Csquare, Inc. 2026 Q2 Earnings Call

Please go ahead. Good afternoon, welcome to Csquare's second quarter 2026 earnings conference call.

Joining me today are Spencer Mullee, Chief Executive Officer, and Steven Cook, Chief Financial Officer. Earlier today, we issued our second quarter earnings release and supplemental materials, which are available in the investor relations section of our website. Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements regarding our expectations for future operating performance, capital allocation, market demand, pricing trends, leverage, and other future events. These statements are based on our current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to today's earnings release and our 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.

With that, I'll turn the call over to Spencer.

Thank you, Michael, Good afternoon, everyone. I appreciate you joining us today. The second quarter reflected the consistency of the business we've been discussing with investors over the past several months. Revenue increased 14 and a half percent year-over-year. Adjusted EBITDA grew by 21%. Adjusted EBITDA margin expanded by more than 300 basis points. We delivered record annualized bookings of $64.7 million, marking our 13th consecutive quarter of sequential bookings growth. More importantly, the quarter unfolded largely as we expected. Commercial execution remained strong, our pipeline continued to build, and the underlying trends across the business remained very constructive. Nothing we saw during the quarter changed our confidence in the long-term opportunity ahead. Rather than simply walk through the numbers, I'd like to spend a few minutes discussing what we're seeing across the business today, because that's ultimately what gives us confidence in the outlook.

The first observation is that demand continues to grow. I've learned over the years that infrastructure customers rarely make decisions based solely on today's requirements. They're making long-term decisions about where critical applications will reside and how they will serve their own customers for years to come. What gives me confidence today isn't simply that activity levels remain strong. It's that customer conversations have become noticeably more strategic. Customers are planning further ahead. They're thinking differently about capacity and increasingly viewing digital infrastructure as long-term competitive advantage rather than simply a real estate decision. That's exactly the environment that Csquare has been preparing for. What stood out during the second quarter wasn't simply the level of customer activity. It was the breadth of that activity.

Demand remained diversified across enterprise customers, cloud and network providers, healthcare, financial services, technology companies, and larger infrastructure deployments. We also continue to see activity across both our largest metropolitan markets and several secondary markets. Many customers are beginning to think through how AI inference, increasing data intensity, and low latency application requirements will influence where and how they will deploy infrastructure. That planning process is creating greater urgency around securing available capacity today, particularly in markets where power availability is becoming increasingly constrained. While AI continues to receive significant attention across our industry, what we're seeing extends well beyond AI alone. Customers continue investing in resilient, highly connected infrastructure capable of supporting an increasingly distributed compute environment, and we believe those trends remain durable. That demand translated into another quarter of strong commercial execution. Annualized bookings reached nearly $65 million, representing our 13th consecutive quarter of record bookings.

While we're certainly pleased with the bookings result, what gave us the greatest confidence wasn't simply that record number. It was why we achieved it. The sales pipeline continued to strengthen through the quarter. Customer conversations became more strategic. We continued to see demand across both smaller enterprise deployments and larger infrastructure opportunities. Customers continue choosing Csquare for a few straightforward reasons. They value reliable operations, highly connected facilities, responsive customer service, and importantly, available capacity in many of the markets where they need to deploy infrastructure. In an environment where available power and capacity remain constrained across portions of the industry, our ability to support customer deployments today continues to differentiate us. Of course, not every aspect of the quarter exceeded our expectations.

One area that continues to require patience is the amount of time some larger customers need to complete Basis of Design work before their deployment begins. Those projects are becoming increasingly sophisticated, and while that can extend deployment timelines, we view this as a reflection of the complexity of the environments our customers are building and our own ability to meet the requirements of next gen deployments rather than any change in underlying demand. One question we've received frequently over the past several months is what differentiates Csquare in an increasingly competitive market? From my perspective, it comes down to execution. When customers evaluate providers, the conversation usually centers on four questions. Those are: Can you deliver capacity when I need it? Can I rely on your operations? Can you support me as my deployments expand? Can you provide all of that at a competitive value?

We believe our platform is well-positioned across each of these dimensions. Operationally, we continue delivering consistently high levels of uptime while maintaining world-class Net Promoter Scores, typically ranging from the 70s to the 80s. These metrics matter because they lead directly to customer retention, expansion activity, and long-term relationships. Our portfolio also gives customers flexibility. Whether they're deploying within a single metropolitan market, across a region, or nationally, we can often support those requirements through a single operating platform. As hybrid infrastructure strategies continue to evolve, we believe that flexibility becomes increasingly valuable. Finally, we continue to benefit from available capacity in many of the markets we serve. While power availability has become an increasingly important consideration throughout the industry, we've continued investing behind customer demand and expanding capacity where we see attractive long-term opportunities. Businesses like Csquare aren't built one quarter at a time.

They're built through thousands of operating decisions made consistently over years. Over the past several years, we've become a stronger and more mature organization. We've refined our operating processes, strengthened our commercial organization, improved the way we allocate capital, and built an experienced operating team that has successfully managed through periods of rapid growth, as well as more challenging market environments. That experience gives me confidence in our ability to continue executing as the business grows. Looking ahead, I'm encouraged by what we're seeing across the business. Our commercial pipeline continues to strengthen, customer conversations continue to become more strategic, demand remains broad-based, and we're continuing to execute against a clear long-term strategy. Like every infrastructure company, we also recognize the challenges that come with growth. One area we're watching closely is the availability of labor.

Competition for experienced construction, commissioning, and technical personnel continues to increase as investment across digital infrastructure accelerates. Successfully attracting, developing, and retaining that talent will remain an important priority for Csquare. Stepping back, I believe we're exceptionally well-positioned for the years ahead. Demand continues to grow across our customer base, commercial execution remains strong, and we're continuing to invest behind attractive long-term opportunities with discipline. At the same time, we're benefiting from favorable industry fundamentals, including improved pricing, constrained supply in many markets, and increasing customer demand for highly connected infrastructure. We believe those trends, combined with our operating platform, customer relationships, and disciplined approach to capital allocation, position us to create meaningful long-term value for our shareholders.

If I leave you with one thought for today's call, it's this: demand continues to accelerate, our commercial execution continues to deliver, and we're well-positioned to convert that demand into long-term recurring growth through disciplined execution and thoughtful capital investment. With that, let me turn the call over to Steve Cook, our CFO.

Thank you, Spencer. I'll begin with our second quarter financial results before discussing our balance sheet, capital allocation priorities, and our outlook for the balance of the year. Revenue for the second quarter was $280.4 million, an increase of 14.5% compared to the second quarter of 2025. Excluding metered power revenue, which can fluctuate based on customer power consumption and generally has little impact on profitability, revenue totaled approximately $260.2 million and performed in line with our expectations. Continued growth in our core colocation business remained the primary driver of our financial performance during the quarter. While reported revenue remains an important metric, we believe the composition of that revenue is equally important. Approximately 95% of our revenue during the quarter was recurring in nature, supported by long-term customer relationships, contractual pricing escalators, and strong customer retention.