Equinix, Inc.

Good afternoon and welcome to the Equinix first quarter earnings conference call. All lines will be able to listen only until we open for questions. Also, today's conference is being recorded. If anyone has any objections, please disconnect at this time. I'd now like to turn the call over to 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 that 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, as well as those identified in our filings with the SEC, including our most recent Form 10-K, filed February 12, 2025, and our most recent Form 10-Q. 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 to an explicit public disclosure. On today's conference call, we will provide non-GAAP measures. We provide a reconciliation of those measures 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 Adair Fox-Martin, 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 ask one question each. At this time, I'll turn the call over to Adair.

Thank you, Chip. Hello everyone. Good afternoon and a warm welcome to our earnings call for the first quarter 2025. I'm very pleased to share that in Q1, our team executed exceptionally well and outperformed across multiple facets of our business. I'd like to call out three salient indicators of this strong performance. First, Our team delivered better than expected financial metrics, including revenues, adjusted EBITDA, and AFFO. As a result of this performance, we are raising our guidance on each of these metrics. Second, our sales team executed remarkably well in building customer momentum, improving deal conversion, and shortening the deal cycle, all whilst maintaining favorable pricing. Third, our strategy is resonating in the market. Our moves around serving better, solving smarter and building bolder have already enabled us to cultivate a stronger pipeline for the range of products and services offered by Equinix. This gives us continued confidence in our projections for healthy recurring revenue step up through 2025 and in our growth ambitions for the long term. Before diving into our operating results, I'd like to take a moment to welcome Harmeen Mehta, who has joined our executive team as our Chief Digital and Innovation Officer. Harmeen is a visionary leader with a proven track record of digital transformation and innovation. She and her team are crucial to the execution of our strategy. Her experience in leading complex programs and developing innovative solutions should equip Equinix to better serve our customers and enhance both efficiency and user experience across our organization. So now I'd like to take a closer look at key financial metrics. As a reminder, the growth rates shared are all on a normalized and constant currency basis. In Q1, we delivered revenues of 2.2 billion, up 8% year over year, excluding the impact of power pass-through. This was driven by strong recurring revenue growth as we begin to see the impact of our second half 2024 bookings performance manifest itself in our recurring revenue trajectory. Our strong recurring revenue growth was offset by lower X-scale leasing and fit-out fees in the first quarter, as we expected. Adjusted EBITDA margins increased to 48% of revenues, and AFFO per share increased 9% year over year. In both instances, results were above our expectations due to strong operating performance, lower utilities costs, and the timing of spend. Keith will provide additional insight into these numbers shortly. Turning to our customer momentum, we continue to cultivate and win significant opportunities across our product set, and in service to the enduring demand for both AI and the broader set of workloads associated with cloud services. We had several notable AI wins in Q1, including deployments across five markets. Generally, customers are increasingly looking to Equinix to deploy their most complex and interconnected inferencing and training infrastructure. Block will be the first company in North America to deploy the NVIDIA DGX SuperPOD with DGX GB200 systems. By deploying at Equinix, Block can leverage our unique ecosystems to ensure data privacy, flexibility, and edge connectivity to thousands of partners. We also had a significant AI win with Grok, the pioneer in AI inference. Grok are rapidly scaling their high-performance infrastructure through Equinix. Our unique ecosystems and wide global footprint will serve as a connectivity gateway to their customers and enable efficient enterprise AI workflows at scale. In our enterprise cloud ecosystem, Panasonic Information Systems expanded their partnership with Equinix in Q1 to support their evolving cloud database requirements. They've chosen Equinix for our seamless high-speed connectivity across key cloud platforms like AWS, Azure, and Oracle. We also saw expansion with Repsol, a global multi-energy company leading the energy transition. Repsol expanded their US operations in partnership with Equinix. With us, they have adopted a hybrid and multi-cloud environment that will support both their business and sustainability objectives. Essity, a leading hygiene and health company, is globally deploying Equinix's interconnection services, including Equinix Fabric and Network Edge, to enhance their efficiency of care whilst reducing their environmental impact. And finally, Brinks is rapidly expanding their digital footprint with Equinix, deploying virtual points of presence across key U.S. metros with additional expansion planned in the coming quarters. This architecture will ensure robust connectivity, security, and reliability in support of their growing business needs. This wide variation in customer use cases closed in Q1 underpins the core value proposition of Equinix and our durable business model. It enables us to cultivate the pipeline we will need to achieve our revenue growth targets for the remaining quarters of 2025. Turning now to our strategy, the momentum we experienced in Q1, coupled with our performance against key non-financial indicators, demonstrate that we are on the right track. As I shared last quarter, we are focusing on three strategic moves in pursuit of our long-term growth ambitions. Serving our customers even better, solving smarter for them and building bolder for them. Serve Better is our strategic move focused on ensuring our customers have the right resources in the right place at the right time so that we deliver value at every stage in their relationship with us. In Q1, our improved deal conversion and shorter deal cycles resulted in more than 4,100 deals across more than 3,200 customers. This pushed our growth and net bookings considerably past our expectations for the quarter. I am pleased to note that our Q2 bookings performance in April is pacing in line with our targets, despite the uncertainty prevalent in the macro environment. Soft Smarter is our strategic move focused on simplifying the consumption of our digital infrastructure and interconnection solutions. In Q1, we saw strong momentum for our Secure Cabinet Express product, a pre-configured co-location solution that makes it faster and easier for our customers to get up and running in our data centers. Now available in more than 75% of our IBXs around the world, this product accounted for one-third of all new cabinet sales in Q1, a nearly 300% increase year over year. Customers love it because it takes what used to be a complex, time-consuming process and turns it into a repeatable, streamlined experience. Our industry-leading interconnection franchise continues to perform well. Interconnection revenues grew a healthy 9% year-over-year on a normalized and constant currency basis, with more than 486,000 total interconnections now deployed. Equinix Fabric continues to over-index with strong adoption of Fabric Cloud Router in the quarter. With Build Bolder, we are building for the future, accelerating innovative ways to expand access to more digital infrastructure for our customers. This means we have shifted our strategy from building many smaller IBXs and phases to building fewer IBXs and larger phases. We have now 56 major projects underway in 33 metros across 24 countries, including 12 X scale projects. In the Americas, we added our Washington DC 17 project, which is expected to deliver 4,700 cabinets or approximately 50 megawatts of capacity to this key market in 2027. In APAC, Our Johor 2 asset is expected to add greater than 2,000 cabinets of capacity in one large delivery in 2027. And in EMEA, we are actively looking to accelerate delivery of capacity in metros like London and Paris. We continue to make good progress across our X-scale joint ventures, with our announced projects more than 85% leased and pre-leased. This quarter, we opened our Frankfurt 10 asset, which was 100% pre-leased, and we have a strong funnel of additional X scale opportunities in the coming quarters. Whilst we are optimistic based on our strong Q1 performance, we are closely monitoring the rapidly evolving macroeconomic environment. We have seen minimal impact from tariffs on our business directly in the immediate term. However, They are a concern for many of our customers and therefore are also a concern for us. The tariffs are felt acutely among specific industries in which many of our customers operate, particularly in consumer goods, transportation, energy and materials. Further, the uncertainty surrounding these tariffs, if protracted, can understandably lead to a wait and see investment posture amongst customers across all industries. We hosted our America's Customer Advisory Board last week. At that event, our customers, who represent a broad spectrum of industries, told us that they have made no significant adjustments to their digital infrastructure strategies beyond some pre-purchases of equipment. These customers are collectively signaling firm demand, which supports our operating plans despite the economic uncertainty. Whilst we are tempering our optimism with prudent caution, we believe that demand for our digital infrastructure will persist through varying business cycles and economic policies. Technology remains a critical driver of revenue growth, whilst allowing companies to reduce costs, enhance operating leverage and operate with more agility and responsiveness to their customers' needs. Additionally, Equinix is highly diversified across geography, product mix, industry, and segment, which historically has contributed to our resilience in the face of market dislocations. This along with strong financial performance, positive customer momentum, a healthy balance sheet, and a strategy that is resonating in the market keeps us confident in our operating outlook for underlying recurring revenue throughout 2025. With that, I'll turn it over to Keith to cover the quarter's financials.