Key Industry Trends, M&A Valuation Trends

Key Industry Trends, M&A Valuation Trends
Herbert May
Partner & Managing Director
DH Capital, LLC
International Colocation Club
5th Annual Meeting
November 7-8, 2017
London, England

Agenda
Confidential | 2
DH Capital Review and UpdateI.
Key Trends We are SeeingII.
Review of Public CompsIII.
Private Market M&A RecapIV.
What We Expect in the Year AheadV.

Overview of DH Capital
Highly Specialized Sector Expertise
Confidential | 4
www.saas-capital.com
Services
Mergers and
Acquisitions
Private Capital
Placements
Financial Advisory
Services
Industry Sectors
Internet
Infrastructure
Cable/
Telecom
Software
As-A-Service
DH Capital has Partnered with SaaS Capital
to Provide Alternative Growth Capital
• $35 million senior debt fund providing capital
to growing SaaS operators
• $90 million follow-on fund established in
February 2015
• Goal is to replace dilutive equity capital with
debt capital to fund growth
• 41 funded loans to date totaling more than
$136 million in commitments

Spanning the Full Spectrum of
“Internet Infrastructure”
Confidential | 5
COLOCATION HYBRID IaaS COMPLEX
CLOUD
APPLICATION
MANAGEMENT SaaS

Our Senior Banking team is the largest
and most experienced covering the sector
Confidential | 6
Partners
Support Team
Total Years
DH Years
Dean Mann
Partner
Doug Webster
Partner
Townsend Devereux
Partner
24 30
Joe Duggan
Chairman & Co-Founder
Herb May
Partner
30
Marty Friedman
Partner
24 34
Peter Hopper
CEO & Co-Founder
Mark Thorsheim
Partner
Adam Lewis
Partner
29 26 17 29 29
Howard Loewenberg
Partner
16 217 14 1417 16 10 4 4
23
Paul Vasilopoulos
Partner
1
Brent Mayo
Associate
Matt DiFrancesco
Associate
Noah Hirshman
Associate
Nick Cipiti
Vice President
Brian Browne
Analyst
Chad Berger
Analyst
Andrew Kaskel
Vice President
Igor Skochilo
Vice President
John Barkeley
Vice President
Remington Yee
Associate
Briana Thompson
Analyst
Emily Coutts
Analyst
The DH supporting team is highly experienced and trained in the data center, managed services,
and cloud infrastructure sectors allowing for highly effective and detailed deal execution

Equity or Debt
Placements
37TOTAL
$2.0BVALUE
Confidential | 7
is the Leading Advisor to the
DH Capital has advised on 96 internet infrastructure related
transactions totaling more than $19.4B in value
Internet Infrastructure Sector
M&A
Transactions
59TOTAL
$17.4BVALUE
Total
Transactions
96TOTAL
$19.4BVALUE

IT HAS BEEN A VERY BUSY YEAR!
Confidential | 8
> $7.5bn in Transaction Value

Key Industry Trends
Confidential | 10
• Cloud adoption is exploding

40,000
30,000
20,000
10,000
Storage is Increasing Exponentially
Confidential | 11
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
(Exabytes)
50 FOLD
GROWTH
2010-2020
Source: IDC’s Digital Universe Study, sponsored by EMC, December 2012

Confidential | 12
2020
2.3ZB
Global IP Traffic
(Data Center to User)
2020
600ZB
Data Generated
by IoT Devices
IoT will Potentially Generate 275x more Data
than IP Traffic
Source: Cisco Global Cloud Index: Forecast and Methodology, 2015-2020

Key Industry Trends
Confidential | 13
• Growth remains strong across the ecosystem

7000
12000
17000
22000
Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17
Confidential | 14
Public Cloud Annualized Revenue Growth
($Billions)
MICROSOFT CLOUD
REVENUE NEARLY
DOUBLED IN 4 QUARTERS
AWS ADDS NEARLY $10B IN
ANNUALIZED REVENUE IN
SIX QUARTERS

Worldwide Hosting & Cloud Market Size, 2010 – 2020
Confidential | 15
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Dedicated Hosting $3,050 $3,257 $3,436 $3,690 $4,562 $4,844 $5,123 $5,414 $5,718 $6,033 $6,534
Shared Hosting $7,734 $8,640 $9,727 $11,256 $12,632 $14,045 $15,528 $17,071 $18,666 $20,293 $21,997
Managed Hosting $12,150 $17,270 $20,954 $25,367 $30,434 $36,256 $42,962 $50,756 $59,663 $69,712 $80,998
Infrastructure as a Service $717 $1,633 $2,994 $4,764 $6,995 $9,698 $12,724 $15,840 $19,082 $22,496 $26,092
Platform as a Service $283 $549 $940 $1,516 $2,279 $3,148 $4,144 $5,172 $6,271 $7,294 $8,615
Infrastructure Software as a Service $695 $1,054 $1,539 $2,176 $3,004 $4,111 $5,476 $6,592 $8,564 $10,288 $12,162
$USMillions
15.8%Total (Hosting + Cloud) $24,629 $32,403 $39,590 $48,769 $59,906 $72,102 $85,957 $100,845 $117,964 $136,116 $156,398
CAGR ‘10-’20
7.9%
11.0%
20.9%
43.3%
40.7%
33.1%
Private
Hosting
CAGR
16.9%
Cloud Services on the Rise: 7% of Total Market in 2010, 30% in 2020
Source: 451 Research, Voice of the Enterprise: Cloud Transformation, Workloads & Key Projects, 2017

Worldwide Hosting & Cloud Market Size, 2010 – 2020
Confidential | 16
Cloud Services on the Rise: 7% of Total Market in 2010, 30% in 2020
2017
$5,414
$17,071
$50,756
$15,840
$5,172
$6,592
 Dedicated Hosting
 Shared Hosting
 Managed Hosting
 Infrastructure as a Service
 Platform as a Service
 Infrastructure Software
as a Service
CAGR ’17 & ‘20
6.5%
8.8%
16.9%
18.1%
18.5%
22.6%
2020
$6,534
$21,997
$80,998
$26,092
$8,615
$12,162
Source: 451 Research, Voice of the Enterprise: Cloud Transformation, Workloads & Key Projects, 2017

Confidential | 17
LARGEST MARKETS
ABSORPTION BY SIZE
H1 2017 U.S. mW Absorption by Size
3.5
3.2
1
2.8
1.1
2.0
16.6
19
192.4
3
15
27
20.5
23.6
8
41
14.3
17.3
Source: JLL Data Center Solutions, National and Regional Data Center Overview, September 2017

1H 2017 mW Absorption 2017 vs 2016
1.45
2
3.5
2.4
1.2
57.6
2.1
7.2
3.4
10
14.1
22.25
8
10.4
32
18
78
1
1.1
2
2.4
2.8
3
3.2
3.5
8
14.3
15
16.6
17.3
19
20.5
23.6
27
41
Houston
New York City
New Jersey
Los Angeles
Boston
Northern California
Denver
Western Canada
Atlanta
Toronto
Phoenix
Pacific Northwest
Montreal
Las Vegas & Reno
Austin & San Antonio
Chicago
Dallas / Fort Worth
Northern Virginia
First Half 2017 Absorption First Half 2016 Absorption
Ashburn continues to dominate
Dallas and Chicago markets have really come on
No Cal has real supply
constraints
These major cities continue to be enterprise only
Source: JLL Data Center Solutions, National and Regional Data Center Overview, September 2017 Confidential | 23

Key Industry Trends
Confidential | 19
• Growth in cloud “not lifting all boats” equally

Rapid Growth of Cloud Adoption
Impacting Ecosystem Unevenly
Confidential | 20
RETAIL
COLOCATION
CONNECTIVITY
CENTRIC
COLOCATION
LEGACY
IaaS
HIGHLY
AUTOMATED
INFRA-
STRUCTURE
SIMPLE
MANAGED
CLOUD
MIGRATION
SERVICES
COMPLEX
MANAGED
& HYBRID
CLOUD APPLICATION
MANAGEMENT
LEGACY IT
OUTSOURCING
TRADITIONAL
V.A.R.
WHOLESALE
COLOCATION

Key Industry Trends
Confidential | 21
• Growth in cloud “not lifting all boats” equally
• Growth & disruption driving unprecedented M&A activity

Unprecedented Amounts of M&A and Investments
Both Strategics and Financial Sponsors Participating Heavily
Confidential | 22
Data Centers
INVESTS INTO

REIT and Corporate Colocation Players
Confidential | 24
Note: Figures are as of November 1, 2017, DFT as of September 13, 2017
Enterprise Value $43,091mm $26,668mm $7,459mm $4,201mm $6,335mm $17,210mm $4,866mm $12,760mm
Annual Revenue $4,359mm $2,298mm $668mm $431mm $472mm $3,795mm $565mm $2,557mm
YoY Growth % 21% 11% 28% 9% 23% 9% 18% 26%
Annual EBITDA $2,053mm $1,315mm $363mm $197mm $259mm $1,265mm $261mm $1,243mm
YoY Growth % 37% 11% 30% 8% 27% 18% 16% 21%
EV to LQA EBITDA 20.4x 21.5x 20.0x 19.0x 24.2x 13.4x 18.5x 11.8x
EV to 2017 EBITDA Est. 21.9x 21.1x 20.4x 21.6x 23.4x 13.6x 18.6x 11.4x
Debt-to-LQA Adjusted EBITDA 3.9x 6.8x 5.2x 5.2x 3.5x 5.1x 3.4x 3.8x
Company

24.1%
45.8%
31.0%
42.9%
31.1%
59.6%
51.1%
3.1%
REIT Colocation-Centric Players
Confidential | 25
2017 Stock Performance
23.7%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17

Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17
CONE $18.1 $13.4 $13.3 $43.6 $43.3 $58.4 $27.0 $19.1 $31.6 $29.6 $27.0
COR $8.9 $19.6 $9.3 $9.3 $7.5 $8.7 $7.5 $34.9 $9.1 $6.6 $8.9
DLR $21.0 $37.0 $33.0 $36.0 $39.0 $15.0 $55.0 $33.0 $50.0 $34.0 $36.1
QTS $13.6 $10.6 $5.6 $9.8 $8.6 $13.3 $14.5 $11.6 $4.3 $13.3 $15.3
Qtr Total 61.6 80.6 61.2 98.7 98.5 95.4 104.0 98.6 95.0 83.5 87.3
Trailing 4 Qtr Avg 75.5 84.7 88.4 99.1 99.1 98.2 95.3 91.1
Y/Y Increase 60% 18% 70% 0% (4%) (12%) (16%)
Qtr versus Trailing 4 Qtr Avg 16% 8% 5% (1%) (3%) (12%) (4%)
Demand for Large Colocation Deployments Solid,
Q3-17 Leasing Levels Increased from Q2-17
Confidential | 26
In Q3 2017, leasing velocity among the top wholesale data center providers increased on average from Q2 2017 as
CONE, COR, DLR, and QTS reported annualized GAAP leasing in aggregate of $87.3M
WHOLESALE DATA CENTER QUARTERLY LEASING

Confidential | 27
REIT Colocation-Centric Players
20.0x
19.0x
20.4x
21.5x
24.2x
18.5x
11.8x
Data Center
REITs
Valuation – EV/LQA EBITDA Multiple Over Time
13.4x
7.0x
9.0x
11.0x
13.0x
15.0x
17.0x
19.0x
21.0x
23.0x
25.0x

132.2%
5.8%
31.2%
14.6%
Corporate Hosting Players
Confidential | 28
2017 Stock Performance
11.1%
-25.00%
25.00%
75.00%
125.00%
175.00%
225.00%

Corporate Hosting Players
Confidential | 29
Valuation – EV/LQA EBITDA Multiple Over Time
16.8x
8.4x
9.5x
9.2x
–
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
20.0x

EQUINIX ACQUISITION OF TELECITY & VERIZON DATA CENTERS
Accretive M&A Rewarded by Market
Confidential | 30
Investors Continue to Reward M&A Acquisition Announced:
Source: Capital IQ. Market data as of 15-Sep-2017
-50%
-30%
-10%
10%
30%
50%
70%
90%
110%
130%
150%
15-Jan-2016
6-May-2015
6-Dec-2016
1-May-2017
Acquisition Closed:
Acquisition
Acquisition
Data Centers

Confidential | 31
Investors Continue to Reward M&A
DIGITAL REALTY ACQUISITION OF TELX, DUPONT FABROS & CARTER VALIDUS
(50%)
(30%)
(10%)
10%
30%
50%
70%
90%
110%
130%
150%
9-Oct-2015
15-Jul-2015
16-May-2016
5-Jul-2016
9-Jun-2017
14-Sep-2017
9-Jun-2017
Acquisition
Acquisition
Divestiture
Acquisition

Confidential | 32
Investors Continue to Reward M&A
CYRUSONE ACQUISITION OF CERVALIS AND SENTINEL
Acquisition Announced:
Acquisition Closed:
(50%)
(30%)
(10%)
10%
30%
50%
70%
90%
110%
130%
150% CyrusOne Inc. (NasdaqGS:CONE) - Share Pricing1-Jul-2015
2-Feb-2017
28-Feb-2017
28-Apr-2015
Acquisition
Acquisition

Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
Application
Management
Complex Managed
Cloud
Hybrid
IaaS
Retail Colocation
Wholesale
Colocation
The Busiest 12 Months for M&A Ever!
Confidential | 34

$3,300 $3,900 $4,000
$10,300
$12,986
$22,402
2012 2013 2014 2015 2016 2017 YTD
Internet Infrastructure M&A Volume Trends
Confidential | 35
TOP 3:
59%
TOP 3:
80%
TOP 3:
61%
TOP 3:
29%
TOP 3:
80%
TOP 3:
60%
(IN MILLIONS)
BOTH SIZE AND VOLUME OF TRANSACTIONS AT UNPRECEDENTED LEVELS
TOTAL
TRANSACTION
VALUE HAS
INCREASED
5 FOLD OVER
PAST 3 YEARS

5.0x 7.0x 9.0x 11.0x 13.0x 15.0x 17.0x >19.0x
M&A Trends: Internet Infrastructure
Confidential | 36
Stated LQA EBITDA Multiples for Scaled North American Platforms Since 2011 (>$100M Deal Value)
Application
Management
Retail
Colocation
Wholesale
Colocation
Complex
Managed
Cloud
IaaS
Hybrid

IPO Recap
Confidential | 37
• IPO Date: 10/6/2017
• IPO Price: $17
• EV/H1 2017 Annualized Adj.
EBITDA: 24.0x (IPO Multiple)
• Annualized 1H Revenue:
~$363 million (17% growth y/y)
• Annualized 1H Adj. EBITDA:
~$189 million (21% growth y/y)
 Founded in 2000 with headquarters in Las Vegas, Nevada
 Datacenter markets served: Las Vegas, Reno, Grand Rapids and Atlanta (2018 commissioning)
 Largest customer, eBay and its affiliates, made up $13M of Switch’s 2016 revenue
 Operational highlights:
Facilities
4 Prime Campuses
3 operational and 1 under
development
Up to 12 million
Gross Square Feet (GSF)
Current U.S. Facilities: 4M GSF
Future U.S facilities: 8M GSF
Up to 1,185
Megawatts of power (mW)
Current U.S. facilities: 415 mW
Future U.S facilities: 770 mW
Customer
Base
800+
Customers
55%
Of YTD Q2 2017 revenue from
customers with 5+ years of tenure
1.4%
Average annual revenue churn
2014-2016
Industry Innovator to Enter Public Market
Overview of Switch Inc. (NYSE: SWCH)
0
2
4
6
8
10
12
16.00
17.00
18.00
19.00
20.00
21.00
22.00
Volume Share Price
SharePrice
VolumeinMillions
Note: Volume on Switch’s IPO date was 44.5 million and is not shown on the graph above
$20.84
$18.22

What We Expect
in the Year Ahead

DH Observations from 2016
Confidential | 39
G
M&A activity is expected to stay strong through the middle of 2017 with
a large number of properties currently in the market and other sale processes
expected to be launched over the next few quarters
Continued high demand and strong valuation premiums for colocation
assets with fee owned real estate and connectivity stories…there are still a
number of strategic platforms
Expect demand for assets that automate the management of workloads on
public clouds
GApplication management comes into focus
Scarcity value will continue to play into valuations as fewer and fewer chess
pieces are left on the board

The Year Ahead
Confidential | 40
M&A activity will remain brisk into middle of 2018 with strong fundamentals and
increasing scarcity value supporting strong valuations

The Year Ahead
Confidential | 41
Highly automated infrastructure providers will continue to flourish alongside giant
public clouds

Cloud & IP traffic growth creates an “almost can’t miss” scenario for data center providers
building highly networked and/or scaled campuses.... “2018 The Year of the Edge”
The Year Ahead
Confidential | 42
public clouds

Financial sponsors get creative on how to play complex hybrid opportunity
The Year Ahead
Confidential | 43
public clouds

The Year Ahead
Confidential | 44
Financial sponsors get creative on how to play complex hybrid opportunity
The public market gets a few more pure plays... universe has been shrinking
for several years AS ALWAYS,
BE READY
public clouds

Thank you!
Herbert May, Partner & Managing Director
DH Capital LLC
www.dhcapital.com

Key Industry Trends, M&A Valuation Trends

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