Operator:

Good afternoon, and welcome to the Equinix Second Quarter Earnings Conference Call [Operator Instructions]. I would now like to turn the call over to Chip Newcom, Senior Director of Investor Relations. Thank you. You may begin.

Adaire Fox-Martin:

Thank you, Chip. Good afternoon and welcome to our second quarter earnings call. I'm honored to be hosting my first earnings call today as CEO and President of Equinix, I'm immensely proud to lead our dedicated team of more than 13,000 employees around the world. I would like to express my gratitude to Charles and the entire Equinix team for the warm welcome and the facilitation of a smooth transition over the past two months. I look forward to the continued partnership with Charles in his role as Executive Chairman, and I'm excited and optimistic about the road ahead. As a board member for the past four years, I've witnessed many of the unique qualities that have driven Equinix's durable success. Our 25 years of investment has built a business now spanning 264 data centers in 72 metros across six continents. Our focus on customer value and outcomes has created interconnected digital ecosystems unrivaled in our industry. It is a phenomenal foundation to build upon as CEO. As the stewards of some of the most important digital infrastructure in the world, we are exceptionally and uniquely positioned to capitalize on the immense opportunities that lie ahead. Business transformation remains a critical priority for our customers, and the emergence of AI marks a pivotal point for our industry. AI, similar to the growth of cloud technologies a decade ago, will take time to fully develop. In the near term AI training workloads are driving significant demand, particularly from service providers. Our xScale program continues to be a direct beneficiary of this demand. We intend to build on this momentum meaningfully augmenting and extending our xScale portfolio, particularly in North America. This will complement our robust portfolio across Europe and Asia Pacific. We are excited to share that we recently closed on land and power for our first multi hundred megawatt xScale campus in Atlanta. We look forward to announcing details of this project and our next xScale joint venture in the coming months. At the operational end of the AI spectrum, our network nodes and inference workloads as with cloud, Equinix continues to be the preferred location for network nodes as customers seek the right connectivity solutions for data ingestion and distribution. We also see inference demand beginning to take shape. We believe the implementation and deployment of these workloads will accelerate over the coming years. The neutrality, global reach and scale of platform Equinix can deliver the performance, network density and cloud adjacency which inference workloads will require. We are already seeing significant enterprise and service provider interest in our deployment capabilities. In Q2, we partnered with WWT to serve Almavic [ph] Technologies, an AI powered marketing analytics platform for enterprise. Almavic [ph] Technologies deployed their AI infrastructure at Equinix to run proprietary inference algorithms on massive datasets for predictable cost, privacy, speed and secure access to data sources in the cloud. InstaDeep, a leading provider of AI decision making solutions, deployed an Nvidia AI cluster at our Paris 10 asset to access key ecosystems, optimize their network, and support their growth objectives. Our approach to the market opportunity created by AI is multifaceted and we believe it will deliver value in the short term and sustainable growth over the medium to long term. Our xScale offering provides the infrastructure and expertise required for massive scalable data center operations for our cloud and large scale technology customers. For our enterprise and mid-market customers, we offer AI ready data centers and turnkey solutions, enabling them to scale efficiently and effectively as they introduce AI technologies into their business operations. For those who require high performance inferencing, our Edge solutions handle the data at the edge where it is generated, ensuring optimal performance for the next generation of business applications. Over the past two months I have embarked on a listening tour across a number of our locations, meeting with our customers, partners and employees and whilst it is still early in my tenure and there is still work that I need to complete, I have noted some areas of opportunity that will underpin our strategy for the company going forward. The opportunity to simplify across numerous aspects of our business. This will allow us to accelerate our pace of execution. The opportunity to drive more focus whilst we may do less. The programs of work that we focus on will represent excellence in execution and deliver the highest quality outcomes. The opportunity to amplify our go-to-market efforts to delight our customers and energize our partners. Equinix has consistently demonstrated discipline and execution. This mantra of discipline allows us to deliver market leading returns on capital and serves as the underlying fuel for long-term growth in AFFO per share, our core financial metric. Building on this foundation and executing on the opportunities I noted should create a simpler, more focused and ultimately higher valued company. With all of this in mind, I'll turn to our Q2 performance. Equinix had a great second quarter. We delivered record growth bookings. Our pricing remains strong. We continue to invest broadly across our offerings to further enhance the scale and reach of our industry leading platform. Our delivery of Adjusted EBITDA and AFFO per share continues to run ahead of expectations. As you can see on Slide three Q2 revenues were $2.2 billion, up 8% over the same quarter last year. This represents our 86th consecutive quarter of top line growth. Adjusted EBITDA was up 17% year-over-year with strong AFFO per share flow-through. Interconnection revenue stepped up to 9% year-over-year. These growth rates are all on a normalized and constant currency basis. In May, we announced the opening of our first data center in Johor with strong interest from customers across our new Malaysian footprint. In July, we announced our expansion into the Philippines through the planned acquisition of three data centers in Manila from Total Information Management. This transaction, valued at approximately $180 million, is expected to close in the fourth quarter of 2024, adding more than 1,000 cabinets of capacity, in addition to land for future development. The combination of our strong leadership position in our Singapore hub and our entries into Malaysia, Indonesia, and the Philippines strategically position Equinix to help our customers capitalize on the expanding digital opportunity in the fast-growing Southeast Asia region. Customers taking advantage of our expanding global footprint include FirstDigital, an Internet and telecommunications provider. FirstDigital is significantly lowering total cost of ownership by building a multi-cloud network with Equinix Fabric Cloud Router to connect to Cisco WebEx and AWS across all three regions. Our global interconnection franchise continues to perform with over 472,000 total interconnections now deployed. Gross interconnection additions were at the highest level in 2 years and pricing continues to trend favorably. However, net interconnection adds were 3,900 due to grooming activity, primarily in our content and networking verticals. We do expect this grooming to lessen over time. Equinix Fabric growth was underpinned by 100 gigabit port additions and strong pull-through from other digital services products. Network Edge experienced continued rapid growth with an expansion activity from existing customers. The recent interconnection and ecosystem wins, include Nuam Exchange. This is a new company formed after the integration of the Santiago Lima and Colombia Stock Exchanges. Capital market participants can now benefit from Nuam's extended reach, low latency and secure connectivity supported by Equinix in key markets like New York and Sao Paulo. Our channel program delivered another solid quarter, accounting for over 30% of new bookings and 55% of company new logos. We continue to see growth from partners like AT&T, Avant, Dell, HPE and Orange business, with wins across a wide range of industry segments and use cases. Notable wins included an AI as a service solution via our distribution partner, Tech Data and MSP partner AsiaPac. Leveraging a combination of co-location and Equinix Fabric, our partners are delivering an LLM for a high-level learning institution based in Malaysia. Now before I turn the call over to Keith, I wanted to recognize that we believe we are in a position of strength financially from both a balance sheet and from an access to capital perspective. Our investment strategy delivers a strong return on invested capital, all of which gives us the flexibility to execute our go-forward strategy. With that, I'll turn it over to Keith to cover the results from the quarter.

Adaire Fox-Martin:

Thank you, Keith. In closing, we had a strong first half of 2024. We stand apart from our competitors by seamlessly integrating a global footprint with cutting-edge infrastructure. This allows us to effectively address the wide range of opportunities in the era of AI from the training needs of the service providers to the business needs of our enterprise customers. It also positions us to continue to effectively address the broader set of demands of our customer base. We believe our unwavering commitment to discipline, simplicity and focus. Combined with our amplified go-to-market efforts, we'll continue to drive growth and deliver higher value for our employees, customers, partners and shareholders. With that, I'll stop here and open it up to questions.

Simon Flannery:

Hi, thank you, good evening. Adaire, congratulations on the new position. And thank you for the comments on your Listening Tour. And where you see the opportunities. I'd love to get your high-level perspective on what led you to take the role at Equinix. Obviously, you've known them from the Board, but you came from Google, you worked at SAP before that. So you've got a great perspective on the cloud needs of the hyperscalers, the AI opportunity. So it'd be great if you could just put all of that into context on where you see Equinix being positioned for the training, but particularly for the inference wave of AI? Thank you.

Simon Flannery:

Great. Thanks for your thoughts.

Operator:

Next, we'll go to the line of Nick Del Deo from MoffettNathanson. Please go ahead.

Adaire Fox-Martin:

For sure. Thank you very much again for the congrats Nick. I appreciate that. First of all, when I look at the overall approach that I will take, it is about creating value, and it will always have a customer lens an outside-in perspective ensuring that customer success translates and is equal to Equinix success in many regards. When I look at this, this means looking at how we continue to evolve the product portfolio, how we continue to drive critical partnerships so that we're at the center of the digital ecosystem and how we continue to enhance and evolve our go-to-market engine. Let me specifically pick up on the notion of simplification. When one simplifies, you bring core processes back to their very core. This enables you to be agile in your response and helps you to accelerate the underpinning pace of the business. And whilst this list is not exhaustive, there are definitely a few areas that I see we have some opportunity to continue to evolve and simplify things like our quote-to-cash process, elements like our customer life cycle and ways that we can systematize and process the customer's journey with us throughout their life cycle. These type of enterprise-grade processes will help us remove friction within the system and help deliver that pace, agility and simplicity. When I look at it from a focus point of view, it is about understanding not just the footprint that's in our core, but how we continue to grow and evolve our core business, to meet the needs of our customers. And this is both in our xScale business but also on retail, where we look at how our global footprint enables customers to operate and transact in environments where they may not need to invest in the physical infrastructure themselves to do that. I also think that focus is an important point when we consider our digital services portfolio and look at this through the lens of where we have adjacency, and augmenting some of that core functionality that we have that exists in the core footprint of the Equinix data center world. This is a point where we have the right to win where customers would expect us to lead. And so for instance, I look at the underpinning growth in our fabric business, how important that can be as we look to continue to evolve our virtual interconnections portfolio. And this enables us to focus in perhaps on certain aspects of our product portfolio in order to ensure that we're investing where we can have the highest level of returns. And on our go-to-market side, we have new leadership in our go-to-market team. I think it's a very important aspect of our business to underpin our go-to-market processes with a very clear segmentation strategy that allows us to identify those customers that have the highest revenue perspective for us and to manage those customers in a high-touch environment but likewise, to enable us to extend our reach through channels and distribution effectively to customers who are in SME more general business type space. So I hope that's given you a little bit of amplification on simplicity, focus and the actual augmentation of our go-to-market. Thank you for the question, Nick

Adaire Fox-Martin:

I'm happy to comment on that, and I can ask any of my colleagues here to us if there's anything that they would need to add to my commentary. So first of all, as we noted, we had 3,900 net adds. We had, as Keith mentioned in his comments, the StackPath liquidation, which impacted us negatively 400. And so without that, we would have had 4,300 adds. Now let me just unpack some of the trends for you, Nick, to build on your question. First, on the positive side. When I look at the gross adds, it's the highest level in 2 years. And year-to-date, this interconnection demand is actually back to peak pandemic levels. In absolute numbers, our A-to-Z connections continue to increase, and we've seen this quarter-over-quarter. And this is obviously the way that we define unique relationships between companies in a metro. And I think this really truly speaks to the value of Equinix. So those things coupled together, the gross adds, the absolute number of A to Z continuing to increase. The fact that we're at a peak pandemic levels, I think they are very good indicators of future momentum. Pricing is also trending very favorably. We have 11% spread between churn and new additions. And you see revenue up to 9% year-on-year on a normalized and constant currency basis. So a number of positives as we look at the interconnection lens. On the churn side, we saw the churn elevated in 2023 and continued to worsen in early 2024. And this was up especially in the EMEA Theater of operation. I think networks have had the most toughest operating environment, and we're continuing to see pressure in that segment of our industry customers. I would also say that M&A affects this where we have paid cross connects, but unpaid intercompany cross connects and often replacing those in an M&A trajectory, and this takes some time for us to work through. But specifically, as it relates to EMEA, we can see that the data indicating some decelerating churn rate from the top 10 who have been churning in the past. So that again gives me the confidence to say that I can believe we'll move forward on a positive trajectory here, and this is an area of focus for me as we move forward over the course of this quarter.

Operator:

Next, we'll go to the line of David Barden from Bank of America. Please go ahead.

Adaire Fox-Martin:

Okay. David, thank you very much for the words of welcome. Maybe we'll start with the muted -- the cabinet growth scenario. I'll throw that to Keith and then he can perhaps comment on the kind of investigation status.

David Barden:

Alright guys, thank you so much. Thank you both.

James Schneider:

Good afternoon. Thanks for taking my questions and welcome, Adaire. I was wondering if you can maybe expand on your comments earlier about AI workloads moving from service providers to enterprise. From your vantage point, how long do you believe it will be before that AI demand becomes more directly material on the enterprise side to Equinix on the sort of conventional retail side?

James Schneider:

Thanks. And then as a follow-up, last quarter, you outlined your plan for your DC1 data center to both modernize and expand capacity. As you look across your portfolio, do you foresee the opportunity to do this more broadly across more facilities?

James Schneider:

DC2, excuse me.

James Schneider:

Thank you.

Michael Elias:

Great. Thanks for taking the questions. And Adaire, congratulations on taking the helm. Maybe to kick things off, one of the things that we've noticed is the differential in densities between what's being churned and what's coming in. As I think through kind of the evolution at the chip level, it seems like there's an acceleration in power consumption there. Do you view this as a structural trend, i.e., we could be talking about 4 or 5 quarters from now, you taking in cabinets at 7 kW per cab and churning at 4. Thus, this represents an increasing headwind to that cabinet number. I guess that's my first question. Just trying to get a sense around is this going to become a greater and greater headwind?

Keith Taylor:

And maybe, Michael, if I can just add on to what Adaire said. I think it's important, as Adaire said, look, we got to keep on looking at and David asked the question earlier on, we wanted to be able to respond to it in a way that absolutely makes sense and give you all the statistics at least, so you can have the same sort of view that we have. Clearly, the shifting dynamics is more density. So that's a positive. But I think what's really -- the crux of what is going to come here, if you have more density, you your price per unit is going up and you're seeing that in the ARPU or the MR per cabinet. But we're also -- when we look to monetize the capital that we invest in the business, no surprise to you, we're looking at a return on that investment. But those targeted IRRs are 20% to 30% fee leverage. And so you're seeing the cash-on-cash yield still deliver. But that one core metric really feels like it's, again, something that I think makes sense to keep on tracking. But we're really going to have to give you other components so that you get the full value of what's going on in the business. But the underlying bias is more density and that's how -- where retail is multi-tenant data center player, you need to deal with the changing shifts in customer expectations. And that -- when you go into one of our data centers, you get a real good feel for that, the true difference between something may be in 1 aisle versus something in a different aisle and that tells you like there are shifting dynamics taking place in a really live environment, and it is an ecosystem that thrives with a propensity to increase density.

Adaire Fox-Martin:

Yes. I'll comment on this, and then perhaps, Keith, feel free to add. I mean, certainly, we're seeing that our churn in the range of 2% to 2.5%, which is the range that we guided to is something that we can continue to manage to. I think that if we normalized for StackPath in this quarter, we'd have been slightly better than our expectations in terms of where we landed. We also have a supply and demand situation in the market, which has a very positive trajectory on pricing. So maybe this gives us the opportunity to be thoughtful about managing our overall churn dynamic so that we could selectively use proactive churn to help us drive and improve some yields here. I see that some of the challenges that we had in the first half will still exist at the macro level. There's certainly there's need for customers across all industry segments to do more with less. Optimization is still something that customers are looking to do because it does give them that outcome on the more with less tangent. And we definitely have a number of our customers who are in a tougher environment in terms of the industry that they're operating in and the dynamics of that industry. That being said, we see that we will be managing within our full year as per the guide to the ranges that we set. And then I guess, just from a thought process incoming to this, in the world of cloud, this is quite a usual process. I think that there is an opportunity for us to look at some -- to some enhancements in terms of management and proactive management early on of our customer engaged with us as it relates to their use profile and intention to churn. And so I think there is a potential for us to lean in and support our customers as they optimize and to engage in churn-type discussions much earlier in the process than we've been doing thus far.

Michael Elias:

Great. Thanks for the color.

Michael Rollins:

Thanks and good afternoon. And Adaire, congratulations on the new role. I'd like to get your thoughts on the addressable market for your retail data center services maybe in a slightly different way. So the deck -- the presentation deck cites that you have about 2,000 networks, over 4,800 enterprises, and I think about 3,000 cloud and IT service providers. And when you look at the opportunity for future revenue growth, curious how much more room do you have to grow the customers in each of these verticals relative to the opportunity to increase the spend from the customers that you have. And then just a follow-up, if I could, as well. Keith, just following up from your comments about second half influences. When we take a look at the constant currency, normalized ex-PPI revenue growth for the last two quarters, it seems like the first half average was roughly 8%, which is at the high end of the 7% to 8% target for the year. And then you made comments, I think, a few times now on the gross bookings environment, the pipeline. So can you share a bit more of what's happening in the back half of the year that's meeting the annual range at that 7% to 8%. Thanks.

Keith Taylor:

Yes, sure. I will do the first one.

Keith Taylor:

Why don't I take it? Let me take the second half of the year, first, Michael, if I may. Look, the -- it's not lost on you, and I'm sure all the other listeners that the business is performing well. The one thing that has been persistent is although we're comfortable with the range of churn, our ability to guide, it has been persistently high, and we had a tough fourth quarter in 2023, and that translates into momentum into 2024. That all said, when you look at this particular quarter, 21.59 [ph], there's an element of quarter-over-quarter currency movement. We've given you all those numbers. I won't repeat them. We also felt the drag related to energy. As you know, we have -- we're going through power price decreases. Then we had this one-off large charge to our recurring revenues that, that we booked in the quarter. To size it for you, it's roughly $7 million. And so there's a number of things that sort of have affected the sequential movement quarter-over-quarter. And that's on the recurring side of it. There's great variability in the non-recurring. We'll do our best to guide you each quarter on what's going on. Suffice it to say, the success in the xScale business has created some volatility with nonrecurring and we'll reconcile that and normalize it out for next year as well, just so you can truly get the sense of how the underlying business is performing. So all that said, we said that churn would slow down in the second half of the year and our bookings would accelerate. The pipeline is at the highest level we have ever seen in our business. So that's good churn. We have, I think, good visibility to. And as a result, that's the momentum you're seeing that you should see in the business. And so we continue to remain confident. And as Adaire said, despite the macroeconomic conditions, we know they're tough out there. Companies like StackPath when they hit the wall at full speed and just liquidate, it gives you a sense that some companies aren't doing well out there. But you've got an evolving economic environment. We know our relevance. We know the digital environment is very friendly to Equinix, and we know the supply environment is going to continue to get more constrained. So the combination of all of that continues to give us the optimism that we have, not only in how we exit year but also how we position ourselves for 2025 again, you know what our lighthouse metric is, is driving value on a per share basis. That is our whole intention. But we believe we can do that with both good fiscal management and top line growth. So hopefully, that gives you the answer that you're looking for.

Chip Newcom:

Thank you, everyone, for joining our call today. This concludes our Q2 call.

Operator:

Good afternoon, and welcome to the Equinix First Quarter Earnings Conference Call. [Operator Instructions] Also, today's conference is being recorded. [Operator Instructions] I would now like to turn the call over to Chip Newcom, Senior Director of Investor Relations. You may begin.

Charles Meyers:

Thank you, Chip. Good afternoon and welcome to our Q1 earnings call. We had a great start to 2024 driven by our highest Q1 bookings performance on record, strong conversion rates, completely favorable pricing dynamics, and lower-than-expected churn, all resulting in our 85th key quarter of top-line revenue growth, the longest such streak of any S&P 500 company. We closed more than 3,800 deals across more than 3,100 customers for the quarter demonstrating both the scale and the consistency of our go-to-market machine. And we again saw accelerating hyperscale demand translate into robust xScale leasing in both EMEA and Asia. While we continue to operate in an environment of broader economic uncertainty, and see some level of corresponding customer caution, our forward-looking pipeline is strong, and we remain optimistic about the opportunity ahead. Digital transformation, particularly given the rapid adoption of AI, serves as a powerful catalyst for economic expansion, and our customers remain steadfastly committed to their digital initiatives, recognizing the pivotal role they play in fostering long-term revenue growth and driving operational efficiency. As we continue to make digital infrastructure more powerful, more accessible and more sustainable, we're thrilled that Merrie Williamson has joined our team as chief customer and revenue officer. Merrie is an operational and visionary leader with unique skills and experience to help drive the next chapter of our growth and brings a proven track record of building new routes to market, enhancing the customer experience, and accelerating go-to-market productivity. On the sustainability front, we continue to advance our bold future first agenda, with Gartner estimating that by 2027, 80% of CIOs will have performance metrics tied to the sustainability of their IT organization. It's clear to us that companies are prioritizing sustainability in their digital infrastructure decisions. We recently published our ninth Annual ISR Report and continued our industry leadership with 96% renewable energy coverage across our growing portfolio, marking our sixth consecutive year with over 90% coverage. Equinix PPAs now support more than one gigawatt of new clean energy in high-impact markets, and we continue to seek additional clean energy projects that will support our growth. In late April, we were pleased to announce our first renewable PPA in Singapore, an important part of our plan to continue to grow in this strategically critical market. This project will provide 75 megawatts of solar and is in line with Singapore's Green Plan 2030, which seeks to have all business sectors supported by cleaner energy sources. In parallel, we remain highly focused on improving the energy efficiency of our existing facilities as measured by power usage effectiveness. In 2023, we invested $78 million in high-returning efficiency projects, improving our average annual PP&E by over 8% year over year to 1.42, another lever in continuing to drive performance in our stabilized assets. We also continue to make progress on adjusting the thermostat in our facilities, with more than 50 of our data centers now operationally ready to enable A1A and strong industry support for the implementation of this important new temperature standard. Turning to our results as depicted on Slide 3, revenues for Q1 were $2.1 billion, up 7% over the same quarter last year driven by strong recurring revenues and xScale fees. Adjusted EBITDA was up 6% year-over-year and AFFO per share was meaningfully better than expectations due to strong operating performance. Interconnection revenues stepped up 9% year over year. These growth rates are all on a normalized and constant-currency basis. Our unmatched scale and reach continue to drive performance in our data center services portfolio. Given strong underlying demand for digital infrastructure and the long duration in delivering new capacity, we see a growing scarcity mindset, and therefore we continue to invest broadly across our global footprint. We currently have 50 major projects underway in 34 markets across 21 countries, including 14 xScale builds, representing more than 16,000 cabinets of retail and more than 50 megawatts of xScale capacity through the end of 2024. This quarter we added new projects in Frankfurt, Madrid, Osaka, and Silicon Valley. Key multi-market wins this quarter include ServiceNow, expanding with Equinix in multiple locations globally, powering their continued growth including new GenAI workloads, and Wasabi technologies, a cloud object storage service provider expanding across all three regions to support their continued growth. Our MRR per cabinet continues to rise increasing $119 year over year on a normalized and constant-currency basis to $2,258 driven by continued mark-to-market momentum, solid attach rates for interconnection and digital services, and increasing power densities. With respect to our net cabinets building capacity constraints in certain key markets and the meaningful delta in power density between churned cabs and booked cabs continues to pressure this metric. But gross additions remain strong and our booked kilowatts in the retail business were at near-record levels. Given strong bookings and upcoming capacity additions, we expect billable cabs to increase in the second half and continue to see cabinet growth as part of the long-term growth story for the business. Turning to our industry-leading global interconnection franchise, we now have more than 468,000 total interconnections deployed on our platform. In Q1, interconnection adds picked up to 6,200 supported by healthy gross adds and a moderation of consolidations into higher bandwidth connections, and we continue to see a healthy pricing dynamic with a roughly 16% spread in the quarter between churned interconnects and new additions. Internet exchange saw peak traffic up 5% quarter over quarter and 24% year over year to nearly 38 terabits per second led by the Americas. We remain confident that Equinix's unique and durable advantages will continue to position our platform as the logical point of nexus for buyers and sellers of digital services to come together to fuel digital transformation and unlock the enormous potential of AI. This year, Gartner projects the spending on public cloud services will grow 20% to reach $679 billion as business needs and emerging technologies, including GenAI, drive cloud model innovation. We're seeing this translate into strong demand across multiple vectors with key cloud and IT customers broadly and with the hyperscalers specifically. In the quarter, we added one new native cloud on-ramp in Madrid, bringing us to 220 native cloud on-ramps across our portfolio, spanning 47 metros. This represents a nearly 40% market share of private cloud on-ramps in the markets where we operate. We remain an integral and growing part of hyperscaler architectures, with these customers collectively representing more than $1.3 billion of annualized revenue in Q1 in our retail business alone, with deployments across an average of more than 60 of our data centers around the world. Importantly, we're also seeing strong go-to-market momentum with these market-shaping players as we partner to meet end-customer needs for hybrid cloud and private AI, making the hyperscalers some of our most productive channel partners. In our xScale program, demand remains robust as cloud and AI needs are translating into strong pre-leasing activity. Since our last earnings call, we've pre-leased an incremental 48 megawatts capacity across our Frankfurt 10, Osaka 4, and Osaka 5 assets, including approximately 34 megawatts leased in mid-April. This brings total xScale leasing to nearly 350 megawatts globally with nearly 90% of our operational and underconstruction capacity leased, and a meaningful pipeline of opportunities to drive continued xScale momentum in the quarters to come. Additionally, in mid-April, we announced our first U.S. xScale joint venture with PGIM Real Estate for our SV12x asset. When combined with our existing joint ventures in Europe, Asia Pacific and Latin America, this new JV will bring the expected global xScale portfolio to more than $8 billion in investment across more than 35 facilities and greater than 725 megawatts of power capacity when fully built out. We're also making good progress on additional planned xScale opportunities in the U.S, and we look forward to updating you on those developments in the coming quarters. Shifting to our digital services portfolio, Equinix Fabric and Network Edge continue to overindex relative to the broader business. We see solid interest from customers looking to use the combination of Fabric, Network Edge and Metal for their digital infrastructure requirements. In support of this need, our engineering teams recently completed the integration of Metal and Fabric, significantly improving the VC creation experience for Metal users. Wins across the business included global security leader CrowdStrike, exploring a cloud-adjacent storage solution on platform Equinix in EMEA to leverage proximity to Equinix's rich ecosystem of cloud and storage provider customers. And an online AI and data analytics education company building out AI infrastructure to support learning for global practitioners. Our channel program delivered another solid quarter with channel and partner influence deals accounting for over 30% of gross bookings and over 60% of new logos. We continue to see growth from the hyperscalers and from other key partners like AT&T, Avant, Dell, Kyndryl, and Zenlayer with wins across a wide range of industry segments and a broad mix of Equinix services. As we expand into new markets, our partners are accelerating our efforts to sell the global platform. In Q1, we had a number of wins with Zenlayer in Malaysia, including delivering co-locations and interconnection solutions to a fintech firm, extending its reach into Kuala Lumpur, as well as supporting logistics consulting firm extending into Johor. We also saw a win with Kyndryl who also selected Platform Equinix to service some of its largest customers in Canada, including from the public sector. So, let me turn the call over to Keith and cover the results for the quarter.

Charles Meyers:

Thanks, Keith. In closing, we continue to see our customers derive compelling value from platform Equinix, leveraging our superior global reach, our scaled digital ecosystem, our market-leading interconnection platform and our greater-than-25-year track record of delivering on our commitments to fuel their investments in digital transformation. We are delighted to see the continued strength and fundamentals of our business, we remain highly confident in the integrity of our financials and we are as optimistic as ever that we'll continue to be an important partner for digital leaders as they accelerate AI investments and embrace hybrid and multi-cloud as the clear architecture of choice. Before we turn to Q&A, I want to spend a few minutes on my transition. In reflecting on the last six years, it has been both a pleasure and a privilege to be the CEO of Equinix, showing up every day in service to our customers, to our employees, and to our shareholders. As I transition to the role of Executive Chairman later this quarter, I'll continue to take an active part in the business as Adaire Fox-Martin steps into the CEO role. Adaire is an extremely accomplished executive with a proven ability to deliver sustained value to the full range of stakeholders. I'm confident that she brings the experience, the skills, and the passion that we need to inspire our teams and support the evolving needs of our customers, driving growth and unlocking the extraordinary power of Platform Equinix. I look forward to working with Adaire in this next chapter of the Equinix journey. I'd also like to thank Peter Van Camp, a shining example of the magic of Equinix over the last 25 years, and look forward to partnering with him as he moves from our Executive Chairman to Special Advisor to the board. I look forward to further collaboration with both Adaire and the broader leadership team as we continue on our path as the world's digital infrastructure company capturing and creating new opportunities and leveraging our distinctive advantages to ensure digital leaders can harness our trusted platform to create and interconnect the foundational digital infrastructure that enhances our world. So, let me stop there and open it up for questions.

Jonathan Atkin:

XScale, just interested in what you're seeing in terms of targeted unlevered returns that you're underwriting. Any difference given the strong demand profile? And then, it looks like you've got $1 billion of senior notes coming due late this year, $1.2 billion due in 2025, and I just wondered what you're thinking in terms of refinancing cost of debt and whether a non-U.S. jurisdiction might provide a cost advantage.

Keith Taylor:

And Jon, maybe I just want to add on to what Charles said there. I think it's important to appreciate that there's a fee stream that Equinix continues to enjoy on a larger revenue base to compensate for the higher costs that Charles alluded to. So, when I think about our all-in returns, they're really quite attractive as a business, and as we've talked about over the last few years, they're at a point where also that it's not only the recurring and nonrecurring stream that we get, I think there's opportunity over some period of time as our partners think about mentioning monetizing some of their investments to promote fees associated with it. So, overall, again, I think the return profile, as Charles alluded to, is attractive, recognizing it's a higher cost model than it was previously, and you'll see that in our results. As it relates to really the debt that's being refinanced, I'm going to maybe approach it from a different perspective, because when you think about the cost, I really want to talk about the spread. Partially, the spread is really about what do we think we can borrow over whatever the base rate is. And as I made reference to it -- and I'm going to pause here for a second, Jon. Can you hear me?

Keith Taylor:

OK. Thank you. We had a funny -- something going on with our conference line here. So, I think about it more spread, and again, I made the reference in the prepared remarks that we're going to look at the timing and the currency in which we borrow money. Suffice it to say between how we raise our capital and where we need it to refinance the existing debt, we're really looking at different markets. And so, the spread, I think, you should expect, based on where we were, I think somewhere between 105 and 115 basis points over base, whatever that is. Now, we might do it in euro, we might do it in dollar, and we could swap it depending on where the cash flows are needed, but suffice it to say, I think we're in a really good spot to enjoy a spread relative to others that is very competitive. The last comment I would just say is, look, the markets are very volatile right now, but for obvious reasons, you see that. And that's why I think it's important to talk about the spread. Suffice it to say, I think we will have ample access to capital. It just depends on the timing of when we execute against that transaction. So, whether it's this year or it's next year refinancing, I think we're in a really good spot. And then I think as everybody is also aware, we have effectively an unused line of credit of $4 billion. So, if the markets aren't there for whatever reason, we can always draw on that and then refinance at a later date, but I don't foresee that as being an issue for us.

Jonathan Atkin:

Just given the demand profile and the pricing dynamic that we've heard elsewhere, would low teens be an unreasonable kind of assumption to think about for unlevered return development yields or not?

Charles Meyers:

Thanks, Jon.

Nicholas Del Deo:

Charles, best of luck in the new role. I appreciate all the time you spent with us on these calls and other forums over the years. First, can you share any details regarding the mechanics of the internal review, like who is engaged to perform the work or the aspects of the accounting that was reviewed and how far back they went? Any suggestions for go-forward changes? Then anything along those lines would be super helpful.

Keith Taylor:

No, I think, well said, Charles. Thanks.

Keith Taylor:

Yeah, sure. It's one of those ones -- we've been working on this initiative for roughly a year, because it is a new category of expansion capex. And certainly, what you're trying to do is do two things. One, we want to extend effectively the life of the asset further than people would typically anticipate. We're really going in and doing is really a heart transplant in a live environment. It's one of our highest-performing assets in the portfolio. And so, to give you a perspective, it's substantial because we refer to the $76 million, so you get a sense it's not something that's small. It's going to do two things. It's going to extend the life. It's going to create more revenue opportunities. And think of the range of 15% to 20% of an augmentation to an already high revenue environment. So that's the kind of value you can extract from it. The $20 million, the recurring capex component, will be doing roof replacement and some other things, and so that will go through the recurring line. But it's the $56 million -- in the prepared remarks, we really talked about the fact that this is going to get a yield, a return for us on an IRR basis better than stabilized assets. So, it gives you a sense it's in the 30s. If you decide to put sort of the end-of-life stuff that was recurring into the mix, you're still in the 20s. So, it gives you a sense of the investment decision that we're making is very, very substantial in a very critical asset. The last thing I also want to leave you with, when we make this type of decision, part of the reason we were really calling it a redevelopment is this isn't like getting something done over a quarter. Again, high-density live environment is going to take two to three years to get this done. So, it gives you a sense of the level of investment. It's not like replacing a motor. We're basically taking out the guts of the entire IBX and replacing it with basic new and updated equipment. So, overall, I'd just say it's one of those things. There's not a huge portfolio, but I think over the next three to five years or something like that, you should expect something like six to eight assets could fall into that mix. Again, it has to be older than 20 years, and we have to invest more than $20 million for it to be considered a redevelopment capex item.

Operator:

The next question comes from Aryeh Klein of BMO Capital Markets. Your line is open.

Charles Meyers:

The short answer is absolutely. We're going to continue to grow the overall platform on the xScale side and retail side, but I think clearly there is a ton of demand out there, and we think we have a very, very credible story. And I think, as you said, the leasing momentum that we have generated over the last several quarters is quite indicative of that. And so, yeah, what we have left, we feel confident we're going to be able to lease effectively and as I said in the script, we're also excited to give you updates on what we have talked about pretty openly, and we've announced the SV12x asset, the first xScale in the Americas, but we also are deeply engaged in a set of conversations around how we're going to expand our xScale platform in the U.S. and the Americas more broadly. And so, we don't have anything specific to share with you, but we will in the not-too-distant future, and we look forward to that conversation. In terms of -- now we're not yet prepared to sort of size that precisely, but I will say that when you look back at what we said when we first talked about xScale at the Analyst Day, I don't know when that was, '18 or something, and what we said was what we thought it was going to be. It's certainly proven to be a lot more than that. And I think it continues to be a super exciting opportunity. Very proud of the team that continues to run that business for us, and they're doing great things and we're excited about the value that deliver for our customers.

Charles Meyers:

Yeah. I mean, the billable cabs, it comes from a few different things. You're right. We've always talked about the volatility in billable cabs based partially on timing of installs. It's not so much a longer sales cycle. Sometimes, it is a bit of a longer install cycle, and so, depending on the timing of installs and in fact the timing of churn, you can see volatility in any quarter. That's why we've always sort of told people over the years to look at a rolling four-quarter metric, but even that has really been under pressure, and has been under pressure primarily because of power density, and I think that kind of makes sense to people, but we're realizing, I think, that we really need to give people a bit more to hang their hat on relative to that particular metric. So, let me give you some of the math, I think, that will help people understand the billable cabs metric and how it plays here and what's causing the bit of pressure on that. We guide the 2% to 2.5% churn rate on our recurring revenue each quarter. So, we're running today at an MRR run rate of about $667 million. So, if you take 2% of that figure, at the low end of the range, so you're at $13 million to $14 million in MRR churn in any given quarter. As we said, our MRR per cab is averaging right now at 2,258. So, if you take that and divide those two together, you'd be churning roundabout 6,000 cabs in any given quarter. And more than that, if we're churning cabs that are at a lower-than-average MRR per cab, which candidly we would hope to be doing, if you're going to churn some cabs, it should be ones that are below the average, right? And so, in Q1, we were churning cabs that were at an average of 4.4 kilowatts. We were adding back cabs at an average of 5.8 kilowatts. And so, when you do that math, all in, in terms of that relatively large gap in density, you're looking at about a 1,500-cab hole that you've got to fill. So actually, staying flat on cabs is really a pretty significant win. The density increase that's causing that sort of hole in the bucket on cab count though is a really important factor in driving the MRR per cab. So, if you go and if you look at our year-over-year growth on billable cabs, Q1 to Q1, last year to this year, it's softer for sure. It's only up about 1%. But over that same time frame, our MRR per cab is up 6% across the estate, and so, you add those two together and the composite gives you that 7% growth. So, long way of saying that, in other words that stable to slightly growing cab count is certainly a different dynamic than what we have seen. But the growth is coming. It's just coming in a slightly different shape. And so, we're still driving the growth in the business and getting the economic returns that we were anticipating. So, I think that, for us, rather than looking for a new indicator, I think, what we're going to look to do is moderate expectations on the cab growth and say, look, we're having to cover that whole quarter-over-quarter from a density standpoint, but it's really driving the MRR per cab, and it's the composite of those two things that really give you the solid growth model going forward.

David Barden:

So, Keith, just the first question would be, based on what Charles was just saying and the explanations that he's been having to make about this interpretation of MRR per cabinet and power density and cabinet numbers, where are we on the creation of these new metrics that I think we've been talking about for six months? And the second question, if I could, would be, it's great that the audit committee hired these independent advisors and it exonerated itself and the company and all the words that were used. But how much daylight is there between what you looked at and what the SEC and the DOJ are looking at and your comfort factor that we've buttoned this thing up, and in what time frame can we expect a resolution to that?

Keith Taylor:

Just add one, as Charles said, and I think it's important to understand that the level of work that was done since March 20th, so five, six weeks of work, was also included what was anticipated to be needed by the DOJ and the SEC. So, a tremendous amount of work has been done, and it's surrounded by what I would call the matters that relate to accounting irregularities. And I would expect, and I know this to be true, that they're already in dialogue with the parties. They're appropriately within dialogue with the parties. And again, this is going to be done independently as you would expect. Of course, they're going to draw on the resources of the company where needed to answer to questions and queries. So, I just think it takes a little bit of time, but getting to where we are that we filed the 10-Q yesterday should give you tremendous comfort on where we concluded. And, again, there is no adjustments, no findings. And so, as a result, I feel really good about where we are. And as Charles has said in his remarks, that related to both GAAP and non-GAAP, and I think that was really important. So, again, it will take probably a little bit of time, but overall, again, I feel very comfortable that by the filing of our 10-Q, it's a pretty good strong indication of where we are in the journey.

Operator:

The next question comes from Michael Rollins of Citi.

Charles Meyers:

Sure. Yeah. Thanks for the well wishes, Mike, and thanks for the questions. I would say that the second half guide or the second half, I think, outlook for us doesn't look dramatically different. I think we had said that we're clearly looking at some acceleration in the back half of the year from a bookings perspective. And again, we feel good about the pipeline. We had a strong Q1, and so we probably had a slightly better Q1, and that gives us a little running start at that back half of the year. But I also think we are seeing -- although we saw lower churn than we had forecasted or expected in the prior guide, I do think we are continuing to see some level of churn in the system that I think we have to continue to navigate. And so, I think there -- not any big changes in the outlook and that's why again, you saw us maintain that outlook overall.

Charles Meyers:

Yeah. And I mean, Mike, we've used this term on the last few calls as sort of crosscurrents, right, which is a sort of strange combination of a lot of interest in demand around digital transformation broadly speaking, around AI, in particular. I think we're still seeing that. I think we're seeing great interest in AI and in hybrid AI, private AI, sort of mixed with public cloud as a sort of preferred architecture for a lot of the AI workloads that we're looking at. I think we're seeing a lot of customers looking at where they want to place their data. And I think they are increasingly reaching the conclusion that sort of proximate to the cloud is the right answer, and I think we're really well-positioned to benefit from that, and we're seeing some demand there. We're seeing a nice pipeline on the managed DGX opportunity that we have out in the market with NVIDIA. And yet at the same time, we are also seeing, as I characterized in the script, some level of customer caution, some level of tightening and desire for optimization in a still somewhat uncertain macro environment. And so, I think it's all those things together that led us to say, hey, this guide is a good one. We feel like we've got opportunity to outperform against it, particularly, on the FFO line, but that's kind of where we landed and sort of overall balance for the guide.

Charles Meyers:

Yeah. I would still characterize it as quite early days because I do think there is a ton of interest in AI, but I think that the actual execution of implementing infrastructure, driving workloads, etc. is I think still relatively early in the cycle. Now, I do think there is a lot of attention on really large-scale training workloads, and I do think we're seeing some of the demand in our xScale business being driven by demand from hyperscalers, which again are the largest customers of our xScale offering. And so, I think that is probably ahead of the game, but I think what we're now seeing is a really rich pipeline of enterprise training opportunities, as well as inference opportunities where inference is more distributed. And we've been saying this all along, I think that's where the unique different creation of Equinix is likely to be because of our highly distributed footprint, and because I think we bring that blend of capabilities to the table not only xScale. And we did see an uptick, I will say this quarter, in larger footprint opportunities, and I think some of that is really associated with AI-related workloads, both service provider and enterprise. And so, we're seeing a little bit of a different mix. I think still relatively early, but I think a lot of room for optimism in the AI opportunity overall for us.

Simon Flannery:

Charles, best of luck with everything. I wanted to come back to the cabinets if I could. I think you mentioned, Charles, at one point that you are limited for capacity constraints in certain key markets. If we look at the overall utilization, we're seeing 78%, 79%, and that's down year-over-year. You've added a lot of capacity over the last few quarters here. So, just help us unpack that a little bit because it looks like, at least, on an aggregate level, where are the pressure points here and what's the opportunity to relieve those.

Keith Taylor:

Yeah. Overall, I mean, if you look at some of the Canadian markets, it's not so much a constraint of generation, it's a constraint of distribution, and so Northern Virginia is an example of that, some of the Canadian markets, the Irish market, the Dublin market is another place. And so overall, it's sort of trying to optimize the environment as Charles alluded to, Singapore being that perfect example of deciding how you want to rerate the space and being very disciplined about what we sell, notwithstanding just a general thought about introducing a lot of new capacity into new markets, second tier, third tier markets for us. And they take longer to ramp, while at the same time, you have these major metros around the world where we're in dire need of incremental capacity. And so, that's what we're investing in. And so, it's really trying to optimize as best as we can across the portfolio, recognizing each market has a little bit of uniqueness to it. And so, working alongside what are we churning, where are we churning, and what does the inventory hold or engineering hold on some of the capacity as we augment with efficiency initiatives and the like, it's a combination of all these things that are factoring into our decision. And it goes back to the sort of the net cabinet billing discussion. When you look at the -- when you step back and say, well, that's part of what's causing that utilization level to be where it is, but you really have to step back and understand what is the revenue drivers of the business. You saw in our second quarter guide, we have a meaningful step up in revenues. A good roughly 65% to 70% of that is coming from MRR. And so, you know that we've got more revenue coming into the next quarter. We've got some MRR activity through xScale, but there's momentum in the business, and it doesn't necessarily appear the way that some of us would expect historically because it's not necessarily going to a lot of new incremental cabinets. There's more volume attached to the cabinets that we have. And so, it's a combination of those two things that I think are causing us to, I guess, be a little bit more cautious in what we talked about on a net billing cabinet basis, but we know that the revenue is there to support our growth.

Keith Taylor:

Charles alluded in his prepared remarks, we see the cabinet building number is going to increase and as a result, utilization will certainly continue to increase. I just don't know if it will happen at the rate that we would expect given all the other things that are going on in the business. And the caution that Charles alluded to, we are being cautious in our guide. We left the revenue guide constant, absent currency. We have momentum. We did better than we anticipated in the first quarter. Obviously, we made a reference to the fact the pipeline is exceedingly deep. That's a positive. But we're just not at a point to say, well, what does that mean from a billing cabinet basis? Are we going to alter basically the trajectory of our revenues based on what we've already guided? And there's just a number of factors that we're considering. But overall, I'd just say there's strong momentum in the business. I think utilization will go up. I think net cabinet spilling will go up. I think based on the power utilization that we're selling, it will cause the density of cabinets to -- or a power sold per cabinet to continue to be elevated. And for all those reasons, that's why we have, I would think, momentum on the revenue line. But we're not yet prepared to change the trajectory of the revenue guide at this point.

Chip Newcom:

This concludes our Q1 earnings call. Thank you for joining us.

Operator:

Good afternoon and welcome to the Equinix Fourth Quarter Earnings Conference Call. [Operator Instructions] Also, today's conference is being recorded. If anyone has objections, please disconnect at this time. I'd now like to turn the call over to Chip Newcom, Senior Director of Investor Relations. Sir, you may begin.

Charles Meyers:

Good afternoon and welcome to our fourth quarter earnings call. We had a solid close to 2023 as digital transformation and accelerating AI demand drove a record quarter for xScale leasing, robust pricing dynamics and continued momentum across our data center and digital services portfolios. For the full year, we delivered more than $8 billion of revenues, eclipsing 21 years of consecutive quarterly growth, all while driving AFFO per share performance above the top end of our long-term expectations. As we look ahead, we see our overall relevance to customers continue to rise with our global reach, highly differentiated ecosystems and full-range portfolio of services, positioning us as a key long-term partner to fuel digital transformation and unlock the enormous potential of AI. At the same time, many customers remain cautious in the face of macro uncertainty and are driving optimization across their broader IT infrastructure. Freeing up dollars for AI-related investments while still managing within tighter overall budgets. These dynamics, combined with capacity constrained in certain key markets continue to create cross currents in our business with solid gross demand and strong pricing dynamics being offset by more deliberate buying decisions and slightly higher levels of churn. Meanwhile, we continue to realize the benefits of efficiency investments over the past few years and are showing strong operating leverage in the business, allowing us to maintain our differentiated return on invested capital, expand margins and deliver outsized performance on AFFO per share which we continue to see as our lighthouse metric and the bedrock of long-term value creation. As work to make digital infrastructure more powerful, accessible and sustainable, we are building relationships as trusted advisers to our customers, innovating across our product portfolio, deepening our technology partnerships to solve customer challenges and maintaining our discipline to put the right customers with the right workloads into the right assets. This approach reinforces the kind of advantages of Platform Equinix as we focus our efforts in 2024 on 4 key areas

Charles Meyers:

Thanks, Keith. In closing, 2023 was a year of significant progress and focused execution against our ambitious agenda. While macro uncertainties persist, we anticipate continued economic recovery as we move through 2024 and believe this will continue to embolden customers to accelerate their digital transformation agendas with a keen focus on capturing business value through the extraordinary power of AI. Against this backdrop, demand for hybrid digital infrastructure should continue to grow and we're confident that the character of this demand will increasingly align with the distinctive advantages of Equinix, offering customer flexibility to deploy architectures that are more distributed, more cloud connected, more on-demand and more ecosystem rich than ever before. Features that have positioned Equinix once again as a leader in IDC MarketScape's worldwide assessment of data center services. Digital transformation is reshaping the fabric of our world, unlocking extraordinary possibilities and changing the basis for competition in almost every industry. Thanks to our distinct and durable advantages, Equinix is well positioned to capture these opportunities. Through the combined balance sheet power of Equinix and our JV partners, we'll continue to invest in supporting the vigorous demand for large-scale cloud and AI infrastructure around the world. Simultaneously, we will leverage the reach and connectivity of the world's leading retail platform to ensure that Equinix remains the best manifestation of the digital edge and a critical point of Nexus [ph] for modern cloud-centric architectures. Reaffirming our purpose to be the platform where the world comes together, enabling the innovations that enrich our work, our life and our planet. So, let me stop there and open it up for questions.

Simon Flannery:

Great. Two, if I could. The first one on the revenue guidance. I think at the Analyst Day, you talked about 18% revenue guidance. Is that -- is it the macro conditions causing the lower end to be at that 7% this year? And you've talked in the past, Charles, about in opportunities in the U.S. xScale, hyperscale market. Any update on your thoughts there?

Operator:

Our next caller is Aryeh Klein with BMO Capital Markets.

Charles Meyers:

Yes. I mean, AI is a really interesting one. I think there is a massive opportunity. I think similar to what other people are seeing, we see it as hugely promising and moving very quickly but still pretty darn early in the overall cycle. So it's -- it clearly was a major factor in our xScale leasing. Obviously, record bookings there and I expect we're going to continue to see a lot of strength and that's informing a bit of that desire to lean in on that investment. I wouldn't say it's yet proving to inflect our retail bookings. As I just said, we kind of -- we were a little shorter than we wanted to be there. But again, we're seeing the green shoots there, we saw some great early on the retail side, both last quarter in terms of these network nodes to support large-scale training requirements with some of the service fares we talked about those. And then some really good enterprise wins as they're looking at really enterprise-level training as well as inference and how to really unlock the full power of the AI ecosystem. And so -- and we think the NVIDIA DGX private cloud managed service is a really distinctive offering. And we're seeing big pipeline build there with NVIDIA on that front. And so -- so I do think we have a very broad range of where I think we can offer that around the world and we'll continue to expand that over time. But again, I think a hugely exciting opportunity. In terms of -- you asked about the TAM, I mean as I said at the Analyst Day, I think the TAM is huge. And so I think it's probably bigger than what we've set out there. I think when you look at the possible impacts and kind of what we're seeing in terms of the early returns on AI, I think you're going to continue to see a lot of investment flow to that. And so I think the TAM is probably bigger than what we outlined. I think the key for us is really where can we be distinctively differentiated in that. Yes, I think we're going to get a piece on the xScale side. But I think the more differentiated position for us over the long term is unlocking the power of the AI ecosystem through this sort of cloud adjacent set of offerings. And on the digital services side, our cloud adjacent storage and Fabric Cloud Router all sort of hitting in that sweet spot of what we think customers are really looking for -- control over their enterprise data ability to access AI tools from the hyperscalers who are innovating rapidly in that area, stitch it all together and make it work in a way that makes sense for them. And so Fabric Cloud Router, fabric, cloud-adjacent storage, all things that really play into that. So we continue to be very optimistic about that. But I would say tempering expectations, I think it's going to -- it's going to take a little time for that to really fully realize itself in terms of the bookings flow.

Jonathan Atkin:

On the churn commentary, is there anything to call out in terms of reading where you saw it or which products? Was it mainly cabinets or cross connects or other?

Jonathan Atkin:

Got it. And then secondly, I was curious about the xScale initiative and the growth path in the Americas and kind of the puts and takes of pursuing that organically versus inorganically?

Operator:

And our next call is Michael Rollins with Citi.

Charles Meyers:

Okay. Maybe Keith can jump in here on the second part of that, too and we'll tag team it a bit. But let me catch your first one first. Yes, you're absolutely right. We've long for many years, talked about our business as a bit of a tetris game [ph] in terms of figuring out how to get optimal returns from our capacity. And I would tell you that I think that given the increasing price environment, given the tendency for our churn to be a bit biased towards the large footprint side of things, we generally see churn as value accretive over time. That doesn't mean we want it all. It's -- but it's -- sometimes, we need it and we actually may sort of work to get it to happen. And that's, as I said, that happens sometimes in Singapore in the markets like that. But there is inherently a trade-off between growth rates and return on invested capital. And what we're seeing is that even in high-demand markets, there is a vacancy drag. And what I mean by that is the time frame that it takes to really fully replace churn with new revenue and that's particularly true when you're replacing a single large foot implementation with a large number of smaller deals, we're seeing probably a little longer vacancy drag than what we maybe would have thought. And so while I think that the -- that kind of positive mark-to-market opportunity exists and improving our business mix has always been central to our ability to deliver increasing MRR per cab and return on investment sort of stabilized asset performance and importantly, FFO per share, it is sometimes a revenue headwind for us. So we do see that on the churn but I think there are positive aspects to it as well. As to the 7% to 8%, look, if you look at stabilized assets, absent the PPI, they're in that 5% range. And -- and so -- but that includes selling interconnection into them. It's probably not a ton of additional volume growth. They're operating at reasonably high levels of utilization. So I do think you're going to see some positive price on mark-to-market. And I think you're going to see continued interconnection sort of probably more, in our more traditional range. And then the rest of that, that growth is going to have come from the broader footprint, including our non-stabilized assets which are probably growing at a slightly higher rate. Anything to add further on that?

Charles Meyers:

Well, Mike, I'd say that the short story on it is that 7% to 8%, I think, is 3% to 5% is the way to think about the stabilized assets. And the balance of that is going to really need to come from the broader portfolio which is probably going to have less mark-to-market juice. I think the 3% to 5% has to come in part from some juice in the mark-to-market opportunity that we have in the stabilized assets. Because those are the ones that are going to be rolling through. You probably have a little less than that in the non-stabilized portfolio because they are newer -- in newer contracts with probably less of a gap there. And then we're just going to have to continue to drive the volume on the gross bookings side.

David Barden:

Two, if I could, just real quick. Charles, we've been talking about the hybrid private public cloud infrastructure for the longest time. You brought up a new term that I hadn't heard before, the private AI. And I wondered if you could maybe elaborate a little bit how that compares, contrasts or doesn't to our understanding of hybrid private public cloud. What is that, the private AI architecture look like as far as Equinix concerned? And then second, Keith. Last quarter, we talked a lot about cabinet, 8 cab [ph] per cab, consumption and how that's evolving and the potential to bring a new number to the forefront which would be something like a cabinet equivalent billing number. Could you kind of elaborate a little bit on how that looked like in the fourth quarter and where we are in evolving that disclosure.

Keith Taylor:

Yes, David. So as it relates to some new metrics, we're continuing to review the data sets. The team, we're not clear that exactly what needs to be presented that we can comfortably put out of the market on a consistent basis. But one of the things we're thinking about, just to give you a sense and we're not ready for prime time yet, is looking at density or a threshold and the extent that there's a certain amount of density over some required threshold, we modify the cabinets again, as you all know, we report on a cabinet equivalent basis. So that's what we're thinking about because we think the cabinet is probably the best representation for you to get a sense of how we're utilizing the asset. That all said, we still -- I think we have to continue to be quite transparent about the overall density of the cabinets sold so that you can see sort of a trend line. We spent some energy thinking about power prices, just doesn't feel like the right metric to be sure. And given the nature of our business model relative to others. Again, as you know, we're a retail player and it just -- it's just a different type of metric and we're not sure that, that is a valuable metric. So looking forward, we're going to continue to work it and we'll absolutely be actually -- be sort of ready to go, I think, sometime in the first half of this year with either adjusted metrics or a different view on how we're going to represent our fill rates.

Michael Elias:

Great. Two, if I may. One of the questions we get from investors is whether GPU-based compute is distance remediating CPU-based compute. And if so, how the legacy data centers designed at lower cabinet densities, we'll be able to handle that. Are you seeing customers swapping CPUs for GPUs for their existing data center deployments. If so, how do you mitigate essentially against the obsolescence in existing facilities? That's the first question. And then the second question is along a similar vein for AI inference. The thought is about the model we need to sit proximate to the data which candidly lives within your facilities. Although I think there's also a question of whether that's CPU-based or GPU-based. As you look to capture demand for inference, how is the standard data center design for you, guys, evolving from both a power density perspective and a cooling architecture standpoint? Any color there would be helpful.

Operator:

The next caller is Matt Niknam with Deutsche Bank.

Charles Meyers:

Yes. Let me take that one first, Matt. We have -- some of that business has close to -- some of that closed very quickly immediately after the quarter and that's just sort of a natural turn of events. Some of it is in our commit for Q1 and some of it has rolled into Q2 or quarters forward from that. So very little lost. We did -- we had lost some of that but very little of it. And so really primarily push forward. Again, as I said, Q4 did unfortunately look a little more like Q1. We would have referred it to look a lot more like Q2 and Q3. But that is the dynamic. And I think that we're -- it's hard to fully predict. But again, our customers, the sentiment we hear from customers is one, yes, we have tighter budgets. Yes, we're continuing to optimize. But boy, we sure are committed to what we're doing on the digital side of things. And yes, we want to talk to you about what we're doing in AI. And yes, we want to figure out where to place our data. But I think those things take a little time to translate into firm bookings trajectory. And then as to why we feel a comfort level around mitigation churn, we do have good visibility to our pipeline. In fact, our large deal churn, we've gotten very good at forecasting. We saw a little bit more midsized churn in Q4 which contributed some to the elevation. And so I think we have to keep our eye very closely on that. And I don't have a ton more to offer you on that particular view. But I think that we do think that it is realistic for us based on what we're hearing in terms of appetite from customers that we would see some abatement and churn in the second half. I'll add one more comment. It used to be, I would say, '21 and most of '22, I think there was a scarcity mindset relative to data center capacity. '23 really changed pretty meaningfully. The macro conditions changed. This sort of desire to tighten budgets, the desire to kind of offset the impact of PPI. I think all did play into what we were hearing was this very different appetite and a higher degree of optimization. I would say, I think we're seeing the front end, though, of some of our customers who have at least talked to us about turning back some capacity, sort of come back and say, yes, don't put that back on the market yet because we're not sure we want to give up capacity in this market. And so that's the first time, I think, in a while that we've heard that kind of mindset. It's typically from larger service providers. But I think we're going to probably see -- we're starting to see the front end of that. And so again, if macro does what we think it will do which we would probably see some improving interest rates over the course of the year. I think we would see a generally improved macro environment and I think that's sort of informing our guidance.

Richard Choe:

I wanted to follow up on the competitive environment. Are you seeing deals go to competitors or...

Richard Choe:

And then in terms of pricing actions for the year, what's kind of implied in guidance? And should we expect that there are some price increases for interconnection this year?

Operator:

And our next caller is Frank Louthan with Raymond James.

Charles Meyers:

Yes, we don't see that as typical as there -- in a lot of markets, I think that our position is so -- it's not that we're the only game in town. And so yes, there is some substitution in cases but it really is more us seeing that people saying, hey, things that they weren't using, things that they can consolidate on the higher-speed circuits, those kind of things are really the broader dynamics. Also, I would tell you that I think we're seeing that the positivity or the positive benefits of being able to have the full range of services available for our customers is really there. And so they may say, "Hey, your -- we think your metal offering really meets our immediate need here. It's our agile as [ph] is more flexible." We may eventually move that into colocation over time or sometimes the opposite. And so -- so I think that the momentum, both in the data center services and I think increasingly on the digital services side, even though I think we've got a lot of work to do continue to evolve our go-to-market motion and our underlying cash systems and processes, etcetera, to really support the slightly different business that an as a service model provides in digital services but I think we're continue to make good progress there. And I think our full portfolio of offerings is resonating well with the customer.

Operator:

Goodbye. And this concludes today's conference. Thank you for participating. You may disconnect at this time and have a great rest of your day.

Operator:

Good afternoon and welcome to the Equinix's Third Quarter Earnings Conference Call. All lines will be able to listen until we open for question. Also, today's conference is being recorded. If anyone has any objection, please disconnect at this time. I would now like to turn the call over to Chip Newcom, Senior Director of Investor Relations. Sir, you may begin.

Charles Meyers:

Thank you, Chip. Good afternoon and welcome to our third quarter earnings call. Despite an increasingly complex macro environment, we delivered another solid quarter of results and continue to drive strong value creation, raising both our dividend and our AFFO per share outlook for the full year. While we continue to operate in an environment characterized by customer caution, this caution is balanced by a clear commitment to digital transformation and accelerating interest in AI and a growing reliance on Equinix as a critical partner in designing and implementing hybrid, multi-cloud, and data-centric architectures. Customers continue to see digital as a critical priority, and they remain focused on optimizing existing infrastructure spend and capabilities across cloud, network and other categories. Demand remains strong. New logo growth is accelerating, and we see a highly favorable pricing environment, allowing us to deliver higher MRR per cabinet yields driven by price, power density, and strong interconnection demand. The net result is solid revenue growth, a strong forward pipeline and continued optimism about our differentiated ability to deliver compelling value to our customers and in turn, to our shareholders. In Q3, our go-to-market engine continued to execute well with more than 4,200 deals in the quarter across more than 3,100 customers, including record new logos from high-value targeted customers. We saw solid performance across all aspects of our platform strategy with data center services, digital services, and our xScale, all coming together to address the evolving demands of our customers and strong cross-regional bookings highlighting the power of our unmatched global reach. On the AI front, we continue to cultivate and win significant opportunities across our existing customer base and with AI-specific prospects. A recent Gartner poll found 55% of organizations are in pilot or production mode with generative AI. We are seeing this manifest in accelerated interest from both enterprise customers and from emerging service providers looking to service this demand. We see strong similarities between the evolving AI demand and the multi-tiered architectures that have characterized the cloud build-out for the past eight years. And believe that our broad portfolio of offerings in tandem with our key technology partners will allow us to capture high-value opportunities across the AI value chain along three key vectors. First, in our retail business, we will aggressively pursue magnetic AI service provider deployments to support on-ramps, inference nodes and smaller scale training needs. We are well-positioned here with nearly 40% market share of the on-ramps to the major cloud service providers, key players in the AI ecosystem. And in Q3, we're proud to have been recognized at a 2023 Google Cloud Customer Awards winner for our work supporting Google AI technology. Key wins in this area for Q3 included Core Wheat, a specialized GPU cloud provider, deploying networking nodes at Equinix leveraging our unique multi-cloud on-ramps and network connectivity across multiple metros. And Lambda, selecting Platform Equinix to offer customers expanded regional connectivity, higher networking performance, security and scale for an enterprise-grade GPU cloud, dedicated to large language models and generative AI workloads. Second, we intend to meaningfully augment our xScale portfolio, including in North America to pursue strategic large-scale AI training deployments with the top hyperscalers and other key AI ecosystem players, including the potential to serve highly targeted enterprise demand. We expect some builds will be tightly coupled with our retail campuses like our newly announced Silicon Valley 12x asset, while other builds will be larger-scale campuses in locations with access to significant power capacity. And finally, in response to burgeoning enterprise AI demand, we will leverage our unique advantages to position Platform Equinix as the place where private AI happens, allowing customers to place compute resources in proximity to data and seamlessly leverage public cloud capabilities, all while maintaining control of high-value proprietary data. We also anticipate a dramatic acceleration in inference workloads and see Equinix as well-positioned to deliver performance and economic benefits derived from our reach, network density and cloud adjacency. While still early, we're seeing broad-based demand for private AI from digital leaders with specific wins in the transportation, education, public sector and healthcare verticals, including Harrison.ai, a clinician-led healthcare artificial intelligence company that is dedicated to addressing the inequality and capacity limitations in our health care system, by developing AI-powered tools in radiology and pathology. An exciting opportunity that not only drives our business, but clearly aligns with Equinix values. As AI demand accelerates, we are adapting our product portfolio and our physical platform in response to evolving customer requirements. In terms of data center design, we're using our co-innovation facility in Ashburn to evaluate technologies to support escalating power requirements and have already commercialized our early work in this area with liquid cooling solutions that are supportable in all markets, including support for direct-to-chip liquid cooling in 45 markets across all three regions. We are already supporting significant liquid cool deployments across our range of deployment sizes and densities and we look forward to sharing more with you on our progress in this space. Turning to our results, as depicted on Slide 3, revenues for Q3 were $2.06 billion, up 14% year-over-year driven by strong recurring revenue growth and power price increases. Adjusted EBITDA was up 9% year-over-year, and AFFO per share was better than our expectations due to strong operating performance and timing of recurring CapEx spend. Interconnection revenues grew 9% year-over-year with continued strength from Equinix Fabric. These growth rates are all on a normalized and constant currency basis. Our data center services portfolio continues to perform well. Given the strong underlying demand for digital infrastructure and the long duration in delivering new capacity, a factor that continues to drive positive pricing trends, we're investing broadly across our global footprint. We currently have 56 major projects underway in 39 markets across 23 countries, including 14 xScale builds that will deliver more than 100 megawatts of capacity once opened. More than 50% of our expansion capital is supporting capacity in our major metros where we have strong visibility to fill rates. Recurring revenues from customers deployed in more than one region stepped up 1% quarter-over-quarter to 77% as customers continue to move to more distributed architectures. On interconnection, we now have over 460,000 total interconnections with 4,200 net interconnections added in Q3 thanks to healthy gross adds, offset somewhat by continued grooming activity and consolidations into higher bandwidth connections. Equinix Fabric saw continued momentum with record port orders and significant growth in provision bandwidth, up 8% quarter-over-quarter to more than 200 terabits per second. Internet Exchange had another strong quarter in APAC with peak traffic in the region, surpassing the Americas for the first time. Globally, peak traffic was up 9% quarter-over-quarter and 27% year-over-year to nearly 35 terabits per second. Recent interconnection and ecosystem wins include Southern Cross, expanding their relationship with Equinix by deploying their SX NEXT subsea cable into our LA4 IBX to boost aggregate capacity on their US to Australia and New Zealand network by 50%. And the Warsaw Stock Exchange, migrating their primary matching engine and trading system to Equinix' Warsaw 3 IBX to offer more capabilities and enhanced trading performance. We continue to invest behind our platform strategy with revenue growth from our digital services portfolio significantly over-indexing relative to the broader business, including strong adoption of our network edge offering by enterprise customers. We're also seeing momentum in expanding our partnerships with leading technology companies, including the recent announcement of NetApp storage on Equinix Metal, which is an integrated full stack solution that provides enterprise customers low latency access to all clouds while keeping control of their data, a critical consideration for AI workloads. Key digital services wins this quarter included McGraw Hill, a leading educational publishing company, deploying virtual hubs using Network Edge across multiple markets to connect to key cloud providers via Equinix Fabric. And a significant win with a global gaming company using Equinix Metal to support a major new product launch. Our channel program delivered another strong quarter, amplifying the reach of our sales team and accounting for over 65% of new logos with wins across a wide range of industry segments focusing on digital transformation initiatives. We continue to see growth from partners like AT&T, Cisco, Dell, and HPE. Key wins included a top five US public school district seeking to modernize aging IT infrastructure while improving systems uptime and enhancing cybersecurity. This win executed with partners, Dell Technology Managed Services, Carasoft, and ImpEx Technologies, will deliver low latency, multi-cloud connectivity and secure network access to key ecosystem resources while lowering operational expenses. Now, let me turn the call over to Keith and cover the results from the quarter.

Charles Meyers:

Thanks Keith. In closing, we continue to see strong demand as customers embrace AI and advance their digital transformation agendas with infrastructure that is more distributed, more cloud connected and more ecosystem enabled than ever before. Despite a variety of cross currents in the business, we are translating healthy bookings growth, a favorable pricing environment, and increasing power densities into strong increases in cabinet yield. These dynamics, combined with the continued focus on driving operating leverage and expense discipline through the business, are allowing us to deliver compelling value on a per share basis. As we close out 2023 and look towards 2024, our forward-looking strategy and vision for our platform will enable us to amplify our unique strengths, leveraging them to expand our market opportunity, and drive sustainable growth in a rapidly evolving landscape. We remain optimistic about the road ahead and steadfast in our commitment to show up every day in service too, starting with the resolve to align, inspire, and empower our teams around our strategy and our mission, enabling them to deliver durable value and meaningful impact to our customers, our shareholders and the communities in which we operate. So, let me stop there and open it up for questions.

Matt Niknam:

Hey guys. Thank you for taking the questions. Just two if I could. First, on the cabs billing metric. I appreciate you, Charles, given some of that color around the increased power density. I'm just wondering if there's any additional color you can share with some of the softness in the cabs billing adds, some of the actions you may be taking to release some of that available capacity at higher mark-to-market rates and any sort of color you can share in terms of expectations for 4Q. And then second question, again, we appreciate all the color on AI. Just wondering if you can give us any more color on the conversations you're having with customers on their AI strategy, what role Equinix can play in helping them meet their goals and any sort of timing in terms of when this can become a little bit more material? Thanks.

Frank Louthan:

Great. Thank you. Just a quick question on -- so on the channel, you mentioned 65% of new logos coming from the channel. What percentage of overall sales are there? And then how do the logos in the channel tend to perform longer term versus those from the existing sales force, they produce the same amount of repeat business?

Frank Louthan:

Okay, great. Thank you.

Jon Atkin:

Thanks. So, I was interested in if there's anything notable to call out that drove the growth in EMEA where things seem to have accelerated a bit versus APAC, which saw a slightly slower growth. And then on pricing, which I think you mentioned in the earlier part of your prepared remarks, where do you see the main levers? Would it be renewal spreads on cabinets or harmonizing cross connects or anything to kind of call out around pricing to think about in 2024? Thanks.

Jon Atkin:

And then lastly, the new logos you mentioned, are there any particular verticals where you're seeing penetration that's driving the vertical? And then on the churn side, anything to kind of think about for the coming quarter or year around where you might fall within your typical range for MRR churn? Thanks.

Jon Atkin:

Thank you.

David Barden:

Hey guys, thanks so much. Two questions, if I could, please. Just Keith, apologies for my voice. Keith, what -- I'm trying to kind of understand my takeaways for the 2024 trajectory. You've had a stronger-than-expected year-to-date through 3Q and you're guiding to kind of a weaker-than-expected jumping off point in 4Q into 2024, but then you're talking about the strong bookings. And so I'm wondering if it's too easy to read into the fourth quarter and maybe we should be looking at the second half as a jumping off point for first half 2024 rather than the fourth quarter specifically? And then the second question, if I could. Maybe Charles, when you mentioned that your churn is 4K and the new clients are coming in to 547, what does that look like? Is that like 1/10 for every three new 4s? Or is that literally just the directional movement of the new client is 50% more power dense? Thank you.

David Barden:

No. Thanks Keith.

David Barden:

No, helpful color guys. Thank you so much.

Michael Rollins:

Thanks. Good afternoon. First, curious if you could discuss the factors that led to the decision to adjust capital allocation and boost the dividend per share in this fourth quarter and then just kind of the go-forward metric of how to think about dividend growth? And then I have a follow-up, if that's okay.

Michael Rollins:

Thanks. And then just on one other thing that you mentioned earlier. You mentioned the opportunity to try to improve the power density in the existing footprint. And just curious if you could share with us how the power utilization of your portfolio compares to the cabinet utilization of your portfolio? And the opportunity based on access to the utility load and thinking about the cost, like how much further can you take the power in the existing portfolio? Thanks.

Keith Taylor:

Mike, maybe I can just add on 1 other thing to what Charles has said. One of the main objectives coming from Ralph's organization is to drive efficiency into the IBXs. So, we're perpetually looking for ways to drive more efficiency and create the capacity -- incremental capacity that Charles refers to. We're also looking at new design and construction techniques to run them more efficiently. And that drives down our PUE and PUE is good for the customer. In some cases, we're held to certain PUE with our customers. And so it drives the efficiency into the business and create that capacity that hopefully we can resell. But these investments, particularly with some of the older data centers to the extent a new technology or certain components of our MCE become available, and we choose to make an investment. You're not expanding as necessarily the footprint but you're making an investment that frees up stranded capacity or energy, that works really well for the business and as I said, for the customer.

Michael Rollins:

Thanks.

Eric Luebchow:

Appreciate it. Thanks for the question. So, maybe you could touch a little bit, Charles, on the kind of the enterprise sales in the quarter in the pipeline? I know with rates moving higher recently and some concerns around potential recession in the US. Are you seeing any of them pulling back an IT spend to being more cautious in their outlook as they look kind of at their IT stack and hybrid cloud migration and any signs that they're kind of optimizing costs that are evident in any of your churn numbers?

Eric Luebchow:

Great. Thanks. And just one quick follow-up. I was curious on the xScale kind of update, a development in Silicon Valley saw. So you made it clear that your desire to expand more into the United States. Maybe as you look at the set of opportunities in the US, is development the best option you see today to attack that opportunity? Or is M&A another lever that you continue to evaluate in the US for xScale?

Eric Luebchow:

Great. Thank you.

Nick Del Deo:

Hey, thanks for fitting me in. I guess to follow up on the xScale question in the US I guess, what do you view as different about AI training that makes you want to support those deployments via xScale in the US relative to cloud where you -- if I understand it correctly, you didn't see the opportunity as worth pursuing given how competitive the supply environment is?

Nick Del Deo:

Okay. Are you able to share anything regarding how you're thinking about returns here or is that premature? And I guess, any progress in terms of line up partner for domestic xScale?

Nick Del Deo:

Okay. Thanks Charles.

Chip Newcom:

This concludes our Q3 conference call. Thank you for joining us.

Operator:

Good afternoon, and welcome to the Equinix Second Quarter Earnings Conference Call. All lines will be in listen-only until we open for questions. Also, today's conference is being recorded. If anyone has any objections, please disconnect at this time. I would now like to turn the call over to Chip Newcom, Senior Director of Investor Relations. Thank you, sir. You may begin.

Charles Meyers:

Thank you, Chip. Good afternoon, and welcome to our second quarter earnings call. As reflected in our results, Equinix continues to enjoy momentum in our business as digital transformation accelerates the pace of innovation and changes the way business is done. By 2026, IDC is forecasting that 40% of revenue from G2000 companies will come from digital products, services and experiences, a dynamic that is reshaping the basis of competition in nearly every industry and making digital an unprecedented force for economic growth. These secular drivers, combined with an accelerating appetite for companies to rapidly integrate AI into their operations are driving increased demand for data center capacity as a broad range of service providers extend and scale their global infrastructure to support the clear enterprise commitment to hybrid and multicloud as the IT architecture of choice. Equinix remains exceptionally well positioned to respond to this demand environment, delivering against the need for infrastructure that is more distributed, more cloud connected, more sustainable and more ecosystem-centric than ever before. Against this backdrop, we had a great second quarter with solid gross and net bookings, very strong pricing dynamics, excellent pipeline conversion and healthy new logo growth. We continue to drive disciplined sales execution at scale with more than 4,100 deals in the quarter across more than 3,100 customers, demonstrating the continued strength of our unmatched go-to-market machine and approach. Turning to our results, as depicted on Slide 3, revenues for Q2 were $2.02 billion, up 14% year-over-year driven by strong recurring revenue growth, power price increases and timing of xScale fees. Adjusted EBITDA was up 7% year-over-year, and AFFO was again better than our expectations due to strong operating performance. These growth rates are all on a normalized and constant currency basis. With customers deployed in all three regions now representing approximately 2/3 of our recurring revenues, we continue to invest behind the scale and reach of our data center services portfolio. We now have 53 major projects underway across 40 metros in 24 countries, including 11 xScale builds that we expect will deliver approximately 90 megawatts of capacity once opened. This quarter, we added 12 new projects, including new data center builds in Lisbon, Monterrey, Mumbai and our first build in Kuala Lumpur, Malaysia. Over the past several years, we have seen Malaysia emerge as an increasingly important location for digital infrastructure. By expanding Platform Equinix in Johor and Kuala Lumpur, the two most strategic markets in Malaysia, we will enable local and global businesses to leverage our trusted platform to bring together and interconnect the foundational digital infrastructure that will power their success. Additionally, we are delighted with the recently announced results of Singapore's data center call for application, where Equinix was one of a very limited set of participants selected to build incremental data center capacity in the critical Singaporean market. Equinix is honored to have this opportunity to strengthen Singapore's digital capabilities, delivering sustainable infrastructure that will fuel the economy, cultivate critical ecosystems and aligned to Singapore's green plan. Multi-region customer wins this quarter included Cogent Communications, a U.S. multinational ISP using Equinix's robust ecosystem and interconnection platform to optimize and enhance their global services and Apcela a provider of software-defined cloud-optimized networks for digitally transforming global enterprises as they leverage Equinix Fabric and other digital services for low-latency network and cloud connectivity. Our global interconnection franchise continues to thrive with over 456,000 total interconnections on our platform. In Q2, interconnection revenue stepped up 11% year-over-year on a normalized and constant currency basis, driven by healthy pricing, increasing traffic levels and strong gross adds. Net interconnection adds remain on the lower side at 4,100 due to continued grooming activity and consolidation into higher bandwidth connections, but the number of unique interconnection relationships across our platform continues to expand with over 110,000 unique pairs, reflecting the exceptional value of our scaled digital ecosystems. Equinix Fabric had another strong quarter with total virtual connections passing 50,000 for the first time and the addition of new capabilities to support data-intensive workloads like AI and cloud migration. Beginning in the third quarter, Fabric customers will be able to provision virtual connections to cloud providers with bandwidth up to 50 gig per second with Google Cloud as the first cloud partner to support this capability. Internet exchange saw strength in our EMEA and APAC markets with peak traffic up 4% quarter-over-quarter and 25% year-over-year to nearly 32 terabits per second. Key interconnection customer wins this quarter included a gaming and entertainment company, expanding interconnection across all three regions to optimize the gamer experience and PEER 1 a Brazilian telco leveraging Platform Equinix to establish its digital presence through network hubs, beginning with South America and Miami. Turning to our xScale portfolio. We continue to see strong overall demand as cloud adoption remains a driving force in digital transformation. In Q2, we leased 10 megawatts of capacity in our Osaka 2 asset with cumulative xScale leasing now over 200 megawatts globally, and we have a strong funnel of additional scale opportunities for the back half of the year. We also won three new native cloud on-ramps this quarter in Bogotá, Madrid and Toronto, further strengthening our cloud ecosystem, which represents nearly 15% of total interconnection on our platform. Key enterprise to cloud ecosystem wins this quarter, including one of the largest auto insurers in the U.S., continuing to expand interconnections on our platform to optimize its networks and multi-cloud connectivity and a leading European automotive company deploying at Equinix to support reliable and scalable connectivity to the cloud worldwide. As businesses increasingly look to consume their digital infrastructure at software speed, we're continuing to enhance our platform strategy and expand our partnerships. In Q2, we announced our expanded partnership with Hewlett Packard Enterprise for pre-provisioned HPE GreenLake for private cloud enterprise and HPE GreenLake for private cloud business addition, both available on demand at select Equinix IBX data centers. These new offerings in 7 metros around the globe will help businesses expand their hybrid multi-cloud strategies, while providing greater agility, control and predictability of workload costs and data. Additional key digital services wins this quarter included Bionexo to Brazil, a health tech company that offers digital solutions for managing health care processes, using fabric and network edge for seamless connections with partners and customers, while reducing complexity and cost. Telna, a global mobile network infrastructure provider using Platform Equinix to facilitate its marketplace for cellular connectivity among its customers. Our Channel program delivered another strong quarter, accounting for 40% of bookings and nearly 60% of new logos. We continue to see growth from partners like Accenture, Avant, Dell, Cisco and HPE with wins across a wide range of industry verticals and digital use cases. Key wins this quarter included partnering with Kyndryl to support a large American health insurance provider with their network and application modernization efforts, featuring the deployment of cloud adjacent infrastructure and interconnection to the health care ecosystem. Now let me turn the call over to Keith to cover the results for the quarter.

Charles Meyers:

Thanks, Keith. In closing, we had a strong first half of the year and continue to see a robust demand environment as key secular drivers positively influence buying behavior even in the face of a challenging macro climate. The relevance of Platform Equinix continues to grow as service providers scale out their global infrastructure in response to growing enterprise demand for hybrid and multi-cloud as the architecture of choice and the associated need for hybrid infrastructure to deliver performance, agility, scalability and sustainability. In this context, we believe Equinix remains uniquely positioned and highly differentiated and will continue to drive disciplined execution of our strategy with a focus on extending our market leadership, driving operating leverage, expanding our platform capabilities to fuel sustained growth and delivering superior returns on capital, all of which we are confident will translate to distinctive and durable value for our customers, and sustained performance for you, our investors, with a keen focus on AFFO per share as our lighthouse metric. So let me stop there and open it up for questions.

Ari Klein:

Maybe on the AI front and as it relates to xScale, there are some exceptionally large leases being done with the vast majority of those in the U.S. where xScale doesn't have a presence. How are you thinking about potentially entering the market capture some of that demand?

Ari Klein :

And then just the Americas and EMEA saw cabinet decline. It sounds like maybe there was some timing and churn potentially there. Can you provide some color on some of the moving pieces? And maybe give us a sense of the size of the backlog?

Operator:

Our next question comes from Michael Rollins with Citi.

Charles Meyers :

Yes. It's a good question, Mike. I do think that we had guided to a range lower than certainly that 7% that we're seeing, absent the PPIs Obviously, PPIs are having a major impact there and reflected in as reported at 10%, but I think that's not really a valid number because that will bounce around a little bit, and we'll based on what's happening with power pricing. But I do think that 7%, obviously, is a very attractive level. I do think that we're seeing that pricing right now is very firm. We are raising -- we've raised prices on our underlying colo products and on interconnection meaningfully and continue to see strong demand and stable churn. And so I think that's going to be a positive factor. The other one that I just mentioned in the previous conversation, a little bit about billable cabs is power densities. Power densities are definitely on the rise. And so some of the churn activity that I just talked about there, those 37 deployments were -- many of them are in stabilized assets. And so you're going to see uplift there as you turn some of that over. So long answer or non-answer to your question in terms of what is the right range, obviously, I think we have been talking about 3 to 5, 7 is obviously nicely above that. I would certainly hope that -- I do think the current dynamic of pricing in the market is a major driver. And so we'll just track that and see how we -- but obviously, we love being above that guided top end. And if we feel like that's a sustained trajectory, we'll come back and look at that.

Charles Meyers :

Yes. I figured that might come up, too, Mike. So the -- what I'd say is that we are -- obviously, we're just a little over halfway through the year. We've been hedging into our positions. And in some markets, hedging in at rates that are below where we had been previously, and in some cases, a bit somewhat materially below that. Obviously, we still have a significant portion of our hedging positions yet to fill. And there's a lot of the year left. And so it's impossible, I think, for us to predict exactly what will happen. So I don't want to be too concrete on this matter. But I would think that there might be some markets if current course continues, where we will hedge into a rate '24 that is below what it was in '23. And as we said to our customers, and I think as we've communicated to our customers, they really sort of embraced and understood the benefits that our hedging program provides -- and we've told them if that is to -- would occur, we would pass that through to you as well. And so I think how many markets that might occur in, not sure. But as we said when we provided the guide and when we provided at Analyst Day and in other forums, said, look, we're -- this sort of assumes nothing relative to power price increases or decreases, and we'll adjust that accordingly or sort of normalize it out because what's really important from our perspective is the underlying performance of the business. And while we do recognize that power price, for example, has some impact on the optics margin. I think it really isn't an underlying fundamental sort of impact on the business. And so we'll let you know. A shorter answer would be, I do think that we may see some markets in which we would see a PD or a price decrease next year and others that we would see it flat and perhaps others would see it go up. But still more work to do in terms of hedging into our positions, and we'll keep you updated as we know more.

Jonathan Atkin :

Yes, a couple of questions. I was curious just about decision time frames by customers closing rates, book-to-bill, that sort of thing? And then if you look at stabilized gross margins, it looks like that was down and I forgot if you might have mentioned this earlier, but why the pressure on stabilized gross margins?

Keith Taylor:

Jon, relating to the second part of the question, just no surprise. You've seen that you'll see the sort of the margin erosion across a number of the key metrics, whether it's on a total basis, whether it's in Europe or whether it's in the stabilized assets, it's primarily related to the reset of the of the energy contracts. As you look at the first quarter, we had the benefit, if you will, of contracts -- the power contracts where they were. But as they reset, was there was a meaningful step up in the second quarter, and that was felt throughout a number of our core metrics. And as they look forward, most of that is now going to stabilize, which is the good part. And that was all factored into the pricing sort of structure that we had when we started the year. We anticipated what the price points were going to be on an average basis, and that was the rate at which we pass through to our customers.

Charles Meyers :

We've seen specific instances of interconnect to support AI. In fact, we had a pretty significant win this quarter in the AI realm with an AI-as-a-service provider that really put their core network nodes with us to really drive interconnection to the multi-cloud connectivity and really to support the inference and interconnection to the cloud. And so we did see that -- I wouldn't say that's likely shown up. In fact, that hasn't shown up in our results yet because we just booked a deal. But I think that's indicative of some of what's going on there, it's probably a little tough to tell. Interestingly, on interconnect, Jon, what I would say is that we've seen really strong gross add activity, and it's really in line with our nine quarter averages. And so that's, I think, a really encouraging sign. And in fact, interconnect to cloud at the end is up meaningfully year-over-year. It was moderated a little by the financial ecosystem, which was a little down year-over-year in terms of gross adds, but we're very stable on the Intersect side in terms of gross adds. And so -- and I'm sure that some of that is attributable to AI. And then -- but then on the churn side, we are seeing a little bit more -- you're also seeing a little more churn activity with cloud as a VM, but more between service provider types, cloud to cloud, cloud to network, et cetera. And so -- and that's, I think, a lot of grooming, a lot of 10 to 100 migration and some M&A activity. So I gave you a little more there than you were looking for on interconnect. But I do think that we're -- you're going to see a lot of data transfer happening. And I think we're just really well positioned on that in terms of our multi-cloud connectivity and the sort of more advanced nature of fabric in terms of being more agile to that demand over time. So we're excited about that opportunity, and that certainly is coming up a lot out there in the market is as people are talking about it. And really, I think more -- a lot on the service provider side, but also enterprise is really talking about the things they're doing to bring AI into their operations.

Simon Flannery :

You talked about the power density requirements a couple of times. So how are you thinking about that strategically? Are there redesigns or retrofitting you're thinking about doing to your IBXs? And how does that impact the scales that you've built so far and that you might build from here? I know people like Meta have been reconsidering data center design.

Operator:

Our next call is Eric Luebchow with Wells Fargo.

Keith Taylor :

Yes. As you can tell from the guidance we delivered and we've said -- Charles has mentioned a few times, the recurring aspect of our business is performing exceedingly well. The nonrecurring, a lot of what you experienced, particularly with the step-ups and the step downs it relates to the xScale fees. As you're wholly aware, there's two nonrecurring xScale fees and there are two recurring xScalev fees. As it relates to the nonrecurring, it's really the sales and marketing fee that has the biggest impact to our business. So as we said, the pipeline is very deep. There's a lot of opportunity that's right in front of us. And so we anticipate that there will be a very large set of fees that get earned over the second half of the year. Right now, we're targeting that to be in the fourth quarter. I guess there's always a scenario where it could be the third quarter, but it's really -- it's a second half anticipated close. And so with that, that's what we've got in the guidance. And then on top of that, of course, the recurring part of our business is still -- you're seeing a nice meaningful step-up on that and you just have to go to the midpoint of the guidance over the rest of the year. And you can see that, that one of those quarters is going to be one of the largest step-up you've ever seen in our history. But part of that, of course, is driven from the nonrecurring fees.

Charles Meyers :

Yes. And that's so much related to the interconnection because that does -- on a net basis, probably not having -- not a huge driver on the churn metric. But it is related in part to those deployments that I talked about when I was giving color on the billable cabs that related to churns that we view as favorable. Again, those 37 deployments, the 85% of those cabs are going to have mark-to-market that are in the 50% to 70% positive range. And so that's -- we're take those when we can get them. And so -- and several of those in Singapore. And so we will -- even with our additional allocation, that's out there in the future. in terms of build. And so it's a precious resource to have capacity in the Singaporean market, particularly capacity that has the kind of characteristics that we do in terms of cloud proximity and sort of network density and ability to drive the performance, et cetera. And so we'll take that capacity. And those are some of the things that led to us seeing a little bit of an uptick there. But as we said in the prepared remarks, we're comfortable that we, on average, for the year, will end in sort of the lower part of our guided range. And you may see a little spikes in there like we did a little bit higher this quarter, but that generally is probably more attributable to favorable type turn activity.

Operator:

Our next caller is David Barden with Bank of America.

Charles Meyers :

Yes, there's a lot in that question. On the -- on peak times V or Q or whichever you prefer, it's -- I think we're definitely seeing a firm pricing environment. And I think that's true of the data capacity industry at large. But I think that we see -- we obviously operate in the retail side of the business at a very different price point than the prevailing broader industry, which I think is -- centers more around a wholesale or hyperscale type price point. But both are on the rise, and I think that's going to continue to be the case for a bit of time here. I think in terms of volumes, I think volumes are also going to grow. The question of whether or not power availability would constrain supply is an interesting question. I think that it could in market by market, but I think that -- on our side, we feel very comfortable that our relationships and our visibility to power allocations are going to allow us to continue to execute on the build plan that we have in place. On the xScale side, I think it's a little more challenging, but we are actively working with the folks to make sure the identity that. And we're also actively looking at alternatives. And for example, things like on-site power generation, I think, are probably more of a reality in some of those -- in that market over time. So done that in certain markets. In fact, our recent Dublin facility has on-site power generation with fuel cells, natural gas-based fuel cells as a primary source of power. We actually use Bloom Energy fuel cells in Silicon Valley, not as a primary source but as a -- but I think that's -- I think we're going to continue to see trends in that area. So I don't -- and I also think that you're going to see that if necessary, the positioning of certain forms of data center capacity, particularly in the hyperscale area and some of AI training may adapt to simply go where the power is. And so I think that you may see some of that movement as well. So I don't think quantity is going to be material constrained -- materially constrained in our retail business by power availability, but it is something that I think we, as an industry, need to continue to grapple with.

Charles Meyers :

Yes. Short answer is not yet. And in fact, obviously, the vast majority of our demand and our revenue and our profitability is sourced from sort of our large campus environments around the world, and that's where bulk of our land has been. You're seeing the rise in our sort of owned asset revenue because we're continuing to build now on owned land and owned facilities around the world. And so the bulk of our land bank is really still going towards that. That doesn't mean we'd necessarily be opposed to that. I think that would more likely be xScale type thing, which would probably run through the -- but I do think those are the kinds of things that we have to be thinking about. I do think in terms of more -- some of our xScale though, I think, is going to be more approximate to our campus locations in those areas where we think we can support that. But I don't think it's out of the question we do that. But right now, the shorter answer to the question is no, that's not really yet part of our equation.

Operator:

Our next caller is Brett Feldman with Goldman Sachs.

Keith Taylor :

Yes, Brett, just generally speaking, given the demand for data centers and all things surrounded, to that industry. The supply chains continue to be constricted. And I think even at the Analyst Day, Charles made a reference to the fact that generator 3-megawatt generated today has roughly 120-week time line. So it gives you a sense of how far out you have to start thinking and planning. And so one of the things that we tried to emphasize at the Analyst Day was we look at look at all our markets, all of the projects and determine exactly what we need where and then we have a very sophisticated procurement team that focuses on making sure we work with the larger providers and get availability either to production capacity or a slot in the production line or available capacity from the inventories. . And I just think that's something that we prudently do. We manage ourselves, and it's something that's going to be very important on a look-forward basis as well. And you have to tie that back into the comments Charles made about power. Demand, you have to have the available power, you have the available cooling and making sure that you have the appropriate kit to roll out the data centers in a fair way that you can deliver the capacity to the need. And again, a lot of work is done on that. The team -- the construction -- the design, construction, procurement sourcing teams are all working together in tandem, and we look out 5 years. And in some cases, as I said, we'll go out as far as 10 or 15 years like the London market where we see a broad future opportunity as well.

Operator:

Our next caller is Matt Niknam with Deutsche Bank.

Keith Taylor :

Yes. On the first one, just recurring CapEx is when you look at it year-over-year, Q2 tends to be -- Q1 is our lowest spend on a seasonal basis, Q2 we're sort of right on line with where we thought would be 2% and that was consistent with last year. And then you see over the next two quarters, we step it up even further. So part of it is just timing and making sure we do the work that we need to, based on the needs inside the different buildings. And as a result, it'll move around by quarter, but we can sort of massage at times into different quarters. But I would just say nothing meaningfully has caused that. It was an $18 million step up quarter-over-quarter just to be exact about it. As it relates to DSOs, as I said in the prepared remarks, our DSOs, our recovery has gone up a little bit. But what I would tell you is some of the things that we've been working on with our customers, as you can appreciate, I said there's not -- there's certainly some discussion around the power price increases. And although we're ahead of what we anticipated, there's still some negotiations. And as a result, our DSOs had moved up a bit. Customers weren't -- some of the customers weren't paying their entire bill instead of just disputing what the power price increase was, the whole bill was being held back. And some of those have since been made in the July time frame. And so DSO, I think you're going to see that step back down to a more traditional level. But overall, I'd just say you've got liquidity in the business, the cash we're generating and the collections you'll get some seasonality. We're running ahead of what we anticipated we'd be for the third quarter already. And as I said, I think DSO is an average days delinquent will go down.

Keith Taylor :

I'm sorry, I misunderstood your question then. As it relates No, there's a little bit more recurring CapEx when we have capacity and we look across the portfolio and think what can we do based on the capacities we have. And so sometimes when we work with Rob Abdel's organization said, we have capacity to put a little bit more recurring CapEx into the year. And so what you could do is pull it forward from one year and put it into the year prior. And so that's what you've just seen. We have -- we felt we had a little bit more capacity to invest in some recurring CapEx this year. That really takes away that obligation for next year.

Nick Del Deo :

Charles, on the interconnection front, are you still expecting an improvement in adds as we move through the year like you communicated previously? Or do you think these headwinds are a bit softer than expected?

Nick Del Deo :

Okay. Okay. Great. And then in Singapore, obviously, great to see the 20-megawatt allocation you got. How long before you can actually bring that online? And then about how long will 20 megawatts last you?

Chip Newcom :

Thank you, everyone. This concludes our Q2 earnings call.

Operator:

Good afternoon, and welcome to today's conference call. Before we get started, I would like to remind everyone that some of the statements that we will be making today are forward-looking in nature and involve risks and uncertainties. Actual results may vary significantly from those statements and may be affected by the risks we've identified in today's press release and those identified in our filings with the SEC, including our most recent Form 10-K filed February 17, 2023. The Equinix assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. In addition, in light of Regulation Fair Disclosure, it is Equinix's policy not to comment on its financial guidance during the quarter unless it's done through an explicit public disclosure. In addition, we will provide non-GAAP measures on today's conference call. We provide a reconciliation of those measures to the most directly comparable GAAP measures and a list of the reasons why the company uses these measures in today's press release on the Equinix Investor Relations page at www.equinix.com. We've made available on the IR page of our website a presentation designed to accompany this discussion, along with certain supplemental financial information and other data. We would also like to remind you that we post important information about Equinix on the IR page from time to time and encourage you to check our website regularly for the most current available information. With us today are Charles Meyers, Equinix's CEO and President; and Keith Taylor, Chief Financial Officer. Following our prepared remarks, we'll be taking questions from sell-side analysts. In the interest of wrapping this call up in one hour, we'd like to ask these analysts to limit any follow-on questions to one. At this time, I'll turn the call over to Charles.

Keith Taylor:

Thanks Charles, and good afternoon to everyone. As highlighted by Charles, we had an outstanding start to the year. As you can see from our financial results, the team delivered on multiple fronts in the quarter. We had record net bookings including power price increases. Excluding those prior price increases, our net bookings performance was solid. The result of, again, net positive pricing actions across each of our regions and lower MRR churn. Global MRR per cabinet yield increase by $124 per cabinet on an as reported basis are about $27 per cabinet adjusting per prior price increases another one-offs. And as we highlighted on the last earnings call, we completed our efforts to strengthen our balance sheet raising both debt and equity in the quarter and remain well funded to meet our future growth expectations. Now, as you would expect, despite the continued strength of our business, we remain highly focused on the broader market dynamics. But as we've stated before, during periods of disruption, Equinix thrives given our high quality and diverse set of customers who view Equinix as a mission critical partner to place their ecosystem driven digital infrastructure, whether it be a cloud on-ramp, a networking node, a cable landing station, or a trading platform. I do remember 90% of our quarterly bookings come from those existing customers as they expand their current environment or maybe move to more markets or simply buy more services. Finally, our strong liquidity position, low dividend, AFFO payout ratio and reduce debt leverage allows us to continue to invest to expand our product portfolio and expand our global footprint in both cases driving top line growth. Simply put, we're in a strong, fully funded financial position allowing us to meet all of our capital meets while maintaining the strategic and operational flexibility we need to grow and scale the business. Now let me cover the highlights from the quarter. Know that all comments in this section are on an normalizing constant currency basis. As depicted on a Slide 4 , global Q1 revenues were $1.998 billion, up 16% over the same quarter last year, and above the top end of our guidance range due to strong recurring revenues and the timing of xScale non-recurring fees. As we've noted before, non-recurring revenues, particularly those revenues attributed to our xScale business and custom installation works are inherently lumpy and given the momentum we're seeing in our xScale business across all three regions. Non-recurring revenues could fluctuate meaningfully over the next three quarters of the year. Q1 revenues net of our FX hedges included a $2 million tailwind when compared to our prior guidance range due to our weaker U.S. dollar in the quarter. Global Q1 adjusted EBITDA was $944 million or 47% of our revenues up 18% over the same quarter last year, and again above the top end of our guidance range due to strong operating performance including flat quarter-by-quarter SG&A spent. As expected, Q1 adjusted EBITDA benefited from lower seasonal power consumption and favorable energy hedge rates, which will reset higher starting in Q2 as anticipated, resulting in increased net utility spend over the next three quarters of the year. Q1 adjusted EBITDA, net of our FX hedges included a $2 million FX benefit when compared to our prior guidance rates and $5 million of integration costs. Global Q1 AFFO was $802 million, above our expectations due to strong business performance, including lower net interest expense and income taxes. As expected, we had seasonally lower recurring CapEx spend consistent with prior years. Q1 AFFO included a $2 million FX benefit when compared to our prior guidance rates. Global Q1 MRR term was 2%, a continued reflection of our disciplined sales strategy. For the full year, we expect MRR churn to average at the low end of 2% to 2.5% of our quarterly range. Turning to our regional highlights, whose full results are covered on Slides 5 through 7. On a year-over-year normalized basis, EMEA was our fastest-growing region at 28% due to our significant power increases. Excluding the benefit attributed to those price increases, EMEA growth was 14%. Our APAC and Americas region growth rates were 15% and 9%, respectively. The Americas region had another solid quarter with strong performance from our public sector team and continued favorable pricing trends. We saw strong momentum in our Chicago, Culpeper, Seattle metros and a Brazilian business. Our EMEA business delivered a great quarter, successfully executing on our price increase program while also seeing lower-than-expected MRR churn. In the quarter, we saw bookings strength in our Amsterdam, Dublin and Manchester metros. And finally, the Asia Pacific region had a solid quarter led by our Mumbai, Tokyo and Singapore markets with strong new logo additions and firm pricing. Now while Singapore remains capacity constrained as part of our IBX optimization efforts, we continue to proactively negotiate with certain customers with larger deployments to recover capacity which we anticipate to be backfilled at much higher rates, although it could affect our in-quarter MRR churn and net CapEx billing metric. And now looking at the capital structure, please refer to Slide 8. Our balance sheet increased to approximately $31.3 billion, including an unrestricted cash balance of $2.6 billion. Our cash balance increased quarter-over-quarter due to strong operating cash flow while we also raised approximately $580 million of yen-denominated debt and closed at the prior year's forward sales from our ATM program. Our net leverage remains low at 3.4 times our adjusted EBITDA with 96% of our outstanding debt being fixed with no near-term maturities. Given the global nature of our business, we continue to look to raise additional debt capital and reduce rate countries where we intend to expand, creating both incremental debt capital to fund our growth and placing natural hedges into these markets. Turning to Slide 9. For the quarter, capital expenditures were $530 million, including seasonally lower recurring CapEx of $22 million. Since our last earnings call, we opened four retail projects in Frankfurt, Paris, Singapore and Sydney. We also purchased land for development in Calgary and Madrid. Revenues from owned assets were 63% of our recurring revenues for the quarter. Our capital investments delivered strong returns, as shown on Slide 10, are now 171 stabilized assets increased revenues by 11% year-over-year on a constant currency basis. Taking out the benefit attributed to power price increases, stabilized assets increased 7% year-over-year. Consistent with prior years, in Q1, we completed the annual refresh of our IBX categorization exercise. Our stabilized asset count increased by a net 13 IBXs. Now stabilized assets are collectively 85% utilized and generate a 27% cash-on-cash return on the gross PP&E invested. And finally, please refer to Slides 11 through 15 for our updated summary of 2023 guidance and bridges. Do note, all growth rates are on a normalized and constant currency basis. For the full year, we're raising our revenue guidance by $30 million and adjusted EBITDA guidance by $20 million, primarily due to favorable FX rates and lower integration costs. This guidance implies a revenue growth rate of 14% to 15%, inclusive of power price increases or 9% to 10%, excluding the power cost pass-through and adjusted EBITDA margins of 45%, excluding integration costs. We now expect to incur $33 million of integration costs in 2023. And we're raising 2023 AFFO [ph] guidance by $44 million to now grow between 10% and 13% compared to the previous year, and AFFO per share is now expected to grow 8% to 11%. 2023 CapEx is expected to range between $2.7 billion and $2.9 billion, including approximately $150 million of on-balance sheet xScale spend, which we expect to be reimbursed as we transfer assets into the JVs of about $205 million of recurring CapEx spend. So let me stop here. I'm going to turn the call back to Charles.

Operator:

Thank you. [Operator Instructions] Our first caller is Matt Niknam with Deutsche Bank. You may go ahead.

Charles Meyers:

Thanks, Matt. Yes. Look, I think overall, as we said in the script, I think we continue to feel good about the demand level. I think definitely, customers are feeling tighter budgets, looking to stretch their dollars. But I think their commitment to digital is strong. And I think how they're using us in terms of looking to capture savings in a variety of areas. And again, long-term digital transformation equipments are driving pretty solid activity levels. So I think the overall, we did about 4,000 deals in the quarter of 3,000 customers, very much in line with kind of what we've done in prior quarters. Linearity was pretty good. And so we probably saw a few more deals slip into the following quarter than we would have in previous quarters. And then on sales cycle, just to give you more of a concrete data point to hang your hat on, we usually see about 45% - I'm sorry, about 40% of our deals extend beyond the 90-day sales cycle. And that rose in this last quarter to about 45%. So a little bit of an increase, but not particularly material. And as we saw a little bit of slippage, actually our linearity in Q2 is already looking pretty good. So we started with a little bit richer funnel and so we're off to a good start in Q2. So again, I think that clearly, you're feeling a little bit of caution in the macro market, but overall, I think in terms of what people are – how they're thinking about digital, how they're thinking about Equinix in that context, we continue to see a pretty good overall environment. Relative to your second question on capital allocation, look, our balance sheet, thanks to our team's efforts, is in a really good place. And as I've said in a number of settings, I do think there's going to be opportunities for us, both organically and inorganic, I don't think we're starting to see, I think, some softening in multiples. And I think that's likely to continue depending on kind of overall sort of recessionary sort of dynamics and that kind of thing. And so we'll keep an eye on that. I do think as a market leader and we've got a long track record of being able to unlock value from M&A, and we're definitely positioned to do that if the right things come along. And so I do think that we probably expect some capital allocation towards that. And I think our balance sheet puts us in a really good position. Keith, anything to add there?

Matt Niknam:

That’s great. Thank you both.

Operator:

Our next caller is Jon Atkin with RBC. You may go ahead.

Charles Meyers:

Yes. Great question, Jon. So on stabilized growth, obviously, incredible results fueled, obviously, in part by PPI on the power price increase. So 11% is definitely really high. If you take out the effects of power price increase, that still takes you down to about 7%, so really attractive. And if you take out the new stabilized assets, which are obviously less mature and probably growing faster than others, take – we take it down to about 5% from the previous sort of portfolio of stabilized assets. So that's still at the high end of the 3% to 5% that we've been talking about. But this is pretty typical of the dynamic as you very well know, when you add in sort of a new set of stabilized assets sort of [indiscernible] the growth a little bit up. And then as you increase utilization and sort of tap out that growth, it might tend to sort of come back down a little bit. And then ROIC goes a little bit in the opposite direction. It's sort of impaired by the fact that these are less mature, but then I think we would tend to rise back. And so overall, we feel really good about stabilized assets. And I think they are a reflection of the strength of the business model. Billable cabs, yes, for sure, definitely good solid quarter in Americas. APAC is coming off a really strong quarter last quarter and so it was flat this one, EMEA actually had sort of no meaningful adds the last couple of quarters. And I know that creates a little sort of mental distance for people to see a couple of quarters without billable cabs. But I think it's important to remember that really the dynamics of the business as such. In EMEA, actually, if you look at eight quarter, 12 quarter trend, we've actually had a lot of strength there in terms of cabinet adds and you get into a situation where essentially you start seeing high utilization rates in certain markets Therefore, you're probably going to see a little less large footprint and then you actually start sort of a cycle of looking for good churn to try to make room. And that kind of – can lead to some flat spots, I think, from billable caps. But we always encourage people to really look at a longer-term trend. We clearly will grow can will and need to grow billable cabs across all three regions. And with the size of the development pipeline that we have, that will happen. But let me give you just a data point on Europe, one of the things – this happened in Europe, and it gives – I think it's something to sort of hang your hat on and really reinforce why we talk so much about our strategy and maintaining discipline in our strategy because we could turn ourselves into cabinet fingers and that's really not what we want. And so if you look at Europe, we actually had a churn this quarter in a market that is very tight about 440 cabs. And that was – it was a pretty low dense implementation from a power density standpoint and not really well interconnected. And so we were getting a cabinet yield there well below our average. When we go to resell that, we will likely resell that in significantly more small to midsized deals than sort of one big footprint. And when you look at what's likely to happen there, we're probably going to increase the revenue and therefore, the yield per cabinet, when you get more interconnection, higher power density and a higher price point, we'll probably increase the revenue from those 440 cabs, 50% from that capacity when all is said and done. And so the significant growth with no billable – essentially zero increase in billable cabs and no incremental CapEx. And so this is why when you hear us talk constantly about right customer, right application, right assets. And that's more than just a sort of a clever thing for the earnings call. That's a way of life here in terms of how we drive our sales team. And I think that gives you kind of a good reflection. So you will see the billable cab growth, but I think right now, you're seeing good healthy growth across those because I think we're playing every lever, power density, price point, interconnection, and I think it's really driving health in the business.

Charles Meyers:

Yes. I think it's a little early to tell, but we have seen – it's interesting because ChatGPT has created a media frenzy around AI. But the reality is we've seen AI-related opportunities in our pipeline for the last several years. And for those that are familiar with the story and out on the investor circuit with us, you've heard me talk about that. And I think that most typically, it is people thinking about how to use their data and where to place their data. And what we're seeing is actually a trend towards people saying, we want to take our data and place it sort of inter cloud. We want to have control of that data. We want to intersect it with other data sources and we want to be able to move it into and out of clouds as appropriate for these things. And so we have seen some large training model training opportunities. Those are partially economically driven just it's actually cheaper to do on sort of dedicated hardware. If you have sort of a sustained commitment to doing AI training. And so we've seen some of those. And then inference deals, which I think are going to be a bit more interconnected, are where people are actually deploying inference AI inference use cases that are sort of – and I think we're going to be uniquely well suited is when insights are both, one, when data sets are dynamic and they're updated frequently, and they're taking in a lot of new data. And secondly, where insights are real-time and mission-critical. I think – and that really doesn't sort of fit the profile of the way current large language models like ChatGPT are being used. But we do think that what's going to happen is people are going to build vertically oriented sort of AI use cases on top of foundational models that are going to be sort of cloud-centric. And I think that we're going to be well suited to responding to some of those opportunities. So I think it's going to be a mix. I actually think some of the training stuff, Jonathan, is going to be more suited to our xScale portfolio. And I think some of the inference stuff is probably going to land in the retail portfolio at the digital edge. And so that's sort of the current dynamic, but early days, but I think an exciting incremental opportunity, and we're going to talk a little bit more about that at Analyst Day.

Operator:

The next caller is Nick Del Deo with MoffettNathanson. You may go ahead.

Keith Taylor:

Well, first, it dovetails nicely into what Charles was really talking about in the European theater, where you have a tight market, you make some decisions about looking to optimize the environment. And with that, sometimes customers move out some of the large deployments. As it relates specifically to Singapore, my reference was no different really than again, what Charles is talking about. But we do see an opportunity. There happens to be a larger installation related to customer. And it maybe it does move to a different market for us, and that would be fine. But the real focus is getting capacity in the Singapore market, getting a price uplift and again, going back to what Charles talked about, that we are sort of maybe with the bread crumbs that we see something that we're looking at right now that is going to be upsized. And of course, when we do that, it has an impact on the net cabinets billing. And of course, it has an impact on our churn metric. I maintain the word churn is going to be at the lower end of our range for the year. So I'm not worried about that. But this billing cab – billing cabinet metric is the 1 that we're always sort of looking at, causes us a little bit of discomfort because we know we're doing the right thing for the business and yet it presents itself maybe a little bit unfairly to us. And so – the bottom line is that's an initiative that we would embark upon. And Singapore is not the only market. Any place that we see that opportunity. And again, I will refer back to Charles' comment, but we don't need – where we can get an uplift an optimization of the asset. We don't have to put more capital to work and you're driving value into the equation. And so that's just a real good outcome for us. And if we can do that in places, we are tight and there is the demand, we'll make sure that we do it.

Nick Del Deo:

That's great. That's great. Thanks for that color. Charles, can I ask one on interconnection. You talked about how adds came back in Q1 versus Q4, still below trend, though. Can you share any updated expectations regarding when we should see that growing dynamic abate and get adds back to more normal levels?

Nick Del Deo:

All right. That’s great. Thanks guys.

Simon Flannery:

Great. Thank you very much. Good evening. I wonder if you could talk a little bit more about pricing outside of the power price increases. We certainly heard a lot on the hyperscale side of prices firming and you referenced some of the capacity constraints in the market. So what are you seeing both in xScale and then also just in your core business around the opportunities to continue to take price both on new business and on renewals. And then maybe a little bit on metal, both in terms of customer adoption and in terms of your continuing to roll out the product across your footprint? Thanks.

Simon Flannery:

Thanks a lot.

David Barden:

Hi guys. Thanks so much for taking the questions. I guess, Keith, I just want to make sure we all have the right jumping off point. So thank you for the waterfall for the 2Q EBITDA guide. And I just wanted to understand the combination of forces of the kind of impact of the roll-off of the hedges and you kind of increased usage as they kind of merge together to kind of create this $43 million kind of move down at the midpoint? And then assuming that that's the right jumping off point that these hedges are the right levels for the rest of the year. It implies about a $14 million sequential EBITDA growth in 3Q and 4Q to get to the midpoint of the full year guide. Could you talk a little bit about what the drivers of that will look like? Is it going to be kind of a steady cost structure with pretty much volume and price being the drivers of the margin? Any color there would be super helpful. Thank you.

Charles Meyers:

Yes. Maybe Dave, a little bit of more color is that I think – I will tell you that we are also focused on every element of the business model. So if you look at the revenue line, say, P times Q, we feel very good about P, continue to feel good about Q and we're going to continue to work the heck out of that. I would say that at the next sort of a click down on cost of goods, we're continuing to drive efficiency sort of projects across the business to try to improve cost of goods and gross margin. Then when you look down further, I also think just given the broader – we’re going to continue to be diligent on spent. We did spend – we opened up the wallet a bit to make sure we can add some more headcount, and we’re trying to bring them up productivity as quickly as possible. But you saw a flat SG&A spend quarter-over-quarter, and we’re going to continue to be very disciplined about that as well. And so, we’re going to work every element of the model and continue to do what we need to do to try to deliver the long-term performance.

Operator:

Our next caller is Michael Elias with TD Cowen. You may go ahead.

Charles Meyers:

Yes. Why don’t we – I’ll take the first one and then Keith can comment on the second one there relative to Hong Kong. But on M&A as I said, I do think there’s opportunities for us. We’ve talked about where some of those markets might be. I think Southeast Asia is going to continue to be an area of opportunity, we believe over time. And there’s several key markets there that I think we’ve got our eyes on. We’ve actually done a couple of organic projects already in Indonesia and Malaysia, and we’re going to continue to stay sort of eyes very wide open in terms of opportunities for us in that area. India, we’ve announced a new build in Chennai, but I do think there’s a lot of opportunity in India, and I think that could be a combination over time of organic and inorganic. And I think that we also I think one of the things that we have not done a lot of, or we haven’t done any of it yet, but I think that could be on radar, is thinking about opportunities from an xScale perspective in partnership with our partners. All of those probably represent some level of opportunity for us M&A and I think as we look at some of the dynamics and opportunities in the market, including AI. I think that could be those could be all very relevant for us. So that’s the first question, and then I’ll let – I’ll kick it over to Keith and he can talk a bit about the – this capital recycling question.

Michael Elias:

Great. Thanks for the color.

Michael Rollins:

Thanks. Hi. Couple questions. First, and I realize it’s still somewhat early in the year, but as you’re looking forward and trying to manage power costs, what’s your sense of where these power price increases or maybe future decreases are heading from what you see across the market portfolio for 2024? And then just secondly, as we take a step back and the market tries to contemplate the forward growth opportunity for Equinix, is it helpful to consider the company’s position on three vectors, the percentage coverage of core global markets, the percent penetration of key customer cohorts, and where the wallet level is, especially when you break out past the top 50 customers? And is that something that you can give us a bit of an update on today?

Keith Taylor:

The only other thing I would add Michael to Charles’ comments, the other aspect of it is operationally we are highly focused on running the business more efficiently. We’re very renewable and sustainable – sustainability focused and as a business, we want to continue to make sure we drive down the overall cost of the business. And so that’s going to be an important aspect on a go forward basis. And Charles also made the comments in his prepared remarks around PPAs and our desire to go into contractual arrangement with whether it’s wind or solar developers and create capacity for the market. And we see that as a bigger part of our business going forward as well. I think it sort of, it tamps down some of the volatility because it is predictable over an extended period of time at least those arrangements are. But overall, it’s the combination of all those things and our commitment to a 100% renewable just as that’s a critical aspect of our energy strategy as well.

Michael Rollins:

Thanks.

Brett Feldman:

Thanks for taking the question. Yes, thanks for taking the question. So, Keith, it was good to hear in your comments, your expectation that you’re going to continue to see full year churn towards the low end of the range that you’ve targeted. I think to a casual observer that would sound very surprising, right? Because it’s a sort of a broadly difficult macro environment. We talked here about slow down and spending on cloud and obviously you pushed through some pretty significant price increases recently. And so I was hoping you can maybe elaborate on what gives you confidence that you’re going to continue to see low churn and then just maybe remind us when you do see churn, what is driving it and has that shifted at all from what you’ve historically seen? Thanks.

Brett Feldman:

Okay. Thank you.

Charles Meyers:

No, I mean, I think, in terms of character of the churn, I think there’s a certain amount of ours that is more frictional churn associated with people evolving their footprints, how they’re serving in customers. That’s particularly true in network providers and some other service provider types. I think that, I think you are seeing, you are going to continue to see some level of cloud migration workloads that are well adapted to the cloud ought to go there. I always – I keep sort of reiterating that, and so I think we see some level of that, but more typical – most typically that is in the context of sort of an evolution towards a long-term hybrid multi-cloud architecture state that really plays to our strengths. And the last comment I would make is that we keep, we always say this regard to churn, the best defense against churn is getting the right opportunities to begin with. And so sales discipline and executing as I’ve talked about earlier and in the script, that’s really central to sort of maintaining that churn. And I think our teams have done a great job on that. And interestingly, I guess the last category I’d give you when we do M&A, you find that there’s often sort of a churn tale that comes from that because people underwrite to a different sort of an approach. And so, you saw that in Verizon and you look at – we now are reaping the other side of that as we’ve sort of managed through that. And I’ll tell you that transaction is looking super attractive, right? And so I think you see some of that comes on the back end of M&A transactions that’s a sort of a third category.

Operator:

Good afternoon, and welcome to the Equinix Fourth Quarter Earnings Conference Call. All lines will be able to listen only until we open for questions. Also, today's conference is being recorded. If anyone has objection, please disconnect at this time. I'd now like to turn the call over to Chip Newcom, Director of Investor Relations. You may begin.

Charles Meyers:

Thank you, Chip. Good afternoon, everybody, and welcome to our fourth quarter earnings call. We had a great finish to 2022, delivering one of the best bookings performances in our history, led by the Americas with continued strength in demand and favorable pricing trends across all three regions. For the full year, we delivered more than $7 billion in revenue for the first time and completed our 80th consecutive quarter of revenue growth, an amazing 20 years of continuous growth, all while driving AFFO per share performance above the top end of our long-term expectations. As we look to the year ahead, even amidst a dynamic and complex global landscape, it's increasingly clear that the secular tailwinds of digital transformation remain strong. In 2023, IDC estimates spending on digital technology by organizations will grow 8x faster than the broader economy. In the current macroeconomic environment, we believe spending on digital transformation will remain robust for two simple reasons. First, as companies work harder for each incremental revenue dollar, digital is seen as a critical driver of competitive differentiation, accelerating time to market and enabling product set evolution. And second, digital transformation is increasingly a means to do more with less, enabling businesses to reduce costs and drive operating leverage while simultaneously becoming more agile and responsive in serving their customers. In the context of this secular demand environment, we remain confident that Platform Equinix is uniquely positioned to support our customers' digital infrastructure needs. Digital leaders are demanding infrastructure that is more distributed, more ecosystem-powered, more flexible and more interconnected because it is fundamental to their ability to differentiate in the marketplace and lower their costs. Our market-leading global reach, vibrant digital ecosystems and comprehensive interconnection platform allow our customers to scale with agility, speed to launch of digital services, deliver world-class experiences and enhance value to all their stakeholders. While we will continue to closely monitor the macro environment and we'll adapt our execution accordingly, the fundamentals of our business remain strong, and we're investing behind the momentum we're seeing, including adding quota-bearing heads, evolving our product set and expanding our industry-leading data center portfolio. With regards to power, our multiyear hedging efforts continue to create visibility and predictability for Equinix and our customers in the coming year. Effective January 1, we raised pricing, passing on the full impact of these additional power costs to our customers, increasing costs but giving our customers much needed budget certainty and, in most cases, leaving them with rates below the prevailing spot market. Overall, we believe we remain in a good position relative to competitors and the broader market, and I'm pleased with where we landed for our customers and our business. Turning to our results, as depicted on Slide 3, revenues for the full year were $7.3 billion, up 11% year-over-year. Adjusted EBITDA was up 8% year-over-year and AFFO per share grew 11% year-over-year. These growth rates are all on a normalized and constant currency basis. Our data center services portfolio continues to extend its scale and reach. And given strong demand and high utilization, we see continued opportunity to deliver highly attractive returns on capital, as evidenced by the largest development pipeline in our history. We currently have 49 major projects underway across 35 metros in 23 countries, including nine xScale projects representing over 34,000 cabinets of retail and over 75 megawatts of xScale capacity. New projects this quarter include new data center builds in Istanbul, Seoul and Tokyo, and our first builds in both Johannesburg, South Africa and Johor, Malaysia. Our new IBX in Johannesburg augments our current footprint in Africa, entering the largest and most digitally developed nation on the continent. And our new IBX in Johor represents our entry into one of the most requested markets in Asia Pacific by our global customers. Equinix remains the best manifestation of the interconnected digital edge. And with these new builds, our unparalleled global footprint will span 75 metros and 35 countries. The strength of our global platform continues to shine, with nearly 90% of our revenue coming from customers operating in multiple metros and nearly 2/3 coming from customers operating in all three regions. Key multi-market wins this quarter included one of the world's leading hospitality companies, finding performance gains at the edge by deploying in strategic markets across all three regions; and a leading cloud and CDN provider extending coverage and scaling globally to support new services and meet growing demand. IDC estimates that more than 750 million cloud-native applications will be developed globally by 2025. And as this digital transformation wave continues, customers see Equinix as the logical point of nexus for hybrid and multi-cloud deployments. This quarter, we won four new cloud on-ramps, including one in Mumbai, making it the 12th metro on Platform Equinix enabled with native cloud on-ramps from all five of the leading cloud providers. No other data center operator has more than one metro with all five clouds. In our xScale business, we continue to see strong overall demand, leasing approximately 8 megawatts of capacity across our Tokyo 12 and Osaka two assets with meaningful expansions in our forward pipeline. Enterprise wins leveraging the cloud this quarter include a global technology company in the payments industry, deploying infrastructure to place their corporate and customer networks closer to AWS and Azure; and a leading paints and coatings company choosing Equinix for its cloud on-ramp capabilities and virtualized service offerings. Our industry-leading interconnection franchise continues to perform well with revenues for the quarter growing 13% year-over-year on a normalized and constant currency basis, outpacing the broader business. We now have over 446,000 total interconnections on our platform. In Q4, we added an incremental 4,500 organic interconnections, slightly lower than our historical run rate due to seasonally slower gross adds, customer consolidations into higher bandwidth BCs on fabric and some elevated grooming activity. Equinix Fabric saw continued growth and is now operating at a $200 million revenue run rate, one of our fastest-growing products. Attach rates for Fabric continue to move higher with 40% of customers realizing the benefits of connecting their digital infrastructure at software speed. Internet exchange saw peak traffic jump 7% quarter-over-quarter and 28% year-over-year to greater than 29 terabits per second, driven by FIFA World Cup streaming demand and reflecting the continued strategic importance of having the world's largest Internet exchange footprint on Platform Equinix. Key interconnection wins this quarter included one of Korea's largest conglomerates, establishing interconnection in Seoul for SJC2, the Southeast Asia-Japan Cable, which will be ready for service this year, and the largest water authority in the Netherlands, implementing Equinix Fabric to directly and securely connect to distributed infrastructure and digital ecosystems to ensure a clean water supply. Turning to our digital services portfolio, we saw continued momentum with Equinix Metal and Network Edge, driving attractive pull-through to Fabric. Digital services wins this quarter included a leading insurance and financial services company evolving their internal systems from their own data center to a public cloud plus Metal approach at Equinix; and a Belgian advertising service provider using Equinix Metal for fast, efficient, reliable data movement to support localized online advertising. And our channel program delivered its seventh consecutive record quarter, accounting for nearly 40% of bookings and nearly 60% of new logos. Wins were across a wide range of industry verticals and digital first-use cases with hybrid multi-cloud as the clear architecture of choice. We saw continued strength from partners like AT&T, Avant, Cisco, HPE and Microsoft. Key wins included delivering a critical time-sensitive site migration for a multinational banking and financial services client in partnership with Options IT and Dell, leveraging a combination of Equinix Metal, Network Edge and Fabric to overcome supply chain delays and ensure continuity of operations while interconnecting to critical trading platforms. So let me turn the call over to Keith and cover the results from the quarter.

Charles Meyers:

Thanks, Keith. Our record of strong and consistent operating performance continued in 2022, and I'm proud of how the team delivered value for our customers and our shareholders. In 2023 and beyond, we believe the opportunity for our business remains significant as enterprises and service providers alike look to Platform Equinix as their key digital infrastructure partner to advance their digital transformation agenda. To expand our market leadership, reinforce our competitive advantage and drive sustained value creation, the leadership team and I have outlined a clear set of priorities for the coming year. First, we intend to press our advantage in our interconnected colo franchise, continuing to scale and evolve our best-in-class bookings engine, delivering on key projects to enhance operating leverage, further extending our superior global reach, refining processes and systems to enhance the Equinix experience for our customers and partners, and integrating our sustainability leadership into our services in ways that better help our customers meet their commitments to environmental and social responsibility. Second, we intend to continue to enrich our platform value proposition by accelerating our digital services growth, delivering a more unified set of platform capabilities and by investing in ecosystem enablement, empowering key partners to bring their value to our platform more quickly and easily and allowing us to leverage their significant go-to-market reach. And we will advance these priorities by continuing to cultivate a culture that remains firmly people-first. We're committed to making Equinix a place that attracts, inspires and develops the best talent in our industry, cultivating an in-service-to mindset and creating a place where every person every day can say, "I'm safe, I belong and I matter." In closing, our business remains well positioned. Despite a challenging macroeconomic and sociopolitical environment, digital transformation remains a clear priority across all industries and digital leaders will continue to harness our trusted platform to bring together and interconnect the foundational infrastructure that powers their success. In that vein, we're pleased to welcome Tom Olinger to our Board of Directors. As the longtime CFO at Prologis, Tom has extensive international operating experience spanning real estate and technology, which will benefit our business. I'd also like to thank Budd Lyons for his exceptional service and contributions to the growth and success of the Company over the past 15 years as he rotates off the Board. So let me stop there and open it up for questions.

Simon Flannery:

I wonder -- it's good to hear the strong outlook for 2023 and the good commentary around current activity. Can you square that for us with some of the comments from Amazon and Microsoft and others about enterprises becoming more cautious in December and through the early part of the first quarter? You did talk a little bit about some grooming, I think, in interconnect, but I understand the core value proposition. But are you seeing any of that behavior? And what gives you the confidence that, that's not going to be of a concern through some of your enterprise or other customers who are facing some challenges in this macro environment? And then the second one on the pricing. Good to see the color, the detail around that. Has that -- have you been able to successfully get the payments? Has there been any pushback from the customers around that or people who have a struggle to pay those increases? Any color on that would be great as you go through the first couple of billing cycles here.

Operator:

Our next question will come from Jon Atkin with RBC Capital Markets. Your line is open.

Charles Meyers:

Sure. Yes. Again, we're very excited. As evident in the guide, we continue to feel very optimistic about the top line of the business. Obviously, it's a bit elevated with the power price pass-through. But even on an adjusted basis, excluding that 9% to 10%, which is above the long-term guide that we had provided at the Analyst Day. So, I think it reflects the overall strength in the business. And we're seeing really across-the-board strength. I think in colo and interconnection, in digital services and really across the regions. And we're seeing a combination of solid volume and very strong pricing. And so, I definitely think pricing is going to continue to contribute, and that is separate and apart from the power price increase. Even if you take that 9% to 10%, I think us increasing list pricing, which I think in sort of an inflationary environment, we have to demonstrate that we can do that. And I think we're having good success with that. So, I think the colo business remains strong, unit volumes on colo interconnection growing at 13%. Again, we saw slightly softer unit adds there, but I think we feel like that will probably normalize through the course of the year. And then digital services, we came off a really strong quarter. 2022 was really, I think, the front end of an inflection point of really, people saying, this is a great way for us to think about how to really use the power of the interconnected edge at Equinix in new ways. And so, I think we're going to see great strength there. The Americas business performed -- '22 is just an amazing year for the Americas business. I think EMEA really demonstrated some strength coming off the back end of the interconnection price increases and continuing to really evolve that portfolio to the retail suite. And then Asia is our fastest-growing region at 17%. So again, I feel very good that we've got pretty comprehensive strength in volume and in price across products and across geographies.

Charles Meyers:

Sure, yes. Generally, I think that the book-to-bill, we have not seen any extensions of book-to-bill. I think in terms of quote to book, in other words, what's the sales cycle, I think we're seeing some anecdotal evidence of this sort of measure twice, cut once. But again, the team has -- is seeing strong conversion rates, solid pipeline and continue to feel good overall. So haven't seen any material change, although again, anecdotal evidence that you're seeing a little just caution in terms of customers really making sure that they're buying exactly what they need in the right amounts. And that's not surprising in sort of the macro kind of environment that we have. And then, Keith, I don't know if you have any further comment on book-to-bill and then xScale.

Operator:

Our next question will come from Frank Louthan with Raymond James. Your line is open.

Charles Meyers:

Sure, yes. I mean, the power pass-through is a really easy one to think through. It's on the order of $350 million on the revenue line and on the expense line. So -- and it's just -- and that's really what causes the 500 bp increase on the revenue line, obviously, without corresponding flow through to EBITDA. And so that impacts the EBITDA margin. But on a normalized basis, so as reported 45% guide but a normalized or excluding that 48%, which we think continues to look very good. And so -- and in terms of power price increases on the rest of the portfolio, I think we're seeing it -- we're going kind of across the board in space, power as well as in the digital services, making adjustments that we think are appropriate in the market. And part of that is just reflecting the increasing expense environment and some of the costs inside of the business that are going up. But then part of that is also just, I think, a really strong reflection of the value we deliver to the customer. And so, I think you're going to -- you're seeing the growth is certainly partially driven by strong pricing, and that's pretty consistent across the space, power and interconnect.

Frank Louthan:

And can you remind me what your average contract length is?

Frank Louthan:

Remaining, two to three years.

Frank Louthan:

What's the average kind of outstanding at any -- currently?

Frank Louthan:

Just in retail?

Charles Meyers:

Yes. And Frank, I'd offer that in a sort of -- we've become very adept at sort of managing and optimizing sort of the overall return profile in the business. And as you look at the current environment, which is strong underlying demand signal, high utilization rates in some markets, particularly we have some markets that are quite tight, it really gives us the opportunity as we look at how to optimize to not only sort of in a rising rate environment, look at how to optimize that and upon renewal, either take unutilized capacity and resell it at significantly higher rates or, in some cases, look to do that proactively. And so, I do think that, that works well for us as we continue to demonstrate that we've got a level of pricing power in the business.

Michael Rollins:

Just a couple of expense questions and then a revenue question. So on the expenses, as you close the books on 2022, if I'm looking at the slides, it looks like there was some impact both to revenue and EBITDA or expenses from the power pass-throughs you previously have discussed, Singapore. Can you share the funnel dollar amounts of impact that we should just be bouncing off of for 2023? And then as you look at 2023, are there incremental sales or product investments that we should be mindful of as we think about the types of opportunities, Charles, that you were discussing in the priorities to enrich the platform? And then I get to the final question of just, what are some of those examples maybe specifically on how you're trying to enrich the platform for 2023 and beyond?

Keith Taylor:

So Singapore, let me step back first. And when I talk -- when we think about Q4, which obviously is the most current guide, you see that we did slightly better than we guided to despite some of the movements. And as we sort of mentioned in the last call, we normally accelerate some costs into fourth quarter, largely for repairs and maintenance and some outside consulting work. And we expect it, our utility costs, to go up largely because of the seasonal aspect, less about the Singapore PPIs but the seasonal aspect. And part of the reason that we did a little bit better was those utility rates didn't go up as much as we anticipated. And then we've seen some moderation in price. Price and power is still inflated but moderated relative to some of our assumptions. So when you look at the fourth quarter, I would say that it performed exactly as we anticipated with a little bit of benefit attributed to power savings and really with the operating performance and then better revenues. Specifically to Singapore though, when we look at the sort of the net hit for Singapore last year, think of it in the order of magnitude of $50 million to $60 million. The reason I'm giving you a range is there was a substantial increase or a weakening of the U.S. dollar relative to the Singapore dollar. And so when you look at the net impact, it had a little bit of a knock-on effect on our results because obviously, you're absorbing a cost at a higher exchange rate. And so that would -- that gives you a sense of where we are in Singapore. As you then sort of fast forward to 2023, one of the things that we had mentioned in 2022 for the costs that we do not recover from Singapore in 2022 because we were out of market, market has moved to Equinix and part of the recovery that you're seeing and it's embedded in that $350 million is basically recovering cost that -- the cost increase in Singapore that we didn't recover in 2022. So it gives you a sense, there's think of, again, in the order of magnitude of $50 million to $60 million, is that number that you should be thinking about.

Keith Taylor:

Does that answer your question, Mike? I want to make sure that we -- because you're asking about the P&L. I want to make sure that we hit that question for you.

Keith Taylor:

No. I mean, it's relatively -- is consistent with what we said. I mean, part of what you're getting is a normalized versus a normalized without power pass-through. And so the difference between those two is we're saying that if -- we would have done a little bit better had we not been exposed to that Singapore exposure.

Keith Taylor:

Yes, definitely. Let me give you a little color on that, Mike. So we -- the investments that we were -- and I've talked about this in a few different forums, that we're holding a pretty tight line on G&A. We are definitely investing in the go-to-market engine so that's a clear area of investment. I think we'll be approaching closer to 700 quota-bearing heads. And so we've definitely made that investment. Some of those are -- many of those were already on board at our Connect sales event -- sales kickoff event and are raring to go for the year. But we're still adding some as we speak. Product is really not an area of significant incremental investment, but we are adapting sort of exactly how we're spending our product level investments. Scott Crenshaw has come in on the digital services side, and I think we're evolving our areas of focus. We're going to continue to focus on -- we think Metal continues to have significant opportunity. Network Edge is continuing to see momentum in the market. But I think evolving Metal to be a more foundational platform for the ecosystem to bring value to our platform is something we see a lot of value in. And so, we're excited about the VMC on Equinix that partnership with VMware. And I think that's sort of more of sort of the color of things to come in terms of more investment in the ecosystem. And so, I think that's something you're going to see. And then we're also going to probably make some efficiency and continued efficiency programs that we think are going to drive long-term, either power efficiencies in terms of PUE improvement, and/or labor efficiencies in the business because we do believe that at some point down the road, we're going to have to use margin expansion as a way to drive AFFO per share growth. If you look at the current guide, it's really being driven by top line growth and then flow through, right? And so -- and we're -- but at a very healthy margin. So absent the PPI, we're at about 48% margin, a little bit of an increase, about 10 bps from where we would have been in 2022. We would have been higher than that because we are delivering operating leverage on G&A and other areas of the business. But we've reinvested it into those areas that I just described for you.

Charles Meyers:

Sure. A couple of areas, one is definitely on that ecosystem enablement side. We've got to make it easier for partners to bring their value to the platform. And so I think in terms of how we think about enabling them from the software side with APIs, richer APIs and easier -- an easier experience for customers and partners improving our portal and our software level, programmatic engagement opportunities at the API level, that's clearly going to be an area of investment. And then making the platform easier to use and more consistent. I think we -- that's one of the things we've heard from our channel partners, making it easier for them to quote and order and deliver our services, that's going to be a continued area of investment for us as well.

David Barden:

I guess, Keith, you probably expect this question. But if I take your fourth quarter revenue and multiply it by four, I add the $350 million of power pass-throughs and I subtract it from the midpoint of your 2023 outlook, the math suggests that you're telling us we're going to see mid-$30 million per quarter sequential revenue growth versus what we saw in 2022, which was closer to mid-$40s million. And so, I just want to make sure I didn't mishear anything about the strength of the platform and other things that we might need to be concerned about. And then I guess my second question is, other than raising your revenue growth guidance over the course of the year, as we think about the June Analyst Day, Charles, what are you -- what kind of expectations do you want to set that we're going to hear when we get to the midyear time?

Charles Meyers:

So in terms of the Analyst Day, I mean, I think we'll -- that will actually be progressed well into the year, and I think we'll be able to give you a continued update on momentum in a number of areas. But I think we'll also continue to give you visibility in how we're evolving, driving the evolution to a more comprehensive platform value proposition. We'll really talk about being the infrastructure platform of choice for customers as they implement hybrid and multi-cloud as the architecture of choice. And so, I think updating you on what that means for our sort of traditional interconnected colo business and what that means for expansion of the platform, continued improvement of the customer experience. And then on the digital services side, how we'll continue to evolve the platform in terms of the service offerings with probably a real focus on Metal as a foundational piece of that. And then also on cloud networking. Networking is definitely an area of value add that we have always had for our customers and I think an area that we can continue to evolve the platform in terms of how we make it easier for customers to interconnect a variety of forms of infrastructure in a very cloud-centric world. And so, I think we'll talk you through those evolutions of the strategy and update you on where we're making investments and how we see the long-term outlook playing out as a result.

Eric Luebchow:

So just curious on your development pipeline, I think it's about as big as I've ever seen in terms of new expansion capacity. Maybe you can talk about, based on pretty tight industry supply, what kind of fill rates your utilization rates you expect to deliver on new development. Is it happening faster than it has in some historical periods? Then in terms of development cost inflation, have we started to see that cost curve flatten out? And do you think that, to some extent, could dictate how much your ability is to raise rents, excluding power pass-throughs as we look throughout the year?

Keith Taylor:

And Eric, let me just add maybe to what Charles has said. And again, in our prepared remarks, one of the things that was really important that we wanted to share with our -- the group here is the fact that we're funding the business. So, we not only have the cash on the balance sheet, we're bringing capital -- more capital on the balance sheet to fund 49 major projects that we've at least announced thus far across many metros. And we're going to be in 75 metros in not too far from now. So, you got a sense, one, the capital plan is increasing. We think we've got the supply chain well secured. We have a really good procurement team and strategic sourcing team that makes sure that we have the resources available. And then you've got a global design and construction team, they're doing just an excellent job delivering the capacity as quickly as we can deliver it. And it's tough out there in some markets. But I think it was really important to understand not only the volume there, we've got strategic planning, sourcing in place. We have the capital that we need. And we're setting ourselves up to fund all those things through 2023 and put us in a really good position as we start 2024. And so leverage is not going to shift in any meaningful way so it gives us that enhanced flexibility. And at the same time, we've all effectively prefunded a lot of the costs into the model, and we are now enjoying the benefits of this large expansion or this growth initiative that Charles has alluded to, both on the physical side and on the digital side. And so, it's the combination of all those things that really give us -- make us feel very good about our capital plan, our balance sheet and the liquidity position we're in right now.

Nick Del Deo:

First, Charles, you noted that interconnection adds were a bit soft due to seasonality, grooming and some virtual interconnections being consolidated. I guess, can you just expand a bit more on what's specifically driving those trends, the relative importance of each one and why you feel comfortable that it's going to normalize over the course of the year? And then second, in the current environment, you've got customers more cautious about spending in general but maybe more averse to capital outlays. Do you see that as sort of a net neutral for services like Metal or net positive or net negative? And do you feel like you're educating your customers appropriately today to take advantage of them?

Nick Del Deo:

Okay. And do you feel this current environment helps that selling proposition or kind of makes it more challenging?

Chip Newcom:

This concludes our Q4 conference call. Thank you for joining us.

Operator:

Good afternoon, and welcome to the Equinix Third Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Katrina Rymill, Senior Vice President of Corporate Finance and Sustainability You may begin.

Charles Meyers:

Thanks, Katrina. Good afternoon, and welcome to our third quarter earnings call. We had another outstanding quarter as global demand for digital infrastructure continues to grow, and customer preferences trend convincingly toward architectures that are highly distributed, persistently hybrid, deeply cloud connected and increasingly on demand. All factors fueling the Equinix position as a trusted partner in digital transformation. This vigorous demand backdrop fueled another great quarter, delivering record gross and net bookings, with strong demand across all three regions, resulting in our 79th quarter of consecutive revenue growth and further demonstrating the resiliency and durability of our business, even in the face of a complex and challenging macro environment. It is increasingly evident that the global pandemic has been a catalyst for a fundamental shift in how customers view digital transformation and its importance as a strategic imperative. And this commitment to digital transformation continues even in the face of a broader dynamic of belt tightening, as companies look to do more with less and see digital as a catalyst to both maximize revenues and optimize costs. While we continue to closely monitor macro conditions and adapt our execution accordingly, the fundamentals of our business remain exceptionally strong. Our expansive global reach and robust interconnected ecosystems continue to attract a wide and diverse customer set as they prioritize digital investments, and embrace platform Equinix as a point of nexus to support hybrid and multi cloud. This wave of digital infrastructure demand and our highly differentiated value proposition are translating to a robust pipeline, a highly favorable pricing environment and low churn, all fueling record performance across the business year-to-date and setting us up for a strong trajectory as we look to 2023 and beyond. As customers navigate rising interest rates and broad based inflation, they're benefiting from our scale purchasing power and our sophisticated capabilities in hedging, risk management and sustainability. Our operating scale and scope give us a variety of levers to manage an increasingly dynamic environment, hedging currency, power and interest rates, investing in advanced procurement teams, expanding renewables coverage and taking a programmatic approach to improving the efficiency of our world-class data centers, an advanced set of capabilities supported by a strong and flexible balance sheet. Specifically, on power, we have had a keen focus in this area and continue to feel confident in our position. Our approach to multiyear hedging is affording Equinix the visibility and predictability to communicate to customers in advance of expected power price increases, and is allowing us to deliver cost points to customers that remain highly favorable against spot rates in many markets, as volatility persists. While our aim remains to dampen this volatility for our customers through hedging, we do expect meaningful increases in power costs in many markets, and per our contracts, the full impact of these additional power costs will be passed on to customers. Overall, we believe we remain in a good position relative to competitors and the broader market. Turning to our results, as depicted on Slide 3. Revenues for Q3 were $1.84 billion, up 11% over the same quarter last year, driven by strong recurring revenue growth. Adjusted EBITDA was up 11% year-over-year with AFFO meaningly -- meaningfully ahead of our expectations due to strong operating performance. Interconnection revenues continue to outpace the broader business growing 13% year-over-year. These growth rates are all on a normalized and constant currency basis. Equinix continues to extend its leadership as the most interconnected platform with four on-ramp wins this quarter, bringing the total in our portfolio to more than 200 on-ramps across 44 markets. We now have 11 metros across platform Equinix enabled with on-ramps from all five of the leading cloud providers. No other competitor has more than one. In addition to placing critical networking nodes in on-ramps at Equinix, hyperscalers are also integral to our go-to-market notion as customers continue to aggressively migrate workloads to the cloud and demand cloud proximity for their own private cloud implementations. As indicated in our recently published Global Interconnection Index, current trend lines indicate that more than 80% of Global 2000 companies will be interconnecting with more than four hyperscale providers and over 30 SaaS providers or other business partners, on average by 2026. We're continuing to invest behind the momentum we're seeing in our data center services business with 46 major projects underway across 31 markets in 21 countries. We continue to build capacity under our xScale offering, including 10 ongoing xScale projects that we expect will deliver another 80 megawatts of capacity once opened. This quarter, we added six new projects, including new data center builds in Barcelona, Tokyo and our first organic build in Jakarta, Indonesia. Our new IBX in Jakarta will add a strategically important high-growth market to our platform, as we look to enable local businesses and global organizations to unleash Indonesia's digital potential. This commitment to market leading reach continues to drive our business with customers operating in all three regions, now accounting for an amazing 64% of our recurring revenues. Key customer expansions this quarter included StackPath, a leading edge computing platform provider, which expanded into Dubai and Mumbai to support the growth of its worldwide edge compute delivery and security offerings. A win with a global multinational airline leveraging Equinix to connect to their federated ecosystem of partner airlines, as well as a significant multi metro expansion with one of the world's largest custodian banks, deploying across all three regions and utilizing the full suite of Equinix digital services. On that note, our digital services portfolio saw continued momentum as companies increasingly demand infrastructure and interconnection services that can be delivered as a service and on demand. Equinix Metal had a strong bookings quarter as customers leverage flexibility and agility across multiple metros. Wins this quarter included a major design win with a global SaaS provider and a significant expansion with a leading pediatric treatment and research facility using Network Edge and Equinix fabric to create an edge hosting environment in key U.S. metros and enable seamless and high-performance connectivity to their cloud partners. In Q3, we added an incremental 7,300 interconnections and now have over 443,000 total interconnections on our platform. Equinix Fabric had another strong quarter as interconnection diversity continues to increase. Expansions this quarter included Colt Technology Services, further expanding its footprint in Europe and interconnectivity with Equinix Fabric to optimize performance for its customers, as well as the financial software tools and enterprise applications provider implementing a global network optimization project leveraging Equinix Fabric. Internet Exchange saw peak traffic up 8% quarter-over-quarter and 28% year-over-year to greater than 27 terabits per second, representing the largest peak traffic growth since prior to the pandemic. Our channel program delivered a six consecutive record quarter accounting for 37% of bookings and approximately 60% of new logos, and remains a critical vector in how we are expanding our reach and scaling our go-to-market engine. We continue to see particular strength from strategic cloud technology and systems integrator partners like AWS, Cisco, Dell, Google HPE, Infosys and Microsoft. This segment accounted for approximately half of our channel bookings, and continues to grow in both deal dollar -- deal and dollar volume. With these partners, we jointly offer a blend of IT and networking technologies that will allow customers to interconnect seamlessly with hyperscale cloud and other as a service providers, and benefit from solutions that deliver optimal performance, cost, security agility and scale across our global platform. Channel wins included a U.K insurance firm with Equinix Partner Softcat for a data center consolidation and modernization project at our London campus where technology elements from HPE, Cisco and Palo Alto Networks are being brought together in a cloud adjacent architecture, all directly interconnected to Microsoft and AWS. Now, let me turn the call over to Keith and cover the results for the quarter.

Charles Meyers:

Thanks, Keith. Our results this quarter continue to reflect strong execution by our global team and highlight the unique position that Equinix enjoys in facilitating digital transformation. As we continue to deliver exceptional business results, I want to also highlight our significant progress in advancing our future-first sustainability commitments. This quarter, in addition to our continued investments and commandments around the environmental sustainability, we're very pleased to have launched the Equinix Foundation, an employee-driven charitable organization working to advance digital inclusion through philanthropic grant making and strategic partnerships. The foundation reflects our ongoing commitment to social sustainability. And we're excited about the work we can do to build a better, more inclusive, more sustainable world, harnessing and amplifying the passion of our people to help close the digital divide in our communities across the globe. As we advance Q4 and position for 2023, our highly differentiated position continues to drive strong momentum, robust customer demand and a deep, high quality pipeline. We're delivering sustained growth at the top line and AFFO per share, while maintaining our clear focus on driving operating leverage across our business. We continue to effectively exercise multiple growth levers including expanded market reach, enhancement of our product portfolio, accelerated new logo capture through our multi channel go-to-market engine, pricing adjustments that reflect our exceptional value, and a commitment to a bold innovation and sustainability agenda, all of which demonstrates the resilience of Platform Equinix and highlights our ability to deliver distinct and durable value to our customers and our shareholders. So let me stop there and open it up for questions.

Jonathan Atkin:

Thanks. Got two questions on energy. One is, Keith, if you could maybe refresh us on what portion of cash OpEx this quarter was for energy? And then on the PIs that you're pushing through starting next year, can you talk a little bit about to what extent it applies to customers that are in the middle of their contracts versus renewables and new contracts? Thanks.

Charles Meyers:

Yes. And on the PIs, Jon, the -- look, the way our contracts reads, we're not impaired in any way from putting those through -- during the -- of course, the contract. So they're not limited to when you take renewals. So just sort of backup and give you a view on, we talked a little bit about it in the script, but I think that we will give you details, more details when we do the '23 guide. But I think thanks to some really incredible work by our teams, we feel really good about where we are on that -- on the PI issue and on power generally. I think we're about 90%-plus, or more than -- well over 90% hedged in our deregulated markets, and we're going to be topping off those positions in the coming weeks and months. And we've already communicated those planned increases to customers, and are generally able, as Keith mentioned in his script, they will provide them with cost points that are meaningfully advantageous relative to current spot in those markets. So, I think we're going to -- we're in a really good position there. I think we're going to be able to pass a few. Obviously, they're not yet passed through, because we're still operating at our hedge rates from this year. But as they adjust, we've given them the advanced visibility to what they expect to see. And I think broadly speaking, they knew it was coming. And I think in a lot of cases, they're pleased to see that it's not quite as bad as they had feared it might be.

Charles Meyers:

Yes, Jon, I do think Cloud Repatriation does happen, but I think it's probably getting more airtime than maybe it's -- it really is appropriated. I mean, I think we're still very early in the movement of clouds from traditional IP architectures into cloud. And that's what we continue to see and well, I recognize, we did see some slowdown from the cloud providers

Simon Flannery:

Great. Thank you very much. Good evening. Just a couple if I could. Just continuing on, it's great to hear that strong demand trends, are you seeing any softness anywhere, any kind of whether it's Europe or whatever? One of your competitors talked about small enterprise is on pressure at the margin there. It seems like -- there's certainly some caution around the uncertain and macro environment. And if you put through some of these power price increases, does that change some of the profitability dynamics for some of these companies? And then just on margin, some really good performance I saw in, particularly in the Americas this quarter. Maybe you can update us on the 50% target and how Singapore is playing out as we exit 2022? Thanks.

Simon Flannery:

Great. Thank you so much.

Simon Flannery:

Right. Thank you.

Michael Rollins:

Hi, good afternoon. First, on the stabilized constant currency revenue growth 7% year-over-year, can you unpack that in terms of what was driving the strength between whether it was utilization, just overall pricing, interconnection, et cetera? And then, second topic is on capital allocation. And just curious in the wake of higher rates, if you're considering any changes to the pace and breadth of the development strategy. And as the AFFO dollars are approaching the combination of non-recurring CapEx and the cash dividends, what does Equinix want to do with the balance sheet flexibility that you were describing earlier in the call? Thanks.

Keith Taylor:

And, Michael, just going to the -- maybe just a couple of things. One of the things that you've probably noted in our same-store reporting in the earnings deck is you can see that a lot of the value on a stabilized basis is coming from colocation and interconnection. In fact, interconnection on a stabilized basis is up 10% year-over-year on a constant currency basis, whereas colocation is up 7%. It's been diluted a little bit by the other services, which is only up 5%. And then nonrecurring is down quarter-over-quarter largely because of the one-off nonrecurring fees that we get from the xScale business. But overall, you're seeing the strong -- just to validate what all that Charles said, it's just you can see it in that slide just perfectly. As it relates to the balance sheet, if you wouldn't mind, I would like you to reframe the question just one last time. I want to make sure we get it right and respond to. So could you just ask that question again on where we are vis-à-vis our capital allocation?

Keith Taylor:

Yes. So thank you on that. So first and foremost, I think we fancy ourselves as pretty darn good capital allocators. We -- also we want to invest in the highest returning investment we can make as in the organic business, and we're going to continue to focus on that. No surprise, this quarter, we have 46 projects currently underway across 31 markets in 21 countries. So we remain very active and we want to continue to grow and expand the business horizontally. At the same time investing quite openly on the vertical side of the investment, which is digital services. So you're going to see a combination of the two and as we look into 2023 we will give you more guide on that. But suffice it to say that we -- there is an appetite to continue to invest in the business. And we really get to enjoy the cash flows we generate in the business, and low payout ratio to basically self fund that for all intents and purposes. So I feel extremely good about that. As you look forward, then, again, we are trying a little bit excess cash right now. We saw an opportunity in the market, in the quarter, pardon me, to pull down a little bit of our ATM. And so we settled some stuff that we did in Q2 this quarter. And then we also we sold some in the quarter in and of itself at 690 -- I think the average was $697 a share. And so we chose to do that because we knew we're going into periods of volatility. And we wanted to make sure that we could fully effect the use of our cash flow and invest in the long-term growth of business, which is really an expansion capital, while also investing in digital services. So that's what you're going to continue to hear us talk about. And then we're also being very judicious about -- I've spoken quite openly about we want to raise more debt even in the current environment. But the question is, where do we source that debt from? And can we take advantage of different markets around the world based on prevailing cost to borrow? That's all -- you'll hear more about that. But suffice it to say, I think you'll see more debt activity over the coming quarters than otherwise. You'd see with ATM. And then just as it relates to investment and capital, yes, I know the cost of capital is moving up. But we -- the benefit of our model is and for all the reasons you just heard Charles speak about, we get a really good return on our assets, our stabilized assets are getting 29% on them and on a gross PP&E invested. So anytime we increment that, knowing that we're keeping our costs well in check here, that you're going to get a nice incremental return. And so from our perspective, we're not arbitraging over our cost of capital. We're driving real value into the business for our customers and for the future. And as a result, we want to continue to make that investment. And we'll be very wise about what we raise in the form of capital to fund our growth, knowing that you've got a dividend that's growing, and you've got a business that's growing. And as a result, we got to fund not only the business and also the capital redeployment back to the investor. So I think it's a great question you're asking. We spent a lot of energy on it. I've got a fantastic treasury team that work underneath us. And we're looking at all ways to source our capital and fund value on a per share basis to the business. And so stay tuned.

Michael Rollins:

Thanks.

Unidentified Analyst:

Hi. Good afternoon, everyone. This is [indiscernible] for Dave. Just, Charles, maybe just on those comments that you just made in terms of building out more capacity. Are you seeing any issues just similar to what's going on in Northern Virginia and other areas of the world of power transmission issues or power procurement issues?

Unidentified Analyst:

Perfect, thank you. And then maybe if I could just ask one more. Just you completed Entel and then you announced a smaller deal on Latin America. Do you just kind of walk us through the Latin America strategy and where you kind of see that, that business going?

Unidentified Analyst:

That's great. Thanks so much, Charles.

Aryeh Klein:

Thank you. Maybe following up on churn, it's been low for a while here, as we move into potentially tougher macro and you ask customers to absorb kind of the forefront [ph] to the price increases. Is that something that, that you would expect to tick up?

Aryeh Klein:

Thanks. And then, Keith, I think you mentioned some of the timing related to some spending during the quarter. Looking at Q4, the margin for the quarter are towards the lower than they've been in a long time, the implied margin. How should we think about the spending in the fourth quarter and how that may be carried into 2023?

Charles Meyers:

Just to give you a little more transparency on, so -- what some of those are, we're pulling forward some R&M [ph], pulling forward -- just finishing out some projects that we are focused on both on the go-to-market side, and on the product side to -- to really give us that, the momentum going into next year. We gave a little bit more -- little wider berth to the teams on T&E in Q4. Because we really continue to believe that getting our teams reconnected both to our customers and to each other is important. And I think we're really seeing the dividends of that. And so -- but we're -- we definitely have not lost the plot in terms of our focus on operating leverage. In fact, if you look at our SG&A line, it's flat quarter-to-quarter and that's in the face of increasing investment in sales and marketing. And so that implies that we're sort of tightening down on G&A. And, even though, we're adding headcount in very targeted areas to support a very healthy organic performance of our business, we're also really tightening down in areas of the business in recognizing that we continue -- have to continue to have a focus on automation and simplification and efficiency. And we got to get that G&A leverage that we need in the business over time. So, we -- there's -- we're trying to make good balanced decisions on that front. And, again, we'll give you more perspective and cover what that means. But feeling very good about the trajectory of the business as we exit towards the end of the year.

Operator:

The next question is from Sami Badri from Credit Suisse. Go ahead. Your lines open.

Keith Taylor:

Okay. Well, let me maybe just start with the ranges. So first and foremost, we want to have a go-to-market engine, the customer facing teams wanted to have some dialogue with the customers on sort of power increases. And so first of all, it was really everybody is seeing what's going on in the broader market, particularly in Europe. And as a result, making sure that you're sort of advising the customers that there is going to be effective power increase at some point. The second value was effectively, look, depending on where you are, one market is very, very different than other markets. Some are regulated, some are unregulated. This is the sort of the range that you should expect. As both Charles and I have mentioned, we've got a sophisticated hedging program. We basically solidified what we think is a good portion of exposure for next year. And so we have specific information on that. And so we give them a range of what that could be. And again, as market specific, is volume-specific as application specific, again, customers, there's going to be a wide range for these customers depending on where they operate. And the third value will be in the not-too-distant future here is your specific increase. And so part of it is just making sure that the customer is fully understood that we're communicating with them. And we got it with -- and we give them enough time to understand what was going to happen, particularly as they start to think about their -- sorry, 2023 planning cycle. And so that was -- that's the first part. To give you something specific about what -- look, I could tell you, in some markets, if you look at spot, you're talking about multiples of increase, particularly in the U.K. market. That's not where we are as a company. We've done a very good job of buying forward and making sure we have a good position with. And I think our customers, as we said, we think we will be in a better spot relative to our competition. and we will be certainly well below what I think prevailing market rates are. So that's the positive. That is a European discussion. As you look at Asia and Americas, it's a different dialogue. You've got a much more structured increase. And overall, I feel very good about that. I think one of the things that you should walk away though, is understanding that the company is almost wholly hedged for next year. And certainly, Europe is even more hedged than the broader company. And so that's the one thing, I think, is really worth noting here. Because last year, we had some exposure to Singapore. We feel much better where we are going into '23 on Singapore. As we said to Michael, we would go to -- come back to the market and the market would come to us and all indications is the market is coming to us. And as a result, we will pass-through those incremental costs as well. So hopefully, that helps you a little bit, Sami, but I can't give you a specific range. It's very -- it's market and customer-specific.

Sami Badri:

Yes.

Charles Meyers:

Yes, it was around the general trends in extended cycles and are we seeing tighter IT budgets and those kind of things. Look, as I said, what we are seeing is generally a substantial commitment to the digital transformation agenda. And that doesn't mean people aren't seeing the need to tighten their belt on IT in other ways, but typically, we see that they are not -- they are trying very hard not to sort of distract their agenda in terms of the move to hybrid multi cloud as [indiscernible] choice. And I was just reading something from Gartner the other day in terms of just looking at how important is a particular IT project to your sort of digital agenda? And what is it going to do to impact your competitiveness to drive top line growth to save money, et cetera? And we continue to see a vigorous commitment to those kinds of things. And so -- and we have -- generally -- and Keith talked about this, both in terms of our cycles -- sales cycle and our backlog have not seen extensions of either of those things. And so sales execution has continued to be very, very good. Pipeline continues to be strong, pipeline execution and conversion continues to be strong. And so we're not saying it doesn't exist, although we're -- but what we would say is that the demand profile and how it's translating for us in bookings and pipeline is very, very good. And we're continuing to invest in the business accordingly.

Charles Meyers:

Sure. Well, definitely, I think, it can be 2x to 3x and more than that -- than its current size, for sure. I think it can be -- so we definitely believe it's a meaningful business going forward for us. I also think we want to see it be more fully integrated. In fact, I think that is feedback we're getting from our customers is we love your individual digital services, but they don't work as effectively as an integrated platform as we would like. And so Scott, who franchise who joined us is sort of out there talking to customers, hearing what's on their mind, that has been a topic. And we're really continuing to align our product and development agenda to ensure that we are addressing the needs that the customers have. And so we do believe that an integrated platform, if you look at network edge, fabric and metal, we think that's a compelling combination of offerings for customers as they look to implement digital transformation strategies in hybrid and multi cloud. And so -- but I think it's important that we really continue to view that as giving them the right sort of portfolio of services to meet their needs. We think that actually public cloud will be a great home for a significant portion of their workloads. We definitely see sometimes repatriation back to either a colo-based solution or a metal type-based solution that allows sort of different level of economic scaling and utilization is something that happens. But we are -- we want to respond to the needs of the customer and have the right solution for them. And so when that's cloud, that's great. Move the workloads to the cloud, we will give you the connectivity you need to connect it to the data and other applications you need to have it perform well, and we will distribute that infrastructure around the world. And so, I think us being able to go in with that trusted adviser status with the customer is really what's driving the business. But we definitely see a big opportunity in metal and I think -- and with the broader digital services portfolio as continued. And as we've said in the past, it's growing at a multiple of the rate of our -- of the broader business.

Operator:

And our last question today is from Matt Niknam from Deutsche Bank. Go ahead. Your line is open.

Charles Meyers:

Sure. Clearly, we are not going to give you a sort of a guide for next year, and we will give you that early. I guess I'd sort of reposition the question to simply tell you that if you look at our performance of what we said we would do at Analyst Day -- at the Analyst Day and what we've now done, I think we continue to feel really good about the trajectory of the business. Top line growth is strong, stronger than outside of the bounds of what we had said. I think that -- and I think that's really on the strength of underlying business momentum. And so -- we feel really good about the trajectory going into next year from a top line growth standpoint, too. I think growth will be a little wind assisted on PPIs next year, but I think we will give you clear transparency on what that is. But I think it's going to be on top of really strong underlying momentum in the business. And we think that's translating into the AFFO per share sort of growth that we think is needed and attractive. And then you combine that with a healthy dividend yield -- and we think it's a great story. So generally, I would say feel good about the momentum. Top line growth is good. We are going to continue to focus on operating leverage. And we think, therefore, we are going to be able to deliver strong performance on an AFFO per share basis. Keith, anything to add there?

Matthew Niknam:

That’s great. Thank you.

Katrina Rymill:

Thank you. That concludes our Q3 call. Thank you for joining us.

Operator:

Good afternoon, and welcome to the Equinix Second Quarter Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Chip Newcom, Director of Investor Relations. You may begin.

Charles Meyers:

Thank you, Chip. Good afternoon, and welcome to our second quarter earnings call. On the heels of a record Q1, we had an outstanding Q2, with strong and sustained demand across our product portfolio, broad pricing momentum and solid sales execution, with particular strength in Americas and EMEA, resulting in record growth and net bookings and our best-ever quarterly revenue step-up. As our customers progress and accelerate their digital transformation journeys, the relevance of Platform Equinix continues to grow. In our recent global tech trend survey, nearly 70% of the 2,900 IT decision-makers polled indicated their intention to adopt private or hybrid as their cloud architecture of choice, with over 45% of those polled working with 3 or more cloud providers and over 80% indicating their intention to sustain or increase their spend on interconnection. Today, we're seeing this demand for interconnected digital infrastructure across our regions. This quarter's bookings sizably surpassed the prior peak, a great indicator of the strength of the business and our go-forward pipeline. Our business remains resilient and highly diversified, with nearly 1/3 of our 10,000-plus customers closing incremental business in any given quarter. Despite macro conditions, this customer demand, paired with lower-than-expected churn, is driving us above the upper end of our Analyst Day revenue guidance this year and benefiting our AFFO per share guide, with the impact of pricing increases still largely unrealized. Turning to our results. As depicted on Slide 3, revenues for Q2 were $1.8 billion, up 10% over the same quarter last year, representing our 78th consecutive quarter of top line revenue growth, a clear reflection of the durability of our business model across economic cycles. Adjusted EBITDA was up 8% year-over-year, with AFFO meaningfully ahead of our expectations due to continued strong operating performance. Interconnection revenues continue to outpace the broader business, growing 13% year-over-year. These growth rates are all on a normalized and constant currency basis. Customers continue to embrace Equinix as the best manifestation of the interconnected digital edge. And we continue to scale, extend and innovate across our data center services portfolio. We now have 49 major projects underway across 34 metros in 21 countries, with 13 new projects this quarter, including new data center builds in Dublin, Montreal, New York, Paris, Warsaw and our first build in Chennai, India, the first of several anticipated metro expansions in this fast-growing market. Our unparalleled global scale and reach continues to be a strategic advantage, driving success with service providers looking to extend their reach and rapidly implement as a Service models and with enterprise customers across nearly every sector of the global economy as they modernize their infrastructure and embrace hybrid and multicloud. Wins this quarter included a multinational energy conglomerate, implementing their hybrid cloud strategy across multiple regions, leveraging Network Edge and Equinix Fabric, and F5, a global technology leader in application security and multicloud networking, establishing additional networking nodes in all 3 regions to better support their customers. In May, we closed our acquisition of 4 data centers from Entel, extending Platform Equinix into Chile and bringing our global footprint to 70 metros across 31 countries. Equinix has a decade-long history in Latin America, and this acquisition provides significant expansion capacity, enabling both local businesses and multinationals the opportunity to accelerate their digital transformation and our Lat Am aspirations. We also expect to close on the acquisition of one additional data center from Entel, extending our reach to Lima, Peru in Q3. As the world's digital infrastructure company, we believe it's our responsibility to help bring about a more sustainable future. In 2022, we continue to advance our bold future-first sustainability strategy and are pleased to have been recognized by Sustainalytics as among the best large-cap REITs for ESG and to be ranked seventh on US EPA's National Top 100 list of the largest green power users. We continue to accelerate the transition to cleaner energy grids and recently executed our second Virtual Power Purchase Agreement in Finland. Once operational, these 2 new wind projects, combined with our prior projects, will bring Equinix' total renewable VPPA capacity to 300 megawatts, and we continue to explore additional PPA projects across all 3 regions as we progress towards our goal of 100% clean and renewable energy. Turning to our industry-leading interconnection franchise, we're seeing continued diversification of our ecosystems and robust activities, including a win with Fast Shop, one of Brazil's largest electronics retailers, who chose Equinix to help strengthen interconnection for its digital core, improved cloud connectivity and integrate with the digital retail ecosystem. In Q2, we added an incremental 7,600 interconnections and now have over 435,000 total interconnections on our platform. Equinix Fabric saw a notable increase in provision capacity as channel enablement is driving network resale use cases and customers are increasingly using inter-metro connections on Fabric to connect across their deployments, including a win with Zivver, a cybersecurity company in the Netherlands using Equinix Fabric to connect deployments in Amsterdam and London to provide connectivity for its customers as part of its business expansion. Internet Exchange saw peak traffic up 4% quarter-over-quarter and 25% year-over-year, to greater than 25 terabits per second. Pivoting to our digital services portfolio. We continue to see strong growth and significant opportunity as customers increasingly leverage more Virtual as a Service and Edge solutions. Equinix Metal had a strong bookings quarter as partner-driven solutions like Pure Storage and Dell PowerStore on Equinix Metal are driving performance-centric hybrid cloud opportunities with enterprise customers. Network Edge also had a strong quarter, with a notable increase in large multi-instance deployments from enterprise customers. Both Metal and Network Edge are also driving attractive revenue pull-through to Equinix Fabric. Digital services wins this quarter included Protocol Labs, an open-source R&D lab, increasing its usage of Equinix Metal to support projects that decentralize the web and cloud storage, and a leading waste management services provider, leveraging Fortinet on Network Edge to connect their business units in Asia to their data centers in the U.S. across Equinix Fabric. Our strategy remains simple, to translate our unique and durable advantages into being the platform where buyers and sellers of digital services can come together, enabling them to deploy and interconnect the infrastructure that they need to transform their business. For service providers, demand remains robust as businesses around the world are planning major investments in digital technologies to support ambitious expansion plans following lessons learned from the pandemic. This year, Gartner projects that global spending on public cloud services will reach nearly $500 billion. And we're seeing strong demand across multiple vectors with these key cloud and IT customers. In the quarter, we added 3 new cloud on-ramps in Paris and London and now have nearly 200 on-ramps to the major cloud service providers deployed on our platform, making Equinix the home of hybrid multicloud. We also continue to see tremendous success supporting our hyperscale partners as they invest in subsea cables to facilitate the rapid growth of Internet traffic between continents. And in addition to being an integral part of hyperscale architectures, we continue to drive go-to-market alignment with these market-shaping players, partnering to meet end customer needs for hybrid cloud and making the hyperscalers some of our most productive channel partners. Hyperscaler demand for our xScale offering also remains robust. We had high leasing activity in Q2, pre-leasing our entire Dublin 6 asset, the first phase of our Paris 13 asset and the second phase of our Frankfurt 11 asset, representing more than 38 megawatts of capacity. Looking across the various xScale JVs, we've seen strong demand, with over 170 megawatts now leased across our portfolio. And we currently have 11 xScale builds under development, of which more than 80% is pre-leased. On the enterprise side, Gartner also continues to view digital transformation not as a 1- or 2-year trend, but as a systemic and long-term theme. Our pipeline strongly supports this thesis, and our enterprise activity this quarter was robust with Americas and EMEA regions driving record bookings, with particular strength in banking and health care. Expansions included a leading U.S. health care software vendor, creating an edge hosting environment on the West Coast, and the Hertz Corporation, one of the largest worldwide vehicle rental companies, who deployed on Platform Equinix to support its digital transformation journey, locating infrastructure proximate to cloud providers and tapping into our digital solutions. And once again, our channel program continued to thrive, delivering its fifth consecutive quarter of record bookings, including strong performances for our EMEA and APAC regions, accounting for more than 35% of bookings and nearly 60% of new logos. Wins were across a wide range of industry verticals and digital-first use cases, with hybrid multicloud as the clear architecture of choice. We saw strength from strategic partners, like AT&T, Cisco, Dell, Google and Microsoft, and including a win with Orange Business Services for -- a security services technology company, to deploy their payment card encryption solution while interconnecting to our financial services and cloud ecosystems. We're also proud to have been named HPE GreenLake's Momentum Partner of the Year for 2022 as we together work to deliver a consistent hybrid and multicloud experience for our joint customers. Now let me turn the call over to Keith and cover the results for the quarter.

Charles Meyers:

Thanks, Keith. In closing, we had an outstanding first half of 2022, and our business continues to deliver strong and consistent results. Despite a challenging macroeconomic and sociopolitical landscape, demand remains robust as customers continue to invest heavily in digital transformation. And as infrastructure needs evolve, Platform Equinix is increasingly relevant as a point of nexus in IT architectures that are more distributed, more hybrid and more cloud-connected, giving us a distinctive value proposition and meaningful pricing flexibility. The emergence of the cloud continues to disrupt the multitrillion-dollar global IT market, fueling both our hyperscaler relationships and our broader service provider business as successful new entrants extend and expand their infrastructure to drive revenue growth and traditional technology leaders build out distributed delivery infrastructure as they transform to as a Service models. We continue to invest behind this momentum, both in expanding the reach and scale of our data center platform and in accelerating the evolution of our digital services portfolio, which is seeing strong customer interest. In that vein, we're pleased to welcome Jeetu Patel and Fidelma Russo to our Board of Directors. As veteran operating leaders at Cisco and HPE, they bring deep knowledge of both technology and go-to-market aspects of the evolving digital infrastructure landscape. And we're excited about their contributions as we continue to innovate our service offerings for the digital leaders of today and tomorrow. So let me stop there and open it up for questions.

Matthew Niknam:

Congrats on the quarter. Just first, maybe on bookings. So you talked about record quarterly gross and net bookings, Americas and EMEA leading the way. I'm just wondering if you can talk a little bit about how trends evolved over the course of the quarter and whether you've seen any moderation, maybe either late 2Q or early 3Q, just in light of the macro backdrop. And then one follow-up. Keith, you mentioned the $400 million in ATM, equity issuance. I'm just wondering, with leverage under 4 turns, can you talk about the strategic rationale for the issuance and how you're thinking about potential uses.

Keith Taylor:

And Matt, sort of responding to the second question, as it relates to using our ATM, first and foremost is, as you probably heard in the prepared remarks, we've done that on a forward basis so we haven't pulled down the equity yet. And part of it I think is, look, there's a lot of disruption in the marketplace. And one of the things that we know is we're going to continue to build. As you heard, we announced 49 new product -- we have 49 projects underway. We added 13 new projects this quarter. We're closing on the acquisitions, and we're going to continue to fund these dividends. As we think a lot about what we need, not only through the rest of this year but through the end of next year, we want to make sure we bring balance to the market, balance to our capital plans, but also recognize that there was volatility in the marketplace. And so we basically did a forward sale through a number of transactions at $680 a share over the quarter. We're very selective in our timing as you can appreciate. And we just felt that it was a good thing to add to the overall liquidity position of the business. Let me just also, just sort of say one last thing. As you step back and you recognize the momentum in our business and what Charles has just -- what we said in the prepared remarks, but certainly what Charles has also spoken of, the momentum in our business is substantial and the investments that we're making in our assets is going to continue to be substantial. As a result, we want to make sure that we have sufficient liquidity in these periods of great uncertainty. And so raising capital at a time when you can is appropriate, so using the cash on our balance sheet, using our equity. And of course, as you can appreciate, we're going to be looking at some debt structures as well to augment our liquidity position so that we don't have to worry about that next decision, which is what will we do if an opportunity presents itself. So again, it's more about being prudent, having balance, supporting our ratings and at the same time, creating liquidity in the balance sheet for future decisions.

Aryeh Klein:

Same-store revenue growth was the best it's been in a while. I think, last quarter, you mentioned you got a 50 basis point benefit from energy. Is that still the case? And then can you talk about the pricing strategy outside of energy? It sounds like you are increasing prices. So can we see increases above and beyond the 2% to 5% that you've received historically?

Aryeh Klein:

Got it. If I can just follow up, is there point at which the higher prices force companies to start to reevaluate their objectives around data center expansion and whatnot?

Operator:

And our next question is from David Barden with Bank of America.

Charles Meyers:

Sure. David, I'll start, and I'll probably not be able to resist the chance to answer some of the second one, in addition. So -- and then -- but I'll hand it over to Keith. As for the broader question on recession and potential impact to the demand backdrop and in particular, around exposure to failures, business failures and weaknesses that, that might represent in either startups or those types of companies, as I said, right now, we're seeing no waning of demand relative to people's investment in digital transformation. In fact, I would argue, that I think as they look forward to a potential recessionary environment, many of them are using that either to try to reduce costs by modernizing their IT infrastructure and moving to hybrid and multicloud with greater agility in their IT footprint and architecture. Or they're using that as a fundamental driver of competitive advantage and therefore fuel to their top line, that I think they don't believe they can afford not to invest in. And you're seeing that in virtually every sector. You look at retail, for example, and that's a classic example of a sector that people are saying, oh, boy, recession could clearly impact consumer wallet spend and retail would suffer from that. Well, we are not seeing that show up in terms of their decision-making around their commitment to digital. They simply can't afford not to be prepared for the digital future. And so we see real strength in that sector. Same could be said for various elements of banking and financial services, which people say could feel some of the sting, and yet they continue to invest. And so every quarter, it seems that we give you a different set of sectors that are demonstrating strength in our business. And I think that's just a reflection of just how durable that demand profile is. And so we're keeping a close eye on it, but our previous experience in recessionary environments as well as the current pipeline would lead us to believe that demand continues to be strong. And frankly, we're investing behind that. We're going to be prudent and appropriate and watch it carefully. But we're going to put more quota-bearing heads on the street, given the level of demand that we're seeing in the business. As to startups, honestly, our exposure is relatively limited. Startups often start in cloud. And only as they scale, they move to hybrid infrastructures. And so we don't see a lot of exposure there. And we have not seen sort of business failures or pullback in those as any kind of meaningful contributor to the business. On the short thesis, I would just tell you that I think it represents an underdeveloped understanding of the data center market and the relative position of various players because I think that as I said -- as we said in the script in various ways, our relationship with the hyperscalers, which is a key part of that thesis, is significant, both in terms of our underlying contributions to their architecture in terms of network nodes, on-ramps, et cetera, as well as our alignment with them from a go-to-market perspective. Because we are -- in fact, they're amongst our most productive channel partners as they are selling large multimillion, sometimes multihundred, million-dollar contracts to players that are implementing cloud. Those customers want an answer to what they're going to do with their private infrastructure and how they're going to place that proximate to the multicloud and how it's going to perform. And those are the answers that we're providing. Those are the questions that we're providing the answers to. And so I think that we continue to feel like that this notion of us, sort of that this is a sort of a zero-sum game between us and the hyperscalers, I think, is just not an accurate view of the marketplace. And so -- and then on the broader returns, again, I would say, yes, our business is dramatically different on a return basis. Look at our same-store sales and look at the 28% cash-on-cash returns of those, growing at 7%, which is what we demonstrated this quarter. That is a very, very different story than virtually any other player in the industry can give you. So I couldn't resist stealing that question from Keith. But Keith, please feel free to add your two cents.

Charles Meyers:

Well, and just to be clear, that last statement in terms of the percentage was relative to xScale. Our broader business with hyperscale is just meaningfully larger than that. It's a $1 billion-plus business outside of xScale run rate and growing nicely because we play a very critical role in that infrastructure in terms of what they do inside of our retail facilities around the world and because of our relationship with them on a go-to-market alignment perspective.

Michael Rollins:

A couple of questions, if I could. First, just on power. If you can give a little bit more detail of what you're seeing in terms of not just power cost in Europe and other markets where there could be issues, but also power availability. And how should investors frame the risk of the supply side of the equation? And then just switching gears over to the change in the annual organic revenue growth guidance, can you give some additional details of as the -- you've seen that evolution in guidance over the last couple of quarters. Where is the relative strength coming from in terms of regions and/or verticals?

Michael Rollins:

And just while we're on the topic of power, maybe before getting to the revenue question, just one other follow-up. Any update on Singapore, which is a larger discussion during the 4Q earnings call?

Michael Rollins:

And then just the regions and verticals of relative strength as you've increased your organic constant currency revenue growth guidance.

Keith Taylor:

Yes. And Mike, maybe just adding a couple of points to Charles' comments. When you look at our overall growth, we telegraphed above sort of Analyst Day guide and said that we can grow the business on a normalized and constant currency basis, so normalized, taking out the acquisitions by 10% to 11%. And of that 10% to 11% of growth, roughly 60 basis points is power -- roughly 60 basis points are power price increases that we sort of initiated at the beginning part of the year. So you can see that the core business is performing just phenomenally well. And the U.S., the Americas business specifically, is performing exceedingly well and growing at 10%, 11%. It just gives you a sense of the momentum. And it's across the verticals and it's in the markets that we're fueling basically the capacity. You can also see that we're building in 13 new projects -- there's 49 projects in total, and we call them major projects. There's much more than 49 projects underway, but 49 major projects underway, a number of -- 34 markets, I think, 21 countries. So we're building across the portfolio. And just as a reminder to everybody, the majority of our growth comes from the installed base. 90-plus percent of our bookings is coming from that installed base. And so despite the fact that we don't -- we're seeing the concentration decrease, but the dispersion increase. And that's just -- that's a phenomenal aspect of our business model. And that -- and then the last thing I would just say is our pricing has been strong. Again, another quarter of net positive pricing actions, notwithstanding all the comments that Charles made, which is those are things we'll see in the future, but the relationship of a price increase to a price decrease this quarter was 3.2:1. So for every $1 of decrease, we saw $3.2 of increase. So it gives you a sense of the momentum in our business. And then -- and you can't hide away from the fact that our digital services, they're performing at a very high clip, and that's adding to the overall business. So it's a combination of all these things that are giving you the positive momentum in revenues.

Jonathan Atkin:

So you talked a lot about influences around the business, around strong demand and power costs, pricing increases. I wonder if you can maybe flesh out a few of the other kind of headwinds or tailwinds as we think about how to model the rest of this year or next year around churn and G&A and maybe any other items that you want to call out and then crystallize maybe kind of the net impact of how you see margins and AFFO per share trend into next year.

Keith Taylor:

And Jon, let me add a couple of comments, just to Charles' comments as well. Again, you asked about the second half of the year. I think it's important to realize, number one, we -- Q2 had some xScale nonrecurring revenues in it. And so think about next quarter, that -- our nonrecurring revenues are going to go down about $10 million quarter-over-quarter. And then you should see them step back up in Q4. So that's one thing that's happening. Second thing is we're making an investment in the business. We're being very deliberate about committing to the top line, committing to the value on a per share basis and driving as hard as we can on that, but at the same time still making decisions about investing in the business. So Charles alluded to the quota-bearing heads. There's development costs, another $10 million of costs in the second half of the year that weren't in the first half of the year. There's some lease adjustments of $11 million that went -- that's going through the second half of the year, related to some Hong Kong leases. And then we're investing in T&E, another $15 million, because we think that's money well spent, getting our go-to-market engine in front of the customers as well as our teams working together, coming out of a post-COVID environment. So overall, I would say you're going to continue to see momentum in the business. The guide is the guide, but we're deliberately making investments to set ourselves up for a good 2023. And the last thing I think is really important to note. Look, absent the implications of currency, with 60% of our revenues residing outside of the U.S., it has an impact to us. But we know that, that will revert over some period of time. And so when we look at it is we're making -- we're putting -- placing our bets on our -- in our hedging strategies. We're doing all the things that you would expect us to do to try and give you the predictability and the forward-looking visibility. But by the same token, absent what we just -- we reported our revenues, we just hit it this quarter for $100 million because of the weakness in the non-U.S. currencies. When that goes back to more traditional levels, where other markets start to increase their interest rates, similar to what the U.S. is doing here to stave off inflation, you're going to see us recover that type of value. And the implications on revenue is $100 million, EBITDA is $50 million and AFFO is $42 million. You had $0.46 just this quarter alone. We're impacting the year's guidance by $0.46 just because of FX. And most of that is being recovered by better business performance. And so there's a number of things that we'll continue to talk about in Q3, Q4 and certainly as we spend time with you in February on the 2023 guide on these matters.

Charles Meyers:

Yes. I mean I think that, as we've said, xScale tends to be one where it's probably a narrower band in pricing. And so -- and it really -- pricing, I think, is dictated substantially more by supply/demand characteristics in any given market. And so I would say that we feel great about our ability to deliver a fantastic offering to those customers. But I would say it's -- it prices more -- market and xScale, I think, is going to price in a narrower band.

Frank Louthan:

How many new logos did you sign in the quarter? And how has that been trending in the last few quarters? And in particular, what sort of verticals are you seeing the most strength with?

Charles Meyers:

Yes. I would add 2 more pieces of color around new logos, Frank. One, I would say, if you look at the nonfinancial metrics, it's -- we're in a relatively tight band on that. And -- but I think the one thing that gets lost in that a bit is the number of customers that come to us through channel partners. And so those don't show up in that because we actually booked that through the channel partner. And so that really masks, I think, some of the momentum we like to see, particularly in the broader enterprise market, where we're relying on some of our key partners around the world, whether that be an AT&T or an Orange or a Telstra or whatever, a variety of types of partners of ours that are bringing those customers to the table. And so I think that's something that's kind of lost there, but an area, and given the strength of our channel, I think that's continuing to add significantly. And then the other thing I would say is our success with what we refer to as STAR targets, these sort of the Global 2000-type companies that we're really focused on, good momentum there. In fact, we had a number of Global 2000 additions this quarter. And I think the team is just doing a fantastic job of helping those large, complex global multinationals really think through their strategies on the enterprise side. And then on the service provider side, virtually every enterprise there, a lot of them are becoming service providers, and we're helping them on that journey and because everything is going as a Service. And so I think we're seeing some real strength on that side as well.

Operator:

Goodbye. And this concludes today's conference. Thank you for participating. You may disconnect at this time.

Operator:

Good afternoon, and welcome to the Equinix First Quarter Earnings Conference Call. All lines will be on able to listen-only until we open for questions. Also, today's conference is being recorded. If any objection, please disconnect at this time. I would now like to turn the call over to Chip Newcom, Director of Investor Relations. Sir, you may begin

Charles Meyers:

Thanks, Chip. Welcome to the call. Good afternoon, everybody, and welcome also to all of you to our first quarter earnings call. We had a great start to 2022, delivering the best net booking performance in our history, fueled by strong demand across all three regions, robust net pricing actions and near-record low churn, resulting in our 77th consecutive quarter of top line growth, the longest such streak of any S&P 500 company. We executed more than 4,200 deals in the quarter across more than 3,100 customers, demonstrating both the scale and the consistency of our go-to-market machine. While there are a number of macroeconomic factors that we continue to proactively manage, including rising interest rates, inflation and geopolitical conflict, the business continues to perform exceptionally well. And underlying demand for digital infrastructure continues to rise as enterprises across the globe and in diverse sectors prioritize digital transformation and service providers continue to innovate, distribute and scale their infrastructure globally in response to that demand. Unfortunately, the war in Ukraine is still unfolding, and we continue to be part of the vigorous global response to that conflict. As stewards of key elements of the world's digital infrastructure, we're committed to doing our part in maintaining that infrastructure to support free and open communications and aid in humanitarian relief. While we do not have operations in Russia or Ukraine, our employees have shown incredible generosity supporting Ukrainian refugees, particularly our team in Poland. Looking more broadly at our responsibilities as a market leader, we continue to advance a bold future-first sustainability agenda that reflects our company's values across our environmental, social and governance initiatives. We recently published our 2021 corporate sustainability highlights, and I'm pleased to report continued progress, including a 3.6% increase in representation of women at leadership levels and a 20% increase in the number of employees, leveraging our well-being and our mental health benefits. We also continue to develop pathways and partnerships to enhance our diversity and create opportunities for historically underrepresented groups, both inside and outside of Equinix. As we work to address the urgency of climate change, I'm also proud, that Equinix is well on our way to meeting our science-based target commitments. In 2021, we achieved over 90% renewable energy coverage for our portfolio for the fourth consecutive year, while also improving the energy efficiency of our facilities by over 5% as measured by average annual power usage effectiveness, or PUE. A focus on sustainability continues to be top of mind for customers and partners, as they look to buy from and work with companies that have established ESG goals and commitments. As the world's digital infrastructure leader, we have a responsibility to harness the power of technology to create a more accessible, equitable and sustainable future, and we will continue to focus on the important issues that impact our stakeholders and our business. Now, turning to the results as depicted on slide three. Revenues for Q1 were $1.7 billion, up 10% over the same quarter last year. Adjusted EBITDA was up 5% year-over-year, and AFFO was better than our expectations, again due to strong operating performance. These growth rates are all on a normalized and constant currency basis. Our data center services portfolio continues to extend our differentiated scale and reach, with 43 projects underway across 29 metros in 20 countries, including new projects in Atlanta, Mumbai, Sydney, Tokyo and Washington, D.C., as customers embrace our interconnected edge as a point of nexus for their hybrid and multi-cloud architectures and leverage our scaled digital ecosystems to enable and drive their digital agenda. According to IDC, by 2024, 65% of the Global 2000 will embed some sort of edge-first data stewardship, security and network practices into their organization's digital business processes, and we're already seeing the impact with an amazing 89% of recurring revenues, now coming from customers deployed in more than one metro. In April, we closed our acquisition of MainOne, extending platform Equinix into Nigeria, Ghana and Ivory Coast, bringing our global coverage to 69 metros across 30 countries. Nigeria, in particular, is emerging as an innovative and dynamic player in the global digital economy, representing a significant opportunity for the expansion of digital services and a key first step in our long-term strategy to extend our carrier-neutral digital infrastructure platform across Africa. In the quarter, we also announced our upcoming expansion into Chile, through the planned acquisition of multiple data centers from Entel, a leading Chilean telecommunications provider. Chile is the fourth largest economy in South America with the highest GDP per capita in the region. And Santiago is emerging as a technology hub, serving both regional cloud and content demand, as well as local enterprises. This transaction is expected to close in Q2 and will further solidify Equinix as the leading provider of digital infrastructure in Latin America. Turning to interconnection. Our industry-leading portfolio continues to outpace the broader business, growing 12% year-over-year on a normalized and constant currency basis, driven by a healthy uptick in connections across our top ecosystem. We added an incremental 8,900 total interconnections in the quarter and now have over 428,000 total interconnections on the platform. Internet exchange saw peak traffic up 7% quarter-over-quarter and 25% year-over-year to greater than 24 terabits per second. And we continue to see expanding customer demand and accelerated growth across our digital services portfolio. Equinix Fabric saw its highest ever virtual connection ads as customers employ an increasingly diverse set of end destinations and utilize fabric for a variety of use cases across cloud networking and backbone connectivity. Equinix Metal and Network Edge also had strong quarters as enterprises leverage these services for a variety of virtual deployments, increasing agility and helping them to mitigate supply chain challenges. Metal has the most net customer adds to its service since its launch, with several key enterprise wins and a healthy backlog as our go-to-market partnerships with Dell, Pure Storage and Mirantis all gained momentum. Shifting to our xScale initiative. In March, we closed our Australian JV with PGIM, which is expected to provide more than 55 megawatts of capacity in the Sydney market when closed and fully built out. And in April, we closed our South Korea JV with GIC, which is expected to provide more than 45 megawatts to the rapidly growing Seoul market. We currently have 9 xScale builds under development with over 80 megawatts of incremental capacity, of which nearly two-thirds are already pre-leased. So now I'll cover some highlights from our verticals. Our network vertical had a great quarter with good momentum across all three regions and record channel activity with our key carrier partners. New wins and expansions included one of the largest ISPs in India, establishing network hubs in our Mumbai 1 and 2 IBS, a high-speed satellite broadband service for military and commercial markets, supporting its expansion into Australia; and Global Net, a specialty network expanding its footprint and upgrading connectivity to support its growing user. And enterprise continues to be our fastest-growing vertical with a strong bookings quarter led by EMEA in the manufacturing and public sector subsegments. New wins and expansions included Technicolor, the creative services and technology company within the media and entertainment industry, establishing regional technology hubs utilizing the full suite of Equinix' digital infrastructure services. The Global [indiscernible] choosing Equinix as their strategic partner, thanks to our robust digital offerings, connectivity to key financial institutions and our sustainability strategy, and [indiscernible], a global leader in the celebrations industry using network edges to enable cloud connectivity and allow private interconnection between sites as they continue with their digital transformation. We were also proud to work with a global money center bank who leveraged our advanced ecosystems to enable a critical connection to the National Bank of Ukraine, where the UNICEF could distribute funds to those in need, to those that need it most as part of their humanitarian efforts. Our cloud and IT services vertical had solid bookings in the quarter, led by the infrastructure subset, while adding new cloud on-ramps in Dubai, Rio de Janeiro and Stockholm. New wins and expansions included Digital Edge, a rapidly scaling global cloud hosting provider, who is expanding its infrastructure footprint across multiple regions as they add customers and products. And a leading SaaS company, leveraging Equinix for its distributed data and cloud strategy and expanding service portfolio. The broadcast and streaming subsegments anchored a solid quarter of content and digital media, including expansions of the Fortune 75 Media Conglomerates, expanding across Platform Equinix to support streaming services and content production. A multinational consumer credit reporting company, enabling direct connectivity via Equinix to their financial services customers and Fastly, a global CDM expanding capacity and deploying network nodes in support of their edge compute strategy. And finally, our channel program again delivered its fourth consecutive quarter of record bookings, accounting for roughly 40% of bookings and 60% of new logos. Reseller and alliance partners accounted for over 75% of channel bookings, as our partners continue to demonstrate tremendous leadership in helping customers quickly adopt new digital business models. Wins were across a wide range of industry verticals and digital first use cases with hybrid multi-cloud featuring prominently as the architecture of choice. We saw continued strength with strategic partners like AWS, Microsoft, Dell and Telstra, including a significant win in France with AT&T, helping a security services company consolidate data centers and interconnect to their choice of cloud providers. We'd also like to recognize AT&T business as our partner of the year for 2021. Proud to have worked together to drive digital first outcomes on complex and transformational projects, including the Equinix and AT&T connected cloud initiatives, benefiting hundreds of customers across multiple industries. Now let me turn the call over to Keith and cover the results for the quarter.

Charles Meyers:

Thanks, Keith. In closing, we had a tremendous start to the year. The demand backdrop for the business remains robust as enterprises across the globe continue to aggressively prioritize digital transformation and service providers expand their infrastructure globally in response to this demand. Data is being created, moved, manipulated, and stored at unprecedented levels. And the need to distribute infrastructure and position it in proximity to the broader digital ecosystem is fueling outsized demand for the distinctive value proposition and platform equities. Growth continues to outpace our Analyst Day expectations, thanks to strength across multiple simultaneous growth vectors for the business, expanding geographic reach, accelerating adoption of digital services, low churn, positive pricing trends and strong channel execution. We continue to leverage our market-leading scale and expansive balance sheet to deliver new capacity, even in an increasingly challenging macro environment. And our bold future-first sustainability agenda guides and rallies our team as we collectively pursue our shared purpose to be the platform where the world comes together to create the innovations that enrich our work, our life and our planet. We are delighted with the ongoing performance of the business, optimistic about the road ahead and remain keenly focused on delivering distinctive and durable value to our customers and to you, our shareholders. So let me stop there, and open it up for questions.

Simon Flannery:

Okay. Good evening. Thanks so much. I think you've talked a couple of times about the macro environment. There's concerns about recession risk in Europe. Could you just talk to what you've seen in sort of March and April from ITs, CIOs, et cetera, in the European market specifically? And perhaps, we could also just -- on the power side, we've seen significant increases there. You talked about the hedges. And obviously, the guidance is good to see. But how should we think about the sort of the medium to longer term when those hedges need to get replaced? Thank you.

Simon Flannery:

Thanks a lot.

David Guarino:

Hey thanks. I have a question on the same-store cash gross profit declining. I think this is the first time we've seen it turn negative since you guys started disclosing that data. Was a lot of that due to the power cost in Singapore or was something else driving that?

Keith Taylor:

Just as we've noted and it's embedded in our guidance is the impact coming from the power cost in Singapore having a knock-on impact not only on the Asia Pac market, but the overall performance of the business on a gross margin basis. So again, nothing out of what we expected. As Charles alluded to, the fact of the matter is that stabilized assets are growing at 6% on a recurring revenue basis. We have great momentum in the business, and we've now absorbed effectively with the Q1 results, the impact of the Singapore business. And so that's the business on a go-forward basis there.

Charles Meyers:

Yeah. I mean the Atlanta market has been good. We continue to see demand there, and we've been making some of our own transition in terms of really attracting and motivating the network density into the AT1 facility on Peachtree. And so it's -- and again, you certainly see competitive wins in that market as well as just net new customers. So it's been a good market. We're continuing to invest there in terms of new capacity, as you noted, and we feel good about that market overall.

Operator:

And our next question is from Jon Atkin with RBC Capital Markets. You may go ahead.

Charles Meyers:

Sure. Yeah. I mean, because where we're hedged now is in the rising rate environment as we have these feathered hedges over multiple years. We're hedged essentially below the prevailing market rate. And so -- and in a rising rate environment, what that provides is actually some protection to the customer against those market rates, because we'll be able to roll them in more gradually. And so that's our effect that we see. Again, as hedges roll-off and you've hedged at increasing rates, you are chasing that up. But again, it provides a net benefit there. And the customer will have an expectation as they see what the market rate is even in their own personal power consumption. There's generally a broader expectation that they're going to see some sort of a rise, and we can mitigate that to some degree. So I think the hedging and the success of our hedging, and that's the way it's worked for us in rising rate environments over time. And so we feel generally good about that. As I said, we're well-ahead of that planning cycle as we build our hedges for 2023 and beyond. So anything further to add there, Keith? And then on pricing, yeah, actually, we had -- continue to have strong pricing -- positive pricing actions. We have increased list pricing meaningfully. And I think that we're continuing to evaluate that in terms of -- and that's partially an implication of an artifact of increasing unit costs and other effects in the business beyond power like labor, for example. But that tends to work its way into the business slowly overtime as you see some of that. And we continue to see just a really strong response to the value proposition on a value basis. And so we have been increasing net pricing beyond power as well.

Jon Atkin:

Just two quick ones and a follow-up, churn, can it remain on a sustainable basis at kind of these below average rates? And then demand seems elevated, and you had obviously a strong result last quarter and a strong guide. And does that feel sustainable as well in terms of enterprise retail colo demand? Or is there some sort of a catch-up dynamic where you're seeing some buying that was catch-up, but it might normalize from here and demand might go back to normal levels, or do you see elevated demand indefinitely? Thanks.

Jon Atkin:

Thank you.

Operator:

Our next question is from Aryeh Klein with BMO Capital Markets. You may go ahead.

Charles Meyers:

Yes, a little bit. I would say, overall, look, the big power issue is really Singapore. It's very much on the margin in any other places. I think, going forward, I think we might see more of -- we have the planning to do in 2023 and beyond as power -- as hedges roll off and as we think about that, as I commented earlier, but I think that's more of something we have plenty of visibility to and an ability to respond to. As it relates to this year, Singapore is by far the overwhelming issue. And there's not a ton of change from what we said last quarter. I think, Q1 was actually a little better than we expected. And then the back half of the year might be a little higher than we had originally forecasted, but they're kind of going to come out kind of in roughly the same place. We now have over 50% of our load hedged or locked in rate-wise in Singapore. So we have better visibility of that. And I don't think a ton of variability and outcome from here. We'll continue to update you, if that changes. But not a big change, probably slightly more on the back end and less in this -- we had a better quarter this quarter than what we had in that original forecast. But on a full year basis, really roughly what we had said previously.

Charles Meyers:

Yes, a good question. Good question. I think that we have a fair amount of headroom in a lot of markets in the Americas, right? We're at a lower overall utilization rate there on a much bigger business. So there's plenty of capacity to sell. So I'm sure my sales teams are hearing me say that. So they're playing to go around. And the Americas business has performed exceptionally well. And another shout-out to Arquelle Shaw, our senior sales leader in the Americas. And I think that business is really humming and delivering strong sales execution. And so, you're right. A lot of the investment is going to -- going outside the US, but we've also are topping up in key markets in the US and in the Americas broadly to meet the demand there. So we feel good about our ability to both deliver the new capacity and to sell it. And we've got a new President of the Americas coming online, Tara Risser, and she's a tremendously customer-centric executive. And very excited about that. So I feel -- we feel great about the trajectory in the Americas. Again, I think plenty of opportunity to grow into the capacity that is there and drive utilization up. And we will continue to invest where there are markets that we start to see sort of pinch points out there in the future. And so overall, I feel really good about our ability to continue to put capacity online and sell it aggressively.

Operator:

Our next question is from Michael Rollins with Citi. You may go ahead.

Charles Meyers:

Yes. I mean I think you're getting that sort of enterprise LFP and whether or not there is a sort of intermediate offer there between xScale. I would tell you that we, again, continue to -- if those needs are in the context of a broader platform requirement and how a customer is thinking about their digital transformation, then we will talk to them about how we might do that and where we might be able to meet that need. But again, the sort of the larger footprint, more commodity sort of colo enterprise requirement, isn't a major focus for us. In fact, as I talked about, we've really been retooling our revenue mix in markets like Europe to really focus on the sweet spot of the retail business, interconnection-edge, ecosystem-centric that delivers superior MRR per cab. It delivers superior retention. And that's what you're seeing show up in the business, better MRR per cab, lower churn, et cetera. So we've got to stick to the strategy that continues to drive the performance in the business. And I would tell you what we're seeing. You saw -- on occasion, you do see large enterprise-type needs. And we'll partner with enterprises and thinking that through. But I will tell you that, for the most part, I think a lot of times, customers are saying, 'Hey, we're going to put -- we're going to use a mix of public cloud and private cloud, and we really need to place our data in a sort of -- in more of an inter-cloud kind of location to drive performance and to meet statutory requirements, et cetera. And so I feel really good about the portfolio that we have. And I actually think the real -- a big opportunity with us on the enterprise side is the digital services portfolio. Really, delivering them Metal -- they're finding very well Metal is a value proposition because it helps them mitigate their technology life cycle management. It helps them be more agile, more scale, more rapidly move capacity around as they need it and as customer demand mandates that for them. And then Network Edge is a way that they really are thinking about retooling and rethinking networking in a cloud-centric world. And then, of course, Fabric, you see the momentum that we have there. And so I feel good about the portfolio, and we're going to -- we stood up the digital services BU and are going to continue to make some investments there, and I think that's going to position us really well for continued enterprise momentum. So really long answer to your question, but I think we'd be very selective about that. We don't see a big priority on sort of large footprint, lower margin profile kind of business.

Operator:

Our next question is from Erik Rasmussen with Stifel. You may go ahead.

Charles Meyers:

Well, I mean it's -- I think the business is executing really well. We're not sort of trying to chase every bit of hyperscale that's out there. We've got an aggressive but an appropriate plan that we think delivers strategic value to the overall platform. We're focused on a relatively small number of sort of global hyperscalers that we think are critical to how the overall cloud macro plays out and are focused on them. I think it's really just being able to continue to deliver capacity. And so we've been more aggressive about land banking. We're continuing to work to make sure that we have the capacity and the key equipment necessary. So our supply chain team has been active both in terms of both our -- the xScale side of our business and retail to ensure that we are buying inventory or making forward commitments to ensure the availability of equipment to get projects delivered on time. So I think that's going to be the key thing for us. And right now, we feel very good about that. In fact, since the last quarter, we talked about -- over a couple of quarters ago I guess it was we talked about having roughly $100 million of pre-commitment and inventory in place to try to mitigate against supply chain, we've nearly doubled that to continue to sort of anticipate and head off any pinch points that exist in the supply chain. So I think we're doing a good job there, but I think that's the area that we need to continue to focus on. And I guess the proof is in the pudding in that our delivery dates are all, on average, a few outliers here and there, but on average, we're no more than a week or two delayed on projects. And so being continuing to deliver on-time deployments.

Charles Meyers:

Yes. Look, I mean we -- every deal is a little bit different. I mean I would say that there are good examples in our past of where we have stretched in what terms of maybe a multiple that we paid based on our belief about our ability to sort of buy that multiple down over time through growth. And I think Metronode and Infomart are probably a couple of examples that pop to mind that we've both turned out to be really great deals for us. But we're going to be appropriately disciplined. We're not going to win every deal, but we also believe that M&A is a key tool in the toolbox. And we think there are opportunities out there for us to continue to extend and scale our platform and our priorities kind of remain the same. Key interconnection assets, scale in markets where we're seeing success and continue to extend our platform geographically into the markets that matter. And I think all those types of opportunities are available. So -- and we've got the balance sheet to pull it off, I think. So we'll be out there, we'll be aggressive. And in cases where we think it makes sense to stretch, we will. And where we don't, we won't.

Operator:

Our next question is from Brendan Lynch with Barclays. You may go ahead.

Charles Meyers:

Yes. Great question, Brendan. One, obviously, that we are very focused on and think a lot about. I'll start with just simply saying that we continue to see 50% as an appropriate long-term target for EBITDA margin. There's a number of moving parts on the overall margin trajectory of the business. And as you said, some -- we've talked about many of those with power, particularly the Singapore power situation being central to that. We kind of already talked about that dynamic, which is -- were a little better than expected in Q1. Back half of the year might be a little bit worse than what we had originally forecast, but not a major shift there. As we enter next year, we'd expect to see APAC margins normalize either through moderating rates, and we can't really predict that fully. Or even if they don't moderate by us, essentially, putting additional PIs through and getting in line with the broader market. And so I think we'll see margin normalization there. And we continue to drive and expect continued operating leverage in the business in the back half of the year from several of our targeted efficiency programs in the business. And so we do think we need to have other levers available to continue to drive operating leverage. But we also may make some investments in quarter ahead, I think, given the tremendous booking strengths that we're seeing. So I don't think that would be surprising to anybody. So bottom line, we'll give you more detailed guidance on the 2023 and beyond margin profile as that becomes more clear. But I think the really critical takeaways are that

Charles Meyers:

Yeah. Really good question. Generally, we don't see that happening. I think a number of the – I think Bell was a little bit more aligned, maybe a little – maybe a little bit of that, and we'll continue to reshape that customer mix a bit, but much smaller scale than Verizon was in a bit of a different dynamic there. And then some of the other ones, I think, are more, more in line with kind of the overall customer profile or much smaller in their overall scope. So there's certainly some of that you inevitably see in M&A, but I wouldn't see anything on the horizon that would meaningfully tick that up.

Operator:

Our next question is from Sami Badri with Credit Suisse. You may go ahead.

Charles Meyers:

Sure. Let me – yeah, and recap, I'll give you a little bit of a more holistic view and then comment on Americas. And Keith just commented on this, we saw a nice uptick in overall in MRR per cap on a global basis. I think it's driven in meaningful part by significant organic strength in Europe and then some uptick in APAC in definitely with the PI – Power PI and Singapore contributing to that. But more than half of that is really driven, on an overall global basis, is driven by underlying organic strength in the business. In the Americas, we – there are a couple of moving parts there. We've always encouraged people to kind of look at a multi-quarter average since that metric can really be more volatile depending on several factors. And we saw a few of those factors. We saw some settlement activity in the Americas that was a one-time thing. We saw a large install, which is not yet ramped. And so you get the cabs, but not as much revenue. And then finally, we get – had a little bit of a price action associated with the very large renewal we did with NASDAQ, which was a huge win for us, but had a little bit of downward impact on that. But overall, I think nothing of concern. I think the MRR per cab in the Americas is still exceptionally healthy. And I think, we'd continue to be able to feel like we can continue to manage it at or above those levels.

Charles Meyers:

Keith, do you want to comment on the regional strength -- the regional breakout of the MRR system?

Sami Badri:

Got it. Thank you very much.

Michael Elias:

Great. Thanks for taking the question. One quick question on the power cost side and the price increases. When you do pass through higher power cost to the customers, just wondering, are you structuring it as a temporary surcharge, or is that a permanent increase in the power costs embedded in that contract? That's my first question. And then, my second question is you mentioned earlier that you've raised your list prices meaningfully higher. Just as we think about the implications of that on MRR per cab going forward and kind of your renewal schedule, any color you can share on what you would expect over the medium to long-term to see the MRR per cab side? Thank you.

Michael Elias:

Perfect. Thank you.

Matt Niknam:

Hey. Thanks for taking the question. I have one on the balance sheet and then a quick follow-up. But on the balance sheet, I think, Keith, you referenced some of the ratings agency upgrades of late. It looks like you've got some additional leverage capacity you've yet to use. I'm just wondering what's the latest thinking around optimal leverage for the business given the expanding scale and stickiness of the platform. And then just as we think about funding for Entel, I think right now, after the $1 billion plus green bond, you're sitting on about $3 billion worth of cash pro forma for that. I get the sense the company is fully funded for the Entel acquisition. I'm just wondering, if we're thinking about it the right way, really trying to understand if the Entel deal will require any sort of incremental financing upon close or whether that's just a straight contribution when it closes? Thanks.

Q –:

That’s great. I really appreciate all that color. Thanks.

Operator:

This concludes today's conference. Thank you for participating. You may disconnect at this time.

Operator:

Good afternoon, and welcome to the Equinix Fourth Quarter Earnings Conference Call. All lines will be on listen-only until we open for questions. Also today's conference is being recorded. [Operator Instructions] I would now like to turn the call over to Katrina Rymill, Senior Vice President of Corporate Finance and Sustainability. You may begin.

Charles Meyers:

Thanks, Katrina. Good afternoon, everybody, and welcome to our fourth quarter earnings call. We had a great finish to the year with our best booking performance ever driven by an exceptional demand backdrop for our business with continued strength across our platform, but more specifically in the Americas low churn and continued momentum in our digital services portfolio. For the full-year, we achieved over $6.6 billion of revenue, marking our 76 consecutive quarter top line increases and amazing 19 years of continuous revenue growth while driving attractive AFFO per share to the bottom line. Amidst the dynamic and complex global landscape, we continue to deliver against our vision and our fiscal year results demonstrate both the increasing relevance of our platform and our uniquely differentiated value proposition. Businesses globally continue to prioritize digital transformation as a foundational source of competitive advantage and the secular drivers for our business have never been stronger, as digital leaders demand infrastructure that is more distributed, more ecosystem powered, more flexible, more sustainable and more interconnected than ever before. Increasingly, Equinix represents a critical point of Nexus customers implement hybrid and multi cloud as a clear architecture of choice. And as a global market leader, we continue to innovate and expand our portfolio to respond to these evolving customer demands, and capture the enormous opportunity ahead. As we look to 2022, the trajectory and underlying momentum in our business is exceptionally strong, with a solid demand pipeline, stable churn and a rising price trend, resulting in a revenue outlook for the year that is at or above the high end of our long-term guidance range. And an AFFO per share outlook is still within our long-term guidance range, despite pressure at the gross margin line associated with power price volatility in Singapore. Absent these specific dynamics our underlying business performance will be producing AFFO per share growth towards the high-end of our Analyst Day guidance well ahead of our expectations. We have a robust global power hedging program [indiscernible] and we expect will continue to be highly effective in smoothing utility price volatility over the years, providing predictability and value across markets for Equinix and our customers. We believe the current dislocation in Singapore is transitory with higher prices showing signs of moderating in the second half of the year. Bottom line, the business is performing very well. And we remain on track to meeting or exceeding our Analyst Day objectives for both top line revenue and AFFO per share growth and as we see the temporary headwinds moderate, and continue to realize efficiency gains from prior-year investments, we have a strong resolve and continued confidence in our ability to scale adjusted EBITDA margins to 50% by 2025. Turning to our results as depicted on Slide 3, revenues for the full-year were $6.6 billion up 8% year-over-year, adjusted EBITDA was also up 8% year-over-year, and AFFO per share grew 9% year-over-year. Interconnection revenues for the current quarter grew 12% year-over-year with solid unit ads reflecting strong momentum with Equinix Fabric as expanding use cases drive connections to more locations and more counterparties. These growth rates are all on a normalized and constant currency basis. Our global reach remains as important as ever. IDC predicts that by 2025, more than 50% of enterprise data will be generated at the edge, and customers continue to see Equinix as the best manifestation of the digital edge. This competitive differentiation continues to drive our business, with revenues from multi-region customers increasing 1% quarter-over-quarter to an impressive 75%. In December, we announced our long awaited entry into Africa with our intended acquisition of MainOne, a leading West African data center and connectivity solutions provider with a presence in Nigeria, Ghana and the Ivory Coast, set to close in early Q2.

, :

Jon has delivered extraordinary results as the President of our Americas business and is a great choice to implement our strategy and extend our global market leadership and interconnected colocation. To that end, we continue to expand on our global footprint with 41 major projects underway across 28 metros in 19 countries, representing over 20,000 cabinets of retail, and over 80 megawatts of xScale capacity. We remain focused on simplifying, automating and digitizing our services, allowing us to scale our business and enhance operating leverage. And we're already seeing the results of these efforts. For example, we recently launched our new Secure Cab Express product, leveraging pre-deployed capacity to dramatically reduce cycle times and enable online quoting and ordering for our most commonly requested configurations. We expect to roll this new service out to customers in the coming quarters, driving increased customer responsiveness while simultaneously enhancing margins. Our global interconnection franchise continues to perform well and we now have over 419,000 interconnections on our industry leading platform. In Q4, we added an incremental 7,500 organic interconnections as enterprises drive growth and further enhance our ecosystem density. Internet exchange saw peak traffic of 6% quarter-over-quarter and 27% year-over-year, with peak traffic in APAC surpassing 10 terabits per second, for the first time as service providers increasingly look to IX to improve Internet traffic delivery. Turning to digital infrastructure services, cloud computing has permanently reshaped customer expectations for speed and simplicity. Customers want to deploy infrastructure where they want it, when they want it seamlessly integrating cloud based workloads and private infrastructure and enabling agility and performance between the two. As a result, customers are embracing a broader set of our services, combining fabric, metal and network edge to build virtual points of presence. And our plan expansions will fully enable this capability across 30 markets by the end of 2022. For the quarter, Equinix Fabric saw excellent growth eclipsing $150 million in revenue run rate with a third of our customers now using Fabric for a variety of use cases across a broad set of destinations. Our Equinix Metal business delivered strong results with a great mix of wins and new logos across verticals at a healthy backlog. And network edge saw continued traction with growth from new and existing customers, as they use the service to implement WAN optimization and cloud-to-cloud routing. Shifting to xScale, in January we announced plans to expand xScale into South Korea with an agreement to establish a $525 million joint venture with GIC to develop two data centers installed. Total investment in our various hyperscale joint ventures when closed and fully built out is now expected to be more than $8 billion across 36 facilities globally, with more than 720 megawatts of power capacity. We currently have nine xScale bills under development and during the quarter, we fully leased the first phase of our Frankfurt 11 asset and the first and second phases of our Sao Paulo 5 assets representing approximately 20 megawatts of capacity. So xScale leasing is now over 130 megawatts and our initial JV at EMEA is over 80% leased. Now let me cover some of the highlights from our verticals. Our network vertical had solid bookings quarter with healthy new logo activity led by the Americas as companies expand and optimize digital capabilities to support the delivery and consumption of data at the edge. New wins and expansions included a Fortune 200 telecom company deploying infrastructure to support the U.S. first cloud native Open RAN-based 5G network. Inligo Networks, an Australian cable systems operator deploying digital infrastructure to support a new subsea cable across Southeast Asia, Australia and the U.S. and an African local telco, deploying a network hub in Lisbon to improve pairing and performance. Our enterprise virtual saw another quarter of record bookings, as IDC predicts almost half of the global economy will be based on or influenced by digital in 2022, fueling strong demand for hybrid infrastructure. Q4 had particular strength in FinTech, industrial services and energy sub segments with wins and expansions, including NASDAQ, a Fortune 500 technology company, scaling its cloud enabled infrastructure to deliver ultra low latency Edge compute capabilities from our NY11 data center in Carteret. Avaya, cloud communications and workstream collaboration company implementing an Edge data center strategy on platform Equinix to streamline private connectivity for its customers and ADT, U.S. leading smart home security provider embracing the cloud with an infrastructure modernization effort spanning multiple geographies. Our cloud and IT services vertical offset solid bookings this quarter led by the software and infrastructure sub segments, with good momentum in EMEA and APAC. The expansions included Zscaler, a leading Global 2000 Security cloud provider, upgrading capacity for sustainable enterprise cloud transformation, and growing network traffic at the Edge. Wiz Technologies, a Singaporean full-suite IT service provider, deploying on Equinix Metal and upgrading Fabric services to support quick and seamless business expansion. And Oracle, a top five global software provider deploying FastConnect Cloud on-ramps to support new regions in Singapore, Milan and Stockholm, bringing their total number of on-ramps available at Equinix to 24 more than any of their other partners. Our content digital media vertical has strong wins led by the publishing and digital media sub segments and record channel activity. Expansions included Cloudflare, the U.S. based global web infrastructure and security company upgrading and expanding their footprint in over 40 markets. Index Exchange, global ad tech marketplace, expanding compute nodes in APAC demanded traffic growth, and a top three global credit agency deploying regional network in cloud hubs in APAC to support its operations. Our channel program delivered a record quarter to close the year accounting for 40% of bookings and nearly 60% of new logos. And we have line of sight for channels to grow to 50% of our bookings in the coming years as we enhance our systems and processes, and leverage our diverse set of partners to scale our reach. Wins were across a wide range of industry verticals, and use cases with continued strength from strategic partners like Microsoft, Dell, Cisco, Google and BT, including a significant win with Wipro and AT&T, helping a utility company modernize its IT infrastructure, Europe and the U.S. So now let me turn the call over to Keith to cover the results for the quarter.

Charles Meyers:

Thanks Keith. In closing, we're immensely pleased with the underlying performance of our business and are as optimistic as ever about the opportunity in front of us. Although the transitory effects from power pricing impact elements of our 2022 guidance, our normalized results would indicate a business trajectory that puts us meaningfully ahead of our Analyst Day expectations. We continue to work hard to further mitigate the end year impacts of the Singapore car volatility. And in parallel, intend to continue to strengthen our market leading position as the world digital infrastructure company by scaling and transforming our data center business, while also accelerating our digital services business to deliver on the promise of physical infrastructure at software speed. And we intend to continue to advance a bold ESG agenda, addressing the urgency of climate change with a commitment to climate neutrality by 2030. And fostering a culture in workplace where every person every day can confidently say I'm safe, I belong and I matter. Of note, we were thrilled to recently receive a perfect score from the Human Rights Campaign and be recognized as a best place to work for LGBTQ plus quality. And are proud to be ranked number one in real estate in JUST Capitals 2022 rankings of America's most JUST companies. Overall nearly 25 year history, we have created and cultivated a foundational set of advantages to period lower reach, now expanding 66 metros in 27 countries. Advantage access to the world's most powerful digital ecosystems with more than 10,000 customers, and over half the Fortune 500, the world's most comprehensive and advanced interconnection platform, and a track record of service excellence that gives our customers the peace of mind they deserve. These advantages are strongly aligned to market trends and nearly impossible to duplicate. A dynamic that continues to feel strong growth and a rapidly expanding addressable market that we are confident will translate to compelling long-term value creation. As we strive to fulfill our purpose, to be the platform where the world comes together, enabling the innovations that enrich our work, our life in our planet. We will continue to show up every day remaining in service to our stakeholders. To each other, to our customers, to our communities, and to you, our shareholders. And let me stop there and open it up for questions.

Jordan Sadler:

Thank you. And good afternoon, first I would like to just touch on maybe some of the macro factors that you identified Keith, in your prepared remarks, first, just maybe on the margin impact related to the power costs that you're seeing in Singapore, I think you said it was 130 basis points impact year-over-year, but what specifically was the impact that you're seeing within the 46% margin related to Singapore? And then separately, can you maybe discuss how you might be dealing with any other exposures for example, in Europe, and if you were able to push through price increases to customers there to offset some of the exposure you might have had?

Keith Taylor:

Yes, Jordan, when it comes to the inflation aspect, I just said, we've really invested heavily over the last couple of years in as I said, procurement and strategic sourcing team and work getting ahead of many of the inflationary issues. In some cases, we've bought substantial inventory that we're hosting, at the supplier of the partners location, and then we draw down on that over time. So by locking in that commitment, we've been able to mitigate some of the inflationary risks that others might be experiencing. But to mention that we've got the supply available, where in some cases, others will not have the supply available, I think we've got a real good job locking it in, we're working on an extended basis over many years, we look forward with what our buying commitments are going to be over that time period. And that's another aspect of again, our increased sophistication around what we're doing, when and where and what we need when and where, and so the team is doing a good job of sourcing the larger material items for that. I'm going to say though, the other area that is probably a little bit more difficult to just the human capital side. And that's one of the greatest risks that you see all across the world and just sourcing humans not only to do the construction, but all the manufacturing. And so getting ahead all of that just means that you have to commit earlier than you might otherwise have done before so that you can get yourself in the appropriate queue in the manufacturing cycles. All that to say is I think we are in really good spot, we have seen limited delays thus far. Certainly prices have gone up in times in different sets of circumstances that Charles sort of alluded to, on his prior comment that we're putting through appropriate price increases into the marketplace, and it would depend solely on the market, but we're putting appropriate price increases into the market accordingly. And one of the things you've heard us say and I maybe I didn't, just to repeat it. This quarter again, we had meaningful net price positive pricing action, and I can't even think of the last time we talked about flat to negative pricing increases, so as an organization our pricing increases are more than offsetting our price decreases which has served us very well in our operating plan.

Operator:

Our next question comes from Michael Rollins. Your line is open.

Operator:

We may have lost, Michael.

Operator:

Thank you. Our next question comes from David Barden, Bank of America. Your line is open.

Charles Meyers:

Sure. David, I will take the first one, and then I think Keith, and maybe Kat can weigh in on the sustainability side as well, given she's so close to that, I will tell you that we're seeing just tremendous strength across the board really, in our verticals, essentially, because as I've looked at the last few scripts, it seems like every time we say we have strength somewhere else, so it's not like we're saying it. And as it relates to, and I think that's really driven by this, this really strong movement towards digital transformation, and people saying, hey, that is a critical source of competitive advantage, or at least keeping up. And they're making investments accordingly, and how they think about their infrastructure, how they think about their mix between cloud based workloads and private infrastructure, I think is really moving in ways that the wind is at our back. And I think the team has done a great job of articulating our relevance to those buyers. And, frankly, sales execution has been super strong. As it relates to COVID, I would tell you that we're not really it is, obviously, as you've seen, we are having ups and downs, and they're operationally challenging, so we are constantly dealing with sort of different mandates and mask mandates, and when we have to be doing sort of testing people, and when we're in the facilities, when we get an exposure dealing with that, et cetera. But the team has just done an amazing job on that. And I wouldn't say that I think we're seeing anywhere around the world that says, oh, they're kind of stuck in a pause mode due to COVID. People seem to be powering through that and saying, we got to move forward, regardless. And so I think we've seen really broad strength, Keith do you want to take the Singapore Moratorium and sustainability questions?

Charles Meyers:

Yes, one more comment, interestingly is a big deal for talent as well. Talent wants to be working for companies that they believe are committed to sustainability and are doing the right things and so and I think maybe that's unique or particularly true in the end. But we're seeing that across the board.

Charles Meyers:

Okay.

Michael Rollins:

Thanks. Can you hear me now?

Michael Rollins:

Great, well, thanks for taking the questions, two if I could, first going back to the organic constant currency revenue guidance, I'm curious if you can just unpack some of the relative strength to the annual target, how much might be coming from some of the pricing actions, versus the pickup in demand for services or if there's any other areas of strength that we should be mindful of? And then the second question is for number of quarters now, you've been discussing the evolution in the contribution to logos and bookings from the indirect channel. And as you've had more experience with that channel, I'm curious, once the customers come in through that channel, how do they look relative to the customers that you get from your direct sales force? Are they adding services expanding or their different characteristics of their revenue lifecycle versus in indirect versus direct?

Michael Rollins:

Thanks.

Unidentified Analyst:

Hi, this is Michael on for Colby. Two questions, if I may. First we've seen key interconnect assets in Africa, namely Telco, get acquired by one of your peers. And there's also another large global data center company that's reportedly for sale, given you still have that incremental turn of leverage that you can deploy opportunistically and just wanted to get your latest thoughts on how you're thinking about M&A. And then also the second question you did 10% year-over-year, Americas growth in the fourth quarter, real acceleration there, just wondering what you would expect to see from that business in 2022? Thank you.

Unidentified Analyst:

Great, thanks for the color.

Nick Del Deo:

Hi, thanks for taking my question, guys. Two for you. Maybe one for Charles and one for Keith. First, as alluded to a moment ago, we've seen a few deals happen in Africa recently, most notably you buying main one and digital buying Teraco? I'm sure you looked at all of them, maybe some of that didn't even trade? Why was main one the best asset for Equinix? And is there a path for catching up with Teraco in South Africa over time? And then for Keith, on recurring capex? It seems like it's going to be at the very low end of your target range in 2022. And it's been towards the lower end for a few years now. Should we expect, that to pick up in coming years? Or is this kind of a new normal for recurring capex?

Keith Taylor:

And so it’s another recurring capex. We are -- as we tend to we are the sort of lower end of the range for fiscal year '22. Quite a bit, just timing, Nick, and recognizing that you, depending on what we have coming into the portfolio, it's going to dictate so the timing of the capex. So that'd be one thing. And so there, you saw an elevated Q4 number of roughly 5%. Recurring capex relative to revenue and steps down of course, in Q1 and then as we look through the year, it is roughly somewhere between 2% and 3%. But I think the biggest thing is really about timing and the number of new assets that we're bringing into the portfolio and as a result, when you think about the level of recurring capex that has to be made, the newer the portfolio, the better position you have in the current campaign. I would continue to model 2% to 3%, it feels like a reasonable approach, and we'll continue to guide you accordingly. But in fairness to your long-term model, I think that that would be a fair point.

Operator:

Our next question comes from John Atkin, RBC Capital Markets. Your line is open.

Keith Taylor:

Well, I think as it relates to churn first and foremost, as I said, in the prepared remarks, churn for the business was 2.1%, on average per quarter for 2021. 2%, in the fourth quarter, which was great. In many ways, Charles sort of alluded to in his comments on revenue, part of the reason the revenues were so strong is, and I like to say, there's no pass through rates to our revenue dollar than these eliminating churn. And churn was a very, very low level. As we look into 2022, there's not going to be a meaningful shift. We've gotten used to that sort of the range of 2% to 2.5%, that's indicative of what we think will happen. I think the midpoint is probably a fair approach at this stage. And we'll continue to update you on it. But there's nothing meaningful that -- there's nothing meaningful, that will guide you differently at this point, John. As it relates to European EBITDA, there's a number of things that are going on in Q3 one example, is just the timing of costs more specifically, but if you look at the implications of Q4 relative to Q3, there's a German power rebates in the third quarter, until we -- you'll add that into the fourth quarter, and then you've got higher seasonal costs in q4, particularly with the winter months in Europe, you've got higher utility consumption. And so as a result, it has an impact on the margin, when you look at it more specifically. And then there was just some services and an increase hiring costs in the quarter, but there was nothing fundamentally different about your going on. And overall, our belief is the trajectory to our target of 50% EBITDA margins. We're still well on that path notwithstanding, the comments that Charles made related to Asian power, that's going to be very much a transitory matter. And we'll get the other side of that would probably by the second half of the year.

Charles Meyers:

Yes, John, we've seen some increases in build costs, but we're striving to offset those one by just continuing to be accretive on the design front, and continuing to sort of design, try to get some of those out from a design perspective. And then also on the sourcing front, and really working on the strategic sourcing side. So we're, and I think we're seeing returns relatively stable. I think, pricing is aggressive, but stable. I think that there -- yes, there is plenty of supply in the market, but there's even more demand. So I would say, I think, supply demand is quite balanced in the xScale realm right now. It's very chunky and very market specific. And so it's a little bit different than our retail business. But as you've seen our uptake, in lease up has been super strong, thus far, I mean teams executed really well. And we feel good about that. And so there's a lot of megawatts coming down the road and a lot of customer demand. So it's an exciting time, I think for xScale, and we're pleased with the performance of that piece of the business. And that, I mean, it's important to just remind everybody that our exposure on the capital side is, we have gearing of 10 to one on that capex, right. So, because we're only 20% of it, and there's always leverage involved there. And so it really allows us to have a relatively modest overall exposure to that capital and so. So we're putting the bulk of our capital to work on the retail side with really stronger John.

Operator:

Our next question comes from Simon Flannery, Morgan Stanley. Your line is open.

Charles Meyers:

Yes, well, what I would say yes, the big factor on the margin profile in 2022 is Singapore, as I said, 100 bps of that, and you have 30 bps associated with the year-over-year compared on the benefits we got from the vPPA last year. And so that's the bulk of it, I mean, you can see in the bridge, there's 1.4 there a margin in step down, 1.3 of that is explained between those two factors. And so there's not the rest is a series of puts and takes with some expenses and investments and really solid operating leverage in the business. And so I would say, it is mitigating the sandboard impact. It is operating the driving operating leverage in the business, which is going to be a key focus for John and the team, and it continues to drive the scale on the business. And then a strong pricing environment. So I think we're continuing to see a solid pricing environment, we've demonstrated our ability to deliver distinctive value our customers. And so as the prices were -- I mean, as some of the inflation goes, we're going to go ahead and offset that some degree on the pricing. So I think all those factors, sort of will lead us to some solid progression there from margin standpoint. And I wouldn't guide on where it goes from there and how linear it is or not. I think it's going to, we're going to make judgments in the business, as we always do about investments and how to maximize long-term value creation. But I think what you heard loud and clear is a level of confidence on our part about the 50% target. And again, as we really dug in hard, which is to some degree, the Singapore dynamic was a real catalyst for us to do. It gave us I think an increased level of confidence about how operating leverage is materializing. And that gives us confidence to sort of reiterate that 50% by 2025.

Charles Meyers:

Thanks Simon.

Sami Badri:

Hi, thank you very much for the question. I'm looking at your same-store growth. And that definitely came in a little bit above people's expectations. And I'm trying to take some of your prior comments where you talked about if there was no Singapore utility impact, you would probably grow or be able to comment adjusted EBITDA margins of 47% and change. And this is making me think about the long-term picture on the road to 50%. The same-store has to grow a 5% plus for you to get to 50% adjusted EBITDA margin long-term by 2025. Or can you just maybe unpack that growth rate or that vector for us?

Sami Badri:

Got it. Thank you.

AriKlein:

Thank you. Charles, you mentioned some of the challenges in the hedging in Singapore, as you look at other markets, where energy prices are elevated, and hedges roll off. Are you hedging at these higher prices? And just you also mentioned passing on some of those costs? What has been the response on the customer side from that?

AriKlein:

Got it. And are those price increases permanent, so if I guess if pricing or energy costs normalized, can that turn into a tailwind from your standpoint?

AriKlein:

Got it, thank you.

Operator:

Thank you. That concludes our Q4 call. Thank you for joining us.

Operator:

Good afternoon and welcome to the Equinix Third Quarter Earnings Conference Call. All lines will be able to listen-only until we open for questions. Also, today's conference is being recorded. If anyone has objections, please disconnect at this time. I would now like to turn the conference over to Katrina Rymill, Vice President of Investor Relations and Sustainability. You may begin.

Charles Meyers:

Thanks, Kat. Good afternoon, everybody, and welcome to our third quarter earnings call. We had a great quarter, achieving our 75th consecutive quarter of top line revenue growth and a record Q3. A clear signal of strong market demand. Our results were fueled by continued strength in our Americas business and robust performance for our channel program globally as key partners continue to see Platform Equinix as a point of nexus for digital transformations solutions. The pandemic has triggered and accelerated need to digitize business models in virtually every segment of the economy. And our strong results reflect its increasing demand for digital infrastructure and Equinix remains uniquely positioned to help customers as they shift towards distributed, hybrid, and multi-cloud as clear architecture of choice. As we continue to strengthen our position as the world digital infrastructure Company, our focus remains on creating distinctive and durable value for our customers and our shareholders, driving growth in scale and our market-leading colocation franchise, expanding our relevance in Cloud ecosystem through xScale, and tapping into massive sources of incremental demand by adapting to evolving customer needs with our rapidly growing digital services business. Turning to our results as depicted on Slide 3. Revenues for Q3 were $1.7 million, up 8% year-over-year, adjusted EBITDA was up 4% year-over-year, and the AFFO was in line with our expectations. Interconnection revenues continued to outpace colocation revenues, growing 11% year-over-year, driven by solid fiscal cross connect growth and broad adoption of Equinix power. These growth rates are all on a normalized and constant currency basis. We process more than 4,200 yields in the quarter across more than 3,100 customers highlighting the reach, scale and predictability of our booking digits. We have a solid demand pipeline as we look in the final quarter of the year, and we continue to add capacity in services demand with 11 major projects delivered this quarter in key markets like Frankfurt, New York, and Singapore, and 31 more major projects underway across 23 markets in 16 countries. Our global interconnection franchise continues to thrive with over 414,000 total interconnections on our industry-leading platform. In Q3, we added an incremental 7,800 interconnections now have at least 1 major cloud on-ramping, 42 metros around the world, 2 times more than the nearest competitor. A clear indication that Equinix is the home of the interconnected cloud. Internet exchange saw peak traffic up 6% quarter-over-quarter, and 30% year-over-year to over 21 terabits per second, as traffic growth remains robust. Equinix Fabric saw excellent growth continuing significantly over index within the broader interconnection portfolio. More than 2,800 customers are now on Fabric, attach rates moving up into the right as businesses diversify their end destinations and service providers integrate Fabric into their own solutions. In September, we extended Platform Equinix into our 27th country, with the close of our GPX acquisition, entering the strategic Indian market. Our 2 data centers in Mumbai form a network-dense campus with more than 350 international and local companies, including 6 on-ramps to the world's leading Cloud service providers and a robust network ecosystem. GPX represents an ideal entry point into this top 10 GDP country, and we expect to expand our operations significantly in India over the coming years as we tap into this rapidly growing market. In parallel with our tremendous retail success, we continue to expand our xScale business. In October, we announced plans to expand in Australia with an agreement to establish a $575 million in joint venture with PGIM real estate to develop two data centers in Sydney, which will provide more than 55 megawatts of capacity when fully built. Also, during the quarter, we closed the first phase of our previous slide-outs to [Indiscernible] joint venture with GIC and signed 2 megawatts with the hyperscalers in Frankfurt. We currently have 8 xScale built under development, including our newly announced [Indiscernible] 3, Mexico C3 and Sydney 9 assets, which will collectively added 25 megawatts capacity when they open in the first half of 2022. The total investment of our various hyper-scale joint ventures when closed and fully built-out, is now expected to be more than $7.5 billion across 34 facilities globally with more than 675 megawatts of power fast. Turning our [Indiscernible] recharge services, our Equinix 's metal business saw strong revenue growth at Cloud-native and service provider customers continue to embrace the ability to deploy physical infrastructure at software speed. And network-edge is our robust growth as established customers purchase more virtual network functions across additional metrics. By year-end, we expect network-edge to be available in 25 metros around the world. So let me cover highlights from our verticals. Our network vertical continues to be a foundation for the business. With strength in the quarter in cable and satellite sub-segments and continued momentum in joint go-to-market with our top net with partners across the globe. Expansions this quarter included Zayo Group, a global communications infrastructure Company adding interconnection and colocation capacity to support demand, Vocus, Australia's leading specialist fiber and network solutions provider, building infrastructure in both Sydney and Melbourne to offer network services, and Hurricane Electric, a global network service provider, utilizing Equinix Fabric to allow Enterprise customers to access their IP transit products at scale and in real-time. Our enterprise vertical saw another strong quarter led by manufacturing in FinTech and record channel activity. New wins and expansions included a Fortune 100 -named manufacturing Company, deploying global network hubs to enable their stats analytics offering, a leading technology manufacturer deploying a custom-liquid cooled environment and solution center to support the next-generation of high performance compute, and a Fortune 250 online retailer and e-commerce platform, deploying across Platform Equinix with low latency, cloud-adjacent network hubs to support their retail branded sites. Our cloud and IT verticals saw particular strength in the Americas, as industry-specific cloud solutions continue to be a catalyst for innovation and new growth. Expansion this quarter included Adobe, a leading cloud software provider, deploying infrastructures towards platforms and optimize sustainable participation in key digital markets and ecosystems. Wasabi, a U.S. based object storage Company expanding their offering on Equinix Fabric into APAC and EMEA, enabling customers to easily connect their bare metal workflows posted on Equinix Metal, and a top 5 global software provider deploying core metals to support their growing user base in demand in both Mexico City and Sao Paulo. Content and digital media had a great bookings quarter with resurgence in this vertical being led by APAC and broad-based strength in the gaming and streaming sub-segments as consumer demand for at-home digital services remains strong. Expansion this quarter included Netflix, a global streaming services spanning across Platform Equinix to new and existing markets to support OTT delivery, Kingsoft, a Chinese cloud provider expanding into sand port to support rapid sales growth, and a top 3 content distributor extending coverage and scale for its growing platform in the delivery of new and existing security solutions. And our channel program continues to shine, delivering another robust quarter. This important go-to-market notion accounted for over 35% of total bookings, nearly half of our enterprise bookings in more than 60% of our new logos in the quarter. We are benefiting from tremendous momentum in hybrid cloud adoption and seeing particular strength from joint enterprise pursuits with our key alliance partners such as AT&T, AWS, Dell, HPE, and Microsoft. Wins were across a wide range of industry verticals and included a marquee win with NVIDIA, IBM, and SBA for Continental Group, a worldwide automotive parts supplier billion - interconnected global network to optimize workloads and speed up AI training for their advanced driver assistance systems. So now let me turn the call over to Keith to cover the results for the quarter.

Charles Meyers:

Thanks, Keith. Our business continues to perform exceptionally well delivering strong and consistent results throughout the changing times. The pandemic has been a driving force for digital transformation and as businesses seek to respond to this imperative, the infrastructure underpinning these services must keep pace. We continue to prosecute multiple compelling growth factors, expanding our platform geographically, scaling our go-to-market engine to capture new customers, and bringing new services to bear that will expand our addressable market. We're evolving the way we design, create, and deliver our products and services to fuel our growth and meet the changing needs of our customers. To that end, I'd also like to welcome Ron Guerrier to our Board of Directors. As a veteran CIO to Fortune 500 corporations and government, Ron brings a unique perspective to the Equinix board as we continue to innovate our digital infrastructure offerings for the digital leaders of today and tomorrow. I'd like to close by expressing my gratitude to our more than 10,000 employees, whose commitment to keep our customers at the center of everything we do continues to drive our market leadership. They embody our commitment to show up every day with an in-service to mindset, starting by being in service to each other, which in turn allows us to be in service to our customers, to our communities, and to you, our shareholders. So let me stop there and open it up for questions.

Ari Klein:

Thanks. It sounds like new customer net adds have been up a fair bit this year and the channel partnerships are doing really well. Can you provide some additional color on what you're seeing there, maybe where you're seeing the most traction from new customers, and also in the channel from a regional standpoint.

Ari Klein:

Thanks. And then just on churn, it's tracking well below where it's been in historically. What's driving that and how sustainable do you think that is moving forward?

Ari Klein:

Thanks for the color.

Jordan Sadler:

Thanks. Wanted touch base on some of the inflationary pressures that have been affecting folks. First, just maybe you could talk about the impact, if any, rising power costs may have had in the quarter on your full-year guide. And maybe elaborate if you could, your hedging protocol by region.

Jordan Sadler:

And just I guess as a follow-up, just one, what would the presenting the portfolio is sort of circuit billing oriented. And then when you factor in some of the ability to pass some of this through, what's sort of the benefit that you may be layered in there in terms of top-line?

Jordan Sadler:

Okay. Thank you.

Jon Atkin:

Thanks. I was interested in xScale, and if you can maybe highlight any major differences with PGI and compared to GIC. And then more broadly as we sort of think about 2022 growth drivers for revenue -- revenue's margins CapEx, as well as AFFO, perhaps coming from xScale. But anything to keep in mind -- I know you're not going to give guidance on this call, but from a qualitative perspective, tailwinds and headwinds to keep in mind for next year. Thanks.

Charles Meyers:

Jon, on the other ones, I say want. Look, I haven't been -- I'm an optimist because I have never been, I guess on the business, how it's performing, what the magnitude of the opportunity ahead is. A little bit of noise in the quarter here, but I think that we had a -- we continue -- the business continues to perform. The fundamentals are very strong. 8,000 [Indiscernible] been added to add in the quarter, 3,000 billable cab ads, record bookings really for the past 3 quarters, at least seasonally adjusted in terms of this is our best Q3 ever. This quarter great degree predictability turn, as I said, at the low-end firm pricing, we added another quarter of positive pricing adjustments that Keith talked about in the script and continue to see good momentum on our new markets. And if you look at big markets that we're relatively earlier entering in in terms of -- think places like Mexico and now India. Huge opportunities in front of us there to over-indexing growth in those markets. And then digital services is really -- Our customers are responding really well to those products even though they're at an earlier stage growth. So I think as I look into 2022 in terms of headwinds, tailwinds, etc, feel really good about the bookings momentum, feel really good about the pricing in our relevance to customers and therefore our ability to support firm price points. A churn looks good, good deal mix is going to continue to be absolutely key to maintaining that. As I said, I think the headwinds more on making sure that we continue to -- we talked a little bit about power as a potential headwind there in some areas. We talked about, I think continuing to drive operational efficiencies in the business is going to be a key focus for us to drive operating leverage. And then continuing to work backlog. I think we've got a big backlog partially because we've got some big deals that have gone into that. We got to continue to work through that backlog, certain deal types, tab slightly longer book-to-bill. And I think we're seeing that as part of the complexity of implementing these more multi-vendor, hybrid multi-cloud kind of deals. And so we're continuing to sort of hone our capabilities there. So if we can continue to drive those things, I think we will be able to really take advantage of the bookings momentum that's there. And obviously, we'll give you a color on all of that as we go into the 2022 guide.

Charles Meyers:

Yeah. A great question, Jon. I would say that we're continuing to learn in that area and we're accelerating our kind of investment of energy in the -- understanding that landscape. And at the same time we are -- we're still digesting and learning some of the business around digital services and how to adapt our approach and build capabilities both from -- evolved capabilities, both from a design and development perspective, as well as from a deployment and go-to-market perspective. And so we're continuing to honor our -- cut our teeth there and really learn those things in that market. But I do think there are real opportunities there. And so we'll be continue to be active in that area in terms of looking at potential opportunities, both to add talent and technology and capabilities, and really learning that landscape better over the course of this year and next year and beyond.

Operator:

Our next question comes from Phil Cusick from JPMorgan, please go ahead.

Charles Meyers:

Hey, Richard, but I hope that party continues for a while. I would tell you I think we feel pretty good about that business. Again, we certainly have -- we spend more quarters than I would like talking about when the Verizon term was going to abate. And so I'm loving talking about the other side of that now. We're really the scale of that business, tremendous sales execution in the region, both for bookings into the region as well as global bookings to the platform elsewhere. I would say we feel really good about the performance of the America's region right now and expect that growth rate is going to continue to persist at elevated levels. And then so we feel good about that fact. I think driving attach rates now to continue to increase the share of wallet with our very, very large customer base and bringing them some of our new services is some of the new area of focus and really leveraging our channel partners to do that. So anything to add Keith

Richard Choe:

And a quick follow-up turning, you see an issue in the Americas, are you seeing that lower now or has that not changed as much.

Richard Choe:

Great. Thank you.

David Guarino:

Thanks. Hey, Charles. Can you elaborate on your comments about pricing being firm? What exactly does firm mean and maybe specifically, if that's renewals or new leases? And then also, maybe just helpful would be if you could put some data behind it on the MRR per cabinet in the U.S. Could you tell us what that was, excluding the large footprint deployments this quarter?

David Guarino:

Okay. And then maybe just one clarification too on the stabilized revenue growth at the low-end factory of 5% range and I know Keith said it's going to step up again next quarter, but would the drag this quarter just due to a timing of commencement on leases?

David Guarino:

Of commencements on leases was it just certain leases got push into next quarter? I guess if we're going to get to the high-end of the guidance rates. I would assume you have a pretty big step-up in near revenue growth. So I was wondering if there was something driving it or just a lease has got pushed into Q4 in terms of when you will start realizing revenue?

David Guarino:

All right. Thank you.

Simon Flannery:

Great, good evening. thanks a lot. just coming back to the inflation and supply chain commentary. Could you talk a little bit about what you're seeing on the construction and the development side of things, availability of labor, raw materials? What's going on in the various markets around the world at both in terms of costs and your ability to pass that along as well as any impacts on timelines for development, and then you've been very active on the xScale, but in terms of other M&A, how are you thinking about the landscape out there or is this going to be more focused on sort of small tuck-ins from here, Thank you.

Simon Flannery:

Great color. And the M&A?