Good afternoon, and welcome to the Equinix First Quarter Earnings Conference Call. Also, today's conference is being recorded. If anyone has any objections, please disconnect at this time. I'd now like to turn the call over to Katrina Rymel, Vice President of Investor Relations and Sustainability. You may begin.
Good afternoon, and welcome to today's conference call. Before we get started, I'd like to remind everyone that some of the statements we're making today are forward looking in nature and involve risks and uncertainties. Actual results may vary significantly from those statements and may be affected by the risks we identified in today's press release on those identified in our filings with the SEC, including our most recent Form 10 ks filed on February 19, 2021. In the Q1. 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 the financial guidance during the quarter unless it is done through an explicit public disclosure. In addition, we will provide non GAAP measures on today's conference call. If we provide a reconciliation of these measures to the most directly comparable GAAP measures and a list of the reasons why the company uses these measures in today's press in the Q1 of 2019. We have made available on the IR page our website, a presentation designed to accompany this discussion, along with certain supplemental financial information and other data. In the future.
We'd also like to remind you that we post important information about Equinix and 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. In the Q
and A.
Following our prepared remarks, we'll be taking questions from sell side analysts. In the interest of wrapping this call up an hour, if you would like to ask these analysts to limit any following questions to just one. At this time, I'll turn the
call over to Charles. In the call.
Thank you, Katrina. Good afternoon and welcome to our Q1 earnings call. We had a great start to the year, delivering one of the strongest net bookings quarters in our in the quarter fueled by strong demand across our platform, our lowest churn quarter in many years and continued momentum in our Americas business. In the second half of twenty nineteen. With the addition of the Bell Canada assets, we are now the market leader in 19 of the 26 countries in which we operate.
And we are delighted to now be the market leader in retail colocation across all three regions of the world, taking the number one spot in Asia Pacific for the first time this quarter. Our bookings performance continues to highlight in consistency and scale of our go to market engine, executing 4,300 deals with more than 3,200 customers. We have a robust build pipeline to support this demand, including 36 major projects underway across 28 markets in 19 countries, one of our most active build years ever.
In the quarter. We fully recognize that
COVID remains a very acute issue
with continued tragic impacts in key markets around the world, including India and Brazil. In our press release. Our hearts go out to our colleagues and customers in those markets, and we are actively taking steps to support those communities. In the future.
But as we navigate
toward a post pandemic world, we believe Equinix remains uniquely well positioned. Digital transformation continues to accelerate and businesses across a broad range of verticals are recognizing that their infrastructure can be a key source of competitive advantage in an increasingly digital world. If you can. Demand is as strong as ever, with global IT spend expected to rebound above pre pandemic levels as enterprises increase hybrid cloud spending and service providers build out their delivery platforms to tap into this demand. Against this backdrop, we remain focused on the clear set of priorities I outlined at the start of the year, investing in our people and culture, simplifying and scaling our business, accelerating our digital services and expanding our global reach, both through our retail footprint and our rapidly growing ex scale business.
In the quarter. While we're delighted with our business results, we are also highly attuned to our responsibilities as a market leader and continue to advance a bold sustainability agenda across all dimensions of ESG. Supporting our people and strengthening our culture continue to be foundational to our strategy. In a time where it matters more than ever, our vision remains clear. For Equinix to be a place where every employee, every day can confidently say, I'm safe, in I belong and I matter, and for our workforce at all levels to better reflect and represent the communities in which we operate.
In early April, we hosted our 2nd annual Days of Understanding, where thousands of our employees around the world attended workshops to listen, learn and promote a culture in a meaningful understanding and inclusion as we continue to build and foster an engaged diverse workforce. In the call. Our people show up every day inspired by our purpose, to be the platform where the world comes together, enabling the innovations that enrich our work, life and planet. In the future. As we pursue this purpose, we are also deeply committed to our role as an important component in Greening Digital Infrastructure.
In the quarter. We recently published our 2020 corporate sustainability highlights and I am proud that Equinix once again achieved more than 90% renewable energy coverage for our global data in our footprint and received an A- score for our CDP Climate Change Survey, a leading environmental rating system focused on climate related transparency and action. In January, we announced alongside other providers the formation of the European Climate Neutral Data Center Pact, committed to ensuring data centers in Europe are carbon neutral by in 2030. We continue to invest significant resources in our ESG leadership and will roll out additional global ambitions over the coming quarters in both our environmental and social initiatives. Now turning to our results as depicted on Slide 3.
Revenues for Q1 were $1,600,000,000 if you look at the Q4 of 2018, up 7% year over year. Adjusted EBITDA was up 10% year over year and AFFO was meaningfully ahead of our expectations. In the quarter. These growth rates are all on a normalized and constant currency basis. Our leading interconnection franchise continues to perform well with revenues substantially outpacing colocation growing 13% year over year, driven by the continued strength of Equinix Fabric.
If we can. We now have over 398,000 interconnections and added more organic interconnections year over year than the next 10 competitors combined. In Q1, we added an incremental 6,700 interconnections fueled by hyperscaler build outs and strong enterprise demand,
in the quarter, offset by
a slight seasonal increase in network grooming activity. Internet Exchange saw peak traffic up 9% quarter over quarter and 28% year over year, in the cloud and network segments. Equinix Fabric also saw strong growth driven by expanded use of our intermetro offering and continued diversification of end destinations. In more than 2,500 customers are now on fabric and we remain focused on driving higher attach rates for this product across our platform.
In the quarter.
We're also seeing strong customer interest in our Equinix metal offering and continue to deliver on our commitment to expand the availability and feature set of this offering, enabling as a service consumption of our value proposition across 18 global metros. On the Xscale side of our business, we're in the quarter. We are now accelerating our pace and continue to make meaningful progress on our ambitious plans for 2021 as rapid growth of the digital economy in the quarter. Drives increased demand for global cloud connectivity. With our ex scale facilities, hyperscale companies can add large footprint core deployments to their existing network and on ramp footprints at Equinix, enabling faster time to market and offering direct interconnection to a vibrant eco in the system with their customers and strategic partners.
Our more than $3,000,000,000 program financed with the support of our JV partners will develop over 2.90 megawatts across our first two JVs with several more already in the works. We are broadening our reach with the first building of our Dublin V campus, which is JV ready and already 100% pre leased to a major hyperscaler. Additionally, after quarter end, we pre leased our entire London 11 asset. In the quarter. These two deals alone represent nearly 40 megawatts of capacity fully committed in advance of delivery.
Now let me cover highlights from our verticals. In the quarter. Please note that we updated our customer segmentation approach to better reflect industry classifications and use cases, as well as combined our in the services and enterprise segments to reflect the true scale and momentum of the enterprise opportunity. Going forward, we'll report under these 4 key verticals. Our network vertical saw strong bookings led by the previously mentioned strength in the Americas as firms expand their capabilities and capacity for digital business in the quarter and momentum begins to build for industrial 5 gs applications.
A meaningful part of our network vertical is resale, in the Q1 of 2019. An indication of the momentum of our channel efforts as we work with partners to deliver more complete solutions to support enterprise digital transformation. Expansions this quarter include British Telecom, a leading telecommunications provider optimizing network and connecting to multi cloud for their global enterprise in 1st and Alestra, 1 of the 1st Mexican cloud service providers leveraging Equinix Fabric to provide a multi cloud product offering in the second half of twenty nineteen and Subco, a leading subsea cable system development firm deploying a cable node to establish the first route between Oman and Australia. In the quarter. Content and Digital Media achieved solid bookings as indoor entertainment continues to drive activity in the social media, gaming and streaming platforms.
In the quarter. Expansions included marquee wins like Roblox expanding across platform Equinix to support their rapidly growing user base and big data requirements as well as a global edge cloud provider expanding capacity and deploying network nodes to support accelerating demand for video content.
In our
cloud and IT vertical delivered strong bookings led by hyperscalers continuing their global growth. And it's worth noting in the quarter. These bookings results do not include the previously referenced ex scale wins, which are additive to the strong retail performance. In Q1 was also an exceptional quarter in terms of cloud on ramp additions, with 21 new on ramp wins in the quarter, in roughly equivalent to our cumulative volume over the prior four quarters and representing a 75% share of onramps launched in our metros. In the Q1.
As a result, Equinix customers can now enjoy low latency access to multiple clouds in 31 metros across the globe, including 8 of the world's top 10 metros by GDP. Expansion this quarter included a Fortune 30 software provider deploying infrastructure
in the quarter to support digital transformation and IT
initiatives and Everest, an Australian cloud services provider specializing in healthcare, in expanding to meet country specific data compliance requirements and improve user experience. Our enterprise vertical continued to be a major contributor to overall booking in the performance driven by strength in the Retail and Financial Services subsegments as enterprises shift from pandemic initiatives such as work from home and collaboration to a broader focus on digital transformation. Expansions included CME Group, a top global financial derivatives exchange, expanding their footprint to support growing demand of matching engines resulting from a new platform launch, as well as a leading global airline if we are re architecting to connect to their preferred network and cloud partners and tap into our growing transportation ecosystem. We had great wins with resellers and our alliance partners, including AT and T, Dell and IBM across a wide range of industry segments focused on digital transformation efforts and COVID-nineteen response. Partner wins included working with Verizon, utilizing their network as a service strategy in the Q1 of 2019 to help a large U.
S. Healthcare provider modernize their mission critical contact center and leverage a new cloud architecture supporting 12,000,000 members across the U. S. As well as a win with a global Canadian manufacturer deploying in Canada and Germany for WAN optimization and cloud access, in the Q1 of 2019, utilizing Cisco's SD WAN solution interconnected to Equinix Fabric. Now let me turn the call over to Keith and cover the results for the quarter.
In the call. Thanks, Charles,
and good afternoon to everyone. On the heels of a record end to 2020, we delivered a great Q1 with strong gross bookings, in fact, in our best Q1 ever and our 2nd best net bookings quarter ever with solid performance across virtually all of our key metrics. In our platform continues to shine with strong inter and inter region activity with a high interest in our expanded product and service capabilities, further separating us from our peers. Interconnection revenues now represent 19% of our recurring revenues reflecting our continued interconnection momentum. With a great start to 2021 and increased visibility over the rest of the year, we're raising our guidance substantially across revenues, adjusted EBITDA, in AFFO and AFFO per share on a constant currency basis.
Now let me cover the highlights for the quarter. Note that all growth rates in this section are on a normalized constant currency basis. As depicted on slide 4, global Q1 revenues were 1,596,000,000 in the quarter, up 7% over the same quarter last year, our 73rd quarter of top line revenue growth due to strong business performance led by the Americas. In the quarter. As expected, nonrecurring revenues decreased quarter over quarter to 5% of revenues.
But as noted on our last earnings call, in the quarter. We anticipate a meaningful rebound in Q2 NRR due to forecasted customer installation work across a number of markets, in the quarter highlighting the inherent lumpiness of this revenue source. Q1 revenues, net of our FX hedges, included a $6,000,000 headwind when compared to in our prior guidance rates. Global Q1 adjusted EBITDA was $773,000,000 up 48 percent of revenues, Up 10% over the same quarter last year, significantly outperforming our expectations due to strong operating performance and lower net utility costs. Our Q1 adjusted EBITDA performance net of our FX hedges included a $3,000,000 FX headwind when compared to our prior guidance rates and $4,000,000 of integration costs.
Global Q1 AFFO was $627,000,000 meaningfully above our expectations due to strong operating performance and lower seasonal recurring capital expenditures. In Q1 global MR churn was 2%, a meaningful step down with lower churn across all three regions. In this improved churn is a reflection of our continued disciplined strategy of selling the platform to the right customer with the right application and into the right footprint. For 2021, we continue to expect MRR churn to average between 2% and 2.5% per quarter. Turning to our regional highlights, whose full results are covered on Slides 5 through 7.
8, PAC and EMEA were the fastest in the quarter. Our growing regions on a year over year normalized basis at 10% and 9%, respectively, followed by the Americas region at 4%. The Americas region saw continued momentum with record price adjusted gross and net bookings, firm pricing and a large step up in cabinets billing. We're seeing good momentum across many markets in the region with particular spend in Dallas, New York and the smaller metros of Denver and Mexico City. We have a strong booked but unbilled backlog and continue to expect a large step up in billing cabinets through the first half of twenty twenty one as partially experienced in Q1 and with more to follow in Q2.
Based on this momentum, in the quarter. We expect the Americas normalized quarterly revenue growth rate for the remainder of the year to be at or near 6% or better. In the quarter. Also, our power hedging strategy minimized the impact of our business from the utility price spikes in Texas during the extreme weather situation in February. Our power hedging program, along with our world class operational management, ensured in the quarter.
We also protected our customers from these price spikes as well. There is no incremental revenue due to this unexpected weather situation. In terms of our outlook. Definitely, our Texas and Oklahoma wind farm settlements trended positively during this quarter. In the quarter, including healthy exports and record intra region activity.
In the quarter. Although our flat markets remain core to the region's booking engine, we're also seeing increased customer interest in our Edge Metals with strong momentum in Dublin, in Madrid and Stockholm and our new market of Muscat and our soon to be opened Bordeaux facility. Revenue growth remains strong, in the quarter, although moderated from previous levels as expected as we lap past our successful cross connect repricing initiative. In the quarter. Interconnection revenue stepped up to 13% of recurring revenues showing continued momentum.
And finally, the Asia Pacific region had solid net bookings with good pricing and strong enterprise and cloud growth led by our Singapore and Japan businesses. Utilization rates continue to remain high, but we've opened capacity in key markets this quarter and will add additional capacity through 2021 to ease potential inventory constraints. And now looking at our capital structure, please refer to slide 8. In the quarter with cash of approximately €1,800,000,000 an increase over the prior quarter, largely due to our inaugural euro denominated green bond refinancing, in the quarter, which raised €1,100,000,000 at a weighted average interest rate of 66 basis points.
In the quarter.
As a result, Equinix now has the lowest weighted average cost of debt capital and the longest weighted average maturity of any publicly traded debt data center company. We also expect to refinance our remaining U. S. Dollar high yield bond over the near term, further driving down our average cost of debt. If our net debt levels remain low relative to our peers at 3.7 times our Q1 annualized adjusted EBITDA.
If we continue to work alongside our credit rating agencies and are pleased to announce that earlier today S and P upgraded Equinix to BBB Flat and widen our leverage tolerance to 5 times. 1, we're very appreciative of the continued support we get from S and P and importantly, we're delighted with this increased financial flexibility. Looking forward, as stated previously, we'll continue to take a balanced approach to funding our growth in opportunities while creating long term value for our shareholders. Turning to slide 9 for the quarter. Capital expenditures were approximately $564,000,000 including recurring CapEx of $20,000,000 We opened 8 new retail projects this quarter adding 7,004 in the Q1 of 2019.
On the Exascale side of the business, we've opened 3 new facilities in London, Paris and Tokyo, adding an initial in 2018. All this hyperscale capacity has been presold. We also purchased land and buildings for in Montreal and Mexico City. Revenues from owned assets represent 56% of our total revenues now. In the quarter.
Also consistent with prior years, during Q1, in the quarter. We completed the annual refresh of our IBX categorization exercise. Our stabilized asset count increased by net 7 IBXs. In the future. These stabilized assets are collectively 85% utilized and generate a 27% cash on cash return on the gross PPE invested.
In the call. And now please refer to Slides 11 through 15 for our updated summary of 2021 guidance and bridges. Do note, our in the Q1 guidance does not include any financial results related to the pending GPS India acquisition, which is expected to close in Q2, in the future capital market activities. For the full year 2021, we're raising our underlying revenues guidance by $40,000,000 and in the quarter and adjusted EBITDA guidance by $33,000,000 primarily due to strong operating performance and favorable net utility costs. This guidance implies a normalized and constant currency growth rate of 7% to 8% year over year and an in adjusted EBITDA margin of approximately 47%.
And given the operating momentum of the business, we're raising our 2021 AFFO by $26,000,000 in between 10% and 12% on a normalized and constant currency basis compared to the previous year. We're also raising our 2021 AFFO per share to range in the Q1 of 2019 to now grow between 9% and 11% on a normalized and constant currency basis. 2021 CapEx is now expected to range between in the Q2.725 $1,000,000,000 and $2,975,000,000 including approximately $180,000,000 of recurring CapEx spend, which represents about 3% of revenues. In the quarter. This guidance also includes an incremental $200,000,000 of balance sheet ex scale projects, funds that we expect to recover after contributing these investments into our current and our future JVs.
So let me stop here. I'll turn the call back to Charles. Thanks, Keith. In closing.
In closing, we had a terrific start to the year. As evidenced by our results, the demand backdrop for digital transformation remains strong. In the quarter. I'm very pleased with our Q1 execution and the continued progress against our key areas of focus. As the world's digital infrastructure company, if we are supporting service providers of every size and shape to build out their infrastructure at the digital edge, infrastructure that is more global, in more distributed and more cloud connected than ever before.
And together, we're leveraging the power of our platform to cultivate scaled digital ecosystems, in enabling our enterprise customers to access all the right places, all the right partners and all the right possibilities as they transform their businesses and seek to accelerate their digital advantage. On behalf of the 13,000 plus dedicated members of the Equinix family around the world, I want to and say thank you to our 10,000 customers for the trust they place in Equinix. Finally, we look forward to our Analyst Day in June, where we'll continue the discussion of highly differentiated business model, outline the enormous opportunity ahead and discuss the actions we are taking and the investments we are making in the call to drive sustained long term value creation for our investors and our customers. So let me stop there and open it up for questions.
And our first question today comes from Ari Klein with BMO Capital Markets. Your line is open.
In the quarter. Thank you. Can you talk a little bit about the lower churn in the quarter? What specifically is driving that? And whether or not maybe longer term you see a path to maybe coming down from that 8% to 10% range that you typically see.
Sure. All right. Yes, obviously a great quarter on churn. Really, as you said in the script, one of the best we've had in a number of years. And Probably a little bit of timing there.
We were we had some kind of pull forward, and we probably pushed a little bit out. But I would say that I think that we are we continue to believe and as we've talked about this many times that the best our best in the right on the money for what we want. I think we're selling a lot of business into that, the sweet spot of sort of small to midsize interconnection heavy in applications and use cases. And again, I think that's going to bode well for us over time. So I mentioned this in several other forums, which is Yes, we have been the last two quarters up towards the high end of the range and even slightly over in Q4.
But now down right at the bottom of the range and I think we're really seeing positive trending on in the churn. So and we have efforts underway to really identify all of the really project out and look at churn risk in the business in a very sophisticated way, identify how to get ahead of it, and I think we're seeing real dividends from that.
Got it. Thanks. And then just maybe quickly on the new customer additions, it seems like you're a little bit off the recent pace. There's obviously a lot of in the activity and you're investing in the go to market. Is that an area we should expect to see an uptick over
the next few quarters? Yes. I mean, I think that we're our new logo additions and continue to be strong. We had good momentum in new logos through the course of 2020. Q1 is a little bit of a seasonally soft quarter for new logo additions Typically, but we saw good results.
I think enterprise demand continues to be very strong. Our aggregate customer count is not going up as fast in our new logos due to a variety of factors, including the fact that we are seeing some consolidation activity at the parent account level. We see some other movement in terms of people leaving the system either due to if you have some smaller customers that might be leaving the system due to financial constraints or other things. But I would say overall, we're Good healthy new logo ads. And I think we're we expect to continue to see the new customer count grow.
Got it. Thank you. You bet.
Thank you. The next question comes from Jon Adkins with RBC. Your line is open.
In the quarter. Thanks. Question about Slide 19 on Excale and then Slide 23 on kind of the lease renewal. So if you can. Excale, I'm just wondering, you've outlined stuff that's opened up, stuff that's kind of in the pipeline.
Is that the right kind of cadence to think about going forward or could that potentially accelerate? And if you could remind us how that translates into if you have a question on fee income, there's like 4 different ways you get paid, but some of that may be more front loaded than others before, where you would get the revenue before if you recognize revenues before the customer actually moves in. And then on Slide 23, just on the lease renewals, if I'm wondering what would be a realistic remaining pipeline to think about that would enable you to convert leased properties to owned properties Or is it mainly a matter of managing your renewals going forward? Thanks.
Sure. Jonathan, why don't I start with a little bit of color on exascale at a macro in the quarter. And then Keith, if you want to jump in and share a little bit more on the fee streams and their impact and flow through into the business, that would be great. And then we'll pick up the second question. But, look, we're delighted with, I think the efforts of Krupaal and in the whole Excale team and the group of people supporting them from within the core Equinix as well as the support we're getting from our partner at GIC if things are really humming in terms of the ExCale business.
Obviously, we talked about the fact that we've had great pre leasing in the activity on the facilities that we put out there. I think there is an opportunity for us to increase the pace and we're going to come back to you at the Analyst Day And really talk about kind of what we would see as the scope of opportunity for Excale going forward. As you'll recall, we talked about that in 2018 at the Analyst Day. And I think that we were we certainly I've said in a number of other forums that we're trending in more towards the high end of that. And I think we'll give more clarity on what's possible we think in the ex scale in the business, but we're targeting the pieces of the pie out there that we think are really strategically important and add to the overall platform value.
And again, we're seeing really good momentum in the business right now. I do think there's an opportunity for us to continue to pick up the pace. So Keith, why don't you comment on the fee streams and impact in the flow through?
Sure. So John, as it relates to the fees, there's 4 fee streams, 2 are recurring in nature and 2 are non recurring. And then the 5th, if you will, stream of value It comes in as below the line through income equity through affiliated entities. So basically that's our equity ownership in the business. Having said all of that, you are starting to see the momentum pick up as we announced in our prepared remarks.
In we introduced 3 new assets in this quarter and all of them are presold. And so it gives you a sense that the momentum is picking up quite substantially with a fairly robust opportunity in front of us. So what you're going to start to see in the coming quarters is some non recurring aspects in the Q1 of 2019. But you're really going to start to see a ramp up of the recurring fee stream as well. And again, we'll talk more about it in June Analyst Day.
But suffice it to say, it is exciting to see the momentum coming from that team. Yeah, So let me just leave it there. I think we answered your question.
Keith, why don't you pick
up the lease renewals as well and just what the opportunity might be for us to continue to increase ownership?
Sure. And then the second one, as you're talking about, John, about the leased properties, there's a number of transactions that we are in the middle of. We have negotiated the purchase price, the purchase of those acquisitions. It's built into our forward guide. No surprise to you both as it relates to cash, but also the anticipated in terms of those lease arrangements inside our financials.
So we are continuing to acquire where we can. If there are some that clearly are more important than others. And so where we can, we will focus on those that are the most important. Yes. At the same time, as we think about our future growth, I think if my memory serves roughly 75% of all of our future growth right now if there is a property that is owned or we have a long term arrangement with for a ground lease and it's 75% is going into major metros.
Notwithstanding the fact that we still have 30 plus over 35 projects underway across the world in many, many metros in in many countries. So all that said is you'll start to see that continue to go up. It takes time. And then we'll I should They won't answer when we're full, but suffice it to say there are some transactions that we are anticipating to announce over the not too distant future.
Understood. And then just lastly, if I could squeeze this in, the Americas margins came in a lot higher at least than we were expecting. Any kind of
Well, I think one of the prepared remarks that I had and Like first and foremost, the business is performing exceedingly well, the Americas business. One of the things when we report, there's 2 aspects to it. There's the, If you will, the fundamental business that will compare apple to apple versus the APAC region, the EMEA region, and then there's the corporate overlay. So if I tell you more specific about the Americas region in and of itself without the corporate overlay, margins are continuing to improve largely because We have very strong interconnection activity. We continue to grow our customer base and our scale and we're driving more profitability into the business.
So if you will, the easy response. The second part is that just is timing of expenses. As you know, between Q3, Q4 and then this quarter, there's been some movement of costs around different quarters. And as a result, if we start to see the benefit of those of that movement in Q4. Specifically as it relates to Q1 though, Again, one of the comments we made was that we have a very strong utility cost or power hedging program.
In our operational team operate our businesses very, very effectively the assets, particularly in the Americas, in this particular case, vis a vis Texas. So we have a strong hedging program that protected us against those spikes in price. But we also have a wind farm arrangement where in both in Texas and in Oklahoma, we have wind parts. And so we had some benefit attached to that. And then there's some seasonality around our repairs and maintenance expense.
But overall, you're seeing fundamentally a U. S. Business or Americas business that is performing exceedingly well and continuing to drive margin into its financials Offset by the corporate investments that we've been making.
And mix of business was really good in the quarter too in terms of strong MRR performance, which Always helps the margin. So, yes, really good quarter. We are continuing to invest. We're being disciplined about the pace of that. But And obviously, we're pleased with the margin performance and we do have an eye on margin expansion as a priority for us over time.
Thanks so much.
In queue. Thank you. The next question is from Sami Badri with Credit Suisse. Your line
is open. In the queue.
Hi, thank you. My first question is to do to visit back on Excale. I know you guys have laid out Quite a bit of information on that recently. But the one thing I think that would be very helpful is when we look at the originally published if you have any questions about the returns that you guys were targeting between 13% 17%, I believe, from the 2018 Analyst Day. Did that include all the various forms of income that you're going to be generating from the Exscale Venture?
And is also that the same yield range we should be thinking about for the Exascale business?
Sure. We're letting Charles direct traffic since we're in 2 different places, so pardon the pause. So as it relates to number 1, it's going to be very market dependent, right? Some markets in the future. And you're looking at unlevered anywhere from sort of unlevered returns of 8% to 12% at the project level.
If we get a fee stream on top of that. And then, of course, we put some debt on the business. So as a result, when you look at, hopefully, Equinix in our position. Our return profile is as good, if not better than what we've shared. Now having said all of that, if you ask me on a specific project, if there will be some variation.
But the team under Kupol's leadership are working really well, not only with our construction team, but with our JV partners to make sure that we get the right returns and we're negotiating appropriately with the various hyperscalers to get a good long term contract. So overall, Again, I would just say that there's no material variance from what we said of ending us a little bit better. And as Charles made in his prior comments, in fact, there's probably a broader or bigger appetite over the coming quarters years given the momentum that we're seeing that you and see maybe as do more than we originally anticipated from the June 2018 Analyst Day.
Got it. Thank you. And then just one quick follow-up for you, Keith, is I know the guide does not include any further capital markets activity and you did mention that you are looking to retire the high yield debt that you have, are you going to reissue that as green debt or in another region? Are you targeting Do you have something in mind for when you do revisit that?
Yes. Yes, I mean, no surprise to you. There will be an element of green attached if you want to take a look at the future. We do anticipate that we will retire over the near term, as I said. There's a relatively in a strong positive impact associated with that.
And again, I'll let everybody do the math and what Well, that is, but it will be a blend of perhaps 5, 7, 10, maybe even a 30 year terms to the extent that we go out that far. Some of them will be green, that would be That tend to be on the shorter end of the curve. And then the only other thing I would say is to the extent that we can, we will take advantage of There's the opportunity to make sure that we can retire some of our foreign debt where possible and arbitrage over a favorable sort of interest rate environment. And the last thing I just want to say is, again, we're delighted with the work that our treasury team has been doing under Melanie's leadership to negotiate with S and P and get a favorable upgrade. But What is really important here is more financial flexibility.
And as many of you have asked over both in our private sessions, but also in some of the calls, We've always wanted to have more financial flexibility as it relates to debt. And no surprise to everybody, debts are cheapest source of capital. And as a result, you will see us continue to focus on refinancing the debt and then also using debt where appropriate in some balance to equity to make sure that we create this long term investment portfolio that we've announced. And from our perspective, I just think It was the best of all situations today that not only getting that upgrade, but also having the flexibility to drive down our cost of capital.
In. Got it. Thank you.
Thank you. And the next question comes from Michael Rollins with Citi. Your line is open.
Thanks and good afternoon. First, I was just curious if you can just unpack a little bit more of the organic increase in the annual revenue guidance, I think that was about $40,000,000 And when you consider the size of that change on $6,000,000,000 of revenue last Sure. How does that fit into the organic constant currency revenue growth guidance range Of 7% to 8% for 2021 that was unchanged from when you provided that in the Q4. And then just secondly, just a follow-up on Excale. So it seems that for some of the projects before they enter into the joint venture, You're taking some of this on balance sheet.
You're running some of this on balance sheet from just a high level perspective. Can you just help frame how We should think about the financial impacts that that's having relative to what's the core operating business strategy. Thanks.
Sure. Well, Keith, why don't you go ahead and grab the revenue guide and we can pair up on the Excale Follow-up.
Yes. So Michael, I think there's a couple of things. 1, when we do the charts, The charts that we've shared in the earnings deck with everybody, we really try to simplify it. There's 2 aspects in One is, what is what's how is the underlying business performing at its $40,000,000 an uplift? The second part is what currency?
And based on the forecast rates that we're using, there's a $61,000,000 downdraft. If I frankly, if I took the spot rates from today, Which we don't do the day off. We obviously have forecast rates. That $61,000,000 would be cut in half, if not by more, just to give you a perspective. Having said all of that, when you look at the fundamental underlying business, it's all about the rounding.
Again, what you've done is in. What we've done is we've taken a step up, added $40,000,000 of revenue on a $6,000,000,000 business, and now you're starting to see us move up into in the range in the 7% to 8% range. So before, the bottom end of the range was slightly below 7%. Now you basically you're well into the range on the 7% to 8%. Again, this is the first step that we've made since the Q4 earnings call.
Again, there's momentum in the business And we're just delighted by the ability to be able to rate $40,000,000 on the underlying business.
And where's that $40,000,000 coming from, regionally or activity?
Yes. I mean, as it relates to sort of our comments around the Americas business, I'm sure it wasn't lost in you. It was very deliberate our comment that in the Americas business for the next three quarters, is going to be at or 6%, if not better. And so it gives you a sense that the Americas business had a record, in not only a record bookings quarter, certainly on the net basis. The churn is moderate and as a result, you're in Americas business continuing to perform.
And so that's one aspect of it. And then the other two regions, sort of down the middle, there's some in the Q2. Due to our prior pricing uplift in Europe, this sort of have we're lapping if you will those price increases and some of the accounting adjustments we made last year. But the reality is that overall the business is performing well across our platform and that's what excites us most. But if I was to say in the quarter.
And that's what excites us most. But if I was to say one specific thing, it's the Americas business. We're just delighted by the momentum that we're seeing. Charles made the comment in his prepared remarks, there's over 4,000 transactions with over 3,000 customers in the quarter. If we're operating at a scale that is just so substantial.
And by the way, our in the pipeline is exceedingly strong. And so you it's a combination of all that that has given us the confidence and the visibility to raise our guidance at this juncture and
Mike, yes, we are kind of leaning in and moving projects forward even in advance of those Being into the JV structure, because we think the market opportunity kind of is there to grab. And as Keith said in his, in the script that there's a couple of $100,000,000 there we would expect to come out of that, if that sort of macro guide he gave overall, which would come in the form of reimbursement once those facilities move into the JV. And so if that's something that we and but I would say that we our preference obviously is for projects to be into the JV from the beginning. And I think we're now at a point where many of the projects will be able to do that with, but especially in markets where we are if you look at the in the Q2. But then looking to get obviously those things get reimbursed and come back to us given that we're again, our capital commitment into those projects is basically 1 geared at sort of a 10:one ratio since we're 20% owners and we expect leverage on those projects.
And if I can just add on to what Charles said there. I think the most important part is to recognize that when we do an uplift, like we said, in this particular case of our CapEx spend, Unfortunately, when you look at our financials, it looks like our CapEx has been elevated. But ultimately, when we get that reimbursement from the joint venture, if it comes through a different line. And so it will be the sale or disposition of that construction and progress into the JV. And so basically, it's a gross up, if you will.
And so that's how it gets represented. But going forward, as Charles said, our objective is to do most of this work inside the JV instead of on our balance sheet.
Thank you. The next question comes from Omotayo Okusanya from Mizuho. Your line is open.
Yes. Good evening. Congrats on the solid quarter. My question has to do more around in some of the FX impact. When I take a look at the new guidance assumptions just around the Singapore dollar or the euro or the pound, it seems like there's an assumption here if that those currencies are going to get that the dollar is going to get stronger against those currencies, but all year we've really seen the dollar get weaker.
So I guess I'm struggling a little bit with why the new FX assumptions are assuming the strength in the dollar, which is kind of causing this FX in an otherwise kind of stellar quarter and outlook.
Sure. Do you want me to take that Charles or? You have, yes, all yours. Okay. So one, thank you for the question and sort of Thanks for raising it.
I think if you were to step back and say what is the overall bias to the U. S. Dollar, it's for the U. S. Dollar to get weaker.
And that is something that we anticipate. Having said all of that, when we go through our in the future. We have to look at the prevailing rates irrespective of what they might be in the future. And so as a company, when we on the Q4 call, if you recall, we took on 100 there's $106,000,000 if you will, win that are back from the weakening of the U. S.
Dollar versus the basket of currencies that we operate in. This quarter, that actually reversed when we annualized the impact of in the $61,000,000 headwind. But as I said in one of my other responses, that's based on our forecast rates that we use when we reforecast in the Q1 of 2019. So it tells you that the U. S.
Dollar weakened again. So again, we try and bring a lot of discipline in it's at the point in time when you do the forecast. We are not projecting forward on what might happen. If it does happen, then you'll see a benefit. And you'll see that benefit primarily because roughly 60% of our revenues are earned in currencies other than the U.
S. Dollar. So when the U. S. Dollar weakens, again, recognize we do have some hedges and they take time to burn off, Then you'll see an uplift in revenue accordingly.
So hopefully that answers your question and Let me stop there and just see if I did answer your question.
Yes. That's actually very helpful. Now I kind of understand some of the nuances around that. If you can just indulge me with one more. I mean, when you at the beginning of the year, there was a lot of concern just around expansion of sales cycles, Whether it was in the hyperscale side or whether it was in the enterprise side.
Could you just talk a little bit about again, it seems like given your stellar in some of the comments you've made about your verticals that that really isn't a concern anymore. Is that a fair statement?
Yes, we I mean, honestly, we hadn't really experienced that other than I think in the very acute periods of COVID where people were trying to Sort of just figure out how to make the transition to work from home and really dealing with matters of survival. We did not see any sort of extension, significant extension of the selling cycle. In fact, I would say that I think what we're finding is that we're improving our skill set and capability of delivering the sort of in the digital transformation oriented messaging to our enterprise prospects and seeing good momentum in terms of bringing those sales if we haven't seen that hyperscale sales cycles are a little longer, but I wouldn't say they have in protracted. In fact, I think we've made really good progress with several of our key hyperscale customers trying to define more repeatable in terms that we can do business under, which is compressing the timeframe in which we can get deals done. And it's been that's been an important in the Q1 of 2019.
Thank you. And then, I would say, no, I feel good about sales in the quarter. In fact, I think when we're looking at our funnel, we are seeing it we're seeing a very deep funnel and we're feeling like conversion rates and conversion timing if you can't support optimism about the remainder of the year, which is all kind of reflected in our guidance.
Thank you very much. You bet.
Thank you. The next question comes from Colby Synesael From Cowen, your line is open.
Great. Thank you. A few questions. So on the 2Q guidance, You mentioned you're using a wider range just given what could be some, I guess, volatility within the nonrecurring portion. I was wondering if you could just give us some sense of what you're thinking NRR might look like and could we step back up to the levels we saw in the Q4 and is that a better assumption going forward.
And then secondly, just a point of clarification on your CapEx guidance. You maintain the guidance at 2.125 to 2.315 for the nonrecurring portion, but is that including the 425 to $475,000,000 for Excal. It felt like you were saying in your prepared remarks that it is included, but the way at least the press release looks like in It's excluded. So I just want to get clarification there. And then just real quickly, as it relates to the Analyst Day, obviously, ex scale is going to be A big focus, it's been a big focus of questions this evening.
What else are you planning like what is the big focus? I mean, where do you think that Investors are maybe a little bit off in terms of their thinking the company really want to make sure you're going to
be hitting home on. Thank you.
In the Q2 revenue range and NRR and then the Xscale CapEx and I'll pick up that last piece on
the Analyst unless they focus. Sure. Yes, Colby, as it relates to the non recurring, I think what you could see is that meaningfully step up to if if you think about Q4 of 2020, you're starting to get to a percentage of non recurring revenue that could look something like that. In the prepared remarks, and again, I know you know this quite well, because of some of the work that we're doing and I made a reference a couple in the quarter. There were some large installations that were taking place in the first half of the year.
It looks like that those will close in Q2. As a result, you'll see a step up. Again, it will be more reflective of what you The percent of revenue coming from non recurring that we saw in Q4. And then it would moderate back down Higher than Q1, but moderate back down more to a more reasonable level for Q3 and Q4. So hopefully is that helpful?
I want to make sure I'm Yes,
that is perfect. Thank you.
Okay.
And then on the Excale CapEx, Keith?
Yes. I'm sorry, pardon me. As it relates to the Excale CapEx, that is included in the number.
Okay.
And then relative to Analyst Day, there'll be a number of things. Yes, we will definitely talk about in the ExCale business. Again, it will start flowing through and at least positively impacting the overall business. Again, since we don't consolidate revenue there, it's not going to be a major driver there other than some very positive flow through on the fee streams and of course the if there is a continued strategic importance of that to our platform overall. But I think our focus is going to be speaking about the overall opportunity, in the Q1 of 2019.
Thank you. Thank
you. Thank you. Thank you.
Our next question comes from
the line of John information continues to increase in the eyes of our customers. We'll talk about what we're doing to continue to evolve our go to market engine to respond to that, including how we're what we're doing on the channel side of things. We'll also talk about our roadmap for digital services And how we're adding to and scaling capabilities like Network Edge and Equinix Metal, and maybe what we have on the horizon in terms of in the future. And I think that right now we'll continue to see great momentum, great response from our customers and we're eager You're going to share those things coming in June.
Great. Thanks for helping me frame up my preview. You bet.
Thank you. And the next question comes from David Guarino with Green Street. Your line is open.
In the quarter.
Hey, thanks. Last quarter, you guys mentioned the development yields for Xscale have declined since you initially entered the hyperscale space. But Can you maybe talk about what's happened to hyperscale cap rates over that same timeframe and what that might mean for Equinix and their ability to Achieve better pricing on JVs than the initial ones that were down with GIC?
Yes. I mean, I would say that we did mention that. And As Keith said, I think that our overall return profile continues to look very attractive in terms of what we think post fees and post leverage, the in terms of returns that we're going to be getting on those projects. Although, as he also said, it is a wide range depending on the digital projects and individual in sort of market circumstances, because I do think there are markets where we've seen that, because I think Keith quoted 8 to 12 as in terms of a range and there are markets that are certainly at the low end of that, where due to a variety in terms of circumstances and just the overall competitive nature of the market. But I think in terms of I think we're very pleased in the future.
With the nature of our relationship with GIC, we think that we can continue to extend that and have other JVs of similar ilk around the world under very favorable set of terms. We find ourselves to be a very attractive partner based on the engagement that we've had as we've I looked at these JVs and so we expect we're going to be able to get very favorable terms for those partnerships and have them be very much a win win. So Keith, I don't know if you want to add anything on that last topic relative to the cap rates.
No, I think that was reflective in the comments. Again, it will be specific to the market. Again, we look at it at the project level and then in the future. The fee stream for Equinix and then the leverage that we put on the business and overall we're pleased with the business and Again, we're going to spend a lot more energy talking about this in the June Analyst Day, and it will be up to break out and give you a little bit more color. I think that will make you probably more satisfied with the overall project, David.
Okay. No, that's helpful. And then maybe one
more question. We haven't really talked about this topic in a while, but could you share your thoughts on public to public M and A for the data center REIT sector and if Equinix could be a potential player in that? Sure.
I'll comment. Keith, if you want to add, feel free. We again, we have always believed and we've been quite in terms of thinking about how to expand our business and create value for our customers and for our shareholders. If you can. That hasn't changed.
We continue to believe that there are opportunities out there. I would say that probably more of them are in the private markets. And we've clearly been active in that regard, filling out our platform geographically And adding key scale and locations in some of our markets around the world. But we're not going to be if we felt like there were transactions that we think were highly strategic and were the right economics in terms of how the deal would flow through on an accretion in the quarter. We're going to be open to those things.
But I'd say that it's probably a little biased right now more towards private opportunities in the private markets, but We're going to always be have our eyes wide open.
Great. Thanks for the time guys.
You bet.
Thank you. And the last question comes from Erik Rasmussen from Stifel. Your line is open.
Yes, thanks. Maybe just back on XScale, you've really been leaning into that initiative over the past few quarters. Can you just Maybe comment on the environment as it relates to the hyperscalers. Is this more concentrated with a few of the leaders or is it more broad based?
Yes. I mean, when we formulated the Excale entity and approach, we talked about A range of players there that would be that we would pursue relationships with and pursue business with. It is to To some degree concentrated, I think that's just that's the nature of the hyperscale community today is that the largest end of that is taking up in more of the overall demand or providing more of the overall demand. So it's concentrated at some level. But we have had significant success beyond sort of in the 3 or 4 that would pop to mind from people right off the top of their head.
And so I think we're going to continue to evaluate those opportunities. And I would say that we're really continuing to build on a strong relationship we've had with that full in the hyperscale community for a very long time because as I talked about with our, when I characterize our hyperscale relationships at the Analyst Day in 2018. They are amongst our largest customers, many of them, and that is a lot of it on the backs So really the important role that we play in terms of their network nodes, their on ramps, and other elements of their infrastructure outside of sort of availability zones and really large core deployments that might be more of the focus of VEX scale. So It's a very multifaceted relationship that we have with them. They're critical.
We believe that as people adopt Hybrid and multi cloud is the architecture of choice. We think doing that at Equinix is really going to be a key priority for them in terms of both superior economics and performance. And so, the relationships that we have with the hyperscalers or with the hyperscalers are very important to us. And it's certainly to some degree concentrated from a demand basis, but we're continuing to strive to extend that to a larger portfolio
Great. Maybe just my last my follow-up and any change in the in the competitive environment in Europe around DLR and interaction year after that deal is closed, especially as it also appears that investment activity has Pickup and demand still seems to be pretty robust there?
Yes. I would say, no, not really. I mean, I in the quarter. I think we continue to feel very good about our overall competitive position in Europe. As I said, InterXion has always been a very credible in the European player there, and I think that continues to be the case.
But we have what we think is a much stronger global story and have had great success in the market and are going to continue to build on that success and we feel good about our position there.
Thank you.
Thank you. That concludes our Q1 call. Thank you for joining us.