CyrusOne Reports First Quarter 2021 Earnings

Signed $35.4 Million in Annualized GAAP Revenue and 28 Megawatts in 1Q’21

CyrusOne Inc. (NASDAQ: CONE), a premier global data center REIT, today announced first quarter 2021 earnings.

Highlights

• Leased 28 megawatts (“MW”) and 156,000 colocation square feet (“CSF”) in the first quarter, totaling $35.4 million in annualized GAAP revenue

• Backlog of approximately $113 million in annualized GAAP revenue as of the end of the first quarter representing approximately $955 million in total contract value

• Settled a forward sale agreement entered into in 2020, resulting in net proceeds of approximately $95 million, which were used to pay down a portion of amounts outstanding on the Company’s unsecured revolving credit facility
  • The Company has approximately $385 million in remaining available forward equity

• Subsequent to the end of the quarter, executed an agreement to acquire a 12-acre site in Frankfurt, providing 63 MW of power capacity to support our continued growth in one of the strongest data center markets in Europe

“Our bookings for the quarter included strong results from our U.S. portfolio and a significant contribution from our hyperscale customers,” said Bruce W. Duncan, president and chief executive officer of CyrusOne. “We are excited to announce the execution of an agreement to acquire an additional development site in Frankfurt, which will give us more product in one of our strongest markets to support our customers as they expand in Europe. We remain well positioned for continued growth with a $113 million revenue backlog, capacity across our markets, and $1.6 billion in available liquidity, including nearly $400 million in available forward equity.”

First Quarter 2021 Financial Results

Revenue was $298.6 million for the first quarter, compared to $245.9 million for the same period in 2020, an increase of 21%. The increase in revenue was driven in part by $27.8 million in metered power reimbursements as a result of electricity rate impacts at our Texas data centers from Winter Storm Uri. Other drivers included a 7% increase in occupied CSF and additional interconnection services.

Net income was $18.2 million for the first quarter, compared to net income of $14.7 million in the same period in 2020, an increase of 24%. Net income for the first quarter included a $15.4 million gain associated with a change in fair value on the undesignated portion of the Company’s net investment hedge compared to a $5.1 million gain in the first quarter of 2020. The Company recognized a $2.4 million gain during the first quarter of 2021 on its marketable equity investment in GDS Holdings Limited, compared to a $14.7 million gain in the first quarter of 2020. Additionally, in the first quarter of 2020, the Company had a $(3.4) million loss on the early extinguishment of debt associated with the amendment of its senior unsecured credit agreement. Net income per diluted common share¹ was $0.15 in the first quarter of 2021, compared to net income per diluted common share of $0.13 in the same period in 2020.

Net operating income (“NOI”)² was $162.8 million for the first quarter, compared to $153.3 million in the same period in 2020, an increase of 6%. Adjusted EBITDA³ was $140.3 million for the first quarter, compared to $132.2 million in the same period in 2020, an increase of 6%.

Normalized Funds From Operations (“Normalized FFO”)⁴ was $120.2 million for the first quarter, compared to $111.8 million in the same period in 2020, an increase of 8%. Normalized FFO per diluted common share was $1.00 in the first quarter of 2021, compared to $0.97 in the same period in 2020, an increase of 3%.

Net income, Adjusted EBITDA, and Normalized FFO were each negatively impacted by $(3.7) million as a result of higher electricity rates at our Texas data centers from Winter Storm Uri, while Net income per diluted common share and Normalized FFO per diluted common share were each negatively impacted by $(0.03) as a result.

Leasing Activity

CyrusOne leased approximately 28 MW of power and 156,000 CSF in the first quarter, representing approximately $2.9 million in monthly recurring rent, inclusive of the monthly impact of installation charges. The leasing for the quarter represents approximately $35.4 million in annualized GAAP revenue⁵, excluding estimates for pass-through power. The weighted average lease term of the new leases, based on square footage, is 116 months (9.7 years), and the weighted average remaining lease term of CyrusOne’s portfolio is 52 months (taking into consideration the impact of the backlog). Recurring rent churn percentage⁶ for the first quarter was 1.8%, compared to 1.0% for the same period in 2020.

Portfolio Development and Percentage CSF Leased

In the first quarter, the Company completed construction on 78,000 CSF and 14 MW of power capacity in the New York Metro area and Frankfurt. Percentage CSF leased⁷ as of the end of the first quarter was 85% for stabilized properties⁸ and 82% overall. In addition, the Company has development projects underway in Frankfurt, Dublin, Paris, London, Northern Virginia, Phoenix, the New York Metro area, Cincinnati, and San Antonio that are expected to add approximately 380,000 CSF and 100 MW of power capacity plus 279,000 square feet of powered shell.

Balance Sheet and Liquidity

As of March 31, 2021, the Company had gross asset value⁹ totaling approximately $8.8 billion, an increase of approximately 13% over gross asset value as of March 31, 2020. CyrusOne had $3.37 billion of long-term debt¹⁰, $241 million of cash and cash equivalents, and approximately $1.01 billion available under its unsecured revolving credit facility as of March 31, 2021. Net debt¹⁰ was $3.16 billion as of March 31, 2021, representing approximately 28% of the Company's total enterprise value as of March 31, 2021 of $11.5 billion. This represented approximately 4.9x Adjusted EBITDA for the last quarter annualized (after further adjusting net debt to reflect the pro forma impact of settlement of the forward sale agreements). Available liquidity¹¹ was $1.63 billion as of March 31, 2021.

During the first quarter of 2021, the Company settled a forward sale agreement entered into in 2020, resulting in net proceeds of approximately $95 million, which were used to pay down a portion of amounts outstanding on the Company’s unsecured revolving credit facility. The Company has approximately $385 million in remaining available forward equity (no portion of these forward sale agreements has been settled as of April 28, 2021). As of March 31, 2021, there was approximately $151 million in remaining availability under the ATM equity program.

Dividend

On February 17, 2021, the Company announced a dividend of $0.51 per share of common stock for the first quarter of 2021. The dividend was paid on April 9, 2021, to stockholders of record at the close of business on March 26, 2021.

Additionally, today the Company is announcing a dividend of $0.51 per share of common stock for the second quarter of 2021. The dividend will be paid on July 9, 2021, to stockholders of record at the close of business on June 25, 2021.

Guidance

CyrusOne is updating its guidance for full year 2021, increasing the lower and upper ends of its guidance range for Total Revenue and Metered Power Reimbursements and reaffirming the other guidance ranges. The annual guidance provided below represents forward-looking statements, which are based on current economic conditions, internal assumptions about the Company's existing customer base, and the supply and demand dynamics of the markets in which CyrusOne operates. We continue to monitor the global outbreak of COVID-19 and to take steps to mitigate the potential risks to us posed by the pandemic. While the impact on our business has not been significant to date, the length and severity of the effects of the pandemic remain uncertain and unpredictable and could be materially adverse to our business, financial condition, results of operations, cash flows and ability to pay dividends as well as the market price of our common stock.

CyrusOne does not provide forward-looking guidance for GAAP financial measures (other than Total Revenue and Capital Expenditures) or reconciliations for the non-GAAP financial measures included in the annual guidance provided below due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including Net income (loss) and adjustments that could be made for Transaction, acquisition, integration and other related expenses, Legal claim costs, Impairment losses and (gain) loss on asset disposals and other charges in its reconciliation of historic numbers, the amount of which, based on historical experience, could be significant.

Upcoming Conferences and Events (All Virtual)

• RBC Capital Markets Global Datacenter, Cloud and Broadband Infrastructure Conference on May 25
• NAREIT’s REITweek Investor Conference on June 8-10
• CyrusOne Investor Meeting on June 16

Conference Call Details

CyrusOne will host a conference call on April 29, 2021, at 11:00 AM Eastern Time (10:00 AM Central Time) to discuss its results for the first quarter 2021. A live webcast of the conference call will be available in the “Investors / Events & Presentations” section of the Company's website at http://investor.cyrusone.com/events.cfm. The presentation to be made during the call is now available in this location. The U.S. conference call dial-in number is 1-844-492-3731, and the international dial-in number is 1-412-542-4121. A replay will be available one hour after the conclusion of the earnings call on April 29, 2021, through May 13, 2021. The U.S. toll-free replay dial-in number is 1-877-344-7529 and the international replay dial-in number is 1-412-317-0088. The replay access code is 10153912.

Safe Harbor

This release and the documents incorporated by reference herein contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward- looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. 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 and our customers’ respective businesses and industries, and other characterizations of future events or circumstances are forward-looking statements. 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. Factors that could cause or contribute to such differences include, but are not limited to, (i) the potential widespread and highly uncertain impact of public health outbreaks, epidemics and pandemics, such as the COVID-19 pandemic; (ii) loss of key customers; (iii) indemnification and liability provisions as well as service level commitments in our contracts with customers imposing significant costs on us in the event of losses; (iv) economic downturn, natural disaster or oversupply of data centers in the limited geographic areas that we serve; (v) risks related to the development of our properties including, without limitation, obtaining applicable permits, power and connectivity, and our ability to successfully lease those properties; (vi) weakening in the fundamentals for data center real estate, including but not limited to, increased competition, falling market rents, decreases in or slowed growth of global data, e-commerce and demand for outsourcing of data storage and cloud-based applications; (vii) loss of access to key third-party service providers and suppliers; (viii) risks of loss of power or cooling which may interrupt our services to our customers; (ix) inability to identify and complete acquisitions and operate acquired properties; (x) our failure to obtain necessary outside financing on favorable terms, or at all; (xi) restrictions in the instruments governing our indebtedness; (xii) risks related to environmental, social and governance matters; (xiii) unknown or contingent liabilities related to our acquisitions; (xiv) significant competition in our industry; (xv) recent turnover, or the further loss of, any of our key personnel; (xvi) risks associated with real estate assets and the industry; (xvii) failure to maintain our status as a REIT (as defined below) or to comply with the highly technical and complex REIT provisions of the Internal Revenue Code of 1986, as amended; (xviii) REIT distribution requirements could adversely affect our ability to execute our business plan; (xix) insufficient cash available for distribution to stockholders; (xx) future offerings of debt may adversely affect the market price of our common stock; (xxi) increases in market interest rates will increase our borrowing costs and may drive potential investors to seek higher dividend yields and reduce demand for our common stock; (xxii) market price and volume of stock could be volatile; (xxiii) risks related to regulatory changes impacting our customers and demand for colocation space in particular geographies; (xxiv) our international activities, including those conducted as a result of land acquisitions and with respect to leased land and buildings, are subject to special risks different from those faced by us in the United States; (xxv) the continuing uncertainty about the future relationship between the United Kingdom and the European Union following the United Kingdom’s withdrawal from the European Union; (xxvi) expanded and widened price increases in certain selective materials for data center development capital expenditures due to international trade negotiations; (xxvii) a failure to comply with anti-corruption laws and regulations; (xxviii) legislative or other actions relating to taxes; (xxix) any significant security breach or cyber-attack on us or our key partners or customers; (xxx) the ongoing trade conflict between the United States and the People’s Republic of China; (xxxi) increased operating costs and capital expenditures at our facilities, including those resulting from higher utilization by our customers, general market conditions and inflation, exceeding revenue growth; and (xxxii) other factors affecting the real estate and technology industries generally. More information on potential risks and uncertainties is available in our recent filings with the Securities and Exchange Commission (SEC), including CyrusOne’s Form 10-K report, Form 10-Q reports, and Form 8-K reports. We disclaim any obligation other than as required by law to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors or for new information, data or methods, future events or other changes.

Use of Non-GAAP Financial Measures and Other Metrics

This press release contains certain non-GAAP financial measures that management believes are helpful in understanding the Company’s business, as further discussed within this press release. These financial measures, which include Funds From Operations, Normalized Funds From Operations, Normalized Funds From Operations per Diluted Common Share, Adjusted EBITDA, Net Operating Income, and Net Debt should not be construed as being more important than, or a substitute for, comparable GAAP financial measures. Detailed reconciliations of these non-GAAP financial measures to comparable GAAP financial measures have been included in the tables that accompany this release and are available in the Investor Relations section of www.cyrusone.com.

Management uses FFO, Normalized FFO, Normalized FFO per Diluted Common Share, Adjusted EBITDA, and NOI, which are non-GAAP financial measures commonly used in the real estate investments trusts (REIT) industry, as supplemental performance measures. Management uses these measures as supplemental performance measures because, when compared period over period, they capture trends in occupancy rates, rental rates and operating costs. The Company also believes that, as widely recognized measures of the performance of REITs, these measures are used by investors as a basis to evaluate REITs. Other REITs may not calculate these measures in the same manner, and, as presented, they may not be comparable to others. Therefore, FFO, Normalized FFO, NOI, and Adjusted EBITDA should be considered only as supplements to net income (loss) presented in accordance with GAAP as measures of our performance. FFO, Normalized FFO, NOI, and Adjusted EBITDA should not be used as measures of our liquidity or as indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. These measures also should not be used as supplements to or substitutes for cash flow from operating activities computed in accordance with GAAP. The Company believes that Net Debt provides a useful measure of liquidity and financial health.

¹Net income (loss) per diluted common share is defined as Net income (loss) divided by the weighted average diluted common shares outstanding for the period, which were 120.5 million for the first quarter of 2021 and 115.1 million for the first quarter of 2020.

²We use Net Operating Income ("NOI"), which is a non-GAAP financial measure commonly used in the REIT industry, as a supplemental performance measure. We use NOI as a supplemental performance measure because, when compared period over period, it captures trends in occupancy rates, rental rates and operating expenses. We also believe that, as a widely recognized measure of the performance of REITs, NOI is used by investors as a basis to evaluate REITs.

We calculate NOI as Net income, adjusted for Sales and marketing expenses, General and administrative expenses, Depreciation and amortization expenses, Transaction, acquisition, integration and other related expenses, Interest expense, net, Gain on marketable equity investment, Loss on early extinguishment of debt, Impairment losses and loss (gain) on asset disposals, Foreign currency and derivative gains, net, Other expense and Income tax benefit. Amortization of deferred leasing costs is presented in Depreciation and amortization expenses, which is excluded from NOI. Sales and marketing expenses are not property-specific, rather these expenses support our entire portfolio. As a result, we have excluded these Sales and marketing expenses from our NOI calculation, consistent with the treatment of General and administrative expenses, which also support our entire portfolio. Because the calculation of NOI excludes various expenses, the utility of NOI as a measure of our performance is limited. Other REITs may not calculate NOI in the same manner. Accordingly, our NOI may not be comparable to others. Therefore, NOI should be considered only as a supplement to Net income presented in accordance with GAAP as a measure of our performance. NOI should not be used as a measure of our liquidity or as indicative of funds available to fund our cash needs, including our ability to pay dividends and make distributions. NOI also should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP.

³Adjusted EBITDA, which is a non-GAAP financial measure, is defined as Net income (loss) as defined by GAAP adjusted for Interest expense, net; Income tax (benefit) expense; Depreciation and amortization expenses; Impairment losses and (gain) loss on asset disposals; Transaction, acquisition, integration and other related expenses; Legal claim costs; Stock-based compensation expense; Cash severance and management transition costs; Severance-related stock compensation costs; Loss on early extinguishment of debt; New accounting standards and regulatory compliance and the related system implementation costs; Gain on marketable equity investment; Foreign currency and derivative losses (gains), net; Other expense (income); and other items as appropriate. Other companies may not calculate Adjusted EBITDA in the same manner. Accordingly, the Company’s Adjusted EBITDA as presented may not be comparable to others.

⁴We use funds from operations ("FFO") and normalized funds from operations ("Normalized FFO"), which are non-GAAP financial measures commonly used in the REIT industry, as supplemental performance measures. We use FFO and Normalized FFO as supplemental performance measures because, when compared period over period, they capture trends in occupancy rates, rental rates and operating costs. We also believe that, as widely recognized measures of the performance of REITs, FFO and Normalized FFO are used by investors as a basis to evaluate REITs.

We calculate FFO as Net income (loss) computed in accordance with GAAP before Real estate depreciation and amortization and Impairment losses and loss (gain) on asset disposals. While it is consistent with the definition of FFO promulgated by the National Association of Real Estate Investment Trusts ("NAREIT"), our computation of FFO may differ from the methodology for calculating FFO used by other REITs. Accordingly, our FFO may not be comparable to others.

We calculate Normalized FFO as FFO adjusted for Loss on early extinguishment of debt; Gain on marketable equity investment; Foreign currency and derivative (gains) losses, net; Amortization of tradenames; Transaction, acquisition, integration and other related expenses; Cash severance and management transition costs; Severance-related stock compensation costs; and Legal claim costs. We believe our Normalized FFO calculation provides a comparable measure between different periods. Other REITs may not calculate Normalized FFO in the same manner, accordingly, our Normalized FFO may not be comparable to others.

In addition, because FFO and Normalized FFO exclude Real estate depreciation and amortization, and capture neither the changes in the value of our properties that result from use or from market conditions, nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO and Normalized FFO as measures of our performance is limited. Therefore, FFO and Normalized FFO should be considered only as supplements to Net income (loss) presented in accordance with GAAP as measures of our performance. FFO and Normalized FFO should not be used as measures of our liquidity or as indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. FFO and Normalized FFO also should not be used as supplements to or substitutes for cash flow from operating activities computed in accordance with GAAP.

⁵Annualized GAAP revenue is equal to monthly recurring rent, defined as average monthly contractual rent during the term of the lease plus the monthly impact of installation charges, multiplied by 12. It can be shown both inclusive and exclusive of the Company’s estimate of customer reimbursements for metered power.

⁶Recurring rent churn percentage is calculated as any reduction in recurring rent due to customer terminations, service reductions or net pricing decreases as a percentage of rent at the beginning of the period, excluding any impact from metered power reimbursements or other usage-based billing.

⁷Percentage CSF leased is calculated by dividing CSF under signed leases for colocation space (whether or not the lease has commenced billing) by total CSF. Percentage CSF leased differs from percentage CSF occupied presented in the Data Center Portfolio table because the leased rate includes CSF for signed leases that have not commenced billing.

⁸Stabilized properties include data halls that have been in service for at least 24 months or are at least 85% leased.

⁹Gross asset value is defined as total assets plus accumulated depreciation.

¹⁰Long-term debt and net debt exclude adjustments for deferred financing costs and bond discounts / premiums. Net debt, which is a non-GAAP financial measure, provides a useful measure of liquidity and financial health. The Company defines net debt as long-term debt and finance lease liabilities, offset by cash and cash equivalents.

¹¹Liquidity is calculated as cash, cash equivalents, and temporary cash investments on hand, plus the undrawn capacity on CyrusOne’s revolving credit facility, plus the pro forma impact of the net proceeds from the settlement of the forward sale agreements.

About CyrusOne

CyrusOne (NASDAQ: CONE) is a premier global REIT specializing in design, construction and operation of more than 50 high-performance data centers worldwide. The Company provides mission-critical facilities that ensure the continued operation of IT infrastructure for approximately 1,000 customers, including approximately 200 Fortune 1000 companies.

A leader in hybrid-cloud and multi-cloud deployments, CyrusOne offers colocation, hyperscale, and build-to-suit environments that help customers enhance the strategic connection of their essential data infrastructure and support achievement of sustainability goals. CyrusOne data centers offer world-class flexibility, enabling clients to modernize, simplify, and rapidly respond to changing demand. Combining exceptional financial strength with a broad global footprint, CyrusOne provides customers with long-term stability and strategic advantage at scale.

Company Profile

CyrusOne (NASDAQ: CONE) specializes in highly reliable enterprise-class, carrier-neutral data center properties. The Company provides mission-critical data center facilities that protect and ensure the continued operation of IT infrastructure for approximately 1,000 customers, including approximately 200 Fortune 1000 companies. CyrusOne's data center offerings provide the flexibility, reliability, and security that enterprise customers require and are delivered through a tailored, customer service-focused platform designed to foster long-term relationships. CyrusOne is committed to full transparency in communication, management, and service delivery throughout its more than 50 data centers worldwide.

• Best-in-Class Sales Force
• Flexible Solutions that Scale as Customers Grow
• Massively Modular® Engineering with Data Hall Builds in 10-14 Weeks
• Focus on Operational Excellence and Superior Customer Service
• Proven Leading-Edge Technology Delivering Power Densities up to 900 Watts per Square Foot
• National IX Replicates Enterprise Data Center Architecture

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