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Operator
Good afternoon and welcome to the Equinix Fourth Quarter Earnings Conference Call. All lines will be on 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 like to now turn the call over to Katrina Reimel, Senior Vice President of Corporate Finance 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're 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 filing with the SEC, including our most recent Form 10-K, filed on February 19, 2021, and 10-Q, filed on November 4, 2021. 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 the 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 following questions to just one. At this time, I'll turn the call over to Charles.
Equinix
Thanks, Katrina. Good afternoon, everybody, and welcome to our fourth quarter earnings call. We had a great finish to the year with our best bookings performance ever driven by an exceptional demand backdrop for our business, with continued strength across our platform, but more specifically in the Americas, low churn and continued momentum in our digital services portfolio. For the full year, we achieved over $6.6 billion of revenue, marking our 76th consecutive quarter of top-line increases, an amazing 19 years of continuous revenue growth, while driving attractive ASFO share to the bottom line. Amidst the dynamic and complex global landscape, we continue to deliver against our vision, and our fiscal year results demonstrate both the increasing relevance of our platform and our uniquely differentiated value proposition. Businesses globally continue to prioritize digital transformation as a foundational source of competitive advantage, and the secular drivers for our business have never been stronger, as digital leaders demand infrastructure that is more distributed, more ecosystem-powered, more flexible, more sustainable, and more interconnected than ever before. Increasingly, Equinix represents a critical point of nexus as customers implement hybrid and multi-cloud as the clear architecture of choice. And as a global market leader, we continue to innovate and expand our portfolio to respond to these evolving customer demands and capture the enormous opportunity ahead. As we look to 2022, the trajectory and underlying momentum in our business is exceptionally strong. with a solid demand pipeline, stable churn, and a rising price trend, resulting in a revenue outlook for the year that is at or above the high end of our long-term guidance range, and an AFFO per share outlook that is still within our long-term guidance range, despite pressure at the gross margin line associated with power price volatility in Singapore. Absent these specific dynamics, our underlying business performance would be producing AFFO per share growth towards the high end of our annual estate guidance, well ahead of our expectations. We have a robust global power hedging program that has been and we expect will continue to be highly effective at smoothing utility price volatility over the years, providing predictability and value across markets for Equinix and our customers. We believe the current dislocation in Singapore is transitory, with power prices showing signs of moderating in the second half of the year. Bottom line, the business is performing very well, and we remain on track to meeting or exceeding our analyst day objectives for both top-line revenue and AFFO per share growth And as we see these temporary headwinds moderate and continue to realize efficiency gains from prior year investments, we have a strong resolve and continued confidence in our ability to scale adjusted EBITDA margin to 50% by 2025. Turning to our results as depicted on slide three, revenues for the full year were $6.6 billion, up 8% year-over-year. Adjusted EBITDA was also up 8% year-over-year, and ASFO per share grew 9% year-over-year. Interconnection revenues for the quarter grew 12% year-over-year with solid unit ads reflecting strong momentum with Equinix Fabric as expanding use cases drive connections to more locations and more counterparties. These growth rates are all on a normalized and constant currency basis. Our global reach remains as important as ever. IEC predicts that by 2025, more than 50% of enterprise data will be generated at the edge, and customers continue to see Equinix as the best manifestation of the digital edge. This competitive differentiation continues to drive our business, with revenues from multi-region customers increasing 1% quarter-over-quarter to an impressive 75%. In December, we announced our long-awaited entry into Africa with our intended acquisition of MainOne, a leading West African data center and connectivity solution provider with a presence in Nigeria, Ghana, and the Ivory Coast, set to close in early Q2. This acquisition will mark the first step in Equincy's long-term strategy to become one of Africa's leading digital infrastructure providers and will position us well in the continent's largest economy. To fuel our ongoing global interconnection leadership, we're also targeting strategic Internet traffic flows by supporting and winning subsea cables such as Elelink, the first-ever subsea cable between Europe and Latin America, which recently went into operation with POPs in our South Hollow 4, Lisbon 1, and Madrid 2 IVXs. and by entering new markets like our recently completed Genoa Italy IBX and our newly announced IBX in Salala, Oman. Our data center services portfolio remains the bedrock of platform equinix, and we're excited about the recent appointment of John Lin to the position of EBP and general manager for data center services. John has delivered extraordinary results as the president of our Americas business and is a great choice to implement our strategy and extend our global market leadership and interconnected co-location. To that end, we continue to expand on our global footprint with 41 major projects underway across 28 metros in 19 countries, representing over 20,000 cabinets of retail and over 80 megawatts of X-scale capacity. We remain focused on simplifying, automating, and digitizing our services, allowing us to scale our business and enhance operating leverage, and we're already seeing the results of these efforts. For example, we recently launched our new SecureCab Express product, leveraging pre-deployed capacity to dramatically reduce cycle times and enable online quoting and ordering for our most commonly requested configurations. We expect to roll this new service out to customers in the coming quarters, driving increased customer responsiveness while simultaneously enhancing margins. Our global interconnection franchise continues to perform well, and we now have over 419,000 interconnections on our industry-leading platform. In Q4, we added an incremental 7,500 organic interconnections as enterprises drive growth and further enhance our ecosystem density. Internet exchange saw peak traffic up 6% quarter-over-quarter and 27% year-over-year, with peak traffic in APAC surpassing 10 terabits per second for the first time as service providers increasingly look to IX to improve Internet traffic delivery. Turning to digital infrastructure services, cloud computing has permanently reshaped customer expectations for speed and simplicity. Customers want to deploy infrastructure where they want it, when they want it, seamlessly integrating cloud-based workloads and private infrastructure and enabling agility and performance between the two. As a result, customers are embracing a broader set of our services, combining fabric, metal, and network edge to build virtual points of presence. And our planned expansions will fully enable this capability across 30 markets by the end of 2022. For the quarter, Equinix Fabric saw excellent growth, eclipsing $150 million in revenue run rate with a third of our customers now using Fabric for a variety of use cases across a broad set of destinations. Our Equinix metal business delivered strong results with a great mix of wins and new logos across verticals and a healthy backlog. And Network Edge saw continued traction with growth from new and existing customers as they used the service to implement WAN optimization and cloud-to-cloud routing. Shifting to Xscale, in January, we announced plans to expand Xscale into South Korea with an agreement to establish a $525 million joint venture with GIC to develop two data centers in Seoul. Total investment in our various hyperscale joint ventures, when closed and fully built out, is now expected to be more than $8 billion across 36 facilities globally, with more than 720 megawatts of power capacity. We currently have nine X-scale builds under development, and during the quarter, we fully leased the first phase of our Frankfurt 11 asset and the first and second phases of our Sao Paulo 5 asset, representing approximately 20 megawatts of capacity. Total X-scale leasing is now over 130 megawatts, and our initial JV in EMEA is over 80% leased. Now let me cover some of the highlights from our verticals. Our network vertical had solid bookings quarter with healthy new logo activity led by the Americas as companies expand and optimize digital capabilities to support both the delivery and consumption of data at the edge. New wins and expansions included a Fortune 200 telecom company deploying infrastructure to support the U.S.' 's first cloud-native, open-RAN-based 5G network. InLego Networks, an Australian cable systems operator, deploying digital infrastructure to support a new subsea cable across Southeast Asia, Australia, and the U.S., and an African local telco deploying a network hub in Lisbon to improve peering and performance. Our enterprise vertical saw another quarter of record bookings, as IDC predicts almost half of the global economy will be based on or influenced by digital in 2022, fueling strong demand for hybrid infrastructure. Q4 had particular strength in fintech, industrial services, and energy subsegments, with wins and expansions including NASDAQ, a Fortune 500 technology company, scaling its cloud-enabled infrastructure to deliver ultra-low latency edge compute capabilities from our NY11 data center in Carteret. Avaya, a cloud communications and workstream collaboration company, implementing an edge data center strategy on platform Equinix to streamline private connectivity for its customers. And ADT, the U.S.' 's leading smart home security provider, embracing the cloud with an infrastructure modernization effort spanning multiple geographies. Our cloud and IT services vertical also had solid bookings this quarter, led by the software and infrastructure subsegments, with good momentum in EMEA and APAC. Expansions included Zscaler, a leading Global 2000 security cloud provider, upgrading capacity for sustainable enterprise cloud transformations and growing network traffic at the edge. Wiz Technologies, a Singaporean full-suite IT service provider, deploying on Equinix Metal, and upgrading fabric services to support quick and seamless business expansion. And Oracle, a top-five mobile software provider, deploying FastConnect Cloud on-ramps to support new regions in Singapore, Milan, and Stockholm, bringing their total number of on-ramps available at Equinix to 24, more than any of their other partners. Our content and digital media vertical had strong lookings, led by the publishing and digital media subsegments and record channel activity. Expansions included CloudFlare, the US-based global web infrastructure and security company, upgrading and expanding their footprint in over 40 markets. Index Exchange, a global ad tech marketplace, expanding compute nodes in APAC to manage traffic growth, and a top three global credit agency, deploying regional network and cloud hubs in APAC to support its operations. Our channel program delivered a record quarter to close the year, accounting for 40% of bookings, and nearly 60% of new logos. And we have line of sight for channels to grow to 50% of our bookings in the coming years as we enhance our systems and processes and leverage our diverse set of partners to scale our reach. WINS were across a wide range of industry verticals and use cases with continued strength from strategic partners like Microsoft. Dell, Cisco, Google, and BT, including a significant win with Wipro and AT&T helping a utility company modernize its IT infrastructure in Europe and the U.S. So now it's time to call over Keith and cover the results for the quarter. Thanks, Charles.
Equinix
Good afternoon to everyone. I'll start my prepared remarks by saying our business is performing exceedingly well. Frankly, better than our expectations for both the quarter and year, and we're bringing our momentum into 2022. We had a great end to the year, delivering record growth in net bookings with very strong channel activity while recording our highest ever recurring revenue step up in a quarter. For the year, without any major acquisitions, revenues were up over $600 million. Closed over 17,500 deals in the 2021, highlighting the tremendous scale and reach of our business and the velocity of our go-to-market engine. America's region continues to pick up steam, growing 10% over the prior year, effectively double the rate of growth from last year, benefiting from strong leadership and a distributed portfolio of highly interconnected IBX assets, resulting in record bookings and lower churn. For the company, our churn settled at the lower end of our guided range of 2% to 2.5% per quarter, for an average of 2.1% per quarter for the year, our lowest level since 2016. which is highly reflective of our strategy to put the right customer with the right application into the right IVX. Quite simply, the decisions we're making are strengthening and extending our leadership position as the world's digital infrastructure company. Now, as previously discussed, perhaps top of mind for you, there are a number of macroeconomic factors that we continue to proactively manage, such as supply chain, power costs, interest rates, and inflation. As it relates to power costs, we're seeing approximately 130 basis points of in-year margin pressure due to the temporarily inflated power rates in Singapore and the lapping of the favorable VPPA settlements from Texas last February. For 2022, we're predominantly hedged to meet our global power needs, but intend to continue to layer in additional hedges for the remaining 2022 exposure and to meet the demands for future periods as we navigate past this unusually volatile period. As Charles noted, we expect the market dislocation in Singapore to be transitory, largely given that current prices are significantly higher than any other markets that we operate in, and the spot market rates appear to be trending down, although they do remain volatile. As reflected in our guidance, we expect second half margins to improve over the first half, and we remain on our path to deliver against our endless day adjusted EBITDA and AFFO margin expectations. As it relates to the rising interest rate environment, our balance sheet is very well positioned. We have minimal near-term exposure to rising interest rates with 95% of our debt fixed across a weighted average maturity period of over nine years. And despite the recent increase in interest rate, the cost of borrow remains at historically low levels while we enjoy returns substantially higher than our multiples of our cost of borrow and WAC. Our financial strength continues to feel significant and our balance sheet fueled by our strong cash generation capabilities, has great flexibility. Lastly, with regards to supply chain and the inflationary pressures in the marketplace, we've invested heavily in a sophisticated and forward-leaning procurement and strategic sourcing organization, allowing us to execute against a robust development pipeline across our platform while continuing to deliver against our return expectations. This is not to say there isn't congestion in the supply chain, but we feel very well placed with our partners and suppliers, resulting in limited delays against our expectations. To highlight that point, in the fourth quarter alone, we added 17 new projects to our IBX and Xfield build program across 14 separate markets, while we completed seven projects across six markets. Now let me cover the highlights for the quarter. Note that all growth rates in this section are on a normalized and constant currency basis. As depicted on slide four, global Q4 revenues were $1.706 billion, up 10% over the same quarter last year and above the top end of our guidance range due to strong business performance led by the Americas. Consistent with our expectations, non-recurring revenues stepped down to 6% of total revenues in the quarter due to timing of large customer installations. Interconnection revenues were 19% of recurring revenues, but strong growth across all three regions, reflecting the continued benefit of our global platform and diversified product portfolio. Q4 revenues net of our FX hedges included a $5 million headwind when compared to our prior guidance rates. Global Q4 adjusted EBITDA was 788 for 46% of revenues, up 11% over the same quarter last year, and above the top end of our guidance range due to strong operating performance and timing of spend. Q4 adjusted EBITDA, and our FX hedges included a $3 million headwind when compared to our prior guidance rates, and $5 million of integration costs. Global Q4 FFO was $564 million, in line with our expectations while absorbing the anticipated and seasonally higher recurring CapEx investments. similar to prior years. Q4 global MRR turn was 2 percent, at the bottom end of our targeted 2 to 2.5 percent range. Turning to our regional highlights, whose full results were covered on slides five through seven. APAC and Americas were the fastest MRR-growing regions on a year-over-year normalized basis at 11 percent and 10 percent respectively, followed by the EMEA region, which stepped back up to 9 percent year-over-year growth, as expected. The Americas region had another outstanding quarter, delivering record bookings with robust channel activity, strong net positive pricing action, and low return. The Americas momentum is broad-based, with 24 of our 27 metros increasing gross bookings year over year, led by our Boston, Denver, Mexico City, Los Angeles, and Toronto markets. The former Bell Canada assets continue to perform better than expected, in part due to increasing carrier and cloud deployments in our key Canadian markets. Our EMEA region had a solid quarter with strong retail bookings by our UK, Dutch, and German businesses. Interestingly, we're seeing growing customer interest in this region given our sustainability efforts, including the recently signed VPPA with a wind farm developer in Finland to cover over 30 megawatts of capacity. And finally, the Asia-Pacific region had a solid quarter with strong pricing and new local activities. We're experiencing good momentum in India with the GPX assets performing well above plan. Although Singapore remains capacity constrained, we welcome the government's recent decision to lift the moratorium on new data center builds. Going forward, new construction will need to deliver strategic value and international connectivity for Singapore's digital economy, but also needs to be at the forefront of sustainability. We feel extremely well positioned to deliver against the government's criteria. Now looking at our capital structure, please refer to slide eight. At the year end, we had unrestricted cash of approximately $1.5 billion, a step up from last quarter due to strong operating cash flow and approximately $400 million of ATM funding, offset by our investment and the dividend payment. In early January, we renegotiated our line of credit, providing us access to $4 billion of additional liquidity. while also increasing our financial flexibility under our new revised covenant package. Looking forward, we'll continue to take a balanced approach to fund yard growth consistent with our investment grade rating, while staying focused on creating long-term value for our shareholders. Turning to slide nine for the quarter, capital expenditures were approximately $817 million, including a recurring capex of $86 million, a meaningful increase over the prior quarter as expected. We opened seven major projects since our last call, including new IVXs in Genoa, Munich, and Perth, and a new X-scale asset in Osaka. We also purchased land for development in Dublin and Istanbul. Revenues from own assets represent 59% of our recurring revenues. Our capital investments deliver strong returns, as shown in slide 10. Our now 158 stabilized assets increase recurring revenues by 5% year-over-year. on a constant currency basis, the top end of our growth range as expected due to strong America's growth. These stabilized assets are collectively 86 percent utilized and generate a 27 percent cash-on-cash return on the growth PPE invested. And please refer to slides 11 through 16 for our updated summary of 2022 guidance and bridges. Do note, all growth rates are on a normalized and constant currency basis, and our guidance does not include the anticipated results from the pending close of the main one acquisition or any potential future capital market activities. Starting with revenues, for 2022, we expect top-line growth of 9% to 10% above the top end of our long-term range, reflecting the continued momentum in the business, MR churn is expected to remain within our targeted range of 2% to 2.5% per quarter. We expect 2022 adjusted EBITDA margins of approximately 46%, excluding integration costs, the result of strong operating leverage and efficiency initiatives in the business, temporarily muted by the higher utility expenses. We expect to incur $20 million of integration costs in 2022 for our various acquisitions. 2022 AFFO is expected to grow 8% to 10% compared to the previous year, and the AFFO per share is expected to grow 7% to 8%. 2022 CapEx is expected to be approximately $2.3 to $2.6 billion, including approximately $100 million of on-balance sheet X-scale spend, which we expect to be reimbursed as we transfer these assets into the JVs, and about $160 million of recurring CapEx spend. And finally, we expect our 2022 cash dividends to increase to slightly greater than $1.1 billion, a 10% increase over the prior year, or an 8% increase on a per share basis. So I'll stop here, and let me turn the call back to Charles.
Equinix
Thanks, Keith. In closing, we're immensely pleased with the underlying performance of our business and are as optimistic as ever about the opportunity in front of us. Although the transitory effects from power pricing impact elements of our 2022 guides, Our normalized results would indicate a business trajectory that puts us meaningfully ahead of our analyst day expectations. We continue to work hard to further mitigate the in-year impacts of the Singapore power volatility, and in parallel, intend to continue to strengthen our market-leading position as the world's digital infrastructure company by scaling and transforming our data center business, while also accelerating our digital services business to deliver on the promise of physical infrastructure at software speed. And we intend to continue to advance a bold ESG agenda, addressing the urgency of climate change with a commitment to climate neutrality by 2030 and fostering a culture and workplace where every person, every day, can confidently say, I'm safe, I belong, and I matter. Of note, we were thrilled to recently receive a perfect score from the Human Rights Campaign and be recognized as a best place to work for LGBTQ plus equality and are proud to be ranked number one in real estate in Just Capital's 2022 rankings of America's most just companies. Over our nearly 25-year history, we have created and cultivated a foundational set of advantages, superior global reach, now spanning 66 metros in 27 countries, advanced access to the world's most powerful digital ecosystems with more than 10,000 customers and over half the Fortune 500, the world's most comprehensive and advanced interconnection platform, and a track record of service excellence that gives our customers the peace of mind they deserve. These advantages are strongly aligned to market trends and nearly impossible to duplicate, a dynamic that continues to fuel strong growth and a rapidly expanding addressable market that we are confident will translate to compelling long-term value creation. As we strive to fulfill our purpose to be a platform where the world comes together, enabling the innovations that enrich our work, our life, and our planet, we will continue to show up every day remaining in service to our stakeholders, to each other, to our customers, to our communities, and to you, our shareholders. So let me stop there and open it up for questions.
Operator
Our first question comes from Jordan Sadler, KBank Capital Market. Your line is open.
Jordan Sadler
Thank you, and good afternoon. First, I'd like to just touch on maybe some of the macro factors that you identified, Keith, in your prepared remarks. First, just maybe on the margin impact related to the power costs that you're seeing in Singapore. I think you said there was 130 basis points. impact year over year, but what specifically was the impact that you're seeing within the 46% margin related to Singapore? And then separately, can you maybe discuss how you might be dealing with any other exposures, for example, in Europe, and if you were able to push through price increases to customers there to offset some of the exposure you might have had?
Equinix
Sure. Hey, Jordan, it's Charles. Let me step back and give you some additional color on the power pricing dynamics, and then Keith can add in both on that. We can sort of tag team discussion on the broader inflationary aspects of the business as well. You know, there's aspects of the power dynamic that are quite complex, but the net of it all is pretty easy to summarize. Other than Singapore, which I'll talk about, we continue to be really well hedged around the world. And as our bridges show, you'll see there the impact of really the 130 bps, which I'll touch on here in a minute. Other than that, we're really seeing limited margin impact from that. In markets with higher volatility, we've really been able to offset the increased rates through a combination of some targeted price increases, which as we've talked about in the past, we have the contractual ability to pass through, and offset in part also by strong operating leverage in the business, which we're very pleased about how that's materializing. But Singapore is clearly an outlier. Last fall, as we looked at the historical trends in that market and other factors, we, alongside our power advisors, decided that we were going to defer unlocking in Singapore. And we were pressing, one, given the rates, where the rates were at that time, and two, given an ongoing negotiation of trying to get to a multi-year sort of hedged or locked position. Then, you know, really the fundamentals of the Singapore power market just dislocated, really driving an unprecedented level of volatility, and so counterparties weren't really able to offer rate locks, and that's exposed us temporarily to the spot rates and leaves us a bit out of sync with what customers are experiencing in the market. So, That's where that exposure, you know, through the course of the year is what we're estimating at about 100 bps. Then there's an additional 30 bps on a year-over-year compare basis that are an impact of favorable dynamics from our Texas BPPA, you know, last year. And so the combination of those factors account for about the 130 bps on margins. So again, absent that, you'd be talking about a margin guide that'd be 47 and change, and I think in the broader context would really reflect the tremendous health of the business. So that's where we are on the margin issue. Across the rest of Europe, yes, there's volatility. As I said, we would sort of manage that through increasing targeted price increases. In some cases, those price increases We're going to phase them over a couple of years because we feel like they're just too big to roll through in one plug. But again, any pressure that we are seeing from that is being offset by nice operating leverage in the business. Maybe you can comment on broader inflationary sort of factors in Europe and elsewhere.
Equinix
Yeah, Jordan, when it comes to the inflation aspect, I just said we've invested heavily over the last, a couple years in, as I said, a procurement and strategic sourcing team. And so we're getting ahead of many of the inflationary issues. In some cases, we've got substantial inventory that we're housing at the supplier or the partner's location, and then we draw down on that over time. And so by locking in that commitment, we've been able to mitigate some of the inflationary risk that others might be experiencing, not to mention that we've got the supply available, where in some cases, others will not have the supply available. So I think we've done a real good job locking it in. We're working on an extended basis over many years. We look forward with what our buying commitments are going to be over that time period. And that's another aspect of our, again, our increased sophistication around what we're doing when and where and what we need when and where. And so the team is doing a good job of sourcing the larger material items for that. I would go on to say, though, the other area that is probably A little bit more difficult is just the human capital site. And that's, you know, one of the greatest risks that you see all across the world and just sourcing humans, not only to do the construction, but all the manufacturing. And so getting ahead of all of that just means that you have to commit earlier than you might otherwise have done before so that you can get yourself in the in the appropriate queue in the manufacturing cycles. All that to say is I think we're in a really good spot. We've seen limited delays thus far. Certainly prices have gone up in different sets of circumstances. as Charles sort of alluded to on his prior comment, you know, we're putting through appropriate price increases into the marketplace. And it would depend, certainly, on the market, but we're putting appropriate price increases into the market accordingly. And one of the things you've heard us say, and maybe I didn't, just to repeat it, This quarter, again, we had meaningful net positive pricing action. And I can't even think of the last time we talked about flat to negative pricing increases. And so as an organization, our price increases are more than offsetting our price decreases, which has served us very well in our operating plan.
Operator
Thank you. Our next question comes from Michael Rollins. Your line is open. We may have lost Michael.
Equinix
Let's go to the next person in the queue, please.
Operator
Thank you. Our next question comes from David Barton, Bank of America. Your line is open.
David Barton
Hey, guys. Thanks so much for taking the questions. Appreciate it. I guess I have two if I could. The first one, maybe Charles or Keith, you kind of highlighted some of the vertical strengths that we're seeing across different markets. I think what we're trying to get our arms around is as we kind of come out post-pandemic and you've got this kind of global – vision of where people who are still mired in COVID are doing one thing and maybe other economies are doing a new thing. Could you kind of elaborate a little bit on how we're watching the vertical demand evolve, what's going up, what's going down? And I guess the second question is, you know, now that we've got the Singapore moratorium lifted, it did kind of put a spotlight on this progression towards, you know, kind of green power. Could you kind of comment on What, if any, other geographies you see are kind of concerned about this issue? And obviously, you've been a leader in this, but I'd be interested to see what that leadership might be getting you from a demand standpoint. Thanks.
Equinix
David, I'll take the first one, and then I think Keith and maybe Kat can weigh in on the sustainability side as well, given that she's so close to that. I will tell you that we're seeing just tremendous strength, you know, across the board, really, in our verticals. It's interesting because as I've looked at the last few scripts, it seems like every time we say we have strength somewhere else. So it's not like we're saying. And, you know, we and and and as it relates to and I think that's really driven by this, you know, this really strong. movement towards digital transformation and people saying, hey, that is a critical source of competitive advantage, or at least keeping up. And they're making investments accordingly. And how they think about their infrastructure, how they think about the mix between cloud-based workloads and private infrastructure, I think is really moving in ways that the wind is at our back. And I think the team has done a great job of articulating our relevance to those buyers. And frankly, sales execution has been super strong. As it relates to COVID, I would tell you that we're not really – it is, you know, obviously, as you've seen, we're having ups and downs, and they're operationally challenging to be constantly dealing with sort of, you know, different mandates and mask mandates and when we have to be doing, you know, sort of testing people and when we're in the facilities, when we get an exposure, you know, dealing with that, et cetera. But, you know, the team has just done an amazing job on that. And I wouldn't say that I think we're seeing anywhere around the world that says, oh, they're kind of stuck in a pause mode due to COVID. People seem to be powering through that and saying, we've got to move forward regardless. And so I think we've seen really broad strength. Keith, do you want to take the Singapore moratorium and sustainability questions?
Katrina Reimel
Yeah, I'll take that off. I'll tell you, David, we're very excited to see the moratorium lifted out in Singapore. That is absolutely one of our strongest markets, and it is a chance to highlight our focus on sustainability. You're seeing us really try to get in front of this. You know, we're actually the first data center to announce a commitment to climate neutrality by 2030. We rolled out science-based targets. Now, underlying that is a very deep green program, whether it's enhancing our renewable energy coverage. It includes looking at areas like energy efficiency. which I am certain our investors are going to love as well because there's returns around those projects, as well as just broadening our commitment in talking with customers, we've seen a huge uptick in customer outreach around this. We used to talk to about 50 customers a year. We're now up to a run rate of 1,000 customers reaching out, asking for all sorts of data to help them really green their supply chain. So while it certainly is getting a lot of focus around the world, I do believe it's an opportunity. And there's markets, particularly the European markets, are heavily focused on this. And you're seeing us react in certain areas, like in Germany. You know, Germany is, if you go to any of our new German sites, they all have green facades on front of them, as well as implementing new renewable energy coverage. So I think you'll see us continue to lean in heavily around this.
Equinix
Yeah, one more comment, interestingly, is it is a big deal for talent as well. Talent wants to be working for companies that they believe are committed to sustainability and are doing the right things. And I think maybe that's particularly true in Amiga, but we're seeing that across the board.
David Barton
Awesome. All right. Thank you, guys. Really appreciate it.
Operator
Yeah. Our next question comes from Michael Rollins, Citi. Your line is open. Thanks. Can you hear me now?
Michael Rollins
We can. Great. Well, thanks for taking the questions. You know, two if I could. First, going back to the organic constant currency revenue guidance, I'm curious if you could just unpack some of the relative strengths to the annual target, how much might be coming from some of the pricing actions versus the pickup and demand for services, or if there's any other areas of strength that we should be mindful of. And then the second question is, For a number of quarters now, you've been discussing the evolution in the contribution to logos and bookings from the indirect channel. And as you've had more experience with that channel, I'm curious, once the customers come in through that channel, how do they look relative to the customers that you get from your direct sales force? Are they adding services, expanding, or are there different characteristics of their revenue lifecycle you know, versus, you know, an indirect versus direct.
Equinix
Thanks, Mike. So on the organic constant currency guide, I would say, you know, it's a combination of factors. Obviously, there is a, you know, we did say we're in a rising sort of price environment, but that's not a major factor. There's actually not a ton of that also that is associated with price increases on the power front. There's some in there, but that's not a major factor. You know, we are seeing, obviously, digital services outpace the broader business, but it's a small portion, right? I mean, the broader and traditional core business is so big that that's really the driving force. And so I point mostly to just momentum in the core business. You know, I think we just continue to win Geographic expansion is going well. Our acquisition assets are outperforming without exception. GPX is doing great. Bell is doing great. Excel is doing great. When we're building on that geographic advantage, we're selling into the hybrid and multi-cloud opportunity. Again, both customer demand is strong and sales execution has been excellent. I think it's driven mostly by, I think, the core, but we're also excited about the trajectory and the momentum that we see in digital services and how that's going to allow us to really respond to the evolving needs of the customer. In terms of channel, I would not say off the top of my head that a channel-acquired customer is meaningfully different. They often come in with a very solution-oriented mindset because typically it's we're working with a channel partner who's already selling to that customer something that is done better at Equinix. I would say that the mix of business through the channel is quite good. It's really in that sweet spot. I don't think they look meaningfully different. I think they grow at newly acquired customers writ large grow faster than But that's true of both channel as well as non-channel customers. So I don't think they differ dramatically, but we're going to continue to really look at that. In fact, it's one of the priorities for the year ahead is continuing to refine our segmentation and make sure that we're delivering the right services to the right segment through the right channels. And I think increased sort of sophistication on that front is going to continue to pay dividends both on the revenue line and the margin line.
Operator
Thanks. Our next question comes from Colby Sinsale, Cohen and Company. Your line is open.
Colby Sinsale
Hi, this is Michael on for Colby. Two questions, if I may. First, we've seen key interconnect assets in Africa, namely Teraco, get acquired by one of your peers. And there's also another large global data center company that's reportedly for sale. You know, given you still have that incremental turn of leverage that you can deploy opportunistically, I just wanted to get your latest thoughts on how you're thinking about M&A. And then also, you know, as a second question, you know, you did 10% year-over-year America's growth in the fourth quarter, you know, real acceleration there. Just wondering what you would expect to see from that business in 2022. Thank you. Sure.
Equinix
On the M&A front, I guess what I'd say is we continue to believe M&A is a very appropriate and powerful tool in the kit. We've been very successful at it. We're going to continue to look at it as an opportunity to extend our reach, scale our business in key markets, and bring in critical interconnection assets. And so, yes, we're actively involved in those processes. We're going to maintain a level of discipline on that, as we always do, and that means we're probably not going to win every deal. But it's really important, I think, particularly in markets with multiples that you could argue are overheated in the private markets. you know to maintain that discipline and in terms of the leverage yes we do we have that turn of leverage available that's a lot of balance sheet flexibility it's not burning a hole in our pocket so we're you know we're we're happy to continue to have it and and you know use it to drive the best returns in the business and that's you know our capital allocation strategy is always to put it where we think we can generate the best returns so but I do expect M&A will be a piece of that puzzle and I'm sure you'll hear more from us over the course of the year on that front. As for the Americas, we don't guide on a regional basis, but what an incredible momentum from that business over the last five or six quarters. As we said, you know, John Lennon team, our sales team and our ops team and really the entire team just, you know, really strong execution. Super excited to, you know, take John's immense capabilities and apply them more broadly across the business. But I think, you know, you're going to see, I do think that, you know, this digital transformation demand is following sort of a typical pattern. You know, really strong demand in America and then emerging in other areas. across the world, and we see that profile. But as you look at it, this quarter is pretty interesting. 10% in the Americas, 11% in APAC, 9% in Europe. Pretty darn strong across the board, and a nice rebound in Europe, and we're beginning to last some of the prior year increases that we saw there. I think we're really staying strong across the board, but I do expect continued momentum in the Americas
Colby Sinsale
Great. Thanks for the call.
Operator
Our next question comes from Nick Del Dio. Moppet Nathanson, your line is open.
Nick Del Dio
Hey, thanks for taking my question, guys. Two for you, maybe one for Charles and one for Keith. You know, first, you know, as alluded to a moment ago, we've seen a few deals happen in Africa recently, you know, most notably you buying Main One and Digital buying Terrico. I'm sure you looked at all of them, maybe some that didn't even trade. Why was main one the best asset for Equinix, and is there a path for catching up with TerraCo in South Africa over time? And then for Keith, on recurring CapEx, it seems like it's going to be at the very low end of your target range in 2022, and it's been towards the lower end for a few years now. Should we expect that to tick up in coming years, or is this kind of a new normal for recurring CapEx?
Equinix
Let me take Africa, and then I'll hand it over to Keith on the recurring CapEx side. Look, we continue to believe Africa is a very attractive long-term market. It is definitely more, you know, it is one that's going to evolve over many years. And we're active in that market, as you know. And I wouldn't draw any specific comparisons between deals because I think they provide different value. You know, but I will say we're very excited about main one. And we think it's a great, you know, sort of cornerstone to build from. You know, Teraco is a great asset. It's a great team and a good business. And, you know, we're going to – and South Africa is an important market. And so that one didn't go our way, and we're going to find – we're going to continue to – we're committed to competing in that market. You know, South Africa has to be a part of any thoughtful African strategy. And there's a variety of other paths for us in that market, and we're hard at work at them.
Equinix
and then keep protecting the recurring capex. And so, it's just on the recurring capex. Yeah, we are at, we tend to, we are at sort of the lower end of the range for fiscal year 22. Part of it's just timing, Nick, you know, recognizing that you, depending on what we have coming into the portfolio, it's going to dictate sort of the timing of the capex. So, that'd be one thing. And so, you saw an elevated Q4 number at roughly 5% recurring capex relative to revenue. It steps down, of course, in Q1, and then as we look through the year, it is roughly somewhere between 2% and 3%. But I think the biggest thing is really about timing and the number of new assets that we're bringing into the portfolio. And as a result, when you think about the level of recurring capex that has to be made, the newer the portfolio, the better the position you have on recurring capex. I would continue to model 2% to 3%. It feels like a reasonable approach. And, you know, we'll continue to guide you accordingly. But in fairness to your long-term model, I think that would be a fair point.
Nick Del Dio
Okay. Great. Thank you, guys.
Operator
Our next question comes from John Atkin, RBC Capital Markets. Your line is open.
John Atkin
Yeah, a couple of kind of EBITDA questions or related questions, and then one on X scale is, So I was just interested in what are the churn expectations that are embedded in your 2022 guidance and then noting the drop in Europe and EBITDA, what are some of the factors that drove that and how can we think about the margin developments by region and what are the special items to kind of be mindful of?
Equinix
Sure. Well, I think as it relates to churn, first and foremost, as I said in the prepared remarks, churn for the business was 2.1% on average per quarter for 2021. It was 2% in the fourth quarter, which was great. And in many ways, you know, as Charles sort of alluded to in his comments on revenue, part of the reason that revenues were so strong is, I'd like to say, there's no faster way to a revenue dollar than merely eliminating churn. And churn was at a very, very low level. As we look into 2022, there's not going to be a meaningful shift. We have gotten to sort of the range of 2% to 2.5%. That's indicative of what we think will happen. I think being in the midpoint is probably a fair approach at this stage. And we'll continue to update you on it. But there's nothing meaningful that would guide you differently at this point, John. As it relates to European EBITDA, there's a number of things that are going on. In Q3, one example is just the timing of costs more specifically, but if you look at the implications of Q4 relative to Q3, there's a German power rebate in the third quarter. And so you lap that into the fourth quarter, and then you've got higher seasonal costs in Q4, particularly with the winter months in Europe, you've got higher utility consumption. And so as a result, it has an impact on the margin when you look at it more specifically. And then there was just some outside services and increased hiring costs in the quarter. But there was nothing fundamentally different about Europe that was going on. And overall, our belief is the trajectory to our target of 50% EBITDA margins. We're still well on that path, notwithstanding the comments that Charles made related to Asian power. That's going to be very much a transitory matter and We'll get to the other side of that probably by the second half of the year.
John Atkin
And then on X scale, just curious any update on your kind of CapEx and growth assumptions, pricing assumptions as well given the hyperscale demand that we've seen in the sector as well as the high level of investment seen by a number of competing platforms. Just curious how you view hyperscale demand pricing and then your level of participation in terms of CapEx.
Equinix
Yes. Yeah, John, we've seen some increases in build costs, but we're striving to offset those, one, by continuing to be creative on the design front and continuing to try to get some of those out from a design perspective, and then also on the sourcing front and really working on the strategic sourcing side. And I think we're seeing returns relatively stable. I think pricing is aggressive but stable. I think that, yes, there is plenty of supply in the market, but there's even more demand. So I would say I think supply-demand is quite balanced in the X-scale realm right now. It's very chunky and very market-specific, so it's a little bit different than our retail business. But as you've seen, our uptake and lease-up, has been super strong thus far. I think the team's executed really well, and we feel good about that. So there's a lot of megawatts coming down the road and a lot of customer demand. So it's an exciting time, I think, for XScale, and we're pleased with the performance of that piece of the business. And it's important to just remind everybody that our exposure of the capital side is, you know, we have gearing of 10 to 1 on that CapEx, right? You know, so because we're only 20% of it and there's always leverage involved there. And so it really allows us to have a relatively modest overall exposure to that capital. And so we're putting the bulk of our capital to work on the retail side, you know, with really strong returns.
David Barton
Thank you.
Operator
Our next question comes from Simon Flannery, Morgan Stanley. Your line is open. Simon Flannery Great.
Simon Flannery Great
Thank you very much. Good evening. I wonder if I could come back to the margin question. You talked a couple of times about margin trends improving the second half of 22. Perhaps just help us with what gives you the visibility into that. Is that mostly Singapore? And how much clarity do you have there? And then you reiterated the 50 percent from by 2025. So given the move here on 22, do we see it going up fairly linearly from 23 through to 25? Are there other puts and takes there as we think about that long-term goal?
Equinix
Yeah. Well, what I say is, yes, the big factor on the margin profile in 2022 is Singapore, as we said, 100 BIPs of that. Then you have 30 BIPs associated with the year-over-year compare on the benefits we got from the DPPA. last year. And so that's the bulk of it. I mean, you can see in the bridge, there's, you know, 1.4 there, a margin in the step down, 1.3 of that is explained between those two factors. And so there's not, the rest is a series of puts and takes with some, you know, some expenses, some investments, and really solid operating leverage in the business. And so I would say, you know, it is mitigating the Sandport impact. It is driving operating leverage in the business, which is going to be a key focus for John and the team and continue to drive the scale in the business. And then a strong pricing environment. So I think we're continuing to see a solid pricing environment. We've demonstrated our ability to deliver distinctive value to our customers. And so as some of the inflation goes up, we're going to go ahead and offset that at some degree on the pricing. So I think all those factors sort of will lead us to some solid progression there from a margin standpoint. And I wouldn't guide on where it goes from there and how linear it is or not. I think we're going to make judgments in the business, as we always do, about investments and how to maximize long-term value creation. But I think what you heard loud and clear is the level of confidence on our part about the 50% target. And again, as we really dug in hard, which to some degree, the SAM4 dynamic was a real catalyst for us to do. It gave us, you know, I think an increased level of confidence about how operating leverage is materializing and that gives us confidence to sort of reiterate that 50% by 2025. All right.
Simon Flannery Great
Thank you.
Operator
Yes, Sam. Our next question comes from . Credit Swiss. Your line is open.
Sam
Hi. Thank you very much for the question. I'm looking at your same-store growth, and that definitely came in a little bit above people's expectations. And I'm trying to take some of your prior comments where you talked about if there was no Singapore utility impact, you would probably grow or be able to come in adjusted EBITDA margins of 47% and change. And this is making me think about the long-term picture and the road to 50%. Does the same store have to grow 5% plus for you to get to 50% adjusted EBITDA margin long-term by 2025? Or could you just maybe unpack, you know, that growth rate or that vector for us?
Equinix
Sure. Yeah, I don't think the short answer is no. We said, you know, we've typically guided it at 3% to 5% on the recurring revenue range. Obviously, really pleased with 5% off into that range for the stabilized assets. They move around a little bit depending on a variety of factors, but I think, you know, overall we're continuing as business, you know, churns in those markets. We're replacing it with a strong, you know, sort of sweet spot business, continuing to drive interconnection, continuing to expand fabric into more locations that drives more interconnection. And so I think that's going to drive good results. But I don't think that's – I don't think, you know, it's incumbent on us to have that happen to get to the 50s. I think there's a variety of sources of operating leverage in our business as we examine our ability to simplify, automate, digitize our business that I think will give us the trajectory that we need to get to that 50%.
John Atkin
Got it.
Operator
Thank you. Our last question comes from Ari Klein, BM Capital Markets. Your line is open.
Ari Klein
Thank you. Charles, you mentioned some of the challenges in hedging in Singapore. As you look at other markets where energy prices are elevated and hedges roll off, are you hedging at these higher prices? And Jeff, you also mentioned passing down some of those costs. What has been the response on the customer side from that?
Equinix
Yeah, look, I mean, undoubtedly customers, you know, aren't excited about it, you know, but it is, you know, it is the reality that, you know, and it's different. The reality is in deregulated markets, everybody's in the same boat. We're all exposed to the regulated rate, and if the rate rises more than a certain percentage, our contracts allow us to pass that through, and that's the baseline expectation of the customer. And so while they may not love it, that's just an expectation. I think in deregulated markets, it's a little more complex. We've had these multi-year hedges, which essentially allow you to dampen volatility and adapt to a rising rate environment more gradually. And so, that's typically what we've seen. That's the way hedging works in a, you know, you're either kind of chasing it down or following it up, you know, because your hedges, you know, work either plus or minus around a range. And so, I think, you know, we're going to be implementing it, you know, gradually over time as hedges roll off and sort of hedging into the new market rates as we, you know, roll those hedges out into future years. And it's important to remember, we've been doing this for many, many years. And so it's not really a new dynamic. There are definitely some markets that were more volatile and more spiky. And then you have to make a judgment about if your rate increase and the potential price increase, if the price increase reflects something that doesn't feel right from a long-term customer relationship standpoint, and we always take the long lens on our customer relationships, then we'll adjust accordingly. And that could mean that we have some pressure from that. But as you see in the bridges, we've been able to offset that with other operating leverage. And so we expect that to continue to be the case. This is an area where the scope and the scale of our business really helps us. And so, yes, there are factors out there that we have to deal with, and we deal with them carefully and with the customer in mind. And I think, as you can see, we feel confident we'll be able to manage through it.
Ari Klein
Got it. And are those price increases permanent? I guess if pricing or energy costs normalize, can that turn into a tailwind from your standpoint? Yeah.
Equinix
Yeah, very good question. Here's what I would say. There are different types of price increases. We're actually implementing some baseline sort of new pricing for new deals because of a broader set of inflationary characteristics and a deep confidence in the value that we deliver to customers. Those I view as more structural. But then in other markets, there are more temporal pricing adjustments associated directly with the utility volatility. And I wouldn't expect those to be permanent. If it retrenches, then we would want to give that back to the customer. But we've been hedged. Our hedging strategy allows us to really dampen that volatility out typically. We have definitely seen more volatility. So I wouldn't say we're going to just bank them regardless of what happens to power prices in the future. But I do think there's a level of those that are more structural in terms of new price points, new deals. Got it.
Ari Klein
Thank you.
Equinix
You bet, Eric.
Katrina Reimel
That concludes our Q4 call. Thank you for joining us.
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