CONE

CyrusOne Inc (CONE)

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Industry: Consumer Services
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CyrusOne Inc. (CONE)

Q4 2012 Results Earnings Call

February 26, 2013 5:00 PM ET

Executives

John Caulfield - Vice President and Treasurer

Gary Wojtaszek - President and CEO

Kim Sheehy - Chief Financial Officer

Analysts

Zhi Zhang - Bank of America Merrill Lynch

Vincent Chao - Deutsche Bank

Sergey Dluzhevskiy - Gabelli & Company

Jordan Sadler - KeyBanc Capital Markets

Jamie Feldman - Bank of America Merrill Lynch

Presentation

Operator

Please standby. Good day, ladies and gentlemen. Thank you for standing by. Welcome to CyrusOne Fourth Quarter and Year End 2012 Earnings Conference Call. My name is Shannon, and I’ll be your conference operator for today. At this time, all participants are in a listen-only mode. After the prepared remarks the management from CyrusOne will conduct the question-and-answer session and conference participants will be given instructions at that time. As a reminder, today’s conference is being recorded.

I would now like to turn the call over to Mr. John Caulfield, the company’s Vice President and Treasurer. Please go ahead, sir.

John Caulfield

Thank you. Good evening, everyone. And welcome to CyrusOne’s fourth quarter 2012 Earnings call. Today I’m joined by Gary Wojtaszek, President and CEO; and Kim Sheehy, Chief Financial Officer.

Before we begin, I would like to remind you that our fourth quarter earnings release along with fourth quarter financial tables, earnings supplement and presentation are available on the Investor Relations section of our website at www.cyrusone.com under the Investor Relations tab.

I’d also like to remind you that comments made on today’s call and some of the responses to your questions deal with forward-looking statements related to CyrusOne that are subject to risks and uncertainties. Factors that may cause our actual results to differ from expectations are detailed in the company’s filings with the SEC, which you may access on the SEC’s website or on cyrusone.com. We undertake no obligation to revise these statements following the date of this conference call except as required by law.

In addition, some of the company’s remarks this evening contained non-GAAP financial measures. You can find reconciliation of these measures to the most comparable GAAP measures in the earnings release and financial tables which are posted on the Investor Relations section of the company’s website.

I would now like to turn the call over to our President and CEO, Gary Wojtaszek.

Gary Wojtaszek

Thank you, John. Good evening, everyone. Welcome to our fourth quarter 2012 earnings conference call. Today after my remarks, Kim will discuss the quarterly and annual financial results in more detail. Before we discuss the financial results, I’d like to acknowledge the success of our recent IPO and express my appreciation to our team for their hard work that led to a successful offering.

As shown on slide three, 2012 was been a very busy and successful year for us. We managed to grow our revenue which is all organic in excess of 20%. We entered the Phoenix and San Antonio markets, launched our new Internet exchange product line, manage to end the year coming nine of the Fortune 20 as our customers and to make it even a little more interesting completed what our bankers told us was the most successful IPO in REIT industry in the past 15 years. In summary was a pretty good year.

CyrusOne continued its growth trend as revenue for the quarter came in at $58 million which is up 21% year-over-year. I’m pleased to note that we delivered at least 20% year-over-year revenue growth for each quarter of 2012 thus highlighting the strong demand for the enterprise-class products and services that CyrusOne sells.

We continue to execute our strategy, what we call converting the unconverted and managed to forge new partnerships with first time customers as we added 30 new logos to our portfolio in the quarter, bringing our total count to 518 customers.

We also continue to be sharply focused on executing our strategy of becoming the preferred data center provider to the Fortune 1000, which currently accounts for more than 75% of our annualized rent.

This quarter we signed up seven Fortune 1000 customers bringing our total Fortune 1000 account to 115, about 65% of our growth over the last 12 months came from existing customers. We still believe that the vast majority of the data center demands are managed internally, which presents a great opportunity for growth.

On slide four you can see that our revenue streams continued to be well-diversified across multiple industries with 57% of our annualized rent generated from investment grade companies, a dominant presence in the data intensive energy sector continues and accounts for approximately 37% of our annualized rent, down 1% from last quarter as a result of the growth from other sectors.

As we mentioned to you on our road show, we expect that the oil and gas industry will become a smaller percentage of our business as our penetration in other industries accelerate. You can also see that our mix of full service and metered power products continue to be well-diversified with our annualized rent split evenly between the customer segments.

This is a competitive advantage that we have as we are well-positioned to serve a diverse range of products because of our advanced customer service delivery model. To provide a little more color, of the 30 new customers that we signed this quarter, 46% purchased our full service or retail product and 54% purchased our wholesale product.

Importantly, the weighted average length of these new contracts was six years, which is longer than our average portfolio maturity. Additionally, two-thirds of these contracts had automatic price escalators built into them.

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