Equinix, Inc.

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 any objections, please disconnect at this time. I would now like to turn the call over to Chip Newcomb, Senior Director of Investor Relations. Sir, you may begin.

Good afternoon and welcome to today's conference call. Before we get started, I would like to remind everyone that some of the statements we will 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've identified in today's press release and those identified in our filings with the SEC, including our most recent Form 10-K, filed February 17, 2023, and 10-Q, filed August 4, 2023. 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's done through an explicit public disclosure. In addition, we'll provide non-GAAP measures on today's conference call. We provide a reconciliation of those measures to the most directly comparable gap measures and a list of the reasons why the company uses these measures in today's press release on the Equinix Investor Relations page at www.equinix.com. We've made available on the IR page of our website a presentation designed to accompany this discussion, along with certain supplemental financial information and other data. We would 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 one hour, we'd like to ask these analysts to limit any follow-on questions to one. At this time, I'd like to turn the call over to Charles.

Thank you, Chip. Good afternoon and welcome to our third quarter earnings call. Despite an increasingly complex macro environment, we delivered another solid quarter of results and continue to drive strong value creation, raising both our dividend and our FFO per share outlook for the full year. While we continue to operate in an environment characterized by customer caution, this caution is balanced by a clear commitment to digital transformation, an accelerating interest in AI, and a growing reliance on Equinix as a critical partner in designing and implementing hybrid, multicloud, and data-centric architectures. Customers continue to see digital as a critical priority, and they remain focused on optimizing existing infrastructure spend and capabilities across cloud, network, and other categories. Demand remains strong, new logo growth is accelerating, and we see a highly favorable pricing environment, allowing us to deliver higher MRR per cabinet yields driven by price, power density, and strong interconnection demand. The net result is solid revenue growth, a strong forward pipeline, and continued optimism about our differentiated ability to deliver compelling value to our customers and, in turn, to our shareholders. In Q3, our go-to-market engine continued to execute well, with more than 4,200 deals in the quarter across more than 3,100 customers, including record new logos from high-value targeted customers. We saw solid performance across all aspects of our platform strategy, with data center services, digital services, and our X-scale offerings all coming together to address the evolving demands of our customers and strong cross-regional bookings highlighting the power of our unmatched global reach. On the AI front, we continue to cultivate and win significant opportunities across our existing customer base and with AI-specific prospects. A recent Gartner poll found 55% of organizations are in pilot or production mode with generative AI. We are seeing this manifest in accelerated interest from both enterprise customers and from emerging service providers looking to service this demand. We see strong similarities between the evolving AI demand and the multi-tiered architectures that have characterized the cloud build out for the past eight years and believe that our broad portfolio of offerings in tandem with our key technology partners will allow us to capture high value opportunities across the AI value chain along three key vectors. First in our retail business, we will aggressively pursue magnetic AI service provider deployments to support on-ramps, inference nodes, and smaller scale training needs. We are well positioned here with nearly 40% market share of the on-ramps to the major cloud service providers, key players in the AI ecosystem. And in Q3, we're proud to have been recognized as a 2023 Google Cloud Customer Awards winner for our work supporting Google AI technology. Key wins in this area for Q3 included CoreWeave, a specialized GPU cloud provider, deploying networking nodes at Equinix, leveraging our unique multi-cloud on-ramps and network connectivity across multiple metros. And Lambda, selecting platform Equinix to offer customers expanded regional connectivity, higher networking performance, security, and scale for an enterprise-grade GPU cloud dedicated to large language models and generative AI workloads. Second, we intend to meaningfully augment our X-scale portfolio, including in North America, to pursue strategic large-scale AI training deployments with the top hyperscalers and other key AI ecosystem players, including the potential to serve highly targeted enterprise demand. We expect some builds will be tightly coupled with our retail campuses, like our newly announced Silicon Valley 12X asset, while other builds will be larger scale campuses in locations with access to significant power capacity. And finally, in response to burgeoning enterprise AI demand, we will leverage our unique advantages to position Platform Equinix as the place where private AI happens, allowing customers to place compute resources in proximity to data and seamlessly leverage public cloud capabilities, all while maintaining control of high-value proprietary data. We also anticipate a dramatic acceleration in inference workloads and see Equinix as well-positioned to deliver performance and economic benefits derived from our reach, network density, and cloud adjacency. While still early, we're seeing broad-based demand for private AI from digital leaders, with specific wins in the transportation, education, public sector, and healthcare verticals, including Harrison.ai, a clinician-led healthcare artificial intelligence company that is dedicated to addressing the inequality and capacity limitations in our healthcare system by developing AI-powered tools in radiology and pathology, an exciting opportunity that not only drives our business, but clearly aligns with Equinix values. As AI demand accelerates, we are adapting our product portfolio and our physical platform in response to evolving customer requirements. In terms of data center design, we're using our co-innovation facility in Ashburn to evaluate technologies to support escalating power requirements and have already commercialized our early work in this area with liquid cooling solutions that are supportable in all markets, including support for direct-to-chip liquid cooling in 45 markets across all three regions. We are already supporting significant liquid-cooled deployments across a range of deployment sizes and densities, and we look forward to sharing more with you on our progress in this space. Turning to our results, as depicted on slide 3, revenues for Q3 were $2.06 billion, up 14% year-over-year, driven by strong recurring revenue growth and power price increases. Adjusted EBITDA was up 9% year-over-year, and AFFO per share was better than our expectations due to strong operating performance and timing of recurring capex spend. Interconnection revenues grew 9% year-over-year, with continued strength from Equinix Fabric. These growth rates are all on a normalized and constant currency basis. Our data center services portfolio continues to perform well. Given the strong underlying demand for digital infrastructure and the long duration in delivering new capacity, a factor that continues to drive positive pricing trends, we're investing broadly across our global footprint. We currently have 56 major projects underway in 39 markets across 23 countries, including 14 X-scale builds that will deliver more than 100 megawatts of capacity once opened. more than 50% of our expansion capital is supporting capacity in our major metros, where we have strong visibility to fill rates. Recurring revenues from customers deployed in more than one region stepped up 1% quarter over quarter to 77% as customers continue to move to more distributed architectures. On interconnection, we now have over 460,000 total interconnections, with 4,200 net interconnections added in Q3, thanks to healthy growth ads offset somewhat by continued grooming activity and consolidations into higher bandwidth connections. Equinix Fabrics saw continued momentum with record port orders and significant growth in provision bandwidth, up 8% quarter-over-quarter to more than 200 terabits per second. Internet Exchange had another strong quarter in APAC, with peak traffic in the region surpassing the Americas for the first time. Globally, peak traffic was up 9% quarter-over-quarter and 27% year-over-year to nearly 35 terabits per second. Recent interconnection and ecosystem wins include Southern Cross, expanding their relationship with Equinix by deploying their SX-NEXT subsea cable into our LA-4 IVX to boost aggregate capacity on their U.S. to Australia and New Zealand network by 500%. and the Warsaw Stock Exchange, migrating their primary matching engine and trading system to Equinix's Warsaw III IBX to offer more capabilities and enhance trading performance. We continue to invest behind our platform strategy, with revenue growth from our digital services portfolio significantly over-indexing relative to the broader business, including strong adoption of our network edge offering by enterprise customers. We're also seeing momentum in expanding our partnerships with leading technology companies, including the recent announcement of NetApp Storage on Equinix Metal, which is an integrated, full-stack solution that provides enterprise customers low-latency access to all clouds while keeping control of their data, a critical consideration for AI workloads. Key digital services wins this quarter included McGraw-Hill, a leading educational publishing company, deploying virtual hubs using Network Edge across multiple markets to connect to key cloud providers via Equinix Fabric. And a significant win with a global gaming company using Equinix Metal to support a major new product launch. Our channel program delivered another strong quarter, amplifying the reach of our sales team and accounting for over 65% of new logos, with wins across a wide range of industry segments focusing on digital transformation initiatives. We continue to see growth from partners like AT&T, Cisco, Dell, and HPE. Key wins included a top five U.S. public school district seeking to modernize aging IT infrastructure while improving systems uptime and enhancing cybersecurity. This win, executed with partners Dell Technology Managed Services, Kerasoft, and Impex Technologies, will deliver low-latency, multi-cloud connectivity and secure network access to key ecosystem resources while lowering operational expenses. Now let me turn the call over to Keith and cover the results from the court.