CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
QTS Realty Trust, Inc.
Q3 EARNINGS PRESENTATION
NOVEMBER 2013
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Forward Looking Statements
QTS Company Confidential 1 |
Some of the statements contained in this earnings release and accompanying supplemental information 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 supplement 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 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
Agenda
QTS Company Confidential 2 |
Chad Williams
Jim Reinhart
Dan Bennewitz
Chief Operations Officer – Operations and Development
Development Progress and Capital Plan
Chief Operations Officer – Sales and Marketing
Third Quarter Sales Results
Bill Schafer Chief Financial Officer
Third Quarter Financial Results and Fourth Quarter 2013 Guidance
Chairman and Chief Executive Officer
Business Review and Overview of Quarter
Jeff Berson Chief Investment Officer and Head of Investor Relations
Introduction
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
QTS at a Glance
QTS Company Confidential 3 |
Custom Data Center
Colocation
Cloud & Managed Services
Differentiated
Platform
High Quality
Customers
Highly Connected,
“Mega” Data
Centers
Strong focus on Fortune 1000-type enterprise customers
39% of annualized rent from customers that use more than one 3C product
Product breadth and connectivity supports customer retention and expansion
10 “best-in-class”, carrier-neutral data centers including two of the largest in the world
3.8 million gross square feet (92% owned) with over 500MW of gross utility power
National platform with 81% of revenue from top tier data center markets¹
Powered by
People
Product and industry-focused sales, development and operations expertise
Culture of providing superior customer service
Management team with significant experience in real estate, technology and operations
Only national data center provider
offering full 3C platform
C1
C2
C3
Note: Data provided as of September 30, 2013.
¹ Top 10 North American Multi-Tenant Data Center Markets as defined by 451 Research LLC.
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
C2
52%
C3
8%
C1
40%
Only National Fully-Integrated 3C Platform
4 |
QTS crossConnect
QTS metroConnect QTS data centerConnect
QTS internetConnect
QTS netConnect
QTS ecoConnect
QTS Company Confidential
¹ As of September 30, 2013.
C1 C2 C3 Custom Data Center Colocation Cloud 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 500 kW to 20MW+
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 agencies
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Best-In-Class “Mega” Data Centers
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 Confidential 5 |
Atlanta - Metro (72MW)1 Richmond (110MW)
0 SF 292,000 SF
358,000 SF 527,000 SF
140,000 SF 214,000 SF
85,000 SF 555,000 SF
Atlanta - Suwanee (36MW) Dallas (140MW)
68% Built out 15% Built out
65% Built out
Note: Square footage reflects our current Raised Floor Operating Net Rentable Square Feet (“NRSF”) as of September 30, 2013 (blue shaded bars) and our “Basis of Design”
Raised Floor NRSF at full buildout. MW denotes available utility power as of September 30, 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.
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Integrated Solutions For Enterprise Customers
Expands addressable market and
customer base
Further enhances growth
Creates cross-sell and up-sell
opportunities
Drives customer retention with high
customer satisfaction
Floorplan flexibility improves capital
efficiency
Higher rents per square foot
QTS Company Confidential 6 |
Cloud
Managed Services
+12,000 interconnections
+500 networks interconnected
Fully meshed QTS network
Communications / Network
Space and Power Security
Physical
Logical
(firewall, etc.)
Private Cloud
Storage NetworkDevices
Virtualization Hosts orHost Cluster
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
C3: Cloud and Managed Services
QTS Company Confidential 7 |
Cloud Infrastructure Managed Services
Private Cloud
Storage NetworkDevices
Virtualization Hosts orHost Cluster
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)
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
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
QTS Connectivity
QTS Company Confidential 8 |
6 core network products
12,000+ interconnections
500+ networks interconnected
Fully 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
InternetinternetConnect
(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
$42.5
$3.5 $36.3
$46.0
3Q 2012 3Q 2013
$27.5
$1.8 $21.9
$29.3
3Q 2012 3Q 2013
Q3 2013 Strong Momentum
QTS Company Confidential 9 |
Operating FFO Adjusted EBITDA
NOI Revenue
Q3 2013 Highlights
$8.2 million in annualized incremental revenue net of downgrades: 4% above trailing 4 quarter average
Commenced leases at 8% higher rates than prior 4 quarter average
Churn of 1.3% for the quarter, 3.0% year to date
Utilization rate at 89.6% of 548,500 leasable raised floor
Ability to more than double raised floor space to over 1.8 million square feet
ROIC on relatively underutilized assets of 15.6%
$11.6
$1.8
$5.4
$13.4
3Q 2012 3Q 2013
$17.9
$1.8
$13.4
$19.7
3Q 2012 3Q 2013
Sacramento
Rest of QTS
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Dan Bennewitz COO – Sales and Marketing
Third Quarter Sales Results
QTS Company Confidential 10 |
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Strong Third Quarter Leasing Performance
QTS Company Confidential 11 |
New and
Modified
Leases
Commenced
Leases
Renewal
Leases
417 new and expansion leases commenced across C1, C2, and C3 portfolio
$23.5 million of annualized rent, representing 72,516 sq. ft.
Above average performance based on mix of large and successful C1 and C2/C3 customer commencements during the quarter
Average price of $324 per sq. ft., compared to trailing four quarter average of $300 per sq. ft.
Renewed 47 leases representing 6,812 sq. ft.
Average price of $783 per sq. ft., up 8% over prior period
Rental churn was 1.3% for the quarter, 3% on a year-to-date basis
351 new and modified leases across C1 – Custom Data Center, C2 - Colocation, and C3 – Cloud and Managed Services portfolio
$8.2 million incremental annualized revenue net of downgrades, up 4% over trailing four quarter average
New leasing activity that has surpassed 2012 full-year leasing performance
Average price of $566 per sq. ft., well above trailing four quarter average
Adjusted for product mix, deal size, and market, pricing was consistent with trailing four quarter average
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
QTS 3C Platform: Delivering Differentiated Customer Value
QTS Company Confidential 12 |
Q3 2013 Revenues by Market 33 new customers signed in third quarter 2013
Compliance capability driving expansion in financial services, card processing, and healthcare
Big Data Analytics demand growth
Success in Cloud and Managed Services (C3), including expansions for email archiving solutions for the federal government
Number of customers taking advantage of more than one of our 3C product offerings has grown by 31 to 218 since Q3 2012, and represents 39% of Q3 2013 MRR
Number of customers in more than one data center has grown by 19 to 82 since Q3 2012, and represents 20% of Q3 2013 MRR
Launched QTS Disaster Recovery (DR) service to support customer backup and recovery plans across QTS data centers
Sequential
Growth
Revenue 7%
Richmond 11%
Atlanta 8%
West Coast 2.5%
Other Markets1 11%
¹ Dallas did not yet contribute to rent based on its stage of redevelopment.
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Jim Reinhart COO – Operations and Development
Development Progress and Pipeline
QTS Company Confidential 13 |
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Success Based Development
QTS Company Confidential 14 |
Q3 2013 Highlights
$52mm of development capital placed in service at average cost less than $7 million per MW
Increased raised floor NRSF by 62,020 sq. ft. and gross power capacity by 10.15 MW
Expect to spend $169 million through the end of 2014 to increase capacity in Richmond, Atlanta, Dallas, at a cost of less than $7 million per MW
Q3 2013 Raised Floor Development
Q3 2013
Expansion
Q3 2013
Raised Floor
Under
Construction
(12/31/14)
Future
Available Total
Richmond 24,581 84,511 22,084 450,000 556,595
Atlanta Metro 35,000 358,016 35,000 134,200 527,216
Dallas - - 26,000 266,000 292,000
Atlanta Suwanee - 140,422 45,000 29,000 214,422
West Coast1 - 101,089 9,000 26,719 136,808
Jersey City 2,439 31,503 - 21,241 52,744
Other2 - 24,992 - - 24,992
Total Portfolio 62,020 740,533 137,084 927,160 1,804,777
1 West Coast includes Santa Clara and Sacramento facilities. 2 Other includes Miami, Overland Park and Wichita facilities.
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
3,780
1,804
741
Gross Square Feet Basis of DesignRaised Floor
Developed RaisedFloor
High Utilization with Capacity for Growth
QTS Company Confidential 15 |
Q3 2013 Raised Floor Capacity (000’s sq. ft.)
Q3 2013 Highlights
Positive lease-up, increasing occupancy to 89.6% of leasable raised floor
41% utilization of 1.8 million NRSF basis of design total capacity, including powered shell
Q3 2013 Total Capacity (000’s sq. ft.)
41% of
Basis of
Design
741 549
492
Raised FloorOperating
NRSF
LeasableRaised Floor
LeasedRaised Floor
89.6%
Occupancy
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Bill Schafer Chief Financial Officer
Third Quarter Financial Results
QTS Company Confidential 16 |
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Continued Growth Across Our Franchise
QTS Company Confidential 17 |
64%
22%
43%
60%
24%
37%
NOI G&A Adjusted EBITDA
Q3 2013 Q3 2012
151%
47% 34% 27%¹ 29%¹
OperatingFFO
AdjustedEBITDA
NOI Revenue MRR
Sequential Q3 Growth (Q2 2013 – Q3 2013) Year to Date Q3 Growth (Q3 2012 – Q3 2013)
Q3 Margins Q3 2013 Highlights
¹ Revenue growth from Q3 2012 to Q3 2013 would have been 17% and MRR growth would have been 14% without the impact of the Sacramento acquisition.
Strong and accelerating growth
Operating leverage has driven increasing margins,
translating strong top line momentum to even
stronger growth in operating profit
Improving margins as we realize efficiencies of
scale
22%
11% 9%
7% 8%
OperatingFFO
AdjustedEBITDA
NOI Revenue MRR
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
$27
$114
$36
Q3 2013 YTD Q3 2012
Annualized booked-not-billed MRR from signed but
not yet commenced leases was $23.5 million as of
September 30, 2013
Contracts are explicit regarding start date and
revenue recognition
Real estate related capital expenditures were $27
million during the quarter and $114 million year to date
– Includes maintenance capex of $0.5 million
during the quarter and $2.2 million year to date
Continued Growth and Capital Efficiency
QTS Company Confidential 18 |
Annualized Booked-Not-Billed MRR – Schedule ($mm)
Real Estate Capital Expenditures ($mm) Annualized ROICs
$6.1
$10.4
$7.0
$23.5 $23.5 $23.5
2013 2014 2015+
15.6%
15.1% 15.0%
Q3 2013 Q2 2013 Q3 2012
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
$331 million total debt pro forma for the offering
– Pro forma debt to LQA Adjusted EBITDA of
4.2x
Targeting a long term stabilized debt-to-EBITDA
ratio of between 4.0x and 5.0x
Total available liquidity of approximately $350
million
– $340 million available under existing credit
facilities
– $6.5 million cash on hand
Expected dividend distribution of $0.29/share for a
full quarter ($0.24 per share pro rata for fourth
quarter 2013), or $1.16/share on an annualized
basis
Well-Capitalized Balance Sheet to Support Growth
QTS Company Confidential 19 |
Limited Near-Term Debt Maturities ($mm)
$ 1 $ 2
$ 72
$ 3 $ 18
$ 234
2013 2014 2015 2016 2017 2018+
Mortgage Debt Credit Facility
Note: All Information is pro forma for $280 million IPO net proceeds & reflects a post-IPO revolver balance of $240 million (pro forma September 30, 2013 balance) unless
otherwise noted. 1 Includes a $225 million term loan and $15 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 * IPO price of $21 per share.
Pro Forma Capital Structure (as of Sep. 30, 2013)
Capital Leases $2mm
Market Cap $773mm
Mortgage Debt
$89mm2
Unsecured
Credit
Facility
$240mm1 3
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
2013 Guidance
QTS Company Confidential 20 |
Q4 2013
High Low
Adjusted EBITDA $21.5 million $20.5 million
Operating FFO $16.2 million $15.2 million
2014 Guidance will be provided on our year end earnings call in February 2014
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Non-GAAP Reconciliations
QTS Company Confidential 21 |
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
Adjusted EBITDA Reconciliation
Three Months Ended Nine Months Ended
($ in thousands) September 30,
2013
June 30,
2013
September 30,
2012
September 30,
2013
September 30,
2012
EBITDA and Adjusted EBITDA
Net income (loss) 2,709 (1,232) (1,757) (597) (8,159)
Interest expense 4,343 5,084 6,646 15,977 19,039
Interest income (4) (7) (8) (17) (54)
Depreciation and amortization 12,136 11,246 8,902 34,197 25,296
EBITDA 19,184 15,091 13,783 49,560 36,122
Adjusted EBITDA
Write off of unamortized deferred finance costs - 2,179 - 3,277 1,434
Equity-based compensation expense 510 420 152 1,305 341
Transaction costs - - 404 - 404
Gain on sale of real estate - - (948) - (948)
Restructuring charge - - - - 3,291
Adjusted EBITDA 19,694 17,690 13,391 54,142 40,644
QTS Company Confidential 22 |
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
FFO Reconciliation Three Months Ended Nine Months Ended
($ in thousands) September 30,
2013
June 30,
2013
September 30,
2012
September 30,
2013
September 30,
2012
FFO
Net income (loss) 2,709 (1,232) (1,757) (597) (8,159)
Real estate depreciation and amortizaton 10,731 10,110 7,652 30,348 21,942
Gain on sale of real estate - - (948) - (948)
FFO 13,440 8,878 4,947 29,751 12,835
Operating FFO
Restructuring charge - - - - 3,291
Write off of unamortized deferred finance costs - 2,179 - 3,277 1,434
Transaction costs - - 404 - 404
Unrealized gain on derivatives - - - - (307)
Operating FFO 13,440 11,057 5,351 33,028 17,657
Adjusted Operating FFO¹
Maintenance Capex (492) (989) (370) (2,240) (714)
Leasing Commissions paid (2,374) (2,544) (1,541) (6,889) (5,277)
Amortization of deferred financing costs 588 693 828 2,193 2,567
Non real estate depreciation and amortizaton 1,406 1,136 1,042 3,849 2,595
Straight line rent revenue (229) (85) (53) (428) (21)
Straight line rent expense 83 85 77 246 242
Equity-based compensation expense 510 420 153 1,305 341
Adjusted Operating FFO 12,932 9,773 5,487 31,064 17,390
QTS Company Confidential 23 |
1 Our calculations of Operating FFO and Adjusted Operating FFO may not be comparable to Operating FFO and Adjusted Operating FFO as calculated by other REITs that do
not use the same definition.
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
NOI Reconciliation Three Months Ended Nine Months Ended
($ in thousands) September 30,
2013
June 30,
2013
September 30,
2012
September 30,
2013
September 30,
2012
NOI
Net income (loss) 2,709 (1,232) (1,757) (597) (8,159)
Interest expense 4,343 5,084 6,646 15,977 19,039
Interest income (4) (7) (8) (17) (54)
Depreciation and amortization 12,136 11,246 8,902 34,197 25,296
Write off of unamortized deferred finance costs - 2,179 - 3,277 1,434
Transaction costs - - 404 - 404
Gain on sale of real estate - - (948) - (948)
Restructuring charge - - - - 3,291
General and administrative expenses 10,097 9,696 8,672 29,387 25,859
NOI 29,281 26,966 21,911 82,224 66,162
Breakdown of NOI by Facility
Atlanta-Metro data center 13,740 12,815 10,772 38,739 30,820
Atlanta-Suwanee data center 7,517 6,644 6,851 20,945 23,618
Santa Clara data center 2,801 2,751 2,502 8,299 8,052
Richmond data center 2,859 2,413 1,798 7,538 3,914
Sacramento data center¹ 1,752 1,962 - 5,638 -
Other data centers 612 381 (12) 1,065 (242)
NOI 29,281 26,966 21,911 82,224 66,162
QTS Company Confidential 24 |
1 Facility was acquired in December 2012.
CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx
MRR Reconciliation
Three Months Ended Nine Months Ended
($ in thousands) September 30,
2013
June 30,
2013
September 30,
2012
September 30,
2013
September 30,
2012
Recognized MRR in the period
Total period revenues (GAAP basis) 46,020 42,940 36,254 130,458 107,586
Less: Total period recoveries (3,603) (3,456) (2,296) (9,925) (6,785)
Total period deferred setup fees (1,263) (1,125) (1,165) (3,450) (3,027)
Total period other (1,240) (911) (457) (3,385) (2,250)
Recognized MRR in the period 39,914 37,448 32,336 113,698 95,524
MRR at period end
Total period revenues (GAAP basis) 46,020 42,940 36,254 130,458 107,586
Less: Total revenues excluding last month (30,448) (28,304) (24,416) (114,886) (95,748)
Total revenues for last month of period 15,572 14,636 11,838 15,572 11,838
Less: Last month recoveries (1,219) (1,224) (731) (1,219) (731)
Last month deferred setup fees (427) (391) (392) (427) (392)
Last month other (127) (278) (26) (127) (26)
MRR at period end 13,799 12,743 10,689 13,799 10,689
QTS Company Confidential 25 |
Top Related