Switch — Q4 2017 Earnings Presentation
26 slides from Switch's earnings presentation, Apr 2, 2018
Slide 1: Investor Presentation Q4 2017
August 2017 ® POWERING THE FUTURE OF THE CONNECTED WORLD® Investor Presentation Q4 2017
Slide 2: Safe Harbor
SAFE HARBOR 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” or “ou
Slide 3: Switch is a technology infrastructure company
3 Switch IS A TECHNOLOGY INFRASTRUCTURE COMPANY POWERING THE SUSTAINABLE GROWTH OF THE CONNECTED WORLD
Slide 4: Financial Highlights 2017
FINANCIAL HIGHLIGHTS 2017 4 • Total revenue of $378.3 million, compared to $318.4 million in 2016, an increase of 19% • Operating income of $18.8 million, compared to operating income of $51.1 million in 2016. Operating income in 2017 includes the impact of $71.3 million in non-recurring equity-base
Slide 5: Financial Highlights Q4 2017
FINANCIAL HIGHLIGHTS Q4 2017 5 • Total revenue of $99.3 million, compared to $81.9 million for the same quarter in 2016, an increase of 21%. • Net loss of $60.3 million, compared to $19.8 million for the same quarter in 2016. • Adjusted EBITDA of $51.1 million, compared to $41.0 million for the same
Slide 6: Switch Company Snapshot Q4 2017
The Four Switch PRIMESTM 3 Campus Locations Operational and 1 Under Development Up to 12 million Gross square feet (GSF) Current U.S. facilities: 4M GSF Future U.S. facilities: 8M GSF Up to 1,185 Megawatts of power (MW) Current U.S. facilities: 415 MW Future U.S. facilities: 770 MW 800+ Customers 38
Slide 7: Strategically Located PRIME Campuses
STRATEGICALLY LOCATED PRIME CAMPUSES 7 2,340,000 sq. ft. and 315 MW power capacity Stable climate with low-humidity Lowest natural disaster rating in Western U.S. Low tax environment 100% renewable power source Grand Rapids Atlanta Miami Ashburn New York The Pyramid Campus (Grand Rapids)
Slide 8: Campus capacity and utilization
Campus ¹ Year Operational Gross Square Feet (up to) ² Utilization % - By Campus ³ Utilization % - By Available Data Center Space ³ Power Capacity (up to) ⁴ The Core Campus Current: 8 Facilities ⁵ Future: 1 Facility 2003-2017 2018/2019 2,000,000 340,000 86% 91% 275 MW 40 MW The Citadel Campus Current
Slide 9: Compelling Financial Model
COMPELLING FINANCIAL MODEL 9 Track Record of Organic Top-Line Growth 84% of the increase in revenue for the year ended December 31, 2017 was attributable to growth from existing customers, while the remaining 16% of the increase in revenue was attributable to new customers initiating service after
Slide 10: History of Organic Growth
$95 $112 $142 $153 $195 2013A 2014A 2015A 2016A ² 2017A HISTORY OF ORGANIC GROWTH (IN $ MILLIONS) ¹ See Appendix for a reconciliation of Adjusted EBITDA to Net Income (Loss). ² 2016 Adj. EBITDA includes front loaded costs to open Citadel Campus and Pyramid Campus. Adjusted EBITDA ¹ $167 $207 $266 $3
Slide 11: 2017 Revenue & Adjusted EBITDA vs. 2016
2017 REVENUE & ADJUSTED EBITDA VS. 2016 11 Revenue & Adjusted EBITDA Performance FY 2017 Actual FY 2016 Actual Revenue $378.3 $318.4 Adj. EBITDA $194.7 $153.2 YOY Actual Revenue Growth % 18.8% YOY Actual Adj. EBITDA Growth % 27.1% $378.3 $318.4 $194.7 $153.2 $0 $50 $100 $150 $200 $250 $300 $350 $400
Slide 12: Quarterly 2017 Revenue vs. 2016
QUARTERLY 2017 REVENUE VS. 2016 12 Quarterly Revenue Performance Q1 Q2 Q3 Q4 2017 Actual Revenue $89.2 $92.1 $97.7 $99.3 2016 Actual Revenue $74.0 $80.8 $81.7 $81.9 YOY % Growth 20.5% 13.9% 19.6% 21.3% $89.2 $92.1 $97.7 $99.3 $74.0 $80.8 $81.7 $81.9 $0 $20 $40 $60 $80 $100 ($ m ill io ns )
Slide 13: Quarterly 2017 Adj. EBITDA vs. 2016
13 Quarterly Adj. EBITDA Performance QUARTERLY 2017 ADJ. EBITDA VS. 2016 Q1 Q2 Q3 Q4 2017 Actual Adj. EBITDA $47.1 $46.8 $49.7 $51.1 2016 Actual Adj. EBITDA $37.6 $40.0 $34.6 $41.0 YOY % Growth 25.1% 17.0% 43.8% 24.7% $47.1 $46.8 $49.7 $51.1 $37.6 $40.0 $34.6 $41.0 $0 $10 $20 $30 $40 $50 $60 ($ m il
Slide 14: Q4 New Customers Highlights by Industry
Q4 NEW CUSTOMERS HIGHLIGHTS BY INDUSTRY 14 • Over 400 contracts signed in Q4 2017 for new services, renewals, and expansions • Over 100 new customers in 2017; 18 of those in Q4 2017 Industry Description Retail & Consumer Goods Global home appliances company Retail & Consumer Goods Leading marine rob
Slide 15: Customer Revenue & Recurring Revenues
CUSTOMER REVENUE & RECURRING REVENUES (IN $ MILLIONS) 15 ¹ Recurring Revenue is comprised of (1) colocation, which includes the licensing of cabinet space and power; and (2) connectivity services. We consider these services recurring because our customers are generally billed on a fixed and recurrin
Slide 16: Revenue Growth & Churn
REVENUE GROWTH & CHURN (IN $ MILLIONS) 16¹ 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. Existing vs. New Customer Revenue Growth Customer Type Q4 2017 2017 % of
Slide 17: 2017 Capital Expenditures & Campus Highlights
2017 CAPITAL EXPENDITURES & CAMPUS HIGHLIGHTS (IN $ MILLIONS) 17 • The Core Campus: • Opened LAS VEGAS 12 and 2 new sectors in LAS VEGAS 10 • Added power and cooling infrastructure to support 20MW of additional capacity • Site development costs for future LAS VEGAS 11 which is expected to add anothe
Slide 18: Development Milestones
DEVELOPMENT MILESTONES 18 Development Milestones Target Date MW Increase (Up To) GSF Capacity (Up To) The Core Campus LAS VEGAS 10 Power System 2 Q1 2018 10 MW - LAS VEGAS 10 Sector 1 Q2 2018 - 110,000 LAS VEGAS 10 Power System 1 Q4 2018 10 MW - LAS VEGAS 11 Sector 1 & Power System 1 Q4 2018/Q1 2019
Slide 19: Debt & Liquidity
DEBT & LIQUIDITY(IN $ MILLIONS) 19¹ Liquidity defined as: Remaining undrawn revolver capacity plus cash & cash equivalents Debt & Liquidity ¹ 12/31/2017 Capital Leases $22 Other Debt $592 Less: Cash & Cash Equivalents ($265) Net Debt $349 LQA Adjusted EBITDA $204 Net Debt / LQA Adjusted EBITDA 1.7x
Slide 20: Full Year 2018 Guidance Summary
FULL YEAR 2018 GUIDANCE SUMMMARY (IN $ MILLIONS) 20 Financial Metric 2017 Results 2018 Guidance 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
Slide 21: Appendix
APPENDIX 21
Slide 22: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES 22 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, whic
Slide 23: Powering the Future of the Connected World
August 2017 ® POWERING THE FUTURE OF THE CONNECTED WORLD® Investor Presentation Q4 2017
Slide 24: 2013-2017 Adjusted EBITDA Reconciliation
2013-2017 ADJUSTED EBITDA RECONCILIATION (IN $ MILLIONS) 24 Adjusted EBITDA Reconciliation 2013 2014 2015 2016 2017 Net income $ 40 $ 57 $ 73 $ 31 $(9) (+) Interest Expense 6 7 8 11 25 (+) Interest Income (0) (1) (0) (0) (1) (+) Depreciation and Amortization 35 44 55 67 89 (+) Loss on disposal of pr
Slide 25: 2016-2017 Adjusted EBITDA Reconciliation by Quarter
2016-2017 ADJUSTED EBITDA RECONCILIATION BY QUARTER (IN $ MILLIONS) 25 Adjusted EBITDA Reconciliation Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Net income $17 $19 $16 ($20) $20 $15 $16 ($60) (+) Interest Expense 2 2 2 4 4 5 9 7 (+) Interest Income (0) 0 (0) (0) (0) (0) (0) (1)
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