SWCH is a provider of high-end data centers with over 800 customers. The company describes itself as a pioneer in the design, construction, and operation of some of the most reliable, secure, and sustainable data centers in the world.
It currently owns and operates three campus locations, which it calls "primes", which encompass ten colocation facilities with an aggregate of up to 4.0 million square feet of space. These primes include the Core Campus is Las Vegas, NV, the Citadel Campus near Reno, NV, and the Pyramid Campus in Grand Rapids, MI. Additionally, SWCH recently purchased land to develop a fourth prime in Atlanta, GA, which will be dubbed the "Keep Campus."
SWCH's data centers are advanced, providing power densities that exceed industry averages with efficient cooling, while also powered by 100% renewable energy. The company builds its facilities using its "Switch Modularly Optimized Designs, or, Switch MODs. This allows it to rapidly deploy or replace infrastructure to meet its customers' current and future data storage and computer requirements.
More than 95% of its revenue is derived from recurring revenue streams, consisting of the licensing of cabinet space and power (colocation), and connectivity devices. Furthermore, the contracts with its customers typically have terms of three to five years, making its business model fairly predictable.
Taking a look at its results for the six months ended June 30, 2017, revenue was up 17% year/year to $181.3 million. This was primarily driven to an increase in colocation revenue, resulting from increased sales as it expanded facilities at its "Core Campus" and opened the first facilities at the Pyramid and Citadel campuses in 2016.
Approximately 63% of the increase in sales was attributable to new customers initiating service after June 30, 2016, and the remaining approximately 37% of the increase in sales was attributable to growth from existing customers.
Gross margin came in at 48.2%, an improvement over FY16's 46.9%, However, on a year/year basis, it was down from 49% for the six months ended June 30, 2016. Cost of revenue was up by 20% due to higher facility costs associated with power usage, as well as higher connectivity costs.
Still, operating income did improve by 14% year/year to $48.0 million. Net Income, on the other hand, was essentially flat at $35.3 million as a result of $9 million in interest payments.