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CyrusOne Inc (NASDAQ:CONE)
Q3 2019 Earnings Call
Oct 31, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and welcome to the CyrusOne LLC Third Quarter 2019 Earnings Conference Call and Webcast. [Operator Instructions]. I would now like to turn the conference over to Michael Schafer. Please go ahead.

Michael Schafer -- Vice President, Capital Markets & Investor Relation

Thank you, Sarah. Good morning everyone and welcome to CyrusOne Third Quarter 2019 Earnings Call.Today. I am joined by Gary Wojtaszek President and CEO, and Diane Morefield CFO. Before we begin, I would like to remind you that our third quarter earnings release, along with the third quarter financial tables are available on the Investor Relations section of our website at cyrusone.com.

I would also like to remind you that comments made on today's call and some of the responses to your questions. Deal with forward-looking statements related to CyrusOne and are subject to risks and uncertainties. Factors that may cause our actual results to differ from expectations are detailed in the company's filings with the SEC, which you may access on the SEC's website or on cyrusone.com.

We undertake no obligation to revise these statements following the date of this conference call, except as required by law. In addition, some of the company's remarks this morning contain non-GAAP financial measures. You can find reconciliations of those measures to the most comparable GAAP measures in the earnings release, which is posted on the Investors section of the company's website.

I would now like to turn the call over to our President and CEO, Gary Wojtaszek.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Thanks, Schafer. And welcome to CyrusOne is Third quarter earnings call. Let me start by saying that while we've had some pretty good quarter results over the last couple of years and a few that had larger bookings numbers. I can't recall a quarter that was stronger than this one given the large number of both financial and operational accomplishments. And I'm excited about the position we are in as we begin to look ahead to 2020.

Slide 4 shows the growth rates for revenue, adjusted EBITDA and normalized FFO and normalized FFO per share we're all very strong in the quarter and materially above the peer group and broader REIT averages. This was in my view the best leasing quarter in the company's history with $52 million in annualized revenue signed and the most diversification we have ever had across markets verticals and product types, including a big contribution from Europe.

Our backlog is nearly $55 million derisking our growth in 2020. We have development activity across our markets in both the US and Europe in response to the strong customer demand we are tracking. We are also recently acquired 20 acres of land in Iowa in connection with the least deliver a unique hybrid cloud solution for enterprises, allowing us to provide the private cloud leg through an architecture that a significantly more efficient than the traditional on-ramp compute node network topology.

Lastly, as you know, we have been focus for years on getting to investment-grade, which will be incredibly important to our future success.

Slide 5 provides more color on the leasing results. And then as I just mentioned it was very broad-based in both the US and Europe, there were a couple of larger deals, but the biggest was only 5.5 megawatts and 7 markets had at least one megawatt of leasing, which highlights the benefit of having a geographically well-diversified portfolio.

We continue to have tremendous success leasing to enterprises and this quarter we signed a record $23 million in annualized revenue to enterprise customers, which is 40% above our prior record. It's always been a little surprising to me that so many investors view us as a hyper-scale data center company seemingly forgetting that the majority of our revenue is generated from enterprise companies.

We have always made the necessary investments in our sales and operational capabilities to serve the needs of the enterprise, which is expensive, difficult to do, and time-consuming, and which are the exact reasons why so many other companies shy away from this market and just want to focus on the hyper-scalers.

The benefits of these investments are easy to see as we have generated record enterprise sales over the last four quarters, which was particularly important as the hyper-scale companies slowed their purchases. We expect continued strong growth from enterprises in the coming years and are better positioned to capitalize on this demand than many other providers, especially as we now have a much larger international footprint.

That said, we expect that demand from hyper-scalers will begin to increase toward the second half of 2020 and we expect these companies will continue to contribute significantly to our growth as we expand internationally.

Moving to slide 6. As you can see our European business has really taken off, we expect it to do well when we decided to expand into Europe and fortunately we are doing even better than we had originally anticipated, we made the decision to build the European platform after receiving so many requests from our hyper-scale customers to develop our product in Europe which historically has been interconnection focused data center market that lack the large-scale data center deployments that CyrusOne is well known for delivering in the US.

Well, our original underwriting assume we would leverage our hyper-scale business to initially grow the European market, we are absolutely focused on developing equally strong enterprise in IX businesses there, similar to what we've built in the US. This will take a few years to develop, but we know that the returns are well worth it.

Europe, revenue grew 81% year-over-year and is now $70 million on an annualized run rate basis, which is nicely ahead of our expectations. Year-to-date we have signed nearly $40 million in annualized revenue, which represents over 40% of our total year-to-date bookings and is a really an is really strong considering that we haven't even launched our Irish of Netherlands facilities, which will be doubled the size of our portfolio in Europe.

We are developing over 50MW across all the key European markets combined with the European capacity once these projects are completed, we will have nearly 150MW in Europe, which represents nearly 20% of our overall perspective footprint. As I mentioned when we were launching our European expansion, I want to Europe to be about 25% of our revenue in 3 years and we are executing according to that plan.

Slide 7 provides an update on another substantial business that we have organically built from the ground up, which also, never seems to get much attention, which is our interconnection business. Similar to our strength in the enterprise market, our interconnection business also seems to get overlooked as of this quarter is generating $50 million of annual revenue and a grew 20% year-over-year, which I believe is the fastest growing interconnection business in the industry.

We have seen consistently strong growth in our IX business, which is the result of a noticeable change in data center network topology that is under way. The change in topology is being driven by the growing importance of compute and storage nodes, and the early days of the Internet [Phonetic] Eyeball acquisition was the primary motivator for companies that we're looking to distribute their product to customers over the Internet, which in turn placed a high value on establishing interconnected data centers.

However, what we are seeing now is that data is becoming the new gold of the Internet and as data sets become so large, they are becoming these digital black holes that continue to grow at an exponential rate. The network nodes that dominated the growth of the data center industry for the first 30 years are becoming less relevant and we believe will be subsumed at the hyper-scalers compute and storage nodes, which will be where the next wave of Internet value creation comes from.

All of the potential value creation that people believe will be generated from artificial intelligence or primarily be generated in the compute and storage nodes of the data center and to a lesser degree in the network nodes. This is a trend that has just started and we believe will only accelerate over the next 5 years playing to CyrusOne core -- competencies of building massively scaled low-cost data centers.

The recent development we have announced in Iowa is a validation of this trend, whereby we will build an enterprise data center in close proximity connected with direct fiber path to a leading hyper-scalers compute and storage nodes, which we used for hybrid cloud deployments. It will bypass and interconnection facility driving significant improvements and performance, cost, and security for these developments, making it a very attractive value proposition for enterprises, particularly those with the massive datasets I referenced earlier.

Turning to slide 8, we have been showing these property level development yields for years, including the past several quarters, this quarter we wanted to highlight Austin III which has 60,000 square feet of raised floor and additional capacity for growth. It was commissioned in the fourth quarter of 2015 and the yield progression is very similar to the yield progression of the other facilities on the slide that we have shown recently.

All of these started negative when we deliver the initial capacity or in the lease-up phase. And over time they progressed to the mid to upper teens range. This is the trend we have seen throughout our markets for years and it's the reason we continue to make investments across the portfolio, as they are highly accretive. I continue to share these development yields -- slides every quarter as I think it's important for investors to understand the yield progression of our properties.

We continue to invest in or invest in organic growth and expansion activities with 13 expansion projects across 10 markets and 5 countries. These projects will initially generate negative yields but in every investment we have shown the yield turns positive and start generating great returns and we expect that trend to continue. I would point out that excluding acquisition-related funding 100% of the equity raises we have done over the past 24 years, has 24 months has produced massive value creation for shareholders despite the initial dilution.

Our investment no data has meaningfully increased in value of the company has gone from having 2MW of contracted power to more than 14 megawatts and still remains in the early stages of expansion. Ricardo and the team have ambitious goals expanding outside of Brazil, more recently into Colombia, and most recently into Mexico.

Similarly, we have also created tremendous value by our GDS partnership which continues to be the fastest-growing data center company in the world. William and the team are managing an incredible ride over there trying to stay on top of really strong growth rates.

Slide 9 highlights the significant outperformance for the quarter compared to the peer data center REIT group and a broader REIT universe. We are growing in the 20% range across all of our key financial metrics, which is 3 times faster than our peers and substantially faster than other REITs. The reason we have consistently been delivering industry-leading financial performance is because we have methodically and consistently invested a substantial amount of capital in line with the customer demand we are generating.

This quarter you are seeing the convergence of our FFO per share growth, with revenue and EBITDA growth, which is the result of the incremental operating leverage we generate as our initial developments which are all essentially equity funding gets sold out, which drives significant value creation across our assets, as I highlighted on the previous slide.

Given that we currently have the capacity of the triple the size of our footprint with powered shell and land inventory, we should be able to generate additional value for customers for years. The last thing that I want to discuss is the achievement of being given an investment-grade rating. For those of you have been involved in CyrusOne since our IPO, you know that one of my objectives has always been to and obtain investment-grade rating. This was something that I had in my original business plan that I developed 10 years ago and it's the only objective from that plan that I hadn't achieve. In fact, we have exceeded every other financial and operational objective by a large margin, except for getting the investment-grade rating. So this is something that is personally one of the most rewarding of accomplishments we have achieved, basically because it's taken us so long to do it.

As I have mentioned in the past, all of our customers are concerned about the financial strength of their data center partners as they are entering a 10 to 15-year contract with us and need to know that the partners are financially secure as they are. For reference, there are only about investment-grade companies in the country, so we're one of the few companies that have an investment-grade designation.

In closing, the business is firing on all cylinders. We had a tremendous leasing quarter on sitting at $92 million in bookings year-to-date. So we've already achieved our $20 million to $25 million quarterly guidance for the year through the first three quarters.

Our decision to expand in Europe was clearly the right one that that business is growing very quickly and you are now beginning to see the benefits of the investments we have made there. Combined with our business partnerships in Asia and Latin America, we have established ourselves as one of the very few providers that can meet our customers' needs across the world. We are also in the strongest financial position in our company's history, which will support a robust set of growth opportunities while lowering our cost of capital.

Lastly in the quarter, we became the number 1 best-performing REIT in the RMZ as measured from the time of our IPO. Before I turn the call over to Diane, who will provide more color on our financial performance for the quarter and update our guidance, I wanted to discuss the market rumors. As you may be aware, several media outlets have reported, and some of you have speculated that we are -- we're in discussions with various 3rd parties regarding a potential sale of the company.

We are not currently pursuing a sale of the company. We remain focused on our strategy and creating long-term shareholder value. We do not intend to have any further comments on the recent media reports and market rumors, but look forward to discussing our results for the quarter. I will now turn the call over to Diane. Thank you.

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

Thanks, Gary, and good morning everyone. As Gary mentioned, we had a great quarter with very strong financial and operational performance.

As slide 11 shows, revenue and adjusted EBITDA grew 21% to 20% respectively. Normalized FFO per share grew 18% and as Gary indicated this is a significantly higher growth rate compared to the broader REIT Universe. Trend was again low at 1% and we continue to trend toward the lower end of our 5% to 7% guidance range.

Turning to slide 12 NOI grew 18% on an adjusted basis, the decline in the margin year-over-year was driven by higher pass-through meter power reimbursements as a percent of the total revenue, which result in zero margin contribution. Adjusted EBITDA grew in line with NOI and the increase in normalized FFO was driven primarily by the increase in adjusted EBITDA as well as lower -- lower interest expense.

Moving to slide 13, we maintain a balanced geographic contribution across our markets. With the leasing success we have had in Europe and our continued expansion there, the contribution from those markets will continue to increase over time. The percentage of CSF leased for stabilized properties was down slightly compared to the prior year, but remains high at 88% despite a 16% increase in capacity.

Turning to slide 14. We have a robust development pipeline to support our strong leasing results with projects across a number of our markets in both the US and Europe. The pipeline is 45% pre-leased on a CSF basis, which is up significantly from the prior quarter. The overall portfolio will be roughly 25% bigger on a CSF basis compared to a year ago upon completion of these projects.

Moving to slide 15. As Gary mentioned, we are thrilled that finally achieved investment-grade status. S&P upgraded our issue-level rating to BBB-minus a year ago and with Fitch initiating coverage recently with the BBB-minus rating, we now have the 2 ratings we need for investment-grade index eligibility to be able to access that market.

Additionally, Moody's recently upgraded us to one notch below investment-grade. As you know, we've been focused on getting the investment grade for years, and in addition to the obvious financial balance, there are also significant strategic benefits. Most importantly, it improves our access to capital, which is critical and a capital-intensive business and ensures that we are able to take advantage of the secular demand trends in the coming years.

Unlike the high-yield market, the investment-grade bond market never shuts down, and in periods of economic distress or recession, it will give us the significant strategic advantage since we can be opportunistic potentially acquire assets at discounted prices.

As Gary also mentioned, it's very important to our customers, particularly the hyper-scalers but also enterprise costs -- partnering -- companies to know that they have partners that are financially sound and positioned to support their growth. They also want to know that the providers they ensure their mission-critical gear will be -- would be around for the long haul and financial risk is just as important to them as the security and reliability of the data center infrastructure.

It also no doubt will improve our profitability and we estimate that we can achieve savings of at least 100 basis points of an investment-grade issuer compared to the high-yield market. Combined with our build cost advantage, this helps insulate us from aggressive pricing decisions by other providers.

Turning to slide 16. We believe we've had an investment -- balance sheet of an investment-grade company for years and now that we have finally reached that status we will continue to manage our leverage in the mid-5 times range to protect our ratings. We ended the quarter at 5.4 times net debt to last quarter annualized EBITDA. We have no near-term maturities and we have nearly $1.3 billion in available liquidity.

We executed two swaps in the quarter to better position the business for the long-term. First we synthetically converted EUR500 million of our term loan maturing in March 2023 into more attractively price year denominated debt resulting in a nearly 200 basis point decrease in the average interest rate over the remaining term based on the current LIBOR and MIBOR forward curves.

This better aligns our long-term euro funding requirements with our expected growth in Europe over the next few years. Also as a result of the inverted yield curve, we converted the remaining EUR300 million of this term loan tranche into fixed-rate debt decreasing the interest rate on this tranche to approximately 2.5% and increasing the percentage of fixed-rate debt to 54% at the end of the quarter.

As we've mentioned on prior calls, now that we are investment-grade, we plan to increase the proportion of fixed-rate debt in our capital structure. We had EUR475 million outstanding on the revolver at the end of the quarter, but EUR450 million of that and been swapped to euro-denominated debt totaling proxy approximately EUR400 million.

We expect to term out that into long-term fixed rate euro market debt by the end of this year. We also plan to reevaluate, we plan to evaluate refinancing $1.2 billion, existing notes maturing in 2024 and 2027 which are at high-interest rates and we expect this will generate significant interest savings. Finally, we will also look to recast our credit facility at some point early next year.

Moving to slide 17, our backlog is more than double in size compared to the end of the second quarter to nearly $53 million. This includes approximately $5.5 million in revenue associated with a paid reservation expected to be exercised in the next 12 months. The backlog, combined with the full-year impact of leases that have recently commenced provides a nice baseline for continued revenue growth into next year.

Turning to slide 18, we are slightly adjusting our guidance ranges given we are closing in on year-end. We are decreasing the midpoint of the revenue and adjusted EBITDA ranges each by less than 1%, primarily reflecting a push back and commencement timing for a few deals as compared to our prior outlook.

We are increasing our normalized FFO per share guidance midpoint by $2.05 primarily as a result of lower interest expense that we had previously anticipated. Again, this is mainly driven by the impact of the swap that I just described.

Lastly, we tightened our guidance range for capital expenditures to the $900 to $950 million range, given the projected development pipeline spending for the balance of the year. In closing, we are very pleased with our results for the quarter, particularly having had one of the strongest and broadest leasing quarters in the company's history.

Again, getting the investment-grade was a significant step that was years in the making, and we are now in an excellent financial position to continue to prosecute our business model and expansion plans in the coming years.

Thank you for participating in the call, and we are now happy to take your questions.

Questions and Answers:

Operator

[Operator Instructions] The first question comes from Frank Louthan with Raymond James. Please go ahead.

Frank Louthan -- Raymond James

Great, thank you. So I guess question you still may not comment, but you say you're not pursuing a sale. Just curious, does that mean you're not entertaining offers or definitively not for sale? And then can you comment a little bit on the revenue trajectory for the back half implies kind of flat to down for revenue. Can you give us some color on what's driving that?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah. Hey Frank. So my comment on the -- on the market rumors were just that we just felt it was appropriate to come out with a statement, but that's all I have to say on that point. With regard to the revenue, I think we had a really strong quarter going to get you on the guidance for the quarter, but for the second, for the last quarter. But in general, I mean we are up around 18%, 20% year-over-year, of that our organic growth was about 14%. So it was really strong for the quarter.

We took down our guidance a little bit just to some of the delayed installments and bookings for the quarter, but we feel really good about where we're sitting right now, particularly as we head into 20 with the strongest backlog and a really long time.

Frank Louthan -- Raymond James

Just to clarify on your comments on what you said that you expect to see some more of the hyper-scale activity in the back half, I think the market was maybe looking more front half. Does that mean bookings or does that mean the actual starting to get the revenue from what you've been booking or how should we think about that?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah, we're still not there in terms of calling the turnaround for that market. I mean, we're seeing clearly more activity and particularly this quarter for us in Europe in particular. But at this point, we don't see that same frenzy, really kind of turning around if it does, that would be great. But we feel more that it's probably a second half issue than it is a first half issue, and I'm talking about bookings, not revenue.

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

And Frank, to clarify if you're -- if your comment on revenue being slightly down compared to second quarter, remember, we had $17.5 million in equipment sales in the second quarter and only about 2.5% this quarter. So that was really the swing if you're looking at that trend.

Frank Louthan -- Raymond James

Okay, thank you very much.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah. We had called that out last quarter so people should -- would know about that.

Operator

Our next question comes from Simon Flannery with Morgan Stanley. Please go ahead.

Simon Flannery -- Morgan Stanley

All right, thanks very much. Good morning, Gary. On Council Bluffs interesting concept, can you just give us a little bit more background about how this all came about and what visibility do you have into the demand profile or pre-leasing to get you committing to that build, is this -- and is this a model that you could move into other markets with similar profiles? And then just quickly on the paid reservation is this a client, a customer option to take this space? And is this something we're starting to see more than what gives you the confidence that they will execute that? So and I think color on that be great.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Sure. Yeah, I'll take the first part of the question Simon. So, yeah, so this is a really interesting development for us, we've been talking for a while now. In terms of where we see the data center network topology changing, so that the nexus of that for the next wave of this is more going to be focused around the compute and storage nodes as these datasets get bigger and bigger and data becomes where the new gold is and people start trying to monetize that. You're going to need larger and larger facilities for people to action upon that particularly AI being one of the great applications there.

What we've done in that location is we're bringing on 4.5MW of capacity, it's half of that capacity is sold out. The location of it is right along the 41 parallel that is the major East-West Internet hubs and that's why a lot of the big hyper-scale data center companies are located along that parallel across the country from Salt Lake back East.

So what we're looking at doing there is putting a data center in close proximity to some of the hyper-scalers bypassing an interconnection hub and allowing those enterprise companies to do a hybrid deployment where they would put a lot of their managed equipment in our facilities, but then connect up to hyper-scale data centers in close proximity. This is something that I think is going to continue to expand over time as the datasets get larger and larger.

We've been working on a number of different initiatives in Houston in particular for our oil and gas customers because what we're seeing is that the data sets that they're dealing with are just so massive that it's not really efficient for our customers there to put that data into a cloud, because the ingress and egress fees going moving that data from back and forth to the cloud is really prohibitively expensive.

So we're, we're expecting this type of topology to -- to happen more and more as a data sets get larger over time. And I'll turn to the second part of the question over to Diane.

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

Yeah. Regarding the paid reservation we included in our bookings the called it out, that at this point it is just paid reservation, it is with one of our top customers and it's contiguous to an actual lease that will be commencing next year. So we feel it's a high probability that they would actually take this space and it is their option.

Simon Flannery -- Morgan Stanley

Thank you.

Operator

Our next question comes from Jon Atkin with RBC. Please go ahead.

Jon Atkin -- RBC

Thanks. So yeah, on the Council Bluffs topic, you've got Quincy and then I guess you've got like Ag Report A7 and do we think about those three in kind of the same vein around single-tenant or at least maybe multi-tenant hyper-scale type server farm deployments. Is that in essence what you're trying to do in all three locations?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

No, actually the Ag Report facility in the Netherlands in Quincy was really more single-tenant hyper-scale focused, that's what -- that's what we believe will obviously saw to anyone, but the original underwriting was based on the hyper-scalers choosing those locations. The Council Bluffs investment here is very different, this is to really establish an enterprise-focused data center going after the hybrid market with enterprise customers going in as well as cloud cust -- linking up to cloud customers data centers so that they can get in close proximity to the hyper-scalers compute and storage nodes.

Jon Atkin -- RBC

Got it. And then just a couple of kind of cats and dogs but JEDI contract and it's been awarded, but there is quite possibly a challenge coming in, and I wondered to kind of what read is having a significant presence in Northern Virginia on how that might affect the sector?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Sure. Okay. We'll see how this will work out. I mean the government works at a pace that is really slow. So I'm -- I probably have a better shot of growing here before that deal actually gets closed. But I think we're in a good position. I mean clearly Microsoft won that contract that is really good, particularly given that we're -- they're a big customer of ours, so we think we're positioned really well. We've got about 130MW of capacity that we are bringing under shell online. So we'll be able to handle that, to the extent that we were to win it, but I think in general, it's a really good healthy sign for the Northern Virginia market whether we get it or someone else gets it just means that a lot of the supply that is -- has been delivered there is going to get utilized, which I think is better for the market overall. Because as I've said I thought and still do that the Northern Virginia market is a bubbly market. I think that is -- there's too much capacity there is overbuilt. So I think it's going to take some time to work through all the capacity that has been brought online.

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

The good news is...

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

So related...

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

We have tremendous capacity, though, whether it'd be shallower to build out shell on three different campuses to be able to accommodate if there is leasing related to that contract.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah. And in the past -- we federally built data center so high-security data centers, we have a lot of experience building out those facilities as well.

Jon Atkin -- RBC

Related to that. I was wondering if you have any sort of updated observations on the behavior unlisted entrants in markets such as Northern Virginia or even Phoenix or elsewhere in terms of pricing that they're showing to customers or their pace of development is any of that change?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah. So I think the pace of development has definitely slowed down, which is good. I think some of the pricing numbers that you're seeing tossed around is what people do when overextended that are willing to take pricing that to me is just ridiculous. I think what you've seen in our pricing this quarter was really strong focus on appropriate return on capital we walked away from a number of deals that we thought were just ridiculously mispriced. Our hope is that some of the folks that were coming in and speculatively building out some of these facilities will stop that and we think that if the continued hyper-scale kind of slowdown in purchases continues, we think that there is going to be some of those other smaller players that are going to probably take a different strategic choice to go forward.

Jon Atkin -- RBC

And then any update on Santa Clara?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

We're continuing to develop that property that is going to be the largest data center campus in Northern Bridget -- I mean in Santa Clara, we won't have property online near to sell until the end of next year at the earliest.

Jon Atkin -- RBC

Thank you very much.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah, thanks.

Operator

Our next question comes from Robert Gutman with Guggenheim Securities. Please go ahead.

Robert Gutman -- Guggenheim Securities

Hi, thanks for taking my question. So $23 million in enterprise, you had mentioned last quarter, I believe a 5-megawatt deal that had been signed after second quarter-end. Think you were saying Antonio with another potential five behind it, and I'm wondering if that seems to be part of it, plus if you add in the think you said 2 or 2.5MW in Iowa, I'm assuming you're counting that as enterprise two.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

No.

Robert Gutman -- Guggenheim Securities

No, that's not being counted as enterprise?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

No, that's not...

Robert Gutman -- Guggenheim Securities

Okay. But then in total was all the enterprise in the US, or is any of that in Europe?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah, was a little bit in Europe, but it was predominantly US and you're spot on for Antonio. That was a big win for us at the beginning part of the quarter. And again there, I mean, this is just kind of a validation of how important that investment-grade rating is. While we didn't have it then, we spent a lot of time with that particular customer with going through financial diligence on us. They wanted to make sure that there was a partner that they are working with, was going to be around for a while and they decided to go with us, and this was what we were added capacity, so we agreed to go build this facility for them and they decided that it was a no interest to wait for us to go deliver that facility, basically because they liked our financial position versus some of the other folks that they were looking at.

And that's why we're really excited about what the IG rating will do for us more so in the future as the likelihood of recession kind of comes further interview we're heading into that and with a stronger balance sheet is something that I think is going to be much more important for our customers go forward.

Robert Gutman -- Guggenheim Securities

Great, thanks. One other...Sorry for that.

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

Rob just to provide a little more color, and as Gary said this in his formal remarks, that it was such a broad leasing or bookings quarter and yet there wasn't like one huge deal that stood it, the largest fleets of the was 5.5 megawatts, almost 80% of them MRR was greater than 500kW. So is a nice broad blend of between the 500-kilowatt and 5.5 megawatts and of the ones over 500kW correctly 25% of that was enterprise. So again, really nice mix that we hope to see continue.

Robert Gutman -- Guggenheim Securities

Great, thanks. Can you also just update us on the near-term availability for leasing in Europe, based on what you've delivered and what's coming online near term?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Sure. Yeah, we've got plenty of capacity available and more coming online in London, Frankfurt, is our tightest market we're effectively sold out. We are bringing on capacity that will have online right around June, July next year, we'll have a couple of megawatts available to sell after that we're looking at securing another property there. Amsterdam we'll have online at the end of this quarter, at 4.5 megs of that we sold out a couple megs, of that three -- or so megs of that already. So we've got a little bit left. Still working through some of the, the nitrous oxide emission issues in Amsterdam another is as well as the the moratorium in Amsterdam. But we think we're in good position there.

Dublin is coming online and we'll have plenty of capacity there and that will be delivered I think in the third, beginning in the third quarter of next year as well. So we feel like we're in a really strong position heading into next year. Our hope is that the spreads issue get settled out and people get back to buying, London is obviously been the weakest market in Europe and I think to a big degree it's because of all of the concerns around Brexit.

Robert Gutman -- Guggenheim Securities

Great, thanks.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah.

Operator

The next question comes from Erik Rasmussen with Stifel. Please go ahead.

Erik Rasmussen -- Stifel

Yeah. Thank you. Maybe just on the European topic. And then you've kind of talked a lot about the development and some opportunities in a lot of those markets and bringing our capacity. But looking at then sort of capex. So this year this quarter you bumped it up a little bit, how should we be thinking about the level of capex heading into 2020, obviously measuring future demand and having capacity and land, bank availability to kind of meet a lot of that future demand in some of the things you just talked about?

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

Yeah, I'll take that one. So we're not in a position to give guidance for 2020 on any of the metrics, including capex and will do that on our February earnings call. And clearly our capital spend is based on the success of our leasing and we clearly had a very strongly of bookings quarter which will factor into our capital budget going into next year.

I think it's important to point out also we remain committed to continue to grow in our four European markets as well as Santa Clara -- we'll give guidance in February.

Erik Rasmussen -- Stifel

Okay. And maybe then my follow-on on the leasing front, it seems like deal sizes are increasing and I think in the slide deck, it seemed like a good percentage over three quarters or greater than the 500 KW , is this is sustainable number or do you think deal sizes revert back to maybe closer to the average? Maybe just any sort of color there would be helpful.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah. This quarter, in my mind was really good because of the broad amount of deals we did. So as I mentioned to one of the earlier callers. I mean, our biggest deal in the quarter was only 5 megs and typically when we've had these type of record quarters is always been a really big deal like a 20 to 30 meg type deal that is really skewed at what was great about this. Was that the biggest deal was 5 megs, we did a megawatt in several different markets across all across the country and in Europe, so it shows about the diversity of that.

The other thing is that our IX business was really strong, that was up 24% year-over-year, which is a really great number, I mean it's a $50 million run rate business. And you know, the other thing is just half of that sale this quarter was for the enterprise, I mean $23 million in enterprise bookings was by far and away the biggest quarter we've ever had. So that was a really strong quarter without the typical hyper-scalers in there, we had some hyper-scalers in there, but they were taking small amounts of capacity, that's why we think we're positioned really well for next year, we expect that the hyper-scale market is going to turn around and given where we're sitting from an inventory perspective we're going to be able to respond quickly to close a lot of those deals that we expect are going to come back around.

Erik Rasmussen -- Stifel

Thank you.

Operator

Our next question will come from Colby Synesael with Cowen and Company. Please go ahead.

Colby Synesael -- Cowen and Company

Hey. Great...

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

Hey Synesael. [Speech Overlap] I'd like to get it, stick to Gary though.

Colby Synesael -- Cowen and Company

I'll tell you another one offline. So, few questions, one is, I know you're not obviously giving guidance for 2020 but Diane, in the past, you had mentioned on calls this quarter that you guys generally expect to see mid-single -- mid-teens revenue and EBITDA growth next year and I believe low double-digit FFO per share growth.

I'm wondering if you could at least just reaffirm that. And then secondly, you talked a lot about pricing, which I greatly appreciate. I know that you guys aren't chasing those deals and as a result, you walked away from some you mentioned this quarter, I'm curious what your expectations are as it relates to renewal spreads on your current business, call it over the next year, I can imagine, many of those customers are going to look for a reduction in price and then you're either going to have to go and match what they're asking for or risk them potentially leaving. So I'm curious how you're going to approach that.

And then lastly, just curious with the company's interest is in terms of expansion outside of Europe, you've obviously done really well, kind of following the bouncing ball, if you will, curious how important it is to be an even more markets over the next, call it medium-term as you're going to call it 2021. Thank you.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Sure, I'll take the last two questions, in fact, take first. But with regard to where we're going to go in new markets. I mean we continue to look at different markets throughout Europe. When we went into Europe, we went into build the big presence there. We're in four of the key markets right now, there is clearly one of the other flaps that were not in now. So you should look for us to continue to look for expansion there. And a couple of the other markets as we build out our portfolio. Again, it's all relative to the customer demand that we're tracking the conversations that we're having with customers and that really kind of dictates where we go and the pace at which we're going to deploy that capital. With regard to pricing, I mean look, this is on renewals. I mean that has been a trend that we have seen for many, many years and we've been managing through this for -- since we've gone public right and and having this concern about other people coming in and lowering the price I mean something that you've had to deal with.

The reality though is is that it's really difficult for customers to move and while the cost, the rental cost that we're going to charge them for the space is one part of their overall bill of material that they're paying each month. It's actually probably the most insignificant part relative to all the other expenses that they have for that data center. And so while they can potentially get a lower price elsewhere, there is a lot of risk and moving it a lot of additional capital required to do it efficiently and we kind of manage through that. I think for some of those companies that are out there offering that pricing, which I think is pretty, pretty remarkable I think those companies, longer-term aren't in business for the long-term because it's hard to sustain adequate returns at those levels. And I think the concern that I have for the customers that went in there is whether they have a partner that is going to be around for the long term. And clearly, we've been focused on the long term since we bought this business, that's why we've never taken short-term decisions and stretched our balance sheet. We've always maintained really really solid leverage in order to get the investment-grade rating, because we're building this company for the long term.

So you're going to win some deals are going to lose some deals, but I think what you saw this quarter is, we've won more than our fair share of deals and took a tremendous amount of market share, even when we walked away for some of those deals that were pretty ridiculous

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

And on our actual renewals that signed this quarter, it was basically flat, up a little.

Colby Synesael -- Cowen and Company

Is that GAAP or cash?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

That's GAAP.

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

That's GAAP

Colby Synesael -- Cowen and Company

Was cash the same?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

No, probably down. I don't know, look at that, but it's probably down. I don't know what the duration of those were.

Colby Synesael -- Cowen and Company

And then on the guide that color for 2020, is just reaffirming what you said before?

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

So for 2020 we're not giving guidance and obviously, so much of what will drive it is one leases commence, bookings were lighter in the first half but it has picked up. So that will come in over time next year. So we're just not in a position to give guidance for 2020.

Colby Synesael -- Cowen and Company

Okay, thank you.

Operator

The next question comes from Sami Badri with Credit Suisse. Please go ahead.

Sami Badri -- Credit Suisse

Hi, thank you. I just have some quick ones and then I have some other questions. The quick ones are what were the percentage of revenues from direct efforts with your sales force the customers versus what came in through value-added...

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

Somewhere 100 in the quarter, 100%.

Sami Badri -- Credit Suisse

100% direct. Okay. The other one is, how many cross connects did you guys have at the end of the quarter?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

I don't know.

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

Schafer can give you that detail.

Sami Badri -- Credit Suisse

Yeah, OK. The longer question is you mentioned -- in your prepared remarks, you mentioned European leasing was driven by US hyper-scale is this tracking above or below your expectations? Because I know the metric or the hurdle rate, we were discussing a while back was about 70% of potential activity in Europe was going to come from US hyper-scale customers or just US customers. Are we are above or below the 70% hurdle?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah, we're above. So when we went into Europe we assumed that 100% of -- basically 100% of all of our underwriting assumed all the growth there, initially it was going to come out of the US relationships that we have in predominantly hyper-scalers that's turned out to be exactly the case. However, what we've also mentioned is that we are planning on building out an enterprise-focused sales force attacking the market that is difficult to do.

It's a really long sales cycle and we have really done a nice job in building out that portion of our sales funnel in the enterprise space. We expect that we're going to continue to do work there but and eventually, that's going to turn to the nice business, but that was never our underwriting going in. So far it's turned out exactly as we anticipated it's mostly our US hyper-scalers there.

Sami Badri -- Credit Suisse

Great. Got it. Thank you. And then last question for you is on page number 8 regarding the development yield. So if we were to look at these development yields and we split this up into two buckets colocation or traditional power and cooling and interconnectivity in IX, what percentage of revenues for these facilities is coming from IX as of the last quarter as of these, but how many point of development yields...

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yes. So 5% of our overall revenue is IX, so you can you get some flavor for that. So, I mean if it's broadly distributed, I mean, probably there's less of an IX component in Austin than there is in some of our other facilities. So it's not really a big driver of the bigger driver is just kind of the blended basis between the enterprise companies and the hyper-scalers that we put in those facilities.

Sami Badri -- Credit Suisse

Got it, OK. Thank you.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah, sure.

Operator

Our next question comes from Nick Del Deo with MoffettNathanson. Please go ahead.

Nick Del Deo -- MoffettNathanson

Hi, thanks for taking my questions. First, Gary, can you expand a bit on what underpins the view that hyper-scale will come back in the second half 2020, is that just based on customer discussions and then describing the road maps, are there other inputs and...

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah...

Nick Del Deo -- MoffettNathanson

Are just you talking globally or just the US?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah, no, it's -- I'm sorry. It's predominantly a US commentary. I mean, we are seeing really strong demand in Europe, not of the same scale that we are seeing in the US, so the commentary is predominantly associated with US demand and it's based on just conversations. Right. We spent a lot of time meeting with all the customers sitting down with them, talking to them about their needs where they're going to need it and the art comes in terms of trying to understand like how focused they are on needing capacity quickly. And while there is a lot more conversations about their need for capacity in different markets now it's not nearly at the pace it was while ago and so we're still not ready to call that that market is going to turnaround anytime soon. If it does, that would be great. But we're not planning on that for 2020 yet.

Nick Del Deo -- MoffettNathanson

Okay, got it. And then maybe switching gears a bit, no you oftentimes complain that the market kind of systematically under-appreciate the value of your expansion opportunities. As far as part of what fueled expectations you might want to go private. I guess are there rules of thumb that you use yourself to assess that expansion option value when you think about what your stock is worth, that might be worth sharing?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah, look, I mean, we've got about close to a billion dollars of investments on our balance sheet. If we take the SIP and some of the GDS investments that we have there. And so that's roughly $10 per share. And so if you think about that relative to whatever number you're going to put, if you put a 15% return on it, you're looking at a 15% return on $1 billion of investment that's a substantial amount of growth. I mean, relative to -- we generate roughly $600 million of NOI 15%, 20% up so you're looking at a pretty substantial potential value creation on that even on a growth-adjusted basis, even if you just look not a book -- on a book basis it's worth 10 bucks a share. So I don't know how people value.

I think in general, I think most dedicated real estate investors do not ascribe a lot of value to development -- to developments. And I think that's with good reason because most real estate asset classes, don't really have the networking effect associated in their business than we do. Right. If you look at our business, 75%, 80% of our business is generated from customers that are in more than one location and what we have seen since inception has been, once you get a customer in the door. The growth rate that you could see from their customers over, over 20% CAGR.

So I can see in some other real estate industries why there's not really the same networking effect, so they don't describe a lot of value to the development business. That is absolutely not the case in this business at all. When I think about our business and the development aspect of it, that's where I see all of the potential value creation coming from. I mean, we're sitting here in a position now what we've just demonstrated this quarter as we just launched into euro. And we just leveraged all of our US relationships with all of our customers over here after having gone into that into the entirely new confidant in one year. And it's played out exactly as we envisioned and that's why we were comfortable going into four different markets there because that's exactly how the company has been built from the ground up since inception.

We started one market in Houston or Cincinnati and just kept growing methodically organically over time and we've built a really nice business. And so we expand in these other markets. We did it with the expectation and we're going to be able to bring our customers there turned out to be exactly true and that's why we feel really confident about our ability to continue to deliver capacity and make the returns that we've done over a really long sustained period of time.

Nick Del Deo -- MoffettNathanson

Got it. Thanks. Gary.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah.

Operator

The next question comes from Ari Klein with BMO Capital Markets. Please go ahead.

Ari Klein -- BMO Capital Markets

Thanks, Gary. Can you talk to the visibility you have in the pipeline and the timing on deals. It doesn't seem like you're expecting this kind of leasing performance, just 90 days ago. So what kind of played out differently than you were expecting?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah, well some of the areas we we had a really bad quarter, last quarter, right. I mean that was, weak quarter for us. We had $13 million in the quarter, which was the lowest we've had in several years. Fortunately, we close that one deal right at the beginning of July, so if you look at that was like a $26 million a quarter. So if you back off the 13 from the 52, we're up about 50% above where we were expecting to be and that was again, it's just the number of deals that we were focused on trying to close. I think got accelerate. I would not expect and don't -- no one should assume that this level of performance is going to be repeated again next quarter.

We feel good that we're basically ahead of our annualized bookings number. Which was between $80 and $100 million for the year, but we expect next quarter it's going to get back down to a much lower number than it was -- it was this quarter. It worked out well that everything kind of came together this quarter and we closed a really big number of deals.

Ari Klein -- BMO Capital Markets

And then I think you mentioned potentially building more enterprise in IX focus data centers in Europe. To what extent can you look for acquisitions there versus development?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah, look, I mean it's difficult. There's not many properties out there. I mean, or platforms out there that you can acquire and that's why we're going the organic path. It's a little slower, but we know the returns that we're going to make on it are going to be better, we can control the quality of the product and the whole integration to our system, it's a lot easier when you do it from the ground up.

Clearly, we will look for other assets that become available but, but the reality has been a lot of these deals have just gone at multiples that are just not attractive to us. I mean really, really expensive and we can't afford to play at that level. And we've decided to take a pass on that. We saw last year, when we're under a lot of pressure in the first quarter last year, predominantly because of the Zenium acquisition, which was very dilutive, as well as some of the expansion that we're doing and what you just saw this quarter, is that our revenue for Zenium is up 80%, our EBITDA was up over 100%.

And we're now starting to get the benefit of that acquisition, with those assets that we acquired plus with the additional organic developments that we're putting around it to compliment it.

Ari Klein -- BMO Capital Markets

Thanks.

Operator

The next question comes from Richard Choe with JPMorgan. Please go ahead.

Richard Choe -- J.P. Morgan

Hi, I just wanted to clarify a little bit given the I guess the bookings this quarter of a backing out the earlier deal and the strength in Europe. Can you kind of go back to what the enterprise business in the US is looking like and what you're seeing there, and kind of the follow-on with that, can you sustain I guess given the new business mix and with hyper-scale being pushed out the $20 to $25 million in bookings, a quarter or is that need to be reset downward?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

No, I think the $20 to $25 million a quarter is as a good estimate that we should be able to continue to deliver on. I think once the -- once some of the hyper-scalers come back in the market. Again, I think you're going to get quarters like this one, where you're going to get a big deal and it's going to pop and it will basically go over that number. But if you look over the last four or five quarters we've been putting up that $20 million $25 million per quarter and that has been predominantly focus on the enterprise business. We've had record quarters and enterprise sales over the last couple even in spite of just kind of muted demand from the hyper-scalers.

So once the hyper-scaler come back, I think we'll be able to do above that, but we're not willing to call that turnaround just yet.

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

And again, it varies so much by quarter just comparing second quarter and third quarter. So it's -- you can't -- that's why we say more of the baseline of the $20 million annualized just feel pretty reasonable.

Richard Choe -- J.P. Morgan

And I guess asking along with that, but the pipeline for the enterprise deals in the US remains robust or is it more in Europe or can you give a little differentiation there?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah, I know the enterprise deals are almost all predominantly in the US, we've got that funnel building in the US for the enterprise business, but to date all the bookings for the most part on the enterprise, have been in the US. In aggregate, I didn't even actually mentioned this in my point, but our funnel is and this is -- I didn't even have it in my prepared remarks, but our funnel is down a couple of percent 2% or 3% versus last quarter and it's down around 14% or so from last year.

So typically I give that in my prepared remarks, but I forgot to do that. I'll give you some color on the quarter from our -- from our funnel perspective.

Operator

The next question comes from Michael Funk with Bank of America Merrill Lynch, please go ahead.

Michael Funk -- Bank of America

Hey, good morning guys. Thank you for taking the questions here. A couple of quick ones, if I could. We've been hearing that due to some kind of the trade tensions maybe there were some slowdown or delay in some of the deals coming from Asia over into the US for some of the hyper scale guys over there. I wonder if you're still seeing that and if you expect a recovery there in 2020?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah, hey, Mike. Yeah. We absolutely have, I mean that business was going really strong. It's dramatically slowed down over the last couple of quarters, your guess is as good as mine as to when both governments can work out to work out a trade deal. I've always been an optimist, I've always thought both of the presidents are very commercial, so I think they both want to get a deal done. So I'm hopeful that they will.

Michael Funk -- Bank of America

And then, Gary, back to your earlier comments about not pursuing anything at this time. I appreciate you wanted to clarify things, given all the press, but just wondering if you were trying to take control the neighbor -- the narrative in front of what might be a kind of a history of deal, one that we just announced recently and if your comments about taking a pass implies that you have been part of a process and have been looking at maybe just stepped away because the valuation as you noted, and then kind of in the second part of the to the question, I guess would be your comments imply that you're not open to a sale, cause I've always kind of thought, I guess any companies for sale at the right price or just that there is not a process going on right now?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah, look, Mike. I mean is there were so many news releases that got out that we felt it appropriate to kind of put out the statement to kind of just kind of bring some clarity to that. I think my comments and there were pretty much spot on. And that's really what we wanted to get across to everyone.

Michael Funk -- Bank of America

Okay, thank you for clarifying . And then final question, we're going to call it starting here in a second. Just on capital needs, Diane, how to potential JVs fit into your capital needs and you've kind of commented on the potential need to raise equity in the last few quarters, saying that you don't have any need to the near term, just wonder if you could update that commentary.

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

Yeah. Nothing really to comment on in the JV category. And as I mentioned in my prepared remarks will continue to manage our leverage in the 5.5 times range, that's what we've committed to the rating agencies in order to protect our investment-grade, and I think it's fair to say that as we've done in the past, we expect to opportunistically utilize our ATM to issue equity to manage to that leverage range and fund the development pipeline depending ultimately on what are our capital -- capital expenditure needs are.

Michael Funk -- Bank of America

Great, thank you guys. So much for the questions and we'll see you in a few weeks in LA.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Absolutely.

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

Yeah.

Operator

Our next question comes from Jordan Sadler with KeyBanc Capital Markets. Please go ahead.

Jordan Sadler -- KeyBanc

Thanks. Sorry to press on this, but I feel like it's really not entirely clear. You've said you're not currently pursuing a sale, but is it fair to say from your commentary that you assess some offers and ultimately decided it's just better to be a public company?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

I think in the last quarter, we got some questions and we told everyone there was no comment on it. There were a bunch of subsequent news, reports, and releases and speculation on it. We wanted to provide some clarity, which was what we attempted to do again to say basically no comment on it, but actually more affirmative to say that there is no deal here, and I don't think we could be any more clear than that.

Jordan Sadler -- KeyBanc

Okay. Not running a process. And then -- I appreciate that. And then in terms of the -- any other comment on the different M&A transaction that was in the market this week, any thoughts on sort of how that might impact the competitive dynamic in Europe.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Yeah. But I think that's a great deal. I think Bill got a really great asset there and it was great to see Dave willing to do that. I think in general, losing Dave ultimately as a competitor is good for us. Right. I mean, he is -- he is a great competitor in the market and having one less company in the European market is going to be good, I think for us. I think in general what you saw when digital acquired Dupon and it was one less player in Northern Virginia that we benefited by that, I'm expecting that. We'll continue to do well in Europe basically because a lot of the customers want to spread around their purchases, so that they don't want to be so -- so weighted to a particular player.

I think in general it's going to benefit us. But I think also that digital is going to do phenomenally well interaction is a fantastic asset.

Jordan Sadler -- KeyBanc

To your comment. And then just Diane, back to the financing and funding, we spent -- you guys spent a lot of time on the investment-grade rating. Congratulations. How did -- have you communicated your perspective funding of growth to the rating agencies. In other words, what's the expected mix of debt and equity, and what's the upper end of the net debt to EBITDA threshold?

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

Yeah, as I said we committed to managing in the mid-5 time's range and that's what they expect from us. So the math works out to pretty similar capital structure regarding percent of equity and percent of debt to our current balance sheet because we ended the quarter at 5.4 times net debt to EBITDA.

Now over time obviously, our EBITDA growth so we create more leverage capacity through that, but as far as where we're managing to -- that's where we're managing to.

Jordan Sadler -- KeyBanc

So it sounds like you've softened up a little bit on the view toward equity right, I mean I feel like earlier in the year maybe it was the stock price, you guys kind of waved it off and said, look, we don't need equity we're going to internally fund, it doesn't sound like you're saying that right now per se, or am I missing it?

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

No, I think either way. And I mean on that Jord. So getting investment-grade is something that we are absolutely going to protect. There is only 100 companies that have an investment-grade rating and now we're going to be one of them. And so the strategic importance of having that particularly as we head into an economy that is kind of slowing down is going to be really important.

So you should assume that we're always going to do the right thing for the long-term interest of the company. And then if that requires getting equity in there that's what will, that's what we'll do.

Jordan Sadler -- KeyBanc

Thank you for the time.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Sure. Thanks.

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

You're welcome.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Gary Wojtaszek for any closing remarks.

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Great. Everyone, thanks for -- Thanks for joining the call. We'll see you in a couple of weeks at [Phonetic] Niery -- and if you have any other questions, don't hesitate to reach out to Schafer or Gary, they're here. Take care.

Operator

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Michael Schafer -- Vice President, Capital Markets & Investor Relation

Gary J. Wojtaszek -- President, Chief Executive Officer & Director

Diane M. Morefield -- Executive Vice President & Chief Financial Officer

Frank Louthan -- Raymond James

Simon Flannery -- Morgan Stanley

Jon Atkin -- RBC

Robert Gutman -- Guggenheim Securities

Erik Rasmussen -- Stifel

Colby Synesael -- Cowen and Company

Sami Badri -- Credit Suisse

Nick Del Deo -- MoffettNathanson

Ari Klein -- BMO Capital Markets

Richard Choe -- J.P. Morgan

Michael Funk -- Bank of America

Jordan Sadler -- KeyBanc

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