Chip Newcom welcomed everyone to the Equinix Second Quarter Earnings Conference Call and reminded them that some of the statements made may be forward-looking and involve risks and uncertainties. He also mentioned that Equinix has a policy of not commenting on financial guidance during the quarter unless it is done through explicit public disclosure. Additionally, non-GAAP measures will be provided and can be found on the Equinix Investor Relations page along with other important information.

Equinix's CEO and President, Charles Meyers, and Chief Financial Officer, Keith Taylor, are holding a second quarter earnings call, during which sell-side analysts will be asked to limit their follow-on questions to one. Equinix is well-positioned to respond to the increasing demand for data center capacity, and had a successful second quarter with solid gross and net bookings, strong pricing dynamics, high pipeline conversion, and healthy new logo growth. They achieved this by executing over 4,100 deals across more than 3,100 customers.

This quarter, Equinix saw strong growth in revenue and adjusted EBITDA, and AFFO was better than expected. They have 53 major projects underway across 40 metros in 24 countries, and added 12 new projects, including builds in Lisbon, Monterrey, Mumbai and Kuala Lumpur. They also won multi-region customer wins, including Cogent Communications, and were selected to build incremental data center capacity in Singapore.

Equinix's global interconnection franchise continues to be successful, with over 456,000 total interconnections and 110,000 unique pairs. Equinix Fabric passed 50,000 virtual connections and is now able to provide virtual connections with bandwidth up to 50 gig per second with Google Cloud as the first cloud partner. Internet exchange saw strength in EMEA and APAC markets with peak traffic up 4% quarter-over-quarter and 25% year-over-year. Key interconnection customer wins included a gaming and entertainment company and Brazilian telco PEER 1. The xScale portfolio also saw success.

In Q2, Equinix leased 10 megawatts of capacity in Osaka 2, and won three new cloud on-ramps in Bogotá, Madrid, and Toronto. Enterprise customers are using their platform to optimize their networks and multi-cloud connectivity, and they announced an expanded partnership with Hewlett Packard Enterprise for pre-provisioned HPE GreenLake for private cloud enterprise and HPE GreenLake for private cloud business. They also won key digital services wins this quarter, including Bionexo to Brazil and Telna, a global mobile network infrastructure provider.

The Channel program had a strong quarter, accounting for 40% of bookings and nearly 60% of new logos across a range of industry verticals and digital use cases. Key wins this quarter included the deployment of cloud adjacent infrastructure for a large American health insurance provider. In Q2, the company delivered solid results, with solid gross and net bookings and positive pricing dynamics. Global MRR per cabinet was up $39 quarter-over-quarter to $2,156 per cabinet. The company is focused on putting the right customer with the right application into the right IBX in order to maximize value.

In Q2, global revenues were up 14% from the same quarter last year due to strong recurring revenues, power price increases, and the timing of xScale nonrecurring fees. Nonrecurring revenues were down as expected, but the company expects to see a meaningful step-up in the second half of the year. The company also noted that there was a $3 million FX headwind due to FX hedges compared to their prior guidance rates. They also discussed how they have been able to mitigate the impacts of energy price volatility across their business and with their customers, as well as the devaluation of the Nigerian naira and the weaker Japanese yen.

In Q2, Global EBITDA and AFFO were both up from the same quarter last year due to strong operating performance, and EMEA and APAC were the fastest-growing regions on a year-over-year basis. The Americas region also had a solid quarter with strong pricing, channel and public sector momentum, and healthy exports. EMEA had firm pricing, lower churn, and a step-up in deal volume, though revenue was slightly down due to the timing of large NRR deals.

During the quarter, the company opened seven retail projects and two xScale projects across the Americas and EMEA regions. Capital expenditures were $638 million, including $40 million of recurring CapEx. Revenue from owned assets increased to 64% of recurring revenues. The company also booked a substantial space and power deal in Lagos, Nigeria and had strong net bookings and firm deal pricing in the Asia Pacific region. Additionally, the company executed $200 million of ATM forward sale transactions to fund 2024 growth plans and increased their balance sheet to $31.6 billion with an unrestricted cash balance of over $2.3 billion.

Keith highlighted the company's strong performance in the first half of the year, with a 10% year-over-year increase in revenue for their 174 stabilized assets, and 85% utilization. For the full year 2023, the company is maintaining its revenue outlook of 14-15% growth, and raising its adjusted EBITDA and AFFO guidance by $20 million and $28 million respectively. CapEx is expected to be between $2.7 billion and $2.9 billion, with $120 million of on balance sheet xScale spend and $220 million of recurring CapEx spend.

Platform Equinix is uniquely positioned and highly differentiated and is continuing to drive its strategy with a focus on extending its market leadership, driving operating leverage, expanding its platform capabilities, and delivering superior returns on capital. Charles Meyers has stated that the company's posture has evolved when it comes to xScale in the Americas, and AI is part of that. He believes that markets where the full portfolio xScale retail digital services are at scale perform best, and that this could be driving the demand for large leases in the US.

Charles Meyers explains that the company's backlog is healthy and that billable cabs can be volatile due to timing of installs, backlog, and churn activity. He encourages people to look at rolling forward quarter averages due to this volatility, and states that the rolling four quarter for the Americas is about 90% of what it's been for the last three years.

Equinix is excited to have been able to allocate capacity in the Singaporean market, as there have been capacity constraints in Asia. Over the past 5 quarters, there have been 7 deployments of meaningful size churn, 85% of which are favorable churn in constrained markets. This will result in a 50-70% MRR uplift with no CapEx, providing millions of dollars of extra MRR on an annual basis.

Charles Meyers explains that the 7% year-over-year growth in constant currency without the power price increases is a very attractive level. He notes that pricing is very firm and they have raised prices on their colo products and interconnection meaningfully. He also mentions that power densities are on the rise, which will lead to uplift in the stabilized assets as they turn over.

Charles Meyers discussed the variability of the power side of the equation and how it affects pricing and revenues. He stated that they are currently halfway through the year and hedging into positions at rates lower than before in some cases. He also mentioned that they have a significant portion of hedging positions yet to fill and it is impossible to predict what will happen. However, if current course continues, there might be some markets where they will hedge into a rate for 2024 that is below what it was in 2023, and they will pass that through to customers.

In Q2, Charles Meyers reported that customers were still cautious, but there was a solid bookings quarter with good pipeline conversion and sales cycles that were in line with historical norms. The push rate bounced back to where it had been previously. Jon Atkin asked about decision time frames, closing rates, book-to-bill, and stabilized gross margins.

In Q2, the company saw a lot of customer caution, hard negotiations, and some customers returning capacity. Despite this, the sales team had a strong quarter and there is optimism for the second half of the year. Margin erosion was seen across a number of metrics due to the reset of energy contracts, which will now stabilize.

Charles Meyers reports that they have seen specific instances of interconnect to support AI and had a significant win this quarter with an AI-as-a-service provider. He also notes that they have seen strong gross add activity in interconnect and it is in line with their nine quarter averages. Additionally, interconnect to cloud is up year-over-year, though churn activity is a bit higher between service provider types.

Charles Meyers discusses the power density requirements of data centers, and how they must be actively evolved and kept up to date. He notes that retail businesses can easily adjust to differing density requirements, but that it is more difficult for hyperscale and xScale customers, as they typically allocate all power to a single customer or two.

Keith Taylor explains that the nonrecurring side of the business will see a material step-up in the back half, which is mainly due to the sales and marketing fee associated with the xScale fees. He anticipates that there will be a large set of fees that get earned over the second half of the year, with the majority of them being earned in the fourth quarter.

Churn ticked up to 2.3%, and Charles Meyers explained that this was related to the interconnection deployments, which have mark-to-market values of 50-70% positive, and are especially valuable in the Singaporean market due to their cloud proximity, network density, and performance capabilities.

Charles Meyers discusses the power availability and pricing of data capacity industry, noting that the retail side of the business operates at a different price point than the wholesale or hyperscale side. He believes that both are on the rise and will continue to be so for a while.

David Barden asked if there would be a shift in the company's CapEx allocation into more novel land bank development opportunities due to power availability constraints. The company's response was that power availability is something that needs to be grappled with, but they do not expect it to materially constrain the quantity of the retail business. They are actively looking at alternatives such as on-site power generation and may position certain forms of data center capacity in certain markets to go where the power is.

Charles Meyers and Keith Taylor are discussing Meta's plans for data centers in places that are not traditionally associated with them. They have not yet done this, but they are open to the idea and are developing smaller byte sizes in 40 markets around the world. They are also looking to enter into new markets.

Keith Taylor is discussing the stresses in the supply chain that the company has been dealing with for a few years. He explains that they have a sophisticated procurement team that focuses on making sure they have availability of production capacity, slots in the production line, or available capacity from inventories. He also emphasizes the importance of power procurement in order to manage the supply chain efficiently.

Charles Meyers discussed the importance of sustainability for power availability, and the need to work closely with utility CEOs to ensure that sustainability is part of the picture. He also mentioned the slight increase in recurring CapEx and the slight rise in DSO.

In the second quarter, CapEx was in line with expectations, but there was an $18 million increase quarter-over-quarter. DSOs had risen due to customers disputing the power price increases, but these issues have been resolved and DSOs are expected to return to a more traditional level. Cash flow and collections are running ahead of expectations for the third quarter.

Charles Meyers of Interconnection expects to see an improvement in adds as the year progresses, due to strong overall demand for interconnection and cloud services. He believes the elevated churn is mostly from the service provider side, and they have looked into it in depth.

The cost of electronics has gone down, making it more available to people with enough interconnects and resulting in 10 to 100 migration. M&A activity in the CDN and network space is finite, and networks have been aggressively managing inventory due to business challenges. Despite this, pricing remains strong and port speeds are increasing, resulting in healthy revenue growth.

Charles Meyers discussed the company's 20-megawatt allocation in Singapore, expressing excitement for the opportunity to build capacity in the important market. He also mentioned that the company is continuing to work to meet customer demands and drive superior returns. The call concluded with Chip Newcom thanking everyone for participating.

This summary was generated with AI and may contain some inaccuracies.