Switch — Q1 2018 Earnings Presentation
26 slides from Switch's earnings presentation, May 14, 2018
Slide 1: Powering the Future of the Connected World
Cc” switch POWERING THE FUTURE OF THE CONNECTED WORLD®
Slide 2: Safe Harbor
SAFE HARBOR | 2018 This presentation includes forward-looking statements. All statements contained in this presentation other than statements of historical facts, including statements regarding future results of operations and financial position of Switch, Inc. and Switch, Ltd. (“Switch,” “we,” “us”
Slide 3: Switch is a technology infrastructure company
Switch IS A TECHNOLOGY INFRASTRUCTURE COMPANY POWERING THE SUSTAINABLE GROWTH OF THE CONNECTED WORLD
Slide 4: Financial Highlights Q1 2018
FINANCIAL HIGHLIGHTS Q1 2018 • Total revenue of $97.7 million, compared to $89.2 million for the same quarter in 2017, an increase of 9.6%. • Net income of $4.0 million, compared to $20.3 million for the same quarter in 2017. • Adjusted EBITDA of $46.9 million, compared to $47.1 million for the same
Slide 5: Company Snapshot Q1 2018
Switch COMPANY SNAPSHOT Q1 2018 ¹ Churn is defined as a reduction in recurring revenue attributed to customer terminations or non-renewal of expired contracts, as a percentage of revenue at the beginning of the period. ² See Appendix for a reconciliation of Adjusted EBITDA to Net Income (Loss). ³ Ca
Slide 6: Strategically Located Prime Campus Locations
STRATEGICALLY LOCATED PRIME CAMPUS LOCATIONS The Citadel Campus | Reno The Pyramid Campus | Grand Rapids Designed to be, upon Designed to be the largest completion, world’s largest data datacenter campus center environment in the Eastern U.S. TAHOE RENO 1 - Up to a 1.3mm Over 1,100,000 sq. f
Slide 7: Growing Portfolio of Hyperscale Facilities
GROWING PORTFOLIO OF HYPERSCALE FACILITIES Utilization % - Gross Square Feet Utilization % - Power Capacity Campus ¹ Year Operational By Available Data (up to) ² By Campus ³ (up to) ⁴ Center Space ³ The Core Campus Current: 8 Facilities ⁵ 2003-2017 2,000,000 86% 91% 275 MW Future: 1 Facility 2018/20
Slide 8: Compelling Financial Model
COMPELLING FINANCIAL MODEL • 59% of the increase in revenue for the quarter ended March 31, 2018 was attributable to growth Track Record of Organic from customers who have been with Switch over one year, while the remaining 41% of the increase Top-Line Growth in revenue was attributable to new custo
Slide 9: History of Organic Growth
HISTORY OF ORGANIC GROWTH (IN $ MILLIONS) Revenue Adjusted EBITDA ¹ $195 $378 $153 $318 $142 $266 $112 $207 -0.4% Decline $47 $47 $89 $98 2014A 2015A 2016A 2017A Q1 '17 Q1 '18 2014A 2015A 2016A 2017A Q1 '17 Q1 '18 ¹ See Appendix for a reconciliation of Adjusted EBITDA to Net Income (Loss). ² 2016 Ad
Slide 10: Q1 2018 Revenue & Adjusted EBITDA vs. Q1 2017
Q1 2018 REVENUE & ADJUSTED EBITDA VS. Q1 2017 Revenue & Adjusted EBITDA Performance Q1’18 Adjusted EBITDA includes $2.3 million of additional professional fees related to the becoming a publicly traded company and $1 million of higher connectivity costs from actual usage charges
Slide 11: Rolling Quarterly Revenue Performance
ROLLING QUARTERLY REVENUE PERFORMANCE Rolling Quarterly Revenue Performance $100 $97.7 $99.3 $97.7 $92.1 $89.2 $80 $80.8 $81.7 $81.9 $60 $40 ($ millions) ($ $20 $0 Q2'17 Q3'17 Q4'17 Q1'18 2018 Actual Revenue $97.7 2017 Actual Revenue $92.1 $97.7 $99.3 $89.2 2016 Actual Revenue $80.8 $81.7 $81.9 YOY
Slide 12: Rolling Quarterly Adjusted EBITDA Performance
ROLLING QUARTERLY ADJUSTED EBITDA PERFORMANCE Rolling Quarterly Adjusted EBITDA Performance $60 $50 $51.1 $49.7 $46.8 $46.9 $47.1 $40 $40.0 $41.0 $34.6 $30 ($ millions) ($ $20 $10 $0 Q2'17 Q3'17 Q4'17 Q1'18 2018 Actual Adj. EBITDA $46.9 2017 Actual Adj. EBITDA $46.8 $49.7 $51.1 $47.1 2016 Actual Adj
Slide 13: Q1 2018 New Customers Highlights by Industry
Q1 2018 NEW CUSTOMERS HIGHLIGHTS BY INDUSTRY • Over 450 contracts signed in Q1 2018 for new services, renewals, and expansions • 36 new customers INDUSTRY DESCRIPTION Cloud, IT & Software Premier online HR technology company Cloud, IT & Software Major cloud security company Cloud, IT & Software Lead
Slide 14: Customer Revenue & Recurring Revenues
CUSTOMER REVENUE & RECURRING REVENUES (IN $ MILLIONS) Customer Revenue Category Q1 2018 % of Q1 2017 % of Revenue YoY Growth (%) Revenue Colocation $77.7 79.5% $72.0 80.7% 8.0% Connectivity $18.2 18.6% $15.9 17.8% 14.9% Other $1.8 1.8% $1.3 1.5% 34.7% Total $97.7 100.0% $89.2 100.0% 9.6% Recurring R
Slide 15: Revenue Growth & Churn
REVENUE GROWTH & CHURN (IN $ MILLIONS) Existing vs. New Customer Revenue Growth Customer Type Q1 2018 % of Revenue Growth from New Customers 41% % of Revenue Growth from Existing Customers 59% Churn ¹ ¹ Churn is defined as a reduction in recurring revenue attributed to customer terminations or non-r
Slide 16: Q1 2018 Capital Expenditures & Campus Highlights
Q1 2018 CAPITAL EXPENDITURES & CAMPUS HIGHLIGHTS Q1 2018 Capital Expenditures Campus Highlights The Citadel Campus: • Continued buildout of 2 new sectors scheduled to open in $61.4 Million Total Q2 2018 • Added power and cooling infrastructure to support 10MW of new capacity for the next power syste
Slide 17: Development Milestones
DEVELOPMENT MILESTONES Development Milestones
Slide 18: Debt & Liquidity
DEBT & LIQUIDITY (IN $ MILLIONS) Debt & Liquidity ¹ Q1 2018 Capital Leases $22 Other Debt $590 Less: Cash & Cash Equivalents ($239) Net Debt $374 LQA Adjusted EBITDA $188 Net Debt / LQA Adjusted EBITDA 2.0x Liquidity $739 ¹ Liquidity defined as: Remaining undrawn revolver capacity plus cash & cash e
Slide 19: Full Year 2018 Guidance Summary
FULL YEAR 2018 GUIDANCE SUMMMARY (IN $ MILLIONS) 2017 2018 Guidance Financial Metric Results Low High Revenue $378.3 $423 $440 Adjusted EBITDA¹ $194.7 $216 $224 Capital Expenditures $402.6 $260 $310 ¹ Switch does not provide reconciliations for the non-GAAP financial measures included in the 2018 gu
Slide 20: Subsequent Events
SUBSEQUENT EVENTS Since March 31, 2018, Switch has closed a number of significant transactions. • Located a high-security government project in The CORE Campus. • A 15 Megawatt deal for The Citadel Campus with an international streaming media corporation - Total contract value over $80 million. • A
Slide 21: Appendix
APPENDIX
Slide 22: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES To supplement Switch’s condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States (GAAP), Switch uses Adjusted EBITDA, Adjusted EBITDA margin and recurring revenue, which a
Slide 23: August 2017 Powering the Future of the Connected World
August 2017 POWERING THE FUTURE OF THE CONNECTED WORLD® Investor Presentation Q4 2017 ®
Slide 24: 2016-2018 Adjusted EBITDA Reconciliation by Quarter
2016-2018 ADJUSTED EBITDA RECONCILIATION BY QUARTER (IN $ MILLIONS) Adjusted EBITDA Reconciliation Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Net income $17 $19 $16 ($20) $20 $15 $16 ($60) $4 (+) Interest Expense 2 2 2 4 4 5 9 7 6 (+) Interest Income (0) 0 (0) (0) (0) (0
Slide 25: 2014-2017 Adjusted EBITDA Reconciliation
2014-2017 ADJUSTED EBITDA RECONCILIATION (IN $ MILLIONS) Adjusted EBITDA Reconciliation 2014 2015 2016 2017 Net income $ 57 $ 73 $ 31 $(9) (+) Interest Expense 7 8 11 25 (+) Interest Income (1) (0) (0) (1) (+) Depreciation and Amortization 44 55 67 89 (+) Loss on disposal of property and equipment 1
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