Equinix, Inc.

Good afternoon and welcome to the Equinix fourth quarter earnings conference call. All lines will be able to listen only until we open up for questions. Also, today's call is being recorded. If there's anyone that has objections, please disconnect at this time. I'd now like to turn the call over to Katrina Reimel, Vice President of Investor Relations. You may begin. Thank you.

Thank you. Good afternoon and welcome to today's conference call. Before we get started, I'd like to remind everyone that some of the statements we'll be making today are forward-looking in nature and involve risks and uncertainties. Actual results may vary significantly from those statements and may be affected by the risks we identified in today's press release and those identified in our filings with the SEC, including our most recent Form 10-K, filed on February 22, 2019, and 10-Q, filed on November 1, 2019. 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 IR 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'd 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 Myers, Equinix's CEO and President, and Keith Taylor, Chief Financial Officer. Following our prepared remarks, we'll be taking questions from sell-side analysts. In the interest of wrapping this call up in an hour, we'd like to ask these analysts to limit any fallen questions to just one. At this time, I'll turn the call over to Charles.

Thanks, Kat. Good afternoon, and welcome to our fourth quarter earnings call. We had a strong finish to 2019, and the momentum within the team and across the business is clearly evident. reflecting solid execution of our strategy and indicative of the tremendous opportunity in front of us. We closed over 17,000 deals in 2019, demonstrating the extraordinary scale of our retail go-to-market engine and the differentiated nature of the Equinix value proposition. The pace of digital transformation continues to accelerate, creating seismic shifts across industries as businesses embrace interconnection as critical to their infrastructure strategy and adopt hybrid and multi-cloud as the clear architecture of choice. The secular forces driving demand for digital infrastructure are as strong as ever. Data is being created, moved, analyzed, and stored at unprecedented levels. These dynamics are expanding the Equinix addressable market as customers seek to distribute infrastructure globally, responding to increasingly demanding workloads and the need to locate and interconnect private infrastructure in close proximity to a rapidly expanding universe of cloud-based resources. Against this backdrop, we continue to focus on four critical vectors to position the business for significant value creation in 2020 and beyond. As it always does, it starts with our people. We will continue to invest first in our people, our organization, and our culture in order to attract and inspire market-leading talent in service to one another, enabling us collectively to be in service to our customers, to our shareholders, and to the communities in which we operate. Second, we'll continue to evolve and grow our go-to-market engine. targeting the right customers with the right workloads and the right locations, amplifying our reach via the channel, and ensuring that our sales and service delivery capabilities continue to be globally aligned and locally responsive. Third, we will continue to invest in platform Equinix, expanding our global reach while also adding new services and capabilities that will allow customers to more flexibly combine Equinix value with that of our partners to more quickly implement hybrid and multi-cloud architectures at the digital edge. And fourth, we will focus on simplifying and scaling our business, implementing our own targeted digital transformation initiatives focused on increasing operating leverage and enhancing our customer experience. These areas of focus and our long-term orientation will allow us to widen the moat around our business, enhance our yields, and increase service attach rates, enabling us to deliver durable revenue growth and attractive AFFO per share. Expanding our reach remains a core tenet, and we now operate across 55 metros in 26 countries, as we recently closed our Mexico acquisition and will open new markets this year, including Hamburg and Muscat. The benefit of our unparalleled reach is reflecting in strong cross-regional activity, which continues to trend positively, with multi-metro customer revenues ticking up to 87%. We also continue to make significant progress with our hyperscale strategy, with six announced projects underway across all three regions and a strong pipeline of customer demand. We are already looking to expand our European JV and advancing additional JV conversations in Japan and other targeted geographies. This strategy will enable us over time to extend our leadership in the cloud ecosystem while mitigating strain on our balance sheet and maintaining market leading returns. Turning to our results as depicted on slide three, Revenues for the full year were $5.6 billion, up 9% year-over-year. Adjusted EBITDA was up 10% year-over-year, and AFFO was meaningfully ahead of our expectations for the year. Interconnection revenues grew 14% year-over-year, driven by strong customer response to the Equinix Cloud Exchange fabric, good traction in our new Internet exchange markets, and solid interconnection ads. These growth rates are all on a normalized and constant currency basis. Our interconnection differentiation continues to pay dividends as we expand our product set, driving growth and customer value. We now have over 363,000 interconnections and delivered our 12th consecutive quarter of adding more interconnections than the rest of the top 10 competitors combined. In Q4, we added an incremental 7,400 interconnections fueled by high gross ads to support new streaming services, expanding intermetro connections, and seasonably lower churn. Peak internet exchange traffic grew by 10% this quarter, also helped by these new OTT video offerings. ECX Fabric is diversifying well as an exchange platform, with over 2,000 customers now connecting their own deployments to over 600 other participants on the platform. Our longer-term vision for platform equinix continues to take shape, influenced by direct feedback from our customers and partners. Our network edge offering, which provides customers access to a number of different virtual network functions provisioned over ECX Fabric, is tracking ahead of plan. And our announced acquisition of Packet represents a bold move to accelerate our strategy to help enterprises quickly and seamlessly deploy hybrid and multi-cloud architectures on platform Equinix. By combining Packet's market-leading hardware automation capabilities with our platform and integrating directly with ECX Fabric, we intend to create a world-class enterprise grade bare metal offering that allows customers to rapidly deploy digital infrastructure at the edge with differentiated performance and robust integration to the public cloud. We expect the packet transaction to close in Q1 and look forward to updating you further on the progress of our platform strategy. Now let me cover highlights from our verticals. Our network vertical achieves solid bookings with robust reseller activity from our global NSP partners as well as continued expansion activity across various network subsegments. New wins included RTI Connectivity, a leading subsea cable operator, extending their solutions in Tokyo and Sydney. We also launched an expanded partnership with Telstra, enabling full API integration with ECX Fabric, giving enterprise customers on-demand access to Telstra services across 38 metros. A good example of how we're automating connectivity with key partners to their last-mile networks via the ECX Fabrics. Our financial services vertical achieved its third highest bookings led by capital markets providers and large multinationals as cloud adoption accelerates. New wins included a top three Nordic bank re-architecting their global network for digital payments and a Fortune 500 financial advisory firm transforming their network topology. Our content and digital media vertical saw record bookings led by APAC in strength in gaming, publishing, and e-commerce as cloud adoption continues to shape this vertical. Expansions included a Fortune 500 media company expanding to launch new OTT delivery services and a multinational conglomerate building out its edge to support growing multiplayer online gaming in South America. Our cloud and IT vertical saw strong bookings led by APAC and double-digit growth in services and infrastructure as cloud customers diversify. Equinix continues to be the clear global leader in cloud connectivity. With over 40% share of total cloud on-ramps, and 15 new on-ramps added in 2019, five times the nearest competitor. Our enterprise vertical saw healthy and high-quality new logo ads with continued strength in manufacturing, healthcare, and retail as enterprises build out hybrid architectures. New wins included a Fortune 150 retailer building out infrastructure to support digital transformation and a global life sciences firm enabling multi-cloud capabilities. Our channel accounted for more than 27% of bookings, and we are very pleased with the progress we've made in building this important go-to-market vector. Two-thirds of our channel bookings are now driven by resellers with integrated solutions like Performance Hub and ECX Fabric, delivering faster, more predictable order flow. We're working together with these resellers to more effectively productize joint offerings to bring mutual customers the benefits of platform Equinix enhanced by our partner services. New channel wins this quarter included a win with Telendis for the city of Amsterdam, as well as a win with Optus to support Children's Cancer Institute of Australia with data analytics for genomics research, highlighting how with partners we are truly better together and reminding us of the far-reaching impact of platform Equinix in helping make the world a better and healthier place. Now let me turn the call over to Keith to cover the results for the quarter.