Equinix Q1 2022 Earnings Call Transcript

Participants

Corporate Executives

• Chip NewCom, Director of Investor Relations.
• Charles Meyers, President and Chief Executive Officer
• Keith Taylor, Chief Financial Officer

Analysts

• Simon Flannery, Morgan Stanley
• David Guarino, Green Street
• Jon Atkin, RBC Capital Markets
• Ari Klein, BMO Capital Markets
• Michael Rollins, Smith Barney Citigroup
• Erik Rasmussen, Stifel Nicolaus
• Brendan Lynch, Barclays PLC
• Sami Badri, Credit Suisse Group AG
• Michael Elias, Cowen and Company.
• Matthew Niknam, Deutsche Bank Aktiengesellschaft

Presentation

[Operator]

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

[Chip NewCom, Director of Investor Relations. at Equinix]

Good afternoon, and welcome to today's conference call. Before we get started, I would like to remind everyone that some of the statements that we will be making today are forward-looking in nature and involve risks and uncertainties. Actual results may vary significantly from those statements and maybe 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 on February 18, 2022. 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 is done through an explicit public disclosure. In addition, we will provide non-GAAP measures on today's conference call. We provide a reconciliation of those measures to the most directly comparable GAAP measures and a list of the reasons why the company uses these measures in today's press release on the Equinix Investor Relations page at www.equinix.com. We have made available on the IR page of our website a presentation designed to accompany this discussion, along with certain supplemental financial information and other data.

We would like to also 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 information available. With us today are Charles Meyers, Equinix's CEO and President; and Keith Taylor, Chief Financial Officer. Following our prepared remarks, we'll will be taking questions from sell-side analysts. In the interest of wrapping this call up under an hour we'd like to ask these analysts to limit any follow-on questions to one.

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

[Charles Meyers, President and Chief Executive Officer at Equinix]

Thank you. Welcome to call. Good afternoon, everybody and welcome also to all of you to our first quarter earnings call. We had a great start to 2022 delivering the best net bookings performance in our history, fueled by strong demand across all 3 regions, robust net pricing actions and near record low churn resulting in our 77th consecutive quarter of top line growth, the longest such streak of any S&P 500 company. We actually more than 4200 deals in the board across more than 3100 customers, demonstrating both the scale and the consistency of our go-to-market machine while there are a number of macroeconomic factors that we continue to proactively manage including rising interest rates, inflation and geopolitical conflict. The business continues to perform exceptionally well and underlying demand for digital infrastructure continues to rise as enterprises across the globe and in diverse sectors prioritize digital transformation and service providers continue to innovate, distribute and scale their infrastructure globally in response to that demand. Unfortunately the war in Ukraine is still unfolding, and we continue to be part of the vigorous global response to that conflict.

As stewards of key elements of the world's digital infrastructure, we are committed to doing our part and maintaining that infrastructure to support free and open communications and aid in humanitarian relief. While we do not have operations in Russia or Ukraine, our employees have shown incredible generosity supporting Ukrainian refugees particularly our team in Poland.

Looking more broadly at our responsibilities as a market leader, we continue to advance a bold future for a sustainability agenda that reflects our company values across our environmental, social and governance initiatives. We recently published our 2021 Corporate Sustainability highlights and I'm pleased to report continued progress, including a 3.6% increase in representation of women at leadership levels and a 20% increase in the number of employees, leveraging our well-being and our mental health benefit.

We also continue to develop pathways and partnerships to enhance our diversity and create opportunities for historically underrepresented groups both inside and outside of Equinix. As we work to address the urgency of climate change, I'm also proud that Equinix is well on our way to meeting our science based target commitments. In 2021, we achieved over 90% renewable energy coverage for our portfolio for the fourth consecutive year, while also improving the energy efficiency of our facility by over 5% as measured by our -- by average annual power use effectiveness or PUE.

Our focus on sustainability continues to be top of mind for customers and partners as they look to buy from and work with companies that has established the ESG goals and commitments. As the world's digital infrastructure leader, we have a responsibility to harness the power of technology to create a more accessible, equitable and sustainable future and we will continue to focus on the important issues that impact our stakeholders and our business.

Now turning to the results as depicted on Slide 3. Revenues for Q1 were $1.7 billion, up 10% over the same quarter last year. Adjusted EBITDA was up 5% year-over-year and AFFO was better than our expectations again due to strong operating performance. These growth rates are all on a normalized and constant currency basis. Our data center services portfolio continues to expand our differentiated scale and reach with 43 projects underway across 29 metros in 20 countries, including new project in Atlanta, Mumbai, Sydney, Tokyo and Washington DC.

As customers embrace our interconnected edge as a point of Nexus for their hybrid and multi-cloud architectures and leverage our scale digital ecosystems to enable and drive their digital agenda. According to IDC by 2024, 65% of the Global 2000 will embed some sort of edge First Data Stewardship, security and network practices into their organizations' digital business processes. And we're already seeing the impact with an amazing 89% of recurring revenues now coming from customers deployed in more than one metro.

In April, we closed our acquisition of MainOne extending platform Equinix into Nigeria, Ghana and Ivory Coast, bringing our global coverage to 69 metros across 30 countries. Nigeria in particular is emerging as an innovative and dynamic player in the global digital economy representing a significant opportunity for the expansion of digital services and a key first step in our long-term strategy to extend our carrier-neutral digital infrastructure platform across Africa.

In the quarter, we also announced our upcoming expansion into Chile through the planned acquisition of multiple datacenters from Entel, a leading Chilean telecommunications provider. Chile is the fourth largest economy in South America with the highest GDP per capita in the region and Santiago is emerging as a technology hub serving both regional cloud and content demand as well as those enterprises. This transaction is expected to close in Q2 and will further solidify Equinix as a leading provider of digital infrastructure in Latin America.

Turning to interconnection, our industry-leading portfolio continues to outpace the broader business growing 12% year-over-year on a normalized and constant currency basis driven by a healthy uptick in connections across our coffee ecosystem. We added an incremental 8,900 total interconnections in the quarter and now have over 428,000 total interconnections on the platform. Internet Exchange saw peak traffic of 7% quarter-over-quarter and 25% year-over-year to greater than 24 terabits per second and we continue to see expanding customer demand and accelerate growth across our digital services portfolio.

Equinix fabric saw its highest ever virtual connection as customers employed increasingly diverse set of end destination and utilized fabric for a variety of use crisis, U.K. across cloud networking and backbone connectivity. Equinix Metal and Network Edge also had strong quarters as enterprises leverage these services for a variety of virtual deployments, increasing agility and helping them to mitigate supply chain challenges. Metal had the most net customer adds to the service since its launch with several key enterprise wins and a healthy backlog as our go-to-market partnerships with Dell, Pure Storage and Nutanix [Phonetic] all gained momentum.

Shifting to our FPL [Phonetic] initiative, in March, we closed our Australian JV with PGIM, which is expected to provide more than 55MW of capacity in the Sydney market when closed and fully built out. And in April, we closed our South Korean JV with GIC which is expected to provide more than 45 megawatt to the rapidly growing soul [Phonetic]market. We currently have 9 xScale bills under development with over 80MW of ethanol capacity of which nearly two-thirds are already pre-leased.

And I'll be covering some highlights from our verticals. Our network vertical had a great quarter with good momentum across all 3 regions and Record channel activity with our key carrier partners. New wins and expansions included Excitel, one of the largest ISPs in India establishing network hubs in our Mumbai one and two IVF high-speed satellite broadband service for military and commercial markets supporting its expansion into Australia and Globalnet, a specialty network, expanding its footprint in upgrading connectivity to support its growing userbase and enterprise continues to be our fastest growing with a strong bookings quarter, led by EMEA in the manufacturing and public sector something.

New wins and expansions included Technicolor the Creative Services and technology company for the media and entertainment industry establishing regional technology hubs, new life in the full suite of Equinix is digital infrastructure services. The global 40 Bank is choosing Equinix as their strategic partner, thanks to our robust digital offerings, connectivity in key financial institutions and our sustainability strategy and Party City, a global leader in the celebrations industry is using network Edge to enable private connectivity and allow private interconnection between sites as they continue with their digital transformation.

We're also proud to work with the global money center banks to leverage our dense ecosystems to enable a critical connection to the National Bank of Ukraine for the UNICEF to distribute funds to those in need -- those that needed most as part of their humanitarian efforts. Our cloud and IT services vertical had solid bookings in the quarter led by infrastructure -- the infrastructure subsite while new cloud on ramps in Dubai, Rio de Janeiro and Stockholm. New wins and expansions included Digital Ocean, a rapidly scaling global cloud hosting provider who is expanding its infrastructure footprint across multiple regions as they add customers and products.

And a leading SaaS company leveraging Equinix for distributed data and cloud strategy and expanding service portfolio. Broadcast and streaming subsegments anchor a solid quarter in content and digital media, including expansions in the Fortune 75 media conglomerate expanding across Platform Equinix to support streaming services in content production. A multinational consumer credit reporting company enabling direct connectivity via Equinix to their financial services customers and Fastly, a global CDN expanding capacity and deploying network nodes in support of their edge compute strategy. And finally our channel program again delivered its fourth consecutive quarter of record bookings, accounting for roughly 40% of bookings and 60% of new logos.

Reseller and alliance partners, accounted for over 75% of channel booking as our partners continue to demonstrate tremendous leadership in helping customers quickly adopt new digital business models. Wins were across a wide range of industry verticals and digital first use cases with hybrid multicloud featuring prominently as the architecture of choice. We saw continued strength with strategic partners like AWS, Microsoft, Dell and Telstra including a significant win in France with AT&T, helping a security services company consolidate data centers and interconnect to their choice of cloud providers.

We would also like to take a moment to recognize, AT&T business as our partner of the Year for '21, proud to work together to drive digital first outcomes on complex and transformational projects including the Equinix and AT&T connected climate initiative benefiting hundreds of customers across multiple industries.

Now let me turn the call over to Keith to cover the results for the quarter.

[Keith Taylor, Chief Financial Officer at Equinix]

Thanks, Charles, and good afternoon to everyone. I do hope you're doing well. Well at Equinix, the team delivered another great quarter. We did better than anticipated. We experienced robust growth in the Americas and solid channel bookings further expanding the universe of opportunities for our highly differentiated business and enjoyed meaningful inter and intra-region activity, a reflection of our selling well across our ever expanding footprint.

Interconnection activity remains high in both the physical and the virtual level. Interconnection revenues represent 19% of our recurring revenues. They're faster than the overall business. Our platform strategy continues to deliver outsized value further separating us from others in our space. We had strong growth from our digital services products and continued momentum in the most recent acquisitions in Canada, India and Mexico. And our pipeline remains solid despite our record bookings. With a great start to 2022, we're raising our guidance across each of our core financial metrics. As we've said previously, we believe the diversity and scale of our business across sectors marketing customers puts us in a highly favorable position to capitalize on all trends digital as well as manage the macro factors in volatility.

We have no meaningful near-term exposure to rising interest rates. Our balance sheet strength continues to provide us with a strategic advantage while allowing us to access the capital markets. At times, they are attractive to us. With regards to supply chain and inflation, we continue to deliver project against our return expectation with limited delays, given our ability to access and secure critical infrastructure components. And while the energy markets remain volatile, our hedging policies are helping us navigate this unusual period. These factors, when combined with the momentum we're seeing in our marketplace, enable us to remain steadfast in our commitment to deliver top line growth, strong and durable AFFO per share growth to our shareholders as well.

Now let me cover the highlights for the quarter. Note that all growth rates in this section are on a normalized and constant currency basis. As depicted on Slide 4, global Q1 revenues were $1.734 billion, up 10% over the same quarter last year and at the midpoint of our guidance due to better than expected MRR revenues offset in part by the late timing of certain nonrecurring xScale fees.

As we look forward, we expect a strong Q2 step up in both recurring and non-recurring revenues. As we've noted before, nonrecurring revenues attributed to customer installation work and get fee income inherently lumpy and can move between quarters. Q1 revenues net of our FX hedges included a $2 million headwind when compared to our prior guidance rate. Global Q1 adjusted EBITDA was $800 million or 46% of revenues, a 5% over the same quarter last year as a high-end of our guidance range due to strong operating performance and timing of spend, although it was impacted by the lower xScale fees.

Q1 adjusted EBITDA, net of our FX hedges included a $1 million FX headwind when compared to our prior guidance rates and also includes 5 million of integration costs. Q1 AFFO was $653 million above our expectations due to strong operating performance. Q1 global MRR churn was 1.8%, the lowest level of churn in recent history of reflection of our disciplined strategy of selling the platform to the right customers with the right application into the right assets. For 2022, we now expect MRR churn to average at the lower end of our Q2 2.5% per quarter range.

Turning to our regional highlights whose full results are covered on slides 5 through 7. APAC was the fastest growing region on a year-over-year and normalized basis at 13% followed by the Americas and EMEA regions at 10% and 9% respectively. The Americas region had another great quarter with strong broad based bookings led by our Chicago, Dallas, New York and Washington DC markets. Enterprises represented over half the regions bookings. We saw a a record channel activity as businesses continue to leverage platform Equinix to maximize their digital infrastructure's flexibility and agility in the hybrid multi-cloud world.

The region also saw robust interconnection activity, I think 4000 total interconnections and significant Internet exchange capacity led by our Sao Paulo market. Our EMEA region delivered its highest net bookings performance in 3 years with strong pricing and a healthy mix of retail activity with solid exports led by our Dubai, Istanbul, London and Milan markets. In EMEA, sustainability is an ever-increasing focus for our customers and communities and our local leadership team continues to work to position Equinix as the industry thought leader at both the local and regional levels.

And finally, the Asia Pacific region had a solid quarter, led by Australia, Japan and Singapore businesses with traction increasing across the region for our digital services India had another great quarter, and we're investing behind our momentum in the market with our newly announced Mumbai 3 IBX project as well as purchasing land for development in Chennai.

And now looking at our capital structure, please refer to slide 8. We ended the quarter with approximately $1.7 billion of cash, an increase over the prior quarter, largely due to strong operating cash flow, offset by growth capex and our cash dividends. Really after the quarter end, we completed our fourth Green bond offering raising $1.2 billion to further our commitment to sustainability leadership. With this latest financing, Equinix has issued approximately $4.9 billion of green bonds making our Company the fourth largest global issuing investment grade green bond market.

In early April, we are also pleased to have Moody's upgrade Equinix to BHHU in line with S&P and Fitch while expanding our leverage tolerance. We're very appreciative of the support we received from Moody's and importantly, we're delighted with the increased financial flexibility we now have across all 3 rating agencies.

Looking forward, as stated previously, we'll continue to take a balanced approach to fund our growth opportunities with both debt and equity, while creating long-term value for our shareholders.

Turning to slide 9 for the quarter, capital expenditures were approximately $413 million including seasonally low recurring capex of $24 million. Also in the quarter, we opened 3 new retail projects in 2 markets, Muscat and Singapore and purchased land for development in Mexico City. Revenues from owned assets increased to 60% of our total revenues.

Our capital investments delivered strong returns as shown on slide 10, are now 164 stabilized assets, increased recurring revenues by 6% year-over-year on a constant currency basis. Consistent with prior years, in Q1, we completed our annual refresh of IBX categorization. Stabilized asset count increased by net 6 IBXs. These stabilized assets are quietly 87% utilized and generate a 27% cash-on-cash return on the gross PP&E invested.

Please refer to slides 11 through 15 for our updated summary of 2022 guidance and bridges. Do note, our 2022 guidance includes the anticipated financial results from the main one acquisition, but does not include any results related to the pending Entel acquisition, which is expected to close in Q2. Starting with revenues for the full year 2022, we're very pleased with momentum we're seeing in the organic business and excited to report that we now expect our revenues to increase in a normalized and constant currency basis by 10% over the prior year.

Relative to our prior guidance, we're increasing our revenues by approximately $90 million, which includes our improved operating performance and $50 million of revenues from MainOne. We expect 2022 adjusted EBITDA margins of approximately 46% with integration costs, an increase of about 40 million, compared to our prior guidance, which includes $20 million from MainOne and we now expect to incur $25 million of integration costs in 2022.

Given the operating momentum of the business, we're raising our underlying 2020 AFFO by $22 million, now brought to an 8% and 10% on a normalized and constant currency basis compared to the previous year, offset by the increased debt financing cost for the MainOne and Entel acquisitions. Note: the MainOne is expected to be immediately accretive and we expect the Airtel acquisition to be accretive when closed 2022 AFFO per share is expected to grow between 7% and 8% on a normalized and constant currency basis. 2022 capex is now expected to range between $2.3 billion and #2.5 billion, including approximately $170 million of recurring capex spend and about $60 million of on-balance sheet xscale spent.

So let me stop here. I'll turn the call back to Charles.

[Charles Meyers, President and Chief Executive Officer at Equinix]

Thank you. In closing, we had a tremendous start to the year. The demand backdrop of the business remains robust as enterprises across the globe continue to aggressively prioritize digital transformation and service providers expand their infrastructure globally in response to this to me. Data is being created, moved, manipulated and stored at unprecedented levels and the need to distribute infrastructure and position it in proximity to the broader digital ecosystem is purely fueling outsized demand for the distinctive value proposition platform Equinix. Growth continues to outpace our Analyst Day expectations, thanks to strengthen across multiple simultaneous growth factors for the business, expanding geographic reach, accelerating adoption to digital services, low churn positive pricing trends and strong channel execution.

We continue to leverage our market leading scale and expansive balance sheet to deliver new capacity even in an increasingly challenging macro environment and our bold future first sustainability agenda guys [Phonetic] and rallies our team as we collectively pursue our shared purpose. To be the platform where the world come together to create the innovations that enrich our work, our life and our plan. We are delighted with the ongoing performance in Business, optimistic about the road ahead and remain keenly focused on delivering distinctive and durable value to our customers and to you, our shareholders.

So let me stop there and open it up for questions.

Questions and Answers

[Operator]

Thank you. [Operator Instructions] Please standby for your first question. Simon Flannery with Morgan Stanley. You may go ahead.

[Simon Flannery, Analyst at Morgan Stanley]

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

[Charles Meyers, President and Chief Executive Officer at Equinix]

Thanks. I mean I'll start and Keith can add on as a you wish. It's -- we had a great quarter in Europe. So big kudos to the sales team there, our sales later just pulled together a tremendous quarter and I think we've asked him to continue to reshape that business as we've shifted our revenue mix there and really the sweet spot of sort of the small and mid-sized deals. We're seeing great momentum there and again, we talked a few quarters ago about accelerating growth there back to sort of prior levels and we certainly delivered on that forecast this year or this quarter with that back at 9% so. And pipeline looks good. So I would say that the broader macro environment in terms of the prioritization of digital transformation and kind of what we're seeing from technology and IT buyers continues to look good and I think had very relevance in terms of how they're looking at us and the role that we play in that. So overall, continue to feel very good about that part as part of the world. So from a power perspective, as we said previously, we were kind of pretty much entirely hedged where we can be in Europe. And so we have not seen substantial impacts there. We are seeing elevated rates in terms of -- so as our -- but we have a lot of runway, as we look at our hedges and are continuing to build our hedge positions for 2023 and beyond, but the hedging -- our hit the success of our hedging program I think gives us a lot of visibility and runway to figuring out when we need to pass those through and at what levels and that's ongoing work and will be I think in a good position going into 2023 to adjust for that.

[Simon Flannery, Analyst at Morgan Stanley]

Thanks a lot.

[Operator]

And our next question is from David Guarino with Green Street. You may go ahead.

[David Guarino, Analyst at Green Street]

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

[Charles Meyers, President and Chief Executive Officer at Equinix]

Yeah, I mean the same store, the revenue growth is strong. We did see some contribution to that 6% from from APAC in Singapore in particular and I think there probably is some contribution from the -- on the cash gross margin side there as well associated with that. But overall, we were actually very pleased with the same-store growth performance because as I said, less than half of that gain to up to the 6% is really impacted by the power price. It's really -- it's impacted more by the addition of the new assets into the mix and strength in the Americas, which sort of has an oversized influence on the stabilized assets. So, Keith anything further to add there?

[Keith Taylor, Chief Financial Officer at Equinix]

No. Just as we've noted in the sort of embedded in our guidance is the impact coming from the power cost in Singapore in a knock-on impact not only on the Asia-Pac market, but the overall performance of the business on a gross margin basis. So again, nothing out of what we expected. As Charles alluded to the fact the matter is that the stabilized assets are growing at 6% on a recurring revenue basis. We have great momentum in the business and we've now absorbed effectively with the Q1 results the impact of the Singapore business and so that's in the business on a go forward basis that.

[David Guarino, Analyst at Green Street]

All right, that's helpful. And then one other quick one. It looks like you guys are building 2 new phases at your AT1 facility in Atlanta. Are you seeing any shift from tenants who want to relocate away from other colocation data centers in the Atlanta market?

[Charles Meyers, President and Chief Executive Officer at Equinix]

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

[David Guarino, Analyst at Green Street]

Great, thanks for the color.

[Operator]

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

[Jon Atkin, Analyst at RBC Capital Markets]

Thank you. I was interested on the energy topic. You're currently hedging presumably at elevated rates and I just wondered what sorts of deification that might have down the road if energy prices were to normalize? Do you see any sort of exposure in terms of pushback from customers? And then on the other end, just any more color around pricing actions? You mentioned about power related PIs, but anything else about just with pricing renewal discussions, cross connects and any color around how pricing is evolving? Thanks.

[Charles Meyers, President and Chief Executive Officer at Equinix]

Yeah, I mean, because we're well hedged now, is kind of in the rising rate environment as we have these sort of certain feathered hedges over multiple years. We're hedged essentially below the below the prevailing market rate, I mean, so -- and in a rising rate environment with that provides actually some protection to the customer against those market rates because we'll be able to roll demand more gradually. And so that's the artifact that we see. Again as hedges roll off and you hedge at and you've hedged at increasing rates you kind of are chasing that up, but again it provides a net benefit there and the customer will have an expectation as they see what the market rate is even in their own personal power consumption, they're generally a broader expectation that they're going to see some sort of horizon we can mitigate that some degree. So I think the hedging and the success of our hedging and that's the way it's worked for us in rising rate environments over time. And so we feel generally good about that. As I said, we're well ahead of that planning cycle as we build our hedges for 23 and beyond. So anything further to add there, Keith? And then on pricing. Yeah, I actually we had continued to have strong pricing, positive pricing actions. We have increased list pricing meaningfully and I think that we're continuing to evaluate that in terms of -- and that's partially an implication of or an artifact of increase in unit costs in other other pacts in the business beyond power like labor for example, but that tends to work its way into the business slowly over time as you -- as we see some of that and we continue to see just a really strong response to the value proposition on a value basis. And so we have been increasing list pricing beyond power as well.

[Keith Taylor, Chief Financial Officer at Equinix]

Jon, if I might just add. I think it also puts a note. Again, we can talk about it specifically, but the net pricing caused the pricing actions this quarter were substantial even when you take out the increased power pricing and so when we look at our overall growth rate, you can take out the full implications of our -- of the price increases associated with prior and you still have growth rate of greater than 9% on a normalizing constant currency basis. So yeah, it just have some impact, but the reality is the fundamental business that is driving the growth on the top line. And that leaves us open to as Charles said some discussion on what happens later as inflation continues to take hold. What do we do with our pricing. In addition to our list price adjustments. So overall I just say that I think we're in a really good position from a pricing perspective. You can see in our blended MRR per cap and even when you sort of discount out the impact of higher pricing associated with according to the price increases, you still see nice fundamental increase in overall pricing on a per cabinet basis.

[Jon Atkin, Analyst at RBC Capital Markets]

Just 2 quick ones in the followup. Churn, can it remain on a sustainable basis at kind of these below average rates and then demand seems elevated and you had obviously a strong result last quarter and a strong guide and did that feel sustainable as well in terms of enterprise retail colo demand or is there some sort of a catch up dynamic where you're seeing some buying that was kept up, but it might normalize from here and demand might go back to normal levels or do you see elevated demand indefinitely? Thanks.

[Charles Meyers, President and Chief Executive Officer at Equinix]

Yeah, I'll start with the demand is, I think we just continue to see an increasing overall addressable market as people continue to prioritize digital transformation has become such a central part of how people are looking to compete in the modern age that and the nature of digital infrastructure has continued to change so much as they adopt public cloud as that becomes a prominent part of their infrastructure strategy as they think about factors like sovereignty and application performance and the application modernization and the complexity of networking in nature, hybrid and hybrid cloud world and all of those things really lend themselves well to our value proposition. And I think people are seeing us as increasingly relevant to those discussions. And so, and that's really resulted in what you're seeing, which is several strong quarters of bookings in a row record levels. And as Keith said in his script, our pipeline continues to look strong. So this isn't a matter of sort of empty in the coverage. We continue to see a growing pipeline. We said we see record levels of pipeline in our digital services portfolio and and you'll continue to see all elements of the business really really respond strongly from a demand perspective. So we're not seeing any any phasing of that. It does not feel in any way linked to us like some sort of catch-up, but instead, a more sustained level of demand for business and then relative to churn, we've always said, the best way to reduce churn over time is to put the right business into the platform to begin with. And I think our strategy is really paying off there. And we always are -- always caution people in terms of churn can move around a little bit quarter-to-quarter, but if you look at our 8 quarter trend or a 12 quarter trend on churn, I think it will start to reveal to you that the downward trend is in fact I think sustainable. Again, I wouldn't want to bet on every quarter being where this one is, but I do think that we have demonstrated sustainable downward trajectory on our churn.

[Jon Atkin, Analyst at RBC Capital Markets]

Thank you.

[Charles Meyers, President and Chief Executive Officer at Equinix]

Thanks, Jon.

[Operator]

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

[Ari Klein, Analyst at BMO Capital Markets]

Thank you. Maybe just following up on the power questions. The expectation with Singapore was for the impact to moderate in the second half of the year. And since the original guidance is provide the backdrop is obviously shifted a little bit with Russia and Ukraine. So I have the view shifted on the pace of improvement that you're expecting for the second map of the year.

[Charles Meyers, President and Chief Executive Officer at Equinix]

Yeah, a little bit. I would say overall it looks a big, the big power issue is really Singapore. There is -- it's a very much on the margin in any other places. I think -- going forward, I think we might see more of our -- we have the planning to do in 23 and beyond as power -- as hedges roll off and as we think about that as I commented earlier, but I think that's more of something we have plenty of visibility to and ability to respond to, as it relates to this year, Singapore is the -- is by far the overwhelming issue and there's not a ton of change from what we said last quarter I think Q1 was actually a little better than we expected. And then the back half of the year, might be a little higher than we had originally forecasted. But they kind of going to come out, kind of in roughly the same place. We now have over 50% of our load hedged or locked-in rate wise in Singapore. So we have better visibility that and I don't think a ton of variability and outcome from here. We'll continue to update you if that changes, but not a big change. Probably a slightly more on the back end and less in this -- we have better quarter this quarter than what we had in that originally forecast. But on a full-year basis is really roughly what we had said previously.

[Ari Klein, Analyst at BMO Capital Markets]

Got it. And then the Americas you've had several quarters in a really strong bookings in the growth rates accelerated. As we look ahead, I think, over 70% of cabinets are outside the Americas in the development pipeline. How should we think about occupancy from utilization rates from here, it's obviously stepped up, What is the kind of level off, or get to before you have to add more significantly to the bill.

[Charles Meyers, President and Chief Executive Officer at Equinix]

Yeah. Good question. I think that we have a fair amount of headroom in a lot of markets in the Americas, tight? We're at a lower overall utilization net rate there on a much bigger business. So there's plenty of capacity itself, so I'm sure my sales teams are hearing me say that. So they are planning to go around and the Americas business has performed exceptionally well and another shout out to our customer, 13 new sales leader in the Americas, and I think that businesses is really humming and delivering strong sales execution and so, but you're right. A lot of the investment is going to the -- going outside of the U.S., but we've also -- and we are tapping up in key markets in the U.S. and in the Americas broadly can meet the demand there. So we feel good about our ability to both deliver the new capacity and to sell it and we've got a new President of the Americas coming online [Indecipherable] and tremendously customer centric executive and very excited about that side, I feel -- we feel great about the trajectory in the Americas. Again I think plenty of opportunity to grow into the capacity is there and drive utilization up and we will continue to invest, where there are markets that we start to see sort of pinch points out there in the future and so, overall, feel really good about our ability to continue to put capacity online and sell it aggressively.

[Ari Klein, Analyst at BMO Capital Markets]

Thanks for the color.

[Operator]

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

[Michael Rollins, Analyst at Smith Barney Citigroup]

Thanks, and good afternoon. Just thinking through some of the comments Charles earlier on the call, talking about hybrid cloud and you have hyperscale through the xScale and you have of course the retail-centric business and as you have more enterprise customers, are you thinking about ways that Equinix can increasingly serve, their hybrid needs and go beyond retail to sum enterprise deployments that they may be looking at to retain as part of the hybrid cloud architecture.

[Charles Meyers, President and Chief Executive Officer at Equinix]

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

[Michael Rollins, Analyst at Smith Barney Citigroup]

Thanks.

[Operator]

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

[Erik Rasmussen, Analyst at Stifel Nicolaus]

Yeah, thanks for taking the questions. So this quarter we are expecting really good straight from hyperscalers and as it relates to your xScale business, considering sort of this elevated demand environment, what would you say are some of the hurdles you're seeing, as you think about meeting this demand?

[Charles Meyers, President and Chief Executive Officer at Equinix]

Well, I mean it's -- I think the business is executing really well where we're not sort of trying to chase every bit of hyperscale that's out there. We've got an aggressive, but an appropriate plan that we think delivers strategic value to the overall platform. We're focused on a relatively small number of sort of global hyperscalers that we think are critical to how the overall found macro plays out and are focused on them. I think it's really just being able to continue to deliver capacity and so we've been more aggressive about land banking. We're continuing to work to make sure that we have the capacity and the key equipment necessary. So our supply chain team has been active both in terms of both our -- the xScale side of our business and retail to ensure that we are buying the --buying inventory or pre -- -before we can make forward commitments to ensure the availability of the equipment to get project delivered on time. So I think that's going to be the key thing for us. And right now we feel very good about that fact since the last quarter, as we talked about a couple of quarters ago. I guess it was. We talked about having roughly $100 million of pre-commitment and inventory in place to try to mitigate against spikes and we've nearly doubled that to continue sort of anticipate and head off any pinch points that exist in supply chain. So I think we're doing a good job there, but I think that's the area that we need to be continue to focus on it. And I guess the proof is in the putting in that our delivery dates are all on average, few outliers here and there, but on average, we're no more than a week or 2 delayed on projects. And so it's been continuing to deliver on time deployments.

[Erik Rasmussen, Analyst at Stifel Nicolaus]

Great. That helpful. And then maybe just on M&A, you obviously been pretty disciplined in your approach historically, but in the current environment, multiples have moved up, just wondering if the right opportunity were to come up, are there scenarios where you would stretch your comfort level, to maybe not lose out on a particular deal and what would that type of deal look like?

[Charles Meyers, President and Chief Executive Officer at Equinix]

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

[Erik Rasmussen, Analyst at Stifel Nicolaus]

Great. Thank you.

[Operator]

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

[Brendan Lynch, Analyst at Barclays]

Great. Good afternoon, and thanks for taking my question. That's just a start. We're about one year on from your long-term guidance when you issued your long term for 50% adjusted EBITDA margin by 2025. Your guidance this year is implying a 140 basis point contraction for some of the well-documented reasons that have been discussed already. I just want an update if you would on the ability to achieve that long-term target and what are some of the elements that are directly within your control on the cost side that could help get you there, if you can get there through pricing power?

[Charles Meyers, President and Chief Executive Officer at Equinix]

Yeah. Great question, Brendan. Obviously that we are very focused on and take a lot of -- I'll start by just simply saying that we continue to see 50% as an appropriate long-term target for EBITDA margin. There is a number of moving parts on the overall margin trajectory of the business and as you said some -- we've talked about many of those, the power in particularly the Singapore power situation being central to that, we can already talked about that dynamic, which is we are a little better than expected in Q1, back half of the year might be a little bit worse than what we had originally forecasted, but not a major shift there and we are -- next year, we'd expect to see APAC margins normalize either through moderating rates and we can't really predict that fully or even if they don't moderate by us, essentially putting a digital PIs through and getting in line with the broader market. And so, I think we'll see margin normalization there and we continue to drive and expect continued operating leverage in the business in the back of the -- back half of the year from several of our targeted efficiency programs in the business and so we do think we need and need to have other levers available to us and to continue to drive operating leverage, but we also may make some investments in quarter where we had -- I think given the tremendous booking strengths that we're seeing. So I don't think that would be surprising to anybody. So bottom line, we'll give you more detailed guidance on the 23 and beyond margin profile as that becomes more clear. But I think the really critical takeaways are that one. We continue to see 50% is an achievable target and two, that we really remain confident that we can deliver against the Analyst Day AFFO per share growth targets through some combination of top line growth and appropriate operating leverage and at the end of the day, that's really our lighthouse metric is driving that AFFO per share growth.

[Brendan Lynch, Analyst at Barclays]

Great, thanks, it's helpful. And maybe, just one follow-up on the churn profile or trajectory. In the past, some of your acquisitions have kind of had a customer product mismatch where that we saw an uptick in churns specifically with the rising assets. I wonder if there is anything like that with any of the recent acquisitions that you've made that might cause churn to increase?

[Charles Meyers, President and Chief Executive Officer at Equinix]

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

[Brendan Lynch, Analyst at Barclays]

Okay, great, thanks for the color.

[Operator]

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

[Sami Badri, Analyst at Credit Suisse Group]

Hi, thank you. I had one question and a follow-up. For the first question, I think you talked a little bit about the Americas business, and I just wanted to hit on specifically Americas MRR per cab and how it was down quarter-on-quarter in 1Q '22, I know there were some adjustments and there was also a footnote, but I just kind of wanted to just get a better idea on what's going on there and then the second question is regarding the $42 million of increased outlook visibility. Which regions are providing the strength for that $42 million?

[Charles Meyers, President and Chief Executive Officer at Equinix]

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

[Keith Taylor, Chief Financial Officer at Equinix]

So may I just add just on to what Charles said. The other thing that you probably recognize we put Dell Canada's assets into our metrics last year -- at the end of last year and they come at a lower MRR per cab than the average rate, and as a result, you've seen the to lose way back of that coupled with the fact that cleaning business continues to perform well and so you bundle that in the next on a go-forward basis.

Last thing I'd say is that currencies again this is a U.S. dollar denominated number. And so we see that give the impact of lower currencies. We're not neutralizing yet when we report on the non-financial metric page, we do on on the regional breakout page, but I don't think that we've got the impact of currencies influencing given the strength of the U.S. dollar, it's just Japan is down about 12% as an example year-to -date. You've got other markets sort of the signal [Indecipherable] relative to to the U.S. dollar. So there are number of things that are going on, but fundamentally, this is not anything to worry about in fact we're seeing greater strength in the business given the pricing profiles that we have and so we will not not focus on that sort of metric.

[Charles Meyers, President and Chief Executive Officer at Equinix]

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

[Keith Taylor, Chief Financial Officer at Equinix]

Yeah. Then as the rest of the regional -- the profitability as we said $42 million incremental EBITDA, $20 million is coming from MainOne, we got $2 million coming from currencies. Again, that gives you a sense of the strength of our hedge positions on a currency basis. The financial impact of the business is relatively de minimis for the rest of the year under current course and speed. So that feels good. So relating to the organic business, you're seeing strong broad-based performance across the business. One of the comments that Charles made is we're seeing strength in all 3 regions of the world and because of that strength in the topline is driving profitability in the top line that we make. Again as you appreciate that in U.S. or the Americas business, we make corporate decisions and make accruals. And so embed that partly at the corporate level. Therefore, the Americas region, but overall the fundamental business across all 3 regions is strong and the only thing I would add to that is yes, you see the fluctuation in Asia. Asia-Pacific and that's specific to the Singapore matter that Charles has spoken on. Again that's in our numbers in our run rate and on a go-forward basis, we feel very good about the profitability in the business. And so you're seeing that growth and the momentum in the business and it's right across the board.

[Sami Badri, Analyst at Credit Suisse Group]

Got it. Thank you very much.

[Operator]

Our next question is from Michael Elias with Cowen and Company. You may go ahead.

[Michael Elias, Analyst at Cowen and Company.]

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

[Charles Meyers, President and Chief Executive Officer at Equinix]

Yeah, the power PIs. I think it all depends, is the answer, because I think that if we say -- if we saw reversion back to meaningfully lower rates, then I think we would adjust accordingly. And so I do think that we kind of separate out more of the power related pricing adjustments associated with power volatility for a more structural sort of price levels and margin profiles within the business. And so I think we're going to have to navigate that in terms of -- but I do think that in markets if we saw a big uptick pass through those meaningful adjustments and then saw a reversion, I think we would make adjustments there. And so, but I think it's going to very much depend and something we'll have to look at on a market by market basis.

And then pricing, I think in terms of its impact on MRR per cab, yeah, I mean I think that as we increase pricing due to various inflationary factors as well as due to the continued strength of our value proposition in our billing -- our ability to continue to add more value for our customers. I think that's going to have a positive impact on our MRR per cab and just allow us to continue to preserve margins and drive the appropriate returns on capital. So we're going to have to continue to monitor that in terms of just how with the pace in the level of the inflationary forces in the business are, but right now I think we've demonstrated that across the board, we can make appropriate pricing adjustments and therefore feel like we can preserve that MRR per cab trajectory.

[Michael Elias, Analyst at Cowen and Company.]

Perfect, thank you.

[Operator]

And our last question comes from Matt Niknam with Deutsche Bank. You may go ahead.

[Matthew Niknam, Analyst at Deutsche Bank Aktiengesellschaft]

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

[Keith Taylor, Chief Financial Officer at Equinix]

Great questions. Let me first start with just the overall performance of the business, the green bond, we just did, as you know that we fishy [Phonetic] over 3.9%, but we put treasury locks in place end of last year and getting this year. And so we're able to trade it down to a 10-year term, 3.35%. So exceedingly pleased with the performance of that transaction. That effectively fully funded the acquisition of Entel and MainOne. As we noted in the results, so there is, when we have a portion of the income, increased interest expense this year relative to the 2 acquisitions. $8 million of it was allocated to MainOne and the other $22 million is running through our books right now. So we've absorbed the cost. It's sitting there in our guidance, it would yet to report the addition of the Entel acquisition that will happen sometime in the second quarter, the measuring timeframe and as you're going to get the net benefit of that. So I think what you're seeing is you -- you've already funded the cost side of the equation, and yet you enjoy the if you will, on the income side of the equation yet. So that's that as it relates to overall sort of our capital management. We do have the flexibility with 3.8 times leverage right now as a business. As we look forward, we still feel that leverage in the 4 plus range is appropriate. We've got more flexibility with the 3 rating agencies. And we're very thankful for that. We've got the flexibility to draw down on debt. We think get is despite the rising interest rates as of late, is still a cheaper source of capital for us and hence why we took $1.2 billion off the table in April. We're looking obviously at other debt transactions over some period of time. Europe seems to be a good place given the differential on loan rates. And then we obviously use a blend of debt and equity, largely because that's what we do and I think that's what allows us to have the strength and which Charles referred to before. We can transact with a strong balance sheet with great success given how we've structured ourselves.

And so the only other thing I'd say is we are looking forward just because what we fund today, we also were looking forward into '23 and '24, What is the capital needs of the business. So we're maintaining that flexibility as we look forward and on periods of great volatility, we always like the strike as I said in my prepared remarks, but we think it's appropriate to raise the capital and given the strong balance sheet, we've used that flexibility and guidance that marks the time that we've chosen and that's been very, very effective to us on long-term basis. So all that is long-winded response. I would say that we have great flexibility. We're absorbing cost today without the income as cash to them, and I'm excited about the opportunity on a go-forward basis. Business is performing exceedingly well and it's going to give us an opportunity to continue to fund the growth that we see in the business, and I'll stop there.

[Charles Meyers, President and Chief Executive Officer at Equinix]

That's great. I really appreciate all that color. Thanks. This concludes our Q1 call. Thank you for joining us.

[Operator]

[Operator Closing Remarks]