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Operator
Good afternoon and welcome to the Equinix Third Quarter Earnings Conference Call. All lines will be able to listen only until we open for questions. Also, today's conference is being recorded. If anyone has objections, please disconnect at this time. I'd now like to turn the call over to Katrina Reimel, Vice President of Investor Relations and Sustainability. You may begin.
Katrina Reimel
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, and 10-Q, filed on July 31, 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, 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 Web site 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 in the IR page from time to time and encourage you to check our Web site 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.
Equinix
Thank you, Katrina. Good afternoon, and welcome to our third quarter earnings call. This year has been an exceptionally challenging one as we all continue to navigate the economic, health, and societal changes happening in our world. Despite these challenges, we find Equinix in a unique position to help our customers adapt, respond, and accelerate digital transformation, a key priority for business across every sector and a critical driver for economic recovery. With over 10,000 customers, cultivating and curating ecosystems that enable digital business remains central to our strategy and has been accelerated by COVID as businesses shift to operating, selling, and expanding online. As we respond to these shifts, we remain focused on driving discipline growth, extending our global leadership, and effectively scaling our business. We are augmenting our capabilities and enhancing our service portfolio in targeted ways to expand our addressable market, responding to evolving customer requirements, and ensuring that we remain well positioned for the future. We continue to complement and extend our global platform both organically and through acquisitions, enhancing cloud and network density, and offering our customers the richest range of options to support their adoption of hybrid and multi-cloud as the architecture of choice. Platform Equinix allows our customers to more effectively distribute infrastructure, putting connectivity, data, security, and applications where they need them, and interconnecting them easily to the cloud, delivering the performance required to service increasingly global digital businesses. In October, we closed the acquisition of Bell Canada's data center portfolio, positioning Equinix as a leading national provider in Canada while giving Canadian customers the global reach they need. We also announced our long-awaited entry into India, one of the world's largest economies and fastest-growing data center markets, and now the 27th country served by platform Equinix. Once completed, our GPX acquisition will add two highly interconnected data centers in Mumbai and will serve as a critical foundation for pan-Indian expansion. Our global reach remains as important as ever, combining unparalleled facilities-based coverage with integrated systems, delivery, and care. This competitive differentiation continues to drive our business, with revenues from multi-region customers increasing 1% quarter-over-quarter to 74%, and revenues from customers across all three regions remaining at a healthy 62%. The Americas continues to lead in exporting business to our other regions, as network, cloud, financial, and manufacturing customers take advantage of our reach. We continue to deepen our penetration of the Fortune 500 and Global 2000, and the consistent growth of our top accounts demonstrates the depth of our addressable market and the stability of our business despite the pandemic, with over 90% of our top 50 accounts increasing their business with Equinix quarter over quarter. As we grow the business, we are also investing in our future, by making Equinix a place that attracts and inspires diverse talent and making sure that our mission reflects our responsibility to leave our world better than we found it. Equinix was recently recognized as one of the top companies for diverse talent and received the 2020 Green Power Partner Award from the US EPA, recognizing our contribution to helping advance the development of the nation's green power market. In September, we issued our first green bond offering as a mechanism to further invest in innovative designs and technologies. meaningfully increasing our efficiency and resource consumption to ensure we continue to operate sustainably and advancing our commitment to reach 100% clean and renewable energy across our portfolio. Turning to the quarter, in Q3, we continued to adapt our selling engine, tapping into a healthy demand environment to deliver another strong bookings performance. These results were driven by continued strength in channel bookings, solid interconnection growth, and firm pricing. and the quality and quantity of our pipeline looks strong as we close out the year. We continue to instrument and automate our business to support high deal volumes, closing over 4,400 deals in the quarter across more than 3,100 customers, with a significant quantity of these orders serviced through digital interfaces, giving our business superior predictability and creating a huge opportunity to drive attach rates for interconnection and other incremental services. Turning to our results as depicted on slide three, revenues for the third quarter were 1.52 billion, up 9% year-over-year. Adjusted EBITDA was up 11% year-over-year, and AFFO was again meaningfully ahead of our expectations. Interconnection revenues were 15% year-over-year as both unit volume and pricing continued to trend favorably. These growth rates are all on a normalized and constant currency basis. We now have over 386,000 interconnections. with 14 of our top metros having ecosystems with over 10,000 interconnections and growing. In Q3, we added an incremental 8,500 interconnects, more than the next 15 competitors combined, driven by work from home, video streaming, and enterprise cloud connectivity. Internet exchange saw peak traffic up 43% year-over-year, with a 7% quarter-to-quarter step-up, albeit returning to a more normal revenue growth rate after the surge of capacity buying in the previous quarter. Equinix Fabric also had a great quarter, eclipsing the $100 million in annualized run rate with over 2,300 customers, fueled by broad-based adoption across all verticals and geographies. As cloud adoption continues to accelerate, we are also making great progress extending our leadership in the cloud ecosystem, capturing new cloud on-ramps and continuing to expand our X-scale business. We're seeing strong demand for our assets in our initial European JV, and are on track to close our new JV in Japan with GIC in Q4, adding locations in Osaka and Tokyo. We've already signed our first X scale deal in Japan, securing a key anchor tenant who will take the full phase one capacity of Tokyo 12. And in Q3, we toppled the final domino to give Equinix direct cloud on ramps for all five of the top clouds across 11 of the metro's most critical for global infrastructure deployments, Silicon Valley, DC, Chicago, Sao Paulo, Amsterdam, London, Frankfurt, Hong Kong, Singapore, Sydney, and Tokyo. Nine more global markets than any other provider. We continue to adapt platform Equinix to the evolving needs of our customers. And despite the significant challenges of integrating a new team during COVID, we effectively merged our packet and Equinix roadmaps and launched our integrated Equinix metal offering in four global metros with plans for an additional 10 by early 2021. Equinix Metal is a feature-rich and fully automated bare metal service, giving our customers the option to deploy the physical infrastructure of their choice at software speed across our platform, enabling digital leaders to place infrastructure where they need it, when they need it. Equinix Metal is also directly integrated into Equinix Fabric, helping enterprises quickly interconnect to thousands of networks, enterprises, and clouds on platform Equinix, advancing our vision to make Equinix the world's digital infrastructure company. Now let me cover highlights from our verticals. Our network vertical continues to be a foundation of the platform, achieving its second best bookings, driven by carriers expanding capacity for digital business. New wins with local telcos included Airtek Internet, a Latin American fiber internet provider deploying a network hub to improve peering and performance, and Mint Telecommunications, a British regional network provider deploying infrastructure for increased performance, security, and scale. Our financial services vertical had a solid quarter, led by EMEA and the insurance sub-segment. New wins included a Fortune 500 commercial bank, simplifying their digital ecosystem, as well as expansion with BitFX, a subsidiary of Singapore Exchange Group, adding new qualifications for its FX trading solutions. Our content and digital media vertical saw particular strength in markets catalyzed by the shift to virtual, including video, social media, and gaming. New wins included Rakuten Mobile, selecting Equinix as the foundation to deliver its communication platform to global operators and enterprise customers, as well as an online real estate brokerage interconnecting to enrich digital experiences for our customers. Our cloud and IT vertical continue to over-index significantly with strength in the Americas and in infrastructure and software sub-segments as adoption of hybrid cloud continues to accelerate. We remain focused on enhancing our market-leading cloud density, adding eight cloud on-ramps this quarter alone, bringing us to 160 direct cloud-on ramps at Equinix, or 42% market share in our metros. Our enterprise vertical had another great quarter with particular strength in healthcare and manufacturing. New enterprise wins included healthcare companies Maxor Pharmacy Services, Sandata Technologies, as well as Garden Health, a leading precision oncology company. Our channel program continues to deliver great results, accounting for over 30% of bookings and generating over 60% of all new logos. We had great wins with reseller and alliance partners including Cisco, Microsoft, Oracle, WWT, and Zenlayer across a wide range of industry segments. Channel partners are also contributing to the success of our new market expansions. We're excited to expand our relationship with Bell Canada as a strategic partner, working to deliver industry-leading joint efforts, joint offers in Canada and globally. This partnership also allows Equinix to engage with Bell resale partners to build stronger relationships across the Canadian channel ecosystem. Other notable wins this quarter included Alestra in our recently acquired Mexican assets for an upscale retail chain, and Capgemini in Sao Paulo for a Fortune 100 pharma firm, both transitioning from on-premise data centers to hybrid multi-cloud solutions for elasticity and scale. Now let me turn the call over to Keith to cover the results for the quarter.
Platform Equinix
Thanks, Charles, and good afternoon to everyone. I hope you and your families are doing well during these unique times. As Charles noted, despite the challenges in 2020, our team continues to deliver. Equinix leadership is so very grateful and thankful for the almost 10,000 employees that come to work every day to make Equinix a success. We have a fabulous team and culture. This makes a huge difference. As it relates to the quarterly financials, we delivered another strong quarter with revenues adjusted EBITDA, AFFO, and AFFO per share ahead of our expectations. We had significant gross and pack bookings and once again benefited from net positive pricing actions. Performance against virtually every key operating metric was positive. Interconnection activity remained healthy with net ads towards the higher end of our targeted range, resulting in strong MR per cabinet step-ups in each of our three regions. In September, we entered into our third debt financing initiative in less than a year, raising another $1.85 billion. we used the proceeds of this debt raise to refinance a portion of our existing debt on a net present value positive basis. Effectively, the interest savings more than offset the redemption premiums and unamortized debt issuance costs, creating a financially attractive outcome for the company. As part of this capital raise, we issued our inaugural green bonds, demonstrating Equinix's continued long-term commitment to green our data center footprint and deliver wide-reaching environmental benefits, not only for ourselves and our communities, but also for our customers. And we established a green finance framework that raises the bar for sustainability in the data center industry. This new framework targets LEED Gold or Better on new construction, an objective to design average annual power usage effectiveness, or PUE, to 1.45 or better, which also exceeds industry benchmarks. To date, our refinancing activities have resulted in annualized interest savings of approximately $125 million. we have another $1.8 billion of debt to refinance, which at current rates could result in another almost $50 million of annualized interest savings. Now let me cover the quarterly highlights. Note that all growth rates in this section are on a normalized and constant currency basis. As depicted on slide 4, global Q3 revenues were $1.52 billion, up 9% over the same quarter last year, our 71st consecutive quarter of revenue growth. Q3 revenues net of our FX hedges included a $13 million benefit when compared to our prior guidance rates, largely due to a stronger Euro and British Pound. Global Q3 adjusted EBITDA was $737 million or 49% of revenues, up 2% compared to the prior quarter and 11% over the same quarter last year, meaningfully better than expected due to strong operating performance. favorable one-time benefits, including a reduction in COVID-related bad debt reserves, given strong customer collection activities, and timing of repairs and maintenance and other spans shifting between our Q3 and our Q4 quarters. Adjusting for the shift in EBITDA between quarters and after normalizing for FX and the Bell Canada asset acquisition, adjusted EBITDA was consistent with our expectations, and we expect Q1 2021 adjusted EBITDA margins to return to traditional seasonal levels. Our Q3 adjusted EBITDA performance, net of our FX hedges included a $6 million net FX benefit when compared to our prior guidance rates. Global Q3 FFO was $580 million, above our expectations on a constant currency basis, largely due to strong operating performance and lower income tax expense, but offset in part by higher seasonal recurring capex spend. As a reminder, our Q4 quarter typically includes higher recurring capex spend compared to any of our other prior quarters. Turning to our regional highlights whose full results are covered on slides 5 through 7. AMIA and APAC were our fastest growing regions by revenues on a year-over-year normalized basis at 16% and 11% respectively, followed by the Americas region which stepped up to 5%. The Americas region saw its second consecutive quarter of record gross bookings with healthy pricing favorable deal mix, and record exports to the other two regions. America's net cross-connect ads were the highest we've seen in several years, while we experienced negative billing cabinet additions in the quarter, largely due to timing of churn. Also in the quarter, we experienced the churn of some lower power density footprints in some of our acquired assets. This occurred a quarter earlier than expected. America's billing cabinet additions should return to traditional levels next quarter, and we expect a larger step up in the first half of 2021. After quarter end, we completed our acquisition of 12 Bell Canada data centres and expect to close the remaining asset allocated to this transaction in November, positioning Equinix as a leading digital infrastructure provider in Canada, adding seven new metros and 500 net new customers to sell to across the platform. Our EMEA region saw strong bookings in the quarter with a healthy mix of small deals and new logo ads led by our London and Amsterdam markets. Interconnection was substantially up on a year-over-year basis, increasing to 12% of the region's recurring revenues due to both strong volume performance and favorable pricing initiatives. IBX asset utilization remains high, and more than half of our major expansion projects are being constructed in the EMEA region, including four hyperscale projects related to our EMEA 1JB with GIC. And finally, the Asia Pacific region saw another strong quarter of bookings led by the Singapore and Japan markets. We're seeing early traction with our pending acquisition of GPX India with interest across all of our customer verticals for the Mumbai market. We expect to close the GPX acquisition in Q1 2021. And now looking at our capital structure, please refer to slide eight. Our balance sheet remains foundational to our future success. We ended the quarter with $2.7 billion of unrestricted cash on the balance sheet. Our total liquidity included our unused revolving line of credit of $4.6 billion. Our net debt leverage ratio remains at 3.3 times our Q3 annualized adjusted EBITDA. During the quarter, we raised a net $197 million of equity, completing our 2018 ATM program at an average price of $777 per share. As we complete this year and head into 2021 and beyond, we intend to enter into a new $1.5 billion ATM equity program, which runs through Q4 of 2023, under which economics may offer and sell from time to time our common stock for working capital and general corporate purposes. As we've stated before, an ATM program is an efficient capital raising tool that we've used to fund our various business initiatives. and we continue to expect to use a balance of debt and equity to fund our future business needs and will continually seek to maximize the long-term value attributed to our shareholders. Turning to slide nine, for the quarter, capital expenditures were approximately $565 million, including recurring capex of $38 million. We opened three new projects in the quarter, including our on-train to Musk and Oman, creating a second neutral hub along with Dubai for the region's networks and subsea cable traffic. Additionally, we added 50 new projects to our expansion tracking sheet, including our first expansion in Mexico following the Accel acquisition in Q1, bringing our total significant builds to 41 projects across 25 markets and 18 countries, the result of a very strong customer pipeline. Approximately 75% of our major project spend is going to metros generating over $100 million in annual revenues, where we leverage the established ecosystem density and our installed customer base. and we continue to expand the ownership of land for development including acquiring land in Bogota, Frankfurt and Paris. Revenues from owned assets were 56% and we continue to expect this number to improve in the near term. Our capital investments delivered strong returns as shown on slide 10. Our 148 stabilized assets increased recurring revenues by 5% year-over-year on a constant currency basis. These stabilized assets are collectively 85% utilized and generate a 28% cash-on-cash return on the gross PP&E invested. And please refer to slides 11 through 15 for our summary of 2020 guidance and bridges. Do note our guidance includes the anticipated financial results from the Bell Canada acquisition, excluding the Ottawa 1 facility, which we expect to close in Q4. Starting with revenues. For the full year, we expect revenues to grow 8% on a normalized and constant currency basis, which includes an incremental $39 million compared to prior guidance due to the acquisition of the Bell Canada assets and an expected foreign currency benefit, offset in part by packet revenues being slightly below our prior range and the deferred timing of Exnex custom order work, which we anticipate will move to early next year. MRR churn is expected to be within our targeted range of 2% to 2.5% for Q4. We expect 2020 adjusted EBITDA margins of approximately 48%, excluding integration costs, an incremental $21 million compared to prior guidance due to the acquisition of the Bell Canada assets and an expected foreign currency benefit. Also, we expect to incur $20 million of integration costs in 2020. We're raising our 2020 AFFO, which is now expected to grow between 16% and 17% compared to the previous year. through the acquisition of the Bell Canada assets and an expected FX benefit and lower interest expense. For 2020, we expect AFFO per share to now grow between 10% and 11%. So with that, let me stop here, and I'll turn the call back to Charles.
Equinix
Thanks, KT. We're very pleased with our results this quarter, and as Keith noted, we're immensely grateful to our teams around the world who continue to keep the customer at the center of everything we do and are delivering sustained performance in the business. Even in these uncertain times, companies in every sector are embracing digital transformation as a critical business priority. We are uniquely positioned to help our customers scale with agility and create digital advantage. Our consistently strong bookings and healthy interconnection growth give us confidence in the strength of our digital ecosystems and the depth of the addressable market created by broad-scale digital transformation. We continue to invest in our strategy, evolving our platform in response to evolving customer needs, expanding our global reach to accelerate digital delivery, committing to a more sustainable future, and ensuring that our culture is widely recognized as a place that attracts, embraces, inspires, and develops exceptional and diverse talent. So let me stop there and open it up for questions.
Operator
Thank you. At this time, if anyone would like to ask a question, please ensure that your phone is unmuted, press star 1, and record your name clearly when prompted. If you need to withdraw your question, press star two. Again, to ask a question, please press star one. Our first question is from Jordan Sadler with KeyBank Capital Markets. You may go ahead.
Jordan Sadler
Thank you and good afternoon. So first, I just want to touch on what you're seeing in the business and whether or not you're seeing any evidence of the enterprise positioning ahead of 2021 for a possible acceleration vis-a-vis sort of the digital transformation you referenced in the release and your remarks?
Equinix
Sure. Yeah, no, I definitely think we're continuing to see enterprise as a very strong sort of vertical for us and both cloud and enterprise, which are sort of the two sides of the adoption of hybrid and multi-cloud as the architecture of choice. We're seeing that show up both on the supplier side in terms of really strong cloud performance and on the demand side of the ecosystem from enterprise. And so I think, you know, what I've been really pleased with is our ability to continue to generate both new logos and enterprise bookings, you know, despite COVID. We've adapted, I think, very well in terms of our selling and marketing engine, our overall go-to-market approach in light of, what is now a largely virtual selling cycle. But yeah, I think we are seeing enterprise continue to pick up in terms of their adoption of cloud, and I think we're going to be in a good position to continue to invest behind that. I think we're going to look carefully at the productivity of our sales teams and look to continue to add where we think that makes sense, but I think there's a lot of opportunity in front of us in terms of the enterprise opportunity. And if you look at how we're evolving the platform by adding things like Network Edge, continued success with Equinix Fabric, which we talked about is a $100 million run rate business now, and then Packit, which we now have in four markets with 10 more coming. I think those are all opportunities to expand the proposition for enterprises.
Jordan Sadler
And then just one point of clarity on the guidance. You touched on a couple of things, a couple of factors, but I just want to make sure I'm capturing all of it. For the fourth quarter, the implied AFFO guidance sort of suggests at the midpoint at least about a 15% decline from what you produced in 3Q. And I know there were a bunch of puts and takes. And I think the magnitude is smaller at the adjusted EBITDA line in terms of the decline. But maybe you could just walk us through that. Keith, what sort of driving that?
Platform Equinix
Sure. Like anything in Q3, you can see that we had just an excellent quarter. And I'd like to say that things generally balance themselves out. But in Q3, we tended to have more goodies than we had baddies, if you will. And as a result, we meaningfully overperformed relative to our guide. But let me try and put that in perspective for you because it Again, when you look at the year in totality and you look at the margin for the year, we're right where we want to be. And then you add in a creative transaction like Bell Canada, we're delighted with what's going on and then throw on top of that currency. But as it relates specifically to the operating costs, there's really three main things that have happened between Q3 and Q4. So let me deal with Q3 first. There's roughly $15 to $20 million of what I call favorables. And that favorable comes in three areas. One, repairs and maintenance was lighter than we had planned. And because of that, we have costs moving from Q3, where you got benefit, into a quarter where we typically do more repairs and maintenance. You moved into Q4. So you have a roughly $11 million swing there, quarter over quarter. The second one relates to utilities. And again, no surprise to, I think, many people on the call. utilities does move around a lot, their seasonality. But we had basically between one-off rebates and other things, we had another sort of $5 million of favorable going through the utility line. And then you flip that into Q4 and we're going the opposite direction where basically we have some settlements with our indirect power purchase arrangement for our sustainable energy. And so you're swinging about $10 million there. And then the last thing that happened was effectively, as I said in the prepared remarks, when we started the year, as you might recall, in Q1, we had basically a negative hit to revenues of $3 million and $14 million to EBITDA. At that time, we took a very conservative view on basically what the implications of COVID-19 would be on our business. And because customer collections have been very, very strong, we're in a position to release a portion of the reserves that we created. And so we had a six, I think about six, $7 million benefit in Q3. But the flip side is, as we move, as we deal with COVID and the return to office and one-off payments to employees, we're moving to a negative four. And so all of a sudden, you've got everything going from, if I can summarize it, sort of a a positive sort of 15, 20 million in Q3 to a negative 15, 20 million in Q4. And that's why I was very deliberate in my comment that once you get back to Q1, we return to our seasonal norm, if you will, for EBITDA margins. So, again, there's a lot of moving pieces, a lot of favorability. And, you know, quite openly, I think we've got a conservative guide on our Q4 numbers. But if everything went as anticipated, that's what you would see. and yet we'd still deliver against our expectations for the year, plus the uptick from currency and then Bell Canada. Long-winded response. I apologize for that.
Jordan Sadler
Thank you for all the color. Appreciate it.
Operator
Thank you. The next question is from Sammy Badri with Credit Suisse. You may go ahead.
Sammy Badri
Hi. Thank you very much for the question. I just wanted to touch on first the channel strategy, and you've obviously been doing a lot of trailblazing and creating new connections and new partners and formulating a much more robust sales motion than I think many of us really kind of thought about a couple of years ago. So I was hoping you could give us a little bit of an update, not necessarily on the percentage of revenue flowing in from channel partners, but more specifically, has this channel strategy now formulated to where you guys want it to be, or is there still essentially a lot more to go with more channel partners to come and to complement your business, complement how you sell through or if you guys are going to continue selling with the channel, just so we can understand how this could potentially evolve over the next coming years.
Equinix
Yeah, great question, Sammy. The short answer is I think there is a long way to go still. I think a bunch of opportunities still in front of us. As you've noted, you were 30% of our bookings coming through the channel, but primarily on a sell-with basis. a lot of success in selling alongside our cloud partners and other technology partners who I think have an aligned interest on, you know, sometimes somewhat begrudgingly but sometimes in a quite embraced way on hybrid and multi-cloud as the architecture of choice. So, you know, but I think there is a way. If you really look at it, one, we probably actually have gone through a pretty normal cycle where we added a lot of partners, realized that we weren't probably having that, you know, that it was a smaller subset of them were really driving productivity and have actually, you know, gleaned that a bit and more focused on the partners that are really making a significant difference in the bookings now. But I think the areas where we have room to go is really finding those partners who have a more sophisticated selling capability and can sell on their own who can create and then leave this. And then also partners who bring complimentary offerings that provide a more complete solution for our customers. And I think we're definitely seeing success. I mean, you look at, you know, companies like VMware, who's a great partner of ours for people who have made big investments in VMware as their tools of choice in terms of infrastructure. within their environment, and then sort of marrying that up with the value proposition that Equinix brings, both in traditional COLO and what they might be doing there, but also with services like the Equinix metal offering, which we just brought to market off the backs of what we acquired with packet. So I think there's a fair amount of opportunity there in terms of growing the channel and taking it to a new level. Thank you.
Sammy Badri
And then one quick follow-up regarding just the X-scale JV and the initiatives. You've clearly had some new announcements in some new regions with GPX in India coming into the pipeline. Is there a potential for taking the X-scale JV, you know, I want to say sales motion or opportunity into regions like, you know, in India and into potentially, say, Latin America where there is high growth and large opportunity for both hyperscale or just very large deals?
Equinix
Yeah, I think we've gotten comfortable with our ability to navigate some of the complexities associated with these things. As you will recall, it took us a while to get there on the X scale JVs and get them sort of fully worked through all the complexities that come with that. But I do think there's opportunity for us to extend that either directly in terms of just additional JVs, which we have commented in this script and in others, that were already, you know, well underway on discussions in other markets where we think the JV structure will work effectively. And we think that, you know, that includes some of the markets that you described. But I also think there's other ways that we kind of think about potentially over time using, you know, quote, other people's money as a point of leverage in terms of getting, you know, financial partners who are really excited about the returns that we could offer. and that would give us the ability to gain, you know, more runway out of our balance sheet and focus our firepower on the, you know, high returning investments that are really down the middle for us. So I do think there's more opportunity for that there. I think a near-term focus is really going to be on additional markets where we would look at JVs, and I think you'll be hearing more about that from us in the coming quarters. Thank you.
Operator
Thank you. The next question is from Ari Klein with BMO Capital Market. You may go ahead.
Ari Klein
Thank you. Can you impact the performance in the Americas a little bit, turn it higher in the quarter, maybe just address that and whether or not that's something that could continue? And then you noted the expectation for improvement in the Americas, but how are you viewing the organic growth profile there and what will specifically drive improvement from here?
Equinix
Sure. Keith, maybe I'll start, and you can add anything that you want there. But look, we actually feel very good about the Americas business. We talked about over the last several calls that we expected to sort of return to about a 5% growth rate in the Americas towards the back half of this year, and you're seeing that now. As you noted, churn was a little bit higher. That was associated. Keith actually mentioned that in his script. really two larger deployments, one that came in a quarter earlier than we thought, the other one that was, you know, came in as forecasted in terms of churn. But candidly, those were both deals that wouldn't have met our commercial hurdle in terms of deals we would have done in terms of our focus on really ecosystem-centric, you know, interconnection-oriented footprints. And so even though we're seeing some, you know, we saw a negative, you know, billable cabs movement associated with that churn, I think as we backfill that with the right kind of business that we're showing that we can find out there and deliver bookings on, I think we're actually going to get improvement on yields in the facilities that were impacted. So it's definitely a more mature market. We're working hard to continue to drive traction in the enterprise market and seeing good success there. I do think there's organic growth opportunity for us, particularly in the enterprise market, and also, by the way, using that, you know, that selling force to export business to our other regions, which is playing a very, very key role in doing. So I think that's the quick snapshot of the Americas. And, again, definitely a more mature market. It has returned to growth pretty nicely. I think, you know, we are going to see some of those turns come out that were, you know, deals that we wouldn't have really targeted prior. And I think as we stabilize, we'll see, you know, continued improvements in yield.
Platform Equinix
Charles, I would just add, you know, a couple comments I would just add to what Charles said is, number one, when Charles made the reference to the fact these aren't deals that we necessarily would have done ourselves, having now churned it, churned those deals, what you've actually effectively seen is our MR per cabinet increase, and it's part of the reason for that increase. The second thing that's really important is, you know, we are dealing with a mature market, but two points are worthy of note that were in our commentary. Number one, America's had one of its best quarters ever, so that's another positive. But the interconnection activity continues to be exceedingly strong, and that's on a net basis, and so you've got a very healthy ecosystem that's being developed And on top of that, we're investing around our new products and services. So I only think over some period of time you're going to see an acceleration of that opportunity, but you also will see a higher attach rate. And so despite some of the negatives that you see, there's some real positives that are coming down the road. The last thing is in my prepared remarks, I did make the comment that America has been choppy. It's been choppy for a few years, but we are anticipating a return next quarter to a more normal billing quarter. And then we do anticipate a more meaningful step up in the first half of next year.
Ari Klein
Thanks. And then just if I can, briefly on the packet acquisition, can you just talk about what the customer response has been to METL? And then I think, Keith, you noted in the guidance that the growth has been a little bit lower than you expected. Maybe address that, too.
Equinix
Sure, you bet. I'll tie those together. Yeah, we had previously guided 32 to 40, and I think that we're going to come in a little below that prior range. It's really an artifact of a decision that we made in terms of focusing on when we first did the acquisition, our belief was that we would kind of let the existing packet offering run for a period of time and then seek to launch a fully integrated Equinix Metal offer in early 21. But the response, frankly, from customers was super positive, you know, in terms of our intentions to offer, you know, metal as an offering. And they were really encouraging us to, you know, bring together the feature set that we envisioned in the organic product that we had underway when we bought packet. And so we decided to bring the teams together, but then we waited a bit in terms of, We wanted to make sure we had the offering in market before we put the real wood behind the arrow from a sales enablement perspective. And so I think that resulted in us being slightly behind in terms of where we had hoped to be from a bookings and revenue standpoint. But if you look at it in terms of what we expect to deliver in Q4 and what that implies on an annualized run rate of about 38, it's really not too far off expectations. And I think the encouragement that we're getting from customers about what they believe is possible with the external offering as we add to the markets over the course of the first half of 2021, I think there's great opportunity there. So we feel very good about it. We bought that business primarily because of the technology and the team and to really give us some credibility in a market we thought was super additive to our value proposition. And I would say along all three of those dimensions, it has been what we hoped for. The team is terrific. We've seen very little turnover in that team. I think they're a great cultural fit. They've come together with our engineering team to really develop, I think, an Equinix Metal offer that's going to be very successful in the market, and we feel very optimistic about the path forward. Appreciate the call, Eric. Thanks. You bet.
Operator
Thank you. The next question is from Michael Rollins with Citi. You may go ahead.
Michael Rollins
Thanks, and good afternoon. I was just curious, as you're getting into the 2021 budgeting process, if you could give us a preview on how you're thinking about balancing top-line growth with the company's long-term margin goals to get above 50%. And then just secondly, in the quarter, I was curious if you can unpack some of the strengths in non-recurring revenue sequentially in year over year and how to think about that level going forward.
Equinix
Sure. Keith, maybe I'll take the first one. You can comment on the second one if that works. You can add anything you want on the budget, too. But we're kind of well underway on that. We do believe that it's, and you've heard from us, Mike, over the years, the same old song and dance, if you will, which is, You know, we really think about this as a long-term, you know, long-term value creation is our objective, and we want to maximize market opportunity and leverage our significant differentiation to do that. And I think that does require that we continue to evolve our service offerings and our platform to be adaptive to what our customers are asking for, and I think that will require investment. But we also have a focus on continuing to drive operating leverage in our business and converting that into margin expansion. And so we continue to believe that that 50% is an achievable long-term target, and we want to drive margin expansion where we can. I think if you look at the operating performance and the sort of EBITDA levels that our mature markets operate at, it's something that we ought to be able to achieve. And we're very focused on trying to make some investments in automation to drive operating leverage and then we'll trade off when we drop that to the bottom line and give margin expansion versus putting that in and doing things like adding additional services to the platform and investing in further automation. We'll come back to you, obviously, with more clarity as we align that, but that is the approach that we take, and I do think it's going to be a journey still for us. On balance, I would say I believe the opportunity is such that we ought to continue to invest in the business, and I think it would be a mistake for us not to do that. But we also need to make sure that we don't lose sight of the importance of operating leverage.
Platform Equinix
Michael, as it relates to the second question, so this quarter we did roughly 5.8% of our revenues came from non-recurring. In fact, that was a meaningful step up, as you note, over the prior year and also over the prior quarter. In fact, we actually did a little less than we anticipated. We thought we'd do $4 to $5 million more this quarter than we actually did here. That all said, I did make the comment that that deferred custom work that we do as a company will likely push into the first part of next year. And I think it's fair to assume, for all the different reasons, that somewhere between 5.5% and 6% is a reasonable non-recurring revenue expectation. We'll certainly update that when we give the full annual guide in February, but that's a reasonable assumption to make vis-a-vis our non-recurring revenues. Again, it's relatively, you know, it's 5.8% on average for the year. It is for the quarter, and it's not a meaningful departure from where we were year-to-date last year. So I think we're about $245 million year-to-date last year at this point, and we're about $243 million year-to-date in 2020. So, again, I'm comfortable in the 5.5% to sort of 6% range, and then we'll update that accordingly.
Michael Rollins
Keith, just to understand the business activity under those dollars, can you describe what's happening in terms of is this representative of some of your customers that can't get to your facilities and they need your smart hands or they need your installation services more than they did in the past, or is this tied to just the normal course installations and what you're processing? Just curious if you can unpack a little more of what that is.
Platform Equinix
Yeah, sure. There's a number of things that certainly go on in that particular line. First and foremost, of course, there's the deferred installation revenue that we realize with every sale that we make. And certainly there's a drag-along effect for every MRR dollar that we book. There's an NRR dollar as well. And so you defer that over basically the relationship of that contract. Then in addition to that, at times there's goods for resale. There's custom work that we do as well. And think about a large you know perhaps a large hyperscaler or a large customer who's looking for build out of their environment and so we do some of that work and we do a fair bit of the work particularly for the hyperscalers and as a result it can be a little bit lumpy and maybe it'd be custom cabling and installation work for the customer so effectively they move in put their servers and their equipment into the racks and they're good to go but we do all the prep work again it's a it's a great line of business for us but It varies in margin return. Again, we use, in some cases, our own workforce. But that's a line of business that generates roughly 25% to 30% margins. And it appears on the non-returning revenue line.
Operator
Thanks. Thank you. The next question is from Colby Sinusel with Cowan. You may go ahead.
Colby Sinusel
Great. Just a few numbers-oriented questions. First off, just to make the point, so we should be adding, if I'm correct, $15 to $20 million back to our first quarter 2021 EBITDA when we're modeling before taking into other considerations like seasonality. Is that correct?
Platform Equinix
There's certainly the takeaway, the seasonal aspects. Colby, as you know, we have the FICA reset in Q1, and we also have our annual sales conference. So if you put that aside, and that's why I wanted to say back to traditional seasonal margins, that has ranged anywhere from 46% to sort of 48% to give you a sense over the last few years. But suffice it to say there, absent any investments that we've made, given Charles's comments, that is, you're talking about $15 to $20 million that would come out of the Q4 numbers.
Colby Sinusel
And then we add it back into the first quarter number.
Platform Equinix
Yes.
Colby Sinusel
Okay. And then secondly, you guys gave guidance back in 2018 at your analyst day of eight to 10% revenue and eight to 12% AFFO per share. And you gave that guidance for each year through 2022. You normally have an analyst every two years. It would have been in June of this year, but you didn't. Is that guidance that you gave back in 2018 in terms of how to think of the business still valid? And then if I could just sneak one extra question in there. You gave guidance earlier this year for $0 to $50 million impact from COVID-19. Curious, you know, where are we in terms of the actual impact year to date and what the thinking is for the fourth quarter? Thank you.
Platform Equinix
Charles, you want me to take those?
Equinix
Yeah, there's a few of them there. Why don't we... Why don't you go ahead and, yeah, jump in where you want there and I'll add.
Platform Equinix
Okay. Okay. Well, first and foremost, Colby, as it relates to the Analyst Day Guide, the 8 to 10% was a number that we embarked upon, again, in June of 2018. And as you know, we've done very well against those expectations, particularly around AFFO per share. Again, 8 to 10%, there's been a lot of activity. And so we've done a good job of normalizing both for currency and then for the acquisitions. And suffice it to say, you know, we are a third, well, I guess our third year into it and, you know, we're running ahead of what we originally told the market at that point in time. As it relates to the next five years, it's probably a little early to give you a sense. But generally speaking, I feel very good about sort of the range, the ranges that we were giving at that time. A lot has changed since then and we'll update you accordingly. including some of the acquisitions we've made and we've been very active as a business. But overall, I feel very good that we can deliver against that profitability target that we set for ourselves vis-a-vis on a per-share basis to make sure that the shareholders recognize the value that we've delivered. I'm sorry, I'm now... COVID-19 impact guide.
Colby Sinusel
Yeah, COVID.
Platform Equinix
As it relates to COVID, again, you're right, we... We basically set a relatively wide range, as you know, but then we targeted around midpoint. And you can see us starting to peel back some. There's definitely some impact, even, you know, as we talk a little bit about, you know, the packet acquisition and just, you know, the difficulty on making sure that we could pull it all together, as Charles said, in a COVID world. You know, that certainly slows it down a little bit. But put that aside for a second. I think overall the things that we were most worried about is what customers were going to go out of business? What payments were we not going to receive? What were the incremental costs? Certainly as a business, you know, again, we said $14 million of costs in Q1 at the EBITDA line. For all intents and purposes, we wrote back $6 million of that in the third quarter, and then we're going to book another $4 million of new costs in Q4. So net-net, you're sort of somewhere in the $10 million to $15 million range on EBITDA. And I would say I feel pretty good about that. As it relates to the top line, it's hard to quantify. There's certainly some impact from COVID. I think I'd size it in the $20 million to $30 million range. And here's how we got there. For a number of reasons, we've had very good success in being able to book, particularly on the gross line. There absolutely was. there has been some fallout from COVID where companies have gone out of business and would make concessions and other things. And so we're absorbing that. But I also think there's been a timing implication. And the timing implication, particularly in Q2 and less so in Q3, customers were having difficulties getting to sites and doing deployments and all that. And so the knock-on effect on the revenue line Again, our estimate, again, as we share internally and also with our board, is probably at a $20 to $30 million number. And so that sort of gives you a sense of the ranges that we've absorbed. Again, we're delighted with where we are vis-a-vis all the – what could have been when we first started here in Q1 and started locking things down. Clearly, we've done – meaningfully better than we originally anticipated from that original guide. But that's, I think, because the company has been running exceedingly well and our customers have been paying their bills as they come due, absent the few concessions that we've been making here and there.
Equinix
Let me just add a little color on all of them. One, just backing up the very first question you had in terms of, again, just to be clear, I think that what we're saying here is that the Q4 downtick, which is apparent in the guide, is really a matter of, you know, movement between Q3, which obviously significantly overperformed on EBITDA, that was, you know, that was pulled forward and, you know, shipped. And I think if you take that and you sort of adjust for that, the movement between quarters, I think you would see a much smoother trajectory. And then we would expect that to sort of continue to roll into Q1. with a margin profile that's more consistent with kind of what we typically see. So that's, you know, that's I guess clarification I'd offer on that one. In terms of the multi-year guide, we're going to come back and obviously provide that in a, hopefully we'll get back to an analyst day here this year and we can offer that. But I do think that we continue to believe that our addressable market opportunity continues to grow and I think we're going to continue to find a way to invest behind that. And then, again, on COVID, I think Keith gave the color, but there were a number of hard costs that we continue to, you know, see in that. There are definitely tradeoffs, and there's some things that are better, but, you know, we're also putting, we've made significant investments in terms of trying to address, you know, our employee well-being during this period of time, putting investments in making sure that work from home is a good experience for our employees. And so there's been some hard dollars that have hit that. It's tough to put all of the revenue impacts fully into play or into perspective, but overall, I've got to tell you, I think we're extremely happy with how the team has performed, you know, despite the pandemic. Thank you.
Operator
Thank you. The next question is from David Guarino with Green Street. You may go ahead.
David Guarino
Hey, guys. Thanks for taking the questions. I've actually got two legislative-focused questions for you. The first one, you know, with Prop 15 on the California ballot in November, could you help give us an idea of what the increase in Equinix's property tax bill would be if that measure were to pass? And then the second one in New Jersey, I'm just curious, have you started having any conversations with some of your financial tenants as a result of the proposed financial transaction tax there? And if you could just remind us of what percent of your cash gross profit comes from New Jersey, that would be great also. Thanks.
Equinix
Yeah, let me jump on this second one first and give a little bit of color, and then, Keith, maybe you can take the Prop 15 and add any color on sizing, you know, potential impacts from the New Jersey thing. But what I would tell you is, yes, obviously we're deeply engaged with our financial trading customers. We have a very healthy ecosystem globally, and certainly New Jersey is an important one. I would tell you that those companies are designed in partnership with Equinix to be highly resilient. And I think that they're going to make it clear that they can move their trading platforms around as they need to. Traditionally, that has been in response to a disaster. I think some of them would consider the New Jersey tax a disaster that they would respond to. I think we're there as a partner to support them in terms of making sure that they can continue to run their business effectively. I think that it would be, you know, it would be, you know, there would be a potential impact to that, but I think it would be a movement around the ecosystem, I think, in terms of being able to re-stabilize that trading volume in other venues. And so I personally think that, you know, I think people are, cooler heads are going to prevail, and I think we'll realize that that's probably not a great outcome, and it wouldn't accomplish what people had hoped for. But we're very closely aligned with our trading customers, and I think in a coordinated approach to try to make sure people are thinking clear-headed about that.
Platform Equinix
Thanks, Charles. And so I would say that as it relates generally to the legislative matters that come in front of us, particularly around tax, first and foremost, as I think we all know, Equinix is a U.S. REIT, and because of that, No matter what the outcomes are, I think we're not going to pay much in the form of corporate income tax. I don't think that would be a meaningful change. As it relates to some of the propositions, though, Charles, I think, has highlighted well what our position on the New Jersey financial transaction tax or the potential for that. Prop 15 in California, we have roughly 11 triple net leases, to give you a perspective. We own some of our properties. If it moved forward, Prop 15 moved forward, we would estimate it's not going to be a huge number, but it's probably going to be in the $5 million to $10 million range. That's at least our estimate today of what it could be. Again, we're paying very close attention to this. Again, we'll know over the coming quarters basically on the outcome, and then we'll update the investors accordingly on the future earnings calls.
David Guarino
Great. That's helpful. Thank you very much.
Operator
Thank you. And that was our last question. Speakers, I will turn it back to you for closing remarks. Thank you for everyone joining the Q3 call. That concludes the call. Thank you for participating in today's conference. All participants may disconnect at this time.
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