Q3 2021 Equinix Inc Earnings Call

November 3, 2021

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.

Good afternoon, and welcome to today's conference call. Before we get started I'd like to remind everyone that some of the statements that we're 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 identified in today's press release and those identified in our filings with the SEC, including our most recent Form 10-K filed on February 19, 2021, and 10-Q filed on July 30th 2021.

As with the SEC, including our most recent Form 10-K filed on February 19, 2021, and 10-Q filed on July 32021.

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's Equinix's policy not to comment on its financial guidance during the quarter unless it is 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 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 IR page at www.Equinix.com.

Provide a reconciliation of those measures 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 IR page at Www Equinix Dot com.

We have 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 we encourage you to check our website regularly for the most current available information.

With us today are Charles Meyers, Equinix was 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 an hour, we'd love to ask these analysts to limit any following questions to just one.

At this time I will turn the call over to Charles.

Thanks. Good afternoon, everybody and welcome to our third-quarter earnings call, we had a great quarter, achieving our 75th consecutive quarter of topline revenue growth and a record Q3 bookings a clear signal of strong market demand.

Our results were fueled by continued strength in our America's business, a robust performance for our channel program globally as key partners continue to see platform Equinix as a point of Nexus for digital transformation solutions. The pandemic has triggered an accelerated need to digitize business models in virtually every segment of the economy and our strong results reflect this increase in demand for digital infrastructure. And Equinix remains uniquely positioned to help customers as they shift towards distributed hybrid and multi-cloud as a clear architecture of choice.

<unk> has triggered an accelerated need to digitize business models in virtually every segment of the economy and our strong results reflect this increase in demand for digital infrastructure and Equinix remains uniquely positioned to help customers as they shift towards distributed hybrid and multi cloud as a clear architecture of choice.

As we continue to strengthen our position as the world's digital infrastructure company, our focus remains on creating distinctive and durable value for our customers and our shareholders driving growth and scale in our market-leading colocation franchise, expanding our relevance to the cloud ecosystem direct scale and tapping into massive source of incremental demand by adapting to evolving customer needs with a rapidly growing digital services business.

Customer needs with a rapidly growing digital services business.

Turning to our results as depicted on slide three revenues for Q3 were $1.7 million up 8% year over year, adjusted EBITDA was up 4% year over year and AFFO was in line with our expectations.

Interconnection revenues continued to outpace colocation revenues growing 11% year over year, driven by solid physical cross-connect growth and broad adoption of Equinix fabric. These growth rates are all on a normalized and constant currency basis.

These growth rates are all on a normalized and constant currency basis.

We processed more than 4200 deals in the quarter across more than 3100 customers highlighting the reach scale and predictability of our bookings engine.

We have a solid demand pipeline as we look to the final quarter of the year and we continue to add capacity to service this 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 414000 total air connections on our industry-leading platform.

In Q3, we added an incremental 7800 interconnection now have at least one major cloud on ramp 42 metros around the world two 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 to significantly over-index within the broader interconnection portfolio.

<unk> fabric saw excellent growth continuing to significantly over index within the broader interconnection portfolio.

More than 2800 customers are now on Fabric attach rates moving up into the right as businesses diversify their end destination and service providers integrate Fabric into their homes.

In September we extended platform Equinix into our 27 countries with the close of our GPS acquisitions entering the strategic Indian markets. Our two data centers in Mumbai form a network dense campus with more than 350 international and local companies, including six on ramps to the world's leading cloud service providers and a robust network ecosystem.

Our two datacenters in Mumbai form a network dense campus with more than 350 international and local companies, including six on ramps to the world's leading cloud service providers and a robust network ecosystem.

GBS represents an ideal entry point into these top 10 GDP countries 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. And in October we announced our plans to expand in Australia with an agreement to establish a $575 million 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.

<unk> already announced plans to expand in Australia with an agreement to establish a $575 million joint venture with <unk> real estate to develop two datacenters 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 previously announced immediate to joint venture with GIC and signed two megawatts with the Hyperscale and frame.

We currently have eight XScale builds under development, including our newly announced matured three Mexico C III and <unk> nine assets, which will collectively add 25 megawatts capacity when they opened in the first half of 2022.

The total investment of our various Hyperscale 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 capacity.

Turning to our digital infrastructure services are Equinix metal business saw strong revenue growth with cloud-native and service provider customers continue to embrace the ability to deploy physical infrastructure at software suite.

And network edge is our robust growth as established customers purchased more virtual network functions across additional metrics by year end, we expect network has 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 network with partners across the globe.

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 network with partners across the globe.

Expansion this quarter included [Zeon], a global communications infrastructure company, adding interconnection and colocation capacity to support demand Vocus, Australia is leading specialist fiber and network solutions provider. Building infrastructure with 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.

<unk> infrastructure, <unk>, 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 and Fintech and record channel activity, New wins and expansions included a fortune 100 manufacturing company deploying global network hubs to enable their SaaS analytics offerings.

Leading technology manufacturer deploying accustom liquid-cooled environment and solutions 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 vertical saw particular strength in the America as industry-specific cloud solutions continue to be a catalyst for innovation and new growth.

Expansions this quarter included Adobe, a leading cloud software provider deploying infrastructure to support platforms and optimize sustainable participation in key digital marketing ecosystems. Wasabi, a US-based object storage companies expanding their offering on Equinix Fabric into APAC and EMEA, enabling customers to easily connect their bare-metal workloads hosted on Equinix Bell. And a top-five global software provider deploying core nodes to support their growth growing user base and demand in both Mexico City and Saint Paulo.

[noise] workloads hosted on Equinix Bell. A top five global software provider deploying core nodes to support their growth growing user base and demand in both Mexico City and so Paulo.

A top five global software provider deploying core nodes to support their growth growing user base and demand in both Mexico City and so 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.

Expansions this quarter included Netflix a global streaming service expanding across platform Equinix to new and existing markets to support OTT delivery.

Ksoft, a Chinese cloud provider expanding into Singapore to support rapid sales growth and a top three content distributor extending coverage and scale for its growing platform and the delivery of new and existing security solutions.

And our channel program continues to shine delivering another robust quarter. This important go to market Ocean accounted for over 35% of total bookings nearly half of our enterprise bookings and more than 60% of our new logos in the quarter.

We are benefiting from tremendous momentum in hybrid cloud adoption and seeing particular strength in joint enterprise pursue with our key alliance partners, such as AT&T, AWS, Dell, HPE and Microsoft.

We're 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 building an interconnected global network to optimize workflows and speed of AI training for their advanced driver assistance systems.

So now let me turn the call over to Keith and cover the results for the quarter.

Great. Thanks, Charles and good afternoon to all. Let me start by saying the Equinix business continues to hum and once again, we met our expectations or better. We had a very solid quarter. The macro-environment for digital infrastructure continues to drive expanding market opportunities as demonstrated by another understanding bookings quarter, both at the gross and the net level from our industry-leading go to market engine.

Let me start by saying the FX business continues to Hum and once again, we met our expectations or better we had a very solid quarter.

Macro environment for digital infrastructure continues to drive expanding market opportunities as demonstrated by another understanding bookings quarter, both at the gross and the net level from our industry, leading go to market engine.

Our bookings backlog remains both significant and elevated as we work to install the substantial volume of business moves through the past few quarters. And our forward-looking pipeline is extremely healthy in all of our regions. Our channel sales activity with the best in our history and our global platform delivered healthy inter and intra region activity, we have firm MMR per cabinet yields with yet again net positive pricing actions. Elevation of our differentiated operating model compared to others in our space.

And our forward looking pipeline is extremely healthy and all of our regions.

Our channel sales activity with the best in our history and our global platform delivered healthy inter and intra region activity, we have firm MMR per cabinet yields with yet again net positive pricing actions.

Elevation of our differentiated operating model compared to others in our space.

On a year to date basis, our global design and construction and ops teams have delivered more than 18000 cabinets of retail capacity and 40 megawatts of ex-fuel inventory. While also lowering our critical network infrastructure assets across our targeted markets in support of our Fabric, network edge and metal service offerings.

And 40 megawatts of ex fuel inventory, while also lowering our critical network infrastructure assets.

Across our targeted markets in support of our fabric network edge and metal service offerings.

We're seeing no major delays to date is delivering new capacity, despite general market concerns related to supply chain challenges.

A reflection of the efforts put forth by our best in class procurement and strategic sourcing teams.

Now let me cover the results for the quarter more than all growth rates. In this section are on a normalizing constant currency basis.

As depicted on slide four global Q3 revenues were $1.675 billion. Up 8% over the same quarter last year due to strong business performance across our platforms led by the America's region.

Up 8% over the same quarter last year due to strong business performance across our platforms led by the Americas region.

Non-recurring revenues represented about 7% of revenues due to an increase in custom installation work and EMEA ex fuel joint venture fees. For Q4 we expect MLR trend downward decreasing sequentially by approximately $12 million due to lower xScale fees and the timing of large customer installations.

For Q4.

<unk> MLR trend downward decreasing sequentially by approximately $12 million due to lower <unk> fees and the timing of large customer installations.

Q3 revenues net of our FX hedges included a $6 million headwind when compared to our prior guidance rates.

Global Q3 adjusted EBITDA was $786 million or 47% of revenues at the high end of our guidance expectations due to timing of spend and lower integration costs.

Q3 adjusted EBITDA net of our FX hedges included a $3 million headwind when compared to our prior guidance rates and $3 million of integration costs. Global Q3 AFFO was 628 million as a result of strong operating performance consistent with our expectations.

Global Q3, <unk> was 628 million as a result of strong operating performance consistent with our expectations.

Similar to prior years, we expect seasonally higher levels of recurring Capex in Q4 as our operating teams worked to complete the 2021 projects. Global Q3, MMR churn was 2.1%. We continue to expect MLR trend for the full year to be at the lower end of our targeted quarterly range of 2% to 2.5%.

Global Q3, MMR churn was two 1%.

We continue to expect MLR trend for the full year to be at the lower end of our targeted quarterly range of two to two 5%.

Turning to our regional highlights whose full results are covered on slides five through seven. The APAC region revenue grew 11% year over year, followed by the Americas at 7% and EMEA at 6%.

The APAC region revenue grew 11% year over year, followed by the Americas at 7% and EMEA, 6%.

As previously discussed we expect the EMEA growth rate to return to normalized levels in Q4, as we lap interconnection price increases and the other one off positive adjustments from last year.

The America's region saw continued strength with our third consecutive quarter of record bookings with a broad distribution across metals, including some of our smaller markets, such as Boston, Denver, Mexico City, Seattle and Toronto.

The America's sales teams continue to sell the global platform with a notable increase in activity coming from our Canadian team.

Our benefits derived from the transaction with Bell, Canada, which is outperforming our expectations.

Our EMEA region had a solid quarter with strength coming from our Amsterdam, Frankfurt and Madrid markets as the enterprise customers and the channel drive bookings.

And as we aim to meet high sustainability and efficiency standards, while progressing towards our 2030 science-based targets, new builds like our recently opened in fact for AIB ex-service models have landed the CDC are positively contributing to the local microclimate.

New builds like our recently opened in fact for AIB ex service models have landed the CDC.

Positive contributing to the local microclimate.

And finally, the Asia Pacific region had a solid quarter with momentum across all of our metros led by Singapore. New deal activity focused on small to medium-sized deployments with firm pricing and continued strength in our cross border selling.

New deal activity focus on small to medium sized deployments with firm pricing and continued strength in our cross border selling.

Our Hong Kong market saw a nice rebound in bookings performance. Although continues continues to feel constrained given the market uncertainty.

And now looking at our capital structure, please refer to slide eight. We ended the quarter with cash of about $1.4 billion and our net debt leverage ratio remains well, particularly relative to our industry peers. Our balance sheet remains highly flexible and liquid and we have a low year for full cash payout ratio. With regards to our outstanding debt, we have minimal near term exposure to potentially rising interest rates with 95% of our debt fixed at a weighted average maturity of over nine years.

We ended the quarter with cash of about $1 4 billion and our net debt leverage ratio remains well, particularly relative to our industry peers.

Our balance sheet remains highly flexible and liquid and we have a low year for full cash payout ratio.

With regards to our outstanding debt, we have minimal near term exposure to potentially rising interest rates with 95% of our debt fixed.

Weighted average maturity of over nine years.

Turning to slide nine for the quarter, capital expenditures were approximately $678 million, including a recurring CAPEX of $48 million. We opened 11 new projects this quarter, including new IDEXXs in Frankfurt, Osaka, and Singapore and purchased land for development in Barcelona, Frankfurt in Helsinki. On the xscale side of the business, we opened our Sao Paulo five in fact, the nine assets.

We opened 11, new projects this quarter, including new IDEXX is in Frankfurt, Osaka, and Singapore and purchased land for development in Barcelona Frankfurt in Helsinki.

On the <unk> side of the business, we opened our Sao Paulo five in fact, the nine assets.

We also closed the first phase of our EMEA to joint venture with GIC for net cash proceeds after our 20% equity contribution of approximately $140 million, including $34 million coming from the contribution of our Sao Paulo five assets into the joint venture after quarter-end.

Into the joint venture after quarter end.

On a separate note we continue to actively manage our partners and suppliers and have built up an appropriate inventory of powertrain components as we hedge against supply chain challenges in support of our business needs.

Finally, total recurring revenues from owned assets stepped up to 59% due to the acquisition of our Sydney one and Sydney two IBEXXs.

Our capital investments delivered strong returns as shown on slide 10. A 153 stabilized assets increased recurring revenues by 3% year over year on a constant currency basis. These stabilized assets are collectively 86% utilized and generate a 27% cash on cash return on the gross PP&E invested.

A 153 stabilized assets increased recurring revenues by 3% year over year on a constant currency basis.

These stabilized assets are collectively 86% utilized and generate a 27% cash on cash return on the gross PP&E invested.

We expect to exit the year closer to the top end of our stabilized asset growth range in part due to strong America's revenue growth. Please refer to slides 11 through 15 for our updated summary of 2021 guidance and bridges. Do note, our guidance now includes the anticipated results from the Gtx, India acquisition, which closed in September.

Please refer to slides 11 through 15 for our updated summary of 2021 guidance and bridges do note. Our guidance now includes the anticipated results from the Gtx, India acquisition, which closed in September.

For the full year 2021, we expect revenues to grow approximately 8% on a normalized and constant currency basis.

Our updated revenue guidance implies our largest ever quarterly step up in recurring revenues on a normalized basis, a reflection of our continued strong execution.

Revenues included about $5 million from the GPX acquisition and reflect updated FX rates. We expect 2021, adjusted EBITDA margins before integration cost to be greater than 47%.

We expect 2021, adjusted EBITDA margins before integration cost to be greater than 47%.

And now include about $3 million from the GPX acquisition and reflect updated FX rates. We expect to spend $80 million of integration costs in 2021.

We expect to spend $80 million of integration.

Costs in 2021.

And we expect 2021 AFFO to grow 10% to 11% on a normalized and constant currency basis compared to the prior year and to deliver AFFO per share growth of 9% to 10%. Our AFFO guidance includes some AFFO impacting accelerated spend including recurring CAPEX.

Our <unk> guidance includes some <unk> impacting accelerated spend including recurring capex.

And elevated cash commissions associated with our strong bookings performance. 2021, Capex is expected to range between 2.7 and $3 billion. Including about $450 million of on balance sheet Xscale CAPEX, a significant portion, which has been or will be reimbursed by the JV.

2021, Capex is expected to range between two seven and $3 billion.

Including about $450 million of on balance sheet X scale capex at significant portion, which has been or will be reimbursed by the JV.

And $193 million of recurring Capex spend at the midpoint. So let me stop here and turn the call back to Charles.

So let me stop here and turn the call back to Charles.

Thanks, Keith. Our business continues to perform exceptionally well delivering strong and consistent results throughout these changing times. The pandemic has been a driving force for digital transformation. Businesses seek to respond that it's imperative the infrastructure underpinning these services must keep pace. We continue to prosecute multiple compelling growth vectors.

Our business continues to perform exceptionally well delivering strong and consistent results throughout these changing times and the pandemic has been a driving force for digital transformation.

Businesses seek to respond that it's imperative the infrastructure underpinning these services must keep pace.

We continue to prosecute multiple compelling growth vectors.

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 are 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 the veteran of the CIO of a 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.

To that end I'd also like to welcome Rob <unk> to our board of directors as the veteran of the CIO of a 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 10000 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 two 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. Thank you. We would now like to open the phone lines for questions. If you would like to ask a question, you may press star one on your phone. If you need to withdraw your question, press start to our first question comes from Ari Klein from BMO capital market. Please go ahead.

<unk> our commitment to show up every day with an in service two 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.

Thank you we would now like to open the phone lines for questions. If you would like to ask a question you May press star one on your phone if you need to withdraw your question press start to our first question comes from Ari Klein from BMO capital markets. Please go ahead.

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

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

Sure.

Yes. We're seeing strength across the board, but really the enterprise side of the business I think is where a lot of the new customer adds are coming from. And most of those 60 about 60% are coming through channel as we talked about in the script. So we're seeing a big uptick as I said more than 35% of the bookings coming through the channel.

We're seeing strength across the board, but really the enterprise side of the business I think is where a lot of the new customer adds are coming from.

And most of those 60 about 60% are coming through channel as we talked about in the script. So we're seeing a big uptick as I said more than 35% of the bookings coming through the channel.

And I think it's been really encouraging we're really seeing strength with our top channel partners and really are our top alliance partners in particular. Who are really engaged in joint enterprise pursuit with us.

Who are really engaged in joint enterprise pursuit with us in.

In terms of pursuing hybrid multi cloud opportunities and people implementing hybrid architectures. And so in fact I'll give you a stat we had our top four alliance partners in this quarter accounted for 10% of the total bookings and that's about 10% of the channel because that's 10% of total bookings.

This quarter accounted for 10% of the total bookings and that's about 10% of the channel because that's 10% of total bookings.

So really strong momentum with the with channel partners and it's across a number of verticals and it's across a number of use cases, but our real strength in terms of how people are thinking about using corporate data to draw insights. How they, therefore, want us to store that data centrally act on it from a variety of cloud resources.

How they therefore want us to store that data centrally act on it from a variety of cloud cloud.

Resources.

And then also AI as a key driver in fact, we had a big win big joint win with Nvidia on that front, as we talked about in the script. And so really really great progress there and I think the range of use cases is really strong. We had an event today that we call Connect.

And on that front as we talked about in the script and so.

Really really great progress there and I think the range of use cases.

<unk> is really strong.

We had an event today that we call connect.

Yeah.

We had about 500 registrations for that event. For enterprises talking about a variety of use cases implemented on Fabric. We're seeing some really good momentum.

For enterprises talking about a variety of use cases implemented on fabric.

We're seeing some really good momentum.

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

Yes.

Again, I do think that that's a durable trend. I would always comment that there is some potential lumpiness inherent at times. And so, but I think if you look at the trend line on that it's been, the line of best fit is clearly downward there.

The line of best fit is clearly downward there.

So we've had a good year and as we said, we expect our full year churn to be towards the bottom end of the range that we talked about two to two and a half.

And I think the big driver of that is really mix of business that we're getting the right kinds of deployments right kinds of customers right kinds of use cases, and I think thats a lot of credit to our sales and marketing team in terms of what they're doing from a targeting perspective.

Our commercial teams in terms of how we're we're really sort of focusing the business. So. I do think it's. I think it's durable and I think that's going to be a continued to be a key driver in the business going forward.

I do think it's.

I think it's durable and I think that's going to be a continued to be a key driver in the business going forward.

Thanks for the color.

Our next question comes from Jordan Sadler from Keybanc capital markets. Please go ahead.

Thanks wanted to touch base on some of the inflationary pressures that's been affecting folks.

<unk>.

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 he could on your hedging protocol by region.

You're hedging protocol by region.

Sure, I'll start and then Keith can jump in if he wants to add anything, but I would say that other than some small one-time items on the power side that had a slight impact on our Q4 guidance.

We're seeing powerhouse pretty much come in where we expected for the remainder of the year and into early next year I think there's it's more going to be the longer term volatility into 2022 that we're really looking at. But as you said similar to currency, we've got pretty extensive hedging program net.

But as you said similar to currency, we've got pretty extensive hedging program net.

And that really feather in our hedges over a multiyear period and we're about 85% hedged in the in the unregulated markets, which represent most of our largest markets.

And so our contracts do allow for us to adjust pricing based on underlying costs and were actively working to implement adjustments, where we think that's appropriate.

On underlying costs and were actively working to implement adjustments, where we think that's appropriate.

Well again, you guys I think recognize our business is different in that we're more heavily circuit based on our power mix. So whereas it's a little more seamless to pass through those costs in a metered power environment. It takes a little more financed to do that in the in the circuit based power environment, but I would say that we are, as I said, we're actively working on that in terms of how to do it. And I'd say that our experience in Europe with the cross-connect pricing increases over the last couple of years.

Whereas it's a little more seamless to pass through those costs in a metered power environment. It takes a little more financed to do that in the in the circuit based power environment, but I would say that we are.

As I said, we're actively working on that in terms of how to do it and I'd say that our experience in Europe with the cross connect pricing increases over the last couple of years.

Really gives us some confidence that we'll be able to go get that done effectively so no doubt there is more volatility in the energy market. So we're watching those closely and we're going to continue to adapt our strategies accordingly.

No doubt there is more volatility in the energy market. So we're watching those closely and we're going to continue to adapt our strategies accordingly.

Okay, and just I guess as a follow-up. Just one what would the percent of 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?

Yeah.

Just one what would the percent of the portfolio is sort of circuit billing oriented and then.

When you 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 percentage.

About 80% of the portfolio is circuit based and again, that's been key to our. As part of our overall return story, we've been very effective in terms of driving sort of aggregate returns across space and power because of that circuit-based power component of the business. And so and in terms of it's really more a matter of how effective can we be in terms of passing through price increases, underlying cost increase increases in the form of price to the circuit-based power environment. And so again, we have the contractual ability to do that and it's just a matter of whether we do it, I do think it won't be like circuit power, we're going where we're going to get every bit of that back.

As part of our overall return story, we've been very effective in terms of driving sort of aggregate returns across space and power because of that circuit based power component.

Component of the business and so and in terms of it's really more a matter of how effective can we be in terms of passing through.

Price increases are underlying cost increase increases in the form of price to the <unk>.

Market based power environment, and so again, we have the contractual ability to do that and it's just a matter of whether we do it I do think it won't be like circuit power, we're going where we're going to get every bit of that path.

So, but I think that will we will look at that market by market and assess what the right approaches.

Okay. Thank you.

You bet.

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

Thanks, I was interested in the Xscale and if you could 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 revenues margins Capex. As well as data, so perhaps coming from Xscale, but anything to kind of keep in mind I know you're not going to give guidance on this call, but from a qualitative perspective tailwind and headwinds to kind of keep in mind for next year. Thanks.

GIC and then more broadly as we sort of think about 2022 growth drivers for revenue.

Revenues margins Capex.

As well as data, so perhaps coming from ex scale, but anything to kind of keep in mind I know youre not going to give guidance on this call, but from a qualitative perspective tailwind and headwinds to kind of keep in mind for next year. Thanks.

Sure Joe. I'll take the first one and then I think Charles will take the second one as it relates to sort of the deal structuring between PGIM and GIC is very similar in many ways. The construct was developed contracting structure with the GIC, but we worked with PGIM. And again delighted to have another partner in a different market in support of our Australian business.

The first one and then I think Charles let's take the second one as it relates to sort of the deal structuring between Pgi MGIC is very similar in many ways. The construct was developed.

Contracting structure with the GIC, but we worked with Pgi and again delighted to have another partner in a different market in support of our Australian business.

As it relates to sort of our ability to the performance this quarter again. As you've heard from some of our prior calls we're basically sold out most of the capacity that were delivered to market. So we're very eager to continue our builds we have eight builds currently underway next scale. And the team is working very hard to identify customer appropriate customers for that capacity plus more. So I'll just leave you with, it's an exciting time for us in the xscale space, we're putting the money to work and as Charles alluded to in his prepared remarks was $7.5 billion of capital is going to be deployed across 34 assets.

The performance this quarter again.

As you've heard from some of our prior calls we're basically sold out most of the capacity that were delivered to market. So we're very eager to continue our builds we have eight builds currently underway next scale.

And the team is working very hard to identify customer appropriate customers for that capacity plus more so I'll just leave you with.

Taking time for us in the <unk> space, we're putting the money to work and as Charles alluded to in his prepared remarks was $7 5 billion.

capital is going to be deployed across 34 assets.

And we still have more to talk about. So why don't I leave it there and just recognize that ex-fuel in of itself right. Now there is not a big component of our revenues or AFFO, but it does create some lumpiness that you've seen in the nonrecurring line, which we highlighted in our prepared remarks. In Q4, we just don't expect as much of that nonrecurring revenue as we've seen before.

So why don't I leave it there and just recognize that ex fuel in of itself right. Now there is not a big big component of our revenues or <unk>, but it does create some lumpiness that you've seen in the nonrecurring line, which we highlighted in our prepared remarks Q4, we just don't expect as much of that nonrecurring revenue as we've seen before.

As we look into '22 and beyond you'll start to see that from a nonrecurring perspective, and then you'll also see more of the recurring piece come into play for the Xscale.

That step up again from a nonrecurring perspective, and then you'll also see.

More of the recurring piece come into play for the X scale.

Yes, John on the other ones I would say want to look at either haven't been as estimates that I've ever 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 the business continues to perform the fundamentals are very strong 8000 are connection add adds in the quarter. 3000 billable cab adds record bookings, really for the past three quarters at least seasonally adjusted in terms of this was our best Q3 ever this quarter. Great degree of predictability churn as I said at the low end. Firm pricing, we had another quarter of positive pricing adjustments of Keith talked about in the script.

A little bit of noise in the quarter here, but I think that we had a.

We continued the business continues to perform the fundamentals are very strong 8000 are connection add adds in the quarter three.

3000, billable cab adds record bookings really for the past three quarters at least seasonally adjusted in terms of this was our best Q3 ever this quarter, great degree of predictability churn as I said at the low end.

Firm pricing, we had another quarter of positive pricing adjustments of Keith talked about in the script.

We continue to see good momentum on our new market. If you look at the big markets that we're in a relatively earlier entrant in in terms of think places like Mexico, and and now India. Huge opportunities in front of US there to over-indexing growth on those in those markets and then digital services is really our customers are responding really well to those products, even though they are at an earlier stage of growth. As I look into 2022 in terms of headwind tailwind et cetera. I feel really good about the bookings momentum, feel really good about the pricing and our relevance to customers and therefore, our ability to support firm price points, our churn looks good. Good deal mix is going to continue to be absolutely key to maintaining that.

<unk> products, even though they are at an earlier stage of growth. So.

As I look into 2022 in terms of headwind tailwind et cetera.

Good about the bookings momentum feel really good about the pricing and our relevance to customers and therefore, our ability to support.

firm price points, our churn looks good. Good deal mix is going to continue to be absolutely key to maintaining that.

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've talked about I think continuing to drive operational efficiencies in the business.

Making sure that we continue to.

We talked a little bit about about power as a potential headwind there in some areas. We've talked about I think continuing to drive operational efficiencies in the business.

It's going to be a key focus for us for to drive operating leverage and then continuing to work the backlog I think we got a big backlog, partially because we've got some big deals that have gone into that and we got to continue to work through that backlog. And certain deal types slightly longer book to bill.

And deal types.

Slightly longer book to Bill.

I think we're seeing that as part of the complexity of implementing these more multi vendor hybrid multi cloud kind of deals.

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 they're in and obviously, we'll give you a color on all of that as we go into the 2022 guidance.

I think we will be able to really take advantage of the of the bookings momentum that they're in and obviously, we'll give you a color on all of that as we go into the into the 2022 guidance.

And then if I could throw one in on M&A. Whether it's networking-related or software, consolidation within the bare metal space, but anything kind of non-core to the classic data center business from an M&A tuck in perspective? What do we do regularly look at those sorts of opportunities?

Whether it's networking related or software.

Consolidation within the bare metal space, but anything kind of non core to the classic data center business from an M&A tuck in perspective, so what do we do regularly look at those sorts of opportunities.

And is there anything that you feel would sort of augment the platform from that perspective?

You feel would sort of augment the platform from that perspective.

Yes, Great question, John I would say that we are continuing to learn in that area and we're accelerating our kind of investment of energy into understanding that 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 a evolve all capabilities, both from a design and development perspective as well as from deployment and go to market perspective. And so we're continuing to hone our aerial 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 to add talent and technology and capabilities. And really learning that landscape better over the course of this year next year and beyond.

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 our approach and build capabilities. Both from a evolve all capabilities, both from a design and development perspective as well as from.

Deployment and go to market perspective, and so we're continuing to.

Hone our aerial 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 we'll be.

continue to be active in that area in terms of looking at potential opportunities to add talent and technology and capabilities. And really learning that landscape better over the course of this year next year and beyond.

Really learning that landscape better over.

Over the course of this year next year and beyond.

Thanks, a lot.

Our next question comes from Phil Cusick from JPMorgan. Please go ahead.

Hi. This is Richard for Phil, just wanted to ask about the strength in the Americas. It went from kind of a modest growth to now it seems like a very strong growth environment. What are you seeing there and how long can the bookings continue?

Convenient.

Hey, Richard, well I hope that party continues for a while I would tell you I think we feel pretty good about that business. Again, we spend more quarters than I would like talking about when the Verizon churn was going to abate and I'm loving talking about the other side of that now.

Yes, again, we started.

We spend more quarters than I would like talking about when the Verizon churn was going to abate and.

11 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.

The platform elsewhere.

I would say, we feel really good about the performance of the Americas region, right now and I expect that that growth rate is going to continue to persist at elevated levels.

And so we feel good about that in fact, I think driving attach rates now to continue to increase share of wallet with our very very large customer base and bringing them some of our new services and some of the new area of focus. And really leveraging our channel partners to do that. So anything to add?

The other thing I would just add. Charles and Richard. Remember this region, 75% utilized so we are substantial amount of capacity that we have built and we continue to build in core markets. And the other thing I would just Charles alluded to. The only the focus that we have on the right customers that are our sales leadership team in the Americas and beyond are doing such a great job of selling the platform. And so the opportunity set that we talked about between intra region and intra region is very real so so overall very optimistic by what we're seeing in the America's region.

Charles.

Richard.

Remember this region, 75% utilized so we are.

The amount of capacity that we have.

He has built and we continue to build in core markets and the other thing I would just.

Charles alluded to not only the focus that we have on the right customers that are our sales leadership team in the Americas and beyond are doing such a great job of selling selling the platform and so the opportunity set that we talked about between intra region and intra region is very real so so overall.

Optimistic by what we're seeing in the Americas region.

And as a quick follow up China used to be an issue in the Americas, are you seeing that lower now or not changed as much?

Now or not.

<unk> not changed much.

Well I mean, I think it was. I mean, I guess you'd have to have, that's been in the story for a long time, Richard. But I think there was a period of time, when we had elevated churn associated with really honing our customer mix in our core competitive advantages and making sure that we were focused on those. I would say that was back in the early days, I was here in 2011 to 12 timeframe. When we really set about honing our sales process and driving greater deal commercial scrutiny et cetera.

I mean, I guess you'd have to have is that <unk> been in the story for a long time, Richard It's Ben.

I think there was a period of time, when we had elevated churn associated with really honing our customer mix in our core competitive advantages and making sure that we were focused on those that would say that was back in the early days I was here in 2011 to 12 timeframe. When we really set about honing our sales process and driving <unk>.

Greater deal.

Deal commercial.

Scrutiny et cetera.

And I think that yes, so we had a little bit of elevated churn as we work through that process and then we had a little bit during that period of time, when we kind of digested.

Some of the some of the Verizon assets, we talked about the fact over a few several quarters ago, where we had deals that candidly just were outside of the traditional sweet spot that we would be focused on. And I think it's the right long term value, creating decision for us to let that kind of things go and use that space and that capacity for advancing the strategy that we're really focused on. And so now you're seeing that and as I've always said the most the best way to avoid losing a deal to get the right deal and in the door to begin with. And so that's where our focus is I think our sales teams are really doing an exceptional job of that.

And use that space.

That capacity for for advancing the strategy that we're really focused on and so now youre seeing that and as I've always said the most the best the best way to avoid losing a deal to get the right deal and in the door to begin with and so that's where our focus is I think our sales teams are really doing an exceptional job of that.

Our new sales leader, our Cal Sean. It's just a dynamite sale. Sales leaders are doing an incredible job. <unk> got a great leadership team across the board, there and so and I got to give some credit John Lynn to our President in America, It's just a great team really driving that.

It's just a dynamite sale.

Sales leaders are doing an incredible job.

<unk> got a great leadership team across the board, there and so and I got to give some credit John Lynn to our President in America, It's just a great team really driving that.

Great. Thank you.

Our next question comes from David Guarino from Green Street. Please go ahead.

Thanks. Hey, Charles can you elaborate on your comment about pricing being firm? What exactly this from me and then maybe specifically is that renewals or new leases? And then also maybe just helpful would be if you could put some data behind it on the MRI per cabinet in the US, could you tell us what that was excluding the large footprint deployments this quarter?

Sure. Yes, I mean, when we say for a price of one of the big things we've talked about it is when we add net positive pricing actions in the quarter. So we essentially take what we're getting in terms of uplifts on our pricing et cetera are accelerators, if you will or price increases that are contractually built-in, we offset that against any potential downward movement that might occur in a release. Our business tends to move in a little bit of a softer within that as well. We will see these price escalators over a kind of a three to five-year contract. We will get a renewal that might have some summary rates and then we'll kind of go through that cycle again, but.

Yes, I mean, when we say for a price of one of the big things we've talked about it is when we add net net positive pricing actions in the quarter. So we essentially take.

What we're getting in terms of.

Uplifts on our on our pricing et cetera are accelerators, if you will or increases price increases that are contractually built in we offset that against any potential downward movement that might occur in a release.

Our business tends to move in a little bit of a softer within that as well.

We will see these price escalators over a kind of a three to five year contract. We will get a renewal that might have some summary rates and then we'll kind of go through that cycle again, but.

In any given quarter, we're seeing those positive pricing overall positive pricing adjustments and that's just I think a reflection of our ability to sustain those higher price points. As you can see in the Americas. Actually in all of the work we've been sort of moving MRO per cab up into the right for a long period of time.

Our ability to sustain those those higher price points as you can see in the Americas.

Actually in all of the work we've been sort of moving.

MRO per cab up into the right for a long period of time.

We've seen some really strong movement in EMEA over the last couple of years because of the interconnection price increasing.

I think we were slightly down in the US on a constant currency basis, but that can often depend on the timing of installs and that kind of things. And so I mean $23.93 per cabin is just an exceptional number. So I think if you look at that relative to the rest of the industry I think you would find it to be sort of far and away the best kind of yield in the industry and so.

So I think if you look at that relative to the rest of the industry I think you would find it to be.

Sort of.

Far far and away the best kind of yield in the industry and so.

And in terms of normalizing that for large footprint, we really aren't doing any really large footprint in the US.

Really large footprint in the U S.

We occasionally will do an anchor deal in a facility, but we're not really active in that hyperscale or Xscale kind of space in the US.

Hyperscale or X scale kind of space in the U S.

We've kind of talked about why that is in the past. And if you look at the even in the other markets. We're doing that now almost strictly through the Xscale business and through the joint venture. And so that's not rolling into the results that you see here, that really only rolls into our sort of core financials in the form of fees.

We're doing that now almost strictly through the X scale business and through the joint venture and so that's not rolling into the results that you see here that really only rolls into our sort of core financials in the form of fees.

And other things that we think are quite accretive to the overall financial picture. So that's kind of a picture on pricing. Pricing I think on Xscale continues to be competitive certainly which is why returns in that business are a little lower but that's also why we decided to go do this through joint ventures, where 80% of that capital is through a thrift. <unk> partner.

<unk> partner.

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

Could you repeat that? Is the timing of what? Commencements on leases was it just certain leases got pushed into next quarter? I guess it if we're going to get to the high end of the guidance raised here I would assume you have a pretty big step up in our revenue growth. So I was wondering if there was something driving it or just leases got pushed into Q4 in terms of when you'll start realizing revenue.

The timing of what.

Commencements on leases was it just certain leases got pushed into next quarter I guess it if we're going to get to the high end of the guidance raised here I would assume you have a pretty big step up in our revenue growth. So I was wondering if there was something driving it or just.

He has got pushed into Q4 in terms of when Youll start realizing revenue.

Well first and foremost as Charles alluded to.

And we had just an outstanding quarter again from a bookings perspective.

And more particularly in the Americas region, and as we just sort of talk to the Americas enjoys the highest highest pricing environment. So there's a number of things that are going on part of it is sure timing, but it is also.

The conversion of our backlog into billable cabinet that will make a big difference here.

So there is nothing that is overly extraordinary other than we're just seeing overall momentum of the business continued to scale sure story has abated or is abating and then you've got a good price point with the.

Inventory this waiting to be.

Booked in.

Corporate backlog into a building into a building.

Items.

Alright, thank you.

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

Great. Good evening, Thanks, a lot just coming back to the inflation and supply chain commentary could you talk.

A little bit about what youre seeing on the construction on the development side of things availability of flavor raw materials, what's going on in the various markets around the world.

Both in terms of costs and your ability to pass that along as well as any impacts on.

Timelines for development.

You've been very active on the X scale, 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.

Sure.

So.

I'd start by saying that.

Generally.

I think our team has done just an exceptional job navigating the current realities as it relates to supply chain around the world.

Our bottom line message has been and continues to be that we really arent seeing any meaningful negative impacts to our business, but that doesn't just magically happen. It happened. It happens by our team doing really great work to go and make sure that we are mitigating the risks that are out there.

The way I charter, we talk about internally is really for kind of levels to the supply chain.

Potential risks and the first one is really facility level or in other words are there are those constraints out there impacting our ability to deliver projects on time and on budget.

And while we've seen some modest level of delays on a few projects those are typically actually more associated with COVID-19 delays in their supply chain candidly.

As <unk> noted in the script, we've actually taken on some inventory or contractual forward commits to the tune of about 100 million Bucks that is giving us.

The confidence to be able to make sure that we can deliver our projects on time that combined with the fact that we've got a huge number of projects underway.

And they're all over the world and we can move stuff around typically it's fungible between.

Between sort of projects.

So the team the construction team and procurement team.

Sourcing team have just done a phenomenal job in terms of mitigating that in terms of <unk> availability and the delivery timeline.

The next level a lot of it is really at the services level in other words, our underlying services, particularly our network related services like fabric.

Connect et cetera.

And metal are we do we have the capacity to support the forecast there and what we've done there is we've just forward purchased several quarters of capacity to give us the confidence that we can we can support that and so so feeling good about that as well.

Third level is really deployment level in other words caged materials and other things that are needed as people build out their cages.

And we've also stockpiled there occasionally there are circumstances, where people have non standard items that caused delays, but if theyre sticking within the sort of the middle of the bell curve in terms of what their needs are we're not seeing any delays there and then customer level delays the start of the last level of it which is our the customers delayed in terms of.

Getting their it equipment to load into deployments.

And if not are they delaying or asking for delays for commencement and those kinds of things and again, while we've seen a few of those things.

Just in the Grand scope of things and in the scale of our business are just not particularly meaningful so.

So theres, some theres, probably a little bit of pressure on costs in some areas. We've been able to take advantage of our scale I think to mitigate that we're continuing to.

People often ask the question as to whether.

Cost to build is inflationary or not I would tell you that I think we're we've been able to keep up with it from a design standpoint, and continuing to optimize our designs faster than costs are going up. So we're trying to keep ahead of the game there.

But I think our team's done a really terrific job.

Managing those things in and I do think that we're we expect that things will start to stabilize over the course of 2022 from a supply chain perspective, so long answer there, but hopefully that gives you some perspective.

Great color.

Yes.

Yes, sorry.

And then from an M&A perspective, I would say.

We are yes.

We continue to think Theres opportunity out there I mean, we talked I think John asked a question about M&A and the <unk>.

The digital services side of the business, but there is also.

We think continued opportunity in terms of extending our reach and.

Looking for critical assets in the market that might be accretive to our strategy and so and we've got to balance the balance sheet and the firepower to go after those kinds of things and so we'll continue to be active as appropriate there always with a high degree of scrutiny on getting the right deals.

Great. Thank you.

Our next question comes from Michael Rollins from Citi. Please go ahead.

Thanks, and good afternoon.

Curious for two questions.

First one is when you look at what's happening on the network side for network customers are you seeing an increasing amount of telecom and wireless companies place their core network infrastructure in your facilities.

Other than having their own.

Mobile switching offices that they might have had it in kind of the more legacy years of the telecom landscape and what kind of opportunity.

That is for you as you as you look at.

Wireless <unk> trying to take more services to the edge and then the second question is what do you make of the tower companies investing in data center assets and do you believe that your data center business.

As well as tower portfolios are destined to be partners or maybe someday fall under the same ownership structure as you look out into the future.

Great questions Mike for sure.

I would say on the on the network side I'd.

I'd say, it's a mixed bag I think that there is a movement towards people viewing third party facilities, particularly.

<unk> like Equinix, where there's large degrees of aggregation as logical places to put portions of their core infrastructure that said.

I think these companies are also.

Have a long history of building on in their own facilities and I think that is there are still a lot of forces within those companies that want that to continue.

And so I think we've been very active on the business development front and we have seen some success there and.

In terms of how they might think about putting certain portions of their of their core <unk> infrastructure for example into our facilities.

And we have the Dallas proof concept center, there that we've been actively working with both equipment providers as well as service providers on start proving out some of those potential value proposition. So I think we're still.

Will happen over.

Longhorn <unk> I do think we're more successful with people who are coming into those markets as disruptors.

They think differently about it and so.

I do think there are some pretty interesting opportunities there.

We're working with with a few that I want to I want to say the names right now, but I'm not sure that they are public.

So I won't.

But there are some interesting things going on there.

As to the tower side.

We've been we believe there is some synergy between.

Companies that have broad based real estate assets that are sort of proximate to communications infrastructure, which is sort of the definition of tower companies.

And I can I can see why and understand why they may have an interest in data center assets and how they fit into potentially to their their portfolio, but I would tell you that for the most part we see a strong demand for traffic at the edge there too.

A very significant majority of that traffic to go back to the aggregated edge and that's really our sweet spot Thats, where are our differentiation is definitely there are use cases that were mobile edge compute out further things like shop floor automation and those kinds of things.

I think there are real use cases is a five day is going to be able to accelerate and we're certainly keeping our eye is on that any active there from a business development standpoint.

But I do think that I think it's more likely that we would partner in some way with those folks over time, it's not necessarily obvious to me that those have to live under the same ownership structure.

But I think we'll just have to continue to see how the markets play out Keith I don't if you have a different view on that.

Thank you.

Thanks.

Our next question comes from Erik Rasmussen from Stifel. Please go ahead.

Yes. Thanks for the questions so getting back to Xscale, obviously made a lot of progress in Europe and APAC, thus far. Recently announcing another JV partner in Australia. But I guess circling back at what point, the Americas become more interesting. As you look to expand the Xscale, are you seeing any characteristics that we're starting to get more exciting about this market than what you're seeing elsewhere or sort of are we seeing in the same sort of scenario?

Thanks for the questions so getting back to X scale, obviously made a lot of progress in Europe and APAC, thus far.

Recently announcing another JV partner in Australia.

But I guess.

Circling back at what point, the Americas become more interesting.

As you look to expand the X scale are you seeing any characteristics that.

We're starting to get more exciting about this market, what youre seeing elsewhere or sort of are we seeing in the same sort of scenario.

Well I think when people stop cutting each other's throats on pricing it'll be still be alone.

Bart.

But.

It's.

Okay.

It's not I mean, it's still a very competitive market I think.

And I think that's different in terms of if you look at the broad Americas, because I think there is opportunities in Latam for US obviously, we've already announced projects in Brazil.

I think we bring certain different with some very distinctive advantages there.

I do think there's a ton of demand as.

As we've always said, we're not we're not.

We're not going to say were religiously out of the business of doing that but I think it would have to be under a special set of circumstances in terms of why we think that fits with the strategy because we're the strategy as youll recall is that we wanted to use those as opportunities to further our position in the cloud ecosystem continue to inch.

And the relationship with the with the major cloud service providers and sort of a broader set of hyper scalar <unk> and.

And use that to create this advantaged overall position in the cloud ecosystem, we feel very good about our position, particularly in the U S.

And whether or not the X scale would be particularly accretive to that I think is an open question. So but we're not we're definitely not it's not out of the question that we would do that I. Just think it's I think right now there are a lot of opportunities for us in other markets that we think are more attractive.

Okay, and maybe just my follow up the <unk>.

Eric is so strong.

Once again this quarter would you characterize that most of the strength is coming maybe from Bell, Canada or is it other factors that you can comment on as it relates to the strength in that region.

Well.

There was a reference in the prepared remarks, just to talk about the Canadian business is better than it's doing better than we originally anticipated and good on the team and they are also selling global from out of Canada into our other assets around the world as it specifically relates to the Americas business I think it goes back to some of the fundamentals that Charles alluded to.

We're targeting the right customers with the right applications and putting them in the right places and at the same by the same token we've got it inventory set.

Caters to.

So a diverse set of customers across the across the U S or the Americas.

As a whole.

Between the assets, we serve the customers we target in the delivery of services. They are additive to two colocation interconnection I just think we're in a much better space.

Our position and as a result, we're going to win more than our fair share of the business is out there.

Great. Thank you.

Our next question comes from Colby <unk> from Cowen. Please go ahead.

Alright, great. Thank you.

Charles in response to Jonathan Atkin's question regarding your outlook on 2022.

Yes, My take from your response was the.

The top line, that's fine, but your concern is around margins.

Whether it's operational efficiencies.

Or in particular power costs.

And as it relates to the question around power costs I feel you may have created more questions than answers so far on this call.

And I'd love to get a little bit more detail.

Specifically you guys I think had talked about at your analyst day in June.

<unk> margins go up just modestly in 2022 I'm curious if you still think that that's possible.

Secondly, you mentioned that you hedge and unregulated markets around 85% how far out are those hedge it seems like you're suggesting that you're okay with power costs going into.

2022, but not necessarily for the full year.

Then as it relates to the potential impact on power do you think at the end of the day. This can be a 25 basis point impact 50 basis point impact hundreds of basis point impact just anything that gives us a better sense because.

My concern personally is that we can now be in a situation where margins go down.

In 2022, and then just lastly, as it relates to anthem. So it looks like April guidance implies a pretty meaningful step down in the fourth quarter.

Is that just the.

The maintenance Capex component that you talked about Keith or is there something else there.

And what's the better jump off point as we look to go into 2022 since the third quarter or is it the fourth quarter. Thank you.

Yes, good questions call me and I'm not sure we will be able to give you all the answers there, but I would say and obviously, we're not going to kind of give you a 2022 guide, but I would say that you're generally I would say we continue to feel good about the momentum in the business from a bookings and a demand perspective.

We did talk about driving efficiencies.

And I think the pursuit of the 50% margin targeted something we continue to be focused on and that's an area, where we continue to have more to do exactly at what pace. We can do that and what that implies for the 2022 margin I don't know and I do think it will it will require us to dig in deeper on power.

And I don't think we're yet in a position where we can quantify any of that for you other than in terms of the hedging that we I mean, they are multiyear hedges, but they're they're feathered in and so obviously do become less impactful as you look further out and so I do think that there is more risk as you go out, but I think the good part of that is that.

And gives us time to.

Determined what our approach is going to be two two.

Two passing those costs through in assessing how to do that and to what degree that is.

How much recovery, we could see there and we don't know the answers to all those things and so I think we're going to track those we're going to look at the markets, where there is volatility and I think that's something we're fortunate I think we'll just have to come back to you. When we when we look into the as we look into 2020 to guide and give you more perspective about that.

And so Colby I just wanted to go back again, a couple of your other question. So there's two things that I thought I heard you ask number one is what's happening.

Quarter over quarter whats the whats going on in Q4, and there was a reference that we made.

We accelerated some cost into this year. So thats number one both from a recurring capex perspective, and some operating expense we did that we did.

For for a number of reasons.

And part of its supply chain specific the other part as we alluded to in the prepared remarks.

When you look at <unk> itself Q4 is historically one of our lower performing a full quarters. That's why we don't guide on a quarterly basis. We give you the annual number and say this is what we will do is we recognize things will move around but the reality is Q4 always tends to be a higher recurring recurring capex quarter and thats, what youre seeing in the <unk>.

Right.

<unk> delivered at $193 million in midpoint. So it gives you a real sense of the.

The big step up in our recurring Capex for Q4, the other thing.

We've said that we had.

We've had a lot of success in the business and as a result, the cash payout attributed to conditions. This is more substantial than we originally anticipated in Q4 and thats reflected in the guidance and Thats, a full impacting non EBITDA impacting and so theres a lot of nuances, but overall when you look at the fundamental business.

It's performed better than we anticipated brewery single quarter of the year, we're delivering against the expectations, we've set and as you I think.

No well that we've raised our guidance our guidance both on revenue EBITDA and if a full throughout the year.

We're at a point now where we feel comfortable and now we're focusing on 2022, and Thats and Thats, where the energy of the businesses.

Again focused on.

Thank you.

Thank you and our final question comes from Frank <unk> from Raymond James. Please go ahead.

It's about the bounce in the Americas that tougher market last few years, what sort of change there and how long do you think you can continue to see some better results out of out of this market.

Hey, Brian.

Yes, it et cetera earlier, I think I think that is the strong trajectory I think we expect that to continue we don't see this as a.

As a as a temporary improvement I think we're out of business moving in a very solid direction strong demand from customers good sales execution.

And again, we don't expect that to and again churn.

Sure and mitigating.

Getting the right customers right deals.

I think that will continue to drive strong performance from that region, So, which obviously is a pretty major driver of our overall performance.

Is it can we expect this to be a little of a new baseline and kind of continue to grow from here or how should we think about the current trend.

Yes, I mean, I think as to whether it really accelerates I think that we have to continue to look at our success in driving new services revenues and.

What's the rate of new customer.

Capture and attaches and those kind of things, but again I think we feel really good about where the business is right now and it feels like that's a sustainable growth rate for us.

Alright, great. Thank you very much.

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

Thank you all for participating in today's conference you may disconnect your line and enjoy the rest of your day.

[music].

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 <unk>, Vice President of Investor Relations and sustainability you may begin.

Good afternoon, and welcome to today's conference call before we get started I'd like to remind everyone that some of the statements we'll 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 identified in today's press release and those identified in our filings.

With the SEC, including our most recent Form 10-K filed on February 19, 2021, and 10-Q filed on July 32021.

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's economic policy not to comment on its financial guidance during the quarter unless it is done through an explicit public disclosure.

In addition, we'll provide non-GAAP measures on today's conference call we.

We provide a reconciliation of those measures the most directly comparable GAAP measures and a list.

The reasons why the company uses these measures in today's press release on the Equinix IR page at Www Dot Equinix Dot com.

We have 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 in 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 was 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 an hour we'd love to ask these analysts to limit any following questions suggest one.

At this time I'll turn the call over to Charles.

Thanks, Ken Good afternoon, everybody and welcome to our third quarter earnings call, we had a great quarter, achieving our 75th consecutive quarter of topline revenue growth and a record Q3 on bookings a clear signal of strong market demand.

Results were fueled by continued strength in our Americas business, a robust performance for our channel program globally and key partners continued to see platform Equinix as a point of Nexus for digital transformation solutions.

<unk> has triggered an accelerated need to digitize business models in virtually every segment of the economy and our strong results reflect this 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's digital infrastructure company, our focus remains on creating distinctive in euro value for our customers and our shareholders driving growth and scale in our market, leading colocation franchise, expanding our relevance in the cloud ecosystem direct scale and tapping into massive sourcing incremental demand by adapting to evolving.

Customer needs with a rapidly growing digital services business.

Turning to our results as depicted on slide three revenues for Q3 were $1 7 million up 8% year over year, adjusted EBITDA was up 4% year over year and <unk> was in line with our expectations.

Interconnection revenues continued to outpace colocation revenues growing 11% year over year, driven by solid physical cross connect growth and broad adoption of Equinix fabric.

These growth rates are all on a normalized and constant currency basis.

We processed 100 4200 deals in the quarter across more than 3100 customers highlighting the reach scale and predictability of our Buckingham.

We have a solid demand pipeline as we look to the final quarter of the year and we continue to add capacity to service. This 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 414000 total Eric actually on our industry leading platform.

In Q3, we added an incremental 7800 interconnection now have at least one major cloud on ramp in 42 metros around the world two times more than the nearest competitor a clear indication that equinix as 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 of traffic growth remains robust.

<unk> fabric saw excellent growth continuing to significantly over index within the broader interconnection portfolio.

The 2800 customers are now on fabric attach rates moving up into the right as businesses diversify their end destination and service providers integrate fabric into their own solutions.

In September we extended platform equinix into our 27 countries with the close of our <unk> acquisition entering this strategic Indian market.

GBS represents an ideal entry point into the top 10, GDP countries 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 scale.

In October we announced plans to expand in Australia with an agreement to establish a $575 million joint venture with <unk> real estate to develop two datacenters in Sydney.

We'll provide more than 55 megawatts of capacity when fully built.

Also during the quarter, we closed the first phase of our previously announced immediate <unk> joint venture with GIC and signed two megawatts with the Hyperscale and frame it.

We currently have eight X scale builds under development, including our newly announced matured three Mexico C III and <unk> nine assets, which will collectively add 25 megawatts capacity when they opened in the first half of 2022.

The total investment of our various Hyperscale 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 capacity.

Turning to our digital infrastructure services are equinix metal business saw strong revenue growth is cloud native and service provider customers continue to embrace the ability to deploy physical infrastructure as software suite.

And network edge saw robust growth as established customers purchased more virtual network functions across additional metrics by year end, we expect network has to be available in 25 metros around the world.

So let me cover highlights from our verticals.

Expansions this quarter included <unk>, a global communications infrastructure company, adding interconnection and colocation capacity to support demand Vocus, Australia is leading specialist fiber and network solutions provider.

Building infrastructure, <unk>, 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 leading technology manufacturer deploying a custom liquid cooled environment and solutions center to support the next generation of high performance for Q 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 IP vertical saw particular strength in the Americas as industry specific cloud solutions continue to be a catalyst for innovation and new growth.

Expansions this quarter included Adobe, a leading cloud software provider deploying infrastructure to support its platforms and optimize sustainable participation in key digital market and ecosystems for Saudi are U S based object storage company expanding their offering on equinix fabric into APAC and EMEA, enabling customers to easily connect their bare metal.

Workloads hosted on Equinix Bell and a top five global software provider deploying core nodes to support their growth growing user base and demand in both Mexico City and so Paulo.

Content digital media had 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.

Spansion this quarter included Netflix for global streaming service expanding across platform equinix to new and existing markets to support OTT delivery.

Any thoughts of Chinese cloud provider expanding in Singapore to support rapid sales growth and a top three content distributor extending coverage and scale for its growing platform in the delivery of new and existing security solutions.

We are benefiting from tremendous momentum in hybrid cloud adoption and seeing particular strength from new joint enterprise pursue with our key alliance partners, such as AT&T, AWS, Dell HP and Microsoft.

When you were across 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 building, an 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 and cover the results for the quarter.

Great. Thanks, Charles and good afternoon to all.

Well, let me start by saying the FX business continues to Hum and once again, we met our expectations or better we had a very solid quarter.

The macro environment for digital infrastructure continues to drive expanding market opportunities.

Demonstrated by another understanding bookings quarter, both at the gross and the net level from our industry, leading go to market engine.

Our bookings backlog remains significant and elevated as we work to install the substantial volume of business flows through the past few quarters.

And our forward looking pipeline is extremely healthy and all of our regions.

Our channel sales activity with the best in our history.

Mobile platform delivered healthy inter and intra region activity, we had firm MMR per cabinet yields with yet again net positive pricing actions, a validation of our differentiated operating model compared to others in our space.

On a year to date basis, our global design and construction and ops teams have delivered more than 18000 cabinets of retail capacity.

And 40 megawatts of ex fuel inventory, while also lowering our critical network infrastructure assets across our targeted markets in support of our fabric.

Cash and metal service offerings.

We have seen no major delays to date is delivering new capacity, despite general market concerns related to supply chain challenges.

A reflection of the efforts put forth by our best in class procurement and strategic sourcing teams.

Now let me cover the results for the quarter Northern all growth rates in this section are on a normalized and constant currency basis.

As depicted on slide four global Q3 revenues were $1 $6 75 billion.

Up 8% over the same quarter last year due to strong business performance across our platform led by the Americas region.

Nonrecurring revenues represented about 7% of revenue due to an increase in custom installation work and EMEA <unk> joint venture fees.

For Q4.

<unk> NR to trend downward decreasing sequentially by approximately $12 million due to lower <unk> fees and the timing of large customer installations.

Q3 revenues net of our FX hedges included a $6 million headwind when compared to our prior guidance rates.

Global Q3, adjusted EBITDA was $786 million or <unk>, 47% of revenues at the high end of our guidance expectations due to timing of spend and lower integration costs.

Q3, adjusted EBITDA net of our FX hedges included a $3 million headwind when compared to our prior guidance rates at $3 million of integration costs.

Global Q3, <unk> was $628 million. The result of strong operating performance consistent with our expectations.

Similar to prior years, we expect seasonally higher levels of recurring Capex in Q4, as our operating teams work to complete the 2021 projects.

Global Q3, MMR churn was two 1%.

We continue to expect MLR trend for the full year to be at the lower end of our targeted quarterly range of two to two 5%.

Turning to regional highlights whose full results are covered on slides five through seven.

The APAC region revenue grew 11% year over year, followed by the Americas at 7% and EMEA, 6%.

As previously discussed we expect the EMEA growth rate to return to normalized levels in Q4, as we lap interconnection price increases and the other one off positive adjustments from last year.

The Americas region saw continued strength with our third consecutive quarter of record bookings with a broad distribution across metals, including some of our smaller markets, such as Boston, Denver, Mexico City, Seattle and Toronto.

The Americas sales teams continue to sell the global platform with a notable increase in activity coming from our Canadian team.

Benefit derived from the transaction with Bell, Canada, which is outperforming our expectations.

Our EMEA region had a solid quarter with strength coming from our Amsterdam, Frankfurt and Madrid markets as enterprise customers and the channel drive bookings.

And as we aim to meet high sustainability and efficiency standards, while progressing towards our 2030 science based targets.

New builds like our recently opened factories <unk> serve as a model to blended to the CDC.

While positively contributing to the local microclimate.

And finally, the Asia Pacific region had a solid quarter with momentum across all of our metros led by Singapore.

New deal activity focused on small to medium sized deployments with firm pricing and continued strength in our cross border selling.

Our Hong Kong market saw a nice rebound in bookings performance, although continuous continues to feel constrained given the market uncertainty.

And now looking at our capital structure, please refer to slide eight.

We ended the quarter with cash of about $1 4 billion and our net debt leverage ratio remains low, particularly relative to our industry peers.

Our balance sheet remains highly flexible and liquid and we have a low <unk> cash payout ratio.

With regards to our outstanding debt, we have minimal near term exposure to potentially rising interest rates with 95% of our debt fixed at a weighted average maturity of over nine years.

Turning to slide nine for the quarter capital expenditures were approximately $678 million, including a recurring capex of $48 million.

We opened 11, new projects this quarter, including new IDEXX is in Frankfurt, Osaka and Singapore.

<unk> land for development in Barcelona factored in Helsinki.

On the <unk> side of the business, we opened our Sao Paulo five in fact, the nine assets.

We also closed the first phase of our EMEA to joint venture with GIC for net cash proceeds.

Our 20% equity contribution of approximately $140 million, including 34 million coming from the contribution of our Sao Paulo five asset.

And so the joint venture after quarter end.

Finally, total recurring revenues from owned assets stepped up to 59% due to the acquisition of our Sydney, one and <unk>.

Our capital investments delivered strong returns as shown on slide 10.

Our 153 stabilized assets increased recurring revenues by 3% year over year on a constant currency basis.

These stabilized assets are collectively 86% utilized and generate a 27% cash on cash return on the gross PP&E invested.

We expect to exit the year closer to the top end of our stabilized asset growth range in part due to strong Americas revenue growth.

Please refer to slides 11 through 15 for our updated summary of 2021 guidance and bridges do note. Our guidance now includes the anticipated results from the <unk> acquisition, which closed in September.

For the full year 2021, we expect revenues to grow approximately 8% on a normalized and constant currency basis.

Our updated revenue guidance implies our largest ever quarterly step up in recurring revenues on a normalized basis, a reflection of our continued strong execution.

Revenues include about $5 million from the GPS acquisition and reflect updated FX rates.

We expect 2021, adjusted EBITDA margins before integration costs to be greater than 47%.

And now include about $3 million from the Gtx acquisition and reflect updated FX rates.

We expect to spend $80 million of integration costs in 2021.

And we expect 2021, and <unk> to grow 10% to 11% on a normalized and constant currency basis compared to the prior year.

And to deliver <unk> per share growth of 9% to 10%.

Our <unk> guidance includes some <unk> impacting accelerated spend including recurring capex.

And elevated cash commissions associated with our strong bookings performance.

2021, Capex is expected to range between two seven and $3 billion.

Including about $450 million of on balance sheet X scale capex at significant portion, which has been or will be reimbursed by the JV.

And $193 million of recurring Capex spend at the midpoint.

So let me stop here and turn the call back to Charles.

Thanks Keith.

Our business continues to perform exceptionally well delivering strong and consistent results throughout these changing times.

Pandemic has been a driving force for digital transformation.

Businesses seek to respond this imperative the infrastructure underpinning these services must keep pace.

We continue to prosecute multiple compelling growth vectors.

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 are 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 Rob <unk> to our board of directors as the better the CIO of a fortune 500 corporations and governments 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 10000 employees, whose commitment to keep our customers at the center of everything we do continues to drive our market leadership.

Our commitment to show up every day with an in service two 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.

Thanks.

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

Sure.

Yes, we're I mean I.

We're seeing strength across the board, but really the enterprise side of the business I think is where a lot of the new customer adds are coming from.

And most of those 60 about 60% are coming through channel as we've talked about in the script. So we're seeing a big uptick as I said more than 35% of the bookings coming through the channel.

And I think it's been really encouraging we're really seeing strength with our top channel partners and really are our top alliance partners in particular.

Who are really engaged in joint enterprise pursuit with us in.

In terms of pursuing hybrid multi cloud opportunities and people implementing hybrid architectures and so in fact I'll give you a stat, we had our top four alliance partners.

This quarter accounted for 10% of the total bookings and that's about 10% of the channel because that's 10% of the total bookings so really strong momentum what they get with channel partners and it's across a number of verticals and it's across a number of use cases, but our real strength in terms of how people are thinking about using corporate data to draw insights.

They therefore want us to store that data centrally act on it from a variety of cloud cloud.

Sources.

And then also AI as a key driver in fact, we had a big win big joint win with Nvidia.

And on that front as we talked about in the script and so.

Really really great progress there and I think the range of use cases.

<unk> is really strong.

We had an event today that we call connect.

We had about 500 registrations for that event.

For enterprises talking about a variety of use cases implemented on fabric and so we're seeing some really good momentum.

Thank you and then just on churn, it's tracking well below where it was.

Where it's been historically whats driving that and how sustainable do you think that is moving forward.

Yes.

Again, I do think that that's a durable trend I would always comment that there is some potential lumpiness inherent at times and so but I think if you look at the trend line on that it's been.

The line of best fit is clearly downward there.

So we've had a good year and as we said, we expect our full year churn to be towards the bottom end of the range that we talked about two two and a half.

Our commercial teams in terms of how we're how we're really sort of focusing the business. So.

I do think it's.

I think it's durable and I think thats going to be a continued to be a key driver in the business going forward.

Thanks for the color.

Our next question comes from Jordan Sadler from Keybanc capital markets. Please go ahead.

Thanks, I wanted to touch base on some of the inflationary pressures.

<unk>.

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 he could.

You are hedging protocol by region.

Sure Al.

Start and then Keith can jump in if he wants to add anything, but I would say that other than some small onetime items on the power side that had a slight impact on our on our Q4 guidance.

We're seeing power costs pretty much come in where we expected for the remainder of the year and into early next year I think there's it's more going to be the longer term volatility into to enter 2022 that we're really looking at.

But as you said similar to currency, we've got pretty extensive hedging program net.

Really better than our hedges over a multiyear period and we're about 85% hedged in the in the unregulated markets, which represent most of our largest markets.

And so our contracts do allow for us to adjust pricing based on underlying cost and.

We're actively working to implement adjustments, where we think that's appropriate.

Again, you guys I think recognize our business is different in that we're more heavily circuit based on our power mix. So.

As I said, we're actively working on that in terms of how to do it and I would say that our experience in Europe with the cross connect pricing increases over the last couple of years.

Give us some confidence that we'll be able to go get that done effectively so.

No doubt there is more volatility in the energy market. So we're watching those closely and we're going to continue to adapt our strategies accordingly.

Okay.

I guess as a follow up.

<unk>.

Just one what would the percent of the portfolio is sort of circuit billing oriented and then when you 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 percentage.

About 80% of the portfolio of circuit based and again Thats been.

Or that's part of our overall return story, we've been very effective in terms of driving sort of aggregate returns across space and power because of that circuit based power.

A component of the business and so and in terms of it's really more a matter of how effective can we be in terms of passing through.

Price increases are underlying cost increase increases in the form of price.

Circuit based power environment, and so again, we have the contractual ability to do that and it's just a matter of whether we there I do think it won't be like circuit power, we're going where we're going to get every bit of that path.

So, but I think that will we will look at that market by market and assess what the right approaches.

Okay. Thank you.

You bet.

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

Thanks, I was interested in the X scale and if you could maybe highlight any major differences with pgi.

<unk> two <unk>.

And then more broadly as we sort of think about 2022 growth drivers for revenue.

Revenues margins Capex.

Sure.

I think the first one and then I think Charles let's take the second one as it relates to sort of the deal structuring between Pgi MGIC is very similar in many ways. The construct was developed.

Contracting structure with the GIC, but we worked with Pgi and.

Again delighted to have another partner in a different market in support of our Australian business.

As it relates to sort of our ability to.

The performance this quarter again.

As you've heard from some of our prior calls we basically sold them most of the capacity that were delivered to market. So we're very eager to continue our builds we have eight builds currently underway next scale.

And the team is working very hard to identify customer appropriate customers for that capacity plus more so I'll just leave you with.

Same thing for us in the <unk> space, we're putting the money to work and as Charles alluded to in his prepared remarks was $7 5 billion.

Of capital is going to be deployed across 34 assets.

We still have more to talk about.

So why don't I leave it there and just recognize that ex fuel in of itself right. Now is not a big big component of our revenues or <unk>, but it does create some lumpiness that you've seen in the nonrecurring line, which we highlighted in our prepared remarks Q4, we just don't expect as much of that nonrecurring revenue as we've seen before but certainly as we look into 'twenty.

Two and beyond Youll start to see that.

That step up again from a nonrecurring perspective, and then you'll also see.

More of the recurring piece come into play for the X scale.

Yes, John on the other ones I would say want to look at either haven't been as estimates as I've ever been I guess on the business, how it's performing what the magnitude of the opportunity ahead of us.

A little bit of noise in the quarter here, but I think that we had.

We continue the business continues to perform the fundamentals are very strong 8000 aircrafts and add it's adds in the quarter three.

<unk> 3000, billable cab adds record bookings really for the past three quarters at least seasonally adjusted in terms of this is our best Q3 ever this quarter, great degree of predictability churn as I said at the low end.

Firm pricing, we had another quarter of positive pricing adjustments of Keith talked about in the script.

We continue to see good momentum on our new market. If you look at big markets that we're in a relatively earlier entrant in in terms of think places like Mexico, and and now India huge opportunities in front of US there to over indexing growth on those in those markets and then digital services really our customers are responding really well to those.

<unk> products, even though they are at an earlier stage growth so.

As I look into 2022 in terms of headwind tailwind et cetera.

Really good about the bookings momentum feel really good about the pricing and our relevance to customers and therefore, our ability to support our firm.

Firm price points churn looks good good deal mix is going to continue to be absolutely key to maintaining that.

I think the headwinds moron.

Making sure that we continue to.

We talked a little bit about about power as a potential headwind there in some areas. We've talked about I think continuing to drive operational efficiencies in the business.

It's going to be a key focus for us to drive operating leverage and then continuing to work the backlog I think we got a we've got big backlog, partially because we've got some big deals that have gone into that and we got to continue to work through that backlog.

And deal types test slightly longer book to Bill.

We are seeing that as part of the complexity of implementing these more multi vendor hybrid multi cloud kind of deals.

So we're continuing to sort of hone our capabilities. There. So if we can continue to drive those things I.

I think we will be able to really take advantage of the of the bookings momentum that they're in and obviously, we'll give you a color on all of that as we go into the into the 2022 guidance.

And then if I could throw one in on M&A.

Whether it's networking related or software.

Consolidation within the bare metal space, but anything kind of non core to the classic data center business from an M&A tuck in perspective to what do we do regularly look at those sorts of opportunities.

Is there anything that.

You feel would sort of augment the platform from that perspective.

Yes, Great question, John I would say that we are continuing to learn in that area and we're accelerating our kind of investment of energy into understanding that that landscape.

And.

Deployment and go to market perspective, and so we're continuing to.

Hone our cut.

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 we'll be.

Continue to be active in that area in terms of looking at potential opportunities to add talent and technology and capabilities.

Really learning that landscape better over.

Over the course of this year this next year and beyond.

Thanks, a lot.

Our next question comes from Phil Cusick from Jpmorgan. Please go ahead.

Hi, This is Richard for Phil just wanted to ask about the strength in the Americas. It went from kind of a modest growth to now it seems like a very strong growth environment. What are you seeing there and how long can the bookings.

Convenient.

Hey, Richard well I Hope that party continues for a while I would tell you I think we feel pretty good about that business.

Yes, again, we started.

We spend more quarters than I would like talking about when the Verizon churn was going to abate.

11 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.

The platform elsewhere.

I would say, we feel really good about the performance of the Americas region, right now and I expect that that growth rate is going to continue to persist at elevated levels.

And so we feel good about that in fact, I think driving attach rates now to continue to increase share of wallet with our very very large customer base and bringing them. Some of our new services as some of the new area of focus and really leveraging our channel partners to do that so anything other kit.

The other thing I would just add.

Charles.

Richard.

Remember that this region, 75% utilized so we have a substantial amount of capacity that we have.

We have built and we continue to build in core markets and the other thing I would just as Charles alluded to not only the focus that we have on the right customers that are our sales leadership team in the Americas and beyond are being such a great job of selling selling the platform and so the opportunity to reset that we talked about.

Intra region and intra region is very real so so overall very optimistic about what we're seeing in the Americas region.

And then as a quick follow up Charlie has to be an issue in the Americas are you seeing that lower now.

Now or not.

<unk> not changed much.

Well I mean, I think it was.

I mean, I guess you'd have to obviously you've been in the story for a long time, Richard it's been but I.

Greater deal.

Deal commercial.

Scrutiny et cetera.

And I think that yes, so we had a little bit of elevated churn as we worked through that process and then we had a little bit during that period of time, when we kind of digested.

Some of the some of the Verizon assets, we talked about the fact or several quarters ago, where we had deals that candidly just were outside of the traditional sweet spot that we would be focused on and I think it's the right long term value, creating decision for us to let those kind of things go.

And use that space.

That capacity for for advancing the strategy that we're really focused on and so now youre seeing that and as I've always said that the most the best the best way to avoid losing a deal to get the right deal and in the door to begin with and so that's where our focus is I think our sales teams are really doing an exceptional job of that.

Our new sales leader, our Cal Sean.

It's just a dynamite sale.

Sales leaders are doing an incredible job.

Great leadership team across the board, there and so and I got to give some credit John Lynn to our President Americas, just a great team really driving that.

Great. Thank you.

Our next question comes from David Guarino from Green Street. Please go ahead.

Thanks, Hey, Charles can you elaborate on your comment about pricing being firm what exactly this from me and then maybe specifically is that renewals or new leases and then also maybe just helpful would be if you could put some data behind it on the MRI per cabinet in the U S could you tell us what that was excluding the large footprint deployments this quarter.

Sure.

Yes, I mean, when we say firm pricing one of the big things. We've talked about is when we add net net positive pricing actions in the quarter. So we essentially take.

What we're getting in terms of.

Our business tends to move in a little bit of a softer within that as well.

We will see these price escalators over a kind of a three to five year contract will get a renewal that might have some summary rates and then we'll kind of go through that cycle again, but.

In any given quarter, we're seeing those positive pricing overall positive pricing adjustments and that's just I think a reflection of of <unk>.

Our ability to sustain those those higher price points as you can see in the Americas.

Actually in all of the we've been sort of moving.

MMR per cab up into the right for a long period of time.

We've seen some really strong movement in EMEA over the last couple of years because of the interconnection price increasing.

I think we were slightly down in the U S on a constant currency basis, but that can often depend on the timing of installs and those kind of things and so I mean $23 93 per cabin is just an exceptional number.

So I think if you look at that relative to the rest of the industry I think you would find it to be.

Sort of.

Far far and away the best kind of yield in the industry and so.

And in terms of normalizing that for large footprint, we really aren't doing any.

Really large footprint in the U S.

We occasionally we will do an anchor deal in a facility, but we're not really active in that.

Hyperscale or X scale kind of space in the U S.

We've kind of talked about why that is in the past and if you look at the even in the other markets.

And other things that we think are quite accretive to the overall financial picture. So so that's kind of that's kind of the picture on pricing pricing I think on X scale continues to be competitive certainly which is why returns in that business are a little lower but that's also why we decided to go do this through joint ventures, where 80% of that capital is through.

Our best partner.

Okay, and then maybe just one clarification to on the stabilized revenue growth at the low end factory to 5% range and I know it keeps said, it's kind of a step up again next quarter, but what is the drag this quarter just due to timing of commencement on leases.

Could you repeat that.

The timing of what.

Commencements on leases or was it just certain leases got pushed into next quarter I guess, if we're going to get to the high end of the guidance raised here I would assume you have a pretty big step up in our revenue growth. So I was wondering if there was something driving it or just leases got pushed into Q4 in terms of when youll start realizing revenue.

Well first and foremost as Charles alluded to and we just have.

Outstanding quarter again from a bookings perspective.

The conversion of our backlog into billable cabinet that will make a big difference here.

Theres nothing that I would say overly extraordinary other than we're just seeing overall momentum in the business continued to scale Shourd story has abated or is abating and then you've got a good price point with your.

Inventory this waiting to be.

Booked in.

Corporate backlog into a building into a building.

Item.

Alright, thank you.

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

Great. Good evening, Thanks, a lot just coming back to the inflation and supply chain commentary could you talk.

A little bit about what youre seeing on the construction on the development side of things availability of flavor raw materials.

What's going on in the various markets around the world.

Both in terms of costs and your ability to pass that along as well as any impacts on <unk>.

Timelines for development.

You've been very active on the X scale, 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.

Sure.

So.

I'd start by saying that.

Generally.

I think our team has done just an exceptional job navigating the current realities as it relates to supply chain around the world.

Our bottom line message had been and continues to be that we really arent seeing any meaningful negative impacts to our business, but that doesn't just magically happen. It happened. It happens by our team doing really great work to go and make sure that we are mitigating the risks that are out there.

The way I Chuckle, we talk about internally is really for kind of levels to the supply chain.

Potential risks and the first one is really facility level or in other words are there are those constraints out there impacting our ability to deliver projects on time and on budget.

And while we've seen some modest level of delays on a few projects. Those are typically actually more associated with COVID-19 delays than there are supply chain candidly.

As <unk> noted in the script, we've actually taken on some inventory or contractual forward commits to the tune of about $100 million box that is giving us.

The confidence to be able to make sure that we can deliver our projects on time that combined with the fact that we've got a huge number of projects underway.

And they're all over the world and we can move stuff around typically it's fungible between.

Between sort of projects.

So the team the construction team and the procurement team.

Sourcing team have just done a phenomenal job in terms of mitigating that in terms of <unk> availability and the delivery timeline.

The next level on it is really at the services level in other words, our underlying services, particularly our network related services like fabric.

Connect et cetera.

Third level is really deployment level in other words caged materials and other things that are needed as people build out their cages.

And we've also stockpiled there occasionally there are circumstances, where people have non standard items that caused delays, but if theyre sticking within the sort of the middle of the bell curve in terms of what their needs are we're not seeing any delays there and then customer level delays in starting the last level of it which is our the customers delayed in terms of.

Getting their it equipment to load into deployments.

And if not are they delaying or asking for delays for commencement and those kinds of things and again, while we've seen a few of those things.

Just in the Grand scope of things and in the scale of our business are just not particularly meaningful so.

So theres, some theres, probably a little bit of pressure on costs in some areas. We've been able to take advantage of our scale I think to mitigate that we're continuing to.

People often ask the question as to whether.

I think our team's done a really terrific job.

Managing those things in and.

I think that we're we expect that things will start to stabilize over the course of 2022 from a supply chain perspective, so long answer there, but hopefully that gives you some perspective.

Great color on the M&A wise.

Alright.

And then from an M&A perspective, I would say.

We are yes.

We continue to think theres opportunity out there.

I think John asked a question about M&A and the.

And sort of the digital services side of the business, but there is also.

We think continued opportunity in terms of extending our reach and.

Looking for critical assets in the market that might be accretive to our strategy and so and we've got the balance the balance sheet and the firepower to go after those kinds of things and so we'll continue to be active as appropriate there always with a high degree of scrutiny on getting the right deals.

Great. Thank you.

Our next question comes from Michael Rollins from Citi. Please go ahead.

Thanks, and good afternoon curious.

Curious for two questions.

Rather than having their own.

Mobile switching offices that they might have had it in kind of the more legacy years of the telecom landscape and what kind of opportunity.

That is for you as you as you look at.

As well as tower portfolios are destined to be partners or maybe someday fall under the same ownership structure as you look out into the future.

Great questions Mike for sure.

I would say on the on the network side.

It's a mixed bag I think that there is a movement towards people viewing third party facilities, particularly facilities like Equinix, where there's large degrees of aggregation as logical place is to put portions of their core infrastructure.

Said.

I think these companies are also.

Have a long history of building on in their own facilities and I think that is there are still a lot of forces within those companies that want that to continue.

And so I think we've been very active on the business development front and we have seen some success there and in terms of how they might think about putting certain portions of their of their core <unk> infrastructure for example into our facilities.

And we have the Dallas.

Concept center, there that we've been actively working with both equipment providers as well as service providers start proving out some of those potential value proposition. So I think we're still.

That will happen over.

Of course, I do think we're more successful with people who are coming into those markets as disruptors.

Because they think differently about it and so.

I do think there are some pretty interesting opportunities there.

We're working with with a few that I want to I want to say the names right now, but I'm not sure that they are public.

So I won't.

But there are some interesting things going on there.

As to the tower side.

We've been we believe there is some synergy between.

Companies that have broad based real estate assets that are sort of proximate to communications infrastructure, which is sort of the definition of tower companies.

And I.

I can I can see why and understand why they may have an interest in data center assets and how they fit into potentially to their their portfolio, but I would tell you that for the most part we see a strong demand for traffic at the edge there too.

I think there are real use cases that <unk> is going to be able to accelerate and we're certainly keeping our eyes on that any active there from a business development standpoint.

But I think we will just have to continue to see how the markets play out Keith I don't if they have a different view on that.

So we'll see.

Thanks.

Our next question comes from Erik Rasmussen from Stifel. Please go ahead.

Yeah. Thanks.

Thanks for the questions so getting back to X scale, obviously made a lot of progress in Europe and APAC, thus far.

Recently announcing another JV partner in Australia.

But I guess.

Circling back at what point, the Americas become more interesting.

As you look to expand the X scale are you seeing any characteristics that.

We're starting to get more exciting about this market, what youre seeing elsewhere or sort of within the same sort of scenario.

Well I think when people stop cutting each other's throats on pricing.

Bart.

But.

It's.

Okay.

It's not I mean, it's still a very competitive market I think.

So I think that's different in terms of if you look at the broad Americas, because I think there is opportunities in Latam for US obviously, we have already announced projects in Brazil.

I think we bring certain different with some very distinctive advantages there.

I do think there is a ton of demand and as we.

<unk> always said were not.

Continue to invest in the relationship with the with the major cloud service providers and sort of a broader set of hyperscale.

And use that to create this advantage overall position in the cloud ecosystem, we feel very good about our position, particularly in the U S.

Okay, and maybe just my follow up the <unk>.

<unk> was strong.

Once again this quarter would you characterize that most of the strength is coming maybe from Bell, Canada or is it other factors that you can comment on as it relates to the strength in that region.

Well there was a reference in the press.

Prepared remarks, just to talk about the Canadian business.

Other than it's doing better than we originally anticipated.

Good on the team and they are also selling the global macro motive, Canada into our other assets around the world as it specifically relates to the Americas business I think it goes back to some of the fundamentals that Charles alluded to we're targeting the right customers with the right applications and putting them in the right places and at the same by the same token we have got an inventory.

Set.

They really caters to.

A diverse set of customers across the across the U S or the Americas.

As a whole.

The assets, we serve the customers we target in the delivery of services. They are additive to two colocation interconnection I just think we're in a much better space.

Our position and as a result, we're going to win more than our fair share of the business is out there.

Great. Thank you.

Our next question comes from Colby <unk> from Cowen. Please go ahead.

Alright, great. Thank you.

Sure.

Charles in response to Jonathan Atkin's question regarding your outlook on 2022.

Yes, my take from your response was.

The topline that's fine, but your concern is around margins.

Whether it's operational efficiencies.

Or in particular power costs.

And as it relates to the question around power costs I feel you may have created more questions than answers so far on this call.

And I'd love to get a little bit more detail.

Specifically you guys I think had talked about at your analyst day in June.

Seeing margins go up just modestly in 2022 I'm curious if you still think that that's possible.

Secondly, you mentioned that you hedge and unregulated markets around 85% how far out are those hedges it seems like you're suggesting that you're okay with power costs going into.

2022, but not necessarily for the full year.

And then as it relates to the potential impact of power.

At the end of the data it can be up 25 basis point impact 50 basis point impact hundreds of basis point impact just anything that gives us a better sense because.

My concern personally is that we could now be in a situation where margins go down.

In 2022, and then just lastly, as it relates to anthem. So it looks like April guidance imply the pace.

Meaningful step down in the fourth quarter.

Is that just the.

The maintenance Capex component that you talked about Keith or is there something else there.

And what's the better jump off point as we look to go into 2022 since the third quarter or is it the fourth quarter. Thank you.

We did talk about driving efficiencies in.

And I think the pursuit of the 50% margin target is something we continue to be focused on and that's an area, where we continue to have work to do exactly at what pace, we can do that and what that implies for the 2022 margin I don't know and I do think it will it will require us to dig in deeper on power.

And I don't think we're yet in a position where we can quantify any of that for you other than in terms of the hedging that we I mean, they are multiyear hedges, but they're feathered in and so obviously do become less impactful as you look further out and so I do think that there is more risk as you go out and I think the good part of that is that.

It gives us time to.

Determined what our approach is going to be two two.

Two passing those costs through in assessing how to do that and to what degree that is.

How much recovery, we could see there and we don't know the answers to all those things and so I think we're going to track those we're going to look at the markets, where there is volatility and I think thats something were unfortunate I think we'll just have to come back to you. When we when we look into that as we look into 2022 guidance and give you more perspective about that.

And so Colgate I just wanted to go back again, a couple of your other question. So there's two things that I thought I heard you ask number one is what's happening.

Quarter over quarter whats the whats going on in Q4, and there was a reference that we made and that we accelerated some cost into this year. So thats number one both from a recurring capex perspective, and some operating space. We did that we did.

For a number of reasons.

And part of its supply chain specific the other part as we alluded to in the prepared remarks.

Right.

Delivered at $193 million in midpoint. So it gives you a real sense of the.

The big step up in our recurring Capex for Q4, the other thing.

We've said that we had.

We've had a lot of success in the business and as a result, the cash payout attributed to commissions, it's more substantial than we originally anticipated in Q4 and thats reflected in the guidance that <unk> impacting on EBITDA impacting and so theres a lot of nuances, but overall when you look at the fundamental business.

It's performed better than we anticipated brewery single quarter of the year, we are delivering against the expectations, we've set and as you I think.

No well that we've raised our guidance our guidance both on revenue EBITDA and <unk> throughout the year and we.

We're at a point now where we feel comfortable and now we're focusing on 2022, and Thats and Thats, where the energy of the businesses.

Again focused on.

Thank you.

Thank you and our final question comes from Frank <unk> from Raymond James. Please go ahead.

It's about the bounce in the Americas that tougher market last few years, what sort of change there and how long do you think you can continue to see some better results out of out of this market space.

Okay great.

Yes, it et cetera earlier, I think I think that business strong trajectory I think we expect that to continue we don't see this as.

As a as a temporary improvement I think we're there.

Business moving at a very solid direction strong demand from customers good sales execution.

And again, we don't expect that to and again churn churn mitigating.

Getting the right customers right deals.

I think that'll continue to drive strong performance from that region, So, which obviously is a pretty major driver of our overall performance.

Is it can we expect this to be a little of a new baseline and kind of continue to grow from here or how should we think about the current trend.

Yes, I mean, I think as to whether it really accelerates I think that we have to continue to look at our success in driving new services revenues and.

What's the rate of new customer.

Capture and attaches and those kind of things, but again I think we feel really good about where the business is right now and feel like that's a sustainable growth rate for us.

Alright, great. Thank you very much.

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

Thank you all for participating in today's conference you may disconnect your line and enjoy the rest of your day.

Q3 2021 Equinix Inc Earnings Call

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