Katrina Rymill - Vice President-Investor Relations, Equinix, Inc. Stephen M. Smith - Chief Executive Officer & President Keith D. Taylor - Chief Financial Officer Charles J. Meyers - Chief Operating Officer.

Jonathan Schildkraut - Evercore ISI Amir Rozwadowski - Barclays Capital, Inc. Michael I. Rollins - Citigroup Global Markets, Inc. (Broker) David W. Barden - Bank of America Merrill Lynch Philip A. Cusick - JPMorgan Securities LLC Jonathan Atkin - RBC Capital Markets LLC Paul B. Morgan - Canaccord Genuity, Inc. Colby Synesael - Cowen and Company.

Good afternoon and welcome to the Equinix First Quarter Earnings Conference Call. All lines will be able to listen-only until we open up for questions. Also, today's conference is being recorded. If anyone has objections, please disconnect at this time. I'd now like to turn the call over to Katrina Rymill, Vice President of Investor Relations.

You may begin. Thank you..

Good afternoon and welcome to today's conference call. Before we get started, I'd like to remind everyone that some of the statements that we'll be making today are forward-looking in nature and involve risks and uncertainties.

Actual results may vary significantly from those statements and may be affected by the risks we identified in today's press release and those identified in our filings with the SEC, including our most recent Form 10-K filed on February 26, 2016.

Equinix assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. In addition, in light of Regulation Fair Disclosure, it's Equinix's policy not to comment on its financial guidance during the quarter, unless it is done through an explicit public disclosure.

In addition, we'll provide non-GAAP measures on today's conference call. We'll provide a reconciliation of those measures to the most directly comparable GAAP measures and a list of the reasons why the company uses these measures in today's press release on the Equinix's Investor Relations page at www.equinix.com.

We would also like to remind you that we post important information about Equinix on the Investor Relations page of our website. We encourage you to check our website regularly for the most current available information.

With us today are Steve Smith, Equinix's CEO and President; Keith Taylor, Chief Financial Officer; and Charles Meyers, Chief Operating Officer. Following our prepared remarks, we'll be taking questions from sell-side analysts.

In the interest of wrapping this call within an hour, we'd like to ask these analysts to limit any follow-on questions to just one. At this time, I'll turn the call over to Steve..

Okay. Thank you, Katrina and good afternoon and welcome to our first quarter earnings call. We had a great start to 2016, delivering both revenue and adjusted EBITDA above the top end of our guidance ranges, as demand for interconnected colocation continues to drive strong performance across all three of our regions.

As depicted on slide three, revenues were $844.2 million, up 3% quarter-over-quarter and up 16% over the same quarter last year on an organic and constant-currency basis. Adjusted EBITDA was $380.7 million for the quarter, up 4% over the prior quarter and up 17% year-over-year on an organic and constant-currency basis.

This drove AFFO growth of 35% year-over-year on a normalized and constant-currency basis. For the quarter, we delivered strong gross and net bookings with solid production from both our direct and indirect channels, as we scale our go-to-market efforts.

Our key operating metrics demonstrate the strength of our ecosystem-centric business modal, with firm MRR per cabinet, low churn and healthy interconnection growth.

Our global platform continues to be a critical source of differentiation, making us the partner-of-choice for customers looking to respond effectively to increasingly distributed infrastructure requirement.

Our reach is allowing us to gain market share, while tapping into higher-growth markets, with EMEA and Asia-Pacific now contributing greater than 50% of our revenues and our geographic reach stretching across 21 countries and 40 metros.

We are pleased with the Telecity acquisition and are excited to add this great set of quality assets and people to Platform Equinix. With less than 90 days under our belt, we are already seeing healthy momentum in cross-platform bookings and are making rapid progress on integration, despite the significant size and complexity of this transaction.

Overall, the Telecity assets delivered solid financial performance, consistent with our guidance for revenue and adjusted EBITDA, while absorbing efforts related to the deal close and the planned divestitures.

We see the anticipated revenue synergies materializing and are tracking well to our expected cost and CapEx synergies, all of which is a great validation of the deal rationale. Bit-isle is also progressing well, tracking above our prior guidance with several strategic wins enabled by these new assets.

Our integration efforts are on track and our plans to optimize the business remain ahead of schedule. As we integrate these two acquisitions, we expect to achieve a combined $30 million in annual cost savings, with about 50% of these savings realized before the end of this year and the remainder in 2017.

With Telecity and Bit-isle we now serve over 8,000 customers and are proud that over 150 of the Fortune 500 are Equinix customers. We have increased our already market-leading network density from 1,100 networks to over 1,400 networks and have added a number of critical new cloud nodes to Platform Equinix.

We are extending our value proposition as the home of the interconnected cloud with industry-leading providers such as AWS, Microsoft and Google contributing directly to the increase in our enterprise business by enabling enterprise CIOs to quickly and cost effectively implement multi-cloud architectures.

Our cloud and enterprise verticals, which represent 28% and 13% of our revenues respectively, remain our fastest-growing market segments and contributed the highest number of new customer additions for the sixth quarter in a row. Interconnection revenue grew a healthy 19% year-over-year on an organic and constant-currency basis.

With over 176,000 cross connects and significant growth on our Internet and our Cloud Exchange, Equinix is benefiting from strong secular trends that are driving businesses to become increasingly interconnected.

We run the largest Internet Exchange globally with 5.5 terabits of peak traffic growing 30% year-over-year, as networks and cloud providers continue to upgrade their capacity.

Given our high utilization rate of 80% and strong returns on development capital, we continue to expand in core markets, heavily weighted towards existing campuses and Tier 1 market – metros, which exhibit strong pipelines and attractive supply-demand profiles. We now have 16 announced expansion projects underway.

In this quarter, we are moving forward with additional expansions in Silicon Valley, New York and Hong Kong, totaling over $200 million of CapEx.

In Silicon Valley, demand remains robust and we are building SV10, a new IBX located directly adjacent to our Great Oaks campus, home to a rich ecosystem of network and cloud hubs and the second largest piering market in the U.S. after our Ashburn campus in Northern Virginia.

Notably, for SV10 we purchased the 11 acres of land for this project, expanding our asset ownership in this important market.

In New York, we are proceeding with the second phase of New York 5, the flagship asset on our Secaucus campus, which is comprised of four adjacent data centers with over 10,000 cabinets and is a key growth engine for our Americas business.

New York 5 saw strong pull-through post the deployment of the Bass (7:25) trading engine and is also seeing solid demand from the broader financial services community as they embrace hybrid cloud. Our first phase of New York 5 project is already 85% full, with strong pricing.

Our capital investments continue to deliver very healthy growth, as well as strong returns across our new expansion and stabilized IBXs, as shown on slide four.

The operating performance of our 70 stabilized global IBXs delivered steady revenue growth of 7%, an increase over the prior quarter, while generating a 31% cash-on-cash return on the gross PP&E invested, reflecting the tremendous economic value of these stabilized campuses.

Stabilized assets include projects that have been open for more than one year with all phases built out. As we shift to 2016, a net three IBXs were added to this category and utilization of these assets remains a healthy 86%. Let me now cover quarterly highlights from our industry verticals, and I'll with the networks.

This vertical experienced strong bookings driven by multi-side expansions with Tier 1 service providers and new wins with Tier 2 providers and cable operators, who are shifting their portfolios to address demand for IP and digital services.

We are seeing a resurgence of subsea cable projects to support global cloud deployments and growth of international data traffic, which are creating new opportunities for Equinix.

There are more than 50 global submarine cable projects under consideration over the coming two years, which places Equinix in a great position to win a portion of this next generation of submarine cable investment.

In the content and digital media vertical, performance was driven by expansions from both traditional lighthouse content providers and our Ad-IX ecosystem. Advertisers continue to optimize user experience, while architecting for increasing traffic volumes, driven by the explosive growth of mobile advertising.

Customer wins included ContentBridge, a supply-chain management digital rights service provider and Grapeshot, an innovative provider of analytics in keyword targeting. The financial services vertical experienced the second highest bookings of all time with strength across insurance, electronic payments, trading and retail banking.

We also saw sharp growth in Performance Hub deployments as financial services enterprise continued to re-architect their IT. Customer wins included Dutch bank, ABN AMRO, a three region expansion by Thompson Reuters for electronic trading and EP2, an Australian provider of digital payment solutions leveraging the Equinix Cloud Exchange.

The cloud and IT services vertical experienced strong bookings across all regions this quarter, including strategic wins with leading software-as-a-service providers, furthering our cloud density objectives.

Cloud services adoption continues with over 370 enterprises, clouds, IT service providers and networks interconnecting on Cloud Exchange in addition to the healthy growth and direct connect activity to cloud providers.

Customer wins included Pure Storage, a cloud scale data platform providing hybrid cloud data management for Microsoft Azure and BlueJeans an enterprise video cloud provider enabling direct access via Cloud Exchange.

And finally turning to the enterprise, this vertical delivered strong bookings driven by manufacturing, travel and government wins, as enterprises leverage our global platform, both directly and through our growing base of Equinix partners to re-architect their infrastructure.

Over 370 customers have deployed our Performance Hub solution, which helps enterprises optimize their network architectures, access the cloud and drive application performance.

Customer wins included Nucor, a Fortune 200 steel manufacturer leveraging Equinix to solve for hybrid cloud connectivity and Avant Homes, a residential and commercial property development firm. We are growing our enterprise customer base at an accelerated pace as CIOs adopt an interconnected oriented architecture, as shown on slide five.

IOA is a blueprint to help CIOs re-architect their IT delivery to better interconnect people, locations, clouds and data.

Leveraging our global data center footprint and multi-cloud interconnection capabilities, interconnection-oriented architectures represent a fundamental shift away from centralized, legacy enterprise IT models to distributed and dynamic models.

Direct interconnectivity enables enterprises to react in real time, adapt quickly to change and leverage digital ecosystems to create new value and growth.

Enterprises are increasingly looking to Equinix as they embark on this journey moving away from in-house data centers in order to leverage multi-cloud architectures, placed closer to users and their customers. We believe this trend will continue to significantly increase our opportunities within this market segment.

So let me stop there and turn it over to Keith to cover the results for the quarter..

Great, thanks, Steve. Good afternoon to everyone. So our first quarter represents a great start to 2016. We continued to deliver top-line growth, expand margins and drive sales across our expanded platform. We had strong bookings in each of our regions including solid cross-region execution.

This quarter we were able to benefit from record three region deployments across all of our segments, as customers leverage our geographic reach. Including recent acquisitions, greater than 53% of our revenues come from customers deployed globally across all three regions and over 81% of customers deployed across multiple metros.

Our interconnection additions remain very positive, adding another 5,600 net cross connects and almost 180 exchange ports in the quarter. This is the seventh quarter in a row where we've added greater than 5,000 cross connects in a quarter. Interconnection revenues represent 16% of our global recurring revenues.

Moving to acquisitions, we've seen early momentum from both the Telecity and Bit-isle businesses, delivering against our guidance expectations, while progressing well towards our expected synergy targets. The integration efforts are well underway.

We've selected the senior leadership team for the EMEA business and we're in the advanced stages of aligning our sales and delivery teams.

Cross selling across the combined platform is taking root and after we divest of the eight assets held-for-sale, we believe that we'll be able to accelerate our sales efforts as customers decide the optimum location to deploy their infrastructure. In addition we've reduced our expected 2016 integration spend to $55 million.

These costs will support our significant systems work and places severance and retention costs, and the substantial organizational restructuring costs related to our REIT and other tax initiatives. As it relates to the eight assets held-for-sale, we remain on track to divest these assets by mid-2016.

Now, as it relates to our full-year guidance, the weaning U.S. dollar has provided us significant FX tailwinds and this uptick along with better-than-expected operating performance in the first quarter allows us to increase our revenue guidance with flow-through benefits to both EBITDA and AFFO.

Our updated annual revenue guidance continues to include flat, non-recurring revenues compared to the prior year, as well as refining our annual view related to the Telecity business, as we continue to work through the divestiture process and complete our integration efforts and have further visibility into their data.

So turning to the first quarter, as depicted on slide six, global Q1 revenues were $844.2 million, up 3% over the prior quarter and 16% over the same quarter last year on an organic and constant-currency basis, our 53rd straight quarter of top-line growth.

Our as-reported revenues include $119 million from acquisitions, consistent with our expectations.

Q1 revenues net of our FX hedges include a $3.3 million negative currency impact when compared to the average FX rates used last quarter, and a $1.4 million positive currency benefit when compared to our FX guidance rates, due to the weakening of the U.S. dollar. For Europe, we've hedged approximately 80% of our Equinix organic business.

Global adjusted EBITDA was $380.7 million, up 4% over the prior quarter and 17% over the same quarter last year on an organic and constant-currency basis, above prior guidance due to revenue flow-through, lower SG&A and innovation costs.

Our as-reported EBITDA includes $52 million of contribution from our acquisitions, as well as $13 million in integration costs. Our adjusted EBITDA margin was 45.1% or 46.9% on an organic and constant-currency basis.

Our Q1 adjusted EBITDA performance, net of FX hedges, reflects a negative $3.8 million currency impact when compared to the average FX rates used last quarter, and a $1.3 million negative impact when compared to our FX guidance rates. Global AFFO was $210 million, including $64 million loss related to the Telecity hedge.

Excluding the Telecity foreign currency loss and integration cost, AFFO on a normalized basis and constant currency increased 20% over the prior quarter to $287 million, tracking above the top end of our guidance range, largely due business performance and lower-than-expected taxes and interest expense.

As we continue to focus on value creation per share, upon the maturity of the remaining portion of our convertible our June 16 convertible debt instrument, we have elected to receive the proceeds from the related cap call in the form of shares, thereby reducing the net dilution from this debt instrument by approximately 400,000 shares.

Moving to churn, global MRR churn for Q1 was 2.2% or 2.1% on an organic basis, consistent with our prior guidance. We continue to expect our quarterly MRR churn rate to remain in our targeted range of 2% to 2.5% quarterly. And one final note before I discuss the regional performance.

Our non-financial metric sheet and supplemental, including our segment IBX reporting, will not include the acquisitions until early next year, as we work to integrate their unit metrics and results into our financial systems. And now I'd like to provide a few highlights on the regions whose full results recovered on slide seven through nine.

Our global platform continues to expand with EMEA and Asia-Pacific growing organic and constant-currency growth over the same quarter last year of 17% and 25% respectively, while the Americas region produced steady growth of 13%.

We added over 1,500 cabinets down from the prior quarter due to timing of installs and churn, and we expect a more normalized net cabinets billing increase next quarter. MRR per cabinet was firm at 1,970, up $11 on a constant-currency basis.

The Americas region had another strong quarter delivering solid bookings from the network and financial verticals, and increasing yield per cabinet and the second best interconnection quarter of all time.

EMEA delivered a solid quarter of bookings, with particular strength in the Dutch and German markets, while absorbing higher churn in the UK at the end of last quarter. Asia-Pacific continued its steady growth with Tokyo and Hong Kong as the fastest-growing markets driven by cloud and content verticals.

Interconnection revenues continued to outpace overall growth of the business with the Americas, APAC and EMEA interconnection revenues now at 23%, 13% and 8% respectively of recurring revenues. EMEA's interconnection revenues declined as a percent of the region's recurring revenue, as the region absorbed the Telecity results.

It is our intention to increase interconnection revenues as a percent of this region's recurring revenues over the medium and longer term. And now looking to balance sheet, please refer to slide 10. Unrestricted cash and investments decreased this quarter to $650 million, largely due to the closing of the Telecity acquisition on January 15.

Our net debt leverage ratio stepped up to 4.3 times our Q1 annualized adjusted EBITDA, although we expect to return to our range of 3 times to 4 times adjusted EBITDA over the next 12 months to 18 months.

Now switching to AFFO and dividends on slide 11; for 2016, we're raising our as-reported AFFO to be greater than $1.015 billion a 22% year-over-year increase. On a normalized basis, AFFO would be greater than $1.134 billion or a 28% constant-currency increase over prior year.

Adjusting for the $6 million of interest earned on the convertible debt through the first half of the year, our fully diluted AFFO per share would be $16.13 using a weighted average 70.7 million shares outstanding as presented on page 34 of the earnings deck.

Also today, we announced our Q2 dividend of $1.75 a share, consistent with our Q1 quarterly dividend. Our AFFO payout ratio is now expected to be approximately 49% for 2016. Now looking at capital expenditures, please refer to slide 12.

For the quarter, CapEx was $198 million, including recurring CapEx of $32 million, below our guidance due to timing of cash payments to our contractors. With respect to our new builds, during the quarter we opened Tokyo 5 IBX our 10th IBX in the Tokyo metro taking into consideration Bit-isle's five assets in Tokyo.

Tokyo 5 is located near the financial district approximate to our existing network-dense Tokyo 3 IBX. We've tethered these two assets together thereby allowing our Tokyo 5 customers to access the rich set of networks in Tokyo 3.

And given our current high utilization rate of 80%, the strong development returns, we continue to invest across many key markets with new IBX builds scheduled to open in the next year, including Amsterdam, São Paulo, Silicon Valley and Sydney, in addition to the expansion phases in Ashburn, Atlanta, Dublin, Frankfurt, Hong Kong and Warsaw.

Also we will continue to purchase and develop land including our recently-purchased Silicon Valley land parcels. Over time we expect revenues from our own sites to increase. Owned properties generate 38% of the organic recurring revenues or 34% of our revenues on a combined basis, as the acquisitions have a higher percent of leased sites.

Including acquisitions, over 85% of our recurring revenue is generated by either owned properties or properties where our lease expiration extends to 2029 or beyond. And finally, we'll provide you a number of slides that bridge our 2016 guidance from the normalized 2015 performance, including slides for revenues, adjusted EBITDA and AFFO.

Please refer to these slides on slides 13 through 16. I'll turn the call back to Steve..

Okay. Thanks, Keith. And finally on slide 17, which summarizes our Q2 and our full-year 2016 guidance, which includes our FX impacts, let me now cover our updated 2016 outlook.

For the full year of 2016, we are raising our revenue guidance to be greater than $3.595 billion, 32% growth on an as-reported basis on organic and constant-currency growth rate of greater than 13.4% compared to the prior year.

This $45 million revenue increase includes a $42 million positive foreign currency benefit when compared to the prior guidance rates, and a $3 million increase due to stronger Q1 operating performance.

For 2016, we are raising our adjusted EBITDA guidance to be greater than $1.65 billion, a 30% increase on an as-reported basis or a greater than 16% year-over-year growth rate on an organic and constant-currency basis.

This $30 million adjusted EBITDA increase includes an $18 million positive foreign currency benefit when compared to the prior guidance rates, a $9 million increase due to Q1 operating performance, and $3 million in lower-than-expected integration costs.

And the growth of our business is driving increased adjusted funds from operations and ultimately cash flow and dividends. We are raising AFFO to be greater than $1.134 billion normalized for the Telecity transaction-related FX loss and integration costs, a 28% constant-currency growth compared to the prior year.

This $56 million AFFO increase includes a $14 million positive foreign currency benefit when compared to the prior guidance rates, a $29 million reduction in interest and tax costs and better-than-expected operating performance and lower integration costs.

And finally, we expect 2016 capital expenditures to continue to range between $900 million and $1 billion for the year.

So in closing, Platform Equinix is the critical intersection point between clouds, networks and the enterprise and this opportunity is translating into solid revenue growth, firm yield and healthy returns on our stabilized and expansion IBXs.

Our platform continues to scale organically and we are progressing well with our strategic acquisitions, positioning us to extend our market leadership, enhance our cloud and network density, and grow our customer ecosystems. So let me stop here and we'll open it up to questions. Over to you Kerry..

Thank you. We will now begin the question and answer session. Our first question is from Jonathan Schildkraut of Evercore. Your line is now open..

Great, thanks for taking the questions. So, Steve, I'd love to hear a little bit more about the cloud-driven enterprise demand.

I know that you guys gave some good examples during the prepared remarks and you've talked about it in the past, but I'd be interested in hearing about whether you're seeing things different globally? What's going on in the U.S., what's happening in Europe, in the Asia-Pac region? Is everybody sort of heading down the same path at a different time or there are different sort of adoption cycles? Thanks..

Let me start and then the rest of the team can chime in here.

So I'm assuming Jonathan you're referring to the cloud demand from enterprises to access the public, private cloud providers?.

Absolutely..

And so, I would characterize it this way, so we have worked very hard as you know, and the people on this phone know, to populate our facilities around the world with access points, network nodes, cash nodes whatever you want to call them to make it very easy for enterprises of all shapes and sizes to find these cloud providers and buy those services as a service.

And so that is happening as the thesis has – continues to prove itself and as the numbers continue to show you enterprises is growing at the highest rate.

Now, the marketing teams and sales teams around the world are pursuing different industry verticals in different countries, so we are building use cases and success stories across multiple industry verticals. There's probably a dozen where we have different use cases being built and they vary by region and by country.

The demand is pretty standard around the world. It probably parallels the growth rates that we see, we're growing the fastest in Asia, followed by Europe, followed by the Americas. So I would say enterprise – particularly global enterprises are demanding footprint across all the big markets across all three regions.

So, it's pretty steady demand, pretty steady demand and it's underpinning most of our new logo accumulation.

Charles, would you add anything?.

Not a lot. The one addition I might make is just again recognizing that 51% of our revenue is from customers who are deployed with us across all three regions.

So I think that I would say solid demand across all three regions and because so many of our customers are global in nature and actually deploying architecture and infrastructure across all three regions, I think that mutes any – to some degrees mutes any variations, but there are some variations country-to-country in terms of cloud adoption.

I would say that, for example, Australia tends to be an outlier on the high side of being receptive to cloud and hybrid cloud as an architecture-of-choice, but we're seeing good solid demand across all three regions..

The only thing I think I'd add Jonathan to that is, if you look at the CapEx that we're moving around the world, it's as we noted in our comments today, it's across the big market.

So the demand is still very, very high in London, Amsterdam, D.C., New York, Silicon Valley these big Tier 1 markets, and so that's where a lot of the enterprise demand is also coming in again where the majority of the cloud access points are..

Great. And I guess as a follow-up, you talked about the three regions and in your prepared remarks, Steve, you gave us a lot of bookings color by industry vertical, historically you've given us that by region.

Is it possible to sort of give us that color on a regional basis?.

Sure.

Let me – we cut it many ways Jonathan, but I'll give you just the Q1 bookings by vertical to start in the quarter on a worldwide basis, roughly 25% of the bookings came in the cloud and IT services vertical this quarter, followed by around 21% came from the networks, around 20% came from the financial services, and then about 17% for both enterprise and content and digital media.

That's how the bookings..

I think he's looking for region..

So by vertical, yeah, and then on a regional perspective, let's see, do I have that? I think we might have to get that for you, Jonathan. I'm not sure I have that broken out..

What I would say, though, is it's solid across all three regions. We didn't have a – this was actually pretty, one of those quarters where pretty uniform performance, solid generally across the regions, so I don't think we're seeing any – a substantial, disparate performance levels across the regions..

Keith's given you pretty good color on the key verticals by region in his prepared remarks, where the majority of the bookings came from..

Great. Thank you..

Thank you. Our next question is from Amir Rozwadowski of Barclays. Your line is now open..

Thank you very much. I was wondering if we could touch base a little bit more on sort of the enterprise demand. What we've seen from our end is that a number of these CIO surveys have obviously cited the cloud as a key area of investment, but also we've seen sort of a tempering expectation for investment dollars out of the enterprise.

It sounds like you guys are not seeing any sort of tempered spending when it comes to the trajectory of the enterprise based on the plans that you've seen out of those folks and I just wanted to clarify that..

Yeah, Amir, we're – we obviously read the same reports and triangulate all that industry data with actual data inside of our bookings. And let me give you a couple of data points just from our perspective.

So, yes, we do see some depressed IT spending trends and we've read the same reports that you're referring to, but the cloud spending continues to fuel the data center requirements, which is what we're benefiting from and the robust leasing activity that we're seeing is really driven by the cloud, which is attracting the enterprises that are – almost all enterprises we talk to today are moving some portion of their applications workload to get access to the hybrid cloud, multi-cloud, et cetera.

And so I think most of the industry analysts data points suggested high teens today is enterprises that are taking advantage of cloud offerings and that will move over the coming four years to 50%, 60% of the workloads. Certainly in the conversations that we're having that's a very common conversation.

I would tell you that we hear security requirements, we hear cloud requirements, we hear big data requirements and we are hearing the early signs of IOT plans with enterprises trying to figure out how to instrument, monitor and measure all this data that they are creating to try to monetize it.

So, there is certainly plenty of trends from the enterprises across these big segments that we're all reading about in these reports..

Yeah, and I guess I'd just offer and add that, what we're seeing is that hybrid cloud adoption is accelerating and in fact I think we look at interconnection-oriented architectures as essentially a mechanism by which these enterprise CIOs are allowing them to do more with less, and that's a key priority for them.

And if you look at adoption rates, IDC says that 65% of enterprises are going to be committed to hybrid multi-cloud by the end of this year, and so we're seeing a very rapid clip of adoption of hybrid and multi-cloud and a real resonance to the interconnection-oriented architecture, and while they may be – their overall spend levels may be reducing because they're not spending as much on traditional IT spend categories, I think that the hybrid cloud enablement in that area is actually increasing in total spend at least from what we're seeing with the enterprise customers that we're serving..

That's very helpful and then I was wondering if we could touch more on the global footprint. I mean clearly you folks have a lot of customers that are using – that are working with you on multiple geographies.

As you've continued to expand that footprint and as you are starting to see enterprises sort of accelerating the adoption of the cloud, do you feel like you're in a position to get more of that share in that transition as the global footprint is built out?.

Short answer is yes. I think most of the customers that we serve have, particularly as they deliver cloud services, even if they're delivering revenue-generating cloud services or they're delivering cloud services that are intended to deliver certain applications to their employee base or whatever, they're doing so on a global basis increasingly.

And as they do that they're looking for an infrastructure partner that can get them to where they need to be and get private, secure, high-performance interconnection to the public cloud services that they're looking for across all three regions.

And so, Equinix is really a very positive choice for that, so we're seeing a lot of adoption across the geographies..

And probably another data point, excuse me Keith, (35:37) but another data point here to supplement Charles' point, our cross-border bookings continue to increase quarter-on-quarter. So that's a signal that we see big demand from customers on – like a single supplier to deal with across multiple regions.

So once you see cross-border bookings growing, that's a really good indicator that the demand is global and they like dealing with a single set of orders, quoting, pricing, billing and that's the advantage we have..

And let me just conclude it, Amir, with the fact that one of the comments is the opportunity set that we see in front of us, there's a direct correlation to the amount of CapEx that we're putting forth into the market and as yourself and the other listeners on the call today know, we've committed to still spend somewhere between $900 million and $1 billion and that capital is being deployed somewhat consistent with the revenue stream, but roughly 40% of it will go to EMEA, almost 40% will go to the Americas, and around 20% will go to APAC.

It's not a perfect alignment with – based on the revenue streams, but it tells you that we are spending quite nicely across all three regions to represent what we think is going to be the underlying demand for these assets..

Yeah and one of the big reasons APAC under indexes there, Keith, is because of the capacity we got with the Bit-isle transaction..

Correct..

Great. Thank you very much for the incremental color..

Thank you. Out next question is from Michael Rollins of Citibank. Your line is now open..

Hi, thanks for taking the questions. First question is on the non-recurring.

Can you talk about the outperformance in the non-recurring line, maybe some of the business drivers behind that, and how that is affecting your outlook for revenue for the rest of the year? And the second question is, if you look at your global utilization levels, they're running a little bit elevated relative to the longer historical period.

So what does that mean in terms of the availability of growth to the business over the next few quarters? What does that mean for future capital? Should we expect capital to accelerate to give you more capacity, which will naturally push that utilization down or are you maturing as a business and you're just going to run at higher utilization levels than some of your history? Thanks..

Let me start and then I know Charles and Steve will jump in here. First as it relates to non-recurring, we did see a little bit of an uptick this quarter.

One of the things that we started the year with, Mike, as you know is we took a very strong view because of the amount of non-recurring business we did in fiscal year 2015 and the number of meaningful deployments we did across our platform, we made a conscious decision because they do come in ebbs and flows to hold that flat for fiscal-year 2016.

Now you saw a little bit of a step up in the Q1 results, that's just a reflection of the lumpiness, if you will, of the non-recurring activity.

As I then sort of – take you then to Q2, we are assuming that the non-recurring activity will go down quarter-over-quarter, partly because of what we see in our pipeline, and partly it's what's – not what's just in the pipeline, what's in our backlog.

So we expect that we'll reduce our non-recurring revenues by roughly $5.5 million next quarter or roughly 60 basis points of growth. So that gives you a sense that again, we still look to do a lot of it, again I hold at the same level as 2015 but we'll see it move around quarter-over-quarter.

As it relates to utilization levels, yes, no surprise we are running at higher levels.

We've had a tremendous amount of success over a number of quarters and when you see that success and also the incremental cabinets billing, that's a clear indication that we're filling up our assets and it suggests that we're going to have to continue to put capital to work. There are certainly some markets that are more constrained than others.

Charles was great in alluding to the Tokyo market, whereby through the acquisition of Bit-isle we got a very large asset, which will allow us to delay any meaningful future spend in Japan for some time period.

Yes, there are other markets where we talked about on the last earnings call where we're now going to do what we call first phase builds, which come with a much larger capital deployment in that initial phase. Silicon Valley is a perfect example, the one that Steve alluded to and there is São Paulo, as well and Sydney 4 and the like.

So we are continuing to make sure we manage ourselves. I want to leave you with a couple of thoughts on how we manage our CapEx. We go through a very detailed exercise. We're looking five years out.

We're looking across markets and IBXs to make sure we understand what our fill rates are, what is the empirical data telling us and what does that imply against our future expectations, understanding what competitive landscapes like in each of those markets or specific to that IBX.

And so when we do that, we look out five years, we have a pretty good view on what we think we could spend. So then in conclusion to go back – to address your final question, we're very much aware of what our capital spend is.

As you know that can ebb and flow based on our performance, knowing that your lead times are going to be anywhere from 9 months to 18 months depending on whether it's an incremental phase or a new build, that's going to dictate what the capital dollars are, but there is an expectation that we will continue to spend at these levels for a period of time given the demand that we see in the marketplace.

I will say one last thing, which I think is important, one of the things that we want to do is continue to see our utilization go up, but we recognize that you are at a point where you don't want to constrain the business. There are certainly some markets where we feel a little bit more constrained today than we otherwise like to feel.

And so we need to put the capital to work in those markets.

Silicon Valley comes to mind again as a critical market where we're very eager to get up that – to put up that Silicon Valley 10 asset, because left unchecked, it will put a constraint on our ability to grow, but we feel we're in a great position to deliver the inventory on a fairly (42:10) just-in-time basis..

Yeah, two more minor adds; actually one pivots off that last point. One is your question, Mike, around growth and what the utilization implies.

If you look at our stabilized assets chart, it delivers 7% I think was what this quarter was and what you'll see there is actually we've seen that – we see that bounce around a little bit this pretty good quarter and on a constant-currency basis have seen even better quarters.

And so, you see that the stabilized assets still have meaningful growth potential in them even at quite high utilization rates.

And then the second point I'd make is that we are making a very purposeful push to phase our capital as best as possible, and so we're trying to be as innovative as possible in phasing our capital and that is going to have a natural tendency to sort of pressure utilization up a bit, which is a good thing as long as we still have the flexibility to respond and not go dark in the market.

And so that's the balance we're striking. And I do think kudos to our engineering and construction teams for really phasing our capital in ways that are allowing us to still be responsive with higher levels of utilization..

Mike, I think the thing I'd add. If you look at slide 23 in the presentation today on our announced expansions, just to pick out a handful here between what we're doing in London next phase, Amsterdam next phase, D.C.

next phase, New York next phase, Silicon Valley next phase, you're a little over $300 million of CapEx that's going into some pretty significant markets to Keith's point. That's going to be done just in time and provide available capacity for the growth rates that you see us delivering here..

Thanks very much..

Thank you. Our next question is from David Barden of Bank of America. Your line is now open..

Hey, guys. Thanks for taking the questions. Two if I could. Just first, maybe, Steve, on the Telecity acquisition, could you kind of give us a status update on where we are both in kind of the revenue integration opportunity and the cost integration opportunity.

And how you feel that is if at all baked into the rest of the year outlook? And then second, I guess, I don't know who this will for.

If Charles is online maybe for you, but if there is one kind of fear that people may have it's that, as the public cloud gets more reliable, more secure that it has the potential to accommodate a growing share of all the outsourced applications that are existing and that slowly the public private, hybrid cloud becomes little less private and a little bit more public and it creates a cannibalization risk.

Could you kind of talk about how you view that issue and if there is any evidence that it's happening in any way inside the Equinix facilities today? Thanks..

Yeah, those are two great questions. Thanks, David. Let me start in the public cloud question and then Charles can jump in here on that and maybe give you an update on Telecity. Very good question.

I know, the big concern would be is everything going to move to public and is there going to be a need for the type of stuff that hosting and managed services and colo providers are providing? The world that we see unfolding and certainly all the industry analysts and all the customers we talk to certainly support the thesis that the hybrid cloud customers needing access to public Internet capability, which has always been there to Equinix for years and years and years, is not going to go away.

We have been working very hard the last four or five years working with all the cloud providers to provide this private connectivity to give the combination of the two, which in our language gives you the hybrid capability to be able to move your traffic around the world is continuing to build and unfold and most of the documentation writings today suggest that public cloud is going to continue to grow from high teens to, like I said earlier, 40%,50% 60% of workload's going to the public cloud and the thing that I think people get confused about, even the big public cloud providers who build their big data centers and build their back office facilities all over the world, still require the Equinixes of the world and the other data center providers of the world for the distributed part of their network because they are not terribly interested in putting capital in 40 different markets and 20 different countries and so they're going to take advantage of the capacity that's out there with the Equinixes of the world to build the hub and spoke, if you will, or build the centralized and decentralized network to run these cloud offerings and because users are all over the world, customers are all over the world, latency is a big factor and that's why you see the continued rollout of public private connectivity and capability.

I don't know what you'd add to that Charles.

The only little incremental color on that I would say is that, I absolutely think that we're seeing and, I think, the results of the strong players in the cloud market both on the sort of ISI as well as SaaS are clearly demonstrating they're going to continue to add capability and functionality that is going to allow them to attract a significant portion of workloads out of the traditional IT sort of consumption model into the cloud model.

So, we absolutely see that, we embrace it, and in fact our platform is really facilitating it. And so, I think if I were a commodity provider of colocation, we'd be very worried about that substitution. But that's not really the business we're in.

We're in the business of enabling that hybrid cloud connectivity, one, via the CSPs and so the supply side of the cloud ecosystem is very relevant for us. And in fact, our top six customers are all delivering cloud services, using Platform Equinix as some portion of their architecture to do so. And so, it's a big opportunity for us.

And then we see a big basket, a very big basket of enterprise workloads that we believe will sort of reside into private infrastructure side of things and really be implemented in this sort of hybrid cloud, multi-cloud setup.

And so, for us we think it's a very much a net positive, but I do believe that this trend you're talking about for cloud service provider is becoming increasingly capable is real and will affect I think the broader data center market.

And then, let me circle back to Telecity now, and I'll give you sort of a quick update and anybody can add color as they wish. We're less than 90 days into the post combination world, and I'd tell you, as a headline we remain very optimistic and thoroughly convinced to the rationale for that transaction.

Deal really cements our leadership in EMEA, 34 new locations and seven new metros, six new countries, material improvement in our network density, which was already marketing leading in EMEA and we add a number of really critical cloud nodes to our platform, of note would be the new Telecity locations in Dublin, which are a great addition for us and is seeing significant demand.

And overall, we're really delighted with the quality assets and people that we've added to the team. As we said in our prepared remarks, a lot of progress on the integration.

We've announced the senior leadership team well advanced in aligning and cross-training the sales and delivery teams, well advanced in our rebranding plan, taken all the steps we needed to be fully REIT compliant, and as I said, we are already seeing cross platform opportunities both in the form of Telecity customers with an interest in Equinix facilities, a bit more so right now of our Equinix customers really seeing opportunities to purchase capacity in the Telecity sites.

And I think we are seeing more in that direction only because we have a larger force selling that on the Equinix side and we're working through the sort of natural distractions of a team going through an integration on the Telecity side. So, but we feel good about the synergies.

We actually think we're going to exceed the synergy estimates that we had previously provided. All that's baked into the guidance you see here today.

And again, we do think there is over time meaningful revenue synergies as well as the cost synergies, which I said, I think we'll exceed and the CapEx synergies that are allowing us to defer some investment in EMEA..

The only thing I'd probably add, Charles, is the divestiture process, David, is we are running and have been running a very robust process. It's proceeding as we expected. There have been very high levels of interest throughout the entire process and we still are on target to complete the transaction by mid-year..

Perfect. Thanks, guys..

Thank you. Our next question is from Phil Cusick of JPMorgan Chase. Your line is now open..

Hi, following up there. You had mentioned earlier some higher churn in the UK, is that part of what you just mentioned.

And then second, it seems like Bit-isle is tracking to the high end, what's happening there?.

So let me take that, as it relates to the churn that we experienced in Q4, that was what we had telegraphed in the marketplace. If you look at the organic churn in Q1, we're roughly 2.1%, consistent with where we think there's a natural churn level in and around that level in the organic business.

Where you're seeing slightly increased churn is attributed to the Bit-isle business. What we talked about on the last earnings call was effectively Bit-isle, part of the reason that we felt comfortable holding the revenues flat relative to – for 2016 over 2015 was the fact that we did have this increased level of churn.

Now having said all of that, coming out of our prior guidance, the Bit-isle team did a little bit better than we originally anticipated.

It's more so in their other services and less in their colocation business, so suffice it to say between what they're doing in the colocation business and what they're performing in the managed services business, there is a direct correlation between what they do in managed services and the pull through to colo.

So, we're very excited about their performance to-date and we continue to focus on very much optimizing that acquisition and I think over the next few quarters, will be much more discuss as it relates to Bit-isle asset..

Very diplomatic.

If I can follow up, there was some slowing in EMEA cross connect growth this quarter, is that seasonality or what should we be thinking about there?.

The primary reason for the slowing of – if you're dealing with on a holistic basis, the primary reason really is more to do with the fact that we have taken the Telecity business and we've merged it into the organic Equinix business, and as a result, their ability while they are generating, if you will, spilling out the interconnection relative to what we are getting, it diluted the overall performance.

So, it's not to suggest that it's slowing down, we think of this as a great opportunity, but the way Telecity sort of prosecuted that opportunity was it was more embedded in colocation.

We're going to over time as I talked about, like breaking out their unit metrics and doing the inventories of all of their cabinets and cross connects and the like, and getting their financials more aligned with Equinix, we'll be in a much better spot in the coming quarters to give you much more clarity on that. It's a little early.

As Charles alluded to, we're just 90 days into it.

As many of you know, under the UK takeover code, we really couldn't touch the results until after January 15, and with an acquisition of that magnitude and knowing what we had to accomplish, we still have work to do and so we're eager to get into it, dissect it more, which will allow us to give you more visibility in the coming quarters..

Good. Thank you..

Thank you. Our next question is from Jonathan Atkin of RBC Capital Markets. Your line is now open..

Thanks.

So on Telecity, I wonder if you could provide a little bit more color on driving – interconnection Europe's in EMEA more generally and maybe Telecity specifically, any adjustments that you sort of need to make to the products, investments you are going to be making to the platform on a broader basis? And then I wondered about the cost synergies.

I think you talked about $30 million across both Bit-isle and Telecity. And what's the rough breakdown of that by region? Is it operating costs, energy costs, what is sort of the composition of that? Thanks..

Let me start with the sort of a few things on the alignment of the product portfolios, et cetera, and then I'll let probably Keith tackle the synergies, any commentary on that. But we are in the process of aligning the product portfolios.

Generally, I would say that the company's had a fairly consistent strategy in the marketplace, so probably not a dramatic set of changes in the product portfolio is there, but we are in a process of taking those and aligning the product portfolios.

I will say that, as Keith commented on we have – interconnection is a very central part of how we go to market and how we position with customers. And so it's really – it's critical that we – we have a great track record of getting the value, delivering great value to our customers through cross connects and through interconnection.

And we also have a great track record of making sure that we get value back in the form of how that's priced. And so needless to say, we'll maintain that strategy and we'll implement it within the Telecity environment as over time because I think our customers are really getting superior value from that.

So – but we're in the process of figuring out what that implies in terms of aligning the product portfolios. We're well advanced in that effort and I think we'll start to see the results of that over the coming quarters..

And so, Jon, as it relates to basically the synergy costs or benefits, clearly I think it's important to recognize the two acquisitions, we're looking at them quite differently. As it relates to Telecity, Charles alluded to a number of the points.

We're certainly going to look to what are the opportunities on the top line on driving incremental revenue that's attached to alignment of our product portfolio and the like.

And we're very confident, albeit we've said there is only modest revenue attachment to that this year, but we're very confident that that will continue to be something that will drive value going forward. As it relates to the cost side which – that's the $30 million we referred to, we talked about $15 million this year, $15 million in 2017.

Again, we're optimistic that we're not only going to be able to get that number, but we'll get beyond that number.

Again, I'm reticent to give you the exact numbers just yet because given the lack of visibility that we had into the numbers prior to January 2015, we're still doing a lot of work as we said to align the sales and delivery organizations as well as all of the back office.

But again, I want you to walk away being confident that we see some incremental benefit.

As it relates to the below-the-line activity more specifically around taxes, again, we think of our tax structure as a competitive advantage and no surprise to you as we then deploy that structure across our portfolio that will generate benefits to our shareholders and so we're excited about that as well.

Now, the other thing I would say is, recognizing that Telecity, we're in the business of investing in this business and so what we want to make sure is that we continue to invest alongside it. So we're managing the synergies with continuing to drive value into the assets and expand that portfolio consistent with what Equinix's expectations would be.

As it relates to Bit-isle, that one, there is less synergies perhaps, but overall a greater opportunity to fill up their – sorry, less cost synergies, pardon me, but a greater opportunity to enjoy revenue synergies because of the underutilization of their assets and that's where we're really excited about the opportunity coupled with some other ways that we think we can optimize the overall business.

Again, we want to be a little bit reserved in our comments right now as we continue to think about our strategy, but overall in the next few quarters you will hear us talk more firmly about what's happening in the Bit-isle integration..

If I could follow up briefly on the Telecity side, how are you managing the risk of customer confusion or potential disruption as you go through that process given that these are live environments and companies are being ring-fenced off depending on which part of the combined footprint they're in.

Any color there as to how customer expectations are being set?.

Yeah, I mean I guess I would say it's not – this is not a new thing for us in terms of acquisitions, whereby a customer may come into Equinix having implementations from an acquisition as well. We have a strong client service management team that's applied to each of the customers to understand what their combined footprint looks like.

They continue to get the service levels that they are contracted for and expect from both of those. Obviously, it doesn't come necessarily without any hiccups, but we have client service managers that are applied to those accounts to deal with issues as they arise.

And that's – so that's how we're doing it in terms of customers that are keeping or maintaining a footprint between both facilities.

In some cases, a more challenging one might be where we are actually separating out the assets associated with the divestiture and that is a more complicated process in that sort of perhaps against their will to some degree.

A customer may be sort of splitting their implementation now between Equinix and between the eventual buyer of the Cheetah (60:42) assets. That is a delicate customer communication. It's one that we would prefer have not to have had to do, but it was unfortunately the European commission didn't cooperate in that regard.

And so, it's simply a matter of us being clear and consistent with the communications to the customer and then stepping – and then standing up the what we refer to as – standing up to divestiture organization or the divested organization to be fully capable of responding to that.

What I would say is, we spent an enormous amount of money to make sure that that divestiture goes out in a way that makes it readily operable on day one to serve those customer needs..

And Jon, I guess I'll add to Charles that there are fairly clear solicitation rules that we have to govern by once the divestiture is made, but we cannot solicit those customers and they're pretty clearly laid out. So, that's all being implemented through the process..

Thank you..

Thank you. Our next question is from Paul Morgan of Canaccord. Your line is now open..

Hi; good afternoon. Just on the UK and in particular, is there – has there been any impacts on the leasing side from the pending vote on the EU referendum? And you mentioned in your guidance that – in your updated guidance that Telecity might be tracking towards the low end.

And I'm just trying to triangulate some of these things and then maybe kind of also in terms of the MRR per cabinet in that market?.

Paul, let me start first. I would say, overall when it comes to the UK, certainly, there is a lot of – there is some level of uncertainty that's been created with the Brexit. We as a company when we see the performance of the business, I would say there is nothing meaningful that would indicate that we're seeing a slowdown.

I think the challenge that when we talked about – we had a commentary on Telecity more trending towards the lower end of the range, that's really more associated with the fact that we're taking two organizations, we're putting them together. When we gave our initial guidance, we didn't have the data and the visibility we have.

Now, we're just refining our numbers because we have much more clarity on what we think we can do as a business, but at the same time aligning our sales force and delivery teams to meet the expectation.

I think the other thing, again, Steve and Charles, I think both alluded to the fact that because we have the benefit of being able to import many of these global deals into markets and London being one of our stronger market, we see that as an opportunity and the number of three region deals that are in our pipeline today, perhaps not scientifically, but I would say is probably larger than we've seen in a long time.

And so that gives us confidence with London and Amsterdam being some key nodes on those typical global deployments, that continues to be an opportunity for us. So overall, I wouldn't say anything meaningful yet, but we're certainly going to pay attention to it and we are monitoring it.

We do get a number of questions from our investors on that subject matter, but it's a bit early to say with any confidence that there's any real impact from this potential Brexit matter..

Thanks and then you talked about growing the interconnections here outside the U.S. I'm just wondering how close do you think you can get that component of the business to the density that you're seeing in the U.S.

and kind of maybe both in terms of Europe and Asia PAC?.

Yes, it's a hard question to answer. There is a variety of different – obviously Western Europe is clearly a fully deregulated telecom market.

And so network density is something that does really benefit customers in a similar way, but they started from a place where interconnection was really sort of, as Keith earlier referenced, sort of packed in and not really clearly delineated as part of the value proposition, and so it's been a bit of a journey for us in terms of being more clear with customers about the distinctive and extraordinary value they're getting from cross connects, and so whether or not you could achieve the same levels that we do now, which are in the north of 20% in the U.S., it's hard to tell.

But I do think that we certainly continue to see upside opportunity in both regions to meaningfully improve those, both through quantity and price levers that are available to us, and so I think they'll filter north for sure.

Whether or not they can get to those same levels, I don't know, but I think they can go meaningfully higher than where they are today..

Yeah and the only thing I'd add, Paul, it's a good question, is on a global basis, you can see inside the slides that we run interconnection as a percent of revenues about 16% on a global basis.

As Charles just said, it was developed in a different way in Americas and we're roughly 23% interconnection as a percent of revenue in the Americas, 13% in Asia and that's been growing and an 8% in Europe.

So to your point and to Charles' point, the largest opportunity to continue to grow the interconnection part of our value proposition exists there and we did it on the back of the acquisition we did when we first went into Europe and we changed that business to enable it and certainly with the mix of three region and multi-region customers that understand the value, as Charles said, of interconnection, it will migrate in that direction, but it will take time..

Great, thanks..

Thank you. Our last question comes from Colby Synesael of Cowen & Company. Your line is now open..

Great, thank you guys. I wanted to talk about your guidance. So, in the first quarter, you just did 16% organic growth and your guidance I believe for the year you raised it from 13% to 13.4%, but obviously that implies then that at some point you can't be below 13.4% to average that number for the full year.

It just – I'm having a hard time understanding what would happen over the next three quarters to see that type of deceleration in the business? I was wondering if you could give us some color on that.

And then you talked about it very briefly in your prepared remarks, but cabinet net adds were 1,500, and the last I think three or four quarters have been north of 3,000. You talked about timing, but it was lower, at least versus our numbers in each of the regions.

I was wondering if you can us a little bit more specificity when you say timing and what's giving you the confidence that we'll see that rebound? And should we think it's going to get back to that, call it 3,000-plus level is really the second quarter? Thanks..

Great questions, Colby. So let me try and address the question on growth year-over-year versus what we're guiding to. So frankly what we've told you on a constant-currency basis that organic business can grow greater than 13.4%.

Now as you recognize Q1 when you look at on a year-over-year basis it's 16% and so we're stepping – we're effectively stepping that down in the second quarter to midpoint of guidance of roughly 2.6% growth quarter-over-quarter if you're looking at the top end of the range 2.9% quarter-over-quarter growth.

60 basis points of that is coming from the fact that right now we're assuming that non-recurring revenue will be $5.5 million less in Q2 than it was in Q1. So number one, there is an element of what's going on in the non-recurring space.

Number two, when we look at that second half of the year, one of the things that we're really – given the level of activity and other matters that are affecting the combination of the business is between Bit- isle, Telecity and ourselves, we are very much – we're being very disciplined in what we want the future guidance to be, right now we're leaving as greater than 13.4% and that's really a reflection of there is a lot of activity that's taking place in the company right now, and because of that we want to make sure we continue to have a relatively conservative view on what it means for the back half of the year.

Notwithstanding the fact though we are working very hard, as I said, to integrate the businesses and between the integration of the businesses and running the organic business, we're optimistic that we can continue to scale the business or to grow the business on a year-over-year basis greater than that 13.4%, but it's a little bit premature to commit to that today.

And I'm sorry I've forgotten the second..

Second one was around the billable cab – billable cab adds..

Yes. As it relates to billable cab adds, there is a couple of things that are certainly affecting that number. First and foremost, it's the size of the deals that we've looked at. The average size of deal that we did this quarter is a lot greater than the averages that we saw in the prior quarters. So, that's number one.

We didn't do a lot of, what I would call, larger footprint of deals in the quarter.

Number two, as you know, we've rolled out a new basic quote to cash platform and that quote to cash platform is putting a little bit of – it's new in the system it's different for our customers, it's different for our employees and so as we continue to refine, if you will, our platform, we think that that's going to continue to increase the number of cabinet add.

Number three, I would tell you that our pipeline and our backlog is, and more particularly the backlog, is higher than it has been before. And as a result, there is that, that is going to give us confidence that it's going to come into the revenue stream and ultimately to the billing cabinets.

And then the fourth thing I would say is, look, this is an area that we've seen before. It generally relates to things that happened near our end of quarter. Churn is a perfect example.

Last quarter, as you recall, we referred to a UK-based churn, a relatively large churn that would affect not only our churn MRR metric, but also affects the number of cabinets, because the customer is affectively there for the entire quarter and then it churns out, and so you lose those cabinets.

No different this quarter, we had a number of churn activities that happened in the back end of the quarter. And they were cabinet c and as a result, it reduced the overall level of cabinets billing.

Bottom line is, we're optimistic that you're going to see that number rebound, we have seen it before, this pattern, and it's something that we'd anticipate changes as we look to the latter part of the year.

The one thing that you can get great confidence in is irrespective of what that number is because it's a calculated metric, we are continuing to drive our revenues up and you can see by the guidance that we provided that we would expect to deliver $22 million of incremental revenue Q2 over Q1, which is a strong indication that we have got a number of billing cabinets in the system..

Great. Thank you for all the color..

Great, thank you. That concludes our Q1 call. Thank you for joining us..

Thank you. That's concludes today's conference. Thank you for participating. You may now disconnect..