CYRUSONE TO ACQUIRE ZENIUM DATA CENTERS THIRD QUARTER 2017 EARNINGS October 31, 2017 DECEMBER 21, 2017
SAFE HARBOR S A F E H A R B O R This presentation contains forward-looking statements regarding future events and our future results that are subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "predicts," "projects," "intends," "plans," "believes," "seeks," "estimates," "continues," "endeavors," "strives," "may," variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Examples of forward-looking statements include, but are not limited to: (i) statements about the benefits of CyrusOne s proposed acquisition of Zenium, including future financial and operating results, enhanced utilization, expected cost savings, enhanced revenues and accretion to reported earnings and funds from operations that may be realized from the acquisition; (ii) statements of plans, objectives and expectations of CyrusOne or its management, including the expected timing of completion of the transaction; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements and other statements that are not historical facts. Readers are cautioned these forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially and adversely from those reflected in the forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to: (i) the risk that a condition to closing of the acquisition may not be satisfied; (ii) the time required to consummate the proposed acquisition; (iii) the risk that Zenium will not be integrated successfully or that such integration may be more difficult, timeconsuming or costly than expected; (iv) the risk that the expected increased revenues, funds from operations and net income may not be fully realized or may take longer to realize than expected; (v) the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; and (vi) disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers. More information on potential risks and uncertainties related to our business is available in our recent filings with the SEC, including CyrusOne's Form 10-K report, Form 10-Q reports, and Form 8-K reports. Actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason. 2
TRANSACTION OVERVIEW The Zenium acquisition establishes a meaningful presence in Europe and is a critical step in CyrusOne s strategic objective of becoming a global data center provider Zenium is a leading hyperscale data center provider in Europe Company Taking into account existing leases and leases signed but not yet billing, the company has approximately $40 million in annualized contracted GAAP revenue excluding estimates for pass-through power, representing approximately $25 million in expected annualized Adjusted EBITDA Markets Zenium operates in London and Frankfurt, the two largest data center markets in Europe Europe is experiencing a meaningful acceleration in hyperscale demand, with major markets in London, Amsterdam, Frankfurt, Paris, and Dublin absorbing the majority of the growth Zenium has four best-in-class data centers; two in London and two in Frankfurt Data Centers Customers Deal Terms Upon full build-out, the four properties will consist of more than 260,000 colocation square feet and 49.3 megawatts (MW) of power capacity 26.8 MW currently leased with capacity to add 22.5 MW of incremental capacity Zenium has more than 10 customers, with hyperscale companies representing nearly 75% of revenue More than half of the customers will be new to CyrusOne, including two Fortune 1000 customers Over 75% of the revenue is generated from investment grade customers The weighted average remaining lease term is approximately six years Purchase price is $442 million; CyrusOne to reimburse Zenium for capital expenditures between signing and closing Transaction is expected to close in the first quarter of 2018, subject to the fulfillment of customary closing conditions Option to assume approximately $65 million of debt currently outstanding under two existing credit facilities (denominated in GBP and EUR), with total capacity of approximately $185 million. If the Company assumes the debt, the balance of the purchase price will be financed through capacity under its $1.1 billion credit facility, which is fully undrawn 3
INTERNATIONAL DRIVERS AND EUROPEAN STRATEGY
CRITICAL FIRST STEP IN CYRUSONE S INTERNATIONAL STRATEGY Drivers of International Expansion Bigger Buyers, Buying More Biggest opportunities coming from customers buying globally (true for both hyperscale players and enterprises) Hyperscale Companies Dwarfing Enterprise Demand Hyperscale companies represent 60-70% of sector demand in our markets Broker reports indicate similar trends going forward Demand is Concentrating Around Major Markets Worldwide Limited evidence of large-scale demand moving into secondary markets International Strategy Focus on Opportunities Leveraging Core Competencies Construction expertise ability to deliver scale assets in a time-sensitive, costeffective manner Industry s leading sales organization consistently signing leases above our revenue weighted share of the industry Focus on the customer from contracting through service delivery Create Market Diversification by Adding Global A Markets vs. B and C Markets in the U.S. Evaluate and Pursue Organic Growth Opportunities in Addition to Acquisitions Make optimal capital allocation decision 5
WHY EUROPE?
#1 HYPERSCALE BUYERS ARE DRIVING ACCELERATING DEMAND In 3Q 17, major markets in Europe absorbed 28 MWs slightly below 2Q s 31 MWs, but well above historical average of 15 MWs Major markets on track for second consecutive year of record take-up - 2016 take-up of 154 MWs compares to average annual absorption of 60-80 MWs - TTM take-up of 161 MWs is fourth consecutive quarter above 150 MW level Hyperscale buyers represent the large majority of the increase in demand 180 160 140 120 100 80 60 40 20 0 TTM Take-up (1) 162 157 161 154 101 80 81 86 86 65 65 54 59 63 66 51 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 Note: (1) Source: CBRE 3Q 17 update (excludes Dublin) 7
#2 THE MAJOR MARKETS ARE ABSORBING THE MAJORITY OF GROWTH Major markets are capable of supporting CyrusOne s scale product - Opportunity to build at scale allows CyrusOne to drive down build cost leverage a competitive advantage - Significant demand from existing hyperscale and Fortune 1000 customers Austin Las Los London Amsterdam Frankfurt Paris Atlanta San Ant. Houston Vegas Angeles Boston Denver Occupied MWs 283 135 144 111 180 392 106 175 192 115 92 2016 Absorption 49 54 34 18 7 11 5 7 4 2 2 Growth Y/Y 17% 40% 24% 16% 4% 3% 5% 4% 2% 2% 2% 60 50 49 54 60 50 40 34 40 30 26 30 20 10 0 18 16 18 3 London Amsterdam Frankfurt Paris 2015 2016 20 10 0 4 7 6 11 Atlanta Austin / S.A. 8 8 5 Houston Las Vegas Los Angeles 7 2015 2016 4 2 2 2 1 2 Boston Denver Note: (1) Source: CBRE, JLL reports (excludes PBB) 8
#3 WHOLESALE DEMAND IS FALLING TO SECONDARY PLAYERS As of YE 16, CBRE reported that wholesale represented less than 50% of the inventory in Europe Market leaders in Europe are primarily retail providers - Higher build costs and focus on smaller footprints make these providers a less than ideal solution Vacuum has opened up the door for non-european providers - Operators without a commitment to the European market have missed construction deadlines and made for poor partners to global customers Lack of scale wholesale providers has also sent demand to smaller regional and market providers - Wholesale market has become fragmented and ripe for consolidation 9
#4 SIGNIFICANT EMBEDDED CUSTOMER DEMAND CyrusOne ighlighted survey missed highlighted opportunities significant in the pent-up U.S. from demand lack of from European existing footprint enterprise and hyperscale customers for data center capacity in Europe Enterprise customer responses (~100 market requests from 30 customers) Cloud customer responses (~50 market requests from 5 customers) European presence requested 67% Rest of world presence requested 33% European presence requested 50% Rest of world presence requested 50% Survey highlighted missed opportunities in the U.S. from lack of European footprint 10
OVERVIEW OF ZENIUM
STRONG MANAGEMENT TEAM Leadership Team Relevant Experience Existing management team will stay and grow with CyrusOne Significant experience in site identification & acquisition, development & construction, and selling to hyperscale customers Ability to scale corporate infrastructure for organic site acquisition & market expansion as well as cost synergies for future European M&A 12
London Frankfurt FOUR SITES ACROSS EUROPE S TWO LARGEST MARKETS Capacity Leased Remaining MWs MWs % MWs % Frankfurt 26.7 17.4 65% 9.3 35% London 22.6 9.4 42% 13.2 58% TOTAL 49.3 26.8 54% 22.5 46% Robust funnel of potential deals with several in the later stages of negotiation 13
ACCELERATED ENTRY INTO EUROPE / SIGNIFICANT OPERATING LEVERAGE Immediate Capacity 22.5 MWs available for immediate development and lease-up Accelerates ability to address customer demand by 12-18 months New capacity to generate high incremental Adjusted EBITDA margins Operating Leverage Leverage management team as CyrusOne adds new locations in London and Frankfurt, as well as other markets in Europe - Additional site already under contract in Frankfurt - Other organic development opportunities in late stages of negotiation in London, Frankfurt, and Dublin Future Cost Synergies Ability to leverage back-office, sales and marketing efforts, and scale economics with suppliers from increased construction levels Also applies to acquisitions, though we continue to look for talented management teams to lead efforts in additional markets 14
FINANCIAL REVIEW AND FIRST LOOK AT ZENIUM FY 18 AND FY 19 ESTIMATES Purchase price of $442MM $40MM of annualized contracted GAAP revenue, excluding estimates for passthrough power Implies an 18x multiple of expected annualized Adjusted EBITDA of $25MM from both commenced and signed but not yet billing contracts ($ in millions) As of Dec. 21 Purchase Price $442 Contracted Revenue $40 Adjusted EBITDA 25 Adjusted EBITDA Margin 63% Adjusted EBITDA Multiple 18x Outlook for Zenium: Full year 2018 Adjusted EBITDA of $17-19MM and full year 2019 Adjusted EBITDA of $32-34MM implying 80%+ growth at the midpoint Transaction expected to be dilutive to Normalized FFO per diluted common share in the first twelve months following closing, modestly accretive in the second twelve months, and meaningfully accretive thereafter 15
TRANSACTION FINANCING, LIQUIDITY UPDATE, AND 2018 GUIDANCE
TRANSACTION FINANCING, LIQUIDITY UPDATE, AND 2018 GUIDANCE Transaction Financing CyrusOne has the option to assume approximately $65 million of debt currently outstanding under Zenium s existing credit facilities (denominated in GBP and EUR) If the company assumes the debt, the balance of the purchase price will be funded through capacity under CyrusOne s $1.1 billion revolving credit facility and available cash balance 4Q 17 Liquidity Update Revolving credit facility currently fully undrawn and expect to end 2017 with a cash balance of more than $130 million Liquidity enhanced in 4Q 17 through: Previously announced $400 million offering of senior fixed rate notes $296 million in net proceeds raised through ATM equity program (4.8 million shares of common stock at average price of $62.09) Full Year 2018 Guidance Full year 2018 CyrusOne guidance excluding the impact of this acquisition: Total Revenue growth of 17-20% compared to full year 2017 Adjusted EBITDA growth of 19-22% compared to full year 2017 Combined full year 2018 guidance to be provided in 4Q 17 earnings release 17