CyrusOne Inc.
Q4 2020 Earnings Call Transcript

Published: 18 Feb 2021

[Operator:]

Good morning and welcome to the CyrusOne Fourth Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

[Michael Schafer:]

Thank you Kate. Good morning, everyone, and welcome to CyrusOne’s fourth quarter 2020 earnings call. Today, I am joined by Bruce Duncan, President and CEO; Katherine Motlagh, CFO; and John Hatem, COO. Before we begin, I would like to remind you that our fourth quarter earnings release, along with the fourth quarter financial tables are available on the Investor Relations section of our website at cyrusone.com. I would also like to remind you that comments made on today's call and some of the responses to your questions deal with forward-looking statements related to CyrusOne and are subject to risks and uncertainties. Factors that may cause our actual results to differ from expectations are detailed in the company's filings with the SEC, which you may access on the SEC's website or on cyrusone.com. We undertake no obligation to revise these statements following the date of this conference call, except as required by law. In addition, some of the company's remarks this morning contain non-GAAP financial measures. You can find reconciliations of those measures to the most comparable GAAP measures in our earnings release, which is posted on the Investors section of the company's website. I would now like to turn the call over to our President and CEO, Bruce Duncan.

[Bruce Duncan:]

Thanks, Michael, and welcome to CyrusOne's fourth quarter earnings call. Before I begin my prepared remarks, I want to give a big shout out and thank you to all of my CyrusOne teammates worldwide. These last 11 months dealing with COVID and now the current major Texas winter storm have been very difficult and challenging more than any other time in the company's history. And you all have risen to the challenge. Your dedication and commitment, taking care of our customers and our data center facilities, as well as each other has been extraordinary. So on behalf of the senior leadership team, I thank each and every one of you from the bottom of my heart. You are very special and talented teammates and it is an honor and privilege to work with you. With that, let me start with my prepared remarks. I'd like to begin by saying that we are very pleased with our leasing results for the fourth quarter with broad-based demand across industry verticals, including significant contributions from both our hyperscale and enterprise customers. The leasing was also well-diversified across geographies with importantly a meaningful improvement from recent quarters in our U.S. market and continued strong performance in Europe. For the full year, we signed $156.8 million in annualized revenue, the highest total in the company's history, up significantly 56% from our 2019 bookings. As a result, we began 2021 with a record backlog and good leasing momentum.

[Katherine Motlagh:]

Thank you, Bruce and good morning, everyone. I'm thrilled to join CyrusOne in such an exciting time for the data center industry. In my first call as the CFO, I can say with confidence, that I'm joining a company with incredible momentum, supported by favorable secular trends, a competitive platform with a presence in key markets and a solid financial position. As Bruce indicated, we believe there is a significant opportunity ahead of us. And we are focused on ensuring the business is best positioned for sustainable and profitable growth. Turning to slide 11. Revenue growth in the fourth quarter of 2020 was driven by a 10% increase in occupied colocation square feet and a 12% interconnection revenue growth, partially offset by the impact of $4.7 million in lease termination fees received in the fourth quarter of 2019.

[Operator:]

We will now begin the question-and-answer session. The first question is from Ari Klein of BMO Capital Markets. Please go ahead.

[Ari Klein:]

Thank you. Can you maybe elaborate a little bit on the timing issues between deployments and commencements? Is that broad-based specific to customer or geography?

[Bruce Duncan:]

Sure, Ari. I'll start and then, I'll hand it over to John. I would say, we're seeing – it's taking more time especially over in Europe in terms of as a result of the pandemic in terms of getting things done and getting permits and so it's a longer process than we anticipated. But John, do you want to just talk about that?

[John Hatem:]

Yeah. Sure. Thanks, Ari. So yeah, Ari, I mean, it's broad-based. It's not, it's not customer-specific, right? Its market specific right, mostly due to the pandemic, right? Like Bruce said, permits equipment leads times, I mean everything is driving. And on the customer side, just straight up execution on their side for contracts and such.

[Ari Klein:]

Got it. Thanks. And then, just on the strategic initiatives, that you've been highlighting and around improving share and the lower targeted yields. I know it's early, but, what are you seeing on the ground post these changes and announcements? And anything in the pipeline you can point to?

[Bruce Duncan:]

Sure. Ari, again, we announced last quarter, that we are bringing our targeted stabilized yields, down 8% to 10%. We weren't leading in the market. We were median the market. In terms of that, again, we're very pleased with what we've seen in the fourth quarter. We had very good results, at $49.3 million. I think what was encouraging there, is it's broad-based, in terms of where we're getting traction, in terms of leasing. So, we're encouraged. I would say that, there's still a lot of demand out there. And our job as a team, is to get our fair share and we're all over it.

[Ari Klein:]

Okay. Thank you.

[Operator:]

Your next question is from Richard Choe of JPMorgan. Please go ahead.

[Richard Choe:]

Hi. I wanted to follow-up a little bit on the churn. Is it mainly in the US or in Europe? And then, also, it looks like its front-end loaded, but you expect it to come down for the second half of the year. A little more color there would be great. Thank you.

[Bruce Duncan:]

Okay. Katherine, do you want to take that?

[Katherine Motlagh:]

Yes, Bruce. Thank you. So when you think about the churn, think about the aging of our portfolio. So we have relatively young portfolio in Europe. And a little bit more mature portfolio in US. So, as the renewals come on that's what's driving the churn. What we are seeing a little bit better-than-expected churn, in the second half in the latter part of 2020, is driven mostly by some of our good efforts on customer renewals, but also the headwinds for the customers, whether from the timing and delaying some of their decisions from 2020 to 2021, which is why, we anticipate some of the churn will pickup in 2021.

[Richard Choe:]

Great. Thank you.

[Bruce Duncan:]

So again, the churn is primarily in the US. As Katherine said, our portfolio in Europe is pretty new. Next question?

[Operator:]

The next question is from Erik Rasmussen of Stifel. Please go ahead.

[Erik Rasmussen:]

Yeah. Thanks. Maybe just on hyperscale activity really seemed like, it picked up especially in the US for you guys. Just trying to get a sense of how sustainable this activity is, and where you're seeing sort of the biggest opportunities as it relates to your sales funnel. And I think maybe within that comment on sort of the mix between US and Europe. That would be helpful. Thanks.

[Bruce Duncan:]

All right, Erik. Let me -- I would say, we're very encouraged in terms of what we're seeing right now, in terms of demand. I think that the hyperscalers are active. We are seeing broad-based demand, as we've talked about. If you looked at our top five markets for the quarter were Frankfurt, Northern Virginia, San Antonio, Phoenix and Dallas. And we are encouraged by that. But as we said, last quarter when our numbers weren't so good. It's a lumpy business. So I think deals take longer to get done and that sort of thing. So again, we're encouraged. We -- there is good demand out there. But one quarter does not a trend make, as I tell the team and we've got to keep going and keep putting up some good numbers. And again, there's good activity. And I'm confident, in the team that we're going to be able to continue to do this. But again, there's a lot of work. But again, the good news is there's a lot of demand both, here and in Europe.

[Erik Rasmussen:]

Okay. Thank you.

[Bruce Duncan:]

Thank you.

[Operator:]

The next question is from Frank Louthan of Raymond James. Please go ahead.

[Frank Louthan:]

Thank you. I wanted to dig a little bit into the sales process. Can you give us -- be a little bit more specific about the strategies that you're -- specific strategies you're employing to drive sales? And then, as a follow-up kind of related to that, is there something that you're doing that's impacting the sales cycle? Or is it more something that's changing on the customer side? Thanks.

[Bruce Duncan:]

I would say in terms of CyrusOne, we've got our own sales force, our internal sales force does 90% of our leasing and it's a great team. And I would say the secret sauce if you will is the relationships we have with our customers throughout the organization and a track record of delivering on what we say. So trying to understand what their needs are. And again, our customers build their own facilities as well. But they do business with us because we can provide solutions to them. So it's the relationships we have with them throughout the organization not only the sales side, but John and his team design, construction and throughout the organization. So I think that that's one of our strengths and it's very important to our success.

[John Hatem:]

Yes. And Frank, it's John. I mean we're in front of our customers directly, right, talking about everything on the sales side as well as obviously on the infrastructure side. And that's the most exciting thing, right? We're in front of our enterprise customers we're in front of our hyperscale customers and really having that relationship is key to success.

[Frank Louthan:]

I mean is that different than what you've done in the past? I mean the bookings have struggled a little bit for the last couple of years. Just curious if you're doing any -- running any new plays and is any of those changes you're making and how you're approaching the sales process impact -- you having an impact on the sales cycle lengthening? Or is that more customer driven?

[Bruce Duncan:]

I think the sale -- the length is customer-driven in terms of taking more time. But in terms of us doing different, I would say a couple of things. John's back, which I think has been a great addition. And we've changed out in terms of the leadership in the sales group with Brent Behrman taking that leadership role. So I think that was a very positive impact. And again, we had a great fourth quarter. We got to keep going and showing progress, but we're encouraged and glad we could continue with this momentum.

[Frank Louthan:]

All right. Great. Thank you.

[Bruce Duncan:]

Thank you.

[Operator:]

The next question is from Matthew Niknam of Deutsche Bank. Please go ahead.

[Matthew Niknam:]

Hey, guys. Thank you for taking the question. It's -- mine is related to sources of funding for the development CapEx. So beyond new debt and equity any updates you can give us on how you're thinking about additional or alternative sources of capital to fund expansion, whether it's through portfolio dispositions or potential JVs? And then I have a really quick follow-up. On the recurring CapEx, I think it's moving up from about $14 million to about $20 million to $40 million this year. If there's any color to provide in terms of what's driving that pickup this year? Thanks.

[Bruce Duncan:]

All right. Let me take the first one. I would say that -- well Katherine, do you want to take it?

[Katherine Motlagh:]

Yes. Sure. Thanks Bruce. So Matt, first of all we are looking at different sources and -- of capital funding and the capital structure. Now as you can see at $1.7 billion liquidity starting this year as well as $485 million available from the forward equity. We're pretty capitalized to maintain and to support our CapEx for this year, which is a little higher than you've seen in the past. Going forward we'll be looking at different options and opportunities and we are really looking forward to share with you our strategies at our Investor Day in June.

[Bruce Duncan:]

Yes. I think that's important. The Investor Day we're going to go through in terms of recycling and talking through that. And I think from our standpoint, again, the good news is where we are today. We've funded all of our needs really through this year with our forward equity and the sale of monetized GDS. But I would anticipate that we will raise some equity this year on a forward basis for next year. But we're also going to discuss on Investor Day sort of a strategy in terms of how we're thinking about recycling capital.

[Katherine Motlagh:]

Yes. And also coming back to your second question on the recurring CapEx. So mostly if you recall in my prepared remarks I mentioned, our inefficient chillers isolated to Frankfurt -- to our Frankfurt property. And we are addressing it, but we have to incur recurring CapEx and it's how would you -- the large part of that replacement of the chillers.

[Matthew Niknam:]

Got it. Thank you.

[Bruce Duncan:]

Next question.

[Operator:]

The next question is from Simon Flannery of Morgan Stanley. Please go ahead.

[Simon Flannery:]

Great. Thank you very much. Good morning. I wonder if you could just talk a little bit more about Paris. How did that all come about? Was that customer driven? Is this something that could become a bigger campus beyond what you've signed up so far? And any commentary around the returns that you're seeing in that market? Thanks.

[Bruce Duncan:]

All right. Michael you want to take that?

[Michael Schafer:]

Sure. So the Paris was an opportunity with a specific customer. We're excited to be in that market. It really rounds out our presence in the key European markets. And we think just having a broader set of markets to be able to offer to our hyperscale customers particularly as they expand in Europe is good and will help us in our positioning relative to the competition. So we're excited to be there. Great opportunity and it's a long-term lease which will provide growth for us in the coming years.

[Bruce Duncan:]

And our challenge is to find more sites like this in Paris, because it's very difficult but we're working on it and – to continue our growth there. But we're very excited to be in all the major markets in Europe right now with this lease.

[Simon Flannery:]

Great. And any comments on the competitive environment in Paris?

[Bruce Duncan:]

I would say the competitive environment everywhere – every place is competitive. I would say that again with Europe, the good news about Europe is it's less competitive than the United States because there's less supply, less competitors. But again, that's not to say it's not competitive. It's competitive but – for instance in Paris, we're just finding sight. It's very hard to find – be able to find good sites that you're able to develop. So it's difficult. But that – again, what I love about Europe the good news – the hard thing is – the bad news is it's hard to develop and it could cost more than the other thing. The good news is once you have something it has more value. So we like that.

[Simon Flannery:]

Thank you.

[Bruce Duncan:]

Thank you.

[Operator:]

The next question is from Michael Rollins of Citi. Please go ahead.

[Michael Rollins:]

Thanks. Two questions if I could. First, just curious if you could provide some context on the renewal spreads or just some of same-store metrics just to understand what's happening in terms of revenue in the existing facilities that are up for renewals? And then secondly, just as you're thinking about development yields. You mentioned the focus now for the US is at 8% to 10%. What's the focus of that development yield in Europe? And what's the risk that those hyperscale yields come down from where they are today given the competitive climate?

[Bruce Duncan:]

Well I would say – let me take the second one first. I would say that the development yields, I would think that you should be thinking of development yields of stabilized yields of 8% to 10% both in the US and in Europe because I do think there is some compression in places there too. So I think that 8% to 10% they'll be at the higher end of that range maybe a little bit above that but the stabilized yields are going to be in that ballpark. So I think you need to think about it that way. In terms of the renewal spreads, Katherine do you want to take that? I would just say in terms of we're going to talk more about this at the Investor Day but do you have any comments Katherine you want to talk about?

[Katherine Motlagh:]

Yes. Mike what I would say is our average renewal rate on a GAAP basis was slightly down for the quarter. Generally speaking, I would guide you to think about how we look at churn, right? Our churn was a little bit better in the second half of 2020, but we expect more headwinds from the churn. And a third of that comes at a rate reduction. The rest of it is more consolidations and some of the exits and moving between the facilities. But I would think about it in that framework and we'll give you a little bit more color when we come to June at the Investor Day.

[Michael Rollins:]

Thanks very much.

[Operator:]

The next question is from Colby Synesael with Cowen. Please go ahead.

[Colby Synesael:]

Great. Thank you. First off congratulations on your leasing in the quarter. My questions are the following though, do you lease out Frankfurt IV in the fourth quarter? And if so is that – should we be thinking of the 11 megawatts, which you talked about before? Or is it the 17 megawatts that you now have referenced in your development table? And then also what are your biggest markets in terms of leasing opportunity in 2021 based on the capacity that you have available to sell? And I guess what I'm really getting at is do you think that the capacity or lack of capacity could be a constraint or restriction to your leasing opportunity in 2021 versus what we just saw in 2020? Thank you.

[Bruce Duncan:]

All right. Well, let me take the second one and then maybe Michael you can take the first one. I would say that we've got good capacity. I mean in terms of -- if you look at what we have capacity, and let's just take the US market. Good capacity in most of the US markets, Northern Virginia, Phoenix, Dallas, I mean so we have capacity. And I think that's great. In Europe, we've got capacity. And in London and a little bit in Frankfurt and Amsterdam, and so we've got -- things are -- I feel pretty good that we're not going to be caught without capacity. And we're working hard as we talked about last quarter. I think what I said in our new acquisition in London and we're working on some other acquisitions in some of the other European markets that we'll hopefully get done in the next quarter or two. But -- so, we're going to make sure we have capacity. We're very excited about our position in Europe, as I mentioned will be 20% of our portfolio, and we have enough capacity in terms of what we have with land and powered shells that we're able to double that footprint in fairly short order. So, I think that's pretty exciting, because it's a great market to be in. And again, in the US market, we have capacity and we get it even in a county in Santa Clara that we're about ready to get our final permitting we hope not pun, but by midyear. So we're excited about that project as well.

[Michael Schafer:]

Hey, Colby. Yeah. Colby, on your question on Frankfurt IV, the 17 megawatts consistent with how we present our properties is on a non-redundant basis. So, the 11 is what's leasable, and there's a substantial portion of that that's leased up. And as Bruce mentioned, in terms of capacity, we're obviously focused on it to ensure that we have the ability to meet our customers' demand as they continue to expand.

[Colby Synesael:]

So again, just to people -- you guys don't see capacity being a hindrance to leasing in 2021?

[Bruce Duncan:]

Well, let me just say this, Colby, I hope we do. I hope we get so many leases, it is a problem. But right now, we don't think it's going to be a problem, no.

[Colby Synesael:]

Okay. Thank you.

[Bruce Duncan:]

Thanks.

[Operator:]

The next question is from Jon Atkin of RBC. Please go ahead.

[Jon Atkin:]

Thanks. So, I appreciate the color about kind of the top five markets where you saw leasing momentum. Bruce, you also talked about kind of delayed customer decision. So I'm wondering to what extent you saw slippage from -- on decisions from 4Q into 1Q? And what that might bode in terms of early year momentum on the leasing front?

[Bruce Duncan:]

Well, again, I would say that the pressure is on us when -- just thinking about what the when I think about what the upside could be in our guidance, it's going to be -- we get some leasing done early and get people in there early, because it takes so long to talk about the timetable to get people in. So we've got it beyond that and get some leases done here in the next few months to have any meaningful impact on the balance of the year in terms of having some upside in the numbers. So, we're all over it, but it's got to be for products that we already have on the shelf that we can do that. But again there is demand. And again, there is demand in the US markets and again, when we've got available capacity. We just got to get some of the leases done, and we'll see if we get it done, but it's competitive. So it's not -- but there's work to be done, but we're -- the team is working hard on it. So we'll see.

[Jon Atkin:]

Slide 15, I was curious the backlog commencements. There's a lot -- the $49.8 million, how much of that is spread into 2022 and even into 2023? Can you give us a little bit of a color, so that we can kind of think about our medium-term forecast a little bit more accurately?

[Bruce Duncan:]

Sure. Katherine or Michael, you want to take that?

[Katherine Motlagh:]

Yeah, I'll take that. So Jon, first of all, good morning, but I think most of this is towards 2022 and 2023, if you think about it. I mean if you look at the beginning of the year, we're about $25 million per quarter so a little bit more longer weighted. And also remember that it includes $26 million of that 22.5 megawatts. That's expected to be deployed all the way to mid-2026.

[Jon Atkin:]

Thank you.

[Operator:]

The next question is from Eric Luebchow of Wells Fargo. Please go ahead.

[Eric Luebchow:]

Great. Thanks for taking the question. I'm curious you had a pretty good enterprise leasing quarter. So maybe you could talk about, was that driven by a single larger customer deal? Or do you see any type of momentum in the business? And should we think about -- as you look at your enterprise funnel into 2021, is there an opportunity to kind of outperform the kind of $10 million to $12 million that you've done historically. So how should we think about that customer segment as we enter 2021? Thanks.

[Bruce Duncan:]

Eric, thanks for that question. I would say, again, we were very pleased with the big number for enterprise in the quarter. And it wasn't just one customer, it's a number of customers. So it was, again, a number of customers that took greater than 500 megawatts. So it’s very encouraging. So we like that a lot. That being said, again, it was such a big quarter relative to our usual $9 million to $12 million a quarter. I would not factor that in that we think that that's going to be the run rate going forward. I think you're going to go back to more of the regular amount. But it was a very good quarter. John, you might want to talk about -- John was front and center in a bunch of these customers on it.

[John Hatem:]

Yes, Eric. Good morning. Yes. So, I mean, we're seeing great demand on the enterprise side. And we're really seeing like what we're seeing is, this enterprise at scale, right, where we're seeing greater than 500 kW deals coming from enterprise customers. And our portfolio is, obviously, well positioned to accept those. And our operating prowess in the space helps us close those deals.

[Bruce Duncan:]

Great. Again, it was a great quarter for enterprise. Going forward I would not assume that that's going to be the new run rate. I'd bring that back.

[Eric Luebchow:]

Yes. Got it. Thanks, Bruce.

[Operator:]

The next question is from Nick Del Deo of MoffettNathanson. Please go ahead.

[Nick Del Deo:]

Hi. Good morning. Bruce, you noted that you want to bring a greater focus to FFO per share growth rather than, call it, aggregate growth. Are there specific steps that you've taken to further that goal? Or are those efforts still kind of in the planning phase?

[Bruce Duncan:]

No, no, we're having some bunch of things. And again, that's going to be one of the focuses on investors to walk through some of the things we're doing to try and change the thinking and how we're looking at things. And also, that we're going to talk more about recycling capital as well. So, again, we think it's an important focus. This is a great company. It's done some great things. But we are changing the focus from just revenue growth to try and get down to, what I think shareholders care about, which is FFO per share and AFFO per share growth. So that's a focus and we're going to walk through that in more detail in June.

[Operator:]

The next question is from Michael Funk of Bank of America. Please go ahead.

[Michael Funk:]

Yes. Thank you very much for the question. Bruce, Katherine, Michael, hope you're all doing well on a personal basis. But operationally wanted to ask about the potential impact from the cold and the power outages in Texas? Do you see operational impact or financial impact from that?

[Bruce Duncan:]

Sure. I think it's early for the financial impact, but let me -- Mike will talk a little bit about the power costs. And then John can give you a little flavor about what's going on, because he's been 24/7 as our Texas teams have been in all over. So, Michael?

[Michael Schafer:]

Yes. Sure. So as it relates to exposure to rising rates, we have a significant portion of our energy requirements in Dallas and Houston that are hedged at low rates. And then Austin and San Antonio are regulated markets. Additionally, a substantial percentage of our leases are meter power. So the power is a pass through, so we're not bearing the risk on that. So we're in good shape from that perspective. John, you can talk more about the operational impact.

[John Hatem:]

Yes. Good morning, Michael. I mean, operationally, and Bruce mentioned it in his earlier remarks, but what the teams have done on the ground here has been phenomenal, obviously, unprecedented event going on here in Texas. Operationally, our sites have been stable and electrically, we've maintained 100% uptime and we've had some minor cooling issues that we've been dealing with. But like I said, this has been an all-out effort by the teams to keep our customers' data centers up and running, keep our facilities up and running. And no major impacts and we're coming out of this hopefully in the next 24 hours. And the freezing temperatures will subside and we'll get back to business as usual.

[Michael Funk:]

Yes. Thank you. So I could -- if I could one more on churn please. So you're guiding for churn of 4% to 6% in 2021. You gave us some color around the drivers there. Thinking about the portfolio though is 4% to 6% the right rate going forward when you think about this customer usage driving maybe more consolidation in the future, the potential for renewal rates to be lower. Is that the right range longer term? Or there are reasons to believe that could be lower?

[Bruce Duncan:]

Kat, do you want to take that?

[Katherine Motlagh:]

Yes, Bruce. Let me take that. So if you think about it our historical range, we've communicated in the past was 5% to 7% and it's been running closer to 5% and under. Now going forward as portfolio renewals are coming on. And you do feel that there is a consolidation happening, especially, in the enterprise segment. We believe that 4% to 6% is probably the right range somewhere in the midpoint of 5% as historically we've seen is probably at this point is what we are thinking about. And the one-third of it is related to the rate really and then the rest is consolidation. So think about it that way.

[Michael Funk:]

Great. Thank you, Katherine.

[Katherine Motlagh:]

You’re welcome.

[Operator:]

The next question is from Sami Badri of Credit Suisse. Please go ahead.

[Sami Badri:]

Hi. Thank you. The first question is on your interconnection growth rate at quarter in 4Q 20'20 there was a deceleration from the prior quarter. You guys came in at 12% year-on-year 4Q 2020 versus slightly above that at 3Q 2020. Can you just maybe walk us a little bit through what's going on the cross-connect activity? And then maybe what 2021 looks like just given some of the delays we've been discussing and the ramp in construction and leasing. Can we just get kind of a trajectory or an idea what that's going to look like?

[Bruce Duncan:]

Michael, do you want to take that?

[Michael Schafer:]

Yes, Sami. I mean, the growth drivers remain the same on that front. Number one, it is the development of ecosystems within our data centers. So as you have more customer types they have an increased desire to connect to one another so that's number one. And number two, as we've talked about before is our SDN partnerships particularly with Megaport. Its customers are really pleased with the opportunity to connect in to various cloud providers through the Megaport platform. And so we benefit from the physical cross-connect there. So those continue to be the drivers and I would anticipate into the future as well those drivers will be in place. And then as we talked about we have the --we have the offering with Google in the five locations with direct connect through that platform.

[Sami Badri:]

Got it. Got it. And then I want to just follow-up on the Texas question that was asked earlier regarding effect of what's going on with the power rate. Is there going to be any kind of effect maybe on 1Q or 2Q power rate assuming this drags on for a little bit longer? But mainly an impact on EBITDA margin if it's possible -- if that plays out worse than you were expecting?

[Bruce Duncan:]

Mike, you want to take that?

[Michael Schafer:]

Yes. Yes. I mean, I'd say it's too early to tell. But again a significant portion of our risk is taken care of given that we have hedges in place in Dallas and Houston and given that a significant proportion of our contracts are pass-through.

[Sami Badri:]

Okay. Thank you.

[Bruce Duncan:]

So the answer there is we don't know. It's too early. We don't think it's going to be a big issue. But again, we can't say anything because it's too early to figure out and we got to see if the heat dance that we're all doing it works and it warms up and we get back to normal here.

[Sami Badri:]

Got it. Got it. Thank you.

[Operator:]

The next question is from Tim Long of Barclays. Please go ahead.

[Tim Long:]

Thank you. Just wanted to follow back up on enterprise two-parter here. First, can you talk a little bit about kind of what you saw in Q4 and kind of current trends with existing customers versus new logos? How is that mix looking and trending? And then second, when you start to think about ramping European enterprise what's that going to take? What kind of time line would that be? What kind of costs would be associated with trying to get that business going more meaningfully to catch up with hyperscale? Thank you.

[Bruce Duncan:]

Let me take the second and then I'll give Michael the first. In terms of European and ramping up to the enterprise. Again we love what we love right now our balance is 50-50 in terms of revenues between enterprise and hyperscale. In Europe though we're almost all hyperscale and that's because that's where the growth has been. I mean our -- the hyperscale customers -- our U.S. hyperscale customers are very focused there and it's been a great opportunity for them and we're trying to help them do that. As I said in my prepared remarks, we hope to build up enterprise. But again I think that'll take a little bit longer. Right now it's just given the demand there is by the hyperscalers. We want to -- if we could have a balanced -- more balanced business we'd like to do that. But right now the demand is so much greater by the hyperscalers. Michael do you want to take the first one talking about...

[Michael Schafer:]

Yes. Yes. So we're obviously Tim focused on bringing in new customers because as we've talked about for years now, just getting them in the door even it's with a small deal initially provides an opportunity for future growth as they grow within their existing data center and then expand into other data centers. So we anticipate that it will most likely be a small percentage of MRR signed any one quarter. But once those customers are in it represents a pretty significant opportunity. So I think it was 6% of bookings this quarter were from new customers. It's just been relatively consistent over the past few quarters.

[Tim Long:]

Thank you.

[Bruce Duncan:]

Sure. Thank you.

[Operator:]

The next question is from David Guarino of Green Street Advisors. Please go ahead.

[David Guarino:]

Hey thanks. A sizable portion of the industry's new leasing activity last year came from two hyperscale companies. Can you comment on any conversations you're having with those customers or other hyperscale customers just to gauge their data center needs in 2021? And then also do you think we're going to see a return of that word lumpy into the data center forecast this year?

[Bruce Duncan:]

I think lumpy is going to be part of our speech going forward in terms of -- I think you have to look at it in terms of -- on a rolling four quarters of that. So I don't think -- as again these deals take time. They're long they're larger. So I think the lumpy as much as it'd be nice to get rid of lumpy, I think lumpy is a word we're going to keep hearing. But in terms of the demand and I can't comment on your comment about the data center or two cloud companies that are clouding up the space. But I can comment that in terms of what we see out there is great demand. I mean it's by all the hyperscalers most hyperscalers by everyone. I mean there's good demand out there. Again well everyone keeps talking about well there is great demand in 2018 and 2019 was up. 2020 was great will 2021 be bad? We're not counting on that -- we're counting on 2021 to be a good -- to be a very good year in terms of getting leasing done. But it's up to the team and all of us to get it done. And -- but we do think there's -- right now we're encouraged by what we're seeing. But again the proof is in the pudding in terms of what we signed because again as we talked these deals take time. It's long and whatever. So we'll report back every quarter in how we're doing.

[David Guarino:]

Great. Thanks for that.

[Bruce Duncan:]

Thank you.

[Operator:]

Your next question is from Tayo Okusanya from Mizuho. Please go ahead.

[Tayo Okusanya:]

Yes. Good afternoon. So my question is around -- you had discussed last quarter your desire to pick up market share after the company has been losing market share in the U.S. Could you talk a little bit about again if you kind of feel you've done everything you need to do from an operational perspective to start to pick up market share? Or if there are still things that do need to be done?

[Bruce Duncan:]

All right. Again when we said it we wanted to pick up market share we're very encouraged by the fourth quarter. Again the numbers we put on board over $30 million of the $49.3 million was in the U.S. and it was across a number of markets. So again we feel very good about that. We feel about bringing our yield targeted stabilized yield requirement of 8% to 10% helped us meet the market. More importantly in terms of having a new head of sales, I think has been helpful. I think reenergized the sales team. And I think John coming back in terms of -- to help us in terms of with our customers in terms of go through their needs and how we can help them in terms of deliver the product they want in a timely manner and the quality they want has been very helpful, so John and his team. So I think we've got -- we have things in place. And again it's up to us as a team to deliver. But I'm encouraged by what we saw in the fourth quarter. As I said earlier one quarter is not a trend and we got to keep it going.

[Tayo Okusanya:]

Got that. Thank you.

[Bruce Duncan:]

Thank you.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Bruce Duncan for closing remarks.

[Bruce Duncan:]

All right. Well again thank you very much for your time and your interest in CyrusOne. We very much appreciate it. If you have any questions please follow-up with Katherine, Michael or myself. We look forward to it and continuing the dialogue and continuing to report back to you on our progress. So thanks again. We appreciate it.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.