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 objections, please disconnect at this time. I would now like to turn the call over to Chip Newcom, Director, 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 and those identified in our filings with the SEC, including our most recent Form 10-K filed on February 18, 2022. 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 Investor Relations 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 would like to also 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 information available. With us today are Charles Meyers, Equinix's CEO and President, and Keith Taylor, Chief Financial Officer. Following our prepared remarks, we will be taking questions from sell side analysts.
In the interest of wrapping this call up under an hour, we'd like to ask these analysts to limit any follow-on questions to one. At this time, I'll turn the call over to Charles.
Thanks, Chip. Welcome to the call. Good afternoon, everybody, and welcome also to all of you to our first quarter earnings call. We had a great start to 2022, delivering the best net booking performance in our history, fueled by strong demand across all 3 regions, robust net pricing actions, and near record low churn, resulting in our 77th consecutive quarter of top-line growth, the longest such streak of any S&P 500 company. We executed more than 4,200 deals in the quarter across more than 3,100 customers, demonstrating both the scale and the consistency of our go-to-market machine. While there are a number of macroeconomic factors that we continue to proactively manage, including rising interest rates, inflation, and geopolitical conflict, the business continues to perform exceptionally well.
Underlying demand for digital infrastructure continues to rise as enterprises across the globe and in diverse sectors prioritize digital transformation, and service providers continue to innovate, distribute, and scale their infrastructure globally in response to that demand. Unfortunately, the war in Ukraine is still unfolding, and we continue to be part of the vigorous global response to that conflict. As stewards of key elements of the world's digital infrastructure, we're committed to doing our part in maintaining that infrastructure to support free and open communications and aid in humanitarian relief. While we do not have operations in Russia or Ukraine, our employees have shown incredible generosity supporting Ukrainian refugees, particularly our team in Poland. Looking more broadly at our responsibilities as a market leader, we continue to advance a bold Future First sustainability agenda that reflects our company's values across our environmental, social, and governance initiatives.
We recently published our 2021 corporate sustainability highlight, and I'm pleased to report continued progress, including a 3.6% increase in representation of women at leadership levels and a 20% increase in the number of employees leveraging our well-being and our mental health benefits. We also continue to develop pathways and partnerships to enhance our diversity and create opportunities for historically underrepresented groups both inside and outside of Equinix. As we work to address the urgency of climate change, I'm also proud that Equinix is well on our way to meeting our science-based target commitments. In 2021, we achieved over 90% renewable energy coverage for our portfolio for the fourth consecutive year while also improving the energy efficiency of our facilities by over 5% as measured by average annual power usage effectiveness or PUE.
A focus on sustainability continues to be top of mind for customers and partners as they look to buy from and work with companies that have established ESG goals and commitments. As the world's digital infrastructure leader, we have a responsibility to harness the power of technology to create a more accessible, equitable, and sustainable future, and we will continue to focus on the important issues that impact our stakeholders and our business. Now turning to the results as depicted on Slide three. Revenues for Q1 were $1.7 billion, up 10% over the same quarter last year. Adjusted EBITDA was up 5% year-over-year, and AFFO was better than our expectations again due to strong operating performance. These growth rates are all on a normalized and constant currency basis.
Our data center services portfolio continues to extend our differentiated scale and reach with 43 projects underway across 29 metros in 20 countries, including new projects in Atlanta, Mumbai, Sydney, Tokyo, and Washington, D.C. As customers embrace our interconnected edge as a point of nexus for their hybrid and multi-cloud architectures and leverage our scaled digital ecosystems to enable and drive their digital agenda. According to IDC, by 2024, 65% of the Global 2000 will embed some sort of edge-first data stewardship, security, and network practices into their organization's digital business processes. We're already seeing the impact, with an amazing 89% of recurring revenues now coming from customers deployed in more than one metro. In April, we closed our acquisition of MainOne, extending Platform Equinix into Nigeria, Ghana, and Ivory Coast, bringing our global coverage to 69 metros across 30 countries.
Nigeria in particular is emerging as an innovative and dynamic player in the global digital economy, representing a significant opportunity for the expansion of digital services and a key first step in our long-term strategy to extend our carrier-neutral digital infrastructure platform across Africa. In the quarter, we also announced our upcoming expansion into Chile through the planned acquisition of multiple data centers from Entel, a leading Chilean telecommunications provider. Chile is the fourth-largest economy in South America with the highest GDP per capita in the region, and Santiago is emerging as a technology hub, serving both regional cloud and content demand as well as local enterprises. This transaction is expected to close in Q2 and will further solidify Equinix as the leading provider of digital infrastructure in Latin America.
Turning to interconnection, our industry-leading portfolio continues to outpace the broader business, growing 12% year-over-year on a normalized and constant currency basis, driven by a healthy uptick in connections across our top ecosystem. We added an incremental 8,900 total interconnections in the quarter and now have over 428,000 total interconnections on the platform. Internet Exchange saw peak traffic of 7% quarter-over-quarter and 25% year-over-year to greater than 24 Tbps. We continue to see expanding customer demand and accelerated growth across our digital services portfolio. Equinix Fabric saw its highest ever virtual connection add as customers employ an increasingly diverse set of end destinations and utilize Fabric for a variety of use cases across cloud networking and backbone connectivity.
Equinix Metal and Network Edge also had strong quarters as enterprises leveraged these services for a variety of virtual deployments, increasing agility and helping them to mitigate supply chain challenges. Metal had the most net customer adds to the service since its launch, with several key enterprise wins and a healthy backlog as our go-to-market partnerships with Dell, Pure Storage, and Mirantis all gained momentum. Shifting to our xScale initiative. In March, we closed our Australian JV with PGIM, which is expected to provide more than 55 megawatts of capacity in the Sydney market when closed and fully built out. In April, we closed our South Korean JV with GIC, which is expected to provide more than 45 megawatts to the rapidly growing Seoul market. We currently have nine xScale builds under development with over 80 megawatts of incremental capacity, of which nearly two-thirds are already pre-leased.
Now let me cover some highlights from our verticals. Our network vertical had a great quarter with good momentum across all 3 regions and record channel activity with our key carrier partners. New wins and expansions included Excitel, one of the largest ISPs in India, establishing network hubs in our Mumbai 1 and 2 IBX. A high-speed satellite broadband service for military and commercial markets, supporting its expansion into Australia. Globalstar, a specialty network expanding its footprint and upgrading connectivity to support its growing user base. Enterprise continues to be our fastest-growing vertical, with a strong bookings quarter led by EMEA in the manufacturing and public sector subsegments. New wins and expansions included Technicolor, the creative services and technology company for the media and entertainment industry, establishing regional technology hubs and utilizing the full suite of Equinix's digital infrastructure services.
A Global 40 bank is choosing Equinix as their strategic partner thanks to our robust digital offerings, connectivity to key financial institutions, and our sustainability strategy. Party City, a global leader in the celebrations industry, using Network Edge to enable cloud connectivity and allow private interconnection between sites as they continue with their digital transformation. We were also proud to work with a global money center bank who leveraged our dense ecosystems to enable a critical connection to the National Bank of Ukraine so that UNICEF could distribute funds to those in need, to those that need it most as part of their humanitarian efforts. Our cloud and IT services vertical had solid bookings in the quarter led by the infrastructure subsegment, while adding new cloud on-ramps in Dubai, Rio de Janeiro, and Stockholm.
New wins and expansions included DigitalOcean, a rapidly scaling global cloud hosting provider who's expanding its infrastructure footprint across multiple regions as they add customers and products. A leading SaaS company leveraging Equinix for its distributed data and cloud strategy and expanding service portfolio. Broadcast and streaming subsegments anchored a solid quarter in content and digital media, including expansions with a Fortune 75 media conglomerate expanding across Platform Equinix to support streaming services and content production. A multinational consumer credit reporting company enabling direct connectivity via Equinix to their financial services customers. Fastly, a global CDN expanding capacity and deploying network nodes in support of their edge compute strategy. Finally, our channel program again delivered its fourth consecutive quarter of record bookings, accounting for roughly 40% of bookings and 60% of new logos.
Reseller and alliance partners accounted for over 75% of channel bookings as our partners continue to demonstrate tremendous leadership in helping customers quickly adopt new digital business models. Wins were across a wide range of industry verticals and digital-first use cases with hybrid multi-cloud featuring prominently as the architecture of choice. We saw continued strength with strategic partners like AWS, Microsoft, Dell, and Telstra, including a significant win in France with AT&T, helping a security services company consolidate data centers and interconnect to their choice of cloud providers. We'd also like to take a moment to recognize AT&T Business as our partner of the year for 2021. Proud to have worked together to drive digital-first outcomes on complex and transformational projects, including the Equinix and AT&T Connected Climate Initiative, benefiting hundreds of customers across multiple industries.
Now let me turn the call over to Keith who can cover the results for the quarter.
Thanks, Charles, and good afternoon to everyone. I do hope you're doing well. Well, at Equinix, the team delivered another great quarter. We did better than anticipated. We experienced robust growth in the Americas, had solid channel bookings, further expanding the universe of opportunity for our highly differentiated business, and enjoyed meaningful inter and intra-region activity, a reflection that we're selling well across our ever-expanding footprint. Interconnection activity remains high, both at the physical and the virtual level. Interconnection revenues represent 19% of our recurring revenues. They're growing faster than the overall business. Our platform strategy continues to deliver outsized value, further separating us from others in our space. We had strong growth from our digital services products and continued momentum in the most recent acquisitions in Canada, India, and Mexico. Our pipeline remains solid despite our record bookings.
With a great start to 2022, we're raising our guidance across each of our core financial metrics. As we've said previously, we believe the diversity and scale of our business across sectors, markets, and customers puts us in a highly favorable position to capitalize on all trends digital, as well as manage the macro factors and volatility. We have no meaningful near-term exposure to rising interest rates. Our balance sheet strength continues to provide us with a strategic advantage while allowing us to access the capital markets at times that are attractive to us. With regards to supply chain and inflation, we continue to deliver projects against our return expectations with limited delays given our ability to access and secure critical infrastructure components. While the energy markets remain volatile, our hedging policies are helping us navigate this unusual period.
These factors, when combined with the momentum we're seeing in our marketplace, enable us to remain steadfast in our commitment to deliver top-line growth, strong and durable AFFO per share growth to our shareholders as well. 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 Q1 revenues were $1.734 billion, up 10% over the same quarter last year, and at the midpoint of our guidance due to better-than-expected MRR revenues, offset in part by the delayed timing of certain non-recurring xScale fees. As we look forward, we expect a strong Q2 step-up in both recurring and non-recurring revenues. As we've noted before, non-recurring revenues attributed to custom installation work and xScale fee income are inherently lumpy and can move between quarters.
Q1 revenues, net of our FX hedges, included a $2 million headwind when compared to our prior guidance rates. Global Q1 adjusted EBITDA was $800 million or 46% of revenues, up 5% over the same quarter last year at the high end of our guidance range due to strong operating performance and timing of spend, although it was impacted by the lower xScale fees. Q1 adjusted EBITDA, net of our FX hedges, included a $1 million FX headwind when compared to our prior guidance rates, and also includes $5 million of integration costs. Global Q1 FFO was $653 million, above our expectations due to strong operating performance.
Q1 global MRR churn was 1.8%, the lowest level of churn in recent history, a reflection of our disciplined strategy of selling the platform to the right customer with the right application into the right asset. For 2022, we now expect MRR churn to average at the lower end of our 2%-2.5% per quarter range. Turning to our regional highlights whose full results are covered on Slides five through 7. APAC was the fastest-growing region on a year-over-year normalized basis at 13%, followed by the Americas and EMEA regions at 10% and 9%, 9% respectively. The Americas region had another great quarter with strong broad-based bookings led by our Chicago, Dallas, New York, and Washington, D.C. markets.
Enterprises represented over half the region's bookings, and we saw record channel activity as businesses continue to leverage Platform Equinix to maximize their digital infrastructure's flexibility and agility in the hybrid multi-cloud world. The region also saw robust interconnection activity, adding 4,000 total interconnections and significant internet exchange capacity led by our São Paulo market. Our EMEA region delivered its highest net bookings performance in three years with strong pricing and a healthy mix of retail activity with solid exports led by our Dubai, Istanbul, London, and Milan markets. In EMEA, sustainability is an ever-increasing focus for our customers and communities, and our local leadership team continues to work to position Equinix as the industry thought leader at both the local and regional levels.
Finally, the Asia Pacific region had a solid quarter led by Australia, Japan, and Singapore businesses, with traction increasing across the region for our digital services. India had another great quarter, and we're investing behind our momentum in the market with our newly announced Mumbai Three IBX project, as well as purchasing land for development in Chennai. Now looking at our capital structure, please refer to Slide eight. We ended the quarter with approximately $1.7 billion of cash, an increase over the prior quarter, largely due to strong operating cash flow, offset by growth CapEx and our cash dividends. Shortly after the quarter end, we completed our fourth green bond offering, raising $1.2 billion to further our commitment to sustainability leadership.
With this latest financing, Equinix has issued approximately $4.9 billion of green bonds, making our company the fourth largest global issuer in the investment-grade green bond market. In early April, we are also pleased to have Moody's upgrade Equinix to Baa2 in line with S&P and Fitch while expanding our leverage tolerance. We're very appreciative of the support received from Moody's, and importantly, we're delighted with the increased financial flexibility we now have across all three rating agencies. Looking forward, as stated previously, we'll continue to take a balanced approach to funding our growth opportunities with both debt and equity while creating long-term value for our shareholders. Turning to Slide nine, for the quarter, capital expenditures were approximately $413 million, including seasonally low recurring CapEx of $24 million.
In the quarter, we opened 3 new retail projects in 2 markets, Muscat and Singapore, and purchased land for development in Mexico City. Revenues from owned assets increased to 60% of our total revenues. Our capital investments delivered strong returns, as shown on Slide 10. Our now 164 stabilized assets increased recurring revenues by 6% year-over-year on a constant currency basis. Consistent with prior years, in Q1, we completed our annual refresh of IBX categorization, and our stabilized asset count increased by a net 6 IBXs. These stabilized assets are collectively 87% utilized and generate a 27% cash-on-cash return on the gross PP&E invested. Please refer to Slides 11 through 15 for our updated summary of 2022 guidance and bridges.
Note our 2022 guidance includes the anticipated financial results from the MainOne acquisition, but does not include any results related to the pending Entel acquisition, which is expected to close in Q2. Starting with revenues for the full year 2022, we're very pleased with the momentum we're seeing in the organic business and excited to report that we now expect our revenues to increase on a normalized and constant currency basis by 10% over the prior year. Relative to our prior guidance, we're increasing our revenues by approximately $90 million, which includes our improved operating performance and $50 million of revenues from MainOne. We expect 2022 adjusted EBITDA margins of approximately 46% excluding the integration costs, an increase of about $40 million compared to our prior guidance, which includes $20 million from MainOne.
We now expect to incur $25 million of integration costs in 2022. Given the operating momentum of the business, we're raising our underlying 2022 AFFO by $22 million to now grow between 8%-10% on a normalized and constant currency basis compared to the previous year, offset by the increased debt financing costs for the MainOne and Entel acquisitions. Note that MainOne is expected to be immediately accretive, and we expect the Entel acquisition to be accretive when closed. 2022 AFFO per share is expected to grow between 7%-8% on a normalized and constant currency basis. 2022 CapEx is now expected to range between $2.3 billion-$2.5 billion, including approximately $170 million of recurring CapEx spend and about $60 million of on-balance sheet xScale spend.
Let me stop here. I'll turn the call back to Charles.
Thanks, Keith. In closing, we had a tremendous start to the year. The demand backdrop for the business remains robust as enterprises across the globe continue to aggressively prioritize digital transformation and service providers expand their infrastructure globally in response to this demand. Data is being created, moved, manipulated, and stored at unprecedented levels, and the need to distribute infrastructure and position it in proximity to the broader digital ecosystem is fueling outsized demand for the distinctive value proposition of Platform Equinix. Growth continues to outpace our Analyst Day expectations, thanks to strength across multiple simultaneous growth vectors for the business, expanding geographic reach, accelerating adoption of digital services, low churn, positive pricing trends, and strong channel execution. We continue to leverage our market-leading scale and expansive balance sheet to deliver new capacity, even in an increasingly challenging macro environment.
Our bold Future First sustainability agenda guides and rallies our team as we collectively pursue our shared purpose: to be the platform where the world comes together to create the innovations that enrich our work, our life, and our planet. We are delighted with the ongoing performance of the business, optimistic about the road ahead, and remain keenly focused on delivering distinctive and durable value to our customers and to you, our shareholders. Let me stop there and open it up for questions.
Thank you. If you would like to ask a question, please ensure your phone is not muted, press star one, and record your first and last name so I may introduce you. Please stand by for our first question. Simon Flannery with Morgan Stanley, you may go ahead.
Okay. Good evening. Thanks so much. I think you've talked a couple of times about the macro environment. There's concerns about recession risk in Europe. Could you just talk to what you've seen in sort of March and April from IT, CIOs, et cetera, in the European market specifically? And perhaps we could also just on the power side, we've seen significant increases there. You talked about the hedges, and obviously, the guidance is good to see. How should we think about, you know, the sort of the medium to longer term, when those hedges need to get replaced? Thank you.
Sure. Thanks, Simon. I'll start, and Keith can add on as he wishes. We had a great quarter in Europe, so big kudos to the you know sales team there. Johan Arntz, our sales leader, just pulled together a tremendous quarter. I think we've you know asked him to continue to reshape that business as we've you know shifted our revenue mix there into the really sweet spot of sort of the small to mid-size deals. We're seeing great momentum there. Again, we talked a few quarters ago about accelerating growth there back to sort of prior levels, and we've certainly delivered on that forecast this year or this quarter with that back at 9%. Pipeline looks good.
I would say that the broader macro environment in terms of, you know, the prioritization of digital transformation and kind of what we're seeing from, you know, technology and IT buyers, you know, continues to look good and I think, you know, a high degree of relevance in terms of how they're looking at us and the role that we play in that. Overall, continue to feel very good about that, about that part of the world. From a power perspective, you know, as we said previously, we're kind of pretty much entirely hedged, where we can be in Europe. We have not seen substantial impacts there.
We are seeing elevated rates, you know, in terms of, you know, but we have a lot of runway as we look at our hedges and are continuing to build our hedge positions for 2023 and beyond. The success of our hedging program, I think, gives us a lot of visibility and runway to, you know, figuring out when we need to pass those through and at what levels. That's ongoing work and we'll be, I think, in a good position going into 2023 to adjust to that.
Thanks a lot.
Our next question is from David Guarino with Green Street. You may go ahead.
Hey, thanks. I have a question on the same-store cash gross profit decline. I think this is the first time we've seen it turn negative since you guys started disclosing that data. Was a lot of that due to the power cost in Singapore, or was something else driving that?
I mean, the same-store revenue growth is strong, and we did see some contribution to that 6% from APAC and Singapore in particular. You know, I think there probably is some contribution from the cash gross margin side there as well associated with that. Overall, we were actually very pleased with the same-store growth performance because, as I said, less than half of that gain you know up to the 6% is really impacted by the power PPIs. It's really impacted more by the addition of the new assets into the mix and strength in the Americas, which sort of has an oversized influence on the stabilized assets.
Keith, anything further to add there?
No, I just, as we've noted, and it's sort of embedded in our guidance, is the impact coming from the power cost in Singapore. It's having a knock-on impact, not only on the Asia Pac market, but the overall performance of the business on a gross margin basis. Again, nothing out of what we expected. As Charles alluded to, the fact of the matter is that the stabilized assets are growing at 6% on a recurring revenue basis. We have great momentum in the business, and we've now absorbed effectively, you know, with the Q1 results, the impact of the Singapore business. That's in the business on a go-forward basis now.
All right. That's helpful. One other quick one. It looks like you guys are building two new phases at your AT1 facility in Atlanta. Are you seeing any shift from tenants who want to relocate away from other colocation data centers in Atlanta market?
Yeah. I mean, the Atlanta market has been good. We you know we continue to see demand there, and we've been making you know some of our own transition in terms of really attracting and motivating the network density into the AT1 facility on Peachtree. You certainly see competitive wins in that market you know as well as just net new customers. It's you know it's been a good market. We're continuing to invest there in terms of new capacity, as you noted, and we feel good about that market overall.
Great. Thanks for the color.
Our next question is from Jon Atkin with RBC Capital Markets. You may go ahead.
Thank you. I was interested on the energy topic. You're currently hedging presumably at elevated rates, and I just wondered what sorts of implications that might have down the road, if energy prices were to normalize. Do you see any sort of exposure in terms of pushback from customers? On the other end, just any more color around pricing actions. You mentioned about power-related PPIs, but anything else about just list pricing, renewal discussions, cross connects, and any color around how pricing's evolving? Thanks.
I mean, because where we're hedged now is kind of in the rising rate environment as we have these sort of, you know, sort of feathered hedges over multiple years, we're hedged essentially below the prevailing market rate. In a rising rate environment, what that provides is actually some protection to the customer, you know, against those market rates because we'll be able to roll them in more gradually. That's the artifact that we see. Again, as hedges roll off and you hedge at increasing rates, you kind of are chasing that up. Again, it provides a net benefit there.
The customer will have an expectation as they see what the market rate is, even in their own personal power consumption, there's generally a, you know, a broader expectation that they're gonna see some sort of a rise, and we can mitigate that to some degree. I think the hedging and the success of our hedging, and that's the way it's worked for us, in rising rate environments over time. We feel generally good about that. As I said, we're well ahead of that planning cycle as we build our hedges for 2023 and beyond. Anything further to add there, Keith? Then on pricing, yeah, actually we continue to have, you know, strong pricing, positive pricing actions.
We have increased list pricing meaningfully, and I think that we're continuing to evaluate that in terms of. You know, that's partially an implication of, or an artifact of, increasing unit costs and other effects in the business beyond power, you know, like labor, for example. But that tends to work its way into the business, you know, slowly, over time as you see some of that. We continue to see just a really strong response to the value proposition on a, you know, on a value basis. We have been increasing list pricing, you know, beyond power as well.
John, if I might just add, I think it's also important to note, again, we didn't talk about it specifically, but the net pricing and positive pricing actions this quarter were substantial, even when you take out the increased power pricing. When we look at our overall growth rate, you could take out the full implication of the pricing increases associated with power, and you still have growth rate of greater than 9%, on a normalizing currency basis. Yeah, it does have some impact, but the reality is it's the fundamental business that is driving the growth there on the top line.
That leaves us open to, as Charles said, to the discussion of what happens later as inflation continues to take hold, what do we do with our pricing in addition to our list price adjustments? Overall, I'd just say that I think we're in a really good position from a pricing perspective. You can see it in our blended MRR per cab. Even when you sort of discount out the impact of power pricing associated with our power price increases, you still see a nice fundamental increase in our overall pricing on a per cab basis.
Just two quick ones then to follow up. Churn can it remain on a sustainable basis at kind of these below average rates? Demand seems elevated, and you had obviously a strong result last quarter and a strong guide, you know, did that feel sustainable as well in terms of, you know, enterprise retail colo demand? Or is there some sort of a catch-up dynamic where you're seeing some buying that was pent up, but it might normalize from here and demand might go back to normal levels? Or do you see elevated demand indefinitely? Thanks.
I'll start with the demand piece. I think we just continue to see an increasing overall addressable market as people continue to prioritize digital transformation. It's become such a central part of how people are looking to compete in the modern age that and the nature of digital infrastructure has continued to change so much as they adopt public cloud, as that becomes a prominent part of their infrastructure strategy, as they think about factors like data sovereignty, and application performance and application modernization and the complexity of networking in a sort of hybrid cloud world. All of those things really lend themselves well to our value proposition, and I think people are seeing us as increasingly relevant to those discussions.
That's really resulted in what you're seeing, which is, you know, several strong quarters of bookings in a row, record levels. As Keith said in his script, our pipeline continues to look strong. This isn't a matter of sort of emptying the cupboards. We continue to see a growing pipeline. We see record levels of pipeline in our digital services portfolio and continue to see, you know, all elements of the business really respond strongly from a demand perspective. We're not seeing any, you know, fading of that. It does not feel in any way to us like some sort of catch up, but instead a more, you know, sustained level of demand for, you know, for the business.
Relative to churn, you know, we've always said the best way to reduce churn over time is to put the right business into the platform to begin with. I think our strategy is really paying off there. You know, we always caution people in terms of churn can move around a little bit quarter to quarter. If you look at an 8-quarter trend or a 12-quarter trend on churn, I think it'll start to reveal to you that, you know, the downward trend is in fact, you know, I think sustainable. Again, I wouldn't want to bet on every quarter being where this one is.
I, you know, I do think that we have demonstrated a sustainable downward trajectory on our churn.
Thank you.
Thanks, Jon.
Our next question is from Ari Klein with BMO Capital Markets. You may go ahead.
Thank you. Maybe just following up on the power questions. The expectation with Singapore was for the impact to moderate in the second half of the year. And since the original guidance was provided, the backdrop has obviously shifted a little bit with Russia and Ukraine. Have the views shifted on the pace of improvement that you're expecting for the second half of the year?
Yeah, a little bit, Ari. I would say overall, look, the big power issue is really Singapore. You know, there, it's very much on the margin in any other places. I think, you know, going forward, I think we might see more of our planning to do in 2023 and beyond as power hedges roll off and as we think about that, as I commented earlier. I think that's, you know, more of something that we have plenty of visibility to and an ability to respond to. As it relates to this year, Singapore is by far the overwhelming issue. There's not a ton of change from what we said last quarter. I think Q1 was actually a little better than we expected.
The back half of the year might be a little higher than we had originally forecasted, but they've kind of gonna come out kind of in roughly the same place. You know, we now have over 50% of our load hedged or locked in rate-wise in Singapore, so we have better visibility to that. I don't think a ton of variability in outcome, you know, from here. You know, we'll continue to update you if that changes, but not a big change. Probably a slightly more on the back end and less in this, you know, we had a better quarter this quarter than what we had in that original forecast. On a full year basis, really roughly what we had said previously.
Got it. The Americas, you've had several quarters in a row of really strong bookings and the growth rate's accelerated. You know, as we look ahead, I think over 70% of cabinets are outside the Americas in the development pipeline. You know, how should we think about occupancy from utilization rates from here? It's obviously stepped up, but where does it kind of level off or get to before you have to add more significantly to the build?
Yeah, good question. You know, I think that we have a fair amount of headroom in a lot of markets in the Americas, right? We're at a lower overall utilization rate there on a much bigger business. There's plenty of capacity to sell. I'm sure my sales teams are hearing me say that. There's plenty to go around. You know, the Americas business has performed exceptionally well. You know, another shout-out to Raquel Sahar, our Senior Sales Leader in the Americas. I think that business is really humming and delivering strong sales execution.
You're right, a lot of the investment is going outside the US, but we've also, you know, are topping up in key markets in the US and in the Americas broadly to meet the demand there. We feel good about our ability to both deliver the new capacity and to sell it. We've got a new President of the Americas coming online, Tara Risser, and you know, she's a tremendously customer-centric executive and very excited about that. We feel great about the trajectory in the Americas. I think plenty of opportunity to grow into the capacity that is there and drive utilization up.
We will continue to invest where there are markets, you know, that we start to see, you know, sort of pinch points out there in the future. Overall, you know, feel really good about our ability to continue to put capacity online and sell it, you know, aggressively.
Thanks for the color.
Our next question is from Michael Rollins with Citi. You may go ahead.
Thanks, good afternoon. Just thinking through some of the comments, Charles, earlier on the call, talking about hybrid cloud. You have hyperscale through the xScale, and you have, of course, the retail-centric business. As you have more enterprise customers, are you thinking about ways that Equinix can increasingly serve their hybrid needs and go beyond retail to some enterprise deployments that they may be looking at to retain as part of the hybrid cloud architecture?
Yeah, I mean, I think you're getting at sort of enterprise LFP and whether or not there is a sort of intermediate offer there between xScale. I would tell you that we again continue to if those needs are in the context of a broader platform requirement and how a customer is thinking about, you know, their digital transformation, then we will, you know, talk to them about how we might do that and where we might be able to meet that need. But again, the sort of larger footprint, more commodity, you know, sort of colo enterprise requirement isn't a major focus for us.
In fact, as I talked about, we've really been, you know, retooling our revenue mix in markets like Europe to really focus on the sweet spot of the retail business, interconnection-rich, ecosystem-centric, that delivers superior MRR per cab, it delivers superior retention, and that's what you're seeing show up in the business. Better MRR per cab, lower churn, et cetera. We gotta stick to, you know, the strategy that continues to drive the performance in the business. I would tell you though what we're seeing, you saw a, you know, on occasion you do see large enterprise, you know, type needs.
You know, we'll partner with enterprises in thinking that through. I will tell you that for the most part, I think a lot of times, customers are saying, "Hey, we're gonna use a mix of public cloud and private cloud, and we really need to place our data, you know, in more of an intercloud, you know, kind of location to drive performance, and to meet, you know, data sovereignty requirements, et cetera." I feel really good about the portfolio that we have, and I actually think a big opportunity with us on the enterprise side is the digital services portfolio. Really delivering them Metal.
They're responding very well to Metal as a value proposition because it helps them mitigate, you know, their technology lifecycle management. It helps them be more agile, more scale, more rapidly, you know, move capacity around as they need it and as customer demand, you know, mandates that for them. Network Edge is a way that they really are thinking about, you know, retooling and rethinking networking in a cloud-centric world. Of course, Fabric, you see the momentum that we have there. I feel good about the portfolio and we're gonna, you know, stood up the digital services BU and are gonna continue to make some investments there and I think that's gonna position us really well for continued enterprise momentum.
Really long answer to your question, but I, you know, I think we'd be very selective about that. We don't see a big priority on sort of large footprint, you know, lower margin, you know, profile kinda business.
Thanks.
Our next question is from Erik Rasmussen with Stifel. You may go ahead.
Yeah. Thanks for taking the questions. This quarter we're expecting really good strength from hyperscalers. As it relates to your xScale business, considering sort of this elevated demand environment, what would you say are some of the hurdles you're seeing as you think about meeting this demand?
Well, I mean, I think the business is executing really well. You know, we're not sort of trying to chase every bit of hyperscale that's out there. We've got you know an aggressive but an appropriate plan that we think delivers strategic value to the overall platform. We're focused on a relatively small number of you know sort of global hyperscalers that we think are critical to how the overall cloud you know macro plays out and are focused on them. I think that it's really just being able to continue to deliver capacity. We've been more aggressive about you know land banking.
You know, we're continuing to work to make sure that we have the capacity and the key equipment necessary. Our supply chain team has been active, both in terms of our xScale side of our business and retail, to ensure that we are you know buying inventory or making forward commitments to ensure the availability of equipment to get you know projects delivered on time. I think that's gonna be the key thing for us. Right now we feel very good about that. In fact, since the last quarter, as
You know, we talked about a couple quarters ago, I guess it was. We talked about having roughly $100 million of pre-commitment and inventory in place to try to, you know, mitigate against supply chain. We've nearly doubled that, you know, to continue to sort of anticipate and head off any pinch points that exist in the supply chain. So I think we're doing a good job there, but I think that's the area that we need to continue to focus on. I guess the proof is in the pudding in that our, you know, our delivery dates are all, you know, on average. There's a few outliers here and there, but on average, we're no more than a week or two, you know, delayed on projects.
You know, continuing to deliver on-time deployments.
Great. That's helpful. Maybe just on M&A, you've obviously been pretty disciplined in your approach historically, but in the current environment, multiples have moved up. You know, just wondering if the right opportunity were to come up, are there scenarios where you would stretch your comfort level to maybe not lose out on a particular deal? What would that type of deal look like?
Yeah, look, I mean, every deal is a little bit different, you know. I mean, I would say that there are, you know, good examples in our past of where we have, you know, quote, “stretched” in terms of maybe a multiple that we paid based on our belief about our ability to sort of buy that multiple down over time through growth. I think Metronode and Infomart are probably a couple examples that pop to mind that have both turned out to be really great deals for us. You know, we're gonna be appropriately disciplined. We're not gonna win every deal. You know, we also believe that M&A is a key tool in the toolbox.
You know, we think there are opportunities out there for us to continue to extend and scale our platform. Our priorities kind of remain the same. You know, key interconnection assets, scale in markets where we're seeing success and continue to extend our platform geographically into the markets that matter. I think all those types of opportunities are available. We've got the balance sheet to, you know, to pull it off, I think. I you know, we'll be out there, we'll be aggressive. In the you know, in cases where we think it makes sense to stretch, we will and where we don't, we won't.
Great. Thank you.
Our next question is from Brendan Lynch with Barclays. You may go ahead.
Great. Good afternoon. Thanks for taking my question. We're about one year on from your long-term guidance when you issued your long-term guidance for a 50% adjusted margin by 2025. Your guidance this year is implying a 140 basis point contraction for some of the well-documented reasons that have been discussed already. I just want an update if you would on the ability to achieve that long-term target and what are some of the elements that are directly within your control on the cost side that could help get you there if you can't get there through pricing power?
Yeah, great question, Brendan. One obviously that we, you know, are very focused on and think a lot about. I'll start by just simply saying that we continue to see 50% as an appropriate long-term target for EBITDA margin. You know, there's a number of moving parts on the overall margin trajectory of the business, and as you said, you know, some, we've talked about many of those with power and particularly the Singapore power situation being central to that. We kinda already talked about that dynamic, which is we're a little better than expected in Q1. Back half of the year might be a little bit worse than what we had originally forecast, but not a major, you know, shift there.
As we enter next year, we'd expect to see APAC margins normalize, either through moderating rates, and we can't really predict that fully. Or even if they don't moderate, by us, you know, essentially, putting additional PPIs through and getting in, you know, in line with the broader market. I think we'll see margin normalization there. We continue to drive and expect continued operating leverage in the business in the back half of the year from several of our targeted efficiency programs in the business. We do think we need to have other levers available to us to continue to drive operating leverage.
We also may make some investments in quota- bearing heads, I think, given the tremendous booking strengths that we're seeing. I don't think that would be surprising to anybody. Bottom line, you know, we'll give you more detailed guidance on the 2023 and beyond margin profile as that becomes more clear. I think the really critical takeaways are that, one, we continue to see 50% as an achievable target. And two, that we really remain confident that we can deliver against the Analyst Day AFFO per share growth targets through some combination of top line growth and appropriate operating leverage. At the end of the day, that's really our lighthouse metric is driving that AFFO per share growth.
Great. Thanks. That's helpful. Maybe just one follow-up on the churn profile or trajectory. In the past, some of your acquisitions have kind of had a customer product mismatch where we saw an uptick in churn, specifically with the Verizon assets. I wonder if there's anything like that with any of the recent acquisitions that you've made that might cause churn to increase.
Yeah, really good question. Generally, we don't see that happening. You know, I think a number of you know, I think Bell was a little bit more aligned, maybe a little bit of that, and we'll continue to you know, reshape that customer mix a bit, but you know, much smaller scale than Verizon was, and a bit of a different dynamic there. Then some of the other ones, I think are you know, more in line with kind of the overall you know, customer profile or much smaller in their overall scope. There's certainly some you know, some of that you inevitably see in M&A, but I wouldn't see anything on the horizon that would meaningfully tick that up.
Okay, great. Thanks for the color.
Our next question is from Sami Badri with Credit Suisse. You may go ahead.
Hi, thank you. I had one question and a follow-up. For the first question, I think you talked a little bit about the Americas business, and I just wanted to hit on specifically Americas MRR per cab and how it was down quarter-over-quarter in 1Q of 2022. I know there were some adjustments and there was also a footnote, but I just kinda wanted to get a better idea on what's going on there. The second question is regarding the $42 million of increased outlook visibility. Which regions are providing the strength for that $42 million?
Sure. Let me, yeah, MRR per cab, I'll give you a little bit of a more holistic view and then comment on Americas, you know, and, Keith just commented on this. If, you know, we saw a nice uptick in overall MRR per cab on a global basis. I think it's driven in meaningful part by significant organic strength in Europe. and then some uptick in APAC and definitely, with the PPIs, power PPIs in Singapore contributing to that. But more than half of that is really driven, on an overall global basis, is driven by, you know, underlying organic strength in the business. in the Americas, you know, we, a couple of moving parts there.
We've always encouraged people to kind of look at a multi-quarter average, since that metric can really be more volatile depending on several factors. We saw a few of those factors. We saw some settlement activity in the Americas that was a one-time thing. We saw a large install which is not yet ramped, and so you get the cabs, but not as much revenue. Then finally, we had a little bit of a price action associated with the very large renewal we did with Nasdaq, which was a huge win for us, but had a little bit of downward impact on that. Overall, I think nothing of concern. I think the MRR per cab in the Americas is still exceptionally healthy.
I think we continue to, you know, be able to, you know, feel like we can continue to manage it, you know, at or above those levels.
Sami, I just add just onto what Charles said there. The other thing that, as you probably recognize, we put Bell Canada's assets into our metrics last year, at the end of last year, and they come at a lower MRR per cab than the average, right? As a result, you're seeing the dilutive impact of that, coupled with the fact that Canadian business continues to perform well, and so you've got a little bit of a mix on a go-forward basis. The last thing I would say is that currencies, again, this is a US dollar denominated number. You see that, you know, the impact of lower currencies, you know, we're not neutralizing it when we report on the non-financial metric page.
We do on the regional breakout page. Also, you got the impact of currencies influencing, you know, given the strength of the U.S. dollar, it's just Japan's down about 12% as an example year-to-date. You've got other markets that have taken a little bit of a hit relative to the U.S. dollar. There are a number of things that are going on, but fundamentally, this is not anything to worry about. In fact, we're seeing greater strength in the business given the pricing profiles that we have. We've not put a lot of focus on that particular metric.
Keith, do you wanna comment on the regional strength, the regional breakout of the?
Yeah.
MRR setup?
Then as it relates to the regional, the profitability, as we said, $42 million of incremental EBITDA. $20 million is coming from MainOne. You got $2 million coming from currencies. Again, that gives you a sense of the strength of our hedge positions on a currency basis. The financial impact to the business is very relatively de minimis for the rest of the year under current course and speed. That feels good. Relating to the organic business, you're seeing strong broad-based performance across the business. You know, one of the comments that Charles made is we're seeing strength in all three regions of the world. Because of that strength in the top line is driving profitability in the top line. Now we make, again, as you appreciate, in the US or the Americas business, we make corporate decisions and make accruals.
We embed that at, partly at a corporate level, therefore the Americas region. Overall, the fundamental business across all three regions is strong. The only thing I would add to that is, yeah, you see the fluctuation in Asia Pacific, and that's specific to the Singapore matter that Charles has spoken of. Again, that's in our numbers now. It's in our run rate. On a go-forward basis, we feel very good about the profitability in the business. You're seeing that growth and the momentum in the business, and it's right across the board.
Got it. Thank you very much.
Our next question is from Michael Elias with Cowen and Company. You may go ahead.
Great. Thanks for taking the question. One quick question on the power cost side and the price increases. You know, when you do pass through higher power costs to the customers, just wondering, are you structuring it as a temporary surcharge, or is that, you know, a permanent increase in the power cost embedded in that contract? That's my first question. Now, my second question is, you mentioned earlier that you've raised your list prices meaningfully higher. You know, just as we think about the implications of that on MRR per cab going forward and your renewal schedule, you know, any color you can share on what you would expect over the medium to long term to see on the MRR per cab side? Thank you.
Sure. The power PPIs, you know, I think it all depends is the answer. You know, 'cause I think that if we, you know, if we saw a reversion back to meaningfully lower rates, then I think we would adjust accordingly. I do think that we kinda separate out more of the power-related pricing adjustments associated with power volatility from more structural sort of you know price levels and margin profiles within the business. I think we're just gonna have to navigate that in terms of.
I do think that in markets, if we saw a, you know, big uptick, you know, pass through those meaningful adjustments and then saw a reversion, I think we would make adjustments there. I think it's gonna, you know, very much, you know, depend and be something we'll have to look at on a market by market basis.
You know, pricing, I think in terms of its impact on MRR per cab, yeah, I mean, I think that, you know, as we increase pricing due to various inflationary factors as well as due to, you know, the continued strength of our value proposition and our ability to continue to add more value for our customers, I think that's gonna have a positive impact, you know, on our MRR per cab, and just allow us to continue to preserve margins and drive, you know, the appropriate returns on capital.
You know, we're gonna have to continue to monitor that in terms of, you know, just how what the, you know, the pace and the level of of the, you know, inflationary forces in the business are. Right now, I think we've demonstrated that across the board, we can, you know, we can make appropriate pricing adjustments and therefore feel like we can preserve that MRR per cab trajectory.
Perfect. Thank you.
Our last question comes from Matt Niknam with Deutsche Bank. You may go ahead.
Hey, thanks for taking the question. I have one on the balance sheet and then just a quick follow-up. On the balance sheet, I think, Keith, you referenced some of the ratings agency upgrades of late. It looks like you've got some additional leverage capacity you've yet to use. I'm just wondering what's the latest thinking around optimal leverage for the business given the expanding scale and stickiness of the platform? Then, just as we think about funding for Entel, I think right now after the $1 billion+ green bond, that you're sitting on about $3 billion worth of cash pro forma for that. I get the sense the company's fully funded for the
Entel acquisition. I'm just wondering if we're thinking about it the right way, really trying to understand if the Entel deal will require any sort of, incremental, financing upon close or whether that's just, straight contribution when it closes. Thanks.
Great questions. Let me first start with just the overall performance of the business. The green bond that we just did, as you know, the face yield is 3.9%, but we put treasury locks in place in the end of last year and the beginning of this year, and so we're able to trade it down to a ten-year term at 3.35%. Exceedingly pleased with the performance of that transaction. That effectively fully funded the acquisition of Entel and MainOne.
As we noted in the results, though, there's you know, when we are, when we apportion the income, the increased interest expense this year relative to the two acquisitions, $8 million of it was allocated to MainOne, and the other $22 million is running through our books right now. Now, we've absorbed the cost. It's sitting there, it's in our GIC. It would be yet to report the you know, the addition of the Entel acquisition. That will happen sometime in the second quarter, the May, June timeframe. As a result, you're gonna get the net benefit of that. Effectively, what you're saying is you know, you've already funded the cost side of the equation and yet you haven't enjoyed the, if you will, the income side of the equation yet. That's that.
As it relates to overall sort of our capital management. You know, we do have the flexibility. We're 3.8 times levered right now as a business. As we look forward, we still feel that, you know, the leverage in the 4+ range is appropriate. We've got more flexibility with our three rating agencies, and we're very thankful for that. We've got the flexibility to draw down on debt. We think, debt is, despite the rising interest rates as of late, still a cheaper source of capital for us, and hence why we took $1.2 billion off the table in April. We're looking obviously at other debt, you know, debt transactions over some period of time. Europe seems to be a good place given the differential in borrowing rates.
You know, we always will use a blend of debt and equity, largely because that's what we do, and I think that's what allows us to have the strength in which Charles referred to before. We can transact with a strong balance sheet with great success given how we've structured ourselves. The only other thing I'll say is we are looking forward. You know, just because what we fund today, we also are looking forward into 2023 and 2024. What is the capital needs of the business? We're maintaining that flexibility as we look forward and, you know, in periods of great volatility, we always like to strike, as I said in my prepared remarks, when we think it's appropriate to raise the capital.
You know, given the strong balance sheet, we've used that flexibility and gone into the markets at times that we've chosen. That's been very, very effective to us on a long-term basis. All that is a long-winded response. I say that we have great flexibility. We're absorbing costs today without the income attached to them, and I'm excited about the opportunity on a go-forward basis. The business is performing exceedingly well, and it's gonna give us an opportunity to continue to fund the growth that we see in the business. I'll stop there.
That's great. I really appreciate all that color. Thanks.
This concludes our Q1 call. Thank you for joining us.
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