Q4 2020 Switch Inc Earnings Call
Good afternoon, and welcome to the switch, Inc, fourth quarter and full year, 'twenty and 'twenty earnings Conference call.
All participants will be in listen only mode.
Should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be and opportunity to ask a question to ask a question you May Press Star then one on your telephone keypad.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
I'd now like to turn the conference over to Matthew Hines, Vice President of Investor Relations. Please go ahead.
Thank you good afternoon, and welcome to switch as fourth quarter and full year 2020 conference call on a call today are Thomas Morton switch as president and Gabe knock switch as CFO.
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 and our forward looking statements, which are subject to certain risks uncertainties and assumptions. Our statements are made as of today and we assume no obligation to update our disclosures. We describe some of these risks and our SEC filings specifically on our form 10-K, particularly.
Early in the section entitled Risk Factors. In addition, today's call includes discussion of non-GAAP financial measures, which should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP.
Please refer to today's press release and supplemental package for further information, including a reconciliation of non-GAAP measures. Our fourth quarter 2020 earnings press release has been furnished to the S. E C. As part of our form 8-K and is available on our Investor Relations website at investors got switch Dot com.
I will now turn the call over to switch President Thomas Morton.
Thank you, Matt and good afternoon, everyone. Thank you for joining us today, the switch team demonstrated tremendous resilience and strong execution in 'twenty and 'twenty, achieving several key strategic priorities. Despite the challenges presented by the COVID-19 pandemic.
Our sales team stepped up to the challenge by delivering record bookings and the fourth quarter, signing a total contract value of $240 million and a record incremental annualized revenue of $36 million, reflecting the strength of market demand by enterprise customers.
For our tier five multi tenant and facilities. We are excited to report that switch ended the year with a record recurring revenue backlog of more than $50 million, our highest ever as a public company.
Full year, 'twenty, and 'twenty revenue increased 11% year over year to $511.5 million or half of 1% below the midpoint of our forecasted range fourth quarter revenues were affected by two customers opting to migrate a poor.
And that their application stack to a public cloud environment. They determined that a portion of their workloads with relatively low power density and low security requirements were better suited for a public cloud while choosing to maintain their more mission critical applications at switch reductions from both <unk>.
Customers were factored into our prior guidance ranges. However, the timing of these adjustments was uncertain contributing to the variability of reported revenue compared to our guidance midpoint. This revenue reduction was more than offset by an improvement and operating efficiency as we achieved our highest ever a.
Adjusted EBITDA margins as a public company and both the fourth quarter and full year 'twenty and 'twenty.
As a result, our a full year 'twenty and 'twenty adjusted EBITDA of 268.3 million came in above the high end of our previously increased guidance range, representing 16% year over year growth and a margin on 52.5%.
While a portion of our 250 basis point margin improvement in 'twenty and 'twenty was attributable to Covid related cost savings, we believe that a material amount of this margin expansion will be sustained moving forward due to the more permanent enhancements in our operating efficiency.
Our current growth outlook for 'twenty 'twenty, one reflects a dynamic of robust enterprise demand offset by near term inventory constraints that we expect will be alleviated as we approach the second half of the year due to our elevated volume a multi megawatt transactions.
Closed during the second half of 'twenty and 'twenty and early 'twenty 'twenty. One we have a number a pending installations that will ramp and over the course of this year and extending into 'twenty and 'twenty two.
As a result, the space and power being reserved for these larger transactions in our backlog will limit the amount of a immediately available space that may have otherwise been sold and monetized earlier in 'twenty and 'twenty. One. In addition, we expect a longer than average initial.
And timeline for customer installations. This year due to COVID-19 related travel restrictions affecting the timing and magnitude of our backlog contribution for 'twenty and 'twenty one.
Against this backdrop of continued strong demand for switch is best in class data Center infrastructure. We are keenly focused on ramping up construction now that permitting bottlenecks have eased in recent months I will provide additional details around our near term and long term development plans later.
And the call.
I would now like to cover some of switch is notable achievements during 'twenty and 'twenty before turning to our key strategic objectives in 'twenty and 'twenty, one and the fourth quarter. We completed a 10 year Colocation agreement with an anchor customer at our Atlanta, one facility, bringing committed utilization too.
Over 70% and less than eight months after opening and response to strong signings and ongoing robust demand in the southeastern Prime region. We began construction and site development on our next two data centers at the keep campus and the fourth quarter with the next facility.
And he expected to open in early 'twenty twenty-three, adding 450000 square feet and up to 50 megawatts of additional capacity. We also broke ground on the second and third ultra scale data centers in the Citadel campus in response to customer signings.
Presenting nearly 15 megawatts at full ramp and bringing committed utilization to over 80% of capacity at Tahoe Reno one our next two data centers planned at the Citadel campus represent an additional 1.2 million gross square feet and up to one.
130 megawatts of incremental power available by the end of 'twenty and 'twenty five.
'twenty and 'twenty also saw a switches continued development of three massive data centers at the Las Vegas Prime. The first of these facilities is expected to come on line in Q2 of 2022, adding over a 330000 gross square feet and up to 40 megawatts of a.
They'll have a power and.
In aggregate the three data centers under development at the core campus represent an additional 950000 gross square feet and up to 120 megawatts of available power to be delivered by the end of 'twenty and 'twenty six.
In November 'twenty, 'twenty switch finalized an agreement with Fedex and Dell technologies to collaborate on the development of multi cloud edge infrastructure services that will leverage switches proprietary a tier four edge colocation designs alongside dell's hyper converged cloud.
<unk> solutions. The initial deployment is expected to launch in late 'twenty 'twenty, one near Fedex is headquarters and Memphis, Tennessee with additional sites likely to be announced in coming months switch was recently awarded the energy Star certification by the Environmental Protection Agency.
For its Las Vegas, a data center at the core campus with additional facilities expected to be certified later this year. This certification and represents an independent third party assessment, signifying that switch data centers perform and the top tier of facilities nationwide for energy efficiency.
And meet the strict energy performance levels set by the E. P. A in October 'twenty 'twenty switch was again named in the top 10, among all U S companies for its investments and utilizing solar energy and the solar energy industry associations annual Soc.
Other means business report alongside Apple Walmart and Google among other Fortune 50 enterprises switch is the only Colocation data Center technology company to be named in the top 10, this acknowledgment of firms and further cements switches.
Physician as a leader in sustainability, which tremendously benefits our customers the communities, where we operate and our planet switch saw continued positive momentum in ESG performance with recent rating upgrades from third party, scoring agencies, including M. S. C I.
And sustain Olympics and I S S, notably our upgrade to a double b rating by MSCI makes switch eligible for the M. S. C. I E. S. G leaders index, one of the largest equity benchmarks tracked by a sustainability focused investors.
And passive index funds with over 170 billion in assets under management.
Switch launch the upgrade of the switch dock client portal in December 'twenty, and 'twenty, providing expanded administrative capabilities and several self serve options for customers. These advancements open additional avenues for sales and enhance customer interactions our day.
Center operations and security staff responded favorably to a rapidly changing and highly uncertain business environment brought forth by the COVID-19 pandemic, helping switch to maintain its perfect record a zero downtime for our clients throughout 'twenty and 'twenty switch partnered with law.
Community organizations, and Nevada, Michigan, and Georgia to provide assistance to health care workers individuals and small businesses grappling with the COVID-19 pandemic. These programs include the Covid kindness program and northern Nevada to provide meals to.
Frontline health care and public safety workers, a partnership with the Grand Rapids Chamber of Commerce to support local restaurants, and we also partnered with Google and a Douglas County Department of economic development to provide funding and support to local businesses and health care work.
There's in the greater Atlanta area I will now summarize switch is top strategic priorities for 'twenty and 'twenty one.
One made continued progress on our development pipeline with a total 75 megawatts a power and nearly 4000 cabinet equivalents expected to come on line between Q2 of 'twenty 'twenty, one and the first half of 'twenty and 'twenty, three which we expect to become <unk>.
<unk> full contributors to revenue growth in 'twenty and 'twenty two and beyond.
To complete the installation of several large customer deployments across our prime campus locations to expedite the realization of a record revenue backlog.
Three maintain our recent sales momentum by closing on opportunities in our sales pipeline that maximize the currently available space and power in our portfolio bore achieve greater revenue diversification through continued growth of customer ecosystems outside of.
The core campus for the full year, 'twenty and 'twenty, our citadel and pyramid and keep primes accounted for nearly 60% of switches total incremental revenue growth as the total aggregate revenue growth for these three primes was 53% last year importantly.
And our citadel and pyramid and keep locations now represent 18% of consolidated revenue as of Q4, 'twenty 'twenty up from 13% in a year ago quarter now to recap our sales activity for the fourth quarter and full year 'twenty 'twenty.
Switch signed over $500 million and total contract value for the second consecutive year, our sales velocity continued to gain momentum and the second half of 'twenty and 'twenty as switch executed transactions totaling over $54 million and incremental.
Realized revenue and the final two quarters of the year, including a record $36 million in the fourth quarter for the full year, 'twenty and 'twenty incremental annualized bookings totaled $76 million and increase of 27% from the 60.
Dollars signed during 2019, we also added 26, new logos and the fourth quarter, representing our best quarter in 'twenty and 'twenty for new customer acquisitions fourth quarter, New logo wins included a leading developer of application software for the autumn.
Motive industry and the core campus, a supply chain management software vendor and the pyramid campus a nationwide provider on streaming video and wireless communication services and the core campus and a leading engineering and construction firm in the keep campus the majority of.
Our Q4 signings came from existing switch customers, including key wins across multiple campus locations totaling more than 25 megawatts and $34 million of incremental annualized recurring revenue among the largest existing customer signings during Q.
<unk> included a 10 year contract with a global transportation and logistics customer to anchor our Atlanta, one facility a five megawatt expansion with a global e-commerce platform spanning both of our Nevada Prime locations and a four megawatt expansion order from.
On a fortune 100, and semiconductor manufacturer in the Citadel campus. This customer has signed for an additional five megawatts and the Citadel campus and early 'twenty 'twenty, one now turning to our construction milestones and project pipeline during 'twenty 'twenty, we delivered a toll.
It'll a 50 megawatts of new power capacity and approximately 2900 cabinet equivalents across the four primes, including 780 cabinet equivalents and to 10 megawatt power systems supporting customer deployments and the Las Vegas 11 facility of which.
94% is now committed under our customer contracts.
And the Citadel campus, we opened two additional sectors totaling 1320 cabinets and 20 megawatts, both of which are fully committed to customers and expected to ramp and over the course of 2021, including the anchor tenant signing for Atlanta one.
And which is expected to commence and the second half of 2021 our Atlanta facility is approximately 70% committed as of year end 2020, following the anchor tenant deployment at the pyramid campus in 'twenty and 'twenty. The Grand Rapids, One facility is currently nine.
6% committed based on available space and power capacity.
More than 90% of the cabinet capacity scheduled to come online over the next 12 months is already committed under customer contracts. These projects include an additional 30 megawatts and 780 cabinets and the Citadel campus, primarily supporting customer expansions.
That were signed during Q4, 'twenty and 'twenty and early 2021.
Also included in our 2021 construction plan is the aforementioned second sector of Atlanta, one, which we expect to complete in Q2, 'twenty 'twenty, one with anchor tenant revenue commencing in Q3 of 2021.
Other projects included in our 'twenty 'twenty, one capex plans with deliveries beyond this year include the Las Vegas, 15 data center, which is scheduled for delivery in Q2 of 2022, the Tahoe Reno to data center scheduled for Q1, 'twenty and 'twenty three.
And the next Atlanta data center in Q2 of 'twenty and 'twenty three.
Looking out beyond 2021, we are excited about our long term growth prospects as we lay out a road map for expansion within the four primes and aggregate switch currently has more than 2.8 million square feet and up to 300 megawatts of new data.
Center capacity currently under development and scheduled for delivery over the next five years, representing a greater than 60% expansion of our current footprint.
Subsequent to year and Super Nap International closed on the sale of supernatural Italia to Ipi partners as part of this transaction switch has agreed to exchange its equity interest and Super Nap Italia for additional equity and Super NAV, Thailand, and retain full control over its international.
And all intellectual property license this created and the opportunity for a successful liquidity event for our JV partner.
I will now turn the call over to Gabe to discuss our financial results Gabe.
Thanks, Thomas today, I'm going to review, our financial results for the fourth quarter and full year, 'twenty and 'twenty and discuss our outlook for 'twenty and 'twenty one.
Switch reported fourth quarter, 'twenty, and 'twenty revenue of $127 $7 million and increase of $7 2 million or 6% compared to the fourth quarter of 2019, 47% of year over year revenue growth and Q4, 'twenty and 'twenty resulted from new customers, who initiated service during the past.
12 months, while 53% a revenue growth came from customers, who have been with switch longer than one year for the full year 'twenty and 'twenty, 88% of total revenue growth was attributable to existing customers with 12% from customers initiating service. After December 31 2019 call.
Location revenue for the fourth quarter of 'twenty, and 'twenty was $104 8 million compared to 97.8 million reported and Q4 2019 and increase of 7.2% connectivity revenue in Q4, a 'twenty 'twenty was 21.5 million increasing by 1.9 person.
And compared to $21 1 million and the same period and 2019 other revenue, including professional services accounted for $1 4 million and Q4, 'twenty and 'twenty compared to 1.6 million for the same period and 2019 fourth quarter 'twenty and 'twenty revenue was affected by two customers opting to migrate a portion.
And of their application stack to a public cloud environment. This resulted in an approximate 3 million dollar reduction and fourth quarter revenue and an approximate $18 million reduction to 2021 projected revenue. The full effect of these customer reductions will be realized and the first quarter, a 'twenty 'twenty, one and importantly.
Both customers have signed renewal contracts to maintain the balance of their hybrid workloads at switch and we do not anticipate further significant customer migrations at this time as of December 31, 2020 switch had approximately 16006 hundred billing cabinet equivalents generating over a $2400 per cabin.
On a equivalent and monthly recurring revenue.
We had more than 8700 billing cross connects as of December 31st and cross connects accounted for approximately 4% of total revenue in Q4, 'twenty and 'twenty up from three 8% in a year ago period.
For the full year, 'twenty and 'twenty revenue from cross connects increased 20% compared to the prior year.
Now turning to bookings as mentioned by Thomas switch delivered a record sales quarter and Q4, 'twenty and 'twenty. During Q4, we executed 580 contracts comprising approximately 26 megawatts, representing total contract value of $240 million and annualized revenue of 50.
And $5 million at full deployment inclusive of both renewals and sales of incremental services in the fourth quarter, We signed a post IPO record 36 million, a incremental annualized recurring revenue, including $34 million and incremental bookings from existing customers and approximately $2 million from new customer.
As of December 31, 2020, a recurring revenue backlog stood at just over $50 million also a new record for switch as a public company.
We expect our backlog to contribute approximately $27 million a incremental revenue during 'twenty 'twenty, one with the remainder contributing in 2022 and beyond.
Our backlog currently includes multiple large strategic enterprise transactions with initial contract terms ranging from three to 10 years. These installations are large and complex in nature and are affected by inherent uncertainty regarding COVID-19 travel restrictions as a result, we anticipate the majority of.
'twenty 'twenty, one backlog revenue contribution to occur and the second half of the year.
Customer churn was 0.4% and Q4, 'twenty and 'twenty compared to 0.2% and a year ago quarter. As a reminder, we define churn as the reduction and recurring revenue attributable to customer terminations or non renewal of expired contracts, resulting and a full customer exit from the switch platform.
Abided by the revenue at the beginning of the period.
Per this definition the previously mentioned customer revenue reductions and Q4 were not included in churn as both customers have maintained a presence and switch.
Cost of revenue increased by $6 4 million and Q4, 'twenty and 'twenty compared to the year ago quarter, primarily due to increases in depreciation and power costs excluding.
Depreciation and amortization and equity based compensation, our Q4, 'twenty and 'twenty adjusted cost of revenue increased by just one per cent and adjusted gross profit increased 8% year over year to $94 7 million a reconciliation of gross profit to adjusted gross profit is provided in the appendix.
Section of our Investor presentation, SG&A expenses in Q4, 2020, or 31.6 million compared to $38 7 million and Q4 2019. This 18 per cent decrease and SG&A compared with a year ago quarter was primarily attributable to lower professional fees and labor.
And then says related to ongoing work from home protocols and Covid travel restrictions and income from operations and Q4, 'twenty and 'twenty increased 43% to $26 3 million compared to $18 3 million and Q4 2019, the growth and operating income was attributable to the $7 1 million.
A reduction in SG&A and a zero point $9 million increase in gross profit interest expense increased by approximately $1 9 million to $9 1 million and Q4, 'twenty and 'twenty, primarily driven by switch as higher debt balance following its first unsecured bond offering and September 'twenty and 'twenty.
This increase and debt was offset by lower LIBOR rates compared to the same quarter last year as of December 31, 'twenty and 'twenty, We had approximately 1 billion and total debt outstanding at a weighted average interest rate a four 1% inclusive of our interest rate swaps on the remaining term loan balance net income for <unk>.
Q4, 'twenty and 'twenty was $15 3 million compared to net income of $12 9 million and Q4, a 2019 net.
Net income and the fourth quarter of 2020 includes a zero point $2 million noncash loss on interest rate swaps, resulting in a one cent reduction to reported net income per diluted share adjusted EBITDA totaled $70 6 million for Q4, 'twenty and 'twenty compared to $57.6 million and Q4 2019.
<unk>, reflecting year over year growth of 22.4%.
Our adjusted EBITDA margin for Q4, 'twenty and 'twenty was 55, 2%, increasing 740 basis points from a year ago quarter, primarily due to the reduction and professional services and labor for the full year 'twenty and 'twenty adjusted EBITDA increased 16, 1% to 268.
And $3 million, reflecting a 52.5% margin and coming and slightly above the high end of our previous guidance range to 250 basis point year over year increase and adjusted EBITDA margin. During 2020 was due to a combination of certain COVID-19 related cost savings and operating efficiencies that.
We expect to be more permanent in nature, I will discuss our 2021 margin expectations in greater detail during the guidance a portion of the call full year, 'twenty and 'twenty capital expenditures, excluding land purchases were $343 8 million compared to $278 8.002 million 19.
And increase of 23% capital expenditures and the fourth quarter, a 2020 were $97 9 million compared to $86 4 million and the same quarter, a 2019 fourth quarter and full year capital expenditures were approximately $19 million above the high end of our prior guidance range. This was poor.
Merrily because of our decision to pull forward certain projects and equipment purchases that were previously expected in 'twenty and 'twenty one due to mid year COVID-19 related permitting delays. However, based on the receipt of all necessary permits and the large capacity requirements to fulfill on a record Q4 backlog we opted to.
<unk> purchasing and construction in the final months of 'twenty and 'twenty, mainly.
Maintenance capital expenditures were $3 4 million for the fourth quarter of 2020, or 2.7% a revenue compared to 1.5 million and one 2% of revenue and the same quarter last year growth Capex for data center construction and improvements was $94 5 million for the fourth quarter a.
<unk> 2020, compared to $84 9 million and the same period last year.
Please refer to our press release and Investor presentation for a detailed breakdown of capital expenditures by campus during the fourth quarter and full year 'twenty and 'twenty.
As of December 31st 2020, the switch primes had capacity for 24200 cabinet equivalents within our open sectors of which 88% were committed under contracts compared to 89% and the prior quarter and 91% and a year ago quarter, Q4, 'twenty and 'twenty utilization.
And rates at these primes based on committed cabinets and currently available Colocation space were approximately 89%, 93%, 96% and 38% at the core campus. The Citadel campus, the pyramid campus and the keep campus respectively compared to nine.
And 1% 90 per cent, 72% and 36% in the prior quarter looking now at the balance sheet as of December 31st 2020, the company's total debt outstanding net of cash and cash equivalents was 958 million, resulting in a net debt to last quarter.
Annualized adjusted EBITDA ratio of 3.4 times compared to three three times and the prior quarter.
As of December 31, 'twenty, and 'twenty switch had liquidity of 597 million, including cash and cash equivalents and availability under its revolving line of credit. We believe this is sufficient to fund our growth plans for the foreseeable future.
As of December 31, 'twenty and 'twenty, there were $240 6 million total shares outstanding, including 119 million class a shares and 121.6 million class B shares.
As disclosed in recent 8-K filings during the fourth quarter of 'twenty and 'twenty. Our members redeemed 10 million common units, resulting and the issuance of an equivalent number of class a common shares at year and class a public float represented 49, 5% a total shares outstanding based on.
Remember redemptions completed as of February 4th 'twenty, 'twenty, one and additional 7.7 million class B shares have been exchanged for class a common stock and the first quarter of 2021, bringing the class a public float up to 52, 7% a total shares outstanding.
Now turning to guidance for 'twenty and 'twenty, one we expect 'twenty 'twenty, one revenue and a range of 540 million to $555 million, reflecting 7% organic year over year growth at the midpoint.
We expect 'twenty 'twenty, one adjusted EBITDA in a range of 278 million to $290 million, reflecting an increase of 6% compared to 2020 and and adjusted EBITDA margin of 52% at the midpoint Lastly, we expect capital expenditures excluding land acquisitions.
In the range of 330 million to $370 million I would like to add a few important points of clarification regarding 2021 guidance.
Due to the timing of our backlog revenue contribution and customer revenue reductions. In addition to the realization of $4 8 million and nonrecurring fiber revenue and the first half of 'twenty and 'twenty switch expects its 'twenty 'twenty, one revenue growth to be weighted towards the second half of the year growth comparisons to the.
Fire year will be most affected and our first quarter growth rate.
Excluding the $4 8 million and nonrecurring 'twenty and 'twenty fiber revenue, our 'twenty 'twenty, one revenue guidance reflects 8% growth at the midpoint from an inventory standpoint, a significant amount of space and power as being reserved for a record backlog of large customer installations, which reduces the remaining quantity of sellable capacity.
City in 'twenty and 'twenty one we.
We fully anticipate that these capacity constraints will be alleviated over the course of this year and into 'twenty and 'twenty two driving a normalization of our growth rate in future periods. In addition, we continue to make great strides and margin expansion and the efficiency gains we achieved in 'twenty and 'twenty will enable us to operate the business above.
Our historical margin levels and.
And now I'll turn it back to Thomas for some closing remarks.
In conclusion, we firmly believe that switch is favorably positioned for the rapid digital transformation among enterprises as they continue their migration to hybrid multi cloud architectures.
We are working hard to accelerate delivery of additional data center capacity to meet the record level of demand. We are currently experiencing and.
And we are confident and our teams ability to execute.
We would once again like to take this opportunity on behalf of our management team to thank our employees customers partners and our shareholders for their continued support of switch and thank you. We would now like to open the line for questions.
We will now begin the question and answer session to a.
Ask a question you May press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble a roster.
Okay.
And our first question comes from Jon Peterson of Jefferies. Please go ahead.
Great. Thank you.
Congrats on a strong leasing quarter and I was just curious on on leasing volume if you could give us.
Maybe any update on any changes and urgency youre seeing from your customer base to sign deals, maybe enterprise versus cloud or <unk> or any other different properties or a different customer types now that we're a.
Getting back to normal and closer to a reopening and I have a.
A follow up.
Well it appears Thomas may be on mute, so I'll take that question okay.
Where we're seeing a.
Continuing to see a good strong pipeline and the deals that we've signed have been enterprise deals.
No switch really does target the enterprise market, we have a number of clouds and our facilities and within our our canvas walls both in terms of.
Up links to the cloud and cloud nodes within our within our facilities, but our bread and butter is the enterprise market and we've signed a number of large deals I think and the last year and a half we have 19 deals that are over a one megawatt all of which had been enterprise transactions. So we are definitely seeing that.
And uptick and that activity and.
And a very happy with the sales pipeline.
Okay, Great and then.
On the customer downgrade I appreciate that.
A clarification on the definition of churn.
And the customers still with you so that didn't fall into the churn.
Category, but maybe if you could help us maybe frame a number that we should be thinking about on an annualized basis I'm sure it's lumpy but.
And how much.
Avenue do you guys have gone out the door from from downgrades each year that we should be thinking about as we model over the years.
You're absolutely right it is lumpy.
And you know this isn't unusual.
The amount for us and it's unusual and that it happened and the fourth quarter, we were aware that these customers.
And we're looking to migrate portions of their workloads to the cloud, which is why we had a relatively wide revenue range for Q4.
But the applications that these debt these companies are running.
Low low density consumer based applications, one is cold storage of of images and.
And that is exactly what the cloud should be doing they can do a cheaper than us.
Where that.
And that workload should go and this is a customer that's been with us for nine years and over that nine year period technology has changed and we've been very consistent and saying the cloud is not going away and the cloud is going to continue to expand and get a a.
A large amount of compute but not everything is going to go to the cloud and switch is very well positioned for the workloads that really arent pest enabled and the cloud, but this happens to be one maybe on the.
The other is a consumer focused.
On a software application that also.
And he is better run and more cheaply run and the cloud and you know these are low density applications theyre continuing to maintain their high density most critical workloads with us.
But we do have a.
Yeah, we don't have a specific number that we that we guide to as far as a yes.
Migrations. It happens from time to time, we've talked publicly that there was a large file storage company that went to a cloud heavy strategy. Several years ago, and then came back to switch because the and and now charges were.
And were too expensive for them.
So theres not a specific number I can give you. It is lumpy. This is an unusual number for us we have our customers adjusting their deployments all the time with us and yet <unk> 88 per cent of our growth is coming from existing customer expansion.
Okay I appreciate that color. Thank you.
No and guidance real quick one one note is that we don't ever have any issue with advancements and technology over the years. We've seen people go from tape drives to a disk drive to static drives.
And cloud is just another evolution of technology every time, there's an evolution and technology. It enhances the amount a digital architecture that people have and that overall is good for the colocation industry. So we welcomed a cloud and we welcome continued advancements in technology.
The next question comes from James Breen of William Blair. Please go ahead.
Yeah.
And thanks for taking the question and you just give us a little more information on the revenue impact. So you said 18 million and it said and the first quarter. So I'm assuming it comes out.
And on day, one and then what sort of EBITDA impact.
Associated with that revenue.
Yeah, Gabe you on a response.
Both of these customers made their migration and Q4 of this year and.
And one of them migrated and the beginning of October the other one and December so the full impact is already.
In our 2021 guidance. So yes, the recurring revenue piece starts in January and carries throughout the year the EBITDA.
Generally a running at around 52% margin on.
These workloads are no different than any other so that's the number that I would I would use for our EBITDA.
And so we'll just we'll see a step down.
From a normal sort of a sequential growth on a quarterly basis.
And that $18 million and grow from there with well, it's $18 million per year $18 million and the annualized number so it's basically a million and a half a month over the 12 months.
Okay perfect. Thank you very much.
The next question comes from Frank Louthan of Raymond James. Please go ahead.
Great.
Back to the churn I'm just curious.
You knew that this was coming out and it was having this impact I can appreciate that you didn't have 2021 guidance out there yet, but something thats impacting you to attain a 25% to 30% of your growth why why didn't you call that out ahead of a call or if you did maybe maybe I missed it and then was there anything one time.
And the in the quarter and he cancellation fees or anything that helped with EBITDA from from either of these customers.
Sure Frank.
Go ahead with regard to the timing both.
Both of these customers were on.
On the contracts that had moved to a month to month and they've been on month to month for quite some time discussing what their strategy was going to be so we really didn't have a specific.
Timing.
Information from these customers it was really up to them when they were going to pull the trigger and make their migration. They just both happen to do it in the fourth quarter and Thats why we didn't call. It out, but we did notice that it was a possibility which is why we created the guidance range that we did and and Frank the second part of your question was.
Well I think so.
Even with a little bit a loss revenue kind of came in at least ahead of our EBITDA I was just curious was there any any one on one.
And debt associated with these guys, leaving and maybe helped help net water.
No absolutely not the EBITDA.
Performance in Q4 was primarily driven by professional services fees and a year ago Q4 quarter, we incurred additional professional services fees that we were able to normalize this year.
You saw and that you probably havent seen yet in the index.
10-K, and we just released.
Previously, we were carrying a material weakness and our financial statements that has been remediated so that helped.
Helped us reduce our audit costs and other professional services.
Okay.
Question, there weren't there weren't any termination fees or anything associated with their departure.
Okay, Great and then can you quantify you know I can I can appreciate.
Nate why things evolve can you quantify any more exposure to workloads that you see and.
And your and your.
And in your data centers currently that you think are.
It should be and the cloud and have a.
Likelihood of churning off to a we can have an idea of what percentage of your revenue might be a risk for customers, making these future decisions.
We currently don't have any major customers that we're expecting a migration in 'twenty and 'twenty one away from our data centers. We continue as we said we have a more of a migration and then we can currently deploy inside of our data centers. So we have a no issues with current customer stability and the inflow of customers is.
And as strong as we would ever hope it would be.
Alright, Thank you very much.
The next question comes from Michael Rollins of Citi. Please go ahead.
Thanks, and good afternoon, and thanks for the additional disclosures and the presentation deck.
Was curious to go back to the comment I believe you made a.
About the inventory potentially being constrained until you on.
You'll get a development done over the next 12 to 18 24 months a.
You can.
Remind me of a timeframe, but I'm just curious.
And.
Investors should think about that in terms of the context of the quant and the bookings and as you've had a ramp during 2020 and how they how we all should think about.
What you could do if the inventory is and that constrained position. Thanks.
Yeah, I'll, let Gabe talk to the numbers, but what you're absolutely right. What we have here, Mike and it's a great question and the confluence of two factors on one hand, we have record setting a number of sales that are large and that ramp up which allocates the space, even though it won't be revenue generating in 'twenty and 'twenty one.
On the other hand, we have COVID-19 caused delays and zoning approvals and the issuance of permits which in turn delays the construction and the new facilities by extra sell a month.
This creates a short term supply demand, which we know will be alleviated as we roll through 2022 and open more facilities. So while COVID-19 is having a onetime effect due to a pushing out a new data center completion dates we've never been really more bullish on the outlook of the true enterprise class technology space as a whole a gay.
And do you want to talk about any particular numbers.
Yeah, I think I mentioned on the last on the on the.
A last question I think and the last year and a half we've had 19, one megawatt transactions are higher and you see the numbers for the fourth quarter.
So.
These large deployments.
And in some cases aren't starting until Q3, a 2021 and then ramp over 36 months and one case it ramps over nine years with debt with the biggest part of the ramp coming and the first three years, but the space assault and.
And unlike the rights, we don't straight line the rent over the period of the contract because we're not a REIT we recognize the revenue as the cabinets come on line and are built so yeah. The net revenue is a straight lined over the contract it will come on line as those cabinets ramp, but nevertheless, the spaces committed.
And we can't sell it otherwise.
We were able to sell out all of that space. If you look at our backlog.
And the backlog slide that we provide to the to.
To the Investor day.
Essentially all of that revenue could be pulled forward today. It is sitting in backlog and you know that $15 million a annualized incremental revenue a space that we are now setting aside.
So is that 15 million inclusive of all of the commitments or is it over just a certain period that you're measuring those commitments on.
No that's inclusive of a that's a full backlog.
Thank you.
Thank you.
The next question comes from Colby <unk> of Cowen. Please go ahead.
Great. Thank you.
And they first.
On pricing as you sign more of these bigger deals.
I'm just curious what impact that's had on pricing. So for example, maybe.
And if you compare for example, and to be a 500 kw type deal versus these bigger deals and just trying to get a sense of.
With the impact of just a discount is simply based on selling these bigger.
And these bigger deals and.
And then secondly, I know, there's a lot a focus on.
Enterprise customers versus Hyperscale ours, and and I know you've talked about how all 19 of those deals were with.
Enterprises, but if we were day you'd think of.
Hyperscale and is not just a large cloud companies like the googles and Microsoft's a this world but also.
You know a large internet companies that debt the apples and Facebooks of this world when would you still define all 19 of those as enterprise customers. Thank you.
Yes.
Sure and as to pricing you know we have these larger scale deals of course, there is some pricing adjustment in terms of size, but what we also have as efficiencies when we do when we deliver a large amount of space and power a week to a single customer we achieve efficiencies and we share some of those efficiencies with the customer and a.
As a result, even though the pricing may be slightly adjusted in order to accommodate the size of the customer. The EBITDA margins are not compromised. So we're able to keep our EBITDA margins at the same the other thing that we're able to do to augment the sale is to sell telecommunications and we will make additional march and on a telecommunication sales to those customers.
As a way to further augment the EBITDA margins and the revenues that we generate from that customer and.
And so that's pricing on large deals as to your second question and enterprise and Hyperscale. There's a few I believe that if you included your broader category, a hyperscale or is that would not change the way, we would label arc and figure of those 19 customers that we spoke to and Gabe do you want a check me on that and yeah and.
And just for clarity Colby.
19, large transactions that we've signed and I said the vast majority of the more enterprise we did announce.
Strategic transactions with a with two major cloud companies that are built.
Zones within our facilities and and nodes within our facilities. So we do business with a hyperscale and when you talk about Facebook and some of those others.
No I don't think that would change the equation at all.
They are not current customers of ours and they tend to to to deploy in a way that is different and then what switch builds even when we're doing business with a large cloud companies. They are still taking a full tier five platinum facilities, they're taking all of the infrastructure that we installed for every other customer and we're not build and powered shell we're not.
Doing what a what digital and some of the others do for as far as a wholesale space.
And we treat all the customers the same but obviously a larger transactions are going to P. A.
Are going to be negotiated from a price standpoint, but nevertheless, theres still priced for the full availability of what switch offers.
Do you change your design for those bigger customers or is it effectively the same design.
For those customers as you would if it was a smaller deployment.
It's a exactly the same design.
That's correct. Thank you.
Yes.
The next question comes from Richard Choe of Jpmorgan. Please go ahead.
Yes.
Given the comments that you said it seems like the churn is upfront and <unk>.
Given the backlog.
Run rate that's cash.
Coming on and near the and so given that the guidance is around 7%.
And you assume one should be looking for a pretty higher exit run rate and a third and fourth quarter can you give us a little color on how should we think about revenue through the year.
Yeah, I think that's that's exactly right for two reasons number one we have the.
And that the two churn events that we've talked about but we also have $4 8 million a nonrecurring fiber revenue that hit in the first half of last year and that was a.
And in conjunction with building a fiber link that links one of the cloud and one of the big three cloud campuses to argue.
And so that's almost a percentage of our revenue. So those two items are going to impact the first half of the year and we've talked about the fiber revenue not recurring for quite some time. So there should be full visibility on that but as we as we exit the year all the other ramps that are starting in January and the ramps that are starting in Q3 from some of these other deals that we have.
Started.
And we'll be picking up steam and as we exit the year.
We should exit at the highest growth rate and the fourth quarter.
Great and then is it fair to say that could be a double digit growth rate and I haven't done on the math.
And just given the puts and takes.
Yeah, we.
We're guiding to 7% at the midpoint for the year and I think you guys can do the math on that but it will.
And it will be and in the high single digits low double digits as we exit the year.
Great. Thank you.
And next question comes from Ari Klein of BMO capital markets. Please go ahead.
Thank you and just on the lack of capacity.
Are you, losing those deals as customers, maybe look elsewhere or are they waiting around to some extent and just provide a little bit more context as to what's happening there.
And that's a great question, Ari and the larger deals and we're actually not losing any of those deals we feel because we have new data centers coming on in 'twenty, and 'twenty, two and each year and as.
We've talked about on the earnings a script, but the but.
But the idea is that there are a bunch of deployments that are getting pushed out due to COVID-19 customers are slowing down their deployments, either because of health concerns or their inability to obtain equipment or chipsets.
And the fact that it's very hard to do installations.
And a T skipper and net cabinet environment, where you try to maintain a six foot distance its just not physically possible there closer than that so there are a number of customers that are pushing out their deployments for all these reasons into 'twenty and 'twenty, two and beyond and we are actually getting rfps and RFID that Astro deployments right about the time that our data centers are coming on.
And so we feel like there's a great backlog that we'll be able to tap into as our data centers open up and.
And we're pretty bullish on that.
So you wouldn't necessarily expect bookings to be weaker and 'twenty 'twenty, one 'twenty 'twenty, one and because of this.
No I don't expect bookings to be a weaker.
And then just on the churn and what is your ability to backfill that space.
And we think we will be back.
With.
Alright, and we think of a space will be back filled without a doubt.
These customers exited and in one case in December and so its not backfill it immediately and it is lower density space. So it needs to be back filled with the right customers. Because ultimately you know theres only so much power that is that is available and that specific segment of the sector.
Alright, thank you.
Thank you Ari.
The next question comes from Eric <unk> of Wells Fargo. Please go ahead.
And thanks for taking the question.
So I know you mentioned that obviously there were some cost efficiencies that that you think will continue on a post COVID-19 and so it's got a 52% do you think the right longer term rates range from margins and maybe you could just help remind us.
Some of the operational efficiencies you've mentioned that.
Enabled you to take margins, a little higher going forward and they have been historically and just wondering if there's any kind of.
Expansion drag as you bring a lot a few deployments on line with a heavy capex year that has impacted margins this year at all.
Yeah.
No.
The operational fit well together they talk to the numbers, but its operational efficiency I mean, one. Great example is the fact that we actually started 2020 with a higher head count and we ended 2020 with and that's just because we.
Had a tremendous amount of efficiency that we gained in a way that we did our operations. So it was basically flat for the year, even though we expanded our deployments and even though we expanded our revenue we've found ways to operate more efficiently efficiently and sometimes the greatest advancements are made and times of disruption and there nobody would doubt that the COVID-19 pandemic.
And with a moment a disruption so why that's why we believe that our efficiencies that we obtained during COVID-19 will be sustaining because they are integral to the way that we operate as a business versus being entirely incidental savings such as lower food costs et cetera.
<unk>.
And some of it is just it is just a maturation as a public company. This is now our third third year third annual close as a company and you just get better at it and as we get better at it we're able to lower professional fees and as Thomas said, we've been keeping our head count and check doing more with fewer people or plan for 'twenty. One is to continue those efficiencies.
In the past, we had signaled that a long term.
Target for our for our EBITDA margin was 51%, we're clearly above that now we ended up at 52 five per the year and while we expect some normalization of things like travel and marketing costs, we expect to maintain the vast majority of that margin expansion going forward.
Okay, great. Thanks.
The next question comes from Erik Rasmussen of Stifel. Please go ahead.
Great. Thanks for taking the questions.
So maybe just on the enterprise.
Can you comment on the enterprise.
And a environment are you seeing a meaningful pick up, especially with a new logo activity and maybe comment on the sales funnel how a.
Large enterprises are looking to address.
Some of their decisions in the coming year.
It's a it didn't acceleration. Thank you Eric it's a great question and it's an acceleration of the trends that we have been seeing which is that as people look at their legacy data centers enterprises look at their legacy data centers, there never been terribly efficient as they may have had that data center be 80 per se.
Occupied.
Moving some room for future growth, but what has really happened is they have shrunk the deployment inside their legacy data center to maybe 40% because a they are offloaded some of that data center space to the cloud when you have that data center only being 40% occupied it is far more efficient to move it to a colocation environment.
And I meant on a multi tenant environment and take advantage of a one to many deployment.
The.
Thing is you're not going to move and deploy into a tier two environment. What you really want to do is deploy into a data center, that's as good or better than your current deployment or your current infrastructure and that is what switch provides it provides a tier five deployment that is better or debt and mutler actually is much better than anything that they're deploying in.
Side their own Datacenters, and so we see that migration continuing with Covid coming on we have seen a number of customers.
Looking for ways to save money at a more rapid rate. We've also seen people leveraged a cloud more robustly those two things are driving people and at an accelerated rate out of their legacy data centers and into our facilities. So we believe that demand for enterprise shifting into a colocation environment will increase in 'twenty and 'twenty, one and beyond.
And just to give you a little color as Thomas mentioned in his remarks.
Every company has done has been impacted by Covid differently. Some of them have had delays if you're a a.
A casino company others have.
Scene and increase in their business and one of the companies that it is a large customer of ours has been expanding quite rapidly is a large semiconductor manufacturer and day not only expanded with us in 'twenty and 'twenty.
And as Thomas mentioned and they've already signed a.
Other five megawatt contract and Q1 to further expand with us and another $6 million a incremental annualized revenue, but again that doesn't start until Q3, a 2021 and they've signed that in Q1.
Okay.
Great that's helpful and maybe just circling back on.
And your guidance being impacted by the delays related to Covid.
How does this compare to maybe what you a previously thinking.
And in terms of the length of that delay.
And then do you envision sort of and a scenario where you can actually pull in this timeline.
And you'll get better performance and maybe pulling some of those construction projects or are we sort of.
Fixed at the moment.
No.
Dave mentioned, we had spent additional capital dollars and we're doing everything we can to pull those timelines and I made at the end of a day. It is steel and concrete it takes a certain amount of time and process for a secure and move and get things signed off but we are doing everything we can to move those timelines as aggressively as possible while maintaining the quality.
Good day and integrity of the type a facility that we construct.
Eric I think you're actually asking two questions. There one is in the ramps that we've talked about and the contracts that we've signed and everything that's showing up and our backlog and those are firm commitments from our customers. So as.
As one would expect they're willing to sign the minimum that they think theyre going to need in the timeline that they think theyre going to need and we don't necessarily control all of their installation timelines.
But historically in the past we've seen customers accelerate their deployments above their minimum total contract commit.
And if vaccines are out there if the customers feel more comfortable sending their teams to install.
We're hopeful that we can pull forward some of that revenue day is already committed and the space is already set aside and we're ready for them.
It's now up to that.
The second question is on construction and we did have some permitting delays that you see from our Capex. Both in Q4 and our guide for next year. We are building and we are building fast because the demand is there we're building as fast as we can and in Las Vegas, We're building as fast as we can and Reno, We're building as fast as we can and Atlanta.
Nevertheless, even with that our capital intensity is still and the 60. So we think it's a very achievable.
Capex plan, it's not going to strain our financials at all we think we're very well positioned for it but I think those are the two aspects of your question and I think you're asking and we're hopeful that customers will pull forward some of their deployments, but we don't control what they do we know what their minimum commitments.
Great. Thanks for the clarification good luck.
Thank you.
The next question comes from Sami Badri of Credit Suisse. Please go ahead.
And thank you for fitting me and.
Can you give us more color on a COVID-19 related delays and switch specific facilities, those are going to and which markets I'm just trying a pen where and the entire supply chain. This is happening and that.
And where the customers are trying to get to that is that might be a bit restrictive just to get more color on what's going on and a supply chain.
Yes, it's not as much a there is some delays there worst and delays and supply chain, but mostly the delays came from permitting and zoning and that was in bolt and Reno and in Vegas, and Nevada, as well as and our Atlanta facility and in Nevada, They laid off a substantial portion of <unk>.
Or furloughed, a substantial portion of the employees, a in Nevada County, and Clark County, where we built and that resulted in a significantly reduced amount of production a permits and zoning and voting variances were much slower to be approved because there just weren't as many committee meetings and those meetings where on line.
And which limited the ability for them to pass resolutions et cetera. So a.
That resulted in a significant delay for us, but we are doing everything and our power and now that that delay has been ameliorated to or have been removed to ameliorate the impact of that delay and roll ourselves forward, but it really was a government impact a it was the largest thing that caused our to life.
And Sami the first building that's coming online is our Las Vegas facility.
And Las Vegas is still 80 plus percent of our revenue and so when we look at customers that are always looking to expand within our within our facilities Las Vegas is still the.
The key driver of that so having that facility come on line first and we're pushing as fast as we can and Las Vegas, I think is going to serve as well and it's scheduled to come online in early 2022.
The ramps that we have set aside and Reno are larger and longer but that facility is also a larger.
So I think we're oh.
Okay, there and in Atlanta.
While the a.
And he is a is almost 80% committed at this point.
The first sector still has availability and customers will still be able to sell and ramping into there. So we have availability.
It's just a little bit of a tetris.
For us to make sure that we can fit to cut the customers into the right slots and in the way that they want and and the time that they want.
Got it got it. Thank you for that color a my next question I think this is a good segue actually and.
And Gabe you mentioned that the capacity or the majority of your capacity is reserved for the backlog at some point your customers will come online and absorb that capacity, but during this during the period of time from now until those customers deploy that cash.
That capacity is essentially just untapped and on monetized is there any point, where you guys might actually change your mandate, where you're more aggressive about bringing on more capacity and make binding agreements with your customers that postponing installations.
Come at a fee or come out and a specific type of requirement change.
Changing the way you guys do things and to your favor a little bit more just so that whenever a customer decides to put push out installations or whenever a new customer comes to you for a capacity you guys can be there ready to go.
Is there you know is there a potential mandates shifts that could exist at some point as you guys get bigger and more flexible or a is.
Is this kind of the dynamic that you're going to deal with for now just where we are and and your growth curve.
And that's.
And I think the dynamic has already happened.
Rather than building, a one building and one sector in advance of where we thought we needed to be and we're building two buildings.
And we've already broken and doing all of the underground work for the next three facilities and Vegas. The next two facilities and Atlanta and the next two facilities and Reno. So we want to make sure that we have expansion space, because where we're actually seeing many more of these two megawatt five megawatts seven megawatt transactions than we ever having a.
Past and so historically, we've grown up as a retail Colocation company and somebody deploying 100 cabinets.
500, kw and that was our bread and butter, we're seeing many more large transactions now and so we need to have that space available. So we're actually building and a faster clip and other larger clip and we do charge reservation fees and many cases for customers that they want to reserve cabinets. So we are able to monetize them and some of these larger.
Transactions that are negotiated we know that a customer can come in and deploy a thousand cabinets a.
Overnight, it's just not feasible. So we allow them to ramp over time, and that's just part of a negotiation.
And the rapid accurate into the things. So there is you know there is a consideration of the idled space. If you will over the course of the deployment. So that's a consideration and Gabe makes another good point, which is that we talk about the large transactions on this call, but we have like we've talked about the number of logos. We brought in this quarter, we have a large number of smaller transactions.
And that are really bread and butter or that actually generate a significant amount of revenue for us as a company and those are great margins and great customers for us to have and they provide a nice diversity of revenue for us.
Got it got it thank you.
And then my final question I don't think has come up on this call. Yet is are you guys going to consider a fifth location or a first campus within North America at some point just because you guys have now surpassed that point of proving.
Rapids, and Atlanta now works right I don't think that's no one can I think for a minute formidably come up with a bear thesis around what you guys have been able to do this opens up the question on your ability to open up to a fifth site a at least in North America.
You guys given any thought to that.
Well first of all May I really I really appreciate your acknowledgment that we have moved to other locations and been very successful and deploying those locations. We we got a lot of questions about could we replicate in other markets could we extend telecom to other markets and we have time and time again shown that we can you know at a new Atlanta campus and we mentioned that we sold out.
<unk> 70 per cent of the massive data center after only being opened for less than eight months and we've now immediately move to build a second and third data centers on the keep campus.
So there is obviously a need for our enterprise class hybrid and multi tenant facilities and so you're absolutely right. We are always looking for ways to expand as a company you've seen us expand and waves of announcing and edge deployment that we started and the partnership that we have there we talked about that again early on the call and we are always looking for ways.
We continue to expand as a company, we haven't announced anything about other primes at this time, but we want to keep our growth cycle, rolling and what and customers demand that we are put up enough demand that we look at a new prime location and we will consider that as an option.
Great. Thank you.
The next question comes from Nate Crossett of Behr and Baird. Please go ahead.
Hey, good evening.
A question on back filling the 18 million.
<unk> 'twenty 'twenty, one guidance assume net debt space is backfill them. This year and I think you mentioned that those companies were on month to month contracts and so I was just curious on.
Many of your contracts on month to month like that.
Yes, Thanks, Nate Yeah.
Our guidance does indeed.
Include the fact that we are selling new cabinets into that space or other available space just as we do it and each of our years, we looked at a run rate we look at our at our backlog and Dirty and we factory and are some churn and that guides us to a a starting point, including our.
Our annual rate lift that we do and the March timeframe and then we add new sales to that so we are expecting new sales that's part of what gets us to the 7% growth.
A number and whether that space will be a alan.
Allocated it and no specific T skips, where these customers are exiting or others is yet to be determined, but it's available space and we're going to be selling new cabinets in order to achieve our growth.
And the second part of your question Nate.
Just on month to month, how many oh and exist.
Yes, the vast majority.
Majority of our of our customers who are locked in and you know on average three year contracts.
Three to five year contracts on average of four years and if you look at our all of the bookings that we've done throughout 2020 I think the average has been about four years. So.
So we don't have other large month to month.
Contracts and as a.
We've stated we're not expecting any other.
Material migrations took a cloud or otherwise.
Okay.
And I also was wondering if you could give a quick update on just the edge product where do things stand.
And when can we expect maybe some more concrete I guess numbers to that initiative.
Yes, so we have announced that we had started the first deployment there with see a seat and we expect that will that will look to open sometime in the latter half of this year.
And we do not have any revenue forecast for the edge and this year's forecast, but we would look to have some forecasting.
In 2022.
Okay and other.
And your tenants started asking you about this product outside of Fedex or what's kind of debt.
Dialogue, you've had with existing tenants.
Yeah, we have had discussions with other prospective tenants outside of a Fedex and connection with this deployment and the number of them have indicated a strong interest and those include a telecommunications carriers as well as enterprise customers, who want to have proximate locations to their facilities.
And a third party infrastructure providers that are servicing and the internet of things and things that involve very low latency. So we've had a number of requests about how we're going out and rollout and how they can take space inside of those facilities and we're working with those customers. So that we have the highest take rate as possible once we get the facilities online.
Okay.
Lastly, I guess you know the flow has improved quite a bit over the last couple of years is there any kind of indication of where you think that might shake out at the end of this year and how it can be difficult but.
Yeah that.
Thomas cut out.
So if you can hear me this is a game.
We'll give our partners the opportunity to exchange their partnership units for public shares a eight.
<unk> eight times this year, and so where it shakes out is entirely up to them and when they choose to exchange.
But we would expect a float to continue to increase throughout a year.
Throughout this year and if you look at how it has increased over the past three years. We went out at just under 15 per cent of the company floated. We're now over 50 I think if you extrapolate that you could a you can get to and expectation.
But it really is entirely up to the partners themselves.
Okay and thank you.
The next question comes from Brendan. Thank you of Barclays. Please go ahead.
Great. Thanks for taking my question just one quick one you've recently had some strong momentum and the health care vertical.
Just wondering if there's any booking activity and a fourth quarter that stood out.
And we didn't have any specific healthcare bookings that were large that stood out in the fourth quarter. A we had other large bookings as you can see from a logistics company to semiconductor companies.
Two a software automotive software companies.
Well, we didn't have notable health care bookings and the fourth quarter.
Alright, still a lot a breath.
Thank you very much that's my only question.
Perfect. Thank you.
This concludes our question and answer session. The conference has now also concluded. Thank you for attending today's presentation and you may now disconnect.
Okay.
[music].