{"id":709331,"date":"2022-11-09T17:22:30","date_gmt":"2022-11-09T22:22:30","guid":{"rendered":"https:\/\/www.marketnewsdesk.com\/index.php\/switch-announces-third-quarter-2022-financial-results\/"},"modified":"2022-11-09T17:22:30","modified_gmt":"2022-11-09T22:22:30","slug":"switch-announces-third-quarter-2022-financial-results","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/switch-announces-third-quarter-2022-financial-results\/","title":{"rendered":"Switch Announces Third Quarter 2022 Financial Results"},"content":{"rendered":"
\n

PR Newswire<\/p>\n<\/p><\/div>\n

\n

\n Revenue of $174.5 million<\/span>, Net Loss of $0.2 million<\/span>, Adjusted EBITDA of $69.5 million<\/span><\/i>\n <\/p>\n

\n Revenue Growth of 10% Compared to Year Ago Quarter, All Organic<\/i>\n <\/p>\n

\n Signed $21 million<\/span> in annualized revenue since Q2, including $8 million<\/span> during Q3<\/i>\n <\/p>\n

\n
\n LAS VEGAS<\/span>
\n <\/span>, Nov. 9, 2022<\/span><\/span> \/PRNewswire\/ — Switch, Inc. (NYSE: SWCH) (“Switch”) today announced financial results for the quarter ended September 30, 2022<\/span>.<\/p>\n

“Switch maintained a strong double-digit revenue growth trajectory in the third quarter of 2022,” said Rob Roy<\/span>, Founder and CEO of Switch. “Our sales pipeline remains active as we continue to have good visibility on customer demand for facilities that are currently under construction across the Five Primes. LAS VEGAS<\/span> 15 is substantially committed to clients just six months after its opening, and we have pre-sold multiple megawatts at the TAHOE RENO<\/span> 2 and ATLANTA<\/span> 3 facilities which are on track for delivery in H1 2023 and H2 2023, respectively. In addition, we remain committed to our long-term development plan to deliver more than four million square feet of capacity through 2026, with enough land to construct an additional seven million square feet thereafter.”<\/p>\n

\n
\n Third Quarter 2022 Financial Results<\/u>
\n <\/b>\n <\/p>\n

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

\n
\n Financial Summary<\/b>
\n <\/span>\n <\/p>\n

\n
\n ($ in millions, except per share amounts)<\/i>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n Q3 2021<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n Q2 2022<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n Q3 2022<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n \n <\/td>\n\n

\n
\n Y\/Y%<\/b>
\n <\/span>\n <\/p>\n

\n
\n Change<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n Q\/Q%<\/b>
\n <\/span>\n <\/p>\n

\n
\n Change<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n \n <\/td>\n\n \n <\/td>\n\n \n <\/td>\n\n \n <\/td>\n\n \n <\/td>\n\n \n <\/td>\n\n \n <\/td>\n<\/tr>\n
\n

\n
\n Consolidated revenue<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $\u00a0 158.1<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $\u00a0 168.2<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $\u00a0 174.5<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n \n <\/td>\n\n

\n
\n 10\u00a0%<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n 4\u00a0%<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n Income from operations<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 17.8<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 21.2<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0\u00a0\u00a0 7.5<\/span>\n <\/p>\n<\/td>\n

\n \n <\/td>\n\n

\n -58\u00a0%<\/span>\n <\/p>\n<\/td>\n

\n

\n -65\u00a0%<\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n Net (loss) income1<\/sup><\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0\u00a0 (0.9)<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0 380.7<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0\u00a0 (0.2)<\/span>\n <\/p>\n<\/td>\n

\n \n <\/td>\n\n

\n n.m.<\/span>\n <\/p>\n<\/td>\n

\n

\n n.m.<\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n Net (loss) income per diluted share1<\/sup><\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0 (0.00)<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 1.51<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0 (0.00)<\/span>\n <\/p>\n<\/td>\n

\n \n <\/td>\n\n

\n n.m.<\/span>\n <\/p>\n<\/td>\n

\n

\n n.m.<\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n Adjusted net (loss) income per diluted share<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 0.01<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 0.02<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0 (0.03)<\/span>\n <\/p>\n<\/td>\n

\n \n <\/td>\n\n

\n n.m.<\/span>\n <\/p>\n<\/td>\n

\n

\n n.m.<\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n
\n Adjusted EBITDA<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $\u00a0\u00a0 76.9<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $\u00a0\u00a0 84.6<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $\u00a0\u00a0 69.5<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n \n <\/td>\n\n

\n
\n -10\u00a0%<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n -18\u00a0%<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n
\n Adjusted EBITDA Margin %<\/i>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n 49\u00a0%<\/span>\n <\/p>\n<\/td>\n

\n

\n 50\u00a0%<\/span>\n <\/p>\n<\/td>\n

\n

\n 40\u00a0%<\/span>\n <\/p>\n<\/td>\n

\n \n <\/td>\n\n

\n
\n -880 bp<\/i>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n -1,050 bp<\/i>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n Adjusted Funds from Operations<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 51.1<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 66.4<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 56.4<\/span>\n <\/p>\n<\/td>\n

\n \n <\/td>\n\n

\n 10\u00a0%<\/span>\n <\/p>\n<\/td>\n

\n

\n -15\u00a0%<\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n \n <\/td>\n\n \n <\/td>\n\n \n <\/td>\n\n \n <\/td>\n\n \n <\/td>\n\n \n <\/td>\n\n \n <\/td>\n<\/tr>\n
\n

\n
\n Key Performance Indicators<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n Q3 2021<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n Q2 2022<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n Q3 2022<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n \n <\/td>\n\n

\n
\n LTM Average<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n Total Contract Value<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 94.1<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0 104.0<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 63.3<\/span>\n <\/p>\n<\/td>\n

\n \n <\/td>\n\n

\n $130.2<\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n Annualized Monthly Recurring Revenue<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 26.9<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 37.4<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 21.9<\/span>\n <\/p>\n<\/td>\n

\n \n <\/td>\n\n

\n $39.9<\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n Incremental Annualized Revenue<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 16.2<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0 22.3<\/span>\n <\/p>\n<\/td>\n

\n

\n $\u00a0\u00a0\u00a0\u00a0 8.1<\/span>\n <\/p>\n<\/td>\n

\n \n <\/td>\n\n

\n $22.0<\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n Weighted Average Term (yrs)<\/span>\n <\/p>\n<\/td>\n

\n

\n 4.3<\/span>\n <\/p>\n<\/td>\n

\n

\n 3.1<\/span>\n <\/p>\n<\/td>\n

\n

\n 3.6<\/span>\n <\/p>\n<\/td>\n

\n \n <\/td>\n\n

\n 4.1<\/span>\n <\/p>\n<\/td>\n<\/tr>\n<\/table><\/div>\n

\n\n\n\n\n
\n \n <\/td>\n<\/tr>\n
\n

\n
\n 1<\/sup>Q2 2022 net income and net income per diluted share include a $372.8 million gain on termination of the tax receivable agreement.<\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n \n <\/td>\n<\/tr>\n<\/table><\/div>\n

“We are pleased with our team’s strong execution during a challenging macroeconomic period, as we continue to deliver the most resilient technology infrastructure to meet our clients’ mission critical demands,” said Thomas Morton<\/span>, President of Switch. “Management remains focused on achieving its operational goals while making continued progress toward closing our go-private transaction with Digital Bridge and IFM. Switch’s Board of Directors and senior management team continue to believe in the merits of this transaction and its tremendous benefits to all stakeholders in the company.”<\/p>\n

“The continued strength in top line growth during the third quarter is reflective of ongoing robust market demand for our premium data center infrastructure,” said Gabe Nacht<\/span>, CFO of Switch. “Elevated power costs continued to affect margins in Q3, in part due to seasonal factors which we expect to moderate in the fourth quarter. While power costs remain elevated on a year-over-year basis, we continue to engage in pricing and hedging strategies to mitigate the impact of higher electricity rates.”<\/p>\n

\n
\n Update on Pending Transaction with Digital Bridge and IFM<\/u>
\n <\/b>\n <\/p>\n

Switch previously announced it has entered into a definitive agreement with DigitalBridge Group, Inc., under which DigitalBridge Partners II and an affiliate of global infrastructure investor IFM Investors will acquire all outstanding common shares of Switch for $34.25<\/span> per share in an all-cash transaction valued at approximately $11 billion<\/span>, including the assumption of debt. The transaction was approved by Switch stockholders on August 4, 2022<\/span>. In addition, the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to the transaction occurred on July 28, 2022<\/span>. The transaction is expected to close in the fourth quarter of 2022. Completion of the transaction is subject to the satisfaction of the remaining closing conditions. Due to the pending merger transaction, Switch management is not providing new guidance or affirming past guidance at this time.<\/p>\n

\n
\n Third Quarter 2022 Operating Results<\/u>
\n <\/b>\n <\/p>\n

Switch reported consolidated third quarter 2022 revenue of $174.5 million<\/span>, representing 10% growth compared to the third quarter of 2021 and increasing 4% from the second quarter of 2022. The strong year-over-year growth in total revenue was primarily driven by colocation, which increased by 11%, and connectivity, which increased by 9% compared to the year ago quarter. Third quarter 2022 Adjusted EBITDA totaled $69.5 million<\/span>, compared to $76.9 million<\/span> in Q3 2021. Adjusted EBITDA margin was 40% in Q3 2022 compared to 49% in the year ago quarter. Relative to the year ago quarter, the differential in Adjusted EBITDA margins was primarily driven by increased power costs. Switch reported a third quarter 2022 net loss of $0.2 million<\/span>, compared to a net loss of $0.9 million<\/span> in Q3 2021. Adjusted net loss was $4.7 million<\/span> in the third quarter, or $0.03<\/span> per diluted share. Third quarter 2022 Adjusted Funds from Operations were $56.4 million<\/span>, compared to $51.1 million<\/span> in the year ago quarter.<\/p>\n

\n
\n Balance Sheet and Liquidity<\/u>
\n <\/b>\n <\/p>\n

As of September 30, 2022<\/span>, Switch’s net debt was $1.91 billion<\/span>(1)<\/sup>, resulting in a net debt to Q3 2022 annualized Adjusted EBITDA(2)<\/sup> ratio of 6.9x. As of September 30, 2022<\/span>, Switch had liquidity of $124.3 million<\/span>, including cash and cash equivalents and availability under its revolver.<\/p>\n

________________________________________<\/p>\n

\n\n\n\n\n
\n

\n (1)<\/span>\n <\/p>\n<\/td>\n

\n

\n Net debt is calculated as total debt outstanding, including finance lease liabilities, of $1.95 billion, net of cash and cash equivalents of $41.3 million, as of September 30, 2022.<\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n (2)<\/span>\n <\/p>\n<\/td>\n

\n

\n Annualized Adjusted EBITDA is calculated as third quarter 2022 Adjusted EBITDA multiplied by four.<\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n \n <\/td>\n\n \n <\/td>\n<\/tr>\n<\/table><\/div>\n

\n
\n Capital Expenditures and Development<\/u>
\n <\/b>\n <\/p>\n

Capital expenditures for the third quarter totaled $152.4 million<\/span>, including maintenance capital expenditures of $0.7 million<\/span>, or 0.4% of total revenue. Growth capital expenditures, excluding land purchases, were $151.7 million<\/span> for the third quarter of 2022, compared to $132.1 million<\/span> in the same period last year.<\/p>\n

During the quarter ended September 30, 2022<\/span>, Switch capital expenditures were incurred as follows: (i) $65.3 million<\/span> in The Citadel Campus for ongoing construction of the TAHOE RENO<\/span> 2 facility scheduled to open in the first half of 2023 and site development activities related to TAHOE RENO<\/span> 3; (ii) $44.8 million<\/span> in The Core Campus primarily related to a strategic customer expansion at LAS VEGAS<\/span> 11 and ongoing construction and tenant improvements at LAS VEGAS<\/span> 15; (iii) $21.8 million<\/span> in The Keep Campus primarily for construction of the ATLANTA<\/span> 3 data center scheduled to open in the second half of 2023, and continued site development costs to support future facilities at the campus; (iv) $14.4 million<\/span> in The Rock Campus primarily related to ongoing site preparation for the AUSTIN<\/span> 4 and AUSTIN<\/span> 5 data centers in Round Rock<\/span>; and (v) $6.1 million<\/span> in The Pyramid Campus for construction and site development related to the GRAND RAPIDS<\/span> 2 data center.<\/p>\n

\n
\n Dividend<\/u>
\n <\/b>\n <\/p>\n

Switch announced today that its Board of Directors has declared a cash dividend of $0.0525<\/span> per share of Switch’s Class A common stock. The dividend will be payable on December 1, 2022<\/span> to all stockholders of record as of the close of business on November 21, 2022<\/span>. Prior to the payment of this dividend, Switch, Ltd. will make a cash distribution to all holders of record of common units of Switch, Ltd., including Switch, of $0.0525<\/span> per common unit.<\/p>\n

Future declarations of dividends are subject to the determination and discretion of Switch’s Board of Directors based on its consideration of many factors, including Switch’s results of operations, financial condition, capital requirements, restrictions in Switch, Ltd.’s debt agreements, and other factors that Switch’s Board of Directors deems relevant.<\/p>\n

\n
\n Recent Business Highlights<\/u>
\n <\/b>\n <\/p>\n