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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

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Page 1: QTS Realty Trust, Inc.filecache.drivetheweb.com/mr5ir_qualitytech/155/downl… ·  · 2014-03-07CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx

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

Page 2: QTS Realty Trust, Inc.filecache.drivetheweb.com/mr5ir_qualitytech/155/downl… ·  · 2014-03-07CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx

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.

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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

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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%

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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

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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

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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

Page 8: QTS Realty Trust, Inc.filecache.drivetheweb.com/mr5ir_qualitytech/155/downl… ·  · 2014-03-07CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx

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

Page 9: QTS Realty Trust, Inc.filecache.drivetheweb.com/mr5ir_qualitytech/155/downl… ·  · 2014-03-07CAGE2012\Presentations\2013-10 3Q13 Earnings\Q3 2013 Earnings Presentation v14.pptx

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

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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

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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

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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

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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

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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

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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”)

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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

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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