Good afternoon. Welcome to Equinix's Second Quarter Earnings Conference Call. All lines will be in listen-only mode until we open for questions. Today's conference is being recorded. I would now like to turn the call 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 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, 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 April 30, 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 in explicit public disclosure. We will provide non-GAAP measures on today's conference call. We provide a reconciliation of these measures to the most directly comparable GAAP measures and the list of the reasons why the company uses these measures in today's press release from Equinix IR page at www.equinix.com. We've made available on the IR page of our website a presentation designed to accompany this discussion, along with certain supplemental financial information and other data. We'd 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 within an hour, we'd like to ask these analysts to limit any follow-on questions to just one. At this time, I'll turn the call over to Charles.

Thanks, Kate. Good afternoon, everybody and welcome to our second quarter earnings call. As reflected in our results, we are seeing significant momentum in our business as digital transformation outpaces previous expectations. Technology spend is accelerating, and Equinix remains uniquely positioned as traditional technology markets continue to shift toward service consumption models with hybrid multi-cloud being widely adopted as the architecture of choice. The pandemic has highlighted that divisional infrastructure is not just a business enabler, but a primary source of competitive advantage for digital leaders across all industries. We continue to see a multitude of trends driving infrastructure that is more distributed or on-demand and more ecosystem-connected than ever before, playing to our distinctive strengths. Our results reflect strong performance across our geographies, tremendous momentum in our market-leading interconnection franchise, and deep customer demand across our expanding portfolio of services. Against this robust demand backdrop, we had a great second quarter, delivering record bookings, fueled by continued momentum in our Americas business and a strong quarter for Equinix Metal. We processed more than 4,600 deals in the quarter across more than 3,200 customers, demonstrating both the scale and the consistency of our go-to-market machine. We achieved our 74th consecutive quarter of top-line growth and are pleased to have recently been included in the Fortune 500, an exciting milestone made possible by the confidence our customers place in Equinix, and by the incredible commitment and passion of our 10,000-plus employees around the world. We continue to expand our global platform with 35 projects underway across 25 markets in 19 countries, with Q2 openings in Bordeaux, Helsinki, and Silicon Valley. Aligned with our values and our purpose, we're also proud to share further enhancements to our commitments on sustainability, leading across all elements of ESG. In early June, we became the first in the data center industry to commit to being Climate Neutral by 2030, backed by science-based targets, an ambitious green financing plan, and a comprehensive sustainability agenda. Aligned with the Paris Climate Agreement, this commitment is a critical step to ensuring Equinix continues to advance investments and innovations to reduce greenhouse gas emissions and greening our customers' digital supply chains. Additionally, as part of our ongoing focus on diversity, inclusion, and belonging, we recently hosted our second annual WeConnect event, a 24-hour virtual gathering led by our employees, our employee connection networks, and our wellbeing teams. This event celebrates equality, diversity, and connection and offers our employees an opportunity to listen, learn, and engage in courageous conversations as we build a culture and a community that can have a meaningful sustainable impact on the future of our world. Turning to our results as depicted on Slide 3, revenues for Q2 were $1.7 billion, up 8% year-over-year. Adjusted EBITDA was up 7% year-over-year, and FFO was again meaningfully ahead of our expectations. Interconnection revenues grew 12% year-over-year, with solid unit additions and healthy pricing. These growth rates are all on a normalized and constant currency basis. Our global interconnection franchise continues to perform well. We now have over 406,000 total interconnections on our industry-leading platform. In Q2, we added an incremental 7,800 interconnections and now have 15 macros with more than 10,000 total interconnections—a reflection of the scale digital ecosystems that drive our differentiated value proposition. Internet exchange saw peak traffic up 4% quarter-over-quarter and 31% year-over-year, and we're seeing IBX diversify as large-scale periods expand to a broader base of enterprise customers. Equinix Fabric saw excellent growth across all three regions, driven by healthy unit growth and increasing yields as customers expand their usage of higher bandwidth connections to interconnect regional and global footprints. More than 2,600 customers are now on Fabric, and we continue to see strong attach rates as businesses diversify their end destinations and evolve their connectivity needs in support of highly distributed infrastructure and the adoption of hybrid multi-cloud. Turning to digital infrastructure services, customers are responding very positively as we augment our portfolio to enable physical infrastructure delivered at software speed. We have strong bookings of Equinix Metal this quarter, including our largest link to date with our channel partner for a blockchain company building a network of validation nodes across eight markets. Our Network Edge offering has shown meaningful acceleration, with average deal size increasing nicely as enterprise customers deploy a diverse set of virtualized network functions from our marketplace of vendors. Importantly, and as expected, digital infrastructure services are also driving strong cross-selling activity and interconnection pull-through, with nearly 1,000 virtual connections already provisioned to support these deployments. Shifting to our xScale initiative, we continue to expand our plans in light of robust market demand and positive customer feedback. Late in the quarter, we announced agreements for additional joint ventures with GIC, Singapore's sovereign wealth fund. When closed and fully built out, the total investment between Equinix and GIC in our xScale data center portfolio will be nearly $7 billion across 32 facilities globally with more than 600 megawatts of power capacity. We currently have seven xScale builds under development across all three regions, and we preleased our entire Frankfurt nine asset in Q2, representing 18 megawatts of capacity fully committed in advance of delivery. With this field, we now have leased more than 100 megawatts of xScale capacity, with 100% of our open capacity leased. We're actively engaged with partners to develop plans for entry and other expansion in global markets, including Australia. Now I'll cover highlights from our verticals. Our network vertical delivered strong bookings across all three regions, with particular strength in APAC, as traditional carriers continue to invest in specialty telecom firms evolving their portfolios to address demand for cloud, mobile, and IP services. New wins and expansions this quarter included a local telecom service provider leveraging interconnection to better serve low-latency financial customers; a leading provider of network services deploying in our London for compared to seven IBXs to support the first new subsea cable laid across the English Channel in nearly 20 years; and a global telecommunications provider expanding their presence to new locations including Milan and Bordeaux. Our cloud and IT vertical saw continued momentum, over-indexing in Europe as organizations accelerate hybrid multi-cloud adoption. Expansion this quarter includes a leading video communications platform expanding coverage and scale to support market demand. Our enterprise vertical achieved record bookings, with broad global strength punctuated by an exceptionally strong quarter in the Americas across several sub-segments, including healthcare, consumer services, business and professional services, and retail. New wins and expansions included a major sports energy drink manufacturer deploying infrastructure across all three regions to take advantage of Equinix's cloud ecosystem; a leading global cosmetics retailer deploying digital infrastructure to optimize their network, move out of legacy data centers, and locate private infrastructure adjacent to their cloud providers; and a Fortune 500 global insurance provider optimizing their infrastructure to support multi-cloud. Content and digital media also achieved solid bookings led by growth in CDN, publishing, and digital media, and gaming, as digital transformation continued to shape this vertical. Expansions include a leading edge computing and services provider deploying infrastructure across multiple edge locations; a leading data analytics company transforming network topology and interconnect to multiple files across our platform; and a leading provider of application hosting and infrastructure services deployed on our platform to enable a consistent high-performance gaming experience globally. Our channel program continues to outperform, delivering a record quarter and accounting for over 35% of bookings. Wins were across a wide range of industry verticals and use cases, including multiple Equinix Metal and Network Edge deals as the channel embraces our digital infrastructure services. We saw continued strength from alliance partners like AWS, Cisco, Dell, Google, IBM, and Microsoft. We also had success with key retailers around the world, including a win with HPE, the Rollers Group, a leading Australian retailer to modernize and scale their payments platform, which processes over 30 million transactions per day. So now let me turn the call over to Keith to cover the results reported.

Thanks, Charles. And good afternoon to everyone. I hope you and your families are well and enjoying the summer months. So let me start by saying it was great to spend time with many of you, albeit virtually, at our June Analyst Day state. No surprise, we were eager to share our plans on how we intend to scale, extend, and innovate the business over the coming years to drive long-term shareholder value, meaning more revenues, higher margins, and more cash flows. With respect to the quarter, the business continues to perform exceedingly well. At the macro environment, digital infrastructure continues to drive favorable demand. In fact, we exceeded our expectations. There are many highlights to share with you from the quarter. To start, we had record bookings activity at both the company and the Americas regional level. We enjoyed robust channel activity along with planned growth. Interconnection additions were solid both physically and virtually, and our digital infrastructure service lines, which include Edge and Metal, are gaining momentum. Simply put, we're continuing to execute against the goals highlighted at the Analysts Day. Given our performance, we're raising our guidance across each of revenues, adjusted EBITDA, AFFO, and AFFO per share for the year. Now let me cover the results for the quarter. Note that all growth rates in this section are on a normalized constant currency basis. As depicted on Slide 4, global Q2 revenues were $1.658 billion, up 8% over the same quarter last year, due to strong business performance across our platform led by the Americas region. And as expected, non-recurring revenues increased quarter-over-quarter to 7% of revenues due to a meaningful step up in xScale joint venture fees in APAC and EMEA, and custom installation work across all three regions. As you can appreciate, non-recurring revenues are inherently lumpy; therefore, we expect the Q3 non-recurring revenues to decrease by $8 million compared to Q2. Our backlog of books, but yet to be built cabinets have increased slightly, despite the 4,200 increase in building cabinets in the quarter. Q2 revenues, net of our FX searches, included an $11 million benefit compared to our prior guidance rates. Total Q2 adjusted EBITDA was $797 million, or 48% of revenues, up 7% over the same quarter last year, meaningfully outperforming our expectations due to strong operating performance and timing of spend. Q2 included a planned rebound of repairs and maintenance spending and higher utility costs relative to Q1. Total Q2 FFO was $632 million, including a $25 million recurring CapEx increase compared to the prior quarter, above our expectations due to strong operating performance and more integration costs. Turning to our regional highlights, with full results covered on Slides 5 through 7, APAC has the highest year-over-year revenue growth of 11%, followed by the Americas and EMEA region both at 8%. EMEA's revenue growth rate reflects the lapping of the significant interconnection price increases and other one-off positive adjustments from last year. We expect the EMEA growth rates to return to normal levels in Q4. The Americas region saw continued strength with our second consecutive quarter of record bookings in six of our seven largest markets improved over the prior year. We're also enjoying healthy booking activity across our smaller markets, including Atlanta, Austin, Denver, and Seattle. Deals were focused on retail interconnected deployments with healthy pricing. The Americas region also benefited from strong imports from the other two regions, reflecting our continued focus on platform sales. Our EMEA region had a strong quarter, led by Dublin and Stockholm and our newly opened Bordeaux market, as well as high exports to the other two regions. Enterprises contributed approximately one third of the region's bookings, up significantly over the prior year. We're also seeing good momentum across our flat markets. The EMEA region benefited from non-recurring revenues related to xScale fees earned from the prelease of our entire Frankfurt 9 and London 11 buildings, which represented 37 megawatts of demand. Finally, the Asia-Pacific region had a solid quarter, led by Singapore and Japan with strong regional bookings. Pricing for small and medium-sized deals remains strong and we’re seeing good traction with Equinix Metal. The APAC region's quarterly AMR growth was partially constrained due to COVID-related capacity delays in Singapore and political uncertainty in our Hong Kong markets. Now looking at the capital structure, please refer to Slides 8 and 9. We ended the quarter with cash of about $1.8 billion, and our net debt leverage ratio is 3.8 times Q2 annualized EBITDA, highlighting the financial flexibility and strategic advantage we have relative to anyone else in our space. In May, we raised $2.6 billion, including an incremental $1 billion in green notes. Since Equinix is an overall investment-grade issuance, in late 2019, we've reduced our annualized interest expense by approximately $196 million, offset in part by the incremental debt capital raised. Our blended cost of debt is now the lowest in the industry at approximately 1.7%, and our weighted average maturity is nearly 10 years. We also raised $100 million of ATM equity in the quarter. We continue to expect to use both debt and equity to fund our future business needs, with an increased lean toward debt capital. Turning to Slide 10 for the quarter, capital expenditures were approximately $692 million, including recurring CapEx of $45 million. We opened three new retail projects this quarter, including new IBXs in Bordeaux and Silicon Valley. We also purchased land for development in Frankfurt and Helsinki. Revenues from owned assets now represent 58% of our total revenue through the acquisition of our Singapore 3 IBX. On the xScale side of the business, after the quarter ended, we contributed a Dublin 5 asset to the EMEA joint venture and in return for net proceeds after our 20% equity contribution of $49 million. Our capital investments delivered strong returns as shown on Slide 11. 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 PPE invested. Looking forward, we expect to exit the year closer to the top end of our stabilized asset growth rate in part due to strong America's revenue growth. Please refer to Slides 12 through 16 for an updated summary of 2021 guidance and bridges. Do note our 2021 guidance does not include any financial results related to the pending GPX India acquisition, which is expected to close in Q3. For the full year 2021, we're raising our revenue guidance by $50 million and adjusted EBITDA guidance by $27 million, primarily due to strong operating performance and favorable FX rates. Although slightly offset due to timing standards, we proactively pulled forward expenditures to mitigate supply chain risks. This guidance implies a normalized constant currency revenue growth rate of approximately 8% in midpoint compared to the prior year and an adjusted EBITDA margin of greater than 47%. Given the operating momentum in the business, we're raising our 2021 AFFO guidance by $15 million going from 10% to 12% on a normalized constant currency basis compared to the previous year while also increasing our AFFO per share range. Our 2021 CapEx is now expected to range between $2.7 billion and $3 billion, including an approximate $450 million of off-balance sheet, xScale CapEx. A significant portion of which is expected to be reimbursed by either the current or future JVs and $193 million of recurring CapEx spend—a slight increase over the prior quarter due to timing of spend as we mitigate supply chain risks. So let me stop here and turn the call back to Charles.

Thanks, Keith. The momentum behind digital transformation is as robust as ever and shows no signs of letting up. As the world's digital infrastructure company, Equinix plays a unique role in this evolving story and is positioned to be both a catalyst and a key beneficiary as we partner with customers to unlock the enormous promise of digital both economically and socially. As we discussed in our latest Analyst Day, we are focused on three strategic levers as we execute on this transformational opportunity. First, we will continue to scale, doubling down on the strength of our core business, investing further to scale our go-to-market machines to win new customers, putting our capital to work to add capacity in existing markets, and executing on targeted operations whether standardized, simplified, or automated. Driving expanded operating margins and providing a better experience for customers and partners. Second, we will extend the reach of our platform and accelerate our aspirations in xScale. By the end of this year, we'll be in 66 markets around the world and see continued opportunities for expansion and growth across the retail and xScale. Third, we will continue to innovate across our portfolio, scoring scalability, self-service, and energy efficiency, delivering advanced features to sustain momentum in our market-leading interconnection franchise and driving adoption of our digital infrastructure services to deepen our relevance to customers. Our ability to scale, expand, and innovate starts with our people. And with our commitment to building a diverse and inclusive workplace for every person, every day, you can confidently say I'm safe, I belong, and I matter. We show up every day with a service-oriented mindset, starting by being in service to each other, which enables us in turn to be in service to our customers, our communities, and you, our shareholders. Purpose creates passion, and we are inspired by ours. To be the platform where the world comes together, serving as an enabling force for our customers in unlocking their incredible potential to deliver the innovations that enrich our work, our life, and our planet. So let me stop there and open it up for questions.

Thank you. Our first question comes from Jordan Sadler with KeyBanc Capital Markets. Your line is open.

Thank you, good afternoon. So during the Investor Day last month, you outlined the 7% to 10% annual AFFO per share growth through 2025. But you also suggested that next year could come in the lower half of the range. I think efficiency initiatives took some time to ramp, and you didn't have as much benefit from refinancing opportunities that have taken place. Given the acceleration you're still seeing in this quarter and the bump you've seen here, can you speak to what the trajectory looks like heading into next year? And then certainly as a follow-up, I’m just curious about the ATM in the quarter. I think Keith, you talked about significant incremental debt capacity, given sort of leeway offered by the agencies. And so we expect to see the equity raise in the quarter? Thanks.

Okay, great. Thank you for the questions. Let me take the first one. First and foremost, when we came out at the Analyst Day, one of the questions we spent a lot of energy talking about was the AFFO per share growth rate in 2022 relative to the broader guide. The reason I said it was going to be in the bottom half of the range instead of the top half of the range was, that was a reflection of all the investments we're making across our portfolio this year—not only as it relates to xScale, but also our digital infrastructure services and all the efficiency initiatives. So we were absorbing the full annualized impact of those costs in 2022. As a result, it tends to cause us to be a little bit more dilutive on the per share metric relative to the broader guide. In addition, of course, we've got a very strong guide for this year as well. So we've had the benefit of refinancing out of the majority of our high-yield debt. And so you've got a little bit of wind at your back, and you won't have that wind to get back next year. That's the primary reason. Relative to the comments we made about this year and raising our guide, probably not a big surprise to many of you, as we saw a lot of this coming in and it is reflected in our long-term model. That said, we saw the ability to move our numbers up. But it's a five-year plan as you can appreciate. And so I wouldn't say that we're changing the trajectory on the guide for Analyst Day just because we had one good quarter. That doesn't feel like the right thing to do. Secondly, as it relates to ATM. Like anything, we are going to use a little bit of debt and equity. This was really commensurate with our commitment to our rating agencies to tap periodically at the ATM facility. But we've dramatically reduced what we anticipate that we would otherwise use. As a result, you saw $100 million, but the message that I had in the prepared remarks was really the lean is toward debt capital on a go-forward basis for obvious reasons when the cost of bad debt capital, and even over the last few weeks, has continued to trend downwards. And so that will be a lean on a go-forward basis. So there is always going to be a little bit of lean. But again, I want to make sure that everybody fully appreciates. We want to use the debt capacity that we have on our balance sheet to its fullest advantage while also maintaining a very positive relationship with the rating agencies.

Yeah, I might augment this a bit in terms of just saying, I think, in the environment as attractive as I believe we're operating in now in terms of seeing so much growth opportunity for the business, I think the ability to continue to respond to that and to have the balance sheet to do so is top of mind for us, as Keith said. The lean is definitely towards debt for the obvious reasons. But I think it probably makes sense for us to have some level of ATM just to continue to have optionality in the business.

Thank you for your question. Our next question is from David Guarino with Green Street. Your line is open, sir.

Hey, thanks, guys. I want to ask you regarding the 3% stabilized revenue growth in the quarter and your comments on the acceleration of that through the rest of the year. Was that actually due to the timing of when the Americas bookings hit during the quarter? So it would be a little bit higher? And could you just remind us of the top end of your stabilized growth rate?

Sure, David. Yeah, we've typically guided three to five. So we're kind of at the bottom lower end of that range this quarter. I think there are some timing effects in there; there are also some one-time items that I think are flowing through. But as we really unpack that and look at what we expected towards the back half of the year, I think we feel good about moving more towards the top end. I think that's partially due to really strong continued momentum in the Americas business and out of the full portfolio of assets there. So, an 8% quarter there, obviously some strong NRR in there. But even on the NRR side, 6% growth is a really strong quarter. And so I think towards the back half of the year, we're feeling really good about the trajectory there on the stabilized assets same store number.

Okay. And then switching gears, you noted strong bookings in the Atlanta market. Could you comment on which data centers in that market saw the strong demand? And specifically, I guess could you mention if your 180 Peachtree data center is gaining any traction versus other properties in that market?

Yeah, I mean, that's where our focus is. I believe the 51 and putting the energy in there and continuing to build that ecosystem, which we believe has the critical mass of interconnection and ecosystem depth that is really necessary to scale our market effectively. So, yeah, we're seeing good success there, and again, the emphasis is on that Peachtree location in Q1.

Thank you for your question. Our next question is from Sami Badri with Credit Suisse. Your line is open.

Hi, thank you for the question. Charles, I have a question for you. And this is kind of going back a couple of quarters. I believe in the back half of 2020, you discussed that there was going to be an enterprise acceleration. And I know the dynamics now are actually picking up across the majority of the tech sector, and we've seen some large-cap tech results that have reflected this, including your results. But how would you describe your expectations in the back half of 2020? So what you're seeing right now? Is this coming in line or ahead of what you were expecting in the back half of 2020?

Yeah. As you indicated here, we were pretty optimistic and bullish about the momentum we were seeing with the enterprise customer, even during the more peak levels of the pandemic, etcetera. And so we're seeing people, despite that, saying, hey, we've got to be investing in digital. It will show up in terms of our pipeline build and bookings and just qualitatively in the conversations we're having with customers. And so that's why we were kind of signaling that optimism. I think that has definitely translated how we expected it. I would say that this quarter was even stronger than I think we would have thought it was going to be. It’s as reflected in our results and therefore, in the adaptation and our guide. I think the business had a really strong quarter from an enterprise perspective. As I said in the script, across all three regions across a variety of sectors, enterprise bookings were very strong. It’s an important part of that working not only in terms of pursuing hybrid cloud opportunities with our key alliance partners and the cloud players but also with our retail portfolio partners. So yeah, I think we're seeing it in line or better than we had thought. I think we expect to continue to see sustained output and growth from the enterprise segment, and probably over-indexing. Again, cloud and IT and enterprise have been over-indexing for a long time now. The enterprise just seems to be on a tear in terms of its growth right now.

Thank you for giving us color on that. One quick follow-up. And I want to ask you this because this is the question a lot about investors actually asked me. Where do you think enterprises are in their IT modernization cycle? Are enterprises 20% there, 40% there, 60%? Where would you put them as far as a cycle in terms of where they are in their upgrades and modernization efforts?

Yeah. I mean, it's obviously really hard to pinpoint that with any precision. But what I would say is, I do think it's still relatively early in terms of people whether they want to use a baseball analogy or whatever. I think it's early innings. We haven't passed the midpoint here. And so I think there's a long way to go in terms of people who still have a lot of legacy IT architecture that they're looking to adapt to that sort of hybrid multi-cloud world. The other comment I would make is that the pace of change itself is just continuing to accelerate. The technology life cycles and refresh cycles are shortening. People are thinking differently about that idea. As I said in my comments, a number of very large technology markets are dislocating as they shift to as a service. As we talked about at Analyst Day, that provides an upside opportunity for us to get a bit more wallet share, as those things are delivered as a service with Equinix as a point of nexus for consuming those services. We're getting both the underlying service providers themselves locating infrastructure at Equinix. Then we're often able to deliver those services on the platform aligned with things like fabric and metal and other things that are allowing us more wallet share. I think it's still early days. There is a long period of IT architecture and digital transformation investment in front of us for the foreseeable future.

Thank you for your question. Our next question is from Simon Flannery with Morgan Stanley. Your line is open.

Great, thank you very much. Good evening. Just on the normalization point again. Can you just talk about the supply chain side of things? And are there any challenges that you see, both in terms of availability as you get into more of the infrastructure businesses? And then just inflation, which some of the others in the food chain have been talking about with freight costs, etc.? You mentioned some of the challenges with COVID in some of the Asian markets like Singapore. I think we've also heard more stories about limitations on power and water, and some municipalities kind of looking at data centers in a slightly different lens. You obviously highlighted your ESG initiatives, but any color around how you see that evolving and how Equinix is positioned for that would be great.

Thanks, Simon. I'll take the one around supply chain. Suffice it to say, we've been investing quite heavily. You've heard us speak about our procurement and strategic sourcing initiatives under very strong leadership. As a result, we are getting ahead of some of the perceived constraints in the marketplace. We're normally managing our access into the production cycles for this year, but it's also contemplating our consumption needs for next year, marrying up nicely with the inflationary exposure that one might otherwise have by entering into broader commitments to mitigate some of that inflationary pressure as well. That all said, we're making some great successes in working with our partners or vendors and our suppliers. Inherently, our contracts have a lot of inflationary protection. So there's the aspect of supply and demand, and then there's the aspect of pricing. We're very confident that our contracts will appropriately contemplate the exposure to the extent that you raised your higher inflationary environment over the coming years. From both perspectives, we want to speed up and make sure that we protect our industries and revenue but we also have access to deliver support the cost model. I think we're doing a good job of that as a company.

Yeah, a little bit there in terms of—specifically, as it relates to Singapore. I think there was a COVID-related delay in terms of the timing of that facility that created a little bit of revenue headwind relative to the timing. Because demand for that is so strong for us, we had planned on that coming online a little bit earlier. We're seeing less, despite that, a really strong quarter. There is a broader phenomenon as you described in terms of markets thinking about how they're going to allocate capacity and deal with the demand for data centers and the environmental impacts. That's why we're making the level of commitment into ESG and in particular the environmental side. Our level of commitment and the investments in ESG is going to continue to differentiate us. This is true in Asia and a number of markets around the world facing similar challenges. I think that's going to be an area where we continue to separate ourselves from other players in the market.

Good color. Thank you.

Thank you for your question. Our next question is from Brendan Lynch with Barclays. Your line is open.

Great, thanks for taking my question. You recently put out a press release related to the channel. And it was clearly another strong quarter for the channel in Q2. Maybe you could talk a little bit about your changing approach there and what type of investment you might need to make to bring the new structure to fruition.

Yeah, it really incredibly strong performance from the channel. It's been that way for every quarter for—as far as I can remember, we've just been really delivering well in that arena. I would say that a few things: one is, the relationship that we have with what we refer to as our alliance partner group, as you mentioned several of them in the script, again, the usual suspects—AWS, Microsoft, Oracle, etc.—those partners are the ones we are working with as enterprises think through their demand for hybrid infrastructure. They need to advance sales cycles for their public cloud services, and to do so, they have to have a comprehensive answer for the customer in terms of the hybrid infrastructure story. Together, that's very much a one-in-one-equals-three kind of story. We're bringing that to the customer and have been effective in winning business together. We're seeing real strength there. In terms of the retailer side, people that are combining value in certain ways with Equinix value to solve customer problems are seeing a nice uptick. I would say we're seeing more concentration in terms of a smaller number of our highly capable retailers delivering more of the revenue. That's a good general dynamic for us. The investments we're making, the big area there, is really to continue to upgrade our processes and systems. To be very honest, we are not designed channel-ready from the beginning and continue to adapt those to be more channel-friendly. The adaptation of our systems is a multiyear trajectory, but those are key areas where we're making investments to better serve channel partners.

Great, just one follow-up on that. I believe you have a goal of getting to about 50% from channel sales. What is the timeframe for that? And also, what effect on margins will be increased channel sales have?

Yeah, I see people have asked me that question. I think you're probably referring to statements I made in the past that I see no reason why we couldn't be 50%. I don't know exactly when that will occur. I do think that success with our—as we're seeing channel partners embrace some of our newer services like Metal and Network Edge. Network Edge is almost inherently sort of channel or service because we're partnering both with people that are providing their virtualized network functions and with providers who are bringing that to market in tandem with other value. I think we're seeing a bias toward continued strength in the channel. But we also have continued great success with our direct selling team, and so both are growing nicely. I don't know; our channels have been over-indexing a bit. I think we will trend toward higher numbers. But it's hard to predict exactly where we land. I think if the newer services really accelerate, that could bring us higher channel percentages faster. In terms of impact on margins, they're really not particularly meaningful. Our current model is slightly higher cost in that we often have double commissions when we have our direct team partnering with channels. Looking at customer lifetime value, the implication to margins is quite small. Given the attractive profile in terms of return on capital and margin of some of these newer services, I don't feel like that's going to be a significant drag on margins. In fact, I think our other areas of margin expansion will overpower those.

Thank you for your question. Our next question is from Ari Klein with BMO Capital Markets. Your line is open.

Thanks. And just maybe in the Americas, the cabinet additions have picked up, which I think you've been alluding to over the last couple of quarters in the backlog. Now, you mentioned that at least overall, committed backlog exceeded the build backlog. So how should we think about utilization rates I guess moving forward? It's around 73% now, a little bit lower than it's been historically. What kind of rate would you like to get to?

I'll take that one. Clearly, you're right; we had a really good quarter. Something that we foreshadow for the last two quarters, particularly around the West Coast of the U.S. We have seen great success, specifically, with the cable landing station. I'll say we've introduced some new capacity or the Silicon Valley 11 asset has come online. When you look at the overall utilization rate, it's still in the mid to low 70s. That said, we're going to continue to have success in the Americas. Charles alluded to it. I mentioned that. I assume that utilization level will continue to move up as we consume the inventory of the assets we built. I'd also add just on that basis, I made the comment in my prepared remarks: the amount of booked but yet to be built inventory is up slightly despite all of the inventory that we’ve got that moved into the billing queues. That gives you a sense that there has been substantial bookings already that will consume that inventory. The other thing I think is really worthy of note is quarter and for that matter, through the rest of the year. We anticipate it will continue to be selling into what was historically known as horizon assets. We've seen a real nice move up in—as we said, six of the seven markets—plus some of the smaller markets in the U.S. That includes much of the capacity related to the formerly known Verizon assets. We're excited about the momentum. I think you're going to see the Americas region continue to perform well. As we said last quarter, and we’ll tell you this quarter, through the rest of the year, and we'll update you on '22 when we get there. Overall, we're just delighted by the success we've seen on the heels of all this opportunity.

Thanks. Maybe just a follow-up on the Americas. AMR per cabinet came down slightly in the quarter. Was that just timing, given the cabinet additions?

It is timing. Again, it goes back to large, as I referred to, a large cable landing station deployment that came at a different price point. You've got the timing impact, as well as a very large deployment on the West Coast. Overall, from a pricing perspective, we have seen great success. Charles alluded to in his prepared remarks just the number of deals we're doing across a number of customers, the volume of activity—primarily small to medium-sized deals—focusing on pricing. Plus, the pricing environment is playing out perfectly for the company. Despite timing, there's actually nothing to be abnormal concerning our pricing environment.

I think that's just a better area where the healthy pricing and the business mix that is being reflected across the board is very strong. We’re hitting that sweet spot in the market. Pricing is firm, interconnection activity is high. All that comes together into a really nice story relative to yields. It’s been years now, people have always been saying, can the Americas get better? I always thought it was pretty darn good, yet it continues to rise. So it’s truly a good story.

Thank you for your question. Our next question comes from Michael Rollins with Citi. Your line is open.

Thanks. And good afternoon. Just a couple of follow-ups. There was a mention that the cabinet backlog increased in the quarter. I was curious if that's relative to the 11,000 that was disclosed at the Analyst Day in June, and how that might compare to historical levels of backlog? And then secondly, the gross new global customers added in the quarter increased to 270, and I’m curious if you could unpack how the increase in this metric could influence your future results and where this increase may be coming from.

On the backlog question, the backlog did disclose 1,000 increased over the last three quarters to this level. I'll refer to it as an elevated level of backlog. It increased slightly over the prior quarter. It's again a reflection of momentum in the business, also to some degree, the tightening of our booking activity—very, very strong June. Because of the strong June, of course, that goes into booked but yet to be built. Overall, into momentum that we are seeing in the booking activity, which means more backward, but more importantly, the depth and scale of our pipeline as we look forward. And that's about revenue; in all three cases, that seems to be enough moving up to the right to show momentum.

On the new customers, I’d say we continue to feel really good about our new logo capture capabilities both directly and via channel. It is interesting that channel isn't necessarily showing up in customer accounts, because often that customer record is the channel partner. There’s even more strength than it appears on the face of the results overall. In terms of where they're coming from, I think we're having pretty uniform success geographically. So there's no one region that is significantly outpacing the others. We obviously had a really strong quarter for the Americas, and that selling team has been exceptional, but we’re also seeing good new logo capture across the other regions as well. How it translates into business, you do see that new logos over-index on growth rate perspective versus existing customers. It's a good part of the business.

Thanks.

Thank you for your question. Our next question is from Colby Synesael with Cowen. Your line is open.

Great. Two modeling questions, if I may. One, in the AFFO calculation, there was an adjustment for impairment charges of $33.6 million, and just curious what that is? And then secondly, you've done just over, I think, 40% margin in the first half. You're getting to just over 47% for the year, so obviously an implied downtick in the back half. Where are we most likely going to see that, COGS, sales and marketing, or is it G&A? Thanks.

Let me just take the impairment charge first. There were some federal tax adjustments associated with the closing of some matters in the quarter. A substantial decrease in tax was primarily in relation to a transaction we did in Australia—vis-à-vis Metronode—where we're indemnified by the other party. You've got the benefit on the tax line while you impaired your assets on the other side. Net-net, it has no meaningful impact on the P&L but it gets disclosed separately and is grossed up. It shows itself independent from the other income and expense line. That's what happened there, but again, as it relates to AFFO, there is no meaningful move because it was embedded in the other lines. As for the margin question, yes, we've done very well in the first two quarters of the year. We want to guide you on what we think will happen for the year, no surprise. Although for the year, we’re seeing greater than 47%, we are making a relatively meaningful investment. In Q2, we added roughly 250 heads to the organization, with expected further additions in Q3 and Q4 totaling another 700-800 heads. You're observing the human capital we’re investing in for our growth. There’s seasonal impact from utilities in the Americas as well. We've also had the benefit of non-recurring revenue items that don't carry a lot of cross with them in Q1 and Q2. Non-recurring revenues when we sell an asset and get a sales fee or get a development fee show up through the revenue line, but with very low drag on the bottom line. So it can be inherently lumpy, and we don't see a lot of that through the second half of the year. If anything, as I mentioned, non-recurring revenue will go down in Q3 over Q2, but will likely flatline in Q4, with another one-off fee that gets recorded

But even with that fee that you just mentioned, you think that NRR is flat in Q4 versus the 3Q number?

Yeah, that is correct.

Thank you for your question. Our next question is from Tim Horan with Oppenheimer. Your line is open.

Thank you. We've seen some pretty transformational outsourcing by the carriers, the hyperscalars. Do you guys think it will be an important partner there? And will that just also attract your new enterprise customers fewer locations? Thanks.

If I understand that, you're asking if the carriers themselves will be attractive partners for us to attract enterprise customers.

Well, AT&T is outsourcing their core network to Azure. And we've seen this announced with AWS. Do you think you'll be an important part of outsourcing to help the hyperscalars and AT&T and other carriers are looking to do the same thing globally?

Yeah, I think so. We definitely have an opportunity here. Overall supply chain is definitely showing signs of reshaping. Carriers are really important partners for us as it is; in fact, their enterprise success is often reflected in our results. Because some of the revenues on the enterprise and network side are really carriers selling enterprises. I think that with this dynamic of carriers working with other providers, really taking a different approach to building their infrastructure is going to be important. Yes, absolutely. In fact, our business development team is really quite active, thinking through edge opportunities and some of these emerging infrastructure areas where people are making significant investments.

Just a follow-up on that. Do you think qualitatively the hyperscalars are more likely to outsource infrastructure or insource more? What do you think the trend is heading there?

We do see some appetite from some of the hyperscalars to self-provision. However, the demand is robust, and there's going to continue to be a huge amount that will need to come from third-parties. As we've already said, our xScale aspirations aren't to capture share in huge buckets. It's really to grow that business by targeting strategically important locations and deployments that benefit Equinix and deliver outstanding returns to the JV and for our JV partner. We’re executing well on that strategy. There's plenty of opportunity out there, but there seems to be some desire for self-provisioning in certain markets.

Thank you for your question. Our last question will come from Jon Atkin with RBC. Your line is open.

Thanks very much. A question on hyperscale: Slide 20 xScale looks like you did 37 megawatts of leasing. You've got 140 megawatts of capacity, and if I'm interpreting the lower right numbers correctly, 31 megawatts available to sell? So I guess my question is, what's the type of wage that we should expect annually or quarterly in terms of at least a number? And at what rate to that 140 grow on a quarterly basis?

I would say one of the comments we made was we have seen a lot of success. Charles made the comment previously that virtually everything built was sold out. We’re going to continue to ramp up dramatically. One of the things that is critically important in the xScale initiative is planning. We’ve had more momentum in the business than we originally anticipated. The teams are working hard to secure future inventory; it's a little bit early to tell you exactly how that will present itself. But suffice it to say, we're continuing to provide a really detailed and detailed summary of everything that’s going on across all regions. Our xScale business is going to be in all three regions of the world now. We see continued capital about $7 billion across 32 buildings and 600 megawatts, which will take us from now until 2025 and beyond. That doesn't consider other initiatives we’re working on, including another joint venture with a different party. We're seeing great success; we’re to secure more land and capacity to build for the future.

Certainly not precise. I realized, but I can tell you that the next 140 to come will happen a lot faster than the first 100. We are definitely accelerating putting capital to work and seeing success.

Great. And then lastly, the balance sheet is showing $227 million in assets held for sale. Can you remind us what it is you're selling?

Those assets typically, so Dublin was the first example of that. Our Dublin 5 asset moved to the joint venture on July 7. That's an asset that is available for sale. We have some other assets. Again, we're investing the capital on our balance sheet, and then we're going to transition or contribute it to the joint ventures and move, thereby getting a recovery of those investments that have equity or ownership. Those are just the assets that are queuing up to be delivered to the joint ventures.

Great. That concludes our Q2 call. Thank you for joining us.

This does conclude today's conference call. You may now disconnect.