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CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
QTS Realty Trust, Inc.DEUTSCHE BANK MEDIA, INTERNET & TELECOM CONFERENCE
MARCH 10 – 12, 2014
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Forward Looking Statements
QTS Company Confidential1 |
Some of the statements contained in this earnings presentation constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our funds from operations and anticipated market conditions are forward-looking statements. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
The forward-looking statements contained in this presentation reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
adverse economic or real estate developments in our markets or the technology industry;
national and local economic conditions;
difficulties in identifying properties to acquire and completing acquisitions;
our failure to successfully develop, redevelop and operate acquired properties and operations;
significant increases in construction and development costs;
the increasingly competitive environment in which we operate;
defaults on or non-renewal of leases by customers;
increased interest rates and operating costs, including increased energy costs;
financing risks, including our failure to obtain necessary outside financing;
decreased rental rates or increased vacancy rates;
dependence on third parties to provide Internet, telecommunications and network connectivity to our data centers;
our failure to qualify and maintain our qualification as a REIT;
environmental uncertainties and risks related to natural disasters;
financial market fluctuations; and
changes in real estate and zoning laws and increases in real property tax rates.
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause our future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the form S-11/A filed on October 10th, 2013. We refer you to our press release and periodic reports furnished or filed with the SEC posted to our website for further information regarding our usage of these non-GAAP financial measures and reconciliation of them to our GAAP results.
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
QTS Strategy and Business Model
QTS Company Confidential2 |
Yielding Strong Growth with High Capital Efficiency
Strong top-line growthOperating leverage and increasing marginsStrong ROIC – 15% unlevered target
Yielding Strong Growth with High Capital Efficiency
Strong top-line growthOperating leverage and increasing marginsStrong ROIC – 15% unlevered target
Drive Revenue Through Fully Integrated 3C Portfolio
C1 – Custom Data CenterC2 – ColocationC3 – Cloud and Managed Services
Drive Revenue Through Fully Integrated 3C Portfolio
C1 – Custom Data CenterC2 – ColocationC3 – Cloud and Managed Services
With Cost-Efficient Delivery of Services
Low basis, mega-scale facilities Significant growth capacity
With Cost-Efficient Delivery of Services
Low basis, mega-scale facilities Significant growth capacity
Integrated Technology Services Platform World-Class Infrastructure
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Only National Fully-Integrated 3C Platform
3 |
QTS crossConnect
QTS metroConnectQTS data centerConnect
QTS internetConnect
QTS netConnect
QTS ecoConnect
QTS Company Confidential
¹ As of December 31 2013.
C1 C2 C3Custom Data Center ColocationCloud and
Managed Services
Description Private turn-key data center space (“wholesale”)
Cabinets, cages, and suites Virtual private cloud
Managed services
- Network management, security, data back-up
Lease Size Median customer 3,000 sq. ft. < 3,000 sq. ft. of raised floor Managed virtual servers
- Small physical space
Lease Term 5 to 10 years
Separately-metered power
Up to 3 years
Non-metered power
Up to 3 years
Example Customers
Global Internet and cloud companies
Large enterprises
Government agencies
Large enterprises
Small and medium businesses
Telecommunications carriers
Government agencies
Large enterprises
Small and medium businesses
Government agenciesC1 40% C2
52%
C38%
C140%
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
QTS Strategy and Business ModelIntegrated Technology Services Platform to Drive Revenue Through 3C Product Offering
QTS Company Confidential4 |
• Solution selling meets needs of sophisticated customers
Targets High Value Enterprise Customers
• Differentiated product offering expands addressable market and customer base
• Creates cross-sell and up-sell opportunities
• Higher rents per square foot
• Drives customer retention
Enhanced Growth Opportunities
Drives RevenueSupports Predictability and Stability
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
C3: Cloud and Managed Services
QTS Company Confidential5 |
Cloud Infrastructure Managed Services
QTS Cloud solution addresses private cloud segments
Customized to unique enterprise needs
High-performance and scalable Cloud
Highly secure and compliant with options to dedicate infrastructure
Meets compliance standards (e.g. HIPAA, PCI, FedRAMP1)
Complements C1, C2 and Cloud Infrastructure products
Services include:
- Computer, storage, networks, systems and database management
- Disaster recovery and data backup
- System security monitoring and testing
C3
¹ Target mid-2014
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
QTS Connectivity
QTS Company Confidential6 |
6 core network products
12,000+ interconnections500+ networks interconnectedFully meshed QTS network
Drives network owned / controlled customer solutions
Enhances customer ecosystem
Provides low latency access across entire network
Across QTS Facilities Within QTS Facilities
¹ Source: 451 Research; North American Multi-Tenant Datacenter Supply: Top 10 Markets. Map only shows markets where QTS has a presence.
Top Data Center Market1
Major Telecom Hub
Customer 1 Customer 2
Customer 3 Customer 4
Carrier
QTS Product Delivery Network
netConnect(QTS Network
Connect)
ecoConnect(Customer
Cross-Connect)
crossConnect(Carrier Cross-
Connect)
Miami, FL
Dallas
Richmond
internetConnect(QTS � Internet)
metroConnect(QTS � Carrier Hotel)
data centerConnect(QTS � QTS)
Silicon Valley
Sacramento
New York / New Jersey
Atlanta, GA
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
QTS Strategy and Business ModelWorld Class Infrastructure to Support Cost Efficient Delivery of Services
QTS Company Confidential7 |
• 3.8M gross square feet including 2 of the largest operating data centers in the world• Drives efficiencies off fixed-cost
basis• Attracts customers looking for
expansion path
Large-Scale Facilities
• National platform of 10 data centers (92% owned) • Drives strong returns from existing
platform• Successful history demonstrates
repeatability
Low-Basis,Owned Facilities
• Ability to more than double operating square feet in existing facilities • Provides visibility and control of
future growth plans• Supports low average cost-to-build
at $7M per gross megawatt
Significant Capacity
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Nationwide Footprint in Top Data Center Markets
QTS Company Confidential8 |
Note: QTS data as of December 31, 2013. 1. Represents our “Basis of Design” Raised Floor NRSF at full buildout. 2. Based on gross square footage.3. Source: 451 Research; North American Multi-Tenant Datacenter Supply: Top 10 Markets. Map only shows markets where QTS has a presence.4. Source: 451 Research. Based on estimated 2012-2014 demand growth among Top 10 U.S. Multi-Tenant Data Center markets.
Top Data Center Market3
Silicon Valley
Sacramento
Miami, FL
Atlanta, GA
New York / New Jersey
Dallas
Richmond
Major Telecom Hub
1.8 Million Square Feet1 (92% owned)2 with over 500 MW of Gross Utility Power
Highest demand growth4
3rd largest Fortune 500 hub
Strong regional demand
Favorable power costs
Proximity to multiple key eastern markets
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
292,000 SF 527,000 SF
Capacity to more than double in size within existing facilities
Carrier-neutral and highly connected
Engineered to among the highest specifications commercially available
More efficient design
Higher operating margins
Flexibility to optimize product offerings in response to demand
Lower redevelopment cost
– Phased expansion
– Large, efficient footprint
– < $7 million per MW on average
QTS Company Confidential9 |
Atlanta - Metro (72MW)1 Richmond (110MW)
0 SF 292,000 SF155,000 SF 214,000 SF
85,000 SF 555,000 SF
Atlanta - Suwanee (36MW) Dallas (140MW)
55% Built out 15% Built out
73% Built out
Note: Square footage reflects our current Raised Floor Operating Net Rentable Square Feet (“NRSF”) as of December 31, 2013 (blue shaded bars) and our “Basis of Design” Raised Floor NRSF at full buildout. MW denotes available utility power as of December 31, 2013.¹ Atlanta - Metro currently has 72 MW of available utility power based on current agreements with its utility provider but has transformer capacity for 120 MW. Includes 66,000 sf
from a prior C1 tenant which is currently being redeveloped for another C1 tenant and additional C2 space. 50,000 related to the C1 tenant was placed in service January 1, 2014
Best-In-Class “Mega” Data Centers
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
High Utilization with Capacity for Growth
QTS Company Confidential10 |
Q4 2013 Raised Floor Capacity (000’s sq. ft.)
Q4 2013 Highlights
38% utilization of 1.8 million raised floor NRSF (net rentable square feet) total capacity
Positive lease-up increased occupancy to 92% of leasable raised floor
Q4 2013 Total Capacity (000’s sq. ft.)
38% of Basis of Design
Gross Square Feet Basis of DesignRaised Floor
Developed RaisedFloor
3,780
1,805
Developed RaisedFloor Operating
NRSF
Leasable RaisedFloor
Leased Raised Floor
690
92% Occupancy
690
486446
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
QTS Strategy and Business Model
QTS Company Confidential11 |
Yields Successful Financial Model
Strong top-line revenue growthOperating leverage and increasing margin accelerates profitability growth Achieved with strong capital efficiency and ROIC target of 15+%
Yields Successful Financial Model
Strong top-line revenue growthOperating leverage and increasing margin accelerates profitability growth Achieved with strong capital efficiency and ROIC target of 15+%
Integrated Technology Services Platform to
Drive Revenue
Integrated Technology Services Platform to
Drive Revenue
With World-Class Infrastructure to
Support Cost-Efficient Delivery of Services
With World-Class Infrastructure to
Support Cost-Efficient Delivery of Services
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Q4 2013 Performance
QTS Company Confidential12 |
Operating FFO ($mm) Adjusted EBITDA ($mm)
NOI ($mm) Revenue ($mm)
Q4 2013 Highlights
15.7% ROIC for Q4
Ecosystem of 884 total customers
Over 500 interconnected network providers and more than 12,000 interconnections
61% of 2013 net incremental leasing activity from existing customers
Customers taking advantage of more than one of our 3C product offerings represented 40% of December 31, 2013 MRR
¹ Sacramento facility acquired on 12.20.2012Information for the fourth quarter and year ended December 31, 2012 represents results for QualityTech, L.P. (“the Predecessor”)Information for the fourth quarter and year ended December 31, 2013 represents the combined results of the Predecessor and QTS Realty Trust, Inc. (the “Company” or “the Successor”)
$24.5$28.3
Q4 2012 Q4 2013
$24.7
$30.4
$6.7
$14.3
Q4 2012 Q4 2013
Sacramento1
Rest of QTS
$6.9
$16.4
$14.5$19.1
Q4 2012 Q4 2013
$14.7
$21.2
$37.8$43.9
Q4 2012 Q4 2013
$38.2
$47.4
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Margin Performance
QTS Company Confidential13 |
Q4 2013 Highlights:
G&A % of Revenue Adjusted EBITDA Margin
G&A continuing to drop as a percent of revenue to 20.8% in Q4 2013
Operating leverage resulting in 630 basis point increase in EBITDA margin from Q4 2012 to Q4 2013
Target EBITDA margin approaching 50% within the next few years
26.5%
21.9%20.8%
24.7%
22.0%
Q4 2012 Q3 2013 Q4 2013 YE 2012 YE 2013
38.5%
42.8%
44.8%
38.0%
42.4%
Q4 2012 Q3 2013 Q4 2013 YE 2012 YE 2013
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Strong Leasing Momentum
QTS Company Confidential14 |
Incremental Annualized Revenue Net of Downgrade – Quarterly ($mm)
Incremental Annualized Revenue Net of Downgrade – Annual ($mm)
Q4 2013 Sales Highlights
Internal Sales Force
Solution-based sales approach “Powered by People”
Specialized by product and industry
Good visibility on pipeline and customer demand
Significant New Customer Wins
Healthcare, Retail, Technology, and Software as a Service
High performance application
Strong security and compliance capabilities to meet enterprise customer needs
Strong expansion activity
Some of the world’s largest internet-based companies
Multiple C3 expansion signed during 2014
Sophisticated private and hybrid cloud, multi-year contracts
Q4 2012 Q3 2013 Q4 2013
5.0
8.2
9.3
YE 2012 YE 2013
25.5
43.0
Information for the fourth quarter and year ended December 31, 2012 represents results for QualityTech, L.P. (“the Predecessor”)Information for the fourth quarter and year ended December 31, 2013 represents the combined results of the Predecessor and QTS Realty Trust, Inc. (the “Company” or “the Successor”)
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Annualized booked-not-billed MRR from signed but not yet commenced leases was $28.2 million as of December 31, 2013
– Of the $13.5 million in 2014, $9.5 million will be recognized in 2014 revenue
– Of the $8.4 million in 2015, $3.6 million will be recognized in 2015 revenue
Contracts are explicit regarding start date and revenue recognition
Churn in Q4 2013 of 2.3%, and 5.7% for full year 2013
Strong Booked-Not-Billed Pipeline
QTS Company Confidential15 |
Annualized Booked-Not-Billed MRR –Schedule ($mm) Highlights
2013 2014 2015 2016+
$28.2 $28.2 $28.2 $28.2
$13.5
$8.4
$6.3
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
$348 million total debt as of 12/31/13
– Debt to LQA Adjusted EBITDA of 4.1x
Targeting a long term stabilized debt-to-EBITDA ratio of between 4.0x and 5.0x
Total available liquidity of approximately $330 million
– $325 million available under existing credit facilities
– $5 million cash on hand
Increased capacity on revolving credit by $50M in Q1 2014, further increasing liquidity
Well-Capitalized Balance Sheet to Support Growth
QTS Company Confidential16 |
Limited Near-Term Debt Maturities ($mm)
Capital Structure (as of Dec 31, 2013)
Unsecured Credit Facility $256.5mm1
Capital Leases $ 2.5mm
Mortgage Debt $89mm2
2014 2015 2016 2017 2018 2019+
Mortgage Debt Credit Facility
$2
$72
$2
$344
$2284
$6
1. Includes a $225 million term loan and $31.5 million of borrowings on the company’s $350 million revolving credit facility.2. Additional $30 million of capacity exists and will be available for future borrowings as Richmond’s NOI continues to grow.3. Market Cap calculated as follows: total common shares and OP units of 36.8 million year end price of $24.78 per share4. Includes $3mm in mortgage debt
Highlights
Market Cap $913mm3
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