Switch — Q3 2018 Earnings Presentation
27 slides from Switch's earnings presentation, Nov 13, 2018
Slide 1: Investor Presentation Q3 2018
INVESTOR PRESENTATION | Q31 2018
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 powering the sustainable growth of the connected world
Switch IS A TECHNOLOGY INFRASTRUCTURE COMPANY POWERING THE SUSTAINABLE GROWTH OF THE CONNECTED WORLD
Slide 4: Financial Highlights Q3 2018
FINANCIAL HIGHLIGHTS Q3 2018 • Total revenue of $102.8 million, compared to $97.7 million for the same quarter in 2017, an increase of 5.2%. Year-to-date, total revenue of $302.6 million, compared to $278.9 million for the same period in 2017, an increase of 8.5%. • Net income of $4.7 million, compa
Slide 5: Company Snapshot Q3 2018
Switch COMPANY SNAPSHOT Q3 2018 The Four Switch PRIMES™ Up to 12 million Up to 1,185 3 Campus Locations Operational and Gross square feet (GSF) Megawatts of power (MW) 1 Under Development Current U.S. facilities: 4M GSF Current U.S. facilities: 415 MW Future U.S. facilities: 8M GSF Future U.S. facil
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 90% 90% 275 MW Future: 1 Facility 2018-20
Slide 8: Compelling Financial Model
COMPELLING FINANCIAL MODEL • 43% of the increase in revenue for the quarter ended September 30, 2018 was attributable to Track Record of Organic growth from customers who have been with Switch over one year, while the remaining 57% of the Top-Line Growth increase in revenue was attributable to new c
Slide 9: History of Organic Growth
HISTORY OF ORGANIC GROWTH (IN $ MILLIONS) Revenue Adjusted EBITDA 1,2 $378 $318 $303 $195 $279 $266 $153 $142 $144 $148 $207 $112 2014A 2015A 2016A 2017A Q3 YTD Q3 YTD 2014A 2015A 2016A 2017A Q3 YTD Q3 YTD 2017 2018 2017 2018 ¹ See Appendix for a reconciliation of Adjusted EBITDA to Net Income (Loss
Slide 10: Q3 2018 Revenue & Adjusted EBITDA vs. Q3 2017
Q3 2018 REVENUE & ADJUSTED EBITDA VS. Q3 2017 Revenue & Adjusted EBITDA Performance $120 $100 $102.8 $97.7 $80 $60 ($ millions) ($ $50.9 $40 $49.7 $20 $0 Q3'18 Q3'17 Actual Actual Revenue $102.8 $97.7 Adj. EBITDA $50.9 $49.7 Adj. EBITDA Margin % 49.5% 50.9% YOY Actual Revenue Growth % 5.2% YOY Actua
Slide 11: Rolling Quarterly Revenue Performance
ROLLING QUARTERLY REVENUE PERFORMANCE Rolling Quarterly Revenue Performance $120 $100 $102.2 $102.8 $99.3 $97.7 $97.7 $92.1 $89.2 $80 $81.9 $60 ($ millions) ($ $40 $20 $0 Q4'17 Q1'18 Q2'18 Q3'18 2018 Actual Revenue $97.7 $102.2 $102.8 2017 Actual Revenue $99.3 $89.2 $92.1 $97.7 2016 Actual Revenue $
Slide 12: Rolling Quarterly Adjusted EBITDA Performance
ROLLING QUARTERLY ADJUSTED EBITDA PERFORMANCE Rolling Quarterly Adjusted EBITDA Performance $60 $50 $51.1 $50.3 $50.9 $49.7 $46.9 $47.1 $46.8 $40 $41.0 $30 ($ millions) ($ $20 $10 $0 Q4'17 Q1'18 Q2'18 Q3'18 2018 Actual Adj. EBITDA $46.9 $50.3 $50.9 2017 Actual Adj. EBITDA $51.1 $47.1 $46.8 $49.7 201
Slide 13: Q3 2018 Total Contract Value Highlights
Q3 2018 TOTAL CONTRACT VALUE HIGHLIGHTS New Existing Metrics Total Customers Customers Contracts1 35 434 469 Customers 30 181 211 Power (MWs) >0.5 >17.5 >18.0 Annualized MRC2 ($millions) >$1 >$37 >$39 Wtd. Avg. Contract Term (yrs) 3.8 3.9 3.9 3 Total Contract Value ($ millions) >$6 >$128 >$134 ¹ Con
Slide 14: Q3 2018 New Customers Highlights by Industry
Q3 2018 NEW CUSTOMERS HIGHLIGHTS BY INDUSTRY • Over 450 contracts signed in Q3 2018 for new services, renewals, and expansions • 30 new customers Industry Description Cloud, IT & Software Premier business technology provider for the insurance industry Cloud, IT & Software Provider of GPU data proces
Slide 15: Q3 2018 New Contract Highlights
Q3 2018 NEW CONTRACT HIGHLIGHTS (IN $ MILLIONS) Total MRC Total NRC Total Annualized % of Total Rank Industry Contract Contract Contract MRC TCV Value Value Value (TCV) 1 Retail & Consumer Goods $12.9 $55.9 $0.1 $56.1 42% 2 Digital Content & Multi-Media Entertainment $5.3 $24.1 $0.4 $24.5 18% 3 Digi
Slide 16: Customer Revenue & Recurring Revenues
CUSTOMER REVENUE & RECURRING REVENUES (IN $ MILLIONS) Customer Revenue Category Q3'18 Q3'17 Growth (%) Q3'18 YTD Q3'17 YTD Growth (%) Colocation $82.4 $79.4 3.8% $241.3 $225.8 6.9% Connectivity $18.5 $17.1 8.0% $55.6 $49.2 12.9% Other $1.8 $1.1 60.3% $5.8 $4.0 44.4% Total $102.8 $97.7 5.2% $302.6 $2
Slide 17: Revenue Growth, Cabinet Equivalents & Churn
REVENUE GROWTH, CABINET EQUIVALENTS & CHURN New vs. Existing Customer Revenue Growth Q3 2018 Q3 YTD 2018 % of Revenue Growth From New Customers 57% 34% % of Revenue Growth From Existing Customers 43% 66% Cabinet Equivalent Metrics1 Q3 2018 Billable Cabinet Equivalents > 14,000 Revenue per Cabinet Eq
Slide 18: Q3 2018 Capital Expenditures & Campus Highlights
Q3 2018 CAPITAL EXPENDITURES & CAMPUS HIGHLIGHTS Q3 2018 Capital Expenditures Campus Highlights The Core Campus: • Build costs for future LAS VEGAS 11 which is expected to add another 340,000 GSF to Switch’s portfolio when it $60.4 Million Total opens in late 2018 or early 2019 • Continued build-out
Slide 19: Development Milestones
DEVELOPMENT MILESTONES Development Milestones Target Date MW Increase (Up To) Sector Increase The Core Campus LAS VEGAS 10 Sector 1 Q2 2018 - 1 LAS VEGAS 10 Power System 1 Q1 2019 10 MW - LAS VEGAS 11 Sector 1 & Power System 1 Q4 2018/Q1 2019 10 MW 1 The Citadel Campus TAHOE RENO 1 Sectors 6 & 7 Q2
Slide 20: Debt & Liquidity
DEBT & LIQUIDITY (IN $ MILLIONS) Debt & Liquidity ¹ Q3 2018 Capital Leases $20 Other Debt $588 Less: Cash & Cash Equivalents ($105) Net Debt $503 LQA Adjusted EBITDA $204 Net Debt / LQA Adjusted EBITDA 2.5x Liquidity $605 ¹ Liquidity defined as: Remaining undrawn revolver capacity plus cash & cash e
Slide 21: Full Year 2018 Guidance Summary
FULL YEAR 2018 GUIDANCE SUMMMARY (IN $ MILLIONS) 2017 2018 Guidance Financial Metric Results Low High Revenue $378 $405 $408 Adjusted EBITDA¹ $195 $197 $200 Capital Expenditures $403 $260 $310 ¹ Switch does not provide reconciliations for the non-GAAP financial measures included in the 2018 guidance
Slide 22: Appendix
APPENDIX 22
Slide 23: 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 24: 24 INVESTOR PRESENTATION | Q3 2018
24 INVESTOR PRESENTATION | Q3 2018
Slide 25: 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 Q2 2018 Q3 2018 Net income (loss) $ 16.7 $ 18.5 $ 15.9 $(19.8) $ 20.3 $ 15.0 $ 16.5 $(60.3) $ 4.0 $ 9.5 $ 4.7 Interest expense 2.
Slide 26: 2014-2017 Adjusted EBITDA Reconciliation
2014-2017 ADJUSTED EBITDA RECONCILIATION (IN $ MILLIONS) Adjusted EBITDA Reconciliation 2014 2015 2016 2017 Net income (loss) $ 56.5 $ 73.5 $ 31.4 $(8.6) Interest expense 6.8 7.7 10.8 25.1 Interest income (1.0) (0.3) (0.3) (0.6) Depreciation and amortization 43.9 55.4 66.6 89.1 Loss on disposal of p
Slide 27: Slide 27