CyrusOne Inc.
Q4 2017 Earnings Call Transcript

Published: 22 Feb 2018

[Operator:]

Good morning, and welcome to the CyrusOne Fourth Quarter 2017 Earnings 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. I would now like to turn the conference over to Michael Schafer. Please go ahead.

[Michael Schafer:]

Thank you, Anita. Good morning, everyone, and welcome to CyrusOne's fourth quarter 2017 earnings call. Today, I am joined by Gary Wojtaszek, President and CEO; and Diane Morefield, CFO. 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 the 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, Gary Wojtaszek.

[Gary J. Wojtaszek:]

Thanks, Schafer. Howdy all, and welcome to CyrusOne's fourth quarter earnings call. We had a really good quarter and another outstanding year putting up very strong results and continuing to grow our U.S. business organically while strategically positioning the company to grow internationally. Since we just celebrated our fifth anniversary as a public company, I wanted to begin with a brief recap of our accomplishments over that period. As slide 4 shows we have been consistently executing the same methodical strategy for the past five years which is no different than what we had been doing for the prior 10 years when we were private. Our strategy is simple. First, we have been and we'll continue to be maniacally focused on being the low-cost leader in the industry, being able to bring on megawatts of capacity at the lowest cost and fastest time to market, which has enabled us to generate mid-teens returns and reduce our capital at risk. While a few have doubted our capabilities in this area and despite our willingness to explain to investors how we do it I would just point out that many companies in our industry seem to now be constantly talking about cost savings, supply chain efficiency, modular building techniques and speed to market, which are all things we were innovating on for many years. So if imitation is a form of flattery we are doing pretty well. Having said that we believe there remains significant demand for quality data center space for years to come and there is plenty of room for successful growth across our industry and our peer group. The second thing that we do which is arguably our greatest strength is sell. We identified and targeted selling to enterprise customers many years ago and have been incredibly successful targeting this segment. Three years ago we believed that the cloud companies were going to change the data center landscape and we started focusing on those customers. Three years later we count practically every single cloud company as a customer, all of which are asking us to expand internationally with them. Over the five year period since our IPO we have stuck to these two strategies and have methodically grown and significantly diversified the business, expanding our portfolio across the entire United States. Over this period we have more than tripled our revenue and adjusted EBITDA, increased the size of our real estate portfolio by 4 million square feet to a total of nearly 6 million and quintupled the value of the company. In short, through the tremendous effort of an incredible team and never veering from our course, we have basically exceeded every goal we set out to achieve for ourselves five years ago and have been the fastest growing company in our industry during this period. Moving to slide 5, revenue of $180.5 million was up 31% over the fourth quarter of 2016 and adjusted EBITDA of $104.2 million was up 43%, which was one of the highest growth rates since our IPO. Normalized FFO of $0.84 per share was up 24% compared to last year. In the quarter, we leased 9 megawatts of power in 86,000 colocation square feet and our bookings totaled $18 million in annualized GAAP revenue, 10% below our bookings goal of $20 million as a result of some deal delays for some very large cloud customers that pushed to Q1. For the year, we signed 58 megawatts and more than 520,000 square feet totaling $105 million in revenue, an average of more than $26 million per quarter, which is over 30% above our targeted quarterly close rate and well above our respective market share as measured by revenue. As slide 6 shows, we signed 20 new customers this quarter with the highest total in the past two-and-a-half years. Roughly 60% of our deals this quarter were for smaller deployments, highlighting our enterprise sales focus, which resulted in an average price of $170 per kilowatt, which is 12% higher than our trailing four quarter average and 25% greater than our trailing eight quarter average when we had some very large hyperscale deals. We continue to sell well above our respective market share and our bookings for the year were equivalent to 18% of our base revenue which will continue to propel our growth into 2018 and beyond. As shown on slide 7, we are continuing to see strong performance in our interconnection business which generated $9.2 million of revenue in the quarter. This is up 20% year-over-year which is one of the highest growth rates in the industry and reflects the changing network topology driven by hyperscale cloud deployments in our facilities, combined with the hybrid cloud deployments of our enterprise customers. As an aside, adding IX to our product portfolio has been the only meaningful change we have made to our product offering in the last 10 years and it's been very successful as measured by its growth rate. Moving to slide 8, our sales funnel is the largest it's been in our history, up 9% sequentially and nearly 40% from a year ago with 60% to 70% of it coming from cloud companies which are increasingly willing to outsource more of their primary data center needs to us and we expect them to continue that trend as we expand internationally. Given the strength of our sales funnel over time, we decided to make substantial investments in our U.S. platform, providing us with additional capacity to grow. As of year-end we had over 250,000 more white floor space available to sell than we did last year across our key markets, which you may recall is when we were essentially sold out. Upon full lease up of this built out white floor space, we expect to generate $100 million to $140 million in additional revenue, equivalent to approximately 20% of our 2017 base revenues. We also have another 1.5 million of built out shell capacity plus more capacity under development. Additionally, we purchased 44 acres of land in Atlanta in the quarter which gives us a stronger presence in the Southeast and increases our total land bank to more than 340 acres which should provide us with adequate inventory to grow over the next few years. In short, I believe our U.S. operations are performing at a very high level with strong demand coming across from both enterprise and cloud customers. We also have plenty of immediate inventory available and future capacity that we can build out, which enable us to grow in the U.S. market for the next several years. Given our already strong position in the market, we will deemphasize investing more capital in the United States and redirect some of our capital spend towards international expansion where we believe we have a better strategic opportunity to win more market share and as we have proven in the U.S. market achieve very attractive profitable growth. Moving to slides 9 through 11, I wanted to recap our thinking on international expansion. Last year, I mentioned that by the second quarter of 2018, we will have a sizable presence outside of the U.S. and in the fourth quarter we've positioned ourselves to do just that. Our focus on growing internationally is grounded in the belief that in order to best serve our customers, we need to have a broader product portfolio. What we are witnessing is that the biggest customers are buying globally and in large part, these are the hyperscale cloud providers followed by enterprise companies. The demand is concentrated in the major global markets and our two other U.S. based global data center competitors are generating significant demand in overseas markets from their existing U.S. based customers, which we are effectively shut off from at this point because we do not have an international presence. Our approach to international expansion is to leverage our core competencies, including our expertise in design and construction, our best-in-class sales organization, and our emphasis on providing unparalleled customer service. We will focus on the markets where demand is aggregating and pursue a dual track approach to establishing a presence in those markets including organic expansion opportunities as well as M&A. In October, we announced $100 million investment in GDS, which is one of the most successful data center companies operating in China today. China is one of the fastest growing data center markets in the world with the largest number of cloud companies outside of the U.S. It's also one of the more challenging markets to do business in. GDS is a phenomenal company led by a great team that is culturally very aligned with the way CyrusOne sees the world and works with customers. As of yesterday, our investment in GDS was worth more than $220 million, increasing over 120% in value in just a few months. However, the primary reason we entered into this arrangement with GDS is because of the partnership we are working on together which will help our companies grow faster in Asia and the U.S. This partnership is working very well and in a short amount of time we have generated a significant deal funnel that will allow our respective customers to grow in each other's markets, benefiting both our companies and the customers that we serve. We expect to close our first deal with a Chinese cloud company this quarter. We followed up the GDS transaction with the year-end announcement of the agreement to acquire Zenium, which we are very excited about. Franek and his team are experienced operators and they have done a remarkable job building and growing that business. Similar to us, they have a particular emphasis on hyperscale cloud companies which represent more than 75% of their portfolio and many of the same customers who are excited about the opportunity to work with CyrusOne at scale in Europe. They have a total of four data centers in London and Frankfurt and very well-positioned to capitalize on the demand I was just referring to with 22 megawatts of capacity available for immediate development and lease-up. Europe has historically been an interconnection driven market, but in the last couple of years demand has accelerated and the size of the deals has increased, in large part driven by the hyperscale cloud companies. This demand is concentrated in a few major markets and due to the lack of larger format data center providers in those markets it is being captured by secondary providers or interconnection focused competitors. As we expand organically, we will be able to leverage the management team. There is another site in Frankfurt under contract and there are other organic development opportunities in the late stages of negotiations in London, Frankfurt and Dublin. Additionally, we anticipate achieving future cost synergies through the benefits of scale, such as improved purchase economics and potentially through acquisitions as we expand into additional markets. Given the maturation of the European data center market, significant demand growth, particularly for larger deals and the positioning of Zenium, we believe there's a tremendous opportunity over the coming years. We hope to close on the transaction at the beginning of the second quarter, and we'd expect to have closed a number of additional deals by then as well. We estimate that Zenium's adjusted EBITDA will grow by over 80% next year. However, the bigger opportunity that we will acquire with Zenium is a platform that will enable us to acquire many other assets in Europe, which will be substantially more accretive as we will have an efficient platform to acquire them with. In closing, we ended 2017 in a very strong position. We generated fourth quarter revenue and adjusted EBITDA growth of 31% and 43%, respectively, which are some of our fastest growth rates over the past five years. We increased our dividend an additional 10% and have almost tripled it over the past five years. We also raised $700 million of capital in the quarter with leverage of 4.7 and ended the year with over $1.2 billion of liquidity, which will enable us to continue to fund our growth throughout 2018. Given our strong fundamental performance this quarter, as well as our peers, it's pretty astonishing that the REITs have fallen by 11% since beginning of the year and the data centers by an even greater amount, which are down by about 16% since January 1. While it'd be the easy to conclude with the recent stock price performance that, there are some bigger issues facing our industry, I think this is short sighted. Our business is fundamentally just as strong today as it was two months ago. The growth in our business is driven by an outsourcing trend in cloud and enterprise companies and as you saw from the recent record results posted by Amazon, Microsoft, Oracle, and Salesforce, which grew between 40% to 60% year-over-year. This trend is not slowing down any time soon and will continue to propel our business for the next several years. While rising interest rates are not helpful for REITs in general, I would point out that the data centers are growing at considerably faster rates than the average REIT, in our case almost 500% faster and the best way to combat rising interest rates is through growth. Given where our stock price is currently trading, we are offering a 4% dividend yield and just provided 2018 EBITDA guidance of 25% growth this year as well. There are not many investment opportunities in the industry that carry this type of current cash yield with the very strong secular growth story attached to it, which is why I believe that the longer term our share price and that my peers will continue to do very well. I will now turn the call over to Diane, who'll provide more color on our financial performance for the quarter and our guidance for 2018. Thanks a lot.

[Diane M. Morefield:]

Thanks, Gary. Good morning, everyone. As Gary mentioned, we were very busy in 2017 and had another great year. As slide 13 shows our growth in the fourth quarter was particularly strong. Adjusted EBITDA grew 43% compared to the prior year and that was the second highest quarterly growth rate since our IPO, while revenue and normalized FFO grew 31% and 39% respectively. The company's growth continues to be driven primarily by strong leasing execution in both the cloud and enterprise company industries and the growth of the interconnection business. In addition, our 2017 results included 10 months of operation from our Sentinel acquisition. Full year churn was 3.9% below the lower end of our full year guidance range of 6% to 8% and the lowest annual churn rate since 2013. We anticipate though full-year 2018 churn will be in the 6% to 8% range, consistent with our annual forecast for the past several years. The weighted average remaining lease term of our portfolio is currently at almost four-and-a-half years, which has nearly doubled over the last five years. Over this same period, the percentage of month-to-month contracts and up for renewal in the next 12 months has steadily decreased. We expect that over time this percentage will continue to decrease as our average new lease terms are longer than the remaining duration of our existing portfolio. Turning to slide 14, NOI grew 34% in the fourth quarter driven primarily by the increase in revenue. The adjusted EBITDA margin was up 4.6 percentage points and at nearly 58% which was our highest quarterly margin as a public company. As we've discussed in past quarters, this improvement is largely being driven by revenue growth without a commensurate growth in overhead. Normalized FFO increased 39% while normalized FFO per share grew 24%. As the chart at the bottom of the slide shows, the net impact of the adjustments to normalized FFO to arrive at AFFO was slightly negative in the fourth quarter and more in line with what we would anticipate without an elevated level of customer installations that impacted the third quarter adjustment. Slide 15 provides an overview of the portfolio by market. As you can see, we have significantly grown our footprint over the last 12 months to accommodate the demand we are seeing across our markets. Our portfolio is very well balanced geographically and with our international expansion will be further diversified. The table on the right shows that utilization for stabilized properties as of the end of the fourth quarter was 93%, 1 percentage point higher than the prior year period. While total utilization declined 2 percentage points year-over-year, but that still reflects strong underlying demand considering our colocation square foot footprint increased by 57% over that same 12 month periods. Slide 16 summarizes our development pipeline as of the end of the quarter which includes projects in Dallas, Northern Virginia, Phoenix and Austin that will deliver 163,000 colocation square feet and 39 megawatts of power capacity. Approximately 27% of the pipeline is pre-leased and we expect meaningful additional leasing to have occurred by the time this capacity comes online, given the strength of our late stage sales funnel across these markets. In Dallas, we're building the seventh and final data hall at our Carrollton location and the first data hall at our new Allen location. In Northern Virginia, we brought the third data hall online in our Sterling V facility, adding 81,000 square feet and the fourth data hall which is fully pre-leased is currently under construction. Finally in Phoenix, we brought the first data hall at our Chandler V facility online, adding 72,000 square feet and it is currently 50% utilized. Upon completion of the projects in our development pipeline, our portfolio will have increased 65% to nearly 3.5 million square feet of raised floor from just over 2 million square feet at the end of 2016. In addition, the Zenium transaction will provide further upside given the development capacity in their portfolio. Moving to slide 17, we ended the year with a conservative capital structure and really strong balance sheet with leverage of 4.7 times. No debt maturities until 2021, a fully unencumbered asset base with a gross book value of over $5 billion and available liquidity, as Gary pointed out, of over $1.2 billion. During the fourth quarter we raised nearly $300 million in our at-the-market equity program and on a market cap basis, shareholders' equity represents more than 70% of our total enterprise value. Our fixed floating interest rate mix is currently now more weighted to fixed rate debt at roughly 60

[Operator:]

We will now begin the question-and-answer session. The first question today comes from Frank Louthan with Raymond James. Please go ahead.

[Frank Garreth Louthan:]

Great. Thank you. Can you talk to us a little bit about the pre-leasing trends, especially on the CapEx number that you have and the likelihood of being, of spending all of that capital? And then can you give us an update on the Atlanta property and remind us how much of that's been pre-leased and when we could expect to see some operations there? Thanks.

[Gary J. Wojtaszek:]

Sure. Hey, Frank. Gary. Yeah. So the way we think about it is as we were coming out of 2017, we were trying to bring on additional inventory capacity available in all the key markets, which we were sold out last year. And my prepared remarks talked about roughly 250,000 square feet of space available built out now that we can sell into. If we were to sell out all of that and just deliver that capacity perfectly as customers would take it, we'd generate anywhere between $120 million, $140 million of additional revenue. Clearly customers don't take the capacity in exactly as we build it out, so we're going to bring on some additional capacity towards the end of the year depending on how customer demand warrants. So when you think about how much capital that we're going to be spending domestically, a lot of that is going to be conditioned upon sales that we expect to occur over the beginning of the year. When Diane spoke, she talked about the different amounts of capital projects that we're bringing online and shared insight in terms of how much of those things are pre-sold that were moving towards demand and she also in our prepared remarks provided some overview of when our revenue expects to come online. But when you look at a high level, you know, we're going to be spending about $300 million less in capital this year. Just off the bat that's going to be directed to Europe and the remaining amount of that $500 million is going to be basically success based as customer demand warrants over the year. With regard to Atlanta and for that matter, the Quincy property is the same that we bought those to basically position those properties that we could be responsive to customer needs, that we could build quickly. So our focus is to get those permitted, ready to go and on the shelf when we have a customer in tow, so that we could deliver that capacity, for our customers as demand warrants. Those are going to be basically triggered by built-to-suit type deals, where you know we're going to need about a 4 megawatt or 5 megawatt type build before we're going to commit to putting something there. We've worked out our supply chain such that we can deliver that capacity in six months, which is well within the timeframe that most customers need. So if you see us building anything in Atlanta, you should assume that we have a customer contract in hand before we do that.

[Frank Garreth Louthan:]

Great. And just a follow-up, you said you expect to sign your first Chinese cloud deal. Where will that be located? And is that a deal you'll have directly with CyrusOne to the customer or is it a GDS deal sort of through you, how should we think about that?

[Gary J. Wojtaszek:]

Yeah, it's a deal that we will have directly with that customer. It'll be here. We're also talking to them about potentially Europe as well, and that's going to be done directly with us. We've got probably about a dozen deals right now in the funnel between customers that we're talking to that want to take space in GDS facilities in China and their customers that want to take space in our facilities in the U.S. So that that relationship is going really, really well.

[Frank Garreth Louthan:]

Great. Thank you very much.

[Gary J. Wojtaszek:]

Sure.

[Operator:]

The next question comes from Robert Gutman with Guggenheim Securities. Please go ahead.

[Robert Gutman:]

Hi, thanks. Two questions, at Chandler VI, I noticed a little bit of rearrangement of the – from the pre-stabilized property some was – 12 megawatts was launched, 6 megawatts went back into development. I was wondering, if that's potentially related to the pushed out deal or what you're seeing related to that facility or more broadly in the Phoenix market? And secondly, I just wanted to ask with the fixed to floating ratio at 60

[Diane M. Morefield:]

Well, let me address the interest rates first. I mean we have stated generally, we're comfortable in the 50

[Gary J. Wojtaszek:]

Yeah. With regards to our markets I mean this quarter, Rob, Phoenix was actually our strongest markets. We sold the most of our capacity in Phoenix followed by Dallas, Austin – Dallas and Northern Virginia. I'm not sure specifically what you're talking about with stabilized or not, but our funnel is, as I mentioned in my comments, is up 9% sequentially and 40% year-over-year. So we're sitting in a really strong position. The majority of that funnel is for capacity in Phoenix, Virginia and Texas. But Schafer can get back to you on that specific thing you're referring to.

[Diane M. Morefield:]

Yeah, any detailed question.

[Robert Gutman:]

Sure. Okay. Thank you very much.

[Gary J. Wojtaszek:]

Sure.

[Diane M. Morefield:]

You're welcome.

[Robert Gutman:]

Okay.

[Operator:]

The next question comes from Richard Choe with JPMorgan. Please go ahead.

[Richard Y. Choe:]

I wanted to follow up and I know you mentioned it in your prepared comments, but want to get a little bit more color. Given how much the stock has sold off and how broadly reports have I think in a lot investors' minds been a little soft and guidance not as strong. Are you seeing anything different out there? Do you see demand still being strong? And then to be a little bit cynical on it is that you're dropping your domestic CapEx from call it $800 million to $500 million. Is that a sign or is this just the shifting of opportunity into your strategy?

[Gary J. Wojtaszek:]

Yeah. Hey, Rich, thanks. Look I mean you have to think about our industry in the context of what's going on more broadly in the IT landscape and in particular cloud right. So you're coming off record sales for Amazon, Microsoft, Salesforce. All of these companies came off fantastic quarters for e-commerce, for cloud businesses overall. And their growth is pretty tremendous. I mean between 40% to 60% type growth rates on companies that are $10 billion, $12 billion type top line companies. So these are really large companies growing at tremendous growth rates. And you see that they're not slowing down. Our business by definition will not slow down because all of that growth that you're seeing in the cloud all resides in the data center and we are just providing the infrastructure that continues to support that growth. I think if there's anything that people should read in from a quarter-to-quarter sales is just the lumpiness of how the industry works, right? I mean these are really large transactions when we're doing these big cloud deals. These are $400 million, $500 million purchase commitments but these customers, right? So these aren't like really short sales cycles. These are long sales cycles and they take a really long time. And you know, while we feel that the quarterly results is a little below our $20 million estimate, we feel good when you look at this in the context of what we've been able to do over the last year. And over the year, we've put up results that are about 30% greater than our expectations. When you think about our re-focus in terms of CapEx, think about it in two ways. One is, last year we were basically sold out. We were bringing on capacity all year long, just to build out and meet existing customer demand that was already pre-sold. We brought on additional capacity to make sure we had inventory in those key markets, because we didn't want to run out of inventory. Last year, there were a couple of deals that we lost to other smaller startup players that we wouldn't have lost had we had inventory available. So we wanted to be thoughtful on brining on additional capacity, which we basically did through year end. The result of that is that you're going to see us spend significantly less capital in the U.S. because we have more inventory now that we didn't have last year. So we feel really strong from that. The other thing you should think about is is the way we're spending our capital is exactly in line with what we've been telling all of our partners for the last year and a half or so is that we believe fundamentally this is an international business. That to really be effective and helpful to customers, you need to have a global portfolio and if you don't, you're in an inferior position strategically and you'll eventually be consolidated up. Our focus has always been expanding internationally we've been talking about that. In the fourth quarter, what you saw is exactly what we said we're going to do. First, we came out of the gate with the partnership with GDS and an investment that we made in them which has more than doubled over the last couple of months. And then we followed that up shortly with a further expansion in Zenium, which we're going to basically use as our land and expand strategy in Europe. So we acquired that entity you know at a pretty high multiple to dilutive acquisition. But strategically, we think it's really valuable because we're going to follow up with some additional capital to work there and build out a really big presence in Europe. And we expect the same way methodically we've grown in the U.S. over the last several years. We're going to do the same thing in Europe because we don't think that the competitive landscape is nearly as vicious in Europe as it is in the U.S. And from a product perspective, no one is doing big format data centers in Europe as they are doing in the U.S. We feel really confident about our ability to execute over there and export the same level of success we've generated in States to Europe.

[Diane M. Morefield:]

I think, Richard, the other thing you have to think about for the domestic CapEx, you know, we ended the year with almost $0.5 billion in CIP and obviously that's completely a domestic pipeline. And hence the additional inventory that we went into this year with. And we still estimate another $0.5 billion for domestic construction. So we're still spending about $1 billion in the U.S. but to Gary's point, the marginal capital is way more weighted now towards international for the year.

[Richard Y. Choe:]

Great. Thank you.

[Gary J. Wojtaszek:]

Sure.

[Operator:]

The next question comes from Amir Rozwadowski with Barclays. Please go ahead.

[Amir Rozwadowski:]

Thank you very much. Couple of questions if I may. Dovetailing on the prior question in terms of the global demand picture right now, Gary, if we think about the opportunity set in the U.S. versus Europe, clearly as you mentioned there that the incremental dollars is going to Europe at the moment in terms of spending, but do you expect that shift to push or to recycle back into the U.S. Just trying to understand sort of how you think about the longer-term picture of the demand dynamics here?

[Gary J. Wojtaszek:]

Well, it goes back into you have to think broadly about what's occurring in the cloud landscape, right. I mean, that industry is still in its early stages. Maybe it's a $60 billion or $70 billion type of market right now out of $1 trillion annual enterprise spend. So really, really early stages. What you're seeing is that the initial amount of that growth that was taking off was predominantly focused in the U.S. and that's what you saw over the last couple of years. And I expect that that's going to continue to grow really nicely in this country for many, many years. The more incremental level of growth however in the last four quarters has been in Europe. That area of the world has been developing. There's been a lot more focus by cloud companies that have been deciding to go to Europe to do things at scale. And like a great example of that is Zenium, the business that we're acquiring. Like Franek, a serial entrepreneur, he's created a couple companies and he just created this one a few years ago. And what did he do was, he started an operation and he quickly expanded into four data centers in two of the key cities in Europe. And this is like a private operator or a smaller company, but tremendously successful, giving you a really good insight in terms of the competitive profile there, that a small private company was able to be so successful. That's why we believe that when we go there, we're going to basically be able to accelerate that growth, do things at scale and at a lower cost in Europe, similar to what we've been do doing in the U.S. and be able to take tremendous market share, right? We've been taking more market share in the U.S. market domestically than anyone. Even again this quarter in spite of like a bookings quarter that was a little below our estimates we still took 20% market share in the U.S. – well actually globally if you compare with one of our competitors that's international. We still did really well versus a revenue share that's only about 15%. So, we're punching well above our weight. We expect once we go to Europe we're going to be able to accelerate that same success over there.

[Amir Rozwadowski:]

That's very helpful. And if I think about sort of the pieces in terms of longer term growth for you folks I mean you'd mentioned with Zenium deal there 80% growth next year on an EBITDA basis and accretive on a normalized FFO basis. The potential to do additional deals in Europe and Europe in and of itself seems to be accelerating in terms of demand. Does this setup indicate – I know it's early stage that that 2019 could be a better growth year in terms of how you're thinking about things?

[Gary J. Wojtaszek:]

Yeah. For us, absolutely. If you think about all of the things that we're just talking about on this call, right, and particularly in the bridge that Diane shared in terms of the FFO bridge. Like if you excluded all these additional investments that we're doing, the GDS investment, dilution of Zenium, the additional capital that we put in the ground, I mean our FFO per share would be up 15% year-over-year. We're intentionally taking off some of that to basically pay that forward in terms of setting up the company for a really nice growth rate well into 2019 and beyond because we're positioning ourselves to take advantage of a competitive profile that we think we're going to be able to win in. And what that does is when we made those investments in the U.S., it really frees the teams up to really focus on doing this in Europe. So now we have additional inventory. We don't need the same kind of construction design teams focused on building that out what they were doing here. We'll repurpose them to focus on Europe and create the same level of success over there. So the way we run the business is all looking down the road in terms of where we're going to be in five years' time like none of these are short-term, short duration assets. We're building a business that's going to be we believe the third global data center player in the world and we think we're positioned well to achieve that success.

[Amir Rozwadowski:]

Excellent. Thanks so much for the incremental color.

[Gary J. Wojtaszek:]

Sure.

[Operator:]

The next question comes from Jonathan Atkin with RBC Capital Markets. Please go ahead.

[Jonathan Atkin:]

Thanks. So I was interested in any updates on the use of potential JV partnerships as a way to finance your expansion. A couple of your peers recently have been talking about those possibilities and I just wondered kind of what your current view is. And then in terms of competitive behavior in the U.S. if you have any sort of comments? You drew the contrast with Europe. Are you seeing it in terms of pricing and are you seeing it just in terms of just announced new supply, how is that manifesting itself? Thanks.

[Diane M. Morefield:]

Want to do competitive first?

[Gary J. Wojtaszek:]

I'll take the competitive position. So if your comment is, is the domestic market, I think what you're seeing and it's kind of related to your JV, right? And there's a lot of capital flowing into this business. And I think a lot of people are seeing the success that some of the publics have generated and think that they're going to be able to recreate that. I think there is an opportunity for a lot of people to do well together, but what you're seeing from our perspective is that, we think we have adequate inventory built out now which is why we are not looking at bringing on significantly more inventory available in the U.S. and we think that the better use of our capital is really to position the company for additional growth in Europe. We'll see how some of these other private companies shake out. Particularly in a rising interest rate environment, I think some of the opportunities that these people really saw originally going into it are going to be less attractive if interest rates go up another 100 points or so.

[Diane M. Morefield:]

Yeah. And on joint venture capital, we continue to have conversations. There is obviously a lot of capital that wants to get into the data center space, given it's really the only real estate product type that has significant growth for years to come. But we don't have anything specific to announce at this point.

[Jonathan Atkin:]

But are you actively pursuing it or is it kind of on hold? How would you kind of characterize the outlook?

[Diane M. Morefield:]

I mean, again, we have some continuing conversations. It's – I just think those situations have a little bit longer gestation period.

[Jonathan Atkin:]

Okay. And then just on the property level, I noticed Raleigh-Durham it seems like the utilization grow as CSF – square feet grew as well. So wondering kind of what drove the activity there. It seems like it was quite strong.

[Gary J. Wojtaszek:]

Yeah. What we talked about I think it was two quarters ago, actually Raleigh was maybe our second or third strongest performing bookings quarter that period. So you're just seeing us bring on additional capacity to meet customer demand there.

[Michael Schafer:]

Yeah. I think that incremental amount that came online was fully pre-leased as well.

[Jonathan Atkin:]

Thank you.

[Operator:]

The next question comes from Simon Flannery with Morgan Stanley. Please go ahead.

[Simon Flannery:]

Great. Thanks so much. Gary, you talked about the $20 million baseline a couple of times. Is that still a good number to use for 2018? And then on Zenium, can you just talk a little bit about what your customer and potential customer commentary has been since you announced that deal? What's the reception been like to them and to those assets? And let's say you close it early in Q2 as you'd expect, is there much work that you need to do to prep that for bringing in some new customers or can that start to lease up with some of your pipeline pretty quickly and in mid and later 2018. Thanks.

[Gary J. Wojtaszek:]

Sure, sure, yes. I think the $20 million is a good bogey. And once we feel confident that the funnel is substantially higher than where it currently sits now and we feel good that we can take that up, we will, right? But we feel good about what we've been able to do this year. I mean in aggregate, we guided to $80 million of bookings for the year and we delivered $105 million of bookings throughout the year, so we're 30% over what we told folks that we were going to do. We expect as we head into 2018, we're going to have quarters that we do above that. But we don't want to create expectations that we're consistently going to be doing that. When I feel really good about the size of our funnel broadly, I'll definitely increase that and share that with everyone. But for the time being, we're sitting in a pretty good position. I mean our funnel is up 9% sequentially, 40% up versus last year. Part of the 9% sequential increase is that some of the opportunities that we had expected to close in the fourth pushed to the first. So we expect that you know we should do well this quarter. With regards to Zenium, the response has been great. I mean 75% of the customers that Zenium has are basically overlapping customers with us. And so the opportunity to do more with those customers over there is great. I mean, they're really relieved that that they have a solid partner now with us, a capital partner that understands their business, so we expect that we're going to be able to help Franek grow his business a lot faster than they originally were able to do. And we're more willing to bring on additional capacity there to supplement the growth on what they would have normally done as a private company. We're a little more willing to do capital deployments for the opportunities that we see, because we have a bigger sales funnel that we're tracking in the U.S. that we can bring to Europe than they probably had visibility to.

[Simon Flannery:]

Great. And is there any work you need to do to make that sort of ready to lease up with some of your new pipeline?

[Gary J. Wojtaszek:]

Yeah. We're going to be bringing on additional inventory in all of those, but we'll have additional capacity available there by the third quarter of this year.

[Simon Flannery:]

Great. Thank you.

[Operator:]

The next question comes from Vincent Chao with Deutsche Bank. Please go ahead.

[Vincent Chao:]

Hey, everyone. Just trying to pull everything together here in terms of big opportunity you have on the investment side, particularly in Europe either organically or M&A with some comments that started with Gary about the stock prices being depressed, maybe not for the right reasons. I'm just curious, how do you balance the growth plans with some of the cost of capital that's come in a bit and then maybe tie that into sort of how comfortable you are with taking leverage up or what you're comfortable taking leverage up to.

[Gary J. Wojtaszek:]

Yeah. Look, I think the response in general has just been completely overblown, for the data center centers as an asset class and us, in particular, right? I think if you look at the fundamental growth drivers for our business, they are just as strong now as they were two months ago prior to an interest rate increase, which as an aside you know the 10 year's only moved up 50 bps in two months. So it's not like a really significant move, particularly given the absolute returns that we generate in our business and the lower amount of leverage in general in the data center asset class versus the other REITs broadly. So it's concerning that the equity has moved where it did, but I think for other people that are looking at it now, I think it's a pretty attractive entry point. At a 4% cash yield with a growth story attached to it, it's a pretty interesting story. With regard to the way we think about the opportunity and how to use additional equity to fund these transactions, I think you should look for us to continue to do the same thing we have methodically. As Diane mentioned, our leverage coming out of the year was you know 4.7, so we're in a really low levered balance sheet. We had $1.2 billion of liquidity. So we have plenty of liquidity available to fund the growth over this period. And I think to the extent that the equity levels stay at these depressed levels, we're probably going to be willing to take-up the leverage a little bit more. But longer term as we've always said is that we need to stay on that investment grade glide path, and we don't want to do anything that jeopardizes our ability to do that. So you'll see us as we've done over the past year bring on additional equity when it's warranted. Over the course of 2017, I think we raised about $700 million of equity over the course of the year. And all the equity raises and everything else that we're planning to do are fundamentally embedded in the per share guidance number that we had shared in that. So while we've never been specific about how much equity we're going to raise in any point in time, we always have also been very thoughtful making sure that our balance sheet never gets over levered because we want to make sure that we're continuing to grow in a strong manner.

[Diane M. Morefield:]

Yeah. I mean just to add on to Gary, the key point is, again, we were very proactive entering the year with a lot of liquidity given we knew Jonathan was looking at things that we may need to fund in the future. So we have no near-term pressure given our leverage. The other thing is we're very transparent with the rating agencies that there will be times we push leverage, particularly, after funding an acquisition and then manage it over time. So we don't feel any near-term pressure and we do think what's going on in the markets seem to be, as Gary said, really overdone.

[Vincent Chao:]

Okay. And just maybe as a follow-up question. Can you just remind us I think the rating reviews are typically done midyear, is that right? So is that sort of the first opportunity you think you could potentially get that ratings increase? And maybe just remind us what do you think would be a leverage level that might have an impact on potential upgrade?

[Diane M. Morefield:]

Obviously, we don't control the rating agencies nor when they choose to review us, so the cycle has varied. And we're closer with S&P and Moody's is a little further off. And we also keep up the dialogue with Fitch. So, all we can do from our standpoint is continue to communicate the story and the safety of our balance sheet. The other thing that's kind of crazy, our fixed charge coverage is over 5 times. So we just communicate with them and meet with them and talk to them after every quarterly call, but we don't have any visibility on what their review cycle is. So we can't tell you that. We just don't know it.

[Gary J. Wojtaszek:]

Yeah, look, Vin, I think in the bigger picture, if you looked at us from the scale of the business or size of the business, the return on our assets, the amount of leverage that we have, the fixed charge coverage ratios like every single metric that you look at we're in a really solid position and we comp up very favorably to many, many other real estate companies that are investment grade now. So it's unclear to us why we're not investment grade now, but we don't want to do anything that jeopardizes our ability to do that. And we believe that if we continue to execute as we have over the last five years, we're going to continue to get increases to our credit rating, which has improved every year over the last five.

[Vincent Chao:]

Okay. Thanks, guys.

[Gary J. Wojtaszek:]

Sure.

[Operator:]

The next question comes from Jon Petersen with Jefferies. Please go ahead.

[Jonathan M. Petersen:]

Great, thanks. I'm curious about land acquisitions. I guess, first, I know you said in your prepared remarks, but can you remind us how much in the guidance is implied for land acquisitions in 2018. And then just thinking kind of more broadly and longer-term, when you came out of the IPO, you obviously had a decent amount of land to develop on and now you've kind of worked your way through it and you're also expanding into new markets. And I guess the question is as we model and think about your company over the next multiple years, should we be thinking about a certain run rate of land acquisitions every year for you guys to further grow your business?

[Diane M. Morefield:]

Well, for this year, and in the guidance, the marginal land acquisitions are in the $150 million range. And again to remind you, we only did $20 million of land acquisitions in 2017 which was the Atlanta parcel. So now we have plenty of land in the U.S. that are suitable for campuses which is how we like to develop. So if you look at our international guidance in the $300 million for CapEx range, roughly half is land and half is the build out of data center space largely in the Zenium portfolio.

[Gary J. Wojtaszek:]

Yeah. When you look at the – time of our IPO, Jon, we had about 100 acres of land in our inventory and that was almost all exclusively in Cincinnati. It's currently at around 340 acres and so that delta of 140 acres is all outside of Cincinnati. And so as we sit here right now, we have plenty of land available in basically every single U.S. market that we feel that we can meet plenty of existing inventory or existing customer demand in all of our markets with the exception of potentially Virginia and Phoenix where we may need some additional capacity there in 2019 or so. But right now we could basically grow really nicely in the U.S. and never have to buy any additional land. So our focus from a land acquisition perspective is going to be in Europe where we're going to be looking to acquire additional properties to augment and accelerate the growth that we're picking up with Zenium and some of the other cities that we're looking at expanding to there.

[Jonathan M. Petersen:]

Okay. That's helpful. And then I'm curious the bridge on the 2018 guidance, the Zenium acquisition, it looks like that's a $0.13 to $0.17 drag on your estimates this year. I'm just kind of curious what the assumptions are around that. I know you raised a lot of equity in the fourth quarter. Is that earmarked for the Zenium transaction as part of that dilution kind of the drag of raising capital before you actually closed the deal or just what's kind of behind that dilution in the bigger picture?

[Gary J. Wojtaszek:]

Yeah. That's, calculated on just a basic 70

[Jonathan M. Petersen:]

Okay. And should we assume with the equity issuance you guys did in the fourth quarter is it safe to assume that you guys are ready to go in terms of closing the Zenium transaction with the capital you have now or should we expect additional equity issuance?

[Diane M. Morefield:]

Oh, yeah. So tied to we're sitting on $1.2 billion of liquidity and the Zenium acquisition price is around $440 million.

[Jonathan M. Petersen:]

Right, okay. All right. Thank you.

[Gary J. Wojtaszek:]

Sure.

[Operator:]

The next question comes from Colby Synesael with Cowen and Company. Please go ahead.

[Colby Synesael:]

Great. Thanks for fitting me in. Two questions if I may. First off on leasing, you mentioned that some of the deals you were anticipating in the fourth quarter got pushed. Just to be clear are you expecting those to actually close in the first quarter or just more broadly 2018? And if there's anything there that kind of explain what might have happened just to get a sense that we're getting back on-track as early as the first quarter? And then secondly, just I guess a modeling question, in your FFO per share guidance, can you tell us what you're assuming for shares outstanding for 2018 and also what you're assuming for interest expense as it relates for 2018?

[Gary J. Wojtaszek:]

Yeah. I'll take the first part.

[Diane M. Morefield:]

I'll take the second one.

[Gary J. Wojtaszek:]

Okay, go ahead.

[Diane M. Morefield:]

Shares outstanding, no, but there was another good try, Colby, because we really don't...

[Colby Synesael:]

Well it seems like a pretty basic question just to understand some of the metrics that go into what the guide is.

[Diane M. Morefield:]

Yeah. Part of it though is timing and everything else. But the interest rates, we do have interest rates rising throughout the year, similar to just what that market guidance is from economists and our investment bankers. So we definitely have both the interest rate going up throughout the year. We do not have a specific share count.

[Colby Synesael:]

But on interest expenses, is there a number that's being factored in and that we can plug into our models?

[Gary J. Wojtaszek:]

Two additional raises effectively is in there.

[Colby Synesael:]

Okay.

[Gary J. Wojtaszek:]

With regard to the question on leasing, I mean look $18 million of bookings in the quarter is pretty strong, I mean, relatively speaking from a market perspective, right. That's about 20% of the market in the U.S., so we punched well above our weight in that quarter. Below the $20 million that we had mentioned, but when you look at these things over the course of the year, as I mentioned to Simon, we had $105 million in bookings on a guided number of $80 million, so we did well above that. We expect that and this is the reason why I've been hesitant to ever say, we're going to be doing more than $20 million, because we don't want people taking up their expectations and factoring that in and setting expectations that we believe are unrealistic. And that is exactly why I originally came out with the $20 billion, because coming out of 2016, we were seeing quarters of $40 million and $50 million of bookings. People thought that was going to continue forever and I wanted to tamp people's expectations down, which is the reason why I came out with that $20 million, five or six quarters ago. So as I mentioned to Simon, once we feel good that the funnel is much bigger we will take that up, but for the time being people assume that it's still $20 million of bookings a quarter. And we expect that there's going to be some quarters, we'll do above that but we're not going to be guiding to that. We expect that some of the deals that were supposed to happen in the fourth quarter will close in the first quarter and we feel good about continuing to be able to deliver that $20 million of bookings over the course of 2018.

[Colby Synesael:]

I think that the point though is that the $20 million number that you keep on referring to is fairly arbitrary. I mean I understand that your point is to reduce expectation but when you look at the mid-teens growth, particularly now on a much bigger base, including Zenium, you're going to have to do higher than $20 million on an average basis through 2018 if you want to sustain being a mid-teens growth company.

[Gary J. Wojtaszek:]

That would be correct. And we feel confident about the $20 million and we also feel confident about the revenue that we guided as well.

[Colby Synesael:]

Great. Thank you.

[Operator:]

The next question comes from Sami Badri with Credit Suisse. Please go ahead. Sami Badri - Credit Suisse Securities (USA) LLC Thank you. So, regarding an earlier comment you made regarding the smaller players winning deals in the market. Just maybe so we can get a better sense, what types of yields are these players are signing leases up? And assuming the number of small players continue to spin up, does this drives our response to change pricing for some of the leasing or the deals that you guys are currently engaging in?

[Gary J. Wojtaszek:]

Look, I think Sami, when you look at – look, we don't like losing. That's fundamentally what the read in should be. When you look at the amount of deals that we closed this year, we closed the largest amount of deals proportionately than anyone in the industry in 2017. And that was the same thing that you saw in 2016. Any time we lose any deal to people that's something that it just irritates us because we play to win. And when we lose, it's an opportunity loss for us. So our game has not changed. Our pricing, the way we approach customers, the way we do everything has not changed at all and customers really like doing business with us, that's why they continue to do more. The deals that I mentioned that we lost these were actually pretty sizable deals and we lost it to good competitors that closed those deals. But the reason those competitors won was because we didn't have the inventory available in two key markets which was Virginia and Chicago at the time and we lost those deals to two other competitors that fortunately won. But nothing's changed in the competitive landscape. I think if anything, I think what you see by the amount of people trying to put capital to work here is that they all see how well everyone is doing and they all see the broad demand and they see how big this industry is going to get to over time which is why there is a lot of capital that's looking to come into the space either through private means or even in the JV arrangements that we've been discussing with folks. I think the underlying thesis for that is that everyone feels really good about the broad, secular demand drivers in this industry, which is why they're willing to commit the amount and duration of the capital that they'll need to tie up in the space. Sami Badri - Credit Suisse Securities (USA) LLC Got it. Thank you. And then just another question is, like, what's the number of leases or maybe just annualized rents signed that came from that channel versus your direct sales force?

[Gary J. Wojtaszek:]

Oh, it's less than 10%.

[Diane M. Morefield:]

Yeah.

[Gary J. Wojtaszek:]

It's pretty minor. And that's one of the things. I think a lot of people, there is not a lot of good information flow in this industry and I think everyone is always latching on different information sources to get a good beat of what's going on. The reality is that 90% to 95% of all of the deals that we do, they are on a direct basis and hardly any come through the channel. So I feel for you and all of your peers that are trying to come up with estimates in terms of what the demand profile looks like the pricing and that sort of thing, because a lot of that data out there is pretty suspect because the reality is not a lot of those you know indirect channels have access to the customers and the deal flow that we do. But in our case it's 5% of our deals in 2017 came through that channel. Sami Badri - Credit Suisse Securities (USA) LLC Got it. Thank you.

[Operator:]

The next question comes from Jordan Sadler with KeyBanc. Please go ahead.

[Jordan Sadler:]

Hi, thank you and good morning.

[Gary J. Wojtaszek:]

Hey, Jordan.

[Jordan Sadler:]

Hi. So, I was trying to figure out the sources and uses, but I think that one has been asked enough, but I'd be curious just on the total uses. Diane, is it the $875 million of total CapEx plus $442 million for Zenium in terms of what's committed right now?

[Diane M. Morefield:]

Well, first of all I wouldn't say the CapEx is committed, right. So the Zenium obviously is the $440 million that we have to for sure spend. We just give you a range of capital, but it's going to depend on the sales funnel. And the timing could be later in the year, but we've always provided an annual range just based on our best estimate at the beginning of the year.

[Jordan Sadler:]

Okay. Do you have a better indication for what the full – the all-in price on Zenium will be yet given that we're closing in on closing with the additional CapEx?

[Gary J. Wojtaszek:]

Yeah. Look I think...

[Jordan Sadler:]

And is that baked into the international CapEx guide of $285 million to $305 million?

[Diane M. Morefield:]

Right. Anything above the $440 million would fall in that umbrella, correct.

[Jordan Sadler:]

Okay.

[Gary J. Wojtaszek:]

Yeah, I think on the call we were talking about including the booked but not billed number, on an EBITDA multiple basis roughly 18 times. I expect given the sales that we're tracking in the funnel that they're doing that by the time this closes that that multiple probably be down 2 turns. And that's kind of – we're trying to provide some type of insight into that, when we're talking about 80% growth rate in Zenium for 2019 to give you some flavor in terms of the type of growth that we're expecting out of that business. And that number is exclusive of any of the other organic things that we're going to do to enhance the growth rate for that particular asset.

[Jordan Sadler:]

Okay. So that's with additional leasing, but does that include the additional CapEx that you've guided toward that multiple?

[Gary J. Wojtaszek:]

Yeah.

[Diane M. Morefield:]

Yes, it does.

[Gary J. Wojtaszek:]

So it's roughly $300 million of CapEx for Europe and that's split – and it'll be dependent upon what stuff that we're going to buy there in terms of either brownfield redevelopments of existing properties or a greenfield land. So that's all embedded in there, but the 80% growth number is exclusive of all the additional capital that we have that we'll put the work in Zenium is included in that $300 million number.

[Jordan Sadler:]

Okay. And then did you say what was causing the delay in terms of the customers signing from 4Q to 1Q? Is there anything in particular you can point to?

[Gary J. Wojtaszek:]

As I was mentioning, I forget to mention. I mean, the deals when they sign up with us are $400 million commitments, in some case $500 million commitments with us. But in addition to that, the way most of these customers are doing their underwriting when they get their approvals is that they have to layer in the amount of additional capital that they have to put in to basically fill up these data centers. So if you think about it right, the amount of capital that we put in, is only about a third of the capital that our customers would have to put in. So when they're going for approvals in their organizations, their approval request could be like $1 billion, $1.5 billion type commitment. And so those are big numbers. Even for guys that have $40 billion of cash in their balance sheet, $1 billion and $1.5 billion commit is expensive. So, I think what you're seeing there is just the results of that. And so, I would expect that timing of those bigger deals will still continue to be lumpy, but the broader trends are still really robust and strong.

[Jordan Sadler:]

Okay. And then, this is a little bit more of a bigger picture one. We've talked about the 10 year a little bit and sort of the impact that that may have had. But I think the concern, the reason data centers have underperformed is maybe not a function of demand which I think everybody believes the demand story. It's as you've talked about you know capital coming in and then the potential for supply, Tom Ray's new company. Equinix is doing wholesale now and so many others. And there seems to be little bit of fear for the potential for oversupply. It sounds like you're not buying that at all based on the demand funnel and I get that. But my question for you is, if this narrative continues and it continues and rising rates continue to be a headwind, how do you fund the business $1.5 billion, $1.4 billion, $1.3 billion of capital you're expecting to spend in 2018...

[Gary J. Wojtaszek:]

Yeah.

[Jordan Sadler:]

...without the equity market coming back?

[Gary J. Wojtaszek:]

Sure. Yeah. Look I think and this is something – and the reason why we have always managed the business to focus on cost is for exactly this reason, right? So when we created this company, it's important to understand we always wanted to be the low cost provider in this industry, exactly for this reason that we're talking about here today. Because if there's any – look this industry broadly is capital intensive, high-fixed costs. That type of broad industry backdrop regardless of the industry is always susceptible to pricing. The reason why we've always maintained the low cost position in the market and a supply chain that works as efficiently as it does is because I never wanted to put myself in a precarious position from a capital perspective where I would be caught doing irrational things. And we've always structured the business to make money because we can always make more money than everyone else because of what we've been able to do on our supply chain and our design. So we feel that we're in a really, really strong position. And as interest rates rise, some of the folks that are in an inferior position on the left side of their balance sheet, meaning their cost to develop per megawatt of capacity is $10 million to $12 million to $13 million, they no longer have the right side of their balance sheet to compete on. And as interest rates go up, the relative advantage that they would have done when they're just underwriting these things from a pure equity return performance slowly goes away. And particularly if you're levering up a lot, it goes even further away. So as interest rates rise, we believe that the low cost provider in this industry is going to do really well and we think that we're positioned to do really well. With regards to how we think about the equity, we believe that longer-term our equity is going to continue to do well. Where it sits now, it's not really attractive to us. And as Diane mentioned, we've got plenty of liquidity and availability that we can fund this additional capital growth for the Zenium acquisition plus this additional stuff. She also mentioned that we'll probably take up leverage a little bit more. Unless we feel that the equity level is appropriate, we're in no rush to additional or issue a new amount of equity, just given where we sit now and know what our prospects are. But I hope that gives you a little insight in terms of the kind of – you know and that's also the reason why we are very focused on becoming investment grade, because in a capital intensive industry, it's really strategically important to have an investment grade rating, to make sure that you always have access to the capital markets when others don't. So we think we're in a really good position as we're heading into 2018 and 2019 and from a cost perspective and a leverage perspective and we think we're going to continue to do well.

[Jordan Sadler:]

Thank you.

[Gary J. Wojtaszek:]

Sure.

[Operator:]

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

[Gary J. Wojtaszek:]

Hey, thanks. Thanks so much. I appreciate everyone's time on the call today. I definitely am concerned about where this industry is headed and the price that's happened over the last two months. But as I mentioned, we feel pretty good about the broad secular trends and our capabilities in the market and feel, we're positioned for tremendous growth in 2018 and in particular 2019 and beyond. Thanks a lot everyone. Talk to you soon.

[Diane M. Morefield:]

Thank you.

[Operator:]

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