Good afternoon, and welcome to the Equinix Second Quarter Earnings Conference Call. All lines will be able to listen only until we open for questions. Also, today's conference is being recorded. If anyone has objections, please disconnect at this time. I'd now like to turn the call over to Katrina Rymill, Vice President of Investor Relations.
You may begin.
Thank you. Good afternoon, and welcome to today's conference call. Before we get started, I'd like to remind everyone that some of the statements we'll be making today are forward looking in nature and involve risks and uncertainties. Actual results may vary significantly from those statements and may be affected by the risks we identified in today's press release and those identified in our filings with the SEC, including our most recent Form 10 ks filed on February 22, 2019, and 10 Q filed on May 3, 2019. 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 and fair disclosure, it is Equinix's policy not to comment on its financial guidance during the quarter unless it is done through an explicit public disclosure. In addition, we will provide non GAAP measures on today's conference call. We provide a reconciliation of those measures to the most directly comparable GAAP measures and a list of the reasons why the company uses these measures in today's press release on the Equinix IR page at www.equinix.com. We have made available on the IR page of our 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 in 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 Meyers, 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.
Thank you, Katrina. Good afternoon, and welcome to our Q2 earnings call. As you can see in our results, we continue to enjoy significant momentum in our business. Our ability to deliver distinctive and durable value for our customers as they pursue their digital transformation agenda is fueling strong bookings performance and accelerated new logo capture. Our platform continues to be highly differentiated due to our superior global reach, vast operating scale and the power of our interconnection platform, separating us from other data center providers and positioning us as the trusted center of a cloud first world.
We continue to execute well against our strategy, achieving our 2nd best gross bookings quarter with incremental deals from more than 3,000 of our customers and strong cross border bookings driven largely by the Americas team. We achieved our 66th consecutive quarter of revenue growth tops among S and P 500 Companies and we now serve more than half of the Fortune 500. With a record number of Fortune 500 and Global 2000 prospects still in the pipeline. The diversity, volume and velocity of our selling engine continues to shine, generating over 4,000 deals in the quarter with the majority comprised of small to midsized multi metro deals, reflecting the tremendous health of our interconnection centric retail business and foreshadowing future land and expand opportunities as these customers use Equinix as the nexus for implementing their hybrid and multi cloud aspirations. Our global reach continues to fuel our top line with revenue from customers deployed across all three regions ticking up to 61% and multi region revenues at 73%.
We saw substantial progress against the 6 priorities I outlined at the start of the year, including evolving our portfolio of products, expanding our go to market engine, including channel and delivering on our hyperscale strategy. We signed our 1st hyperscale JV, a greater than $1,000,000,000 deal with GIC, Singapore Sovereign Wealth Fund, targeting development projects across Amsterdam, Frankfurt, London and Paris to serve the unique core workload deployments for a targeted group of hyperscale companies. And we continue to expand our global platform with 30 projects underway, including 5 ex Scalar builds and Q2 openings in all three regions, including Chicago, Madrid, Osaka, Perth, Seattle, Sofia and Tokyo. Digital transformation continues to be a top priority for our customers and a variety of key trends are making them think differently about their infrastructure. We are responding to this changing demand by both investing across our traditional strength and layering in incremental capabilities.
We're expanding our data center footprint, enhancing our market leading Internet connection platform and have now launched the 1st offering in our planned edge services portfolio, positioning Equinix as an easier to use, more valuable and more accessible platform and driving attach rates that will help us sustain and enhance cabinet yields over the coming years. Turning to the quarter, as depicted on Slide 3, revenues for Q2 were $1,385,000,000 up 10% year over year. Adjusted EBITDA was up 12% year over year and AFFO was meaningfully ahead of our expectations due to strong operating performance. Our interconnection platform continues to perform well, once again outpacing colocation revenues, growing 13% year over year as our ecosystems continue to scale. These growth rates are all on a normalized and constant currency basis.
We now have 348,000 interconnections, over 4 times more than the next closest competitor. In Q2, we added an incremental 7,000 interconnections with strong growth in virtual connections. For our Internet exchange platform, we're seeing strength in the APAC and EMEA markets with IX provision capacity up 30% year over year. ECX Fabric, our SDN enabled interconnection service, now has over 1600 customers. We're seeing increasing adoption of ECX for new use cases, including a diversification of ICX end destinations and more frictionless hybrid multi cloud deployments enabled by API level integration between ECX and market leading cloud and network providers.
In Q2, we also launched Network Edge Services, an NFE offer that provides enterprises a faster, easier and more efficient way to deploy virtual network services at Equinix as we extend our portfolio of interconnection offerings. Customers can choose virtualized services such as routers, firewalls and load balancers from industry leading partners including Cisco, Juniper and Palo Alto Networks. Early customer response has been great. We have a healthy pipeline ahead and we're working to build out the service offering with additional partners and locations over the coming quarters. Now let me cover some highlights from our verticals.
Our network vertical experienced solid bookings led by growth in EMEA and strong resale activity from our top global network partners. We also continue to deepen our network density with over 1800 networks now available on platform Equinix, including every network provider in the Fortune 590 percent of those in the Global 2000. New wins included a Chinese telecom provider serving 40% of China's Internet users and Wander, a U. S. Regional ISP deploying infrastructure to launch wireless services for West Coast residential customers.
Our financial services vertical achieved record bookings led by capital markets, banking and insurance subsegments as firms embrace digital transformation. Expansions included a key win with CME Group, a top 3 global exchange re architecting their network and securely connecting to ecosystem partners and Hanover Life Reassurance, a top 5 global insurer deploying infrastructure and connecting to ECX Fabric. Our content digital media vertical produced solid bookings led by the Americas and strong growth in gaming and publishing sub segments. Expansion wins included Akamai, a top content distributor extending coverage and scale and supporting existing security solutions and Zynga, a leading mobile gaming developer expanding across platform Equinix to support enterprise IT. Our cloud and IT vertical captured record bookings led by the APAC region and the infrastructure and services subsegments.
Equinix continues to be the leading solution for cloud connectivity today with over 40% of all cloud ramps from the top cloud service providers in our IBXs across our metros. Expansions this quarter included a Fortune 75 technology company hosting unified communication services and ServiceNow expanding its footprint to support its rapidly growing customer base. Our enterprise vertical experienced diversified growth with particular strength in travel, legal and healthcare sub segments. New wins included a global builder and operator of toll roads, enabling IoT smart transportation systems and Tapestry Premium, a leading fashion brand implementing a multi cloud strategy, as well as expansions with the top 3 food services company re architecting their network to enable data access and analytics. Our channel business had another great quarter with broad based strength, driving over 25% of bookings and accounting for 60% of our new logos as we deepen our engagement with high priority partners to significantly amplify our go to market reach.
We are focusing our efforts on driving more productivity and joint offer creation across our reseller and alliance partners, which include Amazon, AT and T, Microsoft, Oracle, Orange, Telstra, Verizon and WWT. New channel wins this quarter included a win with Telstra for Genomics England, solving for cloud connectivity to increase computing, storage and resiliency. Now let me turn the call over to Keith to cover the results for the quarter.
Great. Thanks Charles and good afternoon to everyone. Well after a very strong Q4 to enter the year, followed by our best ever Q1, it's great to now discuss the continued momentum we see in the business as reflected in our Q2 results. We had better than expected gross and net bookings in the quarter, including strong cross border activity in addition to healthy core operating metrics. This is simply another positive indication that our strategy is bearing fruit as platform Equinix continues to differentiate ourselves from our competitors.
As a result, we're raising 2019 guidance across the board, including a substantial raise in our key AFFO and AFFO per share metrics due to better than expected revenue performance and improved operating leverage in the business. And as you might expect, we're delighted to have received our 2nd investment grade credit rating from Fitch, a clear recognition of our efforts to improve our debt leverage and liquidity position. Also this quarter, we're very excited to announce our hyperscale JV partnership with GIC. This joint venture will provide us the opportunity to make significant capital investments to capture targeted and strategic large footprint deployments, while maintaining a strong and flexible balance sheet. Upon closing of the joint venture, we expect to receive net cash proceeds from the sale of our London 10 and Paris 8 IBXs and other development properties, as well as other proceeds related to the reimbursement of net costs incurred and fees earned from the joint venture.
We're delighted to be partnering with GIC and we'll continue to work hard to close the transaction in Q3. Now let me cover the quarterly highlights. Note that all growth rates in this section are on a normalized and a constant currency basis. As depicted on Slide 4, global Q2 revenues were $1,385,000,000 up 10% over the same quarter last year, reflecting better than expected recurring revenues and lower than expected non recurring revenues due in part to the mix of small and medium sized deals closed in the quarter. As was stated before, NRR activity is inherently lumpy.
We expect NRR as a percent of revenues to decrease modestly from current levels for the second half of twenty nineteen, consistent with our comments on the prior earnings call. Global Q2 adjusted EBITDA was $677,000,000 up 12% over the same quarter last year and better than our expectations largely due to strong recurring revenue performance and timing of certain costs incurred. Over the second half of the year, despite the increased adjusted EBITDA guidance, we expected to continue to invest in our growth and scaling initiatives, which includes expansion drag related to new markets and leases, while also incurring higher utility spend across the platform. Global Q2 AFFO was $498,000,000 a 14% increase over the same quarter last year, largely due to strong operating flow through and lower net interest expense. Recurring capital expenditures increased $16,000,000 over the prior quarter as planned.
Q2 global MRR churn was 2.4%, better than expected. We expect MRR churn to remain within our guided range 2% to 2.5% per quarter over the remainder of the year. Now turning to regional highlights, whose full results are covered on Slides 5 through 7. APAC and EMEA were the fastest MRR growing regions at 17% 13% respectively on a year over year normalized basis, followed by the Americas region at 5%. The Americas region saw continued momentum, including strong net bookings, solid pricing as reflected in our MRR per cabinet metric and a high mix of small deals including a healthy level of cross border activity.
It's fair to say the Americas region fully embraces the global platform vision and remains a strong source of deal flow for the other two regions. Our EMEA region had another very strong quarter led by our UK and Dutch businesses. We saw a robust increase in billable cabinets and interconnections. As you're aware, we've been opening meaningfully new capacity across our flat and emerging markets and nicely consuming this inventory. We opened new capacity in London, Madrid and Sofia this past quarter.
And Asia Pacific region delivered solid bookings across the region, mostly driven by small to medium sized deals led by our Singapore and Australia businesses. And we booked our first deal into our soon to open Sole IBX. And now looking to capital structure, please refer to Slide 8. Our unrestricted cash balance is approximately 1,600,000,000 flat over the last quarter as the operating cash flow and proceeds from the ATM program were offset by higher capital expenditures, debt repayment and our quarterly cash dividend. Our balance sheet and liquidity position continues to create a strategic advantage for us.
Our net debt leverage ratio dropped to 3.4 times our Q2 annualized adjusted EBITDA well within our targeted range. Our strategic strength, lower debt leverage, increased asset ownership and a commitment to use both debt and equity to fund our future growth drove our 2nd investment grade rating from Fitch and established us as a full fledged investment grade rated company. Reaching this milestone ensures that we have market access to a deeper pool of investors at a lower cost of capital and provides a greater set of immunity to the macroeconomic environment we now operate in. We also expect to drive substantial interest rate savings into the business over the next few years, both as we refinance our current outstanding debt load and as we borrow new incremental funds to invest in our future growth initiatives. Turning to Slide 9 for the quarter, capital expenditures were approximately $444,000,000 including recurring CapEx of 37,000,000 dollars We opened 7 new builds including 2 new IBXs, 1 in Sofia and the other in Tokyo.
For the quarter, we added 3,300 cabinets to our available inventory and we continue to purchase land for future expansion. This quarter required land for development in Madrid. Lastly, revenues from owned assets remained at 55%. And our capital investments delivered strong returns as shown on Slide 10. Our 138 stabilized assets increased recurring revenues by 4% year over year on a constant currency basis, an improvement over the prior quarter.
Our stabilized asset count increased by net 4 IBXs as we're now including the applicable Metro node assets in our stabilized count. The stabilized assets are collectively 85% utilized and now generate a 30% cash on cash return on the gross PP and E invested. Finally, refer to Slides 11 through 15 for our updated summary of 2019 guidance and bridges. Please note that quarter over quarter growth rates for both revenues and adjusted EBITDA are now updated to include the expected impact of the hyperscale joint venture closing in the Q3 and certain other one time adjustments as shown in our earnings deck. For the full year 2019, after absorbing a $7,000,000 reduction in revenue attributed to the sale of our IBXs to the EMEA Hyperscale JV, we're raising revenue guidance by $10,000,000 and our adjusted EBITDA guidance by $15,000,000 primarily due to strong operating performance in the business.
This guidance implies a revenue growth rate of 9% year over year and a healthy adjusted EBITDA margin of approximately 48%. Also, we're reducing our 2019 integration cost to 11,000,000 dollars a $2,000,000 reduction. And given the operating momentum of the business, we continue to improve our AFFO and our AFFO per share metrics. After observing a net $5,000,000 reduction in AFFO from the sale of our IBXs to the joint venture, we're raising our 2019 AFFO by $25,000,000 a growth rate between 13% 14% compared to the previous year, largely due to strong adjusted EBITDA performance and lower net interest expense. AFFO per share is expected to grow between 8% 9%, which includes the dilutive impact from both our ATM program and the prior equity raise.
We've assumed a weighted average of 84,600,000 common shares outstanding on a fully diluted basis. And we expect 2019 cash dividends to now increase to approximately $825,000,000 a 13% increase over the prior year and reflects an 8% increase year over year on a per share basis. So with that, I'm going to stop here and turn the call back to Charles.
Thanks, Keith. In closing, we're delighted with the performance of the business and we continue to execute with focus and urgency against our priorities. We see a large and expanding market opportunity and believe we are uniquely positioned to capture this opportunity as customers embrace digital transformation and adopt hybrid and multi cloud as their architecture of choice. We remain confident that the reach and scale of our global platform, the breadth of our ecosystems, the strength of our interconnection portfolio and the depth of our balance sheet will allow us to further extend our market leadership. We are continuing to scale our go to market engine and will maintain our focus on operating leverage, balancing margin expansion with additional investment in developing innovative new services and curating a robust partner ecosystem that will help us drive top line growth and sustain our industry leading return on capital.
We remain firmly focused on building a company that attracts, inspires and develops the best talent in our industry, delivering distinctive and durable value to our customers and sustainable long term value creation to our shareholders. Bottom line, the company is executing well on a highly differentiated strategy to become the trusted center of a cloud first world. We're excited about the road ahead and look forward to sharing our continued progress. Let me stop there and open it up for questions.
Thank you. We will now begin the question and answer Our first question comes from Philip Cusick with JPMorgan. Your line is open.
Hey, guys. Thanks. Let's talk about the company's sort of potential to grow either organically or inorganically from here. Outside of price, what are the important strategic characteristics that drive your decision to do acquisitions from here? And are there significant holes left in the portfolio?
You've moved into South Korea in the last year. What else is left that you really need to do? Thank you.
Sure. Phil, I'll start and Keith can add on it. Look, we definitely think there are substantial remaining growth opportunities for the business both organically and inorganically. I think in particular, I think I'd focus on the organic side, which is our customers are responding exceptionally well to our value proposition. We're seeing strong bookings growth, new logo capture and really strong land and expand activity with those customers.
So we're going to continue to focus on that as our primary growth vector.
That said, I do think that there are
we've said it on multiple occasions, we think M and A is still
a tool in the toolkit for
us.
The platform in terms of our opportunities to expand it and add to our market leadership in terms of global reach. We've talked specifically about a couple of opportunities and areas where our customers are asking us about our future plans. Those include India. Eventually, I think they include the African continent for us and probably other select opportunities including potentially Mexico as an opportunity for us south of the border here. And so I think there as you said, we'll have to look at those carefully in terms of understanding the price for those assets that might be available and we'll be disciplined about that.
But I do think that those represent an opportunity for us for growth.
And Philip, I would just add what I'd add on just to what Charles said is there's 2 other things that certainly come to the top of my mind. It's new products and services. And Charles alluded to NFE as one example of a new service that we're going to deliver, but we're going to continue to invest around product and service offerings and think of that as a potential for growth. Certainly, continuing to invest in that is the hyperscale initiative, albeit it is going to be in the JV and the majority of that, the growth, at least on a cash flow basis would come below the line. And then the last thing that sort of you feel it today for certain given the macro environment we're operating in.
And with the strength of the U. S. Dollar, as a reminder, 60% of the business in rough numbers is outside of the U. S. And we've got a with a strong dollar policy and soon to be maybe a weaker U.
S. Dollar policy in a go forward basis, there's an opportunity on a currency basis as our hedges flush out that that would provide an element of growth, whether it's the matter how we think about Brexit and the implications of that and how that's affected our revenue base out of the UK to other markets in Europe and beyond. So I think there's a lot of opportunity for growth in addition to what Charles has alluded to.
That's really interesting on the currency side. If I can follow-up once, should we think of new capabilities as sort of relatively small tack on acquisitions to really drive the internal knowledge of the company? Or do you think of bigger service acquisitions as possible? Thank you.
Well, I think that in terms of our edge services portfolio, which is probably we're going to continue to grow the interconnection portfolio in terms of reach and services and feature function, and then the edge services portfolio. The first one off the line, so to speak, is the network edge, which is a little bit of a blend between interconnection and these edge services. But I think that we are going to we probably will look at augmenting our capabilities potentially through targeted M and A. But I think that we'll be looking at a lot of organic development in that portfolio initially. And over time, we'll have to determine whether or not that warrants a more aggressive posture there from a services addition standpoint.
Thanks, guys.
Our next question comes from Aryeh Klein with BMO Capital Markets. Your line is open.
Thanks. It sounds like you're seeing some better momentum in the Americas. Can you talk a little bit about that market? What are you seeing there? And how you kind of expect that growth rate to maybe improve over the next few quarters?
Sure. Yes. I mean, I think the Americas business for us continues to be an exceptionally attractive business. Its size, the profitability of that business, if you look at it from a MRR per cab standpoint at almost $2,400 a cab, it's really an exceptional business, large number of customers and really good traction from the selling team, not only selling, our capacity local to that market, but as a huge outbound engine for the rest of the world. And so, we're super pleased with the performance of the business.
It is growing at a rate that's probably roughly in line with the broader retail colocation market. But in some respects, I think that's a bit of an unfair comparison, because we are what I would say is our real addressable market is that the market opportunity for colocation services that deliver a 30% cash on cash yield. And I will tell you our share in that business is substantially higher than it's a very high share and in terms of being able to grow that business at market rate is I think an impressive accomplishment. So we still are seeing a little bit of headwinds from the tail of churn in Verizon assets in particular. We talked about that.
It just continues to take a little bit longer to come out than we had anticipated. Again, net net, that's a good thing, but it does create some a little bit of headwind in that business. But yes, we see good success. And I think now as we add new services like Network Edge and some of the other things, I think we're going to continue have the opportunity to sustain that business in a very positive
way. Thanks.
Our next question comes from Jon Petersen with Jefferies. Your line is open.
Great. I wanted to talk about the GIC joint venture in Europe. You guys have been a little coy about the details. I think towards the end, in Keith's remarks, you said it was about a $5,000,000 net impact AFFO for the balance of the year. But I'm hoping you can maybe give us just a little more details on what we should expect for the balance of the year and then kind of the growth of that JV over the next couple of years?
Sure. John, let me start off. I just want to make sure there's a clarifying comment. So when we talk about the $5,000,000 impact, that is basically from us selling the assets to the JV. So we're reducing our AFFO by $5,000,000 because of that.
That all said, as you're all aware, we're going to close the transaction in Q3, and we'll certainly update you on the next earnings call with all the specific details. But suffice it to say, there's a number of things that are going to happen. The first thing that's going to be important for everybody to note is the amount of cash proceeds that come back into the business given the sale of our Paris, our London 10 and Paris 8 asset. And again, we've said that we're going to get at market or better cap rate on basically the recovery of our cash flow. We're going to get reimbursement of fees, reimbursement of costs, but we're also going to get our stake, our 20 percent equity interest in the joint venture.
And so we're excited about that opportunity. We've announced the 2 assets that will go in that are stabilized. There's potentially out of the gate 4 more, as we've highlighted in the earnings deck. But then we're going to be active elsewhere in the world. And we really want to be clear, this is not about getting into wholesale business.
This is about us being very, very strategic about the decisions we make that would add value to the overall franchise and our platform. And so we'll be very transparent about the deals that we do. We'll share with the market, but there's going to be a number of different JVs that will be established over the coming quarters years that will give you a good sense of the momentum. And that value will come in typically through the income from affiliated entities, which will be below the line. Some of the fees will be the fee income that we'll earn from the JV will be on the top line.
And again, it will be typically in yes, typically in the top line, but that would just be with the fee income. So there's a lot of discussion still to be at here. The deal has got to close, but we're very optimistic about the decisions we're making and we're delighted by I'll get out with our partner. I think they're going to be a great global partner for us that will go to almost any market that we choose to partner in.
Great. And then just maybe one follow-up. I'm curious about the decision to, I guess, essentially bring in GIC as a development partner to kind of share in the development like through the whole process versus finding more of a takeout partner where you can develop on your own balance sheet and then sell into a joint venture once it's stabilized, which I assume would probably carry a lower cap rate. Just curious your thought process around how you wanted that capital to come in?
Well, I think first recognizing is the first two projects which are stabilized, we're going to get full return for the investment decisions we've made, including all of the development profit associated with those assets. That said, on a go forward basis, our decision is not to take what we think is very dear capital and try and use that as a means to fund a lower returning business. We think partnering with GIC, we're happy to share in those development profits because our focus is really on adding to the overall global platform in the retail business, and we're going to consume all the capital that we have in our balance sheet and more as we shared at the last Analyst Day on growing the retail business. So this is about making a good decision, driving value into our shareholder base and at the same time augmenting. And I've said at a number of investment meetings between the new services, which includes the hyperscale and the new interconnection services, we're not only sort of widening our moat, but we're also deepening the moat around our business.
And I think that's just a good use of our capital and let our partner participate with us in appropriate returns. We'll get outsized returns because of the fee income that gets attached to those leverage returns.
Great. That's very helpful. Thank you.
Our next question comes from Colby Synesael with Cowen and Company.
I just have 2 modeling questions actually. One is on the ATM, the 348,000,000 dollars that you raised in the quarter. A bit surprised just considering you just done the equity raise the quarter before. Can you give us any color on expectations for the remainder of this year to the extent possible? And then secondly, cabinet and cross connects, they were down quarter over quarter.
And just taking into consideration the developments and how much you are building out, any color on what we can expect for both cross connects and I'm talking about physical cross connects and cabinets as we go into the back half of the year as well? Thank you.
Why don't I take the first one, Colby and Charles will take the second one. On the ATM, we've always said that we would use it appropriately at the right time. And as a company, we knew what our funding needs were between now and the end of the year and as we looked into 2020. And we always felt that there'd be a little bit of there'd always be a little bit of ATM that we take off the table at the right time. And certainly, with market conditions being as volatile as they were, as doing this deal that using this ATM at roughly an average price of $4.85 a share.
We thought it was the right thing to do. Having said that, in my prepared remarks, I really wanted to I was trying to highlight a nuance that as we look forward, a lot of our capital needs will come from debt. So we want to make sure that we continue to balance that debt, the capital source with debt and equity. But this was a unique opportunity because, one, we knew that we could get to the market. The market, we got a good price for to sell the equity for our shareholders.
Yet at the same time, it also assured us of that second investment grade rating. And so you saw the market reaction after that. It was very, very positive. And ultimately, when I step back and I now reflect on what we potentially could do to save from an interest perspective, we historically said it could be $100,000,000 I believe today given market conditions and also because of that second investment grade rating that, that number can now be between $100,000,000 say $130,000,000 $140,000,000 of cash interest savings over some period of time. And that's what really excited us is making sure that we have the liquidity position, the strong balance sheet.
We'll use the ATM sparingly. But on a go forward basis, I would tell you that the major absent any M and A or any other sort of strategic thing, we would typically focus more on debt than anything else at this point.
And then taking the second one Colby, relative to cabinets, we feel very good about the momentum in the business. We've always said that sort of cab adds is one that can be a little lumpy and depending on timing and various other factors. And so, we really encourage folks to look at sort of rolling 4 quarter average as sort of an indication of health of our ability to translate capacity into sort of utilized and billable cabinets. And when you look at that, we think that the trajectory across all three regions continues to be very strong. And again, we have added a lot of capacity.
It is and it also is important to note that we are doing that with a very attractive deal mix. And large deals are a way to add a lot of cabinets. They're just not a way to add as much value. And so I think what you're seeing is shifting in our mix and still being able to deliver the cabinet additions that we think are appropriate and attractive, but doing that at much higher returns. And so we feel good about that overall.
And again, we encourage you to really look primarily at the rolling 4 quarter average as the primary metric. And then relative to interconnection and cross connects, physical cross connects in particular, solid quarter. We were sort of right at the bottom end of our range. I do think that we are seeing a little bit of the continued 10 gig to 100 gig migration sort of impacts in terms of slowing that down a little bit. But gross adds continue to be very strong.
And when you combine that and you look at then you add in the virtual, I think you're seeing a number that looks very good. And recognize that both of them are very important to us and actually with very similar economics. We've talked about that previously, which is our ARPU and return profile on virtual interconnection is actually every bit as good as physical. And so it's a matter of just the customers choosing a different tools for different jobs, so to speak. And so I do think that we are going to see the I think we would kind of stick by our prior views on the sort of evolution of 10 to 100 gig migration flattening out at the end of this year and we think that will represent some upside in the Americas as we go into next year.
So interconnection overall, we feel great about 13% year over year growth. I think we're seeing some improvements in pricing globally, and again, strong performance on the platform overall.
Great. Thank you.
Our next question comes from Frank Louthan with Raymond James. Your line is open.
Great. Thank you. Can you comment a little bit on the Americas business and what you're seeing in pricing particularly in Northern Virginia? And then I have a follow-up.
Sure. Yes. I mean, Freddie, it's interesting because I think that revolves around some of the others who have reported some of the challenges in Northern Virginia, which I think revolve primarily around the hyperscale business and large footprint capacity and sort of supply demand dynamics of that business. I think that as we've said in the past, we're kind of taking a pass on playing in that market relative to hyperscale in Northern Virginia. Instead, we're kind of the center of that universe relative to interconnection, and relative to sort of the overall ecosystem in that market, which again continues to be the largest colo market in the world.
And so I think there is going to be I think there is sorting out at the hyper scale side that is impacting pricing, but it's not really having a significant effect on our business there, which we continue to see strong levels of interconnection, good solid cabinet yields and pricing and feel like we really play a differentiated position there in terms of the center of that ecosystem.
Okay, great. I believe you all raised pricing in Europe earlier in the year. Was that pretty much are those price increases pretty much played out at the end of the quarter? Is there any more to bleed in to impact the back half?
No. They're going to bleed in actually over a long period of time. We took a very measured approach in terms of how we wanted to go about normalizing those to what we felt were appropriate market rates. And we did that for a variety of reasons, because we really value the long term relationship with the customers. We want to do that in a way that is measured, but we also want to make sure that we're getting a fair return on what we think is an exceptionally high value service.
And so, the way we've done that is we've rolled them in at renewals typically and so they're coming in as we've already changed the price on new ads and so those will begin to obviously have an impact and then others will roll in on renewals over the coming quarters years. So it'll be a bit of a slow growth there, but we think it'll have a positive impact and sort of ongoing lift in that business.
Any competitive reaction from that?
No, I think well,
I think that what we've seen is that there's general stability in that market in terms of people delivering. I think there's been some upward lift in the overall market pricing. And so and again, I think that's a reflection of the value delivered to the customer. And so overall, it seems to be going well.
Great. Thank you very much. You bet,
Frank. Next, we will hear from Tim Horan with Oppenheimer. You may go ahead.
Thanks, guys. The 40% of all cloud on ramps, could you just elaborate on that
a little bit? What do you mean by that? And
do you think that's been growing as a percentage of share? And will Platform Equinix, is that designed to capture more of those on ramps, broadly speaking? Thanks.
Yes. It's a great question. We will I don't know that we'll continue to grow share on the on ramps because I think that we most of the providers are looking for some level of redundancy and they're looking for oftentimes multiple run ramps in a market. They've very frequently led with us, and so that is why I think we jumped out with a very large share position. And so I think we can continue to grow with them.
And as our geographic footprint expands, hopefully continue to maintain very, very high market share ratings there. If you look at it in terms of a coverage from a coverage standpoint in the markets in which we operate, we have a 70% coverage of on ramps with the largest cloud service providers and 40% share overall. So it's going to continue to be an area of focus for us. We think that the combination of us being able to continue to invest in sort of the retail centric portions of our hyperscale relationships with Equinix and focus our balance sheet firepower on that. And then being able to leverage the strength of our Xscale JV with GIC to pursue the large footprint is really absolutely spot on the right strategy for us, and we think we're going to continue to play a very differentiated position in the overall cloud ecosystem.
And can you add many new products to Platform Equinix and I guess can it be like a material business for you?
Yes and yes. I think that the edge services portfolio that we're looking at, I think network edge services is absolutely capable of being a meaningful contributor to the top line over a period of years. And as we look at other augmentations to our edge services portfolio, I think we absolutely think those can be meaningful additions. And we and we think that they can come at attach rates, strong attach rates and low cost to sale that we think will prove out to be very, very attractive economics and will be able to allow us to sustain return on invested capital at our market leading rates.
Thank you.
Our next question comes from Simon Flannery with Morgan Stanley. Your line is
open. Thanks so much. Good evening. I think, Keith, you talked about on the EBITDA some delayed spend. Can you just give us a little bit more color around that?
And then just coming back to your comment on the currencies, can you just remind us of the hedges that you have right now and what the remaining term are you? Do you have any hedges that extend deep into 2020? Or is it pretty much, say, 6, 9 months left on the existing hedges? Thanks.
Sure. Thanks for the questions, Simon. I think as it relates to EBITDA and when we talk about delayed spend, again, as a company, as you recognize, we've been able to increase our EBITDA guidance this year relative to the beginning of the year, roughly $45,000,000 seventy $1,000,000 of AFFO light. And part of that of course is timing. And timing relates to things that we talked about at the outset.
When we highlighted some of the areas that we were we exposed the P and L to this year, it was about expansion growth at a rate that we've never seen before. Through the second half of the year, you're going to see some of those costs come in, whether it's Seoul or Hong Kong, Singapore, where we're making substantial investments for future opportunity and those costs will run through the P and L. That will affect us by roughly $7,000,000 through the second half of the year incrementally. And then utility spend, as we've said, utilities are going up and we've felt it. We've experienced a lot of it, both from a pricing perspective and a consumption perspective.
And that's going to hit us by roughly another $7,000,000 So there's $14,000,000 of costs that we anticipate, at least we've embedded into our guidance that reflect that outcome. As it relates then to just currency, we hedge out typically over 8 quarters. And
as you
can see in the stated guidance that we delivered with our press release, you can see that we break down our what I call the blended rates, so not only the spot but also the hedge rates. And right now with the euro is roughly at $1.11 and we're hedged out at 1 $17 Pound is trading at $1.21 and we're hedged out at $1.34 And so it just gives you a sense and I'm sorry, let me size that for you. The euro is roughly 20% of our revenues and pound is 9% of our revenues. And one of the things that was really telling to me, so we've got a good hedge position. Of course, those will fall off over again the next 6 to 8 quarters and we'll continue to feather in future hedges and sort of smooth the impact of the currency movement.
But the thing that was very telling to me is if you think about the U. K. Sterling alone and from pre Brexit to where we are today, the rate differential is roughly, it was $1.60 when dollars to the pound and today it's roughly 1.20. So there's a $0.40 movement and we have $500,000,000 roughly 9% of our revenues or $500,000,000 just for that for the pound to go back to its level pre Brexit, I mean, that's roughly $170,000,000 to us on the top line. And so you get a sense of how substantial these currency movements have been and the impact that we've absorbed in the business over this relatively short period of time.
So we're optimistic as things get back to normal one day, whenever that one day will be. It's hard to imagine anytime soon. You're going to see the benefit that we'll accrete to this business because of our diversified portfolio with a lot of growth occurring in markets outside of the U. S.
Great. Thank you.
Our next question comes from Michael Rollins with Citi. Your line is open.
Hi, good afternoon. Just thinking back a little over a year ago, you provided some long term financial goals and you now had a little more than a year of operating results and progress. And I'm curious how you see future performance relative to some of those annual goals, including the revenue target of 8% to 10% annually? Thanks.
Yes, Mike. I think relative to our Analyst Day, what we talked about at our Analyst Day last June, we continue to feel good about that. And I think that we've delivered in retrospect over the past year plus in strong fashion relative to those expectations. And so I think the results today are sort of another step in that direction. So again, I think our business is performing very well.
I think we're comfortable with kind of what we had laid out there. We think there's a huge opportunity for us. We think the addressable market is actually expanding. We think we are actually adding to it by continuing to deliver new and incremental services on top of what we're already doing. And so, yes, we feel good about what Thanks, Mike.
Our next question comes
from Thanks, Mike.
Our next question comes from Jeff Kvaal with Nomura Infinite. Your line is open.
Yes. Thank you very much. I'd like to follow-up on Mike's question a little bit. It sounded as though in your prepared remarks that your sort of organic growth is in the 3% range. And it also sounded as though your intention over time is maybe to lean a little bit more on organic than inorganic for growth.
So I guess if organic is only growing at 3% of that 8% to 10% growth rate, are you suggesting that the organic growth should tick up a little bit with some of these new products? Or how should we think about that?
I think you're referencing our stabilized asset growth at 3 percent, but our combined growth is a much higher number. So I think our organic growth, again, we're comfortable in that in the range that we just had articulated. So I think in fact we just delivered a quarter that was 9% year over year. And so that we feel very comfortable that the organic growth can sustain in the range that we had articulated.
Okay. So ongoing CapEx, that makes sense.
Yes. And Jeff, just to be clear, I mean, we've stated over a 5 year period, when we delivered our guidance to our investors at the June 2018 Analyst Day, we said over the next 5 years, you should expect growth to be in 8% to and this is what I call non acquisition growth, 8% to 10% on a normalized basis, normalized for currency movements and the like over that 5 year period. And that was not a CAGR, it would be it would play in that range depending on inventory development and timing of builds and the like. But we feel 8% to 10% is a reasonable expectation from that 2018 through 2022.
Charles, you Charles, you talked a little bit about being resilient to the macro. It's been quite a while since there's been a bit of a downturn in some respects. And I'm wondering if you can sort of help us understand how your business has played in prior down cycles or how the business is different now from prior down cycles?
Well, again, I think our history in terms of our performance during down cycles has been very, very good. And so I think that and I think the importance of the infrastructure that we provide to our customers in terms of how they operate their business, I think makes it quite resistant. I think that's particularly true as you look at how they use us, in terms of thinking through things like priorities for our customers like Wan Re Architecture, which is a way of improving the performance of their business, but also taking cost out. And so, and as they implement hybrid and multi cloud as a way to stretch their CapEx dollars and drive application performance, those are things that we think are going to be very resistant to sort of fluctuations or macroeconomic conditions. So again, we feel good about the strength
of our business and believe it will be very resilient through the macroeconomic cycles. Jeff, let me just add one other couple of quick comments here. 1st and foremost, as Charles said, we love the fact that we can be resilient and we've historically thrived in periods of economic turmoil. And yes, we can't sort of influence how the market reacts at times and values our stock, but we certainly can take advantage of the opportunities and we've done that over the years. The other part that I think we really tried to highlight that today, being an investment grade rated company, but understanding that we have $1,600,000,000 of cash on our balance sheet, we have an unused line of credit of $2,000,000,000 We're generating AFFO of $1,900,000,000 a year that and we said we think it can grow from it can grow meaningfully over that 5 year period.
Our leverage is 3.4 times. We've just partnered with GIC for our hyperscale initiative. And our payout ratio over an extended period of time is it's going to be in the mid sort of the low to mid-40s. And so that gives us a lot of strategic flexibility as a company. And to the extent thing, we have to pull back.
We're absolutely we've always felt we can push and pull on the levers as needed, whether it's the operating spend or the capital spend. So we have a lot of comfort in who we are and what we're doing. And as we said in the prepared remarks, we think we're strategically advantaged relative to anybody else in our space.
Okay. Thank you both very much.
Our next question comes from Nick Del Deo with MoffettNathanson. Your line is open. Hey, thanks
for taking my questions. First, as we think about the new products and services that you're introducing or planning to introduce, are there boundaries we should consider regarding how far you're willing to push out? For example, limits in terms of your willingness on hardware that customers consume virtually or services that might compete with customers, things of that nature?
Yes, Nick. What I would say is that I think that we view ourselves really as an infrastructure company. And I think but I do think the way people think about consuming infrastructure is changing. And I think we have to adapt to those changing market needs, and be willing to adapt the how we deliver our underlying value proposition, which is centered around global reach, ecosystem access, interconnection and service excellence. And so, I think that we will we are probably not likely to go way up the stack.
I think we are very comfortable being an an infrastructure provider that is an enabler to other people's sort of broader digital transformation aspirations. We believe we unlock ecosystem value by combining our infrastructure value proposition with sort of higher layer value propositions of our partners. And I think that's proving out every day whether those be partnerships that we have with the likes of our network service provider partners or the hyperscalers themselves or other things that we'll continue to look at further down the road. So think that we're going to we're not going to go too far away from what we believe we're really good at. But I also think that we certainly wouldn't shy away from things that are slightly different than what our traditional business has been if that's what's needed to deliver the value proposition to our customers.
So, and in terms of competitive overlap, I do think that we are we really believe that we need to continue to be that trusted partner. We have a our business has been built on an ability to be a sort of neutral provider that gives people broad choice and access a broad value proposition. And I think our strategy will still within reason need to stick to that underlying heritage.
Okay. Okay, that's great. And then I was hoping to get a few more details on Excale. How do you determine what deployments go into XScale versus what goes into Equinix? Will a material amount of your current leasing shift into XScale?
And how tight or loose is the exclusivity component of the agreement with GIC?
Yes, let me take some of it and Keith can add on as needed. But really there's a pretty distinct difference typically in terms of a very large multi megawatt footprint and the requirements of that for hyperscalers as they look at availability zone type of deployments. And they look very different than a typical either sort of on ramp platform or network node. And so most of that business, I think on the very large side of that, we will try to direct to the Xscale facilities. And so because we think that that's a better way to allocate our capital.
And so there are mechanisms in place for us to evaluate that. And again, if we have availability of capacity in an ex scale environment to take on those very large footprint, we would prefer to do that just because that provides better returns overall.
Okay. Just to follow-up real quick.
I mean, my understanding was that you've been willing to take some large deployments in your European footprint. You're saying that what XScale is targeting is even larger than what you've done there historically?
Well, now if you look at what we did in London 10 for example, that was exactly that type of footprint and it was in a hybrid facility. Now that facility is being sort of recapture being sold to the JV. And so yes, we were doing some of those and I do think that there are we talked a little bit of this on either the prior earnings call or last one or the one before that. But we've been we selectively done some of that in our hybrid facilities in Europe. I think our preference would be to do that in the Xscale data centers.
That's not to say it's out of the question that the dynamics of a market either from a capacity or availability Okay. And then regarding the exclusivity component?
Okay.
And then regarding the exclusivity component?
Yes. So on exclusivity, neither party is exclusive to the other, but there's a lot of compelling reasons that we want to partner for a long and extended period with each other. And again, there's the flexibility that if we choose to do something that they're not interested in, in, then we can go do it ourselves or they can go do something themselves. But overall, we have to be careful. There's no competitive tension in the markets that we operate in.
And that's sort of the understanding of the parties that we're not going to compete against each other end market, but there are there could be markets where again one or the other chooses to be in and the other is not interested.
Okay. That helps. Thanks, guys. Thanks, Nick.
Our next question comes from Erik Rasmussen with Stifel. Your line is open.
Yes, thanks. And maybe just continuing with Excale. How should we think about the particulars of the Xscale opportunity, especially around capacity at full build out? I know you put out in the announcement what you expect the capacity of would be, but and then just a number of sites initially in relation to what was laid out at Analyst Day, maybe just compare how that compares to what was laid out?
Yes. I mean, I think it's very much the first step along the vision of what we painted at Analyst Day. So we continue to feel like that we can I think that, that if you recall that slide and from there, we were talking about a larger number of markets and probably 500 megawatts I think over time? Those are things that I think are absolutely doable through a series of joint ventures. And so obviously this one covers sort of 4 key markets that are really we think critical to the overall ecosystem.
And as we add incremental JVs, we think we'll add additional metros. And so, yes, I think that the vision that we laid out is, I think, very accessible. If not, I think we can it may even we may even have the opportunity to grow. I think the overall collection of JVs for Xscale to something that is better than that. We think there's a big opportunity there.
We think we're going to operate at the sort of deep end of the demand pool there. And so I think this is a great first step for us and several more I'm sure to come in the not too distant future.
Okay, great. And then maybe just related to that, one of the properties that was, I guess, under committed and it will be under development would be in Amsterdam. And then I guess it relates to what we've heard recently about the 12 month moratorium on data center construction. Do you have any thoughts on potential impact and what that might mean for this project and maybe just in relation to others?
Yes. I mean, we've obviously the Amsterdam is a significant market for us and in the sort of global scheme of things. We've stayed very close to that. And the good news is that I think we have the runway on our projects that are already sort of grandfathered in. And so we're going to have I think plenty of capacity to keep things moving as we sort through that moratorium.
And I think we'll stay very close to that. But I also think that we're going to have the opportunity as the market leader there to really continue to serve that market well. And because we have so much already committed development to do, I think we're going to be well positioned as we go through that phase.
Okay. Thank you.
We do have time for one more question. Our last question comes from Robert Gutman with Guggenheim Securities. Your line is open.
Yes. Thanks for taking the question. Regarding the $12,000,000 portion of the revenue guidance that raised attributed to outperformance. Can you point with any more specificity to what is performing better than planned? We've talked about a lot of stuff in this call, but something is going faster than you thought it would.
Is it would you say it's Europe? Would you say it's services uptake? Is it the channel deals? Is it multi region deal demand? Would you highlight anything in particular that's pushing you ahead faster?
Robert, I mean the 12% part of us just highlighting that is that where we try to sort of give everybody an indication of where the strength is coming from is in the recurring element of our revenue stream. And that was important for us to highlight on the prepared remarks, number 1. Number 2, when you look at our forward guide for Q3, is relatively modest to the overall guide for the second half of the year, which really is telling you that the momentum is going to come in the 4th quarter more so than that of the 3rd quarter based on some book to bill differentials. And then there's some one off anomalies that are going through our results in Q3 from asset sales to how we get reimbursed for some costs under a favorable tax ruling situation in Dallas. But overall, I mean, there's momentum right across the portfolio, across the platform, and we're delighted with all three regions and how they're performing.
And that was really what Charles alluded to earlier on today.
Okay, great. Thank you.
Great. That concludes our Q2 call. Thank you for joining us.
That does conclude today's conference. Thank you for participating. You may disconnect at this time.