Good afternoon, and welcome to the Equinix third quarter earnings conference call. All lines will be able to listen only until we open for questions. Also, today's conference is being recorded. If anyone has objections, please disconnect at this time. I would now like to turn the conference over to Katrina Rymill, 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 that 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-K filed on February 19, 2021, and 10-Q, filed on July 30th, 2021. Equinix assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. In addition, in light of Regulation Fair Disclosure, it is Equinix's policy not to comment on its financial guidance during the quarter unless it is done through an explicit public disclosure. In addition, we will provide non-GAAP measures on today's conference call.
We provide a reconciliation of those measures, the most directly comparable GAAP measures, and a list of the reasons why the company uses these measures in today's press release at 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 on the IR page from time to time and encourage you to check our website regularly for the most current available information. With us today are Charles 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 follow-up questions to just one. At this time, I'll turn the call over to Charles.
Thanks, Kat. Good afternoon, everybody, and welcome to our third quarter earnings call. We had a great quarter, achieving our seventy-fifth consecutive quarter of top-line revenue growth and a record Q3 on bookings, a clear signal of strong market demand. Our results were fueled by continued strength in our Americas business and robust performance for our channel programs globally as key partners continue to see Platform Equinix as a point of NEXUS for digital transformation solutions. The pandemic has triggered an accelerated need to digitize business models in virtually every segment of the economy, and our strong results reflect its increasing demand for digital infrastructure. Equinix remains uniquely positioned to help customers as they shift towards distributed, hybrid, and multi-cloud as the clear architecture of choice.
As we continue to strengthen our position as the world's digital infrastructure company, our focus remains on creating distinctive and durable value for our customers and our shareholders, driving growth and scale in our market-leading colocation franchise, expanding our relevance to the cloud ecosystem through xScale, and tapping into massive sources of incremental demand by adapting to evolving customer needs with our rapidly growing digital services business. Turning to our results as depicted on slide three, revenues for Q3 were $1.7 billion, up 8% year-over-year. Adjusted EBITDA was up 4% year-over-year, and AFFO was in line with our expectations. Interconnection revenues continued to outpace colocation revenues, growing 11% year-over-year, driven by solid physical cross-connect growth and broad adoption of Equinix Fabric. These growth rates are all on a normalized and constant currency basis.
We processed more than 4,200 deals in the quarter across more than 3,100 customers, highlighting the reach, scale, and predictability of our bookings engine. We have a solid demand pipeline as we look to the final quarter of the year, and we continue to add capacity to service this demand with 11 major projects delivered this quarter in key markets like Frankfurt, New York, and Singapore, and 31 more major projects underway across 23 markets in 16 countries. Our global interconnection franchise continues to thrive with over 414,000 total interconnections on our industry-leading platform. In Q3, we added an incremental 7,800 interconnections and now have at least one major cloud on-ramp in 42 metros around the world, two times more than the nearest competitor. A clear indication that Equinix is the home of the interconnected cloud.
Internet Exchange saw peak traffic up 6% quarter-over-quarter and 30% year-over-year to over 21 Tbps as traffic growth remains robust. Equinix Fabric saw excellent growth, continuing to significantly over-index within the broader interconnection portfolio. More than 2,800 customers are now on Fabric with attach rates moving up into the right as businesses diversify their end destinations and service providers integrate Fabric into their own solutions. In September, we extended Platform Equinix into our 27th country with the close of our GPX acquisition, entering the strategic Indian market. Our two data centers in Mumbai form a network-dense campus with more than 350 international and local companies, including six on-ramps to the world's leading cloud service providers and a robust network ecosystem.
GPX represents an ideal entry point into this top 10 GDP country, and we expect to expand our operations significantly in India over the coming years as we tap into this rapidly growing market. In parallel with our tremendous retail success, we continue to expand our xScale business. In October, we announced plans to expand into Australia with an agreement to establish a $575 million joint venture with PGIM Real Estate to develop two data centers in Sydney, which will provide more than 55 MW of capacity when fully built.
Also, during the quarter, we closed the first phase of our previously announced EMEA 2 joint venture with GIC and signed 2 MW with a hyperscaler in Frankfurt. We currently have 8 xScale builds under development, including our newly announced Madrid Three, Mexico City Three, and Sydney Nine assets, which will collectively add 25 MW of capacity when they open in the first half of 2022. The total investment of our various hyperscale joint ventures when closed and fully built out is now expected to be more than $7.5 billion across 34 facilities globally with more than 675 MW of power capacity. Turning to our digital infrastructure services. Our Equinix Metal business saw strong revenue growth as cloud native and service provider customers continue to embrace the ability to deploy physical infrastructure at software speed.
The Network Edge saw robust growth as established customers purchased more virtual network functions across additional metros. By year-end, we expect Network Edge to be available in 25 metros around the world. Now let me cover highlights from our verticals. Our network vertical continues to be a foundation for the business, with strength in the quarter in cable and satellite sub-segments, and continued momentum in joint go-to-market with our top network partners across the globe. Expansions this quarter included Zayo, a global communications infrastructure company, adding interconnection and co-location capacity to support demand. Vocus, Australia's leading specialist fiber and network solutions provider, building infrastructure within both Sydney and Melbourne to offer network services. Hurricane Electric, a global network service provider, utilizing Equinix Fabric to allow enterprise customers to access their IP transit product at scale and in real time.
Our enterprise vertical saw another strong quarter led by manufacturing and fintech and record channel activity. New wins and expansions included a Fortune 100 manufacturing company deploying global network hubs to enable their SaaS analytics offering. A leading technology manufacturer deploying a custom liquid-cooled environment and solution center to support the next generation of high-performance compute. A Fortune 250 online retailer and e-commerce platform deploying across Platform Equinix with low latency, cloud-adjacent network hubs to support their retail branded sites. Our cloud and IT vertical saw particular strength in the Americas as industry-specific cloud solutions continue to be a catalyst for innovation and new growth. Expansions this quarter included Adobe, a leading cloud software provider, deploying infrastructure to support its platforms and optimize sustainable participation in key digital markets and ecosystems.
Wasabi, a U.S.-based object storage company, expanding their offering on Equinix Fabric into APAC and EMEA, enabling customers to easily connect their bare metal workloads hosted on Equinix Metal. A top five global software provider deploying core nodes to support their growing user base and demand in both Mexico City and São Paulo. Content and digital media had a great bookings quarter, with resurgence in this vertical being led by APAC and broad-based strength in the gaming and streaming subsegments as consumer demand for at-home digital services remained strong. Expansions this quarter included Netflix, a global streaming service expanding across Platform Equinix to new and existing markets to support OTT delivery. Kingsoft, a Chinese cloud provider expanding into Singapore to support rapid sales growth. A top three content distributor extending coverage and scale for its growing platform in the delivery of new and existing security solutions.
Our channel program continues to shine, delivering another robust quarter. This important go-to-market motion accounted for over 35% of total bookings, nearly half of our enterprise bookings, and more than 60% of our new logos in the quarter. We are benefiting from tremendous momentum in hybrid cloud adoption and seeing particular strength in joint enterprise pursuits with our key alliance partners such as AT&T, AWS, Dell, HPE, and Microsoft. Wins were across a wide range of industry verticals and included a marquee win with NVIDIA, IBM and SVA for Continental AG, a worldwide automotive parts supplier, building an interconnected global network to optimize workloads and speed up AI training for their advanced driver assistance systems. Now let me turn the call over to Keith, who will cover the results for the quarter.
Great. Thanks, Charles, and good afternoon to all. Well, let me start by saying the Equinix business continues to hum, and once again, we met our expectations or better. We had a very solid quarter. The macro environment for digital infrastructure continues to drive expanding market opportunities, as demonstrated by another outstanding bookings quarter, both at the gross and the net level from our industry-leading go-to-market engine. Our bookings backlog remains both significant and elevated as we work to install the substantial volume of business closed through the past few quarters. Our forward-looking pipeline is extremely healthy in all of our regions. Our channel sales activity was the best in our history, and our global platform delivered healthy inter and intra-region activity. We had firm MRR per cabinet deals with yet again, net positive pricing actions, a validation of our differentiated operating model compared to others in our space.
On a year-to-date basis, our global design and construction and ops teams have delivered more than 18,000 cabinets of retail capacity and 40 MW of xScale inventory, while also rolling out critical network infrastructure assets across our targeted markets in support of our Fabric, Network Edge, and Metal service offerings. We've seen no major delays to date in delivering new capacity despite general market concerns related to supply chain challenges, a reflection of the efforts put forth by our best-in-class procurement and strategic sourcing teams. Now let me cover the results for the quarter. Note that all growth rates in this section are on a normalized and constant currency basis. As depicted on slide four, global Q3 revenues were $1.675 billion, up 8% over the same quarter last year due to strong business performance across our platform led by the Americas region.
Nonrecurring revenues represented about 7% of revenues due to an increase in custom installation work and EMEA xScale joint venture fees. For Q4, we expect NRR to trend downward, decreasing sequentially by approximately $12 million due to lower xScale fees and the timing of large customer installations. Q3 revenues net of our FX hedges included a $6 million headwind when compared to our prior guidance rates. Global Q3 adjusted EBITDA was $786 million, or 47% of revenues at the high end of our guidance expectations due to timing of spend and low integration costs. Q3 adjusted EBITDA net of our FX hedges included a $3 million headwind when compared to our prior guidance rates and $3 million of integration costs. Global Q3 AFFO was $628 million, the result of strong operating performance consistent with our expectations.
Similar to prior years, we expect seasonally higher levels of recurring CapEx in Q4 as our operating teams work to complete the 2021 projects. Global Q3 MRR churn was 2.1%. We continue to expect MRR churn for the full year to be at the lower end of our targeted quarterly range of 2%-2.5%. Turning to our regional highlights, whose full results are covered on slide five through 7. APAC region's revenue grew 11% year-over-year, followed by the Americas at 7% and EMEA at 6%. As previously discussed, we expect the EMEA growth rate to return to normalized levels in Q4 as we lap interconnection price increases and the other one-off positive adjustments from last year.
The Americas region saw continued strength with our third consecutive quarter of record bookings with a broad distribution across metros, including some of our smaller markets such as Boston, Denver, Mexico City, Seattle, and Toronto. The Americas sales teams continue to sell the global platform with a notable increase in activity coming from our Canadian team, a benefit derived from the transaction with Bell Canada, which is outperforming our expectations. Our EMEA region had a solid quarter with strength coming from our Amsterdam, Frankfurt, and Madrid markets as enterprise customers and the channel drive bookings. As we aim to meet high sustainability and efficiency standards while progressing towards our 2030 science-based targets, new builds like our recently opened Frankfurt IBX serve as a model to blend into the cityscape while positively contributing to the local microclimate.
Finally, the Asia Pacific region had a solid quarter with momentum across all of our metros led by Singapore. New deal activity focused on small to medium-sized deployments with firm pricing and continued strength in our cross-border selling. Our Hong Kong market saw a nice rebound in booking performance, although continues to feel constrained given the market uncertainty. Now looking at our capital structure, please refer to slide eight. We ended the quarter with cash of about $1.4 billion, and our net debt leverage ratio remains low, particularly relative to our industry peers. Our balance sheet remains highly flexible and liquid, and we have a low AFFO cash payout ratio. With regards to our outstanding debt, we have minimal near-term exposure to potentially rising interest rates with 95% of our debt fixed and a weighted average maturity of over nine years.
Turning to slide nine for the quarter. Capital expenditures were approximately $678 million, including a recurring CapEx of $48 million. We opened 11 new projects this quarter, including new IBXs in Frankfurt, Osaka, and Singapore, and purchased land for development in Barcelona, Frankfurt, and Helsinki. On the xScale side of the business, we opened our São Paulo 5 and Frankfurt 9 assets. We also closed the first phase of our EMEA Two joint venture with GIC for net cash proceeds after our 20% equity contribution of approximately $140 million, including $34 million coming from the contribution of our São Paulo 5 asset into the joint venture after quarter end.
On a separate note, we continue to actively manage our partners and suppliers and have built up an appropriate inventory of parts and components as we hedge against supply chain challenges in support of our business needs. Finally, total recurring revenues from owned assets stepped up to 59% due to the acquisition of our Sydney one and Sydney two IBXs. Our capital investments deliver strong returns as shown on slide 10. Our 153 stabilized assets increased recurring revenues by 3% year-over-year on a constant currency basis. These stabilized assets are collectively 86% utilized and generate a 27% cash on cash return on the gross PP&E invested. We expect to exit the year closer to the top end of our stabilized asset growth range, in part due to strong Americas revenue growth.
Now please refer to slides 11 through 15 for our updated summary of 2021 guidance and bridges. Do note our guidance now includes the anticipated results from the GPX India acquisition, which closed in September. For the full year 2021, we expect revenues to grow approximately 8% on a normalized and constant currency basis. Our updated revenue guidance implies our largest ever quarterly step-up in recurring revenues on a normalized basis, a reflection of our continued strong execution. Revenues include about $5 million from the GPX acquisition and reflect updated FX rates. We expect 2021 adjusted EBITDA margins before integration costs to be greater than 47% and now include about $3 million from the GPX acquisition and reflect updated FX rates.
We expect to spend $18 million of integration costs in 2021, and we expect 2021 AFFO to grow 10%-11% on a normalized and constant currency basis compared to the prior year, and to deliver AFFO per share growth of 9%-10%. Our AFFO guidance includes some AFFO impacting accelerated spend, including recurring CapEx and elevated cash commissions associated with our strong bookings performance. 2021 CapEx is expected to range between $2.7 billion-$3 billion, including about $450 million of on-balance sheet xScale CapEx, a significant portion which has been or will be reimbursed by the JVs, and $193 million of recurring CapEx spend at the midpoint. Let me stop here and turn the call back to Charles.
Thanks, Keith. Our business continues to perform exceptionally well, delivering strong and consistent results throughout these changing times. The pandemic has been a driving force for digital transformation, and as businesses seek to respond to this imperative, the infrastructure underpinning these services must keep pace. We continue to prosecute multiple compelling growth vectors, expanding our platform geographically, scaling our go-to-market engine to capture new customers, and bringing new services to bear that will expand our addressable market. We are evolving the way we design, create, and deliver our products and services to fuel our growth and meet the changing needs of our customers. To that end, I'd also like to welcome Ron Guerrier to our board of directors.
As a veteran CIO to Fortune 500 corporations and government, Ron brings a unique perspective to the Equinix board as we continue to innovate our digital infrastructure offerings for the digital leaders of today and tomorrow. I'd like to close by expressing my gratitude to our more than 10,000 employees, whose commitment to keep our customers at the center of everything we do continues to drive our market leadership. They embody our commitment to show up every day with an in-service-to mindset, starting by being in service to each other, which in turn allows us to be in service to our customers, to our communities, and to you, our shareholders. Let me stop there and open it up for questions.
Thank you. We would now like to open the phone lines for questions. If you would like to ask a question, you may press star one on your phone. If you need to withdraw your question, press star two. Our first question comes from Ari Klein from BMO Capital Markets. Please go ahead.
Thanks. You know, it sounds like new customer net adds have been up a fair bit this year and the channels partnerships are doing really well. Can you provide some additional color on what you're seeing there? Maybe where are you seeing the most traction for new customers and also in the channel from a regional standpoint?
Sure. Yeah, I mean, I think, you know, we're seeing strength across the board, but really the enterprise side of the business, I think, is where a lot of the new customer adds are coming from. Most of those, about 60% are coming through channel, as we talked about in the script. We're seeing, you know, a big uptick, as I said, more than 35% of the bookings coming through the channel. I think it's been really encouraging. We're really seeing strength with our top channel partners, and really our top alliance partners in particular, who are really engaged in joint enterprise pursuit with us, in terms of pursuing hybrid multi-cloud opportunities and people implementing hybrid architectures. In fact, I'll give you a stat.
We had our top four alliance partners in this quarter accounted for 10% of the total bookings. That's not 10% of the channel bookings, that's 10% of the total bookings. Really strong momentum with the channel partners. It's across a number of verticals, and it's across a number of use cases, but real strength in terms of how people are thinking about using corporate data to draw insights, how they therefore wanna store that data centrally, act on it from a variety of cloud, you know, resources. Also AI as a key driver. In fact, we had a big joint win with NVIDIA on that front, as we talked about in the script.
You know, really great progress there, and I think the range of use cases is really strong. We had in fact an event today that we call Connect, you know, we had I think about 500 registrations for that event, for you know enterprises talking about a variety of use cases implemented on Fabric. We're seeing some really good momentum.
Thanks. Just on churn, it's tracking well below, you know, where it's been historically. You know, what's driving that, and how sustainable do you think that is moving forward?
Yeah, I, you know, again, I do think that that's a durable trend. I would always comment that there's some, you know, potential lumpiness in churn at times. I think if you look at the trend line on that, it's been, you know, the line of best fit is clearly downward there. We've had a good year, and as we said, we expect our full year churn to be, you know, toward the bottom end of the range that we talked about, the 2%-2.5%. I think the big driver of that is really mix of business. We're getting the right kinds of deployments, right kinds of customers, right kinds of use cases.
I think that's a lot of credit to our sales and marketing team in terms of what they're doing from a targeting perspective, and to our commercial teams in terms of how we're really sort of focusing the business. I do think it's durable, and I think that's going to continue to be a key driver in the business going forward.
Thanks for the color.
Our next question comes from Jordan Sadler from KeyBanc Capital Markets. Please go ahead.
Thanks. Want to touch base on some of the inflationary pressures that have been affecting folks. First, just maybe you could talk about the impact, if any, rising power costs may have had in the quarter on your full year guide, and maybe elaborate, if you could, your hedging protocol by region.
Sure. I'll start and then Keith can jump in if you want to add anything. I'd say this, other than some small one-time items on the power side that had a slight impact on our Q4 guide, we're seeing power costs pretty much come in where we expected for the remainder of the year and into early next year. I think it's, you know, more gonna be the longer term volatility into 2022 that we're really looking at. As you said, similar to currency, we've got a pretty extensive hedging program, and that really feathers in our hedges over a multiyear period. We're about 85% hedged in the unregulated markets, which represent most of our largest markets.
Our contracts do allow for us to adjust pricing based on underlying costs. We're actively working to implement adjustments where we think that's appropriate. Again, you guys, I think, recognize our business is different in that we're more heavily circuit based on our power mix. Whereas it's a little more seamless to pass through those costs in a metered power environment, it takes a little more finesse to do that in the circuit-based power environment. I would say that we are, you know, as I said, we're actively working that in terms of how to do it.
I'd say that our experience in Europe with the cross-connect pricing increases over the last couple of years really give us some confidence that we'll be able to go get that done effectively. No doubt there's more volatility in the energy markets, so we're watching those closely, and we're gonna continue to adapt our strategies accordingly.
Okay. Just, I guess, as a follow-up, just one, what would the percent of the portfolio is sort of circuit billing oriented? When you factor in some of the ability to pass some of this through, what's sort of the benefit that you've maybe layered in there in terms of top line?
Well, about 80% of the portfolio is circuit based. Again, that's been, you know, key to our, you know, that's part of our overall return story. We've been very effective in terms of driving sort of aggregate returns across space and power because of that circuit-based power component of the business. It's really more a matter of how effective can we be in terms of passing through, you know, price increases or underlying cost increases in the form of price to the circuit-based power environment. Again, we have the contractual ability to do that, and it's just a matter of, you know, whether we do it.
I do think it won't be like circuit power, where we're gonna get every bit of that back. You know, but I think that we'll look at that market by market and then assess what the right approach is.
Okay. Thank you.
You bet.
Our next question comes from Jon Atkin from RBC Capital Markets. Please go ahead.
Thanks. I was interested in xScale, and if you could maybe highlight any major differences with PGIM compared to GIC. Then more broadly, as we sort of think about 2022 growth drivers for revenue margins, CapEx, as well as AFFO perhaps coming from xScale. Anything to kind of keep in mind? I know you're not gonna give guidance on this call, but from a qualitative perspective, tailwinds and headwinds to kind of keep in mind for next year. Thanks.
Sure.
Jon, why don't I take the first one, and I think Charles might take the second one. As it relates to sort of the deal structuring between PGIM and GIC, is very similar. In many ways, the construct was developed off of the contracting structure with the GIC when we worked with PGIM. Again, we're delighted to have another partner in a different market in support of our Australian business. As it relates to sort of the performance this quarter, again, as you've heard from some of our prior calls, we've basically sold out most of the capacity that we've delivered to market. So we're very eager to continue our builds. We have eight builds currently underway in xScale, and the team's working very hard to identify customer-appropriate customers for that capacity plus more.
I would just leave you with, it's an exciting time for us in the xScale space. We're putting the money to work. As Charles alluded to in his prepared remarks, you know, $7.5 billion of capital is gonna be deployed across 34 assets, and you know, we still have more to talk about. Why don't I leave it there and just recognize that xScale in and of itself right now is not a big component of our revenues or AFFO, but it does create some lumpiness that you've seen in the non-recurring line, which we highlighted in our prepared remarks. Q4, we just don't expect as much of that non-recurring revenue as we've seen before.
Certainly as we look into 2022 and beyond, you'll start to see that step up again from a non-recurring perspective. Then you'll also see more of the recurring fees come into play for xScale.
Jon Atkin, on the other ones, I'd say, one, you know, look, I'm as optimistic as I've ever been, I guess, on the business, how it's performing, what the magnitude of the opportunity ahead is. You know, a little bit of noise in the quarter here, but I think that we had a, you know, the business continues to perform. The fundamentals are very strong. 8,000 interconnection adds in the quarter. 3,000 billable CAB adds. You know, record bookings really for the past 3 quarters at least, you know, seasonally adjusted in terms of, you know, this was our best Q3 ever, this quarter. Great degree of predictability. Churn, as I said, at the low end.
Firm pricing, we had another quarter of positive pricing adjustments that Keith talked about in the script. You know, we continue to see good momentum on our new markets. You know, if you look at big markets that we're, you know, a relatively earlier entrant in in terms of think places like Mexico and now India, huge opportunities in front of us there to over-index in growth on those in those markets. Digital services is really, you know, our customers are responding really well to those products, even though they're at an earlier stage of growth. You know, I think as I look into 2022 in terms of, you know, headwinds, tailwinds, et cetera, feel really good about the bookings momentum.
feel really good about, you know, the pricing and our relevance to customers, and therefore our ability to, you know, support, you know, firm price points. Churn looks good. Good deal mix is gonna continue to be absolutely key to maintaining that. As I said, I think the headwinds, you know, more on making sure that we continue to, you know. We talked a little bit about power as a potential headwind there in some areas. We talked about I think continuing to drive operational efficiencies in the business is gonna be a key focus for us to drive operating leverage. Continuing to work the backlog. I think we've got a big backlog, partially because we've got some big deals that have gone into that.
We gotta continue to work them through that backlog. Certain deal types have slightly longer book-to-bill. I think we're seeing that as part of the complexity of implementing these more multi-vendor, hybrid multi-cloud kind of deals. We're continuing to, you know, sort of hone our capabilities there. If we can continue to drive those things, you know, I think we'll be able to really take advantage of the bookings momentum that's there. Obviously, we'll give you a color on all of that as we go into the 2022 guide.
If I could throw one in on M&A. You know, whether it's networking related or software, you know, consolidation within the bare metal space, but anything kind of non-core to the classic data center business from an M&A tuck-in perspective, to what degree do you regularly look at those sorts of opportunities? Is there anything that you feel would sort of augment the platform from that perspective?
Yeah, great question, Jon. I would say that we're continuing to learn in that area, and we're, you know, accelerating our kind of investment of energy into understanding that, you know, landscape. You know, at the same time, we're still digesting and learning some of the business around digital services and how to adapt our approach and build capabilities, both from evolved capabilities from a design and development perspective, as well as from a, you know, deployment and go-to-market perspective. We're continuing to, you know, hone our, you know, cut our teeth there and really learn those things in that market. I do think there are real opportunities there.
We'll continue to be active in that area in terms of looking at potential opportunities, both to add talent and technology and capabilities, and really, you know, learning that landscape better, you know, over the course of this year, this next year and beyond.
Thanks a lot.
Our next question comes from Phil Cusick from JP Morgan. Please go ahead.
Hi, this is Richard for Phil. Just wanted to ask about the strength in the Americas. It went from kind of a modest growth to now it seems like a very strong growth environment. What are you seeing there, and how long can the bookings continue?
Hey, Richard. Well, I hope that party continues for a while. I would tell you, I think we feel pretty good about that business. You know, again, we spent more quarters than I would like talking about when the Verizon churn was gonna abate. I'm loving talking about the other side of that now. You know, we're really seeing the scale of that business, tremendous sales execution in the region, both for bookings into the region as well as global bookings, you know, to the platform elsewhere. I would say we feel really good about the performance of the Americas region right now and expect that growth rate's gonna continue to persist at elevated levels.
We feel good about that. In fact, I think driving attach rates now to continue to you know, increase share of wallet with our very, very large customer base and bringing them some of our new services is some of the new area of focus and really leveraging our channel partners to do that. Anything to add there, Keith?
The other thing I would just add, Charles and Richard, remember this region is 75% utilized, so we have substantial amount of capacity that we have built and we continue to build in core markets. The other thing I just, you know, as Charles alluded to, not only the focus that we have on the right customers, but our sales leadership team in the Americas and beyond are doing such a great job of selling the platform. The opportunity, like we said, that we talk about between inter-region and intra-region is very real. Overall, very optimistic about what we're seeing in the Americas region.
As a quick follow-up, churn used to be an issue in the Americas. Are you seeing that lower now, or has that not changed as much?
I mean, obviously, you've been in the story for a long time, Richard. You know, I think there was a period of time when we had elevated churn associated with really honing our customer mix and, you know, our core competitive advantages and making sure that we were focused on those. I would say that was back in the early days I was here in the 2011-2012 timeframe when we really set about honing our sales process and driving greater deal commercial scrutiny, et cetera. I think that, you know, we had a little bit of elevated churn as we worked through that process.
We had a little bit during the period of time when we, you know, kinda digested, you know, some of the Verizon assets. We talked about the fact over a few, you know, several quarters ago, where we had deals that candidly just were outside of the traditional sweet spot that we would be focused on. I think it's the right long-term value-creating decision for us to let those kinda things go, and use that space, and that capacity, you know, for advancing the strategy, you know, that we're really focused on. Now you're seeing that. As I've always said, the best way to avoid losing a deal is get the right deal in the door to begin with.
That's where our focus is. I think our sales teams are really doing an exceptional job of that. Our new sales leader, Arquelle Shaw, in the U.S. is just a dynamite sales leader doing an incredible job. She's got a great leadership team across the board there. I gotta give some credit to Jon Lin too, our president of the Americas, just a great team really driving that thing.
Great. Thank you.
Our next question comes from David Guarino from Green Street. Please go ahead.
Thanks. Hey, Charles, can you elaborate on your comments about pricing being firm? What exactly does firm mean? Maybe specifically if that's renewals or new leases. It may be just helpful. It'd be if you could put some data behind it on the MRR per cabinet in the U.S. Could you tell us what that was excluding the large footprint deployments this quarter?
Sure. Yeah, I mean, when we say firm pricing, one of the big things we've talked about is where we had net positive pricing actions in the quarter. We essentially take, you know, the, you know, what we're getting in terms of, you know, uplifts on our, on our, pricing accelerators or our accelerators, if you will, or increases, price increases that are contractually built in. We offset that against any, you know, potential downward movement that might occur on a re-lease. Our business tends to move at a little bit of a sawtooth in that it's, you know, we'll see these price escalators over a kind of a three to five year contract. We'll get a renewal that might have some rerate, and then we'll kind of go through that cycle again.
At any given quarter, we're seeing those positive pricing overall positive pricing adjustments, and that's just, I think, a reflection of our ability to sustain those higher price points. As you can see in the Americas, you know, actually in all of the, you know, we've been sort of moving, you know, MRR per cab up and to the right for a long period of time. We've seen some really strong movement in EMEA over the last couple of years because of the interconnection price increasing. I think we were slightly down in the U.S. on a constant currency basis, but that can often depend on the timing of installs and those kind of things. I mean, $2,393 per cab is just an exceptional number.
I think if you look at that relative to the rest of the industry, I think you would find it to be, you know, sort of, far, far and away the, you know, the best kind of yield in the industry. In terms of normalizing that for large footprint, we really aren't doing any, you know, really large footprint in the U.S. You know, we occasionally will do an anchor deal in a facility, but we're not really, you know, active in a hyperscale or xScale kind of space in the U.S., and we've kinda talked about why that is in the past.
If you look at the, you know, even in the other markets, we're doing that now almost strictly through the xScale business, and through the joint venture. That's not rolling into the results that you see here. That really only rolls into our sort of core financials in the form of fees, and other things that we think are quite accretive to the overall financial picture. That's kinda the picture on pricing. Pricing, I think on xScale continues to be, you know, competitive certainly, which is why returns in that business are a little lower, but that's also why we decided to go do this through joint ventures where 80% of that capital is through a venture partner.
Okay. Maybe just one clarification too on the stabilized revenue growth at the low end, that 3%-5% range. I know Keith said it's gonna step up again next quarter. Was the drag this quarter just due to a timing of commencement on leases?
Could you repeat that? Is the drag the timing of what?
Of commencements on leases. Was it just certain leases got pushed into next quarter? I guess if we're gonna get to the high end of the guidance range, I would assume you have a pretty big step up in your revenue growth. I was wondering if it was something driving it or just leases got pushed into Q4 in terms of when you'll start realizing revenue?
First and foremost, as Charles alluded to, in the end, we had, you know, just an outstanding quarter, again, you know, from a bookings perspective, and more particularly in the Americas region. As we just sort of talked about, the Americas enjoys the highest pricing environment. There's a number of things that are going on. Part of it is sheer timing, but it is also the, you know, the conversion of our backlog into billable cabinet that will make a big difference here. There's nothing that I would say overly extraordinary other than we're just seeing overall momentum of the business continue to scale. Churn has abated or is abating. Then you've got a good price point with the inventory that's waiting to be invoiced.
Go from backlog into a billing, you know, item.
All right. Thank you.
Our next question comes from Simon Flannery from Morgan Stanley. Please go ahead.
Great. Good evening. Thanks a lot. Just coming back to the inflation and supply chain commentary, could you talk a little bit about what you're seeing on the construction and the development side of things, availability of labor, raw materials, what's going on in the various markets around the world, both in terms of costs and your ability to pass that along as well as any impacts on timelines for development? You've been very active on the xScale, but in terms of other M&A, you know, how are you thinking about the landscape out there, or is this gonna be more focused on sort of small tuck-ins from here? Thank you.
I'd start by saying that, you know, generally, I think our team has done a just and exceptional job navigating the current realities as it relates to supply chain around the world. You know, our bottom line message has been and continues to be that we really aren't seeing any meaningful negative impacts to our business. That doesn't just magically happen. It happens by our team doing really great work to go and make sure that we are mitigating the risks that are out there. You know, we talk about internally is really four kind of levels to the supply chain, you know, potential risks.
The first one is really facility level, or in other words, you know, are those constraints out there impacting our ability to deliver projects on time and on budget? While we've seen some modest level of delays on a few projects, those are typically actually more associated with COVID delays than they are supply chain, candidly. As KT noted in the script, we've actually taken on some inventory or contractual forward commits to the tune of about $100 million that is giving us you know the confidence to be able to make sure that we can deliver our projects on time. That combined with the fact that we've got a huge number of projects underway and they're all over the world, and we can move stuff around.
Typically, it's fundable between sort of projects. You know, the team, the construction team, the procurement team, the sourcing team have just done a phenomenal job in terms of mitigating that in terms of IBX availability and the delivery timelines. You know, the next level on it is really at the services level. In other words, are our underlying services, particularly our network-related services like Fabric, you know, Connect, et cetera, and Metal, do we have the capacity to support the forecast there? What we've done there is we've just forward purchased, you know, several quarters of capacity to give us the confidence that we can support that. Feeling good about that as well. The third level is really deployment level.
In other words, cage materials and other things that are needed as people build out their cages. We've also stockpiled there. Occasionally, there are circumstances where people have non-standard items that cause delays, but if they're sticking within the, you know, sort of the middle of the bell curve in terms of what their needs are, we're not seeing many delays there. Then customer level delays is sort of the last level of it, which is, are the customers, you know, delayed in terms of getting their IT equipment to load into the deployments? You know, if not, are they delaying or asking for delays for commencement and those kind of things.
Again, while we've seen, you know, a few of those things, they just in the grand scale, scope of things and in the scale of our business are just not particularly meaningful. There's probably a little bit of pressure on costs in some areas. We've been able to take advantage of our scale, and I think to mitigate that, we're continuing to. People often ask the question as to whether, you know, cost to build is inflationary or not. I would tell you that I think we've been able to keep up with it from a design standpoint and continuing to optimize our designs faster than, you know, costs are going up. We're trying to keep ahead of the game there.
You know, I think our team's done a really, you know, terrific job of managing those things. I do think that we expect that things will start to stabilize over the course of 2022 from a supply chain perspective. Long answer there, but hopefully that gives you some perspective.
Great color. The M&A?
M&A-wise. From an M&A perspective, I would say, you know, we continue to think there's opportunity out there. I mean, we talked, I think John asked the question about M&A in the in sort of the digital services side of the business. There's also, you know, we think continued opportunity in terms of extending our reach and, you know, looking for, you know, critical assets in the market that might be accretive to our strategy. And we've got the balance, you know, the balance sheet and the firepower to, you know, go after those kinds of things. We, you know, we'll continue to be active as appropriate there, always with a high degree of scrutiny on getting the right deals.
Great. Thank you.
Our next question comes from Michael Rollins from Citi. Please go ahead.
Thanks, good afternoon. I have two questions. The first one is, you know, when you look at what's happening on the network side for network customers, are you seeing an increasing amount of telecom and wireless companies place their core network infrastructure in your facilities, you know, rather than having their own, you know, mobile switching offices that, you know, they might have had in kind of the more legacy years of the telecom landscape? What kind of opportunity that is for you as you look at wireless and 5G trying to take more services to the edge. Then the second question is, what do you make of the tower companies investing in data center assets?
Do you believe that your data center business as well as power portfolios are destined to be partners or maybe someday fall under the same ownership structure as you look out into the future?
Great questions, Mike, for sure. I would say on the network side, I'd say it's a mixed bag. You know, I think that there is a movement towards people viewing third-party facilities, particularly, you know, facilities like Equinix, where there's large degrees of aggregation as logical places to put portions of their core infrastructure. That said, you know, I think these companies are also, you know, have a long history of building in their own facilities, and I think there are still a lot of forces within those companies that want that to continue. I think, you know, we've been very active on the business development front, and we have seen some success there.
In terms of how they might think about putting certain portions of their core 5G infrastructure, for example, into our facilities. You know, we have the Dallas proof of concept center there that we've been actively, you know, working with both equipment providers as well as service providers on, you know, sort of proving out some of those potential value propositions. I think we're still, you know, that'll happen over a long course of time. I do think we're more successful with people who are coming into those markets as disruptors because they think differently about it.
I do think there are some pretty interesting opportunities there, and we're working with a few that I want to say the names right now, but I'm not sure that they are publicly that I can, so I won't. But there's some interesting things going on there. As to the tower side, you know, we've been, you know, we believe there is some synergy between, you know, sort of companies that have, you know, broad-based real estate assets that are sort of proximate to, you know, communications infrastructure, which is sort of the definition of tower companies.
I can see why and understand why they may have an interest in data center assets and how they fit in potentially to their portfolio. I would tell you that for the most part, you know, we see a strong demand for traffic at the edge there, you know, a very significant majority of that traffic to go back to the aggregated edge. That's really our sweet spot. That's where our differentiation is. Definitely there are use cases where, you know, mobile edge compute, you know, out further, you know, things like shop floor automation and those kind of things.
I think there are real use cases that 5G is gonna, you know, be able to accelerate, and we're certainly keeping our eyes on that and being active there from a business development standpoint. I think it's more likely that we would partner in some way with those folks over time. It's not necessarily obvious to me that those have to live under the same ownership structure. You know, I think we'll just have to continue to see how the markets play out. Keith, I don't know if you have a different view on that.
No. I'm with you. Well said.
Thanks.
Our next question comes from Erik Rasmussen from Stifel. Please go ahead.
Yeah, thanks for the questions. Getting back to xScale, you obviously made a lot of progress in Europe and in APAC thus far, and recently announcing another JV partner in Australia. I guess, you know, circling back, at what point does the Americas become more interesting as you look to expand xScale? Are you seeing any characteristics that, you know, are starting to get more exciting about this market than what you're seeing elsewhere, or sort of are we in the same sort of scenario?
Well, I think when people stop cutting each other's throats on pricing, it'll be a little more interesting. It's not a—I mean, it's still a very competitive market, I think. I think that's different in terms of, you know, if you look at the broad Americas, you know, 'cause I think there's opportunities in LatAm for us. Obviously, we've already announced projects in Brazil. I think we bring certain different, some very distinctive advantages there. You know, I do think there's a ton of demand.
As we've always said, we're not gonna say we're religiously out of the business of doing that, but I think it would have to be under a special set of circumstances in terms of why we think that fits with the strategy. Because, you know, the strategy, as you'll recall, is that, you know, we wanted to use those as opportunities to further our position in the cloud ecosystem, continue to invest in the relationship with the major cloud service providers and the broader set of hyperscalers, and use that to, you know, create this advantage and overall position in the cloud ecosystem. We feel very good about our position, particularly in the U.S.
You know, whether or not the xScale would be particularly accretive to that, I think is an open question. We're definitely not, it's not out of the question that we would do that. I just think it's, I think right now there are a lot of opportunities for us in other markets that we think are more attractive.
Okay, maybe just my follow-up. You know, the Americas were strong, you know, once again this quarter. Would you characterize that, you know, most of the strength is coming maybe from Bell Canada, or is it, you know, other factors that, you know, you can comment on as it relates to the strength in that region?
Well, there was a reference in the pre-prepared remarks just to talk about Canadian business is better than our, you know, it's doing better than we originally anticipated, and good on the team, and they're also selling the global platform out of Canada into our other assets around the world. As it specifically relates to the Americas business, I think it goes back to some of the fundamentals that Charles alluded to. You know, we're targeting the right customers with the right applications and putting them in the right places. At the same, you know, by the same token, we've got an inventory set that really caters to a diverse set of customers across the U.S. or the Americas as a whole.
Between the assets we serve, the customers we target, and the delivery of services that are additive to colocation interconnection, I just think we're in a much better space, or position. As a result, we're gonna win more than our fair share of the businesses out there.
Great. Thank you.
Our next question comes from Colby Synesael from Cowen. Please go ahead.
Great. Thank you. Charles, in response to Jonathan Atkin's question regarding your outlook on 2022, you know, my take from your response was the top line looks fine, but your concern is around margins, whether it's operational efficiencies or in particular power costs. As it relates to the question around power costs, I feel you may have created more questions than answers so far on this call, and I'd love to get a little bit more detail. Specifically, you guys, I think, had talked about at your Analyst Day in June, seeing margins go up just modestly in 2022. I'm curious if you still think that that's possible. Secondly, you mentioned that you hedge in unregulated markets around 85%. How far out are those hedges?
Because it seems like you're suggesting that you're okay with power costs going into 2022, but not necessarily for the full year. Then as it relates to the potential impact of power, do you think at the end of the day, this could be a 25 basis point impact, 50 basis point impact, hundreds of basis point impact? Just anything that gives us a better sense because, you know, my concern personally is that we could now be in a situation where margins go down in 2022. Then just lastly, as it relates to AFFO, it looks like AFFO guidance implies a pretty meaningful step down in the fourth quarter. Is that just the maintenance CapEx component that you talked about, Keith, or is there something else there?
What's the better jump-off point as we look to go to in 2022? Is it the third quarter or is it the fourth quarter? Thank you.
Yeah, good questions, Colby, and I'm not sure we'll be able to give you all the answers there, but I would say, and obviously we're not gonna kinda give you a 2022 guide, but you know, I would say that you know, generally, I would say we continue to feel good about the momentum in the business from a bookings and a demand perspective. I think that we did talk about, you know, driving efficiencies and, you know, and I think the pursuit of the 50% margin target is something we continue to, you know, be focused on and, that's an area where we continue to, you know, have work to do. Exactly at what pace we can do that and what that implies for the 2022 margin, I don't know.
I do think it will require us to dig in deeper on power. I don't think we're yet in a position where we can quantify any of that for you, other than you know, in terms of the hedges I mean, they are multi-year hedges, but they're feathered in, and so obviously do become less impactful as you look further out. I do think that there's more risk as you go out, but I think the good part of that is that, you know, it gives us time to determine what our approach is gonna be, you know, to passing those costs through and assessing how to do that and to what degree, that is, you know, how much of recovery we can see there.
We don't know the answers to all those things. So I think we're gonna track those. We're gonna look at the markets where there's volatility, and I think that's something where unfortunately, I think we'll just have to come back to you know, when we look into the 2022 guide and give you know, more perspective on that.
Colby, I just wanted to go back to, again, a couple of your other questions. There's two things that I thought I heard you ask. Number one is what's happening quarter- over- quarter. What's going on in Q4? There was a reference that we made in that we accelerated some costs into this year. That's number one, both from a recurring CapEx perspective and some operating spend. We did that for a number of reasons. Part of it is supply chain specific. The other part, as we alluded to in the prepared remarks, when you look at AFFO in and of itself, Q4 is historically one of our lower performing AFFO quarters. That's why we don't guide on a quarterly basis.
We give you the annual number and say, "This is what we will do," and we recognize things will move around. The reality is Q4 always tends to be a higher recurring CapEx quarter, and that's what you're seeing in the guide that we've delivered at $193 million at midpoint. It gives you a real sense of it's a big step up in our recurring CapEx for Q4. The other thing is, you know, as we've said, you know, we had a lot of success in the business, and as a result, the cash payout attributed to commissions is more substantial than we originally anticipated in Q4, and that's reflected in the guide. That's AFFO impacting on EBITDA impacting. There's a lot of nuances.
Overall, when you look at the fundamental business, you know, it's performed better than we anticipated for every single quarter of the year. We're delivering against the expectations we've set. You know well that, you know, we've raised our guide both on revenue, EBITDA, and AFFO throughout the year. We're at a point now where we feel comfortable, and now we're focusing on 2022, and that's where the energy of the business is again focused on.
Thank you.
Thank you. Our final question comes from Frank Louthan from Raymond James. Please go ahead.
About the bounce in the Americas, it's been a tougher market the last few years. What sort of changed there, and how long do you think you can continue to see some better results out of those markets? Thanks.
Hey, Frank. Yeah, as I said earlier, I think that business has a strong trajectory. I think we expect that to continue. We don't see this as a you know, as a temporary improvement. I think we're you know, the business moving in a very solid direction. Strong demand from customers, good sales execution. You know, again, we don't expect that. Again, churn mitigating, you know, getting the right customers, right deals. I think that will continue to drive you know, strong performance from that region. Which obviously is a pretty major driver of our overall performance.
Can we expect this to be a little bit of a new baseline and kind of continue to grow from here? How should we think about the current trend?
Yeah. I mean, I think in, you know, as to whether it really accelerates, you know, I think that we have to continue to look at our success in, you know, driving, you know, new services revenues and, you know, what the rate of new customer, you know, capture and attach is and those kind of things. But, again, I think we feel really good about where the business is right now and feel like that's a sustainable growth rate for us.
All right, great. Thank you very much.
That concludes our Q3 call. Thank you for joining us.
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