QTS Realty Trust, Inc.

Transcription

1 QTS Realty Trust, Inc. DEUTSCHE BANK MEDIA, INTERNET & TELECOM CONFERENCE MARCH 10 12, 2014

2 Forward Looking Statements 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, 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. 1

3 QTS Strategy and Business Model Integrated Technology Services Platform Drive Revenue Through Fully Integrated 3C Portfolio C1 Custom Data Center C2 Colocation C3 Cloud and Managed Services World-Class Infrastructure With Cost-Efficient Delivery of Services Low basis, mega-scale facilities Significant growth capacity Yielding Strong Growth with High Capital Efficiency Strong top-line growth Operating leverage and increasing margins Strong ROIC 15% unlevered target 2

4 Only National Fully-Integrated 3C Platform Description C1 Custom Data Center C2 Colocation C3 Private turn-key data center space ( wholesale ) Cabinets, cages, and suites Cloud and Managed Services 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 Up to 3 years Up to 3 years Separately-metered power Non-metered power Example Customers C1 C1 40% 40% C2 52% 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 C3 8% QTS crossconnect QTS metroconnect QTS data centerconnect QTS internetconnect QTS netconnect QTS ecoconnect ¹ As of December

5 QTS Strategy and Business Model Integrated Technology Services Platform to Drive Revenue Through 3C Product Offering Enhanced Growth Opportunities Differentiated product offering expands addressable market and customer base Targets High Value Enterprise Customers Solution selling meets needs of sophisticated customers Drives Revenue Supports Predictability and Stability Creates cross-sell and up-sell opportunities Higher rents per square foot Drives customer retention 4

6 C3: Cloud and Managed Services C3 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, FedRAMP 1 ) 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 ¹ Target mid

7 QTS Connectivity 6 core network products 12,000+ interconnections 500+ networks interconnected Fully meshed QTS network Across QTS Facilities Drives network owned / controlled customer solutions Enhances customer ecosystem Provides low latency access across entire network Within QTS Facilities internetconnect (QTS Internet) metroconnect (QTS Carrier Hotel) netconnect (QTS Network Connect) QTS Product Delivery Network New York / New Jersey Customer 1 Customer 2 Sacramento Silicon Valley Richmond ecoconnect (Customer Cross-Connect) data centerconnect (QTS QTS) Dallas Atlanta, GA Customer 3 Customer 4 Top Data Center Market 1 Major Telecom Hub Miami, FL crossconnect (Carrier Cross- Connect) Carrier ¹ Source: 451 Research; North American Multi-Tenant Datacenter Supply: Top 10 Markets. Map only shows markets where QTS has a presence. 6

8 QTS Strategy and Business Model World Class Infrastructure to Support Cost Efficient Delivery of Services Low-Basis, Owned Facilities National platform of 10 data centers (92% owned) Drives strong returns from existing platform Successful history demonstrates repeatability Large-Scale Facilities 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 Significant Capacity 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 7

9 Nationwide Footprint in Top Data Center Markets 1.8 Million Square Feet 1 (92% owned) 2 with over 500 MW of Gross Utility Power Sacramento New York / New Jersey Silicon Valley Richmond Top Data Center Market 3 Major Telecom Hub 3 Note: QTS data as of December 31, rd largest Fortune 500 hub 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 demand growth among Top 10 U.S. Multi-Tenant Data Center markets. 8 Dallas Highest demand growth 4 Atlanta, GA Strong regional demand Favorable power costs Proximity to multiple key eastern markets Miami, FL

10 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 Atlanta -Metro (72MW) 1 Richmond (110MW) More efficient design Higher operating margins Flexibility to optimize product offerings in response to demand 292,000 SF 527,000 SF 85,000 SF 555,000 SF 55% Built out 15% Built out Atlanta - Suwanee (36MW) Dallas (140MW) Lower redevelopment cost Phased expansion Large, efficient footprint < $7 million per MW on average 155,000 SF 214,000 SF 73% Built out 0 SF 292,000 SF 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, 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,

11 High Utilization with Capacity for Growth Q 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 Q Total Capacity (000 s sq. ft.) Q Raised Floor Capacity (000 s sq. ft.) 3,780 38% of Basis of Design % Occupancy 446 1, Gross Square Feet Basis of Design Raised Floor Developed Raised Floor Developed Raised Floor Operating NRSF Leasable Raised Floor Leased Raised Floor 10

12 QTS Strategy and Business Model Integrated Technology Services Platform to Drive Revenue With World-Class Infrastructure to Support Cost-Efficient Delivery of Services Yields Successful Financial Model Strong top-line revenue growth Operating leverage and increasing margin accelerates profitability growth Achieved with strong capital efficiency and ROIC target of 15+% 11

13 Q Performance Operating FFO ($mm) Adjusted EBITDA ($mm) Q Highlights Sacramento 1 $16.4 Rest of QTS $6.9 $14.3 $6.7 Q Q NOI ($mm) $21.2 $14.7 $19.1 $14.5 Q Q Revenue ($mm) 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 $24.7 $30.4 $38.2 $47.4 Customers taking advantage of more than one of our 3C product offerings represented 40% of December 31, 2013 MRR $24.5 $28.3 $37.8 $43.9 Q Q Q Q ¹ Sacramento facility acquired on 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 ) 12

14 Margin Performance Q Highlights: G&A continuing to drop as a percent of revenue to 20.8% in Q Operating leverage resulting in 630 basis point increase in EBITDA margin from Q to Q Target EBITDA margin approaching 50% within the next few years G&A % of Revenue Adjusted EBITDA Margin 26.5% 21.9% 20.8% 24.7% 22.0% 42.8% 44.8% 42.4% 38.5% 38.0% Q Q Q YE 2012 YE 2013 Q Q Q YE 2012 YE

15 Strong Leasing Momentum Incremental Annualized Revenue Net of Downgrade Quarterly ($mm) 5.0 Q Q Q Incremental Annualized Revenue Net of Downgrade Annual ($mm) Q 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 internetbased companies Multiple C3 expansion signed during 2014 Sophisticated private and hybrid cloud, multi-year contracts YE 2012 YE 2013 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 ) 14

16 Strong Booked-Not-Billed Pipeline Annualized Booked-Not-Billed MRR Schedule ($mm) $28.2 $28.2 $28.2 $28.2 $13.5 $8.4 $6.3 Highlights 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 Q of 2.3%, and 5.7% for full year

17 Well-Capitalized Balance Sheet to Support Growth Highlights $348 million total debt as of 12/31/13 Debt to LQA Adjusted EBITDA of 4.1x Capital Structure (as of Dec 31, 2013) Capital Leases $ 2.5mm Unsecured Credit Facility $256.5mm 1 Targeting a long term stabilized debtto-ebitda ratio of between 4.0x and 5.0x Mortgage Debt $89mm 2 Market Cap $913mm 3 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 $50M in Q1 2014, further increasing liquidity Limited Near-Term Debt Maturities ($mm) $228 4 $72 $34 4 $2 $2 $ Mortgage Debt Credit Facility 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 share 4. Includes $3mm in mortgage debt 16