Equinix, Inc.

Good afternoon, and welcome to the Equinix first 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'd now like to turn the call over to Katrina Rimmel, Vice President of Insurance Relations. 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 21, 2020. 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, 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-gap measures on today's conference call. We provide a reconciliation of those measures to the most directly comparable gap 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'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'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 following questions to just one. At this time, I'll turn the call over to Charles.

Thanks, Kat. Good afternoon and welcome to our first quarter earnings call. Before we get into the results of the quarter, I want to take a moment to acknowledge the unprecedented times in our world and share our approach to this continuously evolving situation. First and foremost, our hearts go out to all those who've been impacted by COVID-19. and we extend our gratitude to all the frontline workers who are helping to keep us safe and healthy as we navigate this together. From the beginning, we've approached this situation with a consistent set of priorities, protecting the health and safety of our employees, customers, and partners, ensuring the availability and continuity of our services that underpin the operation of the digital economy, and stepping up to do our part to mitigate the impacts of this crisis on people and communities around the world. Very early on, we activated our business continuity plans with the goal of ensuring seamless operations through this crisis. I am incredibly proud of our teams across the company and moved by the care, kindness, and courage they are demonstrating each day in service to each other, to our customers, and to our communities. As in many other crisis situations through the years, the dedication and professionalism of our operations team has been unwavering, particularly as they were forced to adapt our policies and procedures to rapidly changing conditions. keeping safety first while ensuring responsiveness to the needs of our customers. Thanks to our global teams, our facilities have remained safe, available, and fully operational, and our customer satisfaction scores are at an all-time high. As is often the case, times of crisis reveal fundamental insights about an organization, and COVID-19 is no exception. First, we have seen the remarkable resilience of our people and the tremendous strength of our culture. We talk every day about the magic of Equinix. a reference to our culture that might sound light or ephemeral to many, but when a global pandemic puts every aspect of your business and your life into flux, you quickly realize that 10,000 people committed to values like we before me and find a better way is truly a force to be reckoned with. Second, we're seeing a magnification of the role that Equinix plays not only for our customers but in the basic operation of our society. The massive work from home experiment in which we find ourselves has created a spike of near-term demand from a variety of customers, much of which we believe will sustain even as we calibrate on a new normal. And perhaps most importantly, the unique characteristics of this particular crisis have increased the resolve we see from customers relative to their focus on digital transformation as a long-term priority and have highlighted the relevance of Equinix in supporting these efforts. But this crisis has also created a level of distraction and friction in the overall economy that reinforces the importance of the real-time, on-demand scalability provided by services like ECX Fabric and Network Edge and highlights the need for us to continue our efforts to deliver an even more digitally enabled experience for our customers. And finally, it's times like these where we must stay focused on long-term value creation and maintain the level of commercial discipline that has served us so well for the past decade. We continue to make prudent decisions in the face of our current realities maintaining the priorities I outlined, and ensuring that our balance sheet will sustain us through a wide range of scenarios. These explicit decisions, along with some limited purchase and installation delays, have led us to modestly widen our full-year guidance. But we continue to see strong underlying performance of the business, with particular vibrancy in our market-leading interconnection franchise, which is rapidly approaching a billion-dollar run-rate business. Our funnel remains healthy, with a line of sight to a strong Q2. and we're reaffirming our AFFO guide at the midpoint for the year on a constant currency basis. We are delighted that the Equinix business model continues to be resilient through times of uncertainty, enabling us to step up for our employees, our customers, and our communities. While there are undoubtedly many challenges and much uncertainty still in front of us, I've never been more optimistic about the future of Equinix and the magnitude of the opportunity ahead. Now let me turn to the quarter and the details of our results. We had a great start to the year delivering strong Q1 bookings underpinned by a diverse customer demand and robust interconnection growth. Our bookings span more than 3,000 customers with cross-border bookings up substantially year-over-year. We processed over 4,000 deals in the quarter as our retail go-to-market engine continues to scale in response to our expanding market opportunity. Turning to our results as depicted on slide three, revenues for the first quarter were $1.4 billion, up 7% year-over-year. Adjusted EBITDA was up 5% year over year and ASFO was meaningfully ahead of our expectations. Interconnection revenues grew 15% year over year, steadily rising the last few quarters and a strong reflection of demand across our portfolio of interconnection products, supporting a variety of customer needs and use cases. These growth rates are all on a normalized and constant currency basis. Our interconnection portfolio reflects a unique product set that is driving quantifiable customer value. We now have over 370,000 interconnections and delivered our 13th consecutive quarter of adding more interconnections than the rest of the top 10 competitors combined. In Q1, we had an incremental 6,800 interconnections fueled by video streaming and conferencing services not set by a slight increase in network grooming after a Q4 pause. Peak Internet Exchange traffic grew 44% year-over-year and over 20% quarter-over-quarter, a significant jump driven by work-from-home traffic spikes. Customers are scaling into previously-provisioned 100-gig growth capacity and ordering new capacity as we head into Q2. And ECX Fabric continues to be a bright spot with a strong growth in volume and ARPU as higher bandwidth and inter-metro connections become a larger share of the total. In March, we closed our acquisition of Bare Metal Leader Packet accelerating our ability to deliver physical infrastructure at software speed and enabling both service providers and enterprises to quickly and seamlessly deploy hybrid and multi-cloud architectures. Fair Metal is a rapidly emerging category of digital infrastructure that enables businesses to deploy workloads on secure single-tenant hardware distributed geographically to support high levels of application performance and integrate fully with their choice of software and management platforms across a range of vendors. Deploying bare metal as a service on platform Equinix allows companies to accelerate time to market and reduce capex while enabling new use cases that require both public cloud and private infrastructure. This is a strategic part of our vision to evolve platform Equinix, interconnecting and integrating global businesses at the digital edge. We're excited to welcome the packet team on board and are pleased to report that we expect the packet acquisition to be roughly breakeven in 2020 from a dilution perspective. In April, we also announced our next milestone in our hyperscale strategy, launching a new X-scale JV in Japan with GIC, following the success of our initial X-scale JV with GIC in Europe. Our X-scale approach is a critical element in our strategy, amplifying our already deep balance sheet and allowing us to deliver superior returns on invested capital while strengthening Equinix's leadership position in the cloud ecosystem and leveraging our substantial existing presence and go-to-market strength in major markets around the world. Now let me cover highlights from our verticals. Our network vertical achieved its third highest bookings, driven by strong network reseller activity, as well as meaningful capacity upgrades to support increased bandwidth for work-from-home employees. Expansions included Hurricane Electric, a leading global Internet backbone, utilizing ECX fabric across 33 locations to allow enterprise customers real-time access to their IP transit offering, as well as reseller gold data a leading America's telecom provider deploying edge nodes in advance of a cable landing station to improve connectivity with Latin America. Our financial services vertical continued to diversify led by APAC and capital market wins. This sector saw healthy new logo ads with meaningful growth in Fortune 500 and Global 2000 customers. New wins and expansions included a Fortune 500 financial services firm re-architecting their network and securely accessing ecosystem partners, and a top five global currency exchange tapping into our dense financial services ecosystem across eight locations. Our content digital media vertical saw solid bookings with strength in video and social media. Expansions included Zoom, extending coverage and scale to support their explosive market demand, as well as TikTok, a top 10 social media platform deploying edge nodes to support coverage and scale of its content delivery platform. Two good examples of COVID-related demand on platform Equinix. Our cloud and IT vertical also saw strong bookings led by and a significant increase in ECX fabric participants. Expansions included a Fortune 500 security and networking company deploying infrastructure to support new product offerings worldwide, and , a Japanese IaaS and MSP, deploying infrastructure to support customer experience and ecosystem access. Our enterprise vertical saw healthy bookings despite COVID-related friction in the back half of the quarter. reflecting broad strength including government, healthcare, and education. We continue to focus on helping firms re-architect their infrastructure to solve for the challenges of speed, scale, and security while enabling the move to next-generation digital platforms. New wins included Frigia Inc., a US healthcare platform deploying regional infrastructure to deliver an enhanced customer experience, as well as a Brazilian education institution deploying to support digital transformation and improve performance. Our channel program accounted for approximately 30% of bookings, and we continue to see great productivity from this go-to-market vector. We processed over 2,000 channel deals this quarter, our highest ever, with wins across a wide range of industry segments with projects focused on digital transformation efforts as well as COVID-19 response. New channel wins this quarter included a notable win with Verizon for a premier U.S. retailer transitioning from on-premise data centers to a hybrid multi-cloud solution, to enhance elasticity and performance, and a joint win with British Telecom for a Fortune 150 biopharma firm deploying a multi-region SD-WAN solution optimized for speed and agility. Now, let me turn the call over to Keith to cover the results of the quarter.