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CSQR · Management commentary and analyst questions
Earnings Conference Call
Good day, and welcome to the CSquare 3Q 26 Earnings Announcement Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star Please note this event is being recorded. I would now like to turn the conference over to Michael George Bowen, Senior Vice President of Investor Relations. Please go ahead.
Good afternoon, and welcome to CSquare's third quarter 26 Earnings Conference Call. Joining me today are Spencer Edward Mullee, Chief Executive Officer and Steven Cook. Chief Financial Officer. Earlier today, we issued our third quarter earnings release and supplemental investor materials, which are available in the Investor Relations section of our website. Before we begin, I would like to remind everyone that today's discussion will include forward-looking statements regarding our expectations for future operating performance, bookings, customer demand, capital allocation, leverage, development activity, and other future events. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described today. Please refer to today's earnings materials and SEC filings for additional information regarding these forward-looking statements and the risks associated with them as well as reconciliations of the non-GAAP financial measures discussed today to the most directly comparable GAAP measures. And now I will turn the call over to Spencer.
Thank you, Michael, and good afternoon. I appreciate everyone joining us today. The third quarter was another strong quarter for CSquare. Revenue increased 25.6% year over year and adjusted EBITDA grew by 44.3% during that same time period. Annualized bookings reached $66.1 million marking our 14th consecutive quarter of sequential bookings growth. We also expanded our contracted backlog while continuing to strengthen the balance sheet following our IPO earlier this year. While we are pleased with the results, what gives me the greatest confidence is the quality and the durability of the business underlying those numbers. And what we are hearing directly from our customers. Over the past year, customer conversations have evolved in a meaningful way 3 topics increasingly dominate strategic discussions. Time to delivery, long term cost certainty, and how future AI inference workloads fit within broader enterprise infrastructure strategies. Customers recognize that high quality capacity is not always immediately available, particularly in key metropolitan markets. That is influencing purchasing behavior Large enterprises are increasingly planning further ahead and committing to capacity earlier to create greater certainty around their future infrastructure requirements. At the same time, demand remains broad based. Our customer base spans financial services, health care, technology, communications, network providers, and other enterprises and our pipeline continues to grow across multiple verticals. That diversity matters because our growth is not dependent on a single customer category, industry, or workload. The quality and durability of that customer base are also important parts of our model. More than 85% of our monthly recurring revenue comes from core enterprise customers and more than 60% of our customer base is investment grade or has investment grade credit characteristics. Our average customer relationship extends beyond 12 years and our weighted average lease term has increased to more than 37 months. That durability is also reflected in customer satisfaction with monthly combined net promoter scores ranging from 88 to 93 during the third quarter. We believe those characteristics provide meaningful durability to our recurring revenue base while still allowing us to benefit from emerging demand drivers. They also provide strong validation of the quality of our site portfolio. Before moving into an overview of commercial activity in the quarter, I want to quickly address a common misperception that I regularly hear. Specifically that an older data center building means older infrastructure. that is simply not how our facilities operate. Critical equipment is continuously maintained and replaced through its life cycle And when we expand capacity, we install new electrical and mechanical infrastructure. Ultimately, reliability is what matters. We operate essentially at 100% uptime, virtually no events attributable to equipment failure while successfully deploying high density compute across the portfolio. We believe that is a much better measure of asset quality than the year the original building was constructed. Moving to commercial activity, execution remained strong throughout the quarter. Annualized bookings was $66.1 million supported by activity across customer segments and deployment profiles. The combination of sustained bookings and expanded pipeline and customers planning further ahead continues to reinforce our view of the demand environment. That demand is translating into greater forward visibility. Annualized revenue backlog increased from approximately $70 million at the end of the second quarter to $114 million at the end of Q3, with $104 million expected to commence over the next 12 months. The composition of bookings is also important. Many deals signed during the third quarter have relatively short expected deployment timelines because we were able to sell into existing space or into space requiring targeted infrastructure improvements rather than relying on larger under roof expansion projects. At the same time, we are investing to bring additional capacity online against contracted customer demand Across the platform, we have access to nearly 2 gigawatts of utility feeder capacity compared with approximately 1 gigawatt of transformer capacity installed today and roughly 400 megawatts of installed sellable UPS capacity. At the same time, only about 2-thirds of our available floor space is currently sold. That distinction is important. There can be a perception that vacant space in a data center necessarily means there is no power available to support it. In many of our facilities, that is just not the case. We have additional utility capacity available today or accessible within relatively short time frames which allow us to add UPS and cooling infrastructure within existing facilities as customer demand develops. That incremental infrastructure can be added at a lower capital requirement than constructing additional building shell or pursuing greenfield development. We are also increasingly demonstrating that our existing footprint can support high density compute. We are successfully deploying high density infrastructure across multiple markets today So when we combine available utility capacity existing floor space, the ability to add power and cooling infrastructure within existing facilities, and growing demand for high density deployments we see significant opportunity to increase the revenue and earnings capacity of assets which we already own. That embedded growth runway is an important part of the CSquare investment thesis. We do not need to rely exclusively on new buildings, or greenfield development to create meaningful additional capacity and adjusted EBITDA. A substantial portion of our growth opportunity exists within the existing footprint we already own and operate today. Our ability to sell existing capacity, optimize infrastructure, and add new capacity within our existing portfolio is an important part of our model. It allows us to respond to customer requirements, while deploying capital against demand which is increasingly visible. Pricing provides another important indicator of the strength of our environment. Pricing remained strong during the third quarter. Based on the demand, and the current market conditions, we implemented a meaningful increase to portions of our rate card near the end of Q3. Renewal pricing and customer retention also remained healthy and Steven will provide additional detail on that shortly. We believe the combination of strong pricing and retention demonstrates the value customers place on reliable infrastructure connectivity, and access to quality capacity in the markets we serve. We continue to receive questions regarding AI. So let me be clear about how we view that opportunity. Enterprise colocation is the foundation of this business. More than 85% of our monthly recurring revenue today comes from core enterprise customers. AI is incremental to that foundation and to a business model that was already working well before the recent focus on AI infrastructure. As enterprises develop their AI strategies and scale inference workloads, we believe we are well positioned to participate particularly where connectivity, latency, resiliency, proximity to users, and increasingly high rack densities matter. Importantly, we do not need c square to become an AI company for AI to be meaningful to our growth. As enterprise customers increasingly deploy inference workloads within their existing infrastructure strategies, we believe those workloads represent an additional source of demand for a platform already serving their mission critical infrastructure needs. that is how we think about the opportunity. AI is an incremental demand driver on top of a diversified enterprise colocation business with longstanding customer relationships and highly recurring revenue. As we look forward, my focus is increasingly on execution in the areas where we have a high degree of confidence in long term demand. That means delivering capacity on schedule, converting contracted backlog into revenue, maintaining operational excellence, allocating capital effectively and ensuring we have the right people partners, and processes in place to support our growth. During the third quarter, we continue to bring meaningful capacity into service across the platform while advancing projects supporting our contracted backlog. That execution is reflected in the $104 million of annualized backlog currently expected to commence over the next 12 months. The opportunity in front of us is significant, but execution matters. Stepping back, demand remains strong, but equally important, we believe the quality of that demand remains high. We are selling to a diversified customer base with strong credit characteristics, long standing relationships, and increasingly long commitments. Combined with favorable pricing and growing backlog, that provides meaningful visibility into future revenue and adjusted EBITDA. That visibility increasingly connects our commercial story with our balance sheet story. As contracted deployments become revenue generating, we expect the resulting adjusted EBITDA growth to become an important driver of our deleveraging. So the takeaway from the quarter is not simply that Csquare produced strong growth. it is that we continue to sell capacity improve pricing, build forward visibility, and convert customer demand into infrastructure supporting long duration recurring revenue. We believe that combination creates a strong foundation for sustainable growth and continued balance sheet improvement. And with that, I will turn it over to Steven.
Frank you, Spencer. I will begin with our third quarter results and then discuss capital deployment, our balance sheet and outlook. Third quarter revenue increased 25.6% year over year to $302.3 million Colocation revenue increased 26.7% to $227 million, and total recurring revenue increased 23.4% to $264 million. Our existing portfolio generated approximately 67% of recurring revenue growth with acquisitions completed during 2025 contributing approximately 33%. Turning to GAAP results. Net loss for the quarter was $88.1 million compared with a net loss of $29.8 million in the third quarter of 2025. The year over year increase primarily reflected approximately $58.6 million of IPO-related transaction costs post-IPO stock based compensation expense, and costs associated with terminating certain pre-IPO compensation. Over time, we expect continued growth in recurring revenue and adjusted EBITDA. Together with the benefit of our reduced post-IPO debt balance, to improve our GAAP earnings profile. Depreciation associated with our infrastructure portfolio, however, will continue to be a significant noncash expense. Turning to adjusted EBITDA. Adjusted EBITDA increased 44.3% year over year to $132.1 million Adjusted EBITDA margin in the quarter expanded to 47.8% compared with 40.5% in the prior year period. Reflecting continued recurring revenue growth and significant operating leverage across the platform. Our same data center portfolio was the primary driver of that performance. Growth within that portfolio generated $16.4 million of incremental adjusted EBITDA including contributions from completed customer deployments, while portfolio margin expansion contributed an additional $15.5 million Together, those 2 drivers represented approximately 79% of year over year adjusted EBITDA growth. Pricing also remained strong. Renewal spreads in the quarter were 17%, the highest level we have achieved over the past 5 quarters. Booked pricing increased double digits year over year while net revenue churn remained low at 1.9%. Turning to capital deployment. We invested $149 million in growth capital expenditures during the quarter and $16 million in recurring capital expenditures. Our active development portfolio supports approximately $114 million of annualized contracted revenue backlog. Our objective is straightforward. Deploy capital behind visible customer demand at attractive returns, bring that capacity online, convert it into recurring revenue and adjusted EBITDA, and allow that growth to improve the balance sheet. Turning to the balance sheet. Our IPO materially improved our financial position. Following the IPO, we repaid $1.1 billion of indebtedness. Including the full repayment of our revolving credit facility. We ended the quarter with no revolver borrowings and $1.1 billion of available liquidity. Net leverage, based on our annualized year to date adjusted EBITDA, was approximately 8.4x at quarter end. We recognize that leverage is an important area of focus for investors and we remain committed to our target objective of 6x to 7x. The path toward that objective is primarily driven by adjusted EBITDA growth from deployments already under contract combined with disciplined capital allocation. As contracted capacity commences, revenue and adjusted EBITDA should increasingly reflect investments where much of the associated capital has already been committed. Finally, I want to make 1 broader point about the underlying cash characteristics of the business. As we have shown in our supplemental disclosures, this quarter included a number of significant IPO related and other items that affected reported FFO. We provided those items individually in a supplemental schedule so investors can evaluate them transparently. More fundamentally, the recurring capital required to maintain our existing infrastructure is substantially lower than the depreciation and amortization reflected in our financial statements. That is an important characteristic of the business model. Combined with the adjusted EBITDA contribution we expect from recently completed deployments and contracted backlog, we believe the underlying cash generating characteristics of the portfolio provide meaningful support for continued investment and deleveraging over time. Our capital structure also provides significant stability. Substantially all of our outstanding debt is fixed rate, with a weighted average interest rate of approximately 5.4%. Less than 4% of our non revolving debt matures between now and the end of 28, and 99% of our asset backed securitization issuances are investment grade. That combination of fixed rate debt limited near term maturities, and substantial available liquidity gives us the flexibility to execute our contracted development pipeline while continuing to improve the balance sheet. Turning to guidance. Based on third quarter performance and our visibility into the remainder of the year, we expect full year revenue of $1.14 billion to $1.16 billion and adjusted EBITDA of $490 million to $500 million We expect growth capital expenditures of $620 million to $640 million and recurring capital expenditures of $50 million to $60 million Our confidence in that outlook is supported by contracted deployments, projects that have already been completed and are moving into their revenue generating phase, continued pricing strength and the operating leverage we are seeing across the platform. Let me close with the bigger financial picture. CSquare operates mission critical infrastructure with highly recurring revenue The existing portfolio generates substantial adjusted EBITDA, requires relatively predictable recurring capital investment, and is financed largely with fixed rate debt. At the same time, we have significant contracted growth already in front of us and $1.1 billion of available liquidity to continue funding that opportunity. That is why we do not view growth and deleveraging as competing objectives. When we invest behind contracted demand at attractive and execute well, new capacity generates recurring adjusted EBITDA. That incremental adjusted EBITDA increases the cash generating capacity of the business, and reduces leverage. Our capital allocation priorities therefore remain clear. Maintain the safety, reliability, and performance of the existing portfolio, fund attractive customer backed organic growth, preserve substantial liquidity, and continue moving toward our target leverage objective of 6x to 7x. We believe the combination of recurring revenue predictable recurring capital requirements, visible contracted growth, fixed rate financing and substantial liquidity, all give the business meaningful cash generating capacity, and durable financial characteristics across market and rate cycles. With that, I will turn the call back to Spencer.
Thank you, Steven. We are encouraged by the momentum across the business. But our focus remains squarely on execution. Delivering for our customers bringing contracted capacity online, converting backlog into recurring revenue and adjusted EBITDA, and continuing to strengthen the balance sheet. I want to thank our employees for their hard work this quarter our customers for their trust and our shareholders for their continued support. Operator, we are now ready to take questions.
Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. The first question will come from Cameron McVeigh with Morgan Stanley. Please go ahead.
Hi, Spencer and Steven. This is Gaurav Morken on for Cameron McVeigh. Thanks for taking the questions. I have 1 on--and 1 on pricing. First, the press release mentioned that 3Q bookings should commence on shorter time lines than is typical. On that note, is there anything you can share around typical time lines versus what you may expect in the near term as disclosed in the presentation? And then secondly, on pricing, can you comment on what drove the jump in renewal spreads to over 17% in the quarter? Do you have a sense of how much of your customer base is meaningfully below market rates?
Great. Cameron, thanks for being here today. We really appreciate it. So your first question was on time lines. And the deals that we did in the third quarter. And I would answer this way. We set about very, very diligently, and our sales team did a spectacular job this quarter. I am focusing on spaces which we already have built out and are already to go to market. So we set a record in the quarter. As you know, we set a record in terms of our enterprise business in the quarter. We set a record in terms of deals that we did that could be delivered in very short time frame. So we do expect that to be true for the quarter, and we do think that we will see a number of those deals come online in quarter 4. To address your question on pricing, you did see that we did 17% That really is a function of a variety of things. First, just the market in general and supply and demand. We are in oversold situation. Our service, the things that we deliver to customers, all of the reasons why we have talked about over time as we have talked to you over the past 6 months of all the advantages of CSquare, are all coming to fruition. So I do expect that we will continue to see some of that greater increase as we go, we still have a number of customers who are below market from the legacy days. I do not know that it will be as significant as we saw in the third quarter, but I think it will still be substantial. Going forward. I hope that answers your question.
Thanks, Spencer.
The next question will come from Michael Elias with Cowen and Co. Please go ahead.
Thanks for taking the questions, and it is me. I am going to put on a different spin on the questions that were just asked. You know, maybe starting out on pricing, Spencer. You know, when I consider the landscape, we are looking at demand at generational levels. We have a tighter supply environment as a function of maybe as a and a lower set of people who are building for the enterprise. You know, newer deals are coming in at higher rates. You know, as we consider the installed base of the portfolio, you know, how do you think about over a 2-3 year period? The uplift that we could see, you know, on EBITDA as a function of that as part of that, what it implies for leverage. And then the second question is just on the demand side. You know, again, seem very strong demand, but I think there was a note in the deck that mentioned bookings normalizing from peak. Just any color amid the demand strength, you know, why that would be normalizing from peak and what a new normal would look like. Thank you.
Yep. Super glad to see you, Michael. Thanks for the questions. Okay. So on the demand side, let's talk about that first. We already have a great, great start for the fourth quarter. And so I do not want to really predict what is gonna happen. We did talk about normalizing. Where that normalizes, I do not really know. I do know this. I know that our demand continues to be at record levels. Our enterprise demand has been significantly growing and continues to grow. And so for the future, I do not see any functional reasons why that would change. We do not see any new build of any substantial any substantial at all in terms of new builds of retail data centers We still have existing capacity, both from a power perspective and a space perspective, and we are planning on capitalizing on that. That was on the demand side. Pricing was the other 1? Steven, you want to talk?
Yeah. Right. So I would say the pricing environment, as you can see from the earnings materials, we released, it is constructive on both fronts on the renewal side and the demand side, Michael. In terms of, you know, the demand drivers that Spencer just mentioned, I think the business is well positioned. The book generally matures ratably over the next 3 years. And so you are thinking, you know, in terms of us driving future growth there on renewals specifically, you are. You know, about a third of the portfolio is addressable every 12 months. So I think there is a meaningful opportunity for us to keep driving and capitalize on the environment we find ourselves in.
And Michael, I would say this 1 other thing. As we continue to see these market forces increase our pricing, that path, the leverage of 6x to 7x, becomes easier and easier as we continue to have this pricing strength. And it is so happy to see that as well.
Yes. Thank you for that. And that was part of the--if I could squeeze 1 in really quickly. You know, I thought I saw a disclosure regarding assets held for sale. You know, just any color you could give us in terms of how you are thinking about you know, quantum of monetization that could be in the cards you know, and as part of that, any--if you want any color on cap rate or anything like that. Yeah. Thank you. Yeah.
So, Michael, we have 2 assets that have long been held for just distribution, those are the 2 that you are referencing. These were legacy data centers where decisions had been made years and years ago even before my arrival. That are just now coming to fruition. But to the general question, we evaluate every M&A opportunity. So it is both things that we could acquire things that we could dispose of. If there is something noncore where we can sell it and take our leverage down, we would absolutely consider that, and we look at opportunities on a daily basis. So M&A is active here. We can. We have an M&A department. Steven and I both look at multiple deals on a weekly basis, and we are excited about opportunities ahead of us in 2027.
Thanks, guys. Congrats on the quarter again.
Again, if you have a question, please press 1. The next question will come from Jon Petersen with Jefferies. Please go ahead.
Oh, great. Thank you very much. Congrats on the strong leasing. Curious on the planned CapEx spend on the brownfield expansion. You guys have laid out a $4 million to $8 million a megawatt number. Can you maybe just talk a little more about the projects you are working on right now and where they fall in that range? And maybe more importantly, as we look into 2027, what kind of opportunities are right in front of you, and how should we think about the CapEx per megawatt?
Sure. Thanks for the question. As far as where we are spending time right now, again, I would call your attention to some of the earnings disclosures. A nice balance of drawdown between the equipment optimization which tends to be a lighter capital intensity and a slightly faster time to deploy. And the larger under roof expansions, which tend to be at the upper end of that $4 million to $8 million net CapEx range that we have prescribed. Overall, in terms of what we saw in the quarter and the types of opportunities we are looking at, Spencer mentioned certainly, some opportunities to deploy capital in a low capital intensity way. Striking balance given that we have got some large strategic projects that we have commented on in the past. That are in that under roof expansion. So overall, as we look forward, expect to remain in that range. We may see a balance, and we will continue to see a balance in those 2 types of opportunities. And certainly have plenty of, opportunity to put capital to work.
Just maybe to add on to that, John, in the third quarter, we are super excited about our success in sales. In that we sold 21 megawatts of new capacity either. Or new deals. Excuse me. Some of that is in existing capacity. Some of that is in new capacity. But our overall expected build multiple for that first quarter is at 1.6x. And our cost per megawatt is less than $4 million for the totality of the quarter. So super excited. Terms of being a productive quarter that is really gonna make a difference on some of these numbers going forward.
that is great. Okay. And then just as a follow-up, you talk about doing these higher power density AI focused deployments. You. Your bookings mix--about a third of it as cloud and IT. Should we. When you talk about AI, should we think about it mostly being that cloud and IT bucket? Or are you seeing some of these higher power densities move into your other customer demands?
We certainly have some higher power densities. We currently are installing 150 and 250 and 50 k w racks in multiple data centers. So in the third quarter, only about 30% of the deals that we did from a MRR perspective were AI, strictly AI. So we are seeing just really strong sales across the board. it is not just AI. It is in enterprise. It is in cloud. It is in content delivery. It is in health care, banking, finance. All of those things that you would expect us to be doing, we are doing this quarter.
Alright. Great. Frank you very much.
The next question will come from Eric Lupcho with Wells Fargo. Please go ahead.
Great. Thanks for taking the question. You know, I. Spencer, I think know, kind of the story with c squared after the IPO was that you know, your CapEx would, kind of peak in 2026 and then come down in 2027 and bookings would kind of normalize a little bit, I guess. Kind of as we look out, I know you are not guiding to next year, but just given the level of demand we have seen in another record quarters of book record quarter of bookings, do you think that is still the case Or do you think you will be operating at slightly higher CapEx but obviously at meaningfully higher EBITDA than maybe we had expected a few months ago.
So I do not want to predict the future here. But I will say. And I know Steven is looking at me. He wants to answer this as well. I would say that given our pipeline, and given the space that we have today, we may. I had always said, well, you know, we cannot choose where our customer goes, and then we cannot choose whether it is in 1 of the infrastructure spaces or 1 of the 1 of the new build spaces. I think we are gonna continue to try to put things within spaces which are already built and already powered And to the extent we can do that, I think we can be successful in taking that number that CapEx number down some. So we are trying. And we are certainly moving forward on that from a sales perspective. From a financial perspective, Steven will cover
Yeah. Eric, it is a great question and 1 that we pass the ball around with daily as a team. I would say 1 of the great things about the expansion opportunity in front of us is that there are a variety of different project types that we can pursue. And Spencer commented on some of the lower capital intensity bookings and deals we did in Q3, I think that is really the opportunity for us is to continue to drive velocity and be as aggressive as we can given the demand environment. But also balancing that with capital intensity and being smart about our project selection. So overall, there is a lot for us to choose from. there is a lot embedded in the expansion opportunity across our portfolio. And I think that positions us well to continue taking advantage of the market conditions.
And 1 other thing, Eric. Keep in mind that you know, as we talk about KW per rack, we still sell a significant portion of our business is for the 10 k WO rack. And as people use more power, they may not be going. A lot of our customers are not going to a 150 or 250 kW rack. A lot of our customers are going from 4 kW to 6 kW or 4 kW to 8 kW. Or maybe even as much as 10 kW. But those still work. Within the spaces which were already built already operating. We do not have to install more infrastructure to take that kind of rack density up. I think that is an important thing to keep in mind.
Yeah. I appreciate I appreciate that color, Spencer. And maybe just 1 more for me. As we think about sources and uses here, I think you have about $600 million or so of cost to complete on the backlog, north of $1 billion of liquidity. So maybe you could just kind of help us bridge between operating cash flow incremental debt funding or any other capital sources you would consider. I think you were pretty clear in the press release that equity is off the table for now. But maybe you could just kind of talk through obviously, some of the volatility in the capital markets today, how you feel about, you know, sources and uses of funding, in the near term?
Absolutely. Steven is gonna answer that, but you will hear from me. Equity is off the table. Equity is off the table.
So I would say from a liquidity perspective, you know, post IPO, we closed the quarter with nothing outstanding on our revolver. We have a great access to capital and strong banking partnerships. That is ready, willing, and able to deploy there to help support it. From a free cash flow perspective, the business is. Before growth capital, obviously, is free cash flow positive. We expect to allocate, a meaningful and substantially all of our capital or free cash flow, excuse me, to driving incremental growth that is the, you know, pathway for us to increase EBITDA and ultimately delever And then as required and where appropriate, we will access our available liquidity lines as well. To further the growth. But overall, from a capital structure line of sight on what it is gonna take for us to complete and our available liquidity sources we feel very well positioned.
Alright. Thanks, guys.
The next question will come from Maddison Zazzi with Bernstein. Please go ahead.
Thanks, guys. Steven, you highlighted that 99% of the ABS is investment grade. there is been a lot of noise around this lately. Can you just go ahead and put the rest on the record, maybe the coverage versus the cash trap test, confirm nothing is trapped? How expansion CapEx kind of reaches the common shareholders. And then finally, maybe whether Brooks or any of that is affiliates hold any of those notes.
So that was 3 questions. Let's start with your first 1. As far as our ABS debt, As you correctly pointed out, 99% of that, those tranches and issuances are investment grade ratings. We currently maintain a large restricted cash balance on our balance sheet, which you can see in our financials that our required liquidity reserves under our indenture We are not in a cash trap scenario. The ABS administration works where cash is swept and then released following, you know, debt service. Overall, from a capital perspective, we like the structure. We have operated with it. Now for multiple years. And overall, our trust is. Both of our trusts have performed very, very well. Including delevering our CMPA trust, as part of the IPO. So interest coverage ratios, debt service coverage ratios have trended positively there. Our LTVs have performed in line. And we have seen asset appreciation the support of those facilities, Madison. And overall, very happy with the performance of those 2 trusts.
Incredible. Since I have already asked 3, I am gonna go ahead and get 1 more in. This 1's easier. How much of the existing MRR and maybe also the bookings are strictly investment grade versus your broader greater than $1 billion market cap bucket specifically wanting to kind of 0 in on any neoclass exposure here?
Sure. In our in our 60% number, about 40% of that is IG. So the remaining would be market cap in excess of $1 billion. Our Neo Cloud exposure is relatively light. Madison, today, 10% or less.
Awesome. Thanks so much, guys.
The next question will come from Elliott Simons with Bank of America. Please go ahead.
Hi. This is Elliot on for Mike Funk. Thanks for taking our questions. We are just wondering on capacity, could you discuss the pace and shape of commissioning over the next several quarters? And whether you are on track to meet your new capacity expectations and planned deliveries? Thanks.
So today, we are absolutely generally on track. Much of what we have done in the past 2 quarters has been selling existing space that requires little or no construction, it may require just simple modifications to where air goes installing new air equipment. So currently, over 85% of our jobs are on time and on budget. And generally speaking, on a system wide basis, we are 100% on budget. So nothing on the horizon that I see that would prevent us from making the commitments that we have made. Now we have couple of markets where we have you know, permitting or other issues along with all of the other data center companies. But nothing of a of a material nature from anything that we published.
Okay. Frank you.
The next question will come from Mahir Yaghi with Scotiabank. Please go ahead.
Thank you for taking my question and for the added disclosures you are making this quarter. Very helpful. So first, I was hoping to get some visibility on the progress of timing of delivery of $108 million of contracted backlog to EBITDA. And the associate megawatts for that, if you can. You know, in terms of the delivery of those and how they are going to flow into your P&L. I see also that your ongoing growth spend is running around $7 million per megawatt, well within your range. Is that a good level you still comfortable with your $4 million to $8 million megawatt spend per megawatt spend for your extended 1 gigawatt that you have in the spreadsheet? And finally, excluding the large customer renewals that you had in the quarter, what would be the more normalized renewal spread that you had? Thank you.
So okay. So I will work my way backwards. From a renewal perspective, generally speaking, we see approximately 8% on our renewal spread overall. In the system. that is historically what it is been. So I will just answer what it is historically been. Working backwards, I will go to your first question now. Of the $114 million that is total in backlog at the end of Q3, we expect to see approximately $34 million of that come online by the end of quarter 4. Approximately $44 million of that to come in by the end of quarter 1. And then about $23 million of it by the end of quarter 2 and then the balance later. And then I forgot the middle question. If you just remind me.
Yeah. No. I was just wondering if you still. You are still comfortable with your 4 to $8 million of megawatt for your extended 1 gigawatt that you are you are planning to put together over the couple of years?
Yeah. I do not know that we do not know that we ever said that it would be the same for the whole gigawatt. Right? I think we are looking more at today. And today, that $4 million to $8 million a megawatt seems reasonable. If I look at what we sold, in quarter 3, and what we determine the cost would be, we were able to do that at about $3.8 million a megawatt. You know, future. So I think $4 million to $8 million a megawatt is still a good number. Now I have always said, there are deals that we do where it is 0. And there are deals that we do where it might be $9 or $10 million. So we said $4 million to $8 million is the range in which we are targeting our deals. And there is nothing to make me think today that is different based upon our third quarter sales.
that is great. Thank you.
The next question will come from Richard Cho with JPMorgan. Please go ahead.
Hi. Going through your bookings and the pricing on the new deals, it seems like you have a pretty nice march up. You talked about the new rate card. How much more growth could we see from here? And you know, in terms of the renewals, the detail is helpful about the 8% ex the large deal. But can we get a. Got a little more color on the large deal? Did you drive that? Did the market drive that? Are there more large deal renewals? Down the pipeline that could really kind of support, I guess, nearer term EBITDA growth and growth overall? Then I have a follow-up after that.
Yeah. So the renewal that you are talking was significant. It was with our largest customer. And so I do not foresee anything of that size on the horizon. We are renewing 1 moderate size customer now. For a renewal date of 1/1/2027. And then we are probably done with the largest ones for this year. We still have a number of renewals. Obviously, the book renews 1-third, 1-third, 1-third. So we will see. But the large customer that we are talking about is really an example of the pricing power that we have. If you think about it that they are our largest customer, we still saw a significant increase and that customer does yield a significant power. So I think it is just a great, great take now on how we still have pricing power. Do I expect that to continue? I do. And the reason I do is because there is nothing structurally or functionally to change the nature of what is happening in the business.
Got it. And in terms of, you know, your capital position and liquidity, it does not sound like you feel constrained. I understand wanting to be very disciplined given your leverage level, but given the opportunities, given the relatively shorter return profile, given that pricing is moving up and can move up higher. Do you feel like you are capital constrained?
I do not feel as if I am capital constrained in any way, shape, or form. I am excited about the opportunities that we have I am excited about you know, the opportunity we have within the data centers to do deals which are very accretive And I am excited about the opportunity to get our leverage to 6x to 7x. And I think all of those things can be accomplished in a reasonable time frame.
Great. Thank you.
Again, if you have a question, please press star and then 1. Please stand by as we poll for questions. Showing no further questions, this will conclude our question and answer session. I would like to turn the conference back over to Spencer Edward Mullee for any closing remarks.
I would just like to thank everyone for attending today. I would like to thank our employees, our customers, and everyone who participates in these events. Thank you so much. Have a great day.
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