GDS OverviewGDS has developed and operated high-performance, large-scale data centers for 16 years and is the market leader in China. The company has 17 self-developed carrier-neutral data centers in service and under construction totaling 1.2 million colocation square feet strategically located in China's primary economic centers, including Beijing, Shanghai, Shenzhen, Guangzhou, and Chengdu. GDS has more than 450 customers, including Alibaba Group, Tencent and Baidu (collectively "BAT"), three of the largest internet and cloud service providers in China. The company generated revenue of approximately $50 million and Adjusted EBITDA of approximately $15 million in the second quarter of 2017. Revenue and Adjusted EBITDA grew 42% and 112%, respectively, on a local currency (RMB) basis in the second quarter of 2017 compared to the same period in 2016. The GDS backlog as of the end of the second quarter totaled approximately $163 million in annualized revenue, equivalent to more than 80% of second quarter 2017 annualized GAAP revenue. Transaction Highlights The transaction is expected to provide several key benefits to CyrusOne, including the following:
- Access to More than 450 GDS Customers, Including Key Hyperscale Companies: CyrusOne will coordinate with GDS to market our data centers and related services to more than 450 GDS customers. Among these customers, large internet companies and cloud service providers represent approximately 75% of GDS's contracted space and a similar proportion of expected new demand in China. The GDS customer base includes the largest hyperscale companies in China, including BAT, with Alibaba Group and Tencent having recently signed strategic partnership agreements with GDS recognizing the company as their preferred data center provider. BAT and other Chinese technology companies are investing billions of dollars in the United States, and CyrusOne's ability to deliver significant capacity in a cost-effective and time-sensitive manner provides an attractive alternative for these companies as they expand into and within the country.
- Enhanced Geographic Reach: Strong and growing demand is driving hyperscale companies and enterprises to expand globally, and CyrusOne's partnership with China's leading data center provider having unique local expertise provides our customers with an easy solution customized to meet their needs. Our expanded data center platform provides access to the most important markets in the world's two largest economies.
- Collaborative Knowledge Sharing: CyrusOne and GDS will share knowledge developed over more than 30 years of combined experience building and operating data centers. The companies will exchange best practices around sales and marketing, data center design and construction, supply chain management, customer relationship management, and operations. This will allow them to leverage each other's core competencies to deliver a compelling, differentiated data center solution.
- Capital to Fund Development Projects Expected to Generate Attractive Returns: The cloud market in China is still in an early stage but growing fast, and GDS is experiencing very strong demand from existing and new customers. The investment by CyrusOne in GDS will fund construction of data centers to provide more capacity for further expansion to meet this demand. These projects are expected to generate attractive development yields that meet or exceed CyrusOne's mid-teens target.
Joint Conference Call DetailsCyrusOne and GDS will host a joint conference call on October 18, 2017, at 9:00 AM Eastern Time (8:00 AM Central Time) to discuss the transaction. A live webcast of the conference call will be available under the "Company" tab in the "Investors / Events and Presentations" section of the Company's website at http://investor.cyrusone.com/events.cfm. The U.S. conference call dial-in number is 1-844-492-3731, and the international dial-in number is 1-412-542-4121. A replay will be available one hour after the conclusion of the call on October 18, 2017, through November 1, 2017. The U.S. toll-free replay dial-in number is 1-877-344-7529 and the international replay dial-in number is 1-412-317-0088. The replay access code is 10113452. Safe Harbor This release contains forward-looking statements regarding future events and future results that are subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "predicts," "projects," "intends," "plans," "believes," "seeks," "estimates," "continues," "endeavors," "strives," "may," variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to the transaction with GDS and the expected benefits and results of the transaction and the commercial agreement, projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned these forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially and adversely from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this release and those discussed in other documents we file with the Securities and Exchange Commission (SEC). More information on potential risks and uncertainties is available in our recent filings with the SEC, including CyrusOne's Form 10-K report, Form 10-Q reports, and Form 8-K reports. Actual results may differ materially and adversely from those expressed in any forward-looking statements. Forward-looking statements speak only as of the date first made. We undertake no obligation to revise or update any forward-looking statements for any reason.
About CyrusOneCyrusOne (NASDAQ: CONE) is a high-growth real estate investment trust (REIT) specializing in highly reliable enterprise-class, carrier-neutral data center properties. The Company provides mission-critical data center facilities that protect and ensure the continued operation of IT infrastructure for nearly 1,000 customers, including 190 Fortune 1000 companies. CyrusOne's data center offerings provide the flexibility, reliability, and security that enterprise and cloud customers require and are delivered through a tailored, customer service-focused platform designed to foster long-term relationships. CyrusOne is committed to full transparency in communication, management, and service delivery throughout its 40 data centers worldwide. Additional information about CyrusOne can be found at www.CyrusOne.com.