Switch Inc today announced its Q1 2021 earnings and provided updates on its data center leasing activity, development pipeline, and $420m acquisition of Data Foundry.
Financial Performance in Q1 2021 – Switch Inc
In Q1 2021, Switch Inc reported revenue of $130.9m, a 2.5% increase quarter-over-quarter, and adjusted EBITDA of $73.4m, a 4.0% increase quarter-over-quarter. In turn, the company’s EBITDA margin was 56.1% in Q1 2021. However, excluding a non-recurring benefit, the company’s EBITDA margin was 54%.
Operational Performance in Q1 2021 – Switch Inc
Leasing
In Q1 2021, incremental lease signings were $18.1m, down 50% from the $36.0m of signings during Q4 2020, which was a record for the company. However, lease signings of $18.1m are in-line with the company’s historical quarterly average of $10m to $20m. In total, the incremental lease signings represented 10.5 megawatts of power capacity.
Switch Inc’s leasing included a 5-megawatt expansion order with a Fortune 100 semiconductor manufacturer in the Citadel Campus (Tahoe Reno). Also, the company signed a multi-year renewal and expansion order with a Fortune 500 biotechnology firm at the Core Campus (Las Vegas). Finally, Switch’s data center leasing included a 2-megawatt expansion with an existing cloud service provider at the Core Campus.
Switch’s incremental lease signings of $18.1m were driven primarily by existing customers ($16m), as opposed to new logos ($2m).
Backlog
Switch reached a record booked-not-billed backlog for the second consecutive quarter of $57.2m, an increase of 14% quarter-over-quarter. Of this total backlog, $16.0m (28%) will contribute to the remainder of 2021 revenues. Indeed, the company notes that demand is coming primarily from existing customers who continue to expand their footprint with Switch.
Churn
Customer churn was 0.1% in Q1 2021 as compared to 0.4% in Q4 2020 and Q1 2020. Notably, in Q4 2020, Switch had 2 megawatts of churn from two customers migrating certain workloads to the public cloud.
Development Pipeline – Switch Inc
Active Development
Currently, Switch expects to complete construction on three new data centers at the Core Campus (Las Vegas), the Citadel Campus (Tahoe Reno), and the Keep Campus (Atlanta) between Q2 2022 and Q2 2023.
At full build-out, these three facilities will comprise 150 megawatts (8.6k cabinets) of power capacity and 1.3 million sqft. Notably, Switch has seen strong demand in Atlanta, with the Keep Campus’ power already 70% committed.
Planned Development
Switch is also completing site preparation work on four additional facilities, including two at the Core Campus, one at the Citadel Campus, and one at the Keep Campus. Specifically, these assets have planned completion dates ranging from 2024 through 2026.
Overall, these planned developments will comprise 190 megawatts (10.3k cabinets) of power capacity and 1.6 million sqft upon full build-out.
Data Foundry Acquisition – Switch Inc
Given that Switch Inc’s acquisition of Data Foundry for $420m was announced just last week, no significant updates were given. However, Switch notes that Data Foundry is the catalyst for its fifth campus (i.e., Prime), which tend to be at least 1.5 million sqft. Therefore, the Data Foundry assets represent a good base to expand through.
