QTS Announces Strategic Plan to Accelerate Growth and Profitability
OVERLAND PARK, Kan., Feb. 20, 2018 /PRNewswire/ -- QTS Realty Trust (NYSE: QTS), a leading provider of software-defined and mega-scale data center solutions, today announced a restructuring plan to increase growth, reduce complexity in the business and drive enhanced future profitability and bottom line financial performance.
"Today we are launching a restructuring plan to position QTS for accelerated future growth by re-focusing our organization around the two primary drivers of demand in our business, Hyperscale and Hybrid Colocation," said Chad Williams, Chairman and CEO - QTS. "In addition, by simplifying our business and cost structure we anticipate achieving a meaningful increase in our profitability and long-term value for shareholders."
QTS' restructuring plan will focus on:
1. Realigning its
organization
around: Hyperscale
and Hybrid
Colocation to drive
accelerated growth.
QTS is seeing
significant
momentum within
both Hyperscale and
Hybrid Colocation
opportunities. As
such, QTS is re-
focusing its
organization and
salesforce on these
two demand drivers
to accelerate
momentum and
growth. Dan
Bennewitz, COO -
Sales and
Marketing, plans to
retire in 2018. QTS
has commenced a
search for a Chief
Revenue Officer as
a replacement who
will lead both
Hybrid Colocation
Sales and
Marketing. Tag
Greason, EVP of
Sales will continue
to lead QTS'
Hyperscale sales
team.
° Hyperscale. QTS'
momentum within
Hyperscale
continues to
build and has
accelerated
since announcing
new footprint
expansion
opportunities in
Ashburn, VA;
Phoenix, AZ; and
Hillsboro, OR in
late 2017. QTS'
current
Hyperscale
opportunity
pipeline is four
times larger
than its
pipeline at the
beginning of
2017 and the
Company is in
active
discussions with
Hyperscale
companies on
needs ranging
from 4 to 40MW.
In order to
support
accelerating
momentum in the
Hyperscale
vertical, QTS
has realigned
its salesforce
so that its
former
C1-Wholesale
sales team will
now focus
exclusively on
the top 30
Hyperscale
accounts. QTS
expects a more
focused
Hyperscale sales
team will build
on existing
execution within
the Hyperscale
vertical and
lead to
accelerated
leasing and
revenue growth.
Hybrid
Colocation. QTS
also continues
to see ramping
demand for
colocation
solutions,
seamlessly
integrated with
a path to the
cloud as
evidenced by its
recently
announced
CloudRamp
partnership with
the largest
public cloud
provider in the
world. Through
its industry-
first software-
defined data
center platform
and strategic
partnerships
with SDN-
enabled
connectivity
platforms like
Megaport and
Packetfabric,
QTS is able to
deliver
differentiated
Hybrid
Colocation
solutions,
complete with
dynamic
infrastructure
visibility and
control and
premium customer
support. In
order to take
full advantage
of this
opportunity, QTS
has removed the
artificial cap
of 500kW for its
Hybrid
Colocation
(formerly C2-
Colocation)
sales team which
enables the bulk
of QTS sales
resources to now
pursue all non-
Hyperscale
enterprise
deals. QTS is
already seeing
success from
this
realignment,
with multiple
deals signed and
in the pipeline
in the 500kW to
2MW range.
°
° Jim Reinhart,
QTS' COO-
Operations will
be transitioning
out of the
organization.
Mr. Reinhart's
operational
responsibilities
will be assumed
as follows:
-- David Robey, who currently leads
QTS property development,
hyperscale sales engineering and
property engineering, will take
on additional leadership of the
facilities organization and will
assume the role of Chief
Operating Officer. Mr. Robey
joined QTS in 2010 as part of the
acquisition of QTS' mega data
center site in Richmond and has
nearly 25 years of mission
critical operations and
technology management experience.
-- Jon Greaves, Chief Technology
Officer who currently leads all
IT-related groups within QTS,
will take on additional
operational responsibility of the
Hybrid Colocation business. The
ability to enable hybrid
solutions through a technology
platform serves as the foundation
of QTS' differentiation within
Hybrid Colocation, which makes
Mr. Greaves a natural choice to
lead this business.
2. Further narrowing
focus of C3 - Cloud
and Managed
Services products
to reduce
complexity in the
business, improve
predictability and
operating
efficiency. QTS has
expanded the
previously
announced
initiative of
reducing the scope
of products within
C3 to focus
exclusively on
solutions that
serve as a direct
complement to
colocation. As part
of this initiative,
QTS will seek to
exit certain C3
custom products the
company has
identified as "Non-
Core," which
includes dedicated
cloud, specific
managed services,
and colocation
revenue attached to
specific dedicated
cloud customers.
QTS will seek to
transition the
affected Non-Core
customer contracts
to a strategic
partner to maintain
consistent customer
support. This
expanded initiative
will reduce the
number of cloud and
managed services
products at QTS
from more than 100
to approximately 15
and thereby
significantly
reduce complexity
within the
business. In
addition, by
exiting Non-Core
products, the
Company expects to
realize meaningful
operating cost
savings and
enhanced
predictability in
the business. QTS
expects to complete
the exit of Non-
Core products by
the end of 2018.
3. Implementing a
broader cost
reduction
initiative to align
QTS' cost structure
with a simplified
product set. In
light of a narrowed
product focus, QTS
plans to implement
a company-wide
initiative to
reduce costs within
the business across
several areas
including: 1) rent
expense associated
with certain leased
data centers, 2)
software licenses,
3) communications
expense, 4)
hardware
depreciation and 5)
personnel. QTS
expects these cost
reduction
initiatives will
enable the
Company's go-
forward "Core"
business to achieve
a significant
adjusted EBITDA
margin improvement
over the course of
2018 with
additional margin
expansion potential
over time. QTS
anticipates its
restructuring plan
to have only a
relatively modest
impact on its
consolidated 2018
Adjusted EBITDA and
Operating FFO per
diluted share
results as a result
of a more efficient
cost structure and
it will provide an
opportunity for
improved growth in
future years.
Williams concluded, "Our restructuring plan allows QTS to re-focus 100% of our resources on the two strongest growth drivers in our business and accelerate value creation for shareholders. In addition, this realignment creates an opportunity for several of our leaders to step into more substantial roles and help lead QTS into our next phase of growth supported by Hyperscale and Hybrid Colocation."
Beginning in the first quarter 2018, QTS will modify its earnings reporting and supplemental disclosures to reflect the realignment of its business around Hyperscale and Hybrid Colocation. QTS also expects to separate out the reporting of primary financial measures between its Core and Non-Core businesses to enable enhanced disclosure transparency.
Cautionary Note Regarding Forward-Looking Statements
Some of the statements contained in this press release constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In particular, statements pertaining to the Company's capital resources, portfolio performance, results of operations, anticipated growth in our funds from operations and anticipated market conditions contain forward-looking statements. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You also can identify forward-looking statements by discussions of strategy, plans or intentions.
The forward-looking statements contained in this press release reflect the Company's current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause the Company's actual results to differ significantly from those expressed in any forward-looking statement. The Company does not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: adverse economic or real estate developments in our markets or the technology industry; obsolescence or reduction in marketability of our infrastructure due to changing industry demands; global, national and local economic conditions; risks related to our international operations; difficulties in identifying properties to acquire and completing acquisitions; our failure to successfully develop, redevelop and operate acquired properties or lines of business; significant increases in construction and development costs; the increasingly competitive environment in which we operate; defaults on, or termination or non-renewal of, leases by customers; decreased rental rates or increased vacancy rates; increased interest rates and operating costs, including increased energy costs; financing risks, including our failure to obtain necessary outside financing; dependence on third parties to provide Internet, telecommunications and network connectivity to our data centers; our failure to qualify and maintain QTS' qualification as a real estate investment trust; environmental uncertainties and risks related to natural disasters; financial market fluctuations; and changes in real estate and zoning laws, revaluations for tax purposes and increases in real property tax rates.
While forward-looking statements reflect the Company's good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the Company's future results to differ materially from any forward-looking statements, see the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 and other periodic reports the Company files with the Securities and Exchange Commission.
About QTS
QTS Realty Trust, Inc. (NYSE: QTS) is a leading provider of data center solutions across a diverse footprint spanning more than 6 million square feet of owned mega scale data center space throughout North America. Through its software-defined technology platform, QTS is able to deliver secure, compliant infrastructure solutions, robust connectivity and premium customer service to more than 1,100 leading hyperscale technology companies, enterprises, and government entities. Visit QTS at www.qtsdatacenters.com, call toll-free 877.QTS.DATA or follow on Twitter @DataCenters_QTS.
Investor Relations Contact:
Stephen Douglas, VP Investor Relations and Strategic Planning
QTS Realty Trust
ir@qtsdatacenters.com
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SOURCE QTS Realty Trust, Inc.
