Csquare Inc. (CSQR) Q3 2026 Earnings Call Transcript

Operator: Good day, and welcome to the Csquare 3Q '26 Earnings Announcement Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Michael Bowen, Senior Vice President of Investor Relations. Please go ahead.

Michael Bowen: Good afternoon, and welcome to Csquare's Third Quarter 2026 Earnings Conference Call. Joining me today are Spencer Mullee, Chief Executive Officer; and Steve Cook, Chief Financial Officer. Earlier today, we issued our third quarter earnings release and supplemental investor materials, which are available in the Investor Relations section of our website. Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements regarding our expectations for future operating performance, bookings, customer demand, capital allocation, leverage, development activity and other future events. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described today. Please refer to today's earnings materials and SEC filings for additional information regarding these forward-looking statements and the risks associated with them as well as reconciliations of the non-GAAP financial measures discussed today to the most directly comparable GAAP measures. And now I'll turn the call over to Spencer.

Spencer Mullee: Thank you, Michael, and good afternoon. I appreciate everyone joining us today. The third quarter was another strong quarter for Csquare. Revenue increased 25.6% year-over-year and adjusted EBITDA grew by 44.3% during that same time period. Annualized bookings reached $66.1 million, marking our 14th consecutive quarter of sequential bookings growth. We also expanded our contracted backlog while continuing to strengthen the balance sheet following our IPO earlier this year. While we're pleased with the results, what gives me the greatest confidence is the quality and the durability of the business underlying those numbers and what we're hearing directly from our customers. Over the past year, customer conversations have evolved in a meaningful way. 3 topics increasingly dominate strategic discussions, time to delivery, long-term cost certainty and how future AI inference workloads sit within broader enterprise infrastructure strategies. Customers recognize that high-quality capacity is not always immediately available, particularly in key metropolitan markets, that is influencing purchasing behavior. Large enterprises are increasingly planning further ahead and committing to capacity earlier to create greater certainty around their future infrastructure requirements. At the same time, demand remains broad-based. Our customer base spans financial services, health care, technology, communications, network providers and other enterprises and our pipeline continues to grow across multiple verticals. That diversity matters because our growth is not dependent on a single customer category, industry or workload. The quality and durability of that customer base are also important parts of our model. More than 85% of our monthly recurring revenue comes from core enterprise customers and more than 60% of our customer base is investment grade or has investment-grade credit characteristics. Our average customer relationship extends beyond 12 years, and our weighted average lease term has increased to more than 37 months. That durability is also reflected in customer satisfaction with monthly combined Net Promoter Scores ranging from 88 to 93 during the third quarter. We believe those characteristics provide meaningful durability to our recurring revenue base while still allowing us to benefit from emerging demand drivers. They also provide strong validation of the quality of our site portfolio. Before moving into an overview of commercial activity in the quarter, I want to quickly address a common misperception that I regularly hear specifically that an older data center building means older infrastructure. That's simply not how our facilities operate. Critical equipment is continuously maintained and replaced through its life cycle. And when we expand capacity, we install new electrical and mechanical infrastructure. Ultimately, reliability is what matters. We operate essentially at 100% uptime with virtually no events attributable to equipment failure, while successfully deploying high-density compute across the portfolio. We believe that's a much better measure of asset quality than the year the original building was constructed. Moving to commercial activity. Execution remained strong throughout the quarter. Annualized bookings were $66.1 million, supported by activity across customer segments and deployment profiles. The combination of sustained bookings and expanded pipeline and customers planning further ahead continues to reinforce our view of the demand environment. That demand is translating into greater forward visibility. Annualized revenue backlog increased from approximately $76 million at the end of the second quarter to approximately $114 million at the end of quarter 3 with about $104 million expected to commence over the next 12 months. The composition of bookings is also important. Many deals signed during the third quarter have relatively short expected deployment time lines because we were able to sell into existing space or into space requiring targeted infrastructure improvements rather than relying on larger under roof expansion projects. At the same time, we're investing to bring additional capacity online against contracted customer demand. Across the platform, we have access to nearly 2 gigawatts of utility feeder capacity compared with approximately 1 gigawatt of transformer capacity installed today and roughly 400 megawatts of installed sellable UPS capacity. At the same time, only about 2/3 of our available floor space is currently sold. That distinction is important. There can be a perception that vacant space in a data center necessarily means there's no power available to support it. In many of our facilities, that's just not the case. We have additional utility capacity available today or accessible within relatively short time frames, which allow us to add UPS and cooling infrastructure within existing facilities as customer demand develops that incremental infrastructure can be added at a substantially lower capital requirement than constructing additional building shell or pursuing greenfield development. We're also increasingly demonstrating that our existing footprint can support high-density compute. We are successfully deploying high-density infrastructure across multiple markets today. So when we combine available utility capacity, existing floor space, the ability to add power and cooling infrastructure within existing facilities and growing demand for high-density deployments, we see significant opportunity to increase the revenue and earnings capacity of assets which we already own. That embedded growth runway is an important part of the Csquare investment thesis. We don't need to rely exclusively on new buildings or greenfield development to create meaningful additional capacity and adjusted EBITDA. A substantial portion of our growth opportunity exists within the existing footprint we already own and operate today. Our ability to sell existing capacity, optimize infrastructure and add new capacity within our existing portfolio is an important part of our model. It allows us to respond to customer requirements while deploying capital against demand, which is increasingly visible. Pricing provides another important indicator of the strength of our environment. Pricing remained strong during the third quarter. Based on the demand and the current market conditions, we implemented a meaningful increase to portions of our rate card near the end of quarter 3. Renewal pricing and customer retention also remained healthy, and Steve will provide additional detail on that shortly. We believe the combination of strong pricing and retention demonstrates the value customers place on reliable infrastructure, connectivity and access to quality capacity in the markets we serve. We continue to receive questions regarding AI. So let me be clear about how we view that opportunity. Enterprise colocation is the foundation of this business. More than 85% of our monthly recurring revenue today comes from core enterprise customers. AI is incremental to that foundation into a business model that was already working well before the recent focus on the AI infrastructure. As enterprises develop their AI strategies and scale inference workloads, we believe we're well positioned to participate particularly where connectivity, latency, resiliency, proximity to users and increasingly high rack densities matter. Importantly, we don't need Csquare to become an AI company for AI to be meaningful to our growth. As enterprise customers increasingly deploy inference workloads within their existing infrastructure strategies, we believe those workloads represent an additional source of demand for a platform already serving their mission-critical infrastructure needs. That's how we think about the opportunity. AI is an incremental demand driver on top of a diversified enterprise colocation business with long-standing customer relationships and highly recurring revenue. As we look forward, my focus is increasingly on execution in the areas where we have a high degree of confidence in long-term demand. That means delivering capacity on schedule, converting contracted backlog into revenue, maintaining operational excellence, allocating capital effectively and ensuring we have the right people, partners and processes in place to support our growth. During the third quarter, we continued to bring meaningful capacity into service across the platform while advancing projects supporting our contracted backlog. That execution is reflected in the $104 million of annualized backlog currently expected to commence over the next 12 months. The opportunity in front of us is significant, but execution matters. Stepping back, demand remains strong, but equally important, we believe the quality of that demand remains high. We're selling to a diversified customer base with strong credit characteristics, long-standing relationships, and increasingly long commitments. Combined with favorable pricing and growing backlog, that provides meaningful visibility into future revenue and adjusted EBITDA. That visibility increasingly connects our commercial story with our balance sheet story. As contracted deployments become revenue generating, we expect the resulting adjusted EBITDA growth to become an important driver of our deleveraging. So the takeaway from the quarter is not simply that Csquare produced strong growth. It's that we continue to sell capacity, improve pricing, build forward visibility and convert customer demand into infrastructure supporting long-duration recurring revenue. We believe that combination creates a strong foundation for sustainable growth and continued balance sheet improvement. And with that, I'll turn it over to Steve.

Steven Cook: Thank you, Spencer. I'll begin with our third quarter results and then discuss capital deployment, our balance sheet and outlook. Third quarter revenue increased 25.6% year-over-year to $302.3 million. Colocation revenue increased 26.7% to approximately $227 million and total recurring revenue increased 23.4% to $264 million. Our existing portfolio generated approximately 67% of recurring revenue growth with acquisitions completed during 2025, contributing approximately 33%. Turning to GAAP results. Net loss for the quarter was $88.1 million compared with a net loss of $29.8 million in the third quarter of 2025. The year-over-year increase primarily reflected approximately $58.6 million of IPO-related transaction costs, post-IPO stock-based compensation expense and costs associated with terminating certain pre-IPO compensation agreements. Over time, we expect continued growth in recurring revenue and adjusted EBITDA, together with the benefit of our reduced post-IPO debt balance to improve our GAAP earnings profile. Depreciation associated with our infrastructure portfolio, however, will continue to be a significant noncash expense. Turning to adjusted EBITDA. Adjusted EBITDA increased 44.3% year-over-year to $132.1 million. Adjusted EBITDA margin in the quarter expanded to 47.8% compared with 40.5% in the prior year period, reflecting continued recurring revenue growth and significant operating leverage across the platform. Our same data center portfolio was the primary driver of that performance. Growth within that portfolio generated approximately $16.4 million of incremental adjusted EBITDA, including contributions from completed customer deployments, while portfolio margin expansion contributed an additional approximately $15.5 million. Together, those 2 drivers represented approximately 79% of year-over-year adjusted EBITDA growth. Pricing also remains strong. Renewal spreads in the quarter were approximately 17%, the highest level we've achieved over the past 5 quarters. Booked pricing increased double digits year-over-year, while net revenue churn remained low at 1.9%. Turning to capital deployment. We invested approximately $149 million in growth capital expenditures during the quarter and approximately $16 million in recurring capital expenditures. Our active development portfolio supports approximately $114 million of annualized contracted revenue backlog. Our objective is straightforward, deploy capital behind visible customer demand at attractive returns bring that capacity online, convert it into recurring revenue and adjusted EBITDA and allow that growth to improve the balance sheet. Turning to the balance sheet. Our IPO materially improved our financial position. Following the IPO, we repaid approximately $1.1 billion of indebtedness, including the full repayment of our revolving credit facility. We ended the quarter with no revolver borrowings and approximately $1.1 billion of available liquidity. Net leverage based on our annualized year-to-date adjusted EBITDA was approximately 8.4x at quarter end. We recognize that leverage is an important area of focus for investors, and we remain committed to our target objective of 6 to 7x. The path toward that objective is primarily driven by adjusted EBITDA growth from deployments already under contract combined with disciplined capital allocation. As contracted capacity commences, revenue and adjusted EBITDA should increasingly reflect investments where much of the associated capital has already been committed. Finally, I want to make one broader point about the underlying cash characteristics of the business. As we've shown in our supplemental disclosures, this quarter included a number of significant IPO-related and other items that affected reported FFO. We provided those items individually in a supplemental schedule so investors can evaluate them transparently. More fundamentally, the recurring capital required to maintain our existing infrastructure is substantially lower than the depreciation and amortization reflected in our financial statements. That is an important characteristic of the business model. Combined with the adjusted EBITDA contribution we expect from recently completed deployments and contracted backlog, we believe the underlying cash-generating characteristics of the portfolio provide meaningful support for continued investment and deleveraging over time. Our capital structure also provides significant stability. Substantially, all of our outstanding debt is fixed rate with a weighted average interest rate of approximately 5.4%. Less than 4% of our nonrevolving debt matures between now and the end of 2028 and 99% of our asset-backed securitization issuances are investment grade. That combination of fixed rate debt, limited near-term maturities and substantial available liquidity gives us the flexibility to execute our contracted development pipeline while continuing to improve the balance sheet. Turning to guidance. Based on third quarter performance and our visibility into the remainder of the year, we expect full year revenue of $1.14 billion to $1.16 billion, and adjusted EBITDA of $490 million to $500 million. We expect growth capital expenditures of $620 million to $640 million, and recurring capital expenditures of $50 million to $60 million. Our confidence in that outlook is supported by contracted deployments, projects that have already been completed and are moving into their revenue-generating phase, continued pricing strength and the operating leverage we're seeing across the platform. Let me close with the bigger financial picture. Csquare operates mission-critical infrastructure with highly recurring revenue characteristics. The existing portfolio generates substantial adjusted EBITDA requires relatively predictable recurring capital investment and is financed largely with fixed rate debt. At the same time, we have significant contracted growth already in front of us and approximately $1.1 billion of available liquidity to continue funding that opportunity. That is why we don't view growth in deleveraging as competing objectives. When we invest behind contracted demand at attractive returns and execute well, new capacity generates recurring adjusted EBITDA. That incremental adjusted EBITDA increases the cash-generating capacity of the business and reduces leverage. Our capital allocation priorities, therefore, remain clear: maintain the safety, reliability and performance of the existing portfolio, fund attractive customer-backed organic growth, preserve substantial liquidity and continue moving toward our target leverage objective of 6 to 7x. We believe the combination of recurring revenue, predictable recurring capital requirements, visible contracted growth, fixed rate financing and substantial liquidity all give the business meaningful cash-generating capacity and durable financial characteristics across market and rate cycles. With that, I'll turn the call back to Spencer.

Spencer Mullee: Thank you, Steve. We're encouraged by the momentum across the business, but our focus remains squarely on execution, delivering for our customers, bringing contracted capacity online, converting backlog into recurring revenue and adjusted EBITDA and continuing to strengthen the balance sheet. I want to thank our employees for their hard work this quarter, our customers for their trust at our shareholders for their continued support. Operator, we're now ready to take questions.

Operator: [Operator Instructions]. The first question will come from Cameron McVeigh with Morgan Stanley.

Gaurav Makeneen: This is Gaurav Makeneen on for Cameron McVeigh. I have one on capacity and one on pricing. First, the press release mentioned that 3Q bookings should commence on shorter time lines than it is typical. On that note, is there anything you can share around typical time lines versus what you may expect in the near term as disclosed in the presentation? And then secondly, on pricing, can you comment on what drove the jump in renewal spreads to over 17% in the quarter? Do you have a sense of how much of your customer base is meaningfully below market rates.

Spencer Mullee: Great. Cameron, thanks for being here today. We really appreciate it. So your first question was on time lines and the deals that we did in the third quarter, and I would answer it this way. We set about very, very diligently and our sales team did a spectacular job this quarter on focusing on spaces, which we already have built out and are all ready to go to market. So we set a record in the quarter. As you know, we set a record in terms of our enterprise business in the quarter. We set a record in terms of deals that we did that could be delivered in very short time frame. So we do expect that to be true for the quarter, and we do think that we'll see a number of those deals come online in quarter 4. To address your question on pricing, you did see that we did 17%, that really is a function of a variety of things. First, just the market in general and supply and demand. We are in an oversold situation. Our service, the things that we deliver to customers, all of the reasons why we've talked about over time as we've talked to you over the past 6 months of all the advantages of Csquare are all coming to fruition. So I do expect that we'll continue to see some of that greater increase as we go because we still have a number of customers who are below market from the legacy days. I don't know that it will be as significant as we saw in the third quarter, but I think it will still be substantial going forward. I hope that answers your question.

Operator: The next question will come from Michael Elias with Cowen & Co.

Michael Elias: I'm going to put on a different spin on the questions that were just asked. Maybe starting out on pricing, Spencer. When I consider the landscape, we're looking at demand at generational levels. We have a tighter supply environment as a function of NIMBYism and a lower set of people who are building for the enterprise, newer deals are coming in at higher rates. As we consider the installed base of the portfolio, how do you think about over a 2-, 3-year period, the uplift that we could see on EBITDA as a function of that. And as part of that, what it implies for leverage. And then the second question is just on the demand side. Again, seeing very strong demand, but I think there was a note in the deck that mentioned bookings normalizing from peak. Just any color on the demand strength, why that would be normalizing from peak and what a new normal would look like?

Spencer Mullee: Yes. Super glad to see you, Michael. Thanks for the questions. Okay, so on the demand side, let's talk about that first. We already have a great, great start for the fourth quarter. And so I don't want to really predict what's going to happen. We did talk about normalizing where that normalizes, I don't really know. I do know this, I know that our demand continues to be at record levels. Our enterprise demand has been significantly growing and continues to grow. And so for the future, I don't see any functional reasons why that would change. We don't see any new build of any substantial at all in terms of new builds of retail data centers. We still have existing capacity, both from a power perspective and a space perspective, and we're planning on capitalizing on that. That was on the demand side. Pricing was the other one. Steve, do you want to add?

Steven Cook: Yes. So I would say the pricing environment, as you can see from the earnings materials we released, is constructive on both fronts on the renewal side and the demand side, Michael. In terms of the demand drivers that Spencer just mentioned, I think the business is well positioned. The book generally matures ratably over the next 3 years. And so you're thinking in terms of us driving future growth there on renewals, specifically, about 1/3 of the portfolio is addressable every 12 months. So I think there's a meaningful opportunity for us to keep driving and capitalize on the environment we find ourselves in.

Spencer Mullee: And Michael, I would say this one other thing. As we continue to see these market forces increase our pricing, that path to the leverage of 6x to 7x becomes easier and easier as we continue to have this pricing strengthen. So happy to see that as well.

Michael Elias: Yes. And that was part of the question. If I could squeeze one in really quickly. I thought I saw a disclosure regarding assets held for sale. Any color you could give us in terms of how you're thinking about quantum of monetizations that could be in the cards? And as part of that, if you want any color on cap rate or anything like that.

Spencer Mullee: Yes, yes. So Michael, we have 2 assets that have long been held for distribution. Those are the 2 that you're referencing. These were the legacy data centers where decisions had been made years and years ago even before my arrival that are just now coming to fruition. But to the general question, we evaluate every M&A opportunity, so both things that we could acquire or things that we could dispose of. If there is something noncore, where we can sell it and take our leverage down, we would absolutely consider that, and we look at opportunities on a daily basis. So M&A is active here. We have an M&A department. Steve and I both look at multiple deals on a weekly basis, and we're excited about opportunities ahead of us in 2027.

Operator: The next question will come from Jon Petersen with Jefferies.

Jonathan Petersen: Great. Congrats on the strong leasing. Curious on the planned CapEx spend on the brownfield expansion. You guys have laid out a $4 million to $8 million megawatt number. Can you maybe just talk a little more about the projects you're working on right now and where they fall in that range? And maybe more importantly, as we look into 2027, what kind of opportunities are right in front of you and how should we think about the CapEx per megawatt?

Steven Cook: Sure. Thanks for the question. As far as where we're spending time right now, again, I call your attention to some of the earnings disclosures. A nice balance of drawdown between the equipment optimization, which tends to be a lighter capital intensity and a slightly faster time to deploy and the larger under roof expansions, which tend to be at the upper end of that $8 million -- $4 million to $8 million net CapEx range that we've prescribed. Overall, in terms of what we saw in the quarter and the types of opportunities we're looking at, Spencer mentioned, certainly some opportunities to deploy capital in a low capital intensity way, striking balance given that we've got some large strategic projects that we've commented on in the past that are in that under roof expansion. So overall, as we look forward, we expect to remain in that range. We may see balance, and we'll continue to see a balance in those 2 types of opportunities and certainly have plenty of opportunity to put capital to work.

Spencer Mullee: Just maybe to add on to that, Jon. In the third quarter, we're super excited about our success in sales. In that, we sold 21 megawatts of new capacity -- or new deals, excuse me, some of that's in existing capacity, some of that's in new capacity. But our overall expected build multiple for that first quarter is at 1.6x and our cost per megawatt is less than $4 million for the totality of the quarter. So super excited in terms of being a productive quarter and a quarter that's really going to make a difference on some of these numbers going forward.

Jonathan Petersen: That's great. Okay. And then just as a follow-up, you talked about doing these higher power density AI-focused deployments. Your bookings mix, about 1/3 of it is cloud and IT. When you talk about AI, should we think about it mostly be in that cloud and IT bucket? Or are you seeing some of these higher power densities move into your other customer demands?

Spencer Mullee: We certainly have some higher power densities. We currently are installing 150 and 250 kW racks in multiple data centers. So in the third quarter, only about 30% of the deals that we did from an MRR perspective were AI, strictly AI. So we're seeing just really strong sales across the board. It's not just AI. It is in enterprise. It is in cloud. It is in content delivery. It is in health care, banking, finance, all of those things that you would expect us to be doing, we're doing this quarter.

Operator: The next question will come from Eric Luebchow with Wells Fargo.

Eric Luebchow: Spencer, I think kind of the story with Csquare after the IPO was that your CapEx would kind of peak in '26 and then come down in 2027 and bookings would kind of normalize a little bit. I guess kind of as we look out, I know you're not guiding to next year, but just given the level of demand we've seen in another record quarter -- record quarter of bookings, do you think that's still the case? Or do you think you'll be operating at slightly higher CapEx, but obviously, at meaningfully higher EBITDA than maybe we had expected a few months ago?

Spencer Mullee: So I don't want to predict the future here. But I will say, and I know Steve looking at me, he wants to answer this as well. I would say that given our pipeline and given the space that we have today, we may -- I had always said, well, we can't choose where a customer goes and then we can't choose whether it's in one of the infrastructure spaces or one of the new build spaces. I think we are going to continue to try to put things within spaces which are already built and already powered. And to the extent we can do that, I think we can be successful in taking that number -- that CapEx number down some. So we're trying -- and we're certainly moving forward on that from a sales perspective. From a financial perspective, Steve will cover it.

Steven Cook: Yes, Eric, it's a great question and one that we passed them all around with daily as a team. I would say one of the great things about the expansion opportunity in front of us is that there are a variety of different project types that we can pursue. And Spencer commented on some of the lower capital intensity bookings and deals we did in Q3, I think that's really the opportunity for us is to continue to drive velocity and be as aggressive as we can given the demand environment, but also balancing that with capital intensity and being smart about our project selection. So overall, there's a lot for us to choose from. There's a lot embedded in the expansion opportunity across our portfolio. And I think that positions us well to continue taking advantage of the market conditions.

Spencer Mullee: And one other thing, Eric. Keep in mind that as we talk about kW per rack, we still sell a significant portion of our business is 4 to 10 kW a rack. And as people use more power, they may -- they're not going. A lot of our customers aren't going to 150 or 250 kW a rack. A lot of our customers are going from 4 kW to 6 kW or 4 kW, 8 kW or maybe even as much as 10 kW. But those still work within the spaces which were already built, already operating. We don't have to install more infrastructure to take that kind of rack density up. And I think that's an important thing to keep in mind.

Eric Luebchow: Yes. I appreciate that color, Spencer. And maybe just one more for me. As we think about sources and uses here, I think you have about $600 million or so of cost to complete on the backlog, just north of $1 billion of liquidity. So maybe you could just kind of help us bridge between operating cash flow, incremental debt funding or any other capital sources you would consider, I think you were pretty clear in the press release that equity is off the table for now. But maybe you could just kind of talk through, obviously, given some of the volatility in the capital markets today, how you feel about sources and uses of funding in the near term?

Spencer Mullee: Absolutely. Steve is going to answer that, but you'll hear from me, equity is off the table.

Steven Cook: Equity is off the table. So I'd say from a liquidity perspective, post-IPO, we closed the quarter with nothing outstanding on our revolver. We have a great access to capital and strong banking partnerships that is ready, willing and able to deploy there to help support it. From a free cash flow perspective, the business is -- before growth capital, obviously, is free cash flow positive. We expect to allocate a meaningful and substantially all of our capital -- free cash flow, excuse me, to driving incremental growth. That's the pathway for us to increase EBITDA and ultimately delever. And then as required and where appropriate, we'll access our available liquidity lines as well to further the growth. But overall, from a capital structure line of sight on what it's going to take for us to complete and our available liquidity sources, we feel very well positioned.

Operator: The next question will come from Madison Rezaei with Bernstein.

Madison Rezaei: Steve, you highlighted that 99% of the ABS is investment grade. There's been a lot of noise around this lately. Can you just go ahead and put the rest on the record, maybe the coverage versus the cash trap tests confirm nothing is trapped? How expansion CapEx kind of reaches the common shareholders? And then finally, maybe whether Brookfield or any of the affiliates hold any of those notes?

Steven Cook: So that was 3 questions. Let's start with your first one. As far as our ABS debt, as you correctly pointed out, 99% of that, those tranches and issuances are investment-grade ratings. We currently maintain a large restricted cash balance on our balance sheet, which you can see in our financials that our required liquidity reserves under our indenture. We are not in a cash trap scenario. The ABS administration works where cash is swept and then released following debt service. Overall, from a capital perspective, we like the structure. We've operated with it now for multiple years. And overall, our trust is -- both of our trusts that performed very, very well including delevering our CMPA trust as part of the IPO. So interest coverage ratios, debt service coverage ratios have trended positively there. Our LTVs have performed in line, and we've seen asset appreciation in the support of those facilities, Madison. And overall, very happy with the performance of those 2 trusts.

Madison Rezaei: Incredible. Since I've already asked 3, I'm going to go ahead and get one more in. This one's easier. How much of the existing MRR and maybe also the bookings are strictly investment grade versus your broader, greater than $1 billion market cap bucket, specifically wanting to kind of zero in on any neocloud exposure here?

Steven Cook: Sure. And our 60% number, about 40% of that is IG. So the remaining would be market cap in excess of $1 billion.

Spencer Mullee: Our neocloud exposure is relatively light, Madison, today, approximately 10% or less.

Operator: The next question will come from Elliott Simons with Bank of America.

Elliott Simons: This is Elliott on for Mike Funk. We're just wondering on capacity. Could you discuss the pace and shape of commissioning over the next several quarters and whether you're on track to meet your new capacity expectations and plant deliveries?

Spencer Mullee: So today, we are absolutely, generally on track. Much of what we've done in the past 2 quarters has been selling existing space that requires little or no construction. It may require just simple modifications to where air goes versus installing new air equipment. So currently, over 85% of our jobs are on time and on budget. And generally speaking, on a system-wide basis, we're 100% on budget. So nothing on the horizon that I see that would prevent us from making the commitments that we've made. Now we have a couple of markets where we have permitting or other issues along with all of the other data center companies, but nothing of a material nature from anything that we've published.

Operator: The next question will come from Maher Yaghi with Scotiabank.

Maher Yaghi: Thanks for taking my question and for the added disclosures you're making this quarter, very helpful. So first, I was hoping to get some visibility on the progression of timing of delivery of the $108 million of contracted backlog EBITDA and the associate megawatts for that, if you can, in terms of the delivery of those and how they're going to flow into your P&L. I see also that your ongoing growth spend is running around $7 million per megawatt well within your range. Is that a good level? Are you still comfortable with your $4 million to $8 million megawatt spend -- million of megawatt spend for your extended 1 gigawatt that you have in a spreadsheet. And finally, excluding the large customer renewal that you had in the quarter, what would be the more normalized renewal spread that you had?

Spencer Mullee: So I'll work my way backwards. From a renewal perspective, generally speaking, we see approximately 8% on our renewal spread overall in the system. That's historically what it's been. So I'll just answer what it's historically been. Working backwards, I'll go to your first question now, of the $114 million that's total in backlog at the end of Q3, we expect to see approximately $34 million of that come online by the end of quarter 4, approximately $44 million of that to come in by the end of quarter 1 and then about $23 million of it by the end of quarter 2 and then the balance later. And then I forgot the middle question, if you just remind me.

Maher Yaghi: Yes. No, I was just wondering if you still -- you're still comfortable with your $4 million to $8 million of megawatt for your extended 1 gigawatt that you're planning to put together over the next couple of years?

Spencer Mullee: Yes. I don't know that we ever said that it would be the same for the whole gigawatt, right? I think we're looking more at today. And today, that $4 million to $8 million seems reasonable. If I look at what we sold in quarter 3. And what we determined the cost would be, we were able to do that at about $3.8 million a megawatt in future. So I think the $4 million to $8 million a megawatt is still a good number. Now I've always said there are deals that we do where it's 0. And there are deals that we do where it might be $9 million or $10 million. So we said $4 million to $8 million is the range in which we're targeting our deals, and there's nothing to make me think today that, that's different based upon our third quarter sales.

Operator: The next question will come from Richard Choe with JPMorgan.

Richard Choe: Going through your bookings and the pricing on the new deals. It seems like you have a pretty nice march up. You talked about the new rate card. How much more growth could we see from here? And in terms of the renewals, the detail is helpful about 8% ex the large deal. But could we get a little more color on the large deal? Did you drive that? Did the customer drive that? Are there more deal -- large deal renewals down the pipeline that could really kind of support, I guess, near-term EBITDA growth and growth overall? And then I have a follow-up after that.

Spencer Mullee: Yes. So the renewal that you're talking was significant, it was with our largest customer and so I don't foresee anything of that size on the horizon. We are redoing 1 moderate-sized customer now for a renewal date of 1/1/27. And then we're probably done with the largest ones for this year. We still have a number of renewal. Obviously, the book renews 1/3, 1/3, 1/3, so we'll see. But the large customer that we're talking about is really an example of the pricing power that we have. If you think about it, that they are our largest customer, we still saw a significant increase, and that customer does yield significant power. So I think it's just a great, great take now on how we still have pricing power. Do I expect that to continue? I do. And the reason I do is because there is nothing structurally or functionally to change the nature of what's happening in the business.

Richard Choe: Got it. And in terms of your capital position and liquidity, it doesn't sound like you feel constrained. I understand wanting to be very disciplined, given your leverage level. But given the opportunities, given the relatively shorter return profile, given that pricing is moving up and could move up higher. Do you feel like you're capital constrained?

Spencer Mullee: I don't feel as if I'm capital constrained in any way, shape or form. I'm excited about the opportunities that we have. I'm excited about the opportunity we have within the data centers to do deals which are very accretive. And I'm excited about the opportunity to get our leverage to 6x to 7x. And I think all of those things can be accomplished in a reasonable time frame.

Richard Choe: Great. Thank you.

Operator: [Operator Instructions]. Showing no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Spencer Mullee for any closing remarks.

Spencer Mullee: I would just like to thank everyone for attending today. I would like to thank our employees, our customers and everyone who participates in these events. Thank you so much. Have a great day.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.