E
Q
U
I
N
I
X
A
N
N
U
A
L
R
E
P
O
R
T
F
Y
2
0
1
9
EMEA
Equinix (EMEA) BV
Rembrandt Tower
Amstelplein 1
1096 HA Amsterdam
Netherlands
+31.20.754.0305
info@eu.equinix.com
Asia-Pacific
Equinix Hong Kong Limited
65/F International
Commerce Center
1 Austin Road West
Kowloon, Hong Kong
+852.2970.7788
info@ap.equinix.com
“Equinix private
interconnection gives
our customers the
best of both worlds—
direct and secure
access to Twilio’s
cloud communications
development
platform and leading
telecommunications
services via reliable,
high-speed, low-
latency connections.”
Twilio
Americas
Corporate HQ
Equinix, Inc.
One Lagoon Drive
Redwood City, CA 94065
USA
+1.650.598.6000
info@equinix.com
Equinix.com
International Business Exchange™ pictured above is MX1 exterior
ANNUAL REPORT
FY2019
T
19
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EQUINIX GLOBAL MAP
EMEA
ASIA-PACIFIC
HELSINKI
AMERICAS
SEATTLE
SILICON
VALLEY
TORONTO
BOSTON
DENVER
CHICAGO
STOCKHOLM
MANCHESTER
AMSTERDAM
DUBLIN
LONDON
LOS ANGELES
DALLAS
ATLANTA
NEW YORK
PHILADELPHIA
WASHINGTON, D.C.
CULPEPER, VA
DÜSSELDORF
FRANKFURT
WARSAW
MONTERREY
HOUSTON
MIAMI
PARIS
MUNICH
MEXICO CITY
MILAN
SOFIA
OSAKA
TOKYO
SEOUL
SHANGHAI
HONG KONG
GENEVA
ZURICH
BARCELONA
MADRID
SEVILLE
LISBON
SINGAPORE
JAKARTA
ISTANBUL
PERTH
BRISBANE
ADELAIDE
SYDNEY
DUBAI
ABU DHABI
MELBOURNE
CANBERRA
BOGOTÁ
SÃO PAULO
RIO DE JANEIRO
Executive Team
§ Charles Meyers
President and Chief Executive Officer
Board of Directors
§ Peter Van Camp
Executive Chairman, Equinix
§ Keith Taylor
Chief Financial Officer
§ Raouf Abdel
EVP, Global Operations
§ Sara Baack
President and Chief Executive Officer, Equinix
President and Chief Executive Officer, American Tower
§ Charles Meyers
§ Tom Bartlett
§ Nanci Caldwell
9,700+
Customers†
55
Markets†
99.9999%
Reliability†
210
Data centers†
363,000+
Interconnections†
Image above is NextEra Energy, Rush Springs Wind Energy Center; Rush Springs, OK
This Annual Report (including the Shareholder Letter) contains forward-looking statements within the meaning of the federal securities laws.
These forward-looking statements involve risks and uncertainties that may cause Equinix’s actual results to differ materially from those expressed
or implied by these statements. Factors that may affect Equinix’s results are summarized in our Annual Report on Form 10-K filed February 21, 2020, and
contained herein. Equinix assumes no obligation and does not intend to update forward-looking statements to reflect subsequent events or circumstances.
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Equinix LocationPartner Data Center
* Revenues, Adjusted EBITDA and Adjusted Funds From Operations (AFFO):
• Compound annual growth rate for revenues and adjusted EBITDA from 2015 to 2019
†
and the need to locate and interconnect private infrastructure in close
proximity to a rapidly expanding universe of cloud-based resources.
To meet these needs, we intend to focus on several primary vectors in
the coming years. We will continue to evolve our go-to-market engine,
targeting the right customers with the right workloads in the right
locations and ensuring that our sales and service delivery capabilities
continue to be both globally aligned and locally responsive. We will
continue to invest in Platform Equinix®, adding new services and virtual
capabilities to enable our customers’ digital transformation journeys
with products such as our flagship ECX Fabric™, Network Edge and
bare metal, which will be accelerated by our recent acquisition of bare
metal automation leader, Packet. We will become more partner-rich
because the value of Platform Equinix, combined with that of others,
creates virtually limitless possibilities in solving the most critical business
problems facing our customers. Lastly, we will continue to simplify and
scale our business, implementing our own targeted digital transformation
initiatives including increasing our operating leverage and enhancing
our customer experience. We believe that these areas of focus and our
long-term orientation should allow us to widen the moat around our
business, enhance our yields, and increase service attach-rates against the
industry’s largest installed base, thus enabling us to deliver on our goal
of durable and attractive revenue and AFFO per share growth.
By necessity, the COVID-19 crisis commands our full attention and focus,
but 2019 was a great year for Equinix. We remain as confident as ever
that we are playing the best hand in the industry. We continue to separate
ourselves from our traditional competitors and expand our relevance
to customers. We believe the market opportunity is expansive and is
taking shape in ways that will require ongoing capability development
and sustained investment in our people, culture, processes, footprint
and technology. We are excited about the future of Equinix and honored
to work with our dedicated teams around the world #InServiceTo our
customers, to our communities and to you, our shareholders. On behalf of
our employees worldwide, we want to offer our appreciation for your
support and our commitment to passionately pursue the incredible
opportunity ahead.
With gratitude,
“Equinix has played a key
role in Zoom’s success and
its journey to accelerate
international expansion.
The global presence of
Platform Equinix has
served as a meeting point
for various components
of our infrastructure—
from network to cloud
providers. As we continue
broadening our digital
footprint globally and
targeting enterprise
organizations, ECX Fabric
will help our platform
to deliver reliable, high-
quality communications
that enable productivity,
connectedness and trust.”
Zoom
Charles Meyers
President and Chief Executive Officer
Equinix, Inc.
Peter Van Camp
Executive Chairman
Equinix, Inc.
Keith Taylor
Chief Financial Officer
Equinix, Inc.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(cid:31) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
(cid:30) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 000-31293
7MAR202015241541
EQUINIX, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation)
77-0487526
(IRS Employer Identification No.)
One Lagoon Drive, Redwood City, California 94065
(Address of principal executive offices, including ZIP code)
(650) 598-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.001
Trading Symbol
EQIX
Name of each exchange on which registered
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Act.
Yes (cid:31) No (cid:30)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes (cid:30) No (cid:31)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:31) No (cid:30)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes (cid:31) No (cid:30)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company or an emerging growth company. See definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’
‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:31)
Non-accelerated filer
(cid:30)
Accelerated filer
(cid:30)
Smaller reporting company (cid:30)
Emerging growth company (cid:30)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act. (cid:30)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes (cid:30) No (cid:31)
The aggregate market value of the voting and non-voting common stock held by non-affiliates computed by
reference to the price at which the common stock was last sold as of the last business day of the registrant’s most
recently completed second fiscal quarter was approximately $42.8 billion. As of February 20, 2020, a total of
85,443,883 shares of the registrant’s common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III – Portions of the registrant’s definitive proxy statement to be issued in conjunction with the registrant’s 2020 Annual
Meeting of Stockholders, which is expected to be filed not later than 120 days after the registrant’s fiscal year ended
December 31, 2019. Except as expressly incorporated by reference, the registrant’s proxy statement shall not be deemed
to be a part of this report on Form 10-K.
TABLE OF CONTENTS
Business
Item
1.
1A. Risk Factors
1B. Unresolved Staff Comments
Properties
2.
Legal Proceedings
3.
4. Mine Safety Disclosure
EQUINIX, INC.
FORM 10-K
DECEMBER 31, 2019
PART I
PART II
5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
6.
7. Management's Discussion and Analysis of Financial Condition and Results of Operations
7A. Quantitative and Qualitative Disclosures About Market Risk
8.
9.
9A. Controls and Procedures
9B. Other Information
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
PART III
10. Directors, Executive Officers and Corporate Governance
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
13. Certain Relationships and Related Transactions, and Director Independence
14. Principal Accounting Fees and Services
15. Exhibits, Financial Statement Schedules
16.
Form 10-K Summary
Signatures
Index to Exhibits
PART IV
2
Page No.
3
9
31
31
34
35
36
38
41
64
66
66
66
67
67
67
67
68
68
69
75
76
78
PART I
ITEM 1.
Business
The words "Equinix", "we", "our", "ours", "us" and the "Company" refer to Equinix, Inc. All statements in this
discussion that are not historical are forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, including statements regarding Equinix's "expectations", "beliefs", "intentions",
"strategies", "forecasts", "predictions", "plans" or the like. Such statements are based on management's current
expectations and are subject to a number of factors and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. Equinix cautions investors that there can be no assurance
that actual results or business conditions will not differ materially from those projected or suggested in such forward-
looking statements as a result of various factors, including, but not limited to, the risk factors discussed in this Annual
Report on Form 10-K. Equinix expressly disclaims any obligation or undertaking to release publicly any updates or
revisions to any forward looking statements contained herein to reflect any change in Equinix's expectations with regard
thereto or any change in events, conditions, or circumstances on which any such statements are based.
Overview: Where Opportunity Connects
Equinix, Inc. connects enterprises and service providers directly to their customers and partners across the world's
most interconnected data center and interconnection platform in the Americas, Asia-Pacific, and Europe, the Middle
East and Africa ("EMEA"). Platform Equinix® combines a global footprint of state-of-the-art International Business
Exchange™ ("IBX®") data centers, interconnection solutions, edge services, unique business and digital ecosystems,
and expert consulting and support. Equinix was incorporated on June 22, 1998 as a Delaware corporation and operates
as a real estate investment trust for federal income tax purposes ("REIT").
Al Avery and Jay Adelson founded Equinix as a vendor-neutral multi-tenant data center ("MTDC") provider where
competing networks could connect and share data traffic to help scale the rapid growth of the early internet. The
company’s name, Equinix (Equality, Neutrality and Internet Exchange), reflects that vision. The founders also believed
they not only had the opportunity but also the responsibility to create a company that would be the steward of some
of the most important digital infrastructure assets in the world. Two decades later, we have expanded upon that vision
to build Platform Equinix, with unmatched scale and reach.
Our interconnected data centers around the world allow our customers to increase information and application
delivery performance for users, and quickly deploy distributed IT infrastructures and access business and digital
ecosystems, all while significantly reducing costs. The Equinix global platform and the quality of our IBX data centers,
interconnection offerings and edge services have enabled us to establish a critical mass of customers. As more
customers choose Platform Equinix, for bandwidth cost and performance reasons it benefits their suppliers and business
partners to colocate in the same data centers and connect directly with each other. This adjacency creates a “network
effect” that attracts new customers and enables our existing customers to capture further economic and performance
benefits from our offerings.
3
In 2019, Equinix entered into a joint venture in the form of a limited liability partnership with GIC Private Limited,
Singapore’s sovereign wealth fund (“GIC”) (the “Joint Venture”), to develop and operate xScale™ data centers in
Europe to serve the needs of the growing hyperscale data center market, including the world's largest cloud service
providers. xScale data centers are engineered to meet the technical and operational requirements and price points of
core hyperscale workload deployments and also offer access to Equinix's comprehensive suite of interconnection and
edge services. These services will tie into the hyperscale companies' existing access points at Equinix, thereby
increasing the speed of connectivity to their existing and future enterprise customers. This will enable hyperscale
companies to consolidate core and access point deployments into one global provider to streamline and simplify their
rapid growth.
In 2019, Equinix opened ten new data centers, invested in two xScale data centers, added capacity in 22 markets
and expanded the total number of IBX and xScale data center facilities to 210, including our acquisition of three data
centers in Mexico from Axtel S.A.B. de C.V. in early 2020. 2019 and early 2020 highlights include:
• Equinix formed the Joint Venture with GIC to develop and operate xScale data centers in Europe.
• Data center expansions included five new IBX sites in the following metros: Seoul, Singapore, Sydney, Tokyo
and Helsinki, with an additional new market entry announced in Muscat, Oman.
• Equinix closed transactions that will broaden its Europe and Latin America markets:
• One data center in Amsterdam acquired from Switch Datacenters (closed in April 2019), bringing
Equinix's Amsterdam footprint to a total of eight Amsterdam facilities to serve European markets.
• Three data centers in Mexico acquired from Axtel S.A.B. de C.V. on January 8, 2020, bringing Equinix’s
Latin America footprint to ten data centers.
• Equinix announced an agreement to acquire leading bare metal automation company Packet Host, Inc. on
January 14, 2020. After the closing of this acquisition, which is expected in 2020, bare metal as a service will
allow enterprises and services providers to avoid the capital expenditures and operational requirements of
owning hardware by accessing bare metal servers on demand in Equinix’s global data centers.
In support of our growing business, we’ve added technology leaders to the Equinix team. In September 2019, Dr.
Justin Dustzadeh joined us as Chief Technology Officer and, in October 2019 and January 2020, respectively, we
expanded the expertise of the Equinix Board of Directors (now 11 members) with the appointment of Sandra Rivera
of Intel Corporation and Adaire Fox-Martin of SAP.
Industry Trends: Taking Digital Business to the Edge
Digital transformation is changing where and how businesses deploy and deliver IT services to employees and is
creating new digital business models for partners and customers. At the same time, macroeconomic, technology and
regulatory trends are driving complexity and risk that must be addressed in multiple locations for companies to effectively
compete in the global digital economy. These trends include:
• Digital business transformation: Real-time interactions between people, things, locations, clouds and data
require proximity and direct connections.
• Urbanization: This is creating large, global population centers which require companies to locate digital services
close to users to deliver great user experiences. These same concentrations of people provide an economy
of scale which makes distributing applications, data, content and networking to serve these locations cost
effective.
• Cybersecurity: A cybersecurity breach is one of the most serious risks facing companies today, and many of
the most serious breaches actually occur via a penetration of a company’s business partners’ networks. To
protect against this, businesses need to distribute their security controls out to the edge where most traffic
exchange is happening.
• Data compliance: To meet new regulations, companies need to deploy data storage, analytics and clouds
within the same jurisdiction, and then replicate this across multiple global locations.
• Business ecosystems: Digital trade flows involve an increasing variety of customers, partners and employees.
To enable this, companies deploy a digital presence in close physical proximity to an industry exchange point
and then connect to it directly. In the aggregate, these form a business ecosystem. These ecosystems are
expanding in depth and number.
4
These trends are accelerating the need for a secure, compliant and responsive global business platform that
enables the private interconnection of people, locations, clouds, data and things in multiple locations to deliver real-
time interactions and data exchange around the world.
As part of their digital transformation, businesses in most industries are shifting their centralized IT infrastructures
to the edge to bring digital services closer to users for better performance, which has become a significant driver of
digital business value. To realize the full potential of the edge, IT organizations require greater interconnection
bandwidth. Interconnection bandwidth is defined as the total capacity provisioned to privately and directly exchanged
traffic, with a diverse set of partners and providers, at distributed IT exchange points inside carrier-neutral colocation
data centers. Private interconnection capacity between businesses, as reported in the third annual Global
Interconnection Index ("GXI"), a market study published by Equinix, is anticipated to grow by 51% between 2018 and
2022, reaching 13,300+ terabits per second, which is double the projected peak of global internet traffic and could be
more than 13 times the volume of global internet traffic, or 53 zettabytes annually.
Worldwide Interconnection Bandwidth Capacity Growth (2018 - 2022) in Terabits per Second (Tbps)
Source: GXI Volume 3
Equinix Business Proposition: Reach Everywhere, Connect Everyone, Integrate Everything
In 2019, we continued to build new data center, interconnection and edge services capabilities that will further our
vision for the future of Platform Equinix, a future that will provide our customers with the ability to reach everywhere,
connect with everyone and integrate everything on their digital transformation journey. Equinix offers a comprehensive,
integrated suite of data center, interconnection and edge services and products to more than 9,700 enterprise and
service provider customers worldwide.
The following are the leading revenue generating product and other offerings that collectively make up Platform
Equinix:
5
Data Centers Solutions
Our global, state-of-the-art data centers meet strict standards of security, reliability, certification and sustainability.
Offerings in these data centers are typically billed based on the space and power a customer consumes, are delivered
under a fixed duration contract and generate monthly recurring revenue ("MRR").
•
•
IBX Data Centers - The more than 200 IBX vendor-neutral colocation data centers worldwide provide our
customers with secure, reliable and robust environments that are necessary to aggregate and distribute
information and connect digital and business ecosystems globally. IBX data centers provide access to vital
ecosystems where enterprises, network, cloud and SaaS providers, and business partners directly and securely
interconnect to each other.
xScale Data Centers - xScale data centers are designed to serve the unique core workload deployment needs
of a targeted group of hyperscale companies, which include the world's largest cloud service providers. With
xScale data centers, hyperscale customers add to their core hyperscale data center deployments and existing
customer access points at Equinix, allowing streamlined expansion with a single global vendor.
Interconnection Solutions
Our interconnection solutions connect businesses directly, securely and dynamically within and between our data
centers across our global platform. Our interconnection services are typically billed based on the outbound connections
from a customer and generate MRR.
• Cross Connects - Provide a point-to-point cable link between two customers in the same IBX data center.
They deliver fast, convenient, affordable and highly reliable connectivity and data exchange with business
partners and service providers within the Equinix ecosystem.
• Equinix Cloud Exchange Fabric™ ("ECX Fabric™") - Directly, securely and dynamically connects distributed
infrastructure and ecosystems across Equinix data centers globally using software-defined interconnection.
Customers can establish data center-to-data center network connections on demand between any two ECX
Fabric locations within a metro or globally and move information within a dense digital and business ecosystem.
• Equinix Internet Exchange™ - Enables networks, content providers and large enterprises to exchange
internet traffic through the largest global peering solution. Service providers can aggregate traffic to multiple
counterparties, called peers, on one physical port and handle multiple small peers while moving high-traffic
peers to private interconnections. This reduces latency for end-users when accessing content and applications.
Edge Services
Our edge services help businesses rapidly deploy as-a-service networking, security and hardware across our
global data center footprint - as an alternative to buying, owning and managing the physical infrastructure. Our edge
services are typically billed based on the number of instances and the capacity used by a customer and generate MRR.
• Network Edge - Allows customers to modernize networks quickly, by deploying network functions virtualization
("NFV") from multiple vendors across Equinix metros. Companies can select, deploy and connect virtual
network services at the edge quickly, with no additional hardware requirements.
• Equinix SmartKey™ - Helps customers simplify data protection across any cloud architecture via a global
SaaS-based, hardware security module management and cryptography service that provides on-premises
and hybrid multicloud cloud encryption key management.
• Bare Metal - Equinix’s announced acquisition of Packet on January 14, 2020, once completed, and our own
organic bare metal service also in development, are expected to help enterprises more seamlessly deploy
hybrid multicloud architectures on Platform Equinix. Enterprises and services providers will be able to avoid
the capital expenditures and operational requirements of owning hardware by accessing bare metal servers
on demand in Equinix’s global data centers.
Enablement Offerings
Equinix offers a number of remote support and professional services designed to speed and streamline digital
transformation and data center deployments for its customers. These services are typically billed based on consumption
and generate non-recurring revenue ("NRR").
6
• Equinix Infrastructure Services - Combines Equinix data center expertise with the skills and scale of certified
technology partners worldwide. Our colocation expertise helps customers achieve an efficient data center
deployment design that optimizes space and enables easy service access.
• Equinix Professional Services - Helps enterprises and service providers design and deploy IT solutions.
Our global teams of network transformation, hybrid multicloud and digital edge solution experts help companies
design and manage technology solutions which are deployed on our global platform.
Competition
While a large number of enterprises and service providers, such as hyperscale cloud service providers, own their
own data centers, many others outsource some or all of their IT housing and interconnection requirements in third
party facilities, such as those operated by Equinix.
Historically, that outsourcing market was served by large telecommunications carriers who bundled their products
and services with their colocation offerings. The data center market landscape has evolved to include private and
vendor-neutral MTDC providers, hyperscale cloud providers, managed infrastructure and application hosting providers,
and systems integrators. It is estimated that Equinix is one of more than 1,200 companies that provide MTDC offerings
around the world. The global MTDC market is highly fragmented. Each of these data center solutions providers can
bundle various colocation, interconnection and network offerings and outsourced IT infrastructure solutions. We believe
that this outsourcing trend is likely to accelerate in the coming years.
Equinix is differentiated in this market by being able to offer customers a global platform that reaches 26 countries
and contains the industry’s largest and most active ecosystem of partners in our sites. This ecosystem creates a
“network effect” which improves performance and lowers cost for our customers and is a significant source of competitive
advantage for Equinix.
Customers and Partners
Equinix customers include telecommunications carriers, mobile and other network services providers, cloud and
IT services providers, digital media and content providers, financial services companies, and global enterprise
ecosystems in various industries. We provide each company access to a choice of business partners and solutions
based on their colocation, interconnection and managed IT service needs, and delivered 99.9999% operational uptime
across our global data centers in 2019. As of December 31, 2019, we had more than 9,700 customers worldwide. No
one customer made up 10% or more of our total business revenues in the year ended December 31, 2019.
The following companies represent some of our leading customers and partners:
We serve our customers with a direct sales force and channel marketing program. We organize our sales force
by customer type, as well as by establishing a sales presence in diverse geographic regions, which enables efficient
servicing of the customer base from a network of regional offices. We also support our customers with a global customer
care organization.
7
Employees, Community and Intellectual Property
As the leading global interconnection and data center company, Equinix is dedicated to powering, protecting and
connecting the digital world and doing so in a sustainable and responsible way. In 2015, we made a long-term
commitment to achieve 100% clean and renewable energy across our global operations. We have made substantial
progress against this goal covering over 90% of our footprint worldwide with net-zero carbon emission renewable
energy products.
As of December 31, 2019, Equinix had 8,378 employees worldwide with 3,672 based in the Americas, 2,941 based
in EMEA and 1,765 based in Asia-Pacific. Of those employees, 3,904 employees were in engineering and operations,
1,521 employees were in sales and marketing and 2,953 employees were in management, finance and administration.
Equinix believes its culture is a key differentiator in its ability to attract, retain and motivate its employees. Core to
its culture is a commitment to make sure Equinix is a place where everyone can confidently say, “I’m safe, I belong
and I matter.” New and expanding programs such as our Diversity, Inclusion and Belonging initiative aim to empower
every employee in our company. For example, our Women Leaders Network of over 1,900 employees is driving visibility
of women in our workforce and encouraging the emergence of new leaders worldwide. Also, our Equinix Impact
program continues to grow, enabling employees to give back to their communities with the support of Equinix,
volunteering nearly 14,000 hours to local causes.
Equinix owns and maintains intellectual property in the form of trademarks, patents, application programming
interfaces, customer portals and a variety of products and other offerings.
Our Business Segment Financial Information
We currently operate in three reportable segments comprised of our Americas, EMEA and Asia-Pacific geographic
regions. Information attributable to each of our reportable segments is set forth in Note 17 within the Consolidated
Financial Statements.
Available Information
We were incorporated in Delaware in June 1998. We are required to file reports under the Securities Exchange
Act of 1934, as amended, with the Securities and Exchange Commission ("SEC"). The SEC maintains an internet
website at http://www.sec.gov that contains reports, proxy and information statements and other information.
You may also obtain copies of our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current
reports on Form 8-K, and any amendments to such reports, free of charge by visiting the Investor Relations page on
our website, www.equinix.com. These reports are available as soon as reasonably practical after we file them with the
SEC. Information contained on or accessible through our website is not part of this Annual Report on Form 10-K.
8
ITEM 1A.
Risk Factors
In addition to the other information contained in this report, the following risk factors should be considered carefully
in evaluating our business:
Acquisitions present many risks, and we may not realize the financial or strategic goals that were contemplated
at the time of any transaction.
Over the last several years, we have completed numerous acquisitions, including most recently that of Axtel
S.A.B. de C.V. in Mexico on January 8, 2020. On January 14, 2020, we also announced an agreement to acquire
Packet Host, Inc., a bare metal automation company. We cannot assure that we will consummate the acquisition of
Packet or any future acquisition. We expect to make additional acquisitions in the future which may include (i)
acquisitions of businesses, products, solutions or technologies that we believe to be complementary, (ii) acquisitions
of new IBX data centers or real estate for development of new IBX data centers; or (iii) acquisitions through
investments in local data center operators. We may pay for future acquisitions by using our existing cash resources
(which may limit other potential uses of our cash), incurring additional debt (which may increase our interest
expense, leverage and debt service requirements) and/or issuing shares (which may dilute our existing
stockholders and have a negative effect on our earnings per share). Acquisitions expose us to potential risks,
including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the possible disruption of our ongoing business and diversion of management's attention by acquisition,
transition and integration activities, particularly when multiple acquisitions and integrations are occurring at
the same time;
our potential inability to successfully pursue or realize some or all of the anticipated revenue opportunities
associated with an acquisition or investment;
the possibility that we may not be able to successfully integrate acquired businesses, or businesses in which
we invest, or achieve anticipated operating efficiencies or cost savings;
the possibility that announced acquisitions may not be completed, due to failure to satisfy the conditions to
closing as a result of:
an injunction, law or order that makes unlawful the consummation of the acquisition;
inaccuracy or breach of the representations and warranties of, or the non-compliance with covenants
by, either party;
the nonreceipt of closing documents; or
for other reasons;
the possibility that there could be a delay in the completion of an acquisition, which could, among other things,
result in additional transaction costs, loss of revenue or other negative effects resulting from uncertainty about
completion of the respective acquisition;
the dilution of our existing stockholders as a result of our issuing stock as consideration in a transaction or
selling stock in order to fund the transaction;
the possibility of customer dissatisfaction if we are unable to achieve levels of quality and stability on par with
past practices;
the possibility that we will be unable to retain relationships with key customers, landlords and/or suppliers of
the acquired businesses, some of which may terminate their contracts with the acquired business as a result
of the acquisition or which may attempt to negotiate changes in their current or future business relationships
with us;
the possibility that we could lose key employees from the acquired businesses before integrating them;
the possibility that we may be unable to integrate or migrate IT systems, which could create a risk of errors or
performance problems and could affect our ability to meet customer service level obligations;
the potential deterioration in our ability to access credit markets due to increased leverage;
the possibility that our customers may not accept either the existing equipment infrastructure or the "look-and-
feel" of a new or different IBX data center;
the possibility that additional capital expenditures may be required or that transaction expenses associated
with acquisitions may be higher than anticipated;
the possibility that required financing to fund an acquisition may not be available on acceptable terms or at
all;
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the possibility that we may be unable to obtain required approvals from governmental authorities under antitrust
and competition laws on a timely basis or at all, which could, among other things, delay or prevent us from
completing an acquisition, limit our ability to realize the expected financial or strategic benefits of an acquisition
or have other adverse effects on our current business and operations;
the possible loss or reduction in value of acquired businesses;
the possibility that future acquisitions may present new complexities in deal structure, related complex
accounting and coordination with new partners, particularly in light of our desire to maintain our qualification
for taxation as a REIT;
the possibility that we may not be able to prepare and issue our financial statements and other public filings
in a timely and accurate manner, and/or maintain an effective control environment, due to the strain on the
finance organization when multiple acquisitions and integrations are occurring at the same time;
the possibility that future acquisitions may trigger property tax reassessments resulting in a substantial increase
to our property taxes beyond that which we anticipated;
the possibility that future acquisitions may be in geographies and regulatory environments to which we are
unaccustomed and we may become subject to complex requirements and risks with which we have limited
experience;
the possibility that carriers may find it cost-prohibitive or impractical to bring fiber and networks into a new IBX
data center;
the possibility of litigation or other claims in connection with, or as a result of, an acquisition, including claims
from terminated employees, customers, former stockholders or other third parties;
the possibility that asset divestments may be required in order to obtain regulatory clearance for a transaction;
the possibility of pre-existing undisclosed liabilities, including, but not limited to, lease or landlord related liability,
environmental liability or asbestos liability, for which insurance coverage may be insufficient or unavailable,
or other issues not discovered in the diligence process; and
the possibility that we receive limited or incorrect information about the acquired business in the diligence
process. For example, we sometimes do not receive all of the customer contracts associated with our
acquisitions in the diligence process, which affects our visibility into customer termination rights and could
expose us to additional liabilities.
The occurrence of any of these risks could have a material adverse effect on our business, results of operations,
financial condition or cash flows. If an acquisition does not proceed or is materially delayed for any reason, the price
of our common stock may be adversely impacted, and we will not recognize the anticipated benefits of the acquisition.
We cannot assure that the price of any future acquisitions of IBX data centers will be similar to prior IBX data center
acquisitions. In fact, we expect costs required to build or render new IBX data centers operational to increase in the
future. If our revenue does not keep pace with these potential acquisition and expansion costs, we may not be able
to maintain our current or expected margins as we absorb these additional expenses. There is no assurance we would
successfully overcome these risks, or any other problems encountered with these acquisitions.
The anticipated benefits of the Joint Venture with GIC may not be fully realized, or take longer to realize than
expected.
On October 8, 2019, we entered into a joint venture with GIC, Singapore's sovereign wealth fund, to develop and
operate xScale™ data centers in Europe. We sold our London 10 and Paris 8 data centers and certain construction
development and leases in London and Frankfurt to the Joint Venture. The data centers and facilities are now owned
by wholly-owned subsidiaries of EMEA Hyperscale 1 C.V., a Dutch limited partnership of which Equinix owns a 20%
interest, GIC owns an 80% interest, and Equinix will operate the facilities.
We may not realize all of the anticipated benefits from the Joint Venture. The success of the Joint Venture will
depend, in part, on the successful partnership between Equinix and GIC. Such a partnership is subject to risks as
outlined below and more generally, to the same types of business risks as would impact our IBX data center business.
A failure to successfully partner, or a failure to realize our expectations for the Joint Venture, could materially impact
our business, financial condition and results of operations.
Joint venture investments, such as our Joint Venture with GIC, could expose us to risks and liabilities in
connection with the formation of the new joint ventures, the operation of such joint ventures without sole
decision-making authority, and our reliance on joint venture partners who may have economic and business
interests that are inconsistent with our business interests.
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In addition to our Joint Venture with GIC, we may co-invest with other third parties through partnerships, joint
ventures or other entities in the future. These joint ventures could result in our acquisition of non-controlling interests
in or shared responsibility for managing the affairs of a property or portfolio of properties, partnership, joint venture or
other entity. We may be subject to additional risks, including:
• we may not have the right to exercise sole decision-making authority regarding the properties, partnership,
joint venture or other entity;
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if our partners become bankrupt or fail to fund their share of required capital contributions, we may choose to
or be required to contribute such capital;
our partners may have economic, tax or other business interests or goals which are inconsistent with our
business interests or goals, and may be in a position to take actions contrary to our policies or objectives;
our joint venture partners may take actions that are not within our control, which could require us to dispose
of the joint venture asset, transfer it to a taxable REIT subsidiary ("TRS") in order for Equinix to maintain its
qualification for taxation as a REIT, or purchase the partner's interests or assets at an above-market price;
our joint venture partners may take actions unrelated to our business agreement but which reflect poorly on
Equinix because of our joint venture;
disputes between us and our partners may result in litigation or arbitration that would increase our expenses
and prevent our management from focusing their time and effort on our day-to-day business; and
• we may in certain circumstances be liable for the actions of our third-party partners or guarantee all or a portion
of the joint venture's liabilities, which may require the company to pay an amount greater than its investment
in the joint venture.
Each of these factors may result in returns on these investments being less than we expect or in losses, and our
financial and operating results may be adversely affected.
Our substantial debt could adversely affect our cash flows and limit our flexibility to raise additional capital.
We have a significant amount of debt and may need to incur additional debt to support our growth. Additional debt
may also be incurred to fund future acquisitions, any future special distributions, regular distributions or the other cash
outlays associated with maintaining our qualification for taxation as a REIT. As of December 31, 2019, our total
indebtedness (gross of debt issuance cost, debt discount, and debt premium) was approximately $11.9 billion, our
stockholders' equity was $8.8 billion and our cash, cash equivalents, and investments totaled $1.9 billion. In addition,
as of December 31, 2019, we had approximately $1.9 billion of additional liquidity available to us from our $2.0 billion
revolving credit facility. In addition to our substantial debt, we lease many of our IBX data centers and certain equipment
under lease agreements, some of which are accounted for as operating leases. As of December 31, 2019, we recorded
operating lease liabilities of $1.5 billion, which represents our obligation to make lease payments under those lease
arrangements.
Our substantial amount of debt and related covenants, and our off-balance sheet commitments, could have
important consequences. For example, they could:
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require us to dedicate a substantial portion of our cash flow from operations to make interest and principal
payments on our debt and in respect of other off-balance sheet arrangements, reducing the availability of our
cash flow to fund future capital expenditures, working capital, execution of our expansion strategy and other
general corporate requirements;
increase the likelihood of negative outlook from our credit rating agencies, or of a downgrade to our current
rating;
• make it more difficult for us to satisfy our obligations under our various debt instruments;
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increase our cost of borrowing and even limit our ability to access additional debt to fund future growth;
increase our vulnerability to general adverse economic and industry conditions and adverse changes in
governmental regulations;
limit our flexibility in planning for, or reacting to, changes in our business and industry, which may place us at
a competitive disadvantage compared with our competitors;
limit our operating flexibility through covenants with which we must comply;
limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity, which would
also limit our ability to further expand our business; and
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• make us more vulnerable to increases in interest rates because of the variable interest rates on some of our
borrowings to the extent we have not entirely hedged such variable rate debt.
The occurrence of any of the foregoing factors could have a material adverse effect on our business, results of
operations and financial condition.
We may also need to refinance a portion of our outstanding debt as it matures. There is a risk that we may not be
able to refinance existing debt or that the terms of any refinancing may not be as favorable as the terms of our existing
debt. Furthermore, if prevailing interest rates or other factors at the time of refinancing result in higher interest rates
upon refinancing, then the interest expense relating to that refinanced indebtedness would increase. These risks could
materially adversely affect our financial condition, cash flows and results of operations.
The phase out of the London Interbank Offered Rate (“LIBOR”), and uncertainty as to its replacement, may
adversely affect our business.
On July 27, 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced that it
intends to stop persuading or compelling banks to submit rates for the calibration of LIBOR after 2021 after which time
it can no longer guarantee its availability. Although alternative reference rates have been proposed, it is unknown at
this point which of these alternative reference rates will attain market acceptance as replacements for LIBOR.
Certain term loan borrowings under our Senior Credit Facility bear interest at rates that are calculated based on
LIBOR. In addition, certain of our agreements, including financing, customer, vendor, leasing, intercompany, derivative
and joint venture agreements, also make reference to LIBOR. To prepare for the phase out of LIBOR, we may need
to renegotiate the Senior Credit Facility and other agreements and may not be able to do so on terms that are favorable
to us. It is also currently unknown what impact any contract modification will have on our financial statements. Further,
the financial markets may be disrupted as a result of the phase out of LIBOR if banks fail to execute a smooth transition
to an alternate rate.
Disruption in the financial markets or the inability to renegotiate our agreements to remove and replace LIBOR on
favorable terms, or a negative impact from any contract modifications, could have an adverse effect on our business,
financial position, and operating results.
Adverse global economic conditions and credit market uncertainty could adversely impact our business and
financial condition.
Adverse global economic conditions and uncertain conditions in the credit markets have created, and in the future
may create, uncertainty and unpredictability and add risk to our future outlook. An uncertain global economy could
also result in churn in our customer base, reductions in revenues from our offerings, longer sales cycles, slower adoption
of new technologies and increased price competition, adversely affecting our liquidity. Customers and vendors filing
for bankruptcy can also lead to costly and time-intensive actions with adverse effects. The uncertain economic
environment could also have an impact on our foreign exchange forward contracts if our counterparties' credit
deteriorates or they are otherwise unable to perform their obligations. Finally, our ability to access the capital markets
may be severely restricted at a time when we would like, or need, to do so which could have an impact on our flexibility
to pursue additional expansion opportunities and maintain our desired level of revenue growth in the future.
If we cannot effectively manage our international operations, and successfully implement our international
expansion plans, or comply with evolving laws and regulations, our revenues may not increase, and our
business and results of operations would be harmed.
For the years ended December 31, 2019, 2018 and 2017, we recognized approximately 58%, 55% and 55%,
respectively, of our revenues outside the U.S. We currently operate outside of the U.S. in Canada, Brazil, Colombia,
Mexico, EMEA and Asia-Pacific.
To date, the network neutrality of our IBX data centers and the variety of networks available to our customers has
often been a competitive advantage for us. In certain of our acquired IBX data centers in the Asia-Pacific region, the
limited number of carriers available reduces that advantage. As a result, we may need to adapt our key revenue-
generating offerings and pricing to be competitive in those markets. In addition, we are currently undergoing expansions
or evaluating expansion opportunities outside of the U.S. Undertaking and managing expansions in foreign jurisdictions
may present unanticipated challenges to us.
Our international operations are generally subject to a number of additional risks, including:
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the costs of customizing IBX data centers for foreign countries;
protectionist laws and business practices favoring local competition;
greater difficulty or delay in accounts receivable collection;
difficulties in staffing and managing foreign operations, including negotiating with foreign labor unions or
workers' councils;
difficulties in managing across cultures and in foreign languages;
political and economic instability;
fluctuations in currency exchange rates;
difficulties in repatriating funds from certain countries;
our ability to obtain, transfer or maintain licenses required by governmental entities with respect to our business;
unexpected changes in regulatory, tax and political environments such as the United Kingdom's withdrawal
from the European Union ("Brexit");
our ability to secure and maintain the necessary physical and telecommunications infrastructure;
compliance with anti-bribery and corruption laws;
compliance with economic and trade sanctions enforced by the Office of Foreign Assets Control of the U.S.
Department of Treasury; and
compliance with evolving governmental regulation with which we have little experience.
Geo-political events, such as Brexit, the political unrest in Hong Kong, and the trade war between the U.S. and
China, may increase the likelihood of the listed risks to occur. With respect to Brexit, it is possible that the level of
economic activity in the United Kingdom and the rest of Europe will be adversely impacted and that we will face
increased regulatory and legal complexities in these regions which could have an adverse impact on our business and
employees in EMEA and could adversely affect our financial condition and results of operations. In addition, compliance
with international and U.S. laws and regulations that apply to our international operations increases our cost of doing
business in foreign jurisdictions. These laws and regulations include the General Data Protection Regulation (GDPR)
and other data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import and trade
restrictions, export requirements, economic and trade sanctions, U.S. laws such as the Foreign Corrupt Practices Act
and local laws which also prohibit corrupt payments to governmental officials. Violations of these laws and regulations
could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions on the conduct of
our business. Any such violations could include prohibitions on our ability to offer our offerings in one or more countries,
could delay or prevent potential acquisitions, and could also materially damage our reputation, our brand, our
international expansion efforts, our ability to attract and retain employees, our business and operating results. Our
success depends, in part, on our ability to anticipate and address these risks and manage these difficulties.
Economic and political uncertainty in developing markets could adversely affect our revenue and earnings.
We conduct business and are contemplating expansion in developing markets with economies and governments
that tend to be more volatile than those in the U.S. and Western Europe. The risk of doing business in developing
markets such as Brazil, China, Colombia, Indonesia, Mexico, Oman, Turkey, the United Arab Emirates and other
economically volatile areas could adversely affect our operations and earnings. Such risks include the financial
instability among customers in these regions, political instability, fraud or corruption and other non-economic factors
such as irregular trade flows that need to be managed successfully with the help of the local governments. In addition,
commercial laws in some developing countries can be vague, inconsistently administered and retroactively applied. If
we are deemed to be not in compliance with applicable laws in developing countries where we conduct business, our
prospects and business in those countries could be harmed, which could then have a material adverse impact on our
results of operations and financial position. Our failure to successfully manage economic, political and other risks
relating to doing business in developing countries and economically and politically volatile areas could adversely affect
our business.
Terrorist activity throughout the world and military action to counter terrorism could adversely impact our
business.
The continued threat of terrorist activity and other acts of war or hostility contribute to a climate of political and
economic uncertainty. Due to existing or developing circumstances, we may need to incur additional costs in the future
to provide enhanced security, including cyber security, which could have a material adverse effect on our business
and results of operations. These circumstances may also adversely affect our ability to attract and retain customers,
our ability to raise capital and the operation and maintenance of our IBX data centers.
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Our business may be adversely affected by the recent coronavirus outbreak.
In December 2019, a novel strain of coronavirus, referred to as 2019-nCoV, Covid-19 Coronavirus Epidemic, or
Covid-19, was reported to have surfaced in Wuhan, China. Covid-19 has since spread to other regions in China and
other countries, including jurisdictions in which we operate. We continue to monitor our operations and government
recommendations and have made some modifications to our operations because of Covid-19. For example, we have
implemented enhanced health and safety precautions in certain of our IBXs to reduce the risk of exposure and have
requested that non-IBX datacenter employees in certain jurisdictions work from home and refrain from travel. The
outbreak and any additional preventative or protective actions that we may take in response to this Covid-19 or any
other global health threat or pandemic may result in business and/or operational disruption. Our customers’ businesses
could be disrupted, and our revenues could be negatively affected. Additionally, global economic disrupters like the
Covid-19 could negatively impact our supply chain and cause delays in the construction of our IBX datacenters which
rely on materials, products and manufacturing from China. It may not be possible to find replacement products or
supplies and ongoing delays could affect our business and growth. While it is too early to tell whether Covid-19 will
have a material effect on our business over time, we are experiencing delays from certain vendors and suppliers who
have been affected more directly by Covid-19 in China. The extent to which Covid-19 impacts our results will depend
on many factors and future developments, including new information about Covid-19 and any new government
regulations which may emerge to contain the virus, among others.
Sales or issuances of shares of our common stock may adversely affect the market price of our common
stock.
Future sales or issuances of common stock or other equity related securities may adversely affect the market price
of our common stock, including any shares of our common stock issued to finance capital expenditures, finance
acquisitions or repay debt. We have established an "at-the-market" stock offering program (the "ATM Program") through
which we may, from time to time, issue and sell shares of our common stock to or through sales agents up to established
limits. By the end of 2019, we had $300.0 million of shares available for sale under our ATM Program. We may also
seek authorization to sell additional shares of common stock under the ATM Program which could lead to additional
dilution for our stockholders. Please see Note 12 of the Notes to the Consolidated Financial Statements in Item 8 of
this Annual Report on Form 10-K for sales of our common stock under the ATM Program to date.
The market price of our stock may continue to be highly volatile, and the value of an investment in our common
stock may decline.
The market price of the shares of our common stock has been and may continue to be highly volatile. General
economic and market conditions, and market conditions for telecommunications and real estate investment trust stocks
in general, may affect the market price of our common stock.
Announcements by us or others, or speculations about our future plans, may also have a significant impact on the
market price of our common stock. These may relate to:
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our operating results or forecasts;
new issuances of equity, debt or convertible debt by us, including issuances through our ATM Program;
increases in market interest rates and changes in other general market and economic conditions, including
inflationary concerns;
changes to our capital allocation, tax planning or business strategy;
our qualification for taxation as a REIT and our declaration of distributions to our stockholders;
changes in U.S. or foreign tax laws;
changes in management or key personnel;
developments in our relationships with customers;
announcements by our customers or competitors;
changes in regulatory policy or interpretation;
governmental investigations;
changes in the ratings of our debt or stock by rating agencies or securities analysts;
our purchase or development of real estate and/or additional IBX data centers;
our acquisitions of complementary businesses; or
the operational performance of our IBX data centers.
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The stock market has from time to time experienced extreme price and volume fluctuations, which have particularly
affected the market prices for telecommunications companies, and which have often been unrelated to their operating
performance. These broad market fluctuations may adversely affect the market price of our common stock. One of the
factors that investors may consider in deciding whether to buy or sell our common stock is our distribution rate as a
percentage of our stock price relative to market interest rates. If market interest rates increase, prospective investors
may demand a higher distribution rate or seek alternative investments paying higher dividends or interest. As a result,
interest rate fluctuations and conditions in the capital markets may affect the market value of our common stock.
Furthermore, companies that have experienced volatility in the market price of their stock have been subject to securities
class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could
result in substantial costs and/or damages, and divert management's attention from other business concerns, which
could seriously harm our business.
If we are not able to generate sufficient operating cash flows or obtain external financing, our ability to fund
incremental expansion plans may be limited.
Our capital expenditures, together with ongoing operating expenses, obligations to service our debt and the cash
outlays associated with our REIT distribution requirements, are, and will continue to be, a substantial burden on our
cash flow and may decrease our cash balances. Additional debt or equity financing may not be available when needed
or, if available, may not be available on satisfactory terms. Our inability to obtain additional debt and/or equity financing
or to generate sufficient cash from operations may require us to prioritize projects or curtail capital expenditures which
could adversely affect our results of operations.
Fluctuations in foreign currency exchange rates in the markets in which we operate internationally could harm
our results of operations.
We may experience gains and losses resulting from fluctuations in foreign currency exchange rates. To date, the
majority of revenues and costs in our international operations are denominated in foreign currencies. Where our prices
are denominated in U.S. Dollars, our sales and revenues could be adversely affected by declines in foreign currencies
relative to the U.S. Dollar, thereby making our offerings more expensive in local currencies. We are also exposed to
risks resulting from fluctuations in foreign currency exchange rates in connection with our international operations. To
the extent we are paying contractors in foreign currencies, our operations could cost more than anticipated as a result
of declines in the U.S. Dollar relative to foreign currencies. In addition, fluctuating foreign currency exchange rates
have a direct impact on how our international results of operations translate into U.S. Dollars.
Although we currently undertake, and may decide in the future to further undertake, foreign exchange hedging
transactions to reduce foreign currency transaction exposure, we do not currently intend to eliminate all foreign currency
transaction exposure. In addition, REIT compliance rules may restrict our ability to enter into hedging transactions.
Therefore, any weakness of the U.S. Dollar may have a positive impact on our consolidated results of operations
because the currencies in the foreign countries in which we operate may translate into more U.S. Dollars. However,
if the U.S. Dollar strengthens relative to the currencies of the foreign countries in which we operate, our consolidated
financial position and results of operations may be negatively impacted as amounts in foreign currencies will generally
translate into fewer U.S. Dollars. For additional information on foreign currency risks, refer to our discussion of foreign
currency risk in "Quantitative and Qualitative Disclosures About Market Risk" included in Item 7A of this Annual Report
on Form 10-K.
Our derivative transactions expose us to counterparty credit risk.
Our derivative transactions expose us to risk of financial loss if a counterparty fails to perform under a derivative
contract. Disruptions in the financial markets could lead to sudden decreases in a counterparty's liquidity, which could
make them unable to perform under the terms of their derivative contract and we may not be able to realize the benefit
of the derivative contract.
Changes in U.S. or foreign tax laws, regulations, or interpretations thereof, including changes to tax rates,
may adversely affect our financial statements and cash taxes.
We are a U.S. company with global subsidiaries and are subject to income and other taxes in the U.S. (although
currently limited due to our taxation as a REIT) and many foreign jurisdictions. Significant judgment is required in
determining our worldwide provision for income and other taxes. Although we believe that we have adequately assessed
and accounted for our potential tax liabilities, and that our tax estimates are reasonable, there can be no certainty that
additional taxes will not be due upon audit of our tax returns or as a result of changes to the tax laws and interpretations
thereof. For example, we are currently undergoing audits and appealing the tentative assessments in a number of
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jurisdictions where we operate. The final results of these audits and the outcome of the appeals are uncertain and may
not be resolved in our favor. Further, the nature and timing of any future changes to each jurisdiction's tax laws and
the impact on our future tax liabilities cannot be predicted with any accuracy but could materially and adversely impact
our results of operations and financial position or cash flows.
We may be vulnerable to security breaches which could disrupt our operations and have a material adverse
effect on our financial performance and operating results.
We face risks associated with unauthorized access to our computer systems, loss or destruction of data, computer
viruses, malware, distributed denial-of-service attacks or other malicious activities. These threats may result from
human error, equipment failure or fraud or malice on the part of employees or third parties. A party who is able to
compromise the security measures on our networks or the security of our infrastructure could misappropriate either
our proprietary information or the personal information of our customers or our employees, or cause interruptions or
malfunctions in our operations or our customers' operations. As we provide assurances to our customers that we
provide a high level of security, such a compromise could be particularly harmful to our brand and reputation. We may
be required to expend significant capital and resources to protect against such threats or to alleviate problems caused
by breaches in security. As techniques used to breach security change frequently and are generally not recognized
until launched against a target, we may not be able to promptly detect that a cyber breach has occurred, or implement
security measures in a timely manner or, if and when implemented, we may not be able to determine the extent to
which these measures could be circumvented. Any breaches that may occur could expose us to increased risk of
lawsuits, regulatory penalties, loss of existing or potential customers, damage relating to loss of proprietary information,
harm to our reputation and increases in our security costs, which could have a material adverse effect on our financial
performance and operating results. We maintain insurance coverage for cyber risks, but such coverage may be
unavailable or insufficient to cover our losses.
We offer professional services to our customers where we consult on data center solutions and assist with
implementations. We also offer managed services in certain of our foreign jurisdictions outside of the U.S. where we
manage the data center infrastructure for our customers. The access to our clients' networks and data, which is gained
from these services, creates some risk that our clients' networks or data will be improperly accessed. We may also
design our clients' cloud storage systems in such a way that exposes our clients to increased risk of data breach. If
Equinix were held to be responsible for any such a breach, it could result in a significant loss to Equinix, including
damage to Equinix's client relationships, harm to our brand and reputation, and legal liability.
We are continuing to invest in our expansion efforts but may not have sufficient customer demand in the
future to realize expected returns on these investments.
We are considering the acquisition or lease of additional properties and the construction of new IBX data centers
beyond those expansion projects already announced. We will be required to commit substantial operational and financial
resources to these IBX data centers, generally 12 to 18 months in advance of securing customer contracts, and we
may not have sufficient customer demand in those markets to support these centers once they are built. In addition,
unanticipated technological changes could affect customer requirements for data centers, and we may not have built
such requirements into our new IBX data centers. Either of these contingencies, if they were to occur, could make it
difficult for us to realize expected or reasonable returns on these investments.
Our offerings have a long sales cycle that may harm our revenue and operating results.
A customer's decision to purchase our offerings typically involves a significant commitment of resources. In addition,
some customers will be reluctant to commit to locating in our IBX data centers until they are confident that the IBX
data center has adequate carrier connections. As a result, we have a long sales cycle. Furthermore, we may devote
significant time and resources to pursuing a particular sale or customer that does not result in revenues. We have also
significantly expanded our sales force in recent years, and it will take time for these new hires to become fully productive.
Delays due to the length of our sales cycle may materially and adversely affect our revenues and operating results,
which could harm our ability to meet our forecasts and cause volatility in our stock price.
Any failure of our physical infrastructure or negative impact on our ability to provide our services, or damage
to customer infrastructure within our IBX data centers, could lead to significant costs and disruptions that
could reduce our revenue and harm our business reputation and financial results.
Our business depends on providing customers with highly reliable solutions. We must safehouse our customers'
infrastructure and equipment located in our IBX data centers and ensure our IBX data centers and non-IBX offices
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remain operational at all times. We own certain of our IBX data centers, but others are leased by us, and we rely on
the landlord for basic maintenance of our leased IBX data centers and office buildings. If such landlord has not
maintained a leased property sufficiently, we may be forced into an early exit from the center which could be disruptive
to our business. Furthermore, we continue to acquire IBX data centers not built by us. If we discover that these buildings
and their infrastructure assets are not in the condition we expected when they were acquired, we may be required to
incur substantial additional costs to repair or upgrade the centers.
Problems at one or more of our IBX data centers or corporate offices, whether or not within our control, could result
in service interruptions or significant infrastructure or equipment damage. These could result from numerous factors,
including:
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equipment failure;
physical, electronic and cyber security breaches;
fire, earthquake, hurricane, flood, tornado and other natural disasters;
extreme temperatures;
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fiber cuts;
power loss;
terrorist acts;
sabotage and vandalism;
global pandemics or health emergencies, such as the coronavirus; and
failure of business partners who provide our resale products.
We have service level commitment obligations to certain customers. As a result, service interruptions or significant
equipment damage in our IBX data centers could result in difficulty maintaining service level commitments to these
customers and potential claims related to such failures. Because our IBX data centers are critical to many of our
customers' businesses, service interruptions or significant equipment damage in our IBX data centers could also result
in lost profits or other indirect or consequential damages to our customers. We cannot guarantee that a court would
enforce any contractual limitations on our liability in the event that one of our customers brings a lawsuit against us as
a result of a problem at one of our IBX data centers and we may decide to reach settlements with affected customers
irrespective of any such contractual limitations. Any such settlement may result in a reduction of revenue under U.S.
generally accepted accounting principles ("GAAP"). In addition, any loss of service, equipment damage or inability to
meet our service level commitment obligations could reduce the confidence of our customers and could consequently
impair our ability to obtain and retain customers, which would adversely affect both our ability to generate revenues
and our operating results.
Furthermore, we are dependent upon internet service providers, telecommunications carriers and other website
operators in the Americas, Asia-Pacific and EMEA regions and elsewhere, some of which have experienced significant
system failures and electrical outages in the past. Our customers may in the future experience difficulties due to system
failures unrelated to our systems and offerings. If, for any reason, these providers fail to provide the required services,
our business, financial condition and results of operations could be materially and adversely impacted.
We are currently making significant investments in our back-office information technology systems and
processes. Difficulties from or disruptions to these efforts may interrupt our normal operations and adversely
affect our business and operating results.
We have been investing heavily in our back-office information technology systems and processes for a number
of years and expect such investment to continue for the foreseeable future in support of our pursuit of global, scalable
solutions across all geographies and functions that we operate in. These continuing investments include: 1) ongoing
improvements to the customer experience from initial quote to customer billing and our revenue recognition process;
2) integration of recently-acquired operations onto our various information technology systems; and 3) implementation
of new tools and technologies to either further streamline and automate processes, such as our procurement system,
or to support our compliance with evolving U.S. GAAP, such as the new revenue accounting, derivatives and hedging
and leasing standards. As a result of our continued work on these projects, we may experience difficulties with our
systems, management distraction and significant business disruptions. For example, difficulties with our systems may
interrupt our ability to accept and deliver customer orders and may adversely impact our overall financial operations,
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including our accounts payable, accounts receivables, general ledger, fixed assets, revenue recognition, close
processes, internal financial controls and our ability to otherwise run and track our business. We may need to expend
significant attention, time and resources to correct problems or find alternative sources for performing these functions. All
of these changes to our financial systems also create an increased risk of deficiencies in our internal controls over
financial reporting until such systems are stabilized. Such significant investments in our back-office systems may take
longer to complete and cost more than originally planned. In addition, we may not realize the full benefits we hoped
to achieve and there is a risk of an impairment charge if we decide that portions of these projects will not ultimately
benefit the company or are de-scoped. Finally, the collective impact of these changes to our business has placed
significant demands on impacted employees across multiple functions, increasing the risk of errors and control
deficiencies in our financial statements, distraction from the effective operation of our business and difficulty in attracting
and retaining employees. Any such difficulties or disruptions may adversely affect our business and operating results.
Inadequate or inaccurate external and internal information, including budget and planning data, could lead to
inaccurate financial forecasts and inappropriate financial decisions.
Our financial forecasts are dependent on estimates and assumptions regarding budget and planning data, market
growth, foreign exchange rates, our ability to remain qualified for taxation as a REIT, and our ability to generate sufficient
cash flow to reinvest in the business, fund internal growth, make acquisitions, pay dividends and meet our debt
obligations. Our financial projections are based on historical experience and on various other assumptions that our
management believes to be reasonable under the circumstances and at the time they are made. However, if our
external and internal information is inadequate, our actual results may differ materially from our forecasts and cause
us to make inappropriate financial decisions. Any material variation between our financial forecasts and our actual
results may also adversely affect our future profitability, stock price and stockholder confidence.
The level of insurance coverage that we purchase may prove to be inadequate.
We carry liability, property, business interruption and other insurance policies to cover insurable risks to our
company. We select the types of insurance, the limits and the deductibles based on our specific risk profile, the cost
of the insurance coverage versus its perceived benefit and general industry standards. Our insurance policies contain
industry standard exclusions for events such as war and nuclear reaction. We purchase minimal levels of earthquake
insurance for certain of our IBX data centers, but for most of our data centers, including many in California, we have
elected to self-insure. The earthquake and flood insurance that we do purchase would be subject to high deductibles.
Any of the limits of insurance that we purchase, including those for cyber risks, could prove to be inadequate, which
could materially and adversely impact our business, financial condition and results of operations.
Our construction of additional new IBX data centers or IBX data center expansions could involve significant
risks to our business.
In order to sustain our growth in certain of our existing and new markets, we may have to expand an existing data
center, lease a new facility or acquire suitable land, with or without structures, to build new IBX data centers from the
ground up. Expansions or new builds are currently underway, or being contemplated, in many of our markets. These
construction projects expose us to many risks which could have an adverse effect on our operating results and financial
condition. Some of the risks associated with these projects include:
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construction delays;
lack of availability and delays for data center equipment, including items such as generators and switchgear;
unexpected budget changes;
increased prices for building supplies, raw materials and data center equipment;
labor availability, labor disputes and work stoppages with contractors, subcontractors and other third parties;
unanticipated environmental issues and geological problems;
delays related to permitting from public agencies and utility companies; and
delays in site readiness leading to our failure to meet commitments made to customers planning to expand
into a new build.
Construction projects are dependent on permitting from public agencies and utility companies. We are currently
experiencing permitting delays in Amsterdam due to the temporary halt on construction of data centers in the municipality
due to pressure on power infrastructure and special planning. While we don't expect any negative impact for our
business in Amsterdam, these types of delays related to permitting from public agencies and utility companies could
occur in other markets and have an adverse effect on our growth.
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Additionally, all construction related projects require us to carefully select and rely on the experience of one or
more designers, general contractors, and associated subcontractors during the design and construction process.
Should a designer, general contractor or significant subcontractor experience financial problems or other problems
during the design or construction process, we could experience significant delays, increased costs to complete the
project and/or other negative impacts to our expected returns.
Site selection is also a critical factor in our expansion plans. There may not be suitable properties available in our
markets with the necessary combination of high power capacity and fiber connectivity, or selection may be limited.
Thus, while we may prefer to locate new IBX data centers adjacent to our existing locations, it may not always be
possible. In the event we decide to build new IBX data centers separate from our existing IBX data centers, we may
provide interconnection solutions to connect these two centers. Should these solutions not provide the necessary
reliability to sustain connection, this could result in lower interconnection revenue and lower margins and could have
a negative impact on customer retention over time.
Environmental regulations may impose upon us new or unexpected costs.
We are subject to various federal, state, local and international environmental and health and safety laws and
regulations, including those relating to the generation, storage, handling and disposal of hazardous substances and
wastes. Certain of these laws and regulations also impose joint and several liability, without regard to fault, for
investigation and cleanup costs on current and former owners and operators of real property and persons who have
disposed of or released hazardous substances into the environment. Our operations involve the use of hazardous
substances and materials such as petroleum fuel for emergency generators, as well as batteries, cleaning solutions
and other materials. In addition, we lease, own or operate real property at which hazardous substances and regulated
materials have been used in the past. At some of our locations, hazardous substances or regulated materials are
known to be present in soil or groundwater, and there may be additional unknown hazardous substances or regulated
materials present at sites we own, operate or lease. At some of our locations, there are land use restrictions in place
relating to earlier environmental cleanups that do not materially limit our use of the sites. To the extent any hazardous
substances or any other substance or material must be cleaned up or removed from our property, we may be responsible
under applicable laws, permits or leases for the removal or cleanup of such substances or materials, the cost of which
could be substantial.
We purchase significant amounts of electricity from generating facilities and utility companies that are subject to
environmental laws, regulations and permit requirements. These environmental requirements are subject to material
change, which could result in increases in our electricity suppliers' compliance costs that may be passed through to
us. Regulations promulgated by the U.S. EPA could limit air emissions from coal-fired power plants, restrict discharges
of cooling water, and otherwise impose new operational restraints on conventional power plants that could increase
costs of electricity. Regulatory programs intended to promote increased generation of electricity from renewable sources
may also increase our costs of procuring electricity. In addition, we are directly subject to environmental, health and
safety laws regulating air emissions, storm water management and other issues arising in our business. For example,
our emergency generators are subject to state and federal regulations governing air pollutants, which could limit the
operation of those generators or require the installation of new pollution control technologies. While environmental
regulations do not normally impose material costs upon our operations, unexpected events, equipment malfunctions,
human error and changes in law or regulations, among other factors, can lead to additional capital requirements,
limitations upon our operations and unexpected increased costs.
Regulation of greenhouse gas ("GHG") emissions could increase the cost of electricity by reducing amounts of
electricity generated from fossil fuels, by requiring the use of more expensive generating methods or by imposing taxes
or fees upon electricity generation or use. There has been interest in the U.S. Congress in addressing climate change
expressed by a number of bills introduced in the current Congressional Session. Federal legislative proposals to
address climate change include measures ranging from "carbon taxes," to tax credits, to federally imposed limitations
on GHG emissions. The course of future legislation and regulation remains difficult to predict and the potential increased
costs associated with GHG regulation or taxes cannot be estimated at this time.
State regulations also have the potential to increase our costs of obtaining electricity. Certain states, like California,
have issued or may enact environmental regulations that could materially affect our facilities and electricity costs.
California has limited GHG emissions from new and existing conventional power plants by imposing regulatory caps
and by auctioning the rights to emission allowances. Washington, Oregon and Massachusetts have issued regulations
to implement similar carbon cap and trade programs, and other states are considering proposals to limit carbon
emissions through cap and trade programs, carbon pricing programs and other mechanisms. Some northeastern states
adopted a multi-state program for limiting carbon emissions through the Regional Greenhouse Gas Initiative ("RGGI")
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cap and trade program. State programs have not had a material adverse effect on our electricity costs to date, but due
to the market-driven nature of some of the programs, they could have a material adverse effect on electricity costs in
the future.
Aside from regulatory requirements, we have separately undertaken efforts to procure energy from renewable
energy projects in order to support new renewables development. The costs of procuring such energy may exceed
the costs of procuring electricity from existing sources, such as existing utilities or electric service provided through
conventional grids. These efforts to support and enhance renewable electricity generation may increase our costs of
electricity above those that would be incurred through procurement of conventional electricity from existing sources.
Our business may be adversely affected by climate change and responses to it.
Severe weather events, such as droughts, heat waves, fires, hurricanes, and flooding, pose a threat to our data
centers and our customers' IT infrastructure through physical damage to facilities or equipment, power supply disruption,
and long-term effects on the cost of electricity. The frequency and intensity of severe weather events are reportedly
increasing locally and regionally as part of broader climate changes. Global weather pattern changes may also pose
long-term risks of physical impacts to our business.
We maintain disaster recovery and business continuity plans that would be implemented in the event of severe
weather events that interrupt our business or affect our customers' IT infrastructure. While these plans are designed
to allow us to recover from natural disasters or other events that can interrupt our business, we cannot be certain that
our plans will protect us or our customers from all such disasters or events. Failure to prevent impact to customers
from such events could adversely affect our business.
We face pressures from our customers and stockholders, who are increasingly focused on climate change, to
prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. To address these
concerns, we pursue opportunities to improve energy efficiency and implement energy-saving retrofits. In addition, we
have established a long-term goal of using 100% clean and renewable energy. As a result of these and other initiatives,
we have made progress towards reducing our carbon footprint. It is possible, however, that our customers and investors
might not be satisfied with our sustainability efforts or the speed of their adoption. If we do not meet our customers' or
stockholders' expectations, our business and/or our share price could be harmed.
Concern about climate change in various jurisdictions may result in more stringent laws and regulatory requirements
regarding emissions of carbon dioxide or other GHGs. As described above under "RISK FACTORS - Environmental
regulations may impose upon us new or unexpected costs," restrictions on carbon dioxide or other GHG emissions
could result in significant increases in operating or capital costs, including higher energy costs generally, and increased
costs from carbon taxes, emission cap and trade programs and renewable portfolio standards that are imposed upon
our electricity suppliers. These higher energy costs, and the cost of complying across our global platform, or of failing
to comply with these and other climate change regulations, may have an adverse effect on our business and our results
of operations.
Our business could be harmed by prolonged power outages, shortages or capacity constraints.
Our IBX data centers are affected by problems accessing electricity sources, such as planned or unplanned power
outages and limitations on transmission or distribution. Unplanned power outages, including, but not limited to those
relating to large storms, earthquakes, fires, tsunamis, cyberattacks and planned power outages by public utilities such
as those related to Pacific Gas and Electric Company's ("PG&E") planned outages in California to minimize fire risks,
could harm our customers and our business. Our international operations are sometimes located outside of developed,
reliable electricity markets, where we are exposed to some insecurity in supply associated with technical and regulatory
problems, as well as transmission constraints. Some of our IBX data centers are located in leased buildings where,
depending upon the lease requirements and number of tenants involved, we may or may not control some or all of the
infrastructure including generators and fuel tanks. As a result, in the event of a power outage, we may be dependent
upon the landlord, as well as the utility company, to restore the power. We attempt to limit our exposure to system
downtime by using backup generators and alternative power supplies, but these measures may not always prevent
downtime, which can adversely affect customer experience and revenues.
In each of our markets, we rely on third parties to provide a sufficient amount of power for current and future
customers. At the same time, power and cooling requirements are increasing per unit of equipment. As a result, some
customers are consuming an increasing amount of power per cabinet. We generally do not control the amount of power
our customers draw from their installed circuits, which can result in growth in the aggregate power consumption of our
facilities beyond our originally planning and expectations. This means that limitations on the capacity of our electrical
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delivery systems and equipment could limit customer utilization of our IBX data centers. These limitations could have
a negative impact on the effective available capacity of a given center and limit our ability to grow our business, which
could have a negative impact on our financial performance, operating results and cash flows.
Each new facility requires access to significant quantities of electricity. Limitations on generation, transmission and
distribution may limit our ability to obtain sufficient power capacity for potential expansion sites in new or existing
markets. We may experience significant delays and substantial increased costs demanded by the utilities to provide
the level of electrical service required by our current IBX data center designs.
The security of our electricity supplies in California could be adversely affected by the actions of the court in the
bankruptcy proceeding (the "Bankruptcy Court") filed on January 29, 2019, of PG&E, the public utility that serves the
area in which some of our facilities are located. PG&E announced that it filed for bankruptcy to facilitate the resolution
of liabilities in connection with the 2017 and 2018 Northern California wildfires. On January 31, 2020, PG&E filed an
amended proposed chapter 11 plan of reorganization (the “Plan”). If confirmed, the Plan will provide for the assumption
(i.e., continuation) of all executory contracts not otherwise rejected (i.e., breached) during the pendency of the
bankruptcy case, including high-priced power purchase agreements and other agreements under which PG&E procures
electricity for distribution to customers like us. Until the Plan is confirmed by the Bankruptcy Court and becomes
effective, there are no assurances that any or all executory contracts will be assumed. It is still possible that, during
its bankruptcy, PG&E could seek permission from the Bankruptcy Court to reject certain burdensome executory
contracts. It is not certain that PG&E will be able to obtain such relief. Just before the bankruptcy filing, the Federal
Energy Regulatory Commission ("FERC") ruled that its approval is required before PG&E may reject any FERC-
jurisdictional wholesale power agreements. The Bankruptcy Court disagreed with FERC, holding instead that FERC
does not have concurrent jurisdiction, or any jurisdiction, over the determination of whether any rejection of a power
purchase agreement should be authorized. FERC’s ruling and the Bankruptcy Court’s decision are on direct appeal
to the United States Court of Appeals for the Ninth Circuit where they remain under review. If PG&E seeks and is
ultimately allowed to reject power agreements, it is difficult to predict the consequences of any such action for us but
they could potentially include procuring electricity from more expensive sources, reducing the availability and reliability
of electricity supplied to our facilities and relying on a larger percentage of electricity generated by fossil fuels, any of
which could reduce supplies of electricity available to our operations or increase our costs of electricity.
Any power outages, shortages or capacity constraints may have an adverse effect on our business and our results
of operations.
If we are unable to implement our evolving organizational structure or if we are unable to recruit or retain key
executives and qualified personnel, our business could be harmed.
In connection with the evolving needs of our customers and our business, we undertook a review of our
organizational architecture and have made, and will continue to make, changes as a result of that review. There can
be no assurances that the changes won't result in attrition, that the significant amount of management and other
employees' time and focus to implement the changes won't divert attention from operating and growing the business,
or that any changes will result in increased organizational effectiveness. We must also continue to identify, hire, train
and retain key personnel who maintain relationships with our customers and who can provide the technical, strategic
and marketing skills required for our company's growth. There is a shortage of qualified personnel in these fields, and
we compete with other companies for the limited pool of talent.
The failure to recruit and retain necessary key executives and personnel could cause disruption, harm our business
and hamper our ability to grow our company.
We may not be able to compete successfully against current and future competitors.
The global multi-tenant data center market is highly fragmented. It is estimated that Equinix is one of more than
1,200 companies that provide these offerings around the world. Equinix competes with these firms which vary in terms
of their data center offerings. We must continue to evolve our product strategy and be able to differentiate our IBX data
centers and product offerings from those of our competitors.
Some of our competitors may adopt aggressive pricing policies, especially if they are not highly leveraged or have
lower return thresholds than we do. As a result, we may suffer from pricing pressure that would adversely affect our
ability to generate revenues. Some of these competitors may also provide our target customers with additional benefits,
including bundled communication services or cloud services, and may do so in a manner that is more attractive to our
potential customers than obtaining space in our IBX data centers. Similarly, with growing acceptance of cloud-based
technologies, we are at risk of losing customers that may decide to fully leverage cloud infrastructure offerings instead
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of managing their own. Competitors could also operate more successfully or form alliances to acquire significant market
share.
Failure to compete successfully may materially adversely affect our financial condition, cash flows and results of
operations.
If we cannot continue to develop, acquire, market and provide new offerings or enhancements to existing
offerings that meet customer requirements and differentiate us from our customers, our operating results
could suffer.
As our customers evolve their IT strategies, we must remain flexible and evolve along with new technologies and
industry and market shifts. Ineffective planning and execution in our cloud and product development strategies may
cause difficulty in sustaining our competitive advantages.
The process of developing and acquiring new offerings and enhancing existing offerings is complex. If we fail to
anticipate customers’ evolving needs and expectations or do not adapt to technological and IT trends, our results of
operations could suffer. In order to adapt effectively, we sometimes must make long-term investments, develop, acquire
or obtain certain intellectual property and commit significant resources before knowing whether our predictions will
accurately reflect customer demand for the new offerings. If we misjudge customer needs in the future, our new offerings
may not succeed, and our revenues and earnings may be harmed. Additionally, any delay in the development,
acquisition, marketing or launch of a new offering could result in customer dissatisfaction or attrition. If we cannot
continue adapting our products, or if our competitors can adapt their products more quickly than us, our business could
be harmed.
We recently announced our Joint Venture with GIC and are also in discussions with a targeted set of hyperscale
customers to develop capacity to serve their larger footprint needs by leveraging existing capacity and dedicated
hyperscale builds. We have announced our intention to seek additional joint venture partners for certain of our
hyperscale builds. There can be no assurances that our joint ventures will be successful or that we find additional
partners or that we are able to successfully meet the needs of these customers.
We also recently announced an agreement to acquire Packet Host, Inc., a bare metal automation company which
would facilitate a new product offering for Equinix. While we believe this new product offering will be desirable to our
customers and will complement our other offerings on Platform Equinix, we cannot guarantee the success of this
product or any other new product offering. Our company has not historically offered hardware solutions, and this would
be a new market area for us which can bring challenges and could harm our business if not executed in the time or
manner that we expect.
The use of high power density equipment may limit our ability to fully utilize our older IBX data centers.
Some customers have increased their use of high power density equipment, such as blade servers, in our IBX
data centers which has increased the demand for power on a per cabinet basis. Because many of our IBX data centers
were built a number of years ago, the current demand for power may exceed the designed electrical capacity in these
centers. As power, not space, is a limiting factor in many of our IBX data centers, our ability to fully utilize those IBX
data centers may be impacted. The ability to increase the power capacity of an IBX data center, should we decide to,
is dependent on several factors including, but not limited to, the local utility's ability to provide additional power; the
length of time required to provide such power; and/or whether it is feasible to upgrade the electrical infrastructure of
an IBX data center to deliver additional power to customers. Although we are currently designing and building to a
higher power specification than that of many of our older IBX data centers, there is a risk that demand will continue to
increase and our IBX data centers could become underutilized sooner than expected.
If our internal controls are found to be ineffective, our financial results or our stock price may be adversely
affected.
Our most recent evaluation of our controls resulted in our conclusion that, as of December 31, 2019, in compliance
with Section 404 of the Sarbanes-Oxley Act of 2002, our internal controls over financial reporting were effective. Our
ability to manage our operations and growth through, for example, the integration of recently acquired businesses, the
adoption of new accounting principles and tax laws, and our overhaul of our back office systems that, for example,
support the customer experience from initial quote to customer billing and our revenue recognition process, will require
us to further develop our controls and reporting systems and implement or amend new or existing controls and reporting
systems in those areas where the implementation and integration is still ongoing. All of these changes to our financial
systems and the implementation and integration of acquisitions create an increased risk of deficiencies in our internal
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controls over financial reporting. If, in the future, our internal control over financial reporting is found to be ineffective,
or if a material weakness is identified in our controls over financial reporting, our financial results may be adversely
affected. Investors may also lose confidence in the reliability of our financial statements which could adversely affect
our stock price.
Our operating results may fluctuate.
We have experienced fluctuations in our results of operations on a quarterly and annual basis. The fluctuations in
our operating results may cause the market price of our common stock to be volatile. We may experience significant
fluctuations in our operating results in the foreseeable future due to a variety of factors, including, but not limited to:
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fluctuations of foreign currencies in the markets in which we operate;
the timing and magnitude of depreciation and interest expense or other expenses related to the acquisition,
purchase or construction of additional IBX data centers or the upgrade of existing IBX data centers;
demand for space, power and solutions at our IBX data centers;
changes in general economic conditions, such as an economic downturn, or specific market conditions in the
telecommunications and internet industries, both of which may have an impact on our customer base;
charges to earnings resulting from past acquisitions due to, among other things, impairment of goodwill or
intangible assets, reduction in the useful lives of intangible assets acquired, identification of additional assumed
contingent liabilities or revised estimates to restructure an acquired company's operations;
the duration of the sales cycle for our offerings and our ability to ramp our newly-hired sales persons to full
productivity within the time period we have forecasted;
additions and changes in product offerings and our ability to ramp up and integrate new products within the
time period we have forecasted;
restructuring charges or reversals of restructuring charges, which may be necessary due to revised sublease
assumptions, changes in strategy or otherwise;
acquisitions or dispositions we may make;
the financial condition and credit risk of our customers;
the provision of customer discounts and credits;
the mix of current and proposed products and offerings and the gross margins associated with our products
and offerings;
the timing required for new and future IBX data centers to open or become fully utilized;
competition in the markets in which we operate;
conditions related to international operations;
increasing repair and maintenance expenses in connection with aging IBX data centers;
lack of available capacity in our existing IBX data centers to generate new revenue or delays in opening new
or acquired IBX data centers that delay our ability to generate new revenue in markets which have otherwise
reached capacity;
changes in rent expense as we amend our IBX data center leases in connection with extending their lease
terms when their initial lease term expiration dates approach or changes in shared operating costs in connection
with our leases, which are commonly referred to as common area maintenance expenses;
the timing and magnitude of other operating expenses, including taxes, expenses related to the expansion of
sales, marketing, operations and acquisitions, if any, of complementary businesses and assets;
the cost and availability of adequate public utilities, including electricity;
changes in employee stock-based compensation;
overall inflation;
increasing interest expense due to any increases in interest rates and/or potential additional debt financings;
changes in our tax planning strategies or failure to realize anticipated benefits from such strategies;
changes in income tax benefit or expense; and
changes in or new GAAP as periodically released by the Financial Accounting Standards Board ("FASB").
Any of the foregoing factors, or other factors discussed elsewhere in this report, could have a material adverse
effect on our business, results of operations and financial condition. Although we have experienced growth in revenues
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in recent quarters, this growth rate is not necessarily indicative of future operating results. Prior to 2008, we had
generated net losses every fiscal year since inception. It is possible that we may not be able to generate net income
on a quarterly or annual basis in the future. In addition, a relatively large portion of our expenses are fixed in the short-
term, particularly with respect to lease and personnel expenses, depreciation and amortization and interest expenses.
Therefore, our results of operations are particularly sensitive to fluctuations in revenues. As such, comparisons to prior
reporting periods should not be relied upon as indications of our future performance. In addition, our operating results
in one or more future quarters may fail to meet the expectations of securities analysts or investors.
Our days sales outstanding ("DSO") may be negatively impacted by process and system upgrades and
acquisitions.
Our DSO may be negatively impacted by ongoing process and system upgrades which can impact our customers'
experience in the short term, together with integrating recent acquisitions into our processes and systems, which may
have a negative impact on our operating cash flows, liquidity and financial performance.
We may incur goodwill and other intangible asset impairment charges, or impairment charges to our property,
plant and equipment, which could result in a significant reduction to our earnings.
In accordance with U.S. GAAP, we are required to assess our goodwill and other intangible assets annually, or
more frequently whenever events or changes in circumstances indicate potential impairment, such as changing market
conditions or any changes in key assumptions. If the testing performed indicates that an asset may not be recoverable,
we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill
or other intangible assets and the implied fair value of the goodwill or other intangible assets in the period the
determination is made.
We also periodically monitor the remaining net book values of our property, plant and equipment, including at the
individual IBX data center level. Although each individual IBX data center is currently performing in accordance with
our expectations, the possibility that one or more IBX data centers could begin to under-perform relative to our
expectations is possible and may also result in non-cash impairment charges.
These charges could be significant, which could have a material adverse effect on our business, results of operations
or financial condition.
We have incurred substantial losses in the past and may incur additional losses in the future.
As of December 31, 2019, our retained earnings were $1.4 billion. Although we have generated net income for
each fiscal year since 2008, except for the year ended December 31, 2014, we are currently investing heavily in our
future growth through the build out of multiple additional IBX data centers, expansions of IBX data centers and
acquisitions of complementary businesses. As a result, we will incur higher depreciation and other operating expenses,
as well as transaction costs and interest expense, that may negatively impact our ability to sustain profitability in future
periods unless and until these new IBX data centers generate enough revenue to exceed their operating costs and
cover the additional overhead needed to scale our business for this anticipated growth. The current global financial
uncertainty may also impact our ability to sustain profitability if we cannot generate sufficient revenue to offset the
increased costs of our recently-opened IBX data centers or IBX data centers currently under construction. In addition,
costs associated with the acquisition and integration of any acquired companies, as well as the additional interest
expense associated with debt financing we have undertaken to fund our growth initiatives, may also negatively impact
our ability to sustain profitability. Finally, given the competitive and evolving nature of the industry in which we operate,
we may not be able to sustain or increase profitability on a quarterly or annual basis.
The failure to obtain favorable terms when we renew our IBX data center leases, or the failure to renew such
leases, could harm our business and results of operations.
While we own certain of our IBX data centers, others are leased under long-term arrangements. These leased
centers have all been subject to significant development by us in order to convert them from, in most cases, vacant
buildings or warehouses into IBX data centers. Most of our IBX data center leases have renewal options available to
us. However, many of these renewal options provide for the rent to be set at then-prevailing market rates. To the extent
that then-prevailing market rates or negotiated rates are higher than present rates, these higher costs may adversely
impact our business and results of operations, or we may decide against renewing the lease. In the event that an IBX
data center lease does not have a renewal option, or we fail to exercise a renewal option in a timely fashion and lose
our right to renew the lease, we may not be successful in negotiating a renewal of the lease with the landlord. A failure
to renew a lease could force us to exit a building prematurely, which could disrupt our business, harm our customer
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relationships, expose us to liability under our customer contracts, cause us to take impairment charges and affect our
operating results negatively.
We depend on a number of third parties to provide internet connectivity to our IBX data centers; if connectivity
is interrupted or terminated, our operating results and cash flow could be materially and adversely affected.
The presence of diverse telecommunications carriers' fiber networks in our IBX data centers is critical to our ability
to retain and attract new customers. We are not a telecommunications carrier, and as such, we rely on third parties to
provide our customers with carrier services. We believe that the availability of carrier capacity will directly affect our
ability to achieve our projected results. We rely primarily on revenue opportunities from the telecommunications carriers'
customers to encourage them to invest the capital and operating resources required to connect from their centers to
our IBX data centers. Carriers will likely evaluate the revenue opportunity of an IBX data center based on the assumption
that the environment will be highly competitive. We cannot provide assurance that each and every carrier will elect to
offer its services within our IBX data centers or that once a carrier has decided to provide internet connectivity to our
IBX data centers that it will continue to do so for any period of time.
Our new IBX data centers require construction and operation of a sophisticated redundant fiber network. The
construction required to connect multiple carrier facilities to our IBX data centers is complex and involves factors outside
of our control, including regulatory processes and the availability of construction resources. Any hardware or fiber
failures on this network may result in significant loss of connectivity to our new IBX data center expansions. This could
affect our ability to attract new customers to these IBX data centers or retain existing customers.
If the establishment of highly diverse internet connectivity to our IBX data centers does not occur, is materially
delayed or is discontinued, or is subject to failure, our operating results and cash flow will be adversely affected.
We have government customers, which subjects us to risks including early termination, audits, investigations,
sanctions and penalties.
We derive revenues from contracts with the U.S. government, state and local governments and foreign
governments. Some of these customers may terminate all or part of their contracts at any time, without cause. There
is increased pressure for governments and their agencies, both domestically and internationally, to reduce spending.
Some of our federal government contracts are subject to the approval of appropriations being made by the U.S.
Congress to fund the expenditures under these contracts. Similarly, some of our contracts at the state and local levels
are subject to government funding authorizations.
Additionally, government contracts often have unique terms and conditions, such as most favored customer
obligations, and are generally subject to audits and investigations which could result in various civil and criminal
penalties and administrative sanctions, including termination of contracts, refund of a portion of fees received, forfeiture
of profits, suspension of payments, fines and suspensions or debarment from future government business.
Because we depend on the development and growth of a balanced customer base, including key magnet
customers, failure to attract, grow and retain this base of customers could harm our business and operating
results.
Our ability to maximize revenues depends on our ability to develop and grow a balanced customer base, consisting
of a variety of companies, including enterprises, cloud, digital content and financial companies, and network service
providers. We consider certain of these customers to be key magnets in that they draw in other customers. The more
balanced the customer base within each IBX data center, the better we will be able to generate significant interconnection
revenues, which in turn increases our overall revenues. Our ability to attract customers to our IBX data centers will
depend on a variety of factors, including the presence of multiple carriers, the mix of our offerings, the overall mix of
customers, the presence of key customers attracting business through vertical market ecosystems, the IBX data
center's operating reliability and security and our ability to effectively market our offerings. However, some of our
customers may face competitive pressures and may ultimately not be successful or may be consolidated through
merger or acquisition. If these customers do not continue to use our IBX data centers it may be disruptive to our
business. Finally, the uncertain global economic climate may harm our ability to attract and retain customers if customers
slow spending, or delay decision-making on our offerings, or if customers begin to have difficulty paying us or seek
bankruptcy protection and we experience increased churn in our customer base. Any of these factors may hinder the
development, growth and retention of a balanced customer base and adversely affect our business, financial condition
and results of operations.
25
We may be subject to securities class action and other litigation, which may harm our business and results
of operations.
We may be subject to securities class action or other litigation. For example, securities class action litigation has
often been brought against a company following periods of volatility in the market price of its securities. Litigation can
be lengthy, expensive, and divert management's attention and resources. Results cannot be predicted with certainty
and an adverse outcome in litigation could result in monetary damages or injunctive relief. Further, any payments made
in settlement may directly reduce our revenue under U.S. GAAP and could negatively impact our operating results for
the period. For all of these reasons, litigation could seriously harm our business, results of operations, financial condition
or cash flows.
We may not be able to protect our intellectual property rights.
We cannot make assurances that the steps taken by us to protect our intellectual property rights will be adequate
to deter misappropriation of proprietary information or that we will be able to detect unauthorized use and take
appropriate steps to enforce our intellectual property rights. We also are subject to the risk of litigation alleging
infringement of third-party intellectual property rights. Any such claims could require us to spend significant sums in
litigation, pay damages, develop non-infringing intellectual property or acquire licenses to the intellectual property that
is the subject of the alleged infringement.
Government regulation may adversely affect our business.
Various laws and governmental regulations, both in the U.S. and abroad, governing internet-related services,
related communications services and information technologies remain largely unsettled, even in areas where there
has been some legislative action. For example, the Federal Communications Commission ("FCC") recently overturned
network neutrality rules, which may result in material changes in the regulations and contribution regime affecting us
and our customers. Furthermore, the U.S. Congress and state legislatures are reviewing and considering changes to
the new FCC rules making the future of network neutrality and its impact on Equinix uncertain. There may also be
forthcoming regulation in the U.S. in the areas of cybersecurity, data privacy and data security, any of which could
impact Equinix and our customers. Similarly, data privacy regulations continue to evolve and must be addressed by
Equinix as a global company.
We remain focused on whether and how existing and changing laws, such as those governing intellectual property,
privacy, libel, telecommunications services, data flows/data localization, carbon emissions impact, and taxation apply
to the internet and to related offerings such as ours; and substantial resources may be required to comply with regulations
or bring any non-compliant business practices into compliance with such regulations. In addition, the continuing
development of the market for online commerce and the displacement of traditional telephony service by the internet
and related communications services may prompt an increased call for more stringent consumer protection laws or
other regulation both in the U.S. and abroad that may impose additional burdens on companies conducting business
online and their service providers.
The adoption, or modification of laws or regulations relating to the internet and our business, or interpretations of
existing laws, could have a material adverse effect on our business, financial condition and results of operations.
Industry consolidation may have a negative impact on our business model.
If customers combine businesses, they may require less colocation space, which could lead to churn in our customer
base. Regional competitors may also consolidate to become a global competitor. Consolidation of our customers and/
or our competitors may present a risk to our business model and have a negative impact on our revenues.
We have various mechanisms in place that may discourage takeover attempts.
Certain provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a third party
from acquiring control of us in a merger, acquisition or similar transaction that a stockholder may consider favorable.
Such provisions include:
•
•
•
•
ownership limitations and transfer restrictions relating to our stock that are intended to facilitate our compliance
with certain REIT rules relating to share ownership;
authorization for the issuance of "blank check" preferred stock;
the prohibition of cumulative voting in the election of directors;
limits on the persons who may call special meetings of stockholders;
26
•
•
limits on stockholder action by written consent; and
advance notice requirements for nominations to the Board of Directors or for proposing matters that can be
acted on by stockholders at stockholder meetings.
In addition, Section 203 of the Delaware General Corporation Law, which restricts certain business combinations
with interested stockholders in certain situations, may also discourage, delay or prevent someone from acquiring or
merging with us.
Risks Related to Our Taxation as a REIT
We may not remain qualified for taxation as a REIT.
We have elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our 2015 taxable
year. We believe that our organization and method of operation comply with the rules and regulations promulgated
under the Internal Revenue Code of 1986, as amended (the "Code"), such that we will continue to qualify for taxation
as a REIT. However, we cannot assure you that we have qualified for taxation as a REIT or that we will remain so
qualified. Qualification for taxation as a REIT involves the application of highly technical and complex provisions of the
Code to our operations as well as various factual determinations concerning matters and circumstances not entirely
within our control. There are limited judicial or administrative interpretations of applicable REIT provisions of the Code.
If, in any taxable year, we fail to remain qualified for taxation as a REIT and are not entitled to relief under the
Code:
• we will not be allowed a deduction for distributions to stockholders in computing our taxable income;
• we will be subject to federal and state income tax on our taxable income at regular corporate income tax
rates; and
• we would not be eligible to elect REIT status again until the fifth taxable year that begins after the first year
for which we failed to qualify for taxation as a REIT.
Any such corporate tax liability could be substantial and would reduce the amount of cash available for other
purposes. If we fail to remain qualified for taxation as a REIT, we may need to borrow additional funds or liquidate
some investments to pay any additional tax liability. Accordingly, funds available for investment and distributions to
stockholders could be reduced.
As a REIT, failure to make required distributions would subject us to federal corporate income tax.
We paid quarterly distributions in every quarter of 2019 and have declared a quarterly distribution to be paid on
March 18, 2020. The amount, timing and form of any future distributions will be determined, and will be subject to
adjustment, by our Board of Directors. To remain qualified for taxation as a REIT, we are generally required to distribute
at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding
net capital gain) each year, or in limited circumstances, the following year, to our stockholders. Generally, we expect
to distribute all or substantially all of our REIT taxable income. If our cash available for distribution falls short of our
estimates, we may be unable to maintain distributions that approximate our REIT taxable income and may fail to remain
qualified for taxation as a REIT. In addition, our cash flows from operations may be insufficient to fund required
distributions as a result of differences in timing between the actual receipt of income and the payment of expenses
and the recognition of income and expenses for federal income tax purposes, or the effect of nondeductible
expenditures, such as capital expenditures, payments of compensation for which Section 162(m) of the Code denies
a deduction, interest expense deductions limited by Section 163(j) of the Code, the creation of reserves or required
debt service or amortization payments.
To the extent that we satisfy the 90% distribution requirement but distribute less than 100% of our REIT taxable
income, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we will be
subject to a 4% nondeductible excise tax on our undistributed taxable income if the actual amount that we distribute
to our stockholders for a calendar year is less than the minimum amount specified under the Code.
We may be required to borrow funds, sell assets or raise equity to satisfy our REIT distribution
requirements.
Due to the size and timing of future distributions, including any distributions made to satisfy REIT distribution
requirements, we may need to borrow funds, sell assets or raise equity, even if the then-prevailing market conditions
are not favorable for these borrowings, sales or offerings.
27
Any insufficiency of our cash flows to cover our REIT distribution requirements could adversely impact our ability
to raise short- and long-term debt, to sell assets, or to offer equity securities in order to fund distributions required to
maintain our qualification and taxation as a REIT. Furthermore, the REIT distribution requirements may increase the
financing we need to fund capital expenditures, future growth and expansion initiatives. This would increase our
indebtedness. A significant increase in our outstanding debt could lead to a downgrade of our credit rating. A downgrade
of our credit rating could negatively impact our ability to access credit markets. Further, certain of our current debt
instruments limit the amount of indebtedness we and our subsidiaries may incur. Significantly more financing, therefore,
may be unavailable, more expensive or restricted by the terms of our outstanding indebtedness. For a discussion of
risks related to our substantial level of indebtedness, see other risks described elsewhere in this Form 10-K.
Whether we issue equity, at what price and the amount and other terms of any such issuances will depend on
many factors, including alternative sources of capital, our then-existing leverage, our need for additional capital, market
conditions and other factors beyond our control. If we raise additional funds through the issuance of equity securities
or debt convertible into equity securities, the percentage of stock ownership by our existing stockholders may be
reduced. In addition, new equity securities or convertible debt securities could have rights, preferences and privileges
senior to those of our current stockholders, which could substantially decrease the value of our securities owned by
them. Depending on the share price we are able to obtain, we may have to sell a significant number of shares in order
to raise the capital we deem necessary to execute our long-term strategy, and our stockholders may experience dilution
in the value of their shares as a result.
Complying with REIT requirements may limit our flexibility or cause us to forgo otherwise attractive
opportunities.
To remain qualified for taxation as a REIT for U.S. federal income tax purposes, we must satisfy tests concerning,
among other things, the sources of our income, the nature and diversification of our assets and the amounts we
distribute to our stockholders. For example, under the Code, no more than 20% of the value of the assets of a REIT
may be represented by securities of one or more TRSs. Similar rules apply to other nonqualifying assets. These
limitations may affect our ability to make large investments in other non-REIT qualifying operations or assets. In addition,
in order to maintain our qualification for taxation as a REIT, we must distribute at least 90% of our REIT taxable income,
determined without regard to the dividends paid deduction and excluding any net capital gains. Even if we maintain
our qualification for taxation as a REIT, we will be subject to U.S. federal income tax at regular corporate income tax
rates for our undistributed REIT taxable income, as well as U.S. federal income tax at regular corporate income tax
rates for income recognized by our TRSs; we also pay taxes in the foreign jurisdictions in which our international assets
and operations are held and conducted regardless of our qualification for taxation as a REIT. Because of these
distribution requirements, we will likely not be able to fund future capital needs and investments from operating cash
flow. As such, compliance with REIT tests may hinder our ability to make certain attractive investments, including the
purchase of significant nonqualifying assets and the material expansion of non-real estate activities.
Our ability to fully deduct our interest expense may be limited, or we may be required to adjust the tax
depreciation of our real property in order to maintain the full deductibility of our interest expense.
The Code limits interest deductions for businesses, whether in corporate or passthrough form, to the sum of the
taxpayer's business interest income for the tax year and 30% of the taxpayer's adjusted taxable income for that tax
year. This limitation does not apply to an "electing real property trade or business". Although REITs are permitted to
make such an election, we do not currently intend to do so. If we so elect in the future, depreciable real property that
we hold (including specified improvements) would be required to be depreciated for U.S. federal income tax purposes
under the alternative depreciation system of the Code, which generally imposes a class life for depreciable real property
as long as 40 years.
As a REIT, we are limited in our ability to fund distribution payments using cash generated through our
TRSs.
Our ability to receive distributions from our TRSs is limited by the rules with which we must comply to maintain our
qualification for taxation as a REIT. In particular, at least 75% of our gross income for each taxable year as a REIT
must be derived from real estate. Consequently, no more than 25% of our gross income may consist of dividend income
from our TRSs and other nonqualifying types of income. Thus, our ability to receive distributions from our TRSs may
be limited and may impact our ability to fund distributions to our stockholders using cash flows from our TRSs.
Specifically, if our TRSs become highly profitable, we might become limited in our ability to receive net income from
our TRSs in an amount required to fund distributions to our stockholders commensurate with that profitability.
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In addition, a significant amount of our income and cash flows from our TRSs is generated from our international
operations. In many cases, there are local withholding taxes and currency controls that may impact our ability or
willingness to repatriate funds to the United States to help satisfy REIT distribution requirements.
Our extensive use of TRSs, including for certain of our international operations, may cause us to fail to
remain qualified for taxation as a REIT.
Our operations include an extensive use of TRSs. The net income of our TRSs is not required to be distributed to
us, and income that is not distributed to us generally is not subject to the REIT income distribution requirement. However,
there may be limitations on our ability to accumulate earnings in our TRSs and the accumulation or reinvestment of
significant earnings in our TRSs could result in adverse tax treatment. In particular, if the accumulation of cash in our
TRSs causes (1) the fair market value of our securities in our TRSs to exceed 20% of the fair market value of our
assets or (2) the fair market value of our securities in our TRSs and other nonqualifying assets to exceed 25% of the
fair market value of our assets, then we will fail to remain qualified for taxation as a REIT. Further, a substantial portion
of our TRSs are overseas, and a material change in foreign currency rates could also negatively impact our ability to
remain qualified for taxation as a REIT.
The Code imposes limitations on the ability of our TRSs to utilize specified income tax deductions, including limits
on the use of net operating losses and limits on the deductibility of interest expense.
Our cash distributions are not guaranteed and may fluctuate.
A REIT generally is required to distribute at least 90% of its REIT taxable income to its stockholders.
Our Board of Directors, in its sole discretion, will determine on a quarterly basis the amount of cash to be distributed
to our stockholders based on a number of factors including, but not limited to, our results of operations, cash flow and
capital requirements, economic conditions, tax considerations, borrowing capacity and other factors, including debt
covenant restrictions that may impose limitations on cash payments, future acquisitions and divestitures and any stock
repurchase program. Consequently, our distribution levels may fluctuate.
Even if we remain qualified for taxation as a REIT, some of our business activities are subject to corporate
level income tax and foreign taxes, which will continue to reduce our cash flows, and we will have potential
deferred and contingent tax liabilities.
Even if we remain qualified for taxation as a REIT, we may be subject to some federal, state, local and foreign
taxes, including taxes on any undistributed income, and state, local or foreign income, franchise, property and transfer
taxes. In addition, we could in certain circumstances be required to pay an excise or penalty tax, which could be
significant in amount, in order to utilize one or more relief provisions under the Code to maintain our qualification for
taxation as a REIT.
A portion of our business is conducted through wholly-owned TRSs because certain of our business activities
could generate nonqualifying REIT income as currently structured and operated. The income of our U.S. TRSs will
continue to be subject to federal and state corporate income taxes. In addition, our international assets and operations
will continue to be subject to taxation in the foreign jurisdictions where those assets are held or those operations are
conducted. Any of these taxes would decrease our earnings and our available cash.
We will also be subject to a federal corporate level income tax at the highest regular corporate income tax rate
(currently 21%) on gain recognized from a sale of a REIT asset where our basis in the asset is determined by reference
to the basis of the asset in the hands of a C corporation (such as an asset that we or our qualified REIT subsidiaries
("QRSs") hold following the liquidation or other conversion of a former TRS). This 21% tax is generally applicable to
any disposition of such an asset during the five-year period after the date we first owned the asset as a REIT asset,
to the extent of the built-in-gain based on the fair market value of such asset on the date we first held the asset as a
REIT asset.
Complying with REIT requirements may limit our ability to hedge effectively and increase the cost of our
hedging and may cause us to incur tax liabilities.
The REIT provisions of the Code limit our ability to hedge assets, liabilities, revenues and expenses. Generally,
income from hedging transactions that we enter into to manage risk of interest rate changes or fluctuations with respect
to borrowings made or to be made by us to acquire or carry real estate assets and income from certain currency
hedging transactions related to our non-U.S. operations, as well as income from qualifying counteracting hedges, do
not constitute "gross income" for purposes of the REIT gross income tests. To the extent that we enter into other types
29
of hedging transactions, the income from those transactions is likely to be treated as nonqualifying income for purposes
of the REIT gross income tests. As a result of these rules, we may need to limit our use of advantageous hedging
techniques or implement those hedges through our TRSs, which we presently do. This increases the cost of our hedging
activities because our TRSs are subject to tax on income or gains resulting from hedges entered into by them and
may expose us to greater risks associated with changes in interest rates or exchange rates than we would otherwise
want to bear. In addition, hedging losses in any of our TRSs may not provide any tax benefit, except for being carried
forward for possible use against future income or gain in the TRSs. As a result, our financial performance, including
our AFFO, may also fluctuate.
Distributions payable by REITs generally do not qualify for preferential tax rates.
Dividends payable by U.S. corporations to noncorporate stockholders, such as individuals, trusts and estates, are
generally eligible for reduced U.S. federal income tax rates applicable to "qualified dividends." Distributions paid by
REITs generally are not treated as "qualified dividends" under the Code, and the reduced rates applicable to such
dividends do not generally apply. However, for tax years beginning before 2026, REIT dividends paid to noncorporate
stockholders are generally taxed at an effective tax rate lower than applicable ordinary income tax rates due to the
availability of a deduction under the Code for specified forms of income from passthrough entities. More favorable
rates will nevertheless continue to apply to regular corporate "qualified" dividends, which may cause some investors
to perceive that an investment in a REIT is less attractive than an investment in a non-REIT entity that pays dividends,
thereby reducing the demand and market price of our common stock.
Our certificate of incorporation contains restrictions on the ownership and transfer of our stock, though
they may not be successful in preserving our qualification for taxation as a REIT.
In order for us to remain qualified for taxation as a REIT, no more than 50% of the value of outstanding shares of
our stock may be owned, beneficially or constructively, by five or fewer individuals at any time during the last half of
each taxable year. In addition, rents from "affiliated tenants" will not qualify as qualifying REIT income if we own 10%
or more by vote or value of the customer, whether directly or after application of attribution rules under the Code.
Subject to certain exceptions, our certificate of incorporation prohibits any stockholder from owning, beneficially or
constructively, more than (i) 9.8% in value of the outstanding shares of all classes or series of our capital stock or
(ii) 9.8% in value or number, whichever is more restrictive, of the outstanding shares of any class or series of our capital
stock. We refer to these restrictions collectively as the "ownership limits" and we included them in our certificate of
incorporation to facilitate our compliance with REIT tax rules. The constructive ownership rules under the Code are
complex and may cause the outstanding stock owned by a group of related individuals or entities to be deemed to be
constructively owned by one individual or entity. As a result, the acquisition of less than 9.8% of our outstanding common
stock (or the outstanding shares of any class or series of our stock) by an individual or entity could cause that individual
or entity or another individual or entity to own constructively in excess of the relevant ownership limits. Any attempt to
own or transfer shares of our common stock or of any of our other capital stock in violation of these restrictions may
result in the shares being automatically transferred to a charitable trust or may be void. Even though our certificate of
incorporation contains the ownership limits, there can be no assurance that these provisions will be effective to prevent
our qualification for taxation as a REIT from being jeopardized, including under the affiliated tenant rule. Furthermore,
there can be no assurance that we will be able to monitor and enforce the ownership limits. If the restrictions in our
certificate of incorporation are not effective and, as a result, we fail to satisfy the REIT tax rules described above, then
absent an applicable relief provision, we will fail to remain qualified for taxation as a REIT.
In addition, the ownership and transfer restrictions could delay, defer or prevent a transaction or a change in
control that might involve a premium price for our stock or otherwise be in the best interest of our stockholders. As a
result, the overall effect of the ownership and transfer restrictions may be to render more difficult or discourage any
attempt to acquire us, even if such acquisition may be favorable to the interests of our stockholders.
Legislative or other actions affecting REITs could have a negative effect on us or our stockholders.
At any time, the federal or state income tax laws governing REITs, or the administrative interpretations of those
laws, may be amended. Federal and state tax laws are constantly under review by persons involved in the legislative
process, the Internal Revenue Service, the U.S. Department of the Treasury and state taxing authorities. Changes to
the tax laws, regulations and administrative interpretations, which may have retroactive application, could adversely
affect us. In addition, some of these changes could have a more significant impact on us as compared to other REITs
due to the nature of our business and our substantial use of TRSs, particularly non-U.S. TRSs.
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We could incur adverse tax consequences if we fail to integrate an acquisition target in compliance with the
requirements to qualify for taxation as a REIT.
We periodically explore and occasionally consummate merger and acquisition transactions. When we consummate
these transactions, we structure the acquisition to successfully manage the REIT income, asset, and distribution tests
that we must satisfy. We believe that we have and will in the future successfully integrate our acquisition targets in a
manner that has and will allow us to timely satisfy the REIT tests applicable to us, but if we failed or in the future fail
to do so, then we could jeopardize or lose our qualification for taxation as a REIT, particularly if we were not eligible
to utilize relief provisions set forth in the Code.
ITEM 1B.
Unresolved Staff Comments
There is no disclosure to report pursuant to Item 1B.
ITEM 2.
Properties
Our executive offices are located in Redwood City, California, and we also have sales offices in several cities
throughout the U.S. Our Asia-Pacific headquarters office is located in Hong Kong and we also have sales offices in
several cities throughout Asia-Pacific. Our EMEA headquarters office is located in Amsterdam, the Netherlands and
our regional sales offices in EMEA are based in our IBX data centers in EMEA.
The following tables present the locations of our leased and owned IBX data centers and xScale data centers
investments as of December 31, 2019, plus three IBX data centers in Mexico acquired from Axtel S.A.B. de C.V. on
January 8, 2020.
AMERICAS
Leased (1) Owned (1) (2)
Metro
Atlanta
Bogota
Boston
Chicago
Culpeper
Dallas
Washington DC/Ashburn
Denver
Houston
Los Angeles
Mexico City
Miami
Monterrey
New York
Philadelphia
Rio de Janeiro
Sao Paulo
Seattle
Silicon Valley
Toronto
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EMEA
Leased (1)
Owned (1) (2)
Metro
Abu Dhabi
Amsterdam
Barcelona
Dubai
Dublin
Dusseldorf
East Netherlands
Frankfurt
Geneva
Helsinki
Istanbul
Lisbon
London
Madrid
Manchester
Milan
Munich
Paris
Seville
Sofia
Stockholm
Warsaw
Zurich
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Asia-Pacific
Leased (1)
Owned (1) (2)
Metro
Adelaide
Brisbane
Canberra
Hong Kong
Melbourne
Osaka
Perth
Seoul
Singapore
Shanghai
Sydney
Tokyo
Jakarta (unconsolidated)
(1)
(2)
" " denotes locations with one or more data centers.
Owned sites include IBX data centers subject to long-term ground leases.
The following table presents an overview of our portfolio of IBX data centers as of December 31, 2019:
Americas
EMEA
Asia-Pacific
Total
# of IBXs (1)
Total Cabinet
Capacity (2)
86
73
45
204
110,900
120,300
65,800
297,000
Cabinets Billed
85,000
101,200
49,600
235,800
Cabinet
Utilization % (3)
MRR per
Cabinet (4)
77% $
84%
75%
2,384
1,456
1,824
(1)
(2)
(3)
(4)
Excludes three data centers held by unconsolidated entities (i.e. two xScale data centers and the JK1 IBX data center) and
three Mexico data centers acquired in January 2020.
Cabinets represent a specific amount of space within an IBX data center. Customers can combine and use multiple adjacent
cabinets within an IBX data center, depending on their space requirements.
The cabinet utilization rate represents the percentage of cabinet space billed versus total cabinet capacity, taking into
consideration power limitations.
MRR per cabinet represents average monthly recurring revenue recognized divided by the average number of cabinets billing
during the fourth quarter of the year. Americas MRR per cabinet excludes Brazil, Colombia and Infomart non-IBX tenant
income and Asia-Pacific MRR per Cabinet excludes Bit-isle MIS.
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The following table presents a summary of our significant IBX data center expansion projects under construction
as of December 31, 2019:
Property
Property Location
Target Open
Date
Sellable
Cabinets
Total Capex
(in Millions) (1)
Americas:
BO2 phase II
CH3 phase VI
DA11 phase I
DC15 phase I
SP4 phase III
TR2 phase III
DC21 phase I
SP3 phase III
LA7 phase II
SV11 phase I
SP5x phase I
EMEA:
AM4 phase III
HH1 phase I
WA3 phase I
ZH5 phase III
AM7 phase II-B
MC1 phase I
FR5 phase IV
PA2 phase IV
HE7 phase II
ML5 phase I
PA9x phase I
AM7 phase III
LD7 phase II
LD11x phase I
FR9x phase I
MU4 phase I
Asia-Pacific:
HK4 phase III
SG5 phase I
TY12x phase I
TY11 phase II
OS2x phase I
Boston
Chicago
Dallas
Washington D.C.
São Paulo
Toronto
Washington D.C.
São Paulo
Los Angeles
Silicon Valley
São Paulo
Amsterdam
Hamburg
Warsaw
Zurich
Amsterdam
Muscat
Frankfurt
Paris
Helsinki
Milan
Paris
Amsterdam
London
London
Frankfurt
Munich
Hong Kong
Singapore
Tokyo
Tokyo
Osaka
Q2 2020
Q2 2020
Q2 2020
Q2 2020
Q2 2020
Q2 2020
Q4 2020
Q4 2020
Q2 2021
Q2 2021
Q1 2022
Q1 2020
Q1 2020
Q1 2020
Q1 2020
Q2 2020
Q2 2020
Q2 2020
Q3 2020
Q4 2020
Q4 2020
Q4 2020
Q1 2021
Q1 2021
Q1 2021
Q1 2021
Q3 2021
Q2 2020
Q3 2020
Q4 2020
Q1 2021
Q4 2021
Total
(1)
Capital expenditures are approximate and may change based on final construction details.
550
1,225
1,975
1,600
1,025
725
925
1,050
750
1,450
500
11,775
975
375
550
475
475
250
350
250
600
500
1,200
1,425
875
1,450
1,325
825
11,900
1,000
1,300
950
1,225
1,350
5,825
29,500
$
$
32
31
138
111
59
21
95
25
54
142
52
760
26
27
34
91
6
28
25
8
28
48
112
63
30
135
121
69
851
47
144
147
58
156
552
2,163
ITEM 3.
Legal Proceedings
The following is a description of reportable legal proceedings, including those involving governmental authorities
under federal, state and local laws regulating the discharge of materials into the environment.
In March 2019, charges were brought by the Public Prosecutor in Milan, Italy against Equinix (Italia) S.r.l. and Eric
Schwartz, at that time one of the directors of Equinix (Italia) S.r.l., following the discovery of levels of copper in ground
water in excess of those permitted by law and alleged to have been released by Equinix into the water supply. We
34
determined that the copper levels detected had been misinterpreted by the Public Prosecutor's office, which had
multiplied the findings tenfold. On March 13, 2019, we asked for an initial extension to file our defense and requested
that the charges against both Equinix and Mr. Schwartz be dropped on the grounds that the levels of copper found
were in fact less than double the permitted amounts. The Public Prosecutor accepted that the number it originally used
was incorrect, but did not agree to drop the charges and has requested a trial date. Our defense was filed April 15,
2019. A trial date has been set for March 6, 2020. The maximum fine for Equinix relating to this matter is €350,000
and the maximum personal fine for Mr. Schwartz is €30,000, which together give the maximum exposure of €380,000.
We have recently adopted a formal compliance program pursuant to Italian Legislative Decree No. 231/2001
("Decree 231"), which we expect will reduce our exposure to fines and penalties in a Court verdict by 50%. After
adoption of Decree 231, the exposure for Equinix would be effectively reduced to €175,000, giving a new maximum
exposure of €205,000.
While it is not possible to accurately predict the final outcome of this pending Court proceeding, if it is decided
adversely to Equinix, we expect there would be no material effect on our consolidated financial position. Nevertheless,
this proceeding is reported pursuant to Securities and Exchange Commission regulations.
ITEM 4.
Mine Safety Disclosure
Not applicable.
35
PART II
ITEM 5.
Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Our common stock is quoted on the NASDAQ Global Select Market under the symbol of "EQIX." Our common
stock began trading in August 2000. As of January 31, 2020, we had 85,353,616 shares of our common stock outstanding
held by approximately 303 registered holders. During the years ended December 31, 2019 and 2018, we did not issue
or sell any securities on an unregistered basis.
Stock Performance Graph
The graph set forth below compares the cumulative total stockholder return on Equinix's common stock between
December 31, 2014 and December 31, 2019 with the cumulative total return of:
•
•
•
the S&P 500 Index;
the NASDAQ Composite Index; and
the FTSE NAREIT All REITs Index.
The graph assumes the investment of $100.00 on December 31, 2014 in Equinix's common stock and in each
index, and assumes the reinvestment of dividends, if any.
Equinix cautions that the stock price performance shown in the graph below is not indicative of, nor intended to
forecast, the potential future performance of Equinix's common stock.
Notwithstanding anything to the contrary set forth in any of Equinix's previous or future filings under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate this Annual
Report on Form 10-K or future filings made by Equinix under those statutes, the stock performance graph shall not be
deemed filed with the Securities and Exchange Commission and shall not be deemed incorporated by reference into
any of those prior filings or into any future filings made by Equinix under those statutes.
36
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Equinix, Inc., the NASDAQ Composite Index, the S&P 500 Index and the FTSE NAREIT All REITs Index
$350
$300
$250
$200
$150
$100
$50
$0
12/14 3/15 6/15 9/15 12/15 3/16 6/16 9/16 12/16 3/17 6/17 9/17 12/17 3/18 6/18 9/18 12/18 3/19 6/19 9/19 12/19
Equinix, Inc.
NASDAQ Composite
S&P 500
FTSE Nareit All REITs
*$100 invested on 12/31/14 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
37
ITEM 6.
Selected Financial Data
The following consolidated statement of operations data for the five years ended December 31, 2019 and the
consolidated balance sheet data as of December 31, 2019, 2018, 2017, 2016, and 2015 have been derived from our
audited consolidated financial statements and the related notes. Our historical results are not necessarily indicative of
the results to be expected for future periods. The following selected consolidated financial data for the five years ended
December 31, 2019 and as of December 31, 2019, 2018, 2017, 2016, and 2015, should be read in conjunction with
our audited consolidated financial statements and the related notes in Item 8 of this Annual Report on Form 10-K and
"Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Annual
Report on Form 10-K. We completed acquisitions of Switch Datacenters' AMS1 data center business in Amsterdam,
Netherlands in April 2019, Metronode and Infomart Dallas in April, 2018, the Zenium data center business in Istanbul
and Itconic in October 2017, certain colocation business from Verizon in May 2017, IO UK's data center operating
business in Slough, United Kingdom in February 2017 (the "IO Acquisition), certain Paris IBX data centers in August
2016 (the "Paris IBX Data Center Acquisition"), Telecity Group plc in January 2016, Bit-isle in November 2015 and
Nimbo Technologies Inc. ("Nimbo") in January 2015. In October 2019, we sold our London 10 and Paris 8 data centers,
as well as certain data center facilities in Europe to the Joint Venture. In addition, we sold our New York 12 data center
in October 2019, solar power assets of Bit-isle in November 2016 and eight of our IBX data centers located in the U.K.,
the Netherlands and Germany in July 2016. For further information on our acquisitions and divestitures during the
three years ended December 31, 2019, see Note 3 and Note 5 within the Consolidated Financial Statements.
On January 1, 2019 and 2018, we adopted Topic 842, Leases, and Topic 606, Revenue from Contracts with
Customers, respectively. The consolidated statement of operations is presented under the new accounting standards
from the periods when accounting standards were adopted, while the prior period financial statements have not been
restated and continue to be reported under accounting standards in effect for those periods. See Note 1 within the
Consolidated Financial Statements for further discussion.
38
Years Ended December 31,
2019
2018
2017
(dollars in thousands, except per share data)
2016
2015
Revenues
$ 5,562,140 $ 5,071,654 $ 4,368,428 $ 3,611,989 $ 2,725,867
Costs and operating expenses:
Cost of revenues
Sales and marketing
General and administrative
Transaction costs
Impairment charges
Gain on asset sales
2,810,184
2,605,475
2,193,149
1,820,870
1,291,506
651,046
935,018
24,781
15,790
633,702
826,694
34,413
—
(44,310)
(6,013)
581,724
745,906
38,635
—
—
438,742
694,561
64,195
7,698
(32,816)
332,012
493,284
41,723
—
—
Total costs and operating expenses
4,392,509
4,094,271
3,559,414
2,993,250
2,158,525
Income from operations
Interest income
Interest expense
Other income (expense)
Loss on debt extinguishment
1,169,631
27,697
(479,684)
27,778
977,383
14,482
809,014
13,075
618,739
567,342
3,476
3,581
(521,494)
(478,698)
(392,156)
(299,055)
14,044
9,213
(52,825)
(51,377)
(65,772)
(57,924)
(12,276)
(60,581)
(289)
Income from continuing operations before
income taxes
Income tax expense
692,597
433,038
286,832
159,859
210,998
(185,352)
(67,679)
(53,850)
(45,451)
(23,224)
Net income from continuing operations
507,245
365,359
232,982
114,408
187,774
Net income from discontinued operations,
net of tax
Net income
Net loss attributable to non-controlling
interest
—
—
—
507,245
365,359
232,982
12,392
126,800
—
187,774
205
—
—
—
—
Net income attributable to Equinix
$ 507,450 $ 365,359 $ 232,982 $ 126,800 $ 187,774
Earnings per share ("EPS") attributable to
Equinix:
Basic EPS from continuing operations
Basic EPS from discontinued operations
Basic EPS
Weighted-average shares for basic EPS
Diluted EPS from continuing operations
Diluted EPS from discontinued
operations
Diluted EPS
Weighted-average shares for diluted EPS
Dividends per share (1)
$
$
$
$
$
6.03 $
4.58 $
3.03 $
1.63 $
—
—
—
0.18
6.03 $
4.58 $
3.03 $
1.81 $
84,140
79,779
76,854
70,117
5.99 $
4.56 $
3.00 $
1.62 $
—
—
—
0.17
5.99 $
4.56 $
3.00 $
1.79 $
84,679
80,197
77,535
70,816
9.84 $
9.12 $
8.00 $
7.00 $
3.25
—
3.25
57,790
3.21
—
3.21
58,483
17.71
(1) During the year ended December 31, 2015, we paid $10.95 per share of special distribution and $6.76 per share of quarterly
cash dividend.
39
2019
2018
As of December 31,
2017
(in thousands)
2016
2015
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term
and long-term investments
Accounts receivable, net
$ 1,879,939 $
689,134
Property, plant and equipment, net
12,152,597
610,706 $ 1,450,031 $
761,927 $ 2,246,297
630,119
11,026,020
576,313
396,245
291,964
9,394,602
7,199,210
5,606,436
Total assets
Finance lease liabilities, less current
portion
Mortgage and loans payable, less
current portion
Senior notes, less current portion
Total stockholders' equity
23,965,615
20,244,638
18,691,457
12,608,371
10,356,695
1,430,882
1,441,077
1,620,256
1,410,742
1,287,139
1,289,434
8,309,673
8,840,382
1,310,663
8,128,785
7,219,279
1,393,118
6,923,849
6,849,790
1,369,087
3,810,770
4,365,829
472,769
3,804,634
2,745,386
40
ITEM 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following commentary should be read in conjunction with the financial statements and related notes contained
elsewhere in this Annual Report on Form 10-K. The information in this discussion contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and
uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-
looking statements. For example, the words "believes," "anticipates," "plans," "expects," "intends" and similar
expressions are intended to identify forward-looking statements. Our actual results and the timing of certain events
may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a
discrepancy include, but are not limited to, those discussed in "Liquidity and Capital Resources" and "Risk Factors"
elsewhere in this Annual Report on Form 10-K. All forward-looking statements in this document are based on information
available to us as of the date hereof and we assume no obligation to update any such forward-looking statements.
Item 7 of this Form 10-K focuses on discussion of 2019 and 2018 items as well as 2019 results as compared
to 2018 results. For the discussion of 2017 items and 2018 results as compared to 2017 results, please refer to Item
7 of our 2018 Form 10-K as filed with the SEC on February 22, 2019.
Our management's discussion and analysis of financial condition and results of operations is intended to assist
readers in understanding our financial information from our management's perspective and is presented as follows:
• Overview
• Results of Operations
• Non-GAAP Financial Measures
•
Liquidity and Capital Resources
• Contractual Obligations and Off-Balance-Sheet Arrangements
• Critical Accounting Policies and Estimates
• Recent Accounting Pronouncements
Overview
Reach everywhere, interconnect everyone and integrate everything
● TOTAL GLOBAL FOOTPRINT
210 data centers
● OUR CUSTOMERS
● telecommunications carriers
55 global markets
26 countries
● mobile and other
network services
providers
● cloud and IT
services providers
● global enterprise
ecosystems in
various industries
● digital media and content
providers
● financial services
companies
*Metrics as of 12/31/2019, including 3 Mexico data centers acquired on 1/8/2020 and 2 xScaleTM data centers held in unconsolidated
entities.
Equinix provides a global, vendor-neutral data center, interconnection and edge services platform with offerings
that aim to enable our customers to reach everywhere, interconnect everyone and integrate everything. Global
enterprises, service providers and business ecosystems of industry partners rely on Equinix IBX data centers and
expertise around the world for the safe housing of their critical IT equipment and to protect and connect the world's
most valued information assets. They also look to Platform Equinix® for the ability to directly and securely interconnect
41
to the networks, clouds and content that enable today's information-driven global digital economy. Recent Equinix IBX
data center openings and acquisitions, as well as xScale data center investments, have expanded our total global
footprint to 210 IBX and xScale data centers across 55 markets around the world. Equinix offers the following solutions:
•
•
•
•
premium data center colocation;
interconnection and data exchange solutions;
edge services for deploying networking, security and hardware; and
remote expert support and professional services.
Our interconnected data centers around the world allow our customers to increase information and application
delivery performance to users, and quickly access distributed IT infrastructures and business and digital ecosystems,
while significantly reducing costs. The Equinix global platform and the quality of our IBX data centers, interconnection
offerings and edge services have enabled us to establish a critical mass of customers. As more customers choose
Platform Equinix, for bandwidth cost and performance reasons it benefits their suppliers and business partners to
colocate in the same data centers. This adjacency creates a “network effect” that enables our customers to capture
the full economic and performance benefits of our offerings. These partners, in turn, pull in their business partners,
creating a "marketplace" for their services. Our global platform enables scalable, reliable and cost-effective
interconnection that increases data traffic exchange while lowering overall cost and increasing flexibility. Our focused
business model is built on our critical mass of enterprise and service provider customers and the resulting "marketplace"
effect. This global platform, combined with our strong financial position, continues to drive new customer growth and
bookings.
Historically, our market was served by large telecommunications carriers who have bundled their products and
services with their colocation offerings. The data center market landscape has evolved to include private and vendor-
neutral multitenant data center providers, hyperscale cloud providers, managed infrastructure and application hosting
providers, and systems integrators. It is estimated that Equinix is one of more than 1,200 companies that provide
MTDC offerings around the world. Each of these data center solutions providers can bundle various colocation,
interconnection and network offerings and outsourced IT infrastructure solutions. We are able to offer our customers
a global platform that reaches 26 countries with the industry’s largest and most active ecosystem of partners in our
sites, proven operational reliability, improved application performance and a highly scalable set of offerings.
The cabinet utilization rate represents the percentage of cabinet space billed versus total cabinet capacity, which
is used to measure how efficiently we are managing our cabinet capacity. Our cabinet utilization rate varies from market
to market among our IBX data centers across the Americas, EMEA and Asia-Pacific regions. Our cabinet utilization
rates were approximately 79% and 81%, respectively, as of December 31, 2019 and 2018. Excluding the impact of
our IBX data center expansion projects that have opened during the last 12 months, our cabinet utilization rate would
have increased to approximately 82% as of December 31, 2019. We continue to monitor the available capacity in each
of our selected markets. To the extent we have limited capacity available in a given market, it may limit our ability for
growth in that market. We perform demand studies on an ongoing basis to determine if future expansion is warranted
in a market. In addition, power and cooling requirements for most customers are growing on a per unit basis. As a
result, customers are consuming an increasing amount of power per cabinet. Although we generally do not control the
amount of power our customers draw from installed circuits, we have negotiated power consumption limitations with
certain high power-demand customers. This increased power consumption has driven us to build out our new IBX data
centers to support power and cooling needs twice that of previous IBX data centers. We could face power limitations
in our IBX data centers, even though we may have additional physical cabinet capacity available within a specific IBX
data center. This could have a negative impact on the available utilization capacity of a given IBX data center, which
could have a negative impact on our ability to grow revenues, affecting our financial performance, operating results
and cash flows.
In 2019, we closed our Joint Venture with GIC to develop and operate xScale data centers to serve the needs of
the growing hyperscale data center market, including the world's largest cloud service providers. Upon closing, the
Joint Venture acquired certain data center facilities in Europe, with the opportunity to add additional facilities to the
Joint Venture in the future.
Strategically, we will continue to look at attractive opportunities to grow our market share and selectively improve
our footprint and offerings. As was the case with our recent expansions and acquisitions, our expansion criteria will be
dependent on a number of factors, including but not limited to demand from new and existing customers, quality of
the design, power capacity, access to networks, clouds and software partners, capacity availability in the current market
location, amount of incremental investment required by us in the targeted property, automation capabilities, developer
42
talent pool, lead-time to break even on a free cash flow basis and in-place customers. Like our recent expansions and
acquisitions, the right combination of these factors may be attractive to us. Depending on the circumstances, these
transactions may require additional capital expenditures funded by upfront cash payments or through long-term
financing arrangements in order to bring these properties up to Equinix standards. Property expansion may be in the
form of purchases of real property, long-term leasing arrangements or acquisitions. Future purchases, construction or
acquisitions may be completed by us or with partners or potential customers to minimize the outlay of cash, which can
be significant.
Revenue:
Our business is based on a recurring revenue model comprised of colocation and related interconnection and
managed infrastructure offerings. We consider these offerings recurring because our customers are generally billed
on a fixed and recurring basis each month for the duration of their contract, which is generally one to three years in
length. Our recurring revenues have comprised more than 90% of our total revenues during the past three years. In
addition, during the past three years, more than 80% of our monthly recurring revenue bookings came from existing
customers, contributing to our revenue growth. Our largest customer accounted for approximately 3% of our recurring
revenues for the years ended December 31, 2019, 2018 and 2017. Our 50 largest customers accounted for
approximately 39%, 38% and 37%, respectively, of our recurring revenues for the years ended December 31, 2019,
2018 and 2017.
Our non-recurring revenues are primarily comprised of installation services related to a customer's initial deployment
and professional services we perform. These services are considered to be non-recurring because they are billed
typically once, upon completion of the installation or the professional services work performed. The majority of these
non-recurring revenues are typically billed on the first invoice distributed to the customer in connection with their initial
installation. However, revenues from installation services are deferred and recognized ratably over the period of the
contract term. Additionally, revenue from contract settlements, when a customer wishes to terminate their contract
early, is generally treated as a contract modification and recognized ratably over the remaining term of the contract, if
any. As a percentage of total revenues, we expect non-recurring revenues to represent less than 10% of total revenues
for the foreseeable future.
Operating Expenses:
Cost of Revenues. The largest components of our cost of revenues are depreciation, rental payments related to
our leased IBX data centers, utility costs, including electricity, bandwidth access, IBX data center employees' salaries
and benefits, including stock-based compensation, repairs and maintenance, supplies and equipment and security. A
majority of our cost of revenues is fixed in nature and should not vary significantly from period to period, unless we
expand our existing IBX data centers or open or acquire new IBX data centers. However, there are certain costs that
are considered more variable in nature, including utilities and supplies that are directly related to growth in our existing
and new customer base. We expect the cost of our utilities, specifically electricity, will generally increase in the future
on a per-unit or fixed basis, in addition to the variable increase related to the growth in consumption by our customers.
In addition, the cost of electricity is generally higher in the summer months, as compared to other times of the year.
To the extent we incur increased utility costs, such increased costs could materially impact our financial condition,
results of operations and cash flows. Furthermore, to the extent we incur increased electricity or other costs as a result
of either climate change policies or the physical effects of climate change, such increased costs could materially impact
our financial condition, results of operations and cash flows.
43
Sales and Marketing. Our sales and marketing expenses consist primarily of compensation and related costs for
sales and marketing personnel, including stock-based compensation, amortization of contract costs, marketing
programs, public relations, promotional materials and travel, as well as bad debt expense and amortization of customer
relationship intangible assets.
General and Administrative. Our general and administrative expenses consist primarily of salaries and related
expenses, including stock-based compensation, accounting, legal and other professional service fees, and other
general corporate expenses, such as our corporate regional headquarters office leases and some depreciation expense
on back office systems.
Taxation as a REIT
We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our 2015 taxable year. As
of December 31, 2019, our REIT structure included all of our data center operations in the U.S., Canada, Japan,
Singapore and the data center operations in EMEA with the exception of Bulgaria, the United Arab Emirates, and the
data center operations outside Amsterdam in the Netherlands. Our data center operations in other jurisdictions are
operated as TRSs. We included our interest in the Joint Venture in our REIT structure.
As a REIT, we generally are permitted to deduct from our U.S. taxable income the dividends we pay to our
stockholders. The income represented by such dividends is not subject to U.S. federal income taxes at the entity level
but is taxed, if at all, at the stockholder level. Nevertheless, the income of our TRSs which hold our U.S. operations
that may not be REIT compliant is subject to U.S. corporate federal and state income taxes, as applicable. Likewise,
our foreign subsidiaries continue to be subject to foreign income taxes in jurisdictions in which they hold assets or
conduct operations, regardless of whether held or conducted through TRSs or through QRSs. We are also subject to
a separate U.S. federal corporate income tax on any gain recognized from a sale of a REIT asset where our basis in
the asset is determined by reference to the basis of the asset in the hands of a C corporation (such as an asset held
by us or a QRS following the liquidation or other conversion of a former TRS). This built-in-gains tax is generally
applicable to any disposition of such an asset during the five-year period after the date we first owned the asset as a
REIT asset to the extent of the built-in-gain based on the fair market value of such asset on the date we first held the
asset as a REIT asset. If we fail to remain qualified for U.S. federal income taxation as a REIT, we will be subject to
U.S. federal income taxes at regular corporate income tax rates. Even if we remain qualified for U.S. federal income
taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property in
addition to taxes owed with respect to our TRSs' operations. In particular, while state income tax regimes often parallel
the U.S. federal income tax regime for REITs, many states do not completely follow federal rules, and some may not
follow them at all.
We continue to monitor our REIT compliance in order to maintain our qualification for U.S. federal income taxation
as a REIT. For this and other reasons, as necessary, we may convert some of our data center operations in other
countries into the REIT structure in future periods. We converted our data center operations in Singapore into the REIT
structure effective September 30, 2019.
On each of March 20, June 19, September 18, and December 11, 2019, we paid quarterly cash dividends of $2.46
per share. We expect these quarterly and other applicable distributions to equal or exceed the REIT taxable income
that we recognized in 2019.
2019 Highlights:
•
•
•
•
In March, we issued and sold 2,985,575 shares of common stock for net proceeds of approximately $1,213.4
million, after underwriting discounts, commissions and offering expenses. See Note 12 within the Consolidated
Financial Statements.
In April, we completed the acquisition of Switch Datacenters' AMS1 data center business in Amsterdam,
Netherlands (the "AM11 data center"), for a cash purchase price of approximately €30.6 million, or
approximately $34.3 million. See Note 3 within the Consolidated Financial Statements.
In October, we closed our Joint Venture with GIC to develop and operate xScale data centers in Europe. Upon
closing, we sold certain data center facilities in Europe to the Joint Venture. See Note 5 and Note 6 within the
Consolidated Financial Statements.
In November, we issued $2.8 billion in Senior Notes due 2024, 2026 and 2029 with a weighted average interest
rate of 2.93% and redeemed $1.9 billion in Senior Notes due 2022, 2023 and 2025 with a weighted average
interest rate of 5.47% in November and December 2019. See Note 11 within the Consolidated Financial
Statements.
44
• By the end of December, we had sold 903,555 shares of our common stock for approximately $447.7 million
in proceeds, net of payment of commissions and other offering expenses, under our current ATM program.
See Note 12 within the Consolidated Financial Statements.
Results of Operations
Our results of operations for the year ended December 31, 2019 include the results of operations from the
acquisition of the AM11 data center from April 18, 2019 within the EMEA region. Our results of operations for the year
ended December 31, 2018 include the results of operations from the acquisition of Metronode from April 18, 2018
within the Asia-Pacific region and the acquisition of Infomart Dallas from April 2, 2018 within the Americas region.
Our results of operations for the year ended December 31, 2019 reflect the adoption of Topic 842, Leases, while
the comparative information has not been restated and continues to be reported under the lease accounting standard
in effect for those periods. See Note 1 within the Consolidated Financial Statements for further discussion.
In order to provide a framework for assessing our performance excluding the impact of foreign currency fluctuations,
we supplement the year-over-year actual change in operating results with comparative changes on a constant currency
basis. Presenting constant currency results of operations is a non-GAAP financial measure. See “Non-GAAP Financial
Measures” below for further discussion.
Years ended December 31, 2019 and 2018
Revenues. Our revenues for the years ended December 31, 2019 and 2018 were generated from the following
revenue classifications and geographic regions (dollars in thousands):
Americas:
Recurring revenues
Non-recurring revenues
EMEA:
Recurring revenues
Non-recurring revenues
Asia-Pacific:
Recurring revenues
Non-recurring revenues
Total:
Recurring revenues
Non-recurring revenues
Years Ended December 31,
% Change
2019
%
2018
%
Actual
Constant
Currency
$ 2,456,368
131,359
2,587,727
1,680,746
125,698
1,806,444
1,101,072
66,897
1,167,969
5,238,186
323,954
$ 5,562,140
44%
3%
47%
30%
2%
32%
20%
1%
21%
94%
6%
$ 2,357,326
127,408
2,484,734
1,467,492
95,145
1,562,637
951,684
72,599
1,024,283
4,776,502
295,152
46%
3%
49%
29%
2%
31%
19%
1%
20%
94%
6%
100% $ 5,071,654
100%
4%
3%
4%
15%
32%
16%
16%
(8)%
14%
10%
10%
10%
5%
4%
5%
12%
39%
14%
17%
(6)%
16%
10%
13%
10%
45
Americas Revenues. During the year ended December 31, 2019, Americas revenue increased by 4% (5% on a
constant currency basis). Growth in Americas revenues was primarily due to:
•
•
•
approximately $10.6 million of incremental revenues from the Infomart Dallas acquisition;
$52.6 million of incremental revenues generated from our recently-opened IBX data centers or IBX data center
expansions; and
an increase in orders from both our existing customers and new customers during the period.
EMEA Revenues. During the year ended December 31, 2019, EMEA revenue increased by 16% (14% on a
constant currency basis). Growth in EMEA revenues was primarily due to:
•
•
•
approximately $76.0 million of incremental revenues generated from our recently-opened IBX data centers or
IBX data center expansions;
an increase in orders from both our existing customers and new customers during the period; and
a net increase of $110.6 million of realized cash flow hedge gains from foreign currency forward contracts.
Asia-Pacific Revenues. During the year ended December 31, 2019, Asia-Pacific revenue increased by 14% (16%
on a constant currency basis). Growth in Asia-Pacific revenue was primarily due to:
•
•
•
approximately $16.6 million of incremental revenues from the Metronode acquisition;
approximately $35.4 million of incremental revenues generated from our recently-opened IBX data centers or
IBX data center expansions; and
an increase in orders from both our existing customers and new customers during the period.
46
Cost of Revenues. Our cost of revenues for the years ended December 31, 2019 and 2018 were split among
the following geographic regions (dollars in thousands):
Americas
EMEA
Asia-Pacific
Total
Years Ended December 31,
% Change
2019
$ 1,146,639
1,017,580
645,965
$ 2,810,184
%
41%
36%
23%
2018
$ 1,113,854
916,751
574,870
%
43%
35%
22%
100% $ 2,605,475
100%
Actual
3%
11%
12%
8%
Constant
Currency
4%
12%
14%
9%
Americas Cost of Revenues. During the year ended December 31, 2019, Americas cost of revenues increased by
3% (4% on a constant currency basis). The increase in our Americas cost of revenues was primarily due to:
•
•
•
•
•
$11.3 million of higher utilities costs driven by IBX data center expansions, increased utility usage and utility
price increases;
$10.0 million of higher bandwidth costs in support of our business growth;
approximately $9.9 million of incremental cost of revenues from the Infomart Dallas acquisition;
$8.6 million of higher compensation costs, including salaries, bonuses, and stock-based compensation; and
$7.2 million of higher depreciation expense primarily due to IBX expansion activity.
This increase was partially offset by:
•
•
$8.9 million of reduced property tax expenses, primarily due to accrual releases based on tax appeal
settlements; and
$6.9 million of reduced office expenses.
EMEA Cost of Revenues. During the year ended December 31, 2019, EMEA cost of revenues increased by 11%
(12% on a constant currency basis). The increase in our EMEA cost of revenues was primarily due to:
•
•
•
a net increase of $40.6 million of realized cash flow hedge losses from foreign currency forward contracts;
$30.5 million of higher utilities costs driven by increased utility usage to support IBX data center expansions
and utility price increases, primarily in Germany, the Netherlands and the United Kingdom;
$21.3 million of higher costs from increased equipment resale activities, primarily in Germany and the United
Kingdom;
47
•
•
$7.9 million of higher depreciation expenses driven by IBX data center expansions in London, Frankfurt and
Amsterdam; and
$7.2 million of higher compensation costs, including salaries, bonuses, stock-based compensation and
headcount growth.
This increase was partially offset by:
•
$5.9 million of reduced outside services consulting expenses.
Asia-Pacific Cost of Revenues. During the year ended December 31, 2019, Asia-Pacific cost of revenues increased
by 12% (14% on a constant currency basis). The increase in our Asia-Pacific cost of revenues was primarily due to:
•
•
•
•
$45.3 million of higher rent and facility costs and utilities costs, primarily driven by expansions and higher utility
usage in Hong Kong, Singapore, Australia and Japan;
$20.5 million of higher depreciation expense, primarily from IBX data center expansions in Singapore, Japan,
Australia and Hong Kong;
approximately $11.2 million of incremental cost of revenues from the Metronode acquisition; and
$4.3 million of higher outside services consulting expenses.
This increase was partially offset by:
•
$12.8 million of reduced costs due to lower equipment resale activities in the current period as compared to
the prior year.
We expect Americas, EMEA and Asia-Pacific cost of revenues to increase as we continue to grow our business,
including from the impact of acquisitions.
48
Sales and Marketing Expenses. Our sales and marketing expenses for the years ended December 31, 2019
and 2018 were split among the following geographic regions (dollars in thousands):
Americas
EMEA
Asia-Pacific
Total
Years ended December 31,
% Change
2019
401,034
157,718
92,294
651,046
$
$
%
62%
24%
14%
$
2018
391,386
152,336
89,980
%
62%
24%
14%
100% $
633,702
100%
Actual
2%
4%
3%
3%
Constant
Currency
3%
4%
4%
3%
Americas Sales and Marketing Expenses. During the year ended December 31, 2019, Americas sales and
marketing expenses increased by 2% (3% on a constant currency basis). The increase in our Americas sales and
marketing expenses was primarily due to:
•
•
$7.4 million of higher compensation costs, including sales compensation, salaries and stock-based
compensation and headcount growth; and
$3.7 million of higher travel and entertainment expenses.
EMEA Sales and Marketing Expenses. During the year ended December 31, 2019, EMEA sales and marketing
increased by 4% (and also 4% on a constant currency basis). The increase in our EMEA sales and marketing expenses
was primarily due to:
•
•
a net increase of $7.2 million of realized cash flow hedge losses from foreign currency forward contracts; and
$5.6 million increase in compensation costs, including sales compensation, salaries and stock-based
compensation and headcount growth.
This increase was partially offset by:
•
$6.2 million of reduced amortization expense driven by certain intangibles being fully amortized in the current
year.
Asia-Pacific Sales and Marketing Expenses. Our Asia-Pacific sales and marketing expense did not materially
change during the year ended December 31, 2019 as compared to the year ended December 31, 2018.
49
We anticipate that we will continue to invest in Americas, EMEA and Asia-Pacific sales and marketing initiatives
and expect our Americas, EMEA and Asia-Pacific sales and marketing expenses to increase as we grow our business.
Additionally, given that certain global sales and marketing functions are located within the U.S., we expect Americas
sales and marketing expenses as a percentage of revenues to be higher than our other regions.
General and Administrative Expenses. Our general and administrative expenses for the years ended
December 31, 2019 and 2018 were split among the following geographic regions (dollars in thousands):
Americas
EMEA
Asia-Pacific
Total
Years Ended December 31,
% Change
2019
641,261
198,892
94,865
935,018
$
$
%
69%
21%
10%
$
2018
554,169
184,364
88,161
%
67%
22%
11%
100% $
826,694
100%
Actual
16%
8%
8%
13%
Constant
Currency
16%
7%
9%
13%
$641,261
$554,169
22%
25%
$184,364
$198,892
12%
11%
$88,161
9%
$94,865
8%
2018
2019
2018
2019
2018
2019
Americas
EMEA
Asia-Pacific
Americas General and Administrative Expenses. During the year ended December 31, 2019, Americas general
and administrative expenses increased by 16% (and also 16% on a constant currency basis). The increase in our
Americas general and administrative expenses was primarily due to:
•
•
•
$51.1 million of higher compensation costs, including salaries, bonuses, stock-based compensation, and
headcount growth;
$22.3 million of higher depreciation expense associated with the implementation of certain systems to support
the integration and growth of our business; and
$10.7 million of higher consulting expenses in support of our business growth.
EMEA General and Administrative Expenses. During the year ended December 31, 2019, EMEA general and
administrative expenses increased by 8% (7% on a constant currency basis). The increase in our EMEA general and
administrative expenses was primarily due to:
•
•
a net increase of $8.8 million of realized cash flow hedge losses from foreign currency forward contracts; and
$3.9 million of higher compensation costs, including salaries, bonuses, stock-based compensation and
headcount growth.
50
Asia-Pacific General and Administrative Expenses. During the year ended December 31, 2019, Asia-Pacific general
and administrative expenses increased by 8% (9% on a constant currency basis). The increase in our Asia-Pacific
general and administrative expense was primarily due to:
•
$3.8 million of higher compensation costs, including salaries, bonuses, stock-based compensation and
headcount growth.
Going forward, although we are carefully monitoring our spending, we expect Americas, EMEA and Asia-Pacific
general and administrative expenses to increase as we continue to further scale our operations to support our growth,
including investments in our back office systems and investments to maintain our qualification for taxation as a REIT
and to integrate recent acquisitions. Additionally, given that our corporate headquarters is located within the U.S., we
expect Americas general and administrative expenses as a percentage of revenues to be higher than our other regions.
Transaction Costs. During the year ended December 31, 2019, we recorded transaction costs totaling $24.8
million primarily related to costs incurred in connection with the formation of the new Joint Venture in the EMEA region.
During the year ended December 31, 2018, we recorded transaction costs totaling $34.4 million, primarily in the Asia-
Pacific and Americas regions, due to our acquisitions of Metronode and Infomart Dallas.
Impairment Charges. During the year ended December 31, 2019, we recorded impairment charges totaling $15.8
million in the Americas region primarily as a result of the fair value adjustment for the New York 12 ("NY12") data center,
which was classified as a held for sale asset before it was sold in October 2019. We did not have impairment charges
during the year ended December 31, 2018.
Gain on Asset Sales. During the year ended December 31, 2019, we recorded a gain on asset sales of $44.3
million primarily relating to the sale of both the London 10 and Paris 8 data centers, as well as certain construction
development and leases in London and Frankfurt, as part of the closing of the Joint Venture. During the year ended
December 31, 2018, we recorded gain on asset sales of $6.0 million primarily relating to the sale of a data center in
Frankfurt.
Income from Operations. Our income from operations for the years ended December 31, 2019 and 2018 was
split among the following geographic regions (dollars in thousands):
Americas
EMEA
Asia-Pacific
Total
Years Ended December 31,
% Change
$
2019
413,936
421,786
333,909
$ 1,169,631
%
35%
36%
29%
$
2018
412,610
312,163
252,610
%
42%
32%
26%
100% $
977,383
100%
Actual
—%
35%
32%
20%
Constant
Currency
1%
24%
35%
17%
Americas Income from Operations. Our Americas income from operations did not materially change during the
year ended December 31, 2019 as compared to the year ended December 31, 2018.
EMEA Income from Operations. During the year ended December 31, 2019, EMEA income from operations
increased by 35% (24% on a constant currency basis). The increase in our EMEA income from operations was primarily
due to higher revenues as a result of our IBX data center expansion activity and organic growth, as described above,
as well as lower operating expenses as a percentage of revenues.
Asia-Pacific Income from Operations. During the year ended December 31, 2019, Asia-Pacific income from
operations increased by 32% (35% on a constant currency basis). The increase in our Asia-Pacific income from
operations was primarily due to higher revenues as a result of our IBX data center expansion activity, acquisition and
organic growth as described above, lower operating expenses as a percentage of revenues and lower transaction
costs in the current period as compared to the prior year.
Interest Income. Interest income was $27.7 million and $14.5 million for the years ended December 31, 2019 and
2018, respectively. The average yield for the year ended December 31, 2019 was 1.85% versus 1.24% for the year
ended December 31, 2018.
Interest Expense. Interest expense decreased to $479.7 million for the year ended December 31, 2019 from
$521.5 million for the year ended December 31, 2018, primarily attributable to the reduction in lease interest expense
51
due to the conversion of certain build-to-suit leases to operating leases upon the adoption of ASC 842 and the utilization
of cross-currency interest rate swaps in 2019. During the years ended December 31, 2019 and 2018, we capitalized
$32.2 million and $19.9 million, respectively, of interest expense to construction in progress.
Other Income. We recorded net other income of $27.8 million and $14.0 million for the years ended December 31,
2019 and 2018, respectively. Other income is primarily comprised of foreign currency exchange gains and losses
during the periods.
Loss on Debt Extinguishment. During the year ended December 31, 2019, the Company recorded $52.8 million
of loss on debt extinguishment primarily related to the loss on debt extinguishment from the redemption of the Senior
Notes due 2022, 2023 and 2025.
During the year ended December 31, 2018, the Company recorded $51.4 million of loss on debt extinguishment
comprised of:
•
•
•
•
$17.1 million of loss on debt extinguishment as a result of amendments to leases impacting the related financing
obligations;
$19.5 million of loss on debt extinguishment from the settlement of financing obligations as a result of the
Infomart Dallas acquisition;
$12.6 million of loss on debt extinguishment as a result of the settlement of financing obligations for properties
purchased; and
$2.2 million of loss on debt extinguishment as a result of the redemption of the Japanese Yen Term Loan.
Income Taxes. We operate as a REIT for U.S. federal income tax purposes. As a REIT, we are generally not
subject to U.S. federal and state income taxes on our taxable income distributed to stockholders. We intend to distribute
or have distributed the entire taxable income generated by the operations of our REIT and QRSs for the tax years
ended December 31, 2019 and 2018, respectively. As such, other than tax attributable to built-in-gains recognized and
withholding taxes, no provision for U.S. federal income taxes for the REIT and QRSs has been included in the
accompanying consolidated financial statements for the years ended December 31, 2019 and 2018.
We have made TRS elections for some of our subsidiaries in and outside the U.S. In general, a TRS may provide
services that would otherwise be considered impermissible for REITs to provide and may hold assets that may not be
REIT compliant.
U.S. federal income taxes for the TRS entities located in the U.S. and foreign income taxes for our foreign operations
regardless of whether the foreign operations are operated as QRSs or TRSs have been accrued, as necessary, for
the years ended December 31, 2019 and 2018.
For the years ended December 31, 2019 and 2018, we recorded $185.4 million and $67.7 million of income tax
expenses, respectively. Our effective tax rates were 26.8% and 15.6%, respectively, for the years ended December 31,
2019 and 2018. The higher effective tax rate in 2019 as compared to 2018 is primarily due to a release of valuation
allowance in 2018 as a result of a legal entity reorganization in our Americas region.
Adjusted EBITDA. Adjusted EBITDA is a key factor in how we assess the operating performance of our segments
and develop regional growth strategies such as IBX data center expansion decisions. We define adjusted EBITDA as
income or loss from operations excluding depreciation, amortization, accretion, stock-based compensation expense,
restructuring charges, impairment charges, transaction costs and gain on asset sales. See "Non-GAAP Financial
Measures" below for more information about adjusted EBITDA and a reconciliation of adjusted EBITDA to income or
loss from operations. Our adjusted EBITDA for the years ended December 31, 2019 and 2018 was split among the
following geographic regions (dollars in thousands):
Years Ended December 31,
% Change
Americas
EMEA
Asia-Pacific
Total
2019
$ 1,237,622
827,980
622,125
$ 2,687,727
%
Actual
Constant
Currency
5%
19%
17%
11%
5%
17%
19%
12%
%
46% $ 1,183,831
2018
31%
23%
698,280
531,129
49%
29%
22%
100% $ 2,413,240
100%
52
Americas Adjusted EBITDA. During the year ended December 31, 2019, Americas adjusted EBITDA increased
by 5% (and also 5% on a constant currency basis). The increase in our Americas adjusted EBITDA was primarily due
to higher revenues as a result of our IBX data center expansion activity, acquisition and organic growth as described
above.
EMEA Adjusted EBITDA. During the year ended December 31, 2019, EMEA adjusted EBITDA increased by 19%
(17% on a constant currency basis). The increase in our EMEA adjusted EBITDA was primarily due to higher revenues
as a result of our IBX data center expansion activity and organic growth, as described above, as well as lower operating
expenses as a percentage of revenues.
Asia-Pacific Adjusted EBITDA. During the year ended December 31, 2019, Asia-Pacific adjusted EBITDA increased
by 17% (19% on a constant currency basis). The increase in our Asia-Pacific adjusted EBITDA was primarily due to
higher revenues as a result of our IBX data center expansion activity, acquisition and organic growth as described
above and lower operating expenses as a percentage of revenues.
Non-GAAP Financial Measures
We provide all information required in accordance with GAAP, but we believe that evaluating our ongoing operating
results may be difficult if limited to reviewing only GAAP financial measures. Accordingly, we use non-GAAP financial
measures to evaluate our operations.
Non-GAAP financial measures are not a substitute for financial information prepared in accordance with GAAP.
Non-GAAP financial measures should not be considered in isolation, but should be considered together with the most
directly comparable GAAP financial measures and the reconciliation of the non-GAAP financial measures to the most
directly comparable GAAP financial measures. We have presented such non-GAAP financial measures to provide
investors with an additional tool to evaluate our operating results in a manner that focuses on what management
believes to be our core, ongoing business operations. We believe that the inclusion of these non-GAAP financial
measures provides consistency and comparability with past reports and provides a better understanding of the overall
performance of the business and ability to perform in subsequent periods. We believe that if we did not provide such
non-GAAP financial information, investors would not have all the necessary data to analyze Equinix effectively.
Investors should note that the non-GAAP financial measures used by us may not be the same non-GAAP financial
measures, and may not be calculated in the same manner, as those of other companies. Investors should therefore
exercise caution when comparing non-GAAP financial measures used by us to similarly titled non-GAAP financial
measures of other companies.
Our primary non-GAAP financial measures, adjusted EBITDA and adjusted funds from operations ("AFFO"),
exclude depreciation expense as these charges primarily relate to the initial construction costs of our IBX data centers
and do not reflect our current or future cash spending levels to support our business. Our IBX data centers are long-
lived assets and have an economic life greater than 10 years. The construction costs of an IBX data center do not
recur with respect to such data center, although we may incur initial construction costs in future periods with respect
to additional IBX data centers, and future capital expenditures remain minor relative to our initial investment. This is a
trend we expect to continue. In addition, depreciation is also based on the estimated useful lives of our IBX data centers.
These estimates could vary from actual performance of the asset, are based on historical costs incurred to build out
our IBX data centers and are not indicative of current or expected future capital expenditures. Therefore, we exclude
depreciation from our operating results when evaluating our operations.
53
In addition, in presenting adjusted EBITDA and AFFO, we exclude amortization expense related to acquired
intangible assets. Amortization expense is significantly affected by the timing and magnitude of our acquisitions and
these charges may vary in amount from period to period. We exclude amortization expense to facilitate a more
meaningful evaluation of our current operating performance and comparisons to our prior periods. We exclude accretion
expense, both as it relates to asset retirement obligations as well as accrued restructuring charge liabilities, as these
expenses represent costs which we believe are not meaningful in evaluating our current operations. We exclude stock-
based compensation expense, as it can vary significantly from period to period based on share price, the timing, size
and nature of equity awards. As such, we, and many investors and analysts, exclude stock-based compensation
expense to compare our operating results with those of other companies. We also exclude restructuring charges. The
restructuring charges relate to our decisions to exit leases for excess space adjacent to several of our IBX data centers,
which we did not intend to build out, or our decision to reverse such restructuring charges. We also exclude impairment
charges related to certain long-lived assets. The impairment charges are related to expense recognized whenever
events or changes in circumstances indicate that the carrying amount of long-lived assets are not recoverable. We
also exclude gain or loss on asset sales as it represents profit or loss that is not meaningful in evaluating the current
or future operating performance. Finally, we exclude transaction costs from AFFO and adjusted EBITDA to allow more
comparable comparisons of our financial results to our historical operations. The transaction costs relate to costs we
incur in connection with business combinations and the formation of joint ventures, including advisory, legal, accounting,
valuation, and other professional or consulting fees. Such charges generally are not relevant to assessing the long-
term performance of the company. In addition, the frequency and amount of such charges vary significantly based on
the size and timing of the transactions. Management believes items such as restructuring charges, impairment charges,
gain or loss on asset sales and transaction costs are non-core transactions; however, these types of costs may occur
in future periods.
Adjusted EBITDA
We define adjusted EBITDA as income from operations excluding depreciation, amortization, accretion, stock-
based compensation expense, restructuring charges, impairment charges, transaction costs, and gain on asset sales
as presented below (in thousands):
Income from operations
Years Ended December 31,
2019
$ 1,169,631 $
2018
977,383 $
2017
809,014
Depreciation, amortization, and accretion expense
1,285,296
1,226,741
1,028,892
Stock-based compensation expense
Transaction costs
Impairment charges
Gain on asset sales
Adjusted EBITDA
236,539
24,781
15,790
(44,310)
180,716
34,413
—
(6,013)
175,500
38,635
—
—
$ 2,687,727 $ 2,413,240 $ 2,052,041
Our adjusted EBITDA results have improved each year and in each region in total dollars due to the improved
operating results discussed earlier in "Results of Operations", as well as the nature of our business model consisting
of a recurring revenue stream and a cost structure which has a large base that is fixed in nature also discussed earlier
in "Overview".
Funds from Operations ("FFO") and AFFO
We use FFO and AFFO, which are non-GAAP financial measures commonly used in the REIT industry. FFO is
calculated in accordance with the standards established by the National Association of Real Estate Investment Trusts.
FFO represents net income (loss), excluding gain (loss) from the disposition of real estate assets, depreciation and
amortization on real estate assets and adjustments for unconsolidated joint ventures' and non-controlling interests'
share of these items.
In presenting AFFO, we exclude certain items that we believe are not good indicators of our current or future
operating performance. AFFO represents FFO excluding depreciation and amortization expense on non-real estate
assets, accretion, stock-based compensation, restructuring charges, impairment charges, transaction costs, an
installation revenue adjustment, a straight-line rent expense adjustment, a contract cost adjustment, amortization of
deferred financing costs and debt discounts and premiums, gain (loss) on debt extinguishment, an income tax expense
adjustment, recurring capital expenditures, net income (loss) from discontinued operations, net of tax, and adjustments
54
from FFO to AFFO for unconsolidated joint ventures' and noncontrolling interests' share of these items. The adjustments
for installation revenue, straight-line rent expense and contract costs are intended to isolate the cash activity included
within the straight-lined or amortized results in the consolidated statement of operations. We exclude the amortization
of deferred financing costs and debt discounts and premiums as these expenses relate to the initial costs incurred in
connection with debt financings that have no current or future cash obligations. We exclude gain (loss) on debt
extinguishment since it generally represents the write-off of initial costs incurred in connection with debt financings or
a cost that is incurred to reduce future interest costs and is not a good indicator of our current or future operating
performance. We include an income tax expense adjustment, which represents the non-cash tax impact due to changes
in valuation allowances, uncertain tax positions and deferred taxes that do not relate to current period's operations.
We deduct recurring capital expenditures, which represent expenditures to extend the useful life of its IBX data centers
or other assets that are required to support current revenues. We also exclude net income (loss) from discontinued
operations, net of tax, which represents results that may not recur and are not a good indicator of our current future
operating performance.
Our FFO and AFFO were as follows (in thousands):
Net income
Net loss attributable to non-controlling interests
Net income attributable to Equinix
Adjustments:
Real estate depreciation
(Gain) loss on disposition of real estate property
Adjustments for FFO from unconsolidated joint ventures
FFO
FFO
Adjustments:
Installation revenue adjustment
Straight-line rent expense adjustment
Contract cost adjustment
Amortization of deferred financing costs and debt discounts and
premiums
Stock-based compensation expense
Non-real estate depreciation expense
Amortization expense
Accretion expense (adjustment)
Recurring capital expenditures
Loss on debt extinguishment
Transaction costs
Impairment charges
Income tax expense adjustment
Adjustments for AFFO from unconsolidated joint ventures
AFFO
Years Ended December 31,
2019
507,245 $
2018
365,359 $
2017
232,982
$
205
—
—
507,450
365,359
232,982
845,798
(39,337)
645
883,118
754,351
4,643
—
4,945
85
$ 1,314,556 $ 1,253,120 $
992,363
2017
992,363
24,496
8,925
—
24,449
175,500
111,121
177,008
Years Ended December 31,
2019
2018
$ 1,314,556 $ 1,253,120 $
11,031
8,167
10,858
7,203
(40,861)
(20,358)
13,042
236,539
242,761
196,278
459
13,618
180,716
140,955
203,416
(748)
(13,588)
(186,002)
(203,053)
(167,995)
52,825
24,781
15,790
39,676
2,080
51,377
34,413
—
(12,420)
—
65,772
38,635
—
371
(17)
$ 1,931,122 $ 1,659,097 $ 1,437,040
Our AFFO results have improved due to the improved operating results discussed earlier in "Results of Operations,"
as well as due to the nature of our business model which consists of a recurring revenue stream and a cost structure
which has a large base that is fixed in nature as discussed earlier in "Overview."
55
Constant Currency Presentation
Our revenues and certain operating expenses (cost of revenues, sales and marketing and general and
administrative expenses) from our international operations have represented and will continue to represent a significant
portion of our total revenues and certain operating expenses. As a result, our revenues and certain operating expenses
have been and will continue to be affected by changes in the U.S. dollar against major international currencies. During
the year ended December 31, 2019 as compared to the same period in 2018, the U.S. dollar was stronger relative to
the Brazilian real, Euro, British Pound, Singapore dollar and Australian dollar, which resulted in an unfavorable foreign
currency impact on revenue, operating income and adjusted EBITDA, and a favorable foreign currency impact on
operating expenses. In order to provide a framework for assessing how each of our business segments performed
excluding the impact of foreign currency fluctuations, we present period-over-period percentage changes in our
revenues and certain operating expenses on a constant currency basis in addition to the historical amounts as
reported. Our constant currency presentation excludes the impact of our foreign currency cash flow hedging activities.
Presenting constant currency results of operations is a non-GAAP financial measure and is not meant to be considered
in isolation or as an alternative to GAAP results of operations. However, we have presented this non-GAAP financial
measure to provide investors with an additional tool to evaluate our operating results. To present this information, our
current period revenues and certain operating expenses from entities reporting in currencies other than the U.S. dollar
are converted into U.S. dollars at constant exchange rates rather than the actual exchange rates in effect during the
respective periods (i.e. average rates in effect for the year ended December 31, 2018 are used as exchange rates for
the year ended December 31, 2019 when comparing the year ended December 31, 2019 with the year ended
December 31, 2018).
Liquidity and Capital Resources
As of December 31, 2019, our total indebtedness was comprised of debt and lease obligations totaling
approximately $11.9 billion (gross of debt issuance cost, debt discount, plus mortgage premium) consisting of:
•
•
•
approximately $9,029.2 million of principal from our senior notes;
approximately $1,506.1 million from our finance lease liabilities; and
$1,371.9 million of principal from our loans payable and mortgage.
We believe we have sufficient cash, coupled with anticipated cash generated from operating activities, to meet our
operating requirements, including repayment of the current portion of our debt as it becomes due, payment of regular
dividend distributions and completion of our publicly-announced expansion projects.
During 2019, we completed the following significant financing activities:
•
•
•
•
•
issued $2,800.0 million in Senior Notes due 2024, 2026 and 2029;
redeemed $1,906.3 million of Senior Notes due 2022, 2023 and 2025;
repaid $300.0 million of 5.0% Infomart Senior Notes according to their repayment terms;
issued and sold 2,985,575 shares of common stock in a public equity offering and received net proceeds of
approximately $1,213.4 million, net of underwriting discounts, commissions and offering expenses; and
issued and sold 903,555 shares of common stock under our ATM Program, for proceeds of approximately
$447.5 million, net of payment of commissions to sales agents and other offering expenses.
As of December 31, 2019, we had $1,879.9 million of cash, cash equivalents and short-term investments, of which
approximately $1,456.8 million was held in the U.S. In addition to our cash and investment portfolio, we had $1.9 billion
of additional liquidity available to us from our $2.0 billion revolving facility and $300.0 million of shares issuance available
for sale under our ATM Program.
Besides any further financing activity we may pursue, customer collections are our primary source of cash. While
we believe we have a strong customer base, and have continued to experience relatively strong collections, if the
current market conditions were to deteriorate, some of our customers may have difficulty paying us and we may
experience increased churn in our customer base, including reductions in their commitments to us, all of which could
have a material adverse effect on our liquidity. Additionally, we may pursue additional expansion opportunities, primarily
the build out of new IBX data centers, in certain of our existing markets which are at or near capacity within the next
year, as well as potential acquisitions and joint ventures. While we expect to fund these plans with our existing resources,
additional financing, either debt or equity, may be required, and if current market conditions were to deteriorate, we
56
may be unable to secure additional financing, or any such additional financing may only be available to us on unfavorable
terms. An inability to pursue additional expansion opportunities will have a material adverse effect on our ability to
maintain our desired level of revenue growth in future periods.
Sources and Uses of Cash
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Operating Activities
Years Ended December 31,
2019
2018
(in thousands)
$
1,992,728 $
1,815,426
(1,944,567)
(3,075,528)
1,202,082
470,912
Our cash provided by our operations is generated by colocation, interconnection, managed infrastructure and other
revenues. Our primary uses of cash from our operating activities include compensation and related costs, interest
payments, other general corporate expenditures and taxes. The increase in net cash provided by operating activities
during 2019 compared to 2018 was primarily due to improved operating results combined with the inclusion of full year
operating results of the acquisitions of Infomart Dallas and Metronode closed in April 2018, offset by increases in cash
paid for cost of revenues, operating expenses, interest expense and income taxes.
Investing Activities
The decrease in net cash used in investing activities during 2019 compared to 2018 was primarily due to the
decrease in spending for business acquisitions of approximately $795.5 million, primarily due to the Metronode and
Infomart Dallas acquisitions in 2018 combined with an increase in proceeds from asset sales of approximately $346.6
million, primarily due to the sale of xScale data center facilities in connection with the closing of the Joint Venture.
During 2020, we anticipate our IBX expansion construction activity will increase from our 2019 levels. If the
opportunity to expand is greater than planned and we have sufficient funding to pursue such expansion opportunities,
we may further increase the level of capital expenditure to support this growth as well as pursue additional business
and real estate acquisitions or joint ventures.
Financing Activities
Net cash provided by financing activities during 2019 was primarily due to:
•
•
•
•
the issuance of $2,800.0 million in Senior Notes due 2024, 2026 and 2029;
the sale and issuance of 2,985,575 shares of common stock in a public equity offering and receipt of net
proceeds of approximately $1,213.4 million, net of underwriting discounts, commissions and offering expenses;
the sale of 903,555 shares under our ATM Program, for net proceeds of $447.5 million; and
proceeds from employee awards of $52.0 million.
The proceeds were partially offset by:
•
•
•
•
•
•
•
the redemption of $1,906.3 million in Senior Notes due 2022, 2023 and 2025;
the repayment of $300.0 million of 5.0% Infomart Senior Notes according to the repayment terms;
dividend distributions of $836.2 million;
repayments of capital lease and other financing obligations totaling $126.5 million;
repayments of mortgage and loans payable totaling $73.2 million;
payments of debt extinguishment costs of $43.3 million, primarily related to redemption premium paid related
to the redemption of Senior Notes due 2022, 2023 and 2025; and
payments of debt issuance costs of $23.3 million.
57
Net cash provided by financing activities during 2018 was primarily due to:
•
•
•
•
the issuance of €750.0 million 2.875% Euro Senior Notes due 2024, or approximately $929.9 million in U.S.
dollars, at the exchange rate in effect on March 14, 2018;
borrowing of the JPY Term Loan of ¥47.5 billion, or approximately $424.7 million at the exchange rate effective
on July 31, 2018;
the sale of 930,934 shares under our ATM Program, for net proceeds of $388.2 million; and
proceeds from employee awards of $50.1 million.
The proceeds were partially offset by:
•
•
•
•
•
dividend distributions of $738.6 million;
repayments of capital lease and other financing obligations of $103.8 million;
repayments of mortgage and loans payable of $447.5 million, primarily related to the prepayment of the
remaining principal of our existing Japanese Yen Term Loan;
payments of debt extinguishment costs of $20.6 million; and
payments of debt issuance costs of $12.2 million.
Contractual Obligations and Off-Balance-Sheet Arrangements
We lease a majority of our IBX data centers and certain equipment under long-term lease agreements. The following
represents our debt maturities, financings, leases and other contractual commitments as of December 31, 2019 (in
thousands):
Term loans and other loans
payable (1)
Senior notes (1)
Interest (2)
Finance leases (3)
Operating leases (3)
Other contractual
commitments (4)
Asset retirement obligations (5)
2020
2021
2022
2023
2024
Thereafter
Total
$
77,603
$
77,654
$ 1,180,017
$
6,683
$
6,214
$
23,715
$ 1,371,886
643,711
359,383
173,994
193,663
150,000
333,710
176,357
191,954
1,133,948
256,508
2,081
4,667
—
327,222
176,992
183,908
51,137
12,365
—
1,841,500
6,394,000
303,722
178,289
168,353
33,587
5,442
291,496
177,338
156,502
30,267
6,978
574,633
1,739,235
1,106,944
9,029,211
2,190,166
2,622,205
2,001,324
277,739
1,783,186
70,882
102,415
$ 2,584,383
$ 1,190,850
$ 1,931,641
$
696,076
$ 2,510,295
$10,187,148
$ 19,100,393
(1)
(2)
(3)
(4)
(5)
Represents principal of senior notes, term loans and other loans payable, as well as premium on mortgage payable.
Represents interest on mortgage payable, senior notes, term loan facilities and other loans payable based on their approximate
interest rates as of December 31, 2019, as well as the credit facility fee for the revolving credit facility.
Represents lease payments under finance and operating lease arrangements, including renewal options that are certain to be
exercised.
Represents unaccrued contractual commitments. Other contractual commitments are described below.
Represents liability, net of future accretion expense.
In connection with certain of our leases and other contracts requiring deposits, we entered into 41 irrevocable letters of
credit totaling $84.0 million under the revolving credit facility. These letters of credit were provided in lieu of cash deposits.
If the landlords for these IBX leases decide to draw down on these letters of credit triggered by an event of default under the
lease, we will be required to fund these letters of credit either through cash collateral or borrowing under the revolving credit
facility. These contingent commitments are not reflected in the table above.
We had accrued liabilities related to uncertain tax positions totaling approximately $132.2 million as of December 31,
2019. These liabilities, which are reflected on our balance sheet, are not reflected in the table above since it is unclear when
these liabilities will be paid.
Primarily as a result of our various IBX data center expansion projects, as of December 31, 2019, we were contractually
committed for $795.0 million of unaccrued capital expenditures, primarily for IBX equipment not yet delivered and labor not
58
yet provided in connection with the work necessary to complete construction and open these IBX data centers prior to making
them available to customers for installation. This amount, which is expected to be paid during 2020 and thereafter, is reflected
in the table above as "other contractual commitments."
We had other non-capital purchase commitments in place as of December 31, 2019, such as commitments to purchase
power in select locations and other open purchase orders, which contractually bind us for goods, services or arrangements
to be delivered or provided during 2020 and beyond. Such other purchase commitments as of December 31, 2019, which
total $988.2 million, are also reflected in the table above as "other contractual commitments."
In connection with the Joint Venture which closed in October 2019, we agreed to make future equity contributions to the
Joint Venture of €17.6 million and £15.7 million, or $40.6 million in total at the exchange rate in effect on December 31, 2019,
to fund the Joint Venture’s future development over the next 3 years, which are not reflected in the table above.
Additionally, we entered into lease agreements with various landlords primarily for data center spaces and ground leases
which have not yet commenced as of December 31, 2019. These leases will commence between fiscal years 2020 and
2022, with lease terms of 10 to 49 years and total lease commitments of approximately $608.1 million, which are not reflected
in the table above.
Other Off-Balance-Sheet Arrangements
We have various guarantor arrangements with both our directors and officers and third parties, including customers,
vendors and business partners. As of December 31, 2019, there were no significant liabilities recorded for these arrangements.
For additional information, see "Guarantor Arrangements" in Note 15 within the Consolidated Financial Statements.
Concurrent with the closing of the Joint Venture, the Joint Venture entered into a credit agreement with a group of lenders
for secured credit facilities of €850.0 million, or $953.7 million in total at the exchange rate in effect on December 31, 2019,
consisting of two secured term loan facilities and a secured revolving credit facility. The Joint Venture’s debt is secured by
net assets of the Joint Venture, is without recourse to the partners, and does not represent a liability of the partners. We do
not provide any guarantees to make principle payment to the lenders for the Joint Ventures’ indebtedness. Under the Joint
Venture agreement, we and our joint venture partner GIC are also required to make additional equity contribution
proportionately to the Joint Venture upon situations such as interest shortfall, cost-overrun or capital shortfall to complete
certain construction phases.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial
statements requires management to make estimates and assumptions about future events that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis,
management evaluates the accounting policies, assumptions, estimates and judgments to ensure that our consolidated
financial statements are presented fairly and in accordance with GAAP. Management bases its assumptions, estimates
and judgments on historical experience, current trends and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. However, because future events and their effects cannot
be determined with certainty, actual results may differ from these assumptions and estimates, and such differences
could be material.
Our significant accounting policies are discussed in Note 1 to Consolidated Financial Statements in Item 8 of this
Annual Report on Form 10-K. Management believes that the following critical accounting policies and estimates are
the most critical to aid in fully understanding and evaluating our consolidated financial statements, and they require
significant judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain:
• Accounting for income taxes;
• Accounting for business combinations;
• Accounting for impairment of goodwill;
• Accounting for property, plant and equipment; and
• Accounting for leases.
59
Description
Judgments and Uncertainties
Effect if Actual Results Differ from
Assumptions
Accounting for Income Taxes.
Deferred tax assets and liabilities
are recognized based on the future
tax consequences attributable to
temporary differences that exist
between the financial statement
carrying value of assets and
liabilities and their respective tax
bases, and operating loss and tax
credit carryforwards on a taxing
jurisdiction basis. We measure
deferred tax assets and liabilities
using enacted tax rates that will
apply in the years in which we
expect the temporary differences to
be recovered or settled.
The accounting standard for income
taxes requires a reduction of the
carrying amounts of deferred tax
assets by recording a valuation
allowance if, based on the available
evidence, it is more likely than not
(defined by the accounting standard
as a likelihood of more than 50%)
that such assets will not be realized.
A tax benefit from an uncertain
income tax position may be
recognized in the financial
statements only if it is more likely
than not that the position is
sustainable, based solely on its
technical merits and consideration
of the relevant taxing authority's
widely understood administrative
practices and precedents. The
Company recognizes interest and
penalties related to unrecognized
tax benefits within income tax
benefit (expense) in the
consolidated statements of
operations.
The valuation of deferred tax assets
requires judgment in assessing the likely
future tax consequences of events that
have been recognized in our financial
statements or tax returns. Our
accounting for deferred tax
consequences represents our best
estimate of those future tax
consequences.
In assessing the need for a valuation
allowance, we consider both positive
and negative evidence related to the
likelihood of realization of the deferred
tax assets. If, based on the weight of
that available evidence, it is more likely
than not the deferred tax assets will not
be realized, we record a valuation
allowance. The weight given to the
positive and negative evidence is
commensurate with the extent to which
the evidence may be objectively verified.
This assessment, which is completed on
a taxing jurisdiction basis, takes into
account a number of types of evidence,
including the following: 1) the nature,
frequency and severity of current and
cumulative financial reporting losses, 2)
sources of future taxable income and 3)
tax planning strategies.
In assessing the tax benefit from an
uncertain income tax position, the tax
position that meets the more-likely-than-
not recognition threshold is initially and
subsequently measured as the largest
amount of tax benefit that is greater than
50% likely of being realized upon
ultimate settlement with a taxing
authority that has full knowledge of all
relevant information.
For purposes of the quarterly REIT asset
tests, we estimate the fair market value
of assets within our QRSs and TRSs
using a discounted cash flow approach,
by calculating the present value of
forecasted future cash flows. We apply
discount rates based on industry
benchmarks relative to the market and
forecasting risks. Other significant
assumptions used to estimate the fair
market value of assets in QRSs and
TRSs include projected revenue growth,
projected operating margins and
projected capital expenditure. We revisit
significant assumptions periodically to
reflect any changes due to business or
economic environment.
As of December 31, 2019 and 2018, we had
net total deferred tax liabilities of $211.4 million
and $189.6 million, respectively. As of
December 31, 2019 and 2018, we had a total
valuation allowance of $57.8 million and $57.0
million, respectively. If and when we reduce
our remaining valuation allowances, it may
have a favorable impact to our financial
position and results of operations in the
periods when such determinations are made.
We will continue to assess the need for our
valuation allowances, by jurisdiction, in the
future.
During the year ended December 31, 2019,
we released the full valuation allowances
against the deferred tax assets of one of our
Brazilian legal entities due to the evidence of
achieving sustainable profitability. For the
Metronode Acquisition, we increased the
valuation allowance that was assessed in prior
year as a result of finalizing the provisional
estimates related to the realizability of certain
deferred tax assets.
During the year ended December 31, 2018,
we released the full or partial valuation
allowances against the deferred tax assets in
certain jurisdictions in the Americas, Asia-
Pacific and EMEA regions. As part of the
purchase accounting determination for the
Metronode Acquisition, we provided full
valuation allowance against certain deferred
tax assets in Australia that are not expected to
be realizable in the foreseeable future.
As of December 31, 2019 and 2018, we had
unrecognized tax benefits of $173.7 million
and $150.9 million, respectively, exclusive of
interest and penalties. During the year ended
December 31, 2019, the unrecognized tax
benefit increased by $22.8 million primarily
due to integrations, which was partially offset
by the recognition of unrecognized tax benefits
related to the Company’s tax positions in
France as a result of a lapse in statutes of
limitations and the partial payment of the
Metronode pre-acquisition tax audit
assessment which was fully indemnified by the
seller. During the year ended December 31,
2018, the unrecognized tax benefits increased
by $68.5 million primarily due to the
Metronode Acquisition and the reorganization
of the Spanish entities from the Itconic
acquisition. The unrecognized tax benefits of
$173.7 million as of December 31, 2019, if
subsequently recognized, will affect our
effective tax rate favorably at the time when
such a benefit is recognized, of which $30.8
million is subject to an indemnification
agreement.
60
Description
Judgments and Uncertainties
Effect if Actual Results Differ from
Assumptions
Accounting for Business
Combinations
In accordance with the accounting
standard for business combinations,
we allocate the purchase price of an
acquired business to its identifiable
assets and liabilities based on
estimated fair values. The excess of
the purchase price over the fair
value of the assets acquired and
liabilities assumed, if any, is
recorded as goodwill.
We use all available information to
estimate fair values. We typically
engage outside appraisal firms to
assist in determining the fair value
of identifiable intangible assets such
as customer contracts, leases and
any other significant assets or
liabilities and contingent
consideration, as well as the
estimated useful life of intangible
assets. We adjust the preliminary
purchase price allocation, as
necessary, up to one year after the
acquisition closing date if we obtain
more information regarding asset
valuations and liabilities assumed.
Our purchase price allocation
methodology contains uncertainties
because it requires assumptions and
management's judgment to estimate the
fair value of assets acquired and
liabilities assumed at the acquisition
date. Key judgments used to estimate
the fair value of intangible assets include
projected revenue growth and operating
margins, discount rates, customer
attrition rates, as well as the estimated
useful life of intangible assets.
Management estimates the fair value of
assets and liabilities based upon quoted
market prices, the carrying value of the
acquired assets and widely accepted
valuation techniques, including
discounted cash flows and market
multiple analyses. Our estimates are
inherently uncertain and subject to
refinement. Unanticipated events or
circumstances may occur which could
affect the accuracy of our fair value
estimates, including assumptions
regarding industry economic factors and
business strategies.
During the last three years, we have
completed a number of business
combinations, including the acquisition of
Switch Datacenters' AMS1 data center
business in Amsterdam, Netherlands in April
2019, the Metronode Acquisition and the
Infomart Dallas Acquisition in April 2018, the
Itconic Acquisition and the Zenium data center
acquisition in October 2017, the Verizon Data
Center Acquisition in May 2017, and the IO
Acquisition in February 2017. The purchase
price allocation for these acquisitions has been
finalized.
As of December 31, 2019 and 2018, we had
net intangible assets of $2.1 billion and $2.3
billion, respectively. We recorded amortization
expense for intangible assets of $196.3
million, $203.4 million and $177.0 million for
the years ended December 31, 2019, 2018
and 2017, respectively.
We do not believe there is a reasonable
likelihood that there will be a material change
in the estimates or assumptions we used to
complete the purchase price allocations and
the fair value of assets acquired and liabilities
assumed. However, if actual results are not
consistent with our estimates or assumptions,
we may be exposed to losses or gains that
could be material, which would be recorded in
our consolidated statements of operations in
2019 or beyond.
61
Description
Judgments and Uncertainties
Effect if Actual Results Differ from
Assumptions
Accounting for Impairment of
Goodwill and Other Intangible
Assets
In accordance with the accounting
standard for goodwill and other
intangible assets, we perform
goodwill and other intangible assets
impairment reviews annually, or
whenever events or changes in
circumstances indicate that the
carrying value of an asset may not
be recoverable.
We complete the annual goodwill
impairment assessment for the
Americas, EMEA and Asia-Pacific
reporting units to determine if the
fair values of the reporting units
exceeded their carrying values.
We perform a review of other
intangible assets for impairment by
assessing events or changes in
circumstances that indicate the
carrying amount of an asset may
not be recoverable.
To perform annual goodwill impairment
assessment, we elected to assess
qualitative factors to determine whether
it is more likely than not that the fair
value of a reporting unit is less than its
carrying value. This analysis requires
assumptions and estimates before
performing the quantitative goodwill
impairment test, where the assessment
requires assumptions and estimates
derived from a review of our actual and
forecasted operating results, approved
business plans, future economic
conditions and other market data. There
were no specific factors present in 2019
or 2018 that indicated a potential
goodwill impairment.
We performed our annual review of
other intangible assets by assessing if
there were events or changes in
circumstances indicating that the
carrying amount of an asset may not be
recoverable, such as a significant
decrease in market price of an asset, a
significant adverse change in the extent
or manner in which an asset is being
used, a significant adverse change in
legal factors or business climate that
could affect the value of an asset or a
continuous deterioration of our financial
condition. This assessment requires
assumptions and estimates derived from
a review of our actual and forecasted
operating results, approved business
plans, future economic conditions and
other market data. There were no
specific events in 2019 or 2018 that
indicated a potential impairment.
As of December 31, 2019, goodwill attributable
to the Americas, the EMEA and the Asia-
Pacific reporting units was $1.7 billion, $2.4
billion and $0.6 billion, respectively.
Future events, changing market conditions
and any changes in key assumptions may
result in an impairment charge. While we have
not recorded an impairment charge against
our goodwill to date, the development of
adverse business conditions in our Americas,
EMEA or Asia-Pacific reporting units, such as
higher than anticipated customer churn
or significantly increased operating costs, or
significant deterioration of our market
comparables that we use in the market
approach, could result in an impairment
charge in future periods.
The balance of our other intangible assets,
net, for the year ended December 31, 2019
and 2018 was $2.1 billion and $2.3 billion,
respectively. While we have not recorded an
impairment charge against our other intangible
assets to date, future events or changes in
circumstances, such as a significant decrease
in market price of an asset, a significant
adverse change in the extent or manner in
which an asset is being used, a significant
adverse change in legal factors or business
climate, may result in an impairment charge in
future periods.
Any potential impairment charge against our
goodwill and other intangible assets would not
exceed the amounts recorded on our
consolidated balance sheets.
62
Description
Judgments and Uncertainties
Effect if Actual Results Differ from
Assumptions
Accounting for Property, Plant
and Equipment
We have a substantial amount of
property, plant and equipment
recorded on our consolidated
balance sheet. The vast majority of
our property, plant and equipment
represent the costs incurred to build
out or acquire our IBX data centers.
Our IBX data centers are long-lived
assets. We depreciate our property,
plant and equipment using the
straight-line method over the
estimated useful lives of the
respective assets (subject to the
term of the lease in the case of
leased assets or leasehold
improvements and integral
equipment located in leased
properties).
Accounting for property, plant and
equipment includes determining the
appropriate period in which to
depreciate such assets, assessing
such assets for potential
impairment, capitalizing interest
during periods of construction and
assessing the asset retirement
obligations required for certain
leased properties that require us to
return the leased properties back to
their original condition at the time
we decide to exit a leased property.
Accounting for Leases
A significant portion of our data
center spaces, office spaces and
equipment are leased. Each time
we enter into a new lease or lease
amendments, we analyze each
lease or lease amendment for the
proper accounting, including
determining if an arrangement is or
contains a lease at inception and
making assessment of the leased
properties to determine if they are
operating or finance leases.
Judgments are required in arriving at the
estimated useful life of an asset and
changes to these estimates would have
significant impact on our financial
position and results of operations.
When we lease a property for our IBX
data centers, we generally enter into
long-term arrangements with initial lease
terms of at least 8-10 years and with
renewal options generally available to
us. In the next several years, a number
of leases for our IBX data centers will
come up for renewal. As we start
approaching the end of these initial
lease terms, we will need to reassess
the estimated useful lives of our
property, plant and equipment. In
addition, we may find that our estimates
for the useful lives of non-leased assets
may also need to be revised periodically.
We periodically review the estimated
useful lives of certain of our property,
plant and equipment and changes in
these estimates in the future are
possible.
The assessment of long-lived assets for
impairment requires assumptions and
estimates of undiscounted and
discounted future cash flows. These
assumptions and estimates require
significant judgment and are inherently
uncertain.
Determination of accounting treatment,
including the result of the lease
classification test for each new lease or
lease amendment, is dependent on a
variety of judgments, such as
identification of lease and non-lease
components, allocation of total
consideration between lease and non-
lease components, determination of
lease term, including assessing the
likelihood of lease renewals, valuation
of leased property, and establishing the
incremental borrowing rate to calculate
the present value of the minimum lease
payment for the lease test. The
judgments used in the accounting for
leases are inherently subjective; different
assumptions or estimates could result in
different accounting treatment for a
lease.
As of December 31, 2019 and 2018, we had
property, plant and equipment of $12.2 billion
and $11.0 billion, respectively. During the
years ended December 31, 2019, 2018 and
2017, we recorded depreciation expense of
$1.1 billion, $1.0 billion, and $0.9 billion,
respectively. While we evaluated the
appropriateness, we did not revise the
estimated useful lives of our property, plant
and equipment during the years ended
December 31, 2019, 2018 and 2017. Further
changes in our estimated useful lives of our
property, plant and equipment could have a
significant impact on our results of operations.
As of December 31, 2019, we recorded
operating lease right-of-use assets of $1.5
billion, finance lease assets of $1.3 billion,
operating lease liabilities of $1.5 billion, and
finance lease liabilities of $1.5 billion.
Additionally, during the years ended December
31, 2019, 2018 and 2017, we recorded rent
expense of approximately $219.0 million,
$185.4 million and $157.9 million respectively.
Recent Accounting Pronouncements
See "Recent Accounting Pronouncements" in Note 1 within the Consolidated Financial Statements.
63
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
The following discussion about market risk involves forward-looking statements. Actual results could differ materially
from those projected in the forward-looking statements. We may be exposed to market risks related to changes in
interest rates and foreign currency exchange rates and fluctuations in the prices of certain commodities, primarily
electricity.
We employ foreign currency forward and option contracts, cross-currency interest rate swaps and interest rate
locks for the purpose of hedging certain specifically-identified exposures. The use of these financial instruments is
intended to mitigate some of the risks associated with fluctuations in currency exchange and interest rates, but does
not eliminate such risks. We do not use financial instruments for trading or speculative purposes.
Investment Portfolio Risk
We maintain an investment portfolio of various holdings, types, and maturities that is prioritized on meeting REIT
asset requirements. All of our marketable securities are recorded on our consolidated balance sheets at fair value with
changes in fair values recognized in net income. We consider various factors in determining whether we should
recognize an impairment charge for our securities, including the length of time and extent to which the fair value has
been less than our cost basis and our intent and ability to hold the investment for a period of time sufficient to allow
for any anticipated recovery. We anticipate that we will recover the entire cost basis of these securities and have
determined that no other-than-temporary impairments associated with credit losses were required to be recognized
during the year ended December 31, 2019.
As of December 31, 2019, our investment portfolio of cash equivalents and marketable securities consisted of
money market funds, certificates of deposits and publicly traded equity securities. The amount in our investment portfolio
that could be susceptible to market risk totaled $896.9 million.
Interest Rate Risk
We are exposed to interest rate risk related to our outstanding debt. An immediate 10% increase or decrease in
current interest rates from their position as of December 31, 2019 would not have a material impact on our interest
expense due to the fixed coupon rate on the majority of our debt obligations. However, the interest expense associated
with our senior credit facility and term loans, that bear interest at variable rates, could be affected. For every 100 basis
point change in interest rates, our annual interest expense could increase by a total of approximately $11.5 million or
decrease by a total of approximately $4.8 million based on the total balance of our primary borrowings under the Term
Loan Facility as of December 31, 2019. As of December 31, 2019, we had no outstanding interest rate derivative
hedges against our debt obligations. However, we may enter into interest rate hedging agreements in the future to
mitigate our exposure to interest rate risk.
The fair value of our long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair value of
fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. These interest rate changes
may affect the fair value of the fixed interest rate debt but do not impact our earnings or cash flows. The fair value of
our mortgage and loans payable and 5.000% Infomart Senior Notes, which are not traded in the market, is estimated
by considering our credit rating, current rates available to us for debt of the same remaining maturities and the terms
of the debt. The fair value of our other senior notes, which are traded in the market, was based on quoted market
prices. The following table represents the carrying value and estimated fair value of our mortgage and loans payable
and senior notes as of (in thousands):
Mortgage and loans payable
$ 1,370,118 $ 1,378,429 $ 1,388,524 $
1,389,632
Senior notes
9,029,211
9,339,497
8,500,125
8,422,211
December 31, 2019
December 31, 2018
Carrying
Value (1)
Fair Value
Carrying
Value (1)
Fair Value
(1)
The carrying value is gross of debt issuance cost, debt discount and debt premium.
64
Foreign Currency Risk
A significant portion of our revenue is denominated in U.S. dollars, however, approximately 58% of our revenues
and 55% of our operating costs are attributable to Brazil, Canada, Colombia and the EMEA and Asia-Pacific regions,
and a large portion of those revenues and costs are denominated in a currency other than the U.S. dollar, primarily
the Euro, British pound, Japanese yen, Singapore dollar, Hong Kong dollar, Australian dollar and Brazilian real. To help
manage the exposure to foreign currency exchange rate fluctuations, we have implemented a number of hedging
programs, in particular:
•
•
•
a cash flow hedging program to hedge the forecasted revenues and expenses in our EMEA region;
a balance sheet hedging program to hedge the remeasurement of monetary assets and liabilities denominated
in foreign currencies; and
a net investment hedging program to hedge the long term investments in our foreign subsidiaries.
Our hedging programs reduce, but do not entirely eliminate, the impact of currency exchange rate movements on
our consolidated balance sheets, statements of operations and statements of cash flows.
We have entered into various foreign currency debt obligations. As of December 31, 2019, the total principal amount
of foreign currency debt obligations was $4.4 billion, including $3.1 billion denominated in Euro, $604.3 million
denominated in British Pound, $410.1 million denominated in Japanese Yen and $272.7 million denominated in Swedish
Krona. As of December 31, 2019, we have designated $4.1 billion of the total principal amount of foreign currency debt
obligations as net investment hedges against our net investments in foreign subsidiaries. For a net investment hedge,
changes in the fair value of the hedging instrument designated as a net investment hedge are recorded as a component
of other comprehensive income (loss) in the consolidated balance sheets. Fluctuations in the exchange rates between
these foreign currencies and the U.S. Dollar will impact the amount of U.S. Dollars that we will require to settle the
foreign currency debt obligations at maturity. If the U.S. Dollar would have been weaker or stronger by 10% in comparison
to these foreign currencies as of December 31, 2019, we estimate our obligation to cash settle the principal of these
foreign currency debt obligations in U.S. Dollars would have increased or decreased by approximately $485.9 million
and $397.5 million, respectively.
In 2019, we also entered into cross-currency interest rate swaps where we receive a fixed amount of U.S. Dollars
and pay a fixed amount of Euros, with a total notional amount of $750.0 million. The cross-currency interest rate swaps
are designated as hedges of our net investment in European operations and changes in the fair value of these swaps
are recorded as a component of accumulated other comprehensive income (loss) in the condensed consolidated
balance sheet. If the U.S. Dollar weakened or strengthened by 10% in comparison to Euro, we would have recorded
an additional loss of $93.1 million or gain of $76.2 million, respectively, within accumulated other comprehensive income
(loss) as of December 31, 2019.
The U.S. Dollar strengthened relative to certain of the currencies of the foreign countries in which we operate
during the year ended December 31, 2019. This has impacted our condensed consolidated financial position and
results of operations during this period, including the amount of revenues that we reported. Continued strengthening
or weakening of the U.S. Dollar will continue to impact us in future periods.
With the existing cash flow hedges in place, a hypothetical additional 10% strengthening of the U.S. dollar during
the year ended December 31, 2019 would have resulted in a reduction of our revenues and operating expenses,
including depreciation and amortization expenses, by approximately $153.7 million and $152.5 million, respectively.
With the existing cash flow hedges in place, a hypothetical additional 10% weakening of the U.S. dollar during the
year ended December 31, 2019 would have resulted in an increase of our revenues and operating expenses, including
depreciation and amortization expenses, by approximately $188.2 million and $188.4 million, respectively.
We may enter into additional hedging activities in the future to mitigate our exposure to foreign currency risk as
our exposure to foreign currency risk continues to increase due to our growing foreign operations; however, we do not
currently intend to eliminate all foreign currency transaction exposure.
65
Commodity Price Risk
Certain operating costs incurred by us are subject to price fluctuations caused by the volatility of underlying
commodity prices. The commodities most likely to have an impact on our results of operations in the event of price
changes are electricity, supplies and equipment used in our IBX data centers. We closely monitor the cost of electricity
at all of our locations. We have entered into several power contracts to purchase power at fixed prices in certain
locations in the U.S., Switzerland, Italy, Sweden, Ireland, Bulgaria, Poland, Spain, Portugal, Australia, Brazil, France,
Germany, Japan, the Netherlands, Singapore and the United Kingdom.
In addition, as we are building new, or expanding existing, IBX data centers, we are subject to commodity price
risk for building materials related to the construction of these IBX data centers, such as steel and copper. In addition,
the lead-time to procure certain pieces of equipment, such as generators, is substantial. Any delays in procuring the
necessary pieces of equipment for the construction of our IBX data centers could delay the anticipated openings of
these new IBX data centers and, as a result, increase the cost of these projects.
We do not currently employ forward contracts or other financial instruments to address commodity price risk other
than the power contracts discussed above.
ITEM 8.
Financial Statements and Supplementary Data
The financial statements and supplementary data required by this Item 8 are listed in Item 15(a)(1) and begin at
page F-1 of this Annual Report on Form 10-K.
ITEM 9.
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
There is no disclosure to report pursuant to Item 9.
ITEM 9A.
Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and our
Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure
controls and procedures were effective at the reasonable assurance level as of December 31, 2019.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Exchange Act Rule 13a-15(f). Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting
based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
Based on our evaluation under the framework in Internal Control – Integrated Framework (2013), our management
concluded that our internal control over financial reporting was effective as of December 31, 2019.
The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is
included herein on page F-1 of this Annual Report on Form 10-K.
66
Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure
controls and procedures and internal control over financial reporting are designed and operated to be effective at the
reasonable assurance level. However, our management does not expect that our disclosure controls and procedures
or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits
of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been
detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that
breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management override of the controls. The design of
any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions;
over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies
or procedures may deteriorate. Because of the inherent limitations in a cost effective control system, misstatements
due to error or fraud may occur and not be detected.
Changes in Internal Control Over Financial Reporting
There was no change in our internal controls over financial reporting during the fourth quarter of fiscal 2019 that
has materially affected, or is reasonable likely to affect, our internal controls over financial reporting. While we
implemented certain internal controls related to the adoption of ASC 842, Leases, to ensure we adequately assessed
the impact of the new lease accounting standard on our financial statements to facilitate the adoption effective January
1, 2019, we do not believe these have had a material effect on our internal control over financial reporting.
ITEM 9B. Other Information
There is no disclosure to report pursuant to Item 9B.
PART III
ITEM 10.
Directors, Executive Officers and Corporate Governance
Information required by this item is incorporated by reference to the Equinix proxy statement for the 2020 Annual
Meeting of Stockholders.
We have adopted a Code of Ethics applicable for the Chief Executive Officer and Senior Financial Officers and a
Code of Business Conduct. This information is incorporated by reference to the Equinix proxy statement for the 2020
Annual Meeting of Stockholders and is also available on our website, www.equinix.com.
ITEM 11.
Executive Compensation
Information required by this item is incorporated by reference to the Equinix proxy statement for the 2020 Annual
Meeting of Stockholders.
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Information required by this item is incorporated by reference to the Equinix proxy statement for the 2020 Annual
Meeting of Stockholders.
67
ITEM 13.
Certain Relationships and Related Transactions, and Director Independence
Information required by this item is incorporated by reference to the Equinix proxy statement for the 2020 Annual
Meeting of Stockholders.
ITEM 14.
Principal Accountant Fees and Services
Information required by this item is incorporated by reference to the Equinix proxy statement for the 2020 Annual
Meeting of Stockholders.
68
PART IV
ITEM 15.
Exhibits, Financial Statement Schedules
(a)(1) Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2019, 2018
and 2017
Consolidated Statements of Stockholders' Equity and Other Comprehensive Income (Loss) for the years
ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
(a)(2) Financial statements and schedules:
Schedule III- Schedule of Real Estate and Accumulated Depreciation at December 31, 2019 with
reconciliations for the years ended December 31, 2019, 2018 and 2017
(a)(3) Exhibits:
F-1
F-4
F-5
F-6
F-7
F-9
F-10
F-66
Exhibit
Number
Exhibit Description
2.1
2.2
2.3
2.4
2.5
2.6
2.7
3.1
Rule 2.7 Announcement, dated as May 29,
2015. Recommended Cash and Share Offer
for Telecity Group plc by Equinix, Inc.
Cooperation Agreement, dated as of May 29,
2015, by and between Equinix, Inc. and
Telecity Group plc.
Amendment to Cooperation Agreement, dated
as of November 24, 2015, by and between
Equinix, Inc. and Telecity Group plc.
Transaction Agreement, dated as of December
6, 2016, by and between Verizon
Communications Inc. and Equinix, Inc.
Amendment No. 1 to the Transaction
Agreement, dated February 23, 2017, by and
between Verizon Communications Inc. and
Equinix, Inc.
Amendment No.2 to the Transaction
Agreement, dated April 30, 2017, by and
between Verizon Communications Inc. and
Equinix, Inc.
Amendment No.3 to the Transaction
Agreement, dated June 29, 2018, by and
between Verizon Communications Inc. and
Equinix, Inc.
Amended and Restated Certificate of
Incorporation of the Registrant, as amended to
date.
69
Incorporated by Reference
Filing Date/
Period End
Date
Exhibit
Filed
Herewith
5/29/2015
2.1
Form
8-K
8-K
5/29/2015
2.2
10-K
12/31/2015
2.3
8-K
12/6/2016
2.1
10-K
12/31/2016
2.5
8-K
5/1/2017
2.1
10-Q
8/8/2018
2.7
10-K/A
12/31/2002
3.1
Exhibit
Number
3.2
Exhibit Description
Certificate of Amendment to the Amended and
Restated Certificate of Incorporation of the
Registrant.
Form
8-K
Filing Date/
Period End
Date
6/14/2011
Filed
Herewith
Exhibit
3.1
Incorporated by Reference
8-K
6/11/2013
3.1
10-Q
6/30/2014
3.4
10-K/A
12/31/2002
8-K
3/29/2016
3.3
3.1
8-K
3/5/2013
4.3
8-K
11/20/2014
4.1
8-K
11/20/2014
4.2
8-K
11/20/2014
4.4
8-K
12/4/2015
4.2
8-K
3/22/2017
4.2
3.3
3.4
3.5
3.6
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Certificate of Amendment to the Amended and
Restated Certificate of Incorporation of the
Registrant.
Certificate of Amendment to the Amended and
Restated Certificate of Incorporation of the
Registrant.
Certificate of Designation of Series A and
Series A-1 Convertible Preferred Stock.
Amended and Restated Bylaws of the
Registrant.
Reference is made to Exhibits 3.1, 3.2, 3.3,
3.4, 3.5 and 3.6.
Indenture for the 2023 Notes dated March 5,
2013 between Equinix, Inc. and U.S. Bank
National Association as trustee.
Form of 5.375% Senior Note due 2023 (see
Exhibit 4.2).
Indenture, dated as of November 20, 2014,
between Equinix, Inc. and U.S. Bank National
Association, as trustee.
First Supplemental Indenture, dated as of
November 20, 2014, between Equinix, Inc.
and U.S. Bank National Association, as
trustee.
Form of 5.375% Senior Note due 2022 (see
Exhibit 4.5).
Second Supplemental Indenture, dated as of
November 20, 2014, between Equinix, Inc.
and U.S. Bank National Association, as
trustee.
Form of 5.750% Senior Note due 2025 (see
Exhibit 4.7).
Third Supplemental Indenture, dated as of
December 4, 2015, between Equinix, Inc. and
U.S. Bank National Association, as trustee.
4.10
4.11
4.12
Form of 5.875% Senior Note due 2026 (see
Exhibit 4.9).
Fourth Supplemental Indenture, dated as of
March 22, 2017 between Equinix, Inc. and
U.S. Bank National Association, as trustee.
Form of 5.375% Senior Notes due 2027 (see
Exhibit 4.11).
70
Incorporated by Reference
Filing Date/
Period End
Date
9/20/2017
Filed
Herewith
Exhibit
4.2
Form
8-K
8-K
12/5/2017
4.1
8-K
12/5/2017
4.2
8-K
3/14/2018
4.2
8-K
4/3/2018
4.2
8-K
11/18/2019
4.2
8-K
11/18/2019
4.4
8-K
11/18/2019
4.6
Exhibit
Number
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
4.25
4.26
4.27
4.28
4.29
Exhibit Description
Fifth Supplemental Indenture, dated as of
September 20, 2017 among Equinix, Inc. and
U.S. Bank National Association, as trustee,
and Elavon Financial Services DAC, UK
Branch, as paying agent.
Form of 2.875% Senior Notes due 2025 (see
Exhibit 4.13).
Indenture, dated as of December 12, 2017,
between Equinix, Inc. and U.S. Bank National
Association, as trustee.
Supplemental Indenture, dated as of
December 12, 2017, among Equinix, Inc. and
U.S. Bank National Association, as trustee,
and Elavon Financial Services DAC, UK
Branch, as paying agent.
Form of 2.875% Senior Notes due 2026 (see
Exhibit 4.16).
Second Supplemental Indenture, dated as of
March 14, 2018, among Equinix, Inc. and U.S.
Bank National Association, as trustee, and
Elavon Financial Services DAC, UK Branch,
as paying agent.
Form of 2.875% Senior Notes due 2024 (see
Exhibit 4.18).
Third Supplemental Indenture, dated as of
April 2, 2018, among Equinix, Inc. and U.S.
Bank National Association, as trustee.
Form of 5.00% Senior Notes due April 2020
(see Exhibit 4.20).
Form of 5.00% Senior Notes due October
2020 (see Exhibit 4.20).
Form of 5.00% Senior Notes due April 2021
(see Exhibit 4.20).
Fourth Supplemental Indenture, dated as of
November 18,2019, among Equinix, Inc and
U.S. Bank National Association, as trustee.
Form of 2.625% Senior Notes due 2024 (See
Exhibit 4.26).
Fifth Supplemental Indenture, dated as of
November 18, 2019, among Equinix, Inc. and
U.S. Bank National Association, as trustee.
Form of 2.900% Senior Notes due 2026 (See
Exhibit 4.28).
Sixth Supplemental Indenture, dated as of
November 18, 2019, among Equinix, Inc. and
U.S. Bank National Association, as trustee.
Form of 3.200% Senior Notes due 2029 (See
Exhibit 4.30)
71
Exhibit
Number
4.30
Exhibit Description
Form of Registrant's Common Stock
Certificate.
4.31
Description of Securities
Incorporated by Reference
Filing Date/
Period End
Date
12/31/2014
Filed
Herewith
Exhibit
4.13
Form
10-K
X
10.1**
Form of Indemnification Agreement between
the Registrant and each of its officers and
directors.
S-4 (File No.
333-93749)
12/29/1999
10.5
10.2**
2000 Equity Incentive Plan, as amended.
10.3**
2000 Director Option Plan, as amended.
10.4**
2001 Supplemental Stock Plan, as amended.
10.5**
Equinix, Inc. 2004 Employee Stock Purchase
Plan, as amended.
10.6**
Switch & Data 2007 Stock Incentive Plan.
12/31/2016
12/31/2016
12/31/2016
6/30/2014
10.2
10.3
10.4
10.5
2/5/2007
10.9
10-K
10-K
10-K
10-Q
S-1/A
(File No.
333-137607)
filed by
Switch &
Data
Facilities
Company
Repatriation Agreement by and between
Equinix, Inc. and Eric Schwartz dated June 5.
10-Q
6/30/2019
10.17
10.7**
10.8**
10.9**
10.10**
10.11**
10.12**
10.13**
10.15**
10.16**
10.17**
2017 Form of Revenue/AFFO Restricted
Stock Unit Agreement for Executives.
2017 Form of TSR Restricted Stock Unit
Agreement for Executives.
2017 Form of Time-Based Restricted Stock
Unit Agreement for Executives.
2018 Form of Revenue/AFFO Restricted
Stock Unit Agreement for Executives.
2018 Form of TSR Restricted Stock Unit
Agreement for Executives.
2018 Form of Time-Based Restricted Stock
Unit Agreement for Executives.
10.14**
2019 Equinix, Inc. Annual Incentive Plan.
2019 Form of Revenue/AFFO per Share
Restricted Stock Unit Agreement for
Executives.
2019 Form of TSR Restricted Stock Unit
Agreement for Executives.
10-Q
3/31/2017
10.35
10-Q
3/31/2017
10.36
10-Q
3/31/2017
10.37
10-Q
3/31/2018
10.31
10-Q
3/31/2018
10.32
10-Q
3/31/2018
10.33
10-Q
10-Q
3/31/2019
3/31/2019
10.28
10.29
10-Q
3/31/2019
10.30
2019 Form of Time-Based Restricted Stock
Unit Agreement for Executives.
10-Q
3/31/2019
10.31
72
Incorporated by Reference
Filing Date/
Period End
Date
9/30/2014
Filed
Herewith
Exhibit
10.67
Form
10-Q
10-Q
6/30/2016
10.55
10-K
12/31/2017
10.40
10-Q
8/8/2018
10.35
10-Q
8/8/2018
10.36
10-Q
6/30/2019
10.34
Exhibit
Number
10.18
10.19
10.20
10.21
10.22
10.23
Exhibit Description
Agreement for Purchase and Sale of Shares
Among RW Brasil Fundo de Investimentos em
Participação, Antônio Eduardo Zago De
Carvalho and Sidney Victor da Costa Breyer,
as Sellers, and Equinix Brasil Participaçãoes
Ltda., as Purchaser, and Equinix South
America Holdings LLC., as a Party for Limited
Purposes and ALOG Soluções de Tecnologia
em Informática S.A. as Intervening Consenting
Party dated July 18, 2014.
Share Purchase Agreement with Digital Realty
Trust, L.P., relating to the sale and purchase of
shares in TelecityGroup UK LON Limited,
Telecity Netherlands AMS01 AMS04 BV,
Equinix Real Estate (TCY AMS04) B.V. and
TelecityGroup Germany Fra2 GmbH, dated
May 14, 2016.
Credit Agreement dated as of December 12,
2017 among Equinix, Inc. as Borrower, The
Guarantors Parties (defined therein), Bank of
America, N.A., as Administrative Agent,
Lender and L/C issuer, Barclays Bank PLS,
Goldman Sachs Bank USA, HSBC Securities
(USA) Inc. ING Capital LLC, TD Securities
(USA) LLC, and Wells Fargo Bank, National
Association as Co-Documentation Agents, the
Other Lenders Party (defined therein) and
Bank of America, N.A., Citibank, N.A.,
JPMorgan Chase Bank, N.A., MUFG, and
RBC Capital Markets as Joint Lead Arrangers
and Joint Book Runners.
Consent and First Amendment to Credit
Agreement, dated as of June 28, 2018 by and
among Equinix, Inc. as Borrower, the
Guarantors (defined therein), the Lenders (as
such term is defined in the Credit Agreement
referred to therein), and BANK OF AMERICA,
N.A., as Administrative Agent.
Second Amendment to Credit Agreement,
dated as of July 26, 2018, by and between
Equinix, Inc. as Borrower, the financial
institutions defined therein, MUFG Bank, Ltd.,
as Technical Agent and Bank of America, N.A.
as Administrative Agent, under that certain
Credit Agreement dated December 12, 2017.
Third Amendment to Credit Agreement, dated
as of April 26, 2019, by and among Equinix,
Inc., Delaware corporation ("Equinix" or the
"Borrower"), each "Lender" (as such term is
defined in the Credit Agreement referred to
therein) party hereto, and BANK OF
AMERICA, N.A., as Administrative Agent,
under that certain Credit Agreement dated
December 12, 2017.
10.24**
Relocation Letter Agreement by and between
Equinix, Inc. and Charles Meyers dated
October 12, 2018.
10-K
2/22/2019
10.37
73
Exhibit
Number
10.25**
10.26**
10.27**
10.28**
10.29**
10.30**
10.31**
10.32**
10.33**
10.34**
10.35**
10.36**
10.37**
10.38**
10.39**
10.40**
Exhibit Description
Change in Control Severance Agreement
between Equinix, Inc and Mike Campbell
dated October 3, 2019.
Change in Control Severance Agreement
between Equinix, Inc and Brandi Galvin
Morandi dated October 3, 2019.
Change in Control Severance Agreement
between Equinix, Inc and Karl Strohmeyer
dated October 3, 2019.
Change in Control Severance Agreement
between Equinix, Inc and Peter Van Camp
dated October 3, 2019.
Change in Control Severance Agreement
between Equinix, Inc and Charles Meyers
dated October 4, 2019.
Change in Control Severance Agreement
between Equinix, Inc and Eric Schwartz dated
October 3, 2019.
Change in Control Severance Agreement
between Equinix, Inc and Keith Taylor dated
October 3, 2019.
Change in Control Severance Agreement
between Equinix, Inc and Sara Baack dated
October 3, 2019.
Side Letter Agreement Regarding RSUs
between Equinix, Inc. and Sara Baack dated
October 3, 2019.
Side Letter Agreement Regarding RSUs
between Equinix, Inc. and Charles Meyers
dated October 4, 2019.
Side Letter Agreement Regarding RSUs
between Equinix, Inc. and Eric Schwartz dated
October 3, 2019.
Side Letter Agreement Regarding RSUs
between Equinix, Inc. and Keith Taylor dated
October 3, 2019.
Side Letter Agreement Regarding RSUs
between Equinix, Inc. and Mike Campbell
dated October 3, 2019.
Side Letter Agreement Regarding RSUs
between Equinix, Inc. and Brandi Galvin
Morandi dated October 3, 2019.
Side Letter Agreement Regarding RSUs
between Equinix, Inc. and Karl Strohmeyer
dated October 3, 2019.
Side Letter Agreement Regarding RSUs
between Equinix, Inc. and Peter Van Camp
dated October 3, 2019.
Incorporated by Reference
Filing Date/
Period End
Date
9/30/2019
Filed
Herewith
Exhibit
10.25
Form
10-Q
10-Q
9/30/2019
10.26
10-Q
9/30/2019
10.27
10-Q
9/30/2019
10.28
10-Q
9/30/2019
10.29
10-Q
9/30/2019
10.30
10-Q
9/30/2019
10.31
10-Q
9/30/2019
10.32
10-Q
9/30/2019
10.33
10-Q
9/30/2019
10.34
10-Q
9/30/2019
10.35
10-Q
9/30/2019
10.36
10-Q
9/30/2019
10.37
10-Q
9/30/2019
10.38
10-Q
9/30/2019
10.39
10-Q
9/30/2019
10.4
21.1
Subsidiaries of Equinix, Inc.
X
74
Incorporated by Reference
Exhibit
Number
23.1
31.1
31.2
32.1
32.2
Exhibit Description
Form
Consent of PricewaterhouseCoopers LLP,
Independent Registered Public Accounting
Firm.
Chief Executive Officer Certification pursuant
to Section 302 of the Sarbanes-Oxley Act of
2002.
Chief Financial Officer Certification pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002.
Chief Executive Officer Certification pursuant
to Section 906 of the Sarbanes-Oxley Act of
2002.
Chief Financial Officer Certification pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
101.INS
XBRL Instance Document - the instance
document does not appear in the Interactive
Data File because its XBRL tags are
embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema
Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation
Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition
Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label
Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation
Linkbase Document.
104
Cover Page Interactive Data File - the cover
page interactive data file does not appear in
the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL
document.
Filing Date/
Period End
Date
Exhibit
Filed
Herewith
X
X
X
X
X
X
X
X
X
X
X
X
** Management contracts or compensation plans or arrangements in which directors or executive officers are
eligible to participate.
(b)
Exhibits.
See (a) (3) above.
(c)
Financial Statement Schedule.
See (a) (2) above.
ITEM 16.
Form 10-K Summary
Not applicable.
75
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Signatures
February 21, 2020
EQUINIX, INC.
(Registrant)
By
/s/ CHARLES MEYERS
Charles Meyers
Chief Executive Officer and President
Power of Attorney
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Charles Meyers or Keith D. Taylor, or either of them, each with the power of substitution, their attorney-in-
fact, to sign any amendments to this Annual Report on Form 10-K (including post-effective amendments), and to file
the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or their substitute or substitutes,
may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
76
Signature
Title
Date
/s/ CHARLES MEYERS
Charles Meyers
Chief Executive Officer and President (Principal
Executive Officer)
February 21, 2020
/s/ KEITH D. TAYLOR
Chief Financial Officer (Principal Financial Officer)
February 21, 2020
Keith D. Taylor
/s/ SIMON MILLER
Simon Miller
Chief Accounting Officer (Principal Accounting
Officer)
February 21, 2020
/s/ PETER F. VAN CAMP
Executive Chairman
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
Peter F. Van Camp
/s/ THOMAS A. BARTLETT
Director
Thomas A. Bartlett
/s/ NANCI CALDWELL
Director
Nanci Caldwell
/s/ ADAIRE FOX-MARTIN
Director
Adaire Fox-Martin
/s/ GARY F. HROMADKO
Director
Gary F. Hromadko
/s/ SCOTT G. KRIENS
Director
Scott G. Kriens
/s/ WILLIAM K. LUBY
Director
William K. Luby
/s/ IRVING F. LYONS, III
Director
Irving F. Lyons, III
/s/ CHRISTOPHER B. PAISLEY Director
Christopher B. Paisley
/s/ SANDRA RIVERA
Director
Sandra Rivera
77
Index to Exhibits
Description of Document
Description of Securities
Subsidiaries of Equinix, Inc.
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit
Number
4.31
21.1
23.1
31.1
31.2
32.1
32.2
101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
101.DEF
Inline XBRL Taxonomy Extension Calculation Document.
Inline XBRL Taxonomy Extension Definition Document.
101.LAB
Inline XBRL Taxonomy Extension Labels Document.
101. PRE
Inline XBRL Taxonomy Extension Presentation Document.
104
Cover Page Interactive Data File - the cover page interactive data file does not appear in the
Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
** Management contracts or compensation plans or arrangements in which directors or executive officers are
eligible to participate.
78
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Equinix, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Equinix, Inc. and its subsidiaries (the “Company”)
as of December 31, 2019 and 2018, and the related consolidated statements of operations, of comprehensive income
(loss), of stockholders' equity and other comprehensive income (loss) and of cash flows for each of the three years in
the period ended December 31, 2019, including the related notes and financial statement schedule listed in the index
appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited
the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the COSO.
Changes in Accounting Principles
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts
for leases as of January 1, 2019 and the manner in which it accounts for revenue from contracts with customers as of
January 1, 2018.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in Management's Report on Internal Control Over Financial Reporting appearing under Item 9A.
Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company's
internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting
was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
F-1
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company's internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that (i) relates
to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way
our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which
it relates.
Income taxes - Real estate investment trust asset tests
As described in Notes 1 and 14 to the consolidated financial statements, the Company recorded income tax expense
of $185.4 million for the year ended December 31, 2019. The Company has been operating as a real estate investment
trust for federal income tax purposes (“REIT”) effective January 1, 2015. As a result, the Company may deduct the
distributions made to its stockholders from taxable income generated by the Company and its qualified REIT subsidiaries
("QRSs"). The Company’s qualification and taxation as a REIT depends on its satisfaction of certain asset, income,
organizational, distribution, stockholder ownership and other requirements on a continuing basis. The Company’s
ability to satisfy quarterly asset tests depends upon its analysis and the fair market values of its REIT and non-REIT
assets. For purposes of the quarterly REIT asset tests, management estimates the fair market value of assets within
its QRSs and taxable REIT subsidiaries (“TRSs”) using a discounted cash flow approach, by calculating the present
value of forecasted future cash flows. Management applies discount rates based on industry benchmarks relative to
the market and forecasting risks. Other significant assumptions used by management to estimate the fair market value
of assets in QRSs and TRSs include projected revenue growth, projected operating margins, and projected capital
expenditures. Management revisits significant assumptions periodically to reflect any changes due to business or
economic environment.
The principal considerations for our determination that performing procedures relating to the REIT asset tests is a
critical audit matter are (i) there was significant judgment by management in determining the fair market value of REIT
and non-REIT assets, which in turn led to a high degree of subjectivity in performing procedures relating to the REIT
asset test, (ii) there was significant audit effort and judgment in evaluating audit evidence related to the significant
assumptions used in the REIT asset test, including the discount rates, projected revenue growth, projected operating
margins, and projected capital expenditures, and (iii) the audit effort involved the use of professionals with specialized
skill and knowledge to assist in performing these procedures.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to the REIT asset test, including controls over the determination of the fair market value of REIT and non-REIT
assets. These procedures also included, among others, testing management’s process for estimating the fair market
value of the REIT and non-REIT assets; evaluating the appropriateness of the discounted cash flow approach; testing
F-2
the completeness and accuracy of underlying data used in the approach; and evaluating the significant assumptions
used by management, including the discount rates, projected revenue growth, projected operating margins, and
projected capital expenditures. Evaluating management’s assumptions related to projected revenue growth, projected
operating margins, and projected capital expenditures involved considering the current and past performance of the
Company, economic and industry trends, as well as whether these assumptions were consistent with evidence obtained
in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of
the Company’s discounted cash flow approach and certain significant assumptions, including the discount rates.
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 21, 2020
We have served as the Company's auditor since 2000.
F-3
EQUINIX, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance for doubtful accounts of $13,026 and
Assets
$15,950
Other current assets
Total current assets
Property, plant and equipment, net
Operating lease right-of-use assets
Goodwill
Intangible assets, net
Other assets
Total assets
Current liabilities:
Liabilities and Stockholders' Equity
Accounts payable and accrued expenses
Accrued property, plant and equipment
Current portion of operating lease liabilities
Current portion of finance lease liabilities
Current portion of mortgage and loans payable
Current portion of senior notes
Other current liabilities
Total current liabilities
Operating lease liabilities, less current portion
Finance lease liabilities, less current portion
Mortgage and loans payable, less current portion
Senior notes, less current portion
Other liabilities
Total liabilities
Commitments and contingencies (Note 15)
Equinix stockholders' equity:
Preferred stock, $0.001 par value per share: 100,000,000 shares authorized in
2019 and 2018; zero shares issued and outstanding
Common stock, $0.001 par value per share: 300,000,000 shares authorized in
2019 and 2018; 85,700,953 issued and 85,308,386 outstanding in 2019 and
81,119,117 issued and 80,722,258 outstanding in 2018
Additional paid-in capital
Treasury stock, at cost; 392,567 shares in 2019 and 396,859 shares in 2018
Accumulated dividends
Accumulated other comprehensive loss
Retained earnings
Total Equinix stockholders' equity
Non-controlling interests
Total stockholders' equity
Total liabilities and stockholders' equity
December 31,
2019
2018
$ 1,869,577 $
10,362
606,166
4,540
689,134
303,543
2,872,616
12,152,597
1,475,367
4,781,858
2,102,389
580,788
630,119
274,857
1,515,682
11,026,020
—
4,836,388
2,333,296
533,252
$ 23,965,615 $ 20,244,638
$
760,718 $
301,535
145,606
75,239
77,603
643,224
153,938
2,157,863
1,315,656
1,430,882
1,289,434
8,309,673
621,725
15,125,233
756,692
179,412
—
77,844
73,129
300,999
126,995
1,515,071
—
1,441,077
1,310,663
8,128,785
629,763
13,025,359
—
—
86
12,696,433
(144,256)
(4,168,469)
(934,613)
1,391,425
8,840,606
(224)
8,840,382
81
10,751,313
(145,161)
(3,331,200)
(945,702)
889,948
7,219,279
—
7,219,279
$ 23,965,615 $ 20,244,638
See accompanying notes to consolidated financial statements.
F-4
EQUINIX, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
Revenues
Costs and operating expenses:
Cost of revenues
Sales and marketing
General and administrative
Transaction costs
Impairment charges
Gain on asset sales
Total costs and operating expenses
Income from operations
Interest income
Interest expense
Other income
Loss on debt extinguishment
Income before income taxes
Income tax expense
Net income
Net loss attributable to non-controlling interests
Years Ended December 31,
2018
$ 5,562,140 $ 5,071,654 $ 4,368,428
2017
2019
2,810,184
2,605,475
2,193,149
651,046
935,018
24,781
15,790
633,702
826,694
34,413
—
(44,310)
(6,013)
581,724
745,906
38,635
—
—
4,392,509
1,169,631
27,697
4,094,271
3,559,414
977,383
14,482
809,014
13,075
(479,684)
(521,494)
(478,698)
27,778
(52,825)
692,597
(185,352)
507,245
205
14,044
(51,377)
433,038
(67,679)
365,359
—
9,213
(65,772)
286,832
(53,850)
232,982
—
Net income attributable to Equinix
$
507,450 $
365,359 $
232,982
Earnings per share ("EPS") attributable to Equinix:
Basic EPS
Weighted-average shares for basic EPS
Diluted EPS
Weighted-average shares for diluted EPS
$
$
6.03 $
4.58 $
84,140
79,779
5.99 $
4.56 $
84,679
80,197
3.03
76,854
3.00
77,535
See accompanying notes to consolidated financial statements.
F-5
EQUINIX, INC.
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment ("CTA") gain (loss), net of
tax effects of $(51), $4,419 and $0
Net investment hedge CTA gain (loss), net of tax effects of $10,
$1,358 and $0
Unrealized gain on available-for-sale securities, net of tax effects of
$0, $0 and $(10)
Unrealized gain (loss) on cash flow hedges, net of tax effects of
$2,938, $(14,557) and $18,542
Net actuarial gain (loss) on defined benefit plans, net of tax effects
of $(9), $(15) and $39
Total other comprehensive income (loss), net of tax
Comprehensive income, net of tax
Net loss attributable to non-controlling interests
Other comprehensive loss attributable to non-controlling interests
Years Ended December 31,
2018
365,359 $
2019
507,245 $
2017
232,982
$
(58,334)
(421,743)
454,269
73,294
219,628
(235,292)
—
—
14
(3,842)
43,671
(54,895)
(48)
11,070
518,315
205
19
55
(158,389)
206,970
—
—
(143)
163,953
396,935
—
—
Comprehensive income attributable to Equinix
$
518,539 $
206,970 $
396,935
See accompanying notes to consolidated financial statements.
F-6
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Depreciation
Stock-based compensation
Amortization of intangible assets
Amortization of debt issuance costs and debt discounts and premiums
Provision for allowance for doubtful accounts
Impairment charges
Gain on asset sales
Loss on debt extinguishment
Other items
Changes in operating assets and liabilities:
Accounts receivable
Income taxes, net
Other assets
Operating lease right-of-use assets
Operating lease liabilities
Accounts payable and accrued expenses
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of investments
Sales and maturities of investments
Business acquisitions, net of cash and restricted cash acquired
Purchases of real estate
Purchases of other property, plant and equipment
Proceeds from sale of assets, net of cash transferred
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from employee equity awards
Payment of dividends and special distribution
Proceeds from public offering of common stock, net of issuance costs
Proceeds from senior notes, net of debt discounts
Proceeds from loans payable
Repayment of senior notes
Repayment of finance lease liabilities
Repayment of mortgage and loans payable
Debt extinguishment costs
Debt issuance costs
Other financing activities
Net cash provided by financing activities
Effect of foreign currency exchange rates on cash, cash equivalents and restricted
cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental cash flow information
Cash paid for taxes
Cash paid for interest
Cash and cash equivalents
Current portion of restricted cash included in other current assets
Non-current portion of restricted cash included in other assets
Total cash, cash equivalents, and restricted cash shown in the consolidated statement
of cash flows
$
$
$
$
$
Years Ended December 31,
2018
2017
2019
$
507,245
$
365,359
$
232,982
1,088,559
236,539
196,278
13,042
8,459
15,790
(44,310)
52,825
11,620
(26,909)
32,495
(100,144)
149,031
(152,091)
(27,928)
32,227
1,992,728
(60,909)
40,386
(34,143)
(169,153)
(2,079,521)
358,773
(1,944,567)
52,018
(836,164)
1,660,976
2,797,906
—
(2,206,289)
(126,486)
(73,227)
(43,311)
(23,341)
—
1,202,082
8,766
1,259,009
627,604
1,886,613
136,583
553,815
1,869,577
7,090
9,946
$
$
$
$
1,024,073
180,716
203,416
13,618
7,236
—
(6,013)
51,377
19,660
(52,931)
(10,670)
(47,635)
—
—
35,495
31,725
1,815,426
(65,180)
85,777
(829,687)
(182,418)
(2,096,174)
12,154
(3,075,528)
50,136
(738,600)
388,172
929,850
424,650
—
(103,774)
(447,473)
(20,556)
(12,218)
725
470,912
(33,907)
(823,097)
1,450,701
627,604
93,375
496,795
606,166
10,887
10,551
$
$
$
$
865,472
175,500
177,008
24,449
5,627
—
—
65,772
(11,243)
(161,774)
(34,936)
20,180
—
—
74,488
5,708
1,439,233
(57,926)
46,421
(3,963,280)
(95,083)
(1,378,725)
47,767
(5,400,826)
41,696
(621,497)
2,481,421
3,628,701
2,056,876
(500,000)
(93,470)
(2,277,798)
(26,122)
(81,047)
(900)
4,607,860
31,187
677,454
773,247
1,450,701
72,641
444,793
1,412,517
26,919
11,265
1,886,613
$
627,604
$
1,450,701
See accompanying notes to consolidated financial statements.
F-9
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business and Summary of Significant Accounting Policies
Nature of Business
Equinix, Inc. ("Equinix" or the "Company") was incorporated in Delaware on June 22, 1998. Equinix provides
colocation space and related offerings. Global enterprises, content providers, financial companies and network service
providers rely upon Equinix's insight and expertise to safehouse and connect their most valued information assets.
The Company operates International Business ExchangeTM ("IBX®") data centers, or IBX data centers, across the
Americas; Europe, Middle East and Africa ("EMEA") and Asia-Pacific geographic regions where customers directly
interconnect with a network ecosystem of partners and customers. More than 1,800 network service providers offer
access to the world's internet routes inside the Company's IBX data centers. This access to internet routes provides
Equinix customers improved reliability and streamlined connectivity while significantly reducing costs by reaching a
critical mass of networks within a centralized physical location. As of December 31, 2019, the Company operated 204
IBX data centers in 53 markets across five continents.
The Company has been operating as a real estate investment trust for federal income tax purposes ("REIT")
effective January 1, 2015. See "Income Taxes" in Note 14 below for additional information.
Basis of Presentation, Consolidation and Foreign Currency
The accompanying consolidated financial statements include the accounts of Equinix and its subsidiaries, including
the acquisitions of:
• Switch Datacenters' AMS1 data center business in Amsterdam, Netherlands from April 18, 2019;
• Metronode from the Ontario Teachers' Pension Plan Board (the "Metronode Acquisition") from April 18, 2018;
•
•
Infomart Dallas, including its operations and tenants, from ASB Real Estate Investments (the "Infomart Dallas
Acquisition") from April 2, 2018;
Itconic, a data center business in Spain and Portugal from October 9, 2017;
• Zenium's data center business in Istanbul from October 6, 2017;
•
certain colocation business from Verizon Communications Inc. ("Verizon") consisting of 29 data center buildings
located in the United States ("U.S."), Brazil and Colombia (the "Verizon Data Center Acquisition") from May
1, 2017;
•
IO UK's data center operating business in Slough, United Kingdom ("IO Acquisition") from February 3, 2017.
All intercompany accounts and transactions have been eliminated in consolidation. Foreign exchange gains or
losses resulting from foreign currency transactions, including intercompany foreign currency transactions, that are
anticipated to be repaid within the foreseeable future, are reported within other income (expense) on the Company's
accompanying consolidated statements of operations. For additional information on the impact of foreign currencies
to the Company's consolidated financial statements, see "Accumulated Other Comprehensive Loss" in Note 12.
Use of Estimates
The preparation of consolidated financial statements in conformity with the accounting principles generally accepted
in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates. On an ongoing basis, the Company evaluates its estimates, including, but not limited
to, those related to the allowance for doubtful accounts, fair values of financial instruments, intangible assets and
goodwill, and assets acquired and liabilities assumed from acquisitions, useful lives of intangible assets and property,
plant and equipment, leases, asset retirement obligations, other accruals, and income taxes. The Company bases its
estimates on historical experience and on various other assumptions that are believed to be reasonable.
F-10
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Cash, Cash Equivalents and Short-Term Investments
The Company considers all highly liquid instruments with an original maturity from the date of purchase of 90 days
or less to be cash equivalents. Cash equivalents consist of money market mutual funds and certificates of deposit with
original maturities up to 90 days. Short-term investments generally consist of certificates of deposit with original
maturities of between 90 days and 1 year. Publicly traded equity securities are measured at fair value with changes
in the fair values recognized within other income (expense) in the Company's consolidated statements of operations.
The Company reviews its investment portfolio quarterly to determine if any securities may be other-than-temporarily
impaired due to increased credit risk, changes in industry or sector of a certain instrument or ratings downgrades.
Equity Method Investments
The Company enters into joint venture or partnership arrangements to invest in certain entities for business
development objectives. At the inception of these arrangements, the Company assesses its interests with other entities
to determine whether any of such entities meet the definition of a variable interest entity ("VIE"). A VIE is an entity that
either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial
support, or (ii) has equity investors who lack the characteristics of a controlling financial interest. The Company is
required to consolidate the assets and liabilities of VIEs when it is deemed to be the primary beneficiary. The primary
beneficiary of a VIE is the entity that meets both of the following criteria: (i) has the power to make decisions that most
significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to
receive benefits that in either case could potentially be significant to the VIE. As of December 31, 2019, the Company
concluded that it did not have any significant investments in entities that are deemed to be VIEs.
The Company’s investments in joint ventures and partnerships are generally accounted for under the equity method
of accounting, as the Company concluded it does not have control, but has the ability to exercise significant influence
over the investees. Equity method investments are initially measured at cost, or at fair value for a retained investment
in the common stock of an investee in a deconsolidation transaction. Equity investments are subsequently adjusted
for cash contributions, distributions and the Company's share of the income and losses of the investees. The Company
records its equity method investments in other assets in the consolidated balance sheet. The Company's proportionate
share of the income or loss from its equity method investments are recorded in other income in the consolidated
statement of operations. The Company reviews its investments periodically to determine if any investments may be
impaired considering both qualitative and quantitative factors that may have a significant impact on the investees' fair
value. The Company did not record any impairment charges related to its equity method investments for the years
ended December 31, 2019, 2018 and 2017.
Non-marketable Equity Investments
The Company also has investments in non-marketable equity securities, where the Company does not have the
ability to exercise significant influence over the investees. The Company elected the measurement alternative under
which the securities are measured at cost minus impairment, if any, and adjusted for changes resulting from qualifying
observable price changes. The Company records non-marketable equity investment in other assets in the consolidated
balance sheet. The Company reviews its non-marketable equity investments quarterly to determine if any investments
may be impaired considering both qualitative and quantitative factors that may have a significant impact on the investees'
fair value. The Company did not record any impairment charges related to its non-marketable equity investments for
the years ended December 31, 2019, 2018 and 2017.
Financial Instruments and Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash and
cash equivalents, short-term investments and accounts receivable. Risks associated with cash and cash equivalents
and short-term investments are mitigated by the Company's investment policy, which limits the Company's investing
to only those marketable securities rated at least A-1/P-1 Short Term Rating or A-/A3 Long Term Rating, as determined
by independent credit rating agencies.
A significant portion of the Company's customer base is comprised of businesses throughout the Americas.
However, a portion of the Company's revenues are derived from the Company's EMEA and Asia-Pacific operations.
F-11
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table sets forth percentages of the Company's revenues by geographic region for the years ended
December 31:
Americas
EMEA
Asia-Pacific
2019
2018
2017
47%
32%
21%
49%
31%
20%
50%
31%
19%
No single customer accounted for greater than 10% of accounts receivable or revenues as of or for the years
ended December 31, 2019, 2018 and 2017.
Property, Plant and Equipment
Property, plant and equipment are stated at the Company's original cost or at fair value for property, plant and
equipment acquired through acquisitions, net of depreciation. Depreciation is computed using the straight-line method
over the estimated useful lives of the respective assets. Leasehold improvements and integral equipment at leased
locations are amortized over the shorter of the lease term or the estimated useful life of the asset or improvement.
Leasehold improvements acquired through acquisition are amortized over the shorter of the useful life of the assets
or terms that include required lease periods and renewals that are deemed to be reasonably assured at the date of
acquisition. Leasehold improvements that are placed into service significantly after and not contemplated at or near
the beginning of the lease term are amortized over the shorter of the useful life of the assets or a term that includes
required lease periods and renewals that are deemed to be reasonably assured at the date the leasehold improvements
are purchased.
The Company's estimated useful lives of its property, plant and equipment are as follows:
Core systems
Buildings
Leasehold improvements
Personal Property
3-40 years
12-58 years
12-40 years
3-10 years
The Company's construction in progress includes direct and indirect expenditures for the construction and
expansion of IBX data centers and is stated at original cost. The Company has contracted out substantially all of the
construction and expansion efforts of its IBX data centers to independent contractors under construction contracts.
Construction in progress includes costs incurred under construction contracts including project management services,
engineering and schematic design services, design development, construction services and other construction-related
fees and services. In addition, the Company has capitalized interest costs during the construction phase. Once an IBX
data center or expansion project becomes operational, these capitalized costs are allocated to certain property, plant
and equipment categories and are depreciated over the estimated useful life of the underlying assets.
The Company reviews its property, plant and equipment for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable such as a significant decrease in
market price of an asset, a significant adverse change in the extent or manner in which an asset is being used or in
its physical condition, a significant adverse change in legal factors or business climate that could affect the value of
an asset or a continuous deterioration of the Company's financial condition. Recoverability of assets to be held and
used is assessed by comparing the carrying amount of an asset to estimated undiscounted future net cash flows
expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated undiscounted future
cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. The Company did not record any impairment charges related to its property, plant and equipment
during the years ended December 31, 2019, 2018 and 2017.
F-12
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company enters into non-cancellable lease arrangements as the lessee primarily for its data center spaces,
office spaces and equipment. Assets acquired through finance leases are included in property, plant and equipment,
net on the consolidated balance sheets. In addition, a portion of the Company's property, plant and equipment are
used for revenue arrangements which are accounted for as operating leases where the Company is the lessor.
Assets Held for Sale
Assets and liabilities to be disposed of that meet all of the criteria to be classified as held for sale are reported at
the lower of their carrying amounts or fair values less costs to sell. The Company recorded an impairment charge of
$15.8 million relating to assets held for sale for the year ended December 31, 2019. Assets are not depreciated or
amortized while they are classified as held for sale. For further information on the Company's assets held for sale, see
Note 5.
Asset Retirement Costs and Asset Retirement Obligations
The fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred. The
associated retirement costs are capitalized and included as part of the carrying value of the long-lived asset and
amortized over the useful life of the asset. Subsequent to the initial measurement, the Company accretes the liability
in relation to the asset retirement obligations over time and the accretion expense is recorded as a cost of revenue.
The Company's asset retirement obligations are primarily related to its IBX data centers, of which the majority are
leased under long-term arrangements and are required to be returned to the landlords in their original condition. The
majority of the Company's IBX data center leases have been subject to significant development by the Company in
order to convert them from, in most cases, vacant buildings or warehouses into IBX data centers. For further information
on the Company's leases, see Note 10.
Goodwill and Other Intangible Assets
The Company has three reportable segments comprised of the 1) Americas, 2) EMEA and 3) Asia-Pacific geographic
regions, which the Company also determined are its reporting units. Goodwill is not amortized and is tested for
impairment at least annually or more often if and when circumstances indicate that goodwill is not recoverable.
The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of a
reporting unit is less than its carrying value. Qualitative factors considered in the assessment include industry and
market conditions, overall financial performance, and other relevant events and factors affecting the reporting unit. If,
after assessing the qualitative factors, the Company determines that it is not more likely than not that the fair value of
a reporting unit is less than its carrying value, then performing a quantitative impairment test is unnecessary. However,
if the Company concludes otherwise, then it is required to perform a quantitative goodwill impairment test. The
quantitative impairment test, which is used to identify both the existence of impairment and the amount of impairment
loss, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting
unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying value of the
reporting unit exceeds its fair value, any excess of the reporting unit goodwill carrying value over the respective implied
fair value is recognized as an impairment loss.
As of December 31, 2019, 2018 and 2017, the Company concluded that it was more likely than not that goodwill
attributed to the Company's Americas, EMEA and Asia-Pacific reporting units was not impaired as the fair value of
each reporting unit exceeded the carrying value of its respective reporting unit, including goodwill.
Substantially all of the Company's intangible assets are subject to amortization and are amortized using the straight-
line method over their estimated period of benefit. The Company performs a review of intangible assets for impairment
by assessing events or changes in circumstances that indicate the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is assessed by comparing the carrying amount of an asset to estimated
undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds
its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying
amount of the asset exceeds the fair value of the asset. The Company did not record any impairment charges related
to its other intangible assets during the years ended December 31, 2019, 2018 and 2017.
For further information on goodwill and other intangible assets, see Note 3 and Note 7 below.
F-13
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Debt Issuance Costs
Costs and fees incurred upon debt issuances are capitalized and are amortized over the life of the related debt
based on the effective interest method. Such amortization is included as a component of interest expense. Debt
issuance costs related to outstanding debt are presented as a reduction of the carrying amount of the debt obligation
and debt issuance costs related to the revolving credit facility are presented as other assets.
Derivatives and Hedging Activities
The Company uses derivative instruments, including foreign currency forwards and options and cross-currency
interest rate swaps, to manage certain foreign currency exposures. Derivative instruments are viewed as risk
management tools by the Company and are not used for speculative purposes. The Company recognizes all derivatives
on the Company's consolidated balance sheets at fair value. The accounting for changes in the value of a derivative
depends on whether the contract qualifies and has been designated for hedge accounting. In order to qualify for hedge
accounting, a derivative must be considered highly effective at reducing the risk associated with the exposure being
hedged and there must be documentation of the risk management objective and strategy, including identification of
the hedging instrument, the hedged item and the risk exposure, and the effectiveness assessment methodology. For
cash flow hedges, the Company uses regression analysis at the time they are designated to assess their effectiveness.
Hedge designations are reviewed on a quarterly basis to assess whether circumstances have changed that would
disrupt the hedge instrument's relationship to the forecasted transactions or net investment.
The Company uses the forward method to assess effectiveness of qualifying foreign currency forwards that are
designated as cash flow hedges, whereby, the change in the fair value of the derivative is recorded in other
comprehensive income (loss) and reclassified to the same line item in the consolidated statement of operations that
is used to present the earnings effect of the hedged item when the hedged item affects earnings. The Company uses
the spot method to assess effectiveness of qualifying foreign currency exchange options that are designated as cash
flow hedges, whereby, the change in fair value due to foreign currency exchange spot rates is recorded in other
comprehensive income (loss) and reclassified to the same line item in the consolidated statement of operations that
is used to present the earnings effect of the hedged item when the hedged item affects earnings, and the change in
fair value of the excluded component is recorded in other comprehensive income (loss) and amortized on a straight-
line basis to the same line item in the consolidated statement of operations that is used to present the earnings effect
of the hedged item. When two or more derivative instruments in combination are jointly designated as a cash flow
hedging instrument, as with foreign currency exchange option collars, they are treated as a single instrument. If the
hedge relationship is terminated for any derivatives designated as cash flow hedges, then the change in fair value of
the derivative recorded in other comprehensive income (loss) is recognized in earnings when the previously hedged
item affects earnings, consistent with the original hedge strategy. For hedge relationships that are discontinued because
the forecasted transaction is not expected to occur according to the original strategy, then any related derivative amounts
recorded in other comprehensive income (loss) are immediately recognized in earnings.
From time to time, the Company enters into treasury lock agreements to add stability to interest expense and to
manage its exposure to interest rate movements. A treasury lock is a synthetic forward sale of a U.S. treasury note
which is settled in cash based upon the difference between an agreed upon treasury rate and the prevailing treasury
rate at settlement. It is entered into to effectively fix the treasury rate component of an upcoming debt issuance. The
treasury lock transactions are designated as cash flow hedges, with all changes in value reported in other comprehensive
income (loss). Subsequent to settlement, amounts in other comprehensive income are reclassified to interest expense
as interest payments are accrued on the debt.
The Company uses the spot method to assess effectiveness of cross-currency interest rate swaps that are
designated as net investment hedges, whereby, the change in fair value due to foreign currency exchange spot rates
is recorded in other comprehensive income (loss) and the change in fair value of the excluded component is recorded
in other comprehensive income (loss) and amortized to interest expense on a straight-line basis.
From time to time, the Company also uses foreign exchange forward contracts to hedge against the effect of foreign
exchange rate fluctuations on a portion of its net investment in the foreign subsidiaries. The Company uses the spot
method to assess effectiveness of qualifying foreign currency forwards that are designated as net investment hedges,
whereby, the change in fair value due to foreign currency exchange spot rates is recorded in other comprehensive
income (loss) and the change in fair value of the excluded component is recorded in other comprehensive income
(loss) and amortized to interest expense on a straight-line basis.
F-14
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Foreign currency gains or losses associated with derivatives that are not designated as hedging instruments for
accounting purposes are recorded within other income (expense) in the Company's condensed consolidated statements
of operations, with the exception of (i) foreign currency embedded derivatives contained in certain of the Company's
customer contracts and (ii) foreign exchange forward contracts that are entered into to hedge the accounting impact
of the foreign currency embedded derivatives, which are recorded within revenues in the Company's condensed
consolidated statements of operations.
For further information on derivatives and hedging activities, see Note 8 below.
Fair Value of Financial Instruments
The carrying value of the Company's cash and cash equivalents, short-term investments and derivative instruments
represent their fair value, while the Company's accounts receivable, accounts payable and accrued expenses and
accrued property, plant and equipment approximate their fair value due primarily to the short-term maturity of the related
instruments. The fair value of the Company's debt, which is traded in the public debt market, is based on quoted market
prices. The fair value of the Company's debt, which is not publicly traded, is estimated by considering the Company's
credit rating, current rates available to the Company for debt of the same remaining maturities and terms of the debt.
Fair Value Measurements
The Company measures and reports certain financial assets and liabilities at fair value on a recurring basis,
including its investments in money market funds, certificates of deposit, publicly traded equity securities and derivatives.
The Company also follows the accounting standard for the measurement of fair value for non-financial assets and
liabilities on a nonrecurring basis. These include:
• Non-financial assets and non-financial liabilities initially measured at fair value in a business combination or
other new basis event, but not measured at fair value in subsequent reporting periods;
• Reporting units and non-financial assets and non-financial liabilities measured at fair value for goodwill
impairment tests;
•
Indefinite-lived intangible assets measured at fair value for impairment assessments;
• Non-financial long-lived assets or asset groups measured at fair value for impairment assessments or disposal;
and
• Asset retirement obligations initially measured at fair value but not subsequently measured at fair value.
For further information on fair value measurements, see Note 9 below.
Leases
The Company determines if an arrangement is or contains a lease at its inception. The Company enters into lease
arrangements primarily for data center spaces, office spaces and equipment. The Company recognizes a right-of-use
("ROU") asset and lease liability on the consolidated balance sheet for all leases with a term longer than 12 months,
including renewals.
F-15
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
ROU assets represent the Company's right to use an underlying asset for the lease term. Lease liabilities represent
the Company's obligation to make lease payments arising from the lease. ROU assets and liabilities are classified and
recognized at the commencement date. ROU liabilities are measured based on the present value of fixed lease
payments over the lease term. ROU assets consist of (i) initial measurement of the lease liability; (ii) lease payments
made to the lessor at or before the commencement date less any lease incentives received; and (iii) initial direct costs
incurred by the Company. Lease payments may vary because of changes in facts or circumstances occurring after
the commencement, including changes in inflation indices. Variable lease payments that depend on an index or a rate
(such as the Consumer Price Index or a market interest rate) are included in the measurement of ROU assets and
lease liabilities using the index or rate at the commencement date. Variable lease payments that do not depend on an
index or a rate are excluded from the measurement of ROU assets and lease liabilities and are recognized in the period
in which the obligation for those payments is incurred. Since most of the Company's leases do not provide an implicit
rate, the Company uses its own incremental borrowing rate ("IBR") on a collateralized basis in determining the present
value of lease payments. The Company utilizes a market-based approach to estimate the IBR. The approach requires
significant judgment. Therefore, the Company utilizes different data sets to estimate IBRs via an analysis of (i) yields
on comparable credit rating composite curves; (ii) sovereign rates; (iii) yields on our outstanding public debt; and (iv)
historical difference in yields on the curves of our secured and unsecured rated debt. The Company also applies
adjustments to account for considerations related to (i) tenor; and (ii) country credit rating that may not be fully
incorporated by the aforementioned data sets.
The majority of the Company's lease arrangements include options to extend the lease. If the Company is reasonably
certain to exercise such options, the periods covered by the options are included in the lease term. The depreciable
lives of certain fixed assets and leasehold improvements are limited by the expected lease term. The Company has
certain leases with an initial term of 12 months or less. For such leases, the Company elected not to recognize any
ROU asset or lease liability on the consolidated balance sheet. The Company has lease agreements with lease and
non-lease components. The Company elected to account for the lease and non-lease components as a single lease
component for all classes of underlying assets for which the Company has identified lease arrangements.
Revenue
Revenue Recognition
Equinix derives more than 90% of its revenues from recurring revenue streams, consisting primarily of (1) colocation,
which includes the licensing of cabinet space and power; (2) interconnection offerings, such as cross connects and
Equinix Exchange ports; (3) managed infrastructure solutions and (4) other revenues consisting of rental income from
tenants or subtenants. The remainder of the Company's revenues are from non-recurring revenue streams, such as
installation revenues, professional services, contract settlements and equipment sales. Revenues by service lines and
geographic areas are included in segment information (see Note 17).
Under the revenue accounting guidance, revenues are recognized when control of these products and services
is transferred to its customers, in an amount that reflects the consideration it expects to be entitled to in exchange for
the products and services. Revenues from recurring revenue streams are generally billed monthly and recognized
ratably over the term of the contract, generally 1 to 3 years for IBX data center colocation customers. Non-recurring
installation fees, although generally paid upfront upon installation, are deferred and recognized ratably over the contract
term. Professional service fees and equipment sales are recognized in the period when the services were provided.
For the contracts with customers that contain multiple performance obligations, the Company accounts for individual
performance obligations separately if they are distinct or as a series of distinct obligations if the individual performance
obligations meet the series criteria. Determining whether products and services are considered distinct performance
obligations that should be accounted for separately versus together may require significant judgment. The transaction
price is allocated to the separate performance obligation on a relative standalone selling price basis. The standalone
selling price is determined based on overall pricing objectives, taking into consideration market conditions, geographic
locations and other factors. Other judgments include determining if any variable consideration should be included in
the total contract value of the arrangement such as price increases.
Revenue is generally recognized on a gross basis as a principal versus on a net basis as an agent, as the Company
is primarily responsible for fulfilling the contract, bears inventory risk and has discretion in establishing the price when
selling to the customer. To the extent the Company does not meet the criteria for recognizing revenue on a gross basis,
the Company records the revenue on a net basis. Revenue from contract settlements, when a customer wishes to
F-16
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
terminate their contract early, is treated as a contract modification and recognized ratably over the remaining term of
the contract, if any.
The Company guarantees certain service levels, such as uptime, as outlined in individual customer contracts. If
these service levels are not achieved due to any failure of the physical infrastructure or offerings, or in the event of
certain instances of damage to customer infrastructure within the Company's IBX data centers, the Company would
reduce revenue for any credits or cash payments given to the customer. Historically, these credits and cash payments
have not been significant.
The Company enters into revenue contracts with customers for data centers and office spaces, which contain both
lease and non-lease components. The Company elected to adopt the practical expedient which allows lessors to
combine lease and non-lease components, by underlying class of asset, and account for them as one component if
they have the same timing and pattern of transfer. The combined component is accounted for in accordance with the
current lease accounting guidance ("Topic 842") if the lease component is predominant, and in accordance with the
current revenue accounting guidance ("Topic 606") if the non-lease component is predominant. Lessors are permitted
to adopt this practical expedient on a retrospective or prospective basis. The Company elected to apply the practical
expedient prospectively based on classes of underlying assets. In general, customer contracts for data centers are
accounted for under Topic 606 and Customer contracts for the use of office space are accounted for under Topic 842,
which are generally classified as operating leases and are recognized on a straight-line basis over the lease term.
Certain customer agreements are denominated in currencies other than the functional currencies of the parties
involved. Under applicable accounting rules, the Company is deemed to have foreign currency forward contracts
embedded in these contracts. The Company assessed these embedded contracts and concluded them to be foreign
currency embedded derivatives (see Note 8). These instruments are separated from their host contracts and held on
the Company's consolidated balance sheet at their fair value. The majority of these foreign currency embedded
derivatives arise in certain of the Company's subsidiaries where the local currency is the subsidiary's functional currency
and the customer contract is denominated in the U.S. dollar. Changes in their fair values are recognized within revenues
in the Company's consolidated statements of operations.
Contract Balances
The timing of revenue recognition, billings and cash collections result in accounts receivables, contract assets and
deferred revenues. A receivable is recorded at the invoice amount, net of an allowance for doubtful account and is
recognized in the period when the Company has transferred products or provided services to its customers and when
its right to consideration is unconditional. Payment terms and conditions vary by contract type, although terms generally
include a requirement of payment within 30 to 45 days. In instances where the timing of revenue recognition differs
from the timing of invoicing, the Company has determined that the Company's contracts generally do not include a
significant financing component. The Company assesses collectability based on a number of factors, including past
transaction history with the customer and the credit-worthiness of the customer. The Company generally does not
request collateral from its customers although in certain cases the Company obtains a security interest in a customer's
equipment placed in its IBX data centers or obtains a deposit. The Company also maintains an allowance for doubtful
accounts for estimated losses resulting from the inability of its customers to make required payments for which the
Company had expected to collect the revenues. If the financial condition of the Company's customers were to deteriorate
or if they became insolvent, resulting in an impairment of their ability to make payments, greater allowances for doubtful
accounts may be required. Management specifically analyzes accounts receivable and current economic news and
trends, historical bad debts, customer concentrations, customer credit-worthiness and changes in customer payment
terms when evaluating revenue recognition and the adequacy of the Company's reserves. Any amounts that were
previously recognized as revenue and subsequently determined to be uncollectable are charged to bad debt expense
included in sales and marketing expense in the consolidated statements of operations. A specific bad debt reserve of
up to the full amount of a particular invoice value is provided for certain problematic customer balances. An additional
reserve is established for all other accounts based on the age of the invoices and an analysis of historical credits
issued. Delinquent account balances are written off after management has determined that the likelihood of collection
is not probable.
A contract asset exists when the Company has transferred products or provided services to its customers, but
customer payment is contingent upon satisfaction of additional performance obligations. Certain contracts include
terms related to price arrangements such as price increases and free months. The Company recognizes revenues
F-17
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
ratably over the contract term, which could potentially give rise to contract assets during certain periods of the contract
term. Contract assets are recorded in other current assets and other assets in the consolidated balance sheet.
Deferred revenue (a contract liability) is recognized when the Company has an unconditional right to a payment
before it transfers products or services to customers. Deferred revenue is included in other current liabilities and other
liabilities, respectively, in the consolidated balance sheet.
Contract Costs
Direct and indirect incremental costs solely related to obtaining revenue contracts are capitalized as costs of
obtaining a contract, when they are incremental and if they are expected to be recovered. Such costs consist primarily
of commission fees and sales bonuses, as well as indirect related payroll costs. Contract costs are amortized over the
estimated period of benefit on a straight-line basis. The Company elected to apply the practical expedient which allows
the Company to expense contract costs when incurred, if the amortization period is one year or less.
For further information on revenue recognition, see Note 2 below.
Income Taxes
Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credits
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are
expected more likely than not to be realized in the future. A tax benefit from an uncertain income tax position may be
recognized in the financial statements only if it is more likely than not that the position is sustainable, based solely on
its technical merits and consideration of the relevant taxing authority's widely understood administrative practices and
precedents. Recognized income tax positions are measured at the largest amount that has a greater than 50 percent
likelihood of being realized. Any subsequent changes in recognition or measurement are reflected in the period in
which the change in judgment occurs.
The Company elected to be taxed as a REIT for U.S. federal income tax purposes beginning with its 2015 taxable
year. As a result, the Company may deduct the distributions made to its stockholders from taxable income generated
by the Company and its qualified REIT subsidiaries ("QRSs"). The Company's dividends paid deduction generally
eliminates the U.S. federal taxable income of the Company and its QRSs, resulting in no U.S. income tax due. However,
the Company's taxable REIT subsidiaries ("TRSs") will continue to be subject to the U.S. corporate income taxes on
any taxable income generated by them. In addition, the foreign operations of the Company will continue to be subject
to local income taxes regardless of whether the foreign operations are operated as QRSs or TRSs.
The Company's qualification and taxation as a REIT depends on its satisfaction of certain asset, income,
organizational, distribution, stockholder ownership and other requirements on a continuing basis. The Company's ability
to satisfy quarterly asset tests depends upon its analysis and the fair market values of its REIT and non-REIT assets.
For purposes of the quarterly REIT asset tests, the Company estimates the fair market value of assets within its QRSs
and TRSs using a discounted cash flow approach, by calculating the present value of forecasted future cash flows.
The Company applies discount rates based on industry benchmarks relative to the market and forecasting risks. Other
significant assumptions used to estimate the fair market value of assets in QRSs and TRSs include projected revenue
growth, projected operating margins, and projected capital expenditures. The Company revisits significant assumptions
periodically to reflect any changes due to business or economic environment.
Stock-Based Compensation
Stock-based compensation cost is measured at the grant date for all stock-based awards made to employees and
directors based on the fair value of the award. The Company generally recognizes stock-based compensation expense
on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. However,
for awards with market conditions or performance conditions, stock-based compensation expense is recognized on a
F-18
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
straight-line basis over the requisite service period for each vesting tranche of the award. The Company elected to
estimate forfeitures based on historical forfeiture rates.
The Company grants restricted stock units to its employees and these equity awards generally have only a service
condition. The Company grants restricted stock units to its executives and these awards generally have a service and
performance condition or a service and market condition. To date, any performance conditions contained in an equity
award are tied to the financial performance of the Company or a specific region of the Company. The Company assesses
the probability of meeting these performance conditions on a quarterly basis. The majority of the Company's equity
awards vest over 4 years, although certain of the equity awards for executives vest over a range of 2 to 4 years. The
valuation of restricted stock units with only a service condition or a service and performance condition requires no
significant assumptions as the fair value for these types of equity awards is based solely on the fair value of the
Company's stock price on the date of grant. The Company uses a Monte Carlo simulation option-pricing model to
determine the fair value of restricted stock units with a service and market condition.
The Company uses the Black-Scholes option-pricing model to determine the fair value of its employee stock
purchase plan. The determination of the fair value of shares purchased under the employee stock purchase plan is
affected by assumptions regarding a number of complex and subjective variables including the Company's expected
stock price volatility over the term of the awards and actual and projected employee stock purchase behaviors. The
Company estimated the expected volatility by using the average historical volatility of its common stock that it believed
was best representative of future volatility. The risk-free interest rate used was based on U.S. Treasury zero-coupon
issues with remaining terms similar to the expected term of the equity awards. The expected dividend rate used was
based on average dividend yields and the expected term used was equal to the term of each purchase window.
The accounting standard for stock-based compensation does not allow the recognition of unrealized tax benefits
associated with the tax deductions in excess of the compensation recorded (excess tax benefit) until the excess tax
benefit is realized (i.e., reduces taxes payable). The Company records the excess tax benefits from stock-based
compensation as income tax expense through the statement of operations.
For further information on stock-based compensation, see Note 13 below.
Foreign Currency Translation
The financial position of foreign subsidiaries is translated using the exchange rates in effect at the end of the period,
while income and expense items are translated at average rates of exchange during the period. Gains or losses from
translation of foreign operations where the local currency is the functional currency are included as other comprehensive
income (loss). The net gains and losses resulting from foreign currency transactions are recorded in net income in the
period incurred and recorded within other income (expense). Certain inter-company balances are designated as loans
of a long-term investment-type nature. Accordingly, exchange gains and losses associated with these long-term inter-
company balances are recorded as a component of other comprehensive income (loss), along with translation
adjustments.
Earnings Per Share
The Company computes basic and diluted EPS for net income. Basic EPS is computed using net income and the
weighted-average number of common shares outstanding. Diluted EPS is computed using net income and the weighted-
average number of common shares outstanding plus any dilutive potential common shares outstanding. Dilutive
potential common shares include the assumed exercise, vesting and issuance activity of employee equity awards
using the treasury stock method. See Note 4 below.
Treasury Stock
The Company accounts for treasury stock under the cost method. When treasury stock is re-issued at a higher
price than its cost, the difference is recorded as a component of additional paid-in capital to the extent that there are
gains to offset the losses. If there are no treasury stock gains in additional paid-in capital, the losses are recorded as
a component of retained earnings.
F-19
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Recent Accounting Pronouncements
Accounting Standards Not Yet Adopted
In December 2019, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")
2019-12, Income Taxes ("Topic 740"): Simplifying the Accounting for Income Taxes. The ASU simplifies accounting for
income taxes by removing certain exceptions to the general principles in Topic 740. The ASU also improves consistent
application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For
public entities, the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2020, with early adoption permitted including adoption in any interim period for periods for which financial
statements have not yet been issued. The Company is currently evaluating the extent of the impact that the adoption
of this standard will have on its condensed consolidated financial statements.
In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses ("Topic 326"): Measurement of
Credit Losses on Financial Instruments. The ASU requires the measurement of all expected credit losses for financial
assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable
forecasts. The ASU requires enhanced qualitative and quantitative disclosures to help investors and other financial
statement users better understand significant estimates and judgments used in estimating credit losses, as well as the
credit quality and underwriting standards of an organization's portfolio. In addition, the ASU amends the accounting
for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The ASU
is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early
adoption permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018. The Company will adopt this new ASU on January 1, 2020. The Company is assessing the impact
of this ASU on its accounting for allowances for doubtful accounts, but does not expect the adoption of this standard
to have a significant impact on its condensed consolidated financial statements.
Accounting Standards Recently Adopted
Revenue
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09") and issued
subsequent amendments to the initial guidance, collectively referred as "Topic 606." On January 1, 2018, the Company
adopted Topic 606 using the modified retrospective approach applied to those contracts, which were not completed
as of January 1, 2018, and recognized a net increase to the opening retained earnings of $269.8 million, net of tax
impacts. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while the
comparative information has not been restated and continues to be reported under accounting standards in effect for
those periods.
Derivatives and Hedging
In August 2017, FASB issued ASU 2017-12 Derivatives and Hedging ("Topic 815"): Targeted Improvements to
Accounting for Hedging Activities. This ASU was issued to improve the financial reporting of hedging relationships to
better portray the economic results of an entity's risk management activities in its financial statements and to simplify
the application of the hedge accounting guidance in current GAAP. This ASU permits hedge accounting for risk
components involving nonfinancial risk and interest rate risk, requires an entity to present the earnings effect of the
hedging instrument in the same income statement line item in which the hedged item is reported, no longer requires
separate measurement and reporting of hedge ineffectiveness, eases the requirement for hedge effectiveness
assessment, and requires a tabular disclosure related to the effect on the income statement of fair value and cash flow
hedges. This ASU is effective for annual or any interim reporting periods beginning after December 15, 2018 with early
adoption permitted.
The Company adopted ASU 2017-12 on January 1, 2019 using the modified retrospective approach. For cash
flow hedges existing on the date of adoption, the Company recognized the cumulative effect of the change on the
opening balance of accumulated other comprehensive income (loss) with a corresponding adjustment to the opening
balance of retained earnings for amounts previously recognized in earnings related to ineffectiveness. The adoption
of this standard did not have a material impact on the Company's condensed consolidated financial statements.
F-20
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Leases
In February 2016, FASB issued ASU 2016-02, Leases and issued subsequent amendments to the initial guidance,
collectively referred to as "Topic 842." Topic 842 replaces the guidance in former ASC Topic 840, Leases. The new
lease guidance increases transparency and comparability among organizations by requiring the recognition of the
following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which
is a lessee's future obligation to make lease payments arising from a lease, measured on a discounted basis; and (2)
a right-of-use ("ROU") asset, which is an asset that represents the lessee's right to use, or control the use of, a specified
asset for the lease term. Topic 842 allows entities to adopt with one of two methods: the modified retrospective transition
method or the alternative transition method.
On January 1, 2019, the Company adopted Topic 842 using the alternative transition method. Therefore, results
for reporting periods beginning after January 1, 2019 are presented under Topic 842, while comparative information
has not been restated and continues to be reported under accounting standards in effect for those periods. The Company
recognized the cumulative effects of initially applying the standard as an adjustment to the opening balance of retained
earnings in the period of adoption.
In adopting the new guidance, the Company elected to apply the package of practical expedients permitted under
the transition guidance which allows the Company not to reassess (1) whether any expired or existing contracts contain
leases under the new definition of a lease; (2) lease classification for any expired or existing leases; and (3) whether
previously capitalized initial direct costs would qualify for capitalization under Topic 842. The Company also elected
to apply the land easements practical expedient which permits the Company not to assess at transition whether any
expired or existing land easements are, or contain, leases if they were not previously accounted for as leases under
Topic 840.
Adoption of the standard had a significant impact on the Company's financial results, including the (1) recognition
of new ROU assets and liabilities on its balance sheet for all operating leases; and (2) de-recognition of existing build-
to-suit assets and liabilities with cumulative effects of initially applying the standard as an adjustment to the retained
earnings. The cumulative effect of the changes made to its consolidated January 1, 2019 balance sheet from the
adoption of Topic 842 was as follows (in thousands):
Balance Sheet
Assets
Other current assets
Property, plant and equipment, net
Operating lease right-of-use assets
Intangible assets, net
Other assets
Liabilities
Current portion of operating lease liabilities
Current portion of finance lease liabilities
Current portion of capital lease and other financing
obligations
Other current liabilities
Operating lease liabilities, less current portion
Finance lease liabilities, less current portion
Capital lease and other financing obligations, less current
portion
Other liabilities
Equity
Retained Earnings
F-21
Balances at
December 31,
2018
Adjustments
due to adoption
of Topic 842
Balances at
January 1,
2019
$
274,857
$
(15,949) $
258,908
11,026,020
(293,111)
10,732,909
—
1,468,762
2,333,296
533,252
—
—
77,844
126,995
—
—
(23,205)
(63,468)
144,405
70,795
(77,844)
(6,455)
1,312,262
1,165,188
1,468,762
2,310,091
469,784
144,405
70,795
—
120,540
1,312,262
1,165,188
1,441,077
629,763
(1,441,077)
—
(88,272)
541,491
889,948
(5,973)
883,975
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2. Revenue Recognition
Contract Balances
The following table summarizes the opening and closing balances of the Company's accounts receivable, net;
contract asset, current; contract asset, non-current; deferred revenue, current; and deferred revenue, non-current (in
thousands):
Beginning balances as of January 1, 2019
Closing balances as of December 31, 2019
Increase/(decrease)
Accounts
receivable,
net
$ 630,119
689,134
59,015
$
Beginning balances as of January 1, 2018 (1) $ 576,313
630,119
Closing balances as of December 31, 2018
53,806
Increase/(decrease)
$
Contract
asset,
current
Contract
asset, non-
current
Deferred
revenue,
current
$
$
$
$
9,778
10,033
255
9,002
9,778
776
$
$
$
$
16,396 $
31,521
15,125 $
16,186 $
16,396
210 $
73,143
76,193
3,050
71,085
73,143
2,058
Deferred
revenue,
non-current
46,641
$
46,555
(86)
53,101
46,641
(6,460)
$
$
$
(1)
Includes cumulative adjustments made to these accounts on January 1, 2018 from the adoption of Topic 606.
The difference between the opening and closing balances of the Company's accounts receivable, net, contract
assets and deferred revenues primarily results from the timing difference between the satisfaction of the Company's
performance obligation and the customer's payment, as well as business combinations closed during the years ended
December 31, 2019 and 2018. The amounts of revenue recognized during the years ended December 31, 2019 and
2018 from the opening deferred revenue balance were approximately $87.3 million and $81.8 million, respectively. For
the years ended December 31, 2019 and 2018, no impairment loss related to contract balances was recognized in the
consolidated statement of operations.
Contract Costs
The ending balances of net capitalized contract costs as of December 31, 2019 and 2018 were $229.2 million and
$188.2 million, respectively, which were included in other assets in the consolidated balance sheet. $72.9 million and
$73.1 million of contract costs were amortized during years ended December 31, 2019 and 2018, respectively, which
were included in sales and marketing expense in the consolidated statement of operations.
Remaining performance obligations
As of December 31, 2019, approximately $7.4 billion of total revenues and deferred installation revenues are
expected to be recognized in future periods, the majority of which will be recognized over the next 24 months. While
initial contract terms vary in length, substantially all contracts thereafter automatically renew in one-year increments.
Included in the remaining performance obligations is either 1) remaining performance obligations under the initial
contract terms or 2) remaining performance obligations related to contracts in the renewal period once the initial terms
have lapsed. The remaining performance obligations do not include variable consideration related to unsatisfied
performance obligations such as the usage of metered power, service fees from xScale data centers, which are
calculated based on future events or actual costs incurred in the future, or any contracts that could be terminated
without any significant penalties such as the majority of interconnection revenues. The remaining performance
obligations above include revenues to be recognized in the future related to arrangements where the Company is
considered the lessor.
F-22
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
3. Acquisitions
2019 Acquisitions
On April 18, 2019, the Company completed the acquisition of Switch Datacenters' AMS1 data center business in
Amsterdam, Netherlands, for a cash purchase price of approximately €30.6 million or approximately $34.3 million, at
the exchange rate in effect on April 18, 2019. As of September 30, 2019, the Company had completed the detailed
valuation analysis to derive the fair value of assets acquired and liabilities assumed and updated the final allocation
of purchase price. The operating results of the acquisition were reported in the EMEA region following the date of
acquisition and were not significant to the Company's total operations for the year ended December 31, 2019.
2018 Acquisitions
On April 18, 2018, the Company acquired all of the equity interests in Metronode from the Ontario Teachers' Pension
Plan Board for a cash purchase price of A$1.034 billion, or approximately $804.6 million at the exchange rate in effect
on April 18, 2018. Metronode operated 10 data centers in six metro areas in Australia. The acquisition supports the
Company's ongoing global expansion to meet customer demand in the Asia-Pacific region.
On April 2, 2018, the Company completed the acquisition of Infomart Dallas, including its operations and tenants,
from ASB Real Estate Investments, for total consideration of approximately $804.0 million. The consideration was
comprised of approximately $45.8 million in cash, subject to customary adjustments and $758.2 million aggregate fair
value of 5.000% senior unsecured notes. Prior to the acquisition, a portion of the building was leased to the Company
and was being used as its Dallas 1, 2, 3 and 6 data centers, which were all accounted for as build-to-suit leases. Upon
acquisition, the Company effectively terminated the leases and settled the related financing obligations and other
liabilities related to the leases for approximately $170.3 million and $1.9 million, respectively, and recognized a loss
on debt extinguishment of $19.5 million. The acquisition of this highly interconnected facility and tenants adds to the
Company's global platform and secures the ability to further expand in the Americas market in the future.
Both acquisitions constitute a business under the accounting standard for business combinations and, therefore,
were accounted for as business combinations using the acquisition method of accounting. Under the acquisition method
of accounting, the total purchase price is allocated to the assets acquired and liabilities assumed measured at fair
value on the date of acquisition. During the three months ended March 31, 2019, the Company completed the detailed
valuation analysis of Metronode and Infomart Dallas to derive the fair value of assets acquired and liabilities assumed
and finalized the allocation of purchase price for Metronode and Infomart Dallas. For the Metronode Acquisition, the
adjustments made during the three months ended March 31, 2019 primarily resulted in a decrease in deferred tax
liability and goodwill of $4.2 million and $3.7 million, respectively. No purchase price allocation adjustments were made
during the three months ended March 31, 2019 for the Infomart Dallas Acquisition.
For the Metronode Acquisition, the adjustments made from the provisional amounts reported as of June 30, 2018
primarily resulted in a decrease in property, plant and equipment, other assets, other liabilities and deferred tax assets
of $10.1 million, $10.0 million, $9.7 million and $4.1 million, respectively, and an increase in goodwill, intangible assets
and deferred tax liabilities of $41.6 million, $4.8 million and $31.3 million, respectively. The adjustments for the Infomart
Dallas Acquisition made from the provisional amounts reported as of June 30, 2018 primarily resulted in a decrease
in goodwill of $6.2 million and an increase in intangible assets of $4.6 million. The changes in fair value of acquired
assets and liabilities assumed did not have a significant impact on the Company's results of operations for any reporting
periods prior to March 31, 2019.
F-23
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
A summary of the final allocation of total purchase consideration is presented as follows (in thousands):
Cash and cash equivalents
Accounts receivable
Other current assets
Property, plant and equipment
Intangible assets
Goodwill
Other assets (1)
Total assets acquired
Accounts payable and accrued liabilities
Other current liabilities
Deferred tax liabilities
Other liabilities (1)
Net assets acquired
Metronode
Infomart
Dallas
$
3,206 $
17,432
8,318
9,421
297,092
128,229
410,188
44,373
900,827
(17,104)
(2,038)
(31,281)
(45,851)
637
395
362,023
65,847
197,378
—
643,712
(5,056)
(2,141)
—
(4,723)
$
804,553 $
631,792
(1)
In connection with the Metronode Acquisition, the Company recorded indemnification assets of $44.4 million, which
represented the seller's obligation under the purchase agreement to reimburse pre-acquisition tax liabilities settled after the
acquisition.
The following table presents certain information on the acquired intangible assets (in thousands):
Intangible Assets
Customer relationships (Metronode)
Customer relationships (Infomart Dallas)
In-place leases (Infomart Dallas)
Trade names (Infomart Dallas)
Favorable leases (Infomart Dallas)
Estimated
Useful
Lives
(Years)
20.0
20.0
3.6 - 7.5
20.0
Fair Value
$ 128,229
35,860
19,960
9,552
475
3.6 - 7.5
Weighted-
average
Estimated
Useful
Lives
(Years)
20.0
20.0
6.8
20.0
7.0
The fair value of customer relationships was estimated by applying an income approach, by calculating the present
value of estimated future operating cash flows generated from existing customers less costs to realize the revenue.
The Company applied discount rates of 7.3% for Metronode and 8.2% for Infomart Dallas, which reflected the nature
of the assets as they relate to the risk and uncertainty of the estimated future operating cash flows. Other assumptions
used to estimate the fair value of customer relationships included projected revenue growth, capital expenditures,
probability of renewal, customer attrition rates and operating margins. The fair value of Infomart Dallas' trade name
was estimated using the relief from royalty method under the income approach. The Company applied a relief from
royalty rate of 1.5% and a discount rate of 8.2%. The fair value of in-place leases was estimated by projecting the
avoided costs, such as the cost of originating the acquired in-place leases, during a typical lease up period. The fair
value measurements were based on significant inputs that are not observable in the market and thus represent Level
3 measurements as defined in the accounting standard for fair value measurements.
F-24
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The fair value of property, plant and equipment was estimated by applying the cost approach, with the exception
of land, which was estimated by applying the market approach, for the Metronode Acquisition. For the Infomart Dallas
Acquisition, the fair values of land, building and personal property were estimated by applying the market approach,
residual income method and cost approach, respectively. The cost approach uses the replacement or reproduction
cost as an indicator of fair value. The premise of the cost approach is that a market participant would pay no more for
an asset than the amount for which the asset could be replaced or reproduced. The key assumptions of the cost
approach include replacement cost new, physical deterioration, functional and economic obsolescence, economic
useful life, remaining useful life, age and effective age. The residual income method estimates the fair value of the
Infomart Dallas building using an income approach less the fair values attributed to land, personal property, in-place
leases and favorable and unfavorable leases.
Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets
acquired and liabilities assumed. Goodwill is attributable to the workforce of the acquired business and the projected
revenue increase expected to arise from future customers after the Metronode and Infomart Dallas acquisitions.
Goodwill from the acquisition of Metronode is not amortizable for local tax purposes and is attributable to the Company's
Asia-Pacific region. Goodwill from the acquisition of Infomart Dallas is expected to be deductible for local tax purposes
and is attributable to the Company's Americas region. Operating results of Metronode and Infomart Dallas have been
reported in the Asia-Pacific and Americas regions, respectively.
The Company incurred transaction costs of approximately $31.1 million during the year ended December 31, 2018
for both acquisitions. The Company's results of operations include $78.7 million of revenues and an insignificant amount
of net income from operations from the combined operations of Metronode and Infomart Dallas during the year ended
December 31, 2018.
Certain Verizon Data Center Assets Acquisition
On May 1, 2017, the Company completed the acquisition of certain colocation business from Verizon consisting
of 29 data center buildings located in the United States, Brazil and Colombia, for a cash purchase price of approximately
$3.6 billion. The addition of these facilities and customers adds to the Company's global platform, increases
interconnections and assists with the Company's penetration of the enterprise and strategic markets, including
government and energy. The Company funded the Verizon Data Center Acquisition with proceeds from debt and equity
financings, which closed in January and March 2017.
Purchase Price Allocation
The Verizon Data Center Acquisition constitutes a business under the accounting standard for business
combinations and, therefore, was accounted for as a business combination using the acquisition method of accounting.
During the three months ended March 31, 2018, the Company had completed the detailed valuation analysis to derive
the fair value of assets acquired and liabilities assumed and updated the final allocation of purchase price from
provisional amounts reported as of June 30, 2017, which primarily resulted in a decrease in intangible assets of $9.0
million and an increase in goodwill of $7.7 million. The changes in fair value of acquired assets and liabilities assumed
did not have a significant impact on the Company's results of operations for any reporting periods prior to and including
December 31, 2018.
F-25
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The final purchase price allocation is as follows (in thousands):
Cash and cash equivalents
Accounts receivable
Other current assets
Property, plant and equipment
Intangible assets (1)
Goodwill
Total assets acquired
Accounts payable and accrued liabilities
Other current liabilities
Capital lease and other financing obligations
Deferred tax liabilities
Other liabilities
Net assets acquired
$
Certain Verizon Data Center
Assets
1,073
2,019
7,319
840,335
1,693,900
1,095,262
3,639,908
(1,725)
(2,020)
(17,659)
(18,129)
(5,689)
$
3,594,686
(1)
The nature of the intangible assets acquired is customer relationships with an estimated useful life of 15 years. Included in
this amount is a customer relationship intangible asset for Verizon totaling $245.3 million. Pursuant to the acquisition
agreement, the Company formalized agreements to provide pre-existing space and services to Verizon at the acquired data
centers.
The fair value of customer relationships was estimated by applying an income approach. The Company applied
discount rates ranging from 7.7% to 12.2%, which reflected the nature of the assets as they relate to the risk and
uncertainty of the estimated future operating cash flows. Other assumptions used to estimate the fair value of customer
relationships include projected revenue growth, customer attrition rates, sales and marketing expenses and operating
margins. The fair value measurements were based on significant inputs that are not observable in the market and thus
represent Level 3 measurements as defined in the accounting standard for fair value measurements.
The fair value of property, plant and equipment was estimated by applying the cost approach, with the exception
of land which was estimated by applying the market approach. The cost approach is to use the replacement or
reproduction cost as an indicator of fair value. The assumptions of the cost approach include replacement cost new,
physical deterioration, functional and economic obsolescence, economic useful life, remaining useful life, age and
effective age.
Goodwill is attributable to the workforce of the acquired business and the projected revenue increase expected to
arise from future customers after the Verizon Data Center Acquisition. Goodwill is deductible for U.S. tax purposes
and is attributable to the Company's Americas region. The Company incurred transaction costs of approximately $28.5
million during the year ended December 31, 2017 related to the Verizon Data Center Acquisition. The Company's
results of operations include the Verizon Data Center Acquisition's revenues of $359.1 million and net income of $87.8
million for the period May 1, 2017 through December 31, 2017.
Other 2017 Acquisitions
In addition to the Verizon Data Center Acquisition, the Company also acquired Itconic, Zenium's data center
business in Istanbul, Turkey and IO UK's data center business during 2017. The Company incurred transaction costs
of approximately $8.1 million in total during the year ended December 31, 2017 related to these acquisitions.
On October 9, 2017, the Company completed the acquisition of Itconic for a cash purchase price of €220.5 million,
or $259.1 million at the exchange rate in effect on October 9, 2017. Itconic is a data center provider in Spain and
Portugal, and also includes CloudMas, an Itconic subsidiary which is focused on supporting enterprise adoption and
use of cloud services. The acquisition includes five data centers in four metro areas, with two located in Madrid and
one each in Barcelona, Seville and Lisbon. Itconic's operating results have been reported in the EMEA region following
the date of acquisition.
F-26
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The nature of the intangible assets acquired from the Itconic acquisition is customer relationships with an estimated
useful life of 15 years. The fair value of customer relationships was estimated by applying an income approach. The
Company applied a discount rate of 16.0%, which reflects the risk and uncertainty of the estimated future operating
cash flows. Other assumptions include projected revenue growth, customer attrition rates and operating margins. The
fair value measurements were based on significant inputs that are not observable in the market and thus represent
Level 3 measurements as defined in the accounting standard for fair value measurements. Goodwill is attributable to
the workforce of the acquired business and the projected revenue increase from future customers expected to arise
after the acquisition.
On October 6, 2017, the Company acquired Zenium's data center business in Istanbul for a cash payment of
approximately $92.0 million. Zenium's operating results have been reported in the EMEA region following the date of
acquisition. The nature of the intangible assets acquired from this acquisition is customer relationships with an estimated
useful life of 15 years.
As of December 31, 2018, the Company completed the detailed valuation analysis to derive the fair value of assets
acquired and liabilities assumed from the Itconic and the Zenium data center acquisitions and updated the final allocation
of purchase price from the provisional amounts reported as of December 31, 2017. The adjustments for the Zenium
data center acquisition primarily resulted in an increase in property, plant and equipment of $5.2 million and a
corresponding decrease in other assets of $5.2 million. The adjustments for Itconic primarily resulted in a decrease in
property, plant and equipment of $3.6 million and an increase in goodwill of $2.6 million. The changes in fair value of
acquired assets and liabilities assumed did not have a significant impact on the Company's results of operations for
any reporting periods prior to and including December 31, 2018.
On February 3, 2017, the Company acquired IO UK's data center operating business in Slough, United Kingdom,
for a cash payment of £29.1 million, or approximately $36.3 million at the exchange rate in effect on February 3, 2017.
The acquired facility was renamed London 10 ("LD10") data center. LD10's operating results have been reported in
the EMEA region following the date of acquisition. The nature of the intangible assets acquired from this acquisition is
customer relationships with an estimated useful life of 10 years. As of December 31, 2017, the Company had finalized
the allocation of purchase price for the IO Acquisition from the provisional amounts first reported as of March 31, 2017
and the adjustments made during the year ended December 31, 2017 were not significant. The changes in fair value
of acquired assets and liabilities assumed did not have a significant impact on the Company's results of operations for
any reporting periods prior to and including December 31, 2017.
The final purchase price allocations for the three acquisitions are as follows (in thousands):
Cash and cash equivalents
Accounts receivable
Other current assets
Property, plant and equipment
Intangible assets
Goodwill
Deferred tax assets
Other assets
Total assets acquired
Accounts payable and accrued liabilities
Other current liabilities
Capital lease and other financing obligations
Loans payable
Deferred tax liabilities
Other liabilities
Net assets acquired
F-27
Itconic
Zenium
data center
$
15,659 $
692 $
IO UK's
data center
1,388
16,429
1,885
64,499
101,755
127,711
—
4,025
331,963
(15,846)
(12,374)
(30,666)
(3,253)
(3,198)
(7,515)
198
6,430
58,931
7,900
21,834
—
313
96,298
(1,012)
(451)
—
—
(2,227)
(614)
7
1,082
40,251
6,252
15,804
6,714
3,396
74,894
(439)
(168)
(33,091)
(4,067)
—
(828)
$
259,111 $
91,994 $
36,301
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Goodwill from the acquisitions of Itconic, the Zenium data center and IO UK's data center is not deductible for local
tax purposes and is attributable to the Company's EMEA region. The Company's results of operations include $22.4
million of revenues from the combined operations of Itconic, the Zenium data center and IO UK's data center and an
insignificant net loss for the periods from their respective dates of acquisition through December 31, 2017.
4. Earnings Per Share
The following table sets forth the computation of basic and diluted EPS for the years ended December 31 (in
thousands, except per share amounts):
Net income
Net loss attributable to non-controlling interests
Net income attributable to Equinix
Weighted-average shares used to calculate basic EPS
Effect of dilutive securities:
Employee equity awards
Weighted-average shares used to calculate diluted EPS
EPS attributable to Equinix:
Basic EPS
Diluted EPS
2019
507,245 $
2018
365,359 $
2017
232,982
205
—
—
507,450 $
365,359 $
232,982
84,140
79,779
76,854
539
84,679
418
80,197
681
77,535
6.03 $
5.99 $
4.58 $
4.56 $
3.03
3.00
$
$
$
$
The following table sets forth potential shares of common stock that are not included in the diluted EPS calculation
above because to do so would be anti-dilutive for the years ended December 31 (in thousands):
Common stock related to employee equity awards
Total
5. Assets Held for Sale
Sale of xScale™ data center facilities in Europe
2019
2018
2017
21
21
265
265
63
63
In June 2019, the Company entered into an agreement to form a joint venture in the form of a limited liability
partnership with GIC, Singapore's sovereign wealth fund (the "Joint Venture"), to develop and operate xScale data
centers in Europe. The Company agreed to sell certain data center facilities in Europe to the Joint Venture. The assets
and liabilities of these data center facilities, which were included within the Company's EMEA operating segment, were
classified as held for sale as of June 30, 2019 and through September 30, 2019.
On October 8, 2019, the Company closed the Joint Venture and sold both its London 10 and Paris 8 data centers,
as well as certain construction development and leases in London and Frankfurt, to the Joint Venture in exchange for
a total consideration of $433.0 million, which is comprised of 1) net cash proceeds of $351.8 million, 2) a 20% partnership
interest in the Joint Venture with a fair value of $41.9 million, and 3) a contingent consideration with fair value of
approximately $39.3 million, receivable upon completion of certain performance milestones. As part of the transaction,
the Company recorded liabilities of $41.4 million within other liabilities on the consolidated balance sheet, which
represents its obligation to complete future construction for certain sites sold. During the year ended December 31,
2019, the Company recognized a total gain of $45.1 million on the sale of its xScale data center facilities in Europe to
the Joint Venture.
F-28
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The milestone payments are primarily contingent on the receipt of local regulatory approval for certain sites. The
contingent consideration is considered a derivative and is remeasured at its fair value each reporting period using
inputs such as probabilities of payment, discount rates, foreign currency forward rates and projected payment dates.
The fair value measurements were based on significant inputs that are not observable in the market and thus represent
Level 3 measurements. The fair value of the contingent consideration of $40.1 million at December 31, 2019, of which
$34.3 million was included in other current assets and the remaining $5.8 million was included in other assets on the
consolidated balance sheet. Future changes in the fair value of the contingent consideration will continue to be recorded
in gain (loss) on asset sales on the consolidated statement of operations.
For further information on the Joint Venture, see Note 6 below.
Sale of New York 12 ("NY12") data center
In January 2019, the Company entered into an agreement to sell its NY12 data center, which was reported in its
Americas' region. The assets of the NY12 data center to be divested were classified as held for sale. During the year
ended December 31, 2019, the Company recorded an impairment charge of $15.8 million, reducing the carrying value
of NY12 assets to the estimated fair value less cost to sell. The transaction closed in October 2019 and the gain on
sale recognized was insignificant.
6. Equity Method Investments
As described in Note 5 above, the Company and GIC closed their Joint Venture on October 8, 2019. Upon closing,
GIC contributed €152.6 million in cash, or $167.4 million at the exchange rate in effect on October 8, 2019, for an 80%
partnership interest in the Joint Venture. Equinix sold certain xScale data center facilities to the Joint Venture in exchange
for net cash proceeds of $351.8 million and a 20% partnership interest in the Joint Venture with a fair value of $41.9
million. The Company accounts for its investments in the Joint Venture using the equity method of accounting, whereby
the investments were recorded initially at fair value, which equals to the cost of the Company's initial equity contribution,
and subsequently adjusted for cash contributions and the Company's share of the income and losses of the investees.
As of December 31, 2019, the Company had equity method investments of $59.7 million within other assets on
the consolidated balance sheet. The Company's share of the income and losses of the equity method investments
was not significant for the years ended December 31, 2019, and was included in other income on the consolidated
statement of operations.
F-29
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
7. Balance Sheet Components
Cash, Cash Equivalents and Short-Term Investments
Cash, cash equivalents and short-term investments consisted of the following as of December 31 (in thousands):
Cash and cash equivalents:
Cash
Cash equivalents:
Money market funds
Total cash and cash equivalents
Short-term investments:
Certificates of deposit
Publicly traded equity securities
Total short-term investments
2019
2018
$
983,030 $
486,648
886,547
1,869,577
119,518
606,166
7,583
2,779
10,362
2,823
1,717
4,540
Total cash, cash equivalents and short-term investments
$ 1,879,939 $
610,706
As of December 31, 2019 and 2018, cash and cash equivalents included investments which were readily convertible
to cash and had original maturity dates of 90 days or less. The maturities of certificates of deposit classified as short-
term investments were one year or less as of December 31, 2019 and 2018. The Company does not have any certificates
of deposits with maturities greater than one year as of December 31, 2019 and 2018.
Accounts Receivable
Accounts receivable, net, consisted of the following as of December 31 (in thousands):
Accounts receivable
Allowance for doubtful accounts
Accounts receivable, net
2019
702,160 $
2018
646,069
(13,026)
(15,950)
689,134 $
630,119
$
$
Trade accounts receivable are recorded at the invoiced amount and generally do not bear interest.
The following table summarizes the activity of the Company's allowance for doubtful accounts (in thousands):
Balance as of December 31, 2016
Provision for allowance for doubtful accounts
Net write-offs
Impact of foreign currency exchange
Balance as of December 31, 2017
Provision for allowance for doubtful accounts
Net write-offs
Impact of foreign currency exchange
Balance as of December 31, 2018
Provision for allowance for doubtful accounts
Net write-offs
Impact of foreign currency exchange
Balance as of December 31, 2019
F-30
$
$
15,675
5,627
(4,546)
1,472
18,228
7,236
(8,396)
(1,118)
15,950
8,459
(11,341)
(42)
13,026
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Other Current Assets
Other current assets consisted of the following as of December 31 (in thousands):
Prepaid expenses
Taxes receivable
Restricted cash, current
Other receivables
Derivative instruments
Contract asset, current
Other current assets (1)
Total other current assets
2019
2018
$
55,954 $
122,823
7,090
36,350
25,426
10,033
45,867
70,433
98,245
10,887
12,611
62,170
9,778
10,733
$
303,543 $
274,857
(1)
The December 31, 2019 balance included $34.3 million representing the current portion of the fair value of the contingent
consideration from the sale of xScale data center facilities to the Joint Venture. See Note 5 for further discussion.
Property, Plant and Equipment, Net
Property, plant and equipment, net consisted of the following as of December 31 (in thousands):
Core systems
Buildings
Leasehold improvements
Construction in progress
Personal property
Land
Less accumulated depreciation
Property, plant and equipment, net
2019
2018
$ 8,131,835 $ 7,073,912
5,398,525
1,764,058
1,002,104
1,009,701
781,024
4,822,501
1,637,133
974,152
857,585
631,367
18,087,247
15,996,650
(5,934,650)
(4,970,630)
$ 12,152,597 $ 11,026,020
F-31
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Goodwill and Other Intangibles
The following table presents goodwill and other intangible assets, net, for the years ended December 31, 2019
and 2018 (in thousands):
Goodwill:
Americas
EMEA
Asia-Pacific
Intangible assets, net:
2019
2018
$ 1,741,689 $ 1,745,804
2,426,306
2,474,164
613,863
616,420
$ 4,781,858 $ 4,836,388
Intangible assets - customer relationships
$ 2,712,701 $ 2,733,864
Intangible assets - trade names
Intangible assets - favorable leases
Intangible assets - in-place leases
Intangible assets - licenses
Intangible assets - other
Accumulated amortization - customer relationships
Accumulated amortization - trade names
Accumulated amortization - favorable leases
Accumulated amortization - in-place leases
Accumulated amortization - licenses
Accumulated amortization - other
Total intangible assets, net
46,601
—
33,295
9,697
6,402
71,778
35,969
33,671
9,697
—
2,808,696
2,884,979
(646,632)
(467,111)
(37,885)
(62,585)
—
(14,329)
(4,529)
(2,932)
(9,986)
(8,118)
(3,883)
—
(706,307)
(551,683)
$ 2,102,389 $ 2,333,296
Changes in the carrying amount of goodwill by geographic regions are as follows (in thousands):
Americas
EMEA
Asia-Pacific
Total
Balance as of December 31, 2017
$ 1,561,512 $ 2,610,899 $
239,351 $ 4,411,762
Purchase accounting - Infomart Dallas acquisition
197,378
Purchase accounting - Metronode acquisition
Purchase accounting - other acquisitions
—
333
—
—
1,357
—
413,871
—
197,378
413,871
1,690
Impact of foreign currency exchange
(13,419)
(138,092)
(36,802)
(188,313)
Balance as of December 31, 2018
Purchase accounting - acquisition
Asset sales - xScale data center facilities
Asset sales - NY12 data center
1,745,804
2,474,164
616,420
4,836,388
—
—
(950)
25,863
(59,246)
—
(3,683)
—
—
22,180
(59,246)
(950)
Impact of foreign currency exchange
(3,165)
(14,475)
1,126
(16,514)
Balance as of December 31, 2019
$ 1,741,689 $ 2,426,306 $
613,863 $ 4,781,858
F-32
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Changes in the net book value of intangible assets by geographic regions are as follows (in thousands):
Balance as of December 31, 2016
Verizon Data Center acquisition
Other 2017 acquisitions
Write-off of intangible asset
Amortization of intangibles
Impact of foreign currency exchange
Balance as of December 31, 2017
Infomart Dallas acquisition
Metronode acquisition
Other acquisitions
Write-off of intangible asset
Amortization of intangibles
Impact of foreign currency exchange
Balance as of December 31, 2018
ASC 842 adoption adjustment
Switch AMS1 data center acquisition
Asset sales - NY12 data center
Other
Amortization of intangibles
Impact of foreign currency exchange
Balance as of December 31, 2019
Americas
$
40,117 $
1,693,900
—
—
(84,749)
(2,895)
1,646,373
65,847
—
—
(334)
(125,683)
(7,232)
1,578,971
(108)
—
(8,412)
—
EMEA
562,361 $
Asia-Pacific
116,753 $
Total
719,231
—
112,645
(725)
— 1,693,900
—
—
112,645
(725)
(79,105)
(13,154)
(177,008)
36,043
631,219
3,781
36,929
107,380
2,384,972
—
—
—
128,229
65,847
128,229
8,342
(1,998)
—
(3)
8,342
(1,661)
(62,283)
(31,757)
543,860
(20,692)
4,889
—
1,096
(15,450)
(203,416)
(9,691)
(48,680)
210,465
2,333,296
(2,405)
(23,205)
—
—
472
4,889
(8,412)
1,568
(125,390)
(1,769)
(54,432)
(8,157)
(16,456)
(196,278)
457
(9,469)
$ 1,443,292 $
466,564 $
192,533 $ 2,102,389
The Company's goodwill and intangible assets which are denominated in currencies other than the U.S. Dollar are
subject to foreign currency fluctuations. The Company's foreign currency translation gains and losses, including goodwill
and intangibles, are a component of other comprehensive income and loss.
Estimated future amortization expense related to these intangibles is as follows (in thousands):
Years ending:
2020
2021
2022
2023
2024
Thereafter
Total
$
190,222
182,765
178,780
178,513
177,733
1,194,376
$ 2,102,389
F-33
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Other Assets
Other assets consisted of the following as of December 31 (in thousands):
Deferred tax assets, net
Prepaid expenses
Debt issuance costs, net
Deposits
Restricted cash
Derivative instruments
Contract assets, non-current
Contract costs
Equity method investments
Other assets
Total other assets
2019
2018
$
35,806 $
58,300
61,690
6,395
56,567
9,946
32,280
31,521
229,205
59,737
57,641
125,158
8,532
54,986
10,551
10,904
16,396
188,200
10,000
50,225
$
580,788 $
533,252
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following as of December 31 (in thousands):
Accounts payable
Accrued compensation and benefits
Accrued interest
Accrued taxes (1)
Accrued utilities and security
Accrued professional fees
Accrued repairs and maintenance
Accrued other
2019
2018
$
52,232 $
96,980
241,361
103,345
135,099
107,404
20,741
10,699
89,837
235,697
126,142
118,818
78,547
17,010
10,736
72,762
Total accounts payable and accrued expenses
$
760,718 $
756,692
(1)
Includes income taxes payable of $57.7 million and $67.9 million, respectively, as of December 31, 2019 and 2018.
Other Current Liabilities
Other current liabilities consisted of the following as of December 31 (in thousands):
Deferred revenue, current
Customer deposits
Derivative instruments
Deferred rent
Dividends payable
Asset retirement obligations
Other current liabilities
Total other current liabilities
F-34
2019
2018
$
76,193 $
16,707
31,596
—
9,029
2,081
18,332
73,143
20,430
8,812
6,466
8,795
6,776
2,573
$
153,938 $
126,995
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Other Liabilities
Other liabilities consisted of the following as of December 31 (in thousands):
Asset retirement obligations
Deferred tax liabilities, net
Deferred revenue, non-current
Deferred rent
Accrued taxes
Dividends payable
Customer deposits
Derivative instruments
Other liabilities (1)
Total other liabilities
2019
100,334 $
$
247,179
46,555
—
146,046
7,108
9,306
4,017
61,180
2018
89,887
247,849
46,641
108,693
116,735
6,545
9,671
928
2,814
$
621,725 $
629,763
(1)
The balance as of December 31, 2019 includes $41.4 million of liabilities recorded upon the closing of the Joint Venture,
which represents the Company’s obligation to pay for future construction that was not completed at the close of the transaction.
See Note 5 for further discussion.
The following table summarizes the activities of the Company's asset retirement obligation ("ARO") (in thousands):
Asset retirement obligations as of December 31, 2016
$
103,015
Additions
Adjustments (1)
Accretion expense
Impact of foreign currency exchange
Asset retirement obligations as of December 31, 2017
Additions
Adjustments (1)
Accretion expense
Impact of foreign currency exchange
Asset retirement obligations as of December 31, 2018
Additions
Adjustments (1)
Accretion expense
Impact of foreign currency exchange
Asset retirement obligations as of December 31, 2019
17,736
(34,576)
7,335
5,029
98,539
5,126
(11,288)
6,285
(1,999)
96,663
6,980
(7,969)
6,290
451
$
102,415
(1)
The ARO adjustments are primarily due to lease amendments and acquisition of real estate assets, as well as other
adjustments.
8. Derivatives and Hedging Instruments
Derivatives Designated as Hedging Instruments
Net Investment Hedges. The Company is exposed to the impact of foreign exchange rate fluctuations on the value
of investments in its foreign subsidiaries whose functional currencies are other than the U.S. Dollar. In order to mitigate
the impact of foreign currency exchange rates, the Company has entered into various foreign currency debt obligations,
which are designated as hedges against the Company's net investments in foreign subsidiaries. As of December 31,
F-35
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2019 and 2018, the total principal amounts of foreign currency debt obligations designated as net investment hedges
were $4,078.7 million and $4,139.8 million, respectively.
The Company also uses cross-currency interest rate swaps to hedge a portion of its net investment in its European
operations. As of December 31, 2019, U.S. Dollar to Euro cross-currency interest rate swap contracts with a total
notional amount of $750.0 million were outstanding, with maturity dates in April 2022, January 2024 and January 2025.
At maturity of each outstanding contract, the Company will receive U.S. Dollars from and pay Euros to the contract
counterparty. During the term of each contract, the Company receives interest payments in U.S. Dollars and makes
interest payments in Euros based on a notional amount and fixed interest rates determined at contract inception. The
Company did not have any cross-currency interest rate swaps outstanding as of December 31, 2018.
The effect of net investment hedges on accumulated other comprehensive income and the consolidated statements
of operations for the years ended December 31, 2019, 2018 and 2017 was as follows (in thousands):
Amount of gain or (loss) recognized in accumulated other comprehensive income:
Years Ended December 31,
Foreign currency debt
Cross-currency interest rate swaps (included component) (1)
Cross-currency interest rate swaps (excluded component) (2)
Total
Amount of gain or (loss) recognized in earnings:
2019
2018
$ 47,033 $ 218,269 $(235,292)
—
15,514
2017
—
10,737
—
—
$ 73,284 $ 218,269 $(235,292)
Cross-currency interest rate swaps (excluded
component) (2)
Interest expense
Total
$ 19,261 $
$ 19,261 $
— $
— $
—
—
Location of gain or (loss)
2019
2018
2017
Years Ended December 31,
(1)
(2)
Included component represents foreign exchange spot rates.
Excluded component represents cross-currency basis spread and interest rates.
Cash Flow Hedges. The Company hedges its foreign currency translation exposure for forecasted revenues and
expenses in its EMEA region between the U.S. Dollar and the British Pound, Euro, Swedish Krona and Swiss Franc.
The foreign currency forward and option contracts that the Company uses to hedge this exposure are designated as
cash flow hedges. As of December 31, 2019 and 2018, the total notional amounts of these foreign exchange contracts
were $824.8 million and $760.9 million, respectively.
The Company hedges the interest rate exposure created by anticipated fixed rate debt issuances through the use
of treasury locks, which are designated as cash flow hedges. During the fourth quarter of 2019, we entered into and
settled ten treasury locks designated as cash flow hedges with an aggregate notional amount of $1.5 billion, hedging
anticipated fixed-rate debt issuances. The settlement of these contracts during the fourth quarter of 2019, resulted in
a gain of $5.1 million, which was deferred and included as a component of other comprehensive income (loss), and
is being amortized to interest expense over the life of the associated debt.
The Company enters into intercompany hedging instruments ("intercompany derivatives") with wholly-owned
subsidiaries of the Company in order to hedge certain forecasted revenues and expenses denominated in currencies
other than the U.S. Dollar. Simultaneously, the Company enters into derivative contracts with unrelated third parties
to externally hedge the net exposure created by such intercompany derivatives.
F-36
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The effect of cash flow hedges on accumulated other comprehensive income and the consolidated statements of
operations for the years ended December 31, 2019, 2018 and 2017 was as follows (in thousands):
Amount of gain or (loss) recognized in accumulated other comprehensive income:
Years Ended December 31,
Foreign currency forward and option contracts (included component) (1)
Foreign currency option contracts (excluded component) (2)
Treasury locks
Total
2019
(9,945) $ 58,227 $ (73,437)
2017
2018
$
(1,807)
4,972
—
—
—
—
$
(6,780) $ 58,227 $ (73,437)
Amount of gain or (loss) reclassified from accumulated other comprehensive income to income:
Years Ended December 31,
Foreign currency forward contracts
Foreign currency forward contracts
Treasury locks
Total
Location of gain or (loss)
Revenues
Costs and operating
expenses
Interest Expense
2019
2018
$ 80,046 $ (30,603) $ 20,845
2017
(41,262)
15,341
(11,183)
79
—
—
$ 38,863 $ (15,262) $
9,662
Amount of gain or (loss) excluded from effectiveness testing and included in income:
Foreign currency forward contracts
Other income (expense)
Foreign currency option contracts (excluded
component) (2)
Revenues
Location of gain or (loss)
Total
Years Ended December 31,
2019
2018
88 $ 16,470 $
2017
3,805
(1,082)
—
—
(994) $ 16,470 $
3,805
$
$
(1)
(2)
Included component represents foreign exchange spot rates.
Excluded component represents option's time value.
As of December 31, 2019, the Company's foreign currency cash flow hedge instruments had maturity dates ranging
from January 2020 to December 2021 and the Company recorded a net gain of $16.3 million within accumulated other
comprehensive income (loss) relating to cash flow hedges that will be reclassified to revenues and expenses as they
mature in the next 12 months. As of December 31, 2018, the Company's foreign currency cash flow hedge instruments
had maturity dates ranging from January 2019 to December 2020 and the Company recorded a net gain of $21.4
million within accumulated other comprehensive income (loss) relating to cash flow hedges that will be reclassified to
revenues and expenses as they mature in the next 12 months. As of December 31, 2019, the Company had no interest
rate cash flow hedges outstanding. The net gain in accumulated other comprehensive income (loss) to be reclassified
to interest expense in the next 12 months for settled interest rate cash flow hedges is $0.7 million.
Derivatives Not Designated as Hedging Instruments
Embedded Derivatives. The Company is deemed to have foreign currency forward contracts embedded in certain
of the Company's customer agreements that are priced in currencies different from the functional or local currencies
of the parties involved. These embedded derivatives are separated from their host contracts and carried on the
Company's balance sheet at their fair value. The majority of these embedded derivatives arise as a result of the
Company's foreign subsidiaries pricing their customer contracts in U.S. Dollars.
Economic Hedges of Embedded Derivatives. The Company uses foreign currency forward contracts to manage
the foreign exchange risk associated with the Company's customer agreements that are priced in currencies different
from the functional or local currencies of the parties involved ("economic hedges of embedded derivatives"). Foreign
F-37
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
currency forward contracts represent agreements to exchange the currency of one country for the currency of another
country at an agreed-upon price on an agreed-upon settlement date.
Foreign Currency Forward Contracts. The Company also uses foreign currency forward contracts to manage the
foreign exchange risk associated with certain foreign currency-denominated monetary assets and liabilities. As a result
of foreign currency fluctuations, the U.S. Dollar equivalent values of its foreign currency-denominated monetary assets
and liabilities change. Gains and losses on these contracts are included in other income (expense), on a net basis,
along with the foreign currency gains and losses of the related foreign currency-denominated monetary assets and
liabilities associated with these foreign currency forward contracts. As of December 31, 2019 and 2018, the total notional
amounts of these foreign currency contracts were $2,467.0 million and $1,500.4 million, respectively.
The following table presents the effect of derivatives not designated as hedging instruments in the Company's
consolidated statements of operations (in thousands):
Amount of gain or (loss) recognized in earnings:
Embedded derivatives
Economic hedge of embedded derivatives
Revenues
Revenues
$
63 $
618 $
550
(877)
Location of gain or (loss)
2019
2018
2017
(6,756)
1,655
Foreign currency forward contracts
Other income (expense)
36,846
91,233
(68,962)
Total
$ 37,459 $ 90,974 $ (74,063)
Years Ended December 31,
Fair Value of Derivative Instruments
The following table presents the fair value of derivative instruments recognized in the Company's consolidated
balance sheets as of December 31, 2019 and 2018 (in thousands):
Designated as hedging instruments:
Cash flow hedges
Foreign currency forward and option contracts
$
24,853 $
5,898
$
38,606 $
865
December 31, 2019
December 31, 2018
Assets (1)
Liabilities (2)
Assets (1)
Liabilities (2)
Net investment hedges
Cross-currency interest rate swaps
Total designated as hedging
Not designated as hedging instruments:
Embedded derivatives
Economic hedges of embedded derivatives
Foreign currency forward contracts
Total not designated as hedging
Total Derivatives
26,251
51,104
—
5,898
—
38,606
4,595
1,367
641
6,603
2,268
—
27,446
29,714
4,656
525
29,287
34,468
$
57,707 $
35,612
$
73,074 $
—
865
2,426
180
6,269
8,875
9,740
(1)
(2)
As presented in the Company's condensed consolidated balance sheets within other current assets and other assets.
As presented in the Company's condensed consolidated balance sheets within other current liabilities and other liabilities.
F-38
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Offsetting Derivative Assets and Liabilities
The Company presents its derivative instruments and the accrued interest related to cross-currency interest rate
swaps at gross fair values in the condensed consolidated balance sheets. The Company enters into master netting
agreements with its counterparties for transactions other than embedded derivatives to mitigate credit risk exposure
to any single counterparty. Master netting agreements allow for individual derivative contracts with a single counterparty
to offset in the event of default. For presentation on the consolidated balance sheets, the Company does not offset
fair value amounts recognized for derivative instruments or the accrued interest related to cross-currency interest rate
swaps under master netting arrangements. The following table presents information related to these offsetting
arrangements as of December 31, 2019 and 2018 (in thousands):
Gross Amounts Offset in
Consolidated Balance Sheet
Gross
Amounts
Offset in the
Balance
Sheet
Gross
Amounts
Gross
Amounts not
Offset in the
Balance
Sheet
Net
Net Amounts
$
76,640 $
45,832
— $
76,640 $
(37,820) $
38,820
—
45,832
(37,820)
8,012
$
73,074 $
— $
73,074 $
(6,517) $
66,557
9,740
—
9,740
(6,517)
3,223
December 31, 2019
Derivative assets
Derivative liabilities
December 31, 2018
Derivative assets
Derivative liabilities
9. Fair Value Measurements
Valuation Methods
Fair value estimates are made as of a specific point in time based on methods using the market approach valuation
method which uses prices and other relevant information generated by market transactions involving identical or
comparable assets or liabilities or other valuation techniques. These techniques involve uncertainties and are affected
by the assumptions used and the judgments made regarding risk characteristics of various financial instruments,
discount rates, estimates of future cash flows, future expected loss experience and other factors.
Cash Equivalents and Investments. The fair value of the Company's investments in money market funds
approximates their face value. Such instruments are included in cash equivalents. The Company's money market funds
and publicly traded equity securities are classified within Level 1 of the fair value hierarchy because they are valued
using quoted prices for identical instruments in active markets. The fair value of the Company's other investments,
including certificates of deposit, approximates their face value. The fair value of these investments is priced based on
the quoted market price for similar instruments or nonbinding market prices that are corroborated by observable market
data. Such instruments are classified within Level 2 of the fair value hierarchy. The Company determines the fair values
of its Level 2 investments by using inputs such as actual trade data, benchmark yields, broker/dealer quotes and other
similar data, which are obtained from quoted market prices, custody bank, third-party pricing vendors or other sources.
The Company uses such pricing data as the primary input to make its assessments and determinations as to the
ultimate valuation of its investment portfolio and has not made, during the periods presented, any material adjustments
to such inputs. The Company is responsible for its consolidated financial statements and underlying estimates.
The Company uses the specific identification method in computing realized gains and losses. Realized gains and
losses from the sale of investments are included within other income (expense) in the Company's consolidated
statements of operations. The Company's investments in publicly traded equity securities are carried at fair value.
Subsequent to the adoption of ASU 2016-01, unrealized gains and losses on publicly traded equity securities are
reported within other income (expense) in the Company's consolidated statements of operations. Prior to the adoption
of ASU 2016-01, unrealized gains and losses on publicly traded equity securities were reported in stockholders' equity
as a component of other comprehensive income or loss. Upon adoption of ASU 2016-01, the Company recorded a
net cumulative effect increase of $2.1 million to retained earnings.
F-39
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Derivative Assets and Liabilities. Inputs used for valuations of derivatives are based upon quoted prices for similar
instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and
model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated
by observable market data. The significant inputs used include spot currency rates and forward points, interest rate
curves, and published credit default swap rates of its foreign exchange trading counterparties and other comparable
companies. The Company has determined that the inputs used to value its derivatives fall within Level 2 of the fair
value hierarchy, therefore the derivatives are categorized as Level 2.
During the years ended December 31, 2019 and 2018, the Company did not have any nonfinancial assets or
liabilities measured at fair value on a recurring basis.
The Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31,
2019 were as follows (in thousands):
Fair Value at
December 31,
Fair Value
Measurement Using
2019
Level 1
Level 2
Assets:
Money market and deposit accounts
Publicly traded equity securities
Certificates of deposit
Derivative instruments
Liabilities:
Derivative instruments
Assets:
Money market and deposit accounts
Publicly traded equity securities
Certificates of deposit
Derivative instruments
Liabilities:
Derivative instruments
$
886,547 $
886,547 $
2,779
7,583
57,707
2,779
—
—
954,616 $
889,326 $
—
—
7,583
57,707
65,290
35,612 $
— $
35,612
$
119,518 $
119,518 $
1,717
2,823
73,074
1,717
—
—
197,132 $
121,235 $
—
—
2,823
73,074
75,897
9,740 $
— $
9,740
$
$
$
$
The Company's financial assets and liabilities measured at fair value on a recurring basis at December 31, 2018
were as follows (in thousands):
Fair Value at
December 31,
Fair Value
Measurement Using
2018
Level 1
Level 2
The Company did not have any Level 3 financial assets or financial liabilities during the years ended December 31,
2019 and 2018.
F-40
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
10. Leases
Significant Lease Transactions
Hong Kong 4 ("HK4") Data Center
In August 2018, the Company entered into a lease agreement with the landlord to lease the remaining floors of
the HK4 Data Center. The lease did not commence until May 2019. The lease has an initial term of 9.4 years and one
10-year renewal option which the Company determined it was not reasonably certain to exercise. The Company
therefore excluded the renewal option from the lease term. The Company assessed the lease classification of the HK4
lease at the commencement date and determined the lease should be accounted for as an operating lease. During
the three months ended June 30, 2019, the Company recorded operating lease ROU asset and liability of 317.3 million
Hong Kong dollars, or $40.6 million at the exchange rate in effect on June 30, 2019.
Seoul 1 ("SL1") Data Center
In October 2018, the Company entered into a lease agreement with the landlord for several leased spaces in SL1
Data Center. Phase 1 commenced in August 2019 with an initial term of 5 years. The lease includes three 5-year
renewal options. The Company concluded that one renewal option of 5 years is reasonably certain to be exercised
after considering all relevant factors that create an economic incentive for the Company. The Company assessed the
lease classification of the SL1 lease at the commencement date and determined the lease should be accounted for
as a finance lease. During the three months ended September 30, 2019, the Company recorded finance lease ROU
asset and liability of 35,747 million Korean Won and 34,804 million Korean Won, respectively, or $29.9 million and
$29.1 million, respectively, at the exchange rate in effect on September 30, 2019.
Tokyo 11 ("TY11") Data Center
In July 2019, the Company entered into two new lease agreements for building I and building II in TY11 Data Center
for a lease term of 28.6 years. At the same time, the Company terminated the original lease agreement of certain
leased space in building I. The new spaces in building I and building II provide additional right-of-use assets that are
not included in the original lease agreement and the lease payments for the new spaces are commensurate with the
stand-alone price of the additional right-of-use assets. As a result, the Company concluded the new spaces in building
I and building II met the criteria to be treated as a separate contract and did not modify the accounting treatment of
the original leased space. The Company assessed the lease classification of TY11 leases at the commencement date
and determined that the leases for both the new spaces in building I and building II should be accounted for as finance
leases. During the three months ended September 30, 2019, the Company recorded finance lease ROU asset and
liability of ¥6,922.3 million in aggregate for both new spaces in building I and II, or approximately $64.0 million at the
exchange rate in effect on September 30, 2019.
Singapore 4 ("SG4") Data Center
In July 2019, the Company entered into a lease agreement with the landlord to lease the land and building for its
new SG4 Data Center. The initial lease term is 25 years with a renewal option to extend the lease until 2053. The
Company determined the renewal option was not reasonably certain to exercise; therefore, the renewal option was
not included in the lease term. The Company assessed the lease classification of the SG4 lease at the commencement
date and determined that the lease for the building and land components should be accounted for as a finance lease
and an operating lease, respectively. During the three months ended September 30, 2019, the Company recorded
finance lease ROU asset and liability of 75.5 million Singapore dollars, or approximately $54.6 million, and operating
lease ROU asset and liability of 48.5 million Singapore dollars, or approximately $35.1 million, at the exchange rate
in effect on September 30, 2019.
F-41
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Silicon Valley 3 ("SV3") Data Center
In July 2019, the Company entered into a lease agreement with the landlord to extend the term of the SV3 lease
for an additional 12 years. The lease includes two 5-year renewal options which the Company determined it was not
reasonably certain to exercise; therefore, the renewal options were not included in the lease term. The SV3 lease
renewal is accounted for as a lease modification. The Company assessed the lease classification of the SV3 lease at
modification date and determined that the lease for the building and land components should be accounted for as a
finance lease and an operating lease, respectively. During the three months ended September 30, 2019, the Company
recorded incremental finance lease ROU asset and liability of $39.9 million. The Company also recorded an incremental
operating lease ROU asset and liability of $13.1 million.
Hong Kong 1 ("HK1") Data Center
In October 2019, the Company extended certain leased spaces in HK1 Data Center for another 18 years. The
HK1 lease is accounted for as a lease modification. The Company assessed the lease classification of the HK1 lease
at modification date and determined that the lease should be accounted for as a finance lease. The Company recorded
finance lease ROU asset and liability of 426.0 million Hong Kong dollars, or approximately $54.7 million at the exchange
rate in effect on December 31, 2019.
Toronto 2 ("TR2") Data Center
In October 2019, the Company entered into an agreement with the landlord to purchase the TR2 Data Center for
223 million Canadian dollars, or approximately $171.8 million at the exchange rate in effect on December 31, 2019.
The deal was closed on December 18, 2019. As part of the transaction, the Company assumed the outstanding
mortgage financing on the property of 56.9 million Canadian dollars, or approximately $43.8 million, at the exchange
rate in effect on December 31, 2019 (see Note 11). The cash consideration was reduced by the outstanding mortgage
amount. The Company had previously accounted for the TR2 land and building as operating and finance leases,
respectively. Upon the purchase, the Company effectively terminated the leases and settled the operating and finance
lease liabilities of 13.1 million Canadian dollars and 61.7 million Canadian dollars, respectively, or approximately $10.1
million and $47.5 million, respectively, at the exchange rate in effect on December 31, 2019. The Company also
derecognized operating lease and finance lease ROU assets of 13.1 million Canadian dollars and 49.2 million Canadian
dollars, respectively, or approximately $10.1 million and $37.9 million, respectively, at the exchange rate in effect on
December 31, 2019. The Company recorded land and building of 135.3 million Canadian dollars and 85.0 million
Canadian dollars, respectively, or approximately $104.3 million and $65.5 million, respectively, at the exchange rate
in effect on December 31, 2019.
London 10 ("LD10") Data Center
In October 2019, the Company signed a sub-lease agreement with the Joint Venture to sub-lease a portion of
Equinix's former LD10 Data Center for 15 years. The sub-lease agreement includes one 5-year renewal option which
the Company determined it was not reasonably certain to exercise; therefore, the renewal option was not included in
the lease term. Additionally, Equinix and the Joint Venture signed an agreement for the Joint Venture to operate the
leased space for 15 years. The Company determined that the sub-lease and other agreements should be combined
into a single contract as the contracts were negotiated at the same time and with the same commercial objective to
operate a data center. The Company assessed the lease classification of the lease at the commencement date and
determined the lease should be accounted for as a finance lease. The Company recorded finance lease ROU asset
and liability of £103.2 million, or approximately $136.7 million at the exchange rate in effect on December 31, 2019.
F-42
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Lease Expenses
The components of lease expenses are as follows (in thousands):
Finance lease cost
Amortization of right-of-use assets (1)
Interest on lease liabilities
Total finance lease cost
Operating lease cost
Total lease cost
Twelve Months Ended
December 31, 2019
$
$
82,893
110,688
193,581
219,021
412,602
(1) Amortization of right-of-use assets is included with depreciation expense, and is recorded within cost of revenues, sales and
marketing and general and administrative expenses in the consolidated statements of operations.
Other Information
Other information related to leases is as follows (in thousands, except years and percent):
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases
Operating cash flows from operating leases
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for lease obligations: (1)
Finance leases
Operating leases
Weighted-average remaining lease term - finance leases (2)
Weighted-average remaining lease term - operating leases (2)
Weighted-average discount rate - finance leases
Weighted-average discount rate - operating leases
Finance lease assets (3)
Twelve Months Ended
December 31, 2019
107,000
210,848
126,486
387,808
145,025
As of December 31, 2019
15 years
13 years
9%
4%
1,277,614
$
$
$
(1) Represents all non-cash changes in ROU assets.
(2) Includes lease renewal options that are reasonably certain to be exercised.
(3) Finance lease assets, net of accumulated amortization of $474.8 million, are recorded within property, plant and equipment,
net on the consolidated balance sheets.
F-43
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Maturities of Lease Liabilities
Maturities of lease liabilities under Topic 842 as of December 31, 2019 are as follows (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Plus amount representing residual property value
Less imputed interest
Total
$
Operating Leases
$
Finance Leases
Total
193,663 $
191,954
183,908
168,353
156,502
1,106,944
2,001,324
—
(540,062)
1,461,262 $
173,994 $
176,357
176,992
178,289
177,338
1,739,235
2,622,205
18,164
(1,134,248)
1,506,121 $
367,657
368,311
360,900
346,642
333,840
2,846,179
4,623,529
18,164
(1,674,310)
2,967,383
For the year ended December 31, 2018, the Company's operating lease, capital lease and other financing
obligations under ASC Topic 840 are summarized as follows (in thousands):
2019
2020
2021
2022
2023
Thereafter
Total minimum lease payments
Plus amount representing residual property
value
Less amount representing interest
Present value of net minimum lease
payments
Less current portion
Total
Capital Lease
Obligations
Other
Financing
Obligations (1)
Total Capital Lease
and Other
Financing
Obligations
$
103,859 $
97,326
95,414
94,954
95,463
878,755
1,365,771
80,292 $
73,266
73,672
73,856
69,423
722,496
1,093,005
184,151
170,592
169,086
168,810
164,886
1,601,251
2,458,776
$
Operating
Leases
187,280
179,515
166,159
158,115
147,677
1,130,494
1,969,240
—
(602,026)
389,643
(727,472)
389,643
(1,329,498)
—
—
763,745
(43,498)
720,247 $
755,176
(34,346)
720,830 $
$
1,518,921
(77,844)
1,441,077
1,969,240
—
$ 1,969,240
(1) Other financing obligations are primarily related to build-to-suit arrangements.
The Company entered into lease agreements with various landlords primarily for data center spaces and ground
lease which have not yet commenced as of December 31, 2019. These leases will commence between fiscal years
2020 and 2022, with lease terms of 10 to 49 years and a total lease commitment of approximately $608.1 million.
F-44
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
11. Debt Facilities
Mortgage and Loans Payable
The Company's mortgage and loans payable consisted of the following as of December 31 (in thousands):
Term loans
Mortgage payable and other loans payable
Less the amount representing unamortized debt discount and debt issuance cost
Add the amount representing unamortized mortgage premium
Less current portion
Senior Credit Facility
2019
2018
$ 1,287,151 $ 1,344,482
82,967
44,042
1,370,118
1,388,524
(4,849)
1,768
(6,614)
1,882
1,367,037
1,383,792
(77,603)
(73,129)
$ 1,289,434 $ 1,310,663
On December 12, 2017, the Company entered into a credit agreement with a group of lenders for a $3,000.0
million credit facility ("Senior Credit Facility"), comprised of a $2,000.0 million senior unsecured multicurrency revolving
credit facility ("Revolving Facility") and an approximately $1,000.0 million senior unsecured multicurrency term loan
facility ("Term Loan Facility"). The Senior Credit Facility contains customary covenants, including financial covenants
which require the Company to maintain certain financial coverage and leverage ratios, as well as customary events
of default. The Senior Credit Facility has a 5 year term, maturing on December 12, 2022.
Revolving Facility
The Revolving Facility allows the Company to borrow, repay and reborrow over its term. The Revolving Facility
provides a sublimit for the issuance of letters of credit of up to $250.0 million at any one time. Borrowings under the
Revolving Facility bear interest at a rate based on a benchmark rate defined in the credit agreement plus a margin
that can vary from 0.85% to 1.40% or, at the Company's option, the base rate, which is defined as the highest of (a)
the Federal Funds Rate plus 0.5%, (b) the Bank of America prime rate and (c) one-month LIBOR plus 1% plus a margin
that can vary from 0.0% to 0.4%. The Company is required to pay a quarterly letter of credit fee on the face amount
of each letter of credit, which fee is based on the same margin that applies from time to time to borrowings under the
Revolving Facility. The Company is also required to pay a quarterly facility fee ranging from 0.15% to 0.30% per annum
based on the total Revolving Facility amount.
Term Loan Facility
On December 12, 2017, the Company borrowed £500.0 million and SEK 2,800.0 million under the Term Loan
Facility, or approximately $997.1 million at the exchange rates in effect on that date. The Company is required to repay
the Term Loan Facility at the rate of 5% of the original principal amount per annum with the remaining balance to be
repaid in full at the maturity of the Senior Credit Facility. The Term Loan Facility bears interest at a rate based on LIBOR
plus a margin that can vary from 1.00% to 1.70%. As of December 31, 2019, the Company had £456.3 million and
SEK2,555.0 million, or approximately $877.0 million in U.S. dollars at the exchange rates in effect as of December 31,
2019, outstanding under the Term Loan Facility with a weighted average effective interest rate of 1.86% per annum.
Debt issuance costs related to the Term Loan Facility, net of amortization, were $1.7 million as of December 31, 2019.
F-45
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
On July 26, 2018, the Company entered into an amendment to its Senior Credit Facility. The amendment provided
for a senior unsecured term loan in an aggregate principal amount of ¥47.5 billion (the "JPY Term Loan"). On July 31,
2018, the Company drew down the full ¥47.5 billion of the JPY Term Loan, or approximately $424.7 million at the
exchange rate effective on July 31, 2018, and prepaid the remaining principal of its existing Japanese Yen Term Loan
of ¥43.8 billion or approximately $391.3 million. The Company is required to repay the JPY Term Loan at the rate of
5% of the original principal amount per annum with the remaining balance to be repaid in full at the maturity of the
Senior Credit Facility. The JPY Term Loan bears interest at a rate based on LIBOR plus a margin that can vary from
1.00% to 1.70% and contains customary covenants consistent with the Senior Credit Facility. As of December 31,
2019, total outstanding borrowings under the JPY Term Loan were ¥44.5 billion, or approximately $410.1 million at the
exchange rate effective on that date, with an effective interest rate of 1.74%. Debt issuance costs, net of amortization,
related to the JPY Term Loan were $3.2 million as of December 31, 2019.
Mortgage Payable
In October 2013, as a result of the Frankfurt Kleyer 90 Carrier Hotel Acquisition, the Company assumed a mortgage
payable of $42.9 million with an effective interest rate of 4.25%. The mortgage payable has monthly principal and
interest payments and has an expiration date of August 2022.
In December 2019, as a result of the TR2 Data Center purchase as described in Note 10 above, the Company
assumed a mortgage payable of $43.8 million with an effective interest rate of 3.63%. The mortgage payable has
monthly principal and interest payments and has an expiration date of November 2029.
Senior Notes
The Company's senior notes consisted of the following as of December 31 (in thousands):
Senior Notes
Issuance Date
Maturity Date
Amount
Effective
Rate
Amount
Effective
Rate
2019
2018
5.000% Infomart Senior Notes
April 2018
April 2019 - April 2021
$
450,000
4.46% $
750,000
5.375% Senior Notes due 2022
November 2014
January 2022
343,711
5.56%
750,000
5.375% Senior Notes due 2023
March 2013
April 2023
—
—%
1,000,000
2.625% Senior Notes due 2024
November 2019
November 2024
2.875% Euro Senior Notes due 2024
March 2018
March 2024
5.750% Senior Notes due 2025
November 2014
January 2025
1,000,000
841,500
—
2.79%
3.08%
—%
—
859,125
500,000
2.875% Euro Senior Notes due 2025
September 2017 October 2025
1,122,000
3.04%
1,145,500
2.900% Senior Notes due 2026
November 2019
November 2026
600,000
3.04%
—
5.875% Senior Notes due 2026
December 2015
January 2026
2.875% Euro Senior Notes due 2026
December 2017
February 2026
5.375% Senior Notes due 2027
March 2017
May 2027
3.200% Senior Notes due 2029
November 2019
November 2029
Less amount representing unamortized debt discount and debt issuance cost
Add amount representing unamortized debt premium
Less current portion
1,100,000
1,122,000
1,250,000
1,200,000
9,029,211
(78,030)
1,716
8,952,897
(643,224)
6.03%
1,100,000
3.04%
1,145,500
5.51%
1,250,000
3.30%
—
8,500,125
(75,372)
5,031
8,429,784
(300,999)
$ 8,309,673
$ 8,128,785
4.40%
5.56%
5.51%
—%
3.08%
5.88%
3.04%
—%
6.03%
3.04%
5.51%
—%
2.625% Senior Notes due 2024, 2.900% Senior Notes due 2026 and 3.200% Senior Notes due 2029
On November 18, 2019, the Company issued $1.0 billion aggregate principal amount of 2.625% senior notes due
2024 (the “2024 Notes”), $600.0 million aggregate principal amount of 2.900% senior notes due 2026 (the “2026 Notes”)
and $1.2 billion aggregate principal amount of 3.200% senior notes due 2029 (the “2029 Notes”). Interest on these
notes is payable semi-annually on May 18 and November 18 of each year, commencing on May 18, 2020. Debt issuance
F-46
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
costs and debt discounts related to the 2024 Notes, the 2026 Notes and the 2029 Notes were $8.1 million, $5.9 million
and $11.5 million, respectively.
Tender and Redemption of 5.375% Senior Notes due 2022, 5.375% Senior Notes due 2023 and 5.750% Senior Notes
due 2025
On November 6, 2019, the Company announced a cash tender offer to purchase any and all of its outstanding
5.375% Senior Notes due 2022 (the “2022 Notes”), 5.375% Senior Notes due 2023 (the “2023 Notes”) and 5.750%
Senior Notes due 2025 (the “2025 Notes”), with an aggregated principal amount of $2.25 billion. On November 18,
2019, the Company closed the tender offer and completed the purchase of $1.24 billion in aggregate principal amount
of the 2022, 2023 and 2025 Notes. In connection with this tender offer, the Company paid a tender premium of $27.2
million. On December 16, 2019, the Company redeemed the remaining $662.7 million principal amount of the 2023
and 2025 Notes. The purchase of the 2022, 2023 and 2025 Notes under the tender offer and the subsequent redemption
of the 2023 and 2025 Notes were funded with a portion of the net cash proceeds from the issuance of 2024, 2026 and
2029 Notes as described above.
All of the Company's senior notes are unsecured and rank equal in right of payment to the Company's existing or
future senior indebtedness and senior in right of payment to the Company's existing and future subordinated
indebtedness. Interest on the senior notes is paid semi-annually in arrears. The senior notes are effectively subordinated
to all of the existing and future secured debt, including debt outstanding under any bank facility or secured by any
mortgage, to the extent of the assets securing such debt. They are also structurally subordinated to any existing and
future indebtedness and other liabilities (including trade payables) of any of the Company's subsidiaries.
Each series of senior notes is governed by an indenture and a supplemental indenture between the Company and
U.S. Bank National Association, as trustee. These supplemental indentures contain covenants that limit the Company's
ability and the ability of its subsidiaries to, among other things:
purchase, redeem or retire capital stock or subordinated debt;
incur liens (1);
enter into sale-leaseback transactions (1);
•
•
•
• make investments; and
• merge or consolidate with any other person (1).
(1) The supplemental indentures for the 5.000% Infomart Senior Notes, 2.875% Euro Senior Notes due 2024, 2.625% Senior
Notes due 2024, 2.875% Euro Senior Notes due 2026, 2.900% Senior Notes due 2026, and 3.200% Senior Notes due
2029 only contain covenants footnoted with (1).
As of December 31, 2019, the Company was in compliance with all covenants. Subject to compliance with the
limitations described above, the Company may issue an unlimited principal amount of additional notes at later dates
under the same indenture as the senior notes.
The Company is not required to make any mandatory redemption with respect to the senior notes; however, upon
the event of a change in control, the Company may be required to offer to purchase the senior notes.
F-47
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Optional Redemption Schedule
Each series of the Company's senior notes, with the exception of 5.000% Infomart Senior Notes, provide for optional
redemption. Six series of the Company’s senior notes provide for optional redemption as summarized below:
Senior Notes Description
Early Equity
Redemption
Price (1)
First Scheduled
Redemption Date (2)
First
Scheduled
Redemption
Price
Second
Year
Redemption
Price
Third Year
Redemption
Price
Fourth Year
(if scheduled)
Redemption
Price
5.375% Senior Notes due 2022
105.375%
January 1, 2018
104.031%
102.688%
101.344%
100.000%
2.875% Euro Senior Notes due 2024
102.875%
September 15, 2020
101.438%
100.719%
100.000%
2.875% Euro Senior Notes due 2025
102.875%
October 1, 2020
101.438%
100.719%
100.000%
5.875% Senior Notes due 2026
105.875%
January 15, 2021
102.938%
101.958%
100.979%
100.000%
2.875% Euro Senior Notes due 2026
102.875%
February 1, 2021
101.438%
100.719%
100.000%
5.375% Senior Notes due 2027
105.375%
May 15, 2022
102.688%
101.792%
100.896%
100.000%
(1)
(2)
Within 90 days of the closing of one or more equity offerings and at any time prior to the first scheduled redemption date,
the Company may redeem up to 35% of the aggregate principal amount of any series of senior notes outstanding, at the
respective early equity redemption price, plus accrued and unpaid interest to the redemption date, provided that at least
65% of the aggregate principal amount of the senior notes issued in such series remains outstanding immediately after such
redemption(s).
On or after the first scheduled redemption date, the Company may redeem all or a part of a series of senior notes at the
first scheduled redemption price plus accrued and unpaid interest thereon, if redeemed during the 12 month period beginning
on the first scheduled redemption date and at reduced scheduled redemption prices during the 12 or 18 month periods
beginning on the anniversaries of the first scheduled redemption date.
At any time prior to the first scheduled redemption date, the Company may redeem all or a part of any series of senior notes
at a redemption price equal to 100% of the principal amount of such senior notes redeemed plus an applicable premium
and accrued and unpaid interest, subject to the rights of the holders of record of such senior notes on the relevant record
date to receive interest due on the relevant interest payment date.
With respect to the 2024 Notes, the 2026 Notes and the 2029 Notes, the Company may redeem at its election, at
any time or from time to time, some or all of the notes of any series before they mature. The redemption price will equal
the sum of (1) an amount equal to one hundred percent (100%) of the principal amount of the notes being redeemed
plus accrued and unpaid interest up to, but not including, the redemption date and (2) a make-whole premium. If the
2024 Notes are redeemed on or after October 18, 2024, the 2026 Notes are redeemed on or after September 18,
2026, or the 2029 Notes are redeemed on or after August 18, 2029, in each case, the redemption price will not include
a make-whole premium for the applicable notes.
Loss on Debt Extinguishment
During the year ended December 31, 2019, the Company recorded $52.8 million of loss on debt extinguishment
primarily comprised of:
•
$52.9 million of loss on debt extinguishment from the tender and subsequent redemption of the 2022, 2023
and 2025 Notes, which included $43.3 million tender and redemption premium that was paid in cash and $9.6
million related to the write-off of unamortized debt issuance costs.
During the year ended December 31, 2018, the Company recorded $51.4 million of loss on debt extinguishment
comprised of:
•
•
$17.1 million of loss on debt extinguishment as a result of amendments to leases impacting the related financing
obligations;
$19.5 million of loss on debt extinguishment from the settlement of financing obligations as a result of the
Infomart Dallas Acquisition;
F-48
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
•
•
$12.6 million of loss on debt extinguishment as a result of the settlement of financing obligations for properties
purchased; and
$2.2 million of loss on debt extinguishment as a result of the redemption of the Japanese Yen Term Loan.
During the year ended December 31, 2017, the Company recorded $65.8 million of loss on debt extinguishment
comprised of:
•
•
•
•
$14.6 million of loss on debt extinguishment from the redemption of senior notes, which included $12.2 million
redemption premium that was paid in cash and $2.4 million related to the write-off of unamortized debt issuance
costs;
$22.5 million of loss on debt extinguishment from the redemption of term loans;
$16.7 million of loss on debt extinguishment as a result of amendments to leases and financing obligations;
and
$12.0 million of loss on debt extinguishment from the settlement of financing obligations as a result of properties
purchased.
Maturities of Debt Instruments
The following table sets forth maturities of the Company's debt, including mortgage and loans payable, and senior
notes, gross of debt issuance costs, debt discounts and debt premiums, as of December 31, 2019 (in thousands):
Years ending:
2020
2021
2022
2023
2024
Thereafter
$
721,314
227,654
1,180,017
6,683
1,847,714
6,417,715
$ 10,401,097
Fair Value of Debt Instruments
The following table sets forth the estimated fair values of the Company's mortgage and loans payable and senior
notes as of December 31 (in thousands):
Mortgage and loans payable
Senior notes
2019
2018
$ 1,378,429 $ 1,389,632
9,339,497
8,422,211
The fair values of the mortgage and loans payable and 5.000% Infomart Senior Notes, which were not publicly
traded, were estimated by considering the Company's credit rating, current rates available to the Company for debt of
the same remaining maturities and terms of the debt (level 2). The fair value of the senior notes, which were traded in
the public debt market, was based on quoted market prices (level 1).
F-49
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Interest Charges
The following table sets forth total interest costs incurred and total interest costs capitalized for the years ended
December 31 (in thousands):
Interest expense
Interest capitalized
Interest charges incurred
2019
479,684 $
2018
521,494 $
32,173
19,880
2017
478,698
22,625
511,857 $
541,374 $
501,323
$
$
Total interest paid, net of capitalized interest, during the years ended December 31, 2019, 2018 and 2017 was
$521.6 million, $476.9 million and $422.2 million, respectively.
12. Stockholders' Equity
The Company's authorized share capital is 300,000,000 shares of common stock and 100,000,000 shares of
preferred stock, of which 25,000,000 is designated Series A, 25,000,000 is designated as Series A-1 and 50,000,000
is undesignated. As of December 31, 2019 and 2018, the Company had no preferred stock issued and outstanding.
Common Stock
In March 2017, the Company issued and sold 6,069,444 shares of its common stock in a public offering pursuant
to a registration statement and a related prospectus and prospectus supplement. The Company received net proceeds
of approximately $2,126.3 million, net of underwriting discounts, commissions and offering expenses. In March 2019,
the Company issued and sold 2,985,575 shares of common stock in a public offering pursuant to a registration statement
and a related prospectus and prospectus supplement. The Company received net proceeds of approximately $1,213.4
million, net of underwriting discounts, commissions and offering expenses.
In August 2017, the Company established an "at the market" equity offering program (the "2017 ATM Program"),
under which the Company may, from time to time, offer and sell shares of its common stock to or through sales agents
up to an aggregate of $750.0 million. For the year ended December 31, 2018 and 2017, the Company sold 930,934
shares and 763,201 shares, respectively, for approximately $388.2 million and $355.1 million, respectively, net of
payment of commissions to the sales agents and estimated equity offering costs. As of December 31, 2018, no shares
remained available for sale under the 2017 ATM Program. In December 2018, the Company established another ATM
program, under which it may, from time to time, offer and sell up to an aggregate of $750.0 million of its common stock
to or through sales agents in "at the market" transactions (the "2018 ATM Program"). For the year ended December 31,
2019, the Company sold 903,555 shares for approximately $447.5 million, net of payment of commissions to sales
agents and other offering expenses, under the 2018 ATM Program.
As of December 31, 2019, the Company had reserved the following authorized but unissued shares of common
stock for future issuances:
Common stock options and restricted stock units
Common stock employee purchase plans
Total
3,334,130
2,973,785
6,307,915
F-50
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss, net of tax, by components are as follows (in thousands):
Foreign currency translation
adjustment ("CTA") gain (loss)
Unrealized gain (loss) on cash
flow hedges (1)
Net investment hedge CTA gain
(loss) (1)
Unrealized gain (loss) on
available for sale securities (2)
Net actuarial gain (loss) on
defined benefit plans (3)
December
31, 2016
Net
Change
December
31, 2017
Net
Change
Cumulative
Effect
Adjustment
December
31, 2018
Net
Change
December
31, 2019
$ (1,031,129) $ 454,269
$ (576,860) $(421,743) $
— $ (998,603) $ (58,315) $ (1,056,918)
30,704
(54,895)
(24,191)
43,671
49,989
(235,292)
(185,303)
219,628
—
—
19,480
(3,842)
15,638
34,325
73,294
107,619
2,110
14
2,124
(816)
(143)
(959)
—
55
(2,124)
—
—
(904)
—
(48)
—
(952)
$ (949,142) $ 163,953
$ (785,189) $(158,389) $
(2,124) $ (945,702) $ 11,089
$ (934,613)
(1)
(2)
(3)
Refer to Note 8 for a discussion of the amounts reclassified from accumulated other comprehensive loss to net income.
Upon adoption of ASU 2016-01 during the three months ended March 31, 2018, the Company recorded a net cumulative
effect adjustment of $2.1 million from accumulated other comprehensive loss to retained earnings. The realized gains and
losses reclassified from accumulated other comprehensive loss to net income as a result of sale of available for sale securities
were not significant for the years ended December 31, 2017 and 2016.
The Company has a defined benefit pension plan covering all employees in one country where such plans are mandated by
law. The Company does not have any defined benefit plans in any other countries. The unamortized gain (loss) on defined
benefit plans includes gains or losses resulting from a change in the value of either the projected benefit obligation or the
plan assets resulting from a change in an actuarial assumption, net of amortization.
Changes in foreign currencies can have a significant impact to the Company's consolidated balance sheets (as
evidenced above in the Company's foreign currency translation loss), as well as its consolidated results of operations,
as amounts in foreign currencies are generally translated into more U.S. dollars when the U.S. dollar weakens or less
U.S. dollars when the U.S. dollar strengthens. As of December 31, 2019, the U.S. dollar was generally stronger relative
to certain of the currencies of the foreign countries in which the Company operates as compared to December 31,
2018. This overall strengthening of the U.S. dollar had an overall negative impact on the Company's consolidated
financial position because the foreign denominations translated into less U.S. dollars as evidenced by the increase in
foreign currency translation loss for the year ended December 31, 2019 as reflected in the above table. In future periods,
the volatility of the U.S. dollar as compared to the other currencies in which the Company does business could have
a significant impact on its consolidated financial position and results of operations including the amount of revenue
that the Company reports in future periods.
F-51
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Dividends
During the years ended December 31, 2019, 2018 and 2017, the Company's Board of Directors declared quarterly
dividends whose treatment for federal income tax purposes were as follows:
Declaration Date
Record Date
Payment Date
Fiscal 2019
2/13/2019
5/1/2019
7/31/2019
2/27/2019
5/22/2019
8/21/2019
3/20/2019
6/19/2019
9/18/2019
10/30/2019
11/20/2019
12/11/2019
Total
Fiscal 2018
2/14/2018
5/2/2018
8/8/2018
11/1/2018
Total
Fiscal 2017
2/15/2017
4/26/2017
8/2/2017
11/1/2017
Total
2/26/2018
5/23/2018
8/22/2018
3/21/2018
6/20/2018
9/19/2018
11/14/2018
12/12/2018
2/27/2017
5/24/2017
8/23/2017
3/22/2017
6/21/2017
9/20/2017
11/15/2017
12/13/2017
Total Distribution (1)
Nonqualified
Ordinary Dividend (2)
Total Distribution
Amount
(per share)
(in thousands)
$
$
$
$
$
$
2.460000
$
2.460000
$
2.460000
2.460000
2.460000
2.460000
2.460000
2.460000
9.840000
$
9.840000
$
2.280000
$
2.280000
$
2.280000
2.280000
2.280000
2.280000
2.280000
2.280000
9.120000
$
9.120000
$
2.000000
$
2.000000
$
2.000000
2.000000
2.000000
2.000000
2.000000
2.000000
8.000000
$
8.000000
$
198,933
207,949
209,226
209,785
825,893
180,640
181,207
182,304
183,297
727,448
143,275
155,824
156,055
156,931
612,085
(1)
(2)
Common stock dividends are characterized for federal income tax purposes as nonqualified ordinary dividend, qualified
ordinary dividend, capital gains or return of capital. During the years ended December 31, 2019, 2018 and 2017, the Company
did not classify any portion of the distributions as qualified ordinary dividend, capital gains or return of capital.
All 2019 and 2018 nonqualified ordinary dividends are eligible for the 20% deduction generally allowable to non-corporate
shareholders under Internal Revenue Code Section 199A.
In addition, as of December 31, 2019, for dividends and special distributions attributed to the restricted stock units,
the Company recorded a short term dividend payable of $9.0 million and a long term dividend payable of $7.1 million
for the restricted stock units that have not yet vested. As of December 31, 2018, for dividends and special distributions
attributed to the restricted stock units, the Company recorded a short term dividend payable of $8.8 million and a long
term dividend payable of $6.5 million for the restricted stock units that have not yet vested.
13. Stock-Based Compensation
Equity Compensation Plans
As of December 31, 2019, The Company’s equity compensation plans include:
•
2000 Equity Incentive Plan: Under the 2000 Equity Incentive Plan, nonstatutory stock options, restricted shares,
restricted stock units and stock appreciation rights may be granted to employees, outside directors and
consultants at not less than 85% of the fair value on the date of grant, and incentive stock options may be
granted to employees at not less than 100% of the fair value on the date of grant. Equity awards granted under
the 2000 Equity Incentive Plan generally vest over 4 years.
F-52
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
•
•
•
2000 Director Option Plan: Under the 2000 Director Option Plan, each non-employee board member who was
not previously an employee of the Company would receive an automatic initial nonstatutory stock option grant
as well as an annual non-statutory stock option grant on the date of the Company's regular Annual Meeting
of Stockholders. On December 18, 2008, the Company's Board of Directors passed resolutions eliminating all
automatic stock option grant mechanisms under the 2000 Director Option Plan and replaced them with an
automatic restricted stock unit grant mechanism under the 2000 Equity Incentive Plan.
2001 Supplemental Stock Plan: Under the 2001 Supplemental Stock Plan, non-statutory stock options and
restricted shares/restricted stock units may be granted to consultants and employees who are not executive
officers or board members, at not less than 85% of the fair value on the date of grant. Current stock options
granted under the 2001 Supplemental Stock Plan generally vest over 4 years.
2004 Employee Stock Purchase Plan (2004 Purchase Plan): The 2004 Purchase Plan permits eligible
employees to purchase common stock on favorable terms via payroll deductions of up to 15% of the employee's
cash compensation, subject to certain share and statutory dollar limits. Two overlapping offering periods
commence during each calendar year, on each February 15 and August 15 or such other periods or dates as
determined by the Compensation Committee from time to time, and the offering periods last up to 24 months
with a purchase date every 6 months. The price of each share purchased is 85% of the lower of a) the fair
value per share of common stock on the last trading day before the commencement of the applicable offering
period or b) the fair value per share of common stock on the purchase date.
The Equity compensation plans are administered by the Compensation Committee of the Board of Directors (the
"Compensation Committee"), and the Compensation Committee may terminate or amend these plans, with approval
of the stockholders as may be required by applicable law, at any time. As of December 31, 2019, shares reserved and
available for issuance under the equity compensation plans are as follows:
2000 Equity Incentive Plan
2000 Director Option Plan
2001 Supplemental Stock Plan
2004 Purchase Plan
Shares reserved
Shares available for
grant
16,636,172
594,403
1,494,275
5,392,206
1,255,261
505,646
260,498
2,973,785
F-53
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Restricted Stock Units
Since 2008, the Company primarily grants restricted stock units to its employees, including executives and non-
employee directors, in lieu of stock options. The Company generally grants restricted stock units that have a service
condition only or have both a service and performance condition. Each restricted stock unit is not considered issued
and outstanding and does not have voting rights until it is converted into one share of the Company's common stock
upon vesting. Restricted stock unit activity is summarized as follows:
Number of
Shares
Outstanding
Weighted
Average
Grant Date
Fair Value
per Share
Weighted
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value (1)
(Dollars in
Thousands)
Restricted stock units outstanding, December 31,
2016
1,347,879 $
Restricted stock units granted
Restricted stock units released, vested
Special distribution shares released
Restricted stock units canceled
Special distribution shares canceled
Restricted stock units outstanding, December 31,
2017
Restricted stock units granted
Restricted stock units released, vested
Special distribution shares released
Restricted stock units canceled
Special distribution shares canceled
Restricted stock units outstanding, December 31,
2018
Restricted stock units granted
Restricted stock units released, vested
Special distribution shares released
Restricted stock units canceled
Special distribution shares canceled
658,196
(606,064)
(15,667)
(79,451)
(1,002)
1,303,891
704,249
(593,528)
(13,880)
(173,460)
(485)
1,226,787
779,478
(549,259)
(1,781)
(142,477)
(23)
192.59
389.60
260.75
243.06
313.83
282.49
252.30
387.31
299.07
283.14
336.75
295.77
361.22
448.16
362.66
295.31
364.42
297.04
Restricted stock units outstanding, December 31,
2019
1,312,725 $
411.99
1.29 $
766,238
(1)
The intrinsic value is calculated based on the market value of the stock as of December 31, 2019.
The total fair value of restricted stock units vested and released during the years ended December 31, 2019, 2018
and 2017 was $269.1 million, $249.8 million and $259.1 million, respectively.
Employee Stock Purchase Plan
The Company provides the following disclosures for the 2004 Purchase Plan as of December 31 (dollars, except
shares):
Weighted-average purchase price per share
Weighted average grant-date fair value per share of shares
purchased
$
$
Number of shares purchased
2019
2018
2017
354.72 $
341.48 $
250.65
104.84 $
90.04 $
72.21
146,640
145,346
162,076
F-54
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company uses the Black-Scholes option-pricing model to determine the fair value of shares under the 2004
Purchase Plan with the following assumptions during the years ended December 31:
Range of dividend yield
Range of risk-free interest rate
Range of expected volatility
Weighted-average expected volatility
Weighted average expected life (in years)
Stock-Based Compensation
2019
2018
2017
2.07 - 2.09%
1.97 - 2.00%
2.10 - 2.31%
1.55 - 2.58%
1.79 - 2.68%
0.70 - 1.35%
19.27 - 25.55% 19.04 - 24.33% 16.42 - 24.27%
22.95%
1.24
20.74%
1.43
20.30%
1.52
The following table presents, by operating expense, the Company's stock-based compensation expense recognized
in the Company's consolidated statement of operations for the years ended December 31 (in thousands):
Cost of revenues
Sales and marketing
General and administrative
Total
2019
2018
2017
$
25,355 $
18,247 $
56,719
154,465
53,448
109,021
13,621
50,094
111,785
$
236,539 $
180,716 $
175,500
The Company's stock-based compensation recognized in the consolidated statement of operations was comprised
of the following types of equity awards for the years ended December 31 (in thousands):
Restricted stock units
Employee stock purchase plan
Total
2019
217,541 $
2018
165,141 $
18,998
15,575
2017
164,321
11,179
236,539 $
180,716 $
175,500
$
$
During the years ended December 31, 2019, 2018 and 2017, the Company capitalized $9.1 million, $9.1 million
and $6.2 million, respectively, of stock-based compensation expense as construction in progress in property, plant and
equipment.
As of December 31, 2019, the total stock-based compensation cost related to unvested equity awards not yet
recognized, net of estimated forfeitures, totaled $413.8 million which is expected to be recognized over a weighted-
average period of 2.25 years.
14. Income Taxes
Income (loss) before income taxes is attributable to the following geographic locations for the years ended
December 31, (in thousands):
Domestic
Foreign
Income before income taxes
2019
328,806 $
363,791
692,597 $
2018
298,009 $
135,029
433,038 $
2017
148,500
138,332
286,832
$
$
F-55
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The tax benefit (expenses) for income taxes consisted of the following components for the years ended
December 31, (in thousands):
Current:
Federal
State and local
Foreign
Subtotal
Deferred:
Federal
State and local
Foreign
Subtotal
2019
2018
2017
$
(17,906) $
7,085 $
(4,624)
(135,356)
(157,886)
(2,663)
(118,175)
(113,753)
(7,459)
(1,775)
(18,232)
(27,466)
(27,874)
(1,165)
75,113
46,074
9,346
(849)
(109,032)
(100,535)
9,684
2,018
34,983
46,685
Income tax expense
$
(185,352) $
(67,679) $
(53,850)
State and foreign taxes not based on income are included in general and administrative expenses and the aggregate
amounts were not significant for the years ended December 31, 2019, 2018 and 2017.
The fiscal 2019, 2018, and 2017 income tax benefit (expenses) differed from the amounts computed by applying
the U.S. federal income tax rate of 21%, 21% and 35%, respectively, to pre-tax income as a result of the following for
the years ended December 31 (in thousands):
Federal tax at statutory rate
State and local tax (expense) benefit
Deferred tax assets generated in current year not benefited
Foreign income tax rate differential
Non-deductible expenses
Stock-based compensation expense
Change in valuation allowance
Foreign financing activities
Loss on debt extinguishment
Loss on divestments
Uncertain tax positions reserve
Tax adjustments related to REIT
Enactment of the US tax reform
Change in deferred tax adjustments
Other, net
Total income tax expense
2019
(145,445) $
$
2018
(90,938) $
2017
(100,391)
(5,852)
(5,398)
(11,610)
(1,021)
(2,105)
(2,870)
(18,738)
—
(3,277)
(35,724)
63,614
—
(10,574)
(6,352)
(3,616)
(3,777)
(4,072)
(756)
(2,308)
38,684
(17,548)
—
—
(20,440)
32,189
—
—
4,903
1,000
(7,643)
26,151
(2,629)
(616)
(716)
1,319
(1,604)
—
(66)
41,973
(6,513)
—
(4,115)
$
(185,352) $
(67,679) $
(53,850)
Legislation commonly referred to as the Tax Cuts and Jobs Act ("TCJA"), which was signed into law on December
22, 2017, contained many significant changes to the U.S. federal income tax laws. Among other things, the TCJA
reduced the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018, limited the tax deductibility of
interest expense, accelerated expensing of certain business assets and transitioned the U.S. international taxation
from a worldwide tax system to a territorial tax system by imposing a one-time mandatory repatriation of undistributed
foreign earnings. As a result of the reduced corporate tax rate, the Company recognized an income tax expense of
$6.5 million during the fourth quarter of 2017 as a provisional estimate due to the remeasurement of the net deferred
tax assets in the U.S. TRS. In the fourth quarter of 2018, the Company completed the analysis of the TCJA's income
tax effects and the adjustment to the provisional amount was insignificant.
F-56
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The TCJA included a Global Intangible Low-Taxed Income ("GILTI") provision that increases U.S. federal taxable
income by certain foreign subsidiary income in the year it is earned. The Company's accounting policy is to treat any
tax on GILTI inclusions as a current period cost included in the tax expense in the year incurred. The Company believes
the GILTI inclusion provision will result in no financial statement impact provided the Company satisfies its REIT
distribution requirement with respect to the GILTI inclusions.
As a result of the Company's conversion to a REIT effective January 1, 2015, it is no longer the Company's intent
to indefinitely reinvest undistributed foreign earnings. However, no deferred tax liability has been recognized to account
for this change because the expected recovery of the basis difference will not result in U.S. taxes in the post-REIT
conversion periods due to the fact that none of its foreign subsidiaries is owned by a U.S. taxable REIT subsidiary and
the withholding tax effect would be immaterial. The Company continues to assess the foreign withholding tax impact
of its current policy and does not believe the distribution of its foreign earnings would trigger any significant foreign
withholding taxes, as a majority of the foreign jurisdictions where the Company operates do not impose withholding
taxes on dividend distributions to a corporate U.S. parent.
The types of temporary differences that give rise to significant portions of the Company's deferred tax assets and
liabilities are set out below as of December 31 (in thousands):
Deferred tax assets:
Reserves and accruals
Stock-based compensation expense
Unrealized losses
Operating loss carryforwards
Gross deferred tax assets
Valuation allowance
Total deferred tax assets, net
Deferred tax liabilities:
Property, plant and equipment
Intangible assets
Total deferred tax liabilities
Net deferred tax liabilities
2019
2018
$
7,670 $
24,136
2,675
6,492
59,735
76,572
(57,812)
18,760
2,524
1,471
49,169
77,300
(57,003)
20,297
(85,729)
(144,404)
(230,133)
(50,610)
(159,237)
(209,847)
$
(211,373) $
(189,550)
The tax basis of REIT assets, excluding investments in TRSs, is greater than the amounts reported for such assets
in the accompanying consolidated balance sheet by approximately $1.9 billion as of December 31, 2019.
The Company's accounting for deferred taxes involves weighing positive and negative evidence concerning the
realizability of the Company's deferred tax assets in each tax jurisdiction. After considering such evidence as the nature,
frequency and severity of current and cumulative financial reporting losses, and the sources of future taxable income
and tax planning strategies, the Company concluded that valuation allowances were required in certain foreign
jurisdictions. The operations in the jurisdictions for which a valuation allowance has been established have a history
of significant losses as of December 31, 2019. As such, the Company does not believe these operations have
established a sustained history of profitability and that a valuation allowance is, therefore, necessary. The Company
also provided a valuation allowance against certain gross deferred tax assets in certain tax jurisdictions as these
deferred tax assets are not expected to be realizable in the foreseeable future.
F-57
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Changes in the valuation allowance for deferred tax assets for the years ended December 31, 2019, 2018 and
2017 are as follows (in thousands):
Beginning balance
Amounts from acquisitions
Divested balances
Amounts recognized into income
Current increase (decrease)
Impact of foreign currency exchange
Ending balance
2019
2018
2017
$
57,003 $
84,573 $
(2,707)
(351)
2,870
697
300
33,070
—
(38,684)
(13,086)
(8,870)
29,167
25,283
—
716
28,431
976
$
57,812 $
57,003 $
84,573
The Company's NOL carryforwards for federal, state and foreign tax purposes which expire, if not utilized, at various
intervals from 2020, are outlined below (in thousands):
2020
2021 to 2023
2024 to 2026
2027 to 2029
2030 to 2032
2033 to 2035
Thereafter
Expiration Date
Federal (1)
State
Foreign (2) (3)
Total
$
78,458 $
— $
9,739 $
88,197
149,057
15,564
6,065
—
—
—
—
—
—
—
197
—
6,191
19,867
14,383
—
—
155,248
35,431
20,448
—
197
322,729
322,729
$
249,144 $
197 $
372,909 $
622,250
(1)
(2)
(3)
The total amount of NOL carryforwards that will not be available to offset the Company's future taxable income after dividend
paid deduction due to Section 382 limitations was $241.8 million for federal.
In certain jurisdictions, the net operating loss carryforwards can only be used to offset a percentage of taxable income in a
given year.
If certain substantial changes in the entity's ownership occur or have determined to have occurred, there may be a limitation
on the amount of the carryforwards that can be utilized.
As of December 31, 2019, the Company had tax credit carryforwards of $8.6 million, which expire, if not utilized,
from 2020 to 2031.
The beginning and ending balances of the Company's unrecognized tax benefits are reconciled below for the years
ended December 31 (in thousands):
Beginning balance
Gross increases related to prior year tax positions
Gross decreases related to prior year tax positions
Gross increases related to current year tax positions
Decreases resulting from expiration of statute of limitation
Decreases resulting from settlements
2019
150,930 $
$
—
(1,160)
31,332
(2,112)
(5,264)
2018
2017
82,390 $
33,436
—
48,685
(1,276)
(12,305)
72,187
6,095
—
19,832
(15,410)
(314)
Ending balance
$
173,726 $
150,930 $
82,390
The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense
in the consolidated statements of operations. The Company accrued $14.2 million and $8.4 million for interest and
penalties as of December 31, 2019 and 2018, respectively.
F-58
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The unrecognized tax benefits of $173.7 million as of December 31, 2019, if subsequently recognized, will affect
the Company's effective tax rate favorably at the time when such a benefit is recognized, of which $30.8 million is
subject to an indemnification agreement.
Due to various tax years open for examination and the ongoing tax audits and inquiries by the tax authorities in
different jurisdictions, it is reasonably possible that the balance of unrecognized tax benefits could significantly increase
or decrease over the next 12 months as the Company may be subject to either examination by tax authorities, tax
audit settlements, or a lapse in statute of limitations. The Company is currently unable to estimate the range of possible
adjustments to the balance of unrecognized tax benefits.
The Company's income tax returns for the years from 2016 through current year remain open to examination by
federal and state taxing authorities. In addition, the Company's tax years of 2007 through current year remain open
and subject to examination by local tax authorities in certain foreign jurisdictions in which the Company has major
operations.
15. Commitments and Contingencies
Purchase Commitments
Primarily as a result of the Company's various IBX expansion projects, as of December 31, 2019, the Company
was contractually committed for $0.8 billion of unaccrued capital expenditures, primarily for IBX equipment not yet
delivered and labor not yet provided, in connection with the work necessary to open these IBX data centers and make
them available to customers for installation. In addition, the Company had numerous other, non-capital purchase
commitments in place as of December 31, 2019, such as commitments to purchase power in select locations through
2020 and thereafter, and other open purchase orders for goods, services or arrangements to be delivered or provided
during 2020 and thereafter. Such other miscellaneous purchase commitments totaled $1.0 billion as of December 31,
2019. In addition, the Company entered into lease agreements with various landlords primarily for data center spaces
and ground lease which have not yet commenced as of December 31, 2019. These leases will commence between
fiscal years 2020 and 2022, with lease terms of 10 to 49 years and a total lease commitment of approximately $608.1
million.
Equity Contribution Commitments
In connection with the Joint Venture closed in October 2019, the Company agreed to make future equity contributions
to the Joint Venture of €17.6 million and £15.7 million, or $40.6 million in total at the exchange rate in effect on
December 31, 2019.
Contingent Liabilities
The Company estimates exposure on certain liabilities, such as indirect and property taxes, based on the best
information available at the time of determination. With respect to real and personal property taxes, the Company
records what it can reasonably estimate based on prior payment history, current landlord estimates or estimates based
on current or changing fixed asset values in each specific municipality, as applicable. However, there are circumstances
beyond the Company's control whereby the underlying value of the property or basis for which the tax is calculated on
the property may change, such as a landlord selling the underlying property of one of the Company's IBX data center
leases or a municipality changing the assessment value in a jurisdiction and, as a result, the Company's property tax
obligations may vary from period to period. Based upon the most current facts and circumstances, the Company makes
the necessary property tax accruals for each of its reporting periods. However, revisions in the Company's estimates
of the potential or actual liability could materially impact the financial position, results of operations or cash flows of
the Company.
The Company's indirect and property tax filings in various jurisdictions are subject to examination by local tax
authorities. Although we believe that we have adequately assessed and accounted for our potential tax liabilities, and
that our tax estimates are reasonable, there can be no certainty that additional taxes will not be due upon audit of our
tax returns or as a result of further changes to the tax laws and interpretations thereof. For example, we are currently
undergoing audits and appealing the tentative assessments in a number of jurisdictions where we operate, such as
France and Brazil. The final results of these audits and outcome of the appeals are uncertain and may not be resolved
F-59
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
in our favor. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations
and appeals that would affect the adequacy of its tax accruals for each of the reporting periods. If any issues arising
from the tax examinations and appeals are resolved in a manner inconsistent with the Company's expectations, the
revision of the estimates of the potential or actual liabilities could materially impact the financial position, results of
operations, or cash flows of the Company.
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its
business activities. The Company accrues contingent liabilities when it is probable that future expenditures will be
made and such expenditures can be reasonably estimated. In the opinion of management, there are no pending claims
for which the outcome is expected to result in a material adverse effect in the financial position, results of operations
or cash flows of the Company.
Employment Agreements
The Company has entered into a severance agreement with certain of its executive officers that provides for a
severance payment equal to 100% of the executive officer's annual base salary and maximum bonus in the event his
or her employment is terminated for any reason other than cause or he or she voluntarily resigns under certain
circumstances as described in the agreement, or 200% of the executive officer's annual base salary and maximum
bonus in the event this occurs after a change-in-control of the Company. For certain other executive officers, these
benefits are only triggered after a change-in-control of the Company, in which case the officer is entitled to 200% of
the executive officer's annual base salary and maximum bonus. In addition, under these agreements, the executive
officer is entitled to the payment of his or her monthly health care premiums under the Consolidated Omnibus Budget
Reconciliation Act for up to 24 months.
Indemnification and Guarantor Arrangements
As permitted under Delaware law, the Company has agreements whereby the Company indemnifies its officers
and directors for certain events or occurrences while the officer or director is, or was serving, at the Company's request
in such capacity. The term of the indemnification period is for the officer's or director's lifetime. The maximum potential
amount of future payments the Company could be required to make under these indemnification agreements is
unlimited; however, the Company has a director and officer insurance policy that limits the Company's exposure and
enables the Company to recover a portion of any future amounts paid. As a result of the Company's insurance policy
coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. The Company
has no liabilities recorded for these agreements as of December 31, 2019.
The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to
these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses
suffered or incurred by the indemnified party, generally the Company's business partners or customers, in connection
with any U.S. patent, or any copyright or other intellectual property infringement claim by any third party with respect
to the Company's offerings. The term of these indemnification agreements is generally perpetual any time after execution
of the agreement. The maximum potential amount of future payments the Company could be required to make under
these indemnification agreements is unlimited; however, the Company has never incurred costs to defend lawsuits or
settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value
of these agreements is minimal. The Company has no liabilities recorded for these agreements as of December 31,
2019.
The Company enters into arrangements with its business partners, whereby the business partner agrees to provide
services as a subcontractor for the Company's installations. Accordingly, the Company enters into standard
indemnification agreements with its customers, whereby the Company indemnifies them for other acts, such as personal
property damage, of its subcontractors. The maximum potential amount of future payments the Company could be
required to make under these indemnification agreements is unlimited; however, the Company has general and umbrella
insurance policies that enable the Company to recover a portion of any amounts paid. The Company has never incurred
costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes
the estimated fair value of these agreements is minimal. The Company has no liabilities recorded for these agreements
as of December 31, 2019.
F-60
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company has service level commitment obligations to certain of its customers. As a result, service interruptions
or significant equipment damage in the Company's IBX data centers, whether or not within the Company's control,
could result in service level commitments to these customers. The Company's liability insurance may not be adequate
to cover those expenses. In addition, any loss of services, equipment damage or inability to meet the Company's
service level commitment obligations could reduce the confidence of the Company's customers and could consequently
impair the Company's ability to obtain and retain customers, which would adversely affect both the Company's ability
to generate revenues and the Company's operating results. The Company generally has the ability to determine such
service level credits prior to the associated revenue being recognized. The Company does not have significant liabilities
in connection with service level credits as of December 31, 2019.
16. Related Party Transactions
Related Party Transactions with the Joint Venture
Upon closing of the Joint Venture, the Company sold certain data center facilities in Europe to the Joint Venture
and recognized a gain on assets sale of $45.1 million during the year ended December 31, 2019. For further information
on the transaction, see Note 5 above.
The Company entered into a sub-lease agreement with the Joint Venture to sub-lease a portion of Equinix's former
LD10 Data Center. The Company accounted for the lease as a finance lease. As of December 31, 2019, the Company
recorded a finance lease ROU asset and liability of £103.2 million, or approximately $136.7 million at the exchange
rate in effect on December 31, 2019. For further information on the lease, see Note 10 above.
The Company also entered an agreement to lease to the Joint Venture a portion of land at its Frankfurt 2 data
center site and a new building that is under construction at the land. The lease will have an initial term of 30 years
and 2 renewal options of 10 years each. The consideration of the lease agreement will be based on the total cost of
construction as determined when the construction is completed. As of December 31, 2019, the lease has not
commenced yet.
In connection with the Joint Venture investment, the Company entered into multiple agreements to provide various
services to the Joint Venture, including sales and marketing, development management, facilities management, and
asset management services. During the year ended December 31, 2019, the total revenue recorded from these services
was insignificant.
Other Related Party Transactions
The Company has several significant stockholders and other related parties that are also customers and/or vendors.
The Company's activity of related party transactions was as follows (in thousands):
Revenues
Costs and services
Accounts receivable
Accounts payable
17. Segment Information
Years ended December 31,
2019
2018
2017
$
25,905 $
19,439 $
15,844
19,708
13,726
11,211
As of December 31,
2019
2018
$
3,345 $
800
4,031
585
While the Company has a single line of business, which is the design, build-out and operation of IBX data centers,
it has determined that it has three reportable segments comprised of its Americas, EMEA and Asia-Pacific geographic
regions.
F-61
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following tables present revenue information disaggregated by service lines and geographic areas (in
Includes some leasing and hedging activities. For further information on revenue recognition, see Note 1 and Note 2
above.
Includes revenues of $2.4 billion attributed to the U.S.
Twelve Months Ended December 31, 2018
Includes some leasing and hedging activities. For further information on revenue recognition, see Note 1 and Note 2
above.
Includes revenues of $2.3 billion attributed to the U.S.
Twelve Months Ended December 31, 2017
Twelve Months Ended December 31, 2019
Americas (2)
$ 1,769,654 $ 1,395,544 $ 857,009 $ 4,022,207
Asia-Pacific
EMEA
Total
576,709
90,262
19,743
161,552
113,631
10,019
155,328
88,735
—
893,589
292,628
29,762
2,456,368
1,680,746
1,101,072
5,238,186
131,359
125,698
66,897
323,954
$ 2,587,727 $ 1,806,444 $ 1,167,969 $ 5,562,140
Americas (2)
$ 1,732,998 $ 1,201,769 $ 735,404 $ 3,670,171
Asia-Pacific
EMEA
Total
532,163
75,595
16,570
138,874
118,685
8,164
130,928
85,352
—
801,965
279,632
24,734
2,357,326
1,467,492
951,684
4,776,502
127,408
95,145
72,599
295,152
$ 2,484,734 $ 1,562,637 $ 1,024,283 $ 5,071,654
Americas (2)
$ 1,518,929 $ 1,063,543 $ 595,673 $ 3,178,145
Asia-Pacific
EMEA
Total
469,268
104,891
107,014
68,937
5,218
88,122
10,415
88,110
—
681,173
245,169
15,633
2,062,352
1,266,971
790,797
4,120,120
110,408
79,285
58,615
248,308
$ 2,172,760 $ 1,346,256 $ 849,412 $ 4,368,428
thousands):
Colocation (1)
Interconnection
Managed infrastructure
Other (1)
Recurring revenues
Non-recurring revenues
Total
(1)
(2)
Total
(1)
(2)
Total
(1)
(2)
Colocation (1)
Interconnection
Managed infrastructure
Other (1)
Recurring revenues
Non-recurring revenues
Colocation (1)
Interconnection
Managed infrastructure
Other (1)
Recurring revenues
Non-recurring revenues
Includes some leasing and hedging activities. For further information on revenue recognition, see Note 1 and Note 2
above.
Includes revenues of $2.0 billion attributed to the U.S.
F-62
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company's chief operating decision-maker evaluates performance, makes operating decisions and allocates
resources based on the Company's revenues and adjusted EBITDA performance both on a consolidated basis and
these three reportable segments. The Company defines adjusted EBITDA as income from operations excluding
depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges,
transaction costs and gain on asset sales as presented below for the years ended December 31 (in thousands):
Adjusted EBITDA:
Americas
EMEA
Asia-Pacific
Total adjusted EBITDA
Depreciation, amortization and accretion expense
Stock-based compensation expense
Transaction costs
Impairment charges
Gain on asset sales
2019
2018
2017
$ 1,237,622 $ 1,183,831 $ 1,034,694
827,980
622,125
698,280
531,129
582,697
434,650
2,687,727
2,413,240
2,052,041
(1,285,296)
(1,226,741)
(1,028,892)
(236,539)
(180,716)
(175,500)
(24,781)
(15,790)
44,310
(34,413)
(38,635)
—
6,013
—
—
Income from operations
$ 1,169,631 $
977,383 $
809,014
The Company provides the following segment disclosures related to its operations as follows for the years ended
December 31 (in thousands):
Depreciation and amortization:
Americas
EMEA
Asia-Pacific
Total
Capital expenditures:
Americas
EMEA
Asia-Pacific
Total
2019
2018
2017
$
669,498 $
636,214 $
515,726
353,765
261,574
355,895
235,380
316,250
210,504
$ 1,284,837 $ 1,227,489 $ 1,042,480
$
805,360 $
773,514 $
621,158
733,326
540,835
884,790
437,870
555,346
202,221
$ 2,079,521 $ 2,096,174 $ 1,378,725
The Company's long-lived assets, including property, plant and equipment, net and operating lease right-of-use
assets, are located in the following geographic areas as of December 31 (in thousands):
Americas (1)
EMEA
Asia-Pacific
Total Property, plant and equipment, net
2019
2018
$ 5,400,287 $ 5,010,507
4,051,701
2,700,609
3,726,596
2,288,917
$ 12,152,597 $ 11,026,020
(1)
Includes $4.8 billion and $4.6 billion, respectively, of property, plant and equipment, net attributed to the U.S. as of
December 31, 2019 and 2018.
F-63
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Americas (1)
EMEA
Asia-Pacific
Total Operating lease right-of-use assets
2019
387,598 $
$
2018
521,129
566,640
$ 1,475,367 $
—
—
—
—
(1)
Includes $373.7 million of operating lease right-of-use assets attributed to the U.S. as of December 31, 2019.
18. Subsequent Events
On February 12, 2020, the Company's Board of Directors declared a quarterly cash dividend of $2.66 per share,
which is payable on March 18, 2020 to the Company's common stockholders of record as of the close of business on
February 26, 2020.
On January 14, 2020, the Company entered into an agreement to acquire Packet Host, Inc., the bare metal
automation company. The acquisition is expected to close in the first quarter of 2020, subject to customary closing
conditions.
On January 8, 2020, the Company completed the acquisition of three data centers in Mexico for a cash purchase
price of approximately $175.0 million. The operating results of the acquisition are reported in the Americas region
following the date of acquisition. The valuation of assets acquired and liabilities assumed are still being appraised by
a third-party and the purchase price allocation is not yet complete.
On January 2, 2020, the Company redeemed the remaining $343.7 million principal amount of the 5.375% Senior
Notes due 2022, using a portion of the net cash proceeds from the 2024, 2026 and 2029 Notes as described in Note
11 above. In connection with the redemption, the Company incurred $5.9 million of loss on debt extinguishment,
including $4.6 million redemption premium that was paid in cash and $1.3 million related to the write-off of unamortized
debt issuance costs.
19. Quarterly Financial Information (Unaudited)
The Company believes that period-to-period comparisons of its financial results should not be relied upon as an
indication of future performance. The Company's revenues and results of operations have been subject to significant
fluctuations, particularly on a quarterly basis, and the Company's revenues and results of operations could fluctuate
significantly quarter-to-quarter and year-to-year. Significant quarterly fluctuations in revenues will cause fluctuations
in the Company's cash flows and the cash and cash equivalents and accounts receivable accounts on the Company's
consolidated balance sheet. Causes of such fluctuations may include the volume and timing of new orders and renewals,
the timing of the opening of new IBX data centers, the sales cycle for the Company's offerings, the introduction of new
offerings, changes in prices and pricing models, trends in the internet infrastructure industry, general economic
conditions, extraordinary events such as acquisitions or litigation and the occurrence of unexpected events.
The unaudited quarterly financial information presented below has been prepared by the Company and reflects
all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary
to present fairly the financial position and results of operations for the interim periods presented.
F-64
EQUINIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following tables present selected quarterly information (in thousands, except per share data):
2019
Quarters Ended
Revenues
Gross profit
Net income attributable to Equinix
Earnings per share attributable to Equinix:
Basic
Diluted
Revenues
Gross profit
Net income attributable to Equinix
Earnings per share attributable to Equinix:
Basic
Diluted
March 31
$
1,363,218 $
June 30
1,384,977 $
September 30
1,396,810 $
December 31
1,417,135
681,188
118,078
686,798
143,527
692,471
120,850
691,499
124,995
1.44
1.44
1.70
1.69
1.42
1.41
1.47
1.46
2018
Quarters Ended
March 31
$
1,215,877 $
June 30
1,261,943 $
September 30
1,283,751 $
December 31
1,310,083
593,447
62,894
610,142
67,618
623,442
124,825
639,148
110,022
0.79
0.79
0.85
0.85
1.56
1.55
1.37
1.36
F-65
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(This page has been left blank intentionally.)
EQUINIX GLOBAL MAP
EMEA
ASIA-PACIFIC
HELSINKI
AMERICAS
SEATTLE
SILICON
VALLEY
TORONTO
BOSTON
DENVER
CHICAGO
STOCKHOLM
MANCHESTER
AMSTERDAM
DUBLIN
LONDON
LOS ANGELES
DALLAS
ATLANTA
NEW YORK
PHILADELPHIA
WASHINGTON, D.C.
CULPEPER, VA
DÜSSELDORF
FRANKFURT
WARSAW
MONTERREY
HOUSTON
MIAMI
PARIS
MUNICH
MEXICO CITY
GENEVA
MILAN
SOFIA
ZURICH
BARCELONA
MADRID
SEVILLE
LISBON
ISTANBUL
OSAKA
TOKYO
SEOUL
SHANGHAI
HONG KONG
SINGAPORE
JAKARTA
PERTH
BRISBANE
ADELAIDE
SYDNEY
DUBAI
ABU DHABI
MELBOURNE
CANBERRA
BOGOTÁ
SÃO PAULO
RIO DE JANEIRO
9,700+
Customers†
55
Markets†
99.9999%
Reliability†
210
Data centers†
363,000+
Interconnections†
Image above is NextEra Energy, Rush Springs Wind Energy Center; Rush Springs, OK
Executive Team
§ Charles Meyers
President and Chief Executive Officer
Board of Directors
§ Peter Van Camp
Executive Chairman, Equinix
§ Keith Taylor
Chief Financial Officer
§ Raouf Abdel
EVP, Global Operations
§ Sara Baack
Chief Product Officer
§ Mike Campbell
Chief Sales Officer
§ Justin Dustzadeh
Chief Technology Officer
§ Brandi Galvin Morandi
Chief Human Resources Officer,
Chief Legal Officer, General Counsel
§ Eric Schwartz
§ Charles Meyers
President and Chief Executive Officer, Equinix
§ Tom Bartlett
President and Chief Executive Officer, American Tower
§ Nanci Caldwell
Former CMO, PeopleSoft
§ Adaire Fox-Martin
SAP SE, Global Customer Operations
§ Gary Hromadko
Private Investor
§ Scott Kriens
Chairman of the Board,
Juniper Networks, Inc.
§ William Luby
Chief Strategy and Development Officer
Managing Partner, Seaport Capital
§ Karl Strohmeyer
§ Irving Lyons III
Chief Customer and Revenue Officer
Principal, Lyons Asset Management
§ Milind Wagle
Chief Information Officer
§ Christopher Paisley
Dean’s Executive Professor, Leavey School
of Business at Santa Clara University
§ Sandra Rivera
EVP and Chief People Officer, Intel Corporation
This Annual Report (including the Shareholder Letter) contains forward-looking statements within the meaning of the federal securities laws.
These forward-looking statements involve risks and uncertainties that may cause Equinix’s actual results to differ materially from those expressed
or implied by these statements. Factors that may affect Equinix’s results are summarized in our Annual Report on Form 10-K filed February 21, 2020, and
contained herein. Equinix assumes no obligation and does not intend to update forward-looking statements to reflect subsequent events or circumstances.
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Equinix LocationPartner Data Center E
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EMEA
Equinix (EMEA) BV
Rembrandt Tower
Amstelplein 1
1096 HA Amsterdam
Netherlands
+31.20.754.0305
info@eu.equinix.com
Americas
Corporate HQ
Equinix, Inc.
One Lagoon Drive
Redwood City, CA 94065
USA
Asia-Pacific
Equinix Hong Kong Limited
65/F International
Commerce Center
1 Austin Road West
Kowloon, Hong Kong
“Equinix private
interconnection gives
our customers the
best of both worlds—
direct and secure
access to Twilio’s
cloud communications
development
platform and leading
telecommunications
services via reliable,
high-speed, low-
latency connections.”
+1.650.598.6000
info@equinix.com
+852.2970.7788
info@ap.equinix.com
Twilio
Equinix.com
International Business Exchange™ pictured above is MX1 exterior
ANNUAL REPORT
T
FY2019
19
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