Q3 2023 Equinix Inc Earnings Call

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 any objections. Please disconnect. At this time I would now like to turn the call over to chip NUKEM senior direct.

<unk> of Investor Relations, Sir you may begin.

Good afternoon, and welcome to today's conference call before we get started I would like to remind everyone that some of the statements. We will be making today are forward looking in nature and involve risks and uncertainties.

Actual results may vary significantly from those statements may be affected by the risks we have identified in today's press release and those identified in our filings with the SEC, including our most recent Form 10-K filed February 17th 2023, and 10-Q filed August 4th 2023.

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 does equinix as a 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 provided a reconciliation of those measures to the most directly comparable GAAP measures and a list of the reasons why the company uses these measures in today's press release on the Equinix Investor Relations page at Www Dot Equinix Dot com.

We've made available on the IR page of our website a presentation designed to accompany this discussion along with certain supplemental financial information and other data.

We would also like to remind you that we post important information about equinix on the IR page from time to time and encourage you to check our website regularly for the most current available information.

With us today are Charles Meyers, Equinix, as CEO, and President and Keith Taylor Chief Financial Officer.

Following our prepared remarks, we'll be taking questions from sell side analysts in the interest of wrapping this call up in one hour, we'd like to ask these analysts to limit any follow on questions to one at this time I would like to turn the call over to Charles.

Thank you chip good afternoon, and welcome to our third quarter earnings call. Despite an increasingly complex macro environment. We delivered another solid quarter of results and continue to drive strong value creation, raising both our dividend and our <unk> per share outlook for the full year, while we continue to operate in an environment characterized by customer caution this caution.

Is balanced by a clear commitment to digital transformation and accelerating interest in AI and a growing reliance on equinix as a critical partner in designing and implementing hybrid multi cloud and data centric architectures customers continue to see digital as a critical priority and they remain focused on optimizing existing infrastructure spend in <unk>.

Abilities across cloud network and other categories demand remained strong new logo growth is accelerating and we see a highly favorable pricing environment, allowing us to deliver higher MMR per cabinet yields driven by price power density and strong interconnection demand. The net result is solid revenue growth a strong forward pipeline in <unk>.

Continued optimism about our differentiated ability to deliver compelling value to our customers and in turn to our shareholders.

In Q3, our go to market engine continued to execute well with more than 4200 deals in the quarter across more than 3100 customers, including record new logos from high value targeted customers. We saw solid performance across all aspects of our platform strategy with data Center services digital services and our ex scale offerings all coming together.

To address the evolving demands of our customers and strong cross regional bookings highlighting the power of our unmatched global reach.

On the AI front, we continue to cultivate and win significant opportunities across our existing customer base and with AI specific prospects. A recent gartner ballpark, 55% of organizations are in pilot or production mode with generative AI. We are seeing this manifest in accelerated interest from both enterprise customers and from emerging service providers.

Looking to service this demand, we see strong similarities between the evolving AI demand and a multi tiered architectures that have characterized the cloud build out for the past eight years and believe that our broad portfolio of offerings in tandem with our key technology partners will allow us to capture high value opportunities across the value chain along <unk>.

Three key vectors.

First in our retail business, we will aggressively pursue magnetic AI service provider deployments to support on ramps in French nodes and smaller scale training needs. We are well positioned here with nearly 40% market share of the on ramps to the major cloud service providers key players in the ecosystem and in Q3, we're proud to have been recognized at a time.

23, Google Cloud customer awards winner for our work supporting Google AI Technology key wins in this area for Q3 included core week, a specialized GPU cloud provider deploying networking nodes at Equinix, leveraging our unique multi cloud on ramps and network connectivity across multiple metros and Lambda selecting.

Platform Equinix to offer customers expanded regional connectivity higher networking performance security and scale for an enterprise grade GPU cloud dedicated to large language models and generative AI workloads.

We intend to meaningfully augment our scale portfolio, including in North America to pursue strategic large scale AI training deployment with the top hyperscale and other key.

AI ecosystem players, including the potential to serve highly targeted enterprise demand. We expect some builds will be tightly coupled with our retail campuses like our newly announced Silicon Valley 12 X asset.

While other builds will be larger scale campuses in locations with access to significant power capacity.

And finally in response to burgeoning enterprise AI demand, we will leverage our unique advantages to position platform equinix as the place where private AI happens, allowing customers to place compute resources and proximity to data and seamlessly leverage public cloud capabilities, all while maintaining control of high value proprietary data.

We also anticipate a dramatic acceleration in inference workloads and see Equinix is well positioned to deliver performance and economic benefits derived from our reach network density and cloud adjacency.

While still early we're seeing broad based demand for private AI from digital leaders with specific wins in the transportation education public sector, and health care verticals, including Harrison Dot AI, a clinician led health care artificial intelligence company that is dedicated to addressing the inequality in capacity limitations in our healthcare.

System by developing AI AI powered tools in radiology, and pathology and exciting opportunity to not only drives our business, but clearly aligns with equinix values.

As AI demand accelerates, we are adapting our product portfolio and our physical platform in response to evolving customer requirements in terms of datacenter design, we are using our co innovation facility in ashburn to evaluate technologies to support escalating power requirements and have already commercialized. Our early work in this area with liquid cooling solutions that are supportable.

In all markets, including support for direct to chip liquid cooling in 45 markets across all three regions. We are already supporting significant liquid cooled deployments across a range of deployment sizes and densities and we look forward to sharing more with you on our progress in this space.

Turning to our results as depicted on slide three revenues for Q3 were $2.06 billion up 14% year over year, driven by strong recurring revenue growth and power price increases adjusted EBITDA was up 9% year over year and <unk> per share was better than our expectations due to strong operating performance and timing of recurring cap.

I expect interconnection.

Interconnection revenues grew 9% year over year with continued strength from Equinix fabric. These growth rates are all on a normalized and constant currency basis.

Our data center services portfolio continues to perform well given the strong underlying demand for digital infrastructure, and a long duration and delivering new capacity or factor that continues to drive positive pricing trends, we're investing broadly across our global footprint. We currently have 56 major projects underway in 39 markets across 23 countries.

<unk>, including 14 X scale builds that will deliver more than 100 megawatts of capacity once opened.

More than 50% of our expansion capital is supporting capacity in our major metros, where we have strong visibility to fill rates recurring revenues from customers deployed in more than one region stepped up 1% quarter over quarter to 77% as customers continue to move to more distributed architectures.

On interconnection, we now have over 460000 total interconnections with 4200 net interconnections added in Q3, thanks to healthy gross adds offset somewhat by continued grooming activity and consolidations into higher bandwidth connections equinix fabric saw continued momentum with record port orders and Cigna.

Growth in provision bandwidth up 8% quarter over quarter to more than 200 Terabits per second.

Internet exchange had another strong quarter in APAC with peak traffic in the region, surpassing the Americas for the first time.

Globally peak traffic was up 9% quarter over quarter, and 27% year over year to nearly 35 terabits per second.

Recent interconnection interconnection and ecosystem wins include southern cross expanding their relationship with Equinix by deploying their FX next subsea cable into our La Boor IV X to boost aggregate capacity on their U S to Australia, and New Zealand network by 500% in.

In the Warsaw stock exchange migrating their primary matching engine and trading system to Equinix as Warsaw, three ibs to offer more capabilities and enhanced trading performance.

We continue to invest behind our platform strategy with revenue growth from our digital services portfolio significantly over indexing relative to the broader business, including strong adoption of our network edge offering by enterprise customers.

Also seeing momentum in expanding our partnerships with leading technology companies, including the recent announcement of Netapp storage on Equinix metal, which is an integrated <unk> solution that provides enterprise customers low latency access to all clouds, while keeping control of their data a critical consideration for AI workloads.

Key digital services wins this quarter included Mcgraw Hill, a leading educational publishing company deploying virtual hubs using network edge across multiple markets to connect to key cloud providers via Equinix fabric and a significant win with a global gaming company using equinix metal to support a major new product launch.

Our channel program delivered another strong quarter amplifying the reach of our sales team and accounting for over 65% of new logos with wins across a wide range of industry segments, focusing on digital transformation initiatives. We continue to see growth from partners like AT&T, Cisco Dell and HPE key wins included a top five.

U S public school district, seeking to modernize aging it infrastructure, while improving systems uptime and enhancing cyber security. This wind executed with partners Dell technology managed services caris opt in impacts technologies will deliver low latency multi cloud connectivity and secure network access to key ecosystem.

Resources, while lowering operational expenses now, let me turn the call over to Keith and cover the results for the quarter.

Great. Thanks, Charles and good afternoon to everyone.

Let me start by saying I Hope you and your families are doing well.

Now notwithstanding these complex and difficult times, we continue to remain bullish about our business and the opportunities ahead, as we work hard to expand our strategic and preferential position in the marketplace.

As you all know one of the core tenants of our strategy revolves around long term shareholder value creation.

With that in mind, we continue to build capacity in markets that will enhance our platform positioning and differentiate our offerings into the future.

Also we continue to work diligently to main written so we maintain rigor.

With our pricing strategies, while closely overseeing our spending decisions.

As it relates to our capital structure, we've been able to maintain a highly advantaged balance sheet with ample liquidity and lower leverage.

This gives us the flexibility to opportunistically access the capital markets under terms and conditions that are beneficial to us and.

In addition.

We're actively working to support other strategic operating goals, including how and where we source our supply chain, including energy costs, while increasing our investments in and around our future for sustainability initiatives.

With highly important matters for our customers.

Lastly, we remain pleased with our efforts to manage our derivative risks, including our exposure to foreign currencies and interest rates.

Moving on to the business.

We continue to perform well in Q3, we had solid gross and net bookings with strong customer demand.

Our pricing dynamics are very positive.

<unk> churn is well within our targeted range.

Also given the tight supply environment across many of our metros, we and our customers continue to look for ways to optimize deployment, including increasing the power density of the cabinet sold this drives improved Bud lime bottomline profitability and higher return on invested capital.

Global MMR per cabinet was up $57 quarter over quarter to 2214 per cabinet, a 12% increase on our yield year on year on a constant currency basis.

With respect to our net cabinets billing metric it remains flat compared to Q2, largely due to the meaningful increase in density of cabinet and the timing of bookings and churn at the end of the quarter.

We have a solid backlog of booked but not yet installed cabinets and the depth of our pipeline and the related coverage ratios support an expected strong bookings performance to close out our year.

Now let me cover the highlights from the quarter note that all comments in this section are on a normalized and constant currency basis.

As depicted on slide four global Q3 revenues were $2 061 billion up 14% over the same quarter last year due to strong recurring revenue growth and prior price increases nonrecurring.

Nonrecurring revenues remained flat compared to the prior quarter.

Although as noted before nonrecurring revenues, particularly those attributable to our <unk> business are inherently lumpy for.

For Q4, our guide implies a meaningful step up of nonrecurring revenues attributed to a number of deals expected to close across different markets. This quarter.

Q3 revenues net of our FX hedges included a 1 million dollar headwind when compared to our prior guidance rates.

Global Q3, adjusted EBITDA was $936 million or 45% of revenues up 9% over the same quarter last year due to strong operating performance.

Looking forward our Q4 adjusted EBITDA is expected to remain roughly flat due to the timing of our spend and specific onetime costs attributed to corporate real estate activities.

Q3, adjusted EBITDA net of our FX hedges included a $1 million FX headwind when compared to our prior guidance rates and $2 million of integration costs.

Global Q3, <unk> was $772 million above our expectations due to strong business performance and timing of recurring capex spend.

Q3, <unk> included minimal FX impact when compared to our prior guidance rates.

Global Q3, MMR churn stepped down to two 2% and we expect Q4 MMR churn to remain consistent with Q3 levels in the lower half of our two to two and a half per cent quarterly guidance range.

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

On a year over year normalizing constant currency basis, EMEA and APAC were our fastest growing regions at 26 and 10% respectively.

Operator: Good afternoon and welcome to the Equinix Third Quarter earnings conference call. All lines will be able to listen only until we open for questions. Also, today's conference is being recorded.

Followed by our Americas region at 7% year over year growth.

The Americas region had a solid quarter across many of our key metros and we experienced strong public sector activity.

Operator: If anyone has any objections, please disconnect at this time.

As it relates to AI sales activity discussed and Charles's remarks, the vast majority of the demand is destined for Americas footprint.

Chip Newcom: I would now like to turn the call over to Chip Newcom, Senior Director of Investor Relations, Jerry, you may begin. Good afternoon and welcome to today's conference call. Before we get started, I would like to remind everyone that some of the statements we will be making today are forward-looking in nature and involve risks and uncertainties. Actual results may vary significantly from those statements and may be affected by the risks we've identified in today's press release and those identified in our filings with the SEC, including our most recent form 10K, followed February 17th, 2023, and 10Q, followed August 4th, 2023.

And as highlighted by Charles this quarter, we want a mix of AI training inference and networking deployments with a pipeline of anticipated deals to follow.

Our EMEA business had a strong quarter led by our U K and Dutch markets and record digital services bookings.

In EMEA as highlighted previously we can we continue to lean into our future first sustainability strategy.

Including implementing heat export initiatives into Frankfurt, Helsinki, and Paris communities, while supporting other innovative environmental initiatives to support many other communities where we operate.

Chip Newcom: Equinix assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. In addition, in light of regulation fair disclosure, it is Equinix's policy not to comment on its financial guidance during the quarter unless it's done to an explicit public disclosure. In addition, it will provide non-GAT measures on today's conference call. We provide a reconciliation of those measures to the most directly comparable GAT measures and a list of the reasons why the company uses these measures in today's press release on the Equinix Investor Relations page at www.equinix.com.

And finally, the Asia Pacific region saw solid performance led by our Hong Kong, India, and Singapore markets capacity.

Constraints exist across a number of our markets, particularly Singapore.

The supply constraints will help drive strong deal discipline on pricing power in these markets. During 2024 will be opening new markets in India, Indonesia, and Malaysia, expanding our APAC platform and ecosystems in pursuit of larger opportunities given the demand for digital infrastructure.

And now looking at our capital structure. Please refer to slide eight our net leverage remains low relative to our peers at three five times, our annualized annualized adjusted EBITDA.

Chip Newcom: We've made available on the IR page of our website a presentation designed to accompany this discussion along with certain supplemental financial information and other data. We would also like to remind you that we post important information about Equinix on the IR page from time to time and encourage you to check our website regularly for the most current available information.

Our balance sheet increased slightly to approximately $31 $7 billion, including an unrestricted cash balance of over $2 3 billion.

Our cash balance remained flat quarter over quarter as our strong operating cash flow and financing activity was offset by our investment in growth Capex and the quarterly cash dividend.

Chip Newcom: With us today are Charles Meyers, Equinix's CEO and President and Keith Taylor, Chief Financial Officer. Following our prepared remarks, we'll be taking questions from cell-side analysts. In the interest of wrapping this call up in one hour, we'd like to ask these analysts to limit any follow-on questions to one.

As previously noted we've been opportunistic opportunistically looking to raise additional debt capital and reduce rate environments.

Charles Meyers: At this time, I'd like to turn the call over to Charles. Thank you, Chip.

To that end in September we raised $337 million of Swiss franc denominated five year paper at an attractive to 875% rate. Additionally, during the quarter, we executed an incremental $230 million of ATM forward equity sales, which we expect to settle alongside our Q2 ATM forward contracts in late 2010.

Charles Meyers: Good afternoon and welcome to our third quarter earnings call. Despite an increasingly complex macro-environment, we delivered another solid quarter of results and continued to drive strong value creation, raising both our dividend and our FFO for share outlook for the full year. While we continue to operate in an environment characterized by customer caution, this caution is balanced by a clear commitment to digital transformation and accelerating interest in AI and a growing reliance on Equinix as a critical partner in design.

Three.

These financing transactions will help under 2024 growth initiatives alongside other sources of capital, while allowing us to maintain our strategic flexibility.

Charles Meyers: We are providing and implementing hybrid multi-cloud and data-centric architectures. Customers continue to see digital as a critical priority and they remain focused on optimizing existing infrastructure spend and capabilities across cloud, network and other categories. Demand remains strong. New logo growth is accelerating and we see a highly favorable pricing environment allowing us to deliver higher MRR for cabinet yields driven by price, power density and strong interconnection demand. The net result is solid revenue growth, a strong forward pipeline, and continued optimism about our differentiated ability to deliver compelling value to our customers and in turn to our shareholders.

Also in September we published our 2023 Green bond allocation report.

As highlighted in the report we have now fully allocated the net proceeds from our green bonds aligning our financing efforts with our commitment to create a more environmentally friendly datacenter footprint.

Turning to slide nine for the quarter capital expenditures were 618 million, including recurring capex of $52 million.

Since our last earnings call, we opened six new retail projects, including two new data centers in Dubai and Montreal.

We also purchased our Dublin, one and Montreal, one IV ex assets and land for development in Manchester in Washington D C.

Charles Meyers: In Q3 our go-to-market engine continued to execute well with more than 4,200 deals in the quarter across more than 3,100 customers, including record new logos from high-value targeted customers. We saw solid performance across all aspects of our platform strategy with data center services, digital services, and our ex-scale offerings all coming together to address the evolving demands of our customers and strong cross regional bookings highlighting the power of our unmatched global reach.

Revenue from owned assets were 64% of recurring revenues for the quarter.

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

Our 174 stabilized assets increased revenues by 9% year over year on a constant currency basis.

Our stabilized assets are collectively 85% utilized and generate a 27% cash on cash return on the gross PP&E invested.

And finally, please refer to slides 11 through 15 for our updated summary of 2023 guidance and bridges do note all growth rates are on a normalized and constant currency basis.

Charles Meyers: On the AI front, we continue to cultivate and win significant opportunities across our existing customer base and with AI specific prospects. A recent Gardner poll found 55% of organizations are in pilot or production mode. We are seeing this manifest in accelerated interest from both enterprise customers and from emerging service providers looking to service this demand. We see strong similarities between the evolving AI demand and the multi-tiered architectures that have characterized the cloud build out for the past eight years and believe that our broad portfolio of offerings in tandem with our key technology partners will allow us to capture high value opportunities across the AI value chain along three key vectors.

For the full year 2023, we're maintaining our underlying revenue outlook with expected topline growth of 14% to 15% or approximately 9% growth excluding the impact of prior cost pass through to our customers a reflection of our continued strong execution.

We are raising our underlying 2023, adjusted EBITDA guidance by $17 million due to favorable operating costs and lower integration spend.

We're raising our underlying <unk> guidance by $27 million to now grow between 12, and 14% compared to the previous year.

Charles Meyers: First, in our retail business, we will aggressively pursue magnetic AI service provider deployments to support on ramps, inference nodes, and smaller scale training needs. We are well positioned here with nearly 40% market share of the on ramps to the major cloud service providers key players in the AI ecosystem. In Q3, we are proud to have been recognized as a 2023 Google Cloud customer awards winner for our work supporting Google AI technology.

<unk> per share is now expected to grow between 10 and 11%.

Capex is expected to remain in the two seven to $2 $9 billion range.

Approximately $215 million of on balance sheet X scale spend which we expect to be reimbursed for when these assets are transferred to the Jv's early next year and about $225 million of recurring capex spend and increase over the prior quarter as we accelerated cost into Q4.

Charles Meyers: Key wins in this area for Q3, including core weave, a specialized GPU cloud provider, deploying networking nodes at economics, leveraging our unique multi-cloud on ramps, and network connectivity across multiple metros and lambda. Selecting platform economics to offer customers expanded regional connectivity, higher networking performance, security, and scale for an enterprise-grade GPU cloud dedicated to large language models and generative AI workflows. Second, we intend to meaningfully augment our X-scale portfolio, including in North America to pursue strategic large-scale AI training deployments with the top hyper-scalers and other key AI ecosystem players, including the potential to serve highly targeted enterprise demand.

Lastly, <unk>.

Given our strong operating performance and our historically low <unk> payout ratio, we've accelerated the timing of our cash dividend increase into Q4 of this year from Q1 of next year.

As a result the <unk>.

Quarterly cash dividend will increase by 25% to $4 26 per share this quarter.

Looking forward, we expect our annual cash dividend growth rate will track at or above our <unk> per share growth rate for a number of years. So.

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

Keith in closing, we continue to see strong demand as customers embrace AI and advance their digital transformation agenda is with infrastructure that is more distributed more cloud connected and more ecosystem enabled than ever before despite a variety of cross currents in the business. We are translating healthy bookings growth, a favorable pricing environment and increasing power.

Charles Meyers: We expect some builds will be tightly coupled with our retail campuses, like our newly announced Silicon Valley 12X asset, while other builds will be larger scale campuses in locations with access to significant power capacity. And finally, in response to burgeoning enterprise AI demand, we will leverage our unique advantages to position platform equinix as the place where private AI happens. Allowing customers to place compute resources and proximity to data and seamlessly leverage public cloud capabilities all while maintaining control of high-value proprietary data.

Entities into strong increases in cabinet yields these dynamics combined with a continued focus on driving operating leverage and expense discipline through the business are allowing us to deliver compelling value on a per share basis as we close out 'twenty three and look towards 2020 for our forward looking strategy and vision for our platform will enable us to amplify our youth.

Charles Meyers: We also anticipate a dramatic acceleration in inference workloads and see equinix as well positioned to deliver performance and economic benefits derived from our reach network density and cloud adjacency. While still early, we're seeing broad-based demand for private AI from digital leaders, with specific wins in the transportation, education, public sector, and healthcare verticals, including Harrison. AI, a clinician-led healthcare artificial intelligence company that is dedicated to addressing the inequality and capacity limitations in our healthcare system by developing AI power tools and radiology and pathology.

<unk> strengths leveraging them to expand our market opportunity and drive sustainable growth in a rapidly evolving landscape. We remain optimistic about the road ahead and steadfast in our commitment to show up every day in service to starting with our resolve to align inspire and empower our teams around our strategy and our mission enabling them.

To deliver durable value and meaningful impact to our customers our shareholders and the communities in which we operate so let me stop there and open it up for questions.

Okay.

Thank you if you would like to ask a question. Please press star one.

Charles Meyers: An exciting opportunity that not only drives our business, but clearly aligns with equinix value. As AI Demand accelerates, we are adapting our product portfolio and our physical platform in response to evolving customer requirements. In terms of data center design, we're using our co-innovation facility in Ashburn to evaluate technologies to support escalating power requirements and have already commercialized our early work in this area with liquid cooling solutions that are supportable in all markets, including support for direct chip liquid cooling in 45 markets across all three regions. We are already supporting significant liquid cool deployments across their range of deployment sizes and densities, and we look forward to sharing more with you on our progress in this space.

If he would like to withdraw your question. Please press star two.

Our first question comes from Matt Mcnulty.

With Deutsche Bank.

You May go ahead.

Hey, guys. Thank you for taking the questions just two if I could first on the cabs billing metric I. Appreciate you Charles given some of that color around the increase.

The increased power density and I'm, just wondering if theres any additional color you can share with some of the softness in the cabs billing ads. Some of the actions you may be taking to release some of that available capacity at higher mark to market rates and any sort of.

Color you can share in terms of expectations for <unk>.

And then second question again, we appreciate all the color on AI.

Keith Taylor: During our results has depicted on slide three revenues for Q3 were $2.06 billion, a 14% year over year driven by strong recurring revenue growth and power price increases. Adjusted EBITDA was up 9% year over year, an AFFO per share was better than our expectations due to strong operating performance and timing of recurring capExpect. Interconnection revenues grew 9% year over year with continued strength from Equinix fabric. These growth rates are all on a normalizing constant currency basis.

Wondering if you can give us any more color on the conversations you're having with customers on their AI strategy, what role Equinix can play in helping them meet their goals and any sort of timing in terms of when this can become a little bit more material.

Yeah, you bet Matt.

Absolutely bigger than we would have a question there on the on the cabs as you might imagine Keith.

A key topic in the discussion I want to start by just reinforcing that with the flight cabinet growth is really not driven by a lack of demand as you heard in the script, we had another really solid bookings quarter with overall deal counts in line with what we've been seeing.

Keith Taylor: Our data center services portfolio continues to perform well, given the strong underlying demand for digital infrastructure and the long duration and delivering new capacity, a factor that continues to drive positive pricing trends, we're investing broadly across our global footprint. We currently have 56 major projects underway in 39 markets across 23 countries, including 14 ex-scale builds that will deliver more than 100 megawatts of capacity once opened. More than 50% of our expansion capital is supporting capacity in our major metros where we have strong visibility to fill rates.

And so I think it's not a not a demand problem per se as I said last quarter look we recognize.

<unk> billing cab adds have to be part of the growth story over time, but the pressure on the metric is really linked to some other positive dynamics in the business as you sort of alluded to there. So let me unpack that a little bit for you and give you a little more detail I think the force that I think maybe we didn't fully appreciate the past couple of quarters or didn't highlight as much as the <unk>.

Keith Taylor: Recurring revenues from customers deployed in more than one region stepped up 1% quarter over quarter to 77% as customers continue to move to more distributed architectures. On interconnection, we now have over 460,000 total interconnections with 4200 net interconnections added in Q3 thanks to healthy growth ads offset somewhat by continued grooming activity and consolidations into higher bandwidth connections. Equinix fabric saw continued momentum with record quarter orders and significant growth in provision bandwidth up 8% quarter over quarter to more than 200 terabytes per second.

<unk> and the pace of the evolution on the power density and so we really dug into that this quarter and looked at that for the last several quarters and what we found is is really an expanding delta between the power density of our churn cabinets and that of our newly sold cabinet. So we look back over these first three quarters of 'twenty, three where we've had a flatter profile.

On the on the build cabs billing.

Billing cabs and we've turned cabinets.

That period and the average density of four kilowatts per cab.

But we've added new billable cabs at an average of five seven.

So that's that's really a major factor that our cabinet equivalents metric is not density adjusted so the reality is as we've been paddling hard against that increase in density when it comes to the cabinet growth.

Keith Taylor: Internet exchange had another strong quarter in APAC with peak traffic in the region surpassing the Americas for the first time. Globally peak traffic was up 9% quarter over quarter and 27% year over year to nearly 35 terabytes per second. Recent interconnection interconnection and ecosystem wins include Southern Cross expanding their relationship with equinix by deploying their SX next subsea cable into our L.A. 4 IVX to boost aggregate capacity on their US to Australia and New Zealand network by 500% and the Warsaw Stock Exchange migrating their primary matching engine and trading system to equinix is Warsaw 3 IVX to offer more capabilities and enhanced trading performance.

Additionally, we talked about this in prior calls as well.

We do have some capacity constraints.

Somewhat Q1's in certain markets.

And those are driving some proactive churn on part on our part and we see a level of customer optimization at the cabinet level is similar to what we've been talking about on interconnection, but we're seeing very little customer churn.

A full customer churn.

And so I'm not I'm definitely not saying that all of our churn activity is necessarily desirable or wanted.

But as you can see in our churn metric, we're managing the overall churn really well within our guided range. So you know as I said like I talked about last quarter. These 37 deployments with really positive mark to markets. When you look at both price and power density and can we when we look at Q3, we actually saw that general range of $60 seven.

Keith Taylor: We continue to invest behind our platform strategy with revenue growth from our digital services portfolio significantly over indexing relative to the broader business, including strong adoption of our network edge offering by enterprise customers. We're also seeing momentum in expanding our partnerships with leading technology companies, including the recent announcement of NetApp storage on equinix metal, which is an integrated bolstack solution that provides enterprise customers low latency access to all clouds while keeping control of their data, a critical consideration for AI workloads.

80% uplift as broadly applicable and so on.

In other words our average.

Of our churn cabinets are new cabinets, where about 60% to 70% above what we had churned and so obviously that dynamic is super attractive in terms of and really explain explaining why we're driving healthy revenue growth, even with the limited growth in billable caps.

Keith Taylor: Key Digital Services wins this quarter, included McGraw Hill, a leading educational publishing company deploying virtual hubs using network edge across multiple markets to connect to key cloud providers via Equinix fabric and a significant win with the global gaming company using Equinix Metal to support a major new product launch. Our channel programs delivered another strong quarter amplifying the reach of our sales team and accounting for over 65% of new logos with wins across a wide range of industries through segments focusing on digital transformation initiatives. We continue to see growth from partners like AT&T, Cisco, Dell, and HPE.

So so you know I mean, we've always said, we're we're not ones to chase volume.

As a you know as a business objective because I think that Ralph and results in a loss of discipline in the process.

Very much playing the long game when it comes to our commercial decision, making and although cabinet growth is going to have to be a part of the story over time, we're really seeing that the current dynamics are allowing us to drive as we said strong MMR per cab.

<unk> stabilized asset growth and really I think the return on capital is going to continue to be very favorable. So I think all of that as it translates into what we see is they are really most critical bottom line and that's <unk> <unk> per share and dividend growth and I think sort of the results are really strong in that area.

Keith Taylor: Key wins included a top five US public school district seeking to modernize aging IT infrastructure while improving systems uptime and enhancing cyber security. This win executed with partners Dell Technology Management Services, Cara Soft, and Impact Technologies will deliver low latency, multi-cloud connectivity, and secure network access to key ecosystem resources while lowering operational expenses.

So that's a that's context on the on the first question and on billable cabs, a second one on AI.

Definitely seeing it show up we talked about in the script about a number of deals that we won in the quarter.

Keith Taylor: Now let me turn the call over case and cover the results from the court. Great. Thanks Charles and good afternoon to everyone.

AI and ml are not new things for us we've kind of talked about that we've been working I think through our AI opportunities with digital leaders for several years now theres a lot happening across the platform. In fact, we people don't maybe remember it but we we announced our Nvidia launch pad offering with them over two years.

Keith Taylor: Let me start by saying I hope you and your families are doing well. Now in all of spending these conflicts and difficult times, we continue to remain bullish about our business and the opportunities ahead as we work hard to expand our strategic and preferential position in the marketplace. As you all know, one of the core tenants of our strategy revolves around long-term shareholder value creation. With that in mind, we continue to build capacity in markets that will enhance our platform positioning and differentiate our offerings into the future.

[noise] ago, and really that's been at a unique opportunity for us to get in early with customers as they are piloting AI initiatives in their business.

And really monitor AI demand in the marketplace and so we've closed a number of deals.

Keith Taylor: Also, we continue to work diligently to maintain rigor with our pricing strategies while closely overseeing our spending decisions. As it relates to our capital structure, we've been able to maintain a highly advanced balance sheet with ample liquidity and lower leverage. This gives us the flexibility to opportunistically access to capital markets under terms and conditions that are beneficial to us. In addition, we're actively working to support other strategic operating goals, including how and where we source our supply chain, including energy costs, while increasing our investments in and around our future first sustainability initiatives, both highly important matters for our customers.

With service providers this quarter, there's definitely an emergent set of service providers core we even lambda we talked about.

That I think are really sources of incremental demand for us.

We closed those deals really in the retail footprint footprint focused on networking and inference type nodes and and I think that what we're seeing most with customers is working with them on three big questions. When they're thinking about AI, where do I put my data and I think we're seeing a lot of people looking at sort of cloud adjacent data as.

The answer and I think that plays right to our advantages.

Lee how they bring compute and other data other data and other data sources in other words data that's not their own to their own data.

Keith Taylor: Lastly, we remain pleased with our efforts to manage our derivative risks, including our exposure to foreign currencies and interest rates. Moving on to business, we continue to perform well. In Q3, we had solid growth in net bookings with strong customer demand. Our pricing dynamics are very positive. Our return is well within our targeted range. Also, given the tight supply environment across many of our metros, we and our customers continue to look for ways to optimize deployment, including increasing the power density of the cabinet sold.

And then finally, how do they deliver AI generated business insights to the users of those in strides insights economically and with high performance and so those really are the areas that we've been deeply engaged with our customers I think that it is a contributing factor to our probably our best forward looking pipeline multi quarter pipeline that we see.

Seen in a long time, and so I do think AI is a very positive force in the business overall.

Keith Taylor: This drives improved bottom line profitability and higher return on invested capital. Global MRR per cabinet was up $57.25 to $2,214 per cabinet, a 12% increase on our yield year-on-year on a constant currency basis. With respect to our net cabinet's billing metric, it remains flat compared to Q2 largely due to the minimal increase in density of cabinet and the timing of bookings and churn at the end of the quarter. We have a solid backlog of book but not yet installed cabinets in the depth of our pipeline and the related coverage ratios, support and expected strong book use performance to close out our year.

That's great. Thank you.

Our next question comes from Frank Louthan with Raymond James You May go ahead.

Great. Thank you.

Quick question on so on the channel you mentioned, 65% of new logos coming from the channel what percentage of overall sales are there and then how did the logos and the channel tend to perform longer term versus those from the existing salesforce. They produce the same amount of repeat business.

Yeah, I would I think.

Our I think our bookings percentage is probably in the 40 40 ish percent range from our channel and you do have to recognize Frank and we've been very transparent about this our channel is not really a sell through channel as much. It is really more of a sell with sort of meet in the market.

Keith Taylor: Now let me cover the highlights from the quarter. Know that all comments in this section are on an normalized and constant currency basis. I have to pick it on slide for global Q3 revenues were 2.061 billion up 14% over the same quarter last year due to strong recurring revenue growth and power price increases. Non-recurring revenues remain flat compared to the prior quarter. Although as nor do for non-recurring revenues particularly those attributable to our ex-scale business are inherently lumpy.

But what we're using is the extensive relationships that our channel partners have particularly in the broad enterprise.

To identify opportunities and then bring our unique value to the table and so that often results results in essentially a joint selling proposition between ourselves and our partners and over time I wouldn't say that I think we need to be moving towards a bit more of a sell through model that would provide even more economic leverage to the model, but we do see our <unk>.

Keith Taylor: For Q4 our guide implies a meaningful step up a non-recurring revenues attributed to a number of deals expected to close across different markets this quarter. Q3 revenues net of our effects edges included a 1 million dollar headwind when compared to our prior guidance rates. Global Q3 adjusted EBITDA was 936 million or 45% of revenues up 9% over the same quarter last year due to strong operating performance. Looking forward our Q4 adjusted EBITDA is expected to remain roughly flat due to the timing of our span and specific one-time cost attributed to corporate real estate activities.

Channel or channel wins as very on par in terms of quality of business and our ability to sell into them, sometimes even more even more readily we can capture incremental wallet share even more readily because of the strength of our channel partners from a relationship perspective.

Are those accounts and so I'd say very much a positive force for us and as we look at now we sort of deepening our channel relationship with key technology partners, we talked about the net app offering.

With with Netapp storage on metal those are great. Examples we do have a similar sort of offering with pure.

Keith Taylor: Q3 adjusted EBITDA net of our effects edges includes a 1 million dollar effects headwind when compared to our prior guidance rates and 2 million dollars of integration costs. Global Q3 AFFO was 772 million above our expectations due to strong business performance and timing of recurring cap expand. Q3 AFFO included minimal effects impact when compared to our prior guidance rates. Global Q3 MR turned step down to 2.2% and we expect Q4 MR turned to remain consistent with our Q3 levels in the lower half of our 2 to 2.5% quarterly guidance range.

And so those things are really relevant as customers are saying, hey, we're really deeply thinking about where to place. Our data we have technology opinion about the storage providers, we'd like to use and we really would like to place that at equinix to get proximity and adjacency to the cloud and so I think that's a great example for the kind of deals that where we are.

We're winning in the channel and that continues to be an important part of the business.

Okay, great. Thank you.

Okay.

Our next question comes from Jon Atkin with RBC capital markets. You May go ahead.

Keith Taylor: Turning to our regional highlights whose full results are covered on slides 5 through 7. On a year-over-year normalizing constant currency basis, a MeNAPAC where fastest growing regions at 26 and 10% respectively followed by our America's region at 7% year-over-year growth. The Americas region had a solid quarter across many of our key metros and we experienced strong public sector activity. As released AI sales activity discussed in Charles's remarks, the vast majority of the demand is destined for America's footprint.

Thanks, So I was interested in.

If there's anything notable to call out that drove the growth in EMEA, where.

Things seem to have accelerated a bit versus APAC, which saw a slightly slower growth and then on pricing, which I think you mentioned in the earlier part of your prepared remarks, what do you see the main levers would it be you know renewals spreads on cabinets are harmonizing cross connects or anything to kind of call out around the price tend to think about in 2024.

Sure Yeah, I mean I think.

When you are when you adjust for the PPI I mean, because the EMEA numbers are obviously wings on an as reported basis, our driven significantly by PPI.

Keith Taylor: And it's highlighted by Charles this quarter we want a mix of AI training, inference and networking deployments with a pipeline of anticipated deals to follow. Our MeNAPAC business had a strong quarter led by our UK and Dutch markets and record digital services bookings. In a MeNAPAC highlight previously we continue to lean into our future first sustainability strategy, including implementing heat export initiatives into Frankfurt, Helsinki and Paris communities while supporting other innovative environmental initiatives to support many other communities and where we operate.

And so there is there is there is that we certainly are seeing I think good performance across our regions. APAC. I think is is over over a multi quarter period here a little has more constraints to deal with and so from a capacity perspective, and as we've talked we've talked about Singapore being.

Sort of a primary example, there but I would also say that in EMEA I think a more prominent feature for us to continue to be looking at internally and I realize that there is not as deep of transparency or granularity in your fresher Bellevue, but the deal mix in EMEA continues to be extremely favorable and the team has done a really great job.

Keith Taylor: And finally, the Asia-Pacific region saw a solid performance led by our Hong Kong, India and Singapore markets. Capacity constraints exist across the number of our markets, particularly Singapore. These supply constraints will help drive strong deal discipline and pricing power in these markets. During 2024, we'll be opening new markets in India, Indonesia and Malaysia, expanding our APAC platform and ecosystems in pursuit of larger opportunities given the demand for digital infrastructure.

Going from what I think was a little more dependency on some of the large footprint business over time and now in a post X scale world really shunting the large really large stuff off tax scale and I think leaning away from our dependency on large footprint demand even in the enterprise, which I think always has the sort of the Prost.

Keith Taylor: And now looking at our capital structure, please refer to slide 8. Our net leverage remains low relative to our peers at 3.5 times our annualized adjusted EBITDA. Our balance sheet increased slightly to approximately 31.7 billion, including an unrestricted cash balance of over 2.3 billion. Our cash balance remained flat quarter of a quarter as our strong operating cash flow and financing activity was offset by our investment in growth cap ex and the quarterly cash dividend.

Spec of greater churn probability over time, and so the deal mix in EMEA has really shaped nicely I think over the last couple of years and I think really kudos to the team on the ground there to make that happen.

Then on pricing I would just say that I think pricing broadly speaking is very favorable part of that is just simply driven by I think an understanding from customers that increases in underlying costs are driving a rising price environment across a whole range of things.

Keith Taylor: As previously noted, we've been opportunistically looking to raise additional debt capital and reduce rate environments. So that end in September, we raised $337 million of Swiss-ranked and nominated five-year paper at an attractive 2.875% rate. Additionally, during the quarter, we executed an incremental 230 million of ATM-forward equity sales, which we expect to settle alongside our Q2 ATM-forward contract in late 2023. These financing transactions will help fund our 2024 growth initiatives alongside other sources of capital, while allowing us to maintain our strategic flexibility.

So that's one factor, but then I think that perhaps the more important one for US is I think being able to deliver really compelling value for them and being articulated being able to articulate that effectively to them and so in terms of where it's coming from.

I do think there's continued pricing activity on on all across our portfolio of interconnection space and power and <unk> and on our digital services and and then I think that day and that includes both uplifts on list pricing.

Keith Taylor: Also, in September, we published our 2023 Green Bond allocation report. As highlighted in the report, we've now fully allocated the net proceeds from our green bonds, aligning our financing efforts with our commitment to create a more environmentally friendly data center footprint.

And as well as on renewals and so I think you're really seeing that show up in terms of as I. Just told you. When you look at a dynamic that says okay. If you're if you're churning cabinets at X and you're in your REIT and your selling new cabinets at 1.6 of our 165 ex that.

Keith Taylor: Turning to slide 9 for the quarter, capital expenditures were 618 million, including recurring cap ex of 52 million. Since our last earnings call, we opened six new retail projects, including two new data centers in Dubai and Montreal. We also purchased our Dublin One and Montreal One IVX assets and land for development in Manchester and Washington, D.C. Revenue for Monde assets were 64% of recurring revenues for the quarter. Our capital investments delivered strong returns are shown on slide 10. Our 174 stabilized assets increased revenues by 9% year-over-year on a constant currency basis. Our stabilized assets are collectively 85% utilized and generate a 27% cash-on-cash return on the gross PPE invested.

That's a very attractive dynamics not driven entirely by price because power density is a meaningful part of that and then actually new cabs mature even further as interconnection goes into those over time and so I think those are those are some of the dynamics on the pricing front and I think it has been a little hard for people to hold all of that in their head and.

And figure out exactly why that you have some of these dynamics in there, but but I think you're seeing it show up in terms of.

The.

The MMR per cab as well as the overall revenue growth rates, and then particularly dropping it to the to the <unk> per share results.

And then lastly, the new logos you mentioned are there any particular verticals where you're seeing.

Penetration fitbit striving to new verticals and then on the churn side and you seem to kind of think about for the coming quarter or year around where you might fall within your typical range for him or Archer. Thanks.

Keith Taylor: And finally, please refer to slide 11 through 15 for our updated summary of 2023 guidance and bridges. Do note all growth rates are on a normalized and constant currency basis. For the four-year 2023, we're maintaining our underlying revenue. I would look with expected top-line growth of 14 to 15%, or approximately 9% growth, excluding the impact of power costs passed through to our customers. A reflection of our continued strong execution. We're raising our underlying 2023 Adjusted E-Budot guidance by 17 million due to favorable operating costs and lower integration spend.

You always get full value for your questions John.

So on new logos.

Would say.

I think we're seeing it pretty.

A pretty varied.

A set of.

Across verticals in terms of we're not really seeing a heavy concentration I think that you know more data I would say that more what I would consider data centric or data intensive industries are where we're seeing that that focus on digital transformation and on AI.

Keith Taylor: And we're raising our underlying AFFO guidance by 27 million to now grow between 12 and 14% compared to the previous year. AFFO per share is now expected to grow between 10 and 11%. CapEx has expected to remain in the $2.7 to $2.9 billion range, including approximately $250 million of on balance sheet, ex-scale spend, which we expect to be a reimburse for when these assets are transferred to the JVs early next year, and about $225 million of recurring CapEx spend, an increase over the prior quarter as we accelerate costs into Q4.

And so we talked about some of those in terms of transportation health care et cetera, and we've identified a few wins there, but interestingly things like manufacturing have been tremendously strong for us retail has been tremendously strong for us financial services very strong very forward leaning posture on AI.

A very forward leaning posture on cloud, but one that is moderated by sort of compliance security.

Distributed infrastructure requirements et cetera, and so they continue to be that sort of ideal customer for us that really is using a broad range of infrastructure options.

Keith Taylor: Lastly, given our strong operating performance and our historically low AFFO payout ratio, we've accelerated the time of our cash dividend increase into Q4 of this year from Q1 of next year. As a result, the quarterly cash dividend will increase by 25% to $4.26 per share this quarter. Looking forward, we expect our annual cash dividend growth rate will track add or above our AFFO per share growth rate for a number of years.

But wants to place their data and some of their private infrastructure and proximity to all of that and so so we have seen I think very strong performance across verticals on new logos. It seems like every every earnings report has a different highlight in terms of what we're talking about on new logos and then on <unk> on churn I think we kind of gave there.

Charles Meyers: So let me stop here and turn the call back to Charles. Thanks Keith. In closing, we continue to see strong demand as customers embrace AI in advance their digital transformation agendas with infrastructure that is more distributed, more cloud connected, and more ecosystem enabled than ever before. Despite a variety of cross currents in the business, we are translating healthy booking growth, a favorable pricing environment, and increasing power densities into strong increases in cabinet yield.

Key highlights there.

We are again, well within our range a little bit of churn that we are that we are being proactive about or that we're being sort of receptive to customers looking to optimize footprint because we believe there is meaningful upside there.

And and again I think in an environment that in transparency does have some level of optimization from customers, who may be were buying a little more than they needed to add to I think in the 'twenty one 'twenty two time frame.

Charles Meyers: These dynamics combine with a continued focus on driving operating leverage and expense discipline through the business are allowing us to deliver compelling value on a per share basis. As we close out 23 and look towards 2024, our forward-looking strategy and vision for our platform will enable us to amplify our unique strengths, leveraging them to expand our market opportunity and drive sustainable growth and rapidly evolving landscape. We remain optimistic about the road ahead and steadfast in our commitment to show up every day in service too.

But I think are really tightening that up to ensure that they are buying just what they need and then adapting to the multi the hybrid and multi cloud architectures and so you know a churn something that I think we have to continue to really keep a close eye on.

And but right now I think performing well.

We would have expected in terms of RMR.

<unk> as a percentage of them are.

Thank you.

Charles Meyers: Starting with a resolve to align, inspire and empower our teams around our strategy and our mission, enabling them to deliver durable value and meaningful impact to our customers, our shareholders, and the communities in which we operate.

Yeah.

Yeah.

Thank you. Our next caller is David Barden with Bank of America, You May go ahead.

Hey, guys. Thanks, so much.

Operator: So let me stop there and open it up to questions. Thank you. If you would like to ask a question, please press star one. If you would like to withdraw your question, please press star two.

Two questions if I could please just Keith apologies for my voice.

What I'm trying to kind of understand my takeaways for the 2024.

Matthew Niknam: Our first question comes from Matt Nicknum with Deutsche Bank. You may go ahead. Hey guys, thank you for taking questions. Just to if I could first on the cab's billing metric, I appreciate you Charles giving some of that color around the increased power density. I'm just wondering if there's any additional color you can share with some of the softness in the cab's billing ads. Some of the actions you may be taking to release some of that available capacity at higher market rates and any sort of color you can share in terms of expectations for 4Q.

Trajectory, we've had a stronger than expected year to date through three Q.

You're guiding to kind of a weaker than expected jumping off point in <unk> 'twenty 'twenty four but then you're talking about the strong bookings and so I'm I'm wondering if it's too easy to read into the fourth quarter and maybe we should be looking at the second half of <unk>.

Jumping off point for first half 'twenty four rather than the fourth quarter, specifically and then the second question if I could hum.

Maybe Charles.

When you mentioned that your churn is four key jobs and the new clients are coming to the $5 seven what does that look like is that like 110.

Matthew Niknam: Then second question, again, we appreciate all the color on AI. I just wondering if you can give us any more color on the conversations you're having with customers on their AI strategy, what role like Linux can play in helping them meet their goals and any sort of timing in terms of when this can become a little bit more material. Thanks. Yeah, you bet Matt. Yeah, we absolutely figured that we would have a question there on the cab's as you might imagine, a key topic in the discussion.

For every three new floors or is that literally just the directional movement of the new client is 50% more power dense. Thank you.

So David let me so I'll take the first question and then pass to Charles.

Thank you for the question because I think it's important for us to highlight.

Share with everybody how the business is performing.

Very much like Charles said.

Matthew Niknam: I want to start by just reinforcing that the flat cabinet growth is really not driven by lack of demand as you heard in the script. We had another really solid bookings quarter with overall deal counseling line with what we've been seeing. So I think it's not a demand problem, per se. As I said, last quarter, look, we recognize billing cab ads have to be part of the gross story over time. But the pressure on the metric is really linked to some other positive dynamics in the business as you alluded to there.

The company is performing well.

Notwithstanding the comments around the billing cabinets because you can't you don't grow revenues like you grow revenues as we did.

Over $40 million quarter over quarter, when you don't when you're not creating value and it's coming through price and volume and all the things that we do so as you sort of cast forward to the fourth quarter again, a nice step up in both recurring and nonrecurring revenue I think at midpoint of guide were up $73 million over over.

Matthew Niknam: So let me unpack that a little bit for you and give you a little more detail. I think the force that I think maybe we didn't fully appreciate the past couple of quarters or didn't highlight as much as the extent and the pace of the evolution on the power density. And so we really dug into that this quarter and looked at that for the last several quarters. What we find is is really an expanding delta between the power density of our churn cabinets and that of our newly sold cabinets.

The prior quarter on a on a neutral basis on a currency neutral basis.

And so that's an impressive increase in so let me say give you a little bit of a size on the nonrecurring piece, you've seen nonrecurring being relatively flat quarter over quarter.

<unk>.

The ebbs and flows generally with large.

Large deal done in the <unk> business, but this will.

Matthew Niknam: So we look back at over these first three quarters of 23 where we've had a flatter profile on the on the build cabs or build billing cabs. And we've turned cabinets at that period and average density of four kilowatts per cab. But we've added new billable cabs at an average of 5.7. So that's really a major factor that our cab equivalent metric is not density adjusted. So the reality is we've been paddling hard against that increase in density when it comes to to cabinet growth.

The <unk> business, we see an order of magnitude of roughly $30 million. So that gives you a sense of the size of the uplift in nonrecurring.

That leaves you with plenty of room on the on the run.

Recurring revenue.

Again $73 million in midpoint of guide to what's going on with the cost side of the equation well, there's always some seasonality as we as we all know, but as we sort of said in our prepared remarks, there's two things.

I want to bring to the number one most surprised that company is working hard to be as judicious as we need to be with our spend including our corporate real estate assets.

Matthew Niknam: Additionally, we talked about this in prior calls as well. We do have some capacity constraints, somewhat two ones in certain markets. And those are driving some proactive churn on part on our part. And we see a level of customer optimization at the cabinet levels, similar to what we've been talking about on interconnection. But we're seeing very little customer churn or full customer churn. And so I'm definitely not saying that all of our churn activity is necessarily desirable or wanted.

So we've embedded.

Fairly large charge inside the quarter relating relating to corporate real estate and so order of magnitude to think of that in the $20 million to $30 million range.

Just to size it for you.

<unk> pieces.

The business as you know we've been able to we've.

Being able to deliver a good year and.

So we're setting ourselves up now for 2024, and and and that's where our focus is because we know we had strong bookings in the third quarter, we feel we're really well positioned for booking activity in the fourth quarter and that sort of sets the stage or sets. The table for 2024, and so we did accelerate some costs into the year entered into the last quarter.

Matthew Niknam: But as you can see in our churn metric, we're managing the overall churn really well within our guided range. So as I said, I talked about last quarter of these 37 deployments with really positive mark to markets when you look at both price and power density. And when we look at Q3, we actually saw that general range of 60 to 70 percent uplift as broadly applicable. And so in other words, our average of our churn cabinets, our new cabinets were about 60 to 70 percent above what we had churned.

Both on an Opex basis, and you can certainly see it on a recurring capex basis.

And so we made that decision because we can deliver.

Better than the market was anticipating and simultaneously and make sure that we get some of the investments behind US we could focus 24 on things that were important for 24. So it's a combination of those two things that really have made a difference. If you look at the flow throughs, but as you then enter into the new year, you really set the stage for.

Matthew Niknam: And so obviously that dynamic is super attractive in terms of and really explaining why we're driving healthy revenue growth even with the limited growth in billable caps. So we've always said we're not ones to chase volume as a business objective because I think that we're offering results in a loss of discipline in the process. We're very much playing the long game when it comes to our commercial decision-making. And although cabinet growth is going to have to be a part of the story over time, we're really seeing that the current dynamics are allowing us to drive as we said strong MRR cabs, solid stabilized asset growth.

Good start to 2024, if we deliver against those that booking expectation I think it just it sets the table really nicely for 2024.

I'll start.

So let me leave that I hope I answered your question there.

No. Thanks, Keith So I'll take the I'll take the second one David.

It's pretty simple really in terms of it it really what I was talking about there in terms of the 4% to five seven is really a macro average and overall aggregate average for the.

Matthew Niknam: And really I think the return on capital is going to continue to be very favorable. So I think all of that is it translates into what we see as the really most critical bottom line. And that's AFFO per share and dividend growth. And I think the sort of results are really strong in that area.

Again, that's for the first three quarters. We basically said look this is the number of cabinets that were churned out over that period of time and this is the total contracted power that was turned out over that time divide those two and you get four and then here's all the new cabinets, we build are booked in the during the year and here's the new contract.

Charles Meyers: So that's a context on the first question and on billable cabs. Second one on AI, definitely seeing it show up. We talked about in the script about a number of deals that we want in the quarter. You know, AI and ML are not new things for us. We've kind of talked about that. We've been working, I think, through AI opportunities with digital leaders for several years now. There's a lot happening across the platform.

Power on those in Dubai, those and you get five seven and.

And the reason I think it's important to characterize that as an average I actually think it'll be harder for us to deal with it if it was <unk>.

All exactly four kilowatt cabinets being churn at all exactly five seven kilowatt cabinets being added. The reality is is that the workloads have a quite a range, we still see meaningful demand well below that.

Charles Meyers: In fact, you know, people don't maybe remember it, but we announced our Nvidia launch pad offering with them over two years ago. And really, that's been a unique opportunity for us to, you know, get in early with customers as they're piloting AI initiatives in their business and really, you know, monitor AI demand in the marketplace. And so we close the number of deals, you know, with service providers this quarter, they're definitely an emergent set of service providers.

That $5 seven and obvious thats obvious since that's an average.

And then you see some meaningfully above that right.

You might see we.

We might see deals that are 10, 15, 20 or more kilowatts per cap.

And as we said we may even be looking at liquid cooling.

Two to support some of those very high density requirements, and so and I think that's important in that I think it's an opportunity for us as we have this dynamic of space being freed up to the extent that we can match that up with power and cooling appropriately using liquid cooling or other means our traditional Eric.

Charles Meyers: Core, we even lambda, we talked about that I think are really sources of incremental demand for us. We close those deals really in the retail footprint, footprint focused on networking and inference type nodes. And I think that what we're seeing most of with customers is working with them on three big questions when they're thinking about AI. Where do I put my data? And I think we're seeing a lot of people looking at, you know, sort of cloud adjacent data as the answer.

Charles Meyers: And I think that plays right to our advantages. Secondly, how they bring compute and other data, other data, other data sources, in other words, data that's not their own, to their own data. And then finally, how do they deliver AI generated business insights to the users of those insights, insights economically and with high performance? And so those really are the areas that we've been deeply engaged with our customers. I think that, you know, it's a contributing factor to our probably our best forward looking pipeline, multi-quarter pipeline that we've seen in a long time. And so I do think AI is a very positive force in the business overall. That's great.

<unk> means then.

Operator: Thank you.

Then I think that's an opportunity to unlock more value from the platform and so that's a dynamic that we're very focused on but what I gave you in terms of the four to five seven is really over the overall average.

That's helpful. That's helpful color guys. Thank you so much.

Our next question comes from Michael Rollins with Citi. You May go ahead.

Thanks, Good afternoon.

First just curious if you could discuss the factors that led the decision to just capital allocation and boost the dividend per share.

In this fourth quarter and then it just kind of the go forward metric of how to think about dividend growth and then I'll have a follow up if that's okay.

Yes sure Michael.

But just broadly speaking you know clearly we think of ourselves as very advantaged by the cash that we keep on our balance sheet and liquidity position, we have available to us.

Frank Louthan: Next question comes from Frank Laldon with Raymond James. You may go ahead. Great. Thank you. Quick question on the channel. You mentioned 65% of new logos coming from the channel. What percentage of overall sales are there? And then how do the logos from the channel tend to perform longer term versus those from the existing sales force? They produce the same amount of repeat business. Yeah, I think our bookings percentage is probably in the 40% range from our channel.

And how we're setting up our debt structure, particularly in low rate environments.

And I think that will continue to hold true as we look into 2024 and certainly into 2025.

No surprise.

I noticed it wasn't directly in your question that will come will come to the dividend in a moment.

The cost of debt is going up and so we're trying to be very judicious, how we raise our capital continue to find balanced, but we know it will set the stage. If you will coming out of the analyst day for a five year view on what we think we can accomplish as a business.

Frank Louthan: You do have to recognize, Frank, and we've been very transparent about this. Our channel is not really a sell-through channel as much. It's really more of a sell-with sort of meeting the market. But what we're using is that, you know, the extensive relationships that our channel partners have particularly in the broad enterprise to identify opportunities and then bring our unique value to the table. And so that often results in essentially a joint selling proposition between ourselves and our partners.

And we know how much capital incrementally we need to raise all else being equal inside that business that business plan and so youre seeing us execute against and strike, where we can win this opportunistically that favorable to the business and that's why you saw us raise Swiss francs put it on the balance sheet right away.

The positive carry and so we move on.

And thats good liquid capital for us.

So other than as you then look about how do we distribute some of the cash flow back to back to our investors and no surprise we're.

Frank Louthan: And over time, I would say that I think we need to be moving towards a bit more of a sell-through model that would provide even more economic leverage to the model. But we do see our channel, you know, our channel wins as very on par in terms of quality of business and our ability to sell into them. Sometimes even more readily, you know, we can capture incremental wallet share even more readily because of the strength of our channel partners from a relationship perspective inside of those accounts.

We are a REIT, we've made a commitment to pay out 100% of the tactical income inside the qualified structure in a way.

That that happens.

It is through a distribution of the dividend and basically you limit your taxable income and avoid excise taxes. If you pay out you pay out that dividend now.

What does the business we've been saying this for the last few quarters and I'm sure. It's not lost on everybody. The operating performance of our business and that's what the the primary that is not the primary that is the sole makeup of our dividend.

Frank Louthan: And so I'd say, you know, very much a positive force for us. And as we look at now, we sort of deepening our channel relationship with key technology partners. We talked about the NetApp offering, you know, with the NetApp storage on metal. Those are great examples. We do have a similar sort of offering with Pure. And so those things are really relevant as customers are saying, hey, we're really deeply thinking about where to place our data.

We're returning capital through strong operational performance and that the taxable operational performance of the business, which of course mimics.

Operational performance is has been accelerating.

And over the years and certainly laterally we've been doing all we can to if you will to mitigate.

Frank Louthan: We have technology opinion about the storage providers we'd like to use. And we really would like to place that at Equinix to get proximity and adjacency to the cloud. And so I think that's a great example for the kind of deals that we're winning in the channel. And that continues to be an important part of the business. Okay, great. Thank you.

Point, the time, where we will move under distributed pro rata point, now, where we can hold back that momentum any longer and as a result, we wanted to give our tax team has the flexibility to manage the tax the tax provisions and tax positions. This year instead of having to worry about what we file.

Jonathan Atkin: Our next question comes from John Atkin with RBC Capital Markets. You may go ahead. Thanks.

In September of next year for 2023, so we accelerated the decision.

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

But so that's sort of why we did it in Q4 than just the sheer size of the investment or the distribution is to give you a sense of the momentum in the business.

How much the taxable income is growing relative to the business and so we needed to release that and create capacity for ourselves not just for this quarter and closing out the 2023 year, but certainly for 'twenty 'twenty four as well as we look forward, we are pretty darn good visibility to what we think that taxable income is going to look like.

Charles Meyers: Thanks. Sure. Yeah. I mean, I think that, you know, when you, when you adjust for the PPI, I mean, because the MIA numbers are obviously when done as reported based are driven significantly by PPI. And so there is, you know, there is there is that we certainly are seeing I think good performance across our regions. APEC I think, you know, is over, you know, over a multi-quarter period here. A little has, you know, more constraints to deal with.

So we wanted to mitigate mitigated basically.

Under distributed issue in 2024, and we just we solve the problems by making this decision.

Thanks, and then just one other thing.

You mentioned earlier, you mentioned the opportunity to.

Try to improve the power density in the existing footprint.

And just curious if you could share with us how the power utilization of your portfolio compares to the cabinet utilization of your portfolio.

Charles Meyers: And so, you know, from a capacity perspective, and as we've talked, we've talked about Singapore being sort of a prominent example there. But I would also say that in a Mia, I think a more prominent feature for us to, you know, continue to be looking at internally. And I realized that, you know, there's not as deep a transparency or granularity in the inflationability, but the deal mix in a Mia continues to be extremely favorable.

And.

The opportunity.

Based on access to the utility load and thinking about the cost like how much further can you take the power in the existing portfolio.

Charles Meyers: And the team has done a really great job going from what I think was a little more dependency on some of the large footprint business over time. And now in a post-exscale world, really shunting the large, really large stuff off to ex-scale. And I think weening away from a dependency on large footprint demand, even in the enterprise, which I think always has the sort of the prospect of greater churn probability over time. And so, the deal mix in a Mia has really shaped nicely, I think, over the last couple of years.

Thanks.

Yeah, Great question, Mike It's it's.

And not a <unk>.

Particularly simple matter, but I will give you a.

And to answer your question, which is our power utilization is actually meaningfully lower.

Dan or.

Then our cabinet utilization right and so that does represent I think some opportunity for us.

To the extent that we can match space and power and have the appropriate cooling requirements to unlock productive productive value creation capacity from the platform again, it's not it's not super straightforward because you have to ensure that you can you have the draw.

Charles Meyers: And I think really kudos to the team on the ground there to make that happen. Then on pricing, I would just say that I think pricing broadly speaking is very favorable. Part of that is just simply driven by, I think, an understanding from customers that increases in underlying costs are driving a rising, you know, price environment across a whole range of things. And so, that's one factor. But then I think perhaps the more important one for us is I think being able to deliver really compelling value for them and being able to articulate that effectively to them.

Charles Meyers: And so, in terms of where it's coming from, I do think there's continued pricing activity on all across our portfolio, interconnection, space and power, and on our digital services. And then I think that that includes both uplift on list pricing and as well as on renewals. And so, I think you're really seeing that show up in terms of, as I just, you know, I tell you, when you look at a dynamic that says, okay, if you're churning cabinets at X and you're and you're and you're selling new cabinets at 1.6 or 1.65X, that's a very attractive dynamic.

<unk> can be very different facility to facility and your ability to augment.

Available power is a very substantially either due to availability of power from the utility or from our own ability to do that in terms of the equipment available to power distribution in the in the facility et cetera, and so so I do think that there is there is opportunity there to be had.

And I think it is something that is working to our advantage in terms of the kind of overall dynamics of the business now, but one where we always have to continue to ensure that we are delivering superior reliability to our customers understand exactly what their requirements are can cool that can cool it properly deliver the reliability.

And resiliency, they need and sort of manage all of those factors simultaneously. So I do think though that you are I think you are properly interpreting and opportunity. There that says okay. Well then if you're if you're churning cabinets out at lower selling them at higher and you have some sort of headroom from a power perspective, and youre freeing up.

Charles Meyers: It's not driven entirely by price because power density is a meaningful part of that. And then actually new cabs mature even further as interconnection goes into those over time. And so, I think those are some of the dynamics on the pricing front and I think it's, has been a little hard for people to hold all that in their head and figure out exactly why that you have some of these dynamics in there.

Space or cabinet capacity can you take action to sort of.

Augment power over time in ways that would allow you to create value I think the answer is yes, and we'll be we'll be hard at work figuring out how to do that best.

Maybe I can just add on one other thing to what Charles has said.

Charles Meyers: But I think you're seeing it show up in terms of, you know, the, you know, the MRR per cab as well as the overall revenue growth rates and then particularly dropping it to the, to the FFO for share results.

One of the one of the main.

Objectives coming from Ralph's organization is to drive efficiency into the IV access. So we're perpetually looking for ways to drive more efficiency and create the capacity incremental capacity that Charles referred to we're also looking at new design and construction techniques to run them more efficiently and that drives diner.

Charles Meyers: And then lastly, the new logos you mentioned, are there any particular verticals where you're seeing penetration that's driving the new verticals? And then on the churn side, anything to kind of think about for the coming quarter or year around where you might fall within your typical range for MRR churn? Thanks. You always get full value for your questions, John. So on new logos, I would say the, you know, I think we're seeing it pretty, you know, a pretty varied set of, you know, across the verticals in terms of we're not really seeing a heavy concentration.

And <unk>.

Good for the customer in some cases, we're held to serve <unk> with our customers and so it drives the efficiency into the business and create that capacity that hopefully we can resell, but these investments, particularly with some of the older data centers to the extent, a new technology or where certain certain components of our AMC become.

Available when we choose to to make an investment you know you are not expanding as necessarily the footprint, but you're making an investment it frees up stranded capacity or energy or energy that works really well for the business and as I said for the customer yes, one last comment I'd make Mike is that.

Charles Meyers: I think that, you know, more data, I would say that more what I would consider data centric or data intensive industries are where we're seeing that. That focus on digital transformation and on AI. And so we talked about some of those in terms of, you know, transportation, healthcare, et cetera. We've identified a few wins there. But interestingly, things like manufacturing have been tremendously strong for us. Retail has been tremendously strong for us.

I do think this highlights what a very different business, we have because when you are talking about a very large number of customers in our facility.

That's extremely different so we wouldn't have that same view relative to an X scale facility. For example, right I mean that is how you design it as certain power capacity you sell that to a customer sometimes an entire building to a customer at that and sort of that that is what it is.

Charles Meyers: Financial services, very strong, very forward leaning posture on AI, a very forward leaning posture on cloud. But one that is moderated by, you know, sort of compliance, security, you know, distributed infrastructure requirements, et cetera. And so they continue to be that sort of ideal customer for us that really is using a broad range of infrastructure options. But wants to place their data and some of their private infrastructure and proximity to all that.

One or two customers you know as sort of a it doesn't matter, but when you're talking about very large numbers of customers with very widely ranging power requirements.

Representing both a challenge and an opportunity.

And one that I think over time, we've developed a set of processes and capabilities to manage quite effectively.

Charles Meyers: And so, so we have seen, I think, very strong performance across verticals on new logos. It seems like every, every earnings report has a different highlight in terms of what we're talking about on new logos. And then on turn, I think we kind of gave the key highlights there. You know, we are, again, well within our range, you know, a little bit of turn that we are, that we are either being proactive about or that we're being sort of receptive to customers looking to optimize footprints because we believe there's meaningful upside there.

Thanks.

Our next caller is Eric <unk> with Wells Fargo You May go ahead.

I appreciate it thanks for the question so.

Maybe you could touch a little bit Charles on the kind of enterprise sales in the quarter and the pipeline I know you know with rates moving higher recently and some concerns around.

Potential recession in the U S or are you seeing any of them.

Pulling back on spend are being more cautious in their outlook as they look kind of at the ITU staff and hybrid cloud migration.

<unk> that they're kind of optimizing costs that are evidence in any of your churn numbers.

Charles Meyers: And again, I think an environment that in transparency does have some level of optimization from customers who, you know, maybe we're buying a little more than they needed at I think in the 21 22 timeframe. But I think are really tightening that up to ensure that they're buying just what they need and then adapting to the multi the hybrid and multi cloud architectures. And so, you know, it turns something that I think we have to continue to really keep a close eye on. And, but, you know, right now I think performing, you know, where we would expect it in terms of our, our, our turn as a percentage of our. Thank you.

Yeah, Yeah, Great question, Eric as we said in the script you heard me say that it was an environment that we I thought it was characterized by customer caution.

And I think that's true and so as I and I've been out.

As I would very much like to be out in the field with our teams both in the data centers in the sales offices with customers.

With partners et cetera, and I think our I think I would say that there is a sentiment that says hey customers are.

Every forward leaning from the standpoint of recognizing they need to invest in digital and digital transformation and AI, Although I think they're very early in those endeavors in many cases.

But there. They also are facing that natural constraints that are created in a more challenging macro environment from a budgetary standpoint. So oftentimes. They are trying one they're trying to move dollars around to ensure that they can fund their digital transformation initiatives and two they are saying hey, what can we do to get more out of our more bang for the Buck out of our debt.

David Barton: Our next caller is David Barton with Think of America. You may go ahead. Hey guys, thanks so much.

Keith Taylor: Two questions if I could please just keys, apologies for my voice keys. You know what I'm trying to kind of understand my takeaways for the 2024 trajectory. You know, we've had a stronger than expected year to date through 3Q. You're guiding to kind of a weaker than expected jumping off point in 4Q in the 224, but then you're talking about the strong bookings. And so I'm wondering if it's too easy to read into the fourth quarter, and maybe we should be looking at the second half, you know, as a jumping off point for first half 24, rather than the fourth quarter specifically.

Digital dollars, we spend or the dollars that we spend broadly and so I think youre seeing that in terms of one thing that you are seeing a lot of is people, saying, hey, we really have to look at our cloud spend.

I understand that and determine what the right mix of clouds is and whether or not there are certain workloads that we've attempted to lift and shift to cloud that we may want to think differently about or are you seeing things people, saying hey are there things that eventually we need to get into a cloud native sort of where as cloud native workloads.

Charles Meyers: And then the second question if I could. David Charles, when you mention that your churn is 4k dubs and the new clients are coming in 5.7, what does that look like? Is that like 110 for every three new fours, or is that literally just the directional movement of the new client is 50% more power dance? Thank you. So David, let me, so I'll take the first question and then pass the Charles.

Moved them and so it certainly is working in all of those directions, but I would say I think people are.

Customers are really working hard to optimize their their digital infrastructure and I think we can be a real resource to that networks and the network is another area right. When we talked about network edge and customers being very responsive to that product offering I think that is most commonly in the context of Wan re architecture and trying to save money.

Charles Meyers: Thank you for the question. I think it's important for us to highlight and share with everybody how the business is performing. You know, very much like Charles has said, the company is performing well and you're notwithstanding the comments around the billing cabinets because you can't, you don't grow revenues like you grow revenues as we did over $40 million quarter of a quarter when you don't, when you're not creating value and it's coming through price and volume and all the things that we do.

On networking and still deliver higher levels of performance and so so I would say I think there is there is some level of caution out there, but I think that it is it is one where people are really trying to make room to make the investments in digital and thinking about what is the right long term architecture hybrid multi cloud distributed.

And data centric and I think that positions us well to be a trusted partner to them on that journey.

Charles Meyers: So as you sort of cast forward to the fourth quarter again, a nice step up in both recurring and non-recurring revenue. I think at midpoint of guy worth up 73 million dollars over over the prior quarter on a, on a neutral basis on a currency neutral basis. And so that's an impressive increase. And so let me say you give you a bit of a size on the non-recurring piece. You've seen non-recurring the relatively flat quarter of a quarter.

Great. Thanks, and just one quick follow up I was curious on the X scale.

Update on development in Silicon Valley I saw so.

Made it clear that your desire to expand more into the United States maybe.

Maybe as you look at the set of opportunities in the U S. As development. The best option that you see today to attack that opportunity or is M&A. Another lever that you continue to evaluate in the U S for exco.

Yes, it's great question.

Charles Meyers: You know, ads and flows generally with large, you know, a large deal done in the ex-scale business, but this will, you know, the ex-scale business we see in order of magnitude of roughly 30 million dollars. So that gives you a sense of the size of the uplift and non-recurring that leaves you with plenty of room on the, on the recurring revenue. You know, again, 73 million in midpoint of guy. So what's going on on the cost side of the equation?

Certainly don't think we would be opposed to that.

I think if we if we believed there were assets that were available under reasonable terms from an M&A perspective.

And that we could do that that would likely be a transaction that would be executed through through some sort of ex scale venture joint venture vehicle.

And so.

So.

I wouldn't we're not opposed to that but I do think that probably our immediate focus is on development.

Charles Meyers: Well, there's almost some seasonality as we, as we all know. But as we sort of said in our prepared remarks, there's two things that I want to bring to the top. Number one, no surprise the company's working hard to be as judicious as we need to be with our span, including our corporate real estate assets. And so we have, we've embedded fairly large charge inside the quarter relating, relating to corporate real estate.

And we will keep you updated on both of those fronts as appropriate.

Alright, thank you.

And our last question comes from Nick del Deo with Moffett Nathanson you May go ahead.

Hey, Thanks for thanks for putting me in.

I guess to follow up on the X scale question are in the U S. I guess, what do you view is different about AI training that makes you want to support those deployments by X scale in the U S relative to cloud where you are.

Charles Meyers: And so the order of magnitude of think of that in a 20 to 30 million dollar range just to size it for you. The second piece is, yeah, the business as you know, we've been able to, you know, we've been able to deliver a good year and, you know, we're setting ourselves up now for 2024. And, and you know, that's where our focus is because we know we had strong bookings in the third quarter.

If I understand it correctly you didn't see the opportunity is worth pursuing given how competitive the supply environment is.

Yeah.

I think theres a couple of things one I do think that the.

At the time that we made that judgment.

We're communicating that judgment to the market.

Charles Meyers: We feel we're in really well positioned for booking activity in the fourth quarter. And that sort of sets the stage or sets the table for 2024. And so we did accelerate some costs into the year, into the last quarter, both on an off-ex basis. And you can certainly see it on a current capex basis. And so we made that decision one because we could deliver better than the market was anticipating. And simultaneously, make sure that we get some of the investments behind us so that focus 24 on things that were important for 24.

I would say that the supply demand characteristics and therefore, the return profile of X scale in the U S market was less than stellar I.

I think that dynamic is changing I think the supply demand sort of sort of.

Landscape in the U S. Both because of sort of traditional AZ demand or hyperscale demand for their form or in the form of hyperscale for a disease and those kind of things combined with now a meaningful acceleration in demand for for training I think changes the supply demand profile.

Charles Meyers: And so it's a combination of those two things that really have made a difference if you look at flowthroughs. But as you then enter into the new year, you're really set the stage for a good, you know, a good start to 2024. You know, if we deliver against that booking expectation, I think it just, it sets the table really nicely for our 2024 start. So let me leave that. I hope I answered your question there.

And then I would and so I do think there is a more attractive market in which to sell the other thing that I think is something maybe that we appreciate even more powerfully now is scheduled and we talked about this when we did X scale to begin with but he said look we need to continue to have really well developed and constructed.

Charles Meyers: No thanks, Keith. So I'll take the, I'll take the second, David, the, it's, it's pretty simple really in terms of it's really what I was talking about there in terms of the four to 5.7 is really a macro average or an overall aggregate average for the, for the, again, that's for the first three quarters. We basically said, look, this is the number of cabinets that were turned out over that period of time.

<unk> relationships with the major players in the digital ecosystem and obviously, the hyperscale or at the top of that list and so we continue to work hard to make sure that we can be a partner in meeting their capacity needs.

Charles Meyers: And this is the total contracted pattern that was turned out over that time, divide those two and you get four. And then here's all the new cabinets we build, booked in the, during the year. And here's the new contracted power on those and divide those and you get 5.7. And the reason I think it's important to characterize that as an average, I actually think it will be harder for us to deal with if it was all exactly four kilo cabinets being turned in all exactly 5.7 kilo cabinets being added.

And not only on a retail basis, but at least as one of probably a number of providers that theyre going to lead to leverage in the X scale Arena and then the last thing that I think is maybe maybe underappreciated is I think it's also important that we continue to maintain our scale and relevance in the supply chain.

And so we I think we are.

Very well positioned there and I think our procurement and supply chain teams have done an extraordinary job there and I think part of the reason that they can do that job. So well one of the strength of our balance sheet and two is the scale of our operation and so I think scale is also a way for us to continue to maintain our position in that regard.

Charles Meyers: The reality is is that the workloads have quite a range. We still see meaningful demand well below that, you know, that 5.7 and obvious, that's obvious since that's an average. And then you see, you know, some meaningfully above that, right? You know, and you may, you might see, you know, we might see deals that are 10, 15, 20 or more kilowatts per cat. And as we said, we may even be looking at liquid cooling to support some of those very high density requirements.

Okay are you able to share anything regarding how youre thinking about returns here or is that premature and I guess any progress in terms of lineup of partner for domestic X scale.

Yeah, I mean, I think the last glad that last part is probably premature, but I think the first one.

I don't think that I don't think we see a dramatic shift in the overall return profile I mean, we have seen it already I think improve from where it was where I think it was single digits. There for a while if you were lucky.

Charles Meyers: And so, and I think that's important in that I think it's an opportunity for us as we have this dynamic of space being freed up to the extent that we can match that up with power and cool it appropriately using liquid cooling or other means or traditional air cooling means. Then I think that's an opportunity to unlock more value from the platform. And so that's a dynamic that we're, we're very focused on. But what, what I gave you in terms of the 4 to 5.7 is really a overall average. No helpful, helpful call guys.

If you were lucky it was high single digits, where I think you're now seeing sort of.

A full return yields and levered returns, even above that and for us given that we get started some advantages in the structure associated with fee streams et cetera, I think are still attractive equity return profile for us.

Operator: Thank you so much.

And so.

So I think that but I think those returns have gone up what are you seeing cash on cash yields that are meaningfully higher meaningful up into the double digits and a much more attractive now. So so I do think that that return profile has has improved its going to continue to be a very competitive business, though.

Michael Rollins: Our next question comes from Michael Rollins with city. You may go ahead. Thanks for the afternoon.

And but one that will have a very return profiles different return profile than retail, which is again why we want to preserve our balance sheet firepower to the extent, we can to continue to cultivate our retail business. While at the same time, recognizing the strategic importance of continuing to be active in the <unk> market.

Keith Taylor: First, curious if you could discuss the factors that led to the decision to just capital allocation and boost the dividend per share in this fourth quarter. And then it just kind of the go forward metric of how to think about give it in growth. And then I'll have a follow up if that's OK. Yeah, sure. Michael, the well, you know, just broadly speaking, you know, clearly we think of ourselves as very advantage by the cash that we keep on our balance sheet of liquidity position.

Okay. Thanks Charles.

You bet Nick.

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

Goodbye.

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

Keith Taylor: We have available to us and how we're setting up our debt structure particularly in low rate environments. And I think that will continue to hold true as we look into 2024 and certainly into 2025. I know surprise. I know this one directly in your question. I'll come to the dividend in a moment. The cost of debt is going up. And so we're trying to be very judicious. How we raise our capital, continue to find balance, but we know we've set the stage.

Keith Taylor: If you won't coming out to the analyst day for a five year view on what we think we can accomplish as a business. And we know how much capital and mentally we need to raise all else being equal inside that business, that business plan. And so you're seeing as execute against in strike where we can when it's opportunistically favorable for to the business. And that's why you saw his race with Frank's put on the balance sheet right away.

Keith Taylor: We've got the positive carry and so we move on. And that's good liquid capital for us. So, as you then look about how do we distribute some of the cash flow back to our investors and no surprise, where we are we, we've made a commitment to pay out a hundred percent of the taxable income inside the qualified structure and the way that that happens is through a distribution of the dividend and basically you limit your taxable income and avoid the excite taxes.

Keith Taylor: If you pay out, you pay out that dividend. Now with us, the business we've been saying this for the last few quarters and I'm sure it's not lost in everybody, the operating performance of our business and that's what the primary, that is not the primary, that is the sole makeup of our dividend. It's it we're returning capital through strong operational performance and that the taxable operational performance, the business, which of course mimics, you know, the book operational performance is has been accelerating.

Keith Taylor: And over the years and certainly, we've been doing all we can to, if you will, to mitigate, you know, a point of time where we were under distributed, we're at a point now where we can hold back that moment to many longer. And as a result, we want to give our tax teams the flexibility to manage the tax, you know, tax provisions and tax positions this year instead of having to worry about what we file in September of next year for 2023.

Keith Taylor: So we accelerated the decision, but it so that's sort of why we did it in Q4 and then just the sheer size of the investment or the distribution is to give you a sense of the momentum in the business and how much the taxable income is growing relative to the business. And so we needed to release that and create capacity for ourselves, not just for this quarter and closing out the 2023 year, but certainly for 2024 as well.

Keith Taylor: We look forward we have pretty darn good visibility what we think that taxable income is going to look like. And so we wanted to mitigate, you know, mitigate basically on, you know, an under distributed issue in 2024 and we just we solve the problem by making this decision.

Keith Taylor: Thanks.

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

Keith Taylor: Thanks. Yeah, great question Mike. It's it's an unfortunately not a particularly simple matter, but I will give you a more, you know, an answer your question, which is our power utilization is actually meaningfully lower than our than our cabinet utilization, right. And so that does represent I think some opportunity for us if we to the extent that we can match space and power and have the appropriate cooling requirements to unlock productive productive value creation capacity from the platform.

Keith Taylor: Again, it's not it's not super straightforward because you have to ensure that you can you have the because draw can be very different facility to facility and your ability to augment, you know, available power is very substantially either due to availability of power from the utility or from our own ability to, you know, do that in terms of the equipment available power distribution in the in the facility, etc. And so so I do think that there is there is opportunity there to to be had and I think it is something that is working to our advantage in terms of the kind of overall dynamics of the business now.

Keith Taylor: But one where we always have to continue to ensure that we are delivering superior reliability to our customers, understand exactly what their requirements are can cool that, you know, can cool it properly deliver the reliability and resiliency they need and sort of manage all those factors simultaneously. So I do think though that that you are, I think you're properly interpreting an opportunity there that says, OK, well, then if you're, if you're turning cabinets out at lower selling them at higher and you have some sort of headroom from a power perspective and you're freeing up space or cabinet capacity, you know, can you take action to sort of, you know, augment power over time in ways that would allow you to create value.

Keith Taylor: So I think the answer is yes, and will be will be hard at work figuring out how to do that. I think maybe I can just add on one other thing to what Charles has said. One of the main objectives coming from Ralph's organization is to drive efficiency into the IBXs. So we're perpetually looking for ways to drive more efficiency and create the incremental capacity that Charles refers to. We're also looking at new design and construction techniques to run them more efficiently.

Keith Taylor: And that drives down our PUE. And PUE is good for the customer. In some cases, you know, we're held to certain PUE with our customers. And so drive the efficiency into the business and create that capacity that hopefully we can resale. But these investments, particularly with some of the older data centers, they extend to new taught technology or certain components of RMCE become available when we choose to make an investment. You know, you're not expanding as necessarily the footprint, but you're making an investment that frees up stranded capacity or energy or energy.

Keith Taylor: That works really well for the business and as I said for the customer. Yeah, one last comment I make Mike is that I think I do think this highlights what a very different business we have. You know, because when you're talking about a very large number of customers in a facility, that's extremely different. And so we wouldn't have that same view relative to an ex-scale facility, for example, right? I mean, that is, hey, you design it as certain power capacity.

Keith Taylor: You sell that to a customer sometimes an entire building to a customer at that and sort of that is what it is. You know, and you know, one or two customers, you know, sort of it doesn't matter. But when you're talking about very large numbers of customers with very widely ranging power requirements, it represents both the challenge and an opportunity. And one that I think over time, we've developed a set of processes and capabilities to manage quite effectively.

Charles Meyers: Thanks.

Eric Luco: Our next caller is Eric Luco with Wells Fargo. You may go ahead. Appreciate it. Thanks for the question. So maybe you could touch a little bit Charles on the kind of enterprise sales in the quarter in the pipeline. I know, you know, with rates moving higher recently and some concerns around potential recession in the US, or are you seeing any of them. You know, pulling back an IT spender being more cautious in their outlook as they look kind of at their IT staff and hybrid cloud migration and, you know, any signs that they're kind of optimizing costs that are evidence and any of your turn numbers. Yeah.

Charles Meyers: Great question, Eric. As you know, we said in the script, you heard me say that it was an environment that we thought was characterized by customer caution. And I think that's true. And so I, and I've been out as I was very much like to be out in the field with our teams, both in the data centers in the sales offices with customers, you know, with partners, etc. And I think I think I would say that there is a sentiment that says, hey, customers are very forward leaning from the standpoint of recognizing they need to invest in digital and digital transformation and AI, although I think they're very early in those endeavors in many cases.

Charles Meyers: But they're, they also are facing the natural constraints that are created in a more challenging macro environment from a budgetary standpoint. So oftentimes they're trying, one, they're trying to move dollars around to ensure that they can fund their digital transformation initiatives. And two, they're saying, hey, and what can we do to get more out of our, a more bang for the buck out of our digital dollars we spend or the IT dollars that we spend broadly?

Charles Meyers: And so I think you're seeing that in terms of one thing that you're seeing a lot of is people saying, hey, we really have to look at our cloud spend and understand that and determine what the right mix of clouds is. And whether or not there are certain workloads that we've attempted to lift and shift to cloud that we may want to think differently about. Or you're seeing people saying, hey, are there things that eventually we need to get into a cloud native sort of work as cloud native workloads and move them.

Charles Meyers: And so it certainly is working in all those directions. But I would say I think people are, you know, customers are really working hard to optimize their digital infrastructure. And I think we can be a real resource to them. Network is another area, right? And we talked about, you know, network edge and customers being very responsive to that product offering. I think that is most commonly in the context of when rearchitecture and trying to save money on networking and still deliver higher levels of performance.

Charles Meyers: And so, so I would say I think there is, there is some level of caution out there, but I think that it is, it is one where people are really trying to make room to make the investments in digital and thinking about what is the right long-term architecture, hybrid multi-cloud distributed and data centric. And I think that positions us well to be a trusted partner to them on that journey. Great. Thanks.

Charles Meyers: And just one quick follow up. I was curious in the ex-scale kind of update a development in Silicon Valley. I saw, so, you know, you made it clear that you're desired to expand more into the United States. Maybe as you look at the set of opportunities in the US is development, you know, the best option you see today to attack that opportunity or, you know, was M&A and other lover that you continue to evaluate in the US for ex-scale.

Charles Meyers: Yeah, it's a great question. I certainly don't think we would be opposed to that. I think, you know, if we believed there were assets that were available under reasonable terms from an M&A perspective and that we could do that, that would likely be a transaction that would be executed, you know, through some sort of ex-scale, you know, joint venture vehicle. And, you know, and so I wouldn't, we're not opposed to that, but I do think that probably our immediate focus is on development. And, you know, we'll keep you updated on both of those fronts as appropriate. Great.

Nick Bill Dale: Thank you.

Charles Meyers: And our last question comes from Nick Bill Dale with Moffit, Nathanson. You may go ahead. Hey, thanks for, thanks for putting me in. Yeah, I guess to follow up on the ex-scale question in the US, because what do you view as different about AI training that makes you want to support those deployments via ex-scale in the US, you know, relative to cloud where you, if I understand it correctly, you didn't see the opportunity as worth pursuing given how competitive the supply environment is.

Charles Meyers: Yeah, I mean, I think there's a couple of things that one I do think that the, you know, at the time that we made that judgment or when we're communicating that judgment to the market, I would say that the supply demand characteristics and therefore the return profile of ex-scale in the US market was, you know, less than stellar. I think that dynamic is changing. I think the supply demand sort of sort of landscape in the US both because of sort of traditional AZ demand or, you know, hyper-scale demand for the form of, in the form of hyper-scale for AZs and those kind of things combined with now meaningful acceleration and demand for training.

Charles Meyers: I think changes the supply demand profile. And then I would, and so I do think there is a more attractive market in which to sell. The other thing that I think is something maybe that we appreciate even more powerfully now is, and we talked about this when we did ex-scale to begin with, we said, look, we need to continue to have really well developed and constructive relationships with the major players in the digital ecosystem.

Charles Meyers: And obviously the hyper-scalers are at the top of that list. And so we continue to work hard to make sure that we can be a partner in meeting their capacity needs and not only on the retail basis, but at least as one of probably a number of providers that they're going to need to leverage in the ex-scale arena. And then the last thing that I think is maybe underappreciated is, I think it's also important that we continue to maintain our scale in relevance in the supply chain.

Charles Meyers: And so I think we are, you know, very well positioned there and I think our procurement and supply chain teams have done an extraordinary job there. And I think part of the reason that they can do that job so well, one is the strength of our balance sheet and two is the scale of our operation. And so I think ex-scale is also a way for us to continue to maintain our position in that regard.

Charles Meyers: Okay. Are you able to share anything regarding how you're thinking about returns here, or is that premature? And I guess any progress in terms of line up a partner for domestic ex-scale? Yeah, I mean, I think the last lab, that last part is probably premature. But I think the person, you know, I don't think the, I don't think we see a dramatic shift in the overall return profile. I mean, we have seen it already.

Charles Meyers: I think improved from where it was, where I think it was, you know, single digits there for a while. If you were lucky, you know, if you were lucky, it was high single digits, where I think you're now seeing, you know, sort of, you know, sort of full return yields and levered returns even above that. And for us, even that we get sort of some advantages in the structure associated with fee streams, et cetera.

Charles Meyers: I think an attractive equity to return profile for us, you know, and, you know, and so I think that, but I think those returns have gone up, where you're seeing cash on cash yields that are meaningfully hired. They're meaning to up into the double digits and much more attractive now. So I do think that, you know, that return profile has improved, it's going to continue to be a very competitive business though.

Charles Meyers: It's, you know, and one that will have a very return profile, a different return profile than retail, which is, again, why we want to preserve our, our balance sheet firepower to the extent we can to continue to cultivate our retail business while at the same time, recognizing the strategic importance of continuing to be active in the real market.

Charles Meyers: Okay. Thanks, Charles. You bet, Nick.

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

Operator: Goodbye.

Operator: And this concludes today's conference. Thank you for participating.

Operator: You may disconnect at this time and have a great rest of your day.