Q1 2013 Earnings Call
May 8, 2013 05:30 PM ET
John Caulfield - VP and Treasurer
Gary Wojtaszek - President and CEO
Kim Sheehy - CFO
Frank Melton (ph)
Good day and welcome to the CyrusOne First Quarter Earnings Conference. Currently all participants are in a listen-only mode. At the conclusion of the prepared presentation, there will be a question and answer session. Conference participants will be given instructions at that time. As a reminder, today’s call is being recorded.
At this I would like to turn the conference over to Mr. Mr. John Caulfield, the company’s Vice President and Treasurer. Please go ahead, sir.
Thank you. Good evening, everyone. And welcome to CyrusOne’s First Quarter 2013 Earnings call. Today I’m joined by Gary Wojtaszek, President and Chief Executive Officer; and Kim Sheehy, Chief Financial and Administrative Officer.
Before we begin, I would like to remind you that our first quarter earnings release along with first quarter financial tables, earnings supplement and presentation are available on the Investor Relations section of our website at www.cyrusone.com under the Investor Relations tab.
Please also note that comments made on today’s call and some of the responses to your questions deal with forward-looking statements related to CyrusOne that 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 evening contained non-GAAP financial measures. You can find reconciliation of these measures to the most comparable GAAP measures in the earnings release and financial tables which are posted on the Investor Relations section of the company’s website.
I would now like to turn the call over to our President and CEO, Gary Wojtaszek.
Thanks John and good evening everyone and welcome to CyrusOne’s First Quarter 2013 earnings call. I will focus most of my discussion today on our operational performance and some of our key initiatives. Afterwards Kim will discuss our quarterly results and we will provide our 2013 annual guidance. So let’s begin.
As you can see from our press release, we are very pleased with our inaugural first quarter results which reflect the broad secured trends that are driving our industry, the continued demand by Fortune 1000 customers for CyrusOne’s products and services and the financial strength of our differentiated platform. Every key financial metric that we’ve reported this quarter grew at a double digit pace and we are confident in our ability to maintain this level of execution throughout the year.
As we have explained, there are two broad secured trends driving our growth which we believe are still in their infancy. The first is an accelerating demand for data which is causing significant logistical IT challenges for the CIL Fortune 1000 companies. As a result of these challenges, more and more CIOs are in the process of critically rethinking the optimal long term data center platform architecture for their company.
The strategic review of the ultimately leading enterprise customers the CyrusOne as their global colocation provider of choice. Importantly this outsourcing trend by enterprise customers to CyrusOne is creating a virtuous circle. We are attracting and retaining some of the world’s largest companies, who continue to grow with us over time. As a result our portfolio with some of the world’s largest companies enables us to attract even more enterprise companies to our ecosystem. This virtuous circle will only be further enhanced by the creation of our virtual data center product which provides for the seamless connectivity between and across all of our data centers in Texas.
Our highlights for the quarter are shown on slide 3. Revenue was $16 million for the quarter which is a 15% increase from last year driven by a larger base of customers as well as growth from existing customers. Our normalized funds from operations and adjusted funds from operations each increased 15% and 45% respectively over the first quarter of 2012. Kim will provide additional information on these increases shortly.
This quarter we launched our statewide CyrusOne Texas Internet Exchange which we were very excited about, I will explain why this is not just a great step towards adding high margin revenue but also makes us much more attractive to Fortune 1000 customers.
And on the development and acquisition front we purchased the 33 acre parcel of land next to our Houston West facility which will give us plenty of room for continued expansion of this oil and gas focus campus.
And just this past week we purchased two of our previously leased data centers in Kentucky and Illinois. We are also in the process of acquiring one of our other leased facilities in Austin. The acquisitions of these facilities will increase the percentage of net operating income or NOI from our own facilities from 62% to 70% pro forma for the first quarter 2013.
Slide four provides information on our customer base. Our level of customer engagement remains very strong and broad based and we signed over 35 customers to the CyrusOne platform which is consistent with the number of new customers we added last quarter. Our customer base is approximately 14% higher than last year. Consistent with our strategy we are expanding our portfolio of customers beyond the traditional oil and gas industry that we have historically served.
This quarter we signed nine customers from the information technology vertical and eight customers from financials, four from healthcare and three from oil and gas, showing our PO spends across many different industries. Our total customer count is now in excess of 550. We are also seeing continued success towards our goal becoming preferred global data center partner to the Fortune 1000, as we signed up four additional Fortune 1000 customers this quarter bringing our total Fortune 1000 customer base to 119 which accounts for about 76% of our annualized revenue.
You can also see on slide four that our Hotel California phenomenon in which our guests check in but never leave is in full affect. As shown a recurring win churn which measures all revenue contractions driven by price compression or customer leaving is 0.4% for the quarter which is lower than our churn in the fourth quarter and first quarter of last year. This impressive statistic when you consider the shorter term nature of our contracts which effectively means that we have to compete for our customers’ business every day. I am pointing this out as I think there is a general misperception that customers choose their datacenter providers purely on price alone.
Our customers trust us to manage their most mission critical IT systems that run their companies. We know that while price is an important factor in their decision, it is not the deciding factor. Our products and services and ecosystem provide our customers a differentiated and valuable solution that offers a great incentive for our customers to choose CyrusOne as their datacenter of choice. More importantly it is our customer service and product offerings which keep our customers satisfied and committed to us for the long term.
Along these lines we recognize that there are high switching cost for a customer to move out of the datacenter which is why we don't focus our resources trying to convince a customer that exit from any of our competitors. We understand that it is a risky and expensive proposition for customers to leave the datacenter. This is why we focus ourselves and marketing resources on converting the unconverted that is convincing enterprise CIOs to outsource their datacenter needs to CyrusOne. 90% of that market is still building and managing their datacenters and it represents a vast and untapped market opportunity. we strongly believe that convincing these companies to outsource their datacenter needs to CyrusOne and grow with us overtime is a clear winning strategy and represents a significant growth opportunity.
Turning to slide five. our leasing was very strong this quarter as we leased 31,000 square feet of additional space which is almost twice as much as we leased during the last year and the same period the additional sales resulted in increased utilization of our assets which ended the quarter at 81% up 3% from the end of the fourth quarter our new sales for the quarter were predominantly in Texas however we were especially proud of the success we had in Phoenix where we leased almost 40% of the new space that we just completed at the beginning of the quarter our newest facility in Phoenix is our first ground of purpose built datacenter which was built using our massively modular design approach this facility was constructed in seven months which we believe represent the fastest development time in the industry. Customer interest for this facility has been strong as Phoenix is a great location for many California customers that are searching for a lost cost alternative in a seismically safe location. Our facility there has many innovations but the most attractive benefit afforded by this facility that has gotten the most attention from customers is its low power utilization. We believe the facility is among the most energy efficient multi-tenant data centers in the country. Our typical customer is attracted to the power savings that they can realize which can raise between $4 and $13 million over a ten year period compared to what they can do in their own facilities.
As shown on slide five we have sufficient inventory in each of our markets to satisfy our current pipeline of prospects with the exception of Houston where we are effectively sold out. To meet demand in Houston we just commissioned a new facility on our Houston west campus in April and the first data hall provides us with an additional 42,000 square feet of space. Plus as I mentioned earlier, we purchased an adjacent 33 acre parcel of land next to this site which increases the size of the campus to more than 45 acres.
This land acquisition has enabled us to expand the largest multi-tenant digital energy campus for the oil and gas industry in the United States. We have created a geophysical center of excellence for seismic exploration computing at that site. The purchase of this property represents a significant opportunity to expand and provide customer centric products and services. The Houston west campus shown on slide six also houses the first ever enterprise high performance computing cloud solution for the oil and gas industry in which we partner with Dell and R-Systems. The solution enables companies to align performance computing directly to project periods and refresh cycles optimizing budgets, time commitments and technology for oil and gas customers.
As we continue to expand the ecosystem for facilitating research and development of geophysical exploration data, we plan to partner with some of the largest universities in our footprint to help accelerate and improve the analytical processes associated with the world's exploration activities by combining the top academic research institutions with the leading oil and gas companies.
Turning to slide 7 our interconnection platform went live last month; this platform creates a true paradigm shift in the way we help solve big data challenges faced by our enterprise customers, the solution is critical in solving both data center and connectivity needs which provides tremendous scalability by combining CyrusOne's massively modular facility architecture with the most robust connectivity platform in the state of Texas, beyond that platform is deployed across CyrusOne facilities in Austin, Dallas, Houston and San Antonio and it enables customers to connect to their own enterprise facilities and to third party facilities to seamlessly engage the full ecosystem of business partners and content providers, networks, carriers, internet providers and internet buyers and sellers.
The platform provides customers freedom of choice about how to build not capacity when transporting large amounts of data by choosing CyrusOne's bandwidth marketplace; its internet exchange platform or our cross connect to the cloud services that we provide.
The platform allows our customers to establish robust, low-latency, multi-point connectivity between a broad range of facilities or centers effectively creating a virtual data center network that supports all of our customers data center and connectivity needs. The level of interest from our customers for this product has been very strong. Three of our existing customers are using it or currently installing it. We are in discussions with many other existing clients. Additionally as expected, we are generating new interest in our products and services from digital media, internet, E-commerce and CEN companies that we traditionally have not done any business with. Several of those are establishing multi-side deployments in our facilities currently.
We are excited about the growth opportunity for this business and we further build out our ecosystem of customers behind just enterprise and expand in to these other industry verticals.
Lastly, the marketing initiatives that we have been working on are really starting to take off. We are seeing tremendous improvement in our lead generation and the partner channel programs that we started last year which we expect will complement and accelerate our sales efforts. This past quarter, we expanded our indirect channel program and signed up 12 new partners bringing our total to 55.
Notably this quarter, we signed a partnership agreement with Ingram Micro which is the largest broad based IT distributor in the world offering more than 1,700 vendors access to a global customer base of more than 200,000 resellers in a 160 countries.
Also, this quarter Scott Brueggeman who is our CMO received the marketer of the year award from the business marketing association in the category business to business campaigns. In a relative in a short amount of time, Scott has managed the increase or lead generation by 72% across all large channels and our brand recognition has increased commensurately. For those of you who don’t know, Scott was responsible for the career builder monkey commercial a few years ago which also won several awards and we are glad to have him as part of our team.
As I stated in my opening remark, the CyrusOne team is very pleased with our operation of performance this quarter and glad to see that our initial debt and equity investors have been rewarded as well. We remain very bullish on our company while we are proud that we can count a 119 of the Fortune 1000 as our customers, we know that there are still 880 more companies to convert.
Now, I will turn the call over to Kim.
Thank you, Gary. Good evening, everyone and thank you for joining us today. With the closing of our initial public offering on January on 24th our accounting periods for the first quarter are divided between the first 23 days of January and the remainder of the quarter. My comments this evening will speak CyrusOne’s result for the full first quarter of 2013 to provide a meaningful comparison to the results of operations for 2012.
Slide nine shows our revenue for the first quarter of $60.1 million, an increase of $8 million or 15% from $52.1 million in the first quarter of 2012 and up 4% sequentially from the fourth quarter of 2012. This increase was filled by the addition of new customers and growth on existing customer and our legacy market and our recent new markets.
As the end of the first quarter, we had 554 customers of which 119 are Fortune 1000. We grew our customer count almost 7% from the fourth quarter of 2012 and 13.5% over the prior year. Our annualize rent from March 2013 was approximately 17% higher than March of 2012 and approximately 69% of this growth came from our existing customers.
This growth is an important result from our strategy of delivering excellent customer service to our customers so that they continue to choose us as their provider. In addition to our customers increasing their footprint and power densities, our interconnection revenue continues to increase ranging between 4% and 5% of revenue.
The launch of our interconnection platform across our data centers and taxes should drive acceleration in our interconnection revenue and as Gary mentioned, we’re already seeing good customer interest. As of the end of March, we had 921,000 square feet of collocations space across nine different markets and our leased square foot increased 16% over the first quarter of 2012.
Excluding the legacy low power space that we have decommissioned at our web seven street facility in the fourth quarter of 2012, we renewed a customer contract and they returned approximately 16,000 square feet of their footprint. The rents were below market and we were able to increase their rent by more than four times so that all footprints decreased the total rent received was higher.
During the quarter, we also expanded our London space by an additional 5,000 square feet that was preleased in the fourth quarter of 2012. We continued our momentum with strong leasing from the fourth quarter leasing approximately 31,000 square feet of collocations space this quarter compared to 15,000 in the first quarter of 2012.
The leases signed were 3.1 megawatt of power primarily in our Carrollton and Phoenix facilities. Based on square footage, the weighted average term with these leases were 71 months and approximately 72% of leased to metered power customers.
60% of these contracts are escalators at a weighted average of just under 3%. Our churn continues to trend below 1% in the quarter, 0.4% churn with less than the 0.6% from the fourth quarter of 2012, and the 0.5% from the first quarter of 2012. On an annualized basis, this is less than 2%. Renewal activity was relatively light for the quarter that leased rates remain flat to their pervious rate and head a weighted average duration of 24 months.
On slide 10, our net operating income was $40 million for the first quarter of 2013, an increase of $5.2 million or 15% from the first quarter of 2012. This was driven by organic revenue growth that existing in newly constructed facility. Our NOI margin was flat with the first quarter of 2012 at 67% and up from 54% in the fourth quarter of 2012.
This improvement over the fourth quarter of 2012 was attributed to lower electricity cost and our focus on implementing changes in the data centers driving labor maintenance and energy efficiency.
In early May, we purchased 2 of the data center facility that we previously leased in Florence, Kentucky and Lombard IL. We are also under contract to acquire our leased facilities at Metropolis Drive in Austin by the end of the second quarter.
These facilities represent $18.7 million of annualized rent for March 2013 and approximately 107,000 square feet of collocation state. For the first quarter of 2013, 62% of our NOI came from facilities that we owned, and adjusting for these faculties would have been 17%.
Adjusted EBITDA increased 11% for the first quarter to $31.5 million from $28.3 million for the first quarter of 2012. This quarter we have revived our definition of adjusted EBITDA to exclude all non-cash compensation expenses and we re-casted historical periods in our earnings supplement accordingly.
Our adjusted EBITDA growth came from higher NOI partially offset by increased SG&A expenses. Our story is consistent with the past quarter and that we make additional investments in 2012 to sales and marketing to drive growth, while more recently we increased our staffing and again incurring additional public company cost and G&A department.
Compared to the fourth quarter of 2012, adjusted EBITDA increased by $3 million or 11%, for NOI growth of $2.6 million combined with the decrease of $1 million and sales and marketing expenses due to fewer marketing events and conferences contributed to this increase and adjusted EBITDA.
Excluding non-cash compensation, our general administrative cost increased by $900,000 to support corporate function such as treasury, legal, accounting, insurance and other cost related to corporate governance and SEC reporting.
As report showed in the fourth quarter earnings call, the transaction related compensation expense for Cincinnati Bell and (inaudible) plant with certain CyrusOne employees related to the ITL. This non-recurring expense was recorded on our books in the first quarter and was funded by Cincinnati Bell in April.
Normalized funds from operations or normalized FFO which excludes transaction costs and transaction related compensation was $17.2 million, an increase 15% from the first quarter of 2012. This increase is from higher adjusted EBITDA with partially offsetting increases in non-cash compensations and non-real estate depreciation and increases from charges in 2012 related to our former receivable securitization.
Adjusted funds from operations or AFFO was $17.5 million for the first quarter of 2013, representing a 45% year-over-year increase as a result of lower reoccurring capital expenditures, lower leasing commission and higher non-cash expenses added back to the FFO calculation.
Moving on to slide 11, capital expenditures were $52.6 million in the first quarter of 2013 flat with the first quarter of 2012. As Gary mentioned, we purchased 33 acres of land adjacent to our Houston West facility for $18 million. This provides us with ample room to continue our expansion plants in Houston. Additionally, we think capital to complete our new Houston West facility which was commissioned in April with initial 42,000 square foot data hall.
This will help provide additional space to this campus which was 91% utilized at the end of quarter. We also invested in power upgrades for Houston West, San Antonio, and Lewisville. Our reoccurring capital expenditures were less than half a million dollars for the quarter.
As I mentioned earlier, we acquired our Florence and Lombard data center facilities last week and earned contract to acquire our newer (inaudible) facility in the next month or so.
This improves our NOI and collocation square footage from on facilities to 70% and 76% respectively. We are committed to earning our real estate in the future and continue to review our existing portfolio for opportunity to purchase when it makes economic sense.
On site 12, shows our net debt available liquidity. We have approximately $554 million of available liquidity and with the proceeds from the IPO, our net leverage is 1.8 times our NOI adjusted EBITDA. On April 15th we paid a cash dividend of $0.15 per share on the Company’s common shares and common share equivalents for the first quarter of 2013.
Silde 13 shows our outlook for the full year 2013. We expect our full year revenue to be between $260 million and $270 million and our adjusted EBITDA will be between $133 million and $137 million. We also expect normalized FFO per diluted share and share equivalent to be between $1.15 and $1.25, assuming the shares were outstanding for the full year 2013.
In addition we have provided additional color around our capital expenditure expectations with development capital of $170 million to $180 million, recurring capital of $5 million to $10 million, the acquisition of previously leased facilities up $20 million to $35 million and the acquisition of land up $20 million to $25 million. This capital will enable us to continue with our plans for growth and will allow us to stay ahead of demand.
In closing we are very pleased with our first quarter financial results, the growth achieved in our new markets, the continued expansion of our customer base and the launching of our Texas Internet Exchange. We continue to be optimistic about our future performance and our ability to execute our strategy.
Thank you for your time today. This concludes our prepared remarks. The operator will open the lines for questions.
(Operator Instructions) Our first question comes from Frank Welton (ph).
Looking out at sort of the enterprise space, any sort of hesitation at all that you’ve seen in sales, the sales trends from enterprise, customers making decisions or deferring, any change in that trend there and then could you just clarify the share count that which we are using and that you’re basing your guidance off of?
I will take the first one, Frank. With regard to our customers, the answer is no. We had a really strong fourth quarter. We sold well over 40,000 square feet. This quarter came in at 31,000; really strong in terms of the number of new customers that we were able to sign up as well as the breath across different industries and we had a couple more of Fortune 1000 customers. You look at our pipeline right now, in terms of how we are tracking all the different customers that we are talking to, this is our strongest pipeline ever.
Frank, on the shares, if you combine the common shares in the partnership unit it is 64.5 million shares?
Okay. And then just one follow up. The Phoenix facility, I know you have made a marketing push in trying to grab some customers there. What is sort of success rate that you are there and where are those customers coming from?
Yes so that facility was just commissioned at the last week of December and we sold out 40% of the capacity that we brought online there across three or four customers. The amount of level of engagement from customers deploying it is really strong. It is working out exactly as we kind of envisioned it would with a lot of interest from customers coming out of California and looking at a cheaper low cost alternative than putting in facilities in California.
And our next question comes from Vincent Chao.
Just wanted to go back to Dallas here. It sounds like things are going well there and there is the Phoenix activity but just curious if you are seeing any additional pricing pressure. It seems like some of your competition is adding space in that market in the Greater Texas areas, so sort of legitimizes what you guys are doing there but also it seems like people are getting a little bit more active. Just wondering if you are seeing an impact from that?
No I think the demand in Dallas is pretty strong in some of the reports that I have seen there is actually more demand than supply. I do not know how much weight I have put in all the different reports our there but in general we see continued demand here. There has never been any differences from a pricing perspective at all. We don’t want any share of pricing specifically with folks just because we think it is a very competitive advantage that we have but if you looked at the deal that we signed up in the quarter, our pricing this quarter was actually higher than what we historically have done but a lot of that is across a mix, because since we sell to both retail and wholesale customers, you have a four to five times difference between your lower priced products and your higher priced products. But broadly speaking our pricing remains really confident and even on a renewal basis as well if you looked at the churn metric that we had, the 0.4% that I think maybe our lowest churn metric ever and that gives you really good insight in terms of any of the pricing pressure that we are under.
Okay and just going back to the sort of the side commentary the differences in the, retail versus wholesale. It looks like the space that you signed up is about just under six years of lease terms. So it seems to suggest a larger footprint deal size. But just looking at the lease distribution table, it looks like the biggest increase was sort of in the 1000 to 5000 square feet range. Just wondering where is the demand the strongest in terms of size of deployment, that kind of thing?
Roughly, I mean so we did around 50 new contracts this quarter. 43 of those were contracts that were all inclusive, so kind of a typical retail type contract. The other seven were wholesale. On a weighted average basis, across all of those deals that were done, it was close to a 70 months average duration, with the bigger type deals skewing more towards longer length contracts.
Okay and just on the guidance, the CapEx spend about $170 million to $180 million. I think last quarter you were talking about $200 million but I don't know if that included the recurring or maybe some of the offset is some of the acquisitions that you're doing here, but just curious what level of square footage do you expect to deliver this year, that's associated with this CapEx.
The $200 million that we shared before was really an estimate of just the development CapEx. It didn't include the acquisition of the property. I don't have a square footage amount. A lot of the capital dollars are used for adding power to square footage as well but we would estimate the trend of the 150,000 square feet that we've seen will continue.
And then just one last one from me, just on the renewal or the downsizing with the ForEx improvement and the rent on that space there, just curious we've been hearing about strategic tenants and impacts on renewal spreads. In this case they are downsizing but the actual rent that you're getting from them is much higher. Is that just a one off or is there anything to read into that sort of a roll up for the rest of the portfolio in the Midwest there.
We talked a little about this on the last call. So some of the older leases that we had in Cincinnati at that phenomenon where these were deals that were done 20 years ago, 15 years ago, so really long leases in there. As those come up for renewal, those are under market but you shouldn't assume that we're going to repurpose all those and get significantly increased rents there. To the extent that we sell it there, we will, but I think what we have seen over the last year is that the rate of growth in Cincinnati is relatively slower than what we are seeing in the rest of our portfolio.
And your next question comes from Simon Flannery (ph).
This is actually Lisa for Simon. I have a couple of questions on the guidance first of all with the revenue guidance. It looks like from the point of adjusting 20% year-over-year growth; so it was based on kind of your sequential growth on this quarter. Would it imply that basically you are seeing an acceleration of revenues kind of in the back half of the year? I think we have heard that from the couple of the other in the second telecom companies during this earning cycle.
And second question on the margin side EBITDA guidance; the margin I believe; it looks like a little higher than what you are seeing in 4Q. Can you talk about the drivers on the high end guidance and also can you back out for the stock comp, so we can compare it to how you were reporting EBITDA before?
Yes if we would get some of our supplemental information, you will see that we have done the EBITDA guidance with and without the stock comp. So you got full visibility into that. With regard to the lamp; there is a couple of things going on. In the fourth quarter, we had a really strong quarter last year; that was our strongest quarter that we had all year.
Some of that revenue was recognized in this quarter but not all of it. So we are expecting that the rest of the revenue that we booked for the deals like closing to fourth quarter will be fully realized and recognized in our revenue in the second quarter. This quarter, we also had a really strong quarter in terms of our leasing. We are up actually a 100% versus where we were same period last year. We did about 31,000 square feet of space.
I think can be 200,000 of that revenue was actually recognized in the quarter. So that is all going to flow through in our second and third quarter. When we will get the business we were looking at it from a booking perspective and we're comfortable that we are hitting the bookings and knocking down the customers. We expect and we are comfortable that eventually our top line will reflect the success we have enclosed in deals.
And we'll go next to Jordan Sadler.
I just wanted to ask a question about the new leasing in the quarter. Can you give us a sense of what the overall rate was on the 31,000 square feet, what the expected revenue to be realized will be?
Yes it was higher than we have done but I don’t want to share pricing. I know a lot of our competitors like to share lot of pricing about the deals that they’ve done and we appreciate that and all I want to say is directionally its better than what we’ve done historically.
And maybe along similar lines, but not quite, the guidance in terms of revenue guidance, can you maybe talk about what that would translate into in terms of the square footage? What's embedded in there in terms of how much they expect to sign?
We’ve seen on a couple of different avenues. This isn’t one of the things; we look a datacenter space and just I think it is important to understand the way we use this versus several of our competitors. We view this on multidimensional platform. So when we think about what we’re selling to customers, we’re thinking in terms of square footage, we’re thinking in terms of power densities, we’re thinking in terms of power resonances, we’re rolling a lot more on our cross connect and interconnection of business and so there is multiple different ways that we think about pricing to customers in a product that we’re servicing or that we’re selling for them also with service contingent on there and the price differences are really huge, I mean, it’s a 500…
Any granularity on that any of those elements would be tremendously helpful? Interconnection revenue as a percent of revenue or just straight colo (ph).
Yes, what we said on the last call Jordan is that our interconnection revenue was around 4% to 5% and I think that’s what Kim mentioned and I think that since just have RIX program launched this last month we expect that the relative growth rate of that product is going to accelerate much faster than it has historically but just given that it's amount of our revenue today, I don’t expect until probably the fourth quarter where it’s going to be a meaningful impact to our overall results.
We’ll think about how we can provide little more insight in terms of the different types of products and services that customers are buying to give a little more visibility, to think through how do you do the modeling but I think if you kind of assume our historic….
I guess I’m trying to get what the drivers would be. I could just plug in your revenue numbers and that would work but I guess I’m trying to throw a little bit of effort into it and trying to sensitize it. And so there was some granularity on the deliveries, you said 150,000 square feet of deliveries. Or that would make sense in terms of the development spend? Would maybe utilization rate by the end of ’13, would that be a way to sort of guide us to get? You’re 81% utilized on a current footprint, will you be in the same range?
Because of the space coming on.
Yes, ideally long term, the way we’ve designed the facilities now on a go forward basis, what we’re trying to do is shorten that cycle time from the time that we can bring space online and make it available for customers because since we can bring on facilities on a relatively short amount of time, what that does essentially is give us the ability to run at a higher utilization.
So in locations like Dallas and Huston and Phoenix, the new concept that we’re trying to do from our supply chain is to the extent that we can shorten the delivery time, we can increase our utilization because we don’t think that we’re going to be putting any of our revenue at risk because we’ll be able to bring inventory online within 12 or 14 weeks.
And that does conclude the question and answer session. Mr. Wojtaszek I’ll turn the call back to you.
Well, thanks everyone. We appreciate you joining CyrusOne, we’re really excited about our results for the quarter and if you have any other questions and you want to get more details, please reach out to John Caulfield and he’ll take any questions that you have. Thanks. Have a good night.
And ladies and gentlemen, that does conclude today’s presentation. We thank you for your participation.
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