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Switch (SWCH) Q3 2021 Earnings Call Transcript

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SWCH earnings call for the period ending September 30, 2021.

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Switch (SWCH)
Q3 2021 Earnings Call
Nov 05, 2021, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Hello, and welcome to the Switch, Inc. third quarter 2021 earnings conference call. My name is Katie, and I'll be coordinating your call today. [Operator instructions] I'll now hand the call over to your host, Matthew Heinz, to begin.

Matthew, please go ahead.

Matthew Heinz -- Vice President, Investor Relations

Thank you, operator. Good afternoon, and welcome to Switch, Inc.'s third quarter 2021 earnings conference call. On the call today are Thomas Morton, Switch president; and Gabe Nacht, Switch CFO. Today's call may include forward-looking statements, including references to expectations, projections and other characterizations of future events or market conditions.

Actual results may differ materially from those expressed in our forward-looking statements, which are subject to certain risks, uncertainties and assumptions. Our statements are made as of today, and we assume no obligation to update our disclosures. We described some of these risks in our SEC filings, specifically our Form 10-K in the section entitled risk factors. In addition, today's call includes discussion of non-GAAP financial measures, which should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP.

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Please refer to today's press release and supplemental package for further information, including a reconciliation of non-GAAP measures. Our third quarter 2021 earnings press release has been furnished to the SEC as part of our Form 8-K and is available on our investor website at investors.switch.com. I will now turn the call over to Switch president, Thomas Morton.

Thomas Morton -- President

Thank you, Matt, and good afternoon, everyone. Thank you for joining us today for our third quarter 2021 earnings call. Switch accomplished another solid quarter as we continued to execute on our strategic growth initiatives, driven by strong enterprise demand for our highly resilient and sustainable data center infrastructure. Importantly, our strategic sales initiatives continue to gain traction, producing strong mid-teens revenue growth in the third quarter and a 25% increase in year-to-date incremental revenue signings.

As disclosed in our earnings press release, I am pleased to announce that the Switch board of directors has voted unanimously to pursue REIT conversion, and we'll be targeting a REIT tax election on January 1, 2023. We look forward to sharing additional details as we continue to move forward with this exciting evolution in Switch's corporate structure. Our Q3 2021 financial results detailed on slide four of our investor deck reflect accelerating top line momentum across all of our prime campus locations. Third quarter revenue was $158.1 million, increasing 23% year over year.

Excluding a $12 million revenue contribution from Data Foundry, Switch's revenue was $146.1 million, representing a 13.5% organic growth rate compared to the year-ago quarter. Third quarter adjusted EBITDA increased 14.5% year over year to $76.9 million, including a $4.8 million contribution from Data Foundry. Our Q3 adjusted EBITDA margin of 48.6% was affected by seasonally driven increases in power costs, in addition to a full quarter contribution from Data Foundry's operations, where third quarter SG&A levels do not yet reflect the full benefit of merger-related synergies. Gabe will provide additional details on Q3 financial performance and 2021 guidance later on today's call.

Our sales teams once again delivered solid third quarter bookings, signing over $16 million of incremental recurring revenue and a total contract value of more than $94 million, as detailed on slide 13 of our investor deck. For the first nine months of 2021, our incremental annualized revenue bookings increased 25% year over year to $50 million, and total annualized revenue signings increased 28% to $88 million, inclusive of $38 million in renewals. Switch's strategy to expand its prime footprint equally and strategically across the United States has continued to pay dividends as our customers have increasingly exhibited demand for our world-class infrastructure across multiple Switch locations. As of Q3 2021, multicampus customers comprised over 38% of legacy Switch revenue compared to 33% in the prior year quarter.

This represents a year-over-year growth rate of 26% in third quarter multicampus customer revenue. Our revenue bookings mix also demonstrates the increasing diversity of our business with 60% of our Q3 total contract value coming from PRIMEs other than Las Vegas and 44% on a year-to-date basis. Switch's growth efforts in Texas continued to gain momentum in third quarter as Texas customers accounted for approximately $5 million of incremental annualized revenue signings in the period. Notably, during Q3, we executed a three-megawatt expansion with a Fortune 5 technology customer in Austin whose incremental deployment will utilize substantially all of the remaining capacity in the newest sector of our Austin 3 data center.

We believe this significant expansion from one of the world's largest technology companies represents a strong early validation for the Data Foundry acquisition, which closed just five months ago and sends a positive signal to the other large enterprises as Switch continues its build-out of the Rock Campus in Texas. Our funnel of sales opportunities remains robust for both inbound and outbound expansions by existing enterprise clients at the Rock Campus and across the other four Switch PRIMEs. We are pleased to report our first outbound expansion by a Texas customer in October, a healthcare organization that has signed to expand to Switch's Keep Campus in Atlanta. We remain confident that Switch's national data center footprint and global telecommunications cooperative will be of great value to customers within the legacy Data Foundry footprint, creating tremendous cross-selling opportunities and revenue synergies from this acquisition.

I will now discuss some of Switch's notable third quarter activity and key metrics across the existing prime campus locations. In August, Switch announced the appointment of Jonathan King as our chief revenue officer. Jonathan was previously an executive at Google Cloud, where he led partner ecosystem development, including the launch of Google Cloud's telecom and edge initiative and the Google Cloud VMware Engine. As chief revenue officer from Switch, Jonathan will oversee Switch's go-to-market strategy and business development efforts to further accelerate revenue growth.

Following our land purchase agreement with Dell Technologies and receipt of zoning approval from the City of Round Rock, during Q3, we began underground preparation work on the future sites of our next tier five platinum data centers at the Rock Campus. We expect to begin shell construction on Austin 4 in Q2 of 2022 with a targeted completion in early 2024, and the timeline for Austin 5 will be targeted for six to nine months after completion of Austin 4. Including the Data Foundry assets, the Rock Campus ecosystem will be architected to provide more than 2 million square feet of data center space and 180 megawatts of power upon completion. As previously mentioned, just two months after closing the acquisition of Data Foundry, Switch signed its first multi-megawatt expansion order with a legacy Data Foundry customer.

The transaction involves a five-year renewal of the client's existing space, and its three-megawatt expansion will more than double its current footprint in Austin and Houston. We expect the customer to begin ramping into this new deployment in early 2022. Switch executed another multiyear expansion order with an existing global logistics customer for incremental co-location and telecommunication services in the Core Campus and the Keep Campus. On a combined basis, the order represents approximately $2.4 million of incremental annualized revenue and over $12 million in total contract value.

Subsequent to third quarter, this same customer also signed for an additional 220 cabinets in Atlanta. We signed a one-megawatt expansion with a leading semiconductor manufacturer who is adding to its multicampus footprint in the Citadel Campus and the Keep Campus locations. The new order represents approximately $2.2 million in incremental revenue over a five-year contract term. In October, Switch announced the commencement of the regional water improvement pipeline project in partnership with the Tahoe Reno Industrial Center and various state and local government agencies.

This is the first public-private partnership of its kind in Nevada history. The project further Switch's industry-leading commitment to providing sustainable technology infrastructure for decades into the future. The pipeline will deliver 4,000 acre-feet of treated effluent water from a reclamation facility in Sparks, Nevada to the Tahoe Reno Industrial Center, enabling Switch's Citadel campus to operate indefinitely on 100% recycled water. In November, Switch was recognized for the third year in a row by being placed on the U.S.

Environmental Protection Agency's national top 100 list of the largest green power users from the Green Power Partnership. Switch ranked in the top 10 on the EPA's top 30 technology and telecom list and 23rd on the top 100 list of companies based on renewable power usage with a perfect 100% ranking for the use of green power. Now, turning to our construction milestones and robust project pipeline. As can be seen on slide seven of our investor deck, Switch has a total of more than three million square feet of data center capacity that is either in progress or planned for future development through 2026.

This represents a greater than 60% increase to the 5.1 million square feet of data center capacity currently in service. During the quarter, we delivered the final sector of our Tahoe Reno 1 facility to an anchor customer, placing 10 megawatts and 780 cabinets into service. The massive 1.3 million square-foot data center at our Citadel Campus is now effectively fully committed to customers, and we are underway on the shell construction of Tahoe Reno 2 and the pad construction of Tahoe Reno 3. We continue to prioritize the acceleration of construction of thre new data centers at the Core Campus, the Citadel Campus, and the Keep Campus, totaling 1.3 million gross square feet and up to 160 megawatts of power at full build-out.

As illustrated in our development milestones table on slide 19 of our investor presentation, we expect to complete construction on Las Vegas 15 in Q2 of 2022, Tahoe Reno 2 in Q1 of 2023, and Atlanta 3 in Q2 of 2023. In order to maximize cost efficiency and accelerate the delivery of future capacity, we are also completing the underground utilities and data center pad preparation on five additional facilities spanning our Core Campus, Citadel Campus, Keep Campus, and Rock Campus locations. Additional details are available on slide seven of the investor deck. Please keep in mind that these facilities currently have planned completion dates ranging from 2024 through 2026 and thus will incur the majority of their capital spend much closer to the anticipated in-service dates, in accordance with our real-time evaluation of customer demand.

Upon completion, we expect these five data centers will provide approximately 1.9 million incremental square feet and more than 200 megawatts of power capacity. We look forward to hosting our investors and analysts at our Las Vegas headquarters for the Switch investor day on November 15, 2021. Our founder and CEO, Rob Roy, will present his vision and strategy for the company. Those in attendance will have the opportunity to tour our Las Vegas campus and spend time with a range of Switch executives as they present key elements of our strategy and operations.

In addition, we will provide multiyear financial targets to help guide investors through our evolution over the next several years. I will now turn the call over to Gabe to discuss our financial results. Gabe?

Gabe Nacht -- Chief Financial Officer

Thanks, Thomas. Today, I'm going to review our financial results for the third quarter of 2021 and discuss our outlook for the remainder of 2021. Starting with slide four of our investor presentation. Switch reported total third quarter 2021 revenue of $158.1 million, an increase of $29.3 million or 22.8% compared to the third quarter of 2020.

Excluding Data Foundry revenue of $11.9 million, Switch third quarter revenue totaled $146.2 million, an increase of $17.4 million or 13.5% organic growth compared to the third quarter of 2020. Staying on slide four. Adjusted EBITDA totaled $76.9 million for Q3 2021 compared to $67.2 million in Q3 2020, reflecting a margin of 48.6% and year-over-year growth of 14.5%. Third quarter adjusted EBITDA margins were affected by seasonal power costs and the inclusion of a full quarter of Data Foundry results.

Excluding Data Foundry's adjusted EBITDA contribution of $4.8 million, Switch adjusted EBITDA was $72.1 million, reflecting a margin of 49.3% compared to a margin of 52.1% in the year-ago quarter, again, primarily driven by an increase in power costs relative to Q3 2020. In the third quarter, Switch reported a net loss of $0.9 million compared to net income of $13.2 million in Q3 2020. The reduction in net income was primarily attributable to a $5.1 million reduction in income from operations and an $8.6 million increase in interest expense. Lastly on slide four, customer churn was 0.2% in Q3 2021, unchanged compared to the year-ago quarter.

Looking now at our growing exascale portfolio on slide seven. As of September 30, 2021, Switch had approximately 21,700 billing cabinet equivalents across its five prime campus locations, reflecting 600 net cabinet additions compared to the prior quarter. Included in this total is approximately 3,300 billing cabinet equivalents at Data Foundry compared to 3,200 in the prior quarter. Including a full quarter contribution from Data Foundry, the Switch average monthly recurring revenue per cabinet was over $2,375 in Q3 of 2021.

Staying on slide seven. As of September 30, 2021, the five Switch Primes had capacity for approximately 29,100 cabinet equivalents within our open sectors, of which 91% were committed under contracts compared to 88% in the year-ago quarter. Now, turning to bookings on slide 13. During Q3, we executed 657 contracts, representing total contract value of $94 million and annualized revenue of $27 million at full deployment, inclusive of both renewals and sales of incremental services.

We are continuing to see strong customer demand in Texas and for the Data Foundry assets. Our third quarter bookings in Austin were a great example of the sales traction we are seeing with over $5 million in annualized revenue and approximately $40 million in total contract value from legacy Data Foundry customers. Excluding renewals, we signed $16.2 million of incremental annualized recurring revenue in Q3, including $15 million in incremental bookings from existing customers and approximately $1.2 million from 15 new logos. Now, looking at revenue attribution on slide 15.

Total colocation revenue for the third quarter of 2021 was $125.9 million, up 20% compared to $105.1 million in the year-ago quarter. Excluding $8.3 million in colocation revenue from Data Foundry, Switch colocation revenue grew 12% to $117.7 million compared to the year-ago quarter. Total third quarter connectivity revenue was $29.3 million, increasing 31% from the year-ago quarter. Excluding Data Foundry connectivity revenue of $2.9 million, Switch third quarter connectivity revenue increased 9% sequentially and 18% year over year to $26.4 million on an organic basis.

On a consolidated basis, Switch had more than 10,500 billing cross-connects as of September 30, and cross-connects accounted for 4.2% of total revenue in Q3 2021, reflecting 26% year-over-year growth in cross-connect revenue. Finally, other revenue, including professional services, accounted for $2.9 million in Q3 2021, which includes approximately $750,000 from Data Foundry. Maintenance capital expenditures were $3.7 million for the third quarter of 2021 or 2.3% of revenue compared to $2 million and 1.6% of revenue in the same quarter last year. Growth capex excluding land purchases was $132.2 million for the third quarter of 2021 compared to $80.6 million in the year-ago quarter.

Please refer to slide 18 for a detailed breakdown of our capital expenditures by campus. Third quarter cost of revenue increased by $23.1 million compared to the year-ago quarter, of which $5.8 million was attributable to Data Foundry. The $15.2 million increase in Switch cost of revenue was primarily attributable to higher seasonal power costs and depreciation. Excluding depreciation, amortization and equity-based compensation, Switch's Q3 adjusted cost of revenue increased by $10.2 million, primarily driven by increases in power and connectivity costs compared to the year-ago quarter.

We would note that power rates have normalized in September and October following an elevated forward pricing curve in the peak summer months. Third quarter SG&A expenses were $42.8 million, up from $31.5 million in the year-ago quarter. Normalizing the year-over-year comparison for Data Foundry, Switch's SG&A increased by $7.2 million, primarily attributable to higher professional services costs related to litigation and our ongoing REIT evaluation. In the third quarter of 2021, Switch accrued $4.7 million in litigation costs related to a lawsuit filed against the company in 2017 by Cobalt, a data center operator who ceased operations in or around 2015.

Our prior expectation was for the trial to begin in 2022. However, the court set the trial date for mid-November 2021. We continue to believe the allegations lack merit, and thus, we intend to vigorously defend against the claims. It has historically been our practice to exclude litigation costs from our presentation of adjusted EBITDA that are deemed to be unrelated to our patent portfolio or core business operations.

As such, our third quarter adjusted EBITDA excludes the litigation fees incurred in connection with our defense of the allegations. We expect SG&A costs to remain elevated in the fourth quarter of 2021 in connection with these two items. However, any litigation costs related to the case will be excluded from our presentation of adjusted EBITDA. Q3 2021 income from operations was $17.8 million compared to $22.9 million in Q3 of 2020.

The year-over-year reduction in operating income was attributable to increases in depreciation and amortization, power costs and SG&A expense. Interest expense increased by $8.6 million year over year to $15.2 million in Q3 of 2021, primarily driven by higher debt balances related to the issuance of $1.1 billion in senior unsecured notes. Adjusted funds from operations or AFFO was $51.1 million in Q3 2021, a 9% decrease compared to $56 million in the year-ago quarter. AFFO per diluted share was $0.21 compared to $0.23 in Q3 2020, primarily due to increases in interest expense, maintenance capital expenditures and diluted shares outstanding compared to the year-ago quarter.

Looking now at the balance sheet on page 21. As of September 30, 2021, the company's total debt outstanding, net of cash and cash equivalents, was $1.5 billion, resulting in a net debt to last quarter annualized adjusted EBITDA ratio of 5.0 times. The increase in our leverage ratio was driven by our historically lower Q3 EBITDA margin and the increase of $40 million on our revolver. As of September 30, 2021, Switch had liquidity of $488.3 million, including cash and cash equivalents and borrowings available on our revolver.

As of September 30, 2021, our recurring revenue backlog stood at $37 million compared to $63 million in the prior quarter. The reduction in backlog was a function of our nearly $40 million in annualized revenue commencements during Q3 of 2021. We expect our backlog to contribute approximately $3 million of incremental revenue for the remainder of 2021, representing an estimated $20 million of annualized revenue commencements during Q4. Please reference slide 17 for further details on our backlog and expected timing of commencements.

As of September 30, 2021, there were 242 million total shares outstanding, including 137.5 million class A shares and 104.5 million class B shares. As disclosed in recent 8-K filings, during the third quarter of 2021, our members redeemed 6.1 million common units, resulting in the issuance of an equivalent number of class A common shares. Including member redemptions totaling 6.2 million in October and November, our class A public float now represents 59.4% of total shares outstanding. Now, turning to guidance for 2021 on page 22 of our investor presentation.

We expect consolidated revenue in the range of $590 million to $595 million, including Data Foundry revenue of $27 million to $28 million. This represents 16% growth in consolidated revenue and over 10% organic growth excluding Data Foundry. Our implied revenue guidance for Q4 represents 17% organic growth at the midpoint, demonstrating significant acceleration from recent trends and a result of ongoing growth across our five prime campuses. We expect consolidated adjusted EBITDA of $307 million to $314 million, including $11 million to $12 million from Data Foundry, reflecting a consolidated adjusted EBITDA margin of 52.4% at the midpoint.

Lastly, our guidance range for capital expenditures excluding land acquisitions has been increased to $410 million to $440 million, including $13 million to $17 million in the Rock Campus for development of the final sector of Austin 3 and site preparation for the Austin 4 and Austin 5 facilities. The $25 million increase in our capex midpoint reflects an acceleration of equipment purchases and construction activity in response to strong customer demand, particularly as the sales funnel begins to build for our Las Vegas 15 opening in Q2 of 2022. Relative to our prior guidance range, the 1% reduction in our 2021 revenue guidance midpoint is primarily related to lower-than-expected contribution from pass-through power revenue during the second half of 2021, in addition to a modest timing difference in customer deployments relative to prior expectations. The revenue impact from lower pass-through power is largely offset by lower-than-planned power costs for the second half of 2021, resulting in no material change to the full year adjusted EBITDA guidance.

The portion of 2021 revenue guidance affected by the timing of installations was largely due to the strategic customer signing in Austin that occurred in Q3 but will begin the ramp on its five-year contract in early Q1 2022. And now I will turn it back to Thomas for some closing remarks.

Thomas Morton -- President

Thank you, Gabe. We firmly believe that Switch is favorably positioned for the rapid digital transformation among enterprises as they continue their migration to hybrid multi-cloud architectures. We are working hard to accelerate the delivery of additional data center capacity to meet the strong level of demand we are currently experiencing, and we are confident in our team's ability to execute. On behalf of our entire management team, we would like to take this opportunity to thank our employees, customers, partners and our shareholders for their continued support of Switch.

We would now like to open the line for questions.

Questions & Answers:


Operator

Our first question comes from Eric Luebchow from Wells Fargo. Please go ahead. Your line is open.

Eric Luebchow -- Wells Fargo Securities -- Analyst

Hi. Thanks, and good morning. I know some of this will -- you'll go over this at the analyst day. But just wondering if you could give us a little bit of color on the decision for a REIT conversion, some of the puts and takes and considerations in terms of why you think pursuing a REIT at this point is the right strategy.

Thomas Morton -- President

Yes, Eric. Thank you very much. We've always wanted to maximize shareholder value, and we believe that converting at this time is something that will drive shareholder value, and that is the reason we can do it. The board has met with a variety of external advisors as well as the internal team, and they believe that the change is going to be favorable for shareholder value and will not have any sort of negative impact on our ability to operate and reach our growth initiatives.

So we've worked out ways to balance all of those various imperatives, and we believe at this time that converting to a REIT is the way to maximize shareholder value.

Eric Luebchow -- Wells Fargo Securities -- Analyst

OK. Great. And then, one follow-up for me. Maybe you could just talk about your supply position today.

Obviously, Las Vegas 15 coming online next year. Do you think you'll be a little more limited in terms of your ability to lease up new cabinets the next couple of quarters? As you mentioned, it sounds like the funnel is building for Las Vegas 15. Is that largely available to be pre-leased or presold the next couple of quarters as we enter the new year?

Thomas Morton -- President

Yes, that's correct. We have existing inventory. That inventory is spread around our four or five primes now, and we believe that we will sell into that inventory. And then, in the first half of 2022, we have Las Vegas 15 coming online, which will bring additional revenue to us.

And then, in the beginning of 2023, we have Tahoe Reno 2 coming online. So there will be a lot of inventory available for people to load into in the future, and we believe that we'll be able to meet that demand.

Gabe Nacht -- Chief Financial Officer

Eric, we are currently talking to customers today about Las Vegas 15. So yes, it is available for pre-leasing. And to reiterate Thomas' point, we have 1.3 million square feet coming online between early '22 and early '23. So we believe we're well positioned to continue growing in the future.

And for the first few months of 2022, until Las Vegas 15 comes online, we do have inventory in Las Vegas, we do have inventory in Texas, we do have inventory in Atlanta.

Eric Luebchow -- Wells Fargo Securities -- Analyst

OK, great. Thank you both.

Operator

[Operator instructions] Our next question comes from Richard Choe from J.P. Morgan. Please go ahead.

Richard Choe -- J.P. Morgan -- Analyst

Hi. Now, that you've had a full quarter of Data Foundry, it seems like the acquisition is going well. Can you give some update, given that guidance seemed pretty good, about the margin improvement? How should we think about it going forward?

Gabe Nacht -- Chief Financial Officer

Sure, Richard. I'll take that. We're very happy with the acquisition. The team on the ground at Data Foundry has been fantastic.

And as we talked about our strategy for that acquisition, it was really to give us a two-year head start into the Texas market because we knew we were looking to build our facilities on the Dell campus. And by acquiring Data Foundry, we've got a fantastic staff that knows how to run high-quality data centers. We had a very strategic sale in the quarter that essentially takes the last sector of the existing Data Foundry facility. So we're really happy with the way things are going there.

And as far as the synergies that we expected, we talked to The Street about expecting $2 million in annualized synergies. We are already exceeding that number.

Thomas Morton -- President

Yes. Just to echo one thing that Gabe said, is our largest sale actually came from Data Foundry. And that team has done a really good job with the integration, and that has resulted in achieving synergies faster than expected. So very pleased, by the way, how that acquisition is rolling out.

Richard Choe -- J.P. Morgan -- Analyst

Was that sale already done, in the works before you acquired it? Or can you talk a little bit more about that?

Thomas Morton -- President

That sale was not done and not in the works before we acquired it. It was a post-acquisition opportunity that the Data Foundry team helped us successfully land.

Richard Choe -- J.P. Morgan -- Analyst

Great. Thank you.

Operator

We take our next question from Aryeh Klein from BMO Capital Markets. Please go ahead.

Aryeh Klein -- BMO Capital Markets -- Analyst

Thanks. You brought in a chief revenue officer. Can you talk about how you expect your go-to-market strategy to evolve? And maybe where do you feel like you could be executing a little bit better with that?

Thomas Morton -- President

Well, yes, Aryeh. Thank you very much. And we have pretty good growth in Q3 and then about 17% in Q4 organic growth projected, so we feel like we're doing quite well in our sales. But now that we are in six different cities in five different campuses, there is a need for a growing national footprint.

We need a leader for the sales team for that sales footprint, and that is why Jonathan King has been brought onboard. And we think that he is going to be incredibly effective in deploying that group and enhancing our sales force, both in terms of numbers and strategy and approach. So we're really pleased to have him onboard. And it's just a natural evolution of the company in its size and its breadth and that we need a leader in the sales organization that is of the caliber that Mr.

King is. So very, very pleased to have him onboard and look forward to the results as we move forward into 2022.

Aryeh Klein -- BMO Capital Markets -- Analyst

Got it. And then, can you...

Gabe Nacht -- Chief Financial Officer

And one of the things that Jonathan brings to us -- Aryeh, I'm sorry, this is Gabe. He's been around the industry for 20-plus years. Rob has known Jonathan for many, many years, and he's always wanted to bring him onboard. But he's always been a very tough guy to get because people keep taking him wherever they go.

But in addition to his experience at Google, he was previously at World Wide Technology, which is a very, very large talent partner. Not only do we expect him to build -- continue to build our direct sales force, we really do expect him to add a lot of channel expertise to our sales force and help us grow that national footprint.

Aryeh Klein -- BMO Capital Markets -- Analyst

Got it. And then, Gabe, I think you mentioned that there were some commencement timing issues in the guidance. It doesn't sound like it had a big impact. But could you just talk about that and what you're seeing there?

Gabe Nacht -- Chief Financial Officer

Yes, sure. It was a very small impact to our guidance. The primary reason for adjusting our guidance was pass-through power revenue. When we talked in Q2, we had a forecast for power revenue that involved a forward curve increase.

And we actually locked in power at lower rates than we were expecting, so we passed through those lower rates and therefore, get the lower revenue. So the timing issue was really quite minimal, and it was really related to this large Texas transaction. So instead of selling into that last sector of Austin 3, as we typically do with a variety of customers, this one customer took the entire sector and they're not ramping until early 2022. So that's really the primary driver behind the timing difference.

Aryeh Klein -- BMO Capital Markets -- Analyst

Thank you.

Operator

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

Sami Badri -- Credit Suisse -- Analyst

Great. Thank you. A couple of questions. Could you just walk through how Switch manages the power costs? And you've made several references to how that's managed and power cost savings to the customers, etc., but maybe we could just revisit how you guys are treating things.

And also, do these treatments apply to both the Data Foundry customer base and Switch legacy? So this is question No. 1. And then, question No. 2 is could you just give us an update on any kind of renewal activity and pricing that the existing Data Foundry customers are actually seeing? I know that's part of the synergy -- or the revenue synergy story for you guys.

And I might have a follow-up.

Gabe Nacht -- Chief Financial Officer

Sure, Sami. With regard to power, historically, over the last decade or so, power costs have actually been going down for Switch. Primarily in 2017 when we decoupled from NV Energy, a utility provider in Las Vegas, and went to an open-market strategy, our power rates were able to drop quite significantly. This is really the first time that we've seen an increase in our power rates.

So we typically have not adjusted our power rates upward, but because of this increase, we've specifically adjusted about half of our customers that have -- that provide us with the right to adjust power rates up. The average increase was about 4%. And we do lock in power wherever possible. Right now, we are currently locked in for the next 12 months, and we are actively working in the markets to lock in additional power for longer periods of time.

We're also building our solar fields in Nevada, and we have 25-year power purchase agreements related to those solar fields.

Sami Badri -- Credit Suisse -- Analyst

Got it. And then, maybe the second question on that is renewals.

Gabe Nacht -- Chief Financial Officer

On the renewals and pricing?

Sami Badri -- Credit Suisse -- Analyst

And sorry, Gabe, one other clarification on the prior question is Data Foundry versus Switch. You may have addressed it, but just checking.

Gabe Nacht -- Chief Financial Officer

Yes. No. Data Foundry in Texas has power rates that are coming from the utility as opposed to open-market purchases that we experience here in Las Vegas. So their power structure is different, and we didn't put any power pass-through for any of the Data Foundry customers.

And with regard to renewals in Data Foundry, the renewals are going quite well in addition to the large strategic signing that we made for the last sector in Data Foundry. We also had another large renewal and incremental increase from another large customer at Data Foundry at the same rate, so no rate reduction. So we're very happy with the way things are going at Data Foundry.

Sami Badri -- Credit Suisse -- Analyst

Great. And...

Thomas Morton -- President

Sami, one quick -- sorry. One quick addition. Just to let you know that we are building these solar fields in order to continue and proliferate our 100% commitment to green energy. And as you may have seen in our press release, the EPA just gave us accolades for being 100% green and rated us in the top 23 out of 100 companies on their scale of green energy companies.

So we continue our commitment to our ESG initiatives, and we're doing that through power as well as the way that we operate our facilities.

Sami Badri -- Credit Suisse -- Analyst

Got it. And then, just the renewal pricing question?

Gabe Nacht -- Chief Financial Officer

Sorry, I think we already addressed that.

Thomas Morton -- President

Yes, I think we addressed that.

Sami Badri -- Credit Suisse -- Analyst

OK. The other follow-up question I had was more to do with supply chains, and it's a two-part question. The first one is since Switch actually designs and has the IP for a lot of the actual industrial components that go into your data centers, how are you guys prioritized in the pecking order of manufacturing and shipments with your vendor supply base? So that's question No. 1.

And then, No. 2 is if you were to give us a percentage magnitude of the number of customers that you're working with that have seen delays of equipment to arrive to your facilities and therefore slowing down commencements, what percentage of the customer base or the incoming kind of commencements would you say have been paused or delayed because of supply chain issues?

Thomas Morton -- President

All right. So Gabe, I'll take the first pass at this and then please weigh in. As to prioritizations, we have very long-standing relationships with our supply chain manufacturers. We do, do custom builds so they go in a different supply chain than just the commodity products.

They're very long lead time items, so we've been able to plan and order those items a long time ago. And because they are custom builds, they go on a different route. So we have not had any significant impacts by supply chains delivering and being able to deliver us in a timely manner. As to customers, we haven't experienced any customers doing significant delays or sharing with us that they've had significant delays in their need to obtain items to deploy in our facilities, and they have been deploying on time and on pace.

So we haven't seen much in the way of a supply chain impact at least to date in our operations.

Gabe Nacht -- Chief Financial Officer

Yes. I'll add to that, Sami. As Thomas said, our equipment suppliers really do build a very different product for Switch based on our patents. And you'll notice that we did increase our capex guidance by about $25 million this quarter.

A lot of that has to do with ordering power equipment. We want to make sure that we are -- that we have all of the production slots that we need for our power and cooling equipment from those suppliers to meet our customer demand. So we're not anticipating any slowdowns in our delivery, and we're not anticipating any supply chain issues. But we did want to lock in all of those slots, and we've ordered all of the equipment.

Sami Badri -- Credit Suisse -- Analyst

Got it. Thank you very much.

Gabe Nacht -- Chief Financial Officer

Thank you.

Operator

Next, we take our question from James Breen from William Blair. Your line is now open.

James Breen -- William Blair and Company -- Analyst

Thanks for taking the question. Can you talk a little bit about customer interest across multiple data centers? Any color you can give us on which customers are taking space in all the facilities or mobile facilities?

Thomas Morton -- President

Yes. The customers -- as we mentioned during our initial remarks, the number of customers cross-populating has continued to grow and proliferate, which is great. It's not tied to any particular industry or any particular organization in terms of the way that they are spreading across our campuses, but we are very pleased to see customers take space in multiple locations. And it was one of the reasons that we originally expanded back east and one of the reasons that we also expanded into Texas.

But 38% of our customers -- well, 38% of our revenue is multicampus, which is continuing to grow. And we expect that to continue to increase, which is good in terms of elevating overall revenue, but it's also good in stability of customer engagement. So we are pleased by both of those numbers going up and the fact that it will help stabilize our platform.

James Breen -- William Blair and Company -- Analyst

And are you seeing a noticeable difference in customer churn between the multi-tenant customer versus single spot?

Thomas Morton -- President

No, churn has remained unchanged. It's 0.2%, so it is unchanged from Q3 in 2020. So no appreciable differences there.

James Breen -- William Blair and Company -- Analyst

Great. Thanks.

Operator

We have a question from Michael Rollins from Citi. Please go ahead.

Michael Rollins -- Citi -- Analyst

Thanks, and good morning.

Gabe Nacht -- Chief Financial Officer

Morning.

Michael Rollins -- Citi -- Analyst

Curious to just delve a little more into the REIT conversion. So first, do you have to purge any of the retained earnings and make a distribution to shareholders prior to conversion? And the second part of this topic I was curious about is what happens to the tax receivable agreement. How does REIT conversion impact the existing liability from shares already converted as well as the remaining liability from shares yet to be converted?

Gabe Nacht -- Chief Financial Officer

Sure, Mike. I'll take those. As far as the E&P purge that's required upon a REIT conversion, we are still working through those numbers. We'll provide additional detail at our investor day and really more additional detail next year.

We're targeting January 1, 2023, election date, which means that during 2022 -- this is a complicated process. We need to go through all of our assets and income, determine which ones are going to be REIT qualifying, which ones are not, set up a taxable REIT subsidiary and divide up the business accordingly. So there's a lot of work to be done. Two of the items that still need to be finalized are the E&P purge, but we don't believe that's going to be a materially large number for us.

And as you mentioned, the TRA, the tax receivable agreement is another item. We have a variety of alternatives to deal with the TRA, and those range from early termination of the TRA to continuing the TRA, depending on different structures that we utilize. So all of that is still being analyzed, and we'll provide additional information as we have it.

Michael Rollins -- Citi -- Analyst

And then just an update on -- just as you look at the bookings and churn environment in general, how should investors think about the possible lumpiness of each, not really customer trend per se but revenue churn, which at certain moments has had elevated impacts? But then also, on the other side on the bookings, you've had a range of outcomes over the last number of quarters. So what's the right way to think about the lumpiness of each of these going forward?

Gabe Nacht -- Chief Financial Officer

Yes. Actually, as far as our bookings number, our incremental annualized revenue has been relatively flat for the last three quarters. Q4 of 2020 was quite elevated because at year end, we have some large signings that typically come in. But we've been running at over $15 million in incremental annualized bookings for the last three quarters.

If you go back a year or so ago, we were typically running around $10 million of incremental annualized revenue. So we're really excited and quite happy with the increase in our bookings. But you are correct. I mean, there is lumpiness in our revenue as things -- as bookings commence and as ramps occur.

We've signaled earlier in the year that we would have accelerated revenue going into the back half of the year because we had bookings that we knew would commence, and that's indeed exactly what's happened. If you look -- we obviously had 23% growth in Q3, and we're looking at 27% growth in Q4 at the midpoint of our guidance. But really, the exciting number is the 17% organic growth that we're looking for in Q4, and that's because of the commencements that we've had in the back half of this year as they roll through in comparison to the prior year same-quarter revenue. So there is some lumpiness to our business.

I think that's just a natural part of what we do. We have a number of retail clients, as you know, that take one cabinet to five cabinets to 10 cabinets to 30 cabinets. But then we have some very large customers that take hundreds of capitals. And as those companies ramp in, that's what creates a bit of the lumpiness.

Thomas Morton -- President

I would say that Gabe is spot on. And it is true that we have some lumpiness as we do larger deals. They all have phase-ins or rollouts in the way that they deploy. And even -- it takes some time to close a large deal and then to figure out what their deployment schedule is and how that ramps in over time.

Every deal is different. And even once you've closed the deal, there can be timing of when that revenue starts to flow in. But overall, their projection is onwards and upwards and is continuing to grow. And as Gabe said, we are looking at 17% organic growth in Q4.

So we continue our momentum of growth. And with Jonathan King coming onboard and us firming up the way that we do our sales, both direct sales and indirect sales in channel partners, we believe that we have built a platform to have sustained growth going into 2022 and beyond.

Gabe Nacht -- Chief Financial Officer

Additionally, Mike, you know our history well, and we've been a double-digit growth company for many, many years. And our compound annual growth rate continues to be double digits, but that doesn't mean it's double digits all the time. And our history proves that out. But over the long run, we're very excited about our future.

We have 1.3 million square feet of space coming online in the relatively short future, and then another 1.9 million coming online after that. So we believe, from an inventory standpoint, nobody is building the kind of inventory that Switch is building right now. And certainly, no one is building the quality that Switch is building. So as corporate data centers -- corporations are looking to close their data centers and move to a colocation and hybrid cloud environment, we believe we are uniquely positioned to continue that growth.

Michael Rollins -- Citi -- Analyst

And just on the churn side, a year ago, I think it was in the fourth quarter, if I'm remembering this correctly, there was some incremental revenue churn that didn't come up in the customer churn. There were just some migrations that you had in two of them. Are there any of these chunky types of migrations or risks that we should just be mindful of as we're thinking out over the next one to two years as you kind of see what's coming up for renewal and you've had conversations with customers?

Gabe Nacht -- Chief Financial Officer

Yes. Right now, there really isn't anything that we see in the horizon that is going to be significant. We have normal customer deployments that are moving workloads from one facility to another, customers moving workloads to the cloud, back from the cloud. They've been doing that for 20 years.

But there's nothing material that we're looking at over the near term. When you say multiple years out, I don't have good data on what customers are going to do multiple years out, but we don't expect anything material.

Michael Rollins -- Citi -- Analyst

Thank you.

Operator

The next question comes from Frank Louthan from Raymond James. Please go ahead.

Frank Louthan -- Raymond James -- Analyst

Great. Thank you. Can you give us some -- maybe I missed this, but can you give us an idea of what pass-through power has been running the last few quarters? Or is that disclosed somewhere? I think that's causing some confusion this morning. And then, I've got another question on the REIT conversion.

Do you think you're going to need to seek a PLR with the IRS in conjunction with that? And will you be able to get that done before January '23?

Thomas Morton -- President

I'll answer the second question, Gabe. And we don't think that we're going to need to seek a PLR. Conversion of data centers into REITs is pretty well vetted out, and there probably isn't a need to do that. But we continue to evaluate the various options and pads that we have to do this conversion to being a REIT, and we'll have more to speak about that on our investment day and throughout the course of the next year as we work toward implementation in January 1, 2023.

Gabe, do you want to speak to pass-through power?

Gabe Nacht -- Chief Financial Officer

Sure. With regard to power, we sell contracts in a variety of different flavors. We have a number of circuit-based customers, where they will buy a cabinet with a circuit and they can use as much of that circuit as they like. We have customers that buy cabinets and then buy power separately.

We have customers that commit to an all-in power commitment floor that includes both cabinets and power. So we sell a variety of different formulas. With regard to the increase that we passed through, as I mentioned, it affected about 50% of our customers -- of our utilization of power. And the typical increase was on average about 4%, and this is the first time we've ever done that.

Frank Louthan -- Raymond James -- Analyst

OK. So as far as the guidance going forward coming down, I mean, you mentioned it was kind of no margin or low margin pass-through. Can you give us an idea like on a dollar basis, on a quarterly basis, what does that usually run so we can get an idea of the magnitude of how that -- what's really changed here?

Gabe Nacht -- Chief Financial Officer

Yes. The increase -- the reduction in the power revenue that we were expecting was about $4 million in Q4. And so, that's the largest part of our decrease in guidance.

Frank Louthan -- Raymond James -- Analyst

OK. Is there anything else that was low margin in there for the delta and the change? Or is that pretty much it?

Gabe Nacht -- Chief Financial Officer

No, the other piece of the pie, as we talked about earlier, was really related to the timing of the large sale that we made in Texas.

Frank Louthan -- Raymond James -- Analyst

Got it. OK. All right. Thank you very much.

Gabe Nacht -- Chief Financial Officer

Thank you.

Operator

Next, we have Colby Synesael from Cowen. Please go ahead.

Colby Synesael -- Cowen and Company -- Analyst

Hey. Thank you. I guess I'm still confused, and I apologize, maybe everybody else understands it. So you reduced your guidance for lower pass-through.

As you said, you got lower power pricing, and you passed it on to your customers. And that's the $4 million that you just referenced to Frank. But then you're also saying that -- for 50% of your revenue base, I think, you're saying that you just implemented a 4% increase to your pricing, which presumably would have, I guess, a positive benefit on revenues even though not necessarily on EBITDA in the fourth quarter and then into 2022. So I'm just trying to unpack those two things that seem kind of in polar opposites.

And then, secondly, to the extent that you guys see an opportunity for bigger deals than what you're accustomed to signing, particularly in markets where you may have a decent amount of capacity, so for example, Michigan, would you be interested in those types of deals even though they're -- what some may perceive as hyperscale when you've historically said you're more focused on enterprise?

Gabe Nacht -- Chief Financial Officer

Yes. Colby, with regard to the power, when we put forth our guidance in Q2, we were expecting a certain amount of power pass-through revenue to increase, and we had built in about $7 million or $8 million of additional pass-through revenue coming in the back half of the year. We actually locked in lower prices than we anticipated so that pass-through revenue is less than what we anticipated by about $4 million. But along with that comes lower power cost.

That's why our EBITDA is not impacted. So hopefully, that helps. I mean that was part of our increase in guidance in Q2 based on that expectation. And now we have actual numbers, and we have adjusted guidance for that.

As far as the types of sales that we're interested in, Thomas, do you want to...

Colby Synesael -- Cowen and Company -- Analyst

I mean before we go to that, so how does increasing pricing by 4% play into that? That seems -- is that separate then? And, I guess, isn't that -- if you're raising pricing by 4%, doesn't that mean, for all intents and purposes, for 50% of your revenue, it's 4% higher and, I guess, 2% for the total business? Is that separate from this pass-through component that you just described?

Gabe Nacht -- Chief Financial Officer

No, no, no. That is the component that we...

Thomas Morton -- President

Yes. Some of it's going to be timing, too. I mean Gabe -- I mean, we didn't have a full quarter of the increases in revenue. Those increases -- I'm sorry, increases in pricing.

And those increases in pricing, we'll experience a full quarter in Q4. But it was only a partial quarter in Q3, and that's part of the reason you're seeing that it's not -- the increase in pricing doesn't offset the revenue.

Colby Synesael -- Cowen and Company -- Analyst

OK. We can take it offline.

Thomas Morton -- President

Yes. OK. As to larger customers, we absolutely are open to doing large customers. We had a customer last year that took 12 megawatts from us in Reno, which is fairly significant.

We have talked to a number of enterprises. Just because they're -- not just, but because they're enterprises, it doesn't mean that they're small customers. Hyperscale, large scale, I mean, the cloud customers, it's two or three customers that you're talking about when we reference those customers, but we have very large-scale deployments in -- potentially in the queue. And those come from enterprises migrating out of their corporate data centers and into a colocation environment.

And we're seeing those impacts and potential sales in all of our campuses, most notably up in Reno, where we have a large building coming online in 2023.

Gabe Nacht -- Chief Financial Officer

And Colby, just to come back. I want to make sure that you're clear on what we're saying, and I don't want there to be any confusion. So running the numbers, if you look at our Q4 guidance, we're guiding at the midpoint to about $162 million, $161.8 million. About half of that revenue we're able to adjust for power, so you -- roughly at $81 million or so.

And if you take a 4% increase on that, you're getting to about $3.5 million or so of additional quarterly revenue, and that's what's in our guidance today. Now, in Q2, we thought that was going to be about double, and we were able to lock in lower rates.

Colby Synesael -- Cowen and Company -- Analyst

Got it. OK. Thank you.

Gabe Nacht -- Chief Financial Officer

Does that clarify?

Colby Synesael -- Cowen and Company -- Analyst

I think so. Thank you.

Gabe Nacht -- Chief Financial Officer

OK. Perfect.

Operator

Next, we have a question from Brendan Lynch from Barclays. Brendan, your line is now open.

Brendan Lynch -- Barclays -- Analyst

Great. Thanks for taking my questions. Maybe you can give us an update on the EDGE data center initiatives. It looks like in the slide deck you had a photo from Tennessee.

Maybe just give us an idea how the rollout is going.

Thomas Morton -- President

Yes. Thank you, Brendan. Appreciate that. And yes, we did put a picture of the EDGE data center in Tennessee.

That is looking to come online in the near future, and we're excited about that. We have other locations in the queue that we will be announcing and launching into. But again, just remember -- remind everybody that the EDGE data center from a colocation point of view is not really a large contributor in terms of revenue. The opportunity with EDGE is to work on our VAULT platform through the fourth cloud in conjunction with our partners and expand our telecommunications network.

EDGE will take some time to roll out and do so effectively, but we don't expect it to be a large contributor in 2021 or significant probably in 2022. So that is just an update on EDGE, if you will. Gabe, anything to add to that.

Gabe Nacht -- Chief Financial Officer

No, I think you covered it.

Thomas Morton -- President

Awesome.

Brendan Lynch -- Barclays -- Analyst

Great. And maybe just a follow-up. You -- the press release alluded to you giving multiyear growth objectives at the investor day. Can you tell us if you're planning on giving specific revenue, EBITDA and AFFO targets or your growth objective is going to be more generalized?

Gabe Nacht -- Chief Financial Officer

Well, we're going to give revenue growth targets over the long term. We're going to give an EBITDA margin target over the long range, and we'll provide some additional information on AFFO as well. But we're certainly looking forward to your tuning in to get that data.

Brendan Lynch -- Barclays -- Analyst

Great. Thanks for taking my questions.

Gabe Nacht -- Chief Financial Officer

Thank you.

Operator

The next question comes from Nate Crossett from Berenberg. Nate, please go ahead.

Nate Crossett -- Berenberg Bank -- Analyst

Hey, good morning. Maybe just one follow-up on the REIT conversion in terms of the E&P distribution. When would the timing on something like that be? And how would you think about funding that? It kind of sounds like it's not going to be a large amount, but at the same time, I think your leverage levels are the highest they've ever been. So how should we kind of square that? And then just overall comments on leverage would be helpful.

Gabe Nacht -- Chief Financial Officer

Sure. As far as the E&P purge, again, we're still determining exactly what that number is going to be, but we really don't believe it's going to be material or create a funding issue of any kind for us. As far as timing, we have to do that before we actually make the election. While the election is effective as of the tax year January 1, 2023, we actually have until we file our 2023 tax returns, which would be October 24, to make that election.

Of course, we wouldn't want to wait that long. We'd want to be operating as a REIT as of '23 because, otherwise, you make your election and you're immediately a busted REIT if you haven't provided the dividends that you're required and separate your assets as you're required. But the E&P purge would likely take place in '23 at some point, but we don't believe it's going to be material. And as far as leverage in general, we've -- we were operating at very low leverage from -- since the inception of the company really.

And because of that, we were able to do the Data Foundry acquisition with no additional equity raise, which we think increased our enterprise value, benefited shareholders tremendously and used our balance sheet effectively. We're sitting at around five times today, but we know, if you look back at our history, that Q3 is typically our lowest EBITDA margin quarter because of summer power rates in Nevada, and we expect leverage to come down in Q4.

Nate Crossett -- Berenberg Bank -- Analyst

OK. Just in terms of the dividend level upon converting to a REIT, is there any color you could give us there? I mean there is a disparity across the space about payouts, so I'm just -- what's your thinking on that?

Gabe Nacht -- Chief Financial Officer

We will provide more information on that as we have it. That's just one of the many complexities that we're still working on as part of this REIT conversion.

Nate Crossett -- Berenberg Bank -- Analyst

OK. And then, just one quick on just liquidity of the shares. It's been picking up a lot last year. I'm just curious what the latest redemption would get you to.

Gabe Nacht -- Chief Financial Officer

Yes. If we look at our latest reductions through November, we'll be at just under 60% publicly floated shares. So we're quite happy with the float as it currently sits. We've got good trading volume.

The concerns about low float has essentially dissipated. We're not hearing that anymore. And we'll see additional redemptions next year. We have another eight opportunities for our partners to redeem shares next year.

Thomas Morton -- President

Yes, that's correct. We currently trade more -- north of $50 million worth of stock a day. So most people do not consider us an illiquid stock in any respect. So we really -- Gabe's right, we really don't get many questions on that.

And we will crest over 60% in the near future.

Nate Crossett -- Berenberg Bank -- Analyst

OK. Thanks, guys.

Thomas Morton -- President

Thank you.

Operator

Operator instructions] We take our next question from Erik Rasmussen from Stifel. Erik, your line is open.

Erik Rasmussen -- Stifel Financial Corp. -- Analyst

Yes. Thanks for taking the questions. Maybe just -- a lot's been addressed. But the EBITDA margins obviously were impacted by the higher power costs, but it sounds like a return to more normalized rates in Q4.

But what's sort of the limiting factor at this point? Is it really just the Data Foundry business that's creating some of the headwind given the margin structure?

Gabe Nacht -- Chief Financial Officer

Yes. I think that's -- go ahead, Thomas.

Thomas Morton -- President

Yes. Well, couple -- all right. Thank you. The Q3 power costs are always higher than the other quarters.

So that's a seasonal item that we see every year. It's summer, it's hot. We use more electricity to run the HVAC units and the price of that electricity goes up. That's nothing new.

And then, we have Data Foundry that we've brought onboard, and we have the first three months on Data Foundry, which resulted in about a 75-basis point reduction in margins.

Erik Rasmussen -- Stifel Financial Corp. -- Analyst

OK. Great. And then, maybe just clarifying. You talked about accelerated equipment purchases.

Is that really more just demand? Or is it there's some of the supply chain issues in the market that's at hand, knowing that getting access to critical components and whatnot is a little more challenging?

Thomas Morton -- President

Yes. Some of it is just the fact that we are growing our facilities at such a rapid rate. And the other is to just avoid any supply chain issues, putting our orders in early, making sure that our suppliers know that the orders are there, that they have the money that they need to continue their builds and that we adjust ourselves and our own expectations for the potential of a longer supply chain. So what we have done is place the orders earlier to both help our demand curve and also make sure that our suppliers had adequate time to provide us the equipment that we need without delay.

Gabe Nacht -- Chief Financial Officer

Yes. Erik, I'll add to that a bit. If you look at our build plan, not only is Las Vegas 15 coming online but the other facilities are also going to be coming online about a year after that. But we're also adding a lot of equipment to our Reno facilities due to customer demand.

We're adding equipment to Las Vegas 11 due to customer demand. We're adding equipment to our Atlanta facility due to customer demand. So I think it's primarily demand-driven. But as Thomas said, we also want to lock in those production slots from our suppliers.

Erik Rasmussen -- Stifel Financial Corp. -- Analyst

Helpful. Great. Thank you.

Gabe Nacht -- Chief Financial Officer

Thank you.

Operator

[Operator signoff]

Duration: 73 minutes

Call participants:

Matthew Heinz -- Vice President, Investor Relations

Thomas Morton -- President

Gabe Nacht -- Chief Financial Officer

Eric Luebchow -- Wells Fargo Securities -- Analyst

Richard Choe -- J.P. Morgan -- Analyst

Aryeh Klein -- BMO Capital Markets -- Analyst

Sami Badri -- Credit Suisse -- Analyst

James Breen -- William Blair and Company -- Analyst

Michael Rollins -- Citi -- Analyst

Frank Louthan -- Raymond James -- Analyst

Colby Synesael -- Cowen and Company -- Analyst

Brendan Lynch -- Barclays -- Analyst

Nate Crossett -- Berenberg Bank -- Analyst

Erik Rasmussen -- Stifel Financial Corp. -- Analyst

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