Summary: Interxion reported its 4Q14 results which pointed to signs of continued uptick in the European colocation market after the fourth consecutive quarter of increasing y/y growth and q/q growth above 3%. Interxion opened new expansions in Amsterdam, Vienna, Frankfurt and Marseille during the quarter and cited healthy levels of demand for each location. Management confirmed a new data centre build in Frankfurt and laid out its strategy/outlook for 2015 around building communities of cloud and platform providers. More details below.
Quarterly: Interxion’s 4Q14 top line came in at €117.5m, up 15% y/y and 4% q/q as management noted strength in core markets such as Frankfurt, Amsterdam and improved performance in France. Secondary markets that also performed well include Vienna, Stockholm and Dublin. Interxion brought on one of its largest quarterly amounts of capacity, adding 4.9k sqm of data centre space in the quarter with equipped space now totaling 93.5k sqm. Revenue generating (or utilized) space of 71k sqm increased at a slightly slower pace than equipped space, equating to a marginal drop in utilization rate to 76% (3Q14: 77%). It accelerated the Frankfurt (FRA8) expansion to meet customer demand. The managed services provider segment continues to be the strongest performing vertical, representing 26% of revenues. Network providers still constitute the highest share of revenue at 32%, followed by financial services (11%), digital media & CDNs (10%) and enterprises (9%).
Full-year: Interxion FY14 revenue totaled €340.6m, up 11% y/y and is essentially the identical growth rate as 2013 albeit from a larger revenue base. Looking at geographical splits, the top four core countries (France, Germany, UK and Netherlands) represented 63% of Interxion’s total business and FY14 saw these four regions having a slight uptick compared to FY13. Interxion appears to be de-emphasizing the UK market (added 0.2k sqm) with the majority of its capital focused on expanding in Germany (added 4.5k sqm) and the Netherlands (added 4.9k sqm) in 2014. Interxion’s expansion plans appears to follow a two-year cycle, expanding significantly one year and then pulling back the next, perhaps to allow new builds to ramp up and utilization levels to normalize. For example, Interxion added 10.8k sqm in 2012, then pulling back in 2013 with only 4.7k sqm of capacity added that year. 2014 saw that number nearly triple to 11.5k sqm and current guidance reflects only 3k sqm of expansions/builds planned in 2015. It is however very likely that Interxion will exceed those numbers in 2015, subject to customer demand.
Frankfurt: Management revealed plans to build its tenth data centre in Frankfurt (FRA10), continuing the momentum in 2014 of adding 4.5k sqm in the German market. FRA10 will provide roughly 4.8k sqm of equipped space split into four equally sized phases with 10 MW of total available customer power. The first two phases totaling 2.4k sqm is scheduled to come online in 1H16. Interxion owns the land on its Frankfurt campus with FRA10 expected to cost roughly €92m in capital expenditures.
Interxion 4Q14 (all figures in €m)
| 4Q14 | 4Q13 | 3Q14 | Y/Y% Change | Q/Q% Change | |
| Total Interxion | 89.9 | 78.2 | 86.4 | 15.0 |
4.0 |
| Rev: Recurring | 83.7 | 74.4 | 80.9 | 12.5 |
3.5 |
| Rev: Non-recurring | 6.2 | 3.7 | 5.6 | 67.7 |
11.1 |
Source: Interxion filings
Interxion FY14 (all figures in €m)
| 2014 | 2013 | Y/Y% Change | |
| Total Interxion | 340.6 | 307.2 | 10.9 |
| Rev: Recurring | 319.2 | 291.3 | 9.6 |
| Rev: Non-recurring | 21.4 | 15.7 | 36.3 |
Source: Interxion filings
Takeaways:
- The y/y growth now exceeds the 10% mark, pointing to signs of stabilization in the European colocation market
- Overall, an uptick in recurring and overall revenue
- Strong y/y growth in Germany and Netherlands
Interxion 4Q14 (all figures in €m)
| 4Q14 | 4Q13 | 3Q14 | Y/Y% Change | Q/Q% Change | EBITDA Margin | |
| Adjusted EBITDA | 38.7 | 33.8 | 37.3 | 14.5 |
3.8 |
43.0% |
Source: Interxion filings
Interxion FY14 (all figures in €m)
| 2014 | 2013 | Y/Y% Change | EBITDA Margin | |
| Adjusted EBITDA | 146.4 | 131.9 | 11.0 |
43.0% |
Source: Interxion filings
Footprint metrics at a glance:
- 93,500 sqm equipped space (Q/Q change: +5.5%)
- 71,000 sqm revenue generating space (Q/Q change: +3.6%)
- 76% utilization (Q/Q change: -1pp)
- 99 MW customer available power (Q/Q change: +3 MW)
- 145 MW potential customer power (Q/Q change: same)
- 40 data centres in operation (Q/Q change: +2 DC)
Build activity 4Q14:
- Completed expansion projects in two markets – totalling 2.4k sqm
- MRS1 (Marseille) – Phase 1 – 500 sqm
- AMS7 (Amsterdam) – Phase 4 – 1,300 sqm (expansion)
- VIE2 (Vienna) – Phase 3 – 600 sqm (expansion)
- FRA 8 (Frankfurt) – Phase 3 and 4 – 1,800 sqm (expansion)
Builds to open in 1Q15:
- AMS7 (Amsterdam) – Phase 5 – 700 sqm (expansion)
- VIE2 (Vienna) – Phase 4 – 600 sqm (expansion)
Guidance: Management guided top-line revenues to come in the range of €375-388m for FY15, or 12% y/y growth at the mid-point. Adjusted EBITDA is expected to fall between €162-172m for FY15. Management noted that ARPU decreased 1.5% during the quarter as expected and forecasted that FY15 would see further declines of ARPU in the 1-2% range during the first half. ARPU is expected to stabilize in the second half and then improve as the underlying power and energy uptake from its base become more visible.
Angle: Interxion continues to build on its existing business fundamentals as it pursues what it calls magnetic customers, which consist of cloud services, network and content providers. Placing an emphasis on these ecosystem-enhancing tenants will be the key to driving long-term growth for Interxion. Its current trajectory and strategy is indicative of how the colocation landscape is separating. Interxion is taking the path of an enabler, using its colocation services to enable hybrid cloud adoption by attempting to build cloud communities. These communities are essentially platform-, software- and infrastructure-as-a-service companies that help enable enterprises to architect hybrid cloud environments such as Salesforce, Microsoft Azure, AWS, Oracle and IBM. Management appears to be satisfied with the current level of investment it has made to acquire these magnetic partners and will look to build on these existing relationships in 2015.