Seeking Alpha • Aug 18

Cyxtera Technologies: Unsustainable Business Model

Low margins and utilization prevent CYXT from generating sustaining levels of cash flow from operations as evidenced by an aggregate negative free cash flow of ($160M) since 2019. Severe cash shortages are driven by both persistent under-utilization of assets and excess leverage. Interest expense consumes over 80% of cash flow. With only $40M in cash left, the company filed for a $300M offering along with 130M secondary shares of management, insiders and PIPE investors. Cyxtera (CYXT) came public via a SPAC in the summer of 2021. The company is a sub-scale operator of data centers leased from facility owners. The leasing strategy, high-cost retail model, low space utilization as evidenced by 14 of 23 center with below 70% utilization, and excess leverage drive bottom of the industry cash generation. We believe that financial performance is unlikely to improve going forward. Continued negative leasing dynamics and an ill-considered financial strategy exposing the company to cost inflation and rising rates will likely pressure margins further going forward. The company reported negative financial results for 2Q22 on August 11th. Financial underperformance left the company with only $40M in cash after burning $30M in the quarter. Management lowered guidance for 2H22 modestly in expectation of cost increases. In testimony to the precariously low cash balances, the company filed an S-3 shelf registration for $300M in new securities and the sale of 130M of shares owned by insiders and the SPAC’s PIPE investors. We believe that the offering will be the catalyst that begins to send the stock toward fair value of $2-3. Key issues include: Cannot generate cash from operations to cover necessary CapEx - Low capacity utilization and poor service offering results in sub-par cash flow from operations; coupled with high CapEx requirements drives the company’s large cash burn. In 2021, the company generated only $25.8M in CFO and negative free cash flow of ($51.7M). We believe that further low quality offerings will likely pressure utilization and cash flows going forward. Crippling levels of leverage – The company’s excessive debt load creates an interest expense that consumes an average of 80-85% of all cash generated by the business. Leverage makes CYXT’s financial model unsustainable, in our view. One of the company’s revolvers was not renewed, the other revolver is due in 11/23 and $868M of debt is due in 2024. Insiders are selling – The S-3 also includes 130M shares of recently unlocked shares owned by insiders, the SPAC sponsor, and PIPE investors. The float will increase roughly 4x from ~48M shares to 178M plus whatever is sold in the offering. High comparative valuation – Despite being the weakest public data center operator, CYXT currently trades at an EV/Adjuste868d EBITDA of 30x compared to 25x for peers, which convert ~80% of EBITDA to cash flow compared to 4% for CYXT. A discounted multiple indicates the stock is worth $2-3 or 70-80% below current levels. CYXT’s collection of poor, leased retail data center assets makes for a low margin business in the best case. We believe that excess leverage makes the company’s model unsustainable. I. An Unsustainable Business Model We believe the company’s business model is fundamentally flawed. As a provider of retail colocation space, labor and engineering are significant costs. Leasing the facilities fixes the costs and subjects the firm to potential rent increases, but persistently low utilization results in sub-par revenue and low margins. The company’s flawed business model results in very weak cash flow relative to the other players in the data storage space, as indicated in the table below. Company filings and estimates. CYXT is the weakest financial performer of the group. Low utilization leads to poor EBITDA. (Note that Adjusted EBITDA is constructed to provide comparable metrics. For CYXT we exclude stock-based compensation and changed from warrant liability. For DLR and EQIX, we exclude stock-based compensation, gains on sale and losses on debt extinguishment.) Cash flow from operations in 2021of $25.8M equates to only 4% of revenues, compared with ~40% for the peer group. Weak cash generation is a long-standing problem. Between 2019 and 2Q22, the company generated only a total of $162.7M in cash from operations and accumulated aggregate negative free cash flow of ($160.1M). The company has pursued what we view as short-term financing fixes. In 1Q22, the company completed a sales leaseback that generated $10M. The company factors receivables for short-term financing. During 2021, factoring resulted in net proceeds of $99.5M net of fees. Factoring reduces receivables and increases cash flow from operations. In 1H22, the company factored $11M of receivables. The factoring likely creates a maximum 30-day financing, given the company’s monthly billing cycle. The discount paid implies a 1.8% cost, which is annualized to ~24%. In our view, 24% interest rate for such short-term financing is indicative of severe cash shortages. We believe the sub-par cash flow evident in 2021 is unlikely to change going forward. In 1H22, the company generated only $11.7M in cash flow from operations. Including $62M of CapEx, free cash flow was ($50.6M) for the period. Management lowered guidance modestly for 2H22, reflecting higher expected costs. We estimate that the company will burn an additional $50M in the period taking full-year cash burn to ~($100M). Management strategy may exacerbate the margin problem going forward. Unlike most peers, CYXT does not hedge the cost of power. The company rents mostly on an ‘all in’ basis, including power. Although the company can pass along 90% of power cost increases, they absorb 10% and collect the remainder with a lag. Additionally, all outstanding financial debt is floating rate, exposing the company to rising rates, which will eat-away at the already razor thin cash margin. Cost inflation has already had an impact. For 1H22, the cost of utilities was up $11.5M, increasing cost of revenues 6% for the period. Management expects power cost inflation to accelerate in 2H22. The company’s debt is LIBOR based, which has increased to 2.92% from 0.12% a year ago. The debt reset should raise the cost of interest making the cash flow margin yet smaller. II. Persistently Low Capacity Utilization Since purchasing the business in 2017, CYXT has not been able to consistently increase utilization. Between 4Q19, the first period for which we have data, and 1Q22, total occupancy only increased to 70% from 67%. Occupancy as of 2Q22 was 73.33%. We consider the unusually high net-add during the quarter an anomaly; occupancy statistics available in the quarterly supplemental suggest it was driven primarily by a significant sale in a large market. Going forward, we believe the leasing dynamics will be negative, pressuring occupancy. Four factors drive the negative dynamics. 1. Built-in occupancy headwinds - Lumen Technologies (LUMN), formerly CenturyLink from which CYXT was spun off, was 10% of revenues in 2021. Lumen’s contract ends in April 2025 and has staggered disconnects until then creating leasing headwinds. 2. We believe the company offers a low-quality service. This is evidenced by the fact that the company has not been successful leasing space in high-demand markets with low vacancy. As an example, in 1Q20, CYXT opened in Amsterdam with 12,338 square feet. After renting only 1,029 square feet as of 4Q21, the company increased space to 23,655 square feet. According to Cushman and Wakefield, Amsterdam is one of the world’s 10 largest data center markets with total vacancy less than 10%, yet according to company filings, CYXT has only rented 1,169 square feet in 2½ years for a 95% vacancy rate. CYXT’s inability to rent space in a high demand market suggests the product does not meet customer standards. Current and former employees writing on Glassdoor support the low-quality thesis with posts stating that CYXT’s maintenance and customer service has eroded substantially since the company was purchased by the private equity owners. 3. Increasing competition in key markets. 51% of CYXT’s rented space is in five markets that have significant amounts of data center space under construction, according to Cushman and Wakefield. According to company occupancy statistics, in 3 of 5 markets, the company has had very limited success growing occupancy between 4Q19 and 2Q22 despite high demand and low vacancy. We believe that as new space comes online in these highly competitive markets, the company will be vulnerable to customer losses. 4. The struggle in lackluster markets will intensify – Top-10 markets accounted for 98% of all rental space gains between 4Q19 and 2Q22. CYXT’s remaining 14 markets contributed only 2%. 7 of the 14 markets have lower occupancy now than in 4Q19. This excludes the two most underperforming markets that were shuttered, and are not included in the 14. 3 of the 7 with occupancy increases over the period are near capacity, severely limiting further upside in the markets. This leaves a mere 4 out of 14 markets with a clear path to stronger occupancy. The overall dynamics in markets outside the top-10 indicate pressure on occupancy will increase going forward. Granular analysis of occupancy trends suggests that CYXT’s protracted efforts to reposition company assets and build occupancy are far from over. We believe a mix of low quality product, increasing competition in strong markets and presence in many lackluster markets means the balance of pressure on occupancy is to the downside. III. Over-levered and Needs to Raise Capital CYXT has a total of $2B in debt, consisting of $1.1B in capital leases and $888M of financial debt. The company had a $20M revolving credit line due May 2022 that was not renewed. To repay the facility, the company drew down $20M from a new revolving line due November 2023. $868M in first lien facilities mature in 2024. All facilities are LIBOR plus a margin of 3-4%. As of 2Q22, the rate on $775M was 4% and $95M 5%. The 3-month LIBOR has increased to 2.9% from 0.12% a year ago. We estimate the interest expense on the credit facilities can increase by $16.5M to ~$53M upon reset. Put in context, a $16.5M increase in interest expense amounts to 64% of all cash flow from operations generated in 2021. CYXT is the most highly-levered company in the group as shown in the table below.

お知らせ • Jan 12

Cyxtera Technologies, Inc. Offers OEMs and Technology Service Providers Plug-And-Play Capability to Delivering As-A-Service Solutions

Cyxtera Technologies, Inc. announced that the company is expanding its services ecosystem, by extending the capabilities of its SmartCabs solution to deliver dedicated, on-demand IT infrastructure resources to OEMs and technology service providers, significantly reducing deployment schedules and accelerating time-to-solution. By leveraging Cyxtera SmartCabs, companies like Dell Technologies and PacketFabric gain immediate access to a “ready-to-buy” audience of enterprises who are looking to purchase technology solutions in an on-demand, “as-a-service” model. CyxteraSmartCabs, which are available to both enterprises and service providers, deliver point-and-click provisioning of dedicated, on-demand colocation cabinets that come complete with built-in power and network connectivity as well as access to the Digital Exchange, Cyxtera’s data center network fabric. For enterprises, this results in not only instant network connectivity, but also, immediate access to Cyxtera’s entire partner ecosystem, where they can find the compute, storage, and networking solutions they need to build their complete data center environment. For OEMs and service providers, this capability makes it easier to leverage the data center as a high-growth sales channel. Designed to provide technology and service providers the flexibility of a cloud-like data center experience, Cyxtera SmartCabs offer a full suite of infrastructure capabilities: On-demand, single-tenant colocation cabinets pre-configured with power and built-in network fabric leveraging Cyxtera’s Digital Exchange; Instant access to IP Connect with Layer 3 network services for IP bandwidth; Direct access to solutions providing on-ramps to the major public cloud providers to support hybrid IT architectures. Ability to select from a menu of service options to configure and customize the ideal solution to meet providers’ specific business needs – from raw colocation infrastructure into which proprietary technology components can be deployed, to a fully connected colocation technology stack delivered as a service, ready for providers to deploy their workloads. As digital transformation efforts continue to ramp and infrastructure agility becomes an essential component of business growth, enterprises are increasingly looking to hybrid solutions to deliver the mix of resources their workloads and applications require. IT infrastructure leaders are seeking both the speed and scale typically associated with the cloud and the security and reliability that comes with dedicated infrastructure. SmartCabs are designed to offer a hybrid solution, providing customers with dedicated, single tenant colocation infrastructure while still enabling them to bypass the traditional, time-consuming process of ordering and provisioning into their colocation environments.

総株主利回り	0%
将来の配当利回り	0%
配当成長	n/a
次回配当支払日	n/a
配当落ち日	n/a
一株当たり配当金	n/a
配当性向	n/a

セグメント	配当利回り
会社 (CYXT.Q)	n/a
市場下位25% (US)	1.4%
市場トップ25% (US)	4.2%
業界平均 (IT)	2.5%
アナリスト予想 (CYXT.Q) (最長3年)	0%

データ	最終更新日（UTC時間）
企業分析	2024/01/16 14:23
終値	2024/01/16 00:00
収益	2023/03/31
年間収益	2022/12/31

パッケージ	データ	タイムフレーム	米国ソース例
会社財務	10年	損益計算書キャッシュ・フロー計算書貸借対照表	SECフォーム10-K SECフォーム10-Q
アナリストのコンセンサス予想	+プラス3年	予想財務アナリストの目標株価	アナリストリサーチレポート Blue Matrix
市場価格	30年	株価配当、分割、措置	ICEマーケットデータ SECフォームS-1
所有権	10年	トップ株主インサイダー取引	SECフォーム4 SECフォーム13D
マネジメント	10年	リーダーシップ・チーム取締役会	SECフォーム10-K SECフォームDEF 14A
主な進展	10年	会社からのお知らせ	SECフォーム8-K

アナリスト	機関
Nathan Crossett	BNP Paribas
Frank Louthan	Raymond James & Associates
Jonathan Atkin	RBC Capital Markets

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Cyxtera Technologies 配当と自社株買い

配当金 基準チェック /06

主要情報

最近の配当と自社株買いの更新

Recent updates

Cyxtera Technologies Files Form 15

Cologix, Inc. entered into an agreement to acquire Montreal and Vancouver data centers business from Cyxtera Technologies, Inc. (OTCPK:CYXT.Q).

Cyxtera Launches AI + Quantum Center of Excellence to Empower Customers to Explore New Technologies

Second Amended Reorganization Plan & Disclosure Statement Filed by Cyxtera Technologies, Inc.

Nasdaq to Delist the Class A Common Stock of Cyxtera Technologies

Cyxtera Technologies, Inc.(OTCPK:CYXT.Q) dropped from NASDAQ Composite Index

New major risk - Market cap size

Nasdaq Determines to Delist Cyxtera Technologies's Class A Common Stock as Result of the Chapter 11 Cases

Cyxtera Technologies, Inc.(NasdaqGS:CYXT) dropped from S&P TMI Index

Motion for Joint Administration Filed by Cyxtera Technologies, Inc.

Cyxtera Technologies, Inc. Elects Scott Vogel to Serve as A Member of the Board

Cyxtera Technologies Receives Notice from Nasdaq Regarding Failure to Maintain Minimum Bid Price

Cyxtera Technologies Inc. may file for bankruptcy.

Price target decreased by 8.6% to US$4.57

Full year 2022 earnings: EPS misses analyst expectations

Price target decreased by 17% to US$5.00

At US$3.25, Is Cyxtera Technologies, Inc. (NASDAQ:CYXT) Worth Looking At Closely?

Cyxtera Technologies, Inc. Announces Board Changes

Price target decreased to US$8.86

High number of new and inexperienced directors

Third quarter 2022 earnings: EPS misses analyst expectations

Cyxtera Technologies, Inc. Affirms Earning Guidance for the Year 2022

Cyxtera Technologies, Inc. to Report Q3, 2022 Results on Nov 08, 2022

Price target decreased to US$12.00

Price target decreased to US$13.00

Price target decreased to US$13.71

Cyxtera Technologies, Inc.'s (NASDAQ:CYXT) Intrinsic Value Is Potentially 37% Above Its Share Price

Now 27% undervalued after recent price drop

Now 25% undervalued after recent price drop

Cyxtera Technologies: Unsustainable Business Model

Cyxtera Technologies, Inc. (NASDAQ:CYXT) Second-Quarter Results Just Came Out: Here's What Analysts Are Forecasting For This Year

Second quarter 2022 earnings: EPS misses analyst expectations

Cyxtera Technologies, Inc. Reaffirms Its Full-Year 2022 Guidance for Revenue

Cyxtera GAAP EPS of -$0.27 misses by $0.06, revenue of $184.7M misses by $0.3M

Cyxtera Technologies, Inc. to Report Q2, 2022 Results on Aug 11, 2022

Is Cyxtera Technologies, Inc. (NASDAQ:CYXT) Worth US$12.6 Based On Its Intrinsic Value?

Price target increased to US$15.00

Consensus forecasts updated

First quarter 2022 earnings: EPS misses analyst expectations

Cyxtera Technologies, Inc. Provides Revenue Guidance for the Full Year 2022

High number of new and inexperienced directors

Cyxtera Launches Its Native Cyxtera Cloud Connect Offering

Cyxtera Technologies, Inc., Annual General Meeting, Jun 08, 2022

Cyxtera Technologies: Compelling Value With Secular Tailwinds

A Look At The Intrinsic Value Of Cyxtera Technologies, Inc. (NASDAQ:CYXT)

Cyxtera Technologies, Inc. Offers OEMs and Technology Service Providers Plug-And-Play Capability to Delivering As-A-Service Solutions

Price target increased to US$13.00

Third quarter 2021 earnings released: US$0.32 loss per share

Cyxtera Expands its Digital Exchange with Smart Cabinets, Offering On-Demand Colocation Infrastructure with Native Access to a Configurable Network Fabric

Lead Independent Director recently bought US$785k worth of stock

Director Raymond Svider has joined 5th company board

Director Raymond Svider has joined 5th company board

決済の安定と成長

配当利回り対市場

株主への利益配当

株主配当金

高配当企業の発掘

企業分析と財務データの現状

データソース

分析モデルとスノーフレーク

業界およびセクターの指標

アナリスト筋

配当金基準チェック /06