portfolio and exit.
Also impacting our 2021 outlook is the lengthening of the book to Bill cycle that Bruce discussed.
Please note that they expected increase in zero margin metered power reimbursements.
Approximately 18% negatively impact the implied adjusted EBITDA margin based on the mid points of the total revenue and adjusted EBITDA guidance ranges.
The more muted growth in normalized <unk> per share is driven by the factors that I just mentioned.
And the impact of funding requirements with capital expenditures expected to increase to $975 million in 'twenty and 'twenty one at the mid point of our guidance range.
In closing.
We begin the year in a solid financial position with a record the revenue.
Capacity to meet customer demand across our markets in Europe and U S.
And our strong balance sheet with significant liquidity to support our profitable growth.
We appreciate you participating in our call.
And we're now happy to take questions.
Given the number of people and the Q, we kindly request that each person. Please ask one question. So that we can stay on schedule and conclude the call on time at noon eastern.
Thank you and Kate please open the line.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw from the question queue. Please press Star then two.
The first question is from Ari Klein of BMO capital markets. Please go ahead.
Thank you and can you maybe elaborate a little bit on on the timing issues between deployments and commencement is that broad based on our specific debt customer or geography.
Sure I'll start and then I'll hand, it over to John I would say, what we're seeing is taking more time, especially over in Europe in terms of as a result of the pandemic in terms of getting things done and getting permits and.
So it is a large a longer process than we anticipated, but John you want and just talk about that.
Sure. Thanks Ari.
So yes, I mean, it's broad based it's not it's not customer specific right. It's it's market specific right.
Mostly due to the pandemic right like Bruce said permits equipment lead times I mean, everything is driving that and on the customer side, just straight up execution on their side for for contraction and and <unk>.
And such.
Got it thanks, and then just on the strategic initiatives that you've been highlighting around I'm pretty sure and you know and the lower targeted yields.
I know, it's early but what are you seeing on the ground post these changes and announcements and anything on the pipeline you can point to.
Sure all right again, when we announced last quarter that we are bringing our our targeted stabilized yield down to 810 per cent, we werent, leading the market and we are meeting the market and in terms of that again, we're very pleased with what we've seen in the fourth quarter. We had very good results at 49 3 million and I think what was encouraging there is it.
Broad based in terms of where we're getting traction in terms of leasing. So we're encouraged I would say that you.
And there's still a lot of demand out there and our our our job and the team did to get our fair share and.
And we're all over it.
Thank you.
Yeah.
Yeah.
And next question is from Richard Choe of Jpmorgan. Please go ahead.
Hi, I wanted to follow up a little bit on the churn and is it mainly and the U S or in Europe, and then also and it looks like it's front and loaded but do you expect it to come down for the second half of the year.
And more color there would be great. Thank you.
Kevin you want to take that.
Yes, Bruce Thank you.
So what do you think about the churn and think about the.
Aging of our portfolio. So we have relatively young portfolio, and Europe, and a little bit more mature portfolio and the U S. So as the renewals come on.
And that's what's driving the churn and what we're seeing a little bit on better than expected churn in the second half and the latter part of 'twenty and 'twenty is driven mostly by some of our good efforts on customer renewals, but also the headwinds for the customers whether from the timing and delaying some.
Their decisions from 'twenty and 'twenty to 'twenty 'twenty, one which is why we anticipate some of the churn will pick up in 'twenty and 'twenty one.
Great. Thank you. So again the churn is primarily in the U S. Because as Kevin said, our portfolio and Europe.
It's.
Pretty new.
Next question and.
Next question is from Erik Rasmussen of Stifel. Please go ahead.
Yeah. Thanks, maybe just on on Hyperscale activity really seemed like it picked up especially in the U S. For you guys I'm just trying to get a sense of how sustainable this activity is and where you've seen sort of the biggest opportunities as it relates to your sales funnel.
And then maybe within that you comment on sort of the mix.
Between U S and Europe that.
That would be helpful. Thanks.
Alright here, let me I would say, we're very encouraged in terms of what we're seeing right now in terms of demand I think that.
On the Hyperscale orders are active weir's seen broad based demand as we've talked about if you looked at our you know our top five markets for the quarter and were Frankfurt, Northern Virginia, San Antonio Phoenix, Dallas, and and we were encouraged by that but you know as we said last quarter went on members weren't.
Oh good.
It's a lumpy business, so weighted and things that.
You'll take longer to get done and that sort of thing. So again, we're encouraged.
And we there is good demand out there but.
And one quarter does not a trend make as I tell the team and we got to keep going and keep putting up some good numbers and that and again, there's good activity and I'm confident and the team and we're gonna be able to continue to do this but it again and so there's a lot of work, but again. The good news is there's a lot of demand both here and and in Europe.
Okay. Thank you.
And the next question is from Frank Louthan of Raymond James. Please go ahead.
Thank you I wanted to dig a little bit into.
The sales process can you give us be a little bit more specific about the strategies that you're specific strategies, you're and pulling to drive sales and then.
Follow up kind of related to that is there something that you're doing that's impacting the sales cycle or is it more something that's changing on the customer side. Thanks.
I would say and terms and.
Cyrusone.
And so forth, our internal sales force because 90% of our leasing.
And it's a great team and I would say you know the secret sauce. If you will as the relationships, we have with our customers throughout the organization and a track record of delivering on what we say so trying to understand what their needs are and again you know.
Our customers build their own on facilities as well, so, but they do business with us because we can provide solutions to them. So it's the relationships we have with them throughout the organization that are on the sales side, but John and his team design and construction and and throughout the organization. So I think the debt that's it.
One of our strength and it's very important to our success.
Yeah, and Frank It's John I mean, we're you know we're in front of our customers directly right talking about everything on the sales side as well as obviously on the infrastructure side.
And that's the most exciting thing right in front of our enterprise customers. We're in front of our hyperscale customers and really having that relationship as is key to success.
I mean is that different than what you've done in the past I mean, the bookings have struggled a little bit for the last couple of years, just curious if you're doing any running any new plays and and isn't either any of those changes, you're making and how you're approaching the sales process impact you are having an impact on the sales cycle lengthening or is that more customer driven.
And.
I think the sales and the length of and he is customer driven in terms of taking more time, but in terms of us doing different and I would say a couple of thing Johns back, which I think has been a great addition, and.
And we've changed out in terms of the leadership and the sales group with Brent Behrman take your debt later ship broker and I think that was a very positive impact and yet we had a great. We had a great fourth quarter and we've got to keep going and showing progress, but we're encouraged and oh that was it.
With this and momentum.
Alright, great. Thank you.
Thank you.
The next question is from Matthew nickname of Deutsche Bank. Please go ahead.
Hey, guys. Thank you for taking the question.
But items related to the sources of funding for the development Capex, so beyond new debt and equity any update you can give us on how you're thinking about additional or alternative sources of capital to fund expansion, whether it's through portfolio dispositions or potential JV and then I haven't really quick follow up on on the recurring capex.
And that's moving up from about 14 million to about $20 million to $40 million. This year. If theres any color you could provide in terms of what's driving that pickup this year. Thanks.
Alright, let me take the first one.
Would say that.
Yeah.
Well yeah.
Kevin do you want to take it.
Yeah sure. Thanks, Bruce So Matt first of all we are looking at different sources and of capital funding and the capital structure now as you can see at $1 7 billion liquidity at starting this year as well as the $485 million available from there forward equity.
And we're pretty capitalized to.
And to maintain and to support our Capex for this year, which is a little higher than you've seen in the past.
Going forward, we'll be looking at different options and opportunities and we are really looking forward to share with you our strategies at our Investor day.
And Jim Yeah, I think that's important and Investor day, we were going to go through in terms of the recycling and and talking through that and I think from our standpoint again. The good news is where we are today, we funded our all of our needs really true through this year with our foreign equity and the sales and monetize it.
Jude, yes, but I would anticipate that we will raise some equity this year on a forward basis for next year, but we're also going to discuss and Investor day sort of a strategy in terms of.
How we're thinking about and <unk>.
Recycling capital.
Yeah, and also coming back to your second question on the recurring Capex. So mostly if you recall in my prepared remarks, I mentioned, our inefficient chillers isolate it to Frankfurt.
And so our Frankfurt property.
And we are addressing it but we have to incur a recurring capex and its higher deal. The large part of that is replacement of the chillers.
Got it thank you.
And next next question Simon Flannery, Simon Flannery of Morgan Stanley. Please go ahead.
Thank you very much good morning, I Wonder if you could just talk a little bit more about Paris, how did that all come up and was that customer driven and is this something that could become a bigger campus beyond what you've signed up so far and any commentary around the the returns that you're seeing on that market. Thanks.
Alright, Michael you want to take that.
Sure. So the Paris was an opportunity with a specific customer.
We're excited to be in that market, it really rounds out our presence and the key European markets and we think.
Just having a broader.
Set of markets to be able to offer to our hyperscale customers, particularly as they expand and Europe.
Got it and will help us and.
And our positioning relative to the competition. So we're excited to be there great opportunity and it is a long term lease which will provide growth for us and in the coming years.
And then and our challenge is to find more and more sites like this in Paris, because it's very difficult, but we're working on it and and to continue our growth there, but we're very excited to be on all the major markets.
And in Europe right now.
With this lease.
Great and any comments on the competitive environment and Paris.
I would say the competitive environment everywhere.
Yeah.
Every place these competitive I would say that again it was Europe. The good news about Europe is it's less competitive and the United States, because there's less supply.
And let's.
Let's let's competitors, but again, that's not to say, it's not dependent on its competitive but.
You know for instance, and Paris, we're just finding sites, it's very hard to find and you know to be able to find good sites that you're able to develop so it's difficult, but that's again and what I love about Europe. The good news. The hard thing is the bad news is hard to develop and it costs more and just that the other thing. The good news is once you have something and it has.
Value so we like that.
Thank you.
Thank you.
The next question is from Michael Rollins of Citi. Please go ahead.
Thanks, two questions if I could first just curious if you could provide some context on the renewal spreads or just some same store metrics just to understand what's happening in terms of revenue in the existing facilities that are that are up for renewals and then secondly, just and.
As Youre thinking about development yields you mentioned the focus now for the U S is at eight and 10, what's the focus of that development yield in Europe, and what's the risk that those hyperscale yields.
Come down from where they are today, given the competitive climate.
Well I would say, let me take the second one first I would say that and development yields I would think.
And you should be thinking of development yield of a stabilized yield of 8% to 10% both in the U S and in Europe, because I do think there is you know there is some compression places there too. So I you know I think that eight to 10 per cent year there'll be at the higher end of that range, maybe a little above that but the stabilized.
Yields are going to be in there.
And in that ballpark. So I think you need to think about it that way in terms of.
On the renewals spreads Kathy do you want to take that I would just say we.
In terms of going to talk more about this at the Investor day, but.
And you have any time, and Kathryn and I talked about.
Yeah, Mike what I would say is our average renewal rate on a GAAP basis was slightly down for the quarter generally speaking I would guide you to think about how we how we look at churn right. Our churn was a little bit better in the second half of 'twenty and 'twenty, but we expect and more headwinds.
From the churn and a third of that comes at a rate.
Reductions and the rest of it is more consolidations and some of that exits and moving between the facilities, but I would I would think about it and that framework and we'll give you a little bit more color when we come to June and the Investor day.
Thanks very much.
Thank you. The next question is from Colby <unk> with Cowen. Please go ahead.
Great. Thank you first off congratulations on your and leasing in the quarter and my questions are the following day.
Do you lease out Frankfurt four.
In the fourth quarter and if so is that should we be thinking of the 11 megawatts, which you've talked about before or is it the 17 megawatts.
But you now have referenced in your development table and then also what are your biggest markets in terms of leasing opportunity.
In 2021 based on the capacity that you have available to sound I guess, what I'm really getting at is do.
Do you think that the net debt capacity or lack of capacity could be a constraint or a restriction to your leasing opportunity in 2021 versus what we just saw in 2020. Thank you.
Well, let me take the second one and then maybe Michael you can take the first and where I would say that we've got good capacity I mean in terms of if you look on what we have capacity and.
You know, let's just take the U S market is very good capacity and most of the U S market and Northern Virginia, Phoenix, Dallas, and so we have capacity and I think that's great.
And Europe, we've got capacity.
And Inc.
And and.
London and.
And Frankfurt and.
Amsterdam and.
And so we've got and things are things are you know I feel pretty good that we're not gonna be part without without it and we're working hard as we talked about.
Last quarter.
New acquisition, and London, and we're working on and some other acquisitions and some of the other European markets, hopefully, you'll get done and the next quarter or two but so we're going to make sure. We have capacity and we're very excited about our position in Europe as I mentioned, moving 20 per cent of our portfolio and we have enough capacity in terms of what we have with land and shell powered shell.
And we're able to double that footprint and fairly short order. So you know I think that's pretty exciting because it's a great market to be it.
Hum.
And again and the U S market, we had passed and you get into this and even cash count and Santa Clara net.
We're about ready to get on our final permitting and hope knock on wood I've made years and we're excited about that project as well.
Yes.
Hey, and called Yeah, Yeah Colby on your question on on Frankfurt for 17 megawatts consistent with how we present our properties is on it.
On a non non redundant basis. So the 11 is whats leasable and Theres a substantial portion of that that's leased up.
And as Bruce mentioned in terms of capacity, we're obviously focused on it and to ensure that we have the ability to meet our customers' demand as they continue to expand.
So again just to.
If you blend you guys don't see capacity being a hindrance to leasing.
In 2000 and 2021.
Well, let me just day this Colby I hope we do.
And I hope, we get so many leases and he has a problem, but right now.
We don't think it's gonna be a problem though.
Okay. Thank you.
Thanks.
The next question is from Jon Atkin of RBC. Please go ahead.
Thanks So.
I appreciate the color about kind of the top five markets, we saw leasing momentum.
Bruce you also talked about kind of delayed customer decision and so I'm wondering to what extent you saw slippage from you on.
On decisions from for Q.
<unk> and what that might bode in terms of early year momentum on the leasing front.
Well again, I would say that.
The pressures on us.
And then just thinking about what the.
And when I think about what the upside could be in our guidance, it's going to be we get some leasing done early and get people in their early because it takes so long to talk about the time and people get people and we've got it beyond that gets at least it's done here in the next few months too.
Did you have any meaningful impact on the balance of the year in terms of you know.
Having some upside in that and the numbers. So we're all over it but it's it's gotta be for for products that we already have on the shelf that we can do that but again there is demand and again.
And there is to me and in the U S markets and and and.
And get them and we've got available capacity, we just got to get you know get some leases done and we'll see if we get them done, but it's been competitive. So it's not you know, but there's work to be done, but where we're and the team's working hard on it so let's see.
On slide 15 was curious the.
Backlog Commencements there.
There's a lot you know was.
The $49 8 million, how much of that is spread into 2022, and and even into 2020, tweak and you give us a little bit of a color.
We can kind of think about our medium term forecast a little bit more accurately.
Sure Catharine and Michael you want and take that.
Yeah, I'll take that so John first of all and good morning, but I think most of this is towards 'twenty, two and 'twenty. Three if you think about it and then if you look at the beginning of the year, we're about $25 million per quarter, so a little bit more on link longer wait.
And it and also and they also remember that it includes 26 million of that 22 five megawatts, that's expected to be deployed all the way to mid 'twenty and 'twenty six.
Thank you.
Okay.
The next question is from Eric <unk> of Wells Fargo. Please go ahead.
Great. Thanks for taking the question.
Curious you had a pretty good enterprise leasing quarter. So maybe you could talk about was that driven by.
Single larger customer deal.
Or do you see any type of momentum and the business and should we think about as you look at your enterprise funnel into 'twenty and 'twenty. One is there an opportunity to kind of outperform.
10 to 12 that you've done historically, so how should we think about that customer segment as we enter 2021.
Yeah.
Eric Thanks for the question I would say again, we were very pleased with the.
The big number for enterprise and the quarter and it wasn't just one customer as the number of customers. So it was again.
And again, a number of customers and they took greater than 500 megawatt. So it was very encouraging. So we liked that a lot of that being said again it was such a big quarter relative to our usual $9 million to $12 million a quarter I would not factored that and that we think you know that that's going to be the run rate going forward I think.
You're going to you know you kind of go back to more than makes other amount, but it was a very good quarter. John you might want to talk about you know John.
On this front and center bunch of these customers on it.
Yeah, Eric good morning.
Yes, so I mean, we're seeing great great demand on the enterprise side, and we're really seeing like what we're seeing is this enterprise at scale right, where we're seeing greater than 500 kw deals coming from enterprise customers and.
And our portfolio is obviously well positioned to accept those and you know.
Our operating prowess and the and the space helps us close those deals.
Great. Thanks, Jamie it's a great core it was a great quarter for a free enterprise, but going forward and I would not assume that that's going to be the new run rate I'd bring that back and like that.
Got it thanks Bruce.
Yes.
The next question is from Nick del Deo of Moffett, Nathan and please go ahead.
Hi, good morning.
Bruce you noted that you wanted to bring greater focus to our <unk> per share growth rather than you know call it aggregate growth.
Are there specific steps that you've taken to further that goal or those efforts still kind of and the planning phase.
No no we were having a bunch of things and again, that's the only one other focuses on investor day sort of walk through some of the things we're doing to try and change the men and thinking and how we're looking at things and also that would talk more about recycling capital as well so and again, we think it's an important focus that it is a great company and some great things.
But we we are changed and the focus from just revenue growth to try and get down to what I think shareholders care about which is <unk> <unk> per share and a ethical per share growth. So that's that's a focus and we're going to walk through.
That and more detail.
And Jim.
Yeah.
And operator and is where Michael.
Yes from Michael Funk of Bank of America. Please go ahead.
Yeah. Thank you very much for the question on British Katherine and Mike I Hope, you're all doing well.
And I'm on a personal basis spot operationally.
Wanted to ask about the potential impact from the from the cold and the power outages, and Texas City operational impact where financial impact from that.
Sure I think it's early from financial impact, but let me, let Michael talk a little bit about the power and power cost and then John can give you a little flavor about what's going on because he has been 24, 7%.
Our Texas teams have been and Oliver So Michael Yeah sure. So as it relates to our exposure to rising rates, we have a significant portion of our energy requirements and Dallas and Houston that are hedged at low rates and that Austin and San Antonio are regulated markets. Additionally.
As a percentage of our leases are metered power. So the powers of pass throughs. So we're not bearing the risk on.
And on that so we're in good shape from a.
From a from that perspective, John you can talk more about the operational impact.
Yeah. Good morning, Michael I mean, operationally and Bruce mentioned it and is in his early remarks, but what the teams have done on the ground here is has been phenomenal obviously unprecedented.
And then going on here in Texas operationally, our sites had been stable and electrically.
Electrically we've maintained 100% uptime and and we've had some minor cooling issues that we've been dealing with but like I said this has been and all out effort.
By the teams to keep our customers data centers up and running keep our facilities up and running and no no major impacts and we're coming out of this hopefully the next 24 hours and the freezing temperatures will subside and we'll get back to business as usual.
Yeah, but that could go down here I could one.
[laughter], if I could one more on one more on insurer and please so regarding procure and a 46% and in 'twenty and 'twenty. One he gave you some color around the drivers there.
And thinking about the portfolio, though.
It is 4% to 6% the right rate going forward. When you think about this customer usage is driving me more consolidation and the future.
The potential for renewal rates to be lower is that the right range longer term or other reasons to believe that could be lower.
Yes, I'll take that yeah, let me take that so if you think about it our historical range. We've communicated in the past, what's 5% to 7% and then it's been running closer to 5% and under now going forward as portfolio renewals are coming on and.
Do you do feel that.
And there is a consolidation happening, especially in the enterprise segment, we believe that 4% to 6% that's probably the right range somewhere in the midpoint of five and historically, we've seen it's probably at this point that's what we are thinking about and then the third.
Saturday I bet, it's related to the rate rally and then the rest is consolidations, so think about it that way.
Great. Thank you Catherine.
You're welcome.
The next question is from Sami Badri from Credit Suisse. Please go ahead.
Alright, thank you.
The first question is on your interconnection growth rate and the core.
And for Q 20, there was a deceleration from the prior quarter came in at 12% year on year and for Q 'twenty versus us above that three Q 'twenty.
Maybe walk us a little bit through what's going on on the cross connect activity and then maybe what 2021 looks like just given some of the delays we've been discussing and.
And the ramp and construction and leasing we just get kind of a trajectory or an idea that's going to look like.
Michael you want to take that.
Yes, Jamie I mean, the growth drivers remain the same on that front number one is the development of ecosystems within our data centers. So as you have more customer types day.
They have and increased desire to connect to one another so that's number one and number two as we've talked about before is our SDN partnerships, particularly with mega poured its customers.
Really pleased with the opportunity to connect and to various cloud providers through the Mega Port platform and so we are we benefit from the physical cross connect there. So those continue to be the drivers and I would anticipate you know into the future as well those will those drivers whoa Whoa Whoa whoa.
We will be in place and then as we've talked about we have the we have the offering with Google and the five locations with the direct connect.
Through that through that platform.
Got it got it and then.
I wanted to just follow up on that Texas question and I was asked earlier regarding effect of what's going on and with the power rates.
And <unk>.
And they're gonna be any kind of effect, maybe on <unk> power rates, assuming this drags on for a little bit longer growth.
Mainly and a patent and in fact on a EBITDA margin and it's.
And so that really is not worse than we're expecting.
And I.
And take that on.
Yeah, Yeah, I mean I think.
Too early.
It's too early to tell but again a significant portion of our risk is.
It's taken care of given that we have hedges in place and Dallas, and Houston and given that a significant proportion of our contracts are pass through.
Okay. Thank you.
And the answer there is we don't know it's too early we don't think it's going to be a big issue, but again, we can't say anything because it's too early to figure it out and we got to see if the.
And the heat dance and we're all doing it works and it warms up and we'll get back to normal here.
Got it got it thank you.
The next question is from Tim long of Barclays. Please go ahead.
Thank you.
Just wanted to follow back up on enterprise, a two parter here.
First can you talk a little bit about.
And of what you saw on Q4 and kind of current trends with.
Existing customers versus new logos.
That mix looking and trending and then second.
And when you start to think about ramping European.
Enterprise, what's that going to take and what kind of timeline would that be what kind of costs would be associated with trying to get that business going more meaningfully to catch up with hyperscale. Thank you.
And let me take the second and I'll give Michael the first and in terms of European and ramping up enterprise again, we love We love right now on our balance and 50 50 in terms of revenues and enterprise and Hyperscale and Europe, where almost all of them you know hyperscale and that's because that's where the growth has been I mean are the hyperscale cut.
Our U S. Hyperscale customers are are very focused there and it's been it's been a great opportunity for them and we're trying to help them do that as I said on my prepared remarks, we hope to build up enterprise, but again.
I think that it'll take a little bit longer right now just given the demand there is by the Hyperscale and we want you forget and balanced more balanced business, we'd like to do that but right now the demand is so so much greater by the the Hyperscale or Michael do you want to take the first one talking about it.
Yes.
Yeah. So we're obviously Tim.
<unk> on bringing in new customers because as we've talked about for years now just getting them and the door events with it with a small deal initially provides an opportunity for future growth as they grow within their existing data center and then expand into other data centers. So we anticipate that it will most likely be.
Be a small percentage of MYR signed any one quarter, but once those customers are and it represents a pretty significant opportunity. So I think it was 6%.
Bookings this quarter were from new customers and it's been relatively consistent over the past few quarters.
Okay. Thank you.
Sure. Thank you.
The next question is from David Moreno of Green Street Advisors. Please go ahead.
Hey, Thanks, guys and a sizable portion and the industry new leasing activity last year came from two Hyperscale companies can you comment on any conversations you are having with those customers and our other hyperscale customers just to gauge and their data center needs and 'twenty. One and then also do you think we're going to see a return on that word lumpy and so the data center okay.
And this year.
And I think that the net.
Lumpy is going to be part of R. R.
Going forward in terms of.
I think you have to look at it in terms of on a rolling four quarters of that so I don't think because again these deals take time there long.
Roger So I think the lumpy you know as much as it would be nice to get rid of the lumpy I think lumpy. It is a word everybody keep here, but in terms of the demand and and I can't comment on that.
Your comment about the two day.
Data center to cloud companies are gobbling up the space and I can comment there in terms of what we see out there is great demand.
You know, it's you know and bye bye all the buy and all of the Hyperscale, but like most hook on Hyperscale are used bike.
And everyone I mean, there's good demand out there and again well you know it is everyone keeps talking about well you know there was great demand and in 2018 and 2019.
2000, Twenty's grateful and 21 be bad and we're not counting on what kind of and in 'twenty one to be a good to be a very good year in terms and.
Getting leasing done, but you know it's up to the team and all of us to get it done and.
We do think we do think there's there's right now we're encouraged by what we're seeing but again.
The proof is in the putting in terms of what we think is it yet and so we've talked these deals take time and along and whatever so we'll report back every quarter and how we're doing.
Great Thanks for that.
Thank you.
The next question is from Tayo Okusanya from Mizuho. Please go ahead.
Hi, yes, good afternoon.
So my question is around you had discussed on last quarter then.
Desire to.
To pick up market share up.
The company had been losing market share and the U S could.
Could you talk a little bit about again, if it's on the flu you've done everything you need to do from an operational perspective to start to pick up market share or if there's two things that still needs to be done.
Alright, but again when we set it.
We wanted to pick up market share and we're very encouraged by the fourth quarter and.
The numbers, we put on board over $30 million.
$49 3 million and what was it.
And the U S and it was across a number of markets. So again, we feel very good or bad debt, we feel about bringing there are yield targeted stabilized yield requirement and 8% to 10% helped us meet the market more importantly in terms of having.
Our new head to head on.
Sales and I think has been helpful. I think to Reenergize and sales team and I think John coming back in terms of to help help us in terms of with our customers in terms of go through their needs.
And in it and how we can help them and deliver the product they want and timely manner and the quality day, one had been very helpful. So John and his team. So I think we've got.
We have things in place and again, it's up to us as a team to deliver but I'm encouraged from what we saw on the fourth floor.
Earlier, you know one quarter does not a trend and we got and keep it going on.
Gotcha. Thank you.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Bruce Duncan for closing remarks.
Alright, well again, thank you very much for your time and your interest in Cyrusone and we very much. Appreciate it do you have any questions. Please follow up with Catherine and Michel and myself we.
And we look forward to it and continue the dialogue and continuing to report back to you on our progress. So thanks again and we appreciate it.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.