20 December 2018 Americas/United States Equity Research Data Center REITs
Interxion Holding (INXN) Rating OUTPERFORM Price (18-Dec-18, US$) 56.80 INITIATION Target price (US$) 70.00 52-week price range (US$) 68.75 - 55.11 Positioned in a European Rising Tide Market cap(US$ m) 3,971 Enterprise value (US$ m) 5,271 ■ In coordination with our 2019 Outlook Launch, titled, “The Cloud Has Four Target price is for 12 months. Walls (2019 Edition)”, we initiate coverage of InterXion (INXN) with an Research Analysts Outperform rating and a $70 target price, implying upside potential of 23%. Sami Badri 212 538 1727 ■ Positioned In a Rising Tide: INXN is well positioned to capture expansions [email protected] from existing customers and see better market pricing for capacity as a result Michael Westendorf of factors that its direct competitors are driving in the European region. 212 325 1730 Specifically, Equinix-EMEA has started to lift data center capacity pricing in [email protected] its European data centers and standardize interconnection services, a revenue stream that has not been optimally monetized in the European region. Owing to these factors, we believe INXN's EBITDA margins and recurring revenues are set to rise with little incremental investment, INXN to benefit from a rising colocation market tide. ■ Growing 2x European Market, Supported by Broad Sector Strength: INXN is growing twice the European data center market rate, driven by telecommunications, cloud, and enterprise customers expanding their footprints across key markets in Europe. Growth is fueled by low latency application and hybrid cloud technology demand that is only intensifying globally, highlighted in two extensive I.H.S. Markit industry survey findings. ■ Win-Win-Win Setup Pointing to Upside: INXN is one of the few data center operators that is at the cross-section of what we believe could be a viable win-win-win setup in the medium term, including a scenario for (1) currently generated ~10% return on invested capital yields to expand, driven by favorable business dynamics, (2) resulting in multiple expansion for INXN's market valuations and (3) with the added optionality of strategic maneuvers available at the company's disposal, thus creating a win-win-win setup. ■ Valuation—Outperform, $70 Target Price: We value INXN based on an EV/EBITDA multiple of 15.5x on our 2020E Adj. EBITDA est. of €352.2mil. ■ Risks: Risks to investing in the company include technological disruption, market competition, and rising interest rates. Share price performance Financial and valuation metrics
7 0 Year 12/17A 12/18E 12/19E 12/20E EPS (Excl. ESO) (€) 0.56 0.51 0.74 0.69 6 5 EPS (CS adj., ) 0.58 0.44 0.69 0.66 Prev. EPS (CS adj., €) 6 0 P/E (CS adj.) (x) 86.7 113.5 72.7 76.1 5 5 P/E rel. (CS adj., %) 414.1 671.9 468.2 540.9 Jan - 1 8 A p r - 1 8 Ju l- 1 8 O ct - 1 8 Revenue (€ m) 489,301.0 563,578.4 649,174.8 739,040.6 EBITDA (€ m) 207,769.0 238,804.4 280,058.0 327,390.2 IN XN .N S& P 5 0 0 IN D EX Net Debt (€ m) 794,328 1,214 1,554 1,939 On 18-Dec-2018 the S&P 500 INDEX closed at 2546.16 OCFPS (€) 2.16 2.25 2.90 3.10 Daily Dec19, 2017 - Dec18, 2018, 12/19/17 = US$58.37 P/OCF (x) 23.1 22.3 17.2 16.1
Quarterly EPS Q1 Q2 Q3 Q4 Number of shares (m) 69.92 Price/Sales (x) 6.42 2017A 0.14 0.13 0.14 0.17 BV/share (Next Qtr., €) 7.7 P/BVPS (x) 6.5 2018E 0.17 -0.03 0.14 0.17 Net debt (Next Qtr., € m) 1,074,867.4 Dividend (current, €) - 2019E 0.18 0.15 0.17 0.19 Dividend yield (%) - Source: Company data, Thomson Reuters, Credit Suisse estimates
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. 20 December 2018
Interxion Holding (INXN) Price (18 Dec 2018): US$56.8; Rating: OUTPERFORM; Target Price: 70.00; Analyst: Sami Badri Income Statement 12/17A 12/18E 12/19E 12/20E Company Background Revenue (€ m) 489,301.0 563,578.4 649,174.8 739,040.6 Interxion is a data center operator headquartered in the Netherlands Sales 489,301.0 563,578.4 649,174.8 739,040.6 and offering colocation and other services to customers in Europe. EBITDA 207,769.0 238,804.4 280,058.0 327,390.2 Operating profit 99,518.0 110,413.7 131,710.2 155,064.9 Blue/Grey Sky Scenario Recurring profit 55,151.0 51,937.0 72,597.0 68,092.7 Cash Flow 12/17A 12/18E 12/19E 12/20E Cash flow from operations 155,246 161,831 209,811 224,878 CAPEX (247,228) (424,468) (495,607) (551,385) Free cashflow to the firm (91,982) (262,638) (285,796) (326,507) Cash flow from investments (335,619) (435,883) (509,422) (566,637) Net share issue(/repurchase) - - - - Dividends paid 0 0 0 0 Issuance (retirement) of debt - - - - Other 104,597 452,844 238,856 331,048 Cashflow from financing activities 104,597 452,844 238,856 331,048 Effect of exchange rates - - - - Changes in Net Cash/Debt (174,764) 793,114 (340) (385) Net debt at end 794,328 1,214 1,554 1,939 Balance Sheet ($US) 12/17A 12/18E 12/19E 12/20E Assets Other current assets 0 0 0 0 Total current assets 218,270 432,164 401,328 415,423 Total assets 1,702,071 2,247,711 2,572,811 2,971,828 Liabilities Short-term debt 108,760 4,879 4,879 4,879 Total current liabilities 344,875 266,331 300,184 327,682 Long-term debt 724,052 1,287,192 1,527,192 1,857,192 Total liabilities 1,105,343 1,602,167 1,876,020 2,233,518 Shareholder equity 596,897 645,700 696,948 738,466 Our Blue Sky Scenario (US$) 81.00 Total liabilities and equity 1,702,240 2,247,867 2,572,967 2,971,984 We see a blue sky scenario of $81 based on a 17.6x EV multiple, a Net debt 794,328 1,214 1,554 1,939 EUR/USD conversion factor of 1.13, and our 2020 Adjusted EBITDA of €352.2 mil. This valuation reflects any further favorable trends the Per share 12/17A 12/18E 12/19E 12/20E business may experience in the future. No. of shares (wtd avg) 71,725 72,047 72,267 72,508 CS adj. EPS 0.58 0.44 0.69 0.66 Prev. EPS (€) Our Grey Sky Scenario (US$) 43.00 Dividend (€) 0.00 0.00 0.00 0.00 We see a grey sky scenario of $43 based on a 10.7x EV multiple, a Free cash flow per share (1.28) (3.65) (3.95) (4.50) EUR/USD conversion factor of 1.13, and our 2020 Adjusted EBITDA Earnings 12/17A 12/18E 12/19E 12/20E of €352.2 mil. The grey sky valuation represents a worst-case Sales growth (%) 16.0 15.2 15.2 13.8 scenario in which the risks to valuation identified in this initiation limit EBIT growth (%) 7.5 10.9 19.3 17.7 the performance of the company. Net profit growth (%) 1.1 (9.6) 46.5 (6.2) EPS growth (%) 12.4 (23.6) 56.2 (4.6) Share price performance EBIT margin (%) 20.3 19.6 20.3 21.0 Valuation 12/17A 12/18E 12/19E 12/20E 7 0 EV/Sales (x) 1.63 0.01 0.01 0.01 EV/EBIT (x) 8.0 0.0 0.0 0.0 6 5 P/E (x) 86.7 113.5 72.7 76.1 Quarterly EPS Q1 Q2 Q3 Q4 6 0 2017A 0.14 0.13 0.14 0.17 2018E 0.17 -0.03 0.14 0.17 2019E 0.18 0.15 0.17 0.19 5 5 Jan - 1 8 A p r - 1 8 Ju l- 1 8 O ct - 1 8
IN XN .N S& P 5 0 0 IN D EX
On 18-Dec-2018 the S&P 500 INDEX closed at 2546.16 Daily Dec19, 2017 - Dec18, 2018, 12/19/17 = US$58.37
Source: Company data, Thomson Reuters, Credit Suisse estimates
Interxion Holding (INXN)2 20 December 2018
Key Charts Figure 1: INXN Projected to Grow Revenues by Figure 2: Focused on Europe, INXN Consistently 13.8% in 2020E, Above Peer Comps Growing ~2x EMEA MTDC Market in 2019E/2020E
30% 20% 18.2% 18% 25%
) 16% 15.2% %
( 13.8% 14% h ) 20% t % w ( o 12% r 10.8% h t G
w e
o 15% 13.8% 10% u r 13.2%
12.3% n G 12.1% 12.1%
e
v 7.0% 7.0% e 8% e u 9.4% n R
10% e 8.2% 6% Y v / e 6.4% Y R 4% Y
/ 5% Y 2% 0% 0% INXN EQIX - EMEA Only EMEA MTDC* Market DLR MTDC* EQIX SWCH CONE COR QTS INXN 2019E 2020E 2018E 2019E 2020E
Source: Company data, Credit Suisse estimates, I.H.S. Markit. * Multi-Tenant DC Market. Source: Company data, Credit Suisse estimates, I.H.S. Markit. * Multi-Tenant DC Market.
Figure 3: INXN Strong Revenue Growth Driving Figure 4: INXN's Business Mix Indexed to Growing Higher Adj. EBITDA Growth Data Growth and Mission-Critical Applications…
30% 100%
90% 30% 33% 25% 31% 33% 33% ) 80% % ( ) 70% h % t (
20% x w i o
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r 16.9% l
a 29% 31% G c
i t
r 50% A 14.1% 35% 38% 40% 15% e D V 12.6% 12.7% 12.9% T y I r
t 40% s B
10.3% u 9% 8% E d
. n I j 10% 30% d 7.2% A 20% Y
/ 31% 31% 32% 31% 30% Y 5% 10%
0% 0% 2016 2017 2018E 2019E 2020E DLR EQIX SWCH CONE COR QTS INXN Enterprise Systems Integrators Cloud Connectivity 2018E 2019E 2020E
Source: Company data, Credit Suisse estimates. Source: Company data, Credit Suisse estimates.
Figure 5: INXN Has Capacity to Take On ~2x Debt Figure 6: INXN Currently Receiving Little Credit for Leverage to Keep Scaling Its Business Multiple Expansion Model Dynamics
8.0x 18.0x 17.6x )
A 7.07 D
T 7.0x I 17.0x B E
. j 5.65 16.0x d 6.0x 5.63
A 5.38
E
8 15.0x
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( 14.0x 3.86 A 4.0x 3.58 D T
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t e
N 1.0x 10.0x 1/2/2015 1/2/2016 1/2/2017 1/2/2018 0.0x COR INXN EQIX SWCH DLR CONE QTS EV/FY2 EBITDA Avg Max Min
Source: Company data, Credit Suisse estimates. Source: Thomson Eikon, Company data, Credit Suisse estimates.
Interxion Holding (INXN)3 20 December 2018
Executive Summary We initiate coverage of InterXion Holding (INXN) with an Outperform rating and a $70 target price, implying 23% upside potential from current levels. We highlight the following main factors that support our rating and target price, summarized herein and expanded upon in our report. (1) Positioned Well in a Rising Tide: We believe INXN is one of the best-positioned operators in Europe owing to its data center facility footprint across core European markets, and we see the company's position only strengthening fundamentally driven by factors its direct competitors are driving in the European region. Specifically, we highlight EQIX via the Telecity acquisition that has started to improve colocation pricing across the European markets and charge customers for recurring interconnection services, a revenue stream that has not been optimally monetized in the European region in contrast to the Americas and Asia where businesses are more established. Given these factors, INXN's pricing and recurring revenues are set to rise organically, in our view, driven by strong market dynamics in Europe that likely enable the company to benefit from a rising colocation market tide across the overall European region. (2) Colocation Industry Only Strengthening: Highlighted in our 2019 Outlook report, titled, "The Cloud Has Four Walls (2019 Edition)," we identify increasing evidence that global colocation demand and reliance are only increasing based on two comprehensive industry surveys from IT decision-makers. Owing to the findings from these surveys, we identify INXN as a beneficiary from an end-market perspective, given its vertical customer revenue mix of 35% cloud, 33% connectivity, and 32% enterprise, all of which need low latency interconnection and colocation services to enhance their application performance in a cloud-enabled network landscape. (3) Potential Win-Win-Win Setup Pointing to Upside: As we project INXN’s model to positively inflect in the medium term, driven by the aforementioned factors, we see a scenario for (1) return on invested capital yields to expand driven by favorable business dynamics and international opportunities, (2) resulting in multiple expansion for INXN's market valuations and (3) with the added optionality of strategic maneuvers available at the company's disposal, thus creating a win-win-win setup that would support our Outperform rating and outlook for InterXion Valuation—Outperform, $70 Target Price: We value INXN at $70 per share based on our 2020 EBITDA estimate of €352.2mil multiplied by an EV/FY2 adjusted EBITDA multiple of 15.5x. Risks: Risks to investing in the company include technological disruption, market competition, geographic concentration, and rising interest rates.
Interxion Holding (INXN)4 20 December 2018
INXN Growing 2x the European Market InterXion (INXN) is one of the few pure-play colocation data center operators with over 50 data center locations in 13 cities serving over 2,000 unique customers, competing mainly against telecom, colocation, and connectivity vendors across the European region, competing predominantly against larger operators, including Equinix (EQIX) and Digital Realty (DLR), across its core European markets that include Frankfurt, London, Amsterdam, and Paris. Management notes that EQIX is commonly competing directly with them for business, but INXN considers both themselves and EQIX to be the premier data center options in Europe. The primary difference between the two companies is EQIX’s global scale compared to INXN’s regional focus; however, INXN is open to expanding in the future to other regions. We forecast INXN revenue growth of 15.2%/13.8% for FY19/20, ahead of the global data center market growing at 9%/8% and of the European data center market growing at 7%/7%, respectively. We highlight the global growth rate of the multitenant data center market in Figure 7, which is the market INXN addresses directly, while we compare INXN with its direct peers in Figure 8 and Figure 9.
Figure 7: Global MTDC Market Growing at an ~8.4% CAGR Through 2022, Lifted by Interconnection, a Large Positive for INXN Americas CAGR ($ millions) 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 13-'17 17-'22 Colocation 6,554 7,223 8,057 8,884 9,799 10,702 11,542 12,401 13,248 14,064 10.6% 7.5% Y/Y Change 10% 12% 10% 10% 9% 8% 7% 7% 6% Interconnection 757 834 931 1,088 1,255 1,417 1,623 1,834 2,064 2,303 13.5% 12.9% Y/Y Change 10% 12% 17% 15% 13% 15% 13% 13% 12% Other 520 573 639 637 706 826 888 920 938 947 8.0% 6.1% Y/Y Change 10% 12% 0% 11% 17% 8% 4% 2% 1% Total MTDC Revenue 7,831 8,630 9,627 10,609 11,759 12,945 14,054 15,155 16,249 17,314 10.7% 8.0% Y/Y Change 10.2% 11.5% 10.2% 10.8% 10.1% 8.6% 7.8% 7.2% 6.6%
EMEA CAGR ($ millions) 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 13-'17 17-'22 Colocation 3,955 4,319 4,274 4,368 4,782 5,219 5,580 5,965 6,371 6,761 4.9% 7.2% Y/Y Change 9% -1% 2% 9% 9% 7% 7% 7% 6% Interconnection 352 384 380 408 458 505 565 630 702 776 6.8% 11.1% Y/Y Change 9% -1% 7% 12% 10% 12% 12% 11% 11% Other 298 325 322 307 325 351 358 365 369 370 2.2% 2.6% Y/Y Change 9% -1% -5% 6% 8% 2% 2% 1% 0% Total MTDC Revenue 4,605 5,028 4,976 5,083 5,565 6,075 6,502 6,960 7,442 7,906 4.8% 7.3% Y/Y Change 9.2% -1.0% 2.2% 9.5% 9.2% 7.0% 7.0% 6.9% 6.2%
Asia Pacific CAGR ($ millions) 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 13-'17 17-'22 Colocation 3,132 3,572 3,983 4,627 5,043 5,670 6,278 6,894 7,501 8,096 12.6% 9.9% Y/Y Change 14% 11% 16% 9% 12% 11% 10% 9% 8% Interconnection 261 298 332 404 450 511 585 665 751 841 14.6% 13.3% Y/Y Change 14% 11% 22% 11% 13% 15% 14% 13% 12% Other 215 246 274 298 314 350 374 395 409 419 9.9% 5.9% Y/Y Change 14% 11% 9% 5% 11% 7% 6% 4% 2% Total MTDC Revenue 3,609 4,116 4,589 5,329 5,807 6,531 7,238 7,954 8,661 9,356 12.6% 10.0% Y/Y Change 14.1% 11.5% 16.1% 9.0% 12.5% 10.8% 9.9% 8.9% 8.0%
Global MTDC Market CAGR ($ millions) 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 13-'17 17-'22 Colocation 13,641 15,115 16,314 17,879 19,624 21,591 23,400 25,261 27,120 28,921 9.5% 8.1% Y/Y Change 11% 8% 10% 10% 10% 8% 8% 7% 7% Interconnection 1,370 1,516 1,643 1,900 2,163 2,433 2,773 3,129 3,517 3,920 12.1% 12.6% Y/Y Change 11% 8% 16% 14% 13% 14% 13% 12% 11% Other 1,033 1,144 1,235 1,242 1,345 1,527 1,620 1,680 1,716 1,736 6.8% 5.2% Y/Y Change 11% 8% 1% 8% 14% 6% 4% 2% 1% Total MTDC Revenue 16,044 17,774 19,191 21,021 23,131 25,551 27,794 30,069 32,352 34,576 9.6% 8.4% Y/Y Change 10.8% 8.0% 9.5% 10.0% 10.5% 8.8% 8.2% 7.6% 6.9%
Source: I.H.S. Markit, Company data, Credit Suisse estimates. INXN Growth Compelling Versus Comps InterXion is not only forecasted to grow at double the rate of the European multitenant data center market in 2019E through 2020E, but it is also forecasted to grow the fastest among its direct peer group on a year-over-year revenue growth basis in 2020E, highlighted in Figure 8. Furthermore, the company is lagging EQIX's revenue growth in
Interxion Holding (INXN)5 20 December 2018
EMEA in 2019E, shown in Figure 9, but organically outpacing EQIX's growth in 2020E, driven by existing customer demand that constitutes ~90% of new development leasing. In addition, EQIX EMEA's growth rate has ticked up over the past two years, driven by the Telecity acquisition and a return of economic strength across the European markets for data center capacity despite headwinds such as Brexit and highly enforced GDPR regulatory standards.
Figure 8: INXN Projected to Grow Revenues by Figure 9: Focused on Europe, INXN Consistently 13.8% in 2020E, Above Peer Comps and the Global Growing ~2x EMEA MTDC Market in 2019E/2020E, MTDC Market Growing at 8.2% in 2020E Outpacing EQIX EMEA in 2020E
30% 20% 18.2% 18% 25%
) 16% 15.2% %
( 13.8% 14% h ) 20% t % w ( o 12% r 10.8% h t G
w e
o 15% 13.8% 10% u r 13.2%
12.3% n G 12.1% 12.1%
e
v 7.0% 7.0% e 8% e u 9.4% n R
10% e 8.2% 6% Y v / e 6.4% Y R 4% Y
/ 5% Y 2% 0% 0% INXN EQIX - EMEA Only EMEA MTDC* Market DLR MTDC* EQIX SWCH CONE COR QTS INXN 2019E 2020E 2018E 2019E 2020E
Source: Company data, Credit Suisse estimates, I.H.S. Markit. * Multi-Tenant DC Market. Source: Company data, Credit Suisse estimates, I.H.S. Markit. * Multi-Tenant DC Market. European Markets Positioned Well A recent industry report, sourced by CBRE, highlighted strong growth in the FLAP markets of Frankfurt, London, Amsterdam, and Paris, the four largest European data center markets (excluding several EMEA markets). There was 52.9MW of take-up in the FLAP markets in 3Q18, with 61% of the take-up in 3Q18 being from two transactions that were hyperscale transactions in Amsterdam and London and responsible for a total of 36.0MW of take-up. (See Figure 10.) In our view, INXN is well positioned to capitalize on the strong secular growth in the European data center markets, further supported by its focus on the European market, which is an advantage that could enable the company to outpace market growth consistently, extrapolated in our INXN financial model. Our view is that INXN can benefit from these growth trends and that investors will see the European market more favorably than the North American market, which faces greater uncertainty from market competition, hyperscale spending volatility, and a rising interest rate environment. In addition to solid overall market absorption, INXN and EQIX-EMEA have seen solid portfolio utilization rates in the past three years, highlighted in Figure 11, despite a large supply of capacity entering the market, a testament to the strength the European data center markets are demonstrating.
Interxion Holding (INXN)6 20 December 2018
Figure 10: FLAP Market Colocation Supply and Figure 11: Despite Heavy Supply Entering the Take-up Shows Strong Growth, with Take-up Likely European Markets, INXN and EQIX-EMEA Are Reaching 200MW in 2018 Maintaining or Expanding Facility Utilization Rates
1,800 200 86%
180 ) 85%
1,600 r e k 1,400 160 r 84% a ) M
140 1,200 % 83% ( w
W o s
120 l l e M 82%
1,000 t e y Y a l
100 (
R p
81%
p 800 W n
u 80 o S i M
600 t 80% p 60 a z U i - l 79% i e 400 40 t k U a 78% 200 20 T 0 0 77% 2013 2014 2015 2016 2017 3Q18 2018E 2019E 76% 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18E Supply Take-Up INXN EQIX EMEA
Source: CBRE, Credit Suisse Research. Source: Company data, Credit Suisse estimates. European Colocation Market Pricing Also Improving Further assessing the fundamentals of the European market strength, the recurring revenue per cabinet within EQIX-EMEA's data center install base, and our projections has been supportive of our view that European colocation market strength and pricing are improving. (See Figure 12.)
Figure 12: EQIX EMEA Saw Strong Monthly Recurring Revenue (MRR) per Cabinet Growth in 2H 2017, with Steady Growth Through 2020E on a Strengthening Price Environment
$1,800 8% 5.6% ) 6% $ ( $1,700 e
u 4%
n 2.1% e v $1,600 0.7% 0.8% 0.5% 0.7% 0.5% 0.5% 0.5% 2% e 0.4% 0.3% 0.2% 0.3% 0.3% R
g -1.6% 0% n i $1,500 r r -2% u c e
R $1,400 -4%
y l h
t -6% n $1,300 o
M -8% $1,200 -10% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E
Total MRR Per Cab Q/Q Growth
Source: Company data, Credit Suisse estimates. INXN Pricing Also Seeing a Lift Highlighted in Figure 13, INXN MRR per cabinet is also increasing, correlated to the same periods when EQIX EMEA began integrating its Telecity acquisition and standardizing pricing across the various European data center markets. Moreover, we note that INXN MRR per cabinet is lower than EQIX EMEA even after adjusting for foreign exchange rates, screening INXN as the less-expensive vendor on a services rendered and cabinet leasing basis, supportive of our market position thesis for the company.
Interxion Holding (INXN)7 20 December 2018
Figure 13: INXN Also Seeing Recurring Revenue per Cabinet Lifted with Our 2019E and 2020E Recurring Revenue per Cabinet Pricing Growth Conservatively Forecasted, Implying Potential Upside to Pricing
1,060 € 2.6% 4% )
R 2% U 1,050 € 0.3% 0.6% 0.5% 0.5% 0.5% 0.5% E 0.0% 0.0% 0.0% 0.0% 0.0% ( -0.4% -0.7% e -1.0% 0% u
n 1,040 € e v
e -2% R 1,030 € g n
i -4% r r
u 1,020 € c
e -6% R
y l
h 1,010 €
t -8% n o
M 1,000 € -10% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E
INXN MRR Per Cab. Q/Q Growth
Source: Company data, Credit Suisse estimates.
EQIX to Do the Heavy Lifting in Europe Given EQIX EMEA generates three times more revenue than INXN and has proven that it is capable of increasing pricing in the region despite high volumes of supply entering the market (see Figure 10), we see a clear path for EQIX to do the heavy lifting by standardizing market pricing across various European markets and INXN seeing the benefit given its lower prices on a per cabinet basis versus EQIX EMEA. Furthermore, we believe EQIX has to increase pricing in EMEA since EMEA recurring revenues for colocation and interconnection are much lower on a per cabinet basis (see Figure 14), compressing the company's total return on invested capital yield, particularly when comparing the Americas and Asian markets on a like-for-like basis to the European market, underlining a clear motive to increase pricing in the entire region. It is for this factor we believe Europe is a rising tide environment in which INXN is positioned as the less-expensive vendor (versus EQIX EMEA) with the potential to further increase pricing, expand returns on invested capital, and monetize interconnection services.
Interxion Holding (INXN)8 20 December 2018
Figure 14: EQIX's EMEA Metrics Lag Americas and APAC Materially Region Metric / Criteria 2017A 2018E 2019E Americas MRR Colo. Revenue Per Cabinet ($) $1,924 $1,788 $1,750 MRR Cross Connect Revenue Per Port ($) $319 $311 $313.62 Interconnection Mix of Total Revenues (%) 21.6% 21.4% 21.8% Cross Connects per Cabinet (#) 1.78 1.73 1.71 Utilization Rates (%) 80.6% 79.4% 79.3% EBITDA Margin (%) 47.6%
EMEA MRR Colo. Revenue Per Cabinet ($) $1,123 $1,134 $1,192 MRR Cross Connect Revenue Per Port ($) $99.84 $118.85 $118.17 Interconnection Mix of Total Revenues (%) 7.8% 8.9% 8.3% Cross Connects per Cabinet (#) 1.11 1.10 1.06 Utilization Rates (%) 81.6% 84.8% 86.4% EBITDA Margin (%) 43.3%
APAC MRR Colo. Revenue Per Cabinet ($) $1,594 $1,736 $1,735 MRR Cross Connect Revenue Per Port ($) $203.37 $219.15 $219.30 Interconnection Mix of Total Revenues (%) 12.6% 12.7% 12.7% Cross Connects per Cabinet (#) 1.42 1.37 1.35 Utilization Rates (%) 74.3% 77.3% 79.6% EBITDA Margin (%) 51.2%
Global MRR Colo. Revenue Per Cabinet ($) $1,506 $1,496 $1,500 MRR Cross Connect Revenue Per Port ($) $223.48 $230.30 $228.83 Interconnection Mix of Total Revenues (%) 15.6% 15.8% 15.4% Cross Connects per Cabinet (#) 1.4 1.4 1.4 Utilization Rates (%) 79.9% 81.3% 82.4% EBITDA Margin (%) 47.5%
MRR = Monthly Recurring Revenue
Source: Company data, Credit Suisse estimates.
Interxion Holding (INXN)9 20 December 2018
Colocation Industry Only Strengthening Highlighted in Figure 15-Figure 18 and in our 2019 Outlook report, titled, "The Cloud Has Four Walls (2019 Edition)," we identify increasing evidence that global colocation demand and reliance are only increasing based on two comprehensive industry surveys from global IT spending decision-makers. Owing to the findings from these surveys, we identify INXN as a key beneficiary from an end-market perspective, given its vertical customer revenue mix of 35% cloud, 33% connectivity, and 32% enterprise, all of which need interconnection and colocation services to enhance their application performance.
Figure 15: 37% of IT Budgets Will Be Spent on Figure 16: …With the Average Percent of IT Racks Colocation Data Centers in 2019 Versus 24% in Going into Colo. Increasing to 58% in 2019 from 2017, Signaling Further Adoption… 40% in 2017 Owing to Existing Colo. Customers…
40% 900 100% 898 90% 35% 800 37% 700 80% 30% 600 674 70% 31% 60% 25% 500 503 50% 20% 24% 400 58% 49% 40% 300 15% 40% 30% 200 20% 10% 100 10% 5% - 0% 0% 2017 2018 2019 2017 2018 2019 Average Number of Total IT Racks Average Percent of IT Budget Going to Colo. DCs Average Percent of IT Racks in Colocation Data Centers
Source: I.H.S. Markit, Credit Suisse Research. N=114 responses. Source: I.H.S. Markit, Credit Suisse Research. N=114 responses.
Figure 17: With On-Premise Data Centers Figure 18: And with Cloud Providers Driving Higher (Enterprise Owned) Losing More Traction in 2019 Mix of Wholesale Outsourced Capacity in 2019 Versus Early 2018… Versus 2018 100% 100% 9% 9% 90% 90% 29% 31% 80% 33% 80% 70% 70% 47% 44% 60% 60% 31% 50% 32% 50% 33% 40% 40% 30% 30% 20% 44% 47% 20% 41% 10% 37% 34% 10% 0% 0% Now April 2019
Now 2018 2019 Don't Know Retail Wholesale Cloud Data Centers Colocation Service Provider Data Centers On-Premises Data Centers
Source: I.H.S. Markit, Credit Suisse Research. N=114 responses. Source: I.H.S. Markit, Credit Suisse Research. N=114 responses. Application Performance in Focus The leading driver for using colocation services was the improved application performance enabled by moving workloads to a colocation data center. Because of the ability to directly connect over high bandwidth cross-connects with network providers and cloud service providers, the applications can have more reliable and consistent performance. We believe this dynamic will increasingly become a driver through 2019 as Cloud On-Ramps and SDN On-Ramps continue their expansions/deployments into interconnection dense
Interxion Holding (INXN) 10 20 December 2018
data centers (carrier hotels), a trend we elaborate on extensively in our 2019 Outlook report, titled, The Cloud Has Four Walls (2019 Edition). Furthermore, speed of deployment and decreased operational costs are two benefits that come from enterprises not having to build their own data center space. It takes much less time to sign a contract for new space and power in a colocation facility than it does to build an entirely new data center on premise. The operational costs of running a colocation data center should be less since colocation data centers tend to be more efficiently designed and run owing to this being colocation providers’ core business. Enterprises will likely be more compelled to outsource to colocation data center operators because of this factor.
Figure 19: Improved Application Performance Remains a Leading Reason to Use Colocation Capacity
Access to Renewable Energy Choices 47%
Tax Incentives 49%
Reduction of Data Center Staff Workload 53%
Geographic Proximity to End Users or Devices 57%
Ability to Directly Connect with Partners or Customers 59%
Reduction of Capital Investment 61%
Ability to Directly Connect with Cloud Service Providers 66%
Decreased Operational Costs 67%
Speed of Deployment of New Data Center Space 68%
Improved Application Performance 75%
0% 10% 20% 30% 40% 50% 60% 70% 80% Respondents Selecting Criteria as Highest Driver
Source: I.H.S. Markit, Credit Suisse Research. N=114 responses. MTDCs Gaining More Traction Across the Board Respondents to the administered I.H.S. Markit surveys indicated what types of cloud service architectures they use now and will use by July 2020. Off-premise private cloud, off-premise hybrid cloud, multicloud, and community cloud all anticipate increases by 2020. We believe this dynamic of rapid adoption of multicloud and off-premise hybrid cloud shows promise for the multitenant data center sector, given I.H.S. notes that cloud service providers are more aware of the acceptance of multiclouds and are aggressively adding capabilities to enable integrated solutions. In addition, public clouds saw the greatest decline in anticipated usage by 2020 (from 65% currently to 55% in 2020). The survey reported that public cloud architectures are most likely to be adopted by smaller and startup businesses looking for a low-cost solution. Those that are reducing public cloud adoption are doing so because it becomes too costly with scale. We believe the shift from public clouds will be more than offset by the increase in multicloud , but the organizations that do rely on public clouds will likely utilize several cloud providers, highlighted in the survey results in Figure 20.
Interxion Holding (INXN) 11 20 December 2018
Figure 20: Shifting Preferences in Cloud Service Architectures Favoring Multitenant Data Center Business Models Driven by Multicloud Spenders… Multi-Cloud Clear Community Cloud 22% 26% Focus Area for 16% Multi-Cloud 30% Spenders 26% Off-Premises Hybrid Cloud 35% Clear Sponsorship 40% Off-Premises Private Cloud 46% for Colos/MTDCs 52% Hybrid Cloud 49% 56% On-Premises Private Cloud 50% 65% Public Cloud 55%
0% 10% 20% 30% 40% 50% 60% 70% % of Respondents Notable Difference Now 2020 in Public Clouds
Source: I.H.S. Markit, Credit Suisse Research. N=164 responses. Number of Cloud Service Providers Used Only Increasing Respondents indicated how many cloud service providers for SaaS and how many providers for infrastructure they use now and plan to use by July 2020. Responders are using 10 different cloud service providers (CSPs) for SaaS (growing to 14 by 2020) and 10 for infrastructure (growing to 13 by 2020). This result is not surprising given last year’s study in which respondents were using an average of 8 CSPs in 2017 with plans to use 11 by 2019. We believe this dynamic is beneficial to colocation and multitenant data centers, especially as it requires additional on-ramps and connectivity. Furthermore, I.H.S. noted that one key opportunity multiclouds offer is that enterprises consuming cloud services from different providers will seek support from CSPs to manage the delivery of their services from multiple platforms, ultimately avoiding adding the extra burden to their in- house IT teams. We believe the trend of providing a single connection via which the enterprise can access CSPs is an opportunity for data centers, with the survey results highlighting Digital Realty’s recent extension of connections of Digital Realty Service Exchange to leading CSPs.
Interxion Holding (INXN) 12 20 December 2018
Figure 21: Number of Cloud Service Providers Used Is Only Rising, with a 30% Increase in Infrastructure Providers and 42% Increase in SaaS Providers ( I a I T a
S I n P / f P r r o a
a 10 v s a i t d S r e u / c r C s
t 13 u a r a e S ) S a a S
P 10 r o v i d 14 e r s
0 2 4 6 8 10 12 14 16 % of Respondents
Now 2020
Source: Company data, Credit Suisse estimates. Colocation Part of the Edge Debate as Well Respondents indicated how their organization is addressing data processing proximity requirements now and by 2019. Colocation services experienced a slight drop but remain the top choice for IT decision-makers. We believe the continued strength for colocation is evidence for sustained data center growth, given 77% of respondents currently use colocation providers to bring compute, processing, and storage closer to the people or devices using or generating the data. Other notable findings included the increase in micro data centers (which currently remains a niche strategy), the decline in off-premise cloud services, and the decline of building traditional company-owned on-premise data centers. We believe the sharp decline in plans to build traditional company-owned data centers is a very positive signal for the data center industry, as it supports the need to outsource services to colocation providers.
Interxion Holding (INXN) 13 20 December 2018
Figure 22: Edge Compute Proximity Strategy—Keeping Colocation Relatively Constant, CDNs Seeing Relative Decline
19% No Need for Data Processing Proximity 18%
Build Additional Traditional Company-Owned Data Centers in New 37% Locations 54%
41% Use Content Delivery Networks 53% 2019 50% Purchase and Deploy Company-Owned Micro Data Centers 39% Now
60% Use Off-Premises Cloud Services 68%
74% Use Colocation Services 77%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Source: I.H.S. Markit, Credit Suisse Research. N=114 responses. INXN Positioned Well Based on Findings InterXion has not historically benefited from interconnection growth to the same extent as the North American data center operators, but current trends are positioning the company to benefit in the event that interconnection begins to be monetized more extensively in the European market as it has been elsewhere in the world. INXN appears poised to benefit owing to its vertical customer revenue mix of 35% cloud, 33% connectivity, and 32% enterprise as seen in Figure 23, all of which need interconnection and colocation services to enhance their application performance. Furthermore, INXN maintains several telecommunications companies as customers, and telecom is projected to be the industry with the highest interconnection needs by 2021 as seen in Figure 24.
Figure 23: INXN's Business Mix Indexed to Growing Figure 24: Telecom, Cloud & IT Services, and Data Growth and Mission-Critical Applications Financials Are Interconnect Leaders
100% Installed Capacity (Tbps) - 200 400 600 800 1,000 1,200 1,400 1,600 1,800
90% Telecommunications 1,756 33% 319 31% 30% 33% 33% Cloud & IT Services 1,382 80% 221
Banking & Insurance 1,046 ) 70% 144 % ( Manufacturing 975 x i 96
M 60%
l Securities & Trading 844 a 29% 31%
c 119 i t r 50% 35% 38% 40% 761
e Content & Digital Media
V 121
y
r 410 t 40% Business & Professional Services
s 41
u 9% 8% d 328
n Energy & Utility I 30% 24
Wholesale & Retail Trade 268 20% 27 31% 31% 32% 31% 30% Healthcare & Life Sciences 169 13 10% Government & Education 61 3 0% Other 213 2016 2017 2018E 2019E 2020E 16 2021E 2016 Enterprise Systems Integrators Cloud Connectivity
Source: Company data, Credit Suisse estimates. Source: Equinix Interconnection Index, Credit Suisse Research.
Interxion Holding (INXN) 14 20 December 2018
Win-Win-Win Setup Pointing to Upside Given the varying dynamics of the multitenant data center sector, we wanted to highlight three dynamics that we believe positions INXN very well for the next 12 months and through longer-term projections. ■ Return on Invested Capital Yield Is Positioned to Expand: The European multitenant data center markets have several unfavorable dynamics versus the U.S. markets, including higher construction costs for data center developments, stricter regulations associated with sovereign states, and lower data center contract prices/rates. A key example to highlight this stark contrast is EQIX, for which monthly recurring revenue (MRR) is materially lower in EMEA versus the U.S. and Asia, with lower interconnection revenue mixes as a percent of total regional revenue and lower EBITDA margins comparatively. (See Figure 14.) However, conversely, utilization rates are high considering the limited capacity in the varying European markets, a big positive for data center operators where INXN's utilization rate is ~80% given its focus of offering customers contiguous capacity in its facilities. The revenue dynamics on a per-cabinet or per-square-meter basis are lower than any other region, but construction costs are also elevated owing to higher wages in the European region. Finally, building very large data centers is more difficult owing to the European regulations associated to where data may reside relative to the data consumers/transmitters. These factors compute a lower return on invested capital yield profile in Europe; therefore, INXN, an operator that is solely dedicated to the European markets, has the optionality of expanding its already consistent ~10% ROIC yields if it has interest in expanding into the U.S. (~19%+ for retail colocation) or Asia (~15% for retail colocation), which would likely be viewed as a very positive yield inflection in the model and leads to our next point, addressing potential multiple expansion. ■ Multiple Could Expand as Business Matures: INXN currently trades at a 14.2x forward EV/FY2 EBITDA multiple, which is below the comp group, and we believe this is largely associated with INXN not being a REIT; however, we do believe that, as the data center infrastructure asset class develops and matures, the various operators will begin trading more in-line with each other, meaning INXN's multiple could expand rather than contract. Moreover, given EQIX and DLR are attempting to improve pricing and interconnection revenue recognition dynamics in EMEA, we believe this is a key benefit for INXN that could organically grow revenues, given pricing is being adjusted above INXN's total portfolio levels, meaning pricing compressions and negative contract renewals are unlikely. We believe these are levers for the company to achieve multiple expansion, supporting our constructive narrative on INXN stock. ■ Strategic Options for INXN Have Been Debated Over Time: The last key driver that is supportive of our view on INXN is it could make a strategic decision to merge or acquire another data center operator in the U.S. or Asia to give it an international footprint, given the higher ROIC dynamics in other regions. In addition, the reverse could happen where INXN could merge or be acquired by another operator for a more robust European footprint, all of which are factors we believe are possible within the next two to three years. Given these factors, we see even more safety nets to our Outperform rating and view of the company.
Interxion Holding (INXN) 15 20 December 2018
Relative Metrics Screen Well for INXN As we continue to offer supportive evidence of INXN's well-positioned market dynamics, we take this a step further by comparing INXN on a relative basis to other data center operators that compete in the North American markets and offer a relative benchmark for INXN. We find increasing evidence that INXN is a well-operated data center company with multiple levers for upside potential, including more leverage, interconnection revenue mix increases, and lower cost of debt optionality, all avenues the company could exhaust throughout its further expansion into the European markets.
Figure 25: INXN Projected to Grow Revenues by Figure 26: Driving Adjusted EBITDA Growth on the 13.8% in 2020E, Above Peer Comps and the Global Back of ~50bps of EBITDA Margin Expansion per MTDC Market Growing at 8.2% in 2020E Year, Leading the Group Through 2020E… 30% 30%
25% 25% ) % (
) h 20% t %
w 20% (
o r h 16.9% t G
w A o 15% 13.8% r 13.2% 14.1% 12.3% D 15% G 12.1% 12.1% T
12.9% I 12.6% 12.7% e B u
9.4% E n 10.3% 10% . e 8.2% j v d 10% e
6.4% A
R 7.2%
Y Y / / 5% Y Y 5%
0% DLR MTDC* EQIX SWCH CONE COR QTS INXN 0% DLR EQIX SWCH CONE COR QTS INXN 2018E 2019E 2020E 2018E 2019E 2020E
Source: Company data, Credit Suisse estimates, I.H.S. Markit. * Multi-Tenant DC Market. Source: Company data, Credit Suisse estimates, I.H.S. Markit.
Figure 27: INXN Lagging on Interconnection Figure 28: But Growing Interconnection Revenues Revenue Mix Versus Direct Data Center Peers Fastest Owing to Its High Revenue Growth Rate 18% 20% ) ) 15.6% 16% 18% % % ( (
v h 16% t e 14% 13.2% w R
13.8% l o r a 14% 13.2% 13.2% t 12.8% G
o 12% 12.1% T Y
10.4% / f 12% 10.9% Y o
10% .
8.7% v % e 10% 9.0% . R v 7.2% e 8% n R o 8%
i
6.0% t n c o i
6% e t
n 6% c 4.3% n e o n
4% c n r 4% o e t c r n I
e 2%
t 2% n I 0% 0% CONE INXN QTS DLR MTDC COR EQIX CONE EQIX COR MTDC* DLR QTS INXN
2018E 2019E 2020E 2018E 2019E 2020E
Source: Company data, Credit Suisse estimates. Source: Company data, Credit Suisse estimates.
Interxion Holding (INXN) 16 20 December 2018
Figure 29: Compared with Peers, INXN Has Capacity Figure 30: However, We Note That INXN Also Has to Take On ~2x the Existing Debt Load to Keep One of the Highest Costs of Debt Versus Peers, Scaling Its Established European Footprint, Further Lacking an Investment-Grade Rating and Due to Expanding Its Advantage… Operating in the European Markets 8.0x 6.0% )
A 7.07 D
) 5.04% T 7.0x I
% 4.82% B
( 5.0%
E 4.57%
4.53% 8 . j 5.65 1 d 6.0x 5.63 Q
A 5.38 3 3.92%
f E 4.0% o 8 3.51% 3.52% 1 5.0x s Y
4.38 A
F t (
3.86 b A 4.0x 3.58 e 3.0% D D
T f I o B
t E s 3.0x o o
t 2.0%
C t
b e e 2.0x g a D r
t e e
v 1.0% N 1.0x A
0.0x 0.0% COR INXN EQIX SWCH DLR CONE QTS COR DLR CONE QTS EQIX INXN SWCH
Source: Company data, Credit Suisse estimates. QTS Leverage Includes Preferred Equity. Source: Company data, Credit Suisse estimates. QTS excludes preferred equity expense.
Figure 31: Spending at the Higher End of the Data Figure 32: Reporting Stable ROIC Yields with Slight Center Peer Group on Data Center Infrastructure Pressure Given Increasing Development Costs and Development to Achieve Higher Growth Rates… Few Price Increases Historically… 140% 19% 120% 114.2%
) 17% % ) (
% e 100% ( u 15% n d l e e v 76.2% i e
80% Y 13%
R
f C I o
58.2% O 11% % R
60%
X 48.3% E 42.4% 9% P 40.3%
A 40% C 27.6% 7% 20% 5% 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 0% CONE EQIX DLR COR SWCH INXN QTS CS Calculated LTM ROIC INXN Reported ROIC
2018E 2019E 2020E
Source: Company data, Credit Suisse estimates. Source: Company data, Credit Suisse estimates.
Interxion Holding (INXN) 17 20 December 2018
Leadership Team InterXion’s management team comprises industry experts that bring years of experience to a leading technology infrastructure company. We note that the CFO, chief marketing & strategy officer, and SVP of IT & Operations Support each bring decades of industry experience despite being relatively newer additions to the management team, with the remaining officers having had long tenures with the company, which gives us confidence in the company’s ability to execute. Figure 33: Impressive Lineup of Industry Leaders
Name Position Biography Joined InterXion
Mr. Ruberg is the CEO of InterXion, having joined in 2007 after five years as the Chairman. Prior to this, David was CEO and Chairman of Intermedia Communications, a broadband communications services provider. At the same time he was Chairman of its majority-owned subsidiary, the web hosting company Digex. David has also held posts at Data General, AT&T and other technology organisations and has served on the boards David Ruberg CEO 2003 of several businesses, including Adaptix and Broadview Networks. His Masters degree from the University of Michigan is in Computer and Communications Science. He combines valuable insights into the needs of our customers, especially in the IT, technology and communications sectors, with his knowledge of how colocation technology can add value to such companies and help them develop their business. Mr. Doherty is the CFO of InterXion, having joined in November of 2018. He brings over 25 years of experience in key leadership roles at Verizon, most recently as Senior Vice President of Corporate Development and Chairman and Chief Investment Officer of Verizon Ventures. At Verizon, Mr. Doherty’s responsibilities included supporting the development of group corporate strategy and executing corporate John Doherty CFO 2018 development initiatives including acquisitions, divestitures and venture investments. Previously, Mr. Doherty held a series of global leadership positions across the Verizon group, including the role of Chief Financial Officer of four different Verizon business units. He officially started in the position of CFO on November 1, 2018. Mr. Anten is the Senior Vice President, Human Resources, for InterXion, having joined in 2011 from global Senior Vice management consulting firm the Hay Group, where he was Director, International Strategic Clients Europe. President, In previous posts, he has worked as VP Human Resources for the international organisation Synthon and as a Jan-Pieter Anten 2011 Human senior consultant with the Hay Group. Jan-Pieter has a degree from the University of Utrecht. Jan-Pieter’s Resources expertise and wide experience in human resources enable him to oversee the recruitment, development and retention of the experienced and dedicated staff that are key to the company's business across Europe. Mr. Camman is the Senior Vice President, Legal, for InterXion, having joined in 1999 from the Dutch Senior Vice government, where his roles included Deputy Head of the Insurance Division with the Netherlands Ministry Jaap Camman President, of Finance. Jaap qualified in law at Utrecht University. Jaap Camman provides a strategic direction in finance 1999 Legal across the Interxion group, he draws on his extensive experience in corporate financing, restructuring and business design. Mr. Di Vitantonio is the Chief Marketing & Strategy Officer for InterXion, having joined in 2015 and is responsible for the company's market and product strategies including product management, product marketing, segment strategy and business development. He joined from Cisco Systems where he held the Chief position of Vice President Marketing, Data Center & Cloud. Giuliano has over 20 years of experience in the Guiliano Di Marketing IT industry, including 17 years at Hewlett-Packard, where he held a broad range of positions in R&D, 2015 Vitantonio & Strategy strategy, consulting, business development and marketing. Giuliano’s areas of expertise include IT Officer management software, enterprise applications, data centre infrastructure and business intelligence solutions. He has a Masters degree in EE/Telecommunications from the University of Bologna and an MBA from the London Business School. Giuliano has lived in five different countries and is fluent in four languages. He is based in London. Mr. Oosthoek has held senior management positions in the IT and Telecom industry for a number of years. Before his appointment to the Senior Management Team in January 2016, Adriaan ran Interxion’s UK Senior Vice business for a year. Before that Adriaan was Executive Vice President at Colt responsible for their global President Data Centre footprint. Before Colt, Adriaan spent 11 years at Telecity Group plc, the last 7 years as the Adriaan Oosthoek IT & 2016 Operations Managing Director of the UK & Ireland operation for Telecity Group plc where he significantly grew the Support business. Preceding Adriaan’s tenure in the UK, he ran the Dutch operation of data centre operator Redbus Interhouse and was a founder and Managing Director of the Dutch subsidiary of Teles AG, a Berlin headquartered provider of telecoms and data com products.
Source: Company data.
Interxion Holding (INXN) 18 20 December 2018
Forecasts and Estimates When taking into account the company-provided guidance, management competency, overall business strategy, and our view on INXN’s end-market dynamics, we arrive to the following forecasts and estimates. ■ Revenues: We estimate that INXN will generate €563.6mn/€649.2mn/€739.0mn of revenues, reflecting growth of +15.2%/+15.2%/+13.8% y/y for FY2018/2019/2020, respectively, driven by heavy investments in planned capacity increases by the company. − Capacity Forecasts: INXN has disclosed approximately 38 thousand square meters (sqm) of planned additions to equipped space over the next two years. This would result in approximately 21.5 thousand sqm added in each of FY2018 and FY2019, with 10.3 thousand sqm already announced for FY2020. Compared with 11.7 thousand sqm of additions in FY2017, additions through 3Q18 and announced additions would represent an acceleration of growth in capacity, and utilization has remained at a healthy 79% through 3Q18 despite the accelerating capacity buildout. Conservatively, we are estimating 13.7 thousand sqm of additions in FY2020 with a stable utilization of approximately 79%. − Pricing Forecasts: We are projecting virtually flat increases in MRR per sqm of equipped space in FY2018 and FY2019 with a 2.8% increase in FY2020 with MMR per sqm in FY2018/2019/2020 of €412.34/€412.53/€424.12. We believe these are very conservative estimates, as demand for premium providers such as INXN and EQIX remains strong, which should enable pricing to increase further. ■ Gross Margins: Gross margins for FY2017 were 61.1%. We forecast gross margins to remain fairly steady for FY2018/2019/2020 at 61.2%/61.4%/61.6%, respectively. ■ Adjusted EBITDA: Adjusted EBITDA margins for FY2017 were 45.2%, and our FY2018/2019/2020 estimates are 45.9%/46.4%/47.7%, respectively. ■ Capital Expenditures: Capital expenditures for FY2017 were €256.0mil, and expansion capex was 46.0% of total revenues. We forecast capital expenditures of €433.3/€506.0/€563.2 for FY2018/2019/2020, with expansion capex as a percent of revenues of 71.6%/72.5%/70.6% for FY2018/2019/2020, respectively. The increase in expansion capex is necessary to obtain the capacity buildouts planned by the company.
Figure 34: Credit Suisse Estimates vs. Consensus Estimates
Interxion (in $thousands) 2017A 1Q18A 2Q18A 3Q18A 4Q18E 2018E 2019E 2020E Actual Actual Actual Actual Credit Suisse Consensus Credit Suisse Consensus Credit Suisse Consensus Credit Suisse Consensus Total Revenue € 489,301 € 133,836 € 138,824 € 142,191 € 148,727 € 149,363 € 563,578 € 580,013 € 649,175 € 666,996 € 739,041 € 744,823 y/y growth 16.0% 17.5% 14.9% 14.1% 14.5% 15.2% 18.5% 15.2% 18.4% 13.8% 14.7% Adjusted EBITDA € 220,960 € 60,876 € 63,431 € 65,783 € 68,760 € 68,671 € 258,850 € 261,850 € 301,255 € 305,107 € 352,279 € 353,488 Adj. EBITDA Margin 45.2% 45.5% 45.7% 46.3% 46.2% 46.0% 45.9% 45.1% 46.4% 45.7% 47.7% 47.5% y/y growth 15.8% 18.6% 16.8% 17.1% 16.3% 17.1% 18.5% 16.4% 16.5% 16.9% 15.9% Diluted Adj. EPS € 0.58 € 0.17 (€ 0.03) € 0.14 € 0.17 € 0.16 € 0.44 € 0.49 € 0.69 € 0.75 € 0.66 € 0.84 y/y growth 12.4% 16.4% (124.7%) (1.6%) 2.9% (6.0%) (23.6%) (15.7%) 56.2% 8.4% (4.6%) 22.3% Capex € 256,015 € 96,195 € 120,515 € 103,185 € 113,290 € 124,993 € 433,290 € 443,676 € 505,994 € 445,486 € 563,209 € 369,546 Capex as % of Sales 52.3% 71.9% 86.8% 72.6% 76.2% 83.7% 76.9% 76.5% 77.9% 66.8% 76.2% 49.6% y/y growth 2.0% 75.7% 113.5% 37.3% 62.6% 69.2% 16.8% 11.3%
Source: Thomson Eikon, Company data, Credit Suisse estimates.
Interxion Holding (INXN) 19 20 December 2018
Valuation—Outperform, $70 Target Price Based on the average EV/FY2 EBITDA multiple over the past 12 months, we arrive to a $70 target price, implying 23% upside potential from current levels. Using our 2020 adjusted EBITDA estimate of €352.2 mil and a multiple of 15.5x, the level at which the company has traded in the past 12 months (see Figure 37), as well as a foreign exchange rate of $1.13 per Euro, we arrive at a valuation of $70 per share.
Figure 35: $70 Target Price, 23% Upside Potential from Current Levels
Credit Suisse Valuation Base Case Grey Sky Blue Sky EV / EBITDA 2020E Adj. EBITDA € 352,279 € 352,279 € 352,279 Current Enterprise Value 5,094,566 $5,094,566 $5,094,566 Current Market Multiple 14.5x 14.5x 14.5x Multiple Premium Rationale Peer Group Multiple 14.5x 14.5x 14.5x Add: ROIC Yield Expansion 1.0x Assumed multiple (FY2) 15.5x 10.7x 17.6x Implied Enterprise Value 5,460,322 3,769,384 6,200,108 Less: Net debt (999,797) (999,797) (999,797) Implied Market Capitalization 4,460,525 2,769,587 5,200,311 Shares Outstanding (# in '000) 72,091 72,091 72,091 Valuation Per Share: € 62.00 € 38.00 € 72.00 FX Exchange Rate (USD/EUR) 1.13 1.13 1.13 Credit Suisse Target (USD) Price: $ 70.00 $ 43.00 $ 81.00 Current Market Price (USD) 56.80 56.80 56.80 Upside/downside vs. current price 23.2% -24.3% 42.6%
Source: Thomson Eikon, Company data, Credit Suisse estimates.
Currently Trading at 14.2x on Our 2020 Adj. EBITDA Estimate: INXN currently trades at 14.2x, which we note is lower than its 12-month historical EV/EBITDA multiple of 15.5x. This discount is a result of the company’s performance excelling and higher multiples being the new norm. A 15.5x EV/EBITDA multiple computes a valuation of $70 per share. Combined with our overall outlook on the company, we arrive to a view on the stock enabling a higher valuation than current market prices, supporting our Outperform rating, translating into 23% upside potential from current levels.
Interxion Holding (INXN) 20 20 December 2018
Figure 36: INXN Has Outperformed the S&P 500 in Figure 37: INXN Is Currently Trading Over Its Three- the Past Three Years Year Average on an EV/EBITDA Basis
18.0x 17.6x 240 220 17.0x ) 0 0
1 200 16.0x e s
a 180
B 15.0x (
s 160 14.0x n r 14.0x u t 140 e R 13.0x e 120 c i r P 100 12.0x e r a
h 80 11.0x 10.7x S 60 10.0x 1/2/2015 1/2/2016 1/2/2017 1/2/2018
S&P 500 INXN EV/FY2 EBITDA Avg Max Min
Source: Thomson Eikon, Company data. Source: Thomson Eikon, Company data.
Interxion Holding (INXN) 21 20 December 2018
Grey Sky and Blue Sky Valuations We see a blue sky scenario of $81 that takes into account a 17.6x EV multiple on our 2020 EBITDA of €352.2 mil. This valuation reflects any further favorable trends the business may experience in the future. Regarding our grey sky scenario, we see a valuation of $43 that takes into account a 10.7x EV multiple on our 2020 EBITDA of €352.2 mil. The grey sky valuation represents a worst-case scenario in which the risks to valuation identified in this initiation limit the performance of the company.
Interxion Holding (INXN) 22 20 December 2018
Investment Risks Investing in INXN comes with various risks, including macro and company-specific risks. Regarding the company-specific risks, we identify the following that we believe are the most relevant: ■ Geographic Concentration: INXN is a European-based data center operator with global competition. Multinational corporations may prefer colocation providers that have offerings across regions. In addition, INXN is at risk of the European market growing slower than the MTDC market as a whole. ■ Technological Disruption: The market environment is currently pushing enterprises and IT customers to outsource and decentralize their IT operations (specifically workloads), and we acknowledge that this theme could flip, pushing companies back to insourcing their operations, thus decreasing demand for data center space. ■ Broad Market Competition: The market currently favors data center operators for their expertise and ecosystems; however, expertise, general technology, and ecosystems are becoming table stakes to operate in the industry, increasing the competition and differentiation and inevitably compressing prices. ■ Data Center Space Demand and Supply: Space and power pricing have led to significant increases and decreases in lease pricing per square foot, which we believe is a risk, given some IT infrastructure operators may decide to flood the market with capacity in a speculative fashion, depressing market prices and challenging data center operators’ ability to deploy capital at the right returns on investment. ■ Power Reliability and Cost: Power costs are currently stable and declining; however, it is possible that costs may increase, driven primarily by rising interest rates, which could hurt margins and valuation for the data center group. ■ Established Competitors Focusing Attention on Europe In most of INXN’s major markets, the company competes with a substantial number of foreign and domestic companies, some of which have greater financial, technical, marketing, and other resources or lower operating costs. This gives many of these competitors a competitive advantage to withstand any significant reduction in capital spending by customers over the long term. ■ Interest Rate Risk: The general interest rate environment is trending upward, based on the Federal Reserve's reviews. Although data centers are not as levered as other assets such as utilities, interest rates may still have an adverse effect on equity valuations.
Interxion Holding (INXN) 23 20 December 2018
Figure 38: Credit Suisse Communications Infrastructure Comp Sheet Basic Information Current Market Net Debt Rating / EV/EBITDA P/FFO P/AFFO Company / Group Ticker Price EV ($mil) Cap ($mil) ($mil) Consensus 2017A 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E Equinix EQIX $387 $31,103 $10,547 $41,650 Outperform 20.3x 17.3x 15.6x 14.1x 25.0x 21.5x 19.6x 19.0x 17.2x 15.7x Digital Realty DLR 114 23,582 9,126 32,708 Neutral 22.6x 17.8x 16.9x 15.7x 17.2x 16.9x 16.2x 19.1x 19.4x 18.6x CyrusOne CONE 59 6,279 2,572 8,851 Outperform 23.8x 19.5x 16.1x 14.3x 18.2x 16.9x 15.7x 18.3x 16.3x 14.8x CoreSite Realty COR 97 4,678 1,068 5,746 Neutral 21.8x 19.3x 17.7x 15.6x 19.2x 18.3x 16.6x 19.2x 18.3x 16.6x QTS Realty QTS 40 2,056 1,570 3,626 Neutral 17.4x 16.3x 15.6x 13.7x 15.4x 14.5x 12.9x 15.9x 14.7x 13.0x Data Center REITs AVG $13,540 $4,976 $18,516 21.2x 18.0x 16.3x 14.7x 19.0x 17.6x 16.2x 18.3x 17.2x 15.8x
Switch, Inc. SWCH $7 $1,712 $1,066 $2,778 Outperform 17.4x 9.8x 8.8x 7.8x 10.3x 10.2x 9.5x
Zayo ZAYO 25 5,886 5,496 11,381 Consensus 11.6x 8.8x 8.9x 7.8x Cogent Communications CCOI 47 2,173 508 2,681 Consensus 16.2x 14.4x 13.1x GTT Communications GTT 29 1,571 3,152 4,723 Consensus 21.3x 13.0x 8.9x Fiber/ Comm. REITs AVG $3,210 $3,052 $6,262 16.4x 12.1x 10.3x 7.8x #DIV/0! #DIV/0!
GDS Holdings GDS $25 $3,124 1,283 $4,408 Consensus 54.4x 29.9x 18.9x 13.0x 108.1x 60.7x 37.7x 99.5x 99.5x 57.8x InterXion INXN 58 4,153 1,163 5,316 Outperform 19.4x 17.9x 15.4x 13.2x 21.9x 18.3x 15.8x 20.3x 20.3x 16.8x NextDC NXT 5 1,576 (84) 1,492 Consensus 38.3x 33.1x 24.5x 18.2x Non-REIT Data Centers AVG $2,241 $762 $3,004 30.2x 22.0x 16.3x 12.8x 65.0x 39.5x 26.7x 41.5x 41.5x 26.7x
AT&T T $30 $219,941 $175,884 $395,825 Consensus 7.7x 7.0x 6.5x 6.5x Verizon VZ 57 235,855 111,996 347,851 Consensus 7.7x 7.3x 7.2x 7.1x T-Mobile TMUS 66 55,697 29,593 85,290 Consensus 7.6x 7.0x 6.5x 6.1x Sprint S 6 24,343 31,826 56,169 Consensus 5.7x 5.0x 4.4x 4.3x U.S. Cellular USM 54 4,629 920 5,549 Consensus 17.8x 5.8x 5.9x 6.1x Cincinnati Bell CBB 9 469 2,047 2,515 Consensus 8.8x 6.8x 6.0x 5.9x Telecoms AVG $90,156 $58,711 $148,867 9.2x 6.5x 6.1x 6.0x
Comcast CMCSA $36 $165,329 64,407 $229,736 Consensus 8.2x 7.5x 6.7x 6.3x Charter Communications CHTR 309 70,832 79,985 150,817 Consensus 9.9x 9.5x 9.0x 8.4x Liberty Global LBTA 23 16,999 28,191 45,190 Consensus 6.6x 7.8x 7.9x 8.7x Dish DISH 31 14,334 13,730 28,065 Consensus 11.1x 9.9x 11.8x 13.5x Cable One CABO 855 4,879 929 5,808 Consensus 13.1x 11.6x 11.0x 10.6x WideOpenWest Inc WOW 8 660 2,272 2,932 Consensus 6.6x 7.1x 6.8x 6.4x Cable AVG $45,506 $31,586 $77,091 9.2x 8.9x 8.9x 9.0x
Akamai AKAM $65 $10,603 ($256) $10,346 Consensus 11.1x 9.5x 8.6x 7.7x Limelight Networks LLNW 2 278 (53) 226 Consensus 7.4x 7.2x 6.2x 4.7x Content Delivery Networks AVG $5,441 -$155 $5,286 9.2x 8.4x 7.4x 6.2x
CenturyLink CTL $17 $18,371 $36,137 $54,508 Consensus 9.3x 6.0x 6.0x 6.0x Zayo ZAYO 25 5,886 5,496 11,381 Consensus 11.6x 8.8x 8.9x 8.5x 7.8x Uniti Group UNIT 17 3,091 4,865 7,956 Consensus 10.6x 9.9x 9.4x 9.1x 7.1x 6.7x 6.3x 6.9x 6.9x 6.6x Cogent Comm. CCOI 47 2,173 508 2,681 Consensus 16.2x 14.4x 13.1x 11.8x Consolidated Comm. CNSL 11 800 2,337 3,137 Consensus 7.6x 5.9x 5.9x 5.8x Frontier Comm. FTR 3 279 17,169 17,448 Consensus 4.7x 4.9x 5.1x 5.4x Windstream WIN 3 119 10,394 10,513 Consensus 5.2x 5.3x 5.3x 5.8x Comm. Infra. AVG $4,388 $10,987 $15,375 9.3x 7.9x 7.7x 7.5x 7.4x 6.7x 6.3x 6.9x 6.9x 6.6x
Credit Suisse Defined TMT AVG $23,283 $15,419 $38,702 15.1x 11.6x 10.2x 9.1x 30.5x 21.3x 16.4x 19.2x 18.9x 14.6x
Source: Company data, Thomson Eikon, Credit Suisse estimates.
Interxion Holding (INXN) 24 Interxion Holding (INXN) Interxion Holding 25 Figure 39: Financial Model—Income Statement
Income Statement FY-Dec FY-Dec FY-Dec FY-Dec FY-Dec FY-Dec FY-Dec 3/31/2017 6/30/2017 9/30/2017 12/31/2017 FY-Dec 3/31/2018 6/30/2018 9/30/2018 12/31/2018 FY-Dec 3/31/2019 6/30/2019 9/30/2019 12/31/2019 FY-Dec FY-Dec (€ thousands) 2010 2011 2012 2013 2014 2015 2016 1Q17 2Q17 3Q17 4Q17 2017 1Q18 2Q18 3Q18 4Q18 2018 1Q19 2Q19 3Q19 4Q19 2019 2020 Income Statement
Recurring 192,973.0 228,328.0 259,249.0 291,274.0 319,184.0 365,175.0 399,958.0 108,275.0 113,427.0 117,392.0 123,422.0 462,516.0 126,962.0 131,709.0 134,754.0 140,948.5 534,373.5 148,257.3 148,850.8 157,546.8 160,566.2 615,221.0 700,386.7 Non-Recurring 15,406.0 15,982.0 17,872.0 15,837.0 21,440.0 21,385.0 21,830.0 5,675.0 7,396.0 7,255.0 6,459.0 26,785.0 6,874.0 7,115.0 7,437.0 7,778.9 29,204.9 8,182.2 8,215.0 8,694.9 8,861.6 33,953.7 38,654.0 Total Revenue 208,379.0 244,310.0 277,121.0 307,111.0 340,624.0 386,560.0 421,788.0 113,950.0 120,823.0 124,647.0 129,881.0 489,301.0 133,836.0 138,824.0 142,191.0 148,727.4 563,578.4 156,439.5 157,065.8 166,241.7 169,427.7 649,174.8 739,040.6 y/y growth 21.4% 17.2% 13.4% 10.8% 10.9% 13.5% 9.1% 11.7% 16.1% 18.4% 17.6% 16.0% 17.5% 14.9% 14.1% 14.5% 15.2% 16.9% 13.1% 16.9% 13.9% 15.2% 13.8% q/q growth 3.1% 6.0% 3.2% 4.2% 3.0% 3.7% 2.4% 4.6% 5.2% 0.4% 5.8% 1.9%
Cost of Sales 91,154.0 101,766.0 113,082.0 124,141.0 139,075.0 151,613.0 162,569.0 44,096.0 47,926.0 49,608.0 48,842.0 190,472.0 52,697.0 53,701.0 55,852.0 56,516.4 218,766.4 61,284.1 60,443.3 64,966.5 64,043.7 250,737.6 284,049.2 % of revenue 43.7% 41.7% 40.8% 40.4% 40.8% 39.2% 38.5% 38.7% 39.7% 39.8% 37.6% 38.9% 39.4% 38.7% 39.3% 38.0% 38.8% 39.2% 38.5% 39.1% 37.8% 38.6% 38.4% Gross Profit 117,225.0 142,544.0 164,039.0 182,970.0 201,549.0 234,947.0 259,219.0 69,854.0 72,897.0 75,039.0 81,039.0 298,829.0 81,139.0 85,123.0 86,339.0 92,211.0 344,812.0 95,155.4 96,622.5 101,275.2 105,384.0 398,437.1 454,991.5 Gross Margin 56.3% 58.3% 59.2% 59.6% 59.2% 60.8% 61.5% 61.3% 60.3% 60.2% 62.4% 61.1% 60.6% 61.3% 60.7% 62.0% 61.2% 60.8% 61.5% 60.9% 62.2% 61.4% 61.6% y/y growth 25.9% 21.6% 15.1% 11.5% 10.2% 16.6% 10.3% 11.1% 13.3% 16.3% 20.1% 15.3% 16.2% 16.8% 15.1% 13.8% 15.4% 17.3% 13.5% 17.3% 14.3% 15.6% 14.2%
S&M 15,072.0 17,680.0 20,100.0 22,818.0 24,551.0 28,217.0 29,941.0 7,925.0 8,285.0 8,247.0 9,008.0 33,465.0 8,708.0 9,601.0 8,710.0 9,221.1 36,240.1 10,178.7 10,862.6 10,183.2 10,504.5 41,729.0 47,522.6 as % of revenue 7.2% 7.2% 7.3% 7.4% 7.2% 7.3% 7.1% 7.0% 6.9% 6.6% 6.9% 6.8% 6.5% 6.9% 6.1% 6.2% 6.4% 6.5% 6.9% 6.1% 6.2% 6.4% 6.4% G&A 55,892.0 67,258.0 79,243.0 90,134.0 98,884.0 132,505.0 137,011.0 38,111.0 40,310.0 42,419.0 45,103.0 165,943.0 45,644.0 49,250.0 50,552.0 52,798.2 198,244.2 52,570.6 54,936.2 58,271.4 59,299.7 225,077.9 252,483.9 as % of revenue 26.8% 27.5% 28.6% 29.3% 29.0% 34.3% 32.5% 33.4% 33.4% 34.0% 34.7% 33.9% 34.1% 35.5% 35.6% 35.5% 35.2% 33.6% 35.0% 35.1% 35.0% 34.7% 34.2% Other Expense / (Income) (425.0) (487.0) (463.0) (341.0) (271.0) (21,288.0) (334.0) (27.0) - - (70.0) (97.0) (86.0) - - - (86.0) (20.0) (20.0) (20.0) (20.0) (80.0) (80.0) Total OPEX 70,539.0 84,451.0 98,880.0 112,611.0 123,164.0 139,434.0 166,618.0 46,009.0 48,595.0 50,666.0 54,041.0 199,311.0 54,266.0 58,851.0 59,262.0 62,019.3 234,398.3 62,729.3 65,778.8 68,434.6 69,784.2 266,726.9 299,926.5 as % of revenue 33.9% 34.6% 35.7% 36.7% 36.2% 36.1% 39.5% 40.4% 40.2% 40.6% 41.6% 40.7% 40.5% 42.4% 41.7% 41.7% 41.6% 40.1% 41.9% 41.2% 41.2% 41.1% 40.6% Operating Income (EBIT) 46,686.0 58,093.0 65,159.0 70,359.0 78,385.0 95,513.0 92,601.0 23,845.0 24,302.0 24,373.0 26,998.0 99,518.0 26,873.0 26,272.0 27,077.0 30,191.7 110,413.7 32,426.1 30,843.7 32,840.6 35,599.8 131,710.2 155,064.9 Operating Margin 22.4% 23.8% 23.5% 22.9% 23.0% 24.7% 22.0% 20.9% 20.1% 19.6% 20.8% 20.3% 20.1% 18.9% 19.0% 20.3% 19.6% 20.7% 19.6% 19.8% 21.0% 20.3% 21.0% y/y growth 46.0% 24.4% 12.2% 8.0% 11.4% 21.9% (3.0%) 4.3% 3.2% 3.2% 19.6% 7.5% 12.7% 8.1% 11.1% 11.8% 10.9% 20.7% 17.4% 21.3% 17.9% 19.3% 17.7%
Finance Expense (Interest Expense) (29,444.0) (22,784.0) (17,746.0) (57,453.0) (27,876.0) (29,022.0) (36,269.0) (10,287.0) (10,920.0) (10,833.0) (12,327.0) (44,367.0) (11,404.0) (22,895.0) (11,732.0) (12,445.7) (58,476.7) (13,611.2) (14,528.7) (14,979.5) (15,993.9) (59,113.2) (86,972.3) as % of Total Debt 18.5% 19.9% 8.1% 18.1% 6.1% 5.8% 5.9% 5.8% 6.0% 5.6% 6.2% 5.6% 5.3% 9.7% 4.7% 4.6% 5.4% 4.8% 4.7% 4.6% 4.7% 4.3% 5.1% Earnings Before Taxes (EBT) 17,242.0 35,309.0 47,413.0 12,906.0 50,509.0 66,491.0 56,332.0 13,558.0 13,382.0 13,540.0 14,671.0 55,151.0 15,469.0 3,377.0 15,345.0 17,746.0 51,937.0 18,814.9 16,314.9 17,861.1 19,606.0 72,597.0 68,092.7 EBT Margin 8.3% 14.5% 17.1% 4.2% 14.8% 17.2% 13.4% 11.9% 11.1% 10.9% 11.3% 11.3% 11.6% 2.4% 10.8% 11.9% 9.2% 12.0% 10.4% 10.7% 11.6% 11.2% 9.2% y/y growth (33.0%) 104.8% 34.3% (72.8%) 291.4% 31.6% (15.3%) (9.1%) 0.1% (9.6%) 12.3% (2.1%) 14.1% (74.8%) 13.3% 21.0% (5.8%) 21.6% 383.1% 16.4% 10.5% 39.8% (6.2%)
Tax Expense 2,560.0 9,737.0 15,782.0 6,082.0 15,449.0 17,925.0 16,449.0 3,300.0 3,727.0 4,131.0 3,681.0 14,839.0 3,812.0 2,795.0 4,445.0 4,452.5 15,504.5 4,986.0 4,323.5 4,733.2 5,195.6 19,238.2 18,044.6 Tax Rate 14.8% 27.6% 33.3% 47.1% 30.6% 27.0% 29.2% 24.3% 27.9% 30.5% 25.1% 26.9% 24.6% 82.8% 29.0% 25.1% 29.9% 26.5% 26.5% 26.5% 26.5% 26.5% 26.5% Net Income 14,682.0 25,572.0 31,631.0 6,824.0 35,060.0 48,566.0 39,883.0 10,258.0 9,655.0 9,409.0 10,990.0 40,312.0 11,657.0 582.0 10,900.0 13,293.5 36,432.5 13,829.0 11,991.5 13,127.9 14,410.4 53,358.8 50,048.1 Net Income Margin 7.0% 10.5% 11.4% 2.2% 10.3% 12.6% 9.5% 9.0% 8.0% 7.5% 8.5% 8.2% 8.7% 0.4% 7.7% 8.9% 6.5% 8.8% 7.6% 7.9% 8.5% 8.2% 6.8% y/y growth (44.5%) 74.2% 23.7% (78.4%) 413.8% 38.5% (17.9%) 0.4% 5.3% (10.1%) 9.5% 1.1% 13.6% (94.0%) 15.8% 21.0% (9.6%) 18.6% 1960.4% 20.4% 8.4% 46.5% (6.2%)
Basic EPS 0.24 0.39 0.47 0.10 0.51 0.70 0.57 0.14 0.14 0.13 0.15 0.57 0.16 0.01 0.15 0.19 0.51 0.19 0.17 0.18 0.20 0.74 0.69 Diluted EPS 0.22 0.38 0.46 0.10 0.50 0.69 0.56 0.14 0.13 0.13 0.15 0.56 0.16 0.01 0.15 0.18 0.51 0.19 0.17 0.18 0.20 0.74 0.69 y/y growth (30.4%) 74.3% 21.1% (78.7%) 407.2% 37.1% (18.6%) (0.2%) 4.6% (10.5%) 8.7% 0.4% 12.9% (94.0%) 15.5% 20.6% (10.0%) 18.2% 1953.4% 20.0% 8.0% 46.0% (6.5%)
Basic Adj. EPS - - 0.40 0.41 0.47 0.55 0.52 0.14 0.13 0.14 0.17 0.58 0.17 (0.03) 0.14 0.17 0.44 0.18 0.15 0.17 0.19 0.69 0.66 Diluted Adj. EPS - - 0.39 0.41 0.47 0.54 0.51 0.14 0.13 0.14 0.17 0.58 0.17 (0.03) 0.14 0.17 0.44 0.18 0.15 0.17 0.19 0.69 0.66 y/y growth #DIV/0! #DIV/0! #DIV/0! 4.4% 14.3% 15.0% (4.6%) 0.5% 2.8% 16.2% 31.7% 12.4% 16.4% (124.7%) (1.6%) 2.9% (23.6%) 8.2% (576.9%) 23.3% 9.6% 56.2% (4.6%)
Basic Share Count (Weighted-Avg.) 60,045.1 65,039.6 66,884.3 68,155.9 69,032.4 69,602.2 70,346.2 70,777.0 71,035.0 71,195.0 71,343.0 71,090.0 71,428.0 71,481.0 71,642.0 71,790.9 71,625.0 71,876.5 71,929.8 72,091.8 72,241.7 72,039.8 72,486.4 Diluted Share Count (Weighted-Avg.) 66,819.3 66,764.8 68,212.6 68,978.3 69,870.7 70,600.5 71,262.4 71,415.0 71,739.0 71,848.0 71,900.0 71,725.4 71,903.0 71,946.0 72,091.0 72,143.2 72,047.4 72,146.2 72,189.3 72,334.8 72,387.2 72,267.2 72,508.0 y/y growth (20.3%) (0.1%) 2.2% 1.1% 1.3% 1.0% 0.9% 0.6% 0.8% 0.5% 0.7% 0.6% 0.7% 0.3% 0.3% 0.3% 0.4% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3%
Adj. EBITDA Reconciliation Operating Income (EBIT) 46,686.0 58,093.0 65,159.0 70,359.0 78,385.0 95,513.0 92,601.0 23,845.0 24,302.0 24,373.0 26,998.0 99,518.0 26,873.0 26,272.0 27,077.0 30,191.7 110,413.7 32,426.1 30,843.7 32,840.6 35,599.8 131,710.2 155,064.9 D&A 31,108.0 35,552.0 43,993.0 57,670.0 62,177.0 78,229.0 89,837.0 24,183.0 27,209.0 27,790.0 29,069.0 108,251.0 29,559.0 32,191.0 32,885.0 33,755.7 128,390.7 34,958.2 36,464.6 37,754.4 39,170.6 148,347.8 172,325.3 EBITDA 77,794.0 93,645.0 109,152.0 128,029.0 140,562.0 173,742.0 182,438.0 48,028.0 51,511.0 52,163.0 56,067.0 207,769.0 56,432.0 58,463.0 59,962.0 63,947.4 238,804.4 67,384.3 67,308.3 70,595.0 74,770.4 280,058.0 327,390.2 EBITDA Margin 37.3% 38.3% 39.4% 41.7% 41.3% 44.9% 43.3% 42.1% 42.6% 41.8% 43.2% 42.5% 42.2% 42.1% 42.2% 43.0% 42.4% 43.1% 42.9% 42.5% 44.1% 43.1% 44.3% y/y growth 44.2% 20.4% 16.6% 17.3% 9.8% 23.6% 5.0% 8.3% 13.0% 14.1% 19.7% 13.9% 17.5% 13.5% 15.0% 14.1% 14.9% 19.4% 15.1% 17.7% 16.9% 17.3% 16.9%
Share-Based Payments 2,640.0 4,149.0 6,942.0 7,161.0 6,344.0 2,562.0 2,246.0 2,404.0 1,471.0 8,683.0 3,322.0 3,927.0 3,942.0 4,123.2 15,314.2 4,337.0 4,354.4 4,608.8 4,697.1 17,997.2 20,488.6 Income/ Expense Related to Potential M&A Execution M&A Transaction Costs 325.0 (9,078.0) 2,429.0 773.0 556.0 1,633.0 1,643.0 4,605.0 1,208.0 1,041.0 689.0 689.0 3,627.0 800.0 800.0 800.0 800.0 3,200.0 4,400.0 Items related to terminated or unused data centre sites Items related to sub-leases on unused data centre sites (425.0) (487.0) (463.0) (341.0) (334.0) (365.0) (96.0) (27.0) - - (70.0) (97.0) (86.0) - - - (86.0) ------Other 1,834.0 3,132.0 3,686.0 - (805.0) (184.0) (238.0) ------1,190.0 - 1,190.0 ------Adj. EBITDA 79,203.0 96,290.0 115,015.0 131,837.0 146,690.0 171,276.0 190,877.0 51,336.0 54,313.0 56,200.0 59,111.0 220,960.0 60,876.0 63,431.0 65,783.0 68,759.6 258,849.6 72,521.3 72,462.6 76,003.8 80,267.5 301,255.2 352,278.8 Adj. EBITDA Margin 38.0% 39.4% 41.5% 42.9% 43.1% 44.3% 45.3% 45.1% 45.0% 45.1% 45.5% 45.2% 45.5% 45.7% 46.3% 46.2% 45.9% 46.4% 46.1% 45.7% 47.4% 46.4% 47.7% y/y growth 26.2% 21.6% 19.4% 14.6% 11.3% 16.8% 11.4% 11.8% 14.7% 16.3% 19.9% 15.8% 18.6% 16.8% 17.1% 16.3% 17.1% 19.1% 14.2% 15.5% 16.7% 16.4% 16.9% 20 December 2018
Source: Company data, Credit Suisse estimates. Interxion Holding (INXN) Interxion Holding 26 Figure 40: Financial Model—Balance Sheet Statement
Balance Sheet FY-Dec FY-Dec FY-Dec FY-Dec FY-Dec FY-Dec FY-Dec 3/31/2017 6/30/2017 9/30/2017 12/31/2017 FY-Dec 3/31/2018 6/30/2018 9/30/2018 12/31/2018 FY-Dec 3/31/2019 6/30/2019 9/30/2019 12/31/2019 FY-Dec FY-Dec (€ thousands) 2010 2011 2012 2013 2014 2015 2016 1Q17 2Q17 3Q17 4Q17 2017 1Q18 2Q18 3Q18 4Q18 2018 1Q19 2Q19 3Q19 4Q19 2019 2020 Balance Sheet
Assets Cash & Cash Equivalents 99,115.0 142,669.0 68,692.0 45,690.0 101,573.0 58,554.0 115,893.0 72,541.0 49,243.0 38,204.0 38,484.0 38,484.0 55,336.0 133,563.0 289,860.0 217,203.6 217,203.6 204,119.2 198,615.7 198,563.6 156,449.2 156,449.2 145,737.8 Trade Receivables and Other Current Assets 55,672.0 67,874.0 74,854.0 96,703.0 120,762.0 141,534.0 147,821.0 150,621.0 163,199.0 162,860.0 179,786.0 179,786.0 186,770.0 195,775.0 197,884.0 214,960.3 214,960.3 226,106.9 227,012.0 240,274.3 244,879.1 244,879.1 269,685.4 Current Assets 154,787.0 210,543.0 143,546.0 142,393.0 222,335.0 200,088.0 263,714.0 223,162.0 212,442.0 201,064.0 218,270.0 218,270.0 242,106.0 329,338.0 487,744.0 432,163.9 432,163.9 430,226.1 425,627.7 438,837.9 401,328.4 401,328.4 415,423.2
PP&E, net 342,420.0 477,798.0 620,931.0 698,748.0 895,184.0 999,072.0 1,156,031.0 1,208,984.0 1,235,319.0 1,277,166.0 1,342,471.0 1,342,471.0 1,401,699.0 1,492,495.0 1,580,002.0 1,662,455.2 1,662,455.2 1,744,562.0 1,851,888.9 1,937,404.7 2,030,258.0 2,030,258.0 2,427,211.6 Intangible Assets 6,005.0 12,542.0 18,638.0 17,878.0 18,996.0 23,194.0 28,694.0 58,922.0 59,650.0 59,448.0 60,593.0 60,593.0 61,307.0 61,872.0 61,018.0 57,892.6 57,892.6 55,032.9 52,161.7 49,122.9 46,025.7 46,025.7 33,994.2 Goodwill ------39,364.0 38,900.0 38,900.0 38,900.0 38,900.0 38,900.0 38,900.0 38,900.0 38,900.0 38,900.0 38,900.0 38,900.0 38,900.0 38,900.0 38,900.0 Deferred Tax Assets 39,841.0 39,557.0 30,376.0 34,446.0 30,064.0 23,024.0 20,370.0 24,204.0 24,713.0 25,751.0 24,470.0 24,470.0 25,746.0 29,439.0 30,362.0 30,362.0 30,362.0 30,362.0 30,362.0 30,362.0 30,362.0 30,362.0 30,362.0 Other Investments ------3,281.0 3,246.0 3,693.0 3,693.0 4,088.0 4,731.0 6,689.0 6,689.0 6,689.0 6,689.0 6,689.0 6,689.0 6,689.0 6,689.0 6,689.0 Other Non-Current Assets 3,709.0 3,841.0 5,733.0 17,310.0 6,524.0 6,686.0 13,856.0 55,447.0 14,442.0 14,461.0 13,674.0 13,674.0 14,443.0 18,338.0 19,248.0 19,248.0 19,248.0 19,248.0 19,248.0 19,248.0 19,248.0 19,248.0 19,248.0 Other ------Total Assets 546,762.0 744,281.0 819,224.0 910,775.0 1,173,103.0 1,252,064.0 1,482,665.0 1,570,719.0 1,589,211.0 1,620,036.0 1,702,071.0 1,702,071.0 1,788,289.0 1,975,113.0 2,223,963.0 2,247,710.8 2,247,710.8 2,325,020.0 2,424,877.3 2,520,564.4 2,572,811.1 2,572,811.1 2,971,828.0
Liabilities ST Borrowings 2,396.0 803.0 52.0 1,783.0 21,062.0 4,951.0 11,482.0 56,269.0 60,269.0 90,309.0 108,760.0 108,760.0 188,646.0 4,473.0 4,879.0 4,879.0 4,879.0 4,879.0 4,879.0 4,879.0 4,879.0 4,879.0 4,879.0 Trade Payables and Other Current Liabilities 106,038.0 127,639.0 127,778.0 132,093.0 146,502.0 162,629.0 171,399.0 185,574.0 196,336.0 183,170.0 229,878.0 229,878.0 218,945.0 228,677.0 245,995.0 254,171.2 254,171.2 275,613.0 271,831.6 292,174.0 288,023.6 288,023.6 315,522.2 Current Tax Liabilities 868.0 2,249.0 2,301.0 2,229.0 4,690.0 2,738.0 5,694.0 6,909.0 6,406.0 7,165.0 6,237.0 6,237.0 7,658.0 7,371.0 7,281.0 7,281.0 7,281.0 7,281.0 7,281.0 7,281.0 7,281.0 7,281.0 7,281.0 Income Tax Liabilities 3,073.0 3,108.0 3,978.0 4,020.0 3,443.0 1,517.0 ------Current Liabilities 112,375.0 133,799.0 134,109.0 140,125.0 175,697.0 171,835.0 188,575.0 248,752.0 263,011.0 280,644.0 344,875.0 344,875.0 415,249.0 240,521.0 258,155.0 266,331.2 266,331.2 287,773.0 283,991.6 304,334.0 300,183.6 300,183.6 327,682.2
LT Borrowings 257,403.0 257,267.0 288,085.0 362,209.0 540,530.0 550,812.0 723,975.0 723,012.0 717,732.0 716,749.0 724,052.0 724,052.0 723,055.0 1,077,900.0 1,287,192.0 1,287,192.0 1,287,192.0 1,337,192.0 1,427,192.0 1,487,192.0 1,527,192.0 1,527,192.0 1,857,192.0 Trade and Other Payables 7,795.0 10,294.0 11,194.0 11,537.0 12,211.0 12,049.0 11,718.0 14,498.0 13,505.0 14,659.0 15,080.0 15,080.0 18,047.0 19,536.0 23,879.0 23,879.0 23,879.0 23,879.0 23,879.0 23,879.0 23,879.0 23,879.0 23,879.0 Deferred Tax Liabilities 660.0 1,742.0 2,414.0 4,147.0 7,029.0 9,951.0 9,628.0 19,764.0 20,888.0 21,985.0 21,336.0 21,336.0 21,621.0 23,192.0 24,765.0 24,765.0 24,765.0 24,765.0 24,765.0 24,765.0 24,765.0 24,765.0 24,765.0 Other Non-Current Liabilities 13,260.0 10,618.0 7,848.0 4,855.0 1,491.0 ------Total Liabilities 391,493.0 413,720.0 443,650.0 522,873.0 736,958.0 744,647.0 933,896.0 1,006,026.0 1,015,136.0 1,034,037.0 1,105,343.0 1,105,343.0 1,177,972.0 1,361,149.0 1,593,991.0 1,602,167.2 1,602,167.2 1,673,609.0 1,759,827.6 1,840,170.0 1,876,019.6 1,876,019.6 2,233,518.2
Shareholders' Equity Share Capital 4,434.0 6,613.0 6,818.0 6,887.0 6,932.0 6,992.0 7,060.0 7,101.0 7,106.0 7,132.0 7,141.0 7,141.0 7,143.0 7,160.0 7,167.0 7,167.0 7,167.0 7,167.0 7,167.0 7,167.0 7,167.0 7,167.0 7,167.0 Share Premium 321,078.0 466,166.0 477,326.0 485,347.0 495,109.0 507,296.0 519,604.0 524,221.0 526,176.0 530,315.0 539,448.0 539,448.0 542,732.0 547,549.0 551,424.0 551,424.0 551,424.0 551,424.0 551,424.0 551,424.0 551,424.0 551,424.0 551,424.0 Foreign Currency Translation Reserve 4,933.0 7,386.0 9,403.0 6,817.0 10,440.0 20,865.0 9,988.0 10,413.0 7,473.0 5,163.0 2,948.0 2,948.0 1,595.0 984.0 2,194.0 2,194.0 2,194.0 2,194.0 2,194.0 2,194.0 2,194.0 2,194.0 2,194.0 Hedging Reserve, Net of Tax ------(243.0) (194.0) (187.0) (169.0) (169.0) (170.0) (173.0) (156.0) (156.0) (156.0) (156.0) (156.0) (156.0) (156.0) (156.0) (156.0) Accumulated Profit (175,176.0) (149,604.0) (117,973.0) (111,149.0) (76,089.0) (27,736.0) 12,360.0 22,958.0 33,514.0 43,576.0 47,360.0 47,360.0 59,017.0 58,444.0 69,343.0 84,914.5 84,914.5 90,782.0 104,420.7 119,765.4 136,162.5 136,162.5 177,680.9 Other - - - - (247.0) - - - Total Shareholders' Equity 155,269.0 330,561.0 375,574.0 387,902.0 436,145.0 507,417.0 548,769.0 564,693.0 574,075.0 585,999.0 596,728.0 596,728.0 610,317.0 613,964.0 629,972.0 645,543.5 645,543.5 651,411.0 665,049.7 680,394.4 696,791.5 696,791.5 738,309.9 Total Liabilities and Shareholders' Equity 546,762.0 744,281.0 819,224.0 910,775.0 1,173,103.0 1,252,064.0 1,482,665.0 1,570,719.0 1,589,211.0 1,620,036.0 1,702,071.0 1,702,071.0 1,788,289.0 1,975,113.0 2,223,963.0 2,247,710.8 2,247,710.8 2,325,020.0 2,424,877.3 2,520,564.4 2,572,811.1 2,572,811.1 2,971,828.0
Source: Company data, Credit Suisse estimates. 20 December 2018 Interxion Holding (INXN) Interxion Holding 27 Figure 41: Financial Model—Cash Flow Statement
Cash Flow Statement FY-Dec FY-Dec FY-Dec FY-Dec FY-Dec FY-Dec FY-Dec 3/31/2017 6/30/2017 9/30/2017 12/31/2017 FY-Dec 3/31/2018 6/30/2018 9/30/2018 12/31/2018 FY-Dec 3/31/2019 6/30/2019 9/30/2019 12/31/2019 FY-Dec FY-Dec (€ thousands) 2010 2011 2012 2013 2014 2015 2016 1Q17 2Q17 3Q17 4Q17 2017 1Q18 2Q18 3Q18 4Q18 2018 1Q19 2Q19 3Q19 4Q19 2019 2020 Cash Flow Statement
Net Income 14,682.0 25,572.0 31,631.0 6,824.0 35,060.0 48,566.0 39,883.0 10,258.0 9,655.0 9,409.0 10,990.0 40,312.0 11,657.0 582.0 10,900.0 13,293.5 36,432.5 13,829.0 11,991.5 13,127.9 14,410.4 53,358.8 50,048.1 D&A 31,108.0 35,552.0 43,993.0 57,670.0 62,177.0 78,229.0 89,837.0 24,183.0 27,209.0 27,790.0 29,069.0 108,251.0 29,559.0 32,191.0 32,885.0 33,755.7 128,390.7 34,958.2 36,464.6 37,754.4 39,170.6 148,347.8 172,325.3 Provision for Onerous Lease Contracts (3,157.0) (3,125.0) (2,328.0) (3,285.0) (4,172.0) (3,532.0) (1,533.0) ------Share-Based Payments 1,684.0 2,736.0 5,488.0 4,149.0 6,576.0 6,518.0 6,106.0 1,595.0 2,215.0 2,096.0 1,738.0 7,644.0 3,215.0 3,646.0 3,620.0 3,620.0 14,101.0 3,620.0 3,620.0 3,620.0 3,620.0 14,480.0 14,480.0 Net Finance Expense 29,444.0 22,784.0 17,746.0 57,453.0 27,876.0 29,022.0 36,269.0 10,287.0 10,920.0 10,833.0 12,327.0 44,367.0 11,404.0 22,895.0 11,732.0 12,445.7 58,476.7 13,611.2 14,528.7 14,979.5 15,993.9 59,113.2 86,972.3 Income Tax Expense 2,560.0 9,737.0 15,782.0 6,082.0 15,449.0 17,925.0 16,449.0 3,300.0 3,727.0 4,131.0 3,681.0 14,839.0 3,812.0 2,795.0 4,445.0 4,452.5 15,504.5 4,986.0 4,323.5 4,733.2 5,195.6 19,238.2 18,044.6 Interest and fees paid (9,980.0) (24,472.0) (18,081.0) (22,747.0) (25,166.0) (30,522.0) (36,003.0) (18,450.0) (2,462.0) (19,476.0) (1,536.0) (41,924.0) (20,232.0) (18,600.0) (3,014.0) (12,917.5) (54,763.5) (14,083.0) (15,000.6) (15,451.3) (16,465.7) (61,000.7) (88,859.7) Interest received 390.0 2,251.0 1,007.0 569.0 471.0 152.0 136.0 (61.0) 8.0 193.0 3.0 143.0 - - 2.0 471.9 473.9 471.9 471.9 471.9 471.9 1,887.4 1,887.4 Income tax paid (1,339.0) (3,784.0) (5,545.0) (7,930.0) (6,305.0) (11,948.0) (8,124.0) (2,831.0) (2,474.0) (3,439.0) (3,241.0) (11,985.0) (3,273.0) (4,893.0) (4,005.0) (4,445.0) (16,616.0) (15,504.5) (4,986.0) (4,323.5) (4,733.2) (29,547.1) (32,712.4) Other - 1,725.0 ------Working Capital Change 8,987.0 (4,934.0) (611.0) (26,222.0) (7,548.0) (7,340.0) (5,565.0) 13,333.0 (13,140.0) 946.0 (7,540.0) (6,401.0) (1,566.0) (7,000.0) (2,703.0) (8,900.1) (20,169.1) 10,295.2 (4,686.5) 7,080.1 (8,755.2) 3,933.6 2,692.2 Movements in Trade Receivables 511.0 (16,943.0) (7,154.0) (22,712.0) (24,026.0) (19,380.0) (13,069.0) 2,804.0 (16,191.0) (266.0) (17,013.0) (30,666.0) (6,194.0) (13,858.0) (193.0) (17,076.3) (37,321.3) (11,146.6) (905.1) (13,262.3) (4,604.8) (29,918.8) (24,806.3) Movements in Trade Payables 8,476.0 12,009.0 6,543.0 (3,510.0) 16,478.0 12,040.0 7,504.0 10,529.0 3,051.0 1,212.0 9,473.0 24,265.0 4,628.0 6,858.0 (2,510.0) 8,176.2 17,152.2 21,441.8 (3,781.4) 20,342.4 (4,150.4) 33,852.4 27,498.5 Net Operating Cash Flow 74379 64042 89082 72563 104418 127070 137455 41,614.0 35,658.0 32,483.0 45,491.0 155246 34,576.0 31,616.0 53,862.0 41,776.7 161,830.7 52,183.8 46,727.1 61,992.2 48,908.1 209,811.2 224,877.7
Purchase of PP&E (98,171.0) (154,559.0) (172,036.0) (140,251.0) (212,938.0) (186,115.0) (241,957.0) (52,923.0) (53,399.0) (73,708.0) (67,198.0) (247,228.0) (94,218.0) (117,534.0) (102,143.0) (110,573.4) (424,468.4) (111,622.2) (138,574.5) (118,241.5) (127,168.6) (495,606.8) (551,384.5) Disposal of PP&E 230.0 945.0 ------Financial Investments - Deposits ------1,420.0 (218.0) (148.0) 30.0 13.0 (323.0) 166.0 114.0 (13.0) - 267.0 ------Acquisitions ------(77,517.0) (77,517.0) - - - - Acquisitions of Financial Fixed Asset - - (774.0) ------Purchase of Intangible Assets (2,223.0) (7,397.0) (6,295.0) (3,130.0) (3,339.0) (6,521.0) (8,921.0) (1,834.0) (3,042.0) (1,450.0) (2,461.0) (8,787.0) (1,977.0) (2,981.0) (1,042.0) (2,716.6) (8,716.6) (2,503.0) (2,513.1) (2,659.9) (2,710.8) (10,386.8) (11,824.6) Acquisitions of ST Investments - - - - (1,650.0) 4,713.0 ------Loans ------(1,341.0) (423.0) (1,764.0) (417.0) (834.0) (857.0) (857.0) (2,965.0) (857.0) (857.0) (857.0) (857.0) (3,428.0) (3,428.0) Net Investing Cash Flow (100,164.0) (161,011.0) (179,105.0) (143,381.0) (217,927.0) (187,923.0) (249,458.0) (132,492.0) (57,930.0) (75,128.0) (70,069.0) (335,619.0) (96,446.0) (121,235.0) (104,055.0) -114147.0197 (435,883.0) (114,982.2) (141,944.6) (121,758.3) (130,736.5) (509,421.6) (566,637.2)
Proceeds from Exercised Options 6.0 3,474.0 7,956.0 4,500.0 3,324.0 5,685.0 6,332.0 3,547.0 541.0 2,682.0 199.0 6,969.0 71.0 1,186.0 262.0 262.0 1,781.0 262.0 262.0 262.0 262.0 1,048.0 1,048.0 Proceeds from Issuance of New Shares - 143,352.0 ------Repayment of 'Liquidation Price' to former preferred shareholders - (3,455.0) ------Proceeeds/ (repayment) bank facilities (159,046.0) ------5,970.0 - 5,970.0 50,000.0 90,000.0 60,000.0 40,000.0 240,000.0 330,000.0 Proceeeds from Senior Security Notes 254,276.0 (645.0) 8,731.0 9,621.0 ------Proceeds from 6.00% Senior Secured Notes due 2020 - - - 317,045.0 157,878.0 - 154,808.0 ------Proceeds from 9.50% Senior Secured Notes due 2017 - - - (286,478.0) ------Proceeds from 4.75% Senior Notes 990,000.0 204,800.0 - 1,194,800.0 ------Proceeds from Future Notes ------Repayment of 6.00% Senior Secured Notes (634,375.0) - - (634,375.0) ------Repayments of Mortgages - - - 4,702.0 7,144.0 12,505.0 10,594.0 (548.0) (872.0) (624.0) 1,146.0 (898.0) (548.0) (4,948.0) (548.0) (548.0) (6,592.0) (548.0) (548.0) (548.0) (548.0) (2,192.0) - Proceeds from revolver - - - (1,398.0) 30,000.0 - - 74,775.0 - 30,000.0 24,746.0 129,521.0 79,438.0 69,376.0 - - 148,814.0 ------Repayment on revolver - - - - (30,000.0) - - (30,000.0) - - - (30,000.0) - (250,724.0) - - (250,724.0) ------Other (2,488.0) (2,397.0) (804.0) (81.0) (718.0) - 2,225.0 - - - (995.0) (995.0) - (2,828.0) (4,002.0) - (6,830.0) ------Net Financing Cash Flow 92,748.0 140,329.0 15,883.0 47,911.0 167,628.0 18,190.0 173,959.0 47,774.0 (331.0) 32,058.0 25,096.0 104,597.0 78,961.0 167,687.0 206,482.0 -286 452,844.0 49714 89714 59714 39714 238,856.0 331,048.0
FX Effects 149.0 194.0 163.0 (95.0) 114.0 1,294.0 251.0 (248.0) (695.0) (452.0) (238.0) (1,633.0) (239.0) 159.0 8.0 - (72.0) ------
Change in Cash 67,112.0 43,554.0 (73,977.0) (23,002.0) 54,233.0 (41,369.0) 62,207.0 (43,352.0) (23,298.0) (11,039.0) 280.0 (77,409.0) 16,852.0 78,227.0 156,297.0 (72,656.4) 178,719.6 (13,084.4) (5,503.5) (52.1) (42,114.3) (60,754.4) (10,711.4) Cash BoP 32,003.0 99,115.0 142,669.0 68,692.0 45,690.0 99,923.0 53,686.0 115,893.0 72,541.0 49,243.0 38,204.0 115,893.0 38,484.0 55,336.0 133,563.0 289,860.0 38,484.0 217,203.6 204,119.2 198,615.7 198,563.6 217,203.6 156,449.2 Cash EoP 99,115.0 142,669.0 68,692.0 45,690.0 99,923.0 58,554.0 115,893.0 72,541.0 49,243.0 38,204.0 38,484.0 38,484.0 55,336.0 133,563.0 289,860.0 217,203.6 217,203.6 204,119.2 198,615.7 198,563.6 156,449.2 156,449.2 145,737.8
Source: Company data, Credit Suisse estimates. 20 December 2018 20 December 2018
Credit Suisse PEERs
Figure 42: PEERs Map
Source: Credit Suisse PEERs, Credit Suisse estimates.
Interxion Holding (INXN) 28 20 December 2018
Companies Mentioned (Price as of 18-Dec-2018) AT&T (T.N, $29.75) Akamai Technologies, Inc. (AKAM.OQ, $64.35) Amazon com Inc. (AMZN.OQ, $1551.48) Atos (ATOS.PA, €69.68) Brunswick Corporation (BC.N, $45.08) Cable ONE (CABO.N, $858.28) CenturyLink (CTL.N, $16.33) Charter Communications (CHTR.OQ, $305.93) Cincinnati Bell (CBB.N, $8.37) Cisco Systems (CSCO.OQ, $44.06) Citigroup Inc. (C.N, $53.93) Cogent Communications Holdings Inc. (CCOI.OQ, $45.61) Cognizant Technology Solutions Corp. (CTSH.OQ, $64.62) Comcast Corp. (CMCSA.OQ, $35.65) Consolidated Com (CNSL.OQ, $10.58) CoreSite Realty Corp. (COR.N, $93.52) Credit Suisse Gp (CS.N, $10.89) CyrusOne Inc. (CONE.OQ, $57.02) Digital Realty Trust, Inc. (DLR.N, $109.0) Dish Network (DISH.OQ, $29.05) Equinix, Inc. (EQIX.OQ, $370.97) Frontier Commn (FTR.OQ, $2.45) GDS Holdings Limited (GDS.OQ, $23.99) GTT Communications Inc (GTT.N, $25.53) Hewlett Packard (HPQ.N, $21.41) IBM (IBM.N, $116.65) Interxion Holding (INXN.N, $56.8, OUTPERFORM, TP $70.0) Liberty Global (LBTYA.OQ, $23.0) Limelight (LLNW.OQ, $2.46) Marriott International (MAR.OQ, $108.24) Microsoft (MSFT.OQ, $103.97) Netflix Inc. (NFLX.OQ, $270.94) NextDC (NXT.AX, A$6.39) OneSpan (OSPN.OQ, $13.66) Oracle Corporation (ORCL.N, $45.85) QTS Realty Trust, Inc. (QTS.N, $39.04) RBC (RY.N, $69.55) S&P Global (SPGI.N, $167.99) Siemens India (SIEM.BO, Rs980.1) Spie (SPIE.PA, €11.18) Sprint Corp (S.N, $5.91) Switch, Inc. (SWCH.N, $6.5) T-MOBILE (TMUS.OQ, $64.78) U.S. Cellular (USM.N, $53.16) Uniti Group (UNIT.OQ, $16.42) Verizon Communications (VZ.N, $55.65) WideOpenWest, Inc. (WOW.N, $7.95) Windstream Hldg (WIN.OQ, $2.68) Zayo Gp (ZAYO.N, $22.84)
Disclosure Appendix Analyst Certification Sami Badri and Michael Westendorf each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and Asia stocks (excluding Japan and Australia), ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark (India - S&P BSE Sensex Index); prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time.
Interxion Holding (INXN) 29 20 December 2018
Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products. Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward. Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors. Credit Suisse's distribution of stock ratings (and banking clients) is:
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Target Price and Rating Valuation Methodology and Risks: (12 months) for Interxion Holding (INXN.N)
Method: Our target price of $70 is based on an 15.5x EV multiple and our 2020 Adjusted EBITDA of €352.2mil. We rate INXN Outperform based on its expected total return relative to our coverage universe. Risk: Risks to our $70 target price and Outperform rating include technological disruption, increased European competition, geographic concentration, data center space demand and supply, and increasing interest rates.
Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures/view/selectArchive for the definitions of abbreviations typically used in the target price method and risk sections. See the Companies Mentioned section for full company names Credit Suisse currently has, or had within the past 12 months, the following as investment banking client(s): SIEM.BO, ORCL.N, MSFT.OQ, IBM.N, CTSH.OQ, C.N, AMZN.OQ, T.N, DLR.N, COR.N, SWCH.N, WOW.N, LBTYA.OQ, CHTR.OQ, CMCSA.OQ, S.N, TMUS.OQ, VZ.N, GDS.OQ, GTT.N, HPQ.N, CSCO.OQ Credit Suisse provided investment banking services to the subject company (SIEM.BO, ORCL.N, MSFT.OQ, IBM.N, CTSH.OQ, C.N, AMZN.OQ, T.N, DLR.N, COR.N, SWCH.N, WOW.N, LBTYA.OQ, CHTR.OQ, CMCSA.OQ, S.N, TMUS.OQ, VZ.N, GDS.OQ, GTT.N, HPQ.N, CSCO.OQ) within the past 12 months. Within the last 12 months, Credit Suisse has received compensation for non-investment banking services or products from the following issuer(s): SIEM.BO, MSFT.OQ, IBM.N, CTSH.OQ, C.N, AMZN.OQ, T.N, WOW.N, LBTYA.OQ, CHTR.OQ, CMCSA.OQ, S.N, TMUS.OQ, VZ.N, GTT.N, HPQ.N, CSCO.OQ Credit Suisse has managed or co-managed a public offering of securities for the subject company (C.N, T.N, DLR.N, COR.N, LBTYA.OQ, CHTR.OQ, CMCSA.OQ, S.N, TMUS.OQ) within the past 12 months.
Interxion Holding (INXN) 30 20 December 2018
Within the past 12 months, Credit Suisse has received compensation for investment banking services from the following issuer(s): ORCL.N, MSFT.OQ, IBM.N, CTSH.OQ, C.N, AMZN.OQ, T.N, DLR.N, COR.N, SWCH.N, WOW.N, LBTYA.OQ, CHTR.OQ, CMCSA.OQ, S.N, TMUS.OQ, VZ.N, GDS.OQ, GTT.N, HPQ.N, CSCO.OQ Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (SIEM.BO, ORCL.N, NFLX.OQ, MSFT.OQ, IBM.N, CTSH.OQ, AMZN.OQ, T.N, ATOS.PA, DLR.N, QTS.N, SWCH.N, WOW.N, DISH.OQ, LBTYA.OQ, CHTR.OQ, CMCSA.OQ, S.N, TMUS.OQ, VZ.N, GTT.N, HPQ.N, CSCO.OQ) within the next 3 months. Credit Suisse currently has, or had within the past 12 months, the following issuer(s) as client(s), and the services provided were non-investment- banking, securities-related: SIEM.BO, MSFT.OQ, IBM.N, CTSH.OQ, C.N, AMZN.OQ, WOW.N, LBTYA.OQ, CHTR.OQ, CMCSA.OQ, S.N, VZ.N, GTT.N, HPQ.N, CSCO.OQ Credit Suisse currently has, or had within the past 12 months, the following issuer(s) as client(s), and the services provided were non-investment- banking, non securities-related: SIEM.BO, IBM.N, CTSH.OQ, C.N, AMZN.OQ, T.N, LBTYA.OQ, CMCSA.OQ, TMUS.OQ, VZ.N, GTT.N, HPQ.N, CSCO.OQ Credit Suisse or a member of the Credit Suisse Group is a market maker or liquidity provider in the securities of the following subject issuer(s): T.N, AKAM.OQ, AMZN.OQ, ATOS.PA, CHTR.OQ, CSCO.OQ, C.N, CCOI.OQ, CTSH.OQ, CMCSA.OQ, COR.N, CONE.OQ, DLR.N, DISH.OQ, EQIX.OQ, GDS.OQ, GTT.N, HPQ.N, IBM.N, INXN.N, LBTYA.OQ, MSFT.OQ, NFLX.OQ, ORCL.N, QTS.N, SIEM.BO, S.N, SWCH.N, TMUS.OQ, VZ.N, WOW.N A member of the Credit Suisse Group is party to an agreement with, or may have provided services set out in sections A and B of Annex I of Directive 2014/65/EU of the European Parliament and Council ("MiFID Services") to, the subject issuer (INXN.N, EQIX.OQ, SIEM.BO, ORCL.N, MSFT.OQ, IBM.N, CTSH.OQ, C.N, AMZN.OQ, T.N, ATOS.PA, AKAM.OQ, CONE.OQ, DLR.N, COR.N, QTS.N, SWCH.N, CCOI.OQ, WOW.N, DISH.OQ, LBTYA.OQ, CHTR.OQ, CMCSA.OQ, S.N, TMUS.OQ, VZ.N, GDS.OQ, GTT.N, HPQ.N, CSCO.OQ) within the past 12 months. As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (SWCH.N). Credit Suisse are providing T-Mobile US with committed debt financing to support its announced merger with Sprint Corporation Credit Suisse are providing T-Mobile US with committed debt financing to support its announced merger with Sprint Corporation Credit Suisse is acting as advisor to Cisco (CSCO) in relation to its acquisition of Luxtera Inc.
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Interxion Holding (INXN) 31 20 December 2018
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Interxion Holding (INXN) 32