Switch, Inc. (NYSE: SWCH) is not your ordinary data center operator. The company promotes itself as the leader in exascale data center ecosystems with a focus on enterprise-class and emerging hybrid cloud solutions. Exascale in this context means very high performing, high-powered facilities.
Switch touts its facilities as the only Tier 5-rated data centers in the business. According to ratings from the independent Upside Institute, a Tier 4 data center must be completely fault tolerant and have redundancy for every component with an expected uptime of 99.995 percent or the equivalent of only 26.3 minutes of downtime annually. Switch claims its exascale Tier 5 rating significantly exceeds Tier 4 performance in all parameters.
The company operates five “Prime” exascale data center campuses that are strategically located within low latency reach of major U.S. markets. The Prime campuses are The Core (Las Vegas, NV), The Citadel (Tahoe Reno, NV), The Pyramid (Grand Rapids, MI), The Keep (Atlanta, GA), and its newest, The Rock (Austin, TX).
The fifth Prime campus, The Rock, is the outcome of Switch’s acquisition in May, 2021 of Data Foundry, a carrier-neutral colocation provider, for $420 million in an all-cash transaction. Headquartered in Austin, TX, and with data centers in Austin and Houston, Data Foundry is strategically located and provides Switch with attractive growth opportunities in Texas. The acquisition adds over 400 customer logos, offering robust cross-selling opportunities and significant customer expansion potential. Data Foundry’s properties in Austin and Houston comprise over 500,000 square feet and 60 megawatts (MW) of power.
Then in June, Switch announced The Rock campus location in Texas through a land purchase agreement with Dell Technologies. With that land, Switch can construct over 1.5 million gross square feet (GSF) of Tier 5 data center space next to Dell’s global headquarters in Round Rock, TX.
The Rock campus ecosystem will reach over 2 million square feet and 185 MW of power upon completion. Switch will uphold its sustainability commitment by powering these facilities with 100 percent renewable energy.
These five campuses tally 16 data centers in six locations. At year-end 2021, these sites together had capacity for 32,410 server cabinets, with 88 percent already in service, on 5 million GSF of space and 508 MW of power. As designed, these data centers have full build-out capacity for 92,710 cabinets on 16 million GSF and 1,588 MW expected before the end of the decade.
Switch’s data system design and operation are paying off. The company reported full-year 2021 total revenue of $592 million, up 16 percent over 2020 levels. Adjusted EBITDA was $315 million compared to $268 million in 2020, and AFFO was up 12 percent year-over-year to $244 million. The company maintained an active expansion plan with $456 million in capital expenditures. Since 2015, Switch grew top line revenues and Adjusted EBITDA at a 14 percent CAGR.
For 2022, the company’s midpoint guidance is for revenues of $667 million and Adjusted EBITDA of $351 million. Excluding land acquisitions, capex is budgeted at $535 million for data center build outs and expansion.
Switch’s data centers serve over 1,350 colocated customers from various vertical commercial and government segments led by e-commerce, cloud, software, digital content and multimedia companies. In 4Q21, the top 10 customers accounted for 37 percent of total revenues.
Switch derives its revenues from leasing space to multi-tenant customers and providing network and connectivity services between customers or to other data centers. Of the total 2021 revenues, colocation recurring revenue was $469 million or 79 percent while connectivity accounted for another $102 million or 17 percent.
Colocation recurring revenue includes the licensing and leasing of cabinet space and power. Connectivity services include cross-connects between cabinets, broadband services and external connections to carrier networks. Switch bills customers for these services on a fixed and recurring basis each month for the duration of their contract. Non-recurring revenue for the year was $16 million or roughly 3 percent of the total. mainly for customers’ one-time installation services.
By John Celentano, Inside Towers Business Editor
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