Cyxtera Technologies (NASDAQ: CYXT), a retail colocation provider, today announced its Q1 2022 earnings and provided updates on its data center portfolio, bookings, churn, occupancy, pricing, capital expenditures, and geographic expansion into India via a partnership with Sify Technologies.
As of Q1 2022, Cyxtera operates 61 data centers, comprising 245 megawatts of power capacity. Overall, these data centers involve 1.85 million sellable sqft, in 28 markets throughout North America, Europe, and Asia, supporting 2.3k+ customers.
Financial Performance in Q1 2022 – Cyxtera Technologies
In Q1 2022, Cyxtera Technologies reported total revenue of $182.4m, a 2.2% increase quarter-over-quarter, and transaction adjusted EBITDA of $58.6m, a 22% increase quarter-over-quarter. Therefore, the company’s EBITDA margin was 32.1% in Q1 2022, a 5.2% improvement quarter-over-quarter.
Cyxtera’s recurring revenue for Q1 2022 was $173.7m (95% of total), an increase of 2.0% quarter-over-quarter. Recall that the company’s non-recurring revenues comprise installation services related to a customer’s initial data center deployment, as well as professional services.
Of Cyxtera’s total revenue, interconnection revenue represented 11%, equivalent to ~$20.1m in Q1 2022. At the same time, quarterly interconnection revenues grew 1% year-over-year.
Operational Performance in Q1 2022 – Cyxtera Technologies
Cyxtera’s annualized core bookings were $25.7m in Q1 2022, representing an increase of 19% quarter-over-quarter. During the quarter, the company added 43 new customers to the business.
Also, as a reference point, in Q1 2022, Cyxtera was in-line with its average annualized core bookings rate for the prior four quarters of ~$25m.
Cyxtera reports “core churn” of 1.0% of average core MRR during Q1 2022. However, this figure excludes churn related to Lumen Technologies, which had $0.2m of net disconnects in Q1 2022. On a sequential basis, Cyxtera’s core churn worsened by 40 bps from Q4 2021. To this end, Carlos Sagasta, Cyxtera’s CFO states that the company experienced “a late quarter churn event, which we expect to replace in short order”.
In Q2 2022, Cyxtera’s broader churn dynamics will become more evident, as 7.6% of Lumen’s footprint with Cyxtera will be up for renewal in May 2022. Therefore, Cyxtera may face a possible non-renewal, downsizing, or lower renewal pricing for a portion of Lumen’s occupancy. Recall that Lumen is Cyxtera’s largest customer.
As of Q1 2022, Cyxtera Technologies’ total occupancy, based on sold sqft, was 69.7%, which decreased 1.3% quarter-over-quarter. While the company’s stabilized occupancy, which excludes its Amsterdam (Netherlands) facility, was 70.5%, declining 0.9% quarter-over-quarter.
During the quarter, notable net lease-up occurred in Silicon Valley (1.9k sqft), Dallas (1.0k sqft), and Toronto (1.0k sqft). In contrast, Cyxtera realized much more incremental net vacancy, including in the markets of Chicago (4.7k sqft), New Jersey (3.7k sqft), Tampa (3.6k sqft), and Los Angeles (2.4k sqft).
During the quarter, Cyxtera produced monthly recurring revenue (MRR) per cabinet of $1,418, which represents a 2.4% increase quarter-over-quarter.
Cyxtera spent $32.4m (cash basis) or $34.0m (accrual basis) on capital expenditures in Q1 2022. Of the accrual basis capital expenditures, $27.8m went to expansion projects, $5.8m was for maintenance, and $0.4m was corporate.
Geographic Expansion in India – Cyxtera and Sify Technologies
In May 2022, Cyxtera signed a partnership agreement with Sify Technologies, an ICT service provider and data center operator in India, to begin offering colocation services in India. As part of this agreement, Cyxtera can provide colocation services to customers, via Sify’s carrier-neutral facilities, in 5 markets in India, namely Mumbai, Noida, Chennai, Hyderabad, and Kolkata.
Additionally, as a channel partner of Cyxtera, Sify will resell Cyxtera’s services across its footprint to its 10k+ customers. Therefore, Sify’s customers will have access to Cyxtera’s colocation, interconnection, and bare metal services in 28 markets throughout North America, Europe, and Asia.
Nelson Fonseca, Cyxtera’s CEO notes that “India is a market that we’ve always been interested in. It’s a market where we get a lot of inquiries from our customers”. Fonseca continues, stating “I think it’s the first step of a broader relationship and broader activity for us in India” and he identifies the opportunity to “make potentially a bigger investment in the area”. As part of the Sify deal, Fonseca states that there will be “very modest CapEx as we deploy some of our capabilities in Sify”.
Outlook for 2022 – Cyxtera Technologies
Cyxtera Technologies reiterated its full-year 2022 outlook for revenue of $730m to $760m and transaction adjusted EBITDA of $235m to $253m, implying a 32.8% EBITDA margin. As such, the mid-point of Cyxtera’s 2022 outlook infers a year-over-year increase of 5.9% and 8.7% in revenue and transaction adjusted EBITDA, respectively.
Additionally, in 2022, Cyxtera provides guidance for a significant increase in both its expansion and maintenance capital expenditures, relative to 2021. Below is a breakdown of these capital expenditure projections:
- Expansion: $102m to $127m, implying a 70% increase year-over-year, at the mid-point
- Maintenance: $26m to $28m, inferring a 27% increase year-over-year, at the mid-point